“I think when you're in a company and you set a culture and expectations and an operating system, then you say to your employees, is this what you want to be part of? If not, we understand that and you can choose to leave the business.

But if you want to stay here, you need to get on board. When I was CEO, we were going through transformation. And I said to our team often, and they almost told me to stop saying it was, if you're not having fun four days out of five in this new culture and environment, it's probably not right fit for you.

And we encourage you to move on. We'll promote you to customer, whatever it may be. I think you want your team to be really committed, engaged, focused on driving the results, but also that it resonates with them and they care about it.”

"I think there's a few reasons it happens. One is I think change is happening faster and faster than it ever has. And it's very hard when you're managing a business and you're focused on your customer and you're focused on your product or your service to also focus on this outside world and landscape.”

“I think second is if you think about most leaders, they usually grow up in a business oftentimes. And when you grow up in a business, you become an expert in that business, in that field, in that industry. But sometimes you don't have the perspective of seeing other industries that perhaps have come before you that are different but similar in terms of what happened.

And so you lose some of that perspective. You gain the depth of experience, but that perspective is harder to have. And I think for us, it's like, how do we help leaders think about that and help them see around the curves that might be challenging?

But I think those are a couple of reasons that it's becoming more difficult for leaders.”

“I think the lessons are timeless, and they're what he exposes relatively consistently through those maxims, which I think is great because everyone can learn from him. But really the value of long-term thinking and long-term compounding, the eighth wonder of the world is compounding.

And the value of that, and if you think long-term and are set up structurally to think long-term, there's a lot of value in that. Second, the value of people and finding the right people with high integrity, people who care about what they're doing, and then giving them the right incentives and the right encouragement. Warren gave those people around him, his CEOs or others, really great autonomy and high expectations, but really let people have flexibility, and I saw the value of that.

And then lastly, just the value of continuous learning improvement. You know, Warren reads every single day, gets smarter, gets better. Those in the Berkshire ecosystem do the same, and I think that was something that resonated with me from when I was a kid on the farm.”

“If you only think about the long-term, you probably won't get out of the short-term, because you're going to miss the situations of today, the short-term sort of dynamics.”

“Sometimes you need a different skill set or a different experience to go where you need to go in a business, and sometimes the legacy team doesn't always have that.”

“Why would someone want to come to Pampered Chef? What we found was people weren't coming to Pampered Chef because they necessarily always loved the product or our location or some other factor.

They were coming because they wanted to learn and grow. We could give them opportunities through unimeritocracy that they can learn and grow more quickly and get rewarded for that and be excited by what we're doing. In essence, we really focused on storytelling and saying, what are we going to go do?

We're transforming a business. We're going to reinvent mealtime. We're going to focus on our purpose, which was emerging lives, one meal and one memory at a time.

That's what we're going to focus on. That really started to resonate with employees who were passionate about learning, growing, and then doing something that was unique and special. Then we focused on our culture of how do we actually accomplish that through the culture we're creating, both in terms of opportunities, promotions, incentives, growth, but also in terms of engagement, giving feedback, helping people grow and develop.

We ended up attracting a lot of people who wouldn't normally go to a kitchenware products business.”

“Think as companies scale and you get bigger, there's more complexity in terms of the people side of things. So we always start with people.

Do we have the right people in the right seats? Do we have the right culture? Do we have the right engagement? Do we have the right talent development and talent management? As we think about businesses, you can really enhance a business by focusing on the people and the foundation. We focus there first.

We focus on purpose second. What's the purpose of the business? What's the difference we make in the world? Are we aligned around that? What's the strategy to go execute that purpose and impact? Then we think about performance third.

Then we say, okay, how do we actually achieve those goals? How do we drive alignment and accountability? How do we focus on purpose?

I think if you start by focusing on performance, then I think you miss out on really these foundation settings, which are so critical to get alignment and to drive ultimately the most value in businesses.

That's another thing that people just throw out casually. People are our most valuable asset, but it's so easy to say those words and so hard to live that, because that means investing in your people. It means probably lowering your margins at certain points in time.

It's taking a disciplined approach to how we think about people. So it's not just, how do I reward people more, or how do we have more holiday parties or whatever it may be? It's actually taking a structured, disciplined approach.

We always say with our companies, typically businesses have a structured view to thinking about strategy or KPIs or budgeting. They have a calendar, they have, you know, discipline and an approach to that. We also say, where's your people calendar?”

"So that's everything from hiring to employer value proposition to what are the most critical roles to get the right people in. So on the attract bucket, how do we develop talent? Are we thinking about where people are going in their careers? Are we helping them get there? How are we thinking about that?

And then engagement, are we engaging our talent? Are we thinking about the culture? Are we thinking about incentives?

Are we thinking about communication? And how are we doing that most effectively to support the whole organization? The whole people framework is so significant in terms of what you can do in an organization, but it usually is an afterthought.

