Last Year We Lost $3.77 Billion, However…

“Last year we lost $3.77 billion” was the message Warren Buffett had to personally deliver to Berkshire Hathaway shareholders at the 2002 annual meeting. What’s a CEO to do with news that’s as bad as that?

I first learned about this in the summer of 2004 when Robert Cialdini was a guest speaker at several State Auto agency partner meetings. As Cialdini talked about influence and how to frame a message he shared the Buffett story with us.

As many of you know, Warren Buffett is one of the richest men in the world and Berkshire Hathaway has recovered quite nicely from its disastrous 2001. Nonetheless, having to tell shareholders their company value decreased by nearly $4 billion (6.2% in total value) was not something Buffet looked forward to. Fortunately he and his long time partner Charlie Munger were huge fans of Robert Cialdini and his work on ethical influence.

Let me lay the groundwork for how Buffet delivered his message: From 1965 through 2001, the overall gain in “annual percentage change in per share book value” of the S&P 500 was 4,742%. Not bad! Over the same time period Berkshire Hathaway’s gain was 194,938%!! Yes, you read that correctly, 194,938! (Click here to see the 2001 report). Put another way, if you had invested $1 in the S&P 500 in 1965 it would have been worth $48 by 2001. However, that same $1 invested in Berkshire Hathaway would have been worth $1,950 by the end of 2001. Wow!

So how did Buffett address shareholders? Paraphrasing, he said the following:

“Last year the value of your company went down by $3.77 billion. However, I’d like to remind you that the management team that’s been in place at Berkshire Hathaway for the past 36 years has outperformed the S&P 500 by more than 190,000%.”

Unbelievable! You’re left not focused on the company loss but rather the incredible long-term success of Berkshire Hathaway. What if Buffett had said this?

“I’d like to remind you that the management team that’s been in place at Berkshire for the past 36 years has outperformed the S&P 500 by more than 190,000%. However, last year the value of your company went down by $3.77 billion.”

Ugh! You can feel the difference. Now you’re focused on the loss, not the incredible long-term success of the management team.

I hope you realize the words and facts are the same in both cases. What Buffett realized, and few people pay attention to, is this: people remember what comes after transitional words like “but” and “however.” You know it’s true because you just felt the difference.

If you want to be a master persuader you have to understand this truism and always be conscious of what you want your audience to remember. There are times you want them focused on the negative to prompt action and there are times you want them focused on the positive. How you order the information makes all the difference.

The next time you have to deliver good and bad news think about what you want the audience to remember. Then think about the comparisons that will make your message shine. Last, be sure to order the information correctly. Following these three tips might not make you the next Warren Buffett but they can make you much more persuasive than you are today. Who knows, that might be your first step towards Buffett-like success!

The Ticket is How Much?

(updated 8/26/21)

I’m sure to spice up your home you have pictures scattered throughout different rooms. We usually display pictures that speak to us or make us feel good in some way. Those who are into art are very aware that the frame a picture sits in can make a huge difference. The right frame can really help a picture come to life.

Framing doesn’t just apply to your favorite pictures. In psychology, framing has to do with the context that surrounds an issue or idea. In the same way the right frame can make a picture stand out, proper framing of your ideas can make them stand out and that’s important when you’re trying to persuade others.

Not only is framing important, so is reframing. You see, sometimes we need to reframe issues that are presented to us to have the best opportunity to make the right decision. Allow me to explain.

Not long ago I went to an event with my boss and good friend John. As we chatted, he told me that he was invited to a play his niece was going to appear in. The relative who invited him said tickets were only $12 and could be purchased online. John went online to purchase his ticket and was confronted with additional fees that increased the ticket price from $12 to $21. He couldn’t get beyond the fact that just because he was buying it online the cost was 75% more than if he went to the theater and bought the ticket in person. Of course, there would be some risk buying the ticket at the theater because the show could be sold out and he would have wasted time and gas money. Nonetheless, he was adamant that he wouldn’t pay an extra $9 (75%) for the ticket.

As we discussed this, I finally asked him, “If you were told the ticket was $21 would you have bought it?” He said he would because he wanted to see his niece but was just having a hard time with how much the extra fees came to. I suggested he just reframe the whole scenario and look at the price as $21, not $12 plus an additional $9.

It’s natural for us to make comparisons like John was doing because seldom do we operate in a vacuum. It’s also natural to rail against the comparison when it’s so large. As I’ve shared before – There’s nothing high or low but comparing makes it so.

Think about this – If I offered you $800,000 would you be willing to accept it? I bet you would, and I bet you’d be incredibly happy. However, if I give you $2.1 million and you only got to keep $800,000 because of taxes, you might not feel the same as getting $800,000 with no strings attached.

In both cases, at the end of the day you’d have $800,000 but in one scenario you’ll have a hard time enjoying your new wealth to the same degree because you’re thinking, “But it was originally $2.1 million.”

We face these situations all the time. I travel a lot and spend a good bit of time in airports. Most airlines now charge $25 per bag each way, which means most people pay an extra $50 on top of the ticket price. People detest that because it raises to the surface the pain of paying. Airlines might be wise to either incorporate a smaller fee for all passengers or allow you to pay for bags at the time you purchase your ticket. That way you don’t feel the pain of paying when you get to the ticket counter and the extra fee is an afterthought.

On the flip side, if you want people to feel the pain of paying to bring about change then you might want to separate the fees so they can clearly see them. An example would be gasoline taxes. Did you know in 2012 the average fuel tax for Americans was 49.5 cents per gallon, for state and national taxes? Sometimes there’s a sign at the pump mentioning the additional taxes but people just pay attention to the price per gallon. If gas were $3.19 per gallon in your area it would be under $2.70 per gallon without the tax. If you really want to highlight the issue of taxation, tell them they’re paying $2.70 a gallon, but let them see the meter add on 49.5 cents for every gallon; this just might just catch their attention. After all, most stores advertise pre-tax prices.

How you frame your presentation depends on what you want to accomplish. By the same token you have the power to reframe anything and sometimes doing so will allow you to feel better about the situation you find yourself in. For John it would be acknowledging the fact he would gladly pay $21 or more to see his niece perform instead of focusing on the $9 fee that increased his ticket price by 75%. In the end he’ll enjoy the play a little more and his niece will be happy that her uncle came to see her perform.

Brian Ahearn

Brian Ahearn is the Chief Influence Officer at Influence PEOPLE, LLC. An author, TEDx speaker, international trainer, coach, and consultant, he’s one of only 20 people in the world personally trained by Robert Cialdini, Ph.D., the most cited living social psychologist on the science of ethical influence.

Brian’s first book, Influence PEOPLE: Powerful Everyday Opportunities to Persuade that are Lasting and Ethical, was named one of the 100 Best Influence Books of All Time by BookAuthority. His second book, Persuasive Selling for Relationship Driven Insurance Agents, was an Amazon new release bestseller in several categories.

Brian’s LinkedIn Learning courses on persuasive selling and coaching have been viewed by more than 400,000 people around the world.