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The Essays of Warren Buffett: Lessons for Corporate America, Second Edition

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Over the years, I have read several of the essays that Warren Buffett included in Berkshire Hathaway's annual reports. After reading two biographies of him (Alice Schroeder's The Snowball: Warren Buffett and the Business of Life and Roger Lowenstein's Buffett: The Making of an American Capitalist), I purchased a copy of this volume and began to work my way through the contents selected, arranged, and introduced by Lawrence A. Cunningham. I began with Cunningham's Introduction (all by itself, worth much more than the cost of the book) in which he reviews what he considers to be key points about Buffett and his leadership of Berkshire Hathaway.

For example, "The CEOs of Berkshire's various operating companies enjoy a unique position in corporate America. They are given a simple set of commands: to run their business as if (1) they are its sole owner, (2) it is the only asset they hold, and (3) they can never sell or merge it for a hundred years." With regard to investment thinking, "one must guard against what Buffett calls the `institutional imperative.' It is a pervasive force in which institutional dynamics produce resistance to change, absorption of available corporate funds, and reflexive approval of suboptimal CEO strategies by subordinates. Contrary to what is often taught in business and law schools, this powerful force often interferes with rational business decision-making. The ultimate result of the institutional imperative is a follow-the-pack mentality producing industry imitators, rather than industry leaders - what Buffett calls a lemming-like approach to business."

Cunningham organizes the essays within seven sections between Buffett's Prologue (Pages 27-28) and his Epilogue (Pages 273-282):

I Corporate Governance
II Corporate Finance and Investing
III Alternatives to Common Stock
IV Common Stock
V Mergers and Acquisitions
VI Accounting and Valuation
VII Accounting Policy and Tax Matters

As Buffett explains in his Prologue, members of Berkshire Hathaway's shareholder group receive communications directly "from the fellow you are paying to run the business. Your Chairman has a firm belief that owners are entitled to hear directly from the CEO as to what is going on and how he evaluates the business, currently and prospectively. You should demand that in a private company; you should expect no less in a public company. A once-a-year report of stewardship should not be turned over to a staff specialist or public relations consultant who is unlikely to be in a position to talk frankly on a manager-to-owner basis."

Those who share my own keen interest in Warren Buffett's leadership and management principles will learn a great deal from a careful reading of these essays. They are quite literally "from the horse's mouth." The substantial value-added benefits include the fact that Buffett thinks and writes so clearly, duly acknowledges bad decisions and personal regrets (yes, there were several), explains what he learned from them, and meanwhile reveals a playful (albeit dry) sense of humor. He also includes a number of personal observations about America, especially about its culture and economy, at various times throughout the last 25-30 years. The two aforementioned biographies indicate that throughout his life, Buffett thoroughly enjoyed each and every opportunity to increase others' understanding of sound business principles that include but are by no means limited to investments.

Readers who are not among Berkshire Hathaway's shareholders will especially appreciate the fact that, in each of these essays, Buffett establishes and then sustains a direct and personal rapport. The tone is conversational and, better yet, inclusive. He never talks down to his reader. He never "dumbs down" the material. Inevitably and appropriately, he cites Berkshire Hathaway situations when illustrating certain key points but, really, most of the material in this book will have wide and deep general interest to executives as well as to shareholders who otherwise have no association with either Buffett or his company. I highly recommend this book without hesitation or qualification.

Without a doubt, The Essays of Warren Buffett : Lessons for Corporate America was a definitive and clear insight into the mind of a genius - just see my review for this first edition. The Second Edition, however, adds another dimension reflective of today's business and investing environment.

Specifically:

Corporate Governance
- addition of "Audit Committees" section. As usual, a frank and down-to-earth assessment of just how honest an "audit committee" can be (it can't) - great addition, brings investors back to reality for believing these jokers.

Corporate Finance and Investing
- addition of "Debt" section, and in particular how Berkshire views debt, a section just about every business owner (home-owner too!) and profit/loss manager should read.

Alternatives to Common Stock:
- addition of "Foreign Currencies and Equities" section. Frankly, the decline of the dollar has made this topic of relevance to all investors - but Berkshire still loves America's "dynamism and resiliency." Yet another great, topical addition.
- addition of "derivatives" section. Hedge funds have made this a household term, yet don't be fooled. Not surprisingly, Charlie Munger and Warren call them "time bombs."

