Prem Watsa is a shrewd investor who is often called the Canadian Warren Buffett. He is an immigrant from India who arrived in Canada in 1972 and has been running Fairfax Financial Holdings since 1985. Prem Watsa was born in Hyderabad and studied chemical engineering at IIT-Chennai before emigrating to Canada. Under his leadership, Fairfax’s sales and earnings have been growing and it’s stock price has compounded at the average rate of 19 percent annually.
On understanding and managing risk, Prem Watsa has said, “this idea exists in the marketplace that you can take any risk, put it into a structure, into an asset-backed bond, and you can eliminate, get rid of the risk. … Protect yourself, you don’t know when Katrina comes in.”
“Most ideas on management have been around for a very long time, and the skill of the manager consists in knowing them all and, rather as he might choose the appropriate golf club for a specific situation, choosing the particular ideas which are most appropriate for the position and time in which he finds himself.” — Sir John Harvey-Jones, English Businessman
“The best executive is the one who has sense enough to pick good men to do what he wants done, and self-restraint enough to keep from meddling with them while they do it.” — Theodore Roosevelt, Former President of the United States
“Sure, lots of managers talk about the importance of people, but so much of that talk is lip service. Very few managers carry through when it comes to managing their human capital in constructive ways. A lot of people think that managers are jerks, and unfortunately, as a profession, we’ve earned that reputation.” — John Reh, Business Executive
“The extraordinary manager operates on the emotional and spiritual resources of the organization, on its values, commitment, and aspirations.” — Warren Bennis, American Academic and Management Consultant
“If the role of rewards is to drive performance, managers should make performance the only lever for controlling rewards. That means it is critical to make very clear to individual contributors exactly what performance—what results, within what guidelines, parameters and deadlines—the organization needs and will therefore reward.” — Bruce Tulgan, Management Consultant
“Only when all managers are fully committed to needed change can an organization begin the process of getting the lower-level employees on board. These employees will sense any lack of a manager’s conviction by the way the manager expresses the need for change. Managers must be sincerely behind the proposed changes.” — Don Harrison, Former Anchor on CNN Headline News
“People are the key to success in any undertaking, including business. The foremost distinguishing feature of effective managers seems to be their ability to recognize talent and to surround themselves with able colleagues.” — Norman Augustine, American Aerospace Businessman
“A basic rule for managers is “Pass the pride down.” People like to create when they can earn recognition for their ideas. When a good idea surfaces, the creator’s immediate superiors should show prompt appreciation.” — James L. Hayes, Former president of the American Management Association
“The key, essential element in all good business management is emotional attitude. The rest is mechanics. As I use the term, management is not a collection of boxes with names and titles on the organizational chart. Management is a living force. It is the force that gets things done to acceptable standards—high standards, if you will. You either have it in a company or you don’t. Management must have a purpose, a dedication, and that dedication must be an emotional commitment. It must be built in as a vital part of the personality of anyone who truly is a manager.” — Harold Geneen, Former President of the ITT Corporation
“As a leader in your organization, how important is it for you and your managers to coach others? Plenty! If coaching is alive in the organization, then it’s probably doing things right. If there is little or no coaching going on, then you are unlikely to find real teamwork, real ongoing improvement, and true leadership.” — Linda Richardson, Management Consultant
“The achievement of stability, which is the manager’s objective, is a never-to-be attained ideal. He is like a symphony orchestra conductor, endeavoring to maintain a melodious performance in which the contributions of the various instruments are coordinated and sequenced, patterned and paced, while the orchestra members are having various personal difficulties, stage hands are moving music stands, alternating excessive heat and cold are creating audience and instrumental problems, and the sponsor of the concert is insisting on irrational changes in the program.” — Leonard Sayles, Management Consultant
“Good management consists in showing average people how to do the work of superior people.” — John D. Rockefeller, American Business Magnate and Philanthropist
“A manager’s job should be based on a task to be performed in order to attain the company’s objectives… the manager should be directed and controlled by the objectives of performance rather than by his boss… . Management means, in the last analysis, the substitution of thought for brawn and muscle, of knowledge for folklore and superstition, and of cooperation for force.” — Peter Drucker, Management Consultant
