Masterclass

There isn’t much I wouldn’t be prepared to do to see Warren Buffett or Bill Gates speak. For the chance to see both of them at the same time, I’d probably give me right arm.

That’s exactly what happen last week at Columbia University in New York, when the two richest men in American sat down for a “town hall” style meeting with a group of students. Luckily for us, the entire show was televised by CNBC, which means you can check out the video or read the entire transcript online.

What makes the chat so interesting is that aside from being two of richest men in the world, Gates and Buffett are also great friends, bridge partners and keen philanthropists. Indeed, Buffett has given a big chunk of his personal fortune to Gates giant charity, the Bill & Melinda Gates foundation.

The pair covered an incredible amount of ground, including the state of the economy (Buffett says the “economic panic” is over and many companies have seen the bottom); what keeps them up at night (for Gates, it’s the education system); making quick investment decisions (Buffett says he decided to invest in Coca-Cola in just a few minutes;) and even Apple CEO Steve Jobs (Gates is a big fan).

But for the entrepreneur, one stood out: What is the most important character for a business leader to have?
For Gates, the basic answer is common sense.
“You try to take more in income than you spend in cost. That’s a pretty straightforward subtraction.”

But what good entrepreneurs are able to do, Gates says, is look beyond this year’s and even next year’s figures and have a real vision for the future.

“But it’s surprising in terms of projecting out into the years ahead that, you know, are we making the right investments, are we gaining on the competition, are we making it a little bit harder for people to replace what we’re doing? That kind of common sense, I guess you’ve got to develop it through experience. And I think it’s neat if you are young and you can see that in a small scale and be hands on with it because a lot of people who start with large businesses may have a hard time with it.”

Buffett answered by outlining the message he sends to the managers of his various operating businesses – think long-term.

“I send one message out every year and a half or two years. They get one letter from me every couple of years. And basically it says, run this business like it’s the only business that your family can own for the next 100 years. You can’t sell it.”

“But every year don’t measure it by the earnings in the quarter that year. Measure it by whether the moat around that business, what gives it competitive advantage over time has widened or narrowed. If you keep doing that for 100 years, it’s going to work out very well.”

He also had a warning for entrepreneurs – don’t follow the crowd.

“Then I tell them basically if the reason for doing something is everybody else is doing it, it’s not good enough. If you have to use that as a reason, forget it.”

The fact that Gates and Buffett gave similar answers probably isn’t too surprising – friends are often like-minded and it is clear that these two have a very similar view of the world.

But their point is worth emphasising. For Gates and Buffett, a successful entrepreneur doesn’t just come up with a good idea or product. They don’t just run a company well or manage staff or produce bumper profits in any one year.

A great entrepreneur builds their company around a unique value proposition and continues to develop this competitive advantage as the business grows. And most of all, a great entrepreneur is able to look a decade into the future – or a lot longer – and have real vision for their business.