CEOs like Warren Buffett have created a whole mystique around holding companies.
In public, he says he lives simply: McDonald’s every morning, then reads in his office.
It gives people the impression that HoldCos are mostly about sitting around watching money pile up.
Now I don’t know what Warren gets up to behind closed doors.
(Though I do know that Charlie and Warren’s early days were way different than now.)
But most HoldCo CEOs, me included, are actually extremely busy.
Just as busy as someone running an operating company. We’re just doing different things.
Here’s the big differences, as I see them.
How you spend your time
This is the surface-level difference.
A normal CEO spends their time:
- Building and managing their staff
- Implementing systems
- Selling to customers or raising money
- Getting their hands dirty solving the big problems
This makes sense as the person directly responsible for the business.
But when you have multiple businesses to balance in a HoldCo, you spend time on things like:
- M&A, growth, and maximizing deal flow
- Allocating assets and capital to where it’s most effective
- Supervising and coaching from a distance
- Evaluating systems and incentives
(Notice that “systems” pops up at both levels. Systems are the key to effective growth.)
A difference in mindset
I think of it as the “allocator” mindset vs the “operator” mindset.
An operator-CEO is the person in the arena.
An allocator has to be comfortable sitting in the stands, only occasionally getting involved.
Instead of being involved in the play, you’re constantly scanning for opportunities.
Both allocators and operators can succeed running a HoldCo, just different types.
An allocator CEO — think Warren Buffett — holds disparate, disconnected investments. They’re much less involved in the day-to-day.
An operator CEO is probably best suited to a rollup model. That way, they can be more involved in tactical decisions that affect the whole portfolio.
Everyone gravitates towards one or the other.
Supervising vs Operating
A HoldCo CEO gives operators lots of autonomy.
That means great hiring is critical, but so is support.
One-on-ones, board meetings, culture building, etc. all matter.
My job is to help them make great decisions. Their job is making sure things are getting done.
That’s why I call them CEOs, instead of operators.
Here’s the truth though: no matter your preferences, sometimes you’ll have to be both the allocator and the operator.
When one of your businesses is in trouble, the allocator has to roll up their sleeves.
If you don’t want to do any operating, you should put your money in a mutual fund.
If you want to keep your hands in the details, you should just run a single business.
Don’t get too black and white.
Laying Groundwork
A final key difference between a regular CEO and a HoldCo CEO: building the bigger ecosystem.
Above the day to day, a HoldCo CEO’s job is to maximize profits.
That means both allocating capital and building future deal flow.
HoldCo CEOs are often very community involved, or doing content and branding — all of which is investing in your next opportunities.
Let’s go back to Warren Buffett. His persona is very calculated.
The shareholder letters alone — he’s understood the power of a mailing list since 1965. And Berkshire Hathaway’s annual meeting is basically Woodstock for capitalism.
That all adds up to serious deal flow, and a brand that people want to join.
To recap
In my opinion, the main things that make a HoldCo CEO stand out:
- More allocator than operator
- Empowers the decision makers instead of making the decisions
- Plays the long game, not the day to day
It’s not for everybody. It’s radically different from a regular CEO.
But it’s definitely the best fit for me.
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