Customer Reviews

The essays of Warren Buffett: Lessons for corporate America

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In the first place, Lawrence Cunningham, whose school it turns out is just a couple blocks from me here in Manhattan, has done a very fine public service in collecting these essays. If you've ever tried to wade through Buffet's annual letters yourself, you know that there are long bits of detailed financial discussions interspersed with the gems of wisdom, aphorisms, and humor that the amateur Buffet-ette is more apt to be seeking. So his collection and coalition, which is well-chosen, well-ordered, and well-edited is a treat for any Buffet fan looking for an accessible volume of the man's work.

Buffet has the strangest of powers in that he comes across as a homespun billionaire. Now that's different from just being homespun, the way Sam Walton was, or just being a billionaire, like Bill Gates. Buffet flaunts his wealth and his professional love of money, all the while expressing essential, eternal truths in simple, earthy phrases. When I saw Buffet speak at business school he tapped on the microphone to test it and said "testing, testing, one-million, two-million, three-million." It is that natural genius for combining wealth, truth and comedy that is most vividly on display in "The Essays of Warren Buffet.".

Of course, these timeless, simple truths are all known - the way we know that "eat less, exercise more" is how to lose weight. And yet, and yet, it takes Buffet to remind us to "think like an owner"; invest only in management that you "like, trust, and admire"; and buy pieces of business (stocks) when it costs less than the intrinsic value.

There are the excellent statements of managerial accountability, business valuation, and capital structure. Helpful warnings on accounting shenanigans, trading costs, and paying heed to Mr. Market. For clarity, brevity, wit, truth, and learning, there is no business writer in the 20th century that compares with Warren Buffet.

Buffet's sayings are irreplaceable (and I am not cherry picking here, but merely highlighting a half-dozen of the hundreds of bon mots in this book):

"On the other hand, working with people who cause your stomach to churn seems much like marrying for money - probably a bad idea under any circumstances, but absolute madness if you are already rich."

"The speed at which a business success is recognized, furthermore, is not that important as long as the company's intrinsic value is increasing at a satisfactory rate. In fact, delayed recognition can be an advantage: It may give us the chance to buy more of a good thing at a bargain price."

"Just as work expands to fill available time, corporate projects or acquisitions will materialize to soak up available funds... any business craving of the leader, however foolish, will be quickly supported by detailed rate-of-return and strategic studies prepared by his troops"

In regard to acquisitions, which usually fail to earn the cost of capital: "The managers at fault periodically report on the lesson they have learned from the latest disappointment. They then usually seek out future lessons."

"One of the ironies of the stock market is the emphasis on activity. Brokers, using terms such as `marketability' and `liquidity," sing the praises of companies with high share turnover... but investors should understand that what is good for the croupier is not good for the customer. A hyperactive stock market is the pick pocket of enterprise."

On acquiring bad companies for cheap prices: "In my early days as a manager I, too, dated a few toads. They were cheap dates - I've never been much of a sport - but my results matched those of acquirers who courted higher-price toads. I kissed and they croaked."

Buffet is approaching literature here - the nuance involved, and the delicious counter-pointing of toads, dates, sport are pitch-perfect. The payoff - "I kissed and they croaked" is as fine a line of found poetry as exists.

Buffet, having studied at the feet of the master of investment literature for the first half of the 20th century, has ascended to become the master of investment literature, unqualified. This is a book that will please Buffet-maniacs, investors, finance newbies, and anybody with an interest in the articulated evolution of managerial capitalism that has separated the finance and capital allocation specialties from the operational and day-to-day specializations.

In closing, it's appropriate to quote America's great investing wag quoting America's greatest political wag - the subject is, as always with Buffet, simple maths and simple truths:

"Managers thinking about accounting issues should never forget one of Abraham Lincoln's favorite riddles: `How many legs does a dog have if you call his tail a leg?' The answer: `Four, because calling a tail a leg does not make it a leg'."

Enjoy this book.

I cannot imagine that Mr. Warren Buffet is not on any investor's top 10 list of the greatest investors since there were markets in this Country. I would also suggest that a dispassionate appraisal of his performance argues quite eloquently that he is the best to have ever amassed his fortune, and that of his shareholders on Wall Street.

Thanks to the efforts of Mr. Lawrence A. Cunningham readers have access to essays that previously were available primarily to shareholders, and which are organized in this book thematically for the first time. Annual reports are generally easy to come by, however as I write, 1 Share Of Berkshire Hathaway "A" requires $59,900.00, and the "Baby Berkshires" $1,966.00 per share. Many are quick to respond the price is so high as Mr. Buffet has not split the stock, ever. But what is more important is why he has never done this. This book explains his theory on this matter, and dozens of others.

