Source: Smart investors.

In the spring of 2011, Buffett sent an email to Jim Weber, the CEO of Brooks Running at the time, praising Brooks' performance at the Berkshire Hathaway shareholder meeting.

At the time, Brooks was just a subsidiary of Russell Athletic, reporting to Berkshire Hathaway.

It was several layers away from Berkshire Hathaway, the shoe manufacturer owned by

During the annual Berkshire Hathaway shareholder meeting in May, Brooks would hold a running event to promote the brand to shareholders. Brooks even created a limited-edition 'Berkshire Hathaway One Hathaway' shoe (note: the insole and upper of the shoe feature a cartoon image of Buffett).

This 'Invest in Yourself 5K' event was created by Brooks in 2013 (note: Buffett and Munger both encouraged active participation in the post-meeting race, and almost all Chinese investors who made the pilgrimage would participate in this event).

Buffett continued to express in the email that he received a pair of New Balance shoes about 15 years ago and is still wearing them. He told Jim Weber that his shoe size is 10.5D, in case Jim Weber wants to change his Brooks shoes... after all, it would be embarrassing if he was photographed during a marathon...

At the end of the email, Buffett invited Jim Weber to Omaha for a steak dinner together when he has the time.

Buffett's lunch is known to be expensive.

That summer, Jim Weber went to the Berkshire headquarters and talked with Buffett for three hours about the business story of Brooks.

"How do you compete with Nike? Why don't they just squash you like a bug?" Buffett asked.

To make Buffett fall in love with Brooks, Jim Weber entered promotional mode, quickly discussing the journey of Brooks emerging from a wide, all-encompassing sports shoe and apparel business to become a company focused only on providing quality products for runners.

He also emphasized the growth in Brooks' market share and profit, with its sales nearly quadrupling in the past 10 years.

Jim Weber knows that Buffett will appreciate Bruker Corp's profit and high return on investment, which makes investment and growth a value-creating activity.

Buffett also asked a lot of questions, from user dynamics to the supply chain.

As the holiday season approached at the end of that year, Buffett sent an email to Jim Weber, saying that he saw in the newspaper that Facebook's Zuckerberg bought a pair of Bruker Corp's TraceLan series running shoes. He wanted Jim Weber to know about this.

"In 2012, let's keep going, we just need to add a few million more users like Zuckerberg!" Buffett said.

Just after New Year's Day in 2012, Buffett contacted Jim Weber again to inquire about the integration between Bruker Corp and Berkshire's subsidiary Fresh Fruit Clothing.

"To what extent do you rely on Fresh Fruit Clothing? Do you share services or systems?"

Jim Weber's answer was that the integration level was not high, and other than legal and insurance, Bruker Corp was independent.

Buffett explained to Jim Weber on the phone that he had been considering making Bruker Corp a subsidiary directly managed by Berkshire.

He believes that Fresh Fruit has to focus on the development of clothing, while Brooks has the opportunity to continue developing as a shoe brand in the footwear category.

Jim Weber responded to him with surprise and delight, Brooks' performance in 2011 was very strong. Buffett laughed, 'Great, from now on, I will also take responsibility for Brooks' success!'

A few weeks later, Brooks became an independent subsidiary of Berkshire Hathaway. Jim Weber sent Buffett Brooks' annual report for 2011, which was also a record-breaking year: 33% revenue growth drove a 43% increase in operating profit.

Focus on the niche market of high-performance running shoes.

Cunningham, the editor of Buffett's letter to shareholders, is also a veteran Berkshire Hathaway shareholder and wrote:

'Based on experience, the valuation of shoe companies is twice their sales. This makes the value of Brooks equivalent to the value of Berkshire Hathaway's shares when it acquired Russell Athletic and Fresh Fruit.'

However, Bruker Corp has been in a cumulative loss of tens of millions of dollars for more than 10 years.

Founded in 1914 by a student from the University of Pennsylvania, Bruker Corp is now a well-established sporting goods company with a history of 110 years.

In the first few decades of its establishment, Bruker Corp's products emphasized being "all-inclusive", providing a full range of products for all types of athletes - runners, wrestlers, ice skaters, as well as football, basketball, and baseball players, etc.

The prices cover both high-performance sports products costing hundreds of dollars, as well as sports leisure products ranging from $60 to $80, and mass sports products ranging from $30 to $50, similar to the full range of leading American sporting goods company Nike at the time.

By 2000, over 50% of Bruker Corp's sales revenue came from mass sports products ranging from $30 to $50, with little competitiveness in the mid- to high-end market.

That fall, Bruker Corp was in crisis as the banks refused to provide funding for its operation.

On April 4, 2001, Jim Weber was appointed as the CEO of Bruker Corp, at a time when the scale of Bruker Corp was 1/153 of Nike.

