The world has seen a wide array of business leaders who have had a fair share of successes and failures in different industries the world over. Some of these leaders are usually seasonal making a quick impact then fading away at the same speed. Some leaders on the other hand usually stand the test of time and make an indelible impact in the industry in a way that is hard to ignore. One such leader is Warren Buffet otherwise known as the ‘Oracle of Omaha’. Buffet has over the years gained a reputation as an unstoppable legendary investor known for his peculiar investing style largely based on principles such as patience and due diligence. This style has come to be referred to value investing over the years and has subsequently earned Buffet a deal of respect if not the billions that have come with it. This paper goes on to show that, Buffet’s leadership approach which is inexplicably meshed with his investing style and personality has gone a long way in establishing him as a successful business leader and subsequently one of the wealthiest men in the world.
Affiliated with the former textile company Berkshire Hathaway which he acquired in 1965, and turned into a wildly successful holding company, Buffet started his investment journey in his early childhood (Hagstrom, 2005). This early start is said to have had a hand in his success in this industry. The industry in which Buffet has cut his teeth in indistinguishable though given the diverse nature of his investments over the years. One could say that the industry in which Warren Buffet is prominent is the capital markets but this would be shrinking his level of expertise into a small cocoon which would prove to be a great disservice to his reputation. Growing his investments from the initial Berkshire Hathaway deal moving outwards, he has evolved into a market leader in the food industry, beverage industry, energy and insurance. This is attributed to his investments in companies such as Coca-Cola, Gillette, Exxon and AIG (Hagstrom, 2005). Investing in such a wide array of companies would require one to be conversant with so many aspects of the industry which might be overwhelming for a time-tested business leader like Warren Buffet.
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His leadership style takes an exceedingly hands-off approach to management of the day to day running of the company coming in only when there is need for financial support or invaluable business advice (Chirkova, 2012). Warren Buffet has a strong reading culture that is certainly responsible for his bird’s view insight into companies and his ability to pin point undervalued companies, study them and determine their intrinsic value (Hagstrom 2005). He is also said to have had outstanding abilities including proficiency in Math and Psychology (Chirkova 2012). This approach can be taken to be to some extent precautionary since it analyzes different aspects of the businesses including the managerial team heading the companies. His act of pin-pointing the companies with effective managers and great potential for growth effectively eliminates the need for his involvement in managerial decisions which brings into light his knack for due diligence prior to his investments giving the freedom to concentrate on other companies when he has sufficient confidence on his investments. In effect this would make Buffet more of a great money manager than a company manager. This style of money management has earned Buffet great achievements in the financial markets and subsequently in his philanthropic tendencies. In addition to these traits, Buffet is exceedingly simple, humble and frugal (Chirkova, 2012).
Buffet’s greatest achievement cannot be quantified at face value due to its complexity and the great number of achievements he has had over time. His achievements range from saving great American companies which could have gone under due to some scandal, great accumulation of wealth both for himself and his investors, creating millions of job opportunities due to his direct or indirect impact on the market and finally donating vast amounts of his wealth to charity in a bid to make the world a better place. A notable example is the investment he made in American Express, a company which was sound financially but took a beating in the face of a scandal which wasn’t of its making (Hagstrom 2005).
Apart from the great achievements that Warren Buffet has had, he has also had his fair share of challenges which given his open nature, he has admitted to and learnt from. The business of investing in intrinsically valuable companies calls for great judgement of management and most importantly great timing in terms of when to buy or sell a particular stock. Buffet in his letters to his investors has over the years admitted to having made certain mistakes in his time as the Chairman of Berkshire Hathaway. One of the mistakes he made occurred in the run up to the tech bubble of the late 1990s (Hagstrom, 2005). Given his efficient approach of picking stocks, this challenge arose from something he didn’t do rather than something he might have done wrong. Choosing not to alter his portfolio in any way during the tech craze had a great impact on his portfolio after the bubble burst in early 2000s.
The dotcom bubble had rubbed Buffet off the wrong way from the start given his technophobic tendencies and this might have clouded his judgement on timing, the most essential factor in an investor’s world. In the run up to the bubble, his portfolio including the Coca-Cola stock had appreciated in value to the point where it could have been a wide business decision to sell. His decision not to sell led to the subsequent shrinking of his portfolio. The figures reveal that this stock shed off 9 billion off its value between 1998 and 2002 subsequently cutting the Berkshire Hathaway value by 13 billion dollars, a regrettable figure in any business and a painful business decision (Hagstrom 2005). Being the honest and true business leader that he is, Buffet admitted to his mistake something that would be termed in his speak as a mistake of omission and not commission. Fortunately, the value that Berkshire Hathaway has accumulated over time dwarfs these glitches. Even after this challenge, he has not sold these positions showing his resilience and confidence in the underlying value of this company. This response is what has helped Buffet cut out his niche as an uncontested business leader in this field.
This leads to the examination of other business leaders in the same field as Buffet, how they have done compared to him and the difference in their styles of leadership. Warren Buffet’s style of investing has undertones of Benjamin Graham and so it can be indirectly inferred that Warren Buffet was his successor (Hagstrom 2005; Chirkova 2012). Over time, using the same principles, Buffet has outperformed Graham by taking his approach and improving it to make him the great investor that he is today. Terming himself and his peers such as Charlie Munger as ‘the super investors of Graham and Doddsville’, these proponents of value investing have had unfettered success in the traditional business of investing beating the those that use different approaches such index investors or those that take a more speculative approach in the market.
An overview of Buffet’s career gives a concoction of patience, honesty, pragmatism, open policy and effective due diligence practices that have had a hand in his success (Chirkova 2012). These attributes are indispensable in business and would make me a great business leader on cultivating and improving them. Perhaps the only character trait that I would add to these range of mannerisms is the openness to flexibility in the face of great opportunities brought about by the market. The Warren way also gives great insight into how to run businesses and make decisions and would be just as effective when used on its own.
References
Hagstrom, R. G. (2005). The Warren Buffet Way . Second edition. New York: John Wiley and Sons, Inc.
Chirkova, E. (2012). Why is It that am not Warren Buffet? American Journal of Economics. 2( 6):115-121.
