Legendary investor and Berkshire Hathaway Chairman Warren Buffett has always emphasised a crucial element in business and investing: trust. His famous preference for simple, one-page contracts over lengthy legal documents stems from this core belief. Even as the business world has moved towards complexity, Buffett's principle remains steadfast – if you need a 50-page contract to feel secure, you're likely dealing with the wrong person.
The One-Page Contract Philosophy
In a revealing insight from 2014, Buffett shared the one-page contract used to purchase National Indemnity Company. He lamented that while he still prefers such simplicity, the modern world often demands more. "I like to deal with people where I feel a one-page contract will do the job," Buffett explained. He added a powerful analogy: "If I have to have 50 pages in there to protect me against the guy I’m dealing with, I’ll always wonder whether I needed 51." This approach underscores his belief that a solid relationship built on trust is the ultimate safeguard, far exceeding any legal document.
Why You Can't Make a Good Deal with a Bad Person
Buffett's logic is consistent and profound. In a 2021 CNBC interview with his late partner Charlie Munger, he stated bluntly, "You can't make a good deal with a bad person." He warned that attempting to rely on a contract to outmanoeuvre someone unethical is a losing battle. Bad actors, he noted, often relish litigation and know more manipulative games. For Buffett and Berkshire Hathaway, spending a life in legal battles is no way to operate. The lesson is clear: rigorous vetting of character is a non-negotiable first step before any financial transaction.
This year marked a significant transition, with the 95-year-old Oracle of Omaha stepping back from active investing at Berkshire. The reins were officially handed to long-time successor Greg Abel, who became CEO on January 1st.
Timeless Money Lessons from the Oracle
Beyond contracts and trust, Warren Buffett's career offers foundational lessons for every investor:
Do Your Homework: Buffett believes in thorough personal research, advocating for reading all financial statements yourself.
Invest for the Long Term: He is famous for buying and holding stocks for decades, not days.
Seek an 'Economic Moat': Invest in companies with a strong, durable competitive advantage that protects them from rivals.
Keep It Simple: Investing should not be complicated. Stick to fundamental rules and ignore market noise.
Think for Yourself: Avoid being swayed by market euphoria or pessimism. Make rational, objective decisions based on your analysis.
Ultimately, Warren Buffett's legacy teaches that in business and investing, character and trust are invaluable assets. Building deals with the right people on a foundation of mutual respect is a strategy that has stood the test of time, proving far more reliable than the thickest stack of legal papers.
