Sunday, November 29, 2009

Hiring-An Unconventional Way
In a recent interview with the New york Times, William D. Green, chairman and CEO of Accenture said the following regarding his hiring practices:
"I was recruiting at Babson College. This was in 1991. The last recruit of the day — I get this résumé. I get the blue sheet attached to it, which is the form I’m supposed to fill out with all this stuff and his résumé attached to the top. His résumé is very light — no clubs, no sports, no nothing. Babson, 3.2. Studied finance. Work experience: Sam’s Diner, references on request.
It’s the last one of the day, and I’ve seen all these people come through strutting their stuff and they’ve got their portfolios and semester studying abroad. Here comes this guy. He sits. His name is Sam, and I say: “Sam, let me just ask you. What else were you doing while you were here?” He says: “Well, Sam’s Diner. That’s our family business, and I leave on Friday after classes, and I go and work till closing. I work all day Saturday till closing, and then I work Sunday until I close, and then I drive back to Babson.” I wrote, “Hire him,” on the blue sheet.
He’s still with us, because he had character. He faced a set of challenges. He figured out how to do both."
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Corner Office, Adam Bryant Interview, New York Times, November 22, 2009

Buffett would not find this at all unusual.
"Susan came to Borsheim's 25 years ago as a $4-an hour saleswoman. Though she lacked a managerial background, I did not hesitate to make her CEO in 1994. She's smart, she loves the business, and she loves her associates. That beats having an MBA degree any time.
(An aside, Charlie and I are not big fans of resumes. Instead, we focus on brains, passion and integrity. Another of our great managers is Cathy Baron Tamraz, who has significantly increased Business Wire's earnings since we purchased it in early 2006. She is an owner's dream. It is positively dangerous to stand between Cathy and a business prospect. Cathy, it should be noted, began her career as a cab driver.)"
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Warren Buffett, 2007 Letter to Berkshire Hathaway Shareholders

Saturday, November 21, 2009


Buffett and the Federal Estate Tax-Part II

To follow-up my November 15 post, the New York Times reported that "the Bill and Melinda Gates Foundation on November 19 announced the biggest education donation in a decade, $290 million, in support of three school districts and five charter school groups working to transform how teachers are evaluated and how they get tenure....The foundation's goal, its officials said, is to forge breakthroughs in how school systems recruit, retain and compensate teachers and how they assign them to schools. "It'll be difficult, once this work is finished, to say it can't happen in other places, because this work is going to provide some compelling arguments," said Vicki L. Phillips, an education director of the foundation."
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Sam Dillon, Gates Give $290 Million For Education, New York Times, November 20, 2009
Unlikely that, in the future, tax monies would be allocated to this important project.



Sunday, November 15, 2009

Buffett and The Federal Estate Tax

Last week on CNBC, I heard a knowlegeable Buffett observer say that Buffett's position on the Federal Estate Tax was hypocritical (he supports its retention) because of his estate's future tax savings resulting from his $30 plus billion gift to the Bill and Melinda Gates Foundation.

I don't believe the reduction of his estate's Federal Estate Tax liability was a principal motivating factor in his decision. Rather, I believe he determined that the billions of dollars otherwise going to the U.S. Treasury would be much more wisely spent by the Gates Foundation.

In the concluding paragraph in his June 26, 2006 gift letter to Bill and Melinda, he writes:

"Working through the Foundation, both of you have applied truly unusual intelligence, energy and heart to improving the lives of millions of fellow humans who have not been as lucky as the three of us. You have done this without regard to color, gender, religion or geography. I am delighted to add to the resources with which you carry on this work."

Very simply, I believe Buffett chose the Gates Foundation, rather than Congress, to spend these monies.....another example of his extraordinary capital allocation skills.

Friday, November 13, 2009

Greed and Fear

"We are never going to get rid of greed. We are never going to get rid of fear," so said Warren Buffett yesterday at the Columbia Business School.

I believe one of Buffett's most under-recognized and under-appreciated strengths is his extraordinary ability to understand human behavior, especially in time of crisis. A striking example (including the prophetic "rhyme with 1929 prediction" made in May, 2007) follows:

"I mean it's just the scope of human beings to do crazy things, self-destructive things, things as a mob they do. You saw it on October 19, 1987...You saw Long-Term Capital Management. You've seen all kinds of things. There will be other things in the future. They will all have similar factors. The human factor will be at the bottom of them. They won't be exactly the same. But it's like Mark Twain said, "You know history doesn't repeat itself, but it rhymes." We will see some things that rhyme with 1929 or whatever else it may be.

Well I've seen all kinds of people with 160 IQ's with intense interest in the subject, lots of experience in the investment world. I've seen them self-destruct. And you have to have a certain amount of natural flow of juices just to be excited about the game and those participating. And the trick of course is to keep control of those juices. And most people, even smart people, have trouble getting caught up in the game and thinking I'll just dance one more dance like Cinderella at five minutes till twelve or something like that because they think they are smarter than the rest of the public.....Or they don't protect themselves against something that will come totally from right field. Long Term Capital Management is a good example of that."
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Warren Buffett, "An Exclusive Conversation with Warren Buffett," Interview with Charlie Rose, (May 10, 2007).
















Wednesday, November 11, 2009

How to Run a Company in 50 Words or Less

"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."
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Warren Buffett, 2005 Letter to Berkshire Hathaway Shareholders

Tuesday, November 10, 2009

Burlington Northern Acquisition

One of the more noteworthy provisions of the Burlington Northern acquisition is that Berkshire will pay with about 40% stock (and 60% cash) for the railroad. Buffett has rarely made acquisitions with Berkshire stock. His self-admitted biggest mistake has been an acquisition with Berkshire stock

In 2007, he wrote:

"Finally, I made an even worse mistake when I said "yes" to Dexter, a shoe business I bought in 1993 for $433 million in Berkshire stock (25,203 shares of A). What I had assessed as durable competitive advantage vanished within a few years. But that's just the beginning: That move made the cost to Berkshire shareholders not $400 million, but rather $3.5 billion. In essence, I gave away 1.6% of a wonderful business-one now valued at $220 billion to buy a worthless business. To date, Dexter is the worst deal I've made."
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Warren Buffett, 2007 Letter to Berkshire Hathaway Shareholders