“If you are the boss and your people fight you openly when they think you’re wrong, that’s healthy. If your people fight each other openly in your presence for what they believe in, that’s healthy. But keep all conflict eyeball to eyeball.” — Robert Townsend, American Actor, Comedian, Film Director, Writer
“The secret of managing is to keep the five guys who hate you away from the guys who are undecided.” — Casey Stengel, American Major League Baseball Outfielder and Manager
“Hire the best. Pay them fairly. Communicate frequently. Provide challenges and rewards. Believe in them. Get out of their way—they’ll knock your socks off.” — Mary Ann Allison and Eric Anderson, Management Consultants
“People don’t quit companies; they quit managers. When managers talk about loyalty, what they really mean is that they can count on someone. People aren’t loyal to a company, or to the year-end results—they’re loyal to other people. And they will be loyal to managers who support their development, recognize their achievements, and understand their need to balance work and personal life. But managers will have to earn that level of performance and commitment. Make no mistake, when it comes to employee retention: the manager is absolutely pivotal.” — Barbara Moses, Career Advisor
“The worst rule of management is “If it ain’t broke, don’t fix it.” In today’s economy, if it ain’t broke, you might as well break it yourself, because it soon will be.” — Wayne Calloway, Former Chairman and CEO of PepsiCo
“Your position never gives you the right to command. It only imposes on you the duty of living your life that others can receive your orders without being humiliated.” — Dag Hammarskjold, Swedish diplomat, economist, and author
“If you ask managers what they do, they will most likely tell you that they plan, organize, coordinate and control. Then watch what they do. Don’t be surprised if you can’t relate what you see to those four words.” — Henry Mintzberg, Professor of Management Studies
“Management is more art than science. No one can say with certainty which decisions will bring the most profit, any more than they can create instructions over how to sculpt a masterpiece. You just have to feel it as it goes.” — Richard D’Aveni, Professor of Business and Strategy
“Preventing layoffs is management’s responsibility. It’s management’s primary responsibility. In a sense, it’s management’s only responsibility. Because to prevent layoffs, you have to do a lot of other things right. And you’re much more likely to do them when you’re constantly reminding yourself that jobs are at stake and that you’re responsible for the livelihood of real people who have put their trust in you.” — Jack Stack, American Entrepreneur
“Managing at any time, but more than ever today, is a symbolic activity. It involves energizing people, often large numbers of people, to do new things they previously had not thought important. Building a compelling case—to really deliver a quality product, to double investment in research and development, to step out and take risks each day (for example, make suggestions about cost-cutting when you are already afraid of losing your job)—is an emotional process at least as much as it is a rational one.” — Tom Peters, Management Consultant
“To manage is to forecast and plan, to organize, to command, to coordinate and to control.” — Henri Fayol, French Mining Engineer
“The sign of a good manager is his ability to give and take negative feedback.” — Richard Pascale, Management Consultant
Chance favors the prepared mind. “The prepared mind” is the characteristic of leaders who are outstanding in their talent to perceive, make sense, decide and act across a complex set of conditions. We also believe that “the prepared mind” is not a matter of chance. It is a matter of intentional preparation that requires developing eight mental skills regardless of your role.
How will you prepare for your tomorrow?
You need the skill of observing because your world is more competitive. Execution-driven leaders often become so consumed by the pressures of running their projects and their organizations that they never pause to take a look at what’s going on around them. You may have mastered the core capabilities of your profession, and yet new technology might make these capabilities obsolete. List the capabilities you need to develop. Find a meaningful unifying purpose.
You need the skill of reasoning because you need to reevaluate your assumptions. Data are useless without the skills to analyze them, reason, and make meaning of them. For example, are you thinking big enough? Take your situation and think bigger. Reasoning can complement problem-solving skills that you already have with a methodical approach to use with moral, ethical, organizational, or technical problems.
You need the skill of imagining because you need alternatives to keep yourself sharp. Imagination is not a trait that we inherit in our genes or a blessing bestowed by the angels. It’s a skill. Be curious about everything—the world is full of amazing wonders for you to learn about. Creativity is at the heart of innovation. To improve this skill, list three combinations that would create something new and useful for you. Name one thing that you think you are too old to start. Are you really too old?
