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Buffett: Berkshire Has Built to Charlie’s Blueprint; My Role Has Been That of General Contractor

Warren Buffett: “From my perspective, though, Charlie’s most important architectural feat was the design of today’s Berkshire. The blueprint he gave me was simple: Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices. Altering my behavior is not an easy task (ask my family). I had enjoyed reasonable success without Charlie’s input, so why should I listen to a lawyer who had never spent a day in business school (when—ahem—I had attended three). But Charlie never tired of repeating his maxims about business and investing to me, and his logic was irrefutable. Consequently, Berkshire has been built to Charlie’s blueprint. My role has been that of a general contractor, with the CEOs of Berkshire’s subsidiaries doing the real work as subcontractors cxlvii.”

At Daily Journal’s annual meeting in 2014, Charlie was asked, What daily habits would you recommend practicing?

Charlie: “I have never succeeded very much in anything in which I was not very interested. If you can’t somehow find yourself very interested in something, I don’t think you’ll succeed very much, even if you’re fairly smart. I think that having this deep interest in something is part of the game. If your only interest is Chinese calligraphy, I think that’s what you’re going to have to do. I don’t see how you can succeed in astrophysics if you’re only interested in calligraphy.”

“The rare life that is wisely lived has in it many good habits cultivated and maintained and many bad habits avoided or cured. And the great rule that helps here is again from Franklin’s Poor Richard’s Almanack: ‘An ounce of prevention is worth a pound of cure.’ What Franklin is here indicating, in part, is that Inconsistency-Avoidance Tendency makes it much easier to prevent a habit than to change it cxlviii.”

The source connects these ideas with Berkshire’s decentralized management: subsidiary managers have substantial responsibility, while Buffett and Munger emphasize business quality and trusted people. That structure does not make the company immune to recessions or other economic forces.

The commentary also emphasizes financial independence and avoiding businesses that create unwanted controversy. It introduces Buffett’s concern for reputation with the statement, “If you lose money for the firm and I will be understanding. If you lose reputation I will be ruthless. Reputation is the most valuable gift you ever had cxlix.”

The source presents ethical standards as part of the investment partnership. It invokes Munger’s metaphor: “If you mix raisins with turds, they stay raisins and turds cl.” The practical standards proposed are honest answers to shareholders, careful hiring, and financial decisions that leave the company able to meet its obligations.