01 Invitation from the Oracle of Omaha

Just after New Year's Day in 2012, when the holiday ended, I returned to the office and found a voicemail from Warren Buffett. He mentioned he had an idea and wanted to discuss it with me. Throughout the holiday, I had been using email, and I felt deeply guilty for not checking my voicemail. I had actually left Warren Buffett's voicemail untouched for a whole 5 days! I immediately called Buffett back. Buffett wanted to know the integration level between Bruker Corp and Fresh Fruit Clothing, a subsidiary of Berkshire Hathaway (Bruker Corp's previous controlling shareholder).

"To what extent do you rely on Fresh Fruit Clothing (previous controlling shareholder of Bruker Corp)? Do you share services or systems?"

As he suspected, the answer was, the integration level was not high. Apart from legal and insurance, Bruker Corp operated independently. In fact, Fresh Fruit Clothing might see us as the 'crazy uncle in Seattle'. In my view, Berkshire Hathaway has a unique business model and culture among the Fortune 500 companies. It is an insurance company with a portfolio that includes both wholly-owned businesses and partially-owned businesses. It is well known that Berkshire Hathaway acquires a company and lets it operate completely independently.

Warren Buffett, Charlie Munger, and 25 Berkshire employees truly believe that autonomy and decentralization are important ways for a company to maximize value over time. As a part of the Russell movement, Bruker Corp is two levels below the businesses managed directly by Buffett, yet our performance has still caught his attention.

Observers of Berkshire Hathaway, as written by Lawrence A. Cunningham in the book "Berkshire Beyond Buffett", state that based on experience, a shoe company's valuation is twice its sales. This makes Bruker Corp's value equivalent to the share value during Berkshire Hathaway's acquisitions of Russell and Fresh Fruit Clothing.

On the phone, Buffett told me that he has been considering making Bruker a subsidiary directly managed by Berkshire Hathaway. He believes ckh holdings needs to focus on the development of outfits, while Bruker has the opportunity to continue to grow as a running shoe brand in the footwear category. I was both surprised and delighted, and immediately told him how strong Bruker's performance was in 2011, and our momentum for the following year will definitely be strong.

He laughed. 'Great,' he said, 'from now on, I will also take responsibility for Bruker's success!'

As I walked out of the office after the call, I could hardly contain my excitement. What a great start. Although at the time, I hadn't fully figured out what benefits Warren Buffett's personal support would bring to Bruker.

02 Making Buffett fall for Bruker

On April 17, 2006, Berkshire Hathaway's ckh holdings announced the acquisition of Russell Athletic, including Bruker, coinciding with the 110th Boston Marathon. In January 2012, I had a very fortunate conversation with Buffett, which was significant months before that. In the spring of 2011, he sent me an email praising Bruker's performance at the Berkshire Hathaway annual meeting. At the meeting, we showcased our brand, sold some products, and met shareholders who enjoyed talking to Buffett and Munger about the companies they acquired. We created a limited edition 'Berkshire-Hathaway Shoes'.

In the email, Buffett admitted that about 15 years ago, he received a pair of Nike shoes, which he still wears ('I'm that kind of person'). He told me that his shoe size is 10.5D, in case I wanted to give him a replacement pair of Bruker's shoes. After all, if he ran the marathon in 3 hours, and staff took photos, that could be embarrassing. He also admitted that his running level is not very good, even a 100-yard sprint, he needs to rest twice.

I immediately sent him a care package containing Bruker's shoes and outfits, and he politely expressed his gratitude, and promised to retire his old New Balance shoes. But what caught my attention was his closing remark - 'If you travel to the East Coast and have time to stop in Omaha for a steak, that would be great.' This invitation surprised me because our level was obviously several levels lower than Berkshire Hathaway, we were just a subsidiary of Russell Athletic reporting to ckh holdings.

That summer, I decisively decided to travel to the East Coast. I walked into the plain headquarters of Berkshire Hathaway, known for having only about 25 employees, yet leading a huge enterprise with over 0.27 million employees and a scale of 110 billion dollars. I was led into Buffett's office and started a three-hour long meeting. The meeting was not disturbed by anything, no phones, calls, or emergencies. The door was closed, Buffett looked at me intently as if he had given me all the time in the world. He was warm, generous, curious. He brought his true passion for business into our conversation about Bruker's story. 'How have you grown? How do you compete with Nike? Why don't they squash you like bugs?'

