During the 1995 Berkshire Hathaway Annual Meeting, Warren Buffett explained the difference between businesses that require one-time smart decisions and those needing continuous smart management.
Retailing, he notes, demands constant adaptability since competitors quickly mimic successful strategies. In contrast, some businesses benefit from structural advantages, allowing them to thrive with less ongoing effort.
Buffett shares a story of a southern publisher attributing his newspaper’s success to “monopoly and nepotism,” highlighting the value of entrenched advantages.
He also mentions that in industries like television networks decades ago, good management still made a significant difference despite such advantages. Overall, Buffett emphasizes the varying challenges of sustaining business success.
Here’s an excerpt from the meeting:
Buffett: Yeah, to some extent, Charlie and I try and distinguish between businesses where you have to have been smart once and businesses where you have to stay smart. And, I mean, retailing is a good case of a business where you have to stay smart.
But you can — you are under attack all of the time. People are in your store. If you’re doing something successful, they’re in your store the next day trying to figure out what it is about your success that they can transplant and maybe add a little something on in their own situation. So, you cannot coast in retailing.
There are other businesses where you only have to be smart once, at least for a very long time. There was once a southern publisher who was doing very well with his newspaper.
And someone asked him the secret of his success. And he said monopoly and nepotism. (Laughter) And I mean, he wasn’t so dumb. I mean, he didn’t have any illusions about himself.
And if you had a big network of television affiliates station 30 years ago, there’s still a major difference between good management and bad management. I mean, a major difference.
You can watch the entire discussion here:
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