Warren Buffett and the Loss of Capitalism’s Character Witness

The most revealing thing about Warren Buffett stepping down as chairman of Berkshire Hathaway was how unsurprising it was. In 2011, he had told CBS’ 60 Minutes that his son Howard would one day replace him as the company’s chairman. And 15 years later, that’s exactly what happened. Most succession plans are lucky if they last five years. But Buffett simply did what he said he would.

That reliability is the real reason he became an icon of American business. His returns earned him attention, but plenty of investors have made money without anyone asking them to explain capitalism to the country. What set Buffett apart was that he never seemed to change. The house in Omaha he bought in 1958 for $31,500, the $100,000 salary and nearly 60 years of plain-spoken letters all stayed the same. So people felt they always knew what they were going to get with him. And we trust what we can predict.

Why predictability builds trust

It’s a very basic thing, hard-wired into us. We’re wary of the unpredictable, of what we can’t anticipate. Because at a very primal level, there’s risk and danger in that. So much so that we’d prefer to be around negative people and situations than unpredictable ones. For example, in one psychological experiment, people treated fairly only some of the time had a stronger physiological stress response than people treated unfairly all the time. And working in prisons, I saw something similar. Prisoners disliked officers who were friendly one day but nasty the next, more than those who were mean all the time. The consequence for leadership is that, at a basic biological level, people tend to trust leaders whose behavior they can anticipate and distrust those whose behavior they can’t predict.

Buffett was just as predictable about his mistakes. He called Dexter Shoe “the worst deal that I’ve made,” calculating that it had cost shareholders $3.5 billion. Of the $32 billion Precision Castparts purchase, he wrote that he had been “simply too optimistic” and wrong about the price. He was also open about the limits of his knowledge, refusing year after year to forecast the market and writing in 1992 that “short-term market forecasts are poison.” So, when he did offer a view, people knew it came from someone willing to say when he was wrong and when he did not know. That mattered because it reduced the likelihood of surprises and reinforced the sense of what-you-see-is-what-you-get.

Possibly the hardest test came in 2011. David Sokol, a senior lieutenant once tipped as a possible successor, bought $10 million of Lubrizol shares just before recommending Berkshire buy the firm. Buffett defended him at first. But after Berkshire’s audit committee found Sokol had breached trading policies, Buffett told shareholders, “I obviously made a big mistake.”

The architecture around him

Berkshire’s owner’s manual captured this commitment to candor in one line: “The CEO who misleads others in public may eventually mislead himself in private.” So Buffett built the architecture for it around himself. This mattered because power and authority degrade information. Bad news gets softened as it travels upwards and disagreement gets filtered out, which means the more powerful leaders become, the less accurate their picture of reality tends to be. 

Buffett designed against this, though. For more than 25 years, he sent his managers a memo every two years asking them to “let me know promptly if there’s any significant bad news,” because he did not want to deal with it “after it has festered.” And in 2013, he invited Doug Kass, a hedge fund manager betting against Berkshire’s shares, onto the stage at the annual meeting to question him. These were deliberate steps to encourage the dissent that power usually prevents. And because he built them in public, they further reinforced the sense that he and his judgment could be trusted.

The character witness

Buffett’s cultural authority accumulated from years of saying what he was going to do, doing it and then reporting honestly when he failed. Even his handover follows the pattern, reinforcing the sense that Berkshire will continue to behave tomorrow as it did before. 

The bigger loss, arguably, is not Berkshire’s, but capitalism’s and society’s in general. People judge whole groups by their most visible members. So, when a leader behaves well or badly, it shapes how we see every leader like them. And for half a century, Buffett was the character witness of business and capitalism, the evidence that business leadership, great wealth and reliable decency could coexist. 

The example he set came to matter more as inequality grew and trust in institutions fell. And it’s not clear how easy it will be for anyone to replace him. Today’s social media platforms reward novelty and provocation, which audiences experience as unpredictability. So, the kind of reliability Buffett built over 60 years may now be much harder to establish, and many of the most media-present business leaders show little sign of trying. Buffett had his critics, but few distrusted him. How many of today’s most visible billionaires can we say the same of?

Nik Kinley is a psychologist who has spent over 30 years assessing and coaching leaders in their most demanding moments, from prisoners, politicians and royalty to the CEOs of global banks and heads of national security. His latest book is is The Power Trap: How Leadership Changes People and What to Do About It.