That nugget of wisdom is but one of many you can mine from Warren Buffett's letter to his Berkshire Hathaway shareholders released a few days ago. That letter – actually a 22 page dissertation on the state of the economy as much as a statement of Berkshire Hathaway's condition – is very well worth the time it will take you to read it.
The quote about the need for mind boggling screw ups refers to CEOs. According to Buffett, if a CEO can really foul things up and impact a lot of other people, the government will bail him out, as opposed to local screw ups who just affect the CEOs own employees and investors. He thinks it would be a good idea to haul those major screw-up guys into court.
Buffett himself really screwed up when he put a ton of money into GE. He should have read my book and he would have known better. Investing in Conoco was no stroke of genius either, but that was a little tougher to predict. The hollowing out of GE's manufacturing capability and turning them into a glorified loan sharking outfit was something he should have seen coming years ago. Still, he is the smartest and most successful investor and business person out there.
I have noted that many of the folks in the lean community have looked in vain to Buffett for endorsement of lean. I suppose we would all like to see him make some loud, public proclamation that he will only invest in companies that embrace lean. Said one fellow lean blogger, "The point is, when Warren Buffett speaks, people listen. And if Warren Buffett is saying, in effect, that applying lean principles works, maybe the cause of lean will get some increased attention and a few more devotees. Now Buffett himself didn’t actually say anything about lean."
Expecting the 'Oracle of Omaha' to endorse lean directly strikes me as bit unrealistic. He is an life-long insurance guy and a professional investor. He has never really operated anything. He is well above the fray, pushing 79 years old, and has made so much money that he can't have much motivation to learn too many new tricks.
That said, Buffett's latest letter is, in fact, a clear endorsement of lean. He most likely doesn't know lean manufacturing from Lean Cuisine, but he knows well managed companies when he sees them. The letter says of one of holdings:
"CTB, which operates worldwide in the agriculture equipment field, has now picked up six small firms since we purchased it in 2002. At that time, we paid $140 million for the company. Last year its pre-tax earnings were $89 million. Vic Mancinelli, its CEO, followed Berkshire-like operating principles long before our arrival. He focuses on blocking and tackling, day by day doing the little things right and never getting off course. Ten years from now, Vic will be running a much larger operation and, more important, will be earning excellent returns on invested capital."
Check out this CTB outfit that Buffett is so proud of : LIVING LEAN AT CTB
When Buffett says the guy behind this is "following Berkshire-like operating principles" that strikes me as about as solid endorsement of lean as the smartest business guy in America can make.
Thanks, Warren! Way to go, Vic!