Clearly the attitude of disrespect that many executives have today for accurate reporting is a business disgrace. And auditors, as we have already suggested, have done little on the positive side. Though auditors should regard the investing public as their client, they tend to kowtow instead to the managers who choose them and dole out their pay. (“Whose bread I eat, his song I sing.”)

Source:   Berkshire Hathaway Shareholder Letters

From the economic standpoint of the acquiring company, the worst deal of all is a stock-for-stock acquisition. Here, a huge price is often paid without there being any step-up in the tax basis of either the stock of the acquiree or its assets. If the acquired entity is subsequently sold, its owner may owe a large capital gains tax (at a 35% or greater rate), even though the sale may truly be producing a major economic loss.

Source:   Berkshire Hathaway Shareholder Letters

There is only one combination of facts that makes it advisable for a company to repurchase its shares: First, the company has available funds — cash plus sensible borrowing capacity — beyond the near-term needs of the business and, second, finds its stock selling in the market below its intrinsic value, conservatively-calculated. To this we add a caveat: Shareholders should have been supplied all the information they need for estimating that value. Otherwise, insiders could take advantage of their uninformed partners and buy out their interests at a fraction of true worth. We have, on rare occasions, seen that happen. Usually, of course, chicanery is employed to drive stock prices up, not down...The business “needs” that I speak of are of two kinds: First, expenditures that a company must make to maintain its competitive position (e.g., the remodeling of stores at Helzberg’s) and, second, optional outlays, aimed at business growth, that management expects will produce more than a dollar of value for each dollar spent (R. C. Willey’s expansion into Idaho).

Source:   Berkshire Hathaway Shareholder Letters

Agonizing over errors is a mistake. But acknowledging and analyzing them can be useful, though that practice is rare in corporate boardrooms. There, Charlie and I have almost never witnessed a candid post-mortem of a failed decision, particularly one involving an acquisition. A notable exception to this never-look-back approach is that of The Washington Post Company, which unfailingly and objectively reviews its acquisitions three years after they are made. Elsewhere, triumphs are trumpeted, but dumb decisions either get no follow-up or are rationalized.

Source:   Berkshire Hathaway Shareholder Letters

We’re very suspicious of accounting methodology that is vague or unclear, since too often that means management wishes to hide something.

Source:   Berkshire Hathaway Shareholder Letters

...we don’t want to read messages that a public relations department or consultant has turned out. Instead, we expect a company’s CEO to explain in his or her own words what’s happening.

Source:   Berkshire Hathaway Shareholder Letters

Charlie and I think it is both deceptive and dangerous for CEOs to predict growth rates for their companies. They are, of course, frequently egged on to do so by both analysts and their own investor relations departments. They should resist, however, because too often these predictions lead to trouble.

Source:   Berkshire Hathaway Shareholder Letters

It’s fine for a CEO to have his own internal goals and, in our view, it’s even appropriate for the CEO to publicly express some hopes about the future, if these expectations are accompanied by sensible caveats. But for a major corporation to predict that its per-share earnings will grow over the long term at, say, 15% annually is to court trouble.

Source:   Berkshire Hathaway Shareholder Letters

The problem arising from lofty predictions is not just that they spread unwarranted optimism. Even more troublesome is the fact that they corrode CEO behavior. Over the years, Charlie and I have observed many instances in which CEOs engaged in uneconomic operating maneuvers so that they could meet earnings targets they had announced. Worse still, after exhausting all that operating acrobatics would do, they sometimes played a wide variety of accounting games to “make the numbers.” These accounting shenanigans have a way of snowballing: Once a company moves earnings from one period to another, operating shortfalls that occur thereafter require it to engage in further accounting maneuvers that must be even more “heroic.” These can turn fudging into fraud. (More money, it has been noted, has been stolen with the point of a pen than at the point of a gun.)

Source:   Berkshire Hathaway Shareholder Letters

I can assure you that the marking errors in the derivatives business have not been symmetrical. Almost invariably, they have favored either the trader who was eyeing a multi-million dollar bonus or the CEO who wanted to report impressive “earnings” (or both). The bonuses were paid, and the CEO profited from his options. Only much later did shareholders learn that the reported earnings were a sham.

Source:   Berkshire Hathaway Shareholder Letters

...beware of companies displaying weak accounting. If a company still does not expense options, or if its pension assumptions are fanciful, watch out. When managements take the low road in aspects that are visible, it is likely they are following a similar path behind the scenes. There is seldom just one cockroach in the kitchen. Trumpeting EBITDA (earnings before interest, taxes, depreciation and amortization) is a particularly pernicious practice. Doing so implies that depreciation is not truly an expense, given that it is a “non-cash” charge. That’s nonsense. In truth, depreciation is a particularly unattractive expense because the cash outlay it represents is paid up front, before the asset acquired has delivered any benefits to the business. Imagine, if you will, that at the beginning of this year a company paid all of its employees for the next ten years of their service (in the way they would lay out cash for a fixed asset to be useful for ten years). In the following nine years, compensation would be a “non-cash” expense – a reduction of a prepaid compensation asset established this year. Would anyone care to argue that the recording of the expense in years two through ten would be simply a bookkeeping formality?

Source:   Berkshire Hathaway Shareholder Letters

...unintelligible footnotes usually indicate untrustworthy management. If you can’t understand a footnote or other managerial explanation, it’s usually because the CEO doesn’t want you to. Enron’s descriptions of certain transactions still baffle me.

Source:   Berkshire Hathaway Shareholder Letters

...be suspicious of companies that trumpet earnings projections and growth expectations. Businesses seldom operate in a tranquil, no-surprise environment, and earnings simply don’t advance smoothly (except, of course, in the offering books of investment bankers).

Source:   Berkshire Hathaway Shareholder Letters

Charlie and I love the idea of shareholders thinking and behaving like owners. Sometimes that requires them to be pro-active. And in this arena large institutional owners should lead the way. a. So far, however, the moves made by institutions have been less than awe-inspiring. Usually, they’ve focused on minutiae and ignored the three questions that truly count. First, does the company have the right CEO? Second, is he/she overreaching in terms of compensation? Third, are proposed acquisitions more likely to create or destroy per-share value?

Source:   Berkshire Hathaway Shareholder Letters

When a management proudly acquires another company for stock, the shareholders of the acquirer are concurrently selling part of their interest in everything they own. I’ve made this kind of deal a few times myself – and, on balance, my actions have cost [Berkshire Shareholders] money.

