Warren Buffett isn’t always right – but he’s a $47 billion advertisement for optimism
The legendary investor Warren Buffett has taken more flak than seems necessary for his lapse of judgment over his former lieutenant David Sokol, who bought shares in a company called Lubrizol before recommending it to Buffett as an acquisition for the Berkshire Hathaway conglomerate. Having been tipped as a potential successor if 80-year-old Buffett ever retires from running Berkshire, Sokol resigned abruptly in March. Buffett’s comment at the time, ‘Neither Dave nor I feel his Lubrizol purchases were in any way unlawful’, was widely regarded as inadequate. Belatedly, he introduced phrases such as ‘inexplicable and inexcusable’, but the incident provoked whispers that the great stock- picker, hitherto a pillar of Midwestern principle in contrast to the sharks of Wall Street, is losing his touch. And that dampened the usually fun-filled Berkshire shareholders’ meeting in Omaha, Nebraska, last week.
That’s a pity, because Buffett is still worth listening to — for example, when he talks about why he prefers to buy shares in companies (or simply buy whole companies) with strong cash flows and hold them ‘for ever’, rather than following the fashion for gold. If you took all the gold ever mined, he said recently, it would make a 67-foot cube — and at a price above $1,500 an ounce, that would buy all the farmland in America plus ten companies the size of Exxon Mobil, still leaving you a trillion dollars of change in your pocket. ‘Or you could have a big cube of metal. Which would you take? Which is going to produce more value?’
Buffett’s greatest merit is his belief that the market system has rewarded him disproportionately for his work, and that he therefore has an obligation to invest in ways that, by directing capital towards well-managed companies, generate wider economic benefits. Precious metals may be a safe value-store in a turbulent, inflationary world (my Christmas tip that silver would rise faster than gold has been, I modestly point out, a runaway winner) but they are also essentially negative choices: investments for the pessimist, the recluse and the dictator’s wife. Warren Buffett hasn’t always been right about everything, but his $47 billion fortune is a huge advertisement for optimism and positive engagement.
Proud to be British?
Rolls-Royce ‘wins fight’ to appoint a foreign chairman or chief executive for the first time in its history, reported the FT on Monday — and no doubt Rolls’s PR people were delighted by the presentation of this story as a victory for the aerospace and defence manufacturer over restrictive government rules, rather than a surrender to corporate correctness. Having recently recruited the former head of a Dutch retail group (albeit a Briton, John Rishton) to succeed chief executive Sir John Rose, headhunters will now get busy listing Euro-suspects to follow 70-year-old City gent Sir Simon Robertson if he relinquishes the Rolls chair next year.
The justification for the shift is that Rolls is a ‘global’ company, earning 85 per cent of its revenues from outside the UK, so needs top-level salesmen who can say ‘Sign here, defence minister’ in several languages. But in fact Rolls-Royce is one of the last industrial brands that trades on a quintessentially British heritage — the opposite of BP — and would be ill advised to dilute the Savile Row tailoring quotient in its boardroom because that is exactly the tone expected and admired by the sheikhs who are its major customers. Our royal family is a global company, too, in terms of what it contributes to Britain’s image abroad, but ‘Prince William wins fight to wed Belgian’ would have made a dismal headline. Rolls should celebrate its Britishness, not seek to suppress it.
Action not words
Is there anything more irritating to the consumer than the worthless apology offered by a call-centre operator who is clearly not personally responsible for the fact that — to pick a random example — the roses you sent to Pippa Middleton every day last week were never delivered? That disembodied voice in Glasgow or Bangalore has neither the power nor the incentive nor the corporate pride to ensure that the system failure behind the problem never happens again. She really ought to tell you straight: ‘Look, mate, you and a load of other losers bought our super-cheap bouquet-a-day-for-Her-Royal-Hotness special, but we’ve only got funeral wreaths left, the van driver’s been arrested as a terrorist suspect and we’ve lost your online order anyway because the IT bloke’s been on a bender since the wedding. So just get over it.’
Barring such refreshing honesty, however, here’s an example of how to get it right. Three weeks ago I sent a (correctly addressed) case of wine from London to my home in Yorkshire by DHL, the parcel service owned by the German post office, which promises to deliver, normally, within two working days and has a reputation for being sharper and more consumer-driven than our own Royal Mail. To my surprise, after four days there was no delivery and no message; an operator apologised that the driver had failed to find my house because the computer had scrambled my postcode, and had taken the parcel back to the Leeds depot. Delivery was promised for Tuesday after Easter. When that didn’t happen, the next operator apologised that a bottle had been broken but the repacked case would come on Wednesday. It didn’t. On Thursday, a third operator apologised that she had no idea what was going on and was having trouble getting through to Leeds to find out.
But three hours later a shiny black car swept up my drive, and a cheerful chap called Wayne announced himself as a native of Barnsley and DHL’s health-and-safety manager for the north of England. ‘Sorry you’ve had all this hassle,’ he said. ‘I happened to be in the office and overheard one end of the conversation. I told them, that’s not bloody good enough, give me the parcel and I’ll deliver it myself.’ So he did. I hope they make him chief executive.