Good question, because in that year, Nike was 68 times larger than Bruker Corp.

The purpose of my participation in this meeting is to make Buffett fall in love with Bruker Corp, giving us the opportunity to establish a unique, defensive brand in a great category with high capital returns. I was completely in sales mode, speaking at a speed of 100 miles per hour. I talked about the journey Bruker Corp has taken from a wide, mass-market sports footwear and clothing business to its rise as a company focused solely on providing quality products for runners. I detailed Bruker Corp's high product focus, distribution training, unparalleled customer service, and how the essence of 'run happy' sets it apart from other brands in the industry. I emphasized Bruker Corp's market share and profit growth, with sales increasing nearly fourfold over the past 10 years. I knew he would appreciate Bruker Corp's profitability and high return on investment, a metric that turns investment and growth into a value-creating activity. The meeting progressed quickly, and Buffett asked many questions, from user dynamics to the supply chain.

Warren Buffett drove me to lunch, continuing our conversation and fulfilling his promised steak dinner, although we both opted for salads instead. We discussed the opportunities in China, changing consumer purchasing behaviors, and economic improvements. I told him that he had been guiding me from afar since the mid-1980s because I had read everything he had written.

Upon returning home by plane, I felt very lucky. Tom Ross, our long-time CFO and a key designer of Bruker Corp's strategy, told me that the lunch I had just enjoyed was worth millions of dollars.

Buffett auctions off lunch once a year - a one-on-one dining and conversation experience to benefit Glide, a social justice charity in San Francisco. In 2019, Buffett's lunch was sold to the highest bidder for $4.6 million.

As the holidays approached, Buffett sent me an email, sharing an article he read in The Wall Street Journal. Mark Zuckerberg from Facebook bought a pair of the new TrailChaser running shoes, becoming a user of Bruker Corp. Buffett wanted me to know about this. "Keep it going in 2012, we just need to add a few million more users like Zuckerberg!" he summed up.

03 The fourth owner of Bruker Corp in a decade: Berkshire

A few weeks later, Bruker Corp became an independent subsidiary of Berkshire, and I sent Buffett the 2011 annual report. It was a record year: 33% revenue growth drove a 43% increase in operating profit. After experiencing the economic downturn and the Barefoot Earthquake, we witnessed Bruker Corp's largest product launch in history - PureProject. Buffett often writes short notes, with his old portrait (not a recent one), and he sent me some encouraging words: "You make me look good, and that's not an easy task, keep up the good work."

In October of that year, Buffett asked me to introduce Brooks's story and strategy to Berkshire Hathaway's board of directors. Considering our small scale at Berkshire, I felt greatly honored to be invited. Berkshire's long-term businesses, such as the fourth largest U.S. insurance company GEICO, BNSF Railroad Company, Berkshire Hathaway Energy and others, are much larger enterprises. Brooks became its direct subsidiary in the first year. Buffett assured me that the directors would be eager to hear my message, and I was looking forward to this opportunity.

Within the allotted 60 minutes, I introduced Brooks's history, market, brand positioning, strategy, culture, and financial indicators to the board members. Just as Buffett's question last year about Nike indicated, they wanted to know how we compete. I explained that Brooks represents excellent product performance because it is the first step in creating brand engagement and trust. Runners will be the ultimate judge of our success. They will vote with their feet and money.

To illustrate what we believe is the unique brand formula, I showed a slide showing three key ingredients: biomechanics and science, art and runner insights. This blend is seasoned with a healthy dash of 'Run Happy' (see figure 6-1).

We effectively compete with dozens of brands much larger than us because we are dedicated to creating the world's best running gear. In addition, we excel at attracting runners and serving this market as niche experts.

Every Sunday morning during the Berkshire Hathaway annual meeting in May, you will see Berkshire employees, shareholders, and visitors running along the Missouri River in Omaha. Many people requested that we hold a 5K race, and Buffett accepted the proposal. In 2013, we created Berkshire's "Invest in Yourself" 5K race.

Buffett invites shareholders to the first Berkshire 5K run which will take place on Sunday morning after the meeting ends. "Unfortunately, I will skip the run as someone has to fire the starting gun." This race has become an annual event at Berkshire. Every year, Buffett and Munger announce the race at the start of the shareholders meeting. While everyone is welcome to sign up, these two leaders plan to sleep in. However, they do hope that everyone has a good run.

