The Daily Buffett

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The Integrity Edge

November 21st

In insurance, as elsewhere, the reaction of weak managements to weak operations is often weak accounting. ('It’s difficult for an empty sack to stand upright.')

Warren Buffett

Companies burdened by ineffective operations often reflect the shortcomings of their management, particularly in their accounting practices. Just as an empty sack cannot maintain a facsimile of fullness, a business cannot project success on a foundation of hollow operations and questionable practices.

So, as investors or managers, we must scrutinize our own actions. Have we ever sidestepped confronting operational weaknesses or ethical dilemmas, hoping to make things look better than they are? Confronting these weaknesses is essential - because only by recognizing them can we strive for improvement.

Investors are urged not merely to assess the financial strength of a company but also the integrity and competence of its management. Businesses, like empty sacks, cannot stand upright without the robust grains of integrity, competence, solid operations, and ethical practices.

As investors and managers, the quiet, consistent effort to build and maintain this integrity often proves the most rewarding.

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Copyright © 2023 by Scott Sansovich