Warren Buffett: One Guru's Philosophy to Follow

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The best Wall-Street-er is nothing but the typical "Wall-Steet-er." If there's one guru you'd like to follow, make it The Oracle of Omaha. He amazes us every year, and is a true inspiration. What every business needs, from Buffett's latest gem: Humility: "The hard fact is that I have cost you a lot of money by not moving immediately to close down Gen Re's trading operation. Both Charlie and I knew at the time of the Gen Re purchase that it was a problem and told its management that we wanted to exit the business. It was my responsibility to make sure that happened. Rather than address the situation head on, however, I wasted several years while we attempted to sell the operation." Purpose-driven: "Every day, in countless ways, the competitive position of each of our businesses grows either weaker or stronger. If we are delighting customers, eliminating unnecessary costs and improving our products and services, we gain strength. But if we treat customers with indifference or tolerate bloat, our businesses will wither. On a daily basis, the effects of our actions are imperceptible; cumulatively, though, their consequences are enormous." Pay according to performance: "Too often, executive compensation in the U.S. is ridiculously out of line with performance. That won't change, moreover, because the deck is stacked against investors when it comes to the CEO's pay. The upshot is that a mediocre-or-worse CEO -- aided by his handpicked VP of human relations and a consultant from the ever-accommodating firm of Ratchet, Ratchet and Bingo -- all too often receives gobs of money from an ill-designed compensation arrangement." Forget Wall Street: "Expect no miracles from our equity portfolio. Though we own major interests in a number of strong, highly-profitable businesses, they are not selling at anything like bargain prices."

The Docs (pdfs)

Warren Buffet's: Annual Letters, including his latest Read it. Love it. Pursue it. Evangelize it.

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Posted on March 06

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