The Real Warren Buffett: Managing Capital, Leading People (英語) ペーパーバック – 2004/3/11
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The Real Warren Buffett unveils the secret of how Warren Buffett led Berkshire Hathaway to staggering success.
Zeroing in on his original management style and leadership approach, author James O'Loughlin exposes the powerful and practical lessons of Buffett, demonstrating how he became the second richest man in America.
Many best-selling books have tried to unlock Buffett's secrets by analyzing his genius as an investor. But they missed the real point! THE REAL WARREN BUFFETT is the first book to uncover the truth about how Buffett has delivered his astonishing performancenot by being a stock picker but as a CEO, leading people and managing capital. Zeroing in on his original management style and leadership approach, THE REAL WARREN BUFFETT stands apart with its powerful and practical lessons in corporate strategy, leadership, and the stewardship of publicly owned companies.
Even though I am very familiar with Buffett's investment style, I still found this book valuable. There is something special about hearing a concept a second or third time, but from someone else. It makes you understand it on a completely different level. This is what this book has done for me. I particularly liked the author's explanation of how Buffett used the insurance business for its free float that he used to make other investments. The insurance business was like a bank, but better because float is like deposits but at a much cheaper price.
Some people might say that there is nothing new in this book, but I never get tired of hearing the same thing. It just reinforces to me that I am doing the right thing. I really enjoyed reading it.
- Mariusz Skonieczny, author of Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market
O'Loughlin's "The Real Warren Buffett: Managing capital, leading people" focuses on both Buffett's skill as an investor and his role as a business leader. Most people are perhaps more familiar with the first yet curiously we are likely to learn more from the second. Why, well because Buffett was "hard-wired" with the kind of logical mathematical brain that favoured him in investing whereas he had to learn to become a good leader.
This book is a great help in addressing how Buffett became a sucessful business leader. It talks about the "explosion" in Buffett's cognition after 20 years being a successful stock picker which came in part from his exposure to Charlie Munger, his subsequent business partner. Just as Benjamin Graham influenced his early approach to investing, Charlie Munger was an equally important influence on his later approach to investing and business leadership.
O'Loughlin highlights how Buffett first began to address the issue of the "institutional imperative" in organisations and then realised it applied to him as well. What is the institutional imperative? It refers to the tendency of organisations to resist any change to its current direction. Buffett liked to quote Churchill who said "you shape your houses and then your houses shape you" and Lord Keynes who said "The difficulty lies not in the new ideas but in escaping from the old ones". In Buffett's case this meant escaping the old ways of valuing businesses that he learned from Ben Graham and learning new ways he was exploring himself urged on by Munger.
In Buffett's case his imperative was to stay focused on stock picking or "renting stocks" as O'Loughlin refers to it, whereas Munger was encouraging him to look at value creation and at those businesses that had enduring franchises (the great businesses as Munger called them). Such businesses had a future whereas for most of Buffett's short-term stock picks, their best days were behind them.
Once he started to acquire these "great franchises" he was faced with a new problem, 'How to motivate their managers to stay running the business long after most had any financial need to do so'? Buffett's answer to this question is the main reason he is as successful as a business leader. How did do it?
His challenge was to get the new managers to continue to think like owners. He did this by guaranteeing their autonomy, but trusting them and by giving them a reputation to live up to. He encouraged them to "run their companies as if these are the sole asset of their families and will remain so for the next century" (Buffett, Letter to Shareholders, 1999).
Ralph Schey noted, "The greatest strength he has - giving you a lot of freedom to run the business the way you want. And that way, you can't pass the responsibility back to him" (ex CEO Scott Fetzer). Bill Child noted, "He has a way of motivating you. He trusts you so much that you just want to perform" (R.C. Willey Home Furnishings). On retiring after 20 years working with Berkshire, Ben Rosner commented to Buffett (paraphrase)"I know why it worked" he said "you forgot you bought the business and I forgot I sold it". In 2000 Buffett said, "in our last 36 years Berkshire has never had a manager of a significant subsidiary voluntarily leave to join another business".
In re-reading the book now, I am struck by the emphasis that O'Loughlin places on "development" which is of course central to my own research on Buffett. I am also reminded that just because a book is eight years old, and there have been many other books on Buffett since (most of which I have read), doesn't reduce this book's many useful insights.