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Warren Buffett’s Leadership in Words and Actions

Brad Holland for the New York Times The exercise of leadership is most critical in times of crisis and it can manifest itself in countless ways.

On October 16, 2008, in the middle of one of the rockiest rides the world financial markets have experienced since the Great Depression and with a global recession appearing inescapable, Warren E. Buffett, considered by many to be the sagest investor of his generation, wrote an Op Ed piece for the New York Times titled Buy American, I Am.

He started the editorial with the blunt reality of the situation:

The financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.

Then like all good leaders, Buffett personalizes his communication and shares his thoughts and recent actions. (This is interesting coming from a man who carefully guards his privacy.)

So … I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.

Warren Buffett is not only widely respected in financial circles, his profile among average Americans has risen in recent years. It’s really hard to hide when you are the richest man in the world and he recognizes that. He also knows that he has more credibility in financial matters than politicians in DC and the now exposed Wizards of Wall Street. People want to hear what he has to say.

His advice is simple and direct. Even if you’ve never invested a nickel in your life, you can appreciate it.  Buffett also does what all good leaders do in painting a positive picture for the future.

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Buffett’s famous for his down to earth honest style of communication; in fact he’s perfected it to an art. He doesn’t stray from this in the OpEd piece.

Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

He spends the next couple of paragraphs outlining some history and effectively building his case. He basically tells us that while it might feel good to keep our investments in cash, history has proven that over time this will most likely turn out to be the wrong move.

For the close Buffett reminds us that he’s only human and can’t predict the future and follows up with a recommitted statement of buying American equities.

I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: “Put your mouth where your money was.” Today my money and my mouth both say equities.

The cynic will say that Buffett is just protecting his own hide. But really, when you’re as rich as he is does it really matter. This guy has been living in the same house for decades and allegedly drives himself to work every day. (That one might be tough to swallow but it’s part of the legend.)

On October 5, 2008, Steve Lohr wrote a great article for the NY Times titled Like J.P. Morgan, Warren E. Buffett Braves a Crisis where a comparison of the two financiers during periods of market turmoil shows how much some things have changed over the years and how others have not.

Their times and personalities are vastly different, of course. But J. Pierpont Morgan’s role in the Panic of 1907 has its echo in Warren E. Buffett’s actions during the current financial troubles.

“What Buffett is doing is similar in ways to what Morgan did in 1907,” said Richard Sylla, an economist and financial historian at the Stern School of Business at New York University. “It’s what you might call profitable patriotism.”

In the article Lohr referred to how the PBS talk show host Charlie Rose pleaded with Buffett to appear on the show. Nothing can compare with the words spoken directly by the man himself and experiencing how he communicates. (Mandatory viewing for all leaders!)

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About the author

Peter A. Mello, Founder/Editor Founder of Weekly Leader and Sea-Fever Consulting, LLC, a leadership development and strategic communications consultancy. Previously, CEO of an international nonprofit organization and COO of a national insurance/risk management services firm. Peter has been leading people and managing organizations for over 30 years, writes a leadership column for MarineNews magazine and blogs about maritime culture at Sea-Fever. Follow him on Twitter.

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