Hot Features
Premium
Trade smarter, not harder: Unleash your inner pro with our toolkit and live discussions.
Buffett and Munger inherited two sound managers when Blue Chip Stamps took over the Buffalo Evening News. First there was Henry Urban who served as president and publisher from 1974 until his retirement in 1983. Urban provided a steady, conservative approach to stewarding the organisation during a particularly tumultuous period. He had no problem with switching his allegiance to Blue Chip stamps: “True to his nature, he sought and followed the counsel of the new [Buffett] ownership” (Murray B. Light (2004) From Butler to Buffett)
Buffett said of Urban in his 1983 letter to BH shareholders that “Henry never flinched during the dark days of litigation and losses following our introduction of the Sunday paper – an introduction whose wisdom was questioned by many in the newspaper business, including some within our own building. Henry is admired by the Buffalo business community, he’s admired by all who worked for him, and he is admired by Charlie and me.”
The second key person was Murray B. Light, who had been with the paper since 1949. He gave every appearance of being the archetypal Hollywood movie newspaper editor: strutting around the newsroom, backslapping and barking orders as he moulded the paper’s content and editorials. While hard-driving, he was considered fair-minded and ethical, with a passion for the free press.
Urban and Light respected and wholeheartedly backed Buffett’s enthusiasm for quality journalism; and saw in him a supportive boss. Light wrote in his history of the paper, “Over the years there have been many who compared the similarities or differences between Buffett and Edward H. Butler Sr. In one respect they were similar, both interested in the profitability of the enterprise. Additionally, both men were not fearful of bucking accepted practices, were risk takers, and above all, were not reluctant to express their opinions. But they did differ in many respects. Butler Sr. involved himself in every aspect of News operations…Buffett, for the most part, has confined his direction to News circulation and advertising-rate policies and has refrained from any involvement in its editorial product or policies. He has maintained that hands-off editorial policy steadfastly and fended off numerous opportunities to get involved…..As Berkshire Hathaway expanded through the years, Buffett repeatedly said that his prime areas of control are in capital allocation for all his holdings and compensation of the top managers of his enterprises. In all other areas, his philosophy has consistently been “hands off”, permitting the managers of the individual entities to control policies. He has often said that he might do things differently in some of his properties but did not do so because of his policy of non-interference.”
So there you have the main elements of Buffett’s approach to managing his companies.
- First he does not have the time nor the expertise to deal with day-to-day matters or even to make major operating decisions. And besides which, if he interfered he would deprive proud and capable managers of the autonomy and trust that they deserve; that autonomy and trust that brings loyalty and diligence. Many people are motivated to give of their best if there is a tangible indicator of respect shown by the boss – giving almost complete control to the people on the ground is the ultimate display of respect.
- Second, it is made very clear that Buffett has an over-riding purpose in owning the company – to make a high rate of return on capital devoted to it. So the information he is most keen to receive regularly is about the key performance indicators contributing to earnings, such as circulation figures or the cost of newsprint.
- Third, he takes responsibility for finding the right package of remuneration for the leaders such that their interests are aligned with Buffett’s long-term profit-focused interest. And rewards extend beyond the pecuniary, with his praise for work well-done highly prized.
- Finally, if the marginal dollar generated by the business will, if left in the business, produce less than a satisfactory rate of return, then it must be sent to head office for Buffett to allocate elsewhere, for say helping to by buying another company or buying shares on the markets.
Buffett was so hands-off that he never asked the editors of the News to follow his political philosophy – most of the journalists didn’t even know what it was. His instructions to the editors were to support those politicians likely to be most effective for Buffalo readers.
While Buffett was reluctant to interfere he did make himself available, in the early tough days, to act as a sounding board or to come up with ideas to somehow beat the competition and bring the enterprise to profit. Light and he would frequently discuss ideas for an hour or more on the telephone. Light was always impressed by Buffett’s depth of knowledge about newspapers.
Charlie Munger
Munger was a rock in the dark days of the late 1970s and ea
……………To read the rest of this article, and more like it, subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1
