Better value than an MBA: Warren Buffett’s letter to shareholders

Personal finance

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Warren Buffett recently published his annual (links to a PDF file), which is always worth a read. If you’ve never read it before, Buffett’s candid and easy-to-understand style and the amount of transparency he gives to Berkshire Hathaway’s operations is unlike anything you’d expect. It’s obvious that the words he chooses to describe his operations are carefully considered and intended to depict accuracy in an approachable manner rather than out of fear of bearing responsibility, which tends to be the reason business people spend time poring over verbiage (think business speak jargon).

For example, Buffett explains why a consolidated financial view of Berkshire Hathaway operations doesn’t make sense and provides key figures for each of four business areas. He also compares after-tax, per-share book value comparisons against pre-tax S&P returns with dividends included, and explains why this is the right comparison to make. This level of disclosure, explanation, and care in comparing figures is extremely uncommon. How much better (if misleading) a picture would it have painted had he chosen to ignore tax effects and compare BRK’s market value instead?

Other interesting tidbits I picked up were Buffett’s admission of a mistake he made by pushing for credit cards (which led to a loss of $50M) and how he initiates and monitors every derivatives contract in the company. (He has harsh words for boards and CEOs who mismanage their responsibility of controlling their companies’ risk exposure and face no consequences from their failures.)

Lest you think he’s just a wise and friendly old man though, it’s also obvious that Buffett is a business man, encouraging customers and shareholders to buy at the upcoming shareholder’s meeting in early May and to travel “by rail”, and not revealing all that much about his investment methods (which is fair enough). Nevertheless, 20 min. spent reading these 20 pages (and additional time on the ) will likely glean you much more insight into how to look at and manage businesses than most MBA programs will in two years.

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One Feedback on "Better value than an MBA: Warren Buffett’s letter to shareholders"

Bad Credit Saint

He’s been known to be very direct and sure looks like one of those businessmen that is a straight talker. The problem is that he has proven over a few investments that he does try to use the backing of the “straight talker” to push some of his buy-in deals. I guess there is nothing wrong with this, its just leverage that he uses but its just useful for people to know too.



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