Buffett's 2005-06 letters: On moats, managers and money

A business decline rarely starts with incompetence. It starts with indifference towards customers, capital, or shareholders. It starts with managers chasing short-term numbers while quietly dismantling the foundations they were hired to protect. And it thrives in boardrooms where tough questions go unasked because everyone is too polite—or too well paid—to ask them. In his 2005 and 2006 letters to shareholders, Warren Buffett returns to a few familiar themes: competitive advantage, capital allocation and executive compensation. These are not just lessons in business. They are warnings. Ignore the moat and your business will crumble. Get the incentives wrong and even a flatlining company can make its CEO rich. Hire the wrong investment manager, and one mistake could undo decades of work. This story, part of our series on Buffett's annual letters, brings together those ideas. Because the real risk in business is not failure. It is success ma

This article was originally published on April 25, 2025.