Warren Buffett reveals his secret to great leadership success

  • In his latest letter to Berkshire Hathaway shareholders, Warren Buffett uses analogies and stories to make key points.
  • Communication skills are key for leadership success.
  • Buffett believes the best leaders are master storytellers who make it personal and turn crises into storytelling opportunities.
Warren Buffett, chairman and CEO of Berkshire Hathaway
David A. Grogan | CNBC
Warren Buffett, chairman and CEO of Berkshire Hathaway

Of all the things that Warren Buffett is good at — making money (his net worth: $67 billion), building a company (Berkshire Hathaway's stock market value: $500 billion) and teaching (he wants to be remembered as a teacher, he said) — there's another thing that is certainly his forte but doesn't earn the famous investor a ton of credit: storytelling.

And more than ever, storytelling is an essential building block of leadership success.

Consider Buffett's annual letter to shareholders. In his latest letter, accompanying Berkshire's annual report that came out two weeks ago, Buffett compares fund managers to monkeys and uses other analogies and stories to explain why investors, on average and over time, will do best with low-cost index funds.

In an era of increasing CEO distrust, Buffett relies on a couple of centuries-old methods — letter-writing and storytelling — to build trust in him and his company.

Whenever Buffett wants to share his take on the world, he often tells a story. I'll never forget five years ago Buffett called me at my Fortune office to tell me that he believed many CEOs were discounting women to their own detriment and to the harm of the U.S. economy — and would Fortune run an essay by him about this topic? Of course, we said yes.

In "Warren Buffett Is Bullish on Women," in the 2013 Fortune 500 issue, he brilliantly translated his take on diversity to a language that guys running Fortune 500 businesses can relate to: "No manager operates his or her plants at 80 percent efficiency when steps could be taken that would increase output," Buffett wrote. "And no CEO wants male employees to be underutilized when improved training or working conditions would boost productivity. So take it one step further: If obvious benefits flow from helping the male component of the workforce achieve its potential, why in the world wouldn't you want to include its counterpart? Fellow males, get on board."

What, beyond a point of view and a specific message to communicate, makes a great storyteller? After more than 30 years interviewing and profiling CEOs and world-changing entrepreneurs, I've learned that the leaders who best attract followers do four important things with their storytelling:

1. They make it personal.

Starbucks' Howard Schultz has spread his personal story — he's the son of an uneducated WWII vet who got fired and left without health-care coverage after an accident — to build a winning corporate culture, drive his policy to provide health care for all employees, and shape his own successful leadership. So, too, does Elon Musk propagate storytelling of a personal kind to globalize his brands.

Musk's outrageous gimmick of putting a red Tesla Roadster convertible on board SpaceX's Falcon Heavy rocket that soared into orbit recently was more than brilliant cross-promotional marketing. When a reporter asked Musk whether this launch feels personal because his Tesla is in the payload, he replied: "It's always personal."

2. They turn crises into storytelling opportunities.

When Mary Barra took over as CEO of General Motors at a critical moment in 2014 — when customers lawsuits over faulty ignition switches threatened GM's future — she transformed a crisis into an opportunity to remake GM's culture. "I never want to put this behind us," Barra told employees at a town hall meeting. "I want to put this painful experience permanently in our collective memories." One company vet told Fortune that Barra's remarks "were unlike anything any previous GM CEO has ever said."

3. They keep a good story going.

Why does Jeff Bezos repeat his "Day 1' message every year in Amazon's annual report? To reinforce his mantra that Amazon will never stop being a start-up. Bezos said in his original 1997 letter to shareholders: "Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1." He has republished that message and that 1997 letter in every Amazon annual report since.

4. They find fresh ways to get a story out.

In 2013, when Buffett wanted young people to hear his message about women driving economic growth, he did a livestream conversation at the University of Nebraska. I was the moderator, and we took questions from students. And as we sat on stage that evening, Buffett tweeted for the first time. "Warren is in the house," he proclaimed on Twitter — and found a clever way to blast to the universe his message that women hold the key to American prosperity.

— By Pattie Sellers, co-founder and partner of SellersEaston Media and executive director of Fortune MPW Summits