What is the single most important driver of long term returns for companies and their investors? If I had to choose one thing above all others when it comes to buying the best stocks, that would definitely be management quality.

Building competitive advantages

"The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage."

Warren Buffett

I couldn´t agree more with Buffett; competitive advantages are absolutely central to long term investing success. However, management quality comes first, because the management team can actually create or destroy competitive advantages. Investing in the right management means investing in the business leaders which will grow and protect those competitive advantages.

Howard Schultz created some unbelievably strong competitive advantages for Starbucks Corporation (NASDAQ:SBUX) over the last years much to the benefit of shareholders. Starbucks is not like any other coffee company, in fact, it doesn't just sell coffee, but an integral and unique customer experience supported by a differentiated brand and strong cultural identity.

Schultz decided early on that Starbucks was to be a “third place” between home and work, providing a comfortable and pleasant environment, free wifi connection and a very attentive staff. There is a reason why customers pay extra for a Starbucks coffee, and that's the brand image that Schultz has built for the company.

While Steve Jobs was innovating to a whole new level and pushing his engineering team to achieve the unthinkable, Ballmer was downplaying the mobile revolution that Apple Inc. (NASDAQ:AAPL) was creating. “Apple is a cute, little, tiny niche guy” said Ballmer in February of 2007. “No chance that the iPhone is going to get any significant market share” he added later.

Microsoft´s CEO also said that the iPad was “just another PC” back in 2010 and he didn't expect any problems for Microsoft because of the iPad. As things turned out, the iPad and other tablets are now stealing market share away from PCs at a considerable speed, and Microsoft seems to be doing too little and too late to adapt to adapt to the mobile computing parading.

Being in the right business

“A horse that can count to ten is a remarkable horse—not a remarkable mathematician.” Likewise, a textile company that allocates capital brilliantly within its industry is a remarkable textile company—but not a remarkable business-”

Buffett

Again, being in the right industry, or at least avoiding the declining ones, can be absolutely central. If the industry as a whole is going down, chances are that even the best run companies will suffer the consequences sooner or later.