Built To Last
Recently, I happened upon a 2006 interview with Warren Buffet and he was recounting story after story of some of the companies that he has purchased and then he laid out his secret to success.
Mr. Buffett is the fifth wealthiest person in the world. He’s been called a business magnate, an investment genius, and a generous philanthropist. He has a net worth of over $108 billion and is the chairman and CEO of Berkshire Hathaway.
Berkshire Hathaway Inc. is a holding company and its main business and source of capital is insurance, from which it invests in a broad portfolio of businesses and securities.
During the interview, the reporter, Charlie Rose, kept trying to pull back the layers or Mr. Buffet’s genius and what has made him so incredibly good at picking companies and investments. The reporter asked if it had anything to do with the state of the economy?
Mr. Buffet replied no, he said he never makes a decision based on the state of the economy. Then the reporter dug a bit more and asked if there was a calculation in the financials of the companies he invested in that held the secret?
Mr. Buffet admitted that he studies the annual reports and financial statements diligently because they reveal certain things about how the company is being run. Ok, now were getting somewhere, said the please look on the reporter’s face.
Finally, Mr. Buffet said it really boils down to three things and it’s the same three things that are the hallmark of how he runs Berkshire Hathaway.
He said the leaders of the company that they are investing in or the heads of the businesses that he buys, must possess intelligence, energy and integrity.
He went on to say that you can run a business effectively with intelligence and energy, but if the person or persons at the top lack integrity, it will catch up to them sooner or later. Integrity can’t be faked, at least for long.
When I’m looking for a new hire, I look for the same thing. It’s important to have some knowledge about the business, nonprofits or specific knowledge about the department that you’ll be running, and be intelligent in general.
Secondly, you have to be enthusiastic about the work. Energy is contagious and if you have it, then your direct reports will have a bit of it too.
Integrity is the most important criteria. If one lacks integrity, they are untrustworthy, and they will put the organization at risk and harm the company’s reputation. Once that happens, it’s an uphill battle to rebuild the public’s trust. So, if you want to develop something that’s built to last, remember the three Buffet rules: invest in people who are intelligent, energetic and have integrity.