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Tap Dancing to Work: Warren Buffett on Practically Everything, 1966-2013 Paperback – December 31, 2013
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“Loomis has created an engaging picture of a great influencer of our time.”
“Serious investors as well as those interested in the history of Berkshire Hathaway and the philanthropic ideas of Buffett will enjoy these revealing pieces extracted from the Fortune archives.”
About the Author
CAROL J. LOOMIS is a senior editor-at-large at Fortune, where she has worked since 1954. She has been the magazine’s expert on Warren Buffett since 1966 and has edited his annual letter to shareholders since 1977. Her many honors include five lifetime achievement awards, including a Gerald Loeb Award for business journalism and Time Inc.’s first-ever Henry Luce Award. This is her first book. She lives in Westchester County.
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The book is built around numerous Fortune magazine articles (including 13 cover stories) involving Buffett - most written about him, but also another 12 written by the 'Oracle of Omaha.' Author Carol Loomis' first mentioned (one sentence) the then little-known Buffett in a 1966 Fortune article, and has followed him since. The material also follows his transition from being 'just' an extraordinary investor to being an extraordinary manager as well - the latter resulting from numerous instances in which he's acquired entire companies (eg. BNSF).
In 1969 Buffett announced that he no longer understood the market, believed making money in stocks was going to become much harder to do, and closed his highly successful hedge fund at the end of the year. He'd been providing compounded annual returns of 29.4%, vs. 7.4% for the Dow since 1956 and accumulated a personal fortune of about $25 million running the fund. His partners had kept all gains up to 6%, with Buffett taking one-fourth of everything over that.
Buffett, upon the urging of a friend, became an active trustee of Grinnell College in 1968 - retaining that role until 1987, and staying as lifetime trustee until 2011. During that period its endowment went from $8 million to around $1.5 billion.
When Buffett took over Berkshire Hathaway in 1965 it was a New Bedford (Ma.) textile manufacturer. He closed the textile business in 1985, unwilling to make substantial capital investments to continue competing in a discouraging business. ("Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.")
He's leery of most acquisitions. ('Managers who want to expand their domain at the expense of owners might better consider a career in government.') Part of the rationale is that acquirers' stock often sells for a discount, and is then used to fully pay for fully-valued (even overvalued) properties, reassured by friendly investment bankers anxious for fees. ('Never ask your barber if you need a haircut.')
The book illustrates both Buffett principles and his own adherence to them. For example, Buffett strongly values thrift and cost management - 'Our experience has been that the manager of an already high-cost operation frequently is uncommonly resourceful in finding new ways to add overhead.' His World Headquarters staff in Omaha (currently estimated to number 20 - 25) is characterized by Buffett as 'A compact organization that lets us spend all our time managing the business rather than managing each other.'
Buffett sets the pay of the top men in his operating companies, along with an open-ended incentive plan,and takes no role in compensation beyond that. There also are no companywide management meetings, and no imposed management systems.
His investment advice - 'Buy things that make more things,' not gold or other commodities. He prefers investments that do not involve high technology (admits he's not that knowledgeable in that area), serve a strong demand, are well-managed, bring in strong financial returns, have minimal capital requirements and low debt, and are protected by a strong 'moat' that provides a sustainable competitive advantage (eg. Coca-Cola's brand value, a monopoly position, a low-cost advantage - Geico, often achieved through advantageous economies of scale, patents). He currently sees houses as an investment opportunity for many.
Much of the latter part of 'Tap Dancing to Work' is taken up with his commitment to philanthropy. His children will not inherit a significant proportion of his wealth - he's opposed to the inter-generational transfer of great fortunes. Buffett plans to give 83% of his fortune to the Gates Foundation. On current events, he believes ObamaCare fails to sufficiently deal with the high costs of U.S. health care, though he supports its expanding coverage, that taxes on the wealthy are too low, sees the trade helping net ownership of the U.S. amounting to $11 trillion by 2015 (we become a 'sharecropping society'), supports expensing of stock options and renewable energy.
Bottom-Line: Though sometimes dry and dated, overall the book is entertaining and educational.
The most annoying portions deal with his "philanthropy". In large measure, because it's largely self-serving propaganda. When you give money to a "foundation" that is almost entirely controlled by yourself (there are three trustees in total at the Gates Foundation: Gates, his Wife and Buffett), it's questionable in what sense anything is being given away. When you talk of not given wealth to the next but put your children in charge of "structures" that control enormous pools of wealth, it's worth asking some questions. Control of that wealth (in the form of foundations) is itself a form of wealth. So by putting the money in the foundations, is one really opposing "inter-generational" transfer or is one transferring wealth through a legal structure that will allow a measure of control over the use of the wealth well past the grave? Few hard questions are asked about any of these topics.
There are also his old rants against employee stock options. He pushed hard for accounting changes that have had the effect of restricting the grant of stock options largely to senior managers. It would have been more useful to see a more balanced and more long-term point of view rather than simply reviving one side of the old argument.
The higher truth of his businesses is there to those who read between the lines. Buffett has always been miserly penny-pincher with a preference for stable businesses that can be bled for cash. He has no system for management because all the power is concentrated at the top of the company and most decisions are made banker-style by the balance sheet.
To their credit, they published an in-retrospect embarrassing article on future insider trading scandal figure David Sokol in the book. If you lived through most of the events covered in the book, it's not much worth reading. Maybe if you're young enough, it might be worth something. But it should always be remembered that these articles are usually only half of whatever story was going on.