I read John Train’s chapter on Warren soon after the book came out. In it Train asks Warren what questions would he put on a job application. His answer: oh, just one; are you a fanatic? I might change his answer slightly to: are you capable of being a fanatic. Warren is unusual in being a life-long fanatic in investing. Some of us wander some, given the need.
I would love it, if someone could write a serious study of Warren’s use of incentives. He once wrote that, if you set them correctly, you can look forward to writing large checks. Chuck Huggins once told me how he and Warren came to a quick agreement on compensation after the closing of the See’s purchase in 1974: Huggins would be paid a percentage of the cash he sent to Omaha annually. Initially, it was an oral agreement. In due course it was recorded. “It was only a couple of paragraphs!”, added Huggins. (Imagine a lawyer writing up the agreement!) I’m sure that agreement was in force during his entire 30+ year career. I’m also sure he retired wealthy—as well as having enabled Warren to create a billion dollars of Berkshire shareholder wealth. That story greatly helped me to understand how Warren was able to manage, while sitting in his office, reading, and waiting for the phone to ring. An interesting question is: how was Warren able to function that way? My simple answer if 1. Possessing the right temperament, 2. Having controlling ownership in Berkshire. We all benefited!
Hi Arthur — I agree, the “Are you a fanatic?” question is one of the most memorable moments in the chapter. And I’ll definitely be including it in next week’s article.
That’s really interesting about Chuck Huggins and his incentive compensation. I was just reading an old newspaper article about Huggins — I wish there was more info out there about his work at See’s.
Kevin, you do an excellent job of enriching our understanding of Warren and Charlie! I hope I can add a few stories that had not become public. I had two nice conversations with Chuck at the Markel brunches. I was struck by how comfortable and in charge he was. He exemplified the kind of focused—fanatic—person Warren admired. Such managers Warren empowered to be in charge—leaving him plenty of time to read and to think. Some years ago David Brooks was asked about his experiences with the presidents he had known back to Carter. He made two points: 1. They all come into office thinking they have endless power—only to realize they don’t. (The current one hasn’t learned that yet!) 2. The White House is not a place to build intellectual capital. To make his point, he added: imagine spending your day going from one photo-op to another. (I subsequently mentioned this to Mervyn King who was then Governor of the Bank of England. Mervyn, roared: he is absolutely correct!) Very few CEOs have the freedom to grow intellectual capital. That is what Charlie had in mind when he said that the truly great company allows one to sit on their patoot. He, of course, had Berkshire in mind. Many investors don’t realize how valuable that is. It is astounding how much reading and thinking time Warren has created among us! Incidentally, Mervyn, now Lord King, recently gave his Berkshire shares to Kings College Cambridge to establish a research fellowship. A wonderful gift Warren has given to the world.
Thank you! I'll be updating my kids on the Squishmallows movie immediately, I read it here first. They're big fans and it's a good way to get them interested in Berkshire Harhaway.
It's great to have a source of Berkshire *business* news on a weekly basis. There are other weekly newsletters covering Berkshire but all too often they obsess over the weekly gyrations of the stock (which of course is almost entirely random noise). Here we get what actually matters. Thanks again!
I read John Train’s chapter on Warren soon after the book came out. In it Train asks Warren what questions would he put on a job application. His answer: oh, just one; are you a fanatic? I might change his answer slightly to: are you capable of being a fanatic. Warren is unusual in being a life-long fanatic in investing. Some of us wander some, given the need.
I would love it, if someone could write a serious study of Warren’s use of incentives. He once wrote that, if you set them correctly, you can look forward to writing large checks. Chuck Huggins once told me how he and Warren came to a quick agreement on compensation after the closing of the See’s purchase in 1974: Huggins would be paid a percentage of the cash he sent to Omaha annually. Initially, it was an oral agreement. In due course it was recorded. “It was only a couple of paragraphs!”, added Huggins. (Imagine a lawyer writing up the agreement!) I’m sure that agreement was in force during his entire 30+ year career. I’m also sure he retired wealthy—as well as having enabled Warren to create a billion dollars of Berkshire shareholder wealth. That story greatly helped me to understand how Warren was able to manage, while sitting in his office, reading, and waiting for the phone to ring. An interesting question is: how was Warren able to function that way? My simple answer if 1. Possessing the right temperament, 2. Having controlling ownership in Berkshire. We all benefited!
Hi Arthur — I agree, the “Are you a fanatic?” question is one of the most memorable moments in the chapter. And I’ll definitely be including it in next week’s article.
That’s really interesting about Chuck Huggins and his incentive compensation. I was just reading an old newspaper article about Huggins — I wish there was more info out there about his work at See’s.
Kevin, you do an excellent job of enriching our understanding of Warren and Charlie! I hope I can add a few stories that had not become public. I had two nice conversations with Chuck at the Markel brunches. I was struck by how comfortable and in charge he was. He exemplified the kind of focused—fanatic—person Warren admired. Such managers Warren empowered to be in charge—leaving him plenty of time to read and to think. Some years ago David Brooks was asked about his experiences with the presidents he had known back to Carter. He made two points: 1. They all come into office thinking they have endless power—only to realize they don’t. (The current one hasn’t learned that yet!) 2. The White House is not a place to build intellectual capital. To make his point, he added: imagine spending your day going from one photo-op to another. (I subsequently mentioned this to Mervyn King who was then Governor of the Bank of England. Mervyn, roared: he is absolutely correct!) Very few CEOs have the freedom to grow intellectual capital. That is what Charlie had in mind when he said that the truly great company allows one to sit on their patoot. He, of course, had Berkshire in mind. Many investors don’t realize how valuable that is. It is astounding how much reading and thinking time Warren has created among us! Incidentally, Mervyn, now Lord King, recently gave his Berkshire shares to Kings College Cambridge to establish a research fellowship. A wonderful gift Warren has given to the world.
Keep up your valuable work!
Thanks Arthur! Excellent point about building intellectual capital!
Thank you! I'll be updating my kids on the Squishmallows movie immediately, I read it here first. They're big fans and it's a good way to get them interested in Berkshire Harhaway.
I hope it turns out well. Could be absolutely huge for the Squishmallows brand and Jazwares.
It's great to have a source of Berkshire *business* news on a weekly basis. There are other weekly newsletters covering Berkshire but all too often they obsess over the weekly gyrations of the stock (which of course is almost entirely random noise). Here we get what actually matters. Thanks again!
Thanks! I really appreciate that! I do my best to focus on the news that actually matters most.