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Warren Buffett Leadership

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Dave LaGamba

on 21 March 2014

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Transcript of Warren Buffett Leadership

Leadership
Warren Buffett
Warren Buffett was born on August 30, 1930, in Omaha Nebraska to Howard and Leila Buffett.
His father Howard worked as a stockbroker and also served as a US congressman. His mother was a stay at home mom.
Nicknamed: “The Oracle of Omaha”
Warren Buffett Bio
At a very young age, he demonstrated his mathematical abilities for people by adding very large columns of numbers in his head. Some even called him a mathematical genius
Prodigy?
At the age of eleven years old, Warren made his first purchase in the stock market and bought three shares of “Cities Service Preferred” stock at the price of $38.00 per share. The stock price fluctuated and Warren held onto it, until again reached $40.00 per share and at this time he sold it. This proved to be a tough lesson for Warren. He learned patience in investing in the long run can pay off
Later, the price went up to $200.00 per share!
Investing
Berkshire Hathaway
Geico (Insurance)
General Re (Insurance)
NRG (Insrance)
Berkshire Hathaway Assurance (Insurance)
Approx. 84% of Mid American Holding Company (Energy)
Union Underwear Corp. - Fruit of the Loom (Textile)



Fechheimer Brothers
Garan (Textile)
Russell Corporation (Textile)
H.H Brown Shoe Group (Footwear)
Acme Boots (Footwear)
Justin Brands (Footwear)
Companies Owned by
Berkshire Hathaway
In June of 2006 Warren made an unprecedented announcement, by vowing to give 85% of his fortune to a charity.
He decided to give it to “The Bill & Melinda Gates Foundation” ("Warren Buffett biography," 2013), which turned out to be the largest charitable donation in the history of the United States.
Philanthropist
Warren Buffett’s net worth had grown to roughly $44 billion ("Warren Buffett biography," 2013).
He still lives in Omaha Nebraska, in the same modest home he bought in 1958 for $31,500, although the home’s value has appreciated to approximately $700,000.00!! (Nye, 2013).
Live Simply
Democratic style of leadership
Hands off approach
Empowers his management team to make the decisions they need to make, without his approval
“We delegate to the point of abdication” (Kotelnikov, n.d.)
“Think like owners” (Heller, 2006).
Leadership
“The tendency of executives to mindlessly imitate the behavior of their peers, no matter how foolish it may be to do so” ("How to Avoid the Institutional Imperative," n.d.).
Need for managers to act and do like their peers no matter how irrational it may seem.
Peer pressure for CEOs.
Institutional Imperative
Must have complete confidence in his managers
Trust them with their companies
Allow them to run them the way they see fit
Not subjected to meetings at headquarters nor financing worries nor Wall Street harassment.
“They simply get a letter from me every two years and call me when they wish” (Warren Buffett)
Process Motivation Theory
He understands which behaviors the managers need to fulfill
Uses “reward power” – They know that there is a reward for their behavior and that is one of the reasons they try to achieve it
Great concern for the output of the company and return on investments.
Strives for maximum performance and employee satisfaction” (Kulikowski, 2011).
Confidence in his managers and their abilities to run their companies.
Keeps his team focused on the task at hand

Management rewards are tied directly to the performance of their own business, not directly with Berkshire Hathaway

Team Leader

Positive self-concept
Leadership Style
Valued as the most important aspects by Warren Buffett
“We can afford to lose money – even a lot of money. We cannot afford to lose reputation – even a shred of reputation” (Heller, 2006)
“It can take years to develop trust, but it can only take one lie to destroy trust and relationships” (Lussier & Achua, 2013).
Trust, Reputation and Integrity - Ethics
Warren Buffett Leadership Theory
Like most managers today, they don’t like being surprised by bad news; they would rather hear it firsthand
“You can talk to me about what is going on as little or as much as you wish” (Heller, 2006).
People essentially are left to do their jobs to the best of their abilities
If there is a mistake made, there isn’t any finger pointing and they will take responsibility for the mistakes in their business
"If there is bad news, let me know early” (Heller, 2006)

