Conducting business the Warren Buffett way

What are the most essential requirements for a leader to rise from mediocrity to greatness and effectivity? How come the whole nation seems disproportionately fixated with popularity polls or legal questions on natural-born citizenship as basic requirements for the presidency, but not on the truly essential requisites of leadership?

Due to the surprising volume of e-mails and other reactions to our recent column on the leadership ideas of Jack Welch, we wish to again highlight the leadership and success ideas of another world-class chief executive officer and the world’s second wealthiest billionaire, Warren Edward Buffett. Ayala Alabang entrepreneur Edmund Garcia e-mailed in response to the column on Jack Welch and he recommended that we share with our readers the success ideas of Warren Buffett, who emphasizes the overriding importance of integrity, character and sincerity in leaders.

Warren Buffett once said, "In looking for people to hire, you look for three qualities: integrity, intelligence and energy. And if they don’t have the first quality, which is integrity, the other two qualities will kill you."

According to the 2004 list of the world’s wealthiest billionaires by Forbes magazine, Bill Gates retained his exalted top position for the ninth straight year, with the Microsoft co-founder’s net worth at $40.7 billion. Investment genius Warren Buffett remained in second place on this prestigious roster, with his net worth of $30.5 billion making him richer than many countries on earth.

Steadfast Character & Trustworthiness For Success

An icon admired by business leaders and entrepreneurs, Warren Buffett has emerged as the greatest investor in American history in the past 35 years. If you had invested $10,000 in his firm Berkshire Hathaway when he took over control in 1965, your investments would have grown to over $50 million today. Despite his wealth and fame, Buffett still lives in the same house he bought three decades ago for $31,500, drives an older Lincoln Towncar, and downs countless cans of Coca-Cola every day.

A graduate of the University of Nebraska and Columbia University, Buffett was rejected by the Harvard Business School. He also studied at Wharton School of Finance at University of Pennsylvania.

Mukul Pandya of the Wharton School a few years ago had a presentation at a Wharton executive series on Warren Buffett, investing and leadership. He emphasized Buffett’s strong belief in the importance of character for success, which Buffett used to choose the people whose money he would invest, whom he believes will become true successes and whom he could do business with for the long-term.

Mukul Pandya said: "If you were asked to select a person and told that you could retain 10 percent of his or her earnings for the rest of your life, whom would you choose? Someone with the highest SAT or IQ test scores? Probably not. Chances are that you would pick someone with a steadfast character, whom you could trust to function well through life. Conversely, what kind of person would you shun? Most likely, the type who cuts corners and is generally undependable. Each of these qualities is a characteristic of choice and can make the difference between success and failure. That insight into the link between character and success comes from Warren Buffett, CEO of Berkshire-Hathaway, the world’s second richest man after Microsoft CEO Bill Gates and arguably the most successful investor the world has known."

He added, "Developing characteristics such as trustworthiness and integrity, Buffett believes, is a matter of forming the right habits. ‘The chains of habit are too light to be noticed until they are too heavy to be broken,’ he says. People who stray from these values often show up on Wall Street; they may initially even shine; but eventually they self-destruct. ‘That is sad, because it does not need to happen,’ says Buffett. ‘You need integrity, intelligence and energy to succeed. Integrity is totally a matter of choice – and it is habit-forming’."

Americans and most people of the world tend to revile and criticize billionaires as much as they respect them. But somehow, Warren Buffett is a unique corporate leader who emerged as a modern-day American folk hero partly due to his unimpeachable integrity and trustworthiness.

Korea’s Sincere Leader, Two Corrupt Presidents & Presidential Kin

In Philippine society, we must take heed of Warren Buffett’s advice on the importance of integrity in choosing our leaders. South Korea – after the cruel Japanese colonial occupation and the Korean War in the 1950s – was economically crippled, but it was the incorruptible President Park Chung Hee whose decisive leadership transformed his nation into an economic miracle. Although Park was an authoritarian leader, he did not die a wealthy man when he was assassinated.

In contrast, President Park’s successors Chun Doo Hwan and Roh Tae Woo were indicted for large-scale corruption, with ex-President Chun even cloistering himself in a Buddhist monastery for two years to atone for corruption charges. Will the Catholic Church be able to encourage some of our numerous corrupt government leaders to wear sackcloth like in Biblical times and cloister themselves in ascetic monasteries in order to do daily prayers and penance?

