A Definitive Guide to Berkshire Hathaway’s 2014 Annual Shareholders Meeting

Berkshire Hathaway Annual Meetings

Value Investing Conference and Genius of Warren Buffett Course

Shareholder Events on 02-May-2014, Friday

Cocktail Reception at Borsheim's Fine Jewelry for Berkshire Hathaway Shareholders

Tent at the Berkshire Hathaway Cocktail Reception

  • Cocktail Reception at Borsheim's Fine Jewelry for Berkshire Hathaway Shareholders 6:00 PM to 9:00 PM: Cocktail Reception at Borsheim’s Fine Jewelry. Borsheim’s is Berkshire’s flagship jewelry retailer and the second biggest jewelry store in the world. This cocktail reception is exceptionally crowded. And Borsheim’s also sets a tent in the parking lot to accommodate the swarms of people enjoying the dinner buffet, open bar, and live musical entertainment, all complimentary. Vegetarians can get their fill of broccoli, cauliflower, carrots, and crackers. Location: Borsheim’s, 120 Regency Parkway, Omaha NE 68114 [map], (800) 642-4438.

Berkshire Hathaway Annual Shareholders' Meeting at CenturyLink Center, Omaha

Shareholder Events on 03-May-2014, Saturday

  • 7:00 AM: Doors Open at CenturyLink Center for the annual meeting. Shareholders, young and old, assemble hours before the opening of the doors to the CenturyLink center and, as soon as the doors are unlocked, run as quickly as they can to get the best seats in the house.
  • 7:00 AM: Complementary breakfast: free pastries and bottled drinks in the stands at CenturyLink Center.

Fruit of the Loom store at Berkshire Hathaway Annual Meeting Shopping

Challenge Warren Buffett in Newspaper Tossing Challenge at the Berkshire Hathaway Annual Shareholders' Meeting

NetJets display of Signature Flight Support at Berkshire Hathaway Annual Shareholders' Meeting

  • 12:00 PM to 5:00 PM: NetJets Display. “Signature Flight Support” on the east side of the Omaha airport. Collect passes to the NetJets display at the NetJets stall in the shopping area. Shuttle busses leave the northwest corner of the CenturyLink Center. On display are a fleet of NetJets aircraft “sure to set your pulse racing. Warren urges, “Come by bus; leave by private jet. Live a little.”
  • 12:00 PM to 1:00 PM: Buy-your-own lunch at CenturyLink’s stands.
  • 3:30 PM to 3:45 PM: Recess / regrouping
  • 3:45 PM to 4:00 PM: “Official business” part of the Berkshire Hathaway annual shareholders meeting.

Berkshire Cookout at Nebraska Furniture Mart

Big Time Cookout at Nebraska Furniture Mart (NFM) for Berkshire Hathaway Shareholders

Shareholder Events on 04-May-2014, Sunday

Warren Buffett tries to soften up U.S. Olympian Ariel Hsing in Ping Pong at the Borsheim's Shopping Day

Throughout the Week: Shareholder Discounts and Shopping

  • At Borsheim’s Fine Jewelry, shareholder prices will be available from Monday 28-Apr-2014 through Saturday 10-May-2014. Borsheim’s is usually open 10:00 AM to 8:00 PM on Mondays and Thursday, 10:00 AM to 6:00 PM on Tuesdays, Wednesdays, and Fridays, and 10:00 AM to 5:30 PM on Saturdays. Borsheim’s is located at 120 Regency Parkway, Omaha NE 68114 [map]. Most of the items in Borsheim’s are discounted no less than 30% for Berkshire shareholders.
  • At Nebraska Furniture Mart (NFM,) shareholder prices will be available from Monday, April 28th through Saturday, May 10th. Nebraska Furniture Mart is located at 700 S 72nd St, Omaha NE 68114 [map]. NFM is open 10:00 AM to 9:00 PM Monday through Saturday and 10:00 AM to 6:00 PM on Sundays. Shareholder discounts are also available at Nebraska Furniture Mart’s stores in Kansas City and Des Moines (no furniture; just appliances, electronics, and flooring.)

Getting Meeting Credentials

Berkshire Hathaway Annual Shareholders' Meeting Credentials Meeting credentials are required to enter the CenturyLink Center for the Berkshire Hathaway meeting or the adjoining area to hit the stores of the many Berkshire subsidiaries. Meeting credentials are also required to get special shareholder pricing at Borsheims, Nebraska Furniture Mart, and other stores that might offer shareholder discounts.

Berkshire Hathaway meeting credentials are no more than a plastic identification card and an associated lanyard. The identification card is not personalized and does not contain the shareholder’s or attendee’s name.

Here’s how to get your meeting credentials:

  • If you are a shareholder, your brokerage will send you the annual shareholders’ packet along with a postcard to request a maximum of four passes for the Berkshire annual meeting. Fill this postcard and drop it in the mail. Berkshire will send you passes and lanyards.
  • If you are a shareholder, but do not have time to request the passes, did not receive the passes, or did not receive the shareholder packet from your broker, take proof of your ownership of Berkshire Hathaway stock. Take a statement of your holdings from your broker to the annual meeting at the CenturyLink Center on the Friday afternoon or Saturday morning of the annual meeting to get your meeting credentials.
  • Many years ago, Berkshire Hathaway shareholders started auctioning the annual meeting passes on eBay for a premium. To hinder this premium, Berkshire Hathaway started directly selling two passes for $5 on eBay, with free shipping. “We decided to sell them ourselves on EBay at a nominal price to keep people from getting stung. We hope nobody pays more than what we charge which is basically to cover mailing charges,” a Berkshire Hathaway representative had informed Omaha World-Herald. Buyers could provide a mailing address when you checkout or just collect their passes from the CenturyLink Center on the Friday afternoon or Saturday morning of the Berkshire meeting.
  • If you are straining at the leash to go to the annual meeting and don’t have passes, just show up early on Saturday morning at the CenturyLink Center. I have seen shareholders in the line obliging to requests for passes from devoted fans of Berkshire; this practice needs to be discouraged.

Recommended Reading: “The Oracle & Omaha, How Warren Buffet and His Hometown Shaped Each Other”

‘The Oracle & Omaha, How Warren Buffet and His Hometown Shaped Each Other’ by Steve Jordon, Omaha World Herald

'The Oracle & Omaha, How Warren Buffet and His Hometown Shaped Each Other' by Steve Jordon, Omaha World Herald (ISBN 0615793940)

Warren Buffett in 1951: “The Security I Like Best:” GEICO

Government Employees Insurance Company (GEICO)

In his 2013 annual letter to Berkshire Hathaway Shareholders, Warren Buffet extols his mentor Ben Graham’s discourse on value investing, “The Intelligent Investor.” Warren has previously described The Intelligent Investor as “by far the best book on investing ever written.”

I learned most of the thoughts in this investment discussion from Ben’s book The Intelligent Investor, which I bought in 1949. My financial life changed with that purchase.

And:

'The Intelligent Investor: The Definitive Book on Value Investing' by Benjamin Graham, Jason Zweig (ISBN 0060555661) A couple of interesting sidelights about the book: Later editions included a postscript describing an unnamed investment that was a bonanza for Ben. Ben made the purchase in 1948 when he was writing the first edition and—brace yourself—the mystery company was GEICO. If Ben had not recognized the special qualities of GEICO when it was still in its infancy, my future and Berkshire’s would have been far different.

And,

When I was first introduced to GEICO in January 1951, I was blown away by the huge cost advantage the company enjoyed compared to the expenses borne by the giants of the industry. That operational efficiency continues today and is an all-important asset. No one likes to buy auto insurance. But almost everyone likes to drive. The insurance needed is a major expenditure for most families. Savings matter to them—and only a low-cost operation can deliver these.

Warren Buffett's 1951 Analysis Article: 'The Security I Like Best': GEICO

Warren Buffett’s 1951 Analysis Article: “The Security I Like Best”: GEICO

In 1951, Warren Buffett made his first purchase of GEICO stock In the 06-Dec-1961 (Thursday) edition of The Commercial and Financial Chronicle, a weekly business newspaper in the United States, Warren Buffett published an article on his analysis of the GEICO stock. He described GEICO, Government Employees Insurance Company, as the “The Security I Like Best.” Warren E. Buffett was then the principal of Omaha, NE, Buffett-Falk & Co. Below is a copy of Warren’s article; a facsimile of the article is also available in the PDF format: Warren_Buffett_-_The_Security_I_Like_Best.pdf.

