Buffet Principles
In 1776, a Scottish philosopher named Adam Smith published a book called The Wealth of Nations in which he outlined ideas on free markets, division of labour, and the so-called “invisible hand” guiding economic prosperity; concepts which today, we refer to as capitalism.
Capitalism is an economic system with deep political ties. So, when one of the most prolific capitalists of our time–Warren Buffett (AKA, the Oracle of Omaha)–shares ideas about understanding success in business, they often offer valuable insights into politics and government.
Here are a few insights and takeaways from the 2025 Berkshire Hathaway Annual Shareholder Meeting–Warren Buffett 60th and last as CEO–relevant for understanding politics.
On capitalism
Some people believe capitalism is a bad economic system. As with democracy, though, it is the best of all available options.
“Capitalism in the United States has succeeded like nothing you’ve ever seen. It’s a combination of this magnificent cathedral, which has produced an economy like nothing the world’s ever seen, and then it’s got this massive casino attached,” he said. “In the cathedrals, they basically are designing things that will be producing goods and services for 300-and-some million people like it’s never been done before in history….At the casino, everybody’s having a good time and there’s lots of money changing hands and everything, but you’ve got to make sure the cathedral gets fed, too,” he said. “It’s very important that the United States in the next 100 years makes sure that the cathedral is not overtaken by the casino.” –Warren Buffett
In sustaining capitalism within western democracies, we ought to ensure as many people as possible are empowered to participate in this system; and not in a way where we reward chasing status, but in a way where we reward those who seek to solve problems and provide real value to people by creating something new and unique; a zero to one mindset, if you will (thanks, Peter Thiel).
This does not mean every single person has to be a business owner or entrepreneur, but rather, that we find a way through laws and regulations to reward and incentivize behaviours we want and need like ingenuity and creativity.
On trade
Trade is one of those things where people on the extreme political right and left tend to agree, albeit for different reasons.
“Trade can be an act of war….Trade should not be a weapon.” –Warren Buffett
The idea that trade policy can be used as a geopolitical weapon is particularly resonant in 2025. Policymakers often must use economic tools for political negotiations, which can confuse decision-making and distort market behaviour. Like anything in business and politics, it is always about finding the right balance of trade.
On energy
Politicians are often asked to choose between energy prosperity and environmental considerations, but in fact, this is a false dichotomy.
In speaking about the challenges Berkshire faces in its utility and insurance businesses, the impact of climate change has a direct impact on markets and capitalism. For example, higher incidences of wildfires creates massive profit risk in the insurance sector while also disrupting services (i.e. keeping the lights on) as public safety becomes a higher order consideration.
Buffett and incoming CEO, Greg Abel–who currently leads Berkshire Hathaway Energy–both acknowledge the need to balance energy and environment. Underlying this sentiment, however, is always going to be a balance of managing prosperity with the public good (including environmental and public safety considerations). Policies cannot be either/or, but rather, both/and.
On government deficits
Contrary to the perspectives of the MMT-loving theorists of 2020, Buffett asserts governments cannot sustain budget deficits and a rising national debt in the long-term.
However, incentive structures for elected officials are not built to do the ‘right’ thing when it comes to public finance: governments must either increase taxes or cut spending–neither of which are politically desirable.
“Luck is not a strategy.” –Warren Buffet
When it comes to addressing budgetary imbalances, governments need to make difficult choices and voters need to give them grace in doing so, otherwise we will never be able to get off of the current ride, and make certain capitalism will not be in a position to benefit us, because the government will have such an outsized role and influence in the money supply and in solving problems that we will not cultivate the kind of society and culture required to innovate and solve problems with limited resources; a core tenant of capitalism.
On business
Being a leader in business is different than in politics, mostly because the incentive structures are different. While both voters and markets are unpredictable, voters are emotional, and that complicates things for leaders.
There are some common values that work in both contexts, though:
Be discerning about who you surround yourself with
In business as with politics, you are who you surround yourself with.
"Who you associate with is just enormously important. You're going to have your life progress in the general direction of the people that you work with, that you admire, that become your friends." –Warren Buffett
Politicians should have a clear sense of what is important to them, and be unapologetic about their insistence that those closest to them are aligned with those values. It is a fact that a politician cannot control every member of their political party, just as an investor also does not control every shareholder, but the people who get access and influence are incredibly important.
Avoid being in the business of solving unsolvable problems
Politicians should think of deploying taxpayer dollars with the same care and consideration that Buffett thinks about deploying investor dollars.
“There are some problems that can’t be solved, and we shouldn’t be in the business of taking investors’ money and tackling things that we don’t know the solution for.”—Warren Buffett
It is possible to admit a problem exists and acknowledge the damage it causes while simultaneously resisting the urge to act for action’s sake. In both business and in politics, a bias for action is not inherently strategic; inaction can often be just as valuable, but it is admittedly hard to campaign on opportunity costs.
There’s no such thing as perfect timing
Campaigns and governments alike make these elaborate plans and struggle to adapt when circumstances change. In investing, you have a longer time horizon to work with than you do in politics (two or four years).
“We came pretty close to spending $10 billion not that long ago. We'd spend $100 billion. The one problem with the investment business is that things don't come along in an orderly fashion and they never will.”–Warren Buffett
This is why the idea of playing infinite games in politics is so important; the idea is to keep the game going, and you cannot possibly do that in politics if you are not committed, on some level, to adapt to changing circumstances.
Avoid emotional decision-making
Investors watch the markets; politicians watch the polls. While neither are entirely predictable, one thing is for sure: being emotional about the patterns you see is a waste of energy.
“If you get frightened by markets that decline and get excited when stock markets go up... People have emotions, but you've got to check them at the door when you invest.”–Warren Buffett
Politics is inherently emotional because of the high degree of morality we have built into our political systems. It is no longer enough to debate the merits of one policy over another or for someone to have belief systems incongruent with the few political party options. Policymaking is not discrete, it is a process and disposition that happens over time, just like investing.
Warren Buffett is not who he is today because he made one good decision; he made thousands of good decisions over decades and has realized the benefits of compounding.
“Be sure you can play the next day.” -Buffet
On happiness
When we think of success, often we point to financial success. Perhaps it is easier to use such metrics; when we measure what matters, we position things as black or white and it is just simply easier to understand what is happening around us when we view things in this way.
But what about other metrics that are intangible or more difficult to measure, such as trust, integrity, or happiness?
“One of the great pleasures... is having people trust you. That's really why I work at 94 when I've got more money than anybody could count.”–Warren Buffett
“I think a happy person lives longer than somebody that’s doing some things they don’t really admire much in life.”–Warren Buffet
Politicians must absolutely be judged by their effectiveness; that is after all, their job. Investors are also judged by their effectiveness, but the reason why Buffett is so different is because he seems to strike the needed balance between getting things done, and being the kind of person you would want to have a beer with–both important for politicians.
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