Warren Buffett tells students how to manage and invest; reveals his secret to happiness
Georgina Russell, WG'07
Issue date: 3/19/07 Section: News
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After spending a few February days in Warren Buffett's hometown of Omaha, Nebraska and several hours listening to Mr. Buffett himself, Wharton students can probably agree on two things: (1) Omaha is cold in the winter, and (2) Warren Buffett leads a remarkably ordinary American life. While the former warrants only four words of attention ("below ten degree weather"), the latter is worthy of closer study.
Mr. Buffett's ordinary life is spent year round in the middle of the United States. While he does take vacations, they typically span only a weekend or so, and the destinations - for example, San Francisco or Yellowstone National Park - don't require a passport. Given a choice, Mr. Buffett would probably have a hamburger and milkshake for dinner. He carries a Johnny Rockets discount card in his wallet, drinks Cherry Coke with his roast beef sandwich, and drives an American car. Even Mr. Buffett's outlook could be considered "eighteenth century vintage American," as evidenced by such commentary as "the US unleashed the human potential better than other countries - it is not that we have better people."
Had Wharton students not known any better, what we would have probably found most out of character about Warren Buffett, the person, is that he is the second richest man in the world. Most of us, however, can't escape the first association we make when we see his face or hear his name, which is that he is an American billionaire.
This dichotomy - an ordinary and quintessential American life amidst extreme wealth - begs the question, what relevance does Mr. Buffett's extraordinary ordinariness have on his incredible success?
Ask any of the nearly one hundred trip participants, and they will likely tell you that Mr. Buffett is so very ordinary because that is what makes him happy. Furthermore, they will tell you they know this because Mr. Buffett himself knows this, and has told them. And it is those two facts - one, that Mr. Buffett does what makes him happy, and two, that he has the emotional wherewithal to recognize what makes him, and others, happy - that has made him so successful.
In addressing almost any subject, what Mr. Buffett says is laden with an understanding of emotions of ordinary folks, less than ordinary folks, or perhaps most importantly - those of himself. And while the man can speak to almost any question, it is through his thoughts on Management and Investing, that we can get some guidance on how to succeed ourselves.
On Management
If Warren Buffett were to author a Dummies Guide to Management, it might boil down to a two step process.
Step One: Hire the right people.
For this task, Mr. Buffett has the following to say, "If I were to have one question on an employment form, it would say 'Are you a fanatic?'"
And Rose Blumkin, founder of Nebraska Furniture Mart (now owned by Berkshire Hathaway) may very well be Buffett's favorite fanatic. If nothing else, all an aspiring manager should know about Ms. Blumkin is that she had price tags hanging from the furniture in her house, because it made her feel "at home" and because, as Mr. Buffett said, "she was that much of a fanatic."
"My kind of woman," he says.
Step Two: Keep them working for you.
"While I can't make someone skip to work, I can find a way to maintain the atmosphere that will keep them fanatics," says Mr. Buffett.
To do so, after buying a company, Mr. Buffett gives managers the opportunity and responsibility to continue to "paint their own paintings." He gives them little direction, telling them simply to "Just keep doing what you have been doing."
While he talks to some managers as often as once a week, Mr. Buffett doesn't call them; instead, he lets them call him.
The advice might sound simple, but Berkshire Hathaway has been in business for forty years and has never lost a manager. Interestingly, this two step process seems to resemble the justification Mr. Buffett's gives for his continuing career - he loves what he does and no one tells him how to do it.
On Investing
For Mr. Buffett, investing seems to be as much about doing the work as it is about making choices.
"Being a good investor is in large part about being able to swing," Mr. Buffett told students. And being able to swing is about having conviction.
"You cannot look for reassurance from others, you have to lock yourself in a room and get conviction." But when you get it, Mr. Buffett says, "You must follow the courage of your convictions. And you have to do it with a ladle, and not a teaspoon."
After listening to Mr. Buffett, one could argue that such courage and conviction are born out of an understanding of oneself. Mr. Buffett states that he always works within his core competence, and ties such a narrow focus to his outlook on success in general. "I don't consider myself poor for not doing something that is outside my core competence. Choosing the wrong spouse, not paying attention to your children, these are mistakes to feel bad about. Worrying about not buying a stock is not worth worrying about." Key Requirements
While in Omaha, Mr. Buffett told Wharton students "being an investor makes me a better businessman, and being a businessman makes me a better investor." Shortly after our visit, Mr. Buffett released his annual letter, in which he expressed his intention to hire a "younger man or woman with the potential to manage a large portfolio." On Mr. Buffett's short list of key requirements was "emotional stability and a keen understanding of both human and institutional behavior." Through the perspective Mr. Buffett shared with us on management and investing, one can see from where these requirements stem.
