The Babe Ruth of Good Business Today
One hundred years ago this week, on July 11, 1914, George Herman (“Babe”) Ruth made his major league debut, for the Boston Red Sox at two-year old Fenway Park. Over the course of his baseball career, The Great Bambino set many records, including leading the league in home runs for twelve seasons; most total bases in a season (457); and highest slugging percentage for a season (.847). In all, he hit 714 home runs, a record that stood until 1974, when Hank Aaron of the Atlanta Braves claimed the title. But that is not why the Babe is immortal.
Other home run kings have achieved nothing like Ruth’s iconic status. Many decade-leading hitters—such as Harry Davis, Gavy Cravath, or Jimmie Foxx—are barely known. Even falling short of Ruth’s stature are the two players who passed him in home runs, Aaron and Barry Bonds (Pittsburgh Pirates and San Francisco Giants), who took the top spot in 2007. Nor is Ruth’s immortality due entirely to the fact that he also excelled as a pitcher: for forty-three years he held the record for consecutive scoreless innings pitched in World Series play and his overall win-loss ratio (.671) remains the seventh best of all time.
Ruth’s immorality, rather, is due to how, through such extraordinary feats, he changed the game of baseball. He brought power to the sport at a time when typical strategy was to move players around the bases one small hit at a time. While baseball was thriving as an American pastime before he played, the Babe’s bold style, vast generosity, and utter unpretentiousness won the public’s adulation. His deep sense of ethics helped to rescue baseball from the damage done by the miscreant players who threw the 1919 World Series. His strength and optimism gave hope to millions during the Great Depression. Ruth made baseball a richer sport with a wider and enduring following, which is why we all recognize his name a century after his rookie year. And people venerate the Babe despite his many bad personal habits, such as gluttony, promiscuity, and pugnaciousness.
In American business, we have likewise enshrined transformative figures like Ruth despite faults. Andrew Carnegie, John D. Rockefeller, and Cornelius Vanderbilt built the nation’s infrastructure while J. P. Morgan and Henry Ford forged its business structures and methods. We condemn the cheaters to memory’s hell—from Charles Ponzi to Bernie Madoff—or at least purgatory, as with Michael Milken. We remain ambivalent about the likes of Jay Gould and others still derided as robber barons.
Peering into the crystal ball—ahead to 2064, 2114—who among contemporary figures will be etched in the civic consciousness? In baseball, that status may go less to players than to analysts and coaches. Credit Bill James (Historical Baseball Abstract) for uncovering through statistics the drivers of baseball success and lionize Oakland Athletics manager Billy Beane, who implemented a game-changing strategy based on big data—and became famous for doing so thanks to Michael Lewis’s page turner, Moneyball.
In business, today’s candidates for tomorrow’s public immortality might include Steve Jobs for visionary leadership, Jack Welch for management prowess, Jack Bogle for shrewd investing, and Warren Buffett for . . . all those skills. While I root for the immortality of each of these luminaries, my money is on Buffett.
To date, Buffett is heralded primarily as history’s greatest investor—beating the market by double digits over five decades. But that’s like saying Babe Ruth was history’s greatest power hitter: true but inadequate. Just as Ruth was both a famous home run king as well as an unsung pitching ace, Buffett is both a savvy investor and a spectacularly successful yet underappreciated manager, one whom astute investors have come to admire and discerning managers are starting to emulate. More important, just as Ruth’s presence became a game-changer, Buffett’s approach to business promises to revolutionize American capitalism.
In my upcoming book, Berkshire Beyond Buffett: The Enduring Value of Values, I describe Buffett’s approach at Berkshire Hathaway Inc. as generating economic profits from virtuous behavior. By reaping returns on capital from intangibles such as thrift, integrity, entrepreneurship, autonomy, and a sense of permanence, Berkshire practices a philosophy of capitalism that does well by doing good, is sensitive but unsentimental, lofty yet pragmatic, and public spirited but profitable. This approach drives power returns for Berkshire shareholders (which, in the spirit of disclosure, includes me and my family).
Berkshire’s rivals—whether private equity firms or strategic buyers—often maximize immediate short-term gain by borrowing heavily, cutting workers’ pay, increasing consumer prices, and externalizing the costs of doing business. Berkshire does the opposite. It uses scant debt, respects labor as partners, shares cost savings with customers, and pays a tax bill proportional to its big footprint—$5 to $7 billion annually in recent years.
And this attitude is neither altruistic nor moralistic, but practical and economic. This way of doing business matches today’s zeitgeist, with its heightened sense of stewardship and fair play, where increasing numbers of companies pay more than the minimum wage and those companies seeking to hide income offshore are excoriated. The approach also has a timeless horizon. As the spirit continues to spread, moving across companies from Intel to Whole Foods, the public beneficiaries will have Buffett to thank—perhaps for a century to come.