Source:   Berkshire Hathaway Shareholder Letters

Too often, executive compensation in the U.S. is ridiculously out of line with performance. That won’t change, moreover, because the deck is stacked against investors when it comes to the CEO’s pay. The upshot is that a mediocre-or-worse CEO – aided by his handpicked VP of human relations and a consultant from the ever-accommodating firm of Ratchet, Ratchet and Bingo – all too often receives gobs of money from an ill-designed compensation arrangement.

Source:   Berkshire Hathaway Shareholder Letters

Take, for instance, ten year, fixed-price options (and who wouldn’t?). If Fred Futile, CEO of Stagnant, Inc., receives a bundle of these – let’s say enough to give him an option on 1% of the company – his self-interest is clear: He should skip dividends entirely and instead use all of the company’s earnings to repurchase stock.

Source:   Berkshire Hathaway Shareholder Letters

Huge severance payments, lavish perks and outsized payments for ho-hum performance often occur because comp committees have become slaves to comparative data. The drill is simple: Three or so directors – not chosen by chance – are bombarded for a few hours before a board meeting with pay statistics that perpetually ratchet upwards. Additionally, the committee is told about new perks that other managers are receiving. In this manner, outlandish “goodies” are showered upon CEOs simply because of a corporate version of the argument we all used when children: “But, Mom, all the other kids have one.” When comp committees follow this “logic,” yesterday’s most egregious excess becomes today’s baseline.

Source:   Berkshire Hathaway Shareholder Letters

Charlie began as a lawyer, and I thought of myself as a security analyst. Sitting in those seats, we both grew skeptical about the ability of big entities of any type to function well. Size seems to make many organizations slow-thinking, resistant to change and smug. In Churchill’s words: “We shape our buildings, and afterwards our buildings shape us.” Here’s a telling fact: Of the ten non-oil companies having the largest market capitalization in 1965 – titans such as General Motors, Sears, DuPont and Eastman Kodak – only one made the 2006 list.

Source:   Berkshire Hathaway Shareholder Letters

I know of no reporting mechanism that would come close to describing and measuring the risks in a huge and complex portfolio of derivatives. Auditors can’t audit these contracts, and regulators can’t regulate them. When I read the pages of “disclosure” in 10-Ks of companies that are entangled with these instruments, all I end up knowing is that I don’t know what is going on in their portfolios (and then I reach for some aspirin).

Source:   Berkshire Hathaway Shareholder Letters

In evaluating a stock-for-stock offer, shareholders of the target company quite understandably focus on the market price of the acquirer’s shares that are to be given to them. But they also expect the transaction to deliver them the intrinsic value of their own shares – the ones they are giving up. If shares of a prospective acquirer are selling below their intrinsic value, it’s impossible for that buyer to make a sensible deal in an all-stock deal. You simply can’t exchange an undervalued stock for a fully-valued one without hurting your shareholders.

Source:   Berkshire Hathaway Shareholder Letters

If an acquirer’s stock is overvalued, it’s a different story: Using it as a currency works to the acquirer’s advantage. That’s why bubbles in various areas of the stock market have invariably led to serial issuances of stock by sly promoters. Going by the market value of their stock, they can afford to overpay because they are, in effect, using counterfeit money.

Source:   Berkshire Hathaway Shareholder Letters

Charlie and I enjoy issuing Berkshire stock about as much as we relish prepping for a colonoscopy. The reason for our distaste is simple. If we wouldn’t dream of selling Berkshire in its entirety at the current market price, why in the world should we “sell” a significant part of the company at that same inadequate price by issuing our stock in a merger?

Source:   Berkshire Hathaway Shareholder Letters

I have been in dozens of board meetings in which acquisitions have been deliberated, often with the directors being instructed by high-priced investment bankers (are there any other kind?). Invariably, the bankers give the board a detailed assessment of the value of the company being purchased, with emphasis on why it is worth far more than its market price. In more than fifty years of board memberships, however, never have I heard the investment bankers (or management!) discuss the true value of what is being given. When a deal involved the issuance of the acquirer’s stock, they simply used market value to measure the cost. They did this even though they would have argued that the acquirer’s stock price was woefully inadequate – absolutely no indicator of its real value – had a takeover bid for the acquirer instead been the subject up for discussion.

Source:   Berkshire Hathaway Shareholder Letters

When stock is the currency being contemplated in an acquisition and when directors are hearing from an advisor, it appears to me that there is only one way to get a rational and balanced discussion. Directors should hire a second advisor to make the case against the proposed acquisition, with its fee contingent on the deal not going through. Absent this drastic remedy, our recommendation in respect to the use of advisors remains: “Don’t ask the barber whether you need a haircut.”

Source:   Berkshire Hathaway Shareholder Letters

There is [a subjective] element to an intrinsic value calculation that can be either positive or negative: the efficacy with which retained earnings will be deployed in the future. We, as well as many other businesses, are likely to retain earnings over the next decade that will equal, or even exceed, the capital we presently employ. Some companies will turn these retained dollars into fifty-cent pieces, others into two-dollar bills.

Source:   Berkshire Hathaway Shareholder Letters

This “what-will-they-do-with-the-money” factor must always be evaluated along with the “what-do-we-have-now” calculation in order for us, or anybody, to arrive at a sensible estimate of a company’s intrinsic value. That’s because an outside investor stands by helplessly as management reinvests his share of the company’s earnings. If a CEO can be expected to do this job well, the reinvestment prospects add to the company’s current value; if the CEO’s talents or motives are suspect, today’s value must be discounted. The difference in outcome can be huge. A dollar of then-value in the hands of Sears Roebuck’s or Montgomery Ward’s CEOs in the late 1960s had a far different destiny than did a dollar entrusted to Sam Walton.

Source:   Berkshire Hathaway Shareholder Letters

Leverage, of course, can be lethal to businesses as well. Companies with large debts often assume that these obligations can be refinanced as they mature. That assumption is usually valid. Occasionally, though, either because of company-specific problems or a worldwide shortage of credit, maturities must actually be met by payment. For that, only cash will do the job.

Source:   Berkshire Hathaway Shareholder Letters

Charlie and I favor repurchases when two conditions are met: first, a company has ample funds to take care of the operational and liquidity needs of its business; second, its stock is selling at a material discount to the company’s intrinsic business value, conservatively calculated.