Mr. Buffet has his critics, they range from the idiotic, "he's lucky", "his success allows him to make attractive deals", and to those who feel he missed the money that was made in tech stocks. As for the luck theory, who else has earned 23.8% compounded annually for over 25 years? Winning the lottery is probably more likely an event. As to the attractive deals his wealth is said to facilitate, I guess the answer is, is the questioner serious? He made what he has, his reputation allowed him to have the Federal Government allow Solomon Brothers to continue participating in the bond market based on one thing, his word! This is a man who has rescinded very successful trades because news arrived within days of his buying that could have given the appearance of his having had information others were not privy to.

This book has more useful information and ideas that have been proven over decades than any 10 hot Business Books of the moment. Mr. Buffet has had off years, but he has never gone bust.

One of my favorite stories is when he was hanging out with friends as a kid, his pals were collecting bottles for the deposit. He was collecting bottle caps, sorting them, and determining who was drinking what brand! He clearly was put amongst us for a reason.

On a time invested basis there is no better or more rewarding reading than these essays. No one can match what he has accomplished, why would someone not wish to hear what he has to say on dozens of topics?

The book is well-organized, but it is just a reorganized version of Buffett's original words. I assume that readers purchased the book so that everything would be "laid out" for them. But as Charlie Munger, Berkshire's vice-chairman, said about common stock investments at a shareholders' meeting, "If it were that easy, everyone would be rich." One would be better off obtaining copies of the actual letters to shareholders. They are available on Berkshire Hathaway's website, and a compendium of letters to shareholders from 1977 to 1995 is available for purchase directly from the company for a reasonable price. I would recommend starting with the 1977 letter and proceeding in a chronological fashion. This would add context - a backdrop - for Buffett's investment philosophy. For instance, one would notice his evolution, as his emphasis shifted from mostly statistical undervaluation to favorable qualitative factors. Although he still seeks a "margin of safety" in his investment purchases, he is now more in tune with Philip Fisher than with Benjamin Graham. (His evolution was helped by Charlie Munger, who recognized, earlier in his investment career, the importance of subjective factors which are not readily quantifiable.) The book would be useful as a quick reference guide, but for the investment fanatic - and any truly successful investor is - the Berkshire Hathaway Letters to Shareholders are priceless.

At the 1998 Berkshire annual meeting, Buffett himself credited this book by saying it is better than all the other biographies and the best business investment book to read. Who could ignore such a high recommendation?

Having read several other books claiming to have captured and outlined Buffett's investment wizardry, I am excited to report that finally some one has done so beautifully. Cunningham distills and presents the Berkshire philosophy in a coherent and organized manner that puts it in a whole new light. This book is an excellent investment guidance source for everyone, from the novice to the more seasoned investor. You will find yourself dog-earing pages and underlining like crazy. Absolutely brilliant!

This collection of essays by Warren E. Buffett, compiled by Lawrence A. Cunningham, is an excellent introduction to basic investment concepts that have proven successful for the 'Oracle of Omaha' and his loyal following. The reader will want to supplement these papers periodically with more timely updates from the annual letter Buffett writes to the shareholders of Berkshire Hathaway. Buffett's ideas have been widely reported so there are no surprises here. To be sure, Buffett is consistent. He pokes fun at the 'efficient market' school which confuses stock price with stock value. Early on we hear him calling for the expensing of stock options and urging more transparent, segmented financial reporting by large companies. For Buffett mechanically rebalancing portfolios to achieve diversification, back in fashion, may miss the point of holding-on to your best investments for superior returns. Distinguishing between Growth and Value styles of investing is unnecessary and misleading. If you have ever wondered why Berkshire Hathaway does not pay a dividend or why it doesn't split its high stock price, Buffett gives his reasoned explanations. It was Warren Buffett's fundamental school mentor Benjamin Graham who introduced the allegory of Mr. Market and the concept of 'margin of safety' both of which get satisfactory attention here. Most importantly, I think, Buffett reminds us continually that as stock market investors we are buying for the long-term parts of real businesses that produce measurable cash flows as evidence of their intrinsic value. Real businesses that produce real value are run by dedicated, competent leaders who know how to allocate capital. Hanging-on to such deceptively simple principles can get an investor through some very rough market cycles. Reading this collection is a lot like listening to the conversation of an avuncular and very experienced elder who with great patience, common sense, and wit explains what principles have guided his (investment) life. Indeed uncommon sense and integrity are hallmarks of Warren Buffett's writings. Humor too. In what other serious investment study will you get quotations from such luminaries as Woody Allen, Mae West, and Yogi Berra. Buffett loves aphorisms to make his point. I challenge anyone reading this book not to underline or commit to memory some of these gems. For a general introduction to the fundamental school view of investing this collection is required reading.

