Friday, December 13, 2013
Admitting Your Mistakes Publicly
A few days ago, I was not feeling at all well and needed to take my mind off my discomfort. I picked up a compendium of Warren Buffett’s annual letters to Berkshire Hathaway shareholders and found some of his comments so riveting that I soon forgot about my pain.
The one issue that hit me hard was not his folksy wisdom and common sense. It is his total willingness to explain, IN GREAT DETAIL, the major mistakes that he has made managing his shareholders money. As clearly one of the greatest investors in history, it is amazing to see the stunning humility that Buffett continues to show year after year.
Here are a few examples:
In his 2007 letter to the Berkshire faithful, he conjured up a story that many of us in communications can relate to easily. He discussed at length how 35 years earlier he passed on buying the NBC TV affiliate in Dallas-Ft. Worth (his board member, Tom Murphy of Capital Cities Communications had to divest the station to meet FCC regulations). Buffett talked about how, at the time, TV stations used to “shower cash on their owners.” He went on to say that since he did not pursue the deal the station has spun off approximately $1 billion dollars in profits and was likely worth $800 million. He also said that he could have grabbed it for $35 million back in 1972. Buffett closed by saying, “The only explanation is that my brain had gone on vacation and forgotten to notify me.”
Looking at the 2009 letter we find-- “During 2008, I did some dumb things in investments.......Without urging from Charlie (Charles Munger, his long time business partner and Berkshire Vice Chairman), I bought a large amount of Conoco Phillips stock when oil and gas prices were near their peak....the terrible timing of my purchase has cost Berkshire several billion dollars”.
You simply do not see that kind of candor anywhere else on the business scene. In other letters he went after himself for his USAir involvement and his purchase of Dexter Shoe among others. Today, companies and financial analysts constantly talk and write about transparency. Buffett lets his shareholders know what he has done wrong and also that he has learned from his mistakes. Both the quantity and quality of his admissions are both amazing and refreshing. And, he is truly transparent. If you wish to plow through some dense numbers, he lays out the figures for every Berkshire Hathaway operating company.
As I look back on my career, few people ever admitted mistakes. When an ad campaign did not work, it would be blamed on a bad economy (sometimes true), poor media (true when we did not have sufficient funds), poor distribution, or competitive tactics. How about ineffective creative? No one ever admitted to that!
Over the years, I was often called in to rationalize what went wrong to clients and senior people said that I had become an excellent spin doctor. Hindsight has shown me that these were not my proudest moments but I suppose we all rationalize things to protect our corporate franchise.
One of the problems now is that marketing directors have a rather short tenure; some studies say that it tends to average around two years. So, if you are candid and say, “Sorry, we blew it this time”, you will likely get fired as the marketing director knows that his or her job is tenuous as well.
A few people have told me that Buffett can afford to be honest as his success overshadows the occasional stumble that proves he is human. There is some truth in that but in both my heart and my head, I know that his course is best. I salute him!
If you would like to contact Don Cole directly, you may reach him at email@example.com