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Warren Buffett, Berkshire Hathaway Inc.'s (NYSE:BRK) (NYSE:BRK) legendary former CEO, once told shareholders that the company gives employees two simple instructions before they begin work.
In a 1995 annual meeting clip, he said, "We only give a couple of instructions to people when they go to work for us: One is to think like an owner. And the second is to tell us bad news immediately — because good news takes care of itself. We can take bad news, but we don't like it late."
Buffett has long argued that an owner's mindset drives better decisions and over time, wealth creation. Treating shares as pieces of real businesses pushes investors toward firms they understand and can hold for years and not trades they hope to flip.
He has written that a sound goal is to buy "at a rational price, a part interest in an easily-understandable business whose earnings are virtually certain to be materially higher five, 10, and 20 years from now," and he often distills the idea as, "If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes."
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The second instruction reflects Buffett's emphasis on getting problems right, fast and out, a lesson reinforced by crises he has discussed publicly in an interview with Jeff Cunningham back in 2015. The point, he says, is to correct course before small issues become existential ones.
In psychology, a related hazard is "catastrophizing," the tendency to jump to worst-case conclusions. Albert Ellis's rational emotive behavior therapy teaches that unchecked, irrational beliefs can intensify anxiety and poor choices, another reason leaders prefer facts early over surprises later.
Buffett has paired these rules with other oft-quoted guidance to Berkshire managers and owners. During the 1991 Salomon emergency, he told employees, "Lose money for the firm, and I will be understanding. Lose a shred of reputation for the firm, and I will be ruthless," highlighting that integrity outranks short-term profit for the legendary investor.
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Posted In: BRK
