On a recent episode of WealthTrack, Consuelo Mack interviews Georgetown law professor Lawrence Cunningham regarding Warren Buffett’s evolution from skilled investor to business manager.

Here are highlights from Cunningham’s comments:

• Buffett first became famous as an investor, spending the early decades in Berkshire Hathaway buying common stock of public companies. Then, Cunningham explained, his businesses began spinning off so much cash that Buffett started buying companies outright.
• By the early 2000s, Cunningham notes, 80% of Berkshire’s assets were in operating businesses (versus in marketable securities) and Buffett “had to hone his managerial philosophy and skills.” To do so, he developed a “decentralized, trust-based, autonomous culture.”
• Cunningham argues that such an approach—buying companies that are run by strong and trustworthy managers and then leaving those managers alone to manage–“reflects a lot of common sense” but “not a lot of people do it.”
• He outlines the following investment lessons for corporate managers to be drawn from Buffett’s practices. Managers, he notes, should:
  • Think about the “entire operation from the owner’s perspective—that is, adopt a shareholder attitude.”
  • Own a “substantial portion of stock that they bought with their own cash.”
  • Focus on “the business as a business.” That is, making sure it takes care of its customers, vendors, and suppliers instead of focusing on movements in share price. “There is a big difference,” Cunningham asserts, “between a company’s intrinsic value and its stock price.”
• Cunningham warns that short-term thinking—which tends to dog much of Wall Street–can get in the way of a company’s developing strategic initiatives for long-term growth.
• Although the theme of “conscious capitalism”—which suggests that the interest of shareholders should not necessarily be the key focus in management—has become a popular debate topic these days, Cunningham argues that Buffett has really been practicing this approach his whole career. Specifically, Buffett believes that managers have a fiduciary duty to a company’s shareholders, but they must first tend to the needs of employees and customers, and ensure they are offering a quality product.
• Regarding mistakes Buffett has made in his career, Cunningham cites comments from the Berkshire CEO himself—that his biggest blunders came in the wake of doing something that his partner Charlie Munger said “no” to.