This article is educational because it clearly shows the considerations that Buffett used to probe the company and evaluate its stock. The way of thinking of how Buffett and Berkshire Hathaway came to own GEICO provides a pattern of how to find and research any investment.

The Security I Like Best: The Government Employees Insurance Co. (GEICO)

Full employment, boom time profits and record dividend payments do not set the stage for depressed security prices. Most industries have been riding this wave of prosperity during the past five years with few ripples to disturb the tide.

The auto insurance business has not shared in the boom. After the staggering losses of the immediate postwar period, the situation began to right itself in 1949. In 1950, stock casualty companies again took it on the chin with underwriting experience the second worst in 15 years. The recent earnings reports of casualty companies, particularly those with the bulk of writings in auto lines, have diverted bull market enthusiasm from their stocks. On the basis of normal earning power and asset factors, many of these stocks appear undervalued.

The nature of the industry is such as to ease cyclical bumps. The majority of purchasers regards auto insurance as a necessity. Contracts must be renewed yearly at rates based upon experience. The lag of rates behind costs, although detrimental in a period of rising prices as has characterized the 1945-1951 period, should prove beneficial if deflationary forces should be set in action.

Other industry advantages include lack of inventory, collection, labor and raw material problems. The hazard of product obsolescence and related equipment obsolescence is also absent.

Government Employees Insurance Corporation was organized in the mid-30’s to provide complete auto insurance on a nationwide basis to an eligible class including: (1) Federal, State and municipal government employees; (2) active and reserve commissioned officers and the first three pay grades of non-commissioned officers of the Armed Forces; (3) veterans who were eligible when on active duty; (4) former policyholders; (5) faculty members of universities, colleges and schools; (6) government contractor employees engaged in defense work exclusively, and (7) stockholders.

The company has no agents or branch offices. As a result, policyholders receive standard auto insurance policies at premium discounts running as high as 30% off manual rates. Claims are handled promptly through approximately 500 representatives throughout the country.

The term “growth company” has been applied with abandon during the past few years to companies whose sales increases represented little more than inflation of prices and general easing of business competition. GEICO qualifies as a legitimate growth company based upon the following record:

Year— Premiums Written Policy Holders
1936 $103,696.31 3,754
1940 768,057.86 25,514
1945 1,638,562.09 51,697
1950 8,016,975.79 143,944

Of course the investor of today does not profit from yesterday’s growth. In GEICO’s case, there is reason to believe the major portion of growth lies ahead. Prior to 1950, the company was only licensed in 15 of 50 jurisdictions including D. C. and Hawaii. At the beginning of the year there were less than 3,000 policyholders in New York State. Yet 25% saved on an insurance bill of $125 in New York should look bigger to the prospect than the 25% saved on the $50 rate in more sparsely settled regions.

As cost competition increases in importance during times of recession, GEICO’s rate attraction should become even more effective in diverting business from the brother-in-law. With insurance rates moving higher due to inflation, the 25% spread in rates becomes wider in terms of dollars and cents.

There is no pressure from agents to accept questionable applicants or renew poor risks. In States where the rate structure is inadequate, new promotion may be halted.

Probably the biggest attraction of GEICO is the profit margin advantage it enjoys. The ratio of underwriting profit to premiums earned in 1949 was 27.5% for GEICO as compared to 3.7% for the 135 stock casualty and surety companies summarized by Best’s. As experience turned for the worse in 1950, Best’s aggregate’s profit margin dropped to 3.0% and GEICO’s dropped to 13.0%. GEICO does not write all casualty lines; however, bodily injury and property damage, both important lines for GEICO, were among the least profitable lines. GEICO also does a large amount of collision writing, which was a profitable line in 1950.

During the first half of 1951, practically all insurers operated in the red on casualty lines with bodily injury and property damage among the most unprofitable. Whereas GEICO’s profit margin was cut to slightly above 9%, Massachusett’s Bonding & Insurance showed a 26% loss, New Amsterdam Casualty an 8% loss, Standard Accident Insurance a 9% loss, etc.

Because of the rapid growth of GEICO, cash dividends have had to remain low. Stock dividends and a 25-for-1 split increased the outstanding shares from 3,000 on June 1, 1948, to 250,000 on Nov. 10, 1951. Valuable rights to subscribe to stock of affiliated companies have also been issued.

Benjamin Graham has been Chairman of the Board since his investment trust acquired and distributed a large block of the stock in 1948. Leo Goodwin, who has guided GEICO’s growth since inception, is the able President. At the end of 1950, the 10 members of the Board of Directors owned approximately one third of the outstanding stock.

Earnings in 1950 amounted to $3.92 as contrasted to $4.71 on the smaller amount of business in 1949. These figures include no allowance for the increase in the unearned premium reserve which was substantial in both years. Earnings in 1953 will be lower than 1950, but the wave of rate increases during the past summer should evidence themselves in 1952 earnings. Investment income quadrupled between 1947 and 1950, reflecting the growth of the company’s assets.

At the present price of about eight times the earnings of 1950, a poor year for the industry, it appears that no price is being paid for the tremendous growth potential of the company.

In 1951, Warren Buffett made his first purchase of GEICO stock. In 1996, Warren Buffett purchased all outstanding stock of GEICO, and folded GEICO into the Berkshire Hathaway umbrella as a subsidiary company. GEICO is part of the most noteworthy of Berkshire Hathaway’s businesses: the insurance business.

Insurance ‘Float’: A Significant Enabler of Berkshire Hathaway’s Success

Warren Buffett with GEICO's Gekko Berkshire Hathaway’s insurance operations provides Warren Buffett the ‘float’ that has been critical to his success as an investor. This float is money that Berkshire Hathaway holds to pay insurance claims at some point in the future, but in the intervening time can be put to work in stocks and long-term investments that earn returns for Berkshire. In effect, float constitutes borrowed funds at little or no cost. It enables Berkshire Hathaway to purchase businesses and assets beyond what Berkshire Hathaway’s cash and capital would allow. Other than GEICO, Berkshire Hathaway’s major insurance operations include Berkshire Hathaway Reinsurance Group and General Re.

GEICO is today the second largest auto insurer in the United States. GEICO’s mascot is a Gold dust day gecko with a Cockney accent. GEICO is well known in popular culture for its advertising, having made a large number of commercials that aim to amuse viewers. The GEICO gecko is voiced by English actor Jake Wood.

A Comprehensive List of Books Authored by Management Guru Peter F. Drucker

Peter Ferdinand Drucker, the father of management theory

Famed management guru Peter Ferdinand Drucker spent his life contemplating and writing about how business interests, politics, and human nature interact at companies, non-profits, and governments all over the world. His consultations had an almost legendary reputation in business circles.

Peter Drucker wrote influential works about management since the 1940s. He has written about 30 books, and from 1975 to 1995 he was an editorial columnist for the Wall Street Journal.

Books by Peter F. Drucker

“The End of Economic Man” (1939)

'The End of Economic Man', Book by Peter Drucker The End of Economic Man is Drucker’s first full-length book. It is a diagnostic study of the totalitarian state and the first book to study the origins of totalitarianism. He describes the reasons for the rise of fascism and the failures of established institutions that led to its emergence. Drucker develops an understanding of the dynamics of the totalitarian society and helps us to understand the causes of totalitarianism in order to prevent such a catastrophe in the future. Developing social, religious, economic, and political institutions that function effectively will prevent the emergence of circumstances that frequently encourage the totalitarian state.
     Buy “The End of Economic Man” by Peter Drucker

“The Future of Industrial Man” (1942)

'The Future of Industrial Man', Book by Peter Drucker Drucker describes the requirements for a functioning society by developing a social theory of society in general and of the industrial society in particular. In The Future of Industrial Man, Peter Drucker presents the requirements for any society for it to be both legitimate and functioning. Such a society must give status and function to the individual. The book addresses the question: “How can individual freedom are preserved in an industrial society in light of the dominance of managerial power and the corporation?” Written before the entrance of the U.S. into World War II, it is optimistic about post-World War II Europe and reaffirms its hopes and values through a time of despair. The book dared to ask, “What do we hope for the postwar world?”
     Buy “The Future of Industrial Man” by Peter Drucker

