Integrity Warren Buffett Quotes

Somebody once said that in looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if you don’t have the first, the other two will kill you. You think about it; it’s true. If you hire somebody without [integrity], you really want them to be dumb and lazy.

I is for Integrity, be honest with yourself and others.

The rule is simple: People with integrity are predisposed to perform; people without integrity are predisposed not to perform. It is best not to get the two confused.

The right manager can have an absolutely huge impact. Find people with brains, energy and integrity,

Somebody once said that in looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if you don’t have the first, the other two will kill you. You think about it; it’s true. If you hire somebody without [integrity], you really want them to be dumb and lazy.

Other aspects of human capital include integrity and trust. As Warren Buffett has remarked, “I look for three things in a person: intelligence, and a high energy level, and integrity. If they don’t have the latter, the first two will kill you.”47 Being worthy of trust is one of the most valuable human capital traits one can possess.

We will not go into businesses where technology which is way over my head is crucial to the investment decision. I know about as much about semi-conductors or integrated circuits as I do of the mating habits of the chrzaszcz. (That’s a Polish May bug, students—if you have trouble pronouncing it, rhyme it with thrzaszcz.) Furthermore,

Unfortunately, a good reputation for personal integrity, developed over many years, can be lost quickly. Warren Buffett was exactly right when he said, “It takes 20 years to build a reputation and five minutes to ruin it.”20 The psychologists John Skowronski and Donal Carlston have demonstrated that people don’t evaluate someone’s integrity by observing all of her actions and taking some sort of “average.”21 Rather, people place a heavier weight on negative actions. For a person to be a “liar,” he needs to tell a lie only occasionally; for a person to be “honest,” he must tell the truth all the time.

In the great majority of cases the lack of performance exceeding or even matching an unmanaged index in no way reflects lack of either intellectual capacity or integrity. I think it is much more the product of: (1) group decisions—my perhaps jaundiced view is that it is close to impossible for outstanding investment management to come from a group of any size with all parties really participating in decisions; (2) a desire to conform to the policies and (to an extent) the portfolios of other large well-regarded organizations; (3) an institutional framework whereby average is “safe” and the personal rewards for independent action are in no way commensurate with the general risk attached to such action; (4) an adherence to certain diversification practices which are irrational; and finally and importantly, (5) inertia.6 Classical

As Charlie Munger has said, “I think I’ve been in the top 5% of my age cohort almost my entire adult life in understanding the power of incentives, and yet I’ve always underestimated that power. Never a year passes but I get some surprise that pushes a little further my appreciation of incentive superpower.” An example from FedEx is one of his favorite cases in point. As he explains, the integrity of the FedEx system relies heavily on the ability to unload and then quickly reload packages at one central location within an allotted time. Years ago, the company was having a terrible problem getting its workers to get all the boxes off and then back on the planes in time. They tried numerous different things that didn’t work, until someone had the brilliant idea of paying the workers by the shift as opposed to by the hour. Poof, the problem was solved.2 FedEx’s old pay-by-the-hour system rewarded those who took longer to get the job done. They were incentivized to take longer. By switching to pay-by-the-shift, workers were motivated to work faster and without error so they could go home, yet still earn the wages of a full shift. For the workers, finishing early amounted to a higher effective hourly wage. By aligning the business’s interests with the worker’s incentives, FedEx got the outcome it and its workers both desired. The

One way to make yourself less vulnerable to copycats is to build a moat around your business. How Can I Build a Moat? As you scale your company, you need to think about how to proactively defend against competition. The more success you have, the more your competitors will grab their battering ram and start storming the castle. In medieval times, you’d dig a moat to keep enemy armies from getting anywhere near your castle. In business, you think about your economic moat. The idea of an economic moat was popularized by the business magnate and investor Warren Buffett. It refers to a company’s distinct advantage over its competitors, which allows it to protect its market share and profitability. This is hugely important in a competitive space because it’s easy to become commoditized if you don’t have some type of differentiation. In SaaS, I’ve seen four types of moats. Integrations (Network Effect) Network effect is when the value of a product or service increases because of the number of users in the network. A network of one telephone isn’t useful. Add a second telephone, and you can call each other. But add a hundred telephones, and the network is suddenly quite valuable. Network effects are fantastic moats. Think about eBay or Craigs-list, which have huge amounts of sellers and buyers already on their platforms. It’s difficult to compete with them because everyone’s already there. In SaaS—particularly in bootstrapped SaaS companies—the network effect moat comes not from users, but integrations. Zapier is the prototypical example of this. It’s a juggernaut, and not only because it’s integrated with over 3,000 apps. It has widened its moat with nonpublic API integrations, meaning that if you want to compete with it, you have to go to that other company and get their internal development team to build an API for you. That’s a huge hill to climb if you want to launch a Zapier competitor. Every integration a customer activates in your product, especially if it puts more of their data into your database, is another reason for them not to switch to a competitor. A Strong Brand When we talk about your brand, we’re not talking about your color scheme or logo. Your brand is your reputation—it’s what people say about your company when you’re not around.

The bedrock challenge for directors, nevertheless, remains constant: Find and retain a talented CEO — possessing integrity, for sure — who will be devoted to the company for his/her business lifetime. Often, that task is hard. When directors get it right, though, they need to do little else. But when they mess it up, . . . . . .

In looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if you don’t have the first, the other two will kill you.

The right manager can have an absolutely huge impact. Find people with brains, energy and integrity, and you can own the world.