Just two weeks after Jim Weber took over, Bruker Corp incurred a loss of $5 million, had a debt of over $30 million, and was struggling with a large amount of inventory, including outdated fabric worth millions of dollars.

Brooks at the time had not been able to achieve expected performance for many years, and the entire industry knew it was in a predicament.

Jim Weber recalls:

"What's even worse is that in the high-performance sports shoe market above $100, the competition is fierce and dominated by visible technology.

In every price range and zero distribution channel, Brooks' sales were ranked 6th or 7th."

The new strategy formulated by him for Brooks is to increase investment in the research and development of high-end products, while adjusting the distribution system and focusing on targeted marketing. It is not intended for leisure use by anyone, but strives to become the most recognized high-performance running equipment company for runners, with a high focus on high-profit and high-cost-effective running equipment.

Afterwards, Brooks also faced the huge doubts and market loss brought about by the "barefoot running trend", but they seized the opportunity to reinvent high-performance running shoes.

Michael E. Porter's famous competitive "five forces model" and the three major competitive strategies include descriptions of this strategy.

Brooks' strategic direction is neither a cost-based large-scale market strategy nor an emphasis on high value-added differentiation market strategy, but a "niche market" strategy targeting specific market segments.

China's market is seen as a long-term strategy for 30-50 years.

At that time, Jim Weber also asked Brooks to control inventory, improve cash flow and profit margins through timely development and delivery of products.

Because of missing the opportunity for full-price sales, there will be surplus inventory, which will in turn reduce the profit margin of the product and the user's perception of its value.

To this end, Brooks canceled 50% of its product line and 40% of its retail partnerships.

One key result of focusing on high-performance running shoes was the restructuring of Brooks' mid-priced stable series running shoes - the Adrenaline GTS series, which provided funding for the company's growth over the next 10 years.

To this day, this series remains Brooks' best-selling stability running shoe.

With the exit of low-profit products, Brooks focused on achieving its own profit growth and gradually built a 'moat'.

Brooks gave up producing and selling all shoes below $75. Shortly after, the company achieved its established performance goals and the team received its first bonus in a long time. By clearing surplus and aging inventory, as well as no longer investing in unprofitable cheap shoes, Brooks obtained a large amount of cash.

In 2004, Brooks' revenue increased by 26% compared to 2003, attracting widespread market attention. It was also in the same year that, due to its leading position in high-performance running products, Russell Athletic acquired Brooks for $0.115 billion (9 times the EBITDA of Brooks).

In the spring of 2006, 5 years after Jim Weber became the CEO of Brooks, Russell Athletic, which had acquired Brooks, was bought by Berkshire Hathaway and joined Fruit of the Loom.

By 2014, as Brooks celebrated its 100th anniversary, its revenue had increased to $0.548 billion.

In 2021, Brooks completed the $1 billion plan set by Jim Weber years ago, with total revenue of $1.13 billion. At that time, the 'Billion Dollar Club' was very rare, and globally there were only around twenty some brands, including Chinese brands.

Since 2018, Brooks' compound annual growth rate has exceeded 14%. Its compound growth in revenue and cash flow can even rival that of Hershey's confectioners!

Based on Berkshire Hathaway's quarterly report submitted to the SEC ending on June 30, 2024, it is known that Brooks' revenue in the first six months of 2024 increased by 12.3% compared to 2023, driving growth in the consumer products sector of Berkshire Hathaway.

However, as a running shoe brand still in its growth phase, Brooks' single-digit growth of 5% in 2023 is slightly slow.

This year's newly appointed CEO Dan Sheridan stated in an interview: 'China is one of the top ten running participation markets in the world. For Brooks, the development in China represents a long-term strategy of 30 to 50 years.'

In the second quarter of this year, Bruker Corp opened its first store in Shanghai, the first mainland store. They also plan to open their first stores in Beijing and Guangzhou.

We are witnessing whether the century-old store Bruker Corp can leverage the Chinese market.

What Jim Weber learned from Buffett and Munger.

In 2022, Jim Weber's book "Running with Purpose: The Story of Bruker Corp" will be published. The Chinese version, "This is Bruker Corp", published by Zhanlu, is also available now.

"Jim's inspiring story will inspire you, just as it inspired me in 2012, and made me realize that he would make Bruker Corp an independent star of Berkshire."

- Buffett

Jim Weber wants Berkshire Hathaway to have all the information it needs to understand and track his businesses. He asks Buffett and Greg Abel what information they would like to receive about Bruker Corp.

Buffett's response:

"Send me the front page of the income statement and any important information you think is relevant."

Buffett allows Jim Weber to handle the compensation issue of other employees at Berkshire's Brooks subsidiary independently, without sending expense reports to Berkshire.

