“The first rule of investment is don’t lose. And the second rule of investment is don’t forget the first rule.” – Warren Buffett
Warren Buffett is the fifth richest person on earth and arguably the world’s greatest stock investor. But he’s not perfect.
He personally lost around $23 billion in the financial crisis of 2008. His investment company Berkshire Hathaway has posted an annual loss seven times in the past 40 years—phenomenal results, yes, but not perfect.
So how can Buffett espouse a primary rule of “don’t lose”?
First, Buffett was describing the mindset of a prudent investor. He goes on to say, “this is a business where you think,” where facts and reasoning should drive your decisions.
In other words, don’t approach investing flippantly, thinking it’s okay to lose. Don’t gamble; Do your research. Don’t be frivolous; Do your homework.
Second, Buffett is playing the long game. According to him, if you don’t feel comfortable owning a stock for 10 years, you shouldn’t own it for 10 minutes. Whenever possible, his favorite holding period for a stock is “forever.”
That’s a really long game—but one that has paid off…in the long run.
These same principles apply to Trust. Trust is an investment as well.
How often do we mindlessly give away our trust instead of intentionally investing it wisely? To make better trust decisions, we can explicitly ask Four Questions associated with the Elements of Trustworthiness:
- Is this person for real? (Authenticity)
- Is this person on my side? (Benevolence)
- Does this person know what they’re doing? (Competence)
- Does this person deliver? (Dependability)
We already ask these questions subconsciously when deciding whether to extend or withhold trust, but there’s merit in surfacing and using them to overtly assess trustworthiness.
Despite the risks and occasional losses, Warren Buffett continues to invest wisely for the long haul. Likewise, despite the risks and short-term setbacks, studies show that continuing to trust wisely pays dividends in mental health, team effectiveness, and financial returns.
For Reflection: Based on the Four Questions, how are your trust investments doing?
Update: 75% Proposal Complete
With over 60,000 words written, I’m currently focusing on putting my book proposal together. I worked on the Synopsis this week to move the needle 5% toward completion – We’re three quarters done!
9/10 Content (10%)
9/10 Market (10%)
4/5 Author (5%)
23/25 Synopsis (25%)
30/50 Sample Chapters (50%)
75/100 Total (100%)
