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Margin of Trust: The Berkshire Business Model

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Warren Buffett and his company, Berkshire Hathaway, are legendary for their distinctive investing approach. Yet many equally unconventional but less well known aspects of Berkshire's managerial practices and organizational structure are rich with lessons for those seeking to follow in Buffett's footsteps. Margin of Trust is the first book to distill Buffett's approach to m Warren Buffett and his company, Berkshire Hathaway, are legendary for their distinctive investing approach. Yet many equally unconventional but less well known aspects of Berkshire's managerial practices and organizational structure are rich with lessons for those seeking to follow in Buffett's footsteps. Margin of Trust is the first book to distill Buffett's approach to management and corporate life. It provides a definitive analysis of the tenets of the Berkshire system, its costs and benefits, and how it can be adapted for other organizations. Lawrence A. Cunningham and Stephanie Cuba develop a new account of how Berkshire Hathaway works, showing that the key to its success is trust. Profiling partnership practices and business methods, they contend that Berkshire's distinguishing feature is a culture in which autonomy and decentralization are core management principles. Cunningham and Cuba provide instructive examples of how this model has been successfully adapted by other companies that share a faith in trust as an organizing principle. They also offer candid commentary on the risks of a trust-based approach and how to mitigate them. Margin of Trust features illuminating analysis of Buffett's take on the role trust plays in business agreements, what Buffett looks for in great corporate boards, and what lies ahead for Berkshire after its iconic leader leaves the scene.


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Warren Buffett and his company, Berkshire Hathaway, are legendary for their distinctive investing approach. Yet many equally unconventional but less well known aspects of Berkshire's managerial practices and organizational structure are rich with lessons for those seeking to follow in Buffett's footsteps. Margin of Trust is the first book to distill Buffett's approach to m Warren Buffett and his company, Berkshire Hathaway, are legendary for their distinctive investing approach. Yet many equally unconventional but less well known aspects of Berkshire's managerial practices and organizational structure are rich with lessons for those seeking to follow in Buffett's footsteps. Margin of Trust is the first book to distill Buffett's approach to management and corporate life. It provides a definitive analysis of the tenets of the Berkshire system, its costs and benefits, and how it can be adapted for other organizations. Lawrence A. Cunningham and Stephanie Cuba develop a new account of how Berkshire Hathaway works, showing that the key to its success is trust. Profiling partnership practices and business methods, they contend that Berkshire's distinguishing feature is a culture in which autonomy and decentralization are core management principles. Cunningham and Cuba provide instructive examples of how this model has been successfully adapted by other companies that share a faith in trust as an organizing principle. They also offer candid commentary on the risks of a trust-based approach and how to mitigate them. Margin of Trust features illuminating analysis of Buffett's take on the role trust plays in business agreements, what Buffett looks for in great corporate boards, and what lies ahead for Berkshire after its iconic leader leaves the scene.

