In Defence of Warren Buffett

Currently the press is slamming Warren Buffett and Berkshire Hathaway for the sudden resignation of David Sokol and his questionable involvement with Lubrizol before the Berkshire deal. For more background please read Buffett Misses Chance to Show Moral Courage

I think it likely that an SEC investigation (already announced) and further questioning of Sokol will lead to more answers, but in my view, Buffett's reputation is being unnecessarily damaged. A true contrarian/value investor would look at this news, compare it to Buffett's (and Berkshire's) history, and realize that the street is wrong once again. Lets look at some facts:

• Berkshire's compounded annual gain (from 1965-2010) is 20.2%

• Buffett's annual base salary is $100,000
• Supported Barack Obama and advocates for taxing the rich 

• Convinced Sokol to stay at Berkshire twice
• "Lose money and I will forgive you, but lose even a shred of reputation and I will be ruthless" is taken out of context

The first point is just to reiterate that we are in fact discussing the most successful investor of all time. His performance is in a league of its own, and I think this puts the onus on his detractors to prove anything contrary to his sterling reputation.

The importance of the next two points cannot be understated. Warren Buffett is perhaps one of the most humble and honest people in the investment business today. His philanthropy, his views on social justice, and his 'walking the talk' all contribute to a person that can't be described as greedy or above the law.

The final two points support Buffett's innocence in the Sokol affair. If Buffett respected Sokol enough to convince him to stay at Berkshire twice, how can we possibly expect him to have been aware or even suspicious of wrongdoing on Sokol's part. Also, how can one expect Buffett to be ruthless with an employee that has already resigned? Are we realistically expecting the 80 year old man to publicly bash a good friend and employee of over a decade? Is this rational?

The press is holding the Oracle of Omaha to a much higher moral standard than the rest of the industry, and very soon people will realize this. The street is merely channeling bearish sentiment from one likely insignificant issue (who historically cared about Libyan oil?) to another. If anything, I take this 'Buffett Bashing' as another indicator of the small correction we're having in the midst of an extraordinary bull run. Sokol's mistake is not a "credit negative" for Berkshire and the issue is being blown out of proportion.