Warren Buffett, the longtime chairman and CEO of Berkshire Hathaway (BRK.B) (BRK.A), is celebrated for his disciplined, value-oriented approach to investing. In his 1981 shareholder letter, Buffett articulated a principle that continues to guide Berkshire’s acquisition strategy: “we would rather buy 10% of Wonderful Business T at X per share than 100% of T at 2X per share.”
This philosophy stands in contrast to the prevailing mindset among many corporate managers, who often prioritize full ownership and control, sometimes at the expense of economic rationality. That’s because Buffett’s reasoning is rooted in a focus on maximizing real economic benefits rather than expanding managerial domain or inflating accounting figures.
In fact, the legendary investor has frequently cautioned that managers who stress “accounting appearance over economic substance usually achieve little of either.” This perspective reflects his belief that the true measure of an investment lies in its underlying value, not in the optics of ownership or the ability to consolidate earnings on financial statements.
Throughout his career, Buffett has demonstrated a willingness to take significant minority stakes in high-quality businesses when the price is right, rather than overpaying for full control. This approach allows Berkshire Hathaway to benefit from the growth and profitability of leading companies without incurring the risks or costs associated with outright acquisitions. Notably, this strategy has led to successful long-term investments in firms such as Coca-Cola (KO), American Express (AXP), and Moody’s (MCO), where Berkshire’s minority positions have generated substantial returns.
Buffett’s stance also reflects his broader skepticism of empire-building — a tendency among some executives to pursue acquisitions for the sake of expanding their influence, rather than to create genuine shareholder value. He has repeatedly emphasized that capital should be allocated where it can generate the highest real return, regardless of whether that means owning a small piece or the entirety of a business.
The relevance of Buffett’s 1981 guidance is evident in today’s market environment, where mergers and acquisitions remain a central feature of corporate strategy. As companies face pressure to grow and diversify, the temptation to pursue large, transformative deals can be strong. Yet Buffett’s preference for economic substance over managerial control serves as a reminder that disciplined, value-driven decision-making is often the more prudent path.
Buffett’s enduring influence is grounded in his consistency and transparency. His annual letters, including the 1981 edition, offer investors and business leaders a blueprint for rational capital allocation and long-term thinking. By prioritizing real economic benefits over the allure of control or superficial accounting gains, Buffett has built Berkshire Hathaway into one of the world’s most respected and successful conglomerates — a testament to the power of value-driven leadership
On the date of publication, Caleb Naysmith did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com