Warren Buffett, Confidence and Leadership

Reading a Fortune interview with Warren Buffett the other day, I was struck—as I always am, come to think of it, when I read about him—by the simplicity and clarity of his thinking. Mostly the simplicity. Because that’s where the clarity comes from.

This ability to see simple patterns in the midst of chaos is what distinguishes a lot of fine leaders from those who are masters of complexity. Here are some samples from Fortune’s interview:

There are costs to Sarbanes-Oxley, some of which are wasted. But they’re not huge relative to the $20 trillion in total market value. I think we’ve got fabulous capital markets in this country, and they get screwed up often enough to make them even more fabulous. I mean, you don’t want a capital market that functions perfectly if you’re in my business.

Q. Do you think the $150 billion government stimulus plan will make an impact?
Well, it’s $150 billion more than we’d have otherwise. But it’s not like we haven’t had stimulus. And then the simultaneous, more or less, LBO boom, which was called private equity this time. The abuses keep coming back – and the terms got terrible and all that. You’ve got a banking system that’s hung up with lots of that. You’ve got a mortgage industry that’s deleveraging, and it’s going to be painful…

…Finance has gotten so complex, with so much interdependency. I argued with Alan Greenspan some about this at [Washington Post chairman] Don Graham’s dinner. He would say that you’ve spread risk throughout the world by all these instruments, and now you didn’t have it all concentrated in your banks. But what you’ve done is you’ve interconnected the solvency of institutions to a degree that probably nobody anticipated. And it’s very hard to evaluate…

..The worst thing you can have is models and spreadsheets. I mean, at Salomon, they had all these models, and you know, they fell apart….

…The American economy is going to do fine. But it won’t do fine every year and every week and every month. I mean, if you don’t believe that, forget about buying stocks anyway. But it stands to reason. I mean, we get more productive every year, you know. It’s a positive-sum game, long term. And the only way an investor can get killed is by high fees or by trying to outsmart the market….

The world is increasing in complexity; but Buffett seems one of those content to look past the complexity and see eternal patterns replaying themselves. He’s a big fish who treats big ponds just like the little ones he came from.

It seems to me this is very much tied up with a sense of assured self-confidence. The several really good leaders I have known have this. They are not egotistical, nor unrealistic, nor full of themselves. They simply have the confidence that they know how to get along in the world, understand the underlying rules, and don’t get lost in the details.

From one perspective, it’s the Great American Hustle—just believe in yourself and you too can emulate Warren Buffett. Yet pure confidence absent some grounded view of the world is just a self-con job.

The Rules of the World are simple: but that doesn’t mean they’re easy.