You need the skill of challenging because expertise breeds conservatism. Challenging a group’s willingness to go with the first right answer can be major barrier to unleashing full creative potential. To improve the skill of challenging, list the constraints imposed on you. Who has already dealt with them? What did they do? What could you do?
You need the skill of learning because new opportunities abound. Improved learning skills—concentrating, reading, and listening, remembering, using time, and more—are directly useful and will continue to pay dividends for a long time. What don’t you know that you should? List technologies, practices, or events that might provide insight. Learn about the future by studying some history. Also, list some mistakes or failures from your past. What did you learn from them?
You need the skill of deciding because every decision has consequences, and no decision is a decision. Every solution brings about its own set of new problems. No leader knows enough about the future to make the most favorable decision every time, but it’s better to set a clear direction today and confront problems that crop up tomorrow. It’s not being afraid to fail; and if you do, identify it quickly and more ahead fast so no momentum is lost.
You need the skill of enabling because all of us are smarter than any one of us, and “they” need the knowledge, means, and opportunity to help you reach your goals. Who needs your help, and how can they help you? Provide opportunities—delegate. Ensure that outcomes, actions and questions are properly recorded and actioned, and appropriately dealt with afterwards.
You need the skill of reflecting because you learn more from understanding the reasons for your success and failure than you do from studying someone else’s best practices. Take a current problem and list possible answers. Now think like a beginner by asking dumb questions. Reflect on those questions and answers. The greatest strength of reflective leaders is their thoughtful and attentive nature, which means tremendous persistence to listen and take in information, the ability to connect the dots and garner eye-opening insights, and deep trust in their instinct, creativity, and thinking process.
Many leaders seem so besieged with their current workload that telling they prepare for the future may seem unreasonable. By preparing today to meet tomorrow’s challenges, they can set in motion a new leadership paradigm, one that will help leaders better cope with today.
Prepare your mind and then use your mind wisely. Leaders who focus on those eight basics will be prepared to encounter the unknowable challenges that lie ahead.
Motivation: Inspiring and encouraging employees to perform and stay
Coordination and Control: Measuring and evaluating business performance and risk
Innovation: Generating a flow of ideas so that the organization is able to adapt
Leadership Team: Ensuring leaders shape and inspire the actions of others to drive better performance
Direction: Articulating where the organization is heading and how to get there, and aligning people
External Orientation: Engaging in constant two-way interactions with customers, suppliers, or other partners
Work Environment and Values: Shaping employee interactions and fostering a shared understanding of values
Capabilities: Ensuring internal skills and talent to support strategy and create competitive advantage
Accountability: Designing structures/reporting relationships and evaluating individual performance to ensure accountability and responsibility for business results
In a lunch that investor Mohnish Pabrai of Pabrai Funds had with Charlie Munger, Berkshire Hathaway’s Vice-Chairman and partner of Warren Buffett, Charlie explained that an investment operation that focuses on three attributes would do exceedingly well.
Carefully look at what the other great investors have done. Charlie endorses mirroring the investments of the most successful investors by learning from the 13Fs they might file. Look at what other great minds are doing.
Look at the cannibals. Look thoroughly at the businesses that are buying back huge amounts of their stock. These businesses are eating themselves away, so Charlie describes them as the cannibals.
Carefully study spinoffs.Joel Greenblatt of Gotham Capital has a whole book on spinoffs: “You Can Be a Stock Market Genius Too.” Overall the book discusses investment opportunities presented by circumstances that are usually not considered by the average investor: spin-offs, mergers, risk arbitrage, restructurings, rights offerings, bankruptcies, liquidations, and asset sales.
Charlie Munger believes that if an investor did just three things, the end results would be vastly better than the returns of an average investor.
One of the traditions at the Berkshire Hathaway annual meetings is an hour-long light-hearted movie show. In fact, the “movie” is a collection of video clips some of which showcase commerials and skits from Berkshire Hathaway’s vast array of businesses, some featuring Buffett-comedy, surprise celebrity features, and so on, often to wild laughter among the crowd.
