Of Berkshire, Moats, and Culture

Mark Bidwell interviews Larry Cunningham

Hello and welcome to the Innovation Ecosystem Podcast. With me today is Larry Cunningham who’s a prolific author and lecturer on a broad range of business-related topics and is also a chair professor of law and business at George Washington University. His books include ‘The Essays of Warren Buffet’ and ‘Berkshire Beyond Buffet’. He has written for the Financial Times, The New York Times, and the Wall Street Journal, and has appeared on CNBC, Fox, and NPR. Welcome to the show, Larry.

Delighted to be here, Mark. Thanks so much.

When and how did you become interested in Buffett and Berkshire?

About 25 years ago, so that would be early 1990s. In my practice in corporate governance and in my research I started to encounter Warren Buffett’s writings, and I found them to be just strikingly lucid, compelling and totally against what everyone else thought and knew. It looked like a researcher’s goldmine so I began reading and digesting the information and it just suddenly became clear to me that we had a very special company, a very special leadership, and a very special personality that deserved much more attention than it had been given back. 25 years ago, Warren was not the household name he’s become in the last two decades, and I found that his ideas were very important but undervalued. So I began to systematically examine them.

Lots have been written about him as you say. He is a household name, but there hasn’t been a huge amount about Berkshire as an institution, although, of course, if you go to Omaha for the annual general meeting you do get a sense of the culture. As you started your most recent book, ‘Berkshire Beyond Buffett’, you did a lot interviews with executives in the 50+ subsidiaries that comprise the Berkshire business. What surprised you most as you interacted with these executives?

How much autonomy that they really do have. That is what I think is the most peculiar feature of the Berkshire system. Even as one hears about it — hears about the talk of it being a decentralized organization where the CEOs of the operating units have discretion to make all operational decisions — to hear about it is one thing. To actually sit down with these men and women who execute on a daily basis and talk about how free they are, how they get to decide basically whether they want to talk to Warren or not, how often they want to report, when they need to clear things with him. It’s an amazingly decentralized system and that’s the thing that surprised me most.

I’d just add to the point that you made that there’s been an enormous amount of study and attention given to Warren Buffett, the person, and his particular investment strategies: the style of value investing, the idea of focusing on good businesses at reasonable prices. An enormous amount has been written about that because Warren has been doing that for 50 years. Far less has been written about Berkshire as a company, its corporate culture and these principles that you are developing and discussing. It is partly because Berkshire has only been practicing that for a decade or two. It’s a rich, rich field to plow and I think we’ve only all just begun to do it.

Berkshire has only been practicing this for a decade or so because there was a shift from it being an investment company to being a holding company. I think now 20% of the company is public investments and the 80% are operating businesses. Is that what you mean by your comment about only starting to practice this methodology more recently?

Yes. 20-25 years ago as you said, Berkshire was a huge multi-billion dollar company but 80% of its assets were in investments; marketable securities like Coca-Cola, Wells Fargo, ABC, Cap Cities, the Washington Post. So it had sizable minority stakes, but what Warren was famous for was having selected these investments and having monitored them; his approach to analyzing businesses. But at that point, Berkshire had acquired 100% of maybe only 10 or so companies and they were relatively small. Certainly, Warren had practiced this idea that you’re the ecosystem, the decentralized approach, but it had not been consequential.

In the past 20 years, Berkshire has generated so much excess cash, so much free cash flow that it has acquired 50 wholly-owned subsidiaries, organized them and operated them in a distinctive way. It has been a spectacular success and a huge achievement. The company now ought to be thought of far more as a conglomerate. Berkshire ought to be studied far more for its management style than seen as merely an investment vehicle and him being mostly important for his skill at picking investments. He has been a skilled investor and a studied investor for nearly 50 years. He has assembled this conglomerate and has achieved this managerial record only really in the last 10, 15 or 20 years depending on how you count. I think the record is sufficiently complete that we could say it’s a very successful model as he has designed it. The record isn’t long enough for it to have attracted a robust following and emulators that the investment record has done.

This is interesting. A number of our readers are leaders or executives in large public companies, dealing with quarterly earnings expectations from Wall Street. Yet you have got executives who have been given this enormous amount of autonomy. Charlie Munger, the vice chairman, says it stops just short of abdication, this concept of giving them the space they need. What does it actually look like? Do you have examples of conversations you had with an executive in one of the subsidiaries? What does this autonomy really mean for them?

