Warren Buffett, the legendary value investor, is the type of guy that will do a $37 billion deal after just ‘looking at you’.
There are many myths around the Oracle of Omaha, but this isn’t one of them. When Berkshire Hathaway bought the airplane parts manufacturer Precision Castparts, his due diligence was to look into the eyes of the CEO Mark Donegan.
Buffett said that his main concern was whether Donegan would retire at age 65 or not.
Investors as a breed often get categorised as a ‘quantitative’ bunch. We look at numbers colors on a sheet. We like green more than we do red.
But for Buffett, the qualitative aspect of management is more important, as long as the mainline numbers make sense, of course. Before buying or taking a significant share in a company, he puts emphasis on meeting with and assessing the management of the company.
His philosophy is to “find .400 hitters and [not] tell them how to swing.”
In all his years and experience, he realises that the competence, philosophy and motivation of the management along with the macro direction of the company is more important than any current single figure on the balance sheet (for the most part).
If you’re a property investor or developer, this applies directly to your business. We are the drivers of our business, and it will pay over the long term to work on ourselves as much as we work on our business.
The goal is to become a .400 hitter like Mark Donegan. Become so good that Warren Buffett refuses to buy your property portfolio unless you’re at the helm.
Wouldn’t that be something?
We become a great at property investing just like you become great at anything else.
- Learning and modelling the best in the game
- Taking real swings in the marketplace, accumulating experience and reflecting on your mistakes
- Constantly reading, studying and informing yourself
- Building social capital by adding value to other industry players
- Sticking to the fundamentals but always being aware of innovations around the fringe of the industry
- And finally… putting in the blood, sweat and years (nobody wants to hear this)
Sam Lee
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