According to the Financial Times, in 2006, Warren Buffett published a memo to Berkshire Hathaway managers (a list of people he called “The All-Stars,” which is another lesson for another day) that began with this insightful and inspired line : “The five most dangerous words in business may be…”
Talk about an opening sentence that catches their attention. If you were one of those managers, one of Buffett’s All-Stars, you instantly perked up when he saw this memo in his email.
Much has been written about Buffett and his achievements. Many entrepreneurs admire Buffett for his timeless advice, his smart investment strategies, and his futuristic thinking and leadership. He is the longest-serving CEO of an S&P 500 company. He bought his first stock at age 11 and has since made it his life goal to make as much money as possible, a goal he has accomplished efficiently. and effective in almost every way imaginable.
In the late 2000s, Buffett was the richest man in the world, surpassing Bill Gates for a few years before Jeff Bezos surpassed him. In 2011, then-President Barack Obama awarded her the Presidential Medal of Freedom in large part for his generous philanthropic contributions.
When it comes to business and entrepreneurship, it’s not much of a stretch to say that Buffett has seen and done more in a single year than most men will do in their entire careers.
So when Warren Buffett sends a memo to his leadership that begins with “The five most dangerous words in business may be…”, people listen. So what were those five words that caused this leading expert and investor to worry?
This is what he meant.
“So at Berkshire, let’s start with what is legal, but always move on to what we would like to see printed on the front page of our local newspaper, and never move forward simply based on the fact that other people are doing it.”
Warren Buffett
For the businessman or woman, entrepreneurship can be an exciting but dangerous adventure. There are often high levels of risk surrounding large amounts of money and potential influence. With any version of risk and success comes temptation, and the higher the stakes, the more pressure you may feel to follow the crowd than to follow your conscience.
Warren Buffett has been attentive to the character and conscience of his company. He is often quoted as saying: «It takes 20 years to build a reputation and five minutes to ruin it«. He has also gone on record saying: “If you lose money for the company, I will be understanding. If you lose even an ounce of reputation for the company, I will be ruthless.”
Buffett knows that when it comes to building a good business, good morale and a strong reputation are essential. The idea of “everyone is doing it” It is not an excuse to compromise character. Even if everyone is working the system and seems to get their way, you have nothing to gain by joining.
If you want to avoid the “everyone else is doing it” mentality, sit down and determine what constitutes your core values, your moral compass, and then refuse to stray from that course.
“Your attitude on these matters, expressed both by behavior and words, will be the most important factor in developing your business culture. And culture, more than rule books, determines how an organization behaves.”
Warren Buffett
Avoiding the “everyone else is doing it” mentality is both an individual and business necessity. If you’re committed to keeping morality at the core of your business ethos, make sure that dedication spills over into your corporate culture as well.
Many entrepreneurs hold themselves to higher standards than they are comfortable with their employees or their company in general. It can be easy to turn around and rationalize: “I didn’t make that decision” either “I have no control over what they decide to do.”
Instead of abdicating the moral leadership of your company, seek to create a culture of honest innovation. As Buffett says, more than any set of rules, this honest culture will determine how your business behaves and, as such, how successful it can become.
Innovation is paramount to entrepreneurship, but be sure to innovate in ways that strengthen your reputation, not compromise it.
“Someone is doing something today in Berkshire that you and I wouldn’t be happy if we knew about it. That’s inevitable: we now employ over 200,000 people and the chances of that number getting through the day without any bad behavior occurring are zero. But we can have a great effect in minimizing such activities by jumping on anything immediately when there is the slightest smell of impropriety.”
Warren Buffett
I loved how Buffett closed this memo to his managers. He recognized that with growth and success comes the inevitable: someone at some point will do something that is not up to par. In other words, someone within his company will do something that is what “everyone else is doing.”
We are humans. We make mistakes. We are attracted at all costs to the fictional story of success. Perfection is not achievable, which means that the most vital task of the successful entrepreneur is determining how to quickly get back on track after a mistake.
That’s what Buffett means when he says that leadership can have a “great effect in minimizing such activities.” As? Jumping on anything immediately. If he wants to stay away from the landmine called “everyone else is doing it,” he must decide to move back quickly toward excellence, be alert to course correction.
You will not be able to erase all errors. Wrong decisions often have long-term consequences. But you can work to minimize the negative impact of our errors in good judgment, further preparing yourself to be an excellent and honorable businessman.
If you can’t stand behind your work, why should others? The call to prioritize your character, and consequently your reputation, is not driven by higher profits or higher valuations, although I think Buffett shows us that a strong moral compass will often lead to both.
Even if everyone else is doing something, even if you knew you could get away with it and no one would ever know, staying true to your values is the best way to give the world the best version of yourself.
As an entrepreneur, ultimately, it doesn’t get any better than that.
