After reading | Xia Xinyu
Quote | "Berkshire Beyond Warren Buffett"
Book Donation | Discovery Finance
On weekend evenings, enter the "Discovery Finance" book giveaway. In the last issue of the book giveaway, we shared the wisdom of Charlie Munger, and the effect of the book donation was particularly good during the downturn of the stock market, so we will continue to share the wisdom of the master in tonight's book giveaway, sending Munger away and ushering in his old partner: Warren Buffett.
I don't choose books like "Warren Buffett's Way" or "Snowball" anymore, one is that these classics are a bit too old, and I guess most of my friends who do investment have read them, and the other is that I have also done a special interpretation of these books in the "Discovery Reading Club". The book selected for tonight is "Berkshire Beyond Warren Buffett: The Past and Future of the Corporate Empire".
Why did you choose this book?
First of all, Warren Buffett's investment philosophy is familiar to us, but his business management philosophy is rarely known. In the book "Berkshire Beyond Warren Buffett", I sorted out the nine characteristics of Berkshire's corporate culture, and I think that these "values of values" (the value of values) are of reference significance for the managers of all kinds of enterprises.
Second, the book is actually an attempt to answer a proposition: "What would happen to Berkshire if Warren Buffett was gone?" However, what I am concerned about is that if the soul of a company's success is tied to their boss, then one day the boss will not do it, or will not be there, how can the company continue to write success?
This is an important question, such as the banking industry of Discovery Focus. If a bank has a clear market strategy, a good grasp of the top, and a good internal (the enterprise is most afraid of high-level infighting or high-level rotation), as long as the boss has the determination to work for a long time (rather than seeking a higher career after a few years), the bank often develops well. But the problem is that the boss can't work for the rest of his life, he always has to leave.
Jumping out of the banking industry, in fact, other companies also have similar confusion, we often see that the boss of a capable person must be equipped with the confusion of how to cultivate a successor, and family businesses also have the dilemma of difficult inheritance.
In this regard, my thoughts on "Berkshire Beyond Warren Buffett" are, two points:
First, build a moat for the enterprise, even if the boss leaves, the moat left behind still flows, and it can also protect the enterprise for many years;
Second, and as I will elaborate on in the excerpt I will make later, "the value of values." These are the core of a company's culture that can continue to guide a company's progress. I have expressed a similar view in previous columns of "Discovery Finance": if you want to judge the current performance of a company, look at its financial report, if you want to judge the performance of a company in the next year or two, look at its products and technologies, and if you want to judge the performance of a company in the next ten years, look at its core culture and team values.
Finally, this book is also suitable for investors who are galloping in the capital market. After all, Buffett and Berkshire's way of doing business is also very much the same way they have managed the subsidiaries they have acquired and operated for a long time. In fact, every company that fails is different, and the successful company is likely to have very similar characteristics. Obviously, Lao Ba is using these values to measure, invest in the acquisition and management of its subsidiaries along the way.
So, what are the characteristics of good management, and what is the value of values?
1. Be budget-conscious
If you look at a company, it is operating extensively, carrying out extensive cost management, just burning money to play with concepts, or making careful calculations for the company's various expenditures. For example, the reason why Warren Buffett fell in love with Cover Insurance in the 80s of the last century is that the comprehensive cost ratio of Cover Insurance at that time (1983) was 96%, while the industry-wide average was 111%, and the total underwriting expenses and loss adjustment expenses of Cover Insurance accounted for only 23.5% of the premium income, while competitors were generally 15 percentage points higher.
"A company that does not consider benefits is like growth without considering value, and in the end it will inevitably be a piece of chicken feathers. Warren Buffett said.
2. Be sincere and friendly, and cherish your reputation
I put these two values together because I think they both express the relationship between a company and its customers and society. Being honest with customers, keeping promises, being truly "customer-centric", and being willing to take social responsibility instead of cutting leeks or selling products – these can make the difference between a company's long-term success.
Just like Warren Buffett's favored enterprise Nebras Furniture City, there is a creed: "Good quality and low price, seeking truth from facts, and children are not deceived".
