A Walk in the Rain with Warren Buffet

Warren Buffet, among other things, is known for his ability to choose winning teams and let them soar. Following his talk in Burden, the Harbus had the opportunity to take a pleasant stroll in the rain with the “Oracle of Omaha” to discuss his strategies on investing in winning leaders in today’s global economy.

Harbus: You have clearly developed an unprecedented ability to identify and cultivate leaders as represented by the fact that not a single CEO you have hired (or acquired) over the last thirty-eight years has ever left one of your portfolio companies. In your mind, how do you define great leadership?

WB: A leader is someone who can get things done through other people. They have to be able to do so knowingly, enthusiastically and effectively. Our managers have those qualities and more, but they also have to trust in themselves and in me that over the horizon their strengths and skills will continue to have significant impact.

Harbus: How do you help such behavior endure?

WB: Well, that’s the tough part. How do you find an institution that shares your values? Sam Walton did that with Wal-Mart and I hope I am doing that at Berkshire. One of the ways you do that is to communicate those values and you self-select, in effect, the people who join in. They naturally come through a filter. So the people who joined me at Berkshire are betting on something. They have in effect joined a church of sorts.

Harbus: You recently said in one of your letters to your shareholders “to be a winner, you must work with winners”. What is the single most defining characteristic you look for in a winning management team?

WB: I am lucky that way because I buy businesses that have already been successful and batting 1.000 for twenty years. So all I am really betting on is that they will be able to continue their past performance. It’s a much easier way to go about it. We have dozens of managers with huge successes before they ever saw me.

Now if all my managers suddenly walked away tomorrow, and I had to pick the 20 people in this class that would do the best job at replacing them and managing our businesses, that would be a tough job. It’s much easier to look at people who are already winners.

Harbus: And just help them along the way?

WB: That’s right – my goal is to just stay out of their way. Give them the capital they need, a lot of tender loving care, and a lot of appreciation. Everybody loves appreciation. If you read our annual reports, I love those people and what they have done and they know it.

They also know I am a tough audience. You don’t want some patsy who thinks that everything is wonderful. If I say a guy has done a good job in the insurance business, they have really done a good job in the insurance business. They are getting applause from a real sports writer if they are a baseball player.

Author’s note: We think it’s fair to say that Buffet’s team has already reached World Series championship status.