Most “addictions” come with a warning label, but Warren Buffett’s self-confessed vice is an exception — and it’s one that he claims has fueled his rise to legendary status in the investing world. For Buffett, reading isn’t just a pastime; it’s the engine behind his imagination, decision-making, and enduring edge in knowledge: a daily ritual that he credits as the cornerstone of his extraordinary success.
Warren Buffett once asserted that “Reading could be the BEST addiction one could have. The only proven side effect is imagination & an edge in knowledge.” This encapsulates a philosophy that has shaped his career and investment approach for decades.
Buffett’s rationale is rooted in the idea that knowledge compounds over time, much like interest. He has famously advised aspiring investors to “read 500 pages like this every day. That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it”. This advice highlights Buffett’s conviction that continual learning is the surest way to gain an edge in the markets.
Buffett spends up to 80% of his working day reading and thinking — a habit he developed early in life and one he credits as foundational to his success. For Buffett, reading is not just about staying informed; it is about cultivating a broad, deep, and nuanced understanding of businesses, markets, and the world at large.
Buffett’s reading habit has repeatedly given him the insight and confidence to make bold, contrarian investments:
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Coca-Cola (KO): In 1988, Buffett invested heavily in Coca-Cola despite negative sentiment following the “New Coke” fiasco. His extensive reading helped him recognize the enduring strength of the brand and its business model, leading to one of his most successful investments.
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American Express (AXP): After a major financial scandal in the 1960s, Buffett’s deep understanding — built through research and reading — allowed him to see value where others saw only risk. His investment in American Express became another legendary win.
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Japanese Trading Houses: One of Buffett’s biggest overseas investments is five conglomerates in Japan. According to his most recent annual shareholders meeting, he discovered they were all severely undervalued by reading into them, so he decided to invest billions.
These examples illustrate how Buffett’s voracious reading habit equips him to look beyond headlines and market noise, identifying durable competitive advantages and undervalued opportunities.
To follow in Buffett’s footsteps, investors should:
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Commit to Lifelong Learning: Make reading a daily habit. Focus on annual reports, trade publications, books on business and investing, and credible news sources.
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Diversify Reading Material: Don’t limit yourself to finance. Broader reading — covering history, psychology, science, and biographies — helps develop a well-rounded perspective for better decision-making.
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Reflect and Think: Buffett emphasizes not just reading, but also taking time to think. Digesting and reflecting on information is crucial for turning knowledge into actionable insight.
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Be Patient: Knowledge, like capital, compounds over time. The benefits of reading accrue gradually, but become a powerful advantage over years and decades.
Buffett’s approach has been described as the “Buffett Formula”: strive to go to bed a little smarter each day than when you woke up. This incremental improvement, driven by reading and reflection, is accessible to anyone willing to put in the effort.
Buffett’s “addiction” to reading is not a quirk — it is a deliberate, disciplined strategy that has underpinned his extraordinary investing career. For investors seeking an edge, embracing Buffett’s reading habit offers not just knowledge and imagination, but a lasting advantage in the pursuit of financial success.
On the date of publication, Caleb Naysmith did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com