Tag Archives: buffett’s bites

CNBC Video Interview of L.J. Rittenhouse

“Is Buffett’s Image Tarnished?” CNBCs Squawk on the Street poses this question to L.J. Rittenhouse at the 2011 Berkshire Hathaway Annual Meeting.  Watch here.

The Buffett/Drucker Project

Why Buffett and Drucker?  Both men champion legacy building and service leadership.

As Warren Buffett celebrates his 80th birthday, we don’t want the media frenzy to obscure his legacy.  As revealed in Buffett’s Bites his legacy is both tangible and intangible.  The intangibles are his well-tested principles of long-term capital allocation and stewardship.  His tangible legacy is the creation of Berkshire Hathaway, a wealth-creating company shaped according to these principles.

Peter Drucker’s legacy is also intangible and tangible. His intangible contribution was his passion for examining business challenges as a renaissance thinker.  For instance, his knowledge of Japanese art allowed him to penetrate Japanese culture, win the trust of clients and become the most successful business consultant to Japanese corporations in the ‘50s and ‘60s. Drucker wrote about all he learned and experienced and published over 30 books.  They are the tangible part of his legacy.  He offered a perspective we need today:  the best leaders respect history and practice principles-based management.

Buffett praises the extraordinary efforts of the ordinary people running the Berkshire business.  Their collective actions result in the long-term economic growth of his enterprise.  Many of his managers are entrepreneurs who work because they love what they do – money is a secondary consideration. They focus on serving their customers and taking care of the people who work hard to create business success.  Buffett calls them artists of business masterpieces.

Buffett would like to see more servant leadership among boards of directors and CEOs today, particularly when it comes to offering out-sized executive compensation packages that include stock options not reported as compensation.  He tells his board never to pay him a salary greater than $100,000 a year – and never to grant stock options.  This leaves more money to invest in Berkshire’s future growth.  It says to Berkshire’s investors:  I will make money with you – not at your expense.

Drucker similarly links service leadership with caring for the future.  In his foreword to The Frontiers of Management, he praises the “ordinary people running everyday businesses and organizations” who take responsibility for building for tomorrow.  “Tomorrow,” he writes. “depends heavily on the knowledge, insight, foresight and competence of today’s decision makers…especially executives…”

At the same time, Drucker recognizes that executives are busy people.  “Every one of them is fully occupied with the daily crisis, the one predictable event in the executives’ working day.  To enable them to see and understand the long-range implications and impacts of their immediate, urgent actions and decisions is the purpose of these essays…”

Such thinking in today’s world seems foolhardy, even frivolous.  How can we expect today’s leaders and investors to consider the “long-range implications of their immediate, urgent actions” when CEOs are in one year and out the next, and investors care little beyond the next quarter’s earnings? Yet this is precisely what I propose to do each week, from now until Warren’s birthday on August 30, 2010.  In a series of blogs, I will showcase Drucker’s seminal ideas and apply them to Buffett’s principles of capital allocation to remind us all to get beyond the daily crisis.

Help me celebrate Warren’s birthday.  Join in the blog and send them to your colleagues and friends.

Almost a decade ago I visited Warren Buffett in Omaha just weeks before the 9/11 attacks.  He has not forgotten the lesson learned from that event. It is as vital today as it was then:  we are all interconnected.  We are all responsible for creating the future by serving those in the present.

Both Drucker and Buffett’s examples offer us the gift of hope and a belief that the future can be better.

Choose Wise Not Dumb Capitalism.


June 7, 2010

To: Congressional Committee on Writing Financial Reform Legislation

From: L.J. Rittenhouse, author, Buffett’s Bites

Never forget our children and our children’s children as you prepare to write historic financial reforms.  Write legislation to avoid the dumb mistakes of the past.  What are these?

  • Advocating policies that promote capital allocation decisions based on accounting fictions and not fundamental economics.
  • Instituting tax policies that favor short-term gambling over long-term investing.
  • Tolerating corporate reporting in financial statements that is unintelligible, uninformed and provides worthless disclosure.
  • Failing to execute policies that draw clear lines between speculation and investing.
  • Choosing to promote legal standards of business over moral standards.

You have a rare opportunity to correct these past mistakes and avoid them in the future.  Use this checklist to guide your deliberations.  Avoiding these mistakes is crucial to get us out of our current economic crisis and build a prosperous and sustainable economy.

My ancestor, David Rittenhouse, patriot, financier, and scientist made General George Washington’s first pair of bifocals.  In this family tradition, I aim to focus and realign your vision.  Choose wisely so we can leave a better world for our children and children’s children.  Here is today’s recommended action:

Action 1:   In all your deliberations, choose wisely.

Win a copy of Buffett’s Bites

Happy Friday! My publishers are currently running a contest for my book. Sign up here to win a free copy of my book Buffett’s Bites. If you are from Canada click here.

Warren Buffett likes companies led by CEOs who talk to investors as partners.

Last week L.J. told Henry Blodget of Yahoo Finance that she does not know what stocks Warren Buffett will buy. In fact, no one knows this. Buffett never discusses this publicly and certainly not at his annual meeting. But we do know he likes companies where the CEO talks to investors like partners. Over the years, Rittenhouse Rankings, Inc. has developed a model to analyze which CEOs do the best job in this department. We award points for certain topics so we can quantify the amount of positive candor and negative FOG (Factless, Obfuscating, Generalities) in an executive communication. We total these points to get a score and then rank order the 100 companies in our survey on the basis of these scores. Over the past 8 years, we have found that high-scoring companies outperform low-scoring companies.

And why not? A CEO that chooses to communicate candidly is less likely to start believing his or her own press. They will have clear strategies and elicit better execution from their teams. Clear, straight and balanced talk shows that a CEO respects investors as owners and partners. Why would any investor trust a CEO who communicated with them in unintelligible and muddled prose? Words are powerful. Smart and principles CEOs know this. Just like Warren Buffett does.

Why did Warren Buffett give Buffett’s Bites an A+?

Buffett’s Bites explains why Susie Buffett told Charlie Rose in a 2006 televised interview that her husband’s shareholder letters would be his greatest legacy. It boils down to two seminal ideas in his letters: first, that investor partnership embodied in attitudes of stewardship is the foundation for financial success and second, that the primary job of a CEO and board is to profitably manage risk to allocate capital wisely for long-lasting wealth. Both outcomes realize Adam Smith’s vision of capitalism’s potential to do good.

Buffett’s Bites: The Essential Investor’s Guide to Warren Buffett’s Shareholder Letters