Source:   Berkshire Hathaway Shareholder Letters

Our culture is very old-fashioned, like Ben Franklin or Andrew Carnegie’s. Can you imagine Carnegie hiring consultants?! It’s amazing how well this approach still works. A lot of businesses we buy are kind of cranky and old-fashioned like us.

Source:   Poor Charlie's Almanack

The reason we avoid the word “synergy” is because people generally claim more synergistic benefits than will come. Yes, it exists, but there are so many false promises.

Source:   Poor Charlie's Almanack

In the past, when Berkshire has gotten cheap, we’ve found other even cheaper stocks to buy. I’d always prefer this. It’s no fun to have the company so lacking in repute that we can make money for some shareholders by buying out others.

Source:   Poor Charlie's Almanack

…having started out as Grahamites - which, by the way, worked fine - we gradually got what I would call better insights. And we realized that some company that was selling at two or three times book value could still be hell or a bargain because of the momentums implicit in its position, sometimes combined with an unusual management skill plainly present in some individual or other, or some system or other.

Source:   Poor Charlie's Almanack

…averaged out, betting on the quality of a business is better than betting on the quality of management. In other words, if you have to choose one, bet on the business momentum, not the brilliance of the manager.

Source:   Poor Charlie's Almanack

Efficiency of Management: The attitude of the financial world toward good and bad management to this writer seems to be utterly childish. First, we have the solemn assurance that quality of management is the most important consideration in selecting an investment. Second, we have the complete absence of any serious effort to determine the quality of management by any rational tests? It is all a matter of hearsay and obvious deductions from the degree of success of the company. Third, we find no interest of any kind in the common-sense objective of improving or replacing weak managements – even though their existence is freely admitted. The first and last word of wisdom [given by the financial world] to owners of American business is: “if you don’t like the management, sell your stock.”

Source:   The Intelligent Investor

There are three clear-cut signs that a management has been unsuccessful and is presumably inefficient unless it can convince the proprietors otherwise. These are: 1) Its failure to earn a satisfactory return on the stockholders’ investment during a period of several years in which the industry as a whole is prosperous, 2) Its failure to maintain its approximate share of the total sales volume of the industry, 3) Its failure to show a profit margin on sales reasonably close to that of the industry as a whole.

Source:   The Intelligent Investor

It is time now to say a word about the role of boards of directors in the determination of managerial ability. One reason why stockholders have largely ignored this question is their belief that the directors they elect are the ones who have both the duty and opportunity to pass critical judgement on the executive staff. Since the stockholders are much farther removed from the scene than are the directors, their traditional inertia is reinforced by a certain logic, which limits their expression of ownership to voting for the directors whose names appear on the official proxy statement. The rest is then up to the directors. The trouble with this idea is that the directions are rarely independent of management. They should be, of course, but it does not work out that way. Our observation is that the officers choose the directors more often than the directors choose the officers. In many cases, the executives actually constitute a majority of the board. Where this occurs, the notion that the directors serve as a check on management is patently incorrect. But in most of the other cases the situation is not really different, for even the non-officer directors are generally bound closely to the executives by ties of friendship and often of business dealings. When a president has outlived his usefulness, or fails to measure up to the growing requirements of his job, he is not going to be removed by his personal friends.

Source:   The Intelligent Investor

…an increase in personal performance (regardless of whether it is caused deterministically or by the agency of Lady Fortuna) induces a rise of serotonin in the subject, itself causing an increase of what is commonly called leadership ability. One is "on a roll". Some imperceptible changes in deportment, like an ability to express oneself with serenity and confidence, makes the subject matter look credible - as if he truly deserved the shekels. Randomness will be ruled out as a possible factor in the performance, until it rears its head once again and delivers the kick that will induce the downward spiral.

Source:   Fooled By Randomness

MBAs, typically, can interpret their superficial knowledge of the rules of the game into "expertise".

Source:   Fooled By Randomness

MBAs learn the concept of clarity and simplicity - the five-minute-manager take on things. The concept may apply to the business plan of a fertilizer plant, but not to highly probabilistic arguments - which is the reason I have anecdotal evidence in my business that MBAs tend to blow up in financial markets, as they are trained to simplify matters a couple of steps beyond their requirement. (I beg the MBA reader not to take offense; I am myself the unhappy holder of the degree.)

Source:   Fooled By Randomness

It can be disturbing for many self-styled "bottom line" oriented people to be questioned about the histories that did not take place rather than the ones that actually happened.

Source:   Fooled By Randomness

…it is not natural for us to learn from history…It is a platitude that children learn only from their own mistakes; they will cease to touch a burning stove only when they are themselves burned; no possible warning by others can lead to developing the smallest part form of consciousness. Adults, too, suffer from such a condition...This congenital denigration of the experience of others is not limited to children or to people like myself; it affects business decision-makers and investors on grand scale.

Source:   Fooled By Randomness

Remember that [almost] nobody accepts randomness in his own success, only his failure.

Source:   Fooled By Randomness

...companies which decade by decade have consistently shown spectacular growth might be divided into two groups. For lack of better terms I will call one group those that happen to be both “fortunate and able” and the other group those that are “fortunate because they are able.” A high order of management ability is a must for both groups. No company grows for a long period of years just because it is lucky. It must have and continue to keep a high order of business skill, otherwise it will not be able to capitalize on its good fortune and to defend its competitive position from the inroads of others.

Source:   Common Stocks and Uncommon Profits

I believe that in regard to a company's future sales curve there is one point that should always be kept in mind: If a company's management is outstanding and the industry is one subject to technological change and development research, the shrewd investor should stay alert to the possibility that management might handle company affairs so as to produce in the future exactly the type of sales curve that is the first step to consider in choosing an outstanding investment.

Source:   Common Stocks and Uncommon Profits

In no other major subdivision of business activity are to be found such great variations from one company to another between what goes in as expense and what comes out in benefits as occurs in research. Even among the best-managed companies this variation seems to run in a ratio of as much as two to one. By this is meant some well-run companies will get as much as twice the ultimate gain for each research dollar spent as will others. If averagely-run companies are included, this variation between the best and the mediocre is still greater.

Source:   Common Stocks and Uncommon Profits

It is no simple task for management to bring about this close relationship between research, production, and sales. Yet unless this is done, new products as finally conceived frequently are either not designed to be manufactured as cheaply as possible, or, when designed, fail to have maximum sales appeal. Such research usually results in products vulnerable to more efficient competition.