“Concept of the Corporation” (1946)

'Concept of the Corporation', Book by Peter Drucker This classic book is the first to describe and analyze the structure, policies, and practices of a large corporation, General Motors. The book looks upon a “business” as an “organization,” that is, as a social structure that brings together human beings in order to satisfy economic needs and the wants of a community. It establishes the “organization” as a distinct entity, and management of an organization as a legitimate subject of inquiry. The book represents a link between Drucker’s first two books on society and his subsequent writings on management. Detailed information is provided regarding such management practices as decentralization, pricing, and the roles of profits and of labor unions. Drucker looks at General Motors’ managerial organization and attempts to understand what makes the company work so effectively. Certain questions are addressed, such as: “What are the company’s core principles, and how do they contribute to the success of the organization?” The principles of organization and management at General Motors described in this book became models for organizations worldwide. The book addresses issues that go beyond the borders of the business corporation, and considers the “corporate state” itself.
     Buy “Concept of the Corporation” by Peter Drucker

“The New Society – The Anatomy of Industrial Order” (1950)

'The New Society - The Anatomy of Industrial Order', Book by Peter Drucker In The New Society, Peter Drucker extends his previous works The Future of Industrial Man and Concept of the Corporation into a systematic, organized analysis of the industrial society that emerged out of World War II. He analyzes large business enterprises, governments, labor unions, and the place of the individual within the social context of these institutions. Following publication of the of The New Society, George G. Higgins wrote in Commonweal, “Drucker has analyzed, as brilliantly as any modern writer, the problems of industrial relations in the individual company or ‘enterprise.’ He is thoroughly at home in economics, political science, industrial psychology, and industrial sociology, and has succeeded admirably in harmonizing the findings of all four disciplines and applying them meaningfully to the practical problems of the ‘enterprise.’ Drucker believes that the interests of the worker, management, and corporation are reconcilable with society. He advances the idea of “the plant community” in which workers are encouraged to take on more responsibility and act like “managers.” He questions whether unions can survive in their present form if the worker is encouraged to act as a manager.
     Buy “The New Society – The Anatomy of Industrial Order” by Peter Drucker

“The Practice of Management” (1954)

'The Practice of Management', Book by Peter Drucker This classic is the first book to define management as a practice and a discipline, thus establishing Drucker as the founder of the discipline of modern management. Management has been practiced for centuries, but this book systematically defines management as a discipline that can be taught and learned. It provides a systematic guide for practicing managers who want to improve their effectiveness and productivity. It presents Management by Objectives as a genuine philosophy of management that integrates the interests of the corporation with those of the managers and contributors to an organization. Illustrations come from such companies as Ford, GE, Sears, Roebuck & Co., GM, IBM, and AT&T.
     Buy “The Practice of Management” by Peter Drucker

“America’s Next Twenty Years” (1957)

'America's Next Twenty Years', Book by Peter Drucker In this collection of essays, Peter Drucker discusses the issues that he believes will be significant in America, including the coming labor shortage, automation, significant wealth in the hands of a few individuals, college education, American politics, and perhaps most significantly, the growing disparity between the “haves” and the “have nots.” In these essays, Drucker identifies the major events that “have already happened” that will “determine the future.” “Identifying the future that has already happened” is a major theme of Drucker’s many books and essays.
     Buy “America’s Next Twenty Years” by Peter Drucker

“Landmarks of Tomorrow” (1957)

'Landmarks of Tomorrow', Book by Peter Drucker Landmarks of Tomorrow identifies “the future that has already happened” in three major areas of human life and experience. The first part of the book treats the philosophical shift from a Cartesian universe of mechanical cause to a new universe of pattern, purpose, and configuration. Drucker discusses the need to organize men of knowledge and of high skill for joint effort, and performance as a key component of this change. The second part of the book sketches four realities that challenge the people of the free world: an educated society, economic development, the decline of the effectiveness of government, and the collapse of Eastern culture. The final section of the book is concerned with the spiritual reality of human existence. These are seen as basic elements in late-twentieth-century society. In his new introduction, Peter Drucker revisits the main findings of Landmarks of Tomorrow and assesses their validity in relation to today’s concerns.
     Buy “Landmarks of Tomorrow” by Peter Drucker

“Managing for Results” (1964)

'Managing for Results', Book by Peter Drucker This book focuses upon economic performance as the specific function and contribution of business and the reason for its existence. The effective business, Peter Drucker observes, focuses on opportunities rather than problems. How this focus is achieved in order to make the organization prosper and grow is the subject of this companion to his classic, The Practice of Management. The earlier book was chiefly concerned with how management functions as a discipline and practice, this volume shows what the executive decision-maker must do to move his enterprise forward. One of the notable accomplishments of this book is its combining of specific economic analysis with the entrepreneurial force in business prosperity. For though it discusses “what to do” more than Drucker’s previous works, the book stresses the qualitative aspect of enterprise: every successful business requires a goal and spirit all its own. Managing for Results was the first book to describe what is now widely called “business strategy” and to identify what are now called an organization’s “core competencies.”
     Buy “Managing for Results” by Peter Drucker

“The Effective Executive” (1966)

'The Effective Executive', Book by Peter Drucker The Effective Executive is a landmark book that develops the specific practices of the executive that lead to effectiveness. It is based on observations of effective executives in business and government. Drucker starts by reminding executives that the measure of effectiveness is the ability to “get the right things done.” This involves five practices: (1) managing one’s time, (2) focusing on contribution rather than problems, (3) making strengths productive, (4) establishing priorities, and (5) making effective decisions. A major portion of the book is devoted to the process of making effective decisions and the criteria for effective decisions. Numerous examples are provided of executive effectiveness. The book concludes by emphasizing that effectiveness can be learned and must be learned.
     Buy “The Effective Executive” by Peter Drucker

“The Age of Discontinuity” (1968)

'The Age of Discontinuity', Book by Peter Drucker Peter Drucker focuses with great clarity and perception on the forces of change that are transforming the economic landscape and creating tomorrow’s society. He discerns four major areas of discontinuity underlying contemporary social and cultural reality: (I) the explosion of new technologies resulting in major new industries, (2) the change from an international to a world economy, (3) a new sociopolitical reality of pluralistic institutions that poses drastic political, philosophical, and spiritual challenges, and (4) the new universe of knowledge work based on mass education along with its implications. The Age of Discontinuity is a fascinating and important blueprint for shaping a future already very much with us.
     Buy “The Age of Discontinuity” by Peter Drucker

“Men, Ideas, and Politics” (1970)

'Men, Ideas, and Politics', Book by Peter Drucker Technology, Management, and Society presents an overview of the nature of modern technology and its relationships with science, engineering, and religion. The social and political forces, which increasingly impinge on technological development, are analyzed within the framework of broad institutional change. Scholars and students troubled by society’s growing reliance on technological solutions to complex social and political problems will welcome Peter Drucker’s critical perspective.
     Buy “Men, Ideas, and Politics” by Peter Drucker

“Technology, Management, and Society” (1971)

'Technology, Management, and Society', Book by Peter Drucker This book is a compilation of thirteen essays addressing the issues of society “people, politics, and thought. Included are essays on Henry Ford, Japanese management, and effective presidents. Two articles in particular show aspects of Drucker’s thinking that are especially important. One is an essay on “The Unfashionable Kierkegaard,” which encourages the development of the spiritual dimension of humankind. The other is on the political philosophy of John C. Calhoun, describing the basic principles of lsowo0 America’s pluralism and how they shape government policies and programs.
     Buy “Technology, Management, and Society” by Peter Drucker

“Management: Tasks, Responsibilities, Practices” (1973)

'Management: Tasks, Responsibilities, Practices', Book by Peter Drucker This book is a compendium of Drucker on management. It updates and expands upon The Practice of Management. It is an essential reference book for executives. Management is an organized body of knowledge consisting of managerial tasks, managerial work, managerial tools, managerial responsibilities, and the role of top management. According to Peter Drucker, “This book tries to equip the manager with the understanding, the thinking, the knowledge, and the skills for today’s and also tomorrow’s jobs.” This management classic has been developed and tested during more than thirty years of management teaching in universities, executive programs, seminars, and through the author’s close work with managers as a consultant for large and small businesses, government agencies, hospitals, and schools.
     Buy “Management: Tasks, Responsibilities, Practices” by Peter Drucker

