Warren Buffett credits a valuable personal rule for his success, which he encapsulates as an important life lesson:

We've never succeeded in making a good deal with a bad person.

That's what he shared in a 1989 annual letter to Berkshire Hathaway shareholders. This short lesson is a reminder for anyone who's ever made the mistake of doing business with shady characters.

"After some other mistakes, I learned to go into business only with people whom I like, trust, and admire," said Buffett.

Which makes sense, because business is all about the people with whom you are doing business. And it takes relationships built on honesty and integrity.

What I've learned over the years is that people sometimes don't have your best interest in mind. Even more so today -- when people are begging for transparent and honest communication during uncertain times.

Setting the right boundaries

To avoid making the mistake of striking business deals that will backfire due to dishonesty or lack of trust in people, some strict parameters need to be put in place, including:

  • Do your due diligence upfront and vet your potential business partners thoroughly before you go into business.

  • Research their past decisions and look for trustworthy references. 

  • Trust your gut and don't ignore your intuition. If you have a bad feeling about someone, you're probably right.

  • Meet them for dinner or coffee to get to know them a little better. If the feeling remains, nip any future association in the bud.

  • Set the expectation early in the partnership that conversations will foster open and transparent discussion.
  • Get into the habit of communicating bad news quickly instead of deflecting it. Don't paint a rosy picture of reality when problems arise.
  • Make informed decisions with reliable data.
  • Ground your biggest decisions in integrity, and expect the same from your potential partner. When business partners make decisions in integrity, you're seeing their character in full view. You don't question who they are or whether they have your best interest in mind (because they always do). 

Know when to walk away

If someone still violates your trust, the last line of defense is to simply phase out that undesirable relationship. Associating yourself with the right people will inevitably require disassociating yourself from the wrong types.

As Buffett acknowledges, you'll make mistakes along the way. Sometimes a golden opportunity will blind you to the people involved, or your intuition might fail to warn you about an individual's true character. All you can do is learn from these mistakes, adjust accordingly, and move on.