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The Real Warren Buffett: Managing Capital, Leading People Paperback – March 11, 2004
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From Publishers Weekly
Investors around the globe worship Warren Buffett, the "Oracle of Omaha," and British businessman O'Loughlin is no different. Buffett, after all, jostles with Bill Gates for the title of richest man in America and has built Berkshire Hathaway from a small textile concern into a multi-billion-dollar corporate mammoth. So how does he do it? O'Loughlin tackles the question enthusiastically, laying out Buffett's investing strategies, his management techniques and his unconventional wisdom. Much of it is already well known, of course, from Buffett's love of the cash-generating insurance business, to his hands-off managerial style, to his early passion for the ideas of value-investing guru Benjamin Graham. But the book is a useful distillation of everything business buffs know about the inscrutable Buffett. After the dot-com years, during which his plodding investing style went out of favor, it was he who emerged from the bust relatively unscathed. As O'Loughlin fawns, "We may never see the like of Warren E. Buffett again."
Copyright 2002 Reed Business Information, Inc. --This text refers to an out of print or unavailable edition of this title.
"A timely new book about the Sage of Omaha's management practices...an interesting and worthwhile approach." -- Salon.com
"Fresh and rewarding insight into stock market guru Buffett .... an important and inspiring book." -- The Good Book Guide, February 2003
"How does [Buffett] do it? O'Loughlin tackles the question enthusiastically, laying out Buffett's investing strategies, management techniques and unconventional wisdom." -- Publishers Weekly
"Must reading for students of management. Highly recommended." -- Choice
"Pacey, highly readable ... this book deserves praise for its broad scope." -- The Daily Telegraph, Your Money, February 2003
"Your insights mixed with Buffett's very quotable quotes is great stuff." -- Arnold S. Wood, founding partner, president and CEO of Martingdale Asset Management
Buy and hold! -- Director Magazine
One of the Thirty Best Business Books of 2003! -- SOUNDVIEW EXECUTIVE BOOK SUMMARIES
Timely and insightful....intelligently written. -- Accounting Business --This text refers to an out of print or unavailable edition of this title.
Top customer reviews
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Even though I am very familiar with Buffett's investment style, I still found this book valuable. There is something special about hearing a concept a second or third time, but from someone else. It makes you understand it on a completely different level. This is what this book has done for me. I particularly liked the author's explanation of how Buffett used the insurance business for its free float that he used to make other investments. The insurance business was like a bank, but better because float is like deposits but at a much cheaper price.
Some people might say that there is nothing new in this book, but I never get tired of hearing the same thing. It just reinforces to me that I am doing the right thing. I really enjoyed reading it.
- Mariusz Skonieczny, author of Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market
O'Loughlin's "The Real Warren Buffett: Managing capital, leading people" focuses on both Buffett's skill as an investor and his role as a business leader. Most people are perhaps more familiar with the first yet curiously we are likely to learn more from the second. Why, well because Buffett was "hard-wired" with the kind of logical mathematical brain that favoured him in investing whereas he had to learn to become a good leader.
This book is a great help in addressing how Buffett became a sucessful business leader. It talks about the "explosion" in Buffett's cognition after 20 years being a successful stock picker which came in part from his exposure to Charlie Munger, his subsequent business partner. Just as Benjamin Graham influenced his early approach to investing, Charlie Munger was an equally important influence on his later approach to investing and business leadership.
O'Loughlin highlights how Buffett first began to address the issue of the "institutional imperative" in organisations and then realised it applied to him as well. What is the institutional imperative? It refers to the tendency of organisations to resist any change to its current direction. Buffett liked to quote Churchill who said "you shape your houses and then your houses shape you" and Lord Keynes who said "The difficulty lies not in the new ideas but in escaping from the old ones". In Buffett's case this meant escaping the old ways of valuing businesses that he learned from Ben Graham and learning new ways he was exploring himself urged on by Munger.
In Buffett's case his imperative was to stay focused on stock picking or "renting stocks" as O'Loughlin refers to it, whereas Munger was encouraging him to look at value creation and at those businesses that had enduring franchises (the great businesses as Munger called them). Such businesses had a future whereas for most of Buffett's short-term stock picks, their best days were behind them.
Once he started to acquire these "great franchises" he was faced with a new problem, 'How to motivate their managers to stay running the business long after most had any financial need to do so'? Buffett's answer to this question is the main reason he is as successful as a business leader. How did do it?
His challenge was to get the new managers to continue to think like owners. He did this by guaranteeing their autonomy, but trusting them and by giving them a reputation to live up to. He encouraged them to "run their companies as if these are the sole asset of their families and will remain so for the next century" (Buffett, Letter to Shareholders, 1999).
Ralph Schey noted, "The greatest strength he has - giving you a lot of freedom to run the business the way you want. And that way, you can't pass the responsibility back to him" (ex CEO Scott Fetzer). Bill Child noted, "He has a way of motivating you. He trusts you so much that you just want to perform" (R.C. Willey Home Furnishings). On retiring after 20 years working with Berkshire, Ben Rosner commented to Buffett (paraphrase)"I know why it worked" he said "you forgot you bought the business and I forgot I sold it". In 2000 Buffett said, "in our last 36 years Berkshire has never had a manager of a significant subsidiary voluntarily leave to join another business".
In re-reading the book now, I am struck by the emphasis that O'Loughlin places on "development" which is of course central to my own research on Buffett. I am also reminded that just because a book is eight years old, and there have been many other books on Buffett since (most of which I have read), doesn't reduce this book's many useful insights.
O'Loughlin's book won't make you smarter. What it will do is help you to cut out the mistakes that prove so costly to capial accumulation.
I've read most of the popular books about Buffett. All are interesting, because his tale is compelling, but unlike the others, this book is valuable too.
Why does Tiger win all the majors rather than Phil Mickelson? Both can hit amazing shots, but Tiger has developed a series of mental processes that enables him to employ superior course management to the rest of us and so reduce the chance of dropping shots.
So it is with Buffett. This book describes how Buffett has employed a series of mental models to circumvent the ways that our brains delude us into thinking we are making sound decisions when we are making poor ones.
The take-away messages are clear and I have found it relatively straight-forward to employ them in my investment decision making process. I am making fewer decisions, but feeling much more comfortable with each one.
There's much more to the book than this, but to be honest your time would be better spent learning from O'Loughlin and Buffett than from me.
It took Buffett 40 years and billions of dollars to learn these processes. You can learn them in a couple of hours for under 20 bucks. Now, that really is a Buffett-esque bargain!