Despite Warren Buffett's incredible talent for allocating capital, he is also aware that he can't run Berkshire Hathaway on his own. That means that his most important role isn't actually investing in companies--it's investing in people.
In his 1986 letter to Berkshire Hathaway shareholders, he explains that "The right players will make almost any team manager look good. [Vice chairman Charlie Munger and I] subscribe to the philosophy of Ogilvy & Mather's founding genius, David Ogilvy: 'If each of us hires people who are smaller than we are, we shall become a company of dwarfs. But, if each of us hires people who are bigger than we are, we shall become a company of giants.'"
So what does he mean by bigger? Buffett is stressing the crucial importance of hiring skilled specialists and knowledge workers with more aptitude and experience in their roles than the individuals doing the hiring.
To Buffett, the advantage of this approach is somewhat obvious: "If my job were to manage a golf team--and if Jack Nicklaus or Arnold Palmer were willing to play for me--neither would get a lot of directives from me about how to swing."
Hire smart people, then get out of their way
While many managers complain (some loudly) that "it's hard to find good help," Buffett disagrees: "I really have only two jobs. One is to attract and keep outstanding managers to run our various operations. This hasn't been all that difficult.... They were managerial stars long before they knew us, and our main contribution has been to not get in their way."
If you're ready to dismiss this somewhat self-deprecating remark as an attempt at humility, consider another source of managerial wisdom who certainly wasn't known for that characteristic: Steve Jobs.
Jobs--someone whose ego became the stuff of legend in Silicon Valley and beyond--echoed the sentiment that you should hire the most capable people you can and then let them do their work: "It doesn't make sense to hire smart people and tell them what to do; we hire smart people so they can tell us what to do."
If your business is having trouble achieving sustainable growth, you might want to look around you. As Buffett points out, "When you have able managers of high character running businesses about which they are passionate, you can have a dozen or more reporting to you and still have time for an afternoon nap."