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Buffett Finds Business Success in Timeless Formula


Today's business news is about making it and then giving it away, big time.

Warren Buffett says it's harder to give away money responsibly, than to make it in the first place. Ah. He was talking about his plan to donate much of his $44 billion fortune to the Bill and Melinda Gates foundation.

Mr. Buffett, who is the world's second richest man, makes earning money look easy.

NPR's Scott Horsley reports.

SCOTT HORSLEY reporting:

No other investor has been able to match Warren Buffett's track record, but it's not for lack of trying. You could fill a bookshelf with the how to guides that profess to explain Buffett's money-making strategies. Timothy Vick is the author of one of them called, How to Pick Stocks Like Warren Buffett.

Mr. TIMOTHY VICK (Author): In essence, what you're doing, you're making sure you don't overpay for something and you're really digging into the financials and the fundamentals of the company, and determining that you're buying a good company at a good price and can get a good return from it.

HORSLEY: That's the definition of value investing. But it's easier said than done.

Buffett bought his first company, the Berkshire Hathaway Textile Mill, back in 1965. Over the years he's added insurance companies like Geico, retailers like See's Candy, and manufacturers like Fruit of the Loom. The 75-year-old billionaire invests for the long term. Vick says that puts Buffett at odds with many in the financial market.

Mr. VICK: They say he's old-fashioned and is just lost in these more modern, quick-moving times. But the basic philosophy of studying a company and determining what it's worth before you buy, is timeless.

HORSLEY: Buffett looks for companies with good managers, then delegates. He says almost to the point of abdication. Out of 192,000 employees at Berkshire Hathaway, fewer than 20 work at headquarters in Omaha. Last year, Buffett offered to buy an RV company one day after getting its proposal, and sealed the deal with a single 20-minute meeting. The RV company's founder told the Wall Street Journal the process was easier than renewing his driver's license.

Not every one of Buffett's quick decisions turn out well, of course, but Vick says the vast majority have paid off.

Mr. VICK: I would equate what he does with what a doctor does. Someone who looks down 40,000 throats over a long career, knows very quickly when someone has strep throat or bronchitis. Warren Buffett has looked through so many thousands of companies over the years, he can tell in a couple minutes whether there's a good investment there or not.

HORSLEY: That kind of judgment is not easily replaced. Buffett told shareholders this year, when the times comes for his successor to take over as CEO, Berkshire Hathaway will have to hire an additional person just for the stock-picking duties.

Buffett's annual message to shareholders is widely read, as much for its homespun wisdom as its financial details. It typically includes a plug for Gorat's, Buffett's favorite steakhouse in Omaha, where general manager Mark Gorat says Buffett usually orders the t-bone.

Mr. MARK GORAT (General Manager, Gorat's Steakhouse, Omaha, Nebraska): He likes it medium-rare to rare, and he usually has it with a vegetable and hash brown potatoes. He's just as normal as anyone.

HORSLEY: Author Timothy Vick says that meat and potatoes style is a big part of Buffett's appeal.

Vick says Buffett's gift to the Gates' charity will be good for the world and for Berkshire Hathaway shareholders. Now that he's turned over responsibility for distributing the wealth, Buffett can concentrate on making more of it.

Scott Horsley, NPR News. Transcript provided by NPR, Copyright NPR.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.