Accounting and Valuation:
- addition of "Accounting for Mergers" section. Here, Charlie and Warren put forth their idea for dealing with accounting for acquisitions, whether it be "purchase" or "pooling."
- addition of "Some Insurance History and Accounting" section. True to its name, Warren guides the reader from the birth of Lloyd's, through the asbestos crisis to Berkshire issuing a massive retroactive reinsurance contract. If you invest in Berkshire, you'll want to read this section too.

In all, this updated version provides investors with a timely resource for investing in today's world. Additionally, all managers (and professionals who want to grow) should read this book because here, Cunningham neatly organizes selections from Warren Buffet's annual essays and guides them through a tough-minded, down-to-earth and common sensical manual for reference in today's (sometimes exceedingly) complex business environment.

For these reasons, this reviewer highly recommends "The Essays of Warren Buffett: Lessons for Corporate America" - Second Edition.

The Essays of Warren Buffett: Lessons for Corporate America, Second Editionmade its debut at BRK 2008 annual meeting. It is a definitive and clear source on Buffett's views, and an excellent summary/interpretation of his letters to the shareholders. I believe this is the best work on Buffett written to date (I read all of them). If you want to read only one book on Buffett, this should be it. It is also Buffett's favorite book about himself.

Why buy the 2nd addition instead of, or in addition to the first? Invaluable new additions (among the new gems are sections on audit committees, Buffett's views on debt, and mergers) make this book ever more pertinent to the current corporate environment and today's investment practices. This is a must-read.

Though I'm not a fan of Buffett, and I usually feel that his "wisdom" goes unchallenged in the media, in business circles and in academia because of his stature as an investor, this compilation is a great way to get a distilled collage of his annual report dissertations about many interesting subjects.
Of course one could just go to the website and read the reports, but the selection and organization makes it worth the price. It is very interesting to read some analysis of market turmoil times and think that you are reading about the present, to then at the footnote see that it was written 10 or 20 years ago. It puts today's economic crisis in perspective, and certainly makes the 2008 recession look like one of those opportunities that comes once every 20 years, and not like the apocalyptic event it is perceived to be in some quarters.
The fact that the book is the best compilation of one of the highest-regarded modern business philosophers earns the book 5 stars. The main ideas (and to me the most endearing) are that a corporation is a partnership and stock-holders, boards and managers should run companies with this "family-owned-for-the-long-term" attitude; that investing is about finding good businesses, with good and honest management, to be held for the long term, bought at discounted prices (with margin of safety), and that this should deliver wonderful results no matter what the vagaries of the market, political or social environment are.
But if Buffett was not a muti-deca-billionaire, some of his ideas would (and certainly should) be challenged with more vehemence, because his stature and his influence in an Obama administration could permeate the regulatory environment and infect the intellectual drinking well of policy-makers and rule-writers.
Buffett's analyses, metaphores, fables, simils, allegories and rants about subjects such as derivatives, low-grade bonds, financial advisory, all-stock mergers, etc could be serioursly challenged by an intellectually courageous business thinker that wouldn't mind going against a luminary (and investing the time and risking the reputation of challenging an Oracle.) Some of these challenges are not that difficult, and the internal logic that Buffett uses in some instances is flawed (and simply demonstrably so.) This is not the place to expound on it, but one of the pleasures of reading this compilation, is the excercise of mentally challenging Buffett.
On the matter of style, one can say that part of what makes Buffett's business reports memorable is his hokey style where he parenthetically inserts (often times bad or crude) jokes and aphorisms. But I was surprised by the predominance of mating references (quite often so irrelevant and unnecessary that they seemed forced into the essay). If this phenomenon is not simply the selection preference of the editor, but Buffett's actual thought frequency, it would be interesting to see a psychological profile of the man in light of his personal biography (he as much says in one of the essays that to a guy sitting on $130 million, an older woman should hold no attraction.)
As a last thought on the matter of style, just like I distrust a politician that tells me he is just a regular Joe, I distrust a highly sophisticated investor, that operates complex businesses and manages intricate transactions, and speaks of it all in home-spun, dumbed-down, folksy speech. For all his diatribes against derivatives, he uses them frequently (and profitably), for his disdain of junk-bonds, he "invests" in them, for his "aversion" to speculation he has made a lot of money speculating in silver, in foreign currency, in default swaps, etc. And for all his high-horse-ridding about accounting transparency and operational honesty, he is rather silent on his essays about the alledged improper insurance transactions his company was involved with in his dealings with AIG, but more troublesome is his "throwing under the bus" of his insurance executives (several of them convicted), by claiming himself too far removed from the operations to know about those transactions: Either a lie, or a deriliction of duty (to use his own phrase).

