As the Dow inches closer to 20,000, let's take a break from all-Trump-all-the-time news and consider one of the top beneficiaries of the market rally, Warren Buffett.
The price of a share in his company, Berkshire Hathaway, yesterday hit $250,000 for the first time. Over the past 51 years the stock has appreciated at a 21% annual rate, a performance that is beyond mind-blowing. For every $1,000 an investor put into Berkshire back in 1964, he or she would have almost $45 million now.
Berkshire owns several businesses outright - Burlington Northern Santa Fe, See's Candies, Geico, Precision Castparts, and many others - so he's in charge of how they're run. His management principles aren't complicated, yet they are rarely followed. Among the most important:
** Don't even try to manage a fundamentally bad businesses.
One of Buffett's most famous lines is "With few exceptions, when a manager with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact."
** Judge managers as human beings first.
Buffett buys few of the companies that are offered to him, and one of his first screens is the nature of the people who run it, since he has no interest in trying to replace them.
** Pay for performance like you mean it.
Buffett offers managers unlimited incentive bonuses. He sets the pay of the CEOs of his companies, and from year to year their pay can vary by a factor of 20 or 30.
** Price aggressively.
Buffett is remarkably hands-off in overseeing his businesses, but he often likes to take charge of pricing. That's because most CEOs are too timid, scared of tanking their business by pricing too high. Buffett, managing a portfolio of businesses, is willing to take greater risks.
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