Mr. Buffett's ordinary life is spent year round in the middle of the United States. While he does take vacations, they typically span only a weekend or so, and the destinations - for example, San Francisco or Yellowstone National Park - don't require a passport. Given a choice, Mr. Buffett would probably have a hamburger and milkshake for dinner. He carries a Johnny Rockets discount card in his wallet, drinks Cherry Coke with his roast beef sandwich, and drives an American car. Even Mr. Buffett's outlook could be considered "eighteenth century vintage American," as evidenced by such commentary as "the US unleashed the human potential better than other countries - it is not that we have better people."
Had Wharton students not known any better, what we would have probably found most out of character about Warren Buffett, the person, is that he is the second richest man in the world. Most of us, however, can't escape the first association we make when we see his face or hear his name, which is that he is an American billionaire.
This dichotomy - an ordinary and quintessential American life amidst extreme wealth - begs the question, what relevance does Mr. Buffett's extraordinary ordinariness have on his incredible success?
Ask any of the nearly one hundred trip participants, and they will likely tell you that Mr. Buffett is so very ordinary because that is what makes him happy. Furthermore, they will tell you they know this because Mr. Buffett himself knows this, and has told them. And it is those two facts - one, that Mr. Buffett does what makes him happy, and two, that he has the emotional wherewithal to recognize what makes him, and others, happy - that has made him so successful.
In addressing almost any subject, what Mr. Buffett says is laden with an understanding of emotions of ordinary folks, less than ordinary folks, or perhaps most importantly - those of himself. And while the man can speak to almost any question, it is through his thoughts on Management and Investing, that we can get some guidance on how to succeed ourselves.
On Management
If Warren Buffett were to author a Dummies Guide to Management, it might boil down to a two step process.
Step One: Hire the right people.
For this task, Mr. Buffett has the following to say, "If I were to have one question on an employment form, it would say 'Are you a fanatic?'"
And Rose Blumkin, founder of Nebraska Furniture Mart (now owned by Berkshire Hathaway) may very well be Buffett's favorite fanatic. If nothing else, all an aspiring manager should know about Ms. Blumkin is that she had price tags hanging from the furniture in her house, because it made her feel "at home" and because, as Mr. Buffett said, "she was that much of a fanatic."
"My kind of woman," he says.
Step Two: Keep them working for you.
"While I can't make someone skip to work, I can find a way to maintain the atmosphere that will keep them fanatics," says Mr. Buffett.
To do so, after buying a company, Mr. Buffett gives managers the opportunity and responsibility to continue to "paint their own paintings." He gives them little direction, telling them simply to "Just keep doing what you have been doing."
While he talks to some managers as often as once a week, Mr. Buffett doesn't call them; instead, he lets them call him.
The advice might sound simple, but Berkshire Hathaway has been in business for forty years and has never lost a manager. Interestingly, this two step process seems to resemble the justification Mr. Buffett's gives for his continuing career - he loves what he does and no one tells him how to do it.
On Investing
For Mr. Buffett, investing seems to be as much about doing the work as it is about making choices.
"Being a good investor is in large part about being able to swing," Mr. Buffett told students. And being able to swing is about having conviction.
"You cannot look for reassurance from others, you have to lock yourself in a room and get conviction." But when you get it, Mr. Buffett says, "You must follow the courage of your convictions. And you have to do it with a ladle, and not a teaspoon."
After listening to Mr. Buffett, one could argue that such courage and conviction are born out of an understanding of oneself. Mr. Buffett states that he always works within his core competence, and ties such a narrow focus to his outlook on success in general. "I don't consider myself poor for not doing something that is outside my core competence. Choosing the wrong spouse, not paying attention to your children, these are mistakes to feel bad about. Worrying about not buying a stock is not worth worrying about." Key Requirements
While in Omaha, Mr. Buffett told Wharton students "being an investor makes me a better businessman, and being a businessman makes me a better investor." Shortly after our visit, Mr. Buffett released his annual letter, in which he expressed his intention to hire a "younger man or woman with the potential to manage a large portfolio." On Mr. Buffett's short list of key requirements was "emotional stability and a keen understanding of both human and institutional behavior." Through the perspective Mr. Buffett shared with us on management and investing, one can see from where these requirements stem.
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