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The Warren Buffett "Marriage" Test

Is there is a litmus test by which an investor can judge the managers of the company s/he invests in. Warren Buffett has one, what I call the "marriage test."

In describing his willingness to support the acquisition of ABC by his friends Tom Murphy and Dan Burke at Cap Cities, Buffett noted that they were not only outstanding managers, but that they were "precisely the sort of fellows you would want your daughter to marry."

Even Buffett did not always apply this test successfully. Few would consider John Gutfreund of Salomon Brothers a good prospective son-in-law. Even so, Buffett felt that Gutfreund was more moral than some other Wall St. CEOs he'd seen.

On the other hand, when Jimmy Cayne of Bear Stearns was reportedly smoking pot at the ripe old age of 73, he was doing something that most parents would not want their teenage son or daughter to do. That was a factor in my selling a (19-year) holding of Bear Stearns (and dodging a bullet.)

I once showed the chief economist of a former employer, a  New York Times photo of a high ranking (and unindicted!) female executive, Rebecca Mark, of Enron. The photo was a picture of Ms. Mark and her divisional number 2 riding into a company function on motorcyles dressed in leather jackets and pants. Then I asked the economist if he wanted his 20-something son to date this woman.

"Hell, no," he replied.

"You realize that when you bought Enron bonds, you sent our money on a "date" with people like these," I rejoined.

"I would never have done that if I had thought about it that way."