When Microsoft founder and former CEO, Bill Gates, and Chairman of Berkshire Hathaway Inc, Warren Buffett, get together to address an audience, pearls of wisdom flow. It was, therefore, a rare treat to go through a two decade old issue of fortune dated 20 July 1998 of these two wealthy individuals coming together and speak about taking risks, motivating employees, confronting mistakes and giving back. Although the event took place in May 1998, the billionaire buddies conceived it to coincide with Buffett’s weekend visit to Gates’ home, following Microsoft’s annual summit meeting for CEOs. The super investor and cyber tycoon asked some 350 business school students to participate in the session to gain an insight into their lives. Here are some excerpts which clearly establish that what they said 20 years back still holds today.
How did they get where they were? Clearing the very first and basic question the insights were indeed revealing. “Its not IQ. The big thing is rationality”, Buffett said and continued, “I always look at IQ and talent as representing the horsepower of the motor, but the output i.e. the efficiency with which the motor works depends on rationality. A lot of people start out with 400 HP motors but only get a 100 HP output. It is way better to have a 200 HP motor and get it all into output”. So what do smart interfere with obtaining the optimum output? It becomes a habit, character and temperament to behave in a rational manner. “Not getting in your own way” is the key to rationality, be it life or creating wealth.“Everybody here has the ability to do anything I do and much beyond. Some of you will and some of you won’t.For the ones who won’t, it will be because you get in your own way and not because the world does not allow you”, Buffett added.
Admitting that Buffett is right about habits, Gates said “We did not see any limit to the computer’s potential and we really thought writing software was a neat thing. Pursuing that with pretty incredible focus and by being there at the very beginning of the industry, we were able to build a company that has played a central role in what has been a pretty big revolution. It was 23
years ago when we started the company. But there is no doubt that if we take the habits we formed and stick with them, the next twenty three years should give us a lot more potential and may be even get us pretty close to our original vision -a computer on every desk and in every home.” “Happy is what I am and I get to do what I like every single day of the year” Buffett claimed. “I tap-
dance to work and when I get there, I think I am supposed to lie on my back and paint the ceiling. It is tremendous fun”, he added. Every successful investor needs to imbibe this in his life to happiness. They say success is getting what you want and happiness is wanting what you get. Gates reiterated “You’ve got to enjoy what you do every day. Every time we thought we had a little bit of success, we were pretty careful not to dwell on it too much because the bar gets raised”. Something of the kind the D-mart founder has done over the last two decades. And for him and his company, life has just begun!
For both Buffett and Gates, the world is their oyster. Berkshire Hathaway does not take its business globally directly. It has two large commitments – Coke and Gillette. Coke and Gillette have 80% and two-third of their earnings coming from abroad respectively. Thus, they participate in worldwide improvement in the living standards and Berkshire Hathaway goes global piggy-backing on them. “I can sit in Omaha and let the CEO of Coca Cola fly all over the world” concluded Buffett. For Gates, the business is truly global. The PC standard is global standard. What you need in a spread sheet in Korea or Egypt is about the same as what you need in USA.Although the then richest and second richest individuals shared the same stage, their approach to investment was poles
apart. For both of them, it was conviction that played the key role. Buffett buys the business he understands and therefore, had no holding in Microsoft. Although he did not grasp Gates’ business in 1998, he expected the technological revolution to change the world. Ironically, his approach in dealing with it is opposite to Gates’. “I look for businesses in which I can predict what they are
going to look like in 10 or 15 or 20 years. That means that businesses that will look more or less the same as they do today except that they will be larger and doing more business globally. So I focus on absence of change. When I look at the internet for example, I try to figure out how an industry or a company can be hurt by change and then I avoid it. That does not mean that I don’t think there is a lot of money to be made from that change. I just don’t think that I’m the one to make a lot of money from it. Take Wrigley’s chewing gum for example. I don’t think the internet is going to change how people are going to chew gum. Bill probably does. I don’t think it’s going to change the fact that Coke will be the drink of preference and will gain in per capita consumption around the world. I don’t think it will change whether people shave or how they shave. So we look for very predictable businesses but you won’t find it predictable in what Bill does. As a
member of the society, I applaud what he is doing but as an investor, I keep a wary eye on it”. Gates agrees with Buffett’s thinking and reiterates that is the reason why the multiples of Microsoft are lower than the multiples of Coke and Gillette. The contrasting approach of these two billionaires still holds and tells their millions of investors that there is only one way to their billions viz a rational and realistic approach.
Source : moneytimes