If you look at executive teams, usually in mid-sized companies, there may not even be an HR leader. If they are, it's a more junior-level, generalist type person versus a true talent partner. And so that weight all falls on usually the CEO to navigate it, but that's a lot when you're trying to navigate everything.”

“And as you're scaling, it becomes more and more important, because when you're small, everyone is close to the CEO. They see it, they feel the culture, they see the work ethic and discipline. As you get bigger, you need to sort of step away and have more of a system and a structure that allows for that to continue, because not everyone is going to be sitting shoulder to shoulder with the CEO.”

"We do a few things within our businesses as we think about talent. When we go into a new business, first of all, we really try to understand, what are the mission critical roles in this business? We find most mid-sized companies have between 15 and 30 roles that are the most critical roles to get right.

And these are the ones that are creating the most value. Each business, it may be slightly different. It may be sales in one business, it may be product development in another.

It may be finance in another, depending on what they're doing and how they approach. But do we really have clarity in what those are? Do we have the right capabilities?

Sometimes you might have a mission critical role that you don't have today, that you need the capabilities. So my example earlier of Pampered Chef, when I started a mission critical role for us was technology, we did not have those capabilities in terms of what we needed to go do. And so we had to build it.”

“Once we're in a business, then we really focus, okay, how do we develop our talent? And so we're using different conversations and different processes along the way to really make sure that we're aligned in doing that.

For us, it starts with do we goal set at the beginning of the year? Do we have clear KPIs? Because how do you assess people if you don't have clear KPIs?

And so you have KPIs of what are we going to go achieve? And then you give people the flexibility to go achieve those. You don't tell them how to achieve them.

You say, okay, you have the autonomy to go achieve these, but you give them the skills. So we do problem-solving trading. We help support them so that they're more equipped to actually go achieve those goals.

And they have visibility. And then they have the alignment. We're all going in this direction.

These are the most important KPIs.”

“And then we incorporate conversations or feedback. We're actually giving real-time feedback on, hey, you did this really well.

This is what we could do better. And then through that, you are implementing a talent management process. And then alongside of that, you're doing a leadership development process where you're identifying your leaders, you're helping them understand the vision, the expectations, the strategy.

Ultimately, they're helping shape that strategy. So it's a very sort of structured way of saying, how do we bring in people at the right stages, the right time to really help them enhance their own development, their own learning, their own contributions so that we can leverage their expertise and their insights even more critically.”

“We find areas that we like. We say if we want to go fishing, we want to find a pond with a lot of great fish. And so we want to understand what is an industry that we think has a strong moat or competitive advantage.

And we usually look at that by saying, okay, what are the returns on capital in the space? So quantitatively, can we see if there is a moat? And then qualitatively, can we understand the moat more effectively? How wide is the moat? Is it getting wider or more narrow over time? Is it durable?

Is it going to withstand the test of time? And so we're trying to sort of find those spaces. Once we find industries that we think are a fit there, we spend a fair amount of time reaching out to businesses, finding businesses, getting introduced to businesses.

We have operating advisors who help us understand as well. And then we really try to get smart and find how do we add value in these companies. And then another group of businesses we have are people who come to us, people who hear about what we're doing, who are excited.

And so they'll come to us and say, are you interested in my business, which we appreciate. And we always have the same assessment of what's the moat of the business, quantitatively, qualitatively, can we assess it? And then how do we think about those areas?

And what we've also done is we have built a community of 3,000 CEOs, owners and founders that we bring together to provide content and resources and support. And through that, we learn about new businesses, we learn new spaces, which help us also be better in terms of finding businesses that might be a fit for us. We only invest in one or two companies here.

We'll look at 500, so we're really selective at finding the highest quality businesses that have a long runway.”

"We call the five M's that we look at. First is moat. What is the moat?

What's the competitive advantage? Second is the market. You may have a moat, but is the market growing?

And do we think it's an attractive market? What is the growth rate? What are the likely dynamics of that?

Third, we look at management. Does it have a strong management team today? Or is it something where we think we can help build the management team if there's opportunities?

Sometimes there'll be a great business. It's got three strong leaders, but they need to build out a sales leader or a talent leader or a finance leader. Can we help them do that?”

“The fourth is what we call more potential. And there's some opportunity that's not being fully leveraged today that we think we can help them with. It might be expanding into new markets.

It might be a more structured approach to how they manage the business today. There are a variety of different avenues in terms of more potential, but absolutely a focus. And then for us, the fifth is margin of safety.

And what we mean by margin of safety is we don't want to have to have everything go perfectly right in order for us to be successful. We want to have a little bit of flex so that if there is something like COVID or a downturn or tear ups, that we can navigate that well with the management team and we don't put undue pressure on the business to make shorter term decisions because of something that's happening that may be outside of our control.”

