Managers of those subsidiaries are given considerable freedom to carry out their businesses. Warren Buffett is not intervening as much as he would like, because he knows better, according to him there are two kind of jobs; running the business, and running the people who do it, so managers should be given the freedom to perform. The managers earnings also depend on the performance of their subsidiary instead of the overall performance of Berkshire Hathaway, according to Warren Buffett a very important stimulus to excel at their occupation. As an associate says, 'somehow Warren has been able to keep a diverse cast of characters working harder for him than they did for themselves. I see it every day - and I still don't know how he does it'. But I do know that all of us feel this incredible responsibility to him.” Warren Buffett's ways make the managers of Berkshire Hathaway feel proud to be affiliated with the company, feel valued as human beings and feel they can communicate openly and honestly with Buffett. Berkshire Hathaway has in 34 years never lost an operating chief except to death. Even, a majority of its subsidiaries are still under control by the same managers, which shows the managers great devotion to their company and their loyalty to Warren Buffett as a person. This might be the result the good judgment of character by Warren Buffett or a great corporate culture in which everyone is pushing their limits. So what makes Warren Buffett a good leader? First of all the personality of him, which comes close to the social cognitive level15, because he puts effort in understanding and making sense of people around him, meaning that in an organization he is one that can place himself in another’s persons shoes. 

For subsidiaries and portfolio companies, Warren Buffett sees their shareholders as partners. He considers them as owner-partners and himself and other managers at Berkshire Hathaway as managing-partners. This is not just a simple way to convince shareholders and potential shareholders to invest in the company, since Warren Buffett invested 99% of his net worth in Berkshire Hathaway and Charlie Munger’s (Vice-Chairman of Berkshire Hathaway) family fortune is for more than 90% invested in the company. Furthermore relatives of Warren Buffett also considerably invested in stocks of the company. These facts show that the top-mangers of Berkshire Hathaway have a lot of long term confidence in the company, since a lot of their wealth is invested in stocks of the company, and that are not looking for some short-term return, which regularly occurs when managers are given large stock options as bonuses.

Berkshire Hathaway owns a lot of subsidiaries, but for Warren Buffett’s there is no need to intervene in every detail, he argues the following: “they were managerial stars long before they knew us, and our main contribution has been to not get in their way”. 

WARREN BUFFET’S MANEGERIAL SKILLS

After having looked for sources of success in Warren Buffett’s childhood and his earlier career, and further analyzing his successful investment principles its time to find out what kind of corporate culture is needed to manage his empire. In this part the focus will be on Warren Buffett’s managerial skills and how a management team functions optimal according to Warren Buffett. Of course one man can not run companies on his own, but needs to create management teams that will perform according a certain philosophy. This need stems from the fact that Berkshire Hathaway owns 79 subsidiaries with a total of 246,083 employees. For Warren Buffett, “managers are stewards of shareholder capital. The best managers think like owners in making business decisions.” However as economic theory predicts, manager will not always pursue the same interests as shareholders, which is reflected in the classical agent-principal problem. According to Warren Buffett it is important to select employees who are “able, honest and hard-working” Having those people in a management team is more important than “designing hierarchies and clarifying who reports to whom about what and at what times”.

In times of growth he is very optimistic and euphoric about the business opportunities so he offers very high buy-sell prices in fear that the investor will reap all his imminent gains. On the contrary, when Mr. Market is depressed he sees only the pessimistic picture and his lower expectations of future lucrative opportunities, not say that even losses are anticipated, makes him set very low prices in fear that an investor will unload his interest on him. In both cases prices deviate from the real value of a business. Moreover, Mr. Market is a partner that does not mind being ignored, meaning that transactions are fully optional and whenever an investor does not like the proposed price, he can wait until Mr. Market offers a new one in hope that it will be more suitable. Thus Mr. Market’s emotionality fully favors the investor, as long as one uses the market as a servant not as a guide. For this purpose one should be sure that one understands Mr. Market or else better not deal with him since falling into his influence can be disastrous. Buffett synthesize all that very clearly – “profit from folly rather than participate in it. Be fearful when others are greedy and greedy when others are fearful.”