Munger often sees the "trusted seamless web" as a pursuit in life, and Berkshire Hathaway's corporate culture reflects this concept.

"The culture I have experienced is one of encouragement and support. Buffett invests in people, and he allows them to manage themselves." Jim Weber describes this feeling.

Later, he proposed that Berkshire Hathaway establish an advisory committee at Brooks, an idea that was supported by Buffett.

Nowadays, Abel is also recommending this practice to other subsidiaries of Berkshire Hathaway. The benefits of this committee are: Berkshire Hathaway gives Brooks trust and responsibility, as well as a group of top talent. And when Brooks faces challenges and opportunities, it helps to sharpen its thinking and provide guidance.

In 2014, at the centennial conference of Brooks, Buffett was asked again: Why did you separate Brooks from Fruit of the Loom and make it a subsidiary directly reporting to you?

Buffett said in his unique, frank Nebraska-style:

"Bruker is a very outstanding company, it has too many advantages, not suitable to be a subsidiary of Fresh Fruit Clothes. I don't mean to offend Fresh Fruit Clothes, but I have found out what Bruker is doing, and it should be a subsidiary directly managed by Berkshire. When Bruker succeeds in the future, frankly speaking, I cannot take the credit!"

Next, he talked about another business framework: the importance of companies creating a "moat".

"If you have an economic castle—Bruker has one—people will try to take it away from you. At this time, companies need to do two things.

First, you need the right knights to guard this place, and we have found the right knights. (glanced at Jim Weber) Then, you need to build a moat around the castle. You need to constantly throw piranhas, sharks, and snakes into it, because people will try to cross this moat…

The ultimate moat is a great brand, but to protect this moat, the brand needs to enter the minds of every runner or potential runner in the world, so that they have an expectation for this brand, and then be satisfied with that expectation.

If you do this, the moat will continue to expand. People always want to run, and they want to know about all the famous brands. You want them to think of Bruker as something that can bring out their best and make the greatest effort for them, so it won't let them down. If you do this, the future is limitless…

Running will always be with us. There will be more and more people falling in love with running in the world. This demand will never disappear. We must encourage this demand and find a way to satisfy it. Running is so deeply rooted that we don't have to worry about this business disappearing."

In the book "This is Bruker", Jim Weber also shared the experiences he learned from Berkshire, especially appreciating the following points:

Honesty and integrity.

Buffett told executives to look for three qualities in the people they hire: intelligence, energy, and integrity. He added that if the last one isn't there, don't worry about the first two.

Munger has his own ABC rule for hiring - avoid arrogance, bureaucracy, and complacency.

Buffett also told Jim Weber that the CEO is also the Chief Risk Officer because risk is not something that can be delegated to someone else. "Don't do anything you don't want to see on the front page of the newspaper." The responsibilities of the Chief Risk Officer include hiring highly honest and responsible individuals.

Empowerment culture.

Berkshire Hathaway holds an annual managers meeting that includes a luncheon and CEO panel discussions on relevant business topics. In 2013, Jim Weber attended the meeting for the first time. On one side was a hamburger and on the other side was a salad, with no slides or spreadsheets. Buffett simply stood up and spent a few minutes emphasizing the company's good prospects and thanking everyone for their efforts.

As one of the most important companies in the United States, Berkshire Hathaway's annual business meeting lasts about 10 minutes.

Stay within your scope of ability.

During a company annual meeting, Buffett saw the managers of his three furniture enterprises standing together, 'I hope you are not discussing synergy because I have acquired three great companies. I don't want them to become one.'

He let each company do its own thing. It's not a team, but a combination of actively operating businesses, which has been effective.

Compliment

Buffett and Munger always give enthusiastic feedback to the approximately 60 managers and CEOs of Berkshire Hathaway. Their faces are projected during the meeting, and Buffett and Munger sincerely thank them. If they are mentioned in the annual letter, it is a reward for their value-added performance. Buffett always likes to praise publicly and criticize privately.

Permanence

In Buffett's letters and the 1996 'Shareholder's Manual' of Berkshire Hathaway, he discusses the gift that a financially strong permanent family gives to its acquired companies.

At Berkshire Hathaway, there is no Goldrami-style management behavior (that is, giving up the least promising business every time). The days of dealing with banks and Wall Street analysts are permanently over. For minority shareholders or family businesses who want to continue to participate in operations, Berkshire Hathaway is a unique acquirer.

Jim Weber's leadership: focus, curiosity, and trust.

We also extracted 10 of Jim Weber's views on the construction and leadership of the Brooks brand from his autobiography and some of his recent podcast episodes, which are very inspiring and worth sharing with everyone:

1. The goal of building a brand is not to imitate competitors, but to find untapped opportunities within the advantages that competitors already possess.

