Power Players

Warren Buffett really loves this 'favorite' riddle from Abraham Lincoln — and it makes perfect sense why

Warren Buffett
David A. Grogan | CNBC
Warren Buffett

Warren Buffett released his widely anticipated annual shareholder letter on Saturday.

This year's iteration of the letter was full of interesting points — some of the highlights being a bearish stance on gold, looming cybersecurity risks, a veiled swipe on politics and long-term plans to continue acquiring businesses.

But what particularly stuck out was a riddle from none other than Abraham Lincoln (a.k.a. the "Ancient One," the "Rail Splitter," the "Great Emancipator," "Honest Abe") — and it stuck out less like a sore thumb and more like a green thumb.

"Abraham Lincoln once posed the question: 'If you call a dog's tail a leg, how many legs does it have?' and then answered his own query: 'Four, because calling a tail a leg doesn't make it one,'" Buffett writes.

He then cheekily adds: "Abe would have felt lonely on Wall Street."

It pays to be a skeptic

Lincoln's riddle signifies the difference between illusion and fact. In other words, you can get away with a lot by changing the definition of something, but changing definitions won't change reality.

By including this timeless quip, Buffett points a finger at bankers and corporate CEOs who present their "earnings" in a way that disingenuously excludes "a variety of all-too-real costs."

In an age that is filled with the aggressive pursuit of loopholes, Buffett reminds us that we should never forget the power of deep knowledge and transparency.

And this isn't the first time he's made the Lincoln reference.

"Managers thinking about account issues should never forget one of Abraham Lincoln's favorite riddles," Buffett wrote in Berkshire Hathaway's annual letter in 1992. "'How many legs does a dog have if you call his tail a leg?' The answer: 'Four, because calling a tail a leg does not make it a leg.' It behooves managers to remember that Abe's right even if an auditor is willing to certify that the tail is a leg."

That said, it should behoove us to remember that words of the world's wisest thinkers are truly timeless, and like Buffett, we should always carry them in our back pockets.

Tom Popomaronis is a commerce expert and proud Baltimore native. Currently, he is the Senior Director of Product Innovation at the Hawkins Group. His work has been featured in Forbes, Fast Company and The Washington Post. In 2014, he was named one of the "40 Under 40" by the Baltimore Business Journal. Follow him on LinkedIn and Twitter @tpopomaronis .

Like this story? Subscribe to CNBC Make It on YouTube!

Don't miss: