Warren Buffett Quotes on Management
Who manages the businesses in which you invest is important. Managements change over time. While management is important, investing in excellent businesses is the top priority. Having a shareholder friendly management team is another important factor, but not the most important.
“I try to buy stock in businesses that are so wonderful that an idiot can run them because sooner or later, one will.”
Wonderful businesses can sustain poor management for a short period of time. The same is not true in reverse.
“When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.”
When you are invested in a business with a strong competitive advantage, management should be strengthening that competitive advantage, not venturing out on unrelated projects.
“Loss of focus is what most worries Charlie and me when we contemplate investing in businesses that in general look outstanding. All too often, we’ve seen value stagnate in the presence of hubris or of boredom that caused the attention of managers to wander.”
Managements wander when they get bored. Acquisitions and large business deals typically raise management’s collective pulse – even if the deal is not particularly attractive.
“Talking to Time Magazine a few years back, Peter Drucker got to the heart of things: ‘I will tell you a secret: Dealmaking beats working. Dealmaking is exciting and fun, and working is grubby. Running anything is primarily an enormous amount of grubby detail work . . . dealmaking is romantic, sexy. That’s why you have deals that make no sense.’”
Perhaps the most dangerous thing a management team can do is to manage for accounting statement ‘success’ rather than real world growth.
“In the long run managements stressing accounting appearance over economic substance usually achieve little of either.”
Warren Buffett’s take on the institutional imperative and its negative effect on rationality is below:
“Rationality frequently wilts when the institutional imperative comes into play. For example:
(1) As if governed by Newton’s First Law of Motion, an institution will resist any change in its current direction;
(2) Just as work expands to fill available time, corporate projects or acquisitions will materialize to soak up available funds;
(3) Any business craving of the leader, however foolish, will be quickly supported by detailed rate-of-return and strategic studies prepared by his troops; and
(4) The behavior of peer companies, whether they are expanding, acquiring, setting executive compensation or whatever, will be mindlessly imitated.”
How do businesses fight the institutional imperative? By having the right people in place, and by having a culture focused on value creation for shareholders.
“Culture, more than rule books, determines how an organization behaves.”
Having intelligent, honest, hard-working individuals on your team is far more important than the hierarchical structure in which they are organized.
“Having first-rate people on the team is more important than designing hierarchies and clarifying who reports to whom.”
The final two quotes below discuss Warren Buffett’s take on hiring.
“Somebody once said that in looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if you don’t have the first, the other two will kill you. You think about it; it’s true. If you hire somebody without [integrity], you really want them to be dumb and lazy.”
Without integrity a business will eventually succumb to negative public perception from scandals brought about by the lack of integrity.
Who should you look to hire? People who are your peers – or preferably better.
“If each of us hires people who are smaller than we are, we shall become a company of dwarfs. But, if each of us hires people who are bigger than we are, we shall become a company of giants.”
Final Thoughts
Warren Buffett is arguably the greatest investor of all time.
This article examined 107 quotes from Warren Buffett to give you deeper insight into the thought processes of Buffett.
Warren Buffett’s quotes show that he looks for:
1. Businesses with strong competitive advantages
2. Trading at fair or better prices
3. With shareholder friendly managements
4. That can be held for the long run
You can see Buffett’s 20 highest yielding dividend stocks here to see real-world examples of what he invests in.
Buffett is a life-long learner. He advocates for continual self-improvement. He waits for great opportunities to come in business, and does not act until they do.
Whether you are an investor, manager, or looking for new ways to improve yourself, you have something to learn from Warren Buffett.
Follow Warren Buffett's Berkshire Hathaway
Disclosure: None
