Warren Buffett’s ‘Viral News’ Test for Making Tough Decisions is Backed by Psychologists

Warren Buffett.
Warren Buffett. Photo: Getty Images.

It all comes down to reputation.

There are moments in every person’s life when they are faced with making a tough decision. What does one do in that situation? How does one decide?

Well, Warren Buffett has a simple test for those nerve-wracking moments. He calls it the ‘Newspaper Test’. Many in psychology also call it the ‘Viral News’ test. 

Back in 2005, Warren Buffett was one of the panellists at a Q&A session with Microsoft co-founder Bill Gates at the University of Nebraska-Lincoln when he was asked this question by a student. 

His answer was simply genius. He said he has a simple test for himself and all the managers at his company — how would they feel if their actions would be written about in the newspaper the next day? Would they still take the same decision knowing it would be “written by a smart but pretty unfriendly reporter”? 

What Warren Buffett calls the ‘newspaper test’ for his employees is also called the ‘Viral News’ test in psychology and business management. 

He is correct when he says, “We all have money. While we’d like to have more, we can afford to lose money. But we can’t afford to lose reputation. Not a shred.” And this test can be a great compass for navigating such situations.

Sometimes decisions are not what is right or what is wrong. But what is right and what is ethical. This test in such cases can serve as a moral compass for individuals. 

Many organisations across the world, including Australia, use this test in different forms. 

For instance, the Commonwealth Bank has a ‘Should We?’ test in its Code of Conduct which can be used by employees to discern whether their decision is ethically acceptable and in line with the principles of the bank. 

Having such a test to fall back on has great benefits whether you’re acting as an individual or an employee. It helps one navigate ambiguous situations personally or in professional situations for which there is no previous precedent and helps make one the morally correct choice.