The Sage of Omaha Speaks to CEOs about Uncertainty

Warren Buffett chides CEOs about their “hand-wringing” over “uncertainty” when faced with capital allocation decisions. In his 2012 Berkshire Hathaway annual report, Buffett says America has faced the unknown since 1776 and that “opportunities abound for America. Further he says “American business will do fine over time. And stocks will do well just as certainly, since their fate is tied to business performance.

Despite record levels of both earnings and cash too many CEOs seem unnecessarily spooked, says Warren Buffett , who reports that “we didn’t share their fears, instead spending a record $9.8 billion on plant and equipment in 2012, about 88 percent of it in the U.S. That’s 19 percent more than we spent in 2011, our previous high. Charlie [Munger] and I love investing large sums in worthwhile projects, whatever the pundits are saying. We instead heed the words from Gary Allan’s new country song, “Every Storm Runs Out of Rain.”

Buffett goes on to opine that investors and managers are in a game that is heavily stacked in their favor. (The Dow Jones Industrial advanced from 66 to 11,497 in the 20th Century, a staggering 17,320 percent increase that materialize despite four costly wars, a Great Depression and many recessions.

“Since the basic game is so favorable, Charlie and I believe it’s a terrible mistake to try to dance in and out of it based upon the turn of the tarot cards, the predictions of ‘experts,’ or the ebb and flow of business activity. The risks of being out of the game are huge compared to the risks of being in it.

“My own history provides a dramatic example: I made my first stock purchase in the Spring of 1942 when the U.S. was suffering from major losses throughout the Pacific War zone. Each days headlines told of more setbacks. Even so, there was no talk about uncertainty; every American I knew we would prevail. The country’s success since that perilous time boggles the mind: On an inflation-adjusted basis, GDP per capita more than quadrupled between 1941 and 2012. Throughout that period, every tomorrow has been uncertain. America’s destiny, has always been clear: every-increasing abundance.

“If you are a CEO who has some large, profitable project you are shelving because of short-term worries, call Berkshire. Let us unburden you.”

These are indeed heart-warming words, and without taking anything away from one of the world’s richest men and great investors let us say that in the grand sweep of things he has a point, but the past is not prologue to the future. The world today is not the world of 1945 when the U.S. found itself as the one if not the only intact and unscathed industrial economy in the world. It’s fine to think in multigenerational leaps, but most mortals have to contend with what’s ahead of them now. And while we’re at it, Warren, can you do something about that darned “Buffett rule.”

Read: https://www.berkshirehathaway.com/letters/letters.html


MORE LIKE THIS

  • Get the CEO Briefing

    Sign up today to get weekly access to the latest issues affecting CEOs in every industry
  • upcoming events

    Roundtable

    Strategic Planning Workshop

    1:00 - 5:00 pm

    Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process

    Executives expressed frustration with their current strategic planning process. Issues include:

    1. Lack of systematic approach (70%)
    2. Laundry lists without prioritization (68%)
    3. Decisions based on personalities rather than facts and information (65%)

     

    Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns.  They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning.  Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process.  This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented.  If you are ready for a Strategic Planning tune-up, select this workshop in your registration form.  The additional fee of $695 will be added to your total.

    To sign up, select this option in your registration form. Additional fee of $695 will be added to your total.

    New York, NY: ​​​Chief Executive's Corporate Citizenship Awards 2017

    Women in Leadership Seminar and Peer Discussion

    2:00 - 5:00 pm

    Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations. 

    Limited space available.

    To sign up, select this option in your registration form. Additional fee of $495 will be added to your total.

    Golf Outing

    10:30 - 5:00 pm
    General’s Retreat at Hermitage Golf Course
    Sponsored by UBS

    General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.

    The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.

    To sign up, select this option in your registration form. Additional fee of $295 will be added to your total.