'immediate pain' is a human/physical metaphor for 'immediate financial repercussions'. i.e. they don't suddenly lose money as soon as the decision is made. 'mindless imitation' is copying without thinking. The competitors copy what the first company did, without thinking about the possible repercussions thoroughly. So, they make the same mistakes. My personal impression is that there is a lot of mindless repetition in retail shops in Chinese tourist towns!

Immediate pain in this context refers to immediate consequences. Because there are no consequences to reckless financial decisions, companies keep taking huge risks that end in financial disaster. Mindless imitation refers to copying what another company or person is doing without thinking; again without thinking of the consequences or whether the product is actually good. If it sells, they copy it. I'm thinking Buffett is talking about derivatives here, which is a popular, complex financial product that has caused a lot of damage lately. A more simple example of immediate pain would be if you are allergic to peanuts, eat peanuts, and immediately feel sick. A more simple example of mindless imitation would be when young people bully another person because their friends are doing it; there is no thought as to whether their behavior is actually good, they are just copying what they see without thinking.