Devoted to Managers and those that seek to improve their management skills

I want to share with you another quote from the annual letter to Berkshire Hathaway shareholders, from Warren Buffett:

"When our long-term competitive position improves as a result of these almost unnoticeable actions, we describe the phenomenon as 'widening the moat.' And doing that is essential if we are to have the kind of business we want a decade or two from now. We always, of course, hope to earn more money in the short-term. But when short-term and long-term conflict, widening the moat must take precedence. If a management makes bad decisions in order to hit short-term earnings targets, and consequently gets behind the eight-ball in terms of costs, customer satisfaction, or brand strength, no amount of subsequent brilliance will overcome the damage that has been inflicted."

He continues on from the quote I posted in the last post in reference to maintaining a competitive position.

This post I want to comment on his thoughts on short-term versus long-term. I really appreciate what he says when the two conflict. For him there is no question about must take first place when they are in opposition to one another.

When he talks about it he refers to widening the moat. Of course what he's talking about is 'barriers-to-entry'. Hitting short-term earnings targets at the expense of "widening" and strengthing your "moat" is a huge mistake. Eventually it will lead to terrible overall performance, or as in the case of some, being put on trial.

Recently I talked about Wegman's a privately held business that is doing extraordinary. One analyst made this comment when referring to controlled, steady growth:

Neil Stern adds that it is a "fabulous strategy" for a privately held company such as Wegmans."

"It doesn't work well for a public company, but it's fine for a private company where you only have to report to yourself."

I just can't help saying that this is why there is so much competitive disadvantage for public companies. Think of what Stern says when saying that growing while keeping quality in mind, along with the training that will maintain that quality, is considered something for private companies. And don't think that this is the only person that thinks that way. It is rampant on Wall Street.

If you listen closely to what Buffett is saying, and follow the example of a company like Wegman's, you will have true 'barriers-to-entry' that will be almost impossible to surpass, as long as you stay on that course.