George Schultz on Warren Buffet
“I offer you the real Warren Buffett. A manager of capital.And a leader of people.” – James O’Loughlin
He has been called the Oracle of Omaha, the Forrest Gump of finance and the corn-fed capitalist, just to name a few. Indeed, Warren Buffett has no shortage of nicknames to summarize his success. At a net worth of $54 billion, he is the fourth richest person in the world and widely considered the greatest investor ever. There have been over two dozen books written solely on his story, philosophy and thoughts. His annual letter to shareholders touches more than 300,000 hands and over 15,000 faithful flock to Omaha once a year to hear him speak at what has been dubbed “The Woodstock for Capitalists.”
“Yet, here’s the curiosity: Most people, when they think of Buffett, think of him simply as an investor. That is sad – and also inevitable.” The truth, however, is that he is far more than a stock-picker; he is also a phenomenal business leader and an excellent example of a total leader.
“We’ve been deploying capital since I was 11. That’s our business.” – Warren Buffett
Warren likes to say that he won “the ovarian lottery.” He was born into a successful family – his father was a U.S. Representative – and grew up in Omaha, Nebraska with two siblings. He greatly admired his father but had a very difficult relationship with his mother. Warren had the good fortune of starting early. He bought his first stock at age 11 and filed his first tax return at age 14. He entered Wharton in 1947 before transferring to University of Nebraska–Lincoln and later earning an MBA from Columbia Business School.
In 1954, after graduating from Columbia, Buffett joined Graham-Newman Corp. and earned the opportunity to work for his mentor and former professor, Ben Graham. This changed Warren’s life and set him on a now famous and well-documented path to success. In 1956, after Graham closed his firm, Buffett moved back to Omaha and started the Buffett Partnership, a small hedge fund that he ran (with enormous success) until 1969. After deciding that “there is more to life than chasing an investment habit,” Warren closed the partnership, planning to spend more time with family and pursue other interests. However, through a personal investment, Warren soon became involved with Berkshire Hathaway Inc. (“BRK”), a textile manufacturer. He became CEO and Chairman. He exited the textile business, converted BRK into a public holding company and late partnered with close friend Charlie Munger. Through investments, both public and private, Buffett has grown BRK into a $250 billion company, earning the well deserved nickname “The Oracle of Omaha.” To put that into perspective, $10,000 invested with Buffett at the start of his tenure would be worth approximately $500 million today. Warren remains CEO and Chairman of BRK. He lives in the same house he bought in 1956 and continues to lead a very simple life. He is active in business and politics, and has pledged 99% of his fortune to the Bill & Melinda Gates Foundation.
“I really like my life. I arranged my life and so that I can do what I want… I tap dance to work, and when I get there, I think I’m supposed to lie on my back and paint the ceiling.” – Warren Buffett
Alice Schroeder published a biography on Buffett in 2008 and aptly named it, “The Snowball: Warren Buffett and the Business of Life.” Indeed, much can be learned from studying Buffett – both about investing and, more importantly, about life. In my opinion, Buffett is the perfect example of a Total Leader because he allows his core set of values to inform and shape his life. You would be hard pressed to find someone more authentic and, for that matter, passionate. Warren eats, sleeps and breathes investing. As a result, he is constantly integrating his different domains: work, community, self and family.
As Buffett jokes, “I enjoy the process far more then the proceeds, though I have learned to live with those as well.” He is the rare example of someone who truly tap dances to work. How does he do it? For one, he followed his passion and found it early. However, there is much more to it than that. Buffett also carefully arranges his life so that he doesn’t do anything he doesn’t want to. As someone who once worked for him said, “He is amazing at saying no and not making you feel bad about it.” Buffett works in Omaha, where he feels at home. He doesn’t fill his day with board room meetings. Instead he buys companies with management teams in place and takes a hands-off approach, motivating his managers through trust. Buffett doesn’t have employment contracts or grand strategic plans. As Charlie Munger has said, BRK operates in “a web of deserved trust.”
Despite his professional success, Buffett maintains a strong community domain. He plays bridge 12 hours per week, stays in close contact with a diverse set of friends, advises on political policy and advances philanthropy. Importantly, Buffett sees himself as a teacher. He educates through his lengthy annual letters and takes time each year to meet with student groups from across the globe.
In terms of self, Buffett is famous for following his inner scorecard. As he has said in the past, “The big question about how people behave is whether they’ve got an Inner Scorecard or an Outer Scorecard.” Warren doesn’t worry about what others think. He does what makes him happy – picking stocks, drinking Cherry Coke and eating Dairy Queen. He is also fanatical about instilling good habits and has said on many occasions that “chains of habit are too light to be felt until they are too heavy to be broken”
In his early years, Buffett allowed work to override family. On his honeymoon, Warren read aloud Security Analysis to his wife, Susie – one extreme form of integration! As Buffett has gotten older he has done a much better job of devoting time to family. Today, Howard Buffett (Warren’s son) serves on BRK’s board and Warren seldom misses a family event. In fact, Warren famously did not bid on LTCM because “he was trying to leave his office to get to a granddaughter's birthday party.” Buffett also experiments: he charges Howard rent based on his weight! Lastly, and maybe most importantly, Buffett has encouraged his 3 children to find their passion and is adamant that “a very rich person should leave his kids enough to do anything but not enough to do nothing.”
The lesson of Warren Buffett is that he has been incredibly proactive throughout his life at forming the qualities of character that he admires. He doesn’t do things he doesn’t want to do. He says no. He integrates. He experiments. He makes time for himself, his family and friends. He does what he loves. He operates in a web of trust. Potentially most instructive though, Warren wasn’t always a personal success. Warren Buffet’s life is fascinating to study because he has continued to improve and integrate.