In a lecture, Warren Buffett (Trades, Portfolio) asked students to consider which one of their classmates they would pick to receive 10% of their earnings for the rest of their lives and why they would pick that person. He said, “Some of you are going to be bigger winners than others, and it gets down to a bunch of qualities that, interestingly enough, are self-made. (...) It’s a whole bunch of qualities that really come out of Ben Franklin or the Boy Scout code (...). It’s integrity, it’s honesty, it’s generosity, it’s being willing to do more than your share.”
But why would Buffett say that? Should not those students pick the smartest or most athletic classmate to give them the biggest payout? According to Buffett and his longtime business partner Charlie Munger (Trades, Portfolio), three key qualities lead to success in life and business - integrity, intelligence and energy.
The critical importance of integrity
Out of the three, Buffett and Munger consider integrity to be the most important. When hiring people for Berkshire Hathaway (BRK.A, Financial) (BRK.B, Financial), Buffett looks first for integrity. In a speech to students, he said, “We look for three things when we hire people at Berkshire. We look for intelligence, we look for initiative or energy and we look for integrity. And if they don’t have the latter, the first two will kill you.”
Munger agrees wholeheartedly with placing integrity above all else. At the 2009 Berkshire Hathaway annual meeting, he said, “I think that every human being who thinks at all comes to much the same conclusion about what makes a virtuous human life. And it comes down to ethics of restraint.” Living life guided by strong ethical principles is fundamental to both men.
Why do Buffett and Munger put such a premium on integrity? Because someone very intelligent but lacking integrity can do real damage. They will use their smarts in self-serving ways without regard for ethics or others. As Buffett colorfully puts it, “If you’re going to get somebody without integrity, you want them to be dumb and lazy.”
So, what exactly constitutes integrity? It’s about having principles and conducting yourself ethically in all matters - personal and professional. Integrity encompasses honesty, fairness, accountability and leading by example. It is someone who does the right thing even when no one is watching.
The good news is integrity is a choice. We decide what kind of person we want to be through our actions. As Buffett tells students, “You’re not born with it; you can’t learn it in school. But you can elect to have integrity.”
How do we develop this all-important trait of integrity? By consciously building habits of integrity from a young age. For example, be punctual, keep promises, take responsibility for mistakes, and treat others with respect. Make choices guided by sound principles, not mere expediency. These habits will shape your character over your lifetime.
Intelligence matters, but only with integrity
Buffett recognizes that intelligence or ability also plays a key role in success. After integrity, he looks for smart, talented, and capable people. But intelligence must be accompanied by integrity, or it can be dangerous. Buffett bluntly says, “Smart and energetic with no integrity will kill you.”
Munger agrees. At a Berkshire Hathaway meeting, he said, “It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid instead of trying to be very intelligent.” Avoiding stupidity through wisdom and humility can be more valuable than raw brainpower.
At Berkshire Hathaway, Buffett wants managers who are extremely capable at capital allocation and running a business. Intelligence allows them to make solid decisions and optimize outcomes. But their smarts must be guided by integrity, or they can abuse their power and authority.
Buffett also prizes emotional intelligence - self-awareness, empathy and relationship skills - when looking for intelligent managers and partners. This complements analytical intelligence and enables working well with others. As Buffett says, “You only have to be able to evaluate companies within your circle of competence. The size of that circle is not important; knowing its boundaries, however, is vital.” Staying within one’s circle of competence is a hallmark of wisdom and humility.
Energy and passion drive success
In conjunction with integrity and intelligence, Buffett emphasizes the need for energy, initiative and passion to achieve significant success in life. This inner drive makes all the difference in what someone can accomplish. Buffett says, “Some people really are more energetic than others... It’s not something you can manufacture. But being reasonably energetic and intelligent is all you need.”
Munger attributes much of his success to the sheer willpower he inherited from his grandfather. At a Berkshire meeting, Munger said, “I was raised in a family [where] the supreme value was raw willpower. We just had to succeed, and so we did. And when I got started off, I just kept going.” Buffett and Munger recognize that perseverance comes from inner drive and discipline.
With motivation and work ethic, you proactively make opportunities happen rather than waiting for them. Obstacles are overcome, and setbacks are recovered from quickly. Consistent effort is applied over the long term toward your goals. As Thomas Edison said, “Genius is one percent inspiration, ninety-nine percent perspiration.”
Buffett praises the boundless energy of founders like Jeff Bezos and Bill Gates (Trades, Portfolio), who pour everything into their visions and drive their teams passionately. Without that sheer dynamism and force of will, their companies (Amazon and Microsoft respectivletly) could not have achieved such massive success and industry dominance.
At Berkshire Hathaway, Buffett wants managers brimming with energy and passion for their work. The enjoyment and fulfillment derived from their jobs keeps them engaged. As Buffett says, “I love creating money. I love building systems to make money. The process itself is fascinating to me.” When your work aligns with your inner drive, success comes easier.
Developing good habits is key
Ultimately, achieving success in business and life comes down to consciously developing habits centered on integrity, intelligence and energy.
Habits are behaviors repeated over and over until they become automatic. They form through the choices we make - what to focus on, how to respond to situations, and priorities to set. As Aristotle said, “We are what we repeatedly do. Excellence then, is not an act, but a habit.”
Buffett emphasizes starting young to develop habits of integrity that shape your character. Behaving ethically in childhood forms lifelong patterns. As adult responsibilities arise, integrity endures if ingrained early through habits.
Intelligence must be accompanied by integrity. Habits like humility, self-restraint and teamwork channel intelligence constructively. Never stop learning to expand your abilities. Make understanding other people a daily habit.
Energetic habits include self-motivation, resilience, and time management. Start each day proactively and optimistically. Make health a priority through good habits. Turn ideas into action before momentum is lost.
Evaluate yourself periodically - are your habits aligned with the person you want to become? Identify any detrimental habits like dishonesty, laziness, or ego that need correcting. Institute replacement habits of integrity, drive, and empathy. Just as poor habits can degrade character, new habits can improve it.
Let integrity be your guiding light
Ultimately, achieving significant success in business and life requires integrity first and foremost, followed by intelligence channeled positively through integrity. And, finally, energy, passion, and work ethic to make it happen.
By focusing on developing lifelong habits centered on these three qualities - integrity, intelligence, and energy - your potential to succeed and lead a meaningful life is virtually limitless. Start early, be consistent, and compound positive habits over time, just like how Buffett and Munger built an investing empire and legacy based on these principles.
