The Five Secrets of Warren Buffett, W'51
Five of the key principles that may help you
advance your career, and enhance your life,
that have been basic to the success of fellow Wharton Alum,
Warren Buffett, the "Sage of Omaha"
IN THE NEWS
Buffett to Begin Disbursing $42 Billion Fortune
OMAHA, Neb. ---Billionaire investor Warren Buffett announced plans Sunday to give the bulk of his roughly $42 billion fortune to five foundations in annual gifts of stock starting next month.
The decision represents a stark reversal for the world's second-richest man, who for years had said his wealth would be pleadged to philanthropies after his death.
Moreover, his vast holdings of Berkshire Hathaway Inc. stock had been expected to go largely to the Susan Thompson Buffett Foundation, begun by his late wife. Her foundation has given millions of dollars to hospitals, universities and teachers, as well as to Planned Parenthood and other abortion rights groups.
Instead the 75-year-old chairman and chief executive of Berkshire Hathaway plans to give the largest contribution to the Bill and Melinda Gates Foundation, established by Buffett's friend and Berkshire board member Bill Gates.
--Josh Funk Associated Press, June 25, 2006
Warren Buffett's Five Secrets of Success
by David Garfinkel
As the world's richest investor (and second-richest person after Bill Gates),
Warren Buffett attracts a lot of attention for his stock-market savvy.
Unfortunately, most people in business do not have the time, the skill or
the money to follow in his financial footsteps.
But just about anyone could learn and profit from Buffett's business skills and philosophy.
He's unusually open about how he runs his business and lives his life.
Buffett's business philosophy and his own persona have been achieved
by his adherence to five principles.
Know your strengths and weaknesses;
admit your likes and dislikes.
"I was wired at birth to allocate capital and lucky enough to have people around me early on--my parents and teachers and Susie (his late wife)--who helped me make the most of it," Buffett told Carol Loomis of Fortune Magazine in the June 25 issue.
He started his investment business in 1956 when "seven people wanted me to invest their money for them." He admitted that at the time "I did not have a plan." He let the market---at that time, those seven people---specify his career path and lead him in the direction of his strengths.
His major weakness? Inability to put up with bureaucracy, and inefficiency. So he runs his $141 billion company with fewer than 20 employees at its Omaha headquarters.
Buffett is famous for his few and simple likes. Hamburgers---he drives himself to McDonald's for meals---steak, Cherry Coke, ice cream, and playing bridge. He's fond of one luxury in life---private jets—-and owns a Gulfstream IV-SP.
But he disdains other common rich-guy luxuries: boats, mansions (he still lives in the Omaha house he bought in 1958 for $31,500), fancy cars and pretense in general.
He's not big on technology. He doesn't have a computer in his office and only uses a cell phone when he travels.
Don't take yourself too seriously.
But take what you do---especially for your stakeholders---very seriously.
On the Charlie Rose television show, Buffett was asked what his longtime partner and Berkshire CEO Charlie Munger thought about the plan to give away $30 billion in stock to the Gates foundation.
"He said, 'You finally had a good idea,'" Buffett replied. "It took me 40 years to get that out of him... Yes, one good idea. He's not expecting another one."
Buffett excels at making fun of himself. Some of his better one-liners:
* "I buy expensive suits. They just look cheap on me."
* "There are three kinds of people in the world: Those who can count, and those who can't."
* "I drink five (Cherry Cokes) a day. That's 750 calories. I would have lost 70 pounds a year if I didn't drink them. Really, it's been a lifesaver."
But all the kidding doesn't make a dent in his seriousness about making money: for himself, for his company and for his investors.
"The first rule is not to lose," he says.
"The second rule is not to forget the first rule."
Treat money as a tool,
not a ticket to immortality.
How much would you guess the second-richest man in the world gets as a paycheck each month?
$8,500. He and his CEO Charlie Munger each earn $100,000 a year from their jobs at Berkshire Hathaway.
At the Stanford Law School Directors' College a couple of weeks ago, Munger railed against the "wretched excess of executive compensation," according to the San Francisco Chronicle's Kathleen Pender.
"Corporate compensation in America is now offending a lot of people needlessly and it ought to be fixed," Munger said, clearly echoing Buffett's sentiments.
You could say that Buffett doesn't need the money. But what about former Exxon Mobil CEO Lee Raymond, who received a $400 million retirement package in April. Did he?
And then, there's the $30 billion-plus gift Buffet pledged to the Gates Foundation.
"Some people write a $10,000 check to their alma mater and expect to get a plaque celebrating their generosity," wrote David Leonhardt in The New York Times. "And here was Mr. Buffett making a gift that will effectively send $10,000 to the Gates Foundation every three minutes for decades on end." Leonhardt continued:
For that amount of money, he could have founded Buffett University in his native Nebraska with an endowment larger than Harvard's, or he could have set up the world's richest foundation — the Buffett Foundation — and engaged in a little competitive philanthropy with his fellow bridge player Mr. Gates. Instead, by announcing that he would more than double the holdings of the Gates Foundation, Mr. Buffett made the point that giving away money should be more about results than ego.
Make friends with the media.
Dance to their tune and let them crown you belle of the ball.