I do think that the senior executive in a public company faces pressure from the analyst community and from the securities world that wants to know what the quarterly outlook looks like and what the target for the next half and the final year is. There is an enormous pressure to at least forecast and very often to deliver results on that time frame, on that schedule. It is very often someone else’s schedule because your business doesn’t necessarily operate that way. You might need longer lead times, you might need to correct through a cycle or take time to push price increases through, and it just may not work out in a 3, 6, 12 month operation. So you get a conflict sometimes between what you’d really like to do and what you feel constrained to do by that external pressure.

At Berkshire Hathaway, the directive from the CEO, from headquarters, from Warren is to ignore that kind of external constraint. If your business cycle operates in a 24-month program or 19-month or some sort of scattershot, that’s okay. You need to work through a period to make adjustments or to make an acquisition, to digest an acquisition, so if you get some hiccups in your performance, in your earnings, that’s okay. As long as you’re working through and working towards a satisfactory objective over multiple yearly periods, that’s fine. It’s a world of difference, and it can happen that way in private companies too, but it is notable that Berkshire itself is a public company and it has followers who look for such results in relatively short periods. Buffett has to resist a little bit of that but he does it by avoiding quarterly conference calls and that sort of thing and has educated a group of investors who appreciate looking out over multiple periods not just single year periods.

An individual person, at one of the subsidiaries, take MiTek, the maker of industrial roofing components, they make acquisitions all the time. Sometimes they immediately add to earnings. Sometimes it takes time to digest and work through and he doesn’t have to account every single quarter or every single year for how that performance is going but rather over a five-year period. What have we been building? What have we been delivering? Nor does he have to report on acquisitions under certain sizes, he feels constrained to report to Buffett or acquisitions that are a little further afield than its ordinary business add-ons and bolt-ons and things like that. It’s fairly discretionary. It’s the bottom line over multiple periods of time that matter, not particular business decisions or the results that they achieve.

It’s a totally radically different culture, and it’s based on trust obviously to give a manager that kind of leeway and that kind of rolling time frame. You’ve got to have the people who are going to be able to discharge that responsibility faithfully over those long periods of time and not be slackers or line their own pockets or so on. You need to get trustworthy people in those positions. You need to have a culture in which being trusted fosters reciprocity so that when Warren says, “You’ve got a lot of leeway here” that person says, “Well, I’m really going to discharge that responsibility faithfully.”

I guess to give you an example, I mean, that is the most striking thing. I talked to Bruce Whitman, who is the CEO of FlightSafety, which is Berkshire’s subsidiary that trains pilots. He said, “The way that Warren treats me, I feel like this money is my money and so I treat it as if it’s my own.” When you do it that way you’re much more careful about deploying capital effectively, avoiding excess costs and otherwise acting as a faithful steward of capital.

So that’s the culture and to create it, you need that leadership from a guy like Buffett speaking in those terms and then acting by giving power to the leadership teams that can actually execute. Then having those people feel that responsibility, receiving trust that compels a commitment to honor that trust and it works. There are exceptions. There are some people who have been given responsibilities who breached it and have failed and who had to leave. There are costs to this system but on balance if you are able to assemble a large group like this and create a culture where trust is the most important thing, the cost will be minor in relation to the gain.

Now a lot of the people who choose to sell their businesses to Berkshire, entrepreneurs themselves, built up their businesses. There are lots of rags-to-riches stories in the book. I am interested in the people further down in the organization, what I’d call the intrapreneurs, the innovators within these organizations. What does it feel like? Would they talk in the same way that the chief executives of these subsidiaries might talk about in terms of levels of autonomy, the freedom to think about their role in terms of using their own money versus someone else’s money? That is an analogy that I use in Syngenta where every time you are faced with a difficult business decision, I’d ask the team, “If this was your family’s money, how would you actually choose to spend it?” It’s a nice way of getting people to get completely committed to the decision-making, but what does it mean to be an intrapreneur in one of these subsidiaries? Any views on this?

I do think that corporate cultures tend to self-propagate and proliferate across and down an organization. What I mean is when Berkshire makes an acquisition, it doesn’t necessarily look for a company that has that same kind of decentralized structure, but it just so happens that the people that Warren feels like he can trust have tended to structure their businesses along the same lines so they’ve got a bunch of people in the organization all the way down throughout it that they can trust. Any Berkshire subsidiary, because it’s got autonomy, the CEO can organize that subsidiary however he or she wants. The tendency that I saw across those subsidiaries repeatedly was to have that same attitude of delegation, autonomy, and decentralization.

