“If GM had kept up with technology like the computer industry has, we would all be driving $25 cars that got 1000 mpg.”

Bill Gates

Well said, Mr. Gates.

Recently, you certainly heard that the 3 major automobile industry executives flew to Washington, DC, on their private jets. What seems so obvious to most of us entrepreneurs is hard to grasp by folks who are seemingly much smarter than any of us. And that is, how can you expect anyone to feel sorry for you when you aren’t hurting yourself? In other words, we will never buy into what you’re doing or what you claim to need until we see you giving up something significant.

These 3 men had a chance to make a point by either driving one of their most fuel efficient cars to DC themselves or flying commercially. What a shame — had one of them done something as simple as that, they would have been talked about for years!

Our world has changed forever and in due time, this economic turmoil might be good for us. People will have to be more efficient and use resources more wisely and probably form some good habits in the process. I know it might be hard to see and understand that now.

Learn from what these executives did and did not do and apply the lesson to how you lead your people. I often like to say, “I see better than I hear.”

Good business owners understand the importance of conducting background checks and performing drug testing as a condition of pre-employment. We’ve been doing it at Grunder Landscaping Co. for years. No, it’s not cheap, but what’s the cost of bringing a problem into your organization? Answer? A ton.

Here’s a quick story. Several years ago a client of mine had hired an individual and did not investigate his past. He worked a week for the company and disappeared along with the company uniform shirts and hat. One month later, this person, who happened to be a serial criminal, was captured through a massive manhunt after he went on another crime spree. As he was led off by several US Marshals, the cameras were rolling, focusing very clearly on the company name and logo on the hat and shirt he wore. As you know, I’m all for publicity, but not this kind.

This week, look into what it would cost to conduct drug testing and background checks and what it might cost if you don’t. And think about the other things smart business owners do to protect their reputation.

A while back I had to tell a vendor of ours that we were no longer going to work with them. My whole team had become increasingly irritated at the owner’s know-it-all attitude, insults, and reluctance to listen to us. The funny thing is, they did a decent job on their core service, but everything else they worked on for us was a headache, to say the least. And when we would try and talk to the owner about his company’s poor performance, he always had an excuse and blamed us, pointed out their expertise and arrogantly assumed we did not have any experts on our staff. He had gotten cocky and thought we’d never go anywhere else for the services he provided. He was wrong.

The client is always the boss and they will show their authority by taking their business elsewhere. It is incredibly hard to get someone’s business back once it’s lost. Don’t believe me? Have you worked with a stockbroker or money manager who lost money for you? Did you or would you ever go back? Especially in situations where the vendor or service provider doesn’t listen. Unfortunately, this vendor we used to work with continues to try and tell us how stupid we are for not doing business with them and pointing out all the deficiencies of the new provider we work with. (Thank goodness for the delete button.) Now, do you think that’s going to help them?

This week, reflect a little bit on how you’re doing business and make sure you’re listening to your clients. Don’t get complacent, arrogant, or cocky; those who do rarely win.

Hello, it would be rare for me to forward something from The New York Times, but that’s exactly what I am going to do today. Please read some very interesting comments from a very smart man, Warren Buffett. No one knows what the future may entail, but he just might be right. I missed the tech bubble; I am currently standing on the sidelines and I think it might be time to get back in and, of course, invest in our businesses–the best investment we can all make!

October 17, 2008

Buy American. I Am.

By WARREN E. BUFFETT

Omaha
THE financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.

So … I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.

Why?
A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

A little history here: During the Depression, the Dow hit its low, 41, on July 8, 1932. Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30 percent. Or think back to the early days of World War II, when things were going badly for the United States in Europe and the Pacific. The market hit bottom in April 1942, well before Allied fortunes turned. Again, in the early 1980s, the time to buy stocks was when inflation raged and the economy was in the tank. In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.

Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.

Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: “Put your mouth where your money was.” Today my money and my mouth both say equities.

Warren E. Buffett is the chief executive of Berkshire Hathaway, a diversified holding company.