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Tuesday, 02 Dec 2008
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Do
Business With People You Trust Or Admire
by
Warren Buffett
I've said many times that when a management with a reputation
for brilliance tackles a business with a reputation for bad
economics, it is the reputation of the business that remains
intact.
I just wish I had not been so energetic in creating examples.
A further related lesson: Easy does it. After 25 years of buying
and supervising a great variety of businesses, Charlie (Berkshire
vice-chairman) and I have not learnt how to solve difficult
business problems. What we have learnt is to avoid them.
To the extent we have been successful, it is because we concentrated
on identifying one-foot hurdles that we could step over rather
than because we acquired any ability to clear seven-footers.
The finding may seem unfair, but in both business and
investments it is usually far more profitable to simply stick
with the easy and obvious than it is to resolve the difficult.
On occasion, tough problems must be tackled. In other instances,
a great invesment opportunity occurs when a marvellous business
encounters a one-time huge, but solvable, problem.
Overall, however, we have done better by avoiding dragons than
slaying them.
After some other mistakes, I learnt to go into business only
with people whom I like, trust and admire. This policy of itself
will not ensure success: A second-class textile or department
store company will not prosper simply because its managers are
men that you would be pleased to see your daughter marry.
But an owner—or investor—can accomplish wonders
if he manages to associate himself with such people in businesses
that possess decent economic characteristics.
Conversely, we do not wish to join with managers who lack admirable
qualities, no matter how attractive the business is.
We have never succeeded in making a good deal with a bad person.
Excerpted from Warren Buffett's 1989 letter to Berkshire
Hathaway shareholders.
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