“The Pension Fund Revolution” (1976)

'The Pension Fund Revolution', Book by Peter Drucker In this book, Drucker describes how institutional investors, especially pension funds, have become the controlling owners of America’s large companies, and the country’s “capitalists.” He explores how ownership has become highly concentrated in the hands of large institutional investors, and that through the pension funds, “ownership of the means of production” has become “socialized” without becoming “nationalized.” Another theme of this book is the aging of America. Drucker points to the new challenges this trend will pose with respect to health care, pensions, and social security’s place in the American economy and society, and how, altogether, American politics would increasingly become dominated by middle-class issues and with the values of elderly people. In the new epilogue, Drucker discusses how the increasing dominance of pension funds represents one of the most startling power shifts in economic history, and examines their present-day impact.
     Buy “The Pension Fund Revolution” by Peter Drucker

“Adventures of a Bystander” (1978)

'Adventures of a Bystander', Book by Peter Drucker Adventures of a Bystander is Drucker’s collection of autobiographical stories and vignettes, in which he paints a portrait of his life, and of the larger historical realities of his time. Drucker conveys his life story “from his early teen years in Vienna through the interwar years in Europe, the New Deal era, World War II, and the postwar period in America” … “through intimate profiles of a host of fascinating people he’s known through the years. Along with bankers and courtesans, artists, aristocrats, prophets, and empire builders, we meet members of Drucker’s own family and close circle of friends, among them such prominent figures as Sigmund Freud, Henry Luce, Alfred Sloan, John Lewis, and Buckminster Fuller. Shedding light on a turbulent and important era, Adventures of a Bystander also reflects Peter Drucker himself as a man of imaginative sympathy and enormous interest in people, ideas, and history.
     Buy “Adventures of a Bystander” by Peter Drucker

“Managing in Turbulent Times” (1980)

'Managing in Turbulent Times', Book by Peter Drucker This important and timely book concerns the immediate future of business, society, and the economy. We are, says Drucker, entering a new economic era with new trends, new markets, a global economy, new technologies, and new institutions. How will managers and management deal with the turbulence created by these new realities? This book, as Drucker explains it, “is concerned with action, rather than understanding, with decisions, rather than analysis.” It deals with the strategies needed to adapt to change and to turn rapid changes into opportunities, to turn the threat of change into productive and profitable action that contributes positively to our society, the economy, and the individual. An organization must be structured to withstand a blow caused by environmental turbulence.
     Buy “Managing in Turbulent Times” by Peter Drucker

“Toward the Next Economics” (1981)

'Toward the Next Economics', Book by Peter Drucker These essays cover a wide-ranging collection of topics on business, management, economics, and society. They are all concerned with what Drucker calls “social ecology” and especially with institutions. These essays reflect ‘the future that has already happened.”, The essays reflect Drucker’s belief that, in the decade of the 1970s, there were genuine changes in population structure and dynamics, changes in the role of institutions, changes in the relation between sciences and society, and changes in the fundamental theories about economics and society, long considered as truths. The essays are international in scope.
     Buy “Toward the Next Economics” by Peter Drucker

“The Changing World of the Executive” (1982)

'The Changing World of the Executive', Book by Peter Drucker These essays from the Wall Street Journal explore a wide variety of topics. They deal with changes in the workforce “its jobs, its expectations” with the power relationships of a “society of employees,” and with changes in technology and in the world economy. They discuss the problems and challenges facing major institutions, including business enterprises, schools, hospitals, and government agencies. They look anew at the tasks and work of executives, at their performance and its measurement, and at executive compensation. However diverse the topics, these chapters have one common theme, the changing world of the executive “changing rapidly within the organization, changing rapidly with respect to the visions, aspirations, and even characteristics of employees, customers, and constituents, changing outside the organization, as well, economically, technologically, socially, politically.
     Buy “The Changing World of the Executive” by Peter Drucker

“Innovation and Entrepreneurship” (1985)

'Innovation and Entrepreneurship', Book by Peter Drucker The first book to present innovation and entrepreneurship as a purposeful and systematic discipline. It explains and analyzes the challenges and opportunities presented by the emergence of the entrepreneurial economy in business and public service institutions. It is a major contribution to functioning management, organization, and economy. The book is divided into three main sections: (1) The Practice of Innovation, (2) The Practice of Entrepreneurship, and (3) Entrepreneurial Strategies. Drucker presents innovation and entrepreneurship as both practice and discipline, choosing to focus on the actions of the entrepreneur as opposed to entrepreneurial psychology and temperament. All organizations, including public-service institutions, must become entrepreneurial to survive and prosper in a market economy. The book provides a description of entrepreneurial policies and windows of opportunity for developing innovative practices in both emerging and well-established organizations.
     Buy “Innovation and Entrepreneurship” by Peter Drucker

“The Frontiers of Management” (1986)

'The Frontiers of Management', Book by Peter Drucker This book is a collection of thirty-five previously published articles and essays, twenty-five of which have appeared on the editorial page of the Wall Street Journal. Featuring a new introduction, Drucker forecasts the business trends of what was then the next millennium. The Frontiers of Management is a clear, direct, lively, and comprehensible examination of global trends and management practices. There are chapters dealing with the world economy, hostile takeovers, and the unexpected problems of success. Jobs, younger people, and career gridlock are also covered. Throughout this book, Drucker stresses the importance of forethought and of realizing that “change is opportunity” in every branch of executive decision-making.
     Buy “The Frontiers of Management” by Peter Drucker

“The New Realities” (1989)

'The New Realities', Book by Peter Drucker This book is about the “next century.” Its thesis is that the “next century” is already here, indeed that we are well advanced into it. In this book, Drucker writes about the “social superstructure” politics and government, society, economy and economics, social organization, and the new knowledge society. He describes the limits of government and dangers of “charisma” in leadership. He identifies the future organization as being information-based. While this book is not “futurism,” it attempts to define the concerns, the issues, and the controversies that will be realities for years to come. Drucker focuses on what to do today in contemplation of tomorrow. Within self-imposed limitations, he attempts to set the agenda on how to deal with some of the toughest problems we are facing today that have been created by the successes of the past.
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“Managing the Non-Profit Organization” (1990)

'Managing the Non-Profit Organization', Book by Peter Drucker The service, or nonprofit, sector of our society is growing rapidly (with more than 8 million employees and more than 80 million volunteers), creating a major need for guidelines and expert advice on how to lead and manage these organizations effectively. This book is an application of Drucker’s perspective on management to nonprofit organizations of all kinds. He gives examples and explanations of mission, leadership, resources, marketing, goals, people development, decision-making, and much more. Included are interviews with nine experts that address key issues in the nonprofit sector.
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“Managing for the Future” (1992)

'Managing for the Future', Book by Peter Drucker Bringing together the most exciting of Drucker’s many recent essays on economics, business practices, managing for change, and the evolving shape of the modern corporation, Managing for the Future offers important insights and lessons for anyone trying to stay ahead of today’s unremitting competition. Drucker’s universe is a constantly expanding cosmos composed of four regions in which he demonstrates mastery: (1) the economic forces affecting our lives and livelihoods, (2) today’s changing workforce and workplaces, (3) the newest management concepts and practices, and (4) the shape of the organization, including the corporation, as it evolves and responds to ever-increasing tasks and responsibilities. Each of this book’s chapters explores a business or corporate or “people” problem, and Drucker shows how to solve it or use it as an opportunity for change.
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“The Ecological Vision” (1993)

'The Ecological Vision', Book by Peter Drucker The thirty-one essays in this volume were written over a period of more than forty years. These essays range over a wide array of disciplines and subject matter. Yet they all have in common that they are “Essays in Social Ecology” and deal with the man-made environment. They all, in one way or another, deal with the interaction between individual and community. In addition, they try to look upon the economy, upon technology, upon art, as dimensions of social experience and as expressions of social values. The last essay in this collection, The Unfashionable Kierkegaard, was written as an affirmation of the existential, the spiritual, and the individual dimension of the Creature. It was written by Drucker to assert that society is not enough “not even for society. It was written to affirm hope. This is an important and perceptive volume of essays.
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“Post-Capitalist Society” (1993)

