Angela Natividad's Live & Uncensored!

17 February 2007

Why I Love Warren Buffett

They say Warren Buffett made his first stock purchase at the age of 11, a small number of Cities Services shares for $37 each. When the price hit $40 he sold, only to see them hit $200 some years later.

This allegedly taught him what it meant to invest for the long term. And not just in companies but in the people behind them, too.

One thing I admire about Warren Buffett's annual shareholders letters is their lengthy tell-all nature. You feel the same intimacy encountered when hearing the precious particulars of a good friend's life. He reflects, makes jokes and considers past decisions. He also takes great pains to explain the underpinnings of his methods.

After describing the past year's goings-on and some recent acquisitions including Business Wire, in his 2005 letter Buffett reflects upon the way Berkshire develops relationships:
Unlike many business buyers, Berkshire has no “exit strategy.” We buy to keep. We do, though, have an entrance strategy, looking for businesses in this country or abroad that meet our six criteria and are available at a price that will produce a reasonable return. If you have a business that fits, give me a call. Like a hopeful teenage girl, I’ll be waiting by the phone.
Berkshire does it for keeps.

Businesses aren't just currency machines. They're functioning entities with a culture and an ethos supported by people.

Two contributing reasons to Buffett's decision to join forces with Business Wire lived in company president Cathy Baron Tamraz's two-page letter to him: “As president of Business Wire, I’d like to introduce you to my company, as I believe it fits the profile of Berkshire Hathaway subsidiary companies as detailed in a recent Wall Street Journal article [...] We run a tight ship and keep unnecessary spending under wraps. No secretaries or management layers here. Yet we’ll invest big dollars to gain a technological advantage and move the business forward.”

A close watch on finances, coupled with the gumption to take educated risks, made strong recommendations. Let's add a third element: Cathy who, upon reading Berkshire's profile, wasted no time in developing what appears to be a straightforward, no-nonsense relationship from the get-go.

As a proponent of sincerity in networking I should first have mentioned how important I think it is to start yourself off right before even trying to develop relationships with others.

A responsible financial plan, where you don't spend what you haven't earned, may seem old-fashioned and conservative. But a chill attitude about credit will ease a young business out of your hands faster than you can lift it off the ground. Each debt you take on is like a blood pact against your business's strength. Is a blood pact something you really want to make at every open opportunity? The way you manage money reflects a lot about your character.

A willingness to look facts in the face, take criticism and scrutinize the raw elements of your enterprise are also critical. Buffett knows his businesses in and out. And as well as he knows the balance sheets, he knows the people running them.

Then there's the people element. You should never discount the partners and employees whose near-term destinies it will be to make your business a great one. Even if you don't know all the details of their kids, you should at least keep eyes and ears open to what they love, why they work with you and how they manage others - particularly your customers.

It's my opinion that these are the characteristics that put an enterprise at Berkshire caliber, bearing in mind it ain't Google. You're not looking to explode in a handful of years, you're building a solid foundation that many people can feel good about standing on, perhaps even after you're gone.

The conclusion to Buffett's 2005 letter includes the following admission:
Charlie [Munger] and I are extraordinarily lucky. We were born in America; had terrific parents who saw that we got good educations; have enjoyed wonderful families and great health; and came equipped with a "business" gene that allows us to prosper in a manner hugely disproportionate to other people who contribute as much or more to our society’s well-being.
It's not everybody who shares Buffett's net worth, or the sense of immense gratefulness and personal responsibility he exhibits to the people who make it possible and society at large. It merits noting.
Moreover, we have long had jobs that we love, in which we are helped every day in countless ways by talented and cheerful associates. No wonder we tapdance to work.
Oh yeah, that last thing. It helps to pursue something you love doing. Be passionate. Please.

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