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Warren Buffett & Steve Jobs: 10 Similarities

feature_btnThey are the best at what they do, here are 10 qualities they share.

buffet_jobs


Live non glamorous lifestyles

Warren Buffett, worth $63 billion, lives in a $700,000 house and has been there for 50 years.  His license plate reads “THRIFTY”.  Have you ever seen the website of Buffett’s Berkshire Hathaway, 7th largest corporation in the world? It epitomizes Buffet’s frugality. Disheveled hair and wild eyebrows compliment his awkward fitting suits and favorite old sweaters.

Steve shuns the Silicon Valley social scene and, even largest single shareholder of Disney, never walks the red carpet to Hollywood events. He bought a mansion in Woodville, CA in 1984 – living in it largely unfurnished for the next 10 years. A black mock turtle neck, worn Levi 501s and New Balance kicks are Steve’s every occasion wear.

Liberal

Buffett endorsed Barrack Obama for president. Warren, and his late wife, Susan, long supported pro-choice causes. Speaking at an event last year for Hillary Clinton, he blasted the tax code for having his secretary paying a higher percentage tax than him (his income is mostly through capital gains). The billionaire is also vocal against passing on “dynastic wealth” and testified before congress defending the estate tax. Buffett’s beliefs are cored in what he calls the Ovarian Lottery:

“I have been very lucky. I was born in the United States in 1930 and won the lottery the day I was born. I had terrific parents, a good education, and I was wired in a way that paid off disproportionately in this particular society. If I had been born long ago or in some other country, my particular writing would not have paid off the way it has. But in a market system, where capital-allocation wiring is important, it pays off like no other place.”

Interestingly, Warren’s father, Howard Buffett, was a 4 term congressman with strict Libertarian/Conservative Ron Paul like views on foreign and monetary policy.  In respect to Howard, Warren didn’t change his registration to Democrat until after his father passed away.

Having experimented with drugs, studied eastern religions, and influenced by Bob Dylan – Steve and Apple are icons of the anti-establishment. Steve’s political donations make it more clear.

Steve brought Al Gore onto Apple’s board of directors and praised his Nobel winning work on global warming. Apple’s computers lead the industry in recyclable material, minimizing packaging and eliminating lead and other toxins.  Apple came out publicly against an anti gay rights ballot measure in California.

Dive deeper than the competition

Buffett dedicates hours every day reading the news and thousands of financial reports – he’s a vacuum cleaner of information.  Buffet made a deal with the local paper boy to have the next day’s Wall Street Journal delivered to his house at midnight, before everyone else reads it that morning.

When developing new products, Steve has his designers and engineers come up with dozens of different designs. Rapid prototyping machines, tool makers, CNC machinists, printed circuit board machines, and more work around the clock to make full scale working prototype models. They even have the same manufacturing equipment in Cupertino as they use China to design for manufacture. These prototypes are evaluated by Jobs and company, and revisions made until they are perfect. This iterative process is also performed for software. The work Apple puts into getting their products right is unprecedented in the industry and a testament to the investment Apple puts into R&D.

Showmen

They call it Woodstock for Capitalists. Berkshire Hathaway’s annual shareholder meeting attracts thousands of people from around the world. Buffet plays the Ukulele on stage, then spends hours happily answering questions from shareholders.  Timid when younger, Buffet took in Dale Carnegie’s Public speaking class after finishing college and proudly keeps the certificate of completion hanging in his office to show visitors. No other public company has meetings so large and attended.

Apple events are Steve’s chance to introduce new products to the world.  He performs onstage to a packed auditorium of media and millions more tuned in online. No other company introduces new products with as much attention and fanfare (or gets as much free advertising).

See the future

They call him the “Oracle of Omaha”, Buffett’ average annual compounded return for the past 30 years: 21%. $1 invested then would be $515 today. He buys only companies and stocks he understands completely and scours financial reports to find them under-priced. He has famously has never invested in technology stocks, even when Bob Noyce, one of Buffett’s fellow members on the Grinnell College board, offered him the chance to invest in a startup called Intel in 1968.

In 2003, Buffett argued in his annual shareholder letter that the unregulated derivatives markets were “financial weapons of mass destruction” and most journalists thought he was overreacting. While hedge funds were buying mortgage backed securities with up to 100x leverage along with credit default swaps to seemingly eliminate risk, Buffet saw the writing on the wall. Fast forward to 2008 – Credit crisis, bank failures, huge deleveraging, and massive government intervention. According to his new biography, Snowball, Buffett is taking advantage – trading mispriced bonds, selling default swaps (insurance against firms going bankrupt) on under-priced securities, and buying distressed mortgages at fire sale prices. He also invested in Goldman Sachs and GE – getting a slam dunk deal of preferred stock with a 10% annual dividend and options to buy more within 5 years at today’s price.

Steve Jobs knows what people will want and makes them great products.  Apple doesn’t have focus groups judging products or does design by committee… they keep it close to the vest and it all runs through Jobs.

