Warren Buffett’s 6 Pieces of Advice for Business CEOs

Warren Buffett is closing in on 60 years in managing Berkshire Hathaway. At 92, the American investor is the world’s fifth-wealthiest person.

Ahead of Berkshire Hathaway’s annual shareholder meeting, Buffett and Charlie Munger, vice chairman for the company, release a letter for shareholders. While it includes detailed financial data, it’s also full of advice for business owners of all types.

  1. CEOs must manage risk. “Our CEO will always be the Chief Risk Officer – a task it is irresponsible to delegate,” Buffett writes.
  2. Always stash cash. Buffett says Berkshire will always hold a boatload of cash and U.S. Treasury bills along with a wide array of businesses. “We will also avoid behavior that could result in any uncomfortable cash needs at inconvenient times, including financial panics and unprecedented insurance losses,” he writes.
  3. Not every decision needs to be a homerun. Buffett says Berkshire’s satisfactory results have been the product of about a dozen truly good decisions. “That would be about one every five years,” he writes.
  4. Ignore the weeds. Buffet’s lesson for investors: “The weeds wither away in significance as the flowers bloom. Over time, it takes just a few winners to work wonders. And, yes, it helps to start early and live into your 90s as well.”
  5. Diversify, diversify, diversify. In 1965, Berkshire was a one-trick pony, Buffett writes, the owner of a venerable – but doomed – New England textile operation. “With that business on a death march, Berkshire needed an immediate fresh start,” he says. “Looking back, I was slow to recognize the severity of its problems. Berkshire now enjoys major ownership in an unmatched collection of huge and diversified businesses.”
  6. Choose a smart partner. Buffett and Munger have worked together for decades. Buffett says Munger is his closest partner and right-hand man. Of Munger, Buffett says: “While he makes me think, he also makes me laugh.” One of Buffett’s top pieces of business advice is: “Find a very smart high-grade partner – preferably slightly older than you – and then listen very carefully to what he says.”