In the previous article, we learned that Buffett became the largest shareholder of Berkshire Hathaway through investment. Let's continue learning about how he led the transformation of Berkshire Hathaway!

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During this period, Buffett, as a member of the Berkshire Hathaway board, gained an understanding of the company's operations and leadership structure. From this point on, his life diverged from that of his mentor, Graham, because Graham focused primarily on financial statements and did not involve himself in management.

However, Buffett, because of Berkshire Hathaway, embarked on his career as an entrepreneur.

Do you think Buffett is an investor or entrepreneur? If asked the general public, they would consider him an investor. After Berkshire Hathaway, he became an entrepreneur. Let's explore his further transformations and growth.

While acquiring Berkshire Hathaway, Buffett got to know the company's general manager, Ken Chace, and recognized him as a rare talent, valuing him greatly. Before this, Buffett had quantitatively analyzed the company's financial statements, balance sheets, and income statements. At the same time, he began to conduct a qualitative analysis of the management team, enabling him to make more comprehensive and practical investment decisions. In contrast, Graham's emphasis was solely on quantitative analysis.

Buffett said in his letter to the partners, "Berkshire is a company that can make its owners happy. Although the trends in the textile industry undoubtedly significantly impact Berkshire, we still have a first-rate manager in Ken Chace. Each business division in Berkshire had top-notch industry experts involved. Although Berkshire is unlikely to have high-profit margins like Xerox, Fairchild Camera, and National Videotape, which are companies in growing markets, it is at least a stable and reliable brand."

At Berkshire Hathaway, Buffett learned that "managers should act like shareholders." So he urged Chace to buy a thousand shares of Berkshire Hathaway stock while providing him with financing equivalent to $18,000. Following Buffett's advice, Chace became more concerned about the returns on invested capital in his management decisions.

For Buffett, all of these things were natural. He had invested almost half of his assets into the partnership of his alliance companies. Throughout his career, his management style has revolved around becoming a community of shared destiny with all his partners. In the 1990s, the United States began to require managers to hold a significant amount of their company's stock, gradually making it a standard duty for managers. This brought about a transformation where companies with expanded shareholder value became more prevalent. However, Buffett had already implemented this approach decades ago.

Even in the relationship between managers and bosses, Buffett had advanced ideas. Although he was the largest shareholder and a board member, he delegated the company's daily operations to Chace, entrusting him with authority. Buffett himself took responsibility for "capital allocation." He believed that the board of directors should represent the interests of shareholders and supervise the managers who utilize shareholder capital.

At Berkshire Hathaway, Buffett held the position of chairman of the board, serving the role of supervising the team. In simple terms, he played down his position as a manager. He strengthened his position as a shareholder, clearly distinguishing between the different responsibilities of managers and shareholders, ensuring a structure of oversight and balance.

When Buffett had the financial resources and power, he still chose to trust professional managers for the development and profitability of the company. We can learn from this management approach about Buffett's wisdom.

How will Buffett lead Berkshire Hathaway forward? How will he handle his alliance of partners?

It’s impressive to see Buffett's understanding of Berkshire Hathaway and his choice to delegate authority and supervise, which opened up a different thinking model for American business executives.

The following article will cover how he further led the transformation of Berkshire Hathaway! Stay tuned!

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