Warren Buffett’s annual shareholder letter provides two valuable insights for building materials companies. Now that Berkshire Hathaway is very invested in the construction and building materials industry, his insights are even more relevant.
1. Focus on the Forest – Forget the Trees
Warren’s letter says, “Investors who evaluate Berkshire sometimes obsess on the details of our many and diverse businesses — our economic “trees,” so to speak. Analysis of that type can be mind-numbing, given that we own a vast array of specimens, ranging from twigs to redwoods.
A few of our trees are diseased and unlikely to be around a decade from now. Many others, though, are destined to grow in size and beauty.”
It’s really hard to see the forest for the trees when you are so close to your business, but finding a way to do it will provide you with invaluable insights. You will make fewer mistakes and realize your goals faster.
Your day-to-day work is dealing with the “trees,” but you need to make sure you find a way to keep an eye on the forest. An experienced person from outside your company, with no bias in their observations, who will speak bluntly can be a valuable guide.
2. A Favorable Tailwind
Warren Buffet is one of the biggest fans of our country and economy. He has a wonderful plain-language way of making the case for business.
He compares our economy to a tailwind that can help you grow your business.
Smart airline pilots will look for tailwinds to get them to their destination more quickly and at a lower cost. Building materials companies need to do the same.
The route you have been flying successfully may no longer have the tailwind that once made it easier. Too many building materials companies keep flying the same course even after the tailwinds have shifted to headwinds that make sales growth more difficult and costly.
The fact that buildings and homes are always being built and improved provides you with a tailwind. Where, how and why buildings materials are chosen, sourced and used is constantly changing or shifting from a tailwind to a headwind.
Often, building materials companies only need minor course correction to shift from fighting a headwind to being pushed forward by a tailwind.