Last month I was privileged enough to attend the Berkshire Hathaway AGM in Omaha, Nebraska. Warren Buffett, the world's richest man with an estimated wealth of $73bn, took control of Berkshire Hathaway in 1965, when a share in the business would have cost you just $24. The same share would now cost you $244,280, and Berkshire Hathaway is worth $400bn.
At first glance, there doesn’t seem much that anyone can learn about UK graduate recruitment from a US billionaire waxing lyrical in a Mid-West American city. However - if you’re interested in all things talent, careers and graduate recruitment - read on.
Over the last 52 years Buffett has returned an average of 19% a year for his investors and his collective business interests now employ a staggering 367,000 people. In short, he’s reached legendary status and is still going strong at 86. He runs the business with his right hand man Charlie Munger, who is himself 93. Buffett and Munger are a global phenomenon and, despite having achieved unbelievable results, Buffett still lives in the same $300,000 house and has pledged to give 99.9% of his wealth to charitable causes. Spending time in stunning Omaha was a truly exhilarating experience - the highlight being Buffett’s eight hour stint sharing his wisdom about life and business.
Here are the three key things I learnt from my time there:
1. When it comes to talent strategy, it’s the long term that really matters
Buffett puts his ability to triumph in the investment industry - where so many have failed - down to patience and thinking about the longer term. Here at Bright Network, we’ve observed that many of the most successful graduate recruiters do the same. PwC have been the number one graduate recruiter for 17 years according to Times High Fliers - their consistent and methodical approach over the longer term has served them well.
For Buffett there will be inevitable economic ups and downs, but what really matters is not being swayed by (often irrational) short term thinking. Buffett’s HQ in Omaha (which is run super lean with 20 people) is decorated with news articles about economic crashes, downturns and depressions. He does this to remind himself about the irrationality of market fear and how, over the longer term, humanity will keep evolving and with that economies will keep growing. During the last downturn, the long-term graduate recruiters were careful not to stop their brand marketing on campus, whilst others cut their budgets.
Buffett looks to invest in companies that he thinks will be strong in 5, 10 and 20 years, rather than the latest fad. One of his best deals was See’s Candy, which he purchased in 1972 for $25 million. Since then he’s had $2bn+ in dividends back from this business alone. He says he bought the business because if you propose with See’s Candy, or your family ate it growing up, they own you for life. Buffett uses a great analogy, comparing businesses to medieval castles. If you built a castle, marauders would aim to take it over, so you had to make sure you had a solid moat to protect you. For his businesses he always likes to make sure the same holds true. One of his best investments was Coca Cola, in which he owns a 9.3% stake. With huge marketing budgets, brand building that begins from childhood and relationships in place with just about every restaurant, bar and club, how do you try to take market share from Coca Cola? Richard Branson tried in the 1990s with Virgin Cola - he failed.
Three things really stood out for me on Buffett’s long term thinking:
- ‘If you’re going to dream, you might as well dream big.’
- ‘I’m always interested in the current figures, but I’m dreaming about the future figures.’
- ‘What matters is building the long-term value of the business.’
2. Don’t underestimate the power of a great hire and its ability to have an impact
Being in the world of recruitment technology, you would expect me to be biased when it comes to this point. However, Buffett stresses again and again the importance of finding businesses that are well run with strong management and the impact that talent has on the enterprise. He acknowledges that all businesses will have challenges but feels that if they are well run, they will overcome these issues. Buffett flagged the challenges at some of his key holdings - Coca Cola is being questioned around the role of sugar, Wells Fargo has just gone through a mis-selling scandal and Amex has lost a deal with Costco. However, Buffett believes that with good management, businesses will overcome these inevitable issues. In short, Buffett really understands the impact that each and every hire has on his businesses. Buffett is famous for having invested in the investment bank Salomon Brothers in 1987, only to find in 1990 there was a major compliance scandal. The CEO at the time was made aware of the issue, but did nothing. When the scandal broke, Buffett stepped up to become CEO of the business (a rare move for an investor) and apologised for the organisation’s misdeeds - as a result the business survived and flourished.
When it comes to management, he’s a big fan of tackling problems as they arise, rather than letting them fester, which we can all easily do. To improve his skills, Buffett is a big believer in continuing to learn - for him and Munger it never ends. As Munger said at the AGM, ‘a life properly lived is learn, learn, learn all the time’. Despite owning a global empire of some of the most impressive businesses, Buffett spends most of his day reading and thinking. Here are my favourite Buffett quotes about the importance of talent and learning:
- ‘An ounce of prevention is worth a pound of cure.’
- ‘We keep learning, but we don’t unlearn old tricks.’
- Having first-rate people on the team is more important than designing hierarchies and clarifying who reports to whom.’
- ‘If each of us hires people who are smaller than we are, we shall become a company of dwarfs. But, if each of us hires people who are bigger than we are, we shall become a company of giants.’
3. Focus on your key skills and don’t get distracted
To stay competitive, Buffett sticks to what he feels he does well - he calls this his ‘Circle of Competence’. He uses a baseball analogy, where a batsman will do far better if he connects only with balls that are the ‘sweet spot’ - rather than taking multiple shots. Buffett really focuses on picking his winners - again one of the reasons he spends so much time reading. He famously predicted the dot-com boom before it happened and has generally stayed clear of technology businesses, as he claims not to understand them. He invested in IBM and Apple, but only once they became established businesses and he has since sold off IBM when it failed to deliver. One of his biggest regrets was not investing in Amazon and Google, particularly as he could see early on in Google’s development that one his insurance businesses, Geico, was spending $11 a click on paid search ads. However, his approach is that he would rather miss out on potentially stellar returns to excel at what he does best, finding great investments that will deliver solid results over the longer term.
In a world when we all have so many options about how to spend our time, it was inspiring to hear how a true master focuses. I have no doubt that Buffett would approve of the approach in our industry pioneered by EY - the idea of hiring by strengths, seeking to try to understand what job applicants really enjoy and excel at and then hiring them into those roles where they can play to those natural abilities.
Here are my favourite Buffett thoughts about the importance of focus:
- ‘Diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing.’
- Games are won by players who focus on the playing field - not by those whose eyes are glued to the scoreboard.’
- ‘If we have a strength, it is in recognising when we are operating well within our circle of competence and when we are approaching the perimeter.’
- ‘There seems to be a perverse human characteristic that likes to make things difficult.’ - this perfectly sums up Buffett and what he can teach us all.
It seems there are few fields where thinking about the long-term, focusing on great talent, making sure you keep learning and sticking to what you know best, doesn’t pay off and in the world of careers, talent and graduate recruitment this seems to be more prescient than anywhere.