ABSTRACT
Leadership is a process a person motivates a group of people to
achieve a certain organizational goal. There are different types of leaders,
and some are perceived to be better than others. However, after studying about
different leaders, it does not benefit anyone to pass judgement on them.
Instead, we should look at different qualities of the leaders and learn from
their strengths and avoid their weaknesses.
In this report, I will compare 2 great business leaders of our time
– Warren Buffett and Bill Gates. They have built up billion dollar companies
and are personally worth billions of dollars. What were some of their qualities
that made them who they are? A point by point analysis will be made of the 2
leaders.
At the end of the report, having compared the 2 leaders, a
conclusion is made as to who, between them, was the more effective leader?
Introduction
A leader, a manager and an entrepreneur – each have certain
distinctive qualities but there are also overlapping qualities shared by the
three. Their inter-relationship may be summarized by the following figure.
Leaders are usually focused on their goals and have the ability to
lead and motivate their followers to achieve that goal. The goal could be a
desirable one such as scaling the peak
of Mt Everest, or
undesirable ones such as suicide bombing missions. Managers on the other hand
work within the constraints of a system and ensure the efficient operation of
the organisation. An entrepreneur is someone who is willing to take certain
risks to enhance the financial well being of his venture.
The purpose of this report is to evaluate the effectiveness of two
business leaders, and finally to conclude as to who was the more effective
leader.
Leaders have followers and act differently under different
situations. As such, these 3 are intertwined and ultimately lead to the success
or failure of a leader. The relationship is as shown in Figure 2.1 of Hughes
(2009), page 26.
There are several qualities that are attributed to a successful
leader which have been listed on page 196 of Hughes (2009). Some of the
attributes are:
-
Dynamic
-
Decisive
- Foresighted
-
Excellence Oriented
- Ambitious
- Trustworthy
-
Team Builder
- Confidence Builder
This report evaluates 2 business leaders – Warren Buffett and Bill
Gates.
Warren Buffett
Warren Buffett was born in 1930 in Omaha, Nebraska
(www.wikipedia.org). He is a successful
investor and businessman, and a philanthropist. He is synonymous with Berkshire
Hathaway of which he is the CEO and Chairman. His personal worth as of 2008 was
US$62 billion.
During the early part of his career, he was mainly an equity trader
and investor. During the later stages, he bought not only stocks but whole
businesses. The uniqueness of Berkshire Hathaway is that, despite being a huge
holding company of many businesses, Warren Buffett does not manage any of the
companies. Warren Buffett buys over businesses with the condition that the
current CEO or owner continues to run the business.
As such, Warren Buffett can be described as a great motivator – he
has to motivate people who are already successful and rich, to continue working
(J. O’Lourghin, page 60). He does not manage the businesses but provides
direction. This has paid off for the company as the CEOs in charge do their
best to produce the best results in their capacity (J. O’Lourghin, page 77).
Warren Buffett is an expert in his field, i.e. business valuation.
He uses the same methodology whether he is buying stocks or whole businesses.
He will only buy businesses that he fully understands, which are within his
“circle of competency” (J. O’Lourghin, page 18). He is a decisive person and is
famous for taking 5 minutes to buy billion-dollar companies.
He is ambitious and has set a target annual rate of return of at
least 15%. He also has an unwavering confidence in himself and buys huge
amounts of stocks when everyone else is dumping them (last demonstrated during
the recent financial crisis). He also does not follow the herd and avoided
getting burnt by the dot.com bubble.
He is trustworthy. During his annual shareholders meetings, he will
often criticize himself for the mistakes he made, e.g. paying too high a price
for China Petroleum. He is also a great teacher. His letters to shareholders
don’t just rant off a list of figures but they provide a lot of information on
his thoughts behind certain activities.
Bill Gates
William Henry "Bill" Gates III was born in 1955 in Seattle. He is co-founder and Chairman of
Microsoft, as well as the largest single shareholder with 8% of common stocks (www.wikipedia.org).
He is a firm believer in the future of technology and drives his
company to accomplish his beliefs. He has made it possible for the personal
computer to be a household item. He is dynamic and sets a very high standard
for himself, which his staff and managers try to emulate (Thomas J. Neff &
James M. Citrin, page 130).
He is a great leader who does not manage day to day operations, but
lets his managers run the company. Even though he was the CEO and Chairman,
nobody reports directly to him (www.newsweek.com).
He is highly energetic and constant innovator, constantly producing newer
software to enhance previous versions. Even though he stepped down as CEO, he
continues to be the Chairman, and created the post of Chief Software Architect.
This demonstrates his expertise in this field.
He pays great attention to detail as accounts of his rebuttals
during his meetings with managers forces them to think in detail their
proposals (www.wikipedia.org).
He has turned Microsoft into a dominant market leader in the PC
industry to the extent that anti-trust suits have been filed against him.
However, he continues to come up with new products relentlessly.
Who was the more effective leader? Both contributed significantly in
their respective areas: Warren Buffett in the field of business valuation and
Bill Gates in the field of software. Both are great philanthropists but in
different ways. Bill Gates set up his own foundation, whereas Buffett
encourages his shareholders to nominate a charity of their choice for the
company’s contribution to charity.
Bill Gates has stepped down from Microsft after 4 years of
succession planning. Warren Buffett does not openly declare that he has a
succession plan but insists that the mechanisms put in place in Berkshire
Hathaway will ensure that the company will function as well without him.
I feel that Bill Gates is a more effective leader as he has touched
lives not only in his field of expertise (i.e. software), but also through his
foundation. He has helped, whether directly or indirectly, billions of lives
which no current political leader can claim to have achieved.
No two leaders are alike but they have some common traits. Both Bill
and Buffett manage huge corporations (which are worth more than some small
countries), but they do not get involved in the day to day operations. Instead,
they focused more on providing vision and direction, but of course made
critical decisions when required.
Even though in my opinion Bill Gates is the more effective leader, Warren
Buffett has made no smaller contribution, and still continues to do.
1.
Hughes, R., Ginnett, R. and
Curphy, G., 2009, Leadership: Enhancing the Lessons of Experience, 6th
Edition, McGraw-Hill Irwin,
New York
2.
Donald F. Kuratko, 2009, Introduction
to Entrepreneurship, Eighth Edition, South-Western Cengage Learning, Canada
3.
James O’Loughlin, 2003, The
Real Warren Buffett: Managing Capital, Leading People, Nicholas Brealy Publishing, Maine,
USA
4.
Thomas J. Neff & James M.
Citrin, 2000, Lessons from the Top: In Search of the Best Business Leaders, Penguin
Books, Middlesex, England
6. Steven Levy, June 30, 2008, Microsoft
After Gates. And Bill After Microsoft., http://www.newsweek.com/id/142672