In July 1997, then-South Korean President Kim Young-Sam’s son was charged with bribery and tax evasion in a corruption scandal that crippled his father’s administration. The indictment of Kim Hyun-chul, 37, was the final act in an investigation by state prosecutors who charged him with taking $3.6 million in bribes from two businessmen seeking government contracts, licenses and his influence in a court case. Prosecutors also charged him with taking $3.8 million in cash from four businessmen and laundering the money to evade $1.5 million in taxes.

In October 2002, prosecutors indicted the second son of then-South Korean President Kim Dae-Jung on charges of corruption. The 53-year-old Kim Hong-Up was accused of receiving a total of $2.2 million from six business firms in return for influence with authorities. He was also charged with not paying taxes after taking another $1.8 million from businesses as donations. Hong-Up’s younger brother, 38-year-old Kim Hong-Gul, was also jailed on graft and tax evasion charges.

Unlike many of our politicians who are world-class experts in shameless and obfuscating truth, President Kim Dae Jung had the sense of shame and the guts to make a public apology over his sons’ implication in scandals. Several cabinet ministers and top officials were forced to resign over the past two years. In Japan, there are cases of government or private sector leaders accused of irregularities who voluntarily commit hara-kiri or ritual suicide out of their sense of shame and in order to protect their family’s honor from their shenanigans.

In the thick-faced world of Philippine politics, when will our so-called leaders learn to have some sense of shame when charged with irregularities, publicly apologize for wrongdoings, chastise corrupt relatives and sincerely make amends with the nation? Is it possible for some of our so-called leaders to, at the very least, commit political hara-kiri in order to cleanse their tainted reputations?

Taiwan’s Corrupt Father & Sincere Son Presidents

In Taiwan, the late President Chiang Ching Kuo is today still fondly remembered for decisively leading the island society into amazing economic prosperity and for pioneering the irreversible democratization trend. Although an authoritarian leader with virtually no political opposition and no adversarial free press, President Chiang Ching Kuo was incorruptible, sincere and had the highest integrity. Billionaire taipan John Gokongwei Jr. said when Chiang died, his political allies even had to raise funds to take care of his widow because he didn’t amass wealth.

President Chiang Ching Kuo was a stark contrast to his controversial father with a mixed legacy. The elder Generalissimo Chiang Kai-Shek was a strong leader, but he was accused by critics of having lost control over Mainland China in 1949 to the Communist revolutionaries due partly to his regime’s excessive corruption. Generalissimo Chiang tried to redeem his reputation belatedly, but died an exile in Taiwan province and frustrated in his dream to recover Mainland China.

Singapore’s stunning economic miracle was achieved under the wise, selfless and incorruptible leadership of former Prime Minister Lee Kuan Yew. Under Lee, Singapore’s government became a worldwide paragon for transparency, integrity and efficiency. In Thailand, the popular King has also been above reproach in personal integrity and sincerity, thus becoming a fulcrum for socio-political stability without which no sustained economic development can really be possible.

Even in China, despite numerous accounts of corruption by certain bureaucrats and political leaders, strong leaders such as Mao Zedong, Premier Zhou Enlai, reformer Deng Xiaoping and former Prime Minister Zhu Rongji were incorruptible. Even if corruption has not yet been totally eradicated in the booming China economy, their government routinely puts to death high-level national officials like governors or mayors in high-profile execution cases.

In the Philippines, our government has always been great in photo-ops of hauling small-time bureaucrats to jail for stealing a few million pesos or making publicity gimmicks on ningas-cogon anti-corruption drives, but when will a national-level cabinet official, senator, congressman, a governor or kins of the powerful ever be made to suffer the lethal injection for corruption? Why the hypocritical double standard of executing people who commit rapes, but never mustering the political will to execute powerful political leaders who rape the whole country?

Unfortunately for the Philippines and Indonesia, two capable leaders Ferdinand Marcos and Suharto frittered away numerous real socio-economic accomplishments with their lack of integrity and honesty, which caused the eventual decay of their national economies. Some of their political successors also fumbled in quagmires of corruption, in the process damaging the credibility of the presidency before the eyes of their people.

Tragically, the Philippines and Indonesia have become countries rich in natural and human resources, but with huge proportions of their populations mired in abject poverty and social injustice. A great leader should not only personify sincerity and integrity, he or she should use the prestige of the presidency to educate the whole nation on the virtues of honesty, loyalty and honor. Great and effective leadership requires character and integrity!

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