INVESTING

 After digging into Warren Buffett’s early years its time to see what was inherited and adopted by him in his investment style. In this section the focus will be on Buffett’s views on the market, thus his investing principles will be discussed as well as his criteria for a business worthwhile buying. References to and comparisons with EMT and MPT mentioned in the introduction will be made when talking about his personal believes and principles.

   VIEWS ON THE MARKET

"I'd be a bum on the street with a tin cup if the markets were always efficient."

In his views on the market Buffett is influenced greatly by his friend and teacher Graham, both directly challenging the EMT and the contemporary academic teachings and market views on Wall Street. Buffett uses the same attitude towards it dealing as if the market was a business partner from where the name Mr. Market stems. According to their view Mr. Market often suffers from incurable emotional problems.

After graduating Columbia University, Buffett returned to Omaha where he had a short traineeship at his father‟s brokerage firm. During this time he didn‟t cut his contacts with Graham but on the contrary, informing him for various investments he made and discussing common topics of interest. Graham was generous with his time and thoughts and this relationship between a professor and a former student eventually brought them working under the same roof. In 1954 responding to a invitation of Graham, Warren Buffett ended up as a security analyst at Graham-Newton Corporation. These two years working side-by-side with Graham and the other analysts analyzing hundreds of companies proved decisive for the future successive investment style of Buffett.

Apart from Buffett, Graham employed several other bright youngsters coming from various fields of study and backgrounds. What unified them all was their common understanding of the value investing approach and the willingness to apply it unconditionally. Among them were Walter Schloss manager of WSJ Ltd Partners, Tom Knap, founding partner of Tweedy, Browne Partnerships, and the founder of Sequoia Fund Bill Ruane. All of them became very successful investors in their careers after the liquidation of Graham-Newman which proves the fact that the success of Buffett was not just a pure miracle but grounded to a big extent in his adopted investing methods.

The significance of Graham in Buffett‟s career and the role of a mentor he would have in future deserve a few words to be mentioned about his teachings. Benjamin Graham is known as “the father of value investing”. He stressed the importance of trading on the market as one would trade with a business partner that offers you the chance to buy you or sell you his interest on a daily basis. This imaginary partner, to whom he referred as Mr. Market, would sometimes offer fair deals but often his price would be either undervalued or overvalued given the characteristics of a specific business, which created the possibility of speculation. For him having a margin of safety on an investment, meaning to buy a stock only if its price is lower than the conservative value of he business, was essential. In this way he ensured any investment from fluctuations on the negative side. For this purpose an investor has to determine the intrinsic value of a company. In his believes a company that was well managed and firm in its belief about the value of its product could and should prosper as an investment. The mathematical simplicity of Graham‟s methods appealed much to Warren‟s feeling of numbers. 

 EDUCATION AND EARLY CAREER

After graduating high school Warren Buffett enrolled at the University of Pennsylvania in 1947, and more specifically the Wharton School of Business. However, after two years of studies he became convinced that most lecturers knew less about finance than he did. This made him return back home to Omaha where he obtained Bachelor of Science in Economics from University of Nebraska. During those years he got acquainted with the works of Benjamin Graham by reading “The Intelligent Investor”. This classic book influenced him so much that he became determined to study under Graham and he did so. Warren left home to move to New York where he graduated Columbia University with a Master in Business in 1951. During those years Graham and Buffett formed a bond between each other that would last for decades and would determine the investment philosophy of Warren once and forever. 