For all of you investors who want to invest like Warren Buffett - that is, successfully - this is what you really want to read. There are a large and growing number of books out there that will claim to make you think/act/be like Buffett; here you can actually read his thoughts. As WB has often said, go to the source material (not the analyst reports, etc.) to make your judgments, and that is true in studying Buffett as well.

On top of that, Buffett is a much better writer than most of his biographers. The editor of this compilation has done a good job of organizing Buffett's writings into themes with a light hand. You get a good idea of how Warren thinks.

Buffett has an amazing way of penetrating the thick coating of B.S. that covers most of what passes for investment theory nowadays. He ruthlessly applies Ockham's Razor to cut things down to their essential truths; two of the most basic are that owning stock in a company is truly owning part of a business and that the future is full of uncertainty. Obvious, right? But, when you really absorb these concepts the answers to the questions of when and why you should buy a stock become much clearer. I won't attempt to boil down any more of his thoughts - you can find plenty of that elsewhere. Suffice it to say that, although I am a Chartered Financial Analyst and have advised others regarding investments for over 20 years, when reading this book I had many "V-8 moments" - where you want to slap yourself on the forehead and say "of course!"

While I first heard of WB many years ago (before he was cool), this book was my first significant exposure to his writings. He writes well, with wit and wisdom, and makes fairly complex subjects amazingly accessible to the uninitiated. I wish I had read this book much earlier, but I'm not sure if I would have been mature enough to put much of it into action anyway.

One thing to keep in mind when you hear about all the easy ways to make money from following charts, or are tempted to buy the latest idea emanating from your brother-in-law - or a talking head on CNBC: what Buffett does REALLY works. To put it crudely, it isn't an accident that he is, per Forbes, the 2nd richest man in the world - out of over 6 billion people. (I haven't seen any chartists make the list yet.) If you are really a serious investor, why would you NOT want to read what he has to say?

However, I can tell you why you probably won't actually put into practice most of what he says - it's no fun! It's no fun (for most) reading 10-Ks and 10-Qs. It's no fun keeping your own council and avoiding the crowd. Also, why wait, perhaps for years, for the "fat pitch" of a great company at a great price when you can get your kicks day-trading? After all, if most people were willing to wait until the odds were truly in their favor before they risked their money, lotteries would disappear and Las Vegas would be a dusty little village. Even those who acknowledge Warren's achievements and study his words will find putting his seemingly obvious concepts into action surprisingly difficult.

But that is how you actually earn the money.

Finally, here's a story, retold by Buffett, that illustrates the herd mentality you must overcome to succeed. I quote:

Ben Graham told a story 40 years ago that illustrates why investment professionals behave as they do: An oil prospector, moving to his heavenly reward, was met by St. Peter with bad news. "You're qualified for residence", said St. Peter, "but, as you can see, the compound reserved for oil men is packed. There's no way to squeeze you in." After thinking a moment, the prospector asked if he might say just four words to the present occupants. That seemed harmless to St. Peter, so the prospector cupped his hands and yelled, "Oil discovered in hell." Immediately the gate to the compound opened and all of the oil men marched out to head for the nether regions. Impressed, St. Peter invited the prospector to move in and make himself comfortable. The prospector paused. "No," he said, "I think I'll go along with the rest of the boys. There might be some truth to that rumor after all."

-Warren Buffett, Berkshire Hathaway Letter to Shareholders, 1985

This book is a great, well organized compilation of Mr. Buffett's famous "Letters to Shareholders" which appear in the annual reports of Berkshire Hathaway.

It has been recently updated to include the letters to shareholders written since the book was first released in 1996, a new introduction has been written, and a new, tougher, blue cover has been added. Mr. Buffett advised shareholders at the 1999 & 2000 Berkshire Hathaway annual meeting if he had to pick a single book describing his methods, this would be the one. It is a great tool to use when trying to compile Mr. Buffett's comments on a particular subject since it is organized by subjects he has discussed in his letters over the years. Trying to find all of his comments on a particular subject throughout the annual reports is a time consuming task when you have to look through many years worth of annual reports. Mr. Cunningham has made this task much simpler with this book.

This book is a good digest of Warren Buffett's views becauseMr. Cunningham essentially put together, in a topic by topic form,Buffett's amazing "Chairman's letters" to the shareholdersof Berkshire Hathaway. However, while this book is far better thanothers that attempt to describe Warren Buffett's fabulously successfulinvesting philosophy, it is not as informative or as entertaining asreading through all of Buffett's letters to his shareholders for thosewilling to attempt that feat...

The various other books on WarrenBuffett, written by lesser authors, can be interesting to read, butyou should realize that those books get alot wrong, often trying tocreate a mathematical short-hand or witty one-liner-method to attainBuffett-style investing results.