Source:   Common Stocks and Uncommon Profits

Fisher's Research Questions: POINT 8. Does the company have outstanding executive relations? POINT 9. Does the company have depth to its management?

Source:   Common Stocks and Uncommon Profits

Fisher's Research Questions: POINT 10. How good are the company's cost analysis and accounting controls? No company is going to continue to have outstanding success for a long period of time if it cannot break down its over-all costs with sufficient accuracy and detail to show the cost of each small step in its operation.

Source:   Common Stocks and Uncommon Profits

Fisher's Research Questions: POINT 12. Does the company have a short-range or long-range outlook in regard to profits?

Source:   Common Stocks and Uncommon Profits

The company that will go to special trouble and expense to take care of the needs of a regular customer caught in an unexpected jam may show lower profits on the particular transaction, but far greater profits over the years. The “scuttlebutt” method usually reflects these differences in policies quite clearly.

Source:   Common Stocks and Uncommon Profits

Fisher's Research Questions: POINT 13. In the foreseeable future will the growth of the company require sufficient equity financing so that the larger number of shares then outstanding will largely cancel the existing stockholders' benefit from this anticipated growth?

Source:   Common Stocks and Uncommon Profits

...if investment is limited to outstanding situations, what really matters is whether the company's cash plus further borrowing ability is sufficient to take care of the capital needed to exploit the prospects of the next several years. If it is, and if the company is willing to borrow to the limit of prudence, the common stock investor need have no concern as to the more distant future. If the investor has properly appraised the situation, any equity financing that might be done some years ahead will be at prices so much higher than present levels that he need not be concerned.

Source:   Common Stocks and Uncommon Profits

Fisher's Research Questions: POINT 14. Does the management talk freely to investors about its affairs when things are going well but “clam up” when troubles and disappointments occur? POINT 15. Does the company have a management of unquestionable integrity?

Source:   Common Stocks and Uncommon Profits

The more outstanding the company considering whether to retain or pass on increased earnings, the more important this [choice] can become.

Source:   Common Stocks and Uncommon Profits

Actually dividend considerations should be given the least, not the most, weight by those desiring to select outstanding stocks. Perhaps the most peculiar aspect of this much-discussed subject of dividends is that those giving them the least consideration usually end up getting the best dividend return. Worthy of repetition here is that over a span of five to ten years, the best dividend results will come not from the high-yield stocks but from those with the relatively low yield.

Source:   Common Stocks and Uncommon Profits

I have found that “scuttlebutt” so many times furnishes an accurate forecast of how well a company will measure up to my fifteen points, that usually by the time I am ready to visit the management there will be at least a fair chance that I will want to buy into the company.

Source:   Common Stocks and Uncommon Profits

...the importance of growth will present themselves. But fundamentally it should never be forgotten that, in a world where change is occurring at a faster and faster pace, nothing long remains the same. It is impossible to stand still. A company will either grow or shrink. A strong offense is the best defense. Only by growing better can a company be sure of not growing worse.

Source:   Common Stocks and Uncommon Profits

Of one thing the investor can be certain: A large company's need to bring in a new chief executive from the outside is a damning sign of something basically wrong with the existing management—no matter how good the surface signs may have been as indicated by the most recent earnings statement.

Source:   Common Stocks and Uncommon Profits

A worthwhile clue is available to all investors as to whether a management is predominantly one man or a smoothly working team (this clue throws no light, however, on how good that team may be). The annual salaries of top management of all publicly owned companies are made public in the proxy statements. If the salary of the number-one man is very much larger than that of the next two or three, a warning flag is flying. If the compensation scale goes down rather gradually, it isn't.

Source:   Common Stocks and Uncommon Profits

There must always be a conscious and continuous effort, based on fact, not propaganda, to have employees at every level, from the most newly hired blue-collar or white-collar worker to the highest levels of management, feel that their company is a good place to work.

Source:   Common Stocks and Uncommon Profits

Many companies seem to have an irresistible urge to show the greatest possible profits at the end of each accounting period— to bring every possible cent down to the bottom line. This a true growth-oriented company can never do. Its focus must be on earning sufficient current profits to finance the costs of expanding the business.

Source:   Common Stocks and Uncommon Profits

One of these [popular quotes at Dow Chemicals] was “Never promote someone who hasn't made some bad mistakes, because if you do, you are promoting someone who has never done anything.”

Source:   Common Stocks and Uncommon Profits

I have come to believe that the most that can be said on this subject of dividends is that it is an influence that should be downgraded very sharply by those who do not need the income. In general, more attractive opportunities will be found among stocks with a low dividend payout or none at all.

Source:   Common Stocks and Uncommon Profits

A company that provides average or below-average investment returns but generates cash in excess of its needs has three options: (1) It can ignore the problem and continue to reinvest at below-average rates, (2) it can buy growth, or (3) it can return the money to shareholders. It is at this crossroads that Buffett keenly focuses on management’s decisions, for it is here that management will behave rationally or irrationally.

Source:   The Warren Buffett Way

A company with poor economic returns, excess cash, and a low stock price will attract corporate raiders, which is the beginning of the end of current management tenure. To protect themselves, executives frequently choose the second option instead: purchasing growth by acquiring another company.

Source:   The Warren Buffett Way

When management repurchases stock, Buffett feels that the reward is twofold. If the stock is selling below its intrinsic value, then purchasing shares makes good business sense. If a company’s stock price is $50 and its intrinsic value is $100, then each time management buys its stock, it is acquiring $2 of intrinsic value for every $1 spent. Transactions of this nature can be very profitable for the remaining shareholders.

Source:   The Warren Buffett Way

“What needs to be reported,” argues Buffett, “is data—whether GAAP, non-GAAP, or extra-GAAP—that helps the financially literate readers answer three key questions: (1) Approximately how much is the company worth? (2) What is the likelihood that it can meet its future obligations? (3) How good a job are its managers doing, given the hand they have been dealt?”

Source:   The Warren Buffett Way

...management stands to gain wisdom and credibility by facing mistakes, why do so many annual reports trumpet only success? If allocation of capital is so simple and logical, why is capital so poorly allocated? The answer, Buffett has learned, is an unseen force he calls “the institutional imperative”—the lemming-like tendency of corporate managers to imitate the behavior of others, no matter how silly or irrational it may be. It was the most surprising discovery of his business career. At school he was taught that experienced managers were honest and intelligent, and automatically made rational business decisions. Once out in the business world, he learned instead that “rationality frequently wilts when the institutional imperative comes into play.”

