Opinion

Felix Salmon

Teflon Buffett

By Felix Salmon
December 26, 2009

Warren Buffett is a lovable, avuncular chap, not one of those axe-wielding CEOs who are feared by employees and idolized by the kind of red-claw capitalists who think that firing lots of people is a major leadership skill. Yet somehow he seems to have fired 21,000 people — 8.6% of his workforce — over the past year. And the cuts are being felt hardest by Berkshire’s poorest employees: some 3,000 textile workers have lost their jobs at Fruit of the Loom in El Salvador.

Alice Schroeder, Buffett’s biographer, explains that Buffett is expert at hiring “bad cops” to fire employees and to insulate himself from any blowback:

At NetJets, Sokol has got an enormous challenge on his hands. The changes he’s making at NetJets are so significant that Sokol’s angry employees apparently took their complaints about him to the press.

Try to imagine Berkshire employees doing that to Buffett. It’s unthinkable, right? Buffett could order animal sacrifices on his birthday and his employees probably wouldn’t complain to the New York Times…

No matter who succeeds Buffett (Sokol, if he pulls off the turnaround) this part of the franchise will be “lost” after Buffett is gone, because it is unique to the way Buffett has arranged his image over the years. Buffett has gone to a lot of trouble to be universally liked. I can’t think of anybody else qualified who can replicate that.

Schroeder explains that being universally liked is a major source of Buffett’s wealth: it makes it a lot easier for him to acquire any given business. Absent Buffett, it’s going be much harder for Berkshire to acquire the privately-held companies that it specializes in buying. And more generally, it’s going to be a practical impossibility for Berkshire to be run by someone as teflon-coated as Buffett. Could anybody else fire 3,000 Salvadorean textile workers and receive essentially no bad press at all?

(Incidentally, if anybody can find the RSS feed for Schroeder’s blog, “Passages”, I’d love to add it to my reader.)

Comments
9 comments so far | RSS Comments RSS

Interesting article, Felix, and Schroeder’s Blog feed i:

http://aliceschroeder.com/rss.xml

That’s for her entire blog, including the passages section. (There’s not a separate one for each section that I can find).

Posted by Eyebee | Report as abusive
 

I don’t see an RSS feed on the site, so here’s one generated from the HTML:

http://feed43.com/aliceschroeder_passage s.xml

Posted by FeedHelper123 | Report as abusive
 

Buffett generally doesn’t run most of his 50+ subsidiaries and he can’t. He doesn’t have the time or specialization to run most of his businesses. He leaves it to his managers. Good thing too…

In the case of those 3,000 Salvadorian textile workers, that is a situation where Fruit-of-the-Loom is just not getting as many orders as Americans wear shabbier underpants in accordance with the New Normal. Should they have a jobs bank, GM style? We see how that worked out.

I do have gripes with Buffett but not regarding layoffs in a recession. Ever since Buffett aquired a large stake in Goldman Sachs, he has been eerily silent on Goldman’s errors of integrity during the last few years as well as their continuing over-reliance on short term trading and derivatives (this after spending a lifetime teaching his accolytes to be long-term investors and railing against ‘financial weapons of mass destruction’). Worse still, his reputation provides cover for them and helps shield them from proper scrutiny.

Posted by DanHess | Report as abusive
 

Seriously? Thousands of people get laid off overseas all the time by US companies and no one reports on it. Doesn’t matter who the CEO is. American press is only worried about American jobs.

Posted by right | Report as abusive
 

ABC Television did an expose a few years ago about Kirby Vacuums a company that sells high priced vacuums door-to-door to lower class customers using high-pressure tactics.

The program never mentioned that Kirby is a Buffett company.

Unlike most CEOs Buffett actually owns a significant share in his company and thus benefits every time a Kirby is sold to some sucker by one of his salesmen.

Posted by aculeus | Report as abusive
 

Last I checked, Warren Buffet is a businessman. He doesn’t claim to be a jobs program. And yet he does create and sustain many more jobs than any bloggers I know of. What standard are you holding him to, Felix? Is it one that you could possibly live up to?

Posted by JoeP | Report as abusive
 

Can we make that almost-universally? Nigel Jacquiss (I think he’s still the only investigative reporter to win a Pulitzer for work written at a weekly paper) has some good reporting on Buffett’s lobbying efforts in Oregon here http://blogs.wweek.com/news/2007/05/21/w hat-would-warren-buffett-do/ and elsewhere at Willamette Week.

Willy Week also did a piece critical of Buffett for curtailing Pacificorp’s program that let employees volunteer at Loaves and Fishes serving meals to housebound senior citizens on company time. Can’t find the article now (I think it was a Rogue of the Week?) but I’d like to see a follow-up on it — the impression the article gave was that the staffers provided by Pacificorp were the bulk of the volunteers the charity had.

Posted by SelenesMom | Report as abusive
 

“Last I checked, Warren Buffet is a businessman. He doesn’t claim to be a jobs program. And yet he does create and sustain many”

Right on! It sounds really syrupy, but he is a hero! He feeds us (McLane’s, Dairy Queen, See’s candies), clothes us (Fruit of the Loom, H.H. Brown, Justin Brands, Garan), houses us (Acme Brick, Clayton Homes, HomeServices of America) and powers us (MidAmerican Energy). He insures us, provides us with jewelry, paint, carpet, machine tools, furniture, flight school, boats, RVs, many sources of news, and heaven knows what else.

He’s got to run a tight ship to keep all that going.

That said, I sure would enjoy it if he would put the smackdown on Goldman, mainly because I consider them to be so smart and talented and it’s a waste when so much of their efforts go to win-lose activities (high frequency trading, arbitraging cheap government financing against other government-backstopped assets) when they could be involved more in the win-win activities of building and growing businesses.

Posted by DanHess | Report as abusive
 

Personally, I have a lot of admiration for Buffett. But I doubt the housebound seniors who aren’t getting their Loaves and Fishes meals any more do, and I have to wonder if that was really necessary. Also, it’s not a linear increase in productivity, since you have a hit to morale.

Posted by SelenesMom | Report as abusive
 

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