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Why is Warren Buffett so successful?

I knew very little about Warren Buffett until last week when there was a great interview with him on BBC2. He will be 80 next year, and his right hand man is even older. He lives very modestly and has no PC on his desk, even though Bill Gates is one of his best friends. What he espouses is the very essence of what we call Halo. What we also know from our own clients is that this operating system works. Not always straight away, as Buffett also attests, but in the long run it does. It also makes work so enjoyable you don't want to stop. So this month I give the you the World according to Warren, and translated it into Halo so you can use it straightaway in your organisation.

He buys lots of businesses and lets them know why they are there and what their aim should be
Warren Buffett buys lots of companies. He goes through the index showing the PE ratios of lots of businesses and marks up ones which look like they are undervalued. He then explains to them his very simple business formula, which simplifies the lives of those working in those businesses, which then allows them to make even more money.

This is exactly the way in which Halo works. Instead of having values and mission statements which the teams working for the organisation's don't always associate with, Halo is clear that these have to be simple statements absolutely aligned to what the people who work there do. This means that everyone know how they are contributing to the overall health of the organisation and its direction.

He buys companies for what he thinks they are worth not what industry norms might think they are worth
This is classic Halo, in that the measures Warren follows are his own not someone else's. Numbers are often made up. Multipliers used to determine what a business is worth are made up. The only numbers which really matter are the ones which show you whether your organisation is working or not.  Anything else is someone else's wisdom and may not be as good as yours, as they don't know the individual circumstances.

Watch the interview with Warren Buffett

There is no better way of understanding customers than being like them
Buffett got rich the way many people do so.  They make a little money from a lot of people.

To keep doing this successfully it is helpful to continue to understand them, have similar values and ambitions. There is no better way of doing this than living like they do. What we know from our work with Halo is that if parts of the business become misaligned then your customers will start to feel it.  As will many of your key staff.  Therefore it is vital to stay aligned with the core purpose and values of the organisation, even if this means getting dirty and depressed sometimes!

Give it away
We developed Halo for IBM Business Consulting as a way for them to measure the value they added to their client's business. We were not paid to develop Halo for them, we were paid for a piece of research we carried out, which resulted in us developing Halo. Since then we have taken every opportunity to let other organisations use the ideas whether they pay us to or not. Why do we do this? For the same reason that Warren Buffett gives his money away. Doing so gives us a richer life. We know that people who work in businesses where Halo is a fundamental part of their operating system are happier than when it is not. Buffett knows that people enjoy working in his businesses because although they do make people rich they also help to create a better World.