Covered calls are possibly the best investment strategy on the planet. How many other strategies low...
Buffett on Management
03/14/2003 12:00 am EST
We continue to be blessed with an extraordinary group of managers, many of whom haven’t the slightest financial need to work. They stick around, though: In 38 years, we’ve never had a single CEO of a subsidiary elect to leave Berkshire to work elsewhere. Counting Charlie, we now have six managers over 75, and I hope that in four years that number increases by at least two (Bob Shaw and I are both 72). Our rationale: “It’s hard to teach a new dog old tricks.”
Berkshire’s operating CEOs are masters of their crafts and run their businesses as if they were their own. My job is to stay out of their way and allocate whatever excess capital their businesses generate. It’s easy work.
Berkshire acquired some important new businesses–with economic characteristics ranging from good to great, run by managers ranging from great to great. Those attributes are two legs of our “entrance” strategy, the third being a sensible purchase price. Unlike LBO operators and private equity firms, we have no “exit” strategy–we buy to keep. That’s one reason why Berkshire is usually the first–and sometimes the only–choice for sellers and their managers.
My managerial model is Eddie Bennett, who was a batboy. In 1919, at age 19, Eddie began his work with the Chicago White Sox, who that year went to the World Series. The next year, Eddie switched to the Brooklyn Dodgers, and they, too, won their league title. Our hero, however, smelled trouble. Changing boroughs, he joined the Yankees in 1921, and they promptly won their first pennant in history. Now Eddie settled in, shrewdly seeing what was coming. In the next seven years, the Yankees won five American League titles.
What does this have to do with management? It’s simple–to be a winner, work with winners. In 1927, for example, Eddie received $700 for the 1/8th World Series share voted him by the legendary Yankee team of Ruth and Gehrig. This sum, which Eddie earned by working only four days (because New York swept the Series) was roughly equal to the full-year pay then earned by batboys who worked with ordinary associates.
Eddie understood that how he lugged bats was unimportant; what counted
instead was hooking up with the cream of those on the playing field. I’ve
learned from Eddie. At Berkshire, I regularly hand bats to many of the heaviest
hitters in American business.
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