I recently finished reading The Essays of Warren Buffett: Lessons for Corporate America, a great collection of some of multibillionaire Warren Buffett’s greatest writings on business as collected and introduced by Lawrence Cunningham, and would highly recommend it to anyone who wants to know a bit more about investing or business or both.
The book is organized into 8 “chapters”, with each chapter containing a series of excerpts from Warren Buffett’s writings, which as far as I can tell are mostly from the annual reports that Warren Buffett prepares for his company Berkshire Hathaway (I wonder if he writes personal financial reports…). The chapters discuss Buffett’s views on a number of topics, ranging from corporate governance to mergers and acquisitions to accounting to discussions of how investing should work.
Reading the book will give you an interesting look at the mind of one of the most successful investors of all time, but while I valued that insight, I think I was most impressed by three things:
- I was amazed at how approachable and “folksy” Buffett’s writings are. Instead of relying on complex jargon and consultant-speak, he speaks in plain English, oftentimes using funny analogies or stories (and sometimes even Biblical/literary parables) or extremely nerdy puns to make very simple points. Case in point, to explain the irrationality of some companies who seem to always pursue that “one magical acquisition” which will take them to success, Buffet writes:
“In the past, I’ve observed that many acquisition-hungry managers were apparently mesmerized by their childhood reading of the story about the frog-kissing princess. Remembering her success, they pay dearly for the right to kiss corporate toads, expecting wondrous transfigurations. Initially, disappointing results only deepen their desire to round up new toads. Ultimately, even the most optimistic manager must face reality. Standing knee-deep in unresponsive toads, he then announces an enormous ‘restructuring charge’. In this corporate equivalent of a Head Start program, the CEO receives the education, but the stockholders pay the tuition.”
- I was impressed at how consistent Buffett has been. It’s rare to find a politician, let alone a businessman, who has had the consistency of values and strategy that Buffett has had. You can take any essay from any chapter of this book, regardless of when it’s from, and, other than mentions of specific years or specific political/cultural references, you would not be able to tell what year that essay had been written. His core message and beliefs on corporate governance, mergers & acquisitions, and especially his investment philosophy have not changed.
- I was especially impressed at Buffett’s humility. Most executives seem to always desperately crave the spotlight and credit for positive things which have little to do with them and to deflect blame for things which are. I can’t fault them for that, as their salaries and jobs are highly dependent on the perception that they are capable stewards who do not make mistakes. But, Buffett takes a different approach. In many an essay about Berkshire Hathaway’s success, Buffett attributes the credit to the managers of the businesses Berkshire owns, oftentimes noting that his job is only to pick good businesses to own and that it is the managers and the businesses themselves that drive success. In essays about Buffett’s missteps, he freely owns up to them. In multiple essays, he has owned up to holding on to his textile business for too long or not exiting General Re’s derivatives business fast enough. Buffett even goes so far as to explain mistakes that he had made which nobody outside of Berkshire’s leadership team would know about (i.e. investment opportunities he could have made but passed on).
While I definitely learned a great deal about business and how Buffett thinks of the market, I think the most important learning that I took away from the book is what Buffett calls the “Noah principle”, and it is something I will aim to try to adhere to for the rest of my life:
“Predicting rain doesn’t count, building arks does.”