Consider the opening of Warren Buffett’s 2012 letter to Berkshire Hathaway shareholders.
From the second paragraph:
“A number of good things happened at Berkshire last year, but let’s first get the bad news out of the way.”
Buffett goes on to announce that “for the ninth time in 48 years, Berkshire’s percentage increase in book value was less than the S&P’s percentage gain.” He highlights too his “inability to make a major acquisition.”
This unabashed recounting of Berkshire Hathaway’s setbacks isn’t unique to the 2012 letter; in fact, Buffett frequently opens his letters this way.
According to psychologist Robert Cialdini, this strategy is brilliant. Cialdini is a professor emeritus of psychology and marketing at Arizona State University, the CEO and president of Influence at Work, and the author of the new book “Pre-Suasion,” in which he highlights the invisible interpersonal forces behind our behaviour.
In the book, he highlights Buffett’s letter-writing strategy as a prime example of a “pre-suasive” tactic, or a way to influence people to behave a certain way in the moments before they make their decision. In this case, the decision might be whether to start or continue investing in Berkshire Hathaway.
On a recent episode of The James Altucher Show, Cialdini, who says he’s a stockholder in Berkshire Hathaway, explained why Buffett’s pre-suasive strategy works:
“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.
He’s just readied me to listen to and process the next thing he’s going to say more deeply because he’s established himself as a trustworthy source.”
Cialdini analysed Buffett’s shareholder letters and found that Buffett’s been deploying this strategy more frequently in the last few years.
Presumably, Cialdini said, Buffett has “learned that it’s an effective strategy for retaining and recruiting shareholders. It reassures customers — not only your existing customers — that you know the drawbacks, you know the failings, and you have undertaken an analysis that allows you to change those failings into pluses.”
Interestingly, Cialdini told Altucher that the same technique — opening a conversation with your weaknesses or flaws — might also strengthen romantic relationships.
“It’s disarming. It allows people to say, ‘Oh, somebody’s being really forthcoming with me, not trying to maintain some sort of superiority, so I’m going to give that back that same level of honesty.’
And when you have that I think you have a better relationship.”
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