Source:   The Warren Buffett Way

Buffett believes that the institutional imperative is responsible for several serious, but distressingly common, conditions: “(1) [The organization] resists any change in its current direction; (2) just as work expands to fill available time, corporate projects or acquisitions will materialize to soak up available funds; (3) any business craving of the leader, however foolish, will quickly be supported by detailed rate-of-return and strategic studies prepared by his troops; and (4) the behavior of peer companies, whether they are expanding, acquiring, setting executive compensation or whatever, will be mindlessly imitated.”

Source:   The Warren Buffett Way

Buffett isolates three factors as being most influential in management’s behavior. 1. Most managers cannot control their lust for activity. Such hyperactivity often finds its outlet in business takeovers. 2. Most managers are constantly comparing their business’s sales, earnings, and executive compensation to other companies within and beyond their industry. These comparisons invariably invite corporate hyperactivity. 3. Most managers have an exaggerated sense of their own capabilities.

Source:   The Warren Buffett Way

“Good business or investment decisions,” he says, “will produce quite satisfactory results with no aid from leverage.”

Source:   The Warren Buffett Way

“If my universe of business possibilities was limited, say, to private companies in Omaha, I would, first, try to assess the long-term economic characteristics of each business,” says Buffett. “Second, assess the quality of the people in charge of running it; and third, try to buy into a few of the best operations at a sensible price. I certainly would not wish to own an equal part of every business in town. Why, then, should Berkshire take a different tack when dealing with the larger universe of public companies? And since finding great businesses and outstanding managers is so difficult, why should we discard proven products? Our motto is: If at first you do succeed, quit trying.”

Source:   The Warren Buffett Way

…in the new economy, the speed and means by which advantage grows and declines are becoming increasingly diverse. This is why business leaders in the new economy need to be able to manage across different business models with the agility of a decathlon athlete.

Source:   Renewable Competitive Advantage

A renewal-oriented culture encourages managers to question “the way we do things around here” on an ongoing, systematic basis. In the new economy, willingness to explore, test, and expand the rules of the game should be in the formal job description of managers.

Source:   Renewable Competitive Advantage

Renewal advantage is not based on endowments, handed down from outside, over which you have little control. Neither is it based on luck, outcomes you did not create, don’t control, or do not understand. Renewal is not a crapshoot. Nor is it a game of narrow-mindedly extending past behavior forward. For successful companies – the management of guided obsolescence through economic time – matters a lot.

Source:   Renewable Competitive Advantage

Ask yourself these basic questions: (a) What makes you special? (b) What is your organization ultimately capable of when stretched? (c) What will you never be able to do, no matter how hard you try? (d) What role is left for your corporate headquarters? Or should you leave your diverse businesses alone to run themselves?

Source:   Renewable Competitive Advantage

Convergence thinking encourages – actually forces – us to move away from implicit notions that advantage is sustainable unless it is lost, and toward the transforming assumption that advantage will be lost unless it is renewed. Once managers become comfortable with the idea, that through convergence, all advantage in temporary, they ask the questions of themselves and their companies that take on a greater responsibility for creating the future. By making the reality of convergence central at the onset, leadership becomes focused on reformation and rebirth.

Source:   Renewable Competitive Advantage

Investors operate by the same laws as do managers. For investors, the laws of convergence, alignment, and renewal show up through a concern for the speed and duration of cash flows. In this way, the question for investors is the same as for managers: “Where is the business in economic time?” And, “Where is the business heading in economic time?” Several techniques can align managers with investors in crafting strategy.

Source:   Renewable Competitive Advantage

…failure to quip yourself to think in terms of multi-speed competition – what we call Economic Time – can reduce your effectiveness to that of a horse and buggy driver facing the onset of the automobile.

Source:   Renewable Competitive Advantage

Simply put, in the short run strategy follows structure. In the long run, structure follows strategy.

Source:   Renewable Competitive Advantage

The growth engine of every company has distinguishing competitive mechanics, its own dynamic signature that gives clues as to how value for it is created, destroyed, and potentially renewed. The reality is that customers don’t come first – neither do companies. Each gains its meaning from its relationship with the other. Through Economic Time we see the dynamic forces rooted in these processes of value creation: how managers perceive environmental threats, learn and meet customer needs, and react to one another.

Source:   Renewable Competitive Advantage

[Fast-cycle markets]: With the forces of value creation and destruction operating at high speed, the pursuit of advantage takes place in its fastest, most unrestrained form. This is why managers find their journey in the fastest cycle markets to be marked by a continuous gale of creative destruction, as the economist Joseph Schumpeter emphasized.

Source:   Renewable Competitive Advantage

Ask yourself: Do you think of your advantage as merely sustainable-or as dynamically renewable?

Source:   Renewable Competitive Advantage

It is straightforward to imagine that lowering the cost or raising the price of products is good. What is more useful is to know how some combinations of these two investments will generate greater profits than others.

Source:   Renewable Competitive Advantage

Managing standard-cycle companies is a task analogous to commanding large battleships. It takes a long time to gain momentum and direction. Once established, momentum continues in the same direction unless altered through strong leadership or the actions of competitors. Changes in direction that are desired two or three years from now should be carefully thought through and initiated early on.

Source:   Renewable Competitive Advantage

With a focus on flawless execution, how much opportunity is there in scale orchestra for innovation? Let’s return to our physical metaphor. In a real symphony orchestra, new music is carefully chosen and coordinated with the overall repertoire. New Performers are introduced selectively.

Source:   Renewable Competitive Advantage

Short-term strategy in, in a sense, reactive. Being reactive is not bad; in fact it is necessary. It is consistent with the idea of sticking close to customers. Day-to-day policies, tactics, and operating procedures are continually refined in search of better alignment with what customers currently want.

Source:   Renewable Competitive Advantage

Understanding does not have precede action. Sometimes it is useful to just do something. Careful analysis, thoughtful experimentation, done with an eye toward bridging the past with the future, is the goal: to gain knowledge of what might be possible. Through market research, and superior ability to select and reject projects, managers learn to place intelligent bets on the future. Willingness to experiment combined with the ability to learn quickly from what you find are increasingly valuable, indeed critical, renewable skills.

