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Rupert Hargreaves
Rupert Hargreaves
Articles (1078)  | Author's Website |

Buffett, Malone, Bezos, Gates: What Links These Managers?

These 4 billionaires have several key traits that have helped them get to where they are today

March 27, 2019 | About:

Warren Buffett (Trades, Portfolio), John Malone, Jeff Bezos and Bill Gates (Trades, Portfolio) are some of the best business minds alive today.

All four of these managers have created hundreds of billions of dollars in value for their shareholders over the past several decades, and although each manager has made their money in different sectors, their investment and management styles are relatively similar.

Highly concentrated

For a start, each one of these managers has made most of their money with just one business.

Buffett has made millions from Berkshire Hathaway (NYSE:BRK.A)(BRK.), which is predominantly an insurance operation. Even though he owns many other businesses in different sectors, it is unlikely he would have been able to achieve the success he has without the ability to use his insurance companies' float.

Malone is known for his ability to do deals in the telecommunications sector. He established his reputation, as well as the bulk of his wealth, managing TCI before it was eventually sold to AT&T (NYSE:T).

Bezos made all of his money with Amazon (NASDAQ:AMZN) and Gates has made the bulk of his money through Microsoft (NASDAQ:MSFT).

Stick to what you know

As well as concentrating their efforts on developing just one business, these managers have also stuck to what they know. Buffett famously coined the term "circle of competence," and I think it is fair to say all of these managers have remained within their circle of confidence throughout their careers.

Gates could have taken some of his enormous fortune and used it to start up a business outside the technology sector. While he has donated tens of billions of dollars to his foundation, his central investment continues to be Microsoft.

Malone could have gone into a different industry after he sold TCI, but he continues to focus on cable companies, and to this day is one of the largest investors in the sector.

Focus on the long term

Another factor that links the success of all these investors is their focus on the long term. If you read Bezos' early letters to investors, it is clear that in the early days of Amazon, he was not thinking about how to boost earnings in the next few quarters, but where he could invest to drive growth over the long term. He has always been prepared to sacrifice profits in favor of building Amazon's competitive advantage.

Similarly, Malone has never chased quarterly performance figures. Companies in the Malone empire have never prioritized short-term profitability over long-term investment.

Continuously improve

The four billionaires are also looking to continually improve both their knowledge and the long-term advantages of their businesses. In the early days of Microsoft, Gates and his team completed many acquisitions that helped establish the company as the world's leading software business. In the decades since, the company has not slowed down.

According to FactSet, Microsoft spent $12.3 billion on research and development in 2016 and 2017. Regardless, Amazon is the biggest spender, by far, in research and development. In 2017, it deployed $22.6 billion.

In comparison, Buffett's drive to continuously improve is to focus not on capital spending, but knowledge. He spends most of his time reading and developing ideas, leaving the management of Berkshire's various businesses to others.

Conclusion

There is no shortcut to being a successful business manager, but by looking at what traits linked the best managers and investors of all time, we can refine our own processes.

Buffett, Gates, Bezos and Malone got to where they are today by focusing their efforts on what they know best, trying to improve and concentrating on the long term. These are strategies every investor can implement.

Disclosure: The author owns shares of Berkshire Hathaway.

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About the author:

Rupert Hargreaves
Rupert is a committed value investor and regularly writes and invests following the principles set out by Benjamin Graham. He is the editor and co-owner of Hidden Value Stocks, a quarterly investment newsletter aimed at institutional investors.

Rupert holds qualifications from the Chartered Institute for Securities & Investment and the CFA Society of the UK. He covers everything value investing for ValueWalk and other sites on a freelance basis.

Visit Rupert Hargreaves's Website


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