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

Notes and Interview from "Billionaire Next Door" - Part Four

The fourth installment of the Buffett interview begins with that seeming contradiction of safety versus risk. Talking about insuring Lloyds of London and some of their Asbestos risk, he says it wasn't a problem as Berkshire (BRK-A) is in the insuring business.

As he talked about in the second interview portion, people in insurance need to know the percentages surrounding infrequent events and base their prices accordingly.

The point here is that Buffett is thought of as extremely conservative because of his investment and management philosophy, but in reality within his circle of competence he can be a tiger. In the insurance business he and Berkshire definitely have been. The reason is that they know the business they're in and so are able to properly measure the risk involved. He's not afraid to take a hit.

When asked about other industries, Buffett replied that he will never play someone else's game.

One answer to a question may surprise some, but when asked about how he hires managers he said he doesn't have a clue on how to do it. What he does is not only buy a company but buy the management of that company as well. He says that the only thing he requires of managers in the Berkshire fold is to send him letters instructing him what to do if they were to be gone the next day.

Interviews with managers also confirmed that he's completely hands-off. They don't have to contact him ever. He simply sends them goals for the year and they work on achieving them.

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