I have both editions of this book. If you watch the CNBC special on Buffett, he comes right out and tells the viewers this is the best book you can purchase for what he does. Buffett will never write a book on investing. Why? He has already written it. It is his letters to share holders and The Intelligent Investors (1970s edition). It is basic Dale Carnegie and his way of giving back to those closest to him-the people that have put the ultimate trust in him, Berkshire Shareholders. He puts in right there for you. To better understand, read The Warren Buffett Way and The Warren Buffett Portfolio (two books Buffett and Munger recommend). Read Charlie Munger's Almanac, everything written by Ben Graham (first 4 editions, especially 1940s ed.) and ignore the rest.

There are many things that make Warren Buffett an incredible person. Obviously he is the most successful investor the world has ever seen but this is compounded in achievement by a his level of integrity and his genius for displacing risk in the process. He's done it his way, without feats of risk, financial engineering, or magical inventions. This makes his wisdom all the more compelling and makes this book easily the best comprehensive book of business wisdom ever written. His business partner Charlie Munger has reflected on this unrecognizable genius - "people think Warren and I leap 10 feet fences in a single bound, when in reality we simply step over 1 foot fences".

I have read this book at least 8 times cover to cover and like a fine wine it gets better with age. The magic of Warren's wisdom is rooted in his basic understandings of human nature, durable value propositions, the role of accounting, the dangers of precision and the simplicity of common sense. The more you read this book, the more wisdom is revealed to the reader. An example of this wisdom is buried in one of his favorite sayings "I would rather be generally right then precisely wrong". Seems like a harmless enough saying but if you take the time to digest his meaning it is incredible advice. How else could a single person digest volumes of information and make multi-billion dollars purchases in 15 minutes while avoiding high-priced investment advisory teams and months of due diligence work. To mortals this appears bonkers, but to Warren as conveyed by this saying if the opportunities aren't obvious enough and don't jump out to you then they simply aren't worth doing at all.

This book has made me a better investor and has allowed me to achieve professional goals I once thought to be unachievable.
Highly Recommended - Thanks Warren for sharing your wisdom with the world, easily my most favorite book on business!

This book is a compilation of writings from Warren Buffet's annual shareholder letters to his Berkshire investors. These letters are available for free download at http://www.berkshirehathaway.com/letters/letters.html, but this book is well worth the money because it compresses the writings in these letters and organizes them into principles Buffet uses.

Warren Buffett's annual letter to shareholders of Berkshire Hathaway is one of the most highly anticipated and widely read documents for those interested in business, investments, politics, and economics. Most shareholder letters are either boring documents that shed little light on the operations of a company or merely glossy cheerleading exercises that gloss over much that informed investors would want to know. In both content and appearance, Buffett's letters are anything but typical. You will not find glossy paper, self congratulatory photos, and other marketing material when reading a Berkshire Hathaway annual report.

Given the fact that Berkshire Hathaway has posted a listing of the past thirty shareholder letters, what would be the value in purchasing a compilation of these letters in the form of a book? When I first learned about Lawrence A. Cunningham's book, The Essays of Warren Buffett: Lessons for Corporate America, I had doubts about the value of reading it particularly since I had already read most of Buffett's letters to shareholders. I purchased the first edition in early 2000 shortly after becoming a Berkshire Hathaway shareholder and recently purchased Cunningham's 2nd edition.

I can say that this book is WELL WORTH purchasing. For a full review of this book, please click the following link:

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Unfortunately the living investor legend Buffett himself only writes in Berkshire Hathaway investor letters. Luckily they contain lots of high quality descriptions of his views. And luckily Lawrence Cunningham compiled them in Buffets original writing along a diverse set of topics. It is pleasure pure and value pure. Thanks to both of you.

I generally do not write reviews of products, but I have found the first Cunningham book and this book so helpful in my lifetime that I wanted to post a positive note about them. You can find all of Buffett's letters online and they are a must read, but this book very effectively organizes passages from the letters in a very usable way. I pick it up and read the original every few years to try to absorb more of Buffett's wisdom, and I enjoy reading it each time. Unfortunately, there are no short cuts to copying Warren, but doing your best to emulate him through osmosis is not a terrible idea. So, for what it's worth, this book is definitely worth buying so that you have it around to read now and again. He has an amazing way with words and an even more amazing way with investing-a great combination for educating the masses...