I can give you a dozen examples but that company, MiTek, that I was just talking about, construction engineering roof manufacturing company, they had made 50 or so acquisitions since Berkshire bought it about 10 or 12 years ago. They approach it the exact same way. When they go out and make an acquisition, they tell the seller, “You will have a permanent home here at MiTek. You will have total autonomy to run your business, whatever it is, making brick façades or curtain walls for skyscrapers, roof trusses, you will be able to run your business just as you have without much or any interference from us. We will be here when you need us, but you will have the ability to innovate. You’re the person who knows what’s best in your market what you should be doing, what changes you’d make, what pitches you should be make, what customers you should see, what bids you ought to calculate and so on. So we are going to let you do it.”

I think that is true across most of the Berkshire subsidiaries. And again another example came from Frank Ptak, who is the chairman and CEO of the Marmon Group which is one of the top 10 largest Berkshire subsidiaries. He told me that his company has always been highly decentralized. It’s a large conglomerate itself with 10 different industrial lines, and he says “it’s so big and complicated there is no way I could participate in the day-to-day decision-making of all of those units, so I have presidents of each of them and they call all their own shots”. They have their long time horizons that Berkshire gives Marmon and so it is a bit of a replica of Berkshire.

As Munger has repeatedly said we don’t insist that our subsidiaries have any particular governance structure so there may be some variation out there but by and large the subsidiaries that I have looked at closely tended to share the values that Berkshire stood for including this one of trying to push power and decision-making down to the place where people have the best knowledge and the greatest incentive to get it right rather than having declarations and bulletins from the C suite down to the operational execution level.

As you walked around these businesses, it sounds like they just felt very, very different from the more traditional publicly quoted, hierarchical corporations that many of us might be familiar with?

Yeah, I mean that is the general pattern at Berkshire. Part of it isn’t in fact that they’ve made 50 acquisitions in the last 25 years, just roughly off the top of my head, probably 40 or so of them have been private companies. They purchased publicly traded companies, that’s fine. But I think the culture, the kind of leadership, the kind of marketing position, the kind of attitude they’re looking for is going to congregate in the private sector where they have been able to operate without the kind of pressure of quarterly conference calls, earnings expectations.

I am just sitting here thinking about the companies in the Berkshire landscape. I think the ones that have been private tend to mimic the Berkshire style more clearly and closely than the ones that had been public, where I think you just have a little more bureaucracy built in partly because of legal requirements and internal controls. Within the population of public companies I think that those that have sold to Berkshire and are now part of Berkshire are probably the most loosely-organized, the more streamlined, the more intrapreneurial, if you like. That is part of what Berkshire is looking for and a part of what it gets.

Can we switch to innovation, the subject, because Buffett talks a lot about moats, these sources of competitive advantage? Many people are working in businesses where their moats are getting smaller and shallower. I am thinking of regulated long product life cycle companies that could perhaps be a threat of Uber-ization or threat of changing consumer demand.

Moats, at some point in time, looked unassailable. Think Kodak, think Blackberry, think Nokia. Very quickly it turns out that they weren’t quite unassailable and they just disappeared. There are two questions here that I am really interested in. First: do executives talk about moats in some of the subsidiaries? The reason I ask that is that there are companies in the group, like Geico for instance, for which the moat is getting smaller and smaller as the threat of self-driving cars becomes more and more real. Do people talk in terms of moats? How are these conversations evolving given the fact that you can’t open the newspaper these days without hearing about or reading about FinTech and other disruptions in mature industries?

I heard that word — moat — across the subsidiaries. The CEOs I talked to and the senior people at various companies and some of the directors they certainly all know the word moat and often use it expressly and even if they don’t use that particular word, they are certainly talking in terms of competitive advantages, the capacity to fend off rivals and also onslaughts of technical changes.

It is part of the vocabulary, it is part of the DNA and I do think it’s something that is important when Berkshire considers an acquisition and evaluates the company’s capacity to sustain its prosperity over decades rather than shorter periods. That’s all about detecting a competitive advantage. I’d say most Berkshire companies exhibit that strength and over relatively long periods of time few of them have succumbed and have been beaten.

Such as?

