Warren Buffett explains what makes a good manager using a tailor and the pope (BRK.A, BRK.B)

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Warren Buffett spends a lot of time thinking about management.

Buffett’s Berkshire Hathaway wholly owns dozens of companies — over 10 of which would be Fortune 500 companies on a standalone basis — and yet his management style as CEO of the conglomerate is focused only on 1) allocating capital and 2) attracting good managers.

This second goal comes with another upshot: Buffett wants to stay out of the way.

In his 1986 annual letter to shareholders, Buffett crystallizes how he tries to fulfill this second aim, illustrating the qualities that make a good manager with — in classic Buffett fashion — a parable.

Here’s Buffett (emphasis added):

Some of our key managers are independently wealthy (we hope they all become so), but that poses no threat to their continued interest: they work because they love what they do and relish the thrill of outstanding performance. They unfailingly think like owners (the highest compliment we can pay a manager) and find all aspects of their business absorbing.

(Our prototype for occupational fervor is the Catholic tailor who used his small savings of many years to finance a pilgrimage to the Vatican. When he returned, his parish held a special meeting to get his first-hand account of the Pope. “Tell us,” said the eager faithful, “just what sort of fellow is he?” Our hero wasted no words: “He’s a forty-four, medium.”)

It’s that simple: the best managers will succeed if they are completely consumed and fulfilled by their work.

A visit to the pope, for our Catholic tailor, resulted not in a highlight about seeing His Holiness, but as with all human interactions for our committed manager, about measuring this man — as any — for a suit.

Or as Buffett writes: “the thrill of outstanding performance.”

Read the full 1986 letter here »