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Warren Buffett’s 3 Ls That Will Take Down A Business

I have a buddy whose business partner has a bunch of money.

One year, he paid a big check – a multiple six figure check – at a charity auction in order to be able to take Warren Buffett out to lunch.

When you write a check that big, you want to try to get a return on your investment, so he went in prepared with a lot of different questions. 

So he said to Warren Buffett: “I’m on the rise, building this business. It’s on its way to becoming a $1,000,000,000 company. What are the pitfalls to watch out for in growth as a business?”

Warren Buffett shared with him 3 Ls that day: liquor, ladies and leverage. Let’s break down each one.

#1: LIQUOR

Liquor means anything that can cloud your judgment, that can distract you from operating at the highest level.

That includes alcohol of course, but also drugs and anything along those lines that make you act differently.

He said for a lot of people, once they start making money, they get into drinking and partying, and then all of a sudden they’ve got to recover for three days or they’re doing harder drugs that completely take them off the radar. So you’ve got to watch out for the first L, which is liquor.

#2: LADIES

I don’t mean this in a derogatory manner whatsoever. I think having a great spouse and somebody who can support you is one of the most important things you can have in your business.

But what Buffett meant is that some people… maybe were kind of nerdy in high school or college and never had the attractiveness of females coming to them.

All of a sudden when they gain power, when they make a lot of money, all of a sudden there’s people coming out of the woodwork who want a little bit more of your time, want a little bit more of your attention. And sometimes those are females that have ominous goals and ambitions. 

You know what I mean, on this.

And guess what? There are gold digger guys out there, too. So it goes both ways.

But it’s insane to me that people will risk their entire livelihood, their entire family for a one night stand.

There are a lot of other ways that you can get a release than having to go and do stupid shit. So you gotta be on the lookout for that.

There will be people who are trying to get into your network and trying to ruin you at those high levels, and at the same time, don’t go friggin looking for it.

I don’t go to strip clubs. Why? Because if you’re hanging out in strip clubs, chances are you’re going to do something stupid.

It’s like, I try not to hang out with people who eat french fries too much. I try to hang out with people who eat salads, because if they’re eating salads, I’m probably going to eat a salad. If they’re eating french fries, I’m probably going to go and eat a french fry. And so I make sure that I don’t even put myself in those situations that could turn into something troublesome.

#3: LEVERAGE

And then the third is leverage. This is more the business and the personal finance side of things: don’t over leverage on the money side and don’t over leverage on your time either.

We have a limited amount of resources. You don’t want to go and over leverage yourself on money, on debt, and do something like buying a $10 million building and borrowing $11 million on it in order to take some fees off the table and all this other stuff. If the market shifts and you find yourself in a position where you have to exit that property, you’re going to be in a tight spot.

If COVID happens and you’ve got an eviction moratorium in place for 18 months, you’re going to be in a tight spot.

If you buy at a discount, you create appreciation. You have equity in your properties and in your business, and you’re not overleveraged in that capacity. You’re in a much better position. You also have more options on the exit.

If you had to hang on to it, you could. But you’re not in a tight spot where you have this big debt service that you have to cover every single month on the leverage side. So that’s for financial leverage.

What about time leverage? Because most people think about how much debt I have on a property as leverage.

I think about how much bandwidth you have in your day

Because we all have 24 hours in a day. You have 24 hours a day. I have 24 hours. Elon Musk has 24 hours a day.

How is Elon Musk operating at a higher level than you and me? 

Because he leverages his time in a smart way and he only utilizes his time to do things that have the highest return on his time.

It’s called time autonomy.

He leverages his time in a way that focuses on the things that are the highest and best use of his efforts, his insights, knowledge, his experience, and his skillset.

So you’re doing those things. You’re not leveraging your time across many different businesses or spreading yourself too thin.

Don’t have too many balls up in the air. That gets tricky.

Focus on a handful of things and make sure your time is lasered in on just doing those things.

Straight from one of the wealthiest people on the planet: Mr. Warren Buffett.

Stay away from the three L’s (liquor, ladies, and leverage): the pitfalls of big business and successful people as they continue to grow.

What are the pitfalls that you’ve seen outside of those three? What are some other Ls that you’ve seen take down some absolute rock stars in business and take their attention away from their business and from their success that have created pitfalls for them? Let me know on social media! You can find me on Instagram and TikTok @timbratz, Facebook @tlbratz, or YouTube @legacywealth.

We made a video on this! Watch it on the Legacy Wealth YouTube channel here: https://www.youtube.com/watch?v=sqwK59WxtvI