Warren Buffett, chairman and CEO of Berkshire Hathaway (BRK.B) (BRK.A), is known for his ability to blend sharp financial analysis with memorable storytelling. In his 1981 shareholder letter, Buffett offered a vivid metaphor to describe the pitfalls of acquisition-driven optimism: “Many managements apparently were overexposed in impressionable childhood years to the story in which the imprisoned handsome prince is released from a toad’s body by a kiss from a beautiful princess. Consequently, they are certain their managerial kiss will do wonders for the profitability of Company T(arget).”
He continued, “In other words, investors can always buy toads at the going price for toads. If investors instead bankroll princesses who wish to pay double for the right to kiss the toad, those kisses had better pack some real dynamite. We’ve observed many kisses but very few miracles. Nevertheless, many managerial princesses remain serenely confident about the future potency of their kisses — even after their corporate backyards are knee-deep in unresponsive toads.”
