Investing legend Warren Buffett rarely needed many words to expose what was broken in modern finance. One line, buried in his 1996 Berkshire Hathaway (BRK.B) (BRK.A) shareholder letter, does exactly that. It draws a sharp line between two very different philosophies of capitalism – one built on partnership, and one built on extraction. The line? “We are here to make money with you, not off you.”
Buffett – then CEO of Berkshire, and now chairman – was speaking directly to shareholders, but the implication was much broader. He was rejecting an incentive structure that dominates much of Wall Street, where managers get rich whether investors succeed or fail. Performance fees, upside-only bonuses, asset-gathering games and constant product churn all reward the seller first and the client second. Berkshire refused to play that game.
At Berkshire, Buffett and his late, longtime business partner Charlie Munger structured their compensation so that their fortunes rose and fell alongside shareholders. If the stock underperformed, they felt it personally. If it prospered, they prospered too. There were no escape hatches, no special payouts, and no asymmetric rewards. That alignment wasn’t a marketing slogan, it was the operating system.
Just as important, Buffett kept his own wealth overwhelmingly invested in Berkshire stock. He wasn’t asking others to take risks that he avoided himself. His family and many close friends were invested the same way. That concentration forced discipline. Every capital allocation decision carried personal consequences, which naturally filtered out reckless behavior and fashionable bets.
This approach stood in stark contrast to much of the financial industry, where incentives often encourage activity over results and complexity over clarity. When managers are paid for gathering assets or generating trades, the client’s outcome becomes secondary. Buffett understood that once incentives are misaligned, bad decisions become inevitable, even if intentions start out good.
The results speak for themselves. Berkshire compounded capital for decades not because it was cleverer than everyone else, but because it removed the temptation to game the system. Buffett didn’t need to swing for the fences or chase trends. He only needed to avoid conflicts of interest and let good businesses compound over time.