Source:   Renewable Competitive Advantage

Leaders are explorers. But they are also genetic engineers. Strategy can be thought of as organizational DNA, or the code by which your organization replicates itself. DNA, of course, is the genetic blueprint that guides how an organism reproduces itself, how it interacts to maintain alignment with its environment. DNA determines the growth of the organism, its shape, its life span, and what resources it must consume, and in which environment it must exist in order to sustain itself.

Source:   Renewable Competitive Advantage

Strategy has a fashionable nature to it. This simply reflects the fact that popular competitive ideas come and go, like fashions. The drive for market share, popular in the 1970s, was followed a decade later by an emphasis on profitable, smaller market niches. The early emphasis on centralized planning gave way to a widespread interest in decentralization, and still later to interest in the benefits of core competencies. These changes, although sometimes criticized as signs of weakness, are actually deeper signs of convergence and alignment at work.

Source:   Renewable Competitive Advantage

Where your isolating mechanisms are weak, economic time moves fast, so strategies can be imitated quickly. This is another reason why strategy in fast-cycle markets needs to be quick and adaptive. Where isolating power is strong, and economic time moves slowly, strategies will be more difficult to imitate. In this way the speed at which a strategy can be copied mirrors underlying capabilities and the economic cycle time of a market. Or put simply: think about the half-life of your strategy. It’s part of the calculus of economic time.

Source:   Renewable Competitive Advantage

…in determining the extent to which a capability is renewable, it can be helpful to distinguish how capabilities arise. Generally, capabilities can arise from any of the three sources: skills (hard work and investments), endowments (something that is handed to you), or good fortune (luck). While each of these sources can be a source of renewal, the leverage associated with each and renewal opportunities that they present for managers are different.

Source:   Renewable Competitive Advantage

A common threat to renewal is not that managers will select bad projects, but that they will not select enough good projects. As one manager put it, “We can say no to projects and be right 90% of the time, but the other 10% that we never take on can kill our business.”

Source:   Renewable Competitive Advantage

The capital budgeting process for a standard-cycle company is managed through a hierarchy. Budget approval can require long journeys with reviews at many levels. Consensus over several years is needed to sustain large commitments. In contrast, capital requests for the development of fast-cycle projects should be drafted, reviews and responded to quickly. Market opportunities, and the cash flow associated with them, change rapidly – even during the process of fast cycle project evaluation.

Source:   Renewable Competitive Advantage

We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions.

Source:   Amazon Shareholder Letters

We will continue to measure our programs and the effectiveness of our investments analytically, to jettison those that do not provide acceptable returns, and to step up our investment in those that work best. We will continue to learn from both our successes and our failures.

Source:   Amazon Shareholder Letters

We will make bold rather than timid investment decisions where we see a sufficient probability of gaining market leadership advantages. Some of these investments will pay off, others will not, and we will have learned another valuable lesson in either case.

Source:   Amazon Shareholder Letters

When forced to choose between optimizing the appearance of our GAAP accounting and maximizing the present value of future cash flows, we'll take the cash flows.

Source:   Amazon Shareholder Letters

We will share our strategic thought processes with you when we make bold choices (to the extent competitive pressures allow), so that you may evaluate for yourselves whether we are making rational long-term leadership investments.

Source:   Amazon Shareholder Letters

We will work hard to spend wisely and maintain our lean culture. We understand the importance of continually reinforcing a cost-conscious culture, particularly in a business incurring net losses.

Source:   Amazon Shareholder Letters

We will continue to focus on hiring and retaining versatile and talented employees, and continue to weight their compensation to stock options rather than cash. We know our success will be largely affected by our ability to attract and retain a motivated employee base, each of whom must think like, and therefore must actually be, an owner.

Source:   Amazon Shareholder Letters

We intend to build the world’s most customer-centric company. We hold as axiomatic that customers are perceptive and smart, and that brand image follows reality and not the other way around. Our customers tell us that they choose Amazon.com and tell their friends about us because of the selection, ease-of-use, low prices, and service that we deliver.

Source:   Amazon Shareholder Letters

I constantly remind our employees to be afraid, to wake up every morning terrified. Not of our competition, but of our customers. Our customers have made our business what it is, they are the ones with whom we have a relationship, and they are the ones to whom we owe a great obligation. And we consider them to be loyal to us – right up until the second that someone else offers them a better service.

Source:   Amazon Shareholder Letters

Online selling (relative to traditional retailing) is a scale business characterized by high fixed costs and relatively low variable costs. This makes it difficult to be a medium-sized e-commerce company. With a long enough financing runway, Pets.com and living.com may have been able to acquire enough customers to achieve the needed scale. But when the capital markets closed the door on financing Internet companies, these companies simply had no choice but to close their doors. As painful as that was, the alternative—investing more of our own capital in these companies to keep them afloat—would have been an even bigger mistake.

Source:   Amazon Shareholder Letters

One of our most exciting peculiarities is poorly understood. People see that we’re determined to offer both world-leading customer experience and the lowest possible prices, but to some this dual goal seems paradoxical if not downright quixotic. Traditional stores face a time-tested tradeoff between offering high-touch customer experience on the one hand and the lowest possible prices on the other. How can Amazon.com be trying to do both? The answer is that we transform much of customer experience—such as unmatched selection, extensive product information, personalized recommendations, and other new software features—into largely a fixed expense. With customer experience costs largely fixed (more like a publishing model than a retailing model), our costs as a percentage of sales can shrink rapidly as we grow our business. Moreover, customer experience costs that remain variable—such as the variable portion of fulfillment costs—improve in our model as we reduce defects. Eliminating defects improves costs and leads to better customer experience.

Source:   Amazon Shareholder Letters

Our pricing strategy does not attempt to maximize margin percentages, but instead seeks to drive maximum value for customers and thereby create a much larger bottom line—in the long term. For example, we’re targeting gross margins on our jewelry sales to be substantially lower than industry norms because we believe over time—customers figure these things out—this approach will produce more value for shareholders.

Source:   Amazon Shareholder Letters

You can count on us to combine a strong quantitative and analytical culture with a willingness to make bold decisions. As we do so, we’ll start with the customer and work backwards. In our judgment, that is the best way to create shareholder value.

