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Collection: Warren Buffett - #279 'Do Managers Love The Business or The Money?'



Good morning, my name is Ho Nam from San Francisco, California. I have a two-part question regarding how you evaluate your managers.

In your annual report, you wrote that Berkshire Hathaway owns “good to great” businesses and employs “great to great” managers, and we’re thankful for that.

When you hire a manager, or are evaluating the management team of a business you’re thinking about buying, what are the qualities you look for?

And some of your managers were entrepreneurs who started their businesses from scratch when their business models were unproven, and some of them took over businesses that were already performing well when they took charge.

What are the qualities of a great entrepreneur that might be different from those of a manager who can be great at running a company that’s established, but may not be able to start a business from scratch and tinker around with a business model and figure out how to make it successful?


Yeah, well we love managers that have a passion for their business. And when we’re buying a business we have to ask ourselves, “Do they love the money or do they love the business?”

If they love the money, there’s nothing wrong with that, but they probably wouldn’t be running the business for us a year or two down the road.

I think one difference is that people that create their own businesses, the entrepreneurs, probably, on average would have a significantly greater degree of passion for those businesses than somebody that was just brought in a few years ago and sees themselves as making a profit in a few years on reselling the business and leaving.

I — you’ll find exceptions in both camps. But we’ve had terrific luck with the entrepreneurs who basically love their businesses the way I love Berkshire. I mean, they are not going to let anything happen to their businesses.

They can — you know, they’ll tell me to butt out if I’m going to screw up something in their operations, and they don’t regard them — I mean, in a certain sense, I mean, they know they’re part of Berkshire.

But they regard them in a certain jealousy, almost, as being their businesses, and we love it that way.

And you know, we can spot it when we see it. And we also can avoid it.

We have never — I just got one in the other day, something from an investment banker on somebody that wants to resell a business they bought a few years ago.

Well you know, the chances that they haven’t doctored up the figures in some way or are trying to sell, I mean, you know, they’re — it’s a piece of meat to them. And if it’s a piece of meat to them, you know, what am I going to do with it?

So we — if we make the proper judgment about the passion they have for their business, they’re going to keep running — they may have a lot of money in the bank — but they’re going to keep running the businesses for us, because they love those businesses.

And they really are motivated the same way I am. You know, it wouldn’t make any difference what I get paid, you know. I’m identified, in my own mind, with how Berkshire does.

I really don’t care how the rest of the world thinks about how Berkshire’s doing. I mean, in other words, when we looked like we were out of step a few years ago, that really doesn’t make any difference to me, as long as I feel OK about how Berkshire is doing.

But I do — you know, that’s how I measure what I’m doing every day — not by the price of the stock, but by what’s going on in the business. And that’s what — we have a group of managers like that, and there —

I don’t think there’s — well, there can’t be a company in the country, in my view, that, if you could figure out some way to measure the passion involved, in terms of running their business, I don’t think there’s anybody that could come close to matching the quantity that we have managed to marshal together at Berkshire.

It’s been accidental over time, but it’s really almost unique. I think it is unique.



Well, it’s very interesting to think about what matters most, the passion or the competence that was borne in?

Certainly Berkshire is full of people who have a peculiar amount of passion in their love for their own business. And I would argue that probably the passion is more important than the brainpower.


Yeah, and by the time they get to us, if they were passionate but incompetent, they don’t get to us.

I mean, they’re not going to be there unless they’re competent, but the question is whether they had a passion for money or a passion for their business, to some degree.

And they all like money, and the reason — and they like it, partly, because it enables them to build the business they love.

But they don’t — we’re not going to see an incompetent, but passionate, manager by the time we start laying out a lot of money for a business.

They got weeded out a long time ago. So I don’t have to weed those out, but I do have to weed out the ones who want to cash a big paycheck and go off and do something else at some time. And like I say, we’ve had great luck at that.

But we have literally — I mean, we see lots and lots of businesses owned by — usually owned — by financial operator types, where it’s absolutely clear that, you know, they have come in, they’ve leveraged it up, they’ve played games with the accounting.

They — that has about run out, you know, and they want to sell it. And interestingly enough, fairly often, those are built by — bought by — other financial operators who think they’re going to play the game a second time.

We are not interested in any of those at all, but we are interested in is lunch. And we're going to have that right now and I'll see you back in about 30 minutes.

~ Please visit the site above for full video of Berkshire Hathaway Annual Meeting.


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