Compared to the media shellacking fellow richest guys in the world Bill Gates and Larry Ellison have taken, Buffett has received consistently friendly treatment over the years, almost all of the time.
It doesn't hurt that the companies Berkshire Hathaway owns, or has large investments in, control billions of dollars in ad revenue. Berkshire subsidiary GEICO, for example, spends $300 million on ads each year. But being a large advertiser often doesn't shield a business exec from the snarls and sharp teeth of the media attack dogs.
Attitude and action play a big part for Buffett in his media success. Last week at the New York press conference, "An Italian journalist asked whether Buffett had considered leaving his money to the U.S. Government, which is already organized to address societal ills," reported Thomas S. Mulligan and Maggie Farley of the Chicago Tribune.
A lesser man, a more insecure person, might have ridiculed the question— and, a lot of the reporters in the room did laugh at their Italian colleague, presumably for being so clueless. But Buffett took the question seriously and told the reporter he thought the Gates Foundation could deliver better services more effectively than the feds.
Focus on the fundamentals.
Practice them with the ruthless discipline of a master.
Buffett studied with Benjamin Graham, the guru of value investing, when he was getting his master's degree in economics at Columbia Business School. Buffett was the only student Graham ever gave an A+ to in his securities analysis class.
In the "Owner's Manual" (available for download on the Berkshire site), Buffett explains how he and partner Munger focus relentlessly only on what they are good at:
"We delegate almost to the point of abdication: Though Berkshire has about 190,000 employees, only 17 of these are at headquarters. Charlie and I mainly attend to capital allocation the care and feeding of our key managers. Most of these managers are happiest when they are left alone to run their businesses, and that is customarily how we leave them."
Buffett spends most of his business day reading, thinking and talking on the phone. The one area of his life where he is secretive is what he is buying and selling. He talked to Lynda O'Bryon of PBS's Nightly Business Report about the late Rose Blumkin, plucky and extraordinarily successful CEO of Nebraska Furniture Mart---which she built from nothing and Berkshire invested heavily in.
His comments go a long way to explain what Buffett holds important: "If I had a choice of going to some business school for a couple of years or apprenticing with her for a couple of months---it would be a tough couple of months, incidentally---but you would know how to run a business when you got through... you don't need to know anything except the kind of thing she does."
Takeaway Points to Consider
* "Money frees you from doing things you dislike. Since I dislike doing nearly everything, money is handy."
* "Half of life is luck; the other half is discipline—-and that's the important half, for without discipline you wouldn't know what to do with luck."
* "Bureaucracy is nothing more than the hardening of an organization's arteries."
--William P. Anthony
* "The salary of the chief executive of a large corporation is not a market award for achievement. It is frequently in the nature of a warm personal gesture by the individual to himself."
--John Kenneth Galbraith
* "We can tell our values by looking at our checkbook stubs."
* "If your Riches are yours, why don't you take them with you to t'other world?"
* "Take events in your life seriously, take work seriously, but don't take yourself seriously, or you'll become affected, pompous and boring."
* "You only have to do a very few things right in your life so long as you don't do too many things wrong."
-Warren E. Buffett
* Extreme delegation—-giving away every task that is not in your area of special competency—-can be the recipe for extraordinary riches.
Web Sites Related to Today's Edition
Warren Buffett's Company
Warren Buffett Quotes
Bill & Melinda Gates Foundation
David Garfinkel's World Copywriting Newsletter
David Garfinkel's World Copywriting Blog
About David Garfinkel
David Garfinkel is a veteran marketer with 20-plus year's experience under his belt. As Principal of David Garfinkel, LLC in San Francisco, he has helped people in over 100 industries make millions of dollars for their businesses with his copy, strategic marketing advice, and by teaching them how to write their own copy. He has also provided valuable counsel to the Wharton School Club of Washington, D.C. (www.whartondc.com), one of the most highly regarded clubs in the global Wharton School Alumni Network.
A popular speaker at business events, David is known by industry insiders as "The Marketer's Marketer" because leaders in the field often call on David to help them solve their most thorny problems.
David is Executive Publisher of Knowledge Exchange Press, an imprint of New York-based Morgan James Publishing. Online, he's publisher of the "World Copywriting Newsletter" (http://copynewsletter.com/) and the World Copywriting Blog (http://world-copywriting-institute.typepad.com/world_copywriting_blog/)
He's author of "Advertising Headlines That Make You Rich," and co-author, with Jay Conrad Levinson, of "Guerrilla Copywriting." He is the producer of leading multimedia training products for entrepreneurs and marketing professionals, including "Breakthrough Copywriting," "Killer Copy Tactics," and "Copywriting Templates."
An invitation from Denny Hatch:
This is the 110th edition of "Business Common Sense" and I'm delighted to welcome David Garfinkel as my second guest columnist. Based on the many long, thoughtful responses I receive to this e-zine, many of you readers are terrific writers. Guest columnists are welcome. You know the drill—start with a news story and take off in any direction. Connect some dots. End up with related "Takeaway Points to Consider" that tie the column to marketing, management, information flow, ethics or anything else that can be useful to the person in business. Compensation is not cash but notoriety, possible leads and visits to your Web site. E-mail me your idea and 100 words describing what you have in mind. I'll get back to you quickly. I may do some editing. Nothing will see print without your final OK. I look forward to working with you.
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