Investing and culture

Why Warren Buffett might love what we do

By Maximilian Buyken, Principal /

Would you like to make investment decisions and shape companies the way Warren Buffett has done? Do you have a successful investor’s mindset? 

I recently finished listening to “The Snowball: Warren Buffett and the Business of Life” (1), because I wanted to dive deeper into the fascination that is the legendary investor Warren Buffett. Before, I had watched videos of some of his talks and interviews. In some of them, when asked for advice, he recommended imitating how successful people act, approach problems, and form habits. So why not learn from him? The incredible level of detail in “The Snowball” almost made me feel like I know him personally*. 

That way, I realized something very peculiar: Previously, I often saw Warren Buffett being described as “just” a phenomenal investor, i.e., someone incredibly adept at choosing the right businesses (within his circle of competence, having an “economic moat”) at the right time (being undervalued and even offering a margin of safety). This certainly was and still is one of the cornerstones of his investment philosophy. However, in my opinion, this description falls short of grasping his holistic success formula. What else constitutes his success, you ask? These are some of my favorite insights that relate to Manres’ work in the realm of cultural transformation:

1 / Rely on your “inner scorecard”

Throughout his life, Warren Buffett has made countless statements and decisions that were unpopular, to say the least. He is even ready to publicly criticize the companies that he owns if it seems right to him. Just to name a few examples: After having bought the investment bank “Salomon Brothers”, he openly positioned himself against excessive bonus payments, knowing that he would turn their profiteers against him. On another note, on multiple occasions, he advocated higher taxation of high incomes (especially investment returns), definitely not making friends among other billionaires. He also argued in favor of stricter accounting legislation/regulation, turning against countless companies who had used previous loopholes in their favor. Our own work with leaders relies heavily on this principle and attitude, namely having clear values and authentically embodying them. 

Some questions for you: Could you write down your “inner scorecard”? What are the principles that you are not willing to compromise? What opinion(s) of yours would you gladly accept as being “unpopular”?

2 / Value relationships

All this is not to say that Warren Buffett doesn’t care what people think about him or that he likes to provoke conflicts. On the contrary! He is said to hate and avoid conflicts. But obviously, he draws a well-defined line when it comes to his principles. Apart from that, he has always been concerned with protecting his reputation. It is almost as if he is always willing to put out his hand and engage with anyone sharing his values. In fact, throughout his life, he has always placed great value on friendships and relationships with people he deeply trusts. He has made a habit of putting these people into positions where they would make decisions and shape entire companies (e.g., companies owned by Berkshire Hathaway) in a way that was consistent with his philosophy. These people were most certainly also very competent, but the relationship, friendship, and trust seem to have always been the deciding factor. This mirrors our own conviction about relationships as a driving force of business success.

Some questions for you: What part do trust and relationships play in your investment and leadership decisions? What do you do so that trustful relationships foster in your environment?

3 / Drop your ego and practice self-distancing

Some of Warren Buffett’s controversial positions (e.g., the ones on taxation) offer more than “just” a peek at his principles: They also show a great deal of humility. One of his most famous quotes attributes a large portion of his success to “winning the ovarian lottery”. One might assume that someone who has beaten the market with such stunning consistency would see himself as the creator of his success. The important point, however, is not whether he could have made it anywhere in the world with his skills and abilities or how much of his success is actually due to his skills (versus being born an American). The point is: What kind of a person do I become when I think this way? Mind you, this belief never meant that Warren Buffett doubted that he had talents and that they were vital to his success. It just means that he is a grateful person who therefore doesn’t feel like the world owes him something but rather that he owes the world, also building a strong attitudinal and motivational foundation for his philanthropy. This goes to show that economics and ethics as well as morality go hand in hand very well (and should empower one another – one of our strong beliefs at Manres). And let’s be honest: The fact that he still drives to the airport himself to pick people up is just incredibly likeable. 

Some questions for you: Do you feel like the world owes you or like you owe the world? Which belief do your actions reflect? Does success come from taking or from giving?

4 / Understand and act like there is more to a business than what meets the eye

This is the part where everything comes together: I’m not sure whether Warren Buffett ever deliberately shaped company cultures because he knew that to be a success factor or whether he simply couldn’t help it due to his “inner scorecard”. The fact is: As soon as he had the power to do so, he started influencing corporate cultures by weaving his principles (see the previous paragraphs) into every major decision that was his to make or to influence. He knows that success does not only come from the business itself (e.g., one with an “economic moat”), but also from how this business is conducted. This is why he recommends looking for three things in people: intelligence, energy, and integrity (“… and if they don't have the last one, don't even bother with the first two”, he said!). At least the latter two pertain to this “how”-aspect. He once stated that children quickly learn what their parents place importance on. The same can be said about businesses: People in a company quickly learn – and I would add: imitate – what their leaders place importance on. Therefore, to me, he is much more than “just” an incredible investor: he is a true leader, shaping corporate cultures in ways that match his own principles that are – in turn – a cornerstone of his success. Things have come full circle.

Some questions for you: Do you – as a leader or as an investor – use your influence to shape not just the business side of your investment, but also the cultural side? Are you aware of how strongly culture is connected to getting a return on your investment? What was the last thing you did to positively shape the culture in a company you invested in?

Warren Buffett once summed up all of this himself: “Managers and investors alike must understand that accounting numbers is the beginning, not the end, of business valuation.”

Mr. Buffett, if – by some miraculous chance – you are reading this: I’d be honored to listen to your wisdom in this matter and to talk to you about our work. The next time you’re in Zurich, Hamburg (or wherever, actually), just drop me a line and I’ll be happy to invite you to a nice burger, fries, and a coke.

We wish all our readers and friends a week full of great investment and leadership decisions

Your Manres team

 

(1) Schroeder, A. (2008). The snowball: Warren Buffett and the business of life [Audiobook]. Retrieved from www.audible.com/pd/The-Snowball-Audiobook/B002V01IXA;

* It is important to me to say that everything in this article that is not a “verifiable fact” (e.g., Mr. Buffett’s buying the investment bank “Salomon Borthers”) is my interpretation of the things I heard and understood while listening to his biography. It would be presumptuous of me to assume that I now know his deepest thoughts, motivations, and attitudes. However, I feel like I’m “close enough” to send a powerful message out into the world.