3. Pay attention to family style (for family businesses)
The phrase "no more than three generations of wealth" is a disaster for corporate investors in front of a family business. Therefore, not only the enterprise needs to have values, but also the family, and the stable inheritance of family style can provide corresponding certainty.
For example, Warren Buffett is optimistic about a jewelry company called Benbridge because of two points:
One is that the company only promotes employees from within, and these employees are people who are very much in line with the company's values. (Author's note: Actually, I personally think this is a double-edged sword, and hiring from outside can also help to acquire talent in a more market-oriented way, but it is true that promoting from within will have higher loyalty and lower mobility, which may be useful for semi-family-owned jewelry companies.) ）
The second is that the boss and the boss's son are the same, both like to be conservative in terms of expansion, stick to professionalism, never over-drain the company's financial resources, and both are low-key and frugal in their personal lives.
4. Self-driven
There are three types of people in the world: the first type of people are "matches", they naturally have the quality of "ignition" and are full of passion; the second type of people are "wood", although they do not have the quality of ignition, but the fire is baked against him, and he can be ignited; the third type of people are "stones", no matter how big the fire is, he cannot light it.
The first type of person is called "self-driven", the second type of person is called "other-driven", and the third type of person is called "undriven".
In the judgment of the company, the "Ice Queen" invested by Buffett is a match-like enterprise, they are "authorized by the headquarters, operated by branches, and franchised", and have a full entrepreneurial spirit and strong vitality for a long time.
5. Full authorization
This point has been repeatedly emphasized from Warren Buffett to Munger. For example, Warren Buffett's optimistic Willie Home Furnishing has mobilized the initiative of middle and grassroots management by full authorization, defeating another competitor whose boss is doing everything himself.
But this matter, "Discovery Finance" personally thinks it is also a double-edged sword and is not universal, so I will be verbose and patched. For example, financial companies obviously can't play like this, and in addition, full authorization may be more suitable for small companies in the early stage of entrepreneurship, with a shorter management radius and more flexibility, strong grassroots vitality, and good self-drive, which is indeed conducive to competition. However, large companies are not very good.
6. Smart investment
A company that has both endogenous growth and epitaxial acquisitions is not aggressive in terms of capital allocation, and does not enter the unprofessional areas of the company itself that is separated from its main business, but at the same time it must lay out a good capital allocation and accelerate the company's growth - this is a kind of wisdom.
The book gives an example, Metel, which vigorously carried out "reinforced" acquisitions. Metetsu implemented construction improvements to its machinery, its subsidiaries produced mechanical parts, including cutters, presses, structural connectors, etc., which were needed by the builders, and it acquired a larger and main competitor, Systems Corporation, selling half of the combined company to Bauwart, a British group of companies.
7, 恪守本分
The book first praised Buffett's own investment and adherence to his duty.
It's true, you look at the companies he invests in, the companies he acquires, most of them are traditional industries, what railways, energy, big consumption, finance, and those things in the new economy he is very cautious, and he only invests in what he can understand.
Therefore, I don't evaluate these, Buffett has indeed created miracles in his life. But when you read the book, you should add your own thoughts, after all, some of the ideas summarized in the book have obvious imprints of the times of the last century. For example, in the section "Abide by Duty", the example of Green Arrow chewing gum is given, arguing that "no matter how the world changes, the way people chew gum remains the same...... Well, but people don't seem to chew gum much anymore.
Hey, that's weird, when did you start using chewing gum less? Is it because you don't have that much time to spare, everyone is busy scrolling through their phones? Or after lying down, it doesn't matter if you don't breathe?
8. Sustainable management
A century-old store is not easy. In fact, I think that sometimes, depending on whether a company's strategy has a "long-term" layout, whether it is willing to sacrifice current profits in R&D and other investments to lay out the future, or whether it will gamble a big one regardless of risks, etc., these aspects can actually show whether the enterprise has the characteristics of sustainable operation.
Okay, that's all for my impressions.
The author of "Berkshire Beyond Warren Buffett: The Past and Future of the Corporate Empire" is Lawrence A. Cunningham, a professor at the University of Washington Law School and Buffett's "royal" editor. Since 1996, he has assisted Warren Buffett in compiling and publishing Warren Buffett's Letter to Shareholders.
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