Source:   Amazon Shareholder Letters

In this turbulent global economy [2008-09], our fundamental approach remains the same. Stay heads down, focused on the long term and obsessed over customers. Long-term thinking levers our existing abilities and lets us do new things we couldn’t otherwise contemplate. It supports the failure and iteration required for invention, and it frees us to pioneer in unexplored spaces. Seek instant gratification – or the elusive promise of it – and chances are you’ll find a crowd there ahead of you. Long-term orientation interacts well with customer obsession. If we can identify a customer need and if we can further develop conviction that that need is meaningful and durable, our approach permits us to work patiently for multiple years to deliver a solution. “Working backwards” from customer needs can be contrasted with a “skills-forward” approach where existing skills and competencies are used to drive business opportunities. The skills-forward approach says, “We are really good at X. What else can we do with X?” That’s a useful and rewarding business approach. However, if used exclusively, the company employing it will never be driven to develop fresh skills. Eventually the existing skills will become outmoded. Working backwards from customer needs often demands that we acquire new competencies and exercise new muscles, never mind how uncomfortable and awkward-feeling those first steps might be.

Source:   Amazon Shareholder Letters

Our pricing objective is to earn customer trust, not to optimize short-term profit dollars. We take it as an article of faith that pricing in this manner is the best way to grow our aggregate profit dollars over the long term. We may make less per item, but by consistently earning trust we will sell many more items. Therefore, we offer low prices across our entire product range.

Source:   Amazon Shareholder Letters

Senior leaders that are new to Amazon are often surprised by how little time we spend discussing actual financial results or debating projected financial outputs. To be clear, we take these financial outputs seriously, but we believe that focusing our energy on the controllable inputs to our business is the most effective way to maximize financial outputs over time. Our annual goal setting process begins in the fall, and concludes early in the new year after we’ve completed our peak holiday quarter. Our goal setting sessions are lengthy, spirited, and detail oriented. We have a high bar for the experience our customers deserve and a sense of urgency to improve that experience.

Source:   Amazon Shareholder Letters

A review of our current goals reveals some interesting statistics: 1) 360 of the 452 goals will have a direct impact on customer experience. 2) The word revenue is used eight times and free cash flow is used only four times. 3)  In the 452 goals, the terms net income, gross profit or margin, and operating profit are not used once. Taken as a whole, the set of goals is indicative of our fundamental approach. Start with customers, and work backwards. Listen to customers, but don’t just listen to customers – also invent on their behalf. We can’t assure you that we’ll meet all of this year’s goals. We haven’t in past years. However, we can assure you that we’ll continue to obsess over customers. We have strong conviction that that approach – in the long term – is every bit as good for owners as it is for customers.

Source:   Amazon Shareholder Letters

We live in an era of extraordinary increases in available bandwidth, disk space, and processing power, all of which continue to get cheap fast. We have on our team some of the most sophisticated technologists in the world – helping to solve challenges that are right on the edge of what’s possible today. As I’ve discussed many times before, we have unshakeable conviction that the long-term interests of shareowners are perfectly aligned with the interests of customers.

Source:   Amazon Shareholder Letters

Invention comes in many forms and at many scales. The most radical and transformative of inventions are often those that empower others to unleash their creativity – to pursue their dreams. That’s a big part of what’s going on with Amazon Web Services, Fulfillment by Amazon, and Kindle Direct Publishing. With AWS, FBA, and KDP, we are creating powerful self-service platforms that allow thousands of people to boldly experiment and accomplish things that would otherwise be impossible or impractical. These innovative, large-scale platforms are  not zero-sum – they create win-win situations and create significant value for developers, entrepreneurs, customers, authors, and readers

Source:   Amazon Shareholder Letters

As I write this, our recent stock performance has been positive, but we constantly remind ourselves of an important point – as I frequently quote famed investor Benjamin Graham in our employee all-hands meetings – “In the short run, the market is a voting machine but in the long run, it is a weighing machine.” We don’t celebrate a 10% increase in the stock price like we celebrate excellent customer experience. We aren’t 10% smarter when that happens and conversely aren’t 10% dumber when the stock goes the other way. We want to be weighed, and we’re always working to build a heavier company.

Source:   Amazon Shareholder Letters

Failure comes part and parcel with invention. It’s not optional. We understand that and believe in failing early and iterating until we get it right. When this process works, it means our failures are relatively small in size (most experiments can start small), and when we hit on something that is really working for customers, we double-down on it with hopes to turn it into an even bigger success. However, it’s not always as clean as that. Inventing is messy, and over time, it’s certain that we’ll fail at some big bets too.

Source:   Amazon Shareholder Letters

A dreamy business offering has at least four characteristics. Customers love it, it can grow to very large size, it has strong returns on capital, and it’s durable in time – with the potential to endure for decades. When you find one of these, don’t just swipe right, get married. Well, I’m pleased to report that Amazon hasn’t been monogamous in this regard. After two decades of risk taking and teamwork, and with generous helpings of good fortune all along the way, we are now happily wed to what I believe are three such life partners: Marketplace, Prime, and AWS. Each of these offerings was a bold bet at first, and sensible people worried (often!) that they could not work. But at this point, it’s become pretty clear how special they are and how lucky we are to have them. It’s also clear that there are no sinecures in business. We know it’s our job to always nourish and fortify them.

Source:   Amazon Shareholder Letters

We want to be a large company that’s also an invention machine. We want to combine the extraordinary customer-serving capabilities that are enabled by size with the speed of movement, nimbleness, and risk acceptance mentality normally associated with entrepreneurial start-ups. Can we do it? I’m optimistic. We have a good start on it, and I think our culture puts us in a position to achieve the goal. But I don’t think it’ll be easy. There are some subtle traps that even high-performing large organizations can fall into as a matter of course, and we’ll have to learn as an institution how to guard against them. One common pitfall for large organizations – one that hurts speed and inventiveness – is “one-size-fits-all” decision making.

Source:   Amazon Shareholder Letters

Some decisions are consequential and irreversible or nearly irreversible – one-way doors – and these decisions must be made methodically, carefully, slowly, with great deliberation and consultation. If you walk through and don’t like what you see on the other side, you can’t get back to where you were before. We can call these Type 1 decisions. But most decisions aren’t like that – they are changeable, reversible – they’re two-way doors. If you’ve made a suboptimal Type 2 decision, you don’t have to live with the consequences for that long. You can reopen the door and go back through. Type 2 decisions can and should be made quickly by high judgment individuals or small groups. As organizations get larger, there seems to be a tendency to use the heavy-weight Type 1 decision-making process on most decisions, including many Type 2 decisions. The end result of this is slowness, unthoughtful risk aversion, failure to experiment sufficiently, and consequently diminished invention. We’ll have to figure out how to fight that tendency.

