The Essays of Warren Buffett

The Essays of Warren Buffett: Lessons for Corporate America. Each year, Warren Buffett, Chairman and CEO of Berkshire Hathaway, includes in his letter to the shareholders valuable and understandable lessons for investors and business managers to consider without resorting to unfamiliar jargon that can confuse readers. What Lawrence Cunningham has done in compiling and arranging selections of these essays is to make them available to everyone in a condensed and thematic format. The core message is one of fundamental valuation analysis as extolled by Buffett’s teachers Ben Graham and David Dodd. The essays are divided into five main areas: corporate governance, finance and investing, common stock, mergers and acquisitions, and accounting and taxation. Sub-topics include: the relationship between corporate boards and managers, executive pay, corporate philanthropy, the redundancy of the term “value” investing, transaction costs, dividends and stock splits, stock repurchases, intrinsic value and book value and retiree benefits.

The book’s primary strength is its readability. Anyone who has heard Buffett interviewed will note that his writing style matches his speaking style as well. However, one cannot say that this is a light read for the beach. Each topic requires attentive perusal or the wisdom imparted will not be retained. The only time that the language becomes overwhelmingly technical is in the section on accounting. Many popular business books tend to promote the current fad in investing or strategy, but one of their main weaknesses is that they provide only an instant snapshot of the landscape. By including essays from more than a decade of annual reports, Cunningham allows Buffett to reexamine important issues as the landscape changes and to express how his opinions have changed over time (though admittedly Buffett doesn’t stray far from his original conclusions). The fact that the essays were written from approximately 1979 to 1996 and, therefore, are at least a decade old should not lead readers to devalue their importance, especially given our current economic situation.

Successfully completing the compendium will not instantly make the reader a better investor. As Buffett himself points out, “intrinsic value offers the only logical approach to evaluating the relative attractiveness of investments and businesses. … [It] is an estimate rather than a precise figure, and it is additionally an estimate that must be changed if interest rates move or forecasts of future cash flows are revised.” Nor will this book make one instantly want to go out and buy Berkshire Hathaway shares, but it should help readers understand how Buffett and his company operate. It’s like a mini-seminar on business, investing, finance and accounting from Buffett’s point of view.

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