Psychologist explains why people love listening to Buffett and Munger

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Social psychologist Dr. Robert Cialdini has noticed that Warren Buffett and Charlie Munger have a brilliant way of influencing people, and it can be seen first-hand at Berkshire Hathaway’s (BRK-A, BRK-B) annual shareholder meeting.

In his book — “Pre-Suasion: A Revolutionary Way to Influence and Persuade” — Cialdini explores what effective communicators do before delivering a message to get it accepted. He calls this “pre-suasion,” which he defines as “the process of arranging for recipients to be receptive to a message before they encounter it.”

Buffett and Munger are both effective at this sort of communication, argues Cialdini.

Munger has read and recommended Cialdini’s books.

Disarm the audience, create a sense of unity, establish credibility

“Ironically, Berkshire Hathaway’s financial attainments have been so remarkable that a communication problem has arisen: how to give current and prospective shareholders confidence that the company will maintain such success into the future,” Cialdini said. “Absent that confidence, stockholders might be reasonably expected to sell their shares, while potential buyers could be expected to purchase elsewhere.”

From the lens of a psychologist, Cialdini has been impressed with Buffett and Munger’s adept communication skills.

In the book, he refers to the 50th-anniversary shareholder letter where Buffett makes the case for the future vitality and success of Berkshire Hathaway. In doing so, Buffett did something Cialdini found “disarming.”

“I will tell you what I would say to my family today if they asked me about Berkshire’s future,” Buffett wrote as he went on to make his case for Berkshire Hathaway’s future.

Warren Buffett (Credit: REUTERS/Rick Wilking)

 

By writing this way, Buffett demonstrated that he’s letting the shareholders in on something that he would tell his family. This language creates a sense of unity, by letting the shareholder into the group, Cialdini explained.

Another key attribute of Buffett’s communication style in his letters is that he always acknowledges a mistake that was made early on in the letter. He does this even in years where Berkshire did well, but he still refers back to a mistake from the past. In the most recent letter, he reflects on a mistake acquiring Dexter’s Shoes in 1993 that caused him to lose $6 billion.

This also establishes credibility.

“I can state that in now way do I view Mr. Munger’s (or Mr. Buffett’s) use of this approach as a form of trickery,” Cialdini wrote. “Rather, I see it as illustrating how genuinely trustworthy communicators can also be smart enough (in the case of these guys, way smart enough) to recognize the benefits of gaining pivotal trust through pre-suasive, truthful disclosures.”

They make themselves the “butt of jokes”

Cialdini has also attended the annual shareholder meeting for the last fifteen years and he’s noticed two things that take place that also establishes their credibility.

First, prior to the question and answer session, a short film is played in which Buffett and Charlie are the “butt of the jokes.”

“They make fun of Warren and Charlie, so they humanize them and make them seem like they’re not arrogant, know-it-all types, but very much in keeping with the image of who they are as honest, straight-talking people who will reveal their foibles if those foibles exist,” Cialdini said in a recent interview with Yahoo Finance.

The second thing that takes place is that they field questions from the audience and a panel of financial journalists that haven’t been telegraphed to them ahead of time.

“This is another example of being sure that people understand that everything is above the board, no under-the-table collusion with the questioner at all,” he said.

The takeaway is that even if you already have great credibility in the eyes of your audience, it’s important to bring it to the top of mind beforehand.

“That’s the essence of pre-suasion, focusing people on something that is aligned with the strength of your message that is yet to come,” Cialdini said. “And certainly, credibility is a strength of Berkshire Hathaway and its two founders. Bring credibility to the top of consciousness is exactly what a successful persuader would do.”

Dr. Cialdini is a professor emeritus of psychology and marketing at Arizona State University and the CEO of INFLUENCE AT WORK, a company that helps organizations understand the psychology of influence. He is the author of New York Times‘ best-seller Influence: Science & Practice and his more recent best-seller Pre-Suasion.

Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter.

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