Are You Top Dog….Or Second Banana?

Charlie Munger is Warren Buffett’s right-hand man. And one of the richest men in the world. As vice chairman of Berkshire Hathaway, Munger has a net worth of $2.4 billion (according to Forbes).

Most people recognize Warren Buffett’s name, but few know his very talented partner. Does that minimize Charlie Munger’s wealth or success? Absolutely not.

It may sometimes seem like I’m always pushing you in the direction of becoming No. 1 – of having your own business and being your own boss. And I won’t deny that I spend a lot of time talking about the advantages of entrepreneurship and equity. But some people are better off as No. 2.

In my career, I’ve been both. There’ve been times when I’ve been the unknown No. 2 in a business someone else started. I’ve also been No. 1 in businesses I started myself. But whenever I’ve been the head honcho, I’ve installed a CEO as fast as I could. That’s because I firmly believe that almost any business will do better if it is run by two people.

One person should have the majority of power. But he needs a partner (or sometimes two partners) he can rely on to do things that he can’t do as top dog. He needs a partner to balance out his personality, to excel in the areas where he is weak. If you can provide these skills to the person who owns the business you work for, you can make an extremely good career for yourself as No. 2.

Now I’m not talking about being an assistant. I’m talking about being a full-fledged partner – someone with almost as much power and influence as the No. 1 guy, but with slightly less equity in the business. In fact, being No. 2 can be a fantastic deal for chicken entrepreneurs and ambitious career execs who want the benefits of being the head of a business without having to invest as much time or money as No. 1.

Your goal is probably to be the one on top. If so, that’s fine – because what we are helping you do with ETR will put you there. But realize that it’s possible to have more success, make more money, achieve more, and more fully enjoy your life’s work in the No. 2 position.

Continue Reading

Discovering Warren Buffet’s Secret

During my trip to South Africa and Australia last year, my business partner Bill Bonner and I had a conversation that should interest you. For those of you who don’t know, Bill and I worked together to found Agora publishing.

We were speaking about our company’s future. Right now, Agora is a $400-plus million publishing business with high profitability and good growth. By any conventional standards, it is a great business. But Bill is not satisfied. His goal is to make Agora a business that will last a hundred years. Very few businesses are able to do that.

To accomplish Bill’s goal, Agora will have to develop what Warren Buffet calls a “long-term, durable competitive advantage.”

Coca-Cola is a perfect example of what I’m talking about. Coca-Cola has been selling the same product since 1892. It spent money inventing its core product over one hundred years ago. Today, it spends very little money on research and development. It also has low manufacturing costs, since the machinery required to make Coke rarely needs updating.

These factors give Coca-Cola a big, long-term advantage. They can devote all the money they don’t spend on research, development, and manufacturing to marketing. That is how Coca-Cola stays way ahead of its competition.

This got me thinking about investing. Coca-Cola is one of the companies that Warren Buffet invested in many years ago. After losing money by investing in some speculative opportunities, Buffett realized he would be much better off investing in businesses that were more established and had distinct competitive advantages—businesses like Coca-Cola, Kraft Foods, and American Express. Berkshire Hathaway, his holding company, owns these kinds of companies. He buys them and holds them. If their share prices drop, he doesn’t sell them. He buys more shares. His goal is not year-by-year profits, but owning more and more shares of great companies.

This strategy is very different from what most professional investors use. Yet, it works. In fact, it works very well. Everyone acknowledges that Buffet is the most successful investor in history.

Continue Reading