Working For Great People At Great Companies
“Managing your career is like investing – the degree of difficulty does not count. So you can save yourself money and pain by getting on the right train.”– number 28 in “The Tao of Warren Buffett” by Mary Buffett.
In my year-end post, Ten Lessons Learned In 2007, my number eight lesson learned was “Work for great people at great companies”. Mary Buffett details the lesson with the following account from her former father-in-law:
One not only needs to learn what kind of business to invest in but what kind to work in. If one goes to work for a company with poor long-term economics, then he can never expect to do really well because the company doesn’t do well. Salaries will be below average and raises will be few and long between, and there is greater risk of losing your job because management will always be under pressure to cut costs.
But if you go to work for a company that has great long-term economics working in its favor, then the company will be awash in cash. This means higher salaries and tons of raises and promotions for a job well done. Plus there will be plenty of room for advancement as management looks for ways to spend all that free cash.
You want to work for a company that has high margins and makes lots of money. And you want to stay away from businesses that have low margins and lose money. One is a first-class train ride to Easy Street; the other is a long, slow hard freight-train ride to a Siberian nowhere.
To drive Warren and Mary Buffett’s point home, examine the company that I work for - Avionics Systems, Inc. (not the actual real name) and its stock performance. The company provides a 401K program and presently matches my contributions with 8% in company stock. The historical return on the company stock is 22.41% (since 2001). Assume I am 29 years old and have $10,000 in company stock, and the company’s stock continues to perform at the historical level of 22.4% until I retire in 33 years at the age of 62. My $10,000 of company stock would be worth $7,906,015. And that’s not adding any more shares to the account.
Now what if I had not chosen to work for this great performing company, but rather worked for an average company that performs at the historical stock market average return of 11%? My $10,000 in company stock would be worth $313,082 at retirement.
You see Warren Buffett’s point? Work for great companies. It pays off in the long run.
Are you working for a great company? If not, go get a great job this year.
Want some suggestions? Try Garmin Ltd. (GRMN), The Procter and Gamble Company (PG), Research In Motion, Limited (RIMM), Apple Inc. (AAPL), Google Inc. (GOOG), Intel Corporation (INTC), Microsoft (MSFT), Dick’s Sporting Goods Inc. (DKS), or T Rowe Price Group Inc. (TROW), all which outperformed the market the past year and have great long-term economics working for them.
The Sacramento Executive
(Note: I own shares in The Procter and Gamble Company.)