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June 7, 2013

Lessons in Candor from Warren Buffett

The golden rule of investor partnership: I want to communicate to my investors as I would wish they would communicate to me.

Laura Rittenhouse

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Say the word candor and what CEO comes to mind immediately? Warren Buffett. Why? Because when Warren started his company he actually wrote an owner’s manual. You buy a refrigerator you get an owner’s manual to find out how it operates. You buy Berkshire Hathaway stock, you get an owner’s manual to find out how it operates. The manual codifies the principles. Principle number 12 is, “We will be candid in all our communications.” Why? Because it’s the golden rule of investor partnership: I want to communicate to my investors as I would wish they would communicate to me.

So this is Warren’s fervent belief, but most importantly he believes that candor is essential to avoid probably one of the biggest risks a company faces. And what is that? He writes, “The CEO who chooses and continues to mislead in public will eventually mislead in private.” And time after time after time you can see when companies get into trouble it’s because CEOs have lost sight of the external world and they have begun to believe the obfuscation that they’ve been living in and hearing about and perpetuating.

In Their Own Words is recorded in Big Think’s studio.

Image courtesy of Shutterstock

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