Warren Buffett Answers Shareholder’s Questions – 2009

Posted on May 19, 2009 by John Hunter

Each year Warren Buffett and Charlie Munger answer questions in front of crowds of tens of thousands of Berkshire Hathaway shareholders in Omaha, Nebraska. The question and answer sessions provide great wisdom on economics, investing and management. Here are some of the highlights I have found from the meeting (see more on the Curious Cat Investing and Economic Blog review of the answers)

Buffett, Munger praise Google’s moat

“Google has a huge new moat,” Munger said. “In fact I’ve probably never seen such a wide moat.” Google’s main business of charging companies when people click on their ads after running an Internet search is “incredible,” the Berkshire chairman said. “I don’t know how to take it away from them,” he added. “Their moat is filled with sharks,” Munger said.

Google hopes the anti-trust regulators don’t see it the same way. And I believe Google sees their moat as easy to loose (and I think they are right). At the same time Buffett and Munger are right. The moat is huge but if Google looses focus they can drain the moat in no time.

Warren Buffett’s Q&A With Shareholders (Afternoon Session)

2:58 pm: Buffett says his hope for Berkshire Hathaway 20 years from now is that its culture will be maintained, that it will be seen as a place where good managers want to work for the rest of their lives. That and to have the world’s “oldest living managers.” The audience rises for a standing ovation. That concludes the Q&A session.

3:10 pm: After taking a break, Buffett is now conducting the formal business session of the annual meeting. It is totally routine.

3:15: Buffett, Munger and the other directors have been re-elected to the Board and the meeting has been adjourned.

Related: Warren Buffett’s Letter to Shareholders 2009 – Management Advice from Warren Buffet – Warren Buffett Webcast on the Credit Crisis – Sleep Well Fund Investing Results

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Revealed Preference

Posted on May 16, 2009 by John Hunter

Revealed Preference: the preference consumers display by their action, in contrast to what they may say they prefer. While surveys may be useful people often say they will do one thing and actually when given the choice to do so, don’t.

Normally what matters is not what people say they want but what they actually will choose. For that reason revealed preference is a better measure than stated preference. Stated preference is often used as a proxy for actual preference (which may be fine) but it is important to understand that it is just a proxy for actual preference.

See more explanations from the Curious Cat Management Dictionary.

Related: Packaging Improvement – All Models Are Wrong But Some Are Useful – Dangers of Forgetting the Proxy Nature of Data – Confirmation Bias – Be Careful What You Measure

Posted in Data, Deming, Management, Psychology, Statistics | Tagged , , , | 1 Comment

Dr. Russell Ackoff Webcast on Systems Thinking

Posted on May 13, 2009 by John Hunter

Dr. Ackoff is one of two management thinkers that any manager, that is serious about improving management results in their organization, should study (the other is Dr. Deming). There are plenty of others that are also great resources. From part 2 of his talk: “Why-questions, about objects called systems, cannot be answered by the use of analysis… The product of explanation is understanding… The product of analysis is how things work, never why they work the way they do. Explanations always lie outside the system, never inside it.”

Synthesis (thinking about systems) involves 3 steps: 1) what is this system of which this is a part of; 2) understanding the behavior of the containing whole; 3) identify the role of function of the system in question within the containing system. Every system is defined by its role in the larger system.

Related: posts on Russ Ackoff’s ideas – Ackoff’s New Book: Management f-Laws – Write Down Predictions – Knowledge Management – Management is Prediction

Posted in Creativity, Deming, Management, quote, Science, Systems thinking, webcast | Tagged , , , , , | 4 Comments

Management Improvement Carnival #63

Posted on May 11, 2009 by John Hunter

Also visit the Curious Cat Management Library for online management improvement articles.

  • What You Can Learn Zappos by Robert Scoble – “6. Train, train and train some more. Zappos has a whole department that puts together classes. Your pay goes up the more classes you complete. 18. Remember most policies are to take care of edge cases. They resist writing new policies at Zappos. When they do write a policy, they make sure it really is needed across the company. Usually policies get killed.
  • Unknown and unknowable by Michael Neiss – “The concept I see most overlooked and therefore, least implemented, is nemawashi, or the foundational work that needs to be done so that those that do the work on a daily basis integrate the knowledge into their everyday mindset.”
  • Simplicity by Ron Pereira – “If I was only able to use one word to describe what lean and authentic continuous improvement meant to me I’d choose, without hesitation, simplicity.”
  • How to Quit Your Job and Start a Company by Pamela Slim – “Know the kinds of problems you are trying to solve, and what value solving them would bring to your customers. Get clear on resources needed to bring your business to life… So move quickly, test often, fail fast, and discuss and document your assumptions.”
  • In-the-Flow with Acumen Fund by Michael Idinopulos – “…already had all sorts of processes and mechanisms for capturing knowledge and ideas. The question was how to tap into those resources in a way that would create transparency, access, and reuse across the organization’s four locations in Hyderabad, Karachi, Nairobi, and New York.”
  • Job Breakdown Sheet vs. Work Instruction by Bryan Lund – “Purpose of a Job Breakdown Sheet is distinctly different and clear. The primary purpose of a JBS is to serve as a trainer’s aid. It is not meant to be read by the trainee. It can be, but that isn’t the primary purpose”
  • The difference between truly standing for something and a mission statement – “a tattered piece of paper with some clip art at the top of it pinned to a bulletin board. And it;s a mission statement that says this… And you’re sitting there reading this crap and wondering, ‘What kind of idiot do they take me for?’ It’’ just words on paper that are clearly disconnected from the reality of the experience.”