Built companies from scratch

Buffett started building his war chest in grade school, delivering newspaper.  His prized possession as a youth was a wearable coin holder. He wrote his bicycle and watch off his taxes at 13 years old.  Bought and leased out a 40 acre farm when he was 16.  Returning from his MBA at Columbia after studying under his icon, the famous value investor Ben Graham, Buffet started an investment partnership with 7 friends and family, contributing a total of $105,000 capital for him to invest. After years of 30-60% growth and many more people added to the partnership, he shut it down and poured his money into Berkshire Hathaway, a textile manufacturer which he controlled. Money Berkshire made was reinvested in other underpriced stocks and whole companies and the rest is history.

Secrecy

Buffett never gives out advice on buying certain stocks, nor gives expectations of what the market will do in the near term.  When building up positions in stocks, he uses third party proxies and trusted traders to not tip off anyone about his moves. Apple has security on par with the CIA. Work is performed on a need to know basis. Apple, as we know, is the most secretive of them all. Beyond never divulging information about the company’s future plans, they are notoriously tight-lipped when it comes to relatively standard public information.

Small, tight knit management

Omaha’s Kiewit Plaza, the unlikely headquarters of Berkshire Hathaway, houses Buffet and his office of 12 people. All stock and purchasing decisions are made by Buffet and long time partner Charlie Munger. The managers of the companies Berkshire owns are largely autonomous and may only hear from Buffett a few times per year, as long as they are performing well.

Steve has a lean group of ten managers reporting to him: the COO, CFO, general counsel, and vice presidents of marketing, hardware, software, industrial design, retail, applications, and the iPhone.
Microsoft, by comparison, has a broader chain of command with an executive team of sixteen people, and a Corporate staff council of… “made up of employees from the Law and Corporate Affairs, Finance, Human Resources, Corporate Marketing, and Advanced Strategy and Policy groups at Microsoft. Other Executive Officers include the Presidents and Vice Presidents of the various product divisions, leaders of the marketing section, and the CTO, among others.” (wikipedia)

100% Control

All investment decisions at Berkshire Hathaway are made by Buffett.   Buffett’s ability to find great managers lets him focus on finding new companies, investments and stocks to allocate capital to. Everything at Apple – hardware and software development, marketing, strategy planning, and top level hiring – goes through Mr. Jobs.

Company 100% dependent on them

It’s the unfortunate corollary to having complete control.  What would happen to AAPL or BRK if they lost their Shepherd?

History has seen what happened when Steve was forced out the first time – a spiraling product line up and dwindling profit and market share. Steve secretly had surgery in 2004 to remove pancreatic cancer. Looking gaunt at recent Apple events, uncertainty of Steve’s health attributed to AAPL’s near 40% drop since the summer.

Is Buffet replaceable?  His like-minded right hand man, Charlie Munger, is just as old. Last year, Buffett and his board chose three potential people to take over, should he pass away. They also chose to divide his responsibilities between two people – a CEO and a Chief Investment Officer. Buffett said last year “The good news: At 76, I feel terrific and, according to all measurable indicators, am in excellent health, It’s amazing what Cherry Coke and hamburgers will do for a fellow.”

Bonus round: Biggest dissimilarity?

Relationship with Bill Gates.

Buffett and Gates vacation together and play bridge online regularly. Gates surprised his to-be wife by stopping their plane in Omaha to have Buffet take them to Borsheim’s, a jewelry store Berkshire owns, to choose an engagement ring. Gates joined Berkshire’s board of directors in 2002.  Buffett pledged 84% of his fortune to the Bill and Melinda Gates Foundation:

“It was clear that Bill Gates had an outstanding mind with the right goals, focusing intensely with passion and heart on improving the lot of mankind around the world without any regard to gender, religion, color, or geography. He was just doing the most good for the most people. So when the time came to make a decision on where the money would go, it was a simple decision.”

Gates has been Steve’s arch-rival for 20 years. Microsoft copied Apple’s user interface… well, you know the rest.

 
Disclaimer: I own BRK and AAPL, sleep well at night.
Updated to edit a few typos.

Comments [6]

6 Comments to “Warren Buffett & Steve Jobs: 10 Similarities”

JohnL @ November 11th, 2008 at 2:17 pm
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First of all.. You own Berk? WHAT? is it berk A or berk B? Second, JObs LOVE, LOVE, LOVES Buffet… that’s a fact. other than that.. good piece.

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Chazz @ November 11th, 2008 at 2:22 pm
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These are some astute observations that you have made here. Both are visionaries and both have the power to change the forecast of respective markets. Yeah, and props on the BRK stock.

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Starkey @ November 11th, 2008 at 4:37 pm
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I honestly just don’t see Steve working well into his seventies like buffet… unless I’m totally wrong and he doesn’t go anywhere for like 15 more years.

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woblo @ November 16th, 2008 at 7:08 pm
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Its Woodside, not Woodville. There is no Woodville, CA.

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Moshe @ November 30th, 2008 at 3:56 am
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Clearly there is no doubt that they both are the best at what they do. Rising from a scrap to a mansion is not as easy at it looks. It needs a whole amount of dedication towards your work.

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Rita Churchh @ October 4th, 2009 at 12:27 pm
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Hello waren Buffet and Bill Gates I spend all of my time helping the poor with my own money. I really don’t have money so i just use what every the lord give me to help family from all walk of life. It dont matter where they come from.

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