Learning the invaluable art of persuasion from Warren Buffett
Warren Buffett is considered by many to be the most successful investor of all time. As the chairman and largest shareholder of Berkshire Hathaway since 1970, he has accrued billions of dollars through several insightful 'value' investments. Currently the second-richest person in the world, the 86-year-old 'Oracle of Omaha' has built a stellar reputation in the world as a reliable, ethical, and incredibly generous business magnate. And one of the key factors that has helped him achieve such great success is his skill at persuasion.
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The influence Buffett wields over people, whether they're his employees, shareholders, or admirers is considerable, to say the least. There are two people Buffett credits for his expertise in dealing with people. The first is Dale Carnegie, author of the famed book How to Win Friends and Influence People. Buffett has said that completing the “Dale Carnegie Course in Effective Speaking, Leadership Training, and the Art of Winning Friends and Influencing People” played a vital role in his career. The second person Buffet credits is his first wife Susan Thompson who helped him become a people person —one who could understand and solve human problems along with financial ones.
His ability to persuade others has enabled him to salvage several seemingly hopeless situations with remarkable prowess—chief among which was the Salomon Brothers Treasury securities trading scandal. In 1987, Berkshire Hathaway purchased stocks in the Wall Street investment bank, making Buffett a director in the firm. When the calamitous scandal broke in 1991, Salomon was at the verge of bankruptcy after receiving a trading ban from the US Treasury. Here, Buffett stepped in and negotiated with the Securities and Exchange Commission (SEC), the New York Federal Reserve Bank, and the US Treasury to rescind the ban on his assurance that Salomon would fully cooperate in all investigations regarding the scandal caused by one employee's actions (and his supervisors' inactions). A long nine months later, Salomon Inc., was back on track. It takes a remarkable tenacity to pull off a deal such as that when the weight of the entire financial world rests on your shoulders. But Buffett managed it and it all boils down to how he talks to people.
Sincerity and honesty are two things that Buffett never fails to deploy in his conversations. He has often said that “it takes 20 years to build a reputation and five minutes to ruin it,” and he has built his reputation of being an ethical and trustworthy leader by being completely truthful in whatever he says. While dealing with the Salomon crisis, Buffett told the Secretary of the US Treasury and the chairman of the Federal Reserve Bank of New York how the collapse of the investment firm could wreak havoc on the financial world. He told them upfront what went wrong with the firm's management's handling of the crisis and how he would personally help them tackle it. This honesty is what persuaded the two parties to side with him when they had every reason not to.
He employed the same tactic in 2015. When Berkshire Hathaway investors, doubtful of the firm's ability to continue its remarkable 50-year success streak, began considering selling their stock, Buffett wrote a letter to his shareholders that instantly reinforced their confidence in the company. And he achieved this by opening the letter saying that the following message was “what I would say to my family today if they asked me about Berkshire’s future.” According to psychologist and Berkshire shareholder Robert Cialdini, this was a brilliant persuasive move and since then, he has "never thought of selling any shares. After all, Buffett had given me the same recommendation he first declared he'd give to a family member."
Another tactic Buffett uses to persuade people is a bit surprising: he admits his mistakes. The stereotypical image of a successful businessman is a person who exudes confidence and possesses an aura of being infallible. But Buffett takes the unorthodox route and openly owns up to mistakes while admitting that he's probably going to make a few more—a move that instantly displays his level of self-awareness and improves his credibility and trustworthiness among others. "It's disarming every time he says, 'You know, we made this mistake’. I believe the next thing he says to me—and that's where he puts the strength of the last year," Cialdini explains.
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