Word - PF.LEADERSHIP BUFFETT.pdf

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THE CATHOLIC UNIVERCITY OF AMERICASCHOOL OF ARTS AND SCIENCESDEPARTMENT OF EDUCATION

Leadership and Critical ThinkingDR. MERYLANN J. SCHUTTLOFFEL

A N A L Y S I S O F L E A D E R F IL M

W A R R E N B U F F E T T

The Chairman of Berkshire Hathaway

DISMAS PRASETYO

Student of the Special Education Program

Kruibeke Belgium

January 31, 2009


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Leadership and Critical Thinking 1

ANALYSIS OF LEADER FILM : WARREN BUFFETT

WARREN BUFFETT - BIOGRAPHY AND HISTORY

Warren Buffett, apart from being the worlds most successful investor, is

the CEO of Berkshire Hathaway and is worth an estimated $141 billion. Despite

his wealth he still lives in the house in Nebraska he bought for $31,500 in 1958.

Additionally, he is a great philanthropist and has announced that his entire

fortune will go to charity upon his death.

Early Life

Warren Buffett was born in Omaha, Nebraska on August 30, 1930. He

was quickly identified by his family and others as being exceptionally good with

numbers. In his youth he made money by reselling cokes and delivering

newspapers. At the age of 13 he filed his first tax return and deducted $35 for his

bike as a business expense. Later, as a senior in high school, Buffett purchased

a used pinball machine with a friend and set it up in a local barber shop.

Education

Warren Buffett graduated from Woodrow Wilson High School in 1947 and

then attended the Wharton School at the University of Pennsylvania from 1947 to

1949. He went on to earn a B.S. at the University of Nebraska in 1950 and a

Masters in Economics at Columbia University in 1951. It was at Columbia that


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Buffett met his mentor Benjamin Graham and began to form his investment

strategy.

Early Business

In 1954 Benjamin Graham offered Warren Buffett a job at his partnership.

However, two years later, Graham dissolved the partnership and Buffett moved

back to Nebraska and created his own partnership: Buffett Associates Ltd. In the

next five years Buffett built up Buffett Associates Ltd. while also forming new

partnerships. Then, in 1962, Buffett merged all of his partnerships and began

aggressively purchasing shares of Berkshire Hathaway.

Berkshire Hathaway

By 1965 Warren Buffett had accumulated enough Berkshire Hathaway

shares to take control, at which point he named Ken Chase as President. At this

time Berkshire Hathaway stock was worth about $15 a share; today the stock is

trading around $140,000 per share. Since he took control of Berkshire Hathaway,

Buffett has not only used it as a mechanism for investment, but also as an

umbrella company for subsidiary companies including World Book Encyclopedia

and G.E.I.C.O.

Philanthropy

Warren Buffet has already given a large portion of his earnings to

charitable organizations. His largest contribution has been to the Bill and Melinda


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Gates Foundation which aims to improve healthcare and reduce poverty around

the world. Having already given a significant amount of money to this

organization, Buffett plans to leave 83% of his fortune, or $30 billion, to the

charity upon his death.

THE STRENGTHS OF WARREN BUFFETT

Below are the strengths that I noted from Warren Buffett :

Warren Buffett has the three crucial traits which are needed to be a good

business leader (organizational, controllers and budgeters).

Warren Buffett is a skilled communicator in all aspects of life. He is

experienced at positioning himself at the right place and the right time.

Besides, he is an excellent listener with the ability to convey his

understanding. When Warren Buffett talks, people listen. He can send a

message through open door and does not have to push the message

through a wall.

Warren Buffett leads by doing. Rather than saying how important it is for

the people to give, he simply gave away most of his fortune (something

like 75%) to a charity that can do great things with it. It was indeed the

largest charitable gift in the history of the United States.


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THE WEAKNESS OF WARREN BUFFETT

Warren Buffett himself admits that his major weakness ( or I can even say

strength, depend on how we see it ) is his inability to put up with bureaucracy and

inefficiency. Hence, though Berkshire has about 190.000 employees and runs

$141 billion, he has only 17 employees at its Omaha Headquarters. He says,We

delegate almost to the point of abdication.

