WARREN BUFFET SEEMS TO DISDAIN MICROMANAGEMENT

Warren Buffett (Age 83) is the CEO and Chairman of Berkshire Hathaway, the fifth largest corporation in America, with $162.5 Billion in Revenue and 300,000 Employees.  Buffett and his long-time Co-Everything, Charlie Munger (Age 90), literally took center-stage at the company’s recent Annual Meeting.  Each year, the pair holds a town hall meeting, at which Investors may ask questions.

The linked article, from NY Times, reveals a little insight into the pair of Octogenarians’ management style, http://dealbook.nytimes.com/2014/05/05/berkshires-radical-strategy-trust/?ref=business.  Given the fact that Buffett is one of the World’s most-renowned investors, and one of the most-admired corporate managers, you might find these revelations truly amazing.

Consider the following:  Berkshire Hathaway does not have a General Counsel to overseas its dozens of subsidiaries, each of which operate autonomously;  there is not a Human Resources (A/K/A Personnel) Department; and there is not a Compliance Officer to follow-up on any other loose details that might have been missed.  Basically, according to Mungerr, they believe that the trust that he and Buffet place in the Division Presidents far outweighs the risks.

The pair believes that they have bought great companies with capable managers, and they generally prefer to just get out of their way. Most corporations establish layer upon layer of management, and micromanage the fine details right down to the lowest level.

Behavioral scientists and psychologists have long held that “Trust” can be a powerful force within an organization.  Two professors at the University of Zurich agree with Munger’s premise since, they write, greater monitoring and sanctioning might actually create a system of governance in which crooks could thrive.  Also, a professor at Stanford University’s Rock Center for Corporate Governance has researched the Berkshire Hathaway approach and written a paper on the unconventional management style. What’s next: Berkshire Hathaway 101?

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  1. #1 by andrepartridge on January 26, 2016 - 2:54 PM

    Reblogged this on Memoirs of an Investor.

    • #2 by cheekos on January 27, 2016 - 9:36 PM

      Mr. Andre Partridge, I noticed your comments, and re-blogging to your “Memoirs of an Investor” blog. I thank you for your remarks, and your blog also provides excellent information for anyone who has interest in what goes on in the Financial Arena.

      • #3 by andrepartridge on January 29, 2016 - 2:47 PM

        Thank you! Do you have any recommendations of books to read on investing? I have posted my top three on my menu page. Thank you for the kind words!

      • #4 by cheekos on January 29, 2016 - 3:38 PM

        Here are several:

        “The Rothchilds”, a historical novel about the uber-wealthy dynastic family. It provides general financial common sense and, in some cases, you learn how various securities regulations became necessary. It was truly global banking, before its time.

        “The Bankers”, by Martin Maier. It takes you along with a check, from a small outlying bank, through its processing via the Federal Reserve. Although it is somewhat outdated–due to changes in banking and securities laws–it does provide an understanding of how central banks work.

        Lastly, anything by Michael Lewis. Perhaps the one to focus on, with a recent movie about it, is “The Big Short”. It explains how The Great Recession came about, a few years back. Lewis had worked as a bond salesman right after business school, both in Wall Street and “The City”, of London. He is an excellent story teller–including facts and humor. All of his books are a great read!

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