Tag Archives: Leadership

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.

American Capitalism Run Amok: 3 Questions That Won’t Be Asked at Berkshire Hathaway’s Meeting

This weekend, I am attending  my 14th Berkshire Hathaway shareholder meeting. Over the years, I’ve watched Berkshire grow from an upstart insurance/investment company to an elephant-sized conglomerate. By now I know the questions that will surface in Buffett’s six-hour Q&A-athon. I also can guess the questions that won’t be asked. Why? They expose the underbelly of American capitalism. Armed with my analysis of Berkshire’s economic principles (Buffett’s Bites, McGraw-Hill 2010), here are three leading candidates: Read More at the CommPro Blog

When Principles Trump Personalities

David Sokol’s departure refocuses attention on Berkshire’s succession horse race.  It also underscores a vital fact: at Berkshire, principles trump personalities.

Buffett’s moral standard has always been clear:  Never do anything that you would not want your family and friends to see on the front page of the local paper. This principle is reinforced at every Berkshire shareholder meeting with the screening of a 1991 film clip.  In it, Buffett testifies before Congress as the Interim Chairman of Salomon Brothers.  He wants to win back confidence lost after Salomon’s Treasury auction scandal.  Buffett repeats the caution he gave to Salomon employees: Lose money for the firm, and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless.

David Sokol appears to have crossed this line and exercised poor judgment regarding Lubrizol.  He has stated [and Buffett has affirmed] that he wanted to leave Berkshire in the past, but was persuaded to stay.  Now Buffett has accepted Sokol’s resignation.  Did Buffett act ruthlessly?  No, he acted predictably on principle.  Should he have grilled Sokol who told him in “a passing comment” that he owned shares in Lubrizol?  Most likely, but Buffett operates on trust.  He trusted Mr. Sokol who has contributed immensely to Berkshire’s success.

Sokol’s departure raises an important question about Berkshire’s future. Widely regarded as a leading candidate to become CEO, Sokol had been acting as Berkshire’s Chief Operating Officer, an increasingly important role. Writing in his 2007 shareholder letter, Buffett reminded investors that earnings from non-insurance operating companies, were and would continue to exceed earnings from investments.  He wanted to buy companies outright.  But operating businesses require special management skills – the kind that Sokol displayed in his rapid turnaround of troubled Net Jets and leadership at Johns-Manville.  Buffett’s gracious comments in his press release credit Sokol’s contributions.

The succession question raised by Sokol’s departure is important:  who among the leading CEO candidates has the experience and skills to be the insider turnaround guy for businesses in trouble?  Anyone in this job is not likely to win popularity contests.  Perhaps Berkshire needs a triumvirate management model:  a CEO (Chief Capital Allocator and Chief Risk Officer, the principal roles played by Buffett), a Chief Investment Officer and a Chief Operating Officer.

This decision will be made by Berkshire’s board, which not only upholds fiduciary responsibilities to owner-partners, but also stewards Berkshire’s unique trust and principles based culture.  The current media frenzy shows how tough a job this is in a Twitter-fed environment where straight talk generates bigger headlines than blatant obfuscation.

On the Money! NPR Interview with LJ Rittenhouse

Today, Warren Buffett tapped hedge fund manager Todd Combs to be Berkshire Hathaway’s Chief Investment Officer. How will Todd Combs fit into Berkshire? Tune into NPR‘s On the Money interview last week with L.J. (Laura) Rittenhouse, author of Buffett’s Bites to learn what’s important about the Berkshire culture. Host Steve Pomeranz calls Buffett’s Bites his “favorite new book” and asks L.J. how she got Buffett’s attention: the Omaha oracle posed for the book jacket and signed his photograph inside. Learn the answer to this and other questions like: What is Buffett’s greatest investment tip? Click here.

The Five Top NPR On the Money Interview Questions

1. What is the Warren Buffett investment tip that most investors ignore?

2. How difficult is it to find companies that are trustworthy and transparent?

3. Where can you get a sneak preview of some of the most informative, engaging and candid shareholder letters from 2009?

4. What do most folks miss when they read Warren Buffett’s shareholder letter?

5. What well-known rule makes Berkshire Hathaway one of the most respected companies in the world?

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.