I think the most conspicuous example of that is a company called the Pampered Chef. It was a billion-dollar acquisition for Berkshire about 15 years ago. It now is worth quite a lot less. We don’t have a micro deed on exactly what it’s worth. I think 15 years ago it might have been earning $400m or $500m. Today it might be $30m or $40m.

That was the direct-sales model that was broken by the internet. Is that right?

Exactly. They have these in-house home parties where neighbors sold spatulas and pans to people and it’s a lovely old-fashioned model but that is not how people buy things anymore. That company was great when it was bought, but it has not prospered since. It’s got a lot of problems and I don’t know if they are going to be able to turn it around. They’d really have to soup up their internet presence and that’s not an easy thing to do especially when the gadgetry can be procured by Amazon and sold directly out there. So that business model may be unsustainable, unreliable.

Berkshire bought an apparel manufacturer, shoe company, manufactured products in the United States, right at the time when it became really cheap to move goods across oceans and pay low wages from places from Honduras to Singapore and those companies just got crushed. They picked up the remnants and tried to sustain what parts they could by focusing on products that sell well when they’re made in America, like army boots and uniform and things that have to be made in America under municipal laws for police uniforms.

They were able to salvage a bit of moat, a bit of advantage but a large part of it was just eroded by those onslaughts. On the other side is a company they still have with a similar kind of problem, Fruit of the Loom. They make underwear, they have got a branded advantage, and they are sort of low cost because they are made elsewhere but it’s not as if that’s some thick durable moat full of crocodiles and alligators.

The Garanimals brand is a smaller company but likewise it’s an apparel manufacturing toy maker for children’s lines and it’s got a nice moat in the sense that it’s been really successful in carving out a place where parents feel really comfortable educating their children using the products. It’s got some leadership but it turns the manufacturing costs, so that’s not there at the edge.

On the other side, you got a company like Lubrizol which makes petroleum products and additives. It’s got a real moat. It’s got knowledge, scientists, chemistry, products, history, reputation; enormous capacity to help its clients in the automotive sector in just about every aspect of it. It’s constantly innovating, it’s constantly on the edge, and it’s constantly testing products, helping companies make better products. It’s constantly trying to develop new applications for its products. It’s participating in making plastic money instead of having currency made of paper. Many central banks are thinking about making it plastic and how would that work. Lubrizol is very much involved in that.

BNSF Railway, just to take one of the giant companies, are a leader just because of scale and consolidation in the North American rail industry. There still may be a little bit of consolidation to come but they are a power player in that space. They’ve got to compete not just against the other couple of railroads but also against the trucking industry, so how do they do that? They try to be cheaper, cleaner, faster, and more flexible. They are able to do that in part because they are constantly on edge of technology, too. They’re using logistics engineering, computerized traffic networks and they are out there fighting. They’re fighting for their market share and fighting for their profitability. I think they do pretty well.

Your Geico example is an interesting one because I do think that the automotive insurance industry is facing some change, like most industries are, and their moat has historically been as the low cost supplier of a commodity product with great advertising budget that backs it up with pretty good customer service. That package has served them well and gradually increased market share over the past 25 or 30 years from 2%-3% to around 10%-12%. They have very high premium volume, it’s growing, they usually have underwriting profits but occasionally they hit some bumps. They return any excess profits to the customers in the form of low premiums so they’ve got a moat.

I think the development of the driver-less car is a potential threat. It’s an incipient threat to the moat but I think that the technology is hardly proven and will evolve and develop. From the limited testing that we’ve seen, the driver-less car is not going to be accident-free. There are going to be problems, and somebody is going to have to pay for them. We are going to need to develop a risk-allocation system. It may not be the kind of thing that we are used to. Geico and its rivals will participate in shaping it, so they will have forward advantage, I think, in designing whatever that is. It may look different but I think they have got the capacity, the leadership, and edge to try to shape it and still be a leader, maybe a bigger leader than they already are.

Benjamin Moore paints is another one. They may manufacture paint. They have faced a lot of adversity. The big challenge to them was that when Berkshire bought it in 2000, most paint was bought in stores run by moms and pops in middle America. Right then, there was the enormous expansion of the big box retailers like Walmart and Kmart and especially Home Depot that started to build these huge cavernous warehouse-type facilities with enormous supplies of paint and other hardware. People started to buy from them.

