Wednesday, March 30, 2011 2 comments ++[ CLICK TO COMMENT ]++

David Sokol, a driven executive

The Wall Street Journal has some notes on Daid Sokol's character:

The 54-year-old Mr. Sokol and Mr. Buffett have much in common. Both men live in Omaha, worked as newspaper-delivery boys and grocery-store employees. Early in his career, Mr. Buffett succeeded with a famed private investment partnership. Mr. Sokol was the chief of an energy company while he was still in his twenties.

But Mr. Sokol's hard-charging personality is a contrast to the folksy popular image of his boss. Mr. Sokol, chairman of Berkshire's MidAmerican Energy Holdings Co. utility operation and CEO of jet-rental company NetJets Inc. until he resigned late Monday in a letter to Mr. Buffett, was known for coming into the office at 6 a.m. and seldom taking vacations.

In a self-published 2007 book on management style, "Pleased But Not Satisfied," Mr. Sokol attributed his relentless work to a "driving fear of failure."

"Early in my career, I recognized that I was not always the smartest individual in the groups that I worked in," he wrote. "I would come in earlier, stay later and do whatever I could to create a better result in whatever I was assigned to do."

Mr. Sokol has said that he kept a notebook updated at least once a month with the "successes or failures" of employees, who were then ranked "in the order in which I would terminate each member if I was forced to do so one at a time."

Mr. Sokol entered Mr. Buffett's world when MidAmerican shares tumbled after several geothermal projects in Indonesia were delayed amid the Asian currency crisis. Mr. Sokol began to weigh a management-led buyout, and broached through a go-between the idea of doing a deal with Berkshire.

Mr. Buffett offered to purchase a 75% stake in MidAmerican, then trading for about $27 a share, for $35 a share. But Mr. Sokol and other MidAmerican managers drove a hard bargain, rejecting the offer. After several weeks, Mr. Buffett finally agreed to raise his bid by five cents a share, according to a 2010 profile of Mr. Sokol in The Wall Street Journal.

Mr. Sokol has said that he kept a notebook updated at least once a month with the "successes or failures" of employees, who were then ranked "in the order in which I would terminate each member if I was forced to do so one at a time."

Mr. Sokol entered Mr. Buffett's world when MidAmerican shares tumbled after several geothermal projects in Indonesia were delayed amid the Asian currency crisis. Mr. Sokol began to weigh a management-led buyout, and broached through a go-between the idea of doing a deal with Berkshire.

Mr. Buffett offered to purchase a 75% stake in MidAmerican, then trading for about $27 a share, for $35 a share. But Mr. Sokol and other MidAmerican managers drove a hard bargain, rejecting the offer. After several weeks, Mr. Buffett finally agreed to raise his bid by five cents a share, according to a 2010 profile of Mr. Sokol in The Wall Street Journal.
Seems like a pretty aggressive manager... not my type of boss... driven to succeed but probably alienates many along the way.

One of the problems with Warren Buffett is that he under-pays workers. He doesn't pay them, whether low-level worker or senior management, much, but in return allows them greater freedom. David Sokol clearly suggests that he wasn't being compensated enough (at least that's my read based on his comments about trying to create a financial future for his dependents).

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2 Response to David Sokol, a driven executive

Parker Bohn
April 3, 2011 at 2:40 AM

We will probably never know the inside story, but my opinion is that Sokol's departure absolutely is due to the LZ trades.

Buffett's press release reads as fairly innocuous until you consider that Buffett never criticizes anyone by name, ever (although he feels free to criticize broad groups, such as hedge fund managers in general).  To me, however, his release comes across as fairly frosty.

Here is why I see a link:
1)  the timing
2)  Buffett mentions the LZ trades and Sokol's retirement in the same press release.  This creates an obvious and permanent link in people's minds.  Buffett is very careful with his words and would not create this impression by accident, especially about a trusted longtime lieutenant.
3)  Buffett mentions that Sokol sent word of his resignation through an intermediary.  This is not how you quit a job you have held for 15+ years, if you are on good terms.  Furthermore, it seems to me that for Buffett to point this out publicly is about as strong a negative statement as he ever makes about someone ('we are not on speaking terms').

I think Buffett felt used and decided that Sokol did not fit the culture at Berkshire.

This is just my opinion after having read quite a bit of Buffett over the years, and I am sure that many would disagree.  There are a couple of pretty good blog discussions to be found here:
http://www.rationalwalk.com/

Sivaram Velauthapillai
May 9, 2011 at 8:41 PM

Late reply but I only got a message in my e-mail now saying this message was posted. Anyway...


I think Sokol quit on his own but he knew he made a mistake. It's one of those things where you know you made a mistake and the best thing to do is to quit and avoid ruining others' reputation.

I can't believe he made such a mistake. It still doesn't look illegal but such a silly mistake.

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