In "The Art of War," adhering to the "moral law" is a core strategic principle that ensures loyalty in crisis. Buffett applies this by cultivating a reputation for fairness and character. This becomes a competitive advantage, attracting partners and deals that others cannot access, proving ethics are a strategic asset.
“Wu Wei” is the principle of effortless action by aligning with natural flows. For investors, it means recognizing and moving with powerful secular trends instead of fighting them. As the saying goes, "You don't have to be a great farmer in the spring." The key is to identify the "spring" and participate fully.
Sun Tzu had a sophisticated understanding of probability, framing it as "balancing the chances of life and death." He advised acting only with an overwhelming advantage—a 6,000-to-1 margin of safety—a clear precursor to modern quantitative risk assessment, developed millennia before Fermat and Pascal.
Sun Tzu's "Art of War" is largely written in the negative ("don't do this"), a "via negativa" approach. This simplifies decision-making by focusing on eliminating obvious errors. In investing, this translates to using checklists of past failures to avoid ruin, ensuring that what remains is the only viable path to take.
Buffett's investment timing focuses on company perfection, not market cycles. He identifies a great business with a single flaw, like Apple's pre-buyback cash hoard. He then waits for activists like Icahn to force a fix. Once the "imperfection is removed," he invests, having avoided the activist battle himself.
Buffett’s investment in BNSF exemplified "coup d'oeil"—the ability to synthesize disparate factors into a single strategic insight. He connected the shift in U.S. trade to Asia, accelerated depreciation tax benefits, and the underlying efficiency of rail into one powerful, non-obvious thesis for the railroad's future value.
Facing a massively overvalued Coca-Cola holding, Buffett executed the Gen Re merger as a defensive move. He used Berkshire's inflated stock to acquire Gen Re's bond portfolio, diluting the concentrated risk. This provided capital that rallied during the 2000 market collapse, setting Berkshire up for future offensive plays.