Benjamin Moore had never sold through those kinds of stores. They only sold through their authorized local dealer network and when Buffett bought Benjamin Moore, he made the personal promise that he would retain that distribution system. In the last 15 years, especially during the ’08-’09 household crisis, it was very hard to sell paint at all and where it was getting sold was in Home Depot and these big-box retailers. So it became very difficult to sustain the Benjamin Moore business model, but you couldn’t back out of it because Berkshire and Buffett made a promise.

That’s threading a needle, what they’ve managed to do, and they went through a couple of CEOs. It’s unusual at Berkshire. Mike Searles is the third CEO in the past 10 years, the fourth CEO since Berkshire bought it. It is very unusual because again you want to give these guys autonomy and let them call the shots and they mostly do. In Benjamin Moore’s case, two of the CEOs said, “I have to figure out a way to sell through to the big boxes” so they did a little experiment in Canada and when Warren heard about it he went furious. These guys left.

What the current CEO is trying to do is say, “what is our moat? What is our advantage and how can we capitalize on it? We cannot sell paint at Home Depot, but what can we do about our local authorized dealership retailers?” So what they have done is just plant the flag on that and gone out and told everybody that they are the only paint manufacturer that solely sells through your local authorized dealer who can give you far better service, really think about what the right paint for your home is, working with interior decorators to win their trust and custom, to be the referral or the go-to. They are making silk out of cow’s ears. I think it’s too early to be sure if Mike is able to thread that needle or sustain that moat but that is one way to do it. What is our strength? Let’s build it the best we can on that.

Most of our readers don’t work for Warren Buffett and his organizations, aren’t part of the Warren Buffett ecosystem. What advice would you give to leaders, for instance, who are setting the cultures of these organizations: how to think about disruption, how to think about innovation in the context of these shifts in the industry that are changing the rules of engagement in some of these marketplaces?

I do think an organizational structure that is designed to promote innovation and protect those kinds of moats is the wise one. It’s pushing responsibility for detection and response or anticipation of disruptive onslaught down to the people who are on the front lines. Take Benjamin Moore. I want to know the person on Main Street selling those products. What does she see? What is happening, and being in touch with the 2000 of those people around the country and making sure they participate in the decision-making process whether it’s the mixture, the texture, the colors, the supply chain, the speed, whatever it is.

That decision-making is going to be or at least the knowledge and information is going to be coming from that area. Michael Searles, the CEO, he was probably wise to give as much input, give as much autonomy and power down to those people: where should they set up their shops, what inventory they should carry, and how they should mix the paint.

I think that principle to maintain moats is most likely going to be coming from the ground up, rather than the C suite down. Another one we haven’t really discussed too much but animates Berkshire is the sense of self-reliance — who is responsible? That’s everybody down the chain and that every person ought to be able to rely on themselves and be empowered, to be responsible and accountable. If they do well they’ll be rewarded. If they fail they’ll be let go or punished or be deprived of internal rewards.

These principles of autonomy and empowerment are important factors and the practices to get them down there are the tone at the top, the statements of formal managerial structure of governance. It’s more about trust than about internal control. It’s more about rewarding innovations, spontaneous response rather than sluggishness, that appreciates generating funds internally rather than borrowing them, that appreciates that making acquisitions sometimes is a process that takes time to prove out. I think those principles and those practices can be injected. A lot of people debate whether Berkshire is so special because Warren is so special that it can’t be replicated and there’s not much to learn and it’s not worth emulating. I don’t think any of us should be foolish enough to believe that any of us could design or create the next Berkshire Hathaway on that scale or with that level of success.

I think there’s no question that many of the principles and practices that they stand for are proven and that they are well adaptable to many other organizations. They have got a very strong logic and very strong basis. All of the empirical literature and behavioral psychology in the workforce attest to the fact that people perform better when they’re given responsibilities. When they are trusted and when they have power in an organization, people do tend to stand up and act on it. Autonomy is more value-enhancing than control. Ask a person at the cash registers. They are more likely to try to achieve this result for the organization. They will more likely do this if they are trusted to do it rather than directed to do it, if they are able to do it in a way that makes sense rather than to check a bunch of forms that show that they comply with the policies. There is a strong basis in logic and policy for all this. The payoffs are huge. You’re sustaining your moat, lower cost of administration, lower cost of capital allocation, and lower cost of acquisitions.

A brief point to make, at this moment is that if you referred to those sellers of companies to Berkshire Hathaway who tend to be entrepreneurial, well, they are indeed and they value retaining that autonomy when they join Berkshire. They are willing to sell to Berkshire at a lower price than they would charge to rivals. That’s just a great advantage, if you are leading or building company like this, if you can really develop this kind of reputation: legitimate, genuine trusting of your managers and giving them leeway.