2. (Sometimes successful internal corporate change) requires moving a brick wall forward, as there are many ways to fail.

3. Every industry develops conventional ideas, and following them entails certain risks. Usually, these ideas seem to reflect the path to success of market leaders, or methods that can easily yield short-term gains in sales.

Conventional ideas lead to marketing the obvious rather than creating unique or compelling solutions.

4. Brooks puts all resources into developing leading products and quality services for customers, and making runners and influencers excited about our products and brand.

5. Brooks may be a small part of Fruit of the Loom business, but we adhere to our discipline and work diligently with rigorous data analysis. We understand and master our operational numbers, and we are trustworthy and deserving of autonomy.

6. (Private equity investment) Is the fund in the early or late stages of investment? Is the current fund profitable or incurring losses? Understanding these aspects is crucial for you to know how much time you have to turn the situation around, establish your business, and provide value.

Don't think that these investors will be your friends, they are your financial partners. Their mission is to get returns, and you need to understand what this means for your company.

As Buffett and Munger said, you should strive for the shareholders you should strive for, and you can and should be independent.

7. Strong leadership is a hard currency that is always valuable in business and life. True leadership can be distilled into three key words: focus, curiosity, and trust.

From the first day I worked at Bruker, I knew that in order to survive, we had to stay focused, and as CEO, my responsibility is to clear the obstacles for the team in this regard. If I can't clarify the focus, I may not be able to lead a good team. Clear goals plus sustained focus will help you ultimately succeed.

Curiosity is about solving puzzles in a constantly changing world. Nothing is constant, be a learner, not a learned person. Curiosity often reflects a humble attitude when understanding the world around you. Solving customer needs also requires this strong curiosity.

In the early stages of my career, I lacked empathy. I was emotionally unstable and eager to find the right answer. This often meant that I only cared about numbers and ignored some social interactions. Over the years, I have gradually realized that behind every number and everything in business, there is human behavior. Success requires building relationships with people, which means trust between people.

8. A CEO needs to adhere to six leadership principles:

1) Have a niche market: Enter a niche market, and pursue excellence by continuously growing the business and providing high-quality profits.

2) Build a "moat": Create a unique and defensible brand proposition. The credit obtained from users is the standard to measure its strength and also a necessary condition for sustainable success of the business;

3) Have profitability: Profitability should be included in your business model. If successful, it can create an investment flywheel to strengthen your moat;

4) A vision without execution is a mirage: Without action support, dreams and plans are meaningless;

5) Lead sincerely: Focus, curiosity, and trust are the foundation for communicating with others, treat others with respect, honesty, and humility;

6) The ultimate advantage is a strong culture.

9) Great brands connect with users' minds and souls on both rational and emotional levels. Especially in high-performance running gear, the purchase of products is based on the rational level of personal needs;

If the product is effective, trust will follow. However, when a runner chooses to wear a specific brand and becomes loyal to it, you know they have surpassed rational trust and entered into emotional attachment. They wear a particular brand not just because it is effective, but because it shows the world who they are.

10) (The biggest misconception about excellent leadership) is that you can truly create cultural value through command and control. If you want to attract excellent talent, you must create a "polaris" (goal) to provide these individuals with objectives, mission, and opportunities.

Happiness comes from the connection between people.

On March 12, 2024, Brooks announced that Jim Weber, who had been CEO for 23 years, stepped down. In fact, as early as 2017, Jim Weber had been diagnosed with esophageal cancer.

Setting aside the direction of commercial propaganda, Jim Weber's story is very inspiring. Not only because of the courage he showed in saving a company when he was still struggling to make a living at Brooks, but also because of his courage to communicate his condition to everyone around him, including Buffett, after being diagnosed with cancer.

This kind of inspiration can be seen especially from his sharing in the "ACQUIRED" podcast two years ago.

After the diagnosis, he was initially shocked and fearful, but immediately he remembered the book that had the greatest impact on him - Viktor Frankl's "Man's Search for Meaning".

Frankl observed that life is not just about happiness, but also about meaning and influence.

"Are you living in fear of what you might lose, or are you fighting for what you might have?" Jim Weber didn't want to live in fear, but to look ahead. He believed that tomorrow is there for the sake of his sons, his grandchildren, his wife, and the people he works with.

Two weeks after the second surgery was his 60th birthday. At a family gathering, he shared his truth:

"We all need to enjoy this journey. Happiness in life does not come from the outcome... life is about immersing yourself in the journey with the people around you every day. Goals and joy come from connecting with others and existing for them day after day."

Finally, stay positive every day. Positive emotions transmit positive energy and make everything better. Eat Chitor (a puffed food) at least once a month... find time to laugh heartily and have fun.

Life is beautiful."

Editor/rice