You’ve probably heard of Warren Buffett, the legendary investor, age 81, known alternately as the “Oracle,” “Wizard” or “Sage of Omaha.” This week, the world learned that the CEO of financial behemoth Berkshire Hathaway and economic kingmaker has been diagnosed with stage 1 prostate cancer.
Buffett will begin treatment midsummer, and has indicated that he still intends to participate in Berkshire Hathaway’s annual meeting. Although the news about Buffett’s health sent shares of his company down 2%, he describes his condition as “not remotely life threatening or even debilitating.”
We wish Warren Buffett a speedy recovery and are glad that the situation isn’t too dire—but this news does bring up two timely questions:
- How is a company impacted when its charismatic, public figure of a CEO’s health is called into question? (See also: Apple.)
- What has made Buffett such a legend so far, and what we can learn to help our own investing?
Today, we’ll address both.
What Happens Without a Visionary CEO?
The mere suggestion of Warren Buffett not being around forever sends shivers through investors’ hearts. This, of course, reminds us of the “what will happen after Steve Jobs?” question Apple faced just a few months ago. But if that has taught us anything, it’s that, while visionary founders have the ability to coax their companies to meteoric success, the best leaders create a foundation stable enough to outlive them. We should note that Apple stock has gained 61% since CEO Steve Jobs’ death last October.
What Buffett Has Done
Berkshire Hathaway is a conglomerate that oversees a bunch of subsidiary companies that run the gamut from Geico to Fruit of the Loom. Buffett also invests on behalf of the company, in everything from American Express to Coca-Cola and Kraft Foods.
Outside his role at his company, Buffett is renowned for his incisive, no-B.S. advice on investing, commitment to philanthropic giving and his emphasis on frugality despite the fact that he has a net worth of $44 billion.
How He’s Tried to Protect Against His Own Mortality
The world is waiting to see whom he’ll name as his eventual successor, but one of the core aspects of Berkshire’s operations is stability, and as DailyFinance puts it, this stability “has resulted in Berkshire outperforming the S&P 500 in 39 of the 47 years that Buffett has been at its helm, a stability that will remain long after he’s gone.”
As early as 1996, Berkshire wrote a letter to shareholders called “An Owner’s Manual,” which explained the plan for the longevity of the company beyond Buffett himself. In it, he wrote that he delegates as much of his business as he can to subsidiaries, in part to ensure that the house of cards won’t collapse when he dies. “At my death, the Buffett family will not be involved in managing the business but, as very substantial shareholders, will help in picking and overseeing the managers who do.”
Moral of the story? Great men are great, but the greatest men and women know their own limits and create a self-sufficient system that can last beyond their reign.
What Is Warren Buffett’s Legacy So Far, and What Can We Learn?
Warren Buffett often seems like a man of contradictions:
- He’s #2 on Forbes’ list of billionaires in the U.S. and #3 in the world, but he likes to talk about how he still lives in the same Omaha, Nebraska house he bought in 1958 for $31,500.
- He is one of the top investors in the world but has called the recent downturn in the financial sector “poetic justice.”
- He simultaneously calls on Congress to increase taxes on rich people like himself, and supports Bill Gates’ effort to persuade America’s richest people to commit at least half their fortunes to charity (Buffett has committed to giving away 99% of his).
Buffett is also famous for his often-sassy sound bites about investing and life. Here are some of the main takeaways we’ve learned from him over the years:
- Invest for the long term. Many traders like to flex their investing muscles by trading all the time and talking about how they’ve found the hot new investment. But the reigning king of investing takes a much more long-term approach by taking his time to find the very best investments that are undervalued, and investing in them for the long haul. As he says, “The stock market is a no-called-strike game. You don’t have to swing at everything—you can wait for your pitch.”
- Tune out the pundits. Warren Buffett is often viewed as a contrarian investor, trusting his own research and gut rather than jumping on bandwagons of any sort. Another pearl of wisdom: “I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.”
- Don’t get spooked by other investors. The stock market is often as much a gauge of investors’ emotions as a gauge of real financial conditions. So when everyone is freaking out and buying or selling, you won’t be the best on the block by freaking out, too. In a famous quote, he says: “Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful.”
- Stop trying to find the next big thing. It’s easy to get wrapped up in the machismo of finding the next big thing, but as Buffett says, “I don’t look to jump over seven-foot bars; I look around for one-foot bars that I can step over.” The point of investing isn’t to find one huge blockbuster but rather to avoid crazy risky losses while gaining steadily over time.