Hi there. My name is Lee. I’m from Palo Alto, California. In meeting Ajit Jain, I’ve been very impressed over the years. And I think I even met his parents once they came from India. Please comment on your deepest impressions of his personality and managerial skills, and also how you go about exactly keeping somebody who has such fine skills within the fold. He might go to Walt Disney someday and, you know, pull down 200 million.
Well, if he gets offered 200 million — (laughs) — we may not compete too vigorously at that level. (Laughter) We basically try to run a business so that — Charlie and I have two jobs. We have to identify and keep good managers interested after we’ve figured out who they are. And that often is a little different here, because I would say a majority of our managers are financially independent, so that they don’t go to work because they are worried about putting kids through school or putting food on the table. So they have to have some reason to go to work aside from that. They have to be treated fairly in terms of compensation, but they also have to figure it is better than playing golf every day or whatever it may be. And, so that’s one of the jobs we have and we basically attack that the same way — we look at what they do the same way we look at what we do. We’ve got a wonderful group of shareholders. Before I ran this, I had a partnership. I had a great group of partners. And essentially, I like to be left alone to do what I did. I like to be judged on the scorecard at the end of the year rather than on every stroke, and not second guessed in a way that was inappropriate. I like to have people who understood the environment in which I was operating. And so the important thing we do with managers, generally, is to find the .400 hitters and then not tell them how to swing, as I put in the report. The second thing we do is allocate capital. And aside from that, we play bridge. (Laughter) Pretty much what happens at Berkshire. So, with any of the managers you might name here, we try to make it interesting and fun for them to run their business. We try to have a compensation arrangement that’s appropriate for the kind of business they’re in. We have no company-wide compensation plan. We wouldn’t dream of having some compensation expert or consultant come in and screw it up. (Laughter) We try to — some businesses require a lot of capital that we’re in, some require no capital. Some are easy businesses where good profit margins are a cinch to come by, but we’re really paying for the extra beyond that. Some are very tough businesses to make money in. And it would be crazy to have some huge framework that we try to place everybody in that — where one size would fit all. People, generally, are compensated relating in some manner that relates to how their business does as opposed to — there’s no reason to pay anybody based on how Berkshire does, because no one has responsibility for Berkshire except for Charlie and me. And we try to make them responsible for their own units, compensated based on how those units do. We try to understand the businesses they’re in, so we know what the difference between a good performance and a bad performance — And that’s about — that’s how we work with people. We’ve had terrific luck over the years in retaining the managers that we wanted to retain. I think, largely, it’s because — particularly if they sell us a business — to a great extent, the next day they’re running it just as they were the day before. And they’re having as much fun running their business as I am running Berkshire. Charlie? CHARLIE MUNGER
Well, I’ve got nothing to add, but I think that concept of treating the other fellow the way you’d like to be treated if the roles were reversed — it’s so simple, when you stop to think about it, but — It’s a rare evening when Ajit and Warren aren’t talking once on the phone. It’s more than a business relationship, at least it seems that way to me. WARREN BUFFETT
Yeah, well, it is. It will stay that way, too. CHARLIE MUNGER
And by the way, we like our businesses — our relationships — to be more than a business relationship WARREN BUFFETT
Charlie and I are very — we basically — it’s a luxury but it’s a luxury that we should try to nurture — we get to work with people we like. And it makes life a lot simpler. It probably helps in that goal of being the oldest living American, too. (Laughter) CHARLIE MUNGER
Yeah, and we tend to like people we admire. (Laughter) WARREN BUFFETT
Yeah, who do we like that we don’t admire, Charlie? (Laughter) Start naming names. These people have names. (Laughter)
~ Please visit the site above for full video of Berkshire Hathaway Annual Meeting.
Keep your good employees interested after finding out who they are.
Every business is different, there's no one size fit all compensation plan.
Compensate the employees based on their responsible units, not group performance.