    • Continue reading →

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Toyota Posts Loss of $6.9 Billion in Last Quarter

Posted on May 8, 2009 by John Hunter

Toyota Posts Loss of $6.9 Billion in Last Quarter

For January-March, Toyota booked a $6.9 billion loss, in line with consensus estimates, and cut its annual dividend nearly 30 percent — the first cut since at least 1994, when it changed its reporting period.
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Toyota President Katsuaki Watanabe was more downbeat, stopping short of predicting when sales would pick up in major markets, or when the company would return to profitability as it remains saddled with excess capacity. “Of course the external environment doesn’t help, but we were lacking in the scope and speed of dealing with various problems and issues, and for that I am sorry,” he told a news conference.

For the year to next March, the maker of the Prius hybrid forecast an operating loss of 850 billion yen, more than double the average forecast in a survey of 20 analysts by Thomson Reuters. It sees an annual net loss of 550 billion yen based on the dollar and euro averaging 95 yen and 125 yen.

The bleak forecasts prompted ratings agency Standard & Poor’s to downgrade Toyota’s long-term debt ratings to AA from AA+, with a negative outlook.
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To return to profit, Toyota must sell more cars or cut costs further, Watanabe said. But he predicted the U.S. market would be around 10 million vehicles industrywide at best this year, down from more than 13 million in 2008.
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Toyota is bleeding overhead costs, with about a third of its global assembly lines working on single shifts. It will slash capital spending by more than a third this year to 830 billion yen as it puts expansion projects on hold, but it said it was not thinking of closing any production lines for good.

In my opinion these negative results are a sign of Toyota’s strength not weakness. The credit crisis and economic downturn has resulted in a poor economic environment. Toyota has managed to sustain the blow and hold firm to their principles and likely will come out of this downturn stronger as a company (mainly re-enforcing the importance of planning for bad economic conditions and not getting too excited about growth potential versus risks of growing too fast) and in a better position compared to their competitors. I continue to be an owner of Toyota stock and happily so.

Related: Idle Workers Busy at Toyota – Financial Market Meltdown (Oct 2008) – “2007 has been a difficult year for Toyota” – New Toyota CEO’s Views (2005) – Jim Press, Toyota N. American President, Moves to Chrysler

Posted in Economics, Investing, Management, Toyota Production System (TPS) | Tagged , , , | 1 Comment

Management Blog Posts From February 2006

Posted on May 7, 2009 by John Hunter

John Hunter -Simpson-

The image shows me, as a Simpson’s character by the Simpson’s Maker.

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Joel Spolsky Webcast on Creating Social Web Resources

Posted on May 4, 2009 by John Hunter

Joel Spolsky webcast on creating Stack Overflow (with the goal of providing answers to professional programmers) using ideas from anthropology. Once again he provides great information. This is particularly interesting for software development but also just a good presentation for understanding the importance of customer focus and systems thinking.

What they focused on and did:

  • Voting – Reddit… (see our management Reddit)
  • Tags – lets you see what you want and to block tags you don’t want to see.
  • Editing – letting users edit the questions and responses. For a technical question and answer system this is very useful (based on my experience).
  • Badges – people like to earn “credit” (psychology)
  • Karma – “people are willing to do for free what people are not willing to do for small amounts of money” (psychology)
  • Pre-search – provide quick view of previously answered questions
  • Google is UI – Assumption: “the front page is Google search” – build based on the idea people will search via Google
  • Performance – 16 million pages a month with 2 web servers. They are using the Microsoft stack, not open source.
  • Critical mass – they focused on getting a large user base on day one of the beta site

Related: posts related to Joel Spolsky – Dell, Reddit and Customer Focus – Information Technology and Management – What Motivates Programmers?