'Post-Capitalist Society', Book by Peter Drucker In Post-Capitalist Society, Peter Drucker describes how every few hundred years a sharp transformation has taken place and greatly affected society “its worldview, its basic values, its business and economics, and its social and political structure. According to Drucker, we are right in the middle of another time of radical change, from the Age of Capitalism and the Nation-State to a Knowledge Society and a Society of Organizations. The primary resource in the post-capitalist society will be knowledge, and the leading social groups will be “knowledge workers.” Looking backward and forward, Drucker discusses the Industrial Revolution, the Productivity Revolution, the Management Revolution, and the governance of corporations. He explains the new functions of organizations, the economics of knowledge, and productivity as a social and economic priority. He covers the transformation from Nation-State to Megastate, the new pluralism of political systems, and the needed turnaround in government. Finally, Drucker details the knowledge issues and the role and use of knowledge in the post-capitalist society. Divided into three parts “Society, Polity, and Knowledge” Post-Capitalist Society provides a searching look into the future as well as a vital analysis of the past, focusing on the challenges of the present transition period and how, if we can understand and respond to them, we can create a new future.
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“Managing in a Time of Great Change” (1995)

'Managing in a Time of Great Change', Book by Peter Drucker This book compiles essays written by Drucker from 1991 to 1994 and published in the Harvard Business Review and the Wall Street Journal. All of these essays are about change: changes in the economy, society, business, and in organizations in general. Drucker’s advice on how managers should adjust to these tectonic shifts centers on the rise of the now-ubiquitous knowledge worker and the global economy. In this book, Drucker illuminates the business challenges confronting us today. He examines current management trends and whether they really work, the implications for business in the reinvention of the government, and the shifting balance of power between management and labor.
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“Drucker on Asia” (1995) with Isao Nakauchi

'Drucker on Asia', Book by Peter Drucker Drucker on Asia is the result of an extensive dialogue between two of the world’s leading business figures, Peter F. Drucker and Isao Nakauchi. Their dialogue considers the changes occurring in the economic world today and identifies the challenges that free markets and free enterprises now face, with specific reference to China and Japan. What do these changes mean to Japan? What does Japan have to do in order to achieve a “third economic miracle”? What do these changes mean to society, the individual company, the individual professional and executive? These are the questions that Drucker and Nakauchi address in their brilliant insight into the future economic role of Asia.
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“Peter Drucker on the Profession of Management” (1996)

'Peter Drucker on the Profession of Management', Book by Peter Drucker This is a significant collection of Peter Drucker’s landmark articles from the Harvard Business Review. Drucker seeks out, identifies, and examines the most important issues confronting managers, from corporate strategy to management style to social change. This volume provides a rare opportunity to trace the evolution of great shifts in our workplaces, and to understand more clearly the role of managers in the ongoing effort to balance change with continuity, the latter a recurring theme in Drucker’s writings. These are strategically presented here to address two unifying themes: the first examines the “Manager’s Responsibilities,” while the second investigates “The Executive’s World.” Containing an important interview with Drucker on “The Post-Capitalist Executive,” as well as a preface by Drucker himself, the volume is edited by Nan Stone, longtime editor of the Harvard Business Review.
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“Management Challenges for the 21st Century” (1998)

'Management Challenges for the 21st Century', Book by Peter Drucker In this compilation of essays culled from published magazine articles and a lengthy essay appearing in The Economist in November 2001, and interviews during the period of 1996 to 2002, Drucker has expertly anticipated our ever-changing business society and ever-expanding management roles. In this book, Drucker identifies the reality of the ‘Next Society,” which has been shaped by three major trends: the decline of the young portion of the population, the decline of manufacturing, and the transformation of the workforce (together with the social impact of the Information Revolution). Drucker also asserts that e-commerce and e-learning are to the Information Revolution what the railroad was to the Industrial Revolution, and thus, an information society is developing. Drucker speaks of the importance of the social sector (that is, nongovernmental and nonprofit organizations), because NPOs can create what we now need: communities for citizens and especially for highly educated knowledge-workers, who increasingly dominate developed societies.
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“Managing in the Next Society” (1999)

'Managing in the Next Society', Book by Peter Drucker In his first major book since The Post-Capitalist Society, Drucker discusses the new paradigms of management “how they have changed and will continue to change our basic assumptions about the practices and principles of management. Drucker analyzes the new realities of strategy, shows how to be a leader in periods of change, and explains the “New Information Revolution,” discussing the information an executive needs and the information an executive owes. He also examines knowledge-worker productivity, and shows that changes in the basic attitude of individuals and organizations, as well as structural changes in work itself, are needed for increased productivity. Finally, Drucker addresses the ultimate challenge of managing oneself while meeting the demands on the individual during a longer working life and in an ever-changing workplace.
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“The Daily Drucker” (2002)

'The Daily Drucker', Book by Peter Drucker Revered management thinker Peter F. Drucker is our trusted guide in this thoughtful, day-by-day companion that offers his penetrating and practical wisdom. Amid the multiple pressures of our daily work lives, The Daily Drucker provides the inspiration and advice to meet the many challenges we face. With his trademark clarity, vision, and humanity, Drucker sets out his ideas on a broad swath of key topics, from time management, to innovation, to outsourcing, providing useful insights for each day of the year. These 366 daily readings have been harvested from Drucker’s lifetime of work. At the bottom of each page, the reader will find an action point that spells out exactly how to put Drucker’s ideas into practice. It is as if the wisest and most action-oriented management consultant in the world is in the room, offering his timeless gems of advice. The Daily Drucker is for anyone who seeks to understand and put to use Drucker’s powerful words and ideas.
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“The Effective Executive in Action” (2004)

'The Effective Executive in Action', Book by Peter Drucker The Effective Executive in Action is a journal based on Peter F. Drucker’s classic and preeminent work on management and effectiveness “The Effective Executive“. Here Drucker and Maciariello provide executives, managers, and knowledge workers with a guide to effective action “the central theme of Drucker’s work. The authors take more than one hundred readings from Drucker’s classic work, update them, and provide provocative questions to ponder and actions to take in order to improve your own work. Also included in this journal is a space for you to record your thoughts for later review and reflection. “The Effective Executive in Action” will teach you how to be a better leader and how to lead according to the five main pillars of Drucker’s leadership philosophy.
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“Managing Oneself” (2007)

'Managing Oneself', Book by Peter Drucker We live in an age of unprecedented opportunity: with ambition, drive, and talent, you can rise to the top of your chosen profession regardless of where you started out. However, with opportunity comes responsibility. Companies today are not managing their knowledge workers’ careers. Instead, you must be your own chief executive officer. That means it is up to you to carve out your place in the world and know when to change course. In addition, it is up to you to keep yourself engaged and productive during a career that may span some 50 years. In Managing Oneself, Peter Drucker explains how to do it. The keys: Cultivate a deep understanding of yourself by identifying your most valuable strengths and most dangerous weaknesses. Articulate how you learn and work with others and what your most deeply held values are. Describe the type of work environment where you can make the greatest contribution. Only when you operate with a combination of your strengths and self-knowledge can you achieve true and lasting excellence. Managing Oneself identifies the probing questions you need to ask to gain the insights essential for taking charge of your career.
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Anthologies by Peter Drucker

“The Essential Drucker” (2001)

The Essential Drucker', Anthology by Peter Drucker The Essential Drucker offers, in Drucker’s words, “a coherent and fairly comprehensive ‘Introduction to Management’ and gives an overview of my management work and thus answers the question I’ve been asked again and again: ‘Which writings is Essential?’ The book contains twenty-six selections on management in the organization, management and the individual, and management in society. It covers the basic principles and concerns of management and its problems, challenges, and opportunities, giving managers, executives, and professionals the tools to perform the tasks that the economy and society of today and tomorrow will demand of them.
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“A Functioning Society” (2003)

A Functioning Society', Anthology by Peter Drucker In these essays, Drucker has brought together selections from his vast writings on community, society, and the political structure. Drucker’s primary concern is with a functioning society in which the individual has status and function. Parts I and II identify the institutions that could recreate community, the collapse of which produced totalitarianism in Europe. These selections were written during World War II. Part III deals with the limits of governmental competence in the social and economic realm. This section is concerned with the differences between big government and effective government.
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Novels by Peter Drucker

“The Last of All Possible Worlds” (1982)

The Last of All Possible Worlds', Novel by Peter Drucker This novel occurs in the world of upper-class European society of the transitional age just before World War I. At the center of this novel are the lives of four distinguished Europeans who reach their later years around the turn-of-the-century.

