The 5-Hour Rule
I remember the first time I heard that Warren Buffett spends 80 percent of his time reading and thinking, and has done so for his entire career.
I was even more surprised by how Buffett’s long-term business partner describes his weekly schedule:
You look at his schedule sometimes and there’s a haircut.
Tuesday, haircut day.
That’s what created one of the world’s most successful business records in history. He has a lot of time to think.
“WTF?!” I thought myself. “That makes no sense.”
“How can the CEO of a company with hundreds of thousands of employees have so much free time while my schedule is packed?”
“What is the smartest investor in history seeing that I’m not?” I wondered.
After years of watching nearly every Buffett interview, reading his annual Letters to Shareholders, reading multiple biographies, and applying the lessons to my life, I think I finally have the answer to why and how Buffett has adopted this schedule.
This article shares that answer.
By the end of it, you’ll have a clear path to adopting the 5-Hour Rule (deliberately learning for at least five hours per week) and moving much closer to Buffett’s more intensive Learner’s Lifestyle (making deliberate learning your No. 1 competitive advantage and getting essentially paid to learn).
But, first, let’s uncover what Buffett sees about knowledge work that most of us don’t.
“Knowledge has power. It controls access to opportunity and advancement.” — Peter Drucker
In short, all that Buffett research made me realize two things…
First, in a knowledge economy, learning and thinking are the single best long-term investments you can make in your career. Learning and thinking determine our decisions. Then, decisions determine our results.
Second, Buffett’s schedule is a harbinger of a new class of knowledge workers (especially investors, entrepreneurs, designers, developers, coaches, consultants, thought leaders, etc.) who realize that learning and thinking, not just doing, are the keys to their long-term success.
Let’s go a level deeper.
In 2009, Paul Graham, wrote an iconic article called Maker’s Schedule, Manager’s Schedule. Graham is the founder of YCombinator, the most successful startup accelerator in history — backer of AirBnb, Dropbox, Stripe, and Reddit. In the article, he spells out the difference between two types of schedules in a knowledge economy:
Manager Schedule: The manager’s schedule is for bosses. It’s embodied in the traditional appointment book, with each day cut into one-hour intervals. You can block off several hours for a single task if you need to, but by default you change what you’re doing every hour.
Maker’s Schedule: But there’s another way of using time that’s common among people who make things, like programmers and writers. They generally prefer to use time in units of half a day at least. You can’t write or program well in units of an hour. That’s barely enough time to get started.
“We now accept the fact that learning is a lifelong process of keeping abreast of change. And the most pressing task is to teach people how to learn.”
To put the Learner’s Lifestyle in context, let’s take a step back and think about what it means to be a knowledge worker in the 21st century.
No one has done a better job of this than Peter Drucker, perhaps the greatest management thinker ever.
In one of his great manifestos, Drucker makes the case for the importance of knowledge worker productivity:
“The most important, and indeed the truly unique, contribution of management in the 20th century was the fifty-fold increase in the productivity of the manual worker in manufacturing. The most important contribution management needs to make in the 21st century is similarly to increase the productivity of knowledge work and knowledge workers.”
Here are Drucker’s six factors to knowledge worker productivity:
In most knowledge work, quality is not a minimum and a restraint. Quality is the essence of the output. In judging the performance of a teacher, we do not ask how many students there can be in his or her class. We ask how many students learn anything — and that’s a quality question. In appraising the performance of a medical laboratory, the question of how many tests it can run through its machines is quite secondary to the question of how many test results are valid and reliable.
Productivity of knowledge work therefore has to aim first at obtaining quality — and not minimum quality but optimum if not maximum quality. Only then can one ask: “What is the volume, the quantity of work?
The application of 20th century Statistical Theory to manual work is the ability to cut (though not entirely to eliminate) production that falls below this minimum standard.
This simple difference of optimizing for quality over quantity in one’s work changes the game.
Quantity: Work harder with processes in place to make fewer errors.
Quality: Define what quality is and then create a process that maximizes it.
We see this distinction at play in Warren Buffett’s career. Buffett’s genius is that he prioritizes learning so he can have higher quality insights.
Throughout Buffett’s career, he has only made a handful of investments per year. Describing his approach, Buffett says:
“The trick in investing is just to sit there and watch pitch after pitch go by and wait for the one right in your sweet spot. And if people are yelling, ‘Swing, you bum!,’ ignore them.”
Amazingly, there have been multi-year periods where Buffett has made zero investments. Can you imagine how difficult it would be to wake up every day for years and not invest if you were a professional investor?
Buffett understands and actually follows through on the logical implications of what it means to be a knowledge worker in a knowledge society.
