Warren Buffett has spent more than eight decades studying business. He has spent a lot of time studying people. The numbers on the balance sheet can be audited. A person’s character often cannot be examined until the most important moment, and by then the cost has been paid.
Buffett’s warnings about untrustworthy people appear in shareholder letters over the decades, speeches to business students, and congressional testimony that is still quoted today. Combined, they read like a field guide to people who end up costing you money, time, or peace of mind. Below are five types of people that Buffett has warned about, in his own words.
1. People who lack integrity
“We look for three things when we hire people. We look for intelligence, initiative, energy, and integrity. And if they don’t have the latter, the first two things will kill you, because if you want to get someone without integrity, you want them to be lazy and stupid.” Warren Buffett gave this answer to a group of business students, and he’s been repeating his version of it for years.
People who are intelligent, passionate, and lack integrity are more dangerous than people who are slow or unmotivated. Lazy people can only do so much damage. A smart person who lies well can hide the damage for a long time, and the bill will come due all at once, rather than in manageable small chunks.
2. People Who Give You Conflicting Advice
“Don’t ask the barber if you need a haircut.” Buffett uses this phrase in a shareholder letter to describe bankers, brokers, and advisors who profit by getting you to act.
The point is not that these people are always wrong. Sometimes the barber actually sees a problem. But you cannot completely trust opinions that come with commissions, fees or bonuses associated with the recommended action. Ask who is being paid before you ask whether the suggestion is reasonable.
3. People Who Hide Problems Until a Crisis Forces Them to Come Out
“After all, you only find out who is swimming naked when the tide goes out.” Buffett wrote this in his Berkshire Hathaway shareholder letter, and it’s one of his most frequently used sentences about hidden risks.
Some people seem fine until conditions change. They borrow in secret, assuming the future will continue to benefit them. They take shortcuts that no one realizes when the market is up or the good times are rolling. Then things recede, and the risks they’ve been taking all along become clear to everyone at once. By then, it’s usually too late to protect yourself from what they’re hiding.
4. People Who Treat Reputation as a Disposable Item
“It takes 20 years to build a reputation and five minutes to destroy it. If you thought about it, you would do things differently.” This is one of Buffett’s most quoted lines, and it applies to more than just business transactions.
Pay attention to how someone treats their own name in small moments. Someone who takes an ethical viewpoint on something small shows exactly how they will behave when the stakes get higher. Major betrayals rarely occur without warning. Usually this is preceded by a series of small things that are ignored or forgiven.
5. People Who Choose Short-Term Gains Over Their Words
“If I lose money for the company, then I will understand it. If I lose even the slightest bit of the company’s reputation, then I will be ruthless.” Buffett said this in his testimony before Congress in 1991 in the wake of the Salomon Brothers bond trading scandal, and it remains one of the sharpest lines he ever delivered.
He separated honest mistakes from deliberate compromises of character, and that distinction still applies. A person who pursues quick profits at the expense of his word will ultimately make the same trade with you as his business partner or employer. Buffett’s standards are very clear. A promise is only meaningful if the person keeps it, even though keeping the promise is detrimental to him.
Conclusion
These five warnings have the same idea. Trust is not something a person announces about himself. It’s something they prove, usually in small moments when no one important is watching, and there’s nothing at stake yet.
None of the people Buffett describes seem like criminals at first glance. They are often charming, capable, and easy to like, which is why this pattern is worth learning early on. Finding it can save you more than just a bad deal or wasted money. This can save you from years of mistrust in the wrong people.
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