During the 1998 Berkshire Hathaway Annual Meeting, Warren Buffett offered several insightful lessons on business management, particularly in the context of acquisitions and leadership, including why it’s crucial to discern whether a business leader is driven primarily by a passion for their business or by financial gain. This distinction helps predict their long-term commitment and effectiveness.
Leaders who love their business are likely to continue working diligently and passionately, even when they have no financial need to do so.
Here’s an excerpt from the meeting:
Buffett: I have not promised that they’re going to have all kinds of opportunities or anything. So as a practical matter, we need management with the businesses that we buy.
And three times out of four, thereabouts, the manager is the owner and is receiving tens of millions, maybe hundreds of millions of dollars. So they don’t have to work.
And we have to decide in that time when we meet them whether they love the business or love money. And we’re not making a moral judgment. Charlie may, but I’m not making a moral judgment about whether it’s better to love the business or love money, but it’s very important for me to know which of the two is the primary motivator with them.
And we have had extremely good luck in identifying people who love their business. And so all we have to do is avoid anything that, on our part, that diminishes that love of the business or makes other conditions so intolerable that they overcome that love of the business. And we have a number of people working for us, they have no financial need to work at all.
And they probably outwork, you know, 95 percent or more of the people in the world, and they do it because they just love smacking the ball. And we almost — we virtually had no mistakes in that respect. And we have identified a number of people, Charlie and I have, in terms of proposals to us, where we’ve felt that they did really — they liked the money better than the business.
They were kind of tired of the business. You know? And they might promise us that they would continue on and they would do it in good faith, but something would happen six months later or a year later and they’d say to themselves, “Why am I doing this, you know, for Berkshire Hathaway when I could be doing,” whatever else they want to do?
I can’t tell you exactly how we — what filter it is that we put them through mentally, but I can tell you that if you’ve been around a while, you can — I think you can have a pretty high batting average in coming to those conclusions. As you can about other aspects of human behavior.
I’m not saying you can take a hundred people and take a look at them and analyze their personalities or anything of the sort. But I think when you see the extreme cases, the ones that are going to cause you nothing but trouble, or the ones that are going to bring you nothing but joy, I think you can identify those pretty well.
You can watch the entire meeting here:
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