Warren‟s life is full of stories of childhood entrepreneurship. At the age of six he bought six packs of Coca-Cola bottles, a company with great significance in his mature business ventures, and resoled them for a profit. He made his first stock market investment at the age of eleven when he bought three shares of City Services stock for the price of 38$ and waited till they rose to 40$ when Warren sold them. But the stocks went on rising and reached 200$ in two years, an event that served him as a good lesson to stay on the market. Upon moving to Washington, while his father was busy with politics, he took two routes as a paper delivery boy of The Washington Post, another major investment of him, and Washington‟s Times-Herald. At this occupation he filed his first tax income return being only thirteen. With the money he earned as a paperboy he and a partner of “Warren Buffett” him bought reconditioned pinball machines and placed them in barbershops soon ending up owning seven of those securing them some 50$ each weekly. But Buffett did not like to spend; he was a gatherer and a holder and enjoyed much more seeing his money grow than contribute to somebody else‟s wealth by spending them. Later on with the same partner of him they bought a 1934 Rolls-Royce for 350$ and leased it for 35$ a day. Upon graduation from high school at the age of sixteen, he had close to 6000$ of savings and decided to invest it by buying 40 acres of land for 1200$ renting it to farmers. In home Omaha Warren became a big fan of horse racing and the statistics of weights, speed, and past performance fascinated him to the extent that he formed a partnership to issue the “Stable Boy‟s Tip Sheet”.  None of these would be possible without Warren‟s fascination by the magic of numbers and money. He could easily perform calculation in his mind and keep track of them while having a conversation on a topic. What especially was intriguing to him was the idea of money growing at a compound interest, a passion he would keep for a lifetime. 

BIOGRAPHY

For a tree to grow strong the roots have to be deep. In this section we will dig deep into Buffet’s childhood experiences, the role of his father in his life, his passions, and the education he has undergone. Further on a succinct profile of his mentor Benjamin Graham will be provided and his first steps as a professional will be traced. In this way we would like to show that the path to success has its origins much earlier than the financial statements could account for.

   CHILDHOOD

Warren Edward Buffett was born in 1930 in Omaha, Nebraska. He is the son of Howard and Leila Buffett. The figure of his mother has some ambiguity as to the influence she had in Warren‟s life but the same can‟t be said for that of his father. Howard Buffett was a local stock broker, a banker, and served as a four-term US Congress representative from the conservative wing of the Republican Party. From an early age Warren became fond of his father and often spent his spare time choking stock prices in his office or reading his books on investment. The young Buffett even moved to Washington D.C when his father got elected in the Congress. The figure of Howard Buffett definitely served as a role model of a leader and of entrepreneurial skills to Warren, characteristics clearly recognized in his later years. 

Right from childhood, Buffett was fond of making money. He involved himself in many door to door selling campaigns and also worked in a grocery store owned by his grand father. When he was in high school, he teamed up with one of his best friends and purchased a second-hand pinball machine. Together they placed it in a barber’s shop and with that residual income they slowly started to buy several such machines and placed it in other barber shops. Buffett’s interest in stock market sprouted at a very young age, when he spent hours in the customer’s lounge of a nearby stock brokerage company. He was only ten, when he planned to visit the New York Stock Exchange. In his high school days, he purchased City Service shares for himself and his sister. When he completed his graduation, Buffett had more than 90,000USD in his savings account.
At only six years old, Buffett purchased 6-packs of Coca Cola from his grandfather's grocery store for twenty five cents and resold each of the bottles for a nickel, pocketing a five cent profit. 

Warren buffet life style

 INTRODUCTION

Warren Buffet  was born on August 30, 1930 to his father Howard, a stockbroker-turned-Congressman. The only boy, he was the second of three children, and displayed an amazing aptitude for both money and business at a very early age. Acquaintances recount his uncanny ability to calculate columns of numbers off the top of his head - a feat Warren still amazes business colleagues with today. Warren Edward Buffett, the honourable CEO of Berkshire Hathaway was born on 30th of August 1930. Popularly called as the “Sage of Omaha”, Buffett is known for his successful investment strategies and also for his modesty despite of all his riches and fame. He is currently the third richest person of the world. Omaha, Nebraska is the birthplace of Warren Buffett. He was born to Leila (mother) and Howard Buffett (father). Warren had his elementary school education at Rose Hill Elementary School at Omaha and completed his high school education from Woodrow Wilson High School. When was nineteen, he finished his B.S. in economics from the University of Nebraska.