They Know More Games

From CNBC’s special Buffett & Munger: A Wealth of Wisdom, which aired June 29, 2021. CNBC’s Becky Quick had asked Buffett and his business partner Charlie Munger about Credit Suisse’s $5.5 billion loss on its business with Archegos Capital Management, an investment firm the bank had been lending to. Munger said the bank fell for “the lure of the really easy money” while the world was shouting “Crook. Fool.” at it. Buffett answered with a rule he said they had learned a long time ago.

No contract protects you from a bad person, Buffett went on: if you think you can write one that works against them, “they’re gonna win.” Such people probably enjoy the lawsuits that follow, he said, and Berkshire Hathaway, his company, doesn’t want to spend its life on that. Besides, “the bad guys win. They know more games.” They may lose eventually, he added, but fighting them is no way to spend your life.

The rule was already in Buffett’s 1989 letter to Berkshire shareholders. Reviewing his mistakes of the previous 25 years, he wrote that after some of them he had learned to go into business only with people he liked, trusted, and admired, and that Berkshire did not wish to join with managers who lacked admirable qualities “no matter how attractive the prospects of their business.” The next sentence is an earlier wording of this quote: “We’ve never succeeded in making a good deal with a bad person.”