"For us, moat is what we consider a competitive advantage. The simple example of why a moat is a castle, right? Do you have a castle that is a strong business, and then the moat you want to have around is what defends the castle and what is going to protect the castle.

A wide moat is going to protect a castle more, a narrow moat is going to protect it less. A moat can be driven by different dynamics. It might be you have a brand and a channel that in combination allow you to keep customers out of your business.

You might have a competitive position that allows you to be the low-cost provider that then allows you to attract customers and get route density in your market and then drive down prices further and costs further, which then allow you to attract more customers. And that will keep other people out of your business. There's lots of different types of moats.

There's network effect, there's unlimited supplier power, customers for a concentration and that can limit or expand your moat. But we're really focusing on how do we build a business that “that keeps competitors or new entrants out as effectively as possible. We find that moats are changing every day.

And some businesses that used to have amazing moats, like newspapers, now have eroded quite considerably. And there's other businesses where the moats are getting stronger. So trying to find those businesses where we think we can expand the moat.”

"It's hard in the moment to look and say, this moat is getting stronger. Because typically, it's easier to look back over the course of 10 years. The moat has gotten better or gotten worse.

I think AI is a good example of that. Probably will erode a lot of moats and a lot of industries and businesses because it reduces the friction or the cost for a new entrant to come in. And they can navigate the space more effectively.

I do think there probably will be a subset of businesses where AI actually makes their moat stronger. And because they already have some sort of structured system that is allowing them to have a competitive advantage. And so it might be, you know, maybe they build out a sales force with a technician base that is hard to replicate and for someone else to come into that.

And now AI allows them to quote more effectively or reduce their costs or improve their productivity so that then their costs go down. And if their costs go down, then they can pass that on to the customer and sort of cycle “that and to keeping more customers more effectively. I think it probably is a little early in the context of AI to see, okay, who's going to be the biggest winner, who's going to be the biggest loser, because it's a little bit more of a crapshoot at this stage, I'd say.”

“There's a lot of service businesses where AI could, with somebody with a background with AI who has a reflexive AI mindset, could come in and probably lower costs and create a temporary advantage over the next, I don't know, three to five years. But then you could use that to create this flywheel of pricing power with customers in the sense of giving better pricing so you're always booked.

But also in terms of, we can acquire businesses at the same multiple and get a way better return than other people.

Yeah. I think probably the biggest question in my mind is, how temporary is it and how quick is it? It'll be a race to the bottom where now prices will just go down and then other entrants will come into the market and the customers will capture the value versus the companies.

Or do you already have a moat or can you build a moat in a time where it actually allows you to sustain it and then you ultimately get a stronger business? That's I think essentially we're spending some time thinking about that as well, and especially in the service businesses. I think there are some that it's just harder for new entrants to come in.

If it's a regulated space where you have to get credentialed and there's limited number of credentials, that's harder for someone to come in. If you have a huge sales force and service force that's going out and implementing and supporting your customers, that's harder for someone else to come and replicate. Not impossible, but harder.”

“Do you have that aspect of your mode already that you can reinforce, and what does that look like? But I think that disruption is coming. I think it's going to happen pretty widely in terms of different businesses and industries.

If you have a great business today, are you thinking about that, and can you reinforce your mode and make it stronger?”

“In essence, we're looking at a return on invested capital, and as we think about that, is it going up, is it going down, is it staying the same? Do we think that that is reasonable for the space? What we find is that's one part of it.

You need to understand the quantitative, and typically if you have a mode, you can see it. You can see it in your returns in the business on what you're doing in your return on capital. But beyond the quantitative is then the qualitative.

"That, I think, becomes more important because if you looked at the newspapers, I would say once the remote started to erode, quantitatively, it still looks good for quite a period of time, even though qualitatively, it was starting to erode at that stage. The financials lacked and then it caught up. But I think that's typically what we're trying to do, is look at both the quantitative and the qualitative side.”

"For us, it's really looking at what's the earnings in the business, and then what's the capital required in the business to support those earnings. And so you can do the calculation and get a ratio. We typically say like an OK business is maybe 20% return on capital.

A great business is probably looking at 50% plus in terms of return on capital.

And when you say earnings, like there's a lot of ways that people are defining that now between EBIT, EBITDA, operating earnings, like what is earnings?

We usually look at EBIT, earnings before interest and taxes. Our view on EBITDA is there's some industries where it makes sense, but in most industries depreciation and amortization is real. And so if you focus on that, I think you sometimes give yourself false confidence in terms of what the business really looks like and what it really generates, because you're not since you're trying to get a proxy for cash, cash flow and cash generation.”

“So when we look at it, we'll usually look at EBIT as sort of an earnings approach, and then we'll focus in terms of what's the capital in the business. But earnings, we usually define as EBIT. In some cases, we'll look at EBITDA, but we try to be pretty selective of how we do that in the industries where depreciation and amortization are real.”