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The Analysis of Business Approaches of Buffet and Madoff Case Study

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Updated: Jun 17th, 2022

Warren Buffett has been regarded as the poster child for how incredibly wealthy people can remain humble and generous for a long time. His successful investment management career as the head of Berkshire Hathaway yielded him billions of dollars, a massive fortune, which he has pledged to donate to various causes. Barnie Madoff, on the other hand, is an example of how a rich person led by greed can ruin lives of thousands of people. He managed to establish and maintain one of the biggest Ponzi schemes in history, taking advantage of his clients’ trust. Despite sharing a common approach to communication with clients, the two men espouse mutually exclusive moral, ethical, and philosophical values, which have led them to different outcomes in life and business.

Business Approaches and Ethics of Buffet and Madoff

Buffett’s approach to business can be described as conservative and long-term oriented, he prefers to invest in companies and industries which, in his opinion, seem to consistently expand and generate more revenue. He also views his firm’s shareholders as partners, which highlights his personal quality of being respectful towards others. One of his famous quotes states, “Lose money for the firm… I will be understanding; lose reputation for the firm… and I will be ruthless” (Cunningham, 2015). This demonstrates that he is genuinely concerned about the image of his firm in the eyes of the public and colleagues. He places a lot of importance on trust and understands that without it, no business can expect to be successful. In his interview for PBS, he also mentioned that he would be ready to call out a person exhibiting an unacceptable behavior (PBS NewsHour, 2017). Thus, it can be concluded that Warren Buffet is a businessman who is considerate in both his professional and ethical judgments.

Table 1. Comparison of qualities of Buffet and Madoff

Warren Buffet Bernie Madoff
Generosity Avarice
Altruism Selfishness
Probity Dishonesty
Modesty Arrogance

It is worth noting that a certain aspect of Buffett’s and Madoff’s business strategies is similar. Both men were extremely secretive about their investments and did not disclose them even to the clients, restricting their communication with the latter to yearly statements. Yet, unlike Buffett, Madoff used this method, built solely on trust, to deceive his shareholders and steal their money. The table includes the main qualities of the two investors, it shows that, compared to Buffet, Madoff has a variety of negative characteristics. For instance, Buffet, in his CBS interview, explaining his decision to give away his wealth, said that the money was of no utility to him, which emphasizes his modesty and altruism (CBS Sunday Morning, 2017). While Madoff demonstrated absolute arrogance and selfishness when, in defiance of the clients and regulatory bodies, he continued to accrue large sums of money in an illegal manner.

Philosophies of Buffet and Madoff

Warren Buffett’s professional conduct corresponds the most to Aristotle’s view on business and life in general. For example, the latter stressed the importance of self-restraint and moderation as the essential virtues of every individual (Byars & Stanberry, 2018). Buffet, despite all the billions of dollars he has, still lives in his old house and, according to him, leads a life of a person with an annual income of $100,000 (CBS Sunday Morning, 2017). The idea of truth, fundamental for the Confucian philosophy, is also valued by Buffet, whose success was directly linked to good relations with his shareholders and partners. If he was not genuine with them and, first of all, with himself, he would not be able to carefully design his investment plans and strategies and would not achieve his current status. Thus, Buffet’s approach to business represents a mix between the western and eastern philosophical teachings and notions.

Madoff’s approach can be attributed to utilitarianism, provided that his dealings are viewed from the perspective of maximum benefit for his family and accomplices. The philosophy postulates that if a person aims to produce the ultimate good or the better of the majority, they must not be subject to any moral judgment (Byars & Stanberry, 2018). Madoff was always determined to make more money for himself and people who were close to him, for example, his sons, this is why his strategy can be considered partially utilitarian. Another philosophical doctrine which aligns with Madoff’s ideas is Machiavellianism, which disregards morality and ethics, instead, placing the utmost value on achieving the desired result (Iliopoulos, 2016). In a similar fashion, Madoff demonstrated absolute selfishness and indifference to the interests of his clients and eagerly committed a crime in order to attain his goal of becoming a billionaire.

Conclusion

Warren Buffet and Bernie Madoff are both men of outstanding wealth, yet their philosophical and ethical views completely oppose each other, and, as a result, today they happen to be in different circumstances. Buffet’s commitment to a business model which values trust and respect has allowed him to achieve the status of a living legend of the investment world. Whereas, Madoff’s deeply selfish and arrogant conduct earned a place in jail, where he remains to this date. Buffet’s humble business behavior influenced his altruistic decision to donate a large share of his wealth to charities. While, in the case of Madoff, his greed dishonesty caused harm and financial losses to thousands of his clients. The stories of the two men highlight the importance of ethics in the sphere of business and demonstrate the value of adhering to moral principles.

References

Byars, S., & Stanberry, K. (2018). OpenStax.

CBS Sunday Morning. (2017). [Video file]. YouTube.

Crippen, A. (2008). CNBC.

Cunningham, L. A. (2015). . The New York Times.

Iliopoulos, A. (2016). . The Quintessential Mind. h

PBS NewsHour. (2017). America should stand for more than just wealth, says Warren Buffett [Video file]. YouTube. Web.

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