REFLECTIONS

Below are my reflections about Warren Buffett that I know, using the three

modes of deliberation :

In looking for people to hire, Buffett emphasized the importance of hiring

the right people. (Descriptive)

For Buffett, once he got someone to hire, he then will give him or her a

tremendous amount of responsibility. Buffett wants his managers to think

and act like owners. He even gives them a 10-20% stake in the company

that they lead as an incentive to perform better. Despite running so many

companies, Buffett ties the performance of each manager to their own

business, not Berkshire Hathaway as a whole. Thus each is treated on

their individual merits. He receives regular financial reports but otherwise,

the only contact they have with Buffett is if and when hard times come.


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Normally, Buffett asks them to let him know early, if there is any significant

bad news. (Philosophical)

By bringing in the best (his criterions of the best here is someone who

have an integrity, intelligence and energy) and then taking himself out,

Buffett is sending the message that he had complete confidence in his

managers. As a result, in turn, his approaches enable his managers to act

as owners and decision makers for the business. They will have a strong

motive to succeed. (Interpretive)

Warren Buffett weighs every decision for its impact on the balance sheet.

(Descriptive)

He does it to target an effective use of assets by earning return on

investmentgreater than the cost of capital. (Philosophical)

By giving a huge attention, calculation and consideration to balance sheet,

Warren Buffett is sending the message to his managers that he is skilled

in managing the balance sheet as much if not more than the income

statement. (Interpretive)

Warren Buffett will wait and wait and wait if he can not find an investment

that is selling at an attractive price. (Descriptive)

His principle is it is better to buy a wonderful company at a fair price than a

fair company at a wonderful price. (Philosophical)


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What Buffett does obviously is sending the message that he is patient and

persevere. Mostly he reads and thinks and does not want to be influenced

too much by the outside, lest it make him irrational. (Interpretive)

Warren Buffett emphasizes the importance of honesty and integrity in

running his business. For example, when Buffett writes his annual letter to

shareholders, he is candid, telling his partner both the good and the bad.

(Descriptive)

His principle is that it takes 20 years to build a reputation and five minutes

to ruin it. Thinking about that makes him doing something differently.

(Philosophical)

It is very clear here that the message Buffett is trying to send to

shareholders or shall I say other people, is about trust. He is developing

trust and reputation. Then, obviously the other people respond it very well.

(Interpretive)

Warren Buffett is not a huge spender. (Descriptive)

In fact, we can clearly see it through his life style. He still lives in the same

house he bought 40 years ago, works in a modest office with no computer

at his desk, drives his car by himself and even he does not carry a cell

phone anywhere. (Philosophical)


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By living with the said life style, he is sending the message to his

employees and environment that thrift is a virtue. (Interpretive)

WHAT I LEARNED FROM WARREN BUFFETT

By making this paper I learned something that I consider pretty important

for me. It is that I should not pay too much attention to the criticism that I might

have in the future regarding my works or anything. (Descriptive)

Because now I know even Warren Buffett still experiences it! He, as the

richest man in the world, said that he would always have his critics, no matter

what move he made. Very likely, it is our nature that we like to criticize to one

another or seeing the negative things instead of looking at the good things or

positive things in what others are doing. (Philosophical)

So, the message I received here is I must keep doing something that I had

already carefully considered right, according to my wisdom. And about what

other people might tell me afterwards including criticisms, of course from time to

time I will keep listening and considering that, as long as I believe it can better

my self and my environment. (Interpretive)


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BIBLIOGRAPHY

Bryan Keller. Biography: Warren Buffett. February 24, 2008. Online.

January 27, 2009

http://investment.suite101.com/article.cfm/biography_warren_buffett

Few would call Warren Buffett unwise with his money. Online. January 27,

2009.http://www.mobilebeat.com/superior-leader-warren-buffet/

Leadership by example, Buffett Style. Online. January 27, 2009http://www.clwill.com/leadership/leadership-by-example-buffett-style/

Lesson # 4 : Make people your priority. Online. January 27, 2009.

http://www.evancarmichael.com/Famous-Entrepreneurs/635/Lesson-4-Make-People-Your-Priority.html

Major Weakness. Online. January 27, 2009.

http://www.achievemax.com/blog/2008/08/04/warren-buffett/

Nicholas Tsiougos Management vs leadership: Building a team - Part 2.October 3, 2006. Online. January 27, 2009.

http://www.businesswings.co.uk/articles/Management-vs-leadership-Building-a-team---Part-2

Successful Business Leadership. Online. January 27, 2009.

http://successfulbusinessleadership.ibc01.com/index.php/learn-from-the-

best/warren-buffett/

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