Warren Buffett: Finding His Sweet Spot
Warren Buffett sticks to his sweet spot — and the results speak volumes.
Throughout Discover Your True North, successful individuals discuss how they became authentic leaders. This forum is a chance to delve deeper into the thoughts and journeys of these influential leaders. In this profile, we will talk about finding your sweet spot with Warren Buffett.
Thank you for your time, Warren. Your first job in investing was a far cry from where you wanted to be. What wasn’t right with your initial experience at an investment firm?
My first job as a stockbroker was all about networking and selling. That’s not where I felt comfortable. It’s not where I feel comfortable today. In that culture, because your commissions were based on trades, it was common practice to pressure clients to trade aggressively. You were supposed to encourage activity even when it worked against a customer’s best interests. But my values said that people were important, honesty was important. To this day, I say we should act in people’s best interest when we can.
After that experience, Benjamin Graham hired you at his firm. In Discover Your True North we learn you had read his book, The Intelligent Investor, at a young age and then were a student of his at Columbia. It sounds like you were drawn to Graham’s style. Why was that?
He was interested in the value of stocks and companies. You acted when you thought a valuable company was being priced low; you looked for opportunities. Plus, I knew what kind of person he was. When I moved to his firm, I felt comfortable. There, I knew that I could apprentice under someone I respected and focus on analyzing stocks. When Graham closed his firm, I felt I had learned what I needed to open a firm of my own.
You opened your firm back in Omaha at the age of 26. Were you nervous? That’s a bold move for someone of such a young age.
I had a philosophy and I wanted to practice it. I decided to focus on companies that I believed in and then I could feel confident in the stocks. I looked for quality leadership and decided to only do amicable acquisitions. I wanted partnerships, not assets. Starting a firm at 26 might have been bold, but if you’re focused on the right things it is not quite as risky as it sounds.
Every day you have to decide whether or not you’ll do business with a given company. What separates a company you want to work with and a company you don’t?
I ask potential business partners, “Do you love the business, or do you love the money?” I only want to work with people who love the business.
Traditionally, there is not a lot of transition in the boards of the companies you acquire. Is this intentional, maintaining continuity?
Of course. Some investors want to move the boards to get short-term results. I retain the leaders because, often, they are why I partnered with the company. I try to be as transparent as possible with the people I work with so everyone always knows where he or she stands.
It seems like your sweet spot is analyzing companies and judging leadership. Rarely do you venture into the day-to-day management. Does this allow you to avoid conflict?
As long as I have been in the business I have tried to avoid being a hands-on manager. Conflict is my weakness. I want to avoid it if I can. Of course, company leaders can always call me for advice. It’s just that I want the decisions to be theirs in the end. I prefer to focus on where my strengths are. I like to look at a company and its leaders and decide if it is a good combination, a good investment. Then I can leave the day-to-day operations to the people who are in place.
Is this appreciation for the fundamentals of a company’s strength how you avoided the Internet bubble in the 1990s?
Maybe. I stuck to what I understood to be true. I value companies that produce a valuable product, stocks that have a reasonable price. I saw some Internet stocks collapse because they were valued far beyond their earnings.
You also believe in your instincts and the information you gather. You are also candid about how much you trust people. Have you ever been betrayed and thought about changing your approach?
I believe in trusting people. Occasionally, someone will violate my trust, but on balance I am better off in continuing to trust others.
Thank you for speaking with us, Warren. Others will surely find your modest approach to business valuable as they pursue their own True North.