Coaching his managers

“Subordinates are treated as equals” (Heller, 2006).
Management Styles
“Selecting individuals with whom you work – individuals with whom you trust”
Surround yourself with ten or twelve individuals that you genuinely like and enjoy working with
Can lead to a more fulfilling career as a manager
Circle of Competence
Stick to Fundamental Values - Go with what you know and trust your instincts
Live simply – Don’t be distracted by the ‘things’ and other possessions they can have as leaders, so much so that it sometimes that the motivation of leadership can become clouded
Give back - Remember the purpose by which one is a leader; not to take from the world, but to be an asset and a person of value
Rule No.1: Never lose money. Rule No. 2 : Never forget rule No.1.”
3 Most Important
Leadership Lessons
References
Lussier, R. N., & Achua, C. F. (2013). Leadership: Theory, application & skill development. Mason, OH: South-Western Cengage Learning.
Nye, J. (2013, January 21). Billionaire Warren Buffet still lives in modest Omaha home he bought for$31,500 in 1958 (though he does have $4m Californian home - but even that wasa bargain). Retrieved January 28, 2013, from http://www.dailymail.co.uk/news/article-2265703/Warren-Buffet-lives-modest-Omaha-home-bought-31-500-1958.html
Schroeder, A. (n.d.). How Warren Buffett Made His First Dime. PARADE.com. Retrieved January 27, 2013, from http://www.parade.com/hot-topics/0809/how-warren-buffett-made-his-first-dime
Warren Buffet Leadership. (2012, December). Warren Buffet Leadership. Retrieved January 31, 2013, from http://www.leadership-with-you.com/warren-buffet-leadership.html
Warren Buffett: A short biography. (2013, January 21). Warren Buffett Secrets. Retrieved January 28, 2013, from http://www.buffettsecrets.com/warren-buffett-biography.htm
Warren Buffett biography. (2013). The Biography Channel Website. Retrieved January 27, 2013, from http://www.biography.com/people/warren-buffett-9230729
Ahmed, M. (2010, June 27). Warren Buffet’s (World’s most successful investor) management style and CIOs. Engaged IT for the CIO. Retrieved January 28, 2013, from http://mubbisherahmed.wordpress.com/2010/06/27/warren-buffets-worlds-most-successful-investor-management-style-and-cios/
Anne, R. (2011, December 5). Circle of Competence. Blogging4Jobs RSS. Retrieved January 30, 2013, from http://www.blogging4jobs.com/blogs/circle-of-competence/
Business 2.0: My Golden Rule. (n.d.). CNNMoney. Retrieved January 31, 2013, from http://money.cnn.com/popups/2005/biz2/golden_rule/frameset.9.exclude.html
F10-MANA3001 - Warren Buffett. (n.d.). F10-MANA3001 - Warren Buffett. Retrieved from http://f10-mana3001.wikispaces.com/Warren Buffett
Heller, R. (2006, July 08). Management styles & leadership styles of Warren Buffett & Bill Gates. Management Styles. Retrieved January 30, 2013, from http://www.thinkingmanagers.com/management/management-styles.php
How to Avoid the Institutional Imperative. (n.d.). All Business. Retrieved January 29, 2013, from http://www.allbusiness.com/company-activities-management/financial/14597416-1.html
Kennon, J. (n.d.). Warren Buffett Biography. About.com Investing for Beginners. Retrieved January 28, 2013, from http://beginnersinvest.about.com/cs/warrenbuffett/a/aawarrenbio_3.htm
Kotelnikov, V. (n.d.). WARREN BUFFETT: Success Story, Buffett's Investment Criteria, 7 Contrarian Principles, Key Teachings. WARREN BUFFETT: Success Story, Buffett's Investment Criteria, 7 Contrarian Principles, Key Teachings. Retrieved January 29, 2013, from http://www.1000ventures.com/business_guide/cs_investors_buffett.html
Kulikowski, L. (2011, December 21). 5 best business lessons from Warren Buffett. TheStreet. Retrieved January 30, 2013, from http://www.thestreet.com/story/11352395/1/5-best-business-lessons-from-warren-buffet.html


 
Investing
Leadership
Management
References
Full transcript