The final point I would like to make on this passage is what’s vital in this community and culture is the ability to trust, that is, the trustworthiness of the people. The big cost, in other words, you will invariably make mistakes and have irresponsible miscreants acting out of a self-interest rather than on an organization’s interest. You do have to weigh this. Berkshire has examples of people that lined their own pockets instead of acting for the company. But again, if you can incubate the right culture, those mistakes are going to be few and far between and be a net minor cost overall.

One final question before we start to wrap this up, Larry. You talked about their ability to attract the best type of seller, someone who has similar values but also potentially might do a transaction at a slightly lower price. How has this changed, with what I see is probably one of the most significant innovations in the model, which is getting into bed with 3G? Some of the transactions that they’ve done recently have been followed by very aggressive cost-cutting which is at odds with what it meant to be bought by Berkshire in the past. Buffett has said this is potentially going to be a model that we are going to adopt and use more of. Can you say a little bit about that?

The critics have a point that this is not what Berkshire has done and not what it stands for, that is to buy companies, deliberately downsize and squeeze efficiency out of them. Warren’s response has been, “We have never deliberately maintained a bloated payroll at Berkshire Hathaway.” That’s fair enough, but it’s really only a partial response because they have never gone out and deliberately acquired a company with a bloated workforce and then proceeded to save costs by cutting it. Berkshire does not look for companies that are inefficient. They look for those that are already well managed. It is a very different acquisition model for Berkshire Hathaway. I would discourage Berkshire from continuing to do this kind of thing. My defense of what they’ve done, and I don’t know that Warren is going to exactly put it this way, is to draw a sharp distinction between wholly-owned and minority-owned companies.

Historically, Berkshire bought stocks in McDonald’s, Exxon Mobil and Walmart, and it was not responsible for the day-to-day decision-making of those companies, the policies they had, who they hire, who they fire, whether they have a downsizing, whether they have consolidation or anything like that. Berkshire wasn’t able to control those outcomes or those decisions. It didn’t get a black eye, didn’t deserve a black eye if McDonald’s did this or Coke did that.

Whereas with its 100%-owned subsidiaries, it is responsible for the treatment of customers, suppliers, workers, and the effects on communities, and taxation. I would draw a sharp distinction between those two, and I would locate these 3G acquisitions, the one of Heinz first, then the acquisition of Kraft on the partly-owned side. It’s more like those minority positions rather than wholly-owned positions and my support for that is precisely that in the contract between Berkshire and 3G about the ownership. 3G has whole operational autonomy. They are just like a Coke or a Wells Fargo or another investee.

They make the decisions to downsize, to cut and do these other LBO private equity type things. That’s really their decision. It’s not really a Berkshire decision. That’s how I would defend it and then I will say, “What we will do from the Berkshire holder’s perspective, what is attractive about this, and from Berkshire’s cultural perspective is if after the end of seven years, Kraft, or Heinz doesn’t have a bloated payroll and it’s got these other qualities about autonomy, decentralization, and trust, then Berkshire can buy 3G out”. It will be a Berkshire company. Berkshire can exercise its option to buy the other half that it doesn’t own and then it will continue to be fully responsible for the treatment of the employees, suppliers, customers and so on. It can do so in a traditional Berkshire way. But if Heinz does not like that or Kraft does not like that, Berkshire can sell. That will not violate any Berkshire principle.

Berkshire has always been free under its internal principles to sell common stocks whose economic characteristics start to deteriorate. It has rarely or nearly never sold a wholly-owned subsidiary and the point is not to do so. That’s how I would analyze it. I don’t think that the partnerships are the best ideas they’ve had, but if properly understood they are consistent with Berkshire’s history, practices and philosophy and should not impair its ability to say that to prospective sellers, “We treat businesses we buy with autonomy and respect.” That’s how I would size it up.

That’s fair enough. So wrapping this up, Larry. I sent three questions through to you. Number one: what are your morning rituals?

I’m an early morning riser. I like to get up early. I try to read three newspapers every day: the New York Times, the Wall Street Journal, and the Financial Times. I don’t always get through all three of them but I like at least the headlines and at least the first few paragraphs of each big story to get a sense. These writers are independent journalists trying to be objective, but they tend to have a little different take on things so I feel like I get the fuller version of the main stories when I have a glance of all three.