If you are looking for somethingbeyond this or Buffett's shareholder letters, check out P. Fisher'sUncommon Profits, and B. Graham's Security Analysis 3rd edition, bothof which Buffett has stated as having influenced him strongly.

Larry Cunningham is one of a handful of Warren Buffett aficionados who truly grasps what Buffett is all about. Too much attention has been paid to Warren the stock picker, and very little to Warren the business analyst and corporate manager. To be a successful investor, you first have to be a successful judge of businesses, which Buffett has been exceptional at.

That is the key legacy of Larry Cunningham's Essays. He has artfully stitched together Buffett's musings over the past 20 years and created an extraordinary primer that both individual investors and corporate managers will find extremely useful. I will resort to this book time and again for illumination and refreshment.

It is certainly true that Mr. Warren Buffet is nothing if not consistent. On June 29, Forbes Magazine will release their latest compilation of the wealthiest people in the world. There are 538 on the list, 269 from America, 56 that disappeared from last year, and many that while still present, have seen their billions cut in half or even a third of what they once enjoyed. Even the wealthiest individual, Mr. Gates, while maintaining his position at number one saw his assets decline. Guess who has billions more than last year? Warren Buffet!

I always enjoy watching those that enjoy being critical of Mr. Buffet. Their charges are absurd, ranging from he never changes his methods, or he did not buy into the technology sector. The year 2000 will be remembered for many things but the amount of money lost in the tech sector will always remain the stuff of which legend is made.

Mr. Buffet did in fact embrace technology as he saw fit, and last year the stock of his company went up by 14.4%. That is a number shared by other companies, however it is closer to what they are worth today as compared to one year ago if they are still alive and limping. We have embraced the 21st century by entering such cutting-edge industries as brick, carpet, insulation and paint, Buffett told his Berkshire Hathaway shareholders this year. "Try to control your excitement." More exciting is the holding's company's stock price in the last year, up 14.4%. Stings a bit to the nay Sayers I would think.

The real treat for investors is that Mr. Lawrence A. Cunningham has earned the respect of Mr. Buffet and Mr. Munger unlike others who report from afar. In this his, "First Revised Edition", Mr. Cunningham has expanded the text by over 10%, and added items like a, "Disposition Table", that are instructive to maximizing the value of what he presents.

The comments I made on the first version need to be revised as follows. One share of Berkshire "A" stock is not $59,900.00; you missed that bargain, Now it will cost you $67,000.00. Up $2,250.00 this past Friday when the markets were soft to say the least. And that bargain "B" Berkshire? Well last time $1,966.00 would have done it, $2,235 will be required now, and it too rose $84.00 this past Friday.

I cannot imagine that Mr. Warren Buffet is not on any investor's top 5 list of the greatest investors since there were markets in this Country. I would also suggest that a dispassionate appraisal of his performance argues quite eloquently that he is the best to have ever amassed his fortune, and that of his shareholders on Wall Street. Thanks to the efforts of Mr. Lawrence A. Cunningham readers have access to essays that previously were available primarily to shareholders, and which are organized in this book thematically for the second time. Annual reports are generally easy to come by, however as I wrote on August 3, 2000, 1 Share Of Berkshire Hathaway "A" required $59,900.00, and the "Baby Berkshires" $1,966.00 per share. Many are quick to respond the price is so high as Mr. Buffet has not split the stock, ever. But what is more important is why he has never done this. This book explains his theory on this matter, and dozens of others. Mr. Buffet has his critics, they range from the idiotic, "he's lucky", to "his success allows him to make attractive deals", and to those who feel he missed the money that was made in tech stocks. As for the luck theory, who else has earned 23.8% compounded annually for over 25 years? Winning the lottery is probably more likely an event. As to the attractive deals his wealth is said to facilitate, I guess the answer is, is the questioner serious? He made what he has, his reputation allowed him to have the Federal Government allow Solomon Brothers to continue participating in the bond market based on one thing, his word! This is a man who has rescinded very successful trades because news arrived within days of his buying/selling that could have given the appearance of his having had information others were not privy to. This book has more useful information and ideas that have been proven over decades than any 10 hot Business Books of the moment. Mr. Buffet has had off years, but he has never gone bust. One of my favorite stories is when he was hanging out with friends as a kid, his pals were collecting bottles for the deposit. He was collecting bottle caps, sorting them, and determining who was drinking what brand! He clearly was put amongst us for a reason. On a time invested basis there is no better or more rewarding reading than these essays. No one can match what he has accomplished, why would someone not wish to hear what he has to say on dozens of topics?

Thank you Mr. Cunningham for gaining this man's trust.