Posted in Customer focus, IT, Software Development, Systems thinking, webcast | Tagged , , , , , | 2 Comments

Management Improvement Carnival #62

Posted on May 2, 2009 by John Hunter

Mark Graban is hosting the Management Improvement Carnival #62 on the Lean blog, highlights include:

  • Why Quality is Dangerous (Dr. John Toussaint – ThedaCare Center Blog): “If we are going to have carrots and sticks it should be centered on what improvements healthcare organizations and providers are making every day, month, and year. Measuring and improving is how we are going to create better performance in healthcare not dictating and punishing.”
  • Beth Israel Deaconess: Systems, safety, and (avoided) severance… (Steven J. Spear – Chasing the Rabbit): “… BIDMC’s efforts to achieve perfect safety by being transparent when systems fail, using that transparency to see problems so they can be solved.
  • Going to Gemba (Paul Levy – Running a Hospital): “By witnessing problems and work-arounds in real time, the team can have a better idea of how to solve problems to root cause and make incremental improvements in work flows.”
  • Managing the Burning Platform (Mark Rosenthal – Lean Thinker Blog): “It is really easy to say that, in these emergencies, long term thinking doesn’t matter. But I contend that it is even more important right now. This is a time for action. It is not a time for panic.”
  • LeanBlog Video Podcast #2 – Kevin Frieswick, Error Proofing Handwashing (Mark Graban – Lean Blog): “I’m still experimenting with video podcasting, after my first attempt with Jamie Finchbaugh. LeanBlog Video Podcast #2 is… the video from Kevin Frieswick and MetroWest Medical Center with the device for error proofing hand washing on the way into patient rooms”

Overview of the management improvement carnival.

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Why Congress Won’t Investigate Wall Street

Posted on April 30, 2009 by John Hunter

Why Congress Won’t Investigate Wall Street

The famous Pecora Commission of 1933 and 1934 was one of the most successful congressional investigations of all time, an instance when oversight worked exactly as it should. The subject was the massively corrupt investment practices of the 1920s. In the course of its investigation, the Senate Banking Committee, which brought on as its counsel a former New York assistant district attorney named Ferdinand Pecora, heard testimony from the lords of finance that cemented public suspicion of Wall Street. Along the way, the investigations formed the rationale for the Glass-Steagall Act, the Securities Exchange Act, and other financial regulations of the Roosevelt era.
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Over the years, federal agencies have been defunded, their workers have grown dispirited, their managers, drawn in many cases from antiregulatory organizations, have seemed to care far more about industry than the public.
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And while today’s chastened Democrats might be ready to reregulate the banks, they are no more willing to scrutinize the bad ideas of the Clinton years than Republicans are the bad ideas of the Bush years.

“We may now need to be reminded what Wall Street was like before Uncle Sam stationed a policeman at its corner,” Pecora wrote in 1939, “lest, in time to come, some attempt be made to abolish that post.” Well, the time did come. The attempt was made. And we could use that reminder today.

Well said. The incredibly dire current economic results should encourage some thought about choices we have made. The failures of the political leaders (putting their donors interests above the public interest) is something that should be investigated seriously. The economy declined 6.3% in the fourth quarter of last year and 6.1% in the first quarter of 2009. And we have paid several hundred billion to bail out bankers; the same bankers that had congress repeal the regulation that prevented such enormous failures in the past.

It would be nice if we at least learned our lesson, but I don’t think we are remotely close to learning our lesson. There seems to be some tilt away from the most egregious excesses of the last 25 years of financial deregulation. But only minor adjustments around the edges seem to be under consideration at this time.

Related: Failing to Understand the Capitalist Economic Model – Looting: Bankruptcy for Profit – Leverage, Complex Deals and Mania – Lobbyists Keep Tax Break for Billion Dollar Private Equities Deals (2007) – Congress Eases Bank Laws (1999) – Why Pay Taxes or be Honest – Failure to Regulate Financial Markets Leads to Predictable Consequences – Losses Covered Up to Protect Bonuses – Bankers Bet Billions and Lose (guess who pays? Not them) – Uncertain Economic Times

Posted in Economics, Systems thinking | Tagged , , , , | 2 Comments

Carve Out Time to Think

Posted on April 29, 2009 by John Hunter

Dan Markovitz recently discussed the practice of the CEO of eBay to take thinking days, Why isn’t “thinking time” part of your standard work?,

Some people think that it’s all well and good for a CEO to unplug himself — when you’re the big cheese, you make the rules — that’s just not possible for the folks in the trenches. But I think that’s a lie. Unless you’re in a sadly dysfunctional organization (and if you are, feel free to stop reading now and go to ESPN.com for the latest baseball scores), you’re being paid to create value for customers (internal or external). You’re not being paid to respond to every random thought or idle question in 8 nanoseconds. And to create value, sometimes you have to actually stop and think.

And a recent Business Week article quotes Turner Broadcasting CEO, Phil Kent: “carve out time to think, not just to react.”

I agree. We need to take more time to think and reflect on how to improve the system to produce better results. We too often find ourselves trapped by spending so much time reacting to seemingly urgent but less important matters. We need to make time to focus on important but perhaps less urgent matters. And taking time to think is part of doing so.

Related: Think Long Term Act Daily – How to Improve – Most Meetings are Muda – Managing Innovation

Posted in Management | Tagged , | 1 Comment