These Maxims Are Always True

Barry Ritholtz published this interview with Warren Buffett.  It was Buffet’s first ever television interview.  The interview was in 1985.  Berkshire Hathaway started in 1962.

The video is well worth watching. Some gems:

“When you buy a company if you are worried about the stock market opening tomorrow then you aren’t investing. You shouldn’t worry if the stock market isn’t going to open for the next five years”-this is long focus, not short term focus. Fama would tell you the same thing about investing for retirement.

“Stock prices don’t tell you about how the business is run”-True. They tell you the sentiment of the market given all the public information available.

“I don’t have to play every game”-Buffett focuses on what he knows.

I think what’s interesting about Berkshire, is the first investment he made failed.

In 1962, Warren Buffett began buying stock in Berkshire Hathaway after noticing a pattern in the price direction of its stock whenever the company closed a mill. Eventually, Buffett acknowledged that the textile business was waning and the company’s financial situation was not going to improve. In 1964, Stanton made an oral tender offer of $11​¹⁄₂ per share for the company to buy back Buffett’s shares. Buffett agreed to the deal. A few weeks later, Warren Buffett received the tender offer in writing, but the tender offer was for only $11​³⁄₈. Buffett later admitted that this lower, undercutting offer made him angry.^[12] Instead of selling at the slightly lower price, Buffett decided to buy more of the stock to take control of the company and fire Stanton (which he did). However, this put Buffett in a situation where he was now majority owner of a textile business that was failing.

Being stubborn can cost you money. Buffett has talked about that at length over the years.

But what is interesting is Buffett operated Berkshire from 1962 to 1985 and made millions of dollars without doing any publicity. No mass media. No hype. Can you imagine that today?

My friend Scott Kitun of Technori posted this article on his Facebook. I think it’s true. Startups don’t need a “publicity campaign”.

First of all, the media business is in such flux, the money you spend rarely finds its target. In the B2B world, you can microtarget customers but nothing beats good old word of mouth marketing like Ted Wright talks about in his book Fizz. I can think of no greater waste of money for a startup than a publicist.

Great startups create their own publicity. They are scrappy. Or, their investors have networks that get them some publicity or do things that get them noticed. Publicity never signed a monthly recurring revenue contract.

You know what gets you more customers? Execution. Delighting them. Focusing on them.

One day I was having lunch with Richard Duchossois. We were chatting about business, social media and other things. He remarked, “I just don’t understand why people are spending money on all this stuff. In our businesses, our own customers brought us new customers.”

There is a lot of wisdom in just executing and making your customers happy. The pomp and circumstance and hype is distracting and feeds egos. It doesn’t get you wins.