30 review for Margin of Trust: The Berkshire Business Model

  1. 4 out of 5

    Dino

    This book is repetitive, with the same examples and quotes appearing in multiple places. It’s a short book of 130 pages that could have been shorter still. The analysis is surface level, creaming quotes from Buffet or Munger and drawing broad comparisons to other company structures such as private equity and the 3G model. There is little sense that the authors have any special knowledge of Berkshire’s inner workings. The one exception is perhaps the vignette about David Sokol, one of Buffet’s risi This book is repetitive, with the same examples and quotes appearing in multiple places. It’s a short book of 130 pages that could have been shorter still. The analysis is surface level, creaming quotes from Buffet or Munger and drawing broad comparisons to other company structures such as private equity and the 3G model. There is little sense that the authors have any special knowledge of Berkshire’s inner workings. The one exception is perhaps the vignette about David Sokol, one of Buffet’s rising stars, who first purchased $10 million of shares in a company, Lubrizol, and then recommended that Buffet acquire it. Sokol “forgets” to mention his recent “investment” to Buffet. While not found guilty of insider trading by the SEC, his career with Berkshire swiftly ends and the story is meant to illustrate Buffet’s ruthlessness toward anyone who risks the company’s reputation. The thesis of the book is that Buffet’s company, Berkshire, has survived and thrived as a conglomerate due to the Trust-based culture Buffet has created. He has adopted a partnership model, seeks a win-win, and is loathed to make any changes at his portfolio companies, preferring to defer to the management teams who run them. A quote from Buffet’s partner Charlie Munger encapsulates the ethos of trust in the context of scandals: “The greatest institutions … select very trustworthy people, and they trust them a lot … [T]here’s so much self respect you get from [being] trusted and [being] worthy of the trust that [the] best compliance cultures are the ones which have this attitude of trust. [Some corporate cultures] with the biggest compliance departments, like Wall Street, have the most scandals. So it’s not so simple that you can make your behavior better automatically just by making the compliance department bigger. This general culture of trust is what works. Berkshire hasn’t had that many scandals of consequence, and I don’t think we’re going to get huge numbers either.” In addition to the role of a trust-based culture in preventing bad behavior, Berkshire’s decentralized model allows each CEO to tailor its resources for its unique needs. Centralization, while purporting to avoid duplication of resources, does not always deliver on this promise. Witness the swelling of head offices that grow unchecked in the absence of a cost-conscious manager who is accountable for the “shared resource”. It is remarkable that amid a highly litigious public company environment, Buffet has been able to operate as he does. His board is a group of his contemporaries and friends, more than a few getting on in years, and amazingly, the board often does not learn of an acquisition until it has been publicly announced. It’s tough to envision this degree of latitude, earned by Buffet over a half century of market-beating returns, extending to any successor. It seems inevitable that upon Buffet’s passing, the board will shift from passive adviser to the more traditional role of “monitor” over the CEO and management. While the authors consider the risk that Berkshire will be “broken up” upon Buffet’s passing, they point out that it is a decision that will be taken by its shareholders who tend to see things as Buffet does (as shown by their twice rejecting a dividend in favor of their capital continuing to be reinvested). If you want to learn about Berkshire, I would pass on this book and instead read Berkshire’s annual letters to his shareholders. They offer more insight into the man and the unique organization he has created. The writing is better too.

  2. 4 out of 5

    Anders Gränfors

    Bershire code of trust Can Birkshire thrive without Buffet. The answer after reading this review is still Maybe. Even if Cunningham tries to convince me that there is a corporate ethereum larger than Munger and Buffet I am not so sure. IKEA have managed to thrive without Ingvar Kamprad. The succession was done very gradually. That is not the case in Berkshire I really hope that this power transfer now will intensify.

  3. 5 out of 5

    Daniel

    This review has been hidden because it contains spoilers. To view it, click here. Interesting exploration of BRK organizational philosophy and structure with trust underpinning both. Also good comparisons with other companies adopting similar principles and the centricity of trust to their systems, as well.

  4. 4 out of 5

    Gustavo Saiani

    While the book brings fresh facts about Berkshire, they are few. The text is structured poorly, typos abound (first edition). Stories are repeated several times, as in David Sokol's leaving the company. Unfortunately, I would recommend a pass on this book. While the book brings fresh facts about Berkshire, they are few. The text is structured poorly, typos abound (first edition). Stories are repeated several times, as in David Sokol's leaving the company. Unfortunately, I would recommend a pass on this book.

  5. 4 out of 5

    Greg

    This is a wonderful account of Warren Buffet’s Berkshire Hathaway business model. It is full of details and stories on how this legendary investor manage his company.

  6. 5 out of 5

    Tanya

    An easy read highlighting the philosophy of Warren Buffett. Interesting to read the behind the scenes account. The Private Equity compare and contrasts were not on target based on my own experiences. Interesting, nonetheless.

  7. 5 out of 5

    Ana Wong

  8. 5 out of 5

    Xunchi Chen

  9. 5 out of 5

    Joe

  10. 5 out of 5

    Jake Stein

  11. 5 out of 5

    Peter

  12. 5 out of 5

    Arun Lakshminarayan G

  13. 5 out of 5

    Thomas

  14. 5 out of 5

    Gregory Walsh

  15. 4 out of 5

    ryan boselo

  16. 4 out of 5

    Chance Butler

  17. 5 out of 5

    vincent

  18. 5 out of 5

    Guillem

  19. 4 out of 5

    MAREK SMRHA

  20. 5 out of 5

    Kevin

  21. 5 out of 5

    Idam Adam

  22. 4 out of 5

    Aswin Chandrakantan

  23. 4 out of 5

    Francesco

  24. 5 out of 5

    Peter Pribula

  25. 4 out of 5

    Tom

  26. 5 out of 5

    Laura

  27. 5 out of 5

    Ian Macfarlane

  28. 4 out of 5

    Richie Gill

  29. 5 out of 5

    Yee Loong Hoo

  30. 4 out of 5

    Larry

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