The Business of Buffett: Harnessing the Power of the Velocity Advantage
And while the image of a billionaire conjures fancy yachts and flashy oceanfront villas, one of the world’s richest men lives in Omaha, Nebraska, in the same house he bought in 1958 for $31,500. This fact is even more remarkable given that Buffett is now worth over $81 billion.
Warren Buffett has amassed this giant fortune with the help of very few workers. In 2016, Buffett’s firm, Berkshire Hathaway, earned a net income of $24 billion with a staff of just 25 people. Famous for running lean, this small group owns more than 60 companies, including household brands like Duracell, Geico and Dairy Queen.
Berkshire Hathaway’s achievement is the perfect example of the velocity advantage in action. Traditional work has physical limits, but knowledge work — the type of business that Buffett is the master at — is infinitely scalable.
Becoming the Big Picture
Velocity may sound like a quality that requires speed alone, but this not the complete picture. Velocity incorporates both speed and direction, and direction comes from thoughtful planning and staying the course, despite pressures from the market, and shareholders and stakeholders pushing you to change your path.
Short-sighted thinking rarely achieves long-lasting business success. It requires discipline to choose future value over immediate gains. Buffett’s mid-century family home is the perfect metaphor for playing the long game. Keep it simple and stay the course.
Just like his family home, Buffett has pioneered — and profited — from a “buy and hold” investment style. In a 1996 letter to Berkshire Hathaway shareholders, Buffett famously wrote, “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”
According to Buffett, “Money is made in investments by investing.” And owning good companies over long periods of time will reap benefits 20 and 30 years into the future. In other companies, this is true with internal investments and strategic initiatives as well.
By staying the course and investing in what he understood, Buffett may have missed out on some trendy companies that turned into major market winners, but Berkshire Hathaway — regardless of underperforming at certain points — has stood the test of time. The company generated a 20.9 percent annual return between 1965 and 2017, during a time when the S&P 500 returned only 9.9 percent.
Thinking Big by Starting Small
How can companies be more like Buffett and profit over time like Berkshire Hathaway? By creating and implementing cross-functional initiatives that incorporate velocity. These kinds of projects require a little more strategic planning in the beginning, but take less effort and lead to better results with less aggravation over time.
By incorporating the velocity advantage and engaging the right people at the right time, in the right way, you can — like Warren Buffett — achieve more with less, and do it more sustainably.
To bring better and faster cross-functional success to your team, company and career, contact Consequent and check out The Velocity Advantage.
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