Critics argue that part of Warren Buffett's success stems from his access to 'sweetheart deals,' like the Goldman Sachs preferred stock, which are unavailable to ordinary investors. Is this criticism valid?

Analysis of the Relationship Between Buffett's Success and "Sweetheart Deals"

Validity of the Criticism

Yes, this criticism holds some validity. Warren Buffett, as the helm of Berkshire Hathaway, leverages his massive capital scale, personal reputation, and extensive network to secure "sweetheart deals" inaccessible to ordinary investors. For example:

• Goldman Sachs Preferred Shares Case: During the 2008 financial crisis, Buffett invested $5 billion in Goldman Sachs preferred shares, securing a 10% annual dividend and warrants. This deal offered high returns alongside exceptionally low entry barriers and protective clauses—conditions impossible for average investors to replicate.
• Other Similar Deals: Investments in General Electric (GE) and Bank of America also involved preferential terms, such as high dividends or conversion rights. These opportunities often arose when companies urgently needed capital, with Buffett’s role as a "lifeline" enabling him to negotiate favorable terms.

These deals indeed contributed significantly to Berkshire Hathaway’s returns, partially enhancing Buffett’s overall performance. Critics argue this is not pure value investing but rather "privilege" gained through "asymmetric information" and influence, somewhat undermining his image as a role model for ordinary investors.

Counterarguments and a Broader Perspective

However, this view is not entirely fair, as it overlooks the core foundation of Buffett’s success:

• Value Investing Principles: Buffett’s success primarily stems from Benjamin Graham’s value investing philosophy—buying undervalued quality businesses, long-term holding, and moat analysis. Even without "sweetheart deals," his portfolio (e.g., Coca-Cola, Apple) achieved massive appreciation through public markets.
• Scale Effect, Not Privilege: Berkshire Hathaway’s size (hundreds of billions in assets) naturally attracts large-scale deals, similar to advantages held by institutional investors (e.g., pension funds), rather than personal scheming. While ordinary investors cannot replicate this, they can learn indirectly through index funds or small-scale value strategies.
• Buffett’s Own Response: In shareholder letters, Buffett repeatedly emphasizes that his investments are based on public information and rational analysis, not insider advantages. He even advises ordinary investors to choose low-cost index funds rather than attempting to mimic his trades.

Conclusion

Overall, the criticism has merit—"sweetheart deals" did amplify his success, but they represent only the tip of the iceberg. Buffett’s true value lies in the universality of his investment strategy: patience, discipline, and focus on intrinsic business value. Ordinary investors should draw lessons from this rather than attributing everything to "privilege." If Buffett is viewed as an "investment philosopher" rather than a "trading maestro," the impact of such criticism diminishes significantly.