  • The aristocratic Polish Prince Sobieski, a wealthy landowner, businessperson, and the Austro-Hungarian diplomat to Great Britain
  • McGregor Hinton, a mathematics historian and an immensely successful banker, who faces an ethical crisis and reviews his life, his poor beginnings, his noble secret marriage to a prostitute after she bore his deformed child, and his brushes with aristocracy.
  • A wealthy Jewish banker Julius von Mosenthal is planning a major restructuring of a bank while ruminating on the future meeting with partners Hinton and Sobieski
  • Baroness Rafaela Wald-Reifnitz—descended from the purest Sephardic Jews, painted by two great artists, devoted to music, in love with her problematic husband Arthur.
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“The Temptation to Do Good” (1984)

The Temptation to Do Good', Novel by Peter Drucker “The Temptation to Do Good”, like “The Last of all Possible Worlds”, is outstanding and brilliant. They are very important additions to Peter Drucker’s outstanding and comprehensive picture of management thinking and practice. The Temptation to Do Good features Father Heinz Zimmerman, the President of a Catholic university. Father Zimmerman faces all of the leadership challenges common to nonprofit CEOs: budgets, donors, staff conflicts, board members, and ethical issues. If you’d add to the mix student and faculty and their expectations, you’ll come to appreciate the sense and purpose of an organization more.
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15 Rules and 10 Don’ts for Evaluating Companies by Value Investing Pioneer Phil Fisher

Common Stocks and Uncommon Profits, by Philip Fisher

Philip Fisher, Investor, Author of Common Stocks And Uncommon Profits Philip Fisher (1907–2004) is widely considered the pioneer and thought process leader in long-term value investing. Even after ten years after his death, Fisher is widely respected and admired as one of the most influential investors of all time. Fisher developed his long-term investing philosophy decades ago and discussed them in his seminal book, Common Stocks and Uncommon Profits. Common Stocks and Uncommon Profits was first published in 1958 and continues to be a must-read today for investors and finance professionals around the world.

Phil Fisher’s Common Stocks and Uncommon Profits is a perfect complement to Ben Graham’s The Intelligent Investor. Fisher’s book explains the qualitative side to value investing, while Graham explains the quantitative side of value investing. Warren Buffett, the world’s most successful value investor, describes himself as “85% Graham, 15% Fisher.”

Core to Fisher’s value-investing philosophy is that long-term value investors who will be investing in a company for 20-30 years should understand and appraise the management of a company because it is the management who is directly accountable for the long-term financial performance and business competitiveness of the company.

Phil Fisher’s Common Stocks and Uncommon Profits can be summarized by means of his 15-point checklist for buying stocks and a 10-point don’t list. These principles will stand the test of time.

Phil Fisher’s 15 Rules for Evaluating Companies for Value Investing

  1. Does the company have products or services with sufficient market potential to make possible a sizeable increase in sales for at least several years?
  2. Does the management have a determination to continue to develop products or processes that will still further increase total sales potential when the growth potential of currently attractive product lines have largely been exploited?
  3. How effective are the company’s research and development efforts in relation to its size?
  4. Does the company have an above-average sales organization?
  5. Does the company have a worthwhile profit margin?
  6. What is the company doing to maintain or improve profit margins?
  7. Does the company have outstanding labor and personnel relations?
  8. Does the company have outstanding executive relations?
  9. Does the company have depth to its management?
  10. How good are the company’s cost analysis and accounting controls?
  11. Are there other aspects of the business somewhat peculiar to the industry involved that will give the investor important clues as to how the company will be in relation to its competition?
  12. Does the company have a short-range or long-range outlook in regard to profits?
  13. In the foreseeable future, will the growth of the company require sufficient financing so that the large number of shares then outstanding will largely cancel existing shareholders’ benefit from this anticipated growth?
  14. Does the management talk freely to investors about its affairs when things are going well and “clam up” when troubles or disappointments occur?
  15. Does the company have a management of unquestioned integrity?

Phil Fisher’s 10 Don’ts for Evaluating Companies for Value Investing

  1. Don’t buy into promotional companies.
  2. Don’t ignore a good stock just because it is traded “over-the-counter.”
  3. Don’t buy a stock just because you like the “tone” of the annual report.
  4. Don’t assume that the high price at which a stock may be selling in relation to earnings is necessarily an indication that further growth in those earnings has largely been already discounted in the price.
  5. Don’t quibble over eights and quarters.
  6. Don’t overstress diversification.
  7. Don’t be afraid of buying on a war scare.
  8. Don’t forget your Gilbert and Sullivan (Don’t be influenced by what doesn’t matter).
  9. Do not fail to consider time as well as price in buying a true growth stock.
  10. Don’t follow the crowd.

Recommended Reading

  • 'The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel' by Benjamin Graham, Jason Zweig (ISBN 0060555661)
    The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel: Benjamin Graham, Jason Zweig updates timeless “value investing” wisdom from the greatest investment teacher of the twentieth century, Benjamin Graham. This beloved book has been the investors’ bible since its original publication in 1949.
  • 'One Up On Wall Street' by Peter Lynch, John Rothchild (ISBN 0743200403)
    One Up On Wall Street: Peter Lynch, John Rothchild describes a well-revered bottom-up approach to investing in stocks by selecting companies familiar to the investor followed by a comprehensive fundamental analysis with emphasis on a company’s prospects, its business, it’s competitive environment, and then determining a reasonable price for the company’s stock. Peter Lynch is Vice Chairman of Fidelity Management & Research Company.
  • 'The Essays of Warren Buffett: Lessons for Corporate America' by Warren E. Buffett, Lawrence A. Cunningham (ISBN 1611634091)
    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.

Creating a Winning Corporate Strategy: Jack Welch’s 5 Key Strategy Questions

During his adored tenure as Chairman and CEO of General Electric, Jack Welch created a strategy development framework that was implemented across the vast organization. managers across General Electric used the winning corporate strategy model to gauge their businesses and make decisions about where to go next.

'Winning' by Jack Welch, Suzy Welch (ISBN 0060753943) Jack Welch advocated that strategy is not something that should be left to the management and strategy consultants. He called strategy “a living, breathing, totally dynamic game.” In his book “Winning” (with wife Suzy Welch,) Jack Welch declares the key to success is to “pick a general direction and implement like hell.”

For Jack Welch, strategy was a “killer idea” or a “winning value proposition” that can provide any organization a general direction for durable competitive advantage. He described strategy as a living, breathing story about how your organization is going to win. In this pursuit, strategy should be a tool, that is agile and can change over time, but it is not arbitrary or indiscriminate.

Jack Welch's Questions for Strategy Planning

Jack Welch’s Questions for Strategy Planning

'HBR's 10 Must Reads on Strategy ' by Harvard Business Review (ISBN 1422157989) Conceptualizing and developing a successful business strategy lies not in having all the right answers, but rather in asking the right questions. Creating a winning corporate strategy is the process of asking (and answering) the question of what needs to change and why? Jack Welch proposes a rapid, practical questioning procedure to come up with a winning corporate strategy by probing for answers to five key questions:

  1. What does the competitive playing field look like?
  2. What have our competitors been up to lately?
  3. What have we done lately?
  4. What future events or possible changes keep us up at night with worry?
  5. And, given all that, what’s our winning move?

Theme 1: What the Playing Field Looks Like Now

  • Who are the competitors in this business, large and small, new and old?
  • Who has what share, globally and in each market? Where do we fit in?
  • What are the characteristics of this business? Is it commodity or high value or somewhere in between? Is it long cycle or short? Where is it on the growth curve? What are the drivers of profitability?
  • What are the strengths and weaknesses of each competitor? How good are its products? How much does each one spend on R&D? How big is each sales force? How performance-driven is each culture?
  • Who are this business’s main customers, and how do they buy?

Theme 2: What the Competition Has Been Up To

  • What has each competitor done in the past year to change the playing field?
  • Has anyone introduced game-changing new products, new technologies, or a new distribution channel?
  • Are there any new entrants, and what have they been up to in the past year?

