Leadership Training by Warren Buffett
I’m a raving fan of Warren Buffet. I believe I’ve read every piece he’s ever written (mostly his annual shareholder letters), along with every piece written about him. I believe the biggest part of his genius is the way in which he can simply, quickly and thoroughly explain even the most complex financial topics. I never really understood derivatives until I read one of his shareholder letters. I believe he referred to them as “weapons of mass wealth destruction.” This reference quickly relays to you his position on the subject.
Over the years, there’ve been four key Warren Buffet ideologies I’ve followed with great success. He has many more than these four, but these are the ones I cherish the most. I want to share these with you in the hopes they'll inspire you like they did me. They are:
- When people are greedy be fearful, and when people are fearful be greedy.
This concept guided Assurance in 2008–2009. During this time period most companies were cutting costs to maintain a certain level of profitability in light of the recession. We were a fortunate company at that time considering we had a solid balance sheet and capital reserves. It was during this time period I inspired our board with this Warren Buffet quote. We went on a hiring spree those years and added to our company some of the best talent in the industry. The work we did in that 12 month period has allowed us to maintain a 15%+ compounded growth rate for the past five years. Thanks, Warren!
- I would rather buy a great company at a fair price than a fair company at a great price.
I’ve reflected on this phrase many times when I’ve been approached with a deal from someone that’s basically too good to be true. I always make my team decide first whether this is a great company. If not, we generally walk away. We’ve done this three times over the past five years. I have the fortunate circumstance to talk with the individual who purchased one of these companies at a great price. In the end, the investment didn’t work out for him and he had to fold the company. I felt vindicated to say the least.
- It takes 20 years to build a good reputation and five minutes to destroy it.
I think about this often in my daily interactions. For me, I’ve tried to always adhere to all my commitments with my employees and clients. In my business, commitments are the way to build or destroy a reputation. I’m definitely hopeful people feel a verbal commitment from me is better than a written contract. This is the legacy I hope to one day leave.
- Price is what you pay, but value is what you get.
For Assurance, this comes up often when we’re trying to secure new great, talented people. Sometimes these people come with a great cost. When we’re working out the financial package and my colleagues think the cost is too great, I ask the simple question – what value are we getting? Generally we find that the person brings to us a new skill set, new market potential or new service for our company. These are items of great value for us and this is what justifies the cost.
I hope these four ideologies help inspire you in your leadership efforts. If you have the time, read all of the annual letters written by Warren Buffet. It’s just about the greatest financial education you can ever get. Good luck in all your business endeavors.
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