Buffett Tells Coke CEO Study Failure, Avoid Complacency

UPDATE: The video of the Coca-Cola Annual Meeting (Mr. Buffett enters around the 17-minute mark) is available HERE and HERE.

Warren Buffett, who controls the largest stake in Coca-Cola Co. (KO), told the chief executive officer of the soft-drink maker to stay ahead of competitors by reviewing what made other businesses falter.

“I like to study failure,” Buffett told Coca-Cola CEO Muhtar Kent at the Atlanta-based company’s annual meeting today. “We want to see what has caused businesses to go bad, and the biggest thing that kills them is complacency. You want a restlessness, a feeling that somebody’s always after you, but you’re going to stay ahead.”

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“I’m the kind of guy that likes to bet on sure things,” Buffett told Kent. “If you take care of a great brand, it’s forever. Those are the kind of businesses I like.”

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He said today that he wants a culture that promotes innovation and customer service.

“That belief that tomorrow is more exciting than today, you just have to have it permeate the organization,” he said. “The world does not belong to the pessimist. Believe me.”

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The article above reminded me of this excerpt from Bill Miller’s Q2 2008 letter to investors:

Mason Hawkins said, "Warren, I'm an optimist. I think this whole thing can turn quickly, and surprise people. Are you an optimist?" "I'm a realist, Mason," the sage replied. Warren went on to say he was optimistic long term, and backed that up in a talk the next morning on the remarkable history of growth, innovation, and wealth creation the U.S. had produced over the past 200-plus years. He also offered a sober assessment of the current challenges we face, and said it would take some time to work through them.

My opinion is that the best outlook to take on investing and life is not to be a pessimist or an optimist, but to be a positive realist. I think it is important to be a positive person and to have the long-term optimism that Mr. Buffett discusses, but I also think it is vital to be a realist in the present moment. Though a positive one.