Creating Advisory Committee in 2004

Berkshire Hathaway has a unique business model in the Fortune 100 companies list. Approximately 25 head office employees change based on business needs, rather than the other way around. As a newcomer, I wanted to make sure that the boss at Bruker Corp understood all the information needed to track our business, I asked Warren Buffett and his non-insurance operations vice chairman Greg Abel what information and reports they would like to receive about Bruker Corp's operations. Buffett's response was: "Send me the front page of the P&L summary and any other important data you think is relevant. The only meeting needed is to determine my compensation annually." He asked me to handle the compensation of other Bruker Corp employees independently without having to submit expense reports to Berkshire Hathaway. He said, "Your CFO can approve them." He told me we could issue a press release about the reorganization to Berkshire Hathaway. "Your judgment on wording is fine." Munger often refers to a "seamless network of trust" as a pursuit in life, and Berkshire Hathaway's corporate culture reflects this concept. As a corporate manager, I can confirm that having trust is very important. With complete trust, I am highly focused on achieving results at every level as I hold myself accountable for all outcomes.

I intentionally visit Omaha every year to meet with Buffett and review Bruker Corp's strategy and progress. The culture I experience is one of encouragement and support. Buffett invests in people, letting them run themselves. In our early conversations, I asked Buffett if he would be willing to establish an advisory committee at Bruker Corp. While I did not know Charlotte Gaiman, I felt she would be an excellent member. Charlotte Gaiman lives in Seattle and is a member of Berkshire Hathaway's board of directors. Buffett was very supportive of this idea, and now Greg Abel of Berkshire Hathaway is recommending this practice to other subsidiaries.

My goal is to recreate the excellent atmosphere we had at John Whitney Company: a super-wise board with a variety of experiences that our senior leadership team can collaborate with to make us better. I miss this ideal board, but I also know that our leadership team must prepare strategies and plans for those who will challenge us and ask many questions, from whom they will benefit. We and the team have become so familiar that we can almost complete each other's sentences. Drawing from the experience of a CEO friend whose private company has a very effective board model, I created the following Advisory Committee concept for Bruker Corp:

1. Objective: Addressing and resolving important issues. Avoiding time-consuming and uninteresting trustee committee and regulatory responsibilities. Selfishly speaking, these meetings are more of a leadership team's need rather than the board's need. The goal of the meetings should be to expand, adjust our plans, and benefit from the experience of board members to guide the next steps of work.

2. Format: Non-trust advisory committee, meeting 4 times a year, each lasting for 7 hours, from 8 am to 3 pm, including a working lunch.

Meeting focus: Business review, in-depth discussion of selected strategic issues, aiming to have at least 40% of board members speaking time. We will also invite board members to participate in Brooks' activities to experience our brand and culture.

Our Brooks Advisory Board, established nearly 10 years ago, has had a huge impact on our team and company. Brooks, with its surpassing energy, has attracted many incredible talents, including former Microsoft Entertainment and Devices President Robbie Bach, former Vice Chairman of Barclays Bank Deanna Oppenheimer, Berkshire board members, former Microsoft executive Charlotte Guyman, former Nike executives, Levi's Americas President Annie Rhodesi, Zulily co-founder Darrell Cavins, Outdoor magazine CEO, MapMyFitness founder, former Chief Digital Officer of Under Armour Robin Thurston.

The establishment of the Brooks Advisory Board has the dual benefit of the trust and responsibility given to us by Berkshire and a group of top talents. They help sharpen our thinking and guide us when we face challenges and opportunities.

When Buffett attended the conference at Seattle City Hall with our entire global team, this generous spirit was fully embodied. This was the commemorative conference for the 100th anniversary of the Brooks brand. The event took place at the historic Moore Theater in Seattle, hosted by Charlotte Guyman. Guyman started by asking Buffett a question that everyone in the room wanted to hear the answer to: why did he separate Brooks from Fruit of the Loom and make it a subsidiary reporting directly to him?

Buffett, in his typical candid Nebraska style, said:" Brooks is a very outstanding company with too many advantages to be a subsidiary of Fruit of the Loom. I have no intention of offending Fruit of the Loom, but I found what Brooks is doing and it should be directly managed by Berkshire's subsidiary. And, when Brooks succeeds in the future, candidly speaking, I can't take all the credit!"

