How Morals Affect Buffett’s Investments

Warren Buffett is not a shy man. He is perfectly content sharing his strategies and thought processes to pretty much anyone who asks. The octogenarian has shared his wisdom on types of companies he avoids, things he looks for in companies, and even his favorite books to build your circle of competence. But there is something he doesn’t talk about too much— how do morals affect Buffett’s investments?

Probably the most controversial investments that someone could make is one in the tobacco industry. It has been a hot topic for some time now, and the popular book “Barbarians at the Gate” actually gives us some insight as to how Buffett feels about the morals behind those investments.

“It costs a penny to make. Sell it for a dollar. It’s addictive. And there’s fantastic brand loyalty,” Buffett was quoted saying, though he continued, “I’m wealthy enough where I don’t need to own a tobacco company and deal with the consequences of public ownership.”

At a different time, when questioned about his morals during a student visit, Buffett said, “We would buy stock in a tobacco company, but we didn’t want to own it…. A good example is Charlie’s favorite company, Costco…. the No. 3 distributor in the U.S. of cigarettes, but you wouldn’t avoid buying it because of that… We’ll buy the stocks without any problems, but we just won’t be in certain businesses.”

To put it simply, Buffett doesn’t want to take on any companies that will create more problems for him and his company Berkshire Hathaway. He would much prefer to simply opt out and save his reputation. This isn’t all that surprising since we know that Buffett holds his companies reputation to very high standard— lose a shred of it, and he’ll be ruthless.

Another more recent example of how Buffett does not avoid companies simply because of their morals is the recent scandal with Wells Fargo. Even though the company gained a lot of attention from it, Buffett did not cut Berkshire’s stake. Here’s what he has to say about it:

“There are 250,000 employees at Berkshire Hathaway. I guarantee you that someone, somewhere is doing something at Berkshire that we do not like.”

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