In my CEO workshop today here in Omaha – the day before Warren Buffett’s Berkshire Hathaway annual meeting, I will stress to the CEOs present the one key secret to Buffett’s success.
Before I describe that secret here, I first need to digress and explain the paradox at the heart of behavioral economics. As most readers know, behavioral economics has found more than 150 cognitive biases and blind spots that affect leadership and decision-making.
For example, behavioral economists have gathered significant evidence for something called “confirmation bias” – the tendency for us to see what we already believe and to ignore anything that contradicts our beliefs. Other biases and blind spots they have found include “overconfidence bias”, our tendency to overstate our own abilities, “egocentric bias”, our inclination to take more credit than we otherwise deserve, “bandwagon effect”, our propensity to believe things because other people do, and so on.
The problem is that even the behavioral economists themselves cannot tell when they are falling prey to these blind spots that they have spent decades analyzing and cataloguing. So if a leader learns that they can be trapped by confirmation bias that knowledge itself doesn’t actually help. Knowing about confirmation bias is not enough. It turns out that you can’t solve cognitive biases with cognition. This is an obvious problem.
What should a CEO or any leader do to avoid falling into these traps? And what does this have to do with Warren Buffett? Buffett has discovered a solution to this challenge and it’s played a large role in his remarkable success. What is the solution?
He asks for help.
Buffett acknowledges that he himself cannot see possible landmines lurking in his own decision-making. As a result, he has carefully cultivated a 50+ year relationship with the vice chairman of Berkshire Hathaway, Charlie Munger. Munger is so important to helping him avoid mistakes and blind spots that Buffett refers to Charlie as his “abominable no-man.” Here’s a quote from Buffett describing his relationship with Munger (quote is from Michael Eisner’s bookWorking Together, which has a chapter dedicated to Warren Buffett and Charlie Munger).
“It’s beneficial…to have a partner who will say, ‘You’re not thinking straight’….This is the partner serving as skeptic. “
There are many reasons for Buffett’s success. Some of those I outlined in part 1 of this column – his commitment to the customer experience, his time arbitrage strategy, certainly his value investing approach, the culture of Berkshire Hathaway, among many factors. But what most people don’t know is that the man often widely regarded as the smartest and most successful business leader of the last 100 years is smart enough to know that he needs to ask for help. Many CEOs are too arrogant or suffer from overconfidence to ask for help and be open to what they might be missing. Not Warren Buffett.
This is one key element of what I – and the speakers I’ve lined up (including one of the Berkshire CEOs) – will be talking about today at our workshop.
I will be asking the CEOs present these questions: “Do you recognize that when it comes to being a leader you cannot see your own biases and blind spots? Do you know that you need to create environments where it’s safe for you to open up and ask for help?”
As the reader of this post, I want you to think about this for yourself – and for your CEO. If you don’t practice the art of asking for help, then you are destined to fall into traps and make the kinds of mistakes that the founders of Yahoo made in the 1990s that set up that company for eventual failure. I’ll talk more about Yahoo in my next column.
In the meantime, I’m starting my workshop here in Omaha in a few moments and we are going to spend the day talking about all the leadership lessons CEOs need to learn from Warren Buffett, including why and how one of the successful CEOs in the world constantly and consistently asks for help and perspective on his key decisions.
– Phil
1. Attending the annual meeting in Omaha?
If you are already planning to attend the “Woodstock of Capitalism”, then let me know. My workshop is sold out but it would be great to see you tomorrow, Saturday, at the annual meeting.
2. Customers Included? This offer has proven quite popular so I’ll state it again – the first 10 U.S.-based readers of this post to email us will get a free copy of my book (including free shipping). Email us at… book at collaborative gain dot com.
