In his 1983 Berkshire Hathaway (BRK.B) (BRK.A) shareholder letter, Warren Buffett summed up one of his least-discussed but most consequential philosophies in business leadership: “We try to attract investors who will understand our operations, attitudes and expectations… and dissuade those who won’t.” It’s an unorthodox stance in a market culture where companies often obsess over appealing to as many investors as possible. But for Buffett, building a shareholder base isn’t about quantity; it’s about quality.
Buffett’s reasoning is straightforward: the shareholders you attract influence the stability, decision-making, and valuation of your business. Investors who understand a company’s long-term approach are less likely to panic during downturns, demand short-term results, or pressure management into unsound moves. By contrast, courting investors with a trading mentality — those who are focused on short-term price swings rather than intrinsic business value — can create volatility that serves neither management nor long-term owners.
His approach is deliberate. Berkshire’s shareholder letters, policy decisions, and even its refusal to split the stock are “advertisements” to attract the right type of investor while subtly repelling the wrong kind. This self-selection strategy works like a filter: clear communication draws disciplined investors, avoiding hype turns away short-term speculators, and an owner-oriented mindset appeals to those thinking in decades, not days. As Buffett has explained elsewhere, the goal is to create a market “populated by rational, informed investors” — not speculators chasing headlines.
In today’s markets, this principle is more relevant than ever. Meme stocks can double overnight, social media posts can move billions in market cap in hours, and zero-commission trading apps have gamified speculation. For public company CEOs, a shareholder base dominated by short-term traders can pressure management into unsustainable earnings “beats,” drive up volatility that deters long-term institutional investors, and distract leadership from executing a long-range strategy. For private business owners seeking outside capital, misaligned investors can push for premature exits, demand risky growth strategies for faster payback, or undermine a company’s culture to boost margins.
Entrepreneurs and CEOs can apply this principle by communicating their philosophy clearly, resisting “style drift” to match market fads, being selective with capital partners, and educating investors about operational realities. The more investors understand your approach, the less likely they are to push for harmful short-term changes.
Berkshire offers a striking example here. Its investor base has famously low turnover, with more than 90% of shares once estimated to be held by people who had been owners for at least five years. That stability contrasts sharply with high-turnover companies whose stocks can swing wildly on day-trader sentiment or algorithmic trades.
For Buffett, fewer “impressionable” shareholders mean a truer correlation between Berkshire’s intrinsic value and its market price — and the freedom to make multi-year decisions without fear of a stock-price backlash. His advice isn’t just for CEOs, either. Individual investors can invert the principle by seeking companies whose communications, governance, and strategy are aimed at long-term owners, while avoiding those whose management panders to hype and short-termism. The same investor discipline Buffett uses to select companies should guide the choices of the people running them. In short, if you want to build a business that lasts, attract owners — not traders. And if you want to build wealth that lasts, become the kind of owner Buffett has always sought.
On the date of publication, Caleb Naysmith did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