Theme 3: What You’ve Been Up To

  • What have you done in the past year to change the competitive playing field?
  • Have you bought a company, introduced a new product, stolen a competitor’s key salesperson, or licensed a new technology from a startup?
  • Have you lost any competitive advantages that you once had—a great salesperson, a special product, a proprietary technology?

Theme 4: What’s Around the Corner?

  • What scares you most in the year ahead—what one or two things could a competitor do to nail you?
  • What new products or technologies could your competitors launch that might change the game?
  • What M&A deals would knock you off your feet?

Theme 5: What’s Your Winning Move?

  • What can you do to change the playing field—is it an acquisition, a new product, globalization?
  • What can you do to make customers stick to you more than ever before and more than to anyone else?

Strategy Questions for Global Competition for Resources and Market-Access

Strategy Questions for Global Competition for Resources and Market-Access

'Playing to Win: How Strategy Really Works ' by A.G. Lafley, Roger L. Martin (ISBN 142218739X) In the context of global completion, both for resources and access to markets, leaders need to identify factors and attributes that will shape the future of globalization. Such a framework should provide guidance to those who will make, influence, and predict decisions about the global economic structure and develop a game plan to succeed in an increasingly global environment. Here are Jack Welch’s five strategy questions modified for the global nature of business.

  1. What does your global competition look like over the next several years?
  2. What have your competitors done in the last three years to upset these global dynamics?
  3. What have you done to them in the last three years to affect those dynamics?
  4. How might your competitor attack you in the future?
  5. What are your plans to leapfrog the competition?

Applying a strategy-development framework can help companies focus their activities and goals in ways that are more efficient and lead to a more powerful approach to growing their business. The framework helps analyze the dynamics of the current line of attack, reveal the forces currently influencing the global competition. The framework works by, in part, by recognizing that the strategy must not only be understood by everyone in the organization, but must be acted on by everyone.

Recommended Reading: Best Books for Strategy Planning

Recommended Reading: Best Books on and by Jack Welch

Winston Churchill’s Famous Sense of Humor

Winston Churchill's Famous Sense of Humor

Winston Churchill was one of the most eminent and one of the most debated men of the 20th Century. Churchill was greatly admired at this time of his career (having just won the war) and recaptured his seat in Parliament to represent the Woodford constituency. The British people nevertheless were exhausted of war and didn’t regard Churchill and the Tory Party as the party to “lead the peace”. Therefore, even though Churchill was in Parliament, his party moved to the backbenches as the Labor Party took power and Clement Attlee became Prime Minister.

Churchill won the Second World War, but in the election of July 1945, he was defeated. Many thought that the British public showed flagrant thanklessness. Churchill was still a Member of Parliament, his party lost control of Parliament and thus by tradition the right to the position of Prime Minister.

When the news came out, Churchill was taking a bath (was there ever a statesman who spent more time in the bath?) He commented, “They have a perfect right to kick me out. That is democracy”. When he was offered the Order of the Garter, he asked, “Why should I accept the Order of the Garter, when the British people have just given me the Order of the Boot?”

Recollect Winston Churchill’s prominent dictum from a oration he made at the House of Commons on 11-Nov-1947: “Democracy is the worst form of government, except for all those other forms that have been tried from time to time.”

Churchill returned to power in 1951. The remark about democracy was made when he had lost power and had every reason to be bitter. Fortunately, he kept his sense of humor even in the most trying circumstances.

Best Books about Winston Churchill

Strategic Success in Joint Venture Management

Joint Venture Management

A joint venture represents the prospect of two businesses that believe that they can collaborate to accomplish marketplace goals that neither could achieve single-handedly. Joint venture partnerships are essential to how multinational companies can best achieve their global business objectives and improve top-line and bottom-line growths. Alliances and joint ventures provide many benefits, including filling gaps in capabilities or facilitating entry to new markets. Through carefully structured joint venture partnerships and international alliances, businesses can combine mutual strengths and capabilities to gain the benefits of scale that they would be unable to realize without help.

Each company must strive to be exceptional in how it develops, manages, operates, and evaluates joint venture partnerships. Joint ventures frequently go wrong due to neglect of the first stage (development of strategy) and operating implementation. A frequent and detailed joint venture assessment can determine if the company’s partnerships are being operated and managed in a way that provide real value to end customers and the joint venture partners and to determine ongoing improvements to ensure that the joint venture represents a rapid and very effective mechanism for strategic growth.

Doing Business in China

Statements of Joint Venture Management Excellence

  1. The JV partners and the joint venture recognize the needs of the end-customers in order to present tangible business value.
  2. The joint venture partnership is structured and leveraged to generate multiple sources of economic value for each JV partner.
  3. JV partners pay particular attention to the ownership and governance arrangement of the joint venture.
  4. Business objectives, strategies, and processes of the joint venture partnership are aligned with the objectives, strategies, and processes of the respective JV partners.
  5. The support mechanisms and processes of each JV partner that are significant to the success of the joint venture partnership are documented, synchronized and controlled to generate measurable results.
  6. The JV partners set priorities, convey the underlying principle behind them, advocate them even when the outcomes are undefined, and provide the support that the management of the joint venture needs to stand behind those choices as well.
  7. Business and functional leaders of each JV partner offer best practices and capable processes, tools and people to sustain the joint venture partnership.
  8. The joint venture partnership is managed using best practices, processes, tools, and quality standards as established by the JV partners.
  9. Confidential information received or created by the joint venture partnership is defined and maintained in a confined environment.
  10. Regular and consistent communication and flow of information occur within the joint venture partnership and between all parties at numerous levels.
  11. Representatives of the JV partners engage in shared activities that develop mutual trust.
  12. The parties openly define the roles of the JV partners, the Board and operating management of the joint venture partnership, and then they authorize the management and operate according to the agreed definitions.
  13. Managements of cross-border joint venture partnerships consist of a diverse mix of local managers and locally capable expatriates. Companies that survive the experience of doing business in other countries can learn from this experience and develop a distinctive competitive advantage that will serve them well when entering comparable challenging markets around the world.
  14. The right environment within the joint venture partnership is established based on reciprocated trust and shared respect. By understanding the changing nature of business and the potential pitfalls of joint venture partnerships, businesses can collaborate stronger alliances that benefit both JV partners.
  15. JV partnerships operate in conformity with all governmental laws, regulations, environmental standards, and safety standards and with the codes of conduct of the JV partners.
  16. JV partners are treated as customers and favored suppliers. Profitable exploratory actions hold more meaningful lessons for companies than failures do.
  17. Joint venture partnerships use shared problem-solving tools as reciprocally agreed by the partners. Lean manufacturing and other reliable management principles are used to identify and deliver process improvements.

Businesses pursuing joint ventures would do well to contemplate on the lessons of other companies that have engaged in joint ventures to improve the chances of success.

Sam Walton and Frugality at Wal-Mart

Sam Walton Homespun Frugality

Sam Walton, the iconic founder of Wal-Mart, loved retailing and pursued it with boundless energy. He was famously frugal and devoted to the concept of beating merchandise prices down as part of the trademark “everyday lower prices” promise to customers. Walton once wrote, “A lot of what goes on these days with high-flying companies and these overpaid CEOs, who’re really just looting from the top and aren’t watching out for anybody but themselves, really upsets me. It’s one of the main things wrong with American business today.”

Despite being America’s richest man, Sam Walton flew first class only once in his life on a flight from South America to Africa. Wal-Mart did not have a corporate jet until the retailing giant was approaching $40 billion in sales. Walton’s “corporate car” consisted of a red pick-up truck. Bernie Marcus, the co-founder of Home Depot, once recalled having lunch with Sam Walton, “I hopped into Sam’s red pick-up truck. No air-conditioning. Seats stained by coffee. And by the time I go to the restaurant, my shirt was soaked through and through. And that was Sam Walton—no airs, no pomposity.”