In recent years, the “movie” has also featured Warren Buffett’s opening statement to a Committee of the U.S. House of Representatives on the Salomon Saga. “Lose money for the firm, and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless,” warns Mr. Buffett at the end of that opening statement.
The security staff at the Berkshire Hathaway meetings forbid attendees from recording audio or video from the opening movie due to confidentiality and copyright restrictions. At the beginning of the movie, a voice-over or video recording from Warren Buffett assures appearances from “a number of people you recognize” and reminds that the celebrities work for free, at the request of the notoriously stingy Buffett. “Surprise, surprise.”
Over the years, the most popular clips in the movie feature a hilarious Warren Buffett attempting at diverse jobs in Berkshire’s businesses. Here’s one from Berkshire’s furniture business, Nebraska Furniture Mart.
At the Berkshire Hathaway annual shareholders meetings in Omaha, Warren Buffet and Charlie Munger sit at the center of the stage in front of a dark sea of shareholders. Warren Buffet first fields questions from the audience and a panel of journalists and stock analysts. Warren answers them and will ramble on a bit in his unique way (often with a one-liner or two mixed in) for a few minutes.
Then, Warren will look over to his partner and query, “Charlie?” Then Charlie Munger will either lean in and make a sharp, critical, pithy, often derisive comment (which usually extracts gasps or loud chuckles from the audience) or simply remark, “I have nothing to say,” which can be entertaining particularly after a long-winded digression from Warren Buffett.
Berkshire Hathaway annual shareholders meetings are normally held on the first Saturday of May in Omaha, Nebraska.
Recommended Reading
Common Stocks and Uncommon Profits and Other Writings: Philip A Fisher provides a framework for evaluating stocks based on prospective growth in earnings, management quality, and other analyses. Philip Fisher is among the most influential investors of all time, and advocates paying up for a stock, to complement the philosophy of value investing as proposed chiefly by Benjamin Graham and David.
The Essays of Warren Buffett: Lessons for Corporate America: Warren E. Buffett, Lawrence A. Cunningham is a thematically arrangement of the lengthy writings of Warren Buffett. This classic book provides an understandable and consistent understanding of the principles and logic of Warren Buffett’s attitude to life, investing, and business.
Behavioral assessments ask specific questions focused on target behaviors. Behavioral assessments are interested in samples of behavior and not behavior as a sign of internal processes. The responses collected from behavioral assessments can be interpreted as samples of a person behavior that are thought to generalize to other situations that the person might be subject to.
Overall, data and information resulting from behavioral assessments may have numerous advantages over data and information derived by traditional assessments or other methods of assessments. Data derived from behavioral assessments can be used:
to present behavioral baseline data with which other behavioral data (gathered after the passage of time, after a particular intervention, or after some other event) can be compared
to make available a record of the subject’s behavioral strengths and weaknesses across a assortment of situations, circumstances, and settings that the subject can be exposed to
to identify and pin down environmental circumstances that act to trigger, maintain, or extinguish certain behaviors in the subject
to identify and target precise behavioral patterns in a subject for modification through clinical or psychological interventions
to produce graphic displays that can be used to encourage inventive methods of treatment or more effective clinical or psychological therapy methods
The level of training and the experience of assessors influence the validity and reliability of behavioral assessments. Also affecting the soundness of the behavioral interviews is the ability to generalize the observations to other subjects, settings, and situations.
“I even take care to tear-off single sheets of toilet paper. Because I’m cheap? No. Because it’ll help the environment? No. I just think wasting is wrong.”
“If you relentlessly pursue a big goal with laser-beam focus, you will likely like your life and be a most worthy person.”
“Where at all ethically possible, we must give others hope. Without it, a person figuratively or even literally dies.”
“Exploring what your parents did to you may provide insight but, often, your life is no better. It just legitimizes your malaise, maybe even increases your stuckness..”
“Facing our parents’ aging forces us to confront our own mortality. It reminds us to appreciate and live each moment wisely.”
“Keep it simple: Reasonable diets all distill to: Lots of vegetables and legumes, some fruit, and small portions of everything else.”
“Be kind where you can, tough where you should.”
