Peter Drucker once said that management is doing things right, but leadership is doing the right things. Well Warren Buffett is definitely a leader.
Warren Buffett is also a great business mind, one of the wealthiest businessmen in the world, and known as the Oracle of Omaha. But what makes him really special is his ability to stick to his values and beliefs even in the face of world-wide criticism.
Buffett credits much of his skill in investing in businesses to his mentor Benjamin Graham. It is true indeed that he learned his analytical skills and investment purchasing philosophy from Graham. But Ben Graham could not have prepared him for the incredible and unbelievable road Warren Buffett has had to navigate as a business leader.
It truly is his ability to take correct actions when times are tough that has allowed him to take Berkshire Hathaway from near certain bankruptcy to being one of the most respected names in insurance and investing today. Please note that this is a stock that is currently trading for nearly $300,000 per share. A closer examination will reveal 3 leadership lessons we can all learn from Warren Buffett and use in our lives.
1. GO AGAINST THE GRAIN
Warren Buffett has made his success by sticking to his values and investing his money in areas that fly directly in the face of intense market pressures to follow the crowd. For example:
- Buffett invested heavily in the Washington Post in 1973 when the US was heading into a crisis stemming from the OPEC oil cartel and the Vietnam War backlash. Even after suffering another 25% drop in the stock price, he sat still, while the rest of Wall Street hit the panic button. Some 40 years later the original $10 million investment was worth well over $1 Billion.
- In the mid-1960’s Warren Buffett bought 5% of American Express stock after the company took a major beating on Wall Street when it was held liable for $60 million in a lawsuit. Buffett correctly estimated that, although the news surrounding the company was gloom and doom, the underlying business was stable. His $13 million investment in AMEX was 40% of his partnership capital. He was literally “betting the house” on his assumption.
- Berkshire Hathaway bought a seasonal candy store called See’s Candy for $25 million in 1972. The company was only making net income of $4.2 million per year and prospects were not great for the economy. Of course, we know now that he was right in his projections because it has been reported that this little candy company has produced over 1.5 billion dollars in profits for Warren Buffett since he bought it.
Results like these would give any money manager confidence to blaze his own trail, but neither Warren Buffett nor Berkshire Hathaway management had a track record of this type of success at the time. It is probable that most fund managers would have looked at these investments as the height of poor decision making.
At the very least, the investments he was making were considered “unattractive” because everyone know that “conglomerates”, buying the “Nifty 50”, and “momentum” investing were what the “In Crowd” was doing. This trait of “going against the grain” of popular delusions is a sure sign of inherently strong leadership qualities.