The Oracle of Omaha
We all still know who Warren Buffett is right? Sometimes I have to check myself so I don’t sound like I just came out of a time machine from 30 years ago.
For those that don’t pay too close attention to the investment world, few would argue against the notion that Warren is the GOAT of investing.What you might not know is just how simple Buffett’s approach is to investing. There is no shortage of quips, metaphors, and phrases he has in the world but he sums it up best with this quote:
“Put all your eggs in one basket, and watch the hell out of that basket.” – Warren Buffett
That phrase is quite contrary to the notion we always heard growing up of “Don’t put your eggs in one basket.” How this philosophy plays out in his investment strategy is that Berkshire Hathaway (his investment company) pools cash and will constantly reinvest that cash in a business until he has a reason not to, ie there are no further growth opportunities.
He will then take the excess cash (in the form of dividends) from the now growth capped company and put it wherever he thinks the next best growth opportunity lives. This is why BH has never paid a dividend on their stock, because there is always another opportunity to invest for a better return.
Without giving you the entire history, its actually how Berkshire Hathaway formed. It originated as a growthless textile business that was on the decline (the whole industry was). Buffett saw the writing on the wall so while the getting was still good, he diverted the excess cash in the business to other investment opportunities.
Eventually the textile portion went out of business but what was left was an early version of what we know Berkshire Hathaway to be to this day. A super successful investment company. How is that for a pivot?
Great story Russel, what the heck does that have to do with agencies?
Two things. The first…always be investing. And the second…never start a side hustle. I’m going to focus on the first and leave the second for next time.
Growth oriented agency owners, successful agency owners, make investments in their business.
I’ll go as far to say, growth will not happen without investment.
For early stage owners, that investment typically comes in the form of investing in themselves. Courses, reading, coaches, mentors, etc. The bigger the business grows, that investment gets moved to the team, process, sales, etc. Investment capital can be paid in time and money. Of the more profitable and larger agencies I’ve talked to, every single owner found their egg baskets and invested heavily in them…and of course watched them like a hawk. Right now, in your business, there is one investment that will pay off tremendously more than anything else.
The question becomes…Is that where your investment capital is focused?
Does this sound too simple, too elementary? Perhaps, but I’d be willing to bet that for most of us, we don’t have the level of discipline employed by Buffett to actually go deeper into fewer baskets. There is nothing extraordinary about Buffett’s approach. It’s his discipline to his approach that makes him successful. This is often why we as owners take the approach most investors take. Since I don’t know exactly where to put my investment, I’ll spread it out over a number of things to be safe.
An Agency Story – Featured Episode
David has achieved more than respectable success in a relatively short amount of time. If I could redo this episode with him, I’d have to ask where he’s focused his investment, because I know he’s done it well. Check out his story!
I’m off to Austin this weekend to verify my son is still alive
Sincerely,
Russel
“The Backboard”