Wal-Mart's Small-town Roots

Under the leadership of Sam Walton, Wal-Mart stuck to its small-town roots. “Every time Wal-Mart spends one dollar foolishly, it comes out of our customers’ pockets,” Walton preached wherever he went. Some particulars on how Sam Walton’s homespun frugality is still ingrained in Wal-Mart’s culture:

  • As part of corporate policy, Wal-Mart employees are required to be thrifty as well. They were required to sleep two to a room in properties of Holiday Inn, Ramada Inn, Days Inn, and other economy hotel brands. They are encouraged to eat in family restaurants.
  • At a 2007 convention of 250 CEOs of suppliers, Wal-Mart’s third CEO Lee Scott famously raised a pen he had picked up from the Embassy Suites hosting the conference. He declared that Wal-Mart asked its business travelers to bring pens and notepads from their hotel rooms (yes, with the hotels’ logos) back to their offices and use them as office supplies. With thousands of business trips, the Wal-Mart home office in Bentonville probably accumulated thousands of dozens of pens.
  • On business or purchasing trips to New York City, Wal-Mart employees would avoid taking cabs, and instead walk or take subway wherever possible.

Such corporate-instilled policies to drive frugality across the Wal-Mart organization were more about instilling in its employees the miserly, no-waste, keep-costs-down attitude than about saving, for instance, $10,000 or more on the cost of office pens every year. Wal-Mart aimed to limit purchasing overhead expenses to 1 percent of their purchases.

Recommended Reading on Sam Walton and Wal-Mart

Warren Buffett’s Opening Statement at Salomon Brothers Testimony

In 1991, Wall Street investment bank Salomon Brothers was embroiled in a bond-rigging scandal. U.S. Treasury Deputy Assistant Secretary Mike Basham ascertained that, between December 1990 and May 1991, Salomon Brothers’ trader Paul Mozer had dishonestly been submitting false bids to purchase more Treasury bonds than a limit imposed per buyer. Salomon was fined $290 million for this breach of rules.

Warren Buffett was the largest investor in Salomon Brothers during the days of this Salomon scandal. Warren Buffett took the helm as chairman and chief executive of the embattled company for an annual salary of $1.

Here is Warren Buffett’s opening statement before the Subcommittee on Telecommunications and Finance of the Energy and Commerce Committee of the U.S. House of Representatives:

Mr. Chairman, I thank you for the opportunity to appear before this subcommittee. I would like to start by apologizing for the acts that have brought us here. The nation has a right to expect its rules and laws to be obeyed. And at Salomon, certain of these were broken. Almost all of Salomon’s 8,000 employees regret this as deeply as I do. And I apologize on their behalf as well as mine.

My job is to deal with both the past and the future. The past actions of Salomon are presently causing our 8,000 employees and their families to bear a stain. Virtually all of these employees are hardworking, able and honest. I want to find out exactly what happened in the past so that this stain is borne by the guilty few and removed from the innocent. To help do this, I promise to you, Mr. Chairman, and to the American people, Salomon’s wholehearted cooperation with all authorities. These authorities have the power of subpoena, the ability to immunize witnesses, and the power to prosecute for perjury. Our internal investigation has not had these tools. We welcome their use.

As to the future, the submission to this subcommittee details actions that I believe will make Salomon the leader within the financial services industry in controls and compliance procedures. But in the end, the spirit about compliance is as important or more so than words about compliance. I want the right words and I want the full range of internal controls. But I also have asked every Salomon employee to be his or her own compliance officer. After they first obey all rules, I then want employees to ask themselves whether they are willing to have any contemplated act appear the next day on the front page of their local paper, to be read by their spouses, children, and friends, with the reporting done by an informed and critical reporter. If they follow this test, they need not fear my other message to them: Lose money for the firm, and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless.

'Liar's Poker' by Michael Lewis (ISBN 039333869X) Recommended Reading: Liar’s Poker by Michael Lewis, an autobiographical account of Michael Lewis’s own experience as a bond salesman at Salomon Brothers where the Liar’s Poker is a figure of speech for the Salomon culture of intense risk-taking with immediate payoffs.

Cognizant Technology Solutions: An IT Juggernaut

Propelled by the increased outsourcing of health-care data processing and by a growing number of European clients and an mindful operational strategy to reinvestment substantially higher proportion of operating profits in the business drove Cognizant’s top line growth and lent a hand in maintaining operating margins over the years.

Despite being based in Teaneck, N.J., Cognizant had an organizational structure that was India-centric from the very beginning. Cognizant realized early that its business and customer service strategy required that Cognizant satisfied the needs of its customers locally and still operate an increasingly global workforce, most of which is based in India. Cognizant designed its organization around how the tactical or operational situations its customers are facing. Cognizant’s phenomenal growth was built around the USP that it is as American as the large consulting companies (Accenture, Cap Gemini, IBM) and as Indian in terms of workforce as its primary competitors Infosys, TCS, and Wipro.

Cognizant Technology Solutions Juggernaut

Cognizant was the fourth Indian IT services firm, to reach $1BB annual revenue milestone, but it was the fastest: TCS took 35 years to hit the $1BB annual revenue milestone, Infosys 23 years and Wipro 25 years, while Cognizant took just 12 years. To be fair, Cognizant never had a start-from-scratch beginning. The company was originally established in 1994 as Dun & Bradstreet Satyam Software (a 76:24 joint venture with the erstwhile Satyam Group) as an in-house technology unit of Dun & Bradstreet with headquarters in Chennai, India. In due course, as Cognizant started serving external clients, the joint venture was rechristened Cognizant Technology Solutions and spun off as a separate company in 1996. In 1997, Cognizant moved its headquarters from Chennai in South India to Teaneck, NJ. After a series of corporate splits and restructures of its parent companies, Cognizant had an IPO in 1998 and has never looked back. Cognizant experienced rapid growth during the 2000s and was a regular on lists of fastest growing companies compiled by Fortune and BusinessWeek magazines.

Cognizant’s operating margins have remained healthy even in the face of heightened competition for customers and talent, wage inflation, attrition costs, and fluctuations in the strength of the Indian Rupee. Historically, Cognizant’s margins of about 20% have been lower than the 28% margins earned by market leader Infosys. Francisco D’Souza, Cognizant’s CEO stated in the company’s release of year 2013 third quarter earnings, “We delivered yet another quarter of industry-leading growth that was broad-based across our portfolio of industries, services, and geographies. The sheer velocity of change in the industries we serve is driving the C-suite to challenge the status quo and rethink their business models to be relevant for the future. Our investments across multiple horizons of growth position us well to deliver differentiated value as we partner with clients in this journey.”

Wall Street was worried of Cognizant’s performance earlier in 2013. First, Infosys gave terrible guidance during its first quarter results compelling Wall Street to believe that Cognizant might lower its guidance as well. The earnings miss from IBM also hurt the information technology sector. Taking into consideration recent events, there are concerns about upcoming legislation may impact the status of foreign workers and profitability. Many of these factors are tangential concerns and do not impact the company directly.

Cognizant Technology Solutions, Cathedral Road, Chennai (Dec 2004)

Cognizant was a late participant in the rapidly-growing European region for demands for computer services. In response, Cognizant made aggressive efforts to increase its presences there—geographically and expertise-wise. In an interview with the Business Standard, R Chandrasekaran, Cognizant’s Group Technology & Operations CEO expressed confidence that his company is well positioned to meet the demand for IT services and consulting: “In Europe, clients are looking to move more work to a global delivery model. A structural shift from discretionary projects to larger annuity-based outsourcing deals across Europe is being catalyzed by the economic climate. Our continued investments in Europe, local leadership and broad range of capabilities make us optimistic in our long-term growth prospects across Europe.”

Cognizant, with a large number of clients in the United States, could confront problems in attracting and retaining highly skilled foreign workers—largely computer programmers from India—in the United States due to restrictions in the availability of H1B visas. The Obama Administration has not yet resolved the issue of immigration reform. In a recent interview with India’s Economic Times, Gordon Coburn, former CFO and Operating Officer and current President responsible for managing Cognizant’s P&L, stated, “We continue to work with our legislators to develop the immigration reform that would be good for the US economy and the clients. We are encouraged that our legislators understand that some of the components in the original bill may not have been good for the economy and the US clients. So we are seeing a better understanding around what part of the bill will be good and what part will be not. It is an on-going discussion and it will continue.” Cognizant will face challenges in deploying strategic and operational measures to shield its cost base from the impact of wage inflation and employee attrition.

There can be no doubting that Cognizant will continue to grow well into the future. Cognizant Technology Solutions will continue to exploit every opportunity to expand its top-line and bottom line further and garner significant market share.