Sunday, July 16, 2017

Lessons for universities from Warren Buffett

This is not about managing university endowments!

On a recent flight I watched the fascinating HBO documentary, Becoming Warren Buffett.
He may be one of the richest people in the world, and perhaps the most successful investor of all time. However, what is much more striking than his success is how he got there: in a completely counter-cultural (or iconoclastic) way.

Here a few lessons that I think are particularly relevant to universities as they struggle with their identity, purpose, and management.

Several times Buffett and some of his admirers emphasised this. Good research of companies and understanding the market requires considerable focus. You can't be doing lots of different things or jumping into the latest fad. Universities need to focus on teaching and research. Faculty need to focus on just a few things they can do well.

The long view.
Buffett does not "play" the market. He finds companies that are undervalued or have enduring market share and keeps their stocks for decades.
Similarly, quality and innovative research requires large and long time investments. Rarely do things happen quickly.

Personal relationships are key.
Buffett has had a long and fruitful relationship with Charlie Munger. Furthermore, it seems within Berkshire Hathaway, the personal relationships between employees and with companies they invest in are key. If people can't get along or management is heavy handed or autocratic, long term productivity is unlikely.

Cut all the bureaucratic and management BS.
I might have misheard it but I got the impression that Berkshire Hathaway did not really have an HR or marketing department. Their reputation is their marketing. HR is worked out on a personal level.

It is all about the quality of the product.
Buffett looks for companies that have a quality product for which there is likely be long term demand. It does not matter how much slick marketing there is. In the long term, all that matters is the product. Similarly, universities need to focus on the quality of their "product": their graduates, and the content of the research they produce in papers and books.

Reputation is central.
Buffett preserves his and looks carefully at the companies he invests. Furthermore, a good reputation takes decades to establish but can be lost in days (e.g. through scandal). Universities with a good reputation should really think twice before they "cut corners"  to boost revenue [e.g. by offering expensive Masters degrees by coursework to international students but actually involve students taking undergraduate classes].

Integrity and leadership by example.
This is an important component of Buffett's reputation. Just one example is how he released his tax returns during last years US Presidential campaign. University managers who take/demand ridiculous salaries should think about how that undermines their ability to lead.

Jobs should be fun.
Buffett keeps working because he is having fun not because he wants to make more money. Universities should carefully consider whether they are creating an environment that employees enjoy.

I was also struck by Buffett's generous philanthropy, his concern about economic inequality, and that it would be hard to find a billionaire who was anymore the antithesis of Trump.


  1. I really have to say I am a bit disappointed with the recent trend on this blog. I used to read this blog as one of the very few internet places to learn and discuss condensed matter physics. It was on this blog that I finally understood the meaning of vertex corrections etc. Nowadays posts on condensed matter seem rarer and rarer.

    Just a thought from a longtime reader.

  2. I also find this post disgusting. Who can imagine Jesus carrying Carnegies wallet?

  3. Condensed matter physics isn't everything, anonymous folks. It's fine to mix up the science with thoughts on university politics.

  4. Activism is required in gentle form like this. There is a documentary by University of Leiden on becoming a scientist where the activism of Bohr , Einstein is explained. Linus Pauling was also an activist. This post may not have the punch of the legendary activists, but activism is required by acadmeics.

    Marc Edwards article perverse incentives in academia which was posted here is a form of activism. The message of this post is for more philanthropy to universities for academics to do good basic science.

  5. Why mention Trump?

  6. I really don't buy into the whole Buffett as Role Model shtick. He worked out how to make a fortune using other people's money, but he never innovated, created or did anything of benefit for other people. The companies he invests in are largely "B" ark organisations like insurers.

    Buffett likes to play the homespun wisdom act, but his organisation is as complex (and about as ethical) as Goldman Sachs. For all the wet noises he makes about tax policy he's never put his money where his mouth is and his companies engage in the usual range of taxation practices that all the big multinational companies do.

    The fundamental message of Buffett that applies to universities is that corporate ethics are not real ethics, and that fundamental concepts like "integrity" and "reputation" are all to easily corrupted by the glorification of profit.

  7. Thanks for the comments.

    I am glad that the first commenter has appreciated the science so much.

    I am painfully aware that I post less often and that there are less posts about science. Unfortunately, this reflects some changes in personal circumstances, including different job responsibilities and some mental health struggles. I am actually at the beginning of a four month leave from the university. I will post more about some of this in due course.

    I do recommend readers check out the blog, This Condensed Life, for lots of nice science posts.

    The blog has a diverse readership and I often get positive feedback about the diverse range of topics and perspectives covered. I just post what I am currently thinking about and that I think may be of interest to at least some subset of readers. If I have less time, energy, and mental space to think about science then I post less about it.

    1. To prof. RM. I am also a regular reader and usually anonymous commenter. I was sorry to hear you allude to your own current struggles. It didn't occur to me that the person who often - especially in non-science posts - best articulates and clarifies my own worries must have worries of his own. I wanted to say I view this blog both as a place where I can learn new insights about science, surprisingly broadly, but also about doing science and being an honest thinker. Thanks for doing what you do. I hope your holiday is relaxing and fun!

    2. Thanks for the kind words and encouragement.

  8. I only read the comment section occasionally and am quite surprise with the many negative comments about this post.

    First, regardless of whether I enjoy these posts or not, it is the author's right to post whatever they feel appropriate, as long as it does no harm to others. If one feels the posts is not useful to them, they could just not read them. One can use , so that one does not need to come to the blog site if the post is not of interest to him/her.

    About the non-technical content, perhaps because I'm not a condense matter researcher, I quite enjoy the non-technical posts, as it gives some lesson on meta-research and the academic world. I found them quite helpful for young academics like me.

    About this particular post. One needs to give credit to Warren Buffet for his skills. He actually spends the time to properly study the market, rather than becoming celebrity "hot air". It's easy to find the use of such an example in scientific world.