Bailout

Teflon Buffett

By Felix Salmon

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.)

Full post as published by Macroprudential on December 26, 2009 (boomark / email).