The Wisdom of Buffet

The Snowball is an excellent new biography of Warren Buffet by Alice Schroder published in September 2008.  It is packed full of wonderful anecdotes and stories from Warren’s life.  At 838 pages one might think it is a bit long, except for the fact that Buffet’s life and business experience span such a long period, the book needs every page and probably more to give the full story justice.  I have a listed a few of Buffet’s life lessons here that relate directly to the topic of leadership:

 

• Think for yourself.  This is a fundamental value that Buffet credits again and again as being critical for his success over the years.  Even at an early age, Buffet learned to trust his own judgement and think through problems by coming to his own conclusions.  This requires one to block out conventional wisdom and reject the herd mentality that is so common with money managers.  The most striking example of this virtue is an eerily prescient presentation that Warren made to a group of high flying Internet media moguls in Sun Valley in 1999. Remember, this is a time when Buffet was being dismissed by the press and other money managers as a dinosaur whose outdated view of the world was out of step with the new realities of the Internet.  Despite the fact that most of his audience thought he was crazy, he delivered a lecture on the market and investing, and he made a bold prediction that the market was extremely overvalued and that over the next seventeen years one should expect a much lower rate of return from stocks — his guess was 6 percent.  So far, his judgement is looking very sound.

 

• Integrity Matters.  Like anyone who leads a bold and adventurous life, there are times when Warren finds himself in a situation when his reputation is at stake.  During these moments of truth, Buffet returns to the principles of honesty and integrity, always fiercely guarding his reputation.  He has an uncanny ability to speak the truth when it needs to be spoken.  Perhaps the most vivid example comes from his testimony to Congress during his tenure as Salomon’s Chairman when he rescued the firm from less-than-honest management.  When asked by Congress how he was going to change the culture at Salomon Brothers he said “Lose money for the firm, and I will be understanding.  Lose a shred of reputation for the firm, and I will be ruthless.”

 

• Do What You Love.  When Warren is asked by journalists or students what is the secret to success, he says, “Do what you love and work for whom you admire the most, and you’ve given yourself the best chance in life you can.”  This message is extremely valuable for leadership development professionals because it speaks on two different levels.  It says, make sure the people who work at your company really love what they’re doing.  And, it also says, make sure you have leaders at your company that your employees can look up to and learn from.

 

• Control The Information You Receive.  Everyone knows that to be a successful money manager you must be in New York City and you must constantly follow the streams of market data, trading in and out of positions using a Bloomberg machine (a computer terminal highly customized to sift through financial data and make trades).  But along comes Buffet, the most successful investor ever, and not only does he not live in New York City, but he doesn’t have a computer on his desk.  Rather than let the information control him, he controlled the information and used it to make good long-term investment decisions.  There is a lesson here for the new leaders of the 21st century who are glued to their computers or blackberrys.

 

• People Matter, but the Business Model Matters More.  Those of us in leadership development like to think that great leaders can do anything.  The theory goes, if we can develop great leaders, the business will be successful.  Warren’s answer assessment of that theory is that it’s flat out wrong.  Buffet says you can take poor management and place them into a good business model and still be successful, but you can take great management and place them in a lousy business and it will still fail.  When giving advice to students, he calls this, “Getting on the Right Train.”

“Managing your career is like investing – the degree of difficulty does not count. So you can save yourself money and pain by getting on the right train.“