Wednesday, November 5, 2014

How to Invest in a Business Venture: Warren Buffett on What to Look for When Investing and What Makes a Great Manager

Warren Buffett explained how his company, Berkshire Hathaway, selected businesses to invest in. According to Buffett, it is all about looking at past performance and the quality of the management team:
We do look for intelligence, energy and integrity. Our managers overwhelmingly come with the businesses that we buy, so we have the chance to look at what they've done over twenty or thirty, forty years and we can see their abilities just as if you were hiring soccer players and you had the chance to see how they performed over the previous ten years, you would know what you were getting. I would not be able to do as well in evaluating managers if I were to select, we'll say, from a class of a hundred MBAs. I would not know that much about their... I would know they're pretty smart or they wouldn't be there. And I'd know that they all had energy, but I wouldn't have the track record that I get when we buy a business. When we buy a business, we're looking at a management that's been there for a long time. We can see their performance, we can see how they've behaved in difficult situations. We can see how they've treated their employees and customers, and we can get a very good reading on them.

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