Buffett and the Learner’s Lifestyle converts time into value in a completely different way than the typical approach to work, which borrows from the culture of routine, manual work.
Here’s the knowledge work assembly line for the 21st century:
There once was a power plant that shut down because of a mechanical failure. As you can imagine, this was a disaster!
The employees went all hands on deck trying to fix the problem for days, but no one could find its source.
In desperation, the plant manager reached out to a consultant.
Not long after, the consultant confidently walked into the plant and spent a few hours very deliberately walking around to understand each of the components and how they interacted with each other. He spent several more hours asking the plant manager and employees a series of questions.
Finally, he went back to a part of the plant he had previously inspected and pressed a button.
Amazingly, the entire plant came back to life. The lights turned on. The machines started whirring. The problem was fixed.
“Oh my god!” the manager exclaimed. “You did it. How much do I owe you?”
“$100,000,” the consultant confidently replied.
“What?! $100,000. All you did is push a button! How do you account for that?”
The consultant pulled out a pencil from behind his ear and grabbed an invoice template from his pocket.
Next, he wrote down the following:
Pushing a button: $1
Knowing which button to push: $99,999
This parable gets at the heart of the power of insight.
In certain situations, having insight can provide 1,000 times the leverage.
We live in a unique time: Insight is the key to solving more and more problems, and the dividends on insight are increasing because we live in an increasingly global, digital, technological, and complex world.
Here’s why there has never been a better time to adopt a Learner’s Lifestyle:
“The removal of the physical constraints on effective information production has made human creativity and the economics of information itself the core structuring facts in the new networked information economy.”
Bottom line: We’re in a time of a lot of technical change. That technical change is resulting in cultural change — specifically, how we work and live — which is increasing the return on insight. Hard work is critical to success. But the scales are tipping toward insight.
This brings me to my next point: the Learner’s Lifestyle is the perfect fit to the ways we live and work now.
Over the last two decades, many professionals have moved away from more traditional work lifestyles:
…to the following Lifestyle Design Movements:
While all of these movements are different, they also have a lot in common. People don’t want to be forced to do:
… just to make barely enough money to feed themselves and their family.
Buffett’s contribution is a new category of lifestyle design — The Learner’s Lifestyle. This category of work is particularly well-suited for people who:
My only regret is that I wasn’t exposed to this as a life and career path earlier, as I’m perfectly suited for it.
Here’s my journey toward it unfolded…
When I first heard about Warren Buffett’s Learner’s Lifestyle, my kids were 3 years old and 1 year old. My business required a lot of travel and meetings. I was working so much it was hurting my health, my relationship with my wife, and my relationship with my kids. In retrospect, I was burned out.
The only learning time I had was once the kids were asleep. However, by that point, my energy was so shot that my routine became:
At the time, my daughter and I were occasionally watching “Hannah Montana.” I’m embarrassed to say that I watched an episode alone far more than once.
That was my rock bottom — watching a preteen sitcom by myself and enjoying it.
Today — six years later — I spend 4–5 hours a day reading and thinking, and I view it as fundamental to what I do. I have one meeting per day or so. I take a 1–2 hour break in the middle of the day. When the kids go to bed, I go for a walk with our dog while listening to audiobooks.
So, how did I go from watching “Hannah Montana” to leading a Learner’s Lifestyle where learning is baked into my day?
Of course, there were many more detailed steps (which I will go into my next article), but here are the two key ideas you need to know now so you can begin the journey or go to the next level.
There are two steps you can take right now:
Step #1: Put yourself in jobs, professions, companies, and industries where you are valued for your insight.
As life goes by, we are presented with choices about the people we collaborate with, the bosses and mentors we learn from, the projects we take on, and the professions and industries we join.
Each of these choices has a profound impact on our ultimate learning.
At the extreme end of the spectrum, someone stocking shelves at Wal*Mart is only going to be valued for their physical effort. Similarly, a white-collar worker who does the same thing over and over is primarily going to be valued for their effort and accuracy.
In the middle of the spectrum, a rapidly-evolving industry is more likely to appreciate new insights and innovations than one that is changing slowly.
At the other end of the spectrum, a long-term value investor like Warren Buffett can get an incredible return on investment by only making a handful of big investment decisions per year. Entrepreneurs must rapidly learn several disciplines in order to succeed and they live and die by their own decisions.
The pathway that I followed included the following steps:
Step #2: Increase the leverage of your insights.
As you improve your learning and thinking ability, the value of your insights multiplies.
To take advantage of this multiplier, you need to put time into learning and learn how to learn more effectively.
This way, your knowledge will compound upon itself, and over time, your insights will become your durable competitive advantage in your career.
Published By: Michael Simmons, Bellaland
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