The 1 Money-Making Lesson Warren Buffett Wishes He Learned Earlier

Warren Buffett changed his billion-dollar empire for the better.

Aug 31, 2014 at 12:19PM

Over the past decade or so, Warren Buffett's Berkshire Hathaway has transformed from a company dependent on the success of its stock portfolio to a company leaning on operating businesses like energy and railroads. However, one of the biggest questions about the company going forward is, "what happens to these operations after its mastermind, Warren Buffett, is no longer running the show?"

To find some answers, Motley Fool analyst David Hanson recently sat down with Larry Cunningham, the author of The Essays of Warren Buffett: Lessons for Corporate America Warren Buffett himself said of the book, "Larry Cunningham has done a great job at collating our philosophy." Cunningham also has a new book coming out this fall, titled Berkshire Beyond Buffett: The Enduring Value of Values The book explores Berkshire's ability to live on after Buffett. In the following video, Cunningham explains the current model at Berkshire is the right one and how Warren Buffett learned to appreciate a strong operating business.

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At the recent Berkshire Hathaway annual meeting, Warren Buffett admitted this emerging technology is threatening his biggest cash-cow. While Buffett shakes in his billionaire-boots, only a few investors are embracing this new market which experts say will be worth over $2 trillion. Find out how you can cash in on this technology before the crowd catches on, by jumping onto one company that could get you the biggest piece of the action. Click here to access a FREE investor alert on the company we're calling the "brains behind" the technology.

full transcript follows.

Hanson: Right, and you mentioned the "scores" of operating businesses at Berkshire Hathaway. One of the most underappreciated and under-covered aspects of Berkshire, in my opinion, over the last 5-10 years, has been the shift to a collection of operating businesses, rather than just a collection of stocks.

You and I were both at the Berkshire Hathaway annual meeting this year, and there were essentially no questions or discussions about the stock portfolio. It's kind of just in the background now, and the whole discussion is the collection of businesses.

My question to you is, do you think Buffett has transformed the company in that way to prepare it to live on after him? Or is it because that's the right move, regardless? Say he was only 50 years old; do you think he would still have this focus on operating businesses, rather than buying equities?

Cunningham: I think it's a great question, and I think there's an answer to it in my book. When I asked Warren who I should ask to write the forward to Berkshire Beyond Buffett, he instantly said, "Tom Murphy." Tom is the legendary executive who built up Capital Cities/ABC and ran it so successfully for years. It's a position Berkshire owned a big piece of, and invested in before it was acquired by Walt Disney Company.

I asked Warren, "Why Tom? Why do you suggest Tom?"

He said, "Tom is the manager that I have tried to emulate myself after."

I said, "Wow. That's fascinating. Does he know that?"

Warren joked that, "No, Tom will probably deny it," but he said later -- following up in correspondence for the book, he added this statement that I quote right in the beginning. He said, "Everything I know about management, I learned from Tom Murphy, and I only kick myself that I learned it too late."

What he's saying is, this shift that you describe, in some ways it's a natural shift, and in some ways it fortuitously prepares the company, I think, for life beyond him. But what he's saying in that conversation is, "In my double-barreled approach to investing, I might have done better with more Murphy and less Graham, or at least I could have gotten in there sooner, buying these companies."

Tom's operating principles include those that you see at Berkshire; decentralization, enormous managerial autonomy, generous latitude, compensation programs. It's just a very healthy culture, so I think it just worked out this way fortuitously. But it will, I think, serve the shareholders, the continuing participants in Berkshire, well over many years to come.

David Hanson owns shares of Berkshire Hathaway. The Motley Fool recommends Berkshire Hathaway. The Motley Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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