“If you have a clearly good idea, to avoid getting talked out of it, get input only on how to better execute it.”
“As we age, we may accrue a creeping bitter wisdom.”
“Telling people I can’t lose weight may make me eat more—to prove myself right. Perhaps if I told people, “‘I’m gonna lose 20.'””
“There’s cost and benefit each time you criticize or suggest. Sometimes, it’s worth the price. Make the choice consciously.”
“That a partner ‘gets’ you, this is what above all cements love: love as accurate (but still benevolent) interpretation.”
“A desire to “give back” needn’t imply giving to the neediest. It could mean giving to those with the most potential to benefit.”
“We dun perfectionism, e.g., as causing procrastination. Yet haven’t your perfectionist efforts yielded the most good & satisfaction?”
“A mantra to cure procrastinators: It needn’t be perfect; it needn’t be fun; it just has to get done.”
“Far better than a course is self-study + a tutor to get you past your trouble spots.”
“Far more of life’s pleasures are in the process than in the outcome. Be in the moment.“
“Whatever bad awaits, don’t let it spoil the present moment.”
“Scratch the surface of any thinking ideologue and you’ll find doubts. Ask, “Ever wondered whether the other side might be right?””
“Might you be wise to focus more on self-acceptance than self-improvement? That might even motivate you to self-improve.”
“More than a little “processing” of past bad experiences is often counterproductive.”
“No matter how brilliant you are, if your style is too intense, most people will dismiss you.”
“It’s easy to be liked: listen more than talk, praise often, and disagree rarely. The question is, is it worth the loss of integrity? “
“Long-winded? Constantly ask yourself, “Does the person really need & want to know this phrase?” And keep utterances to <30 sec.”
“I used to think most people are intrinsically motivated to work hard. But I’m finding that many if not most people need monitoring.”
“The key to a well-led life is maxing your contribution. Happiness, less key, is most likely found in simple pleasures.”
“How feeble are we that we’re swayed more by dubious flattery than by valid suggestions.”
“Key to being liked: While retaining integrity, do more agreeing, amplifying, empathizing. do less arguing, one-upping, yes-butting.”
“Why do so many people prefer a silly, manipulative, games-playing, selfish hottie over an ugly, intense, honest, kind person?”
“When you think you can nail someone with your argument, take a breath & see if you can phrase it as a face-saving question.”
“Some people are nice as a way of compensating for their not being good.”
“If possible, slightly under-schedule yourself. That gives you the time to make your work higher-quality.”
“Ever get tired of being nice? Tempted to throw caution to the wind and say what you really think? If deserved, even yell? “
“Winners do not let themselves succumb to anything. They distract themselves by immersing themselves in their most engaging work.”
“Good conversationalists choose a topic that enables each participant to contribute. “
“It worked for me, it can work for you books aren’t helpful because typical readers are less smart & driven than book authors.”
“To broaden your horizons, mix with people other than people from your own background (professional, cultural, social, academic, racial, ethnic, etc.) Most people prefer the company of other people from similar backgrounds. Birds of a feather do flock together.”
“Most of us think ourselves bold, individualistic thinkers when in fact we’re tepid if not downright lemmings.”
“Good, simple conversation starter, “What’s doing in your life?” or “Whatcha been thinking about these days?””
“What skill of yours has given you the must success? Use it more.”
“The most valuable way to spend a dollar? A memo pad. Keep it with you at all times. Think of ideas. Write them down. Implement them.”
“Successful, productive people fuel themselves with their work & accomplishment, unsuccessful people through recreation.”
“The desire to be right usually trumps the desire for truth.”
“The only God resides within us: It is our our wisest attitudes and actions.”
“We hear stories of persistence rewarded yet for each of those, hundreds have pressed on only to end up broken and/or broke.”
“If the risk/reward ratio of taking an action is good, even if you may fail, it’s usually wise to follow Nike’s advice: Just do it!”
“Sometimes, a problem has both a rational and an irrational component. It may help to try to solve those separately.”
“People see counselors when they could journal on their own. People take classes when they could read on their own. Why? They’re forced to act.”
“Don’t give up prematurely. Your continued efforts will iterate, improve based on lessons learned from your past failures.”