He then talked about another business framework: the importance of building a "moat" for the enterprise. "If you have an economic castle - as Brooks does- someone will try to take it from you. At this point, a company needs to do two things. First, you need the right knights to guard the place, we have found the right knights." At this point, he glanced at me, and the Brooks team immediately burst into enthusiastic applause, which startled me with everyone's attention. "Then, you need to build a moat around the castle, you need to constantly throw cannibals, sharks, and snakes into it because people will try to cross this moat..." he continued, "The ultimate moat is a great brand, but protecting this moat requires getting this brand into the minds of every runner or potential runner in the world, making them have an expectation of this brand, and then being satisfied with that expectation. If you do this, the moat will expand continuously."

People always want to run. They want to know about all the well-known brands. You want them to see Brooks as something that brings out their best and makes the utmost effort for them so it doesn't disappoint them. If you do this, the future is limitless... Running will always be with us. More and more people around the world will fall in love with running. This demand will never disappear. We must encourage this demand and find a way to meet it. Running is so deeply rooted that we don't have to worry about this business disappearing.

Finally, Buffett concluded:" Brooks is doing absolutely what it should do. You are improving the lives of people who use your products."

What I Learned at Berkshire in 05

Over the past 10 years, many of us at Bruker, especially me, have learned a lot of valuable experiences from Buffett and we are still learning. Both this book and business review articles are dedicated to this Omaha prophet. It's true. People often ask me how it feels to work with Berkshire and its leaders. In my business career, I have never had such a high level of autonomy, nor have I ever felt so responsible and accountable. In all the ownership structures I've experienced, it is closest to controlling operations and being fully responsible for them. Why? Because the managers are completely autonomous and fully responsible.

Buffett is constantly looking for passionate people, and he has done a lot of homework to attract and retain those who are passionate about their careers. He always wants those who love their business. Buffett told the Brooks team that he imagines himself as Michelangelo going to the Sistine Chapel every morning. He could do anything, but what he most wants to do is perfect his masterpiece in that office.

In cooperation with Berkshire, I have experienced a lot of values ​​and qualities. Among them, the following are the ones I appreciate most.

1. Honesty and Integrity

Buffett tells executives to look for three qualities in the people they hire: intelligence, energy, and integrity. He added that if you don't have the last one, don't worry about the first two. Munger also has his ABC rule in employing people - avoid arrogance, bureaucracy, and complacency. We often remind ourselves to pay attention to these aspects. Buffett also told me that a CEO is also a Chief Risk Officer because risk is not something you can delegate to others. He added a witty remark: 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 seriously responsible individuals. Munger and Buffett believe in a culture: trust is earned. Whether trust is deserved or undeserved is a matter of principle.

2. Empowering Culture

Berkshire holds a manager's meeting every year, which includes a luncheon and CEO group discussions on relevant business topics. I first attended in 2013. Buffett hosted this simple luncheon: on one side there were hamburgers, on the other side salads, not even slides or spreadsheets. He just stood up, took a few minutes to emphasize the good year for the entire business, and thanked everyone for their efforts. He said the only failure was himself because that year he didn't find a suitable acquisition target to invest in and generate more cash flow. 'Let's make another good year next year.'

As one of the most important companies in the USA, Berkshire's annual business meeting lasted about 10 minutes.

Stay within your abilities.

At one annual meeting, Buffett saw the managers of his three furniture companies standing together in the corridor. "I hope you are not talking about synergies because I acquired three great companies. I don't want them to become one. He let each company do its own thing. This is not a team, but a combination of actively operating businesses, and it works effectively. This highly focused approach to discrete customers and markets is highly consistent with Bruker's DNA.

Buffett and Munger always give enthusiastic feedback to approximately 60 managers and CEOs of Berkshire. During the meeting, the faces of these managers and CEOs are projected, and Buffett and Munger sincerely thank them. If you are mentioned in his annual letter, it is a reward for your value enhancement performance. Buffett always likes to praise publicly and criticize privately.

Praise.

Permanence.

In Buffett's letters and Berkshire's 1996 'Shareholder Manual,' he discussed the gift of permanent financial strength that a family business gives to its acquired companies. At Berkshire, there is no Graham-style management behavior (i.e., abandoning the most unpromising businesses each time). The days of dealing with banks and Wall Street analysts are over. For the few who want to continue to participate in the operations of privately held or family businesses, Berkshire is a unique acquirer.

In conclusion, I have learned a lot from the generation of Buffett and Munger, who are often referred to as the 'greatest generation,' and this is not an exaggeration.

Editor/Somer