Source:   Amazon Shareholder Letters

“Jeff, what does Day 2 look like?” That’s a question I just got at our most recent all-hands meeting. I’ve been reminding people that it’s Day 1 for a couple of decades. I work in an Amazon building named Day 1, and when I moved buildings, I took the name with me. I spend time thinking about this topic. “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.” To be sure, this kind of decline would happen in extreme slow motion. An established company might harvest Day 2 for decades, but the final result would still come. I’m interested in the question, how do you fend off Day 2? What are the techniques and tactics? How do you keep the vitality of Day 1, even inside a large organization? Such a question can’t have a simple answer. There will be many elements, multiple paths, and many traps. I don’t know the whole answer, but I may know bits of it. Here’s a starter pack of essentials for Day 1 defense: customer obsession, a skeptical view of proxies, the eager adoption of external trends, and high-velocity decision making.

Source:   Amazon Shareholder Letters

There are many ways to center a business. You can be competitor focused, you can be product focused, you can be technology focused, you can be business model focused, and there are more. But in my view, obsessive customer focus is by far the most protective of Day 1 vitality. Why? There are many advantages to a customer-centric approach, but here’s the big one: customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great. Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf. No customer ever asked Amazon to create the Prime membership program, but it sure turns out they wanted it, and I could give you many such examples.

Source:   Amazon Shareholder Letters

As companies get larger and more complex, there’s a tendency to manage to proxies. This comes in many shapes and sizes, and it’s dangerous, subtle, and very Day 2. A common example is process as proxy. Good process serves you so you can serve customers. But if you’re not watchful, the process can become the thing. This can happen very easily in large organizations. The process becomes the proxy for the result you want. You stop looking at outcomes and just make sure you’re doing the process right. Gulp. It’s not that rare to hear a junior leader defend a bad outcome with something like, “Well, we followed the process.” A more experienced leader will use it as an opportunity to investigate and improve the process. The process is not the thing. It’s always worth asking, do we own the process or does the process own us? In a Day 2 company, you might find it’s the second.

Source:   Amazon Shareholder Letters

The outside world can push you into Day 2 if you won’t or can’t embrace powerful trends quickly. If you fight them, you’re probably fighting the future. Embrace them and you have a tailwind. These big trends are not that hard to spot (they get talked and written about a lot), but they can be strangely hard for large organizations to embrace. We’re in the middle of an obvious one right now: machine learning and artificial intelligence.

Source:   Amazon Shareholder Letters

First, there’s a foundational question: are high standards intrinsic or teachable? If you take me on your basketball team, you can teach me many things, but you can’t teach me to be taller. Do we first and foremost need to select for “high standards” people? If so, this letter would need to be mostly about hiring practices, but I don’t think so. I believe high standards are teachable. In fact, people are pretty good at learning high standards simply through exposure. High standards are contagious. Bring a new person onto a high standards team, and they’ll quickly adapt. The opposite is also true. If low standards prevail, those too will quickly spread. And though exposure works well to teach high standards, I believe you can accelerate that rate of learning by articulating a few core principles of high standards, which I hope to share in this letter.

Source:   Amazon Shareholder Letters

Another important question is whether high standards are universal or domain specific. In other words, if you have high standards in one area, do you automatically have high standards elsewhere? I believe high standards are domain specific, and that you have to learn high standards separately in every arena of interest. When I started Amazon, I had high standards on inventing, on customer care, and (thankfully) on hiring. But I didn’t have high standards on operational process: how to keep fixed problems fixed, how to eliminate defects at the root, how to inspect processes, and much more. I had to learn and develop high standards on all of that (my colleagues were my tutors). Understanding this point is important because it keeps you humble. You can consider yourself a person of high standards in general and still have debilitating blind spots. There can be whole arenas of endeavor where you may not even know that your standards are low or non-existent, and certainly not world class. It’s critical to be open to that likelihood.

Source:   Amazon Shareholder Letters

A close friend recently decided to learn to do a perfect free-standing handstand. No leaning against a wall. Not for just a few seconds. Instagram good. She decided to start her journey by taking a handstand workshop at her yoga studio. She then practiced for a while but wasn’t getting the results she wanted. So, she hired a handstand coach. Yes, I know what you’re thinking, but evidently this is an actual thing that exists. In the very first lesson, the coach gave her some wonderful advice. “Most people,” he said, “think that if they work hard, they should be able to master a handstand in about two weeks. The reality is that it takes about six months of daily practice. If you think you should be able to do it in two weeks, you’re just going to end up quitting.” Unrealistic beliefs on scope – often hidden and undiscussed – kill high standards. To achieve high standards yourself or as part of a team, you need to form and proactively communicate realistic beliefs about how hard something is going to be – something this coach understood well.

Source:   Amazon Shareholder Letters

Building a culture of high standards is well worth the effort, and there are many benefits. Naturally and most obviously, you’re going to build better products and services for customers – this would be reason enough! Perhaps a little less obvious: people are drawn to high standards – they help with recruiting and retention. More subtle: a culture of high standards is protective of all the “invisible” but crucial work that goes on in every company. I’m talking about the work that no one sees. The work that gets done when no one is watching. In a high standards culture, doing that work well is its own reward – it’s part of what it means to be a professional.

Source:   Amazon Shareholder Letters

So, the four elements of high standards as we see it: they are teachable, they are domain specific, you must recognize them, and you must explicitly coach realistic scope. For us, these work at all levels of detail. Everything from writing memos to whole new, clean-sheet business initiatives. We hope they help you too.

Source:   Amazon Shareholder Letters

The sad truth is that incentives have diluted the importance of investment philosophy in recent decades. While well intentioned and hard working, corporate executives and money managers too frequently prioritize growing the business over delivering superior results for shareholders. Increasingly, hired managers get paid to play, not to win.

Source:   More Than You Know

Leadership is tricky to define, let alone assess. But I look for three qualities in a senior manager that, taken together, seem like a reasonable means to judge leadership. These qualities are learning, teaching, and self-awareness.

Source:   More Than You Know

A quality manager can absorb and weigh contradictory ideas and information as well as think probabilistically. I add hesitantly that this aspect of learning is borderline academic. I like CEOs who read and think.

Source:   More Than You Know