I love doing that and then I always try to take a run or have some kind of exercise in the early parts of the day. It’s just a great way to ignite brain activity. I have so many of my better ideas when I’m running and then the day is also off to a good start. It’s part of the routine, most days, I do usually write in the morning all the way up to lunch time and on the good days, I get more writing done by lunch than many people get done in a week. Those are my ambitions for most mornings.

Excellent. Second question: what have you changed your mind about recently?

The most consequential change of mind that I made depends. The word recently, might be ‘plenty’. About 10 years ago I made a decision. I had been married once and divorced and I just planned on leaving that part of life behind. My eldest brother, sitting at dinner with my nephew, said, “Larry, the best thing in life is being married and having children.” So, I changed my mind, opened my heart and ended up finding a wife and we’ve got two beautiful girls. My brother was right. That’s probably the most important change of mind I have ever had in my whole life and probably the most important one to share with people.

We could spend an hour on that question because this is something that Charlie Munger talks a lot about, about the need to reassess some of your assumptions on a regular basis because we inherit them and we don’t necessarily test them as frequently as we should do. Thanks for that. Finally: what advice would you have for your 25-year-old self?

Right, that’s a great one. I’d think it’s to appreciate that your first job is probably not going to be your only job. That was true 25 years ago. I think it’s even more true today that very few people stay in their first job for the rest of their careers. It sometimes happens but I’d stress to people that it’s an important job. It’s an important first step but very likely you are going to make some switches and changes along the way. Sometimes you might even change careers as I did. I started out as a corporate lawyer, I became a law professor, I got into finance, investing and consulting. So I have just had many different kinds of iterations in my career, most of it all cumulative. So I keep learning and bringing the old skills to the new assignments and so on. I think keeping that in mind as a 25-year-old, if you think of yourself as just a corporate lawyer or just an investment banker or just an investment analyst or just a security officer, whatever it is, I think you might short-change yourself. I think you should appreciate that you’re in this job now and do the absolute immaculate best you can but always be ready to take what you learned to new places, new firms, new careers and new horizons.

Excellent. That’s actually the common theme with previous guests who have made similar comments. Where can people get in touch with you, Larry?

Well, they can visit my website, BerkshireBeyondBuffett.com. It has a lot of information about the book that you so kindly brought to their attention. Your viewers can feel free to send me an email. It’s lacunningham@law.gwu.edu. Mention that you heard me talk with Mark on this show.

Of course, the obvious thing is that people can go to Omaha at the end of this month and you are going to be there right?

I’m going to be there at Omaha. I will be giving a couple of different presentations, and be at book signings at various places. So I will be at the Bookworm during the annual meeting at lunch, in the exhibit hall, signing books. I will also be on a panel Friday afternoon from 3–5 at Creighton University. I will be signing books there. I’ve got a new book coming out, that’s an annotated transcript of the symposium I did with Warren and Charlie 20 years ago where we launched The Essays. That’s going to be a fun little product and it’s going to debut at the meeting this year.

It’s been a great pleasure having you on the show, Larry. I am looking forward to meeting you face-to-face. I can’t make it to Omaha this year. Let’s keep in touch and I’m sure our audience will have enjoyed this as much as I did. Thanks very much for your time.

It was my pleasure, thanks very much indeed, Mark. I look forward to catching up again soon.

But wait…there’s more?!

This post has been adapted from The Innovation Ecosystem podcast. Listen here for the full interview and the story of Larry Cunningham and to download a PDF version of this entire conversation.

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About Mark
Mark has spent much of his 20+ year career seeking out people and resources to help him innovate and grow businesses. He has worked at BP, The Hay Group , and most recently Syngenta, where he led the creation and development of a $2B Specialty Crops business unit. Wherever possible, he tries to learn from other people’s experience, especially if they bring a fresh perspective to a situation. Follow Mark on Twitter at @markehb.

About Roddy
Roddy Millar is the Co-Founder and Managing Editor of IEDP (International Executive Development) and has managed the editorial content and direction since its inception. He oversees the development of the website and has helped design and launch Developing Leaders magazine, as well as managing the financial aspects of the business. In 2000 Roddy took over as editor of the original International Executive Development Programs directory from Philip Sadler CBE, the former Chief Executive of Ashridge Business School. Follow Roddy on Twitter at @RoddyMillar.

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