The Essays of Warren Buffett : Lessons for Corporate America

While Buffett has a policy of seldom commenting on stocks he owns--he feels public pronouncements will only lead to the public's expectation of more public pronouncements, and he likes to keep his cards close to his vest--he loves to discuss the principles behind his investments. These come primarily from Ben Graham, under whom Buffett studied at Columbia University and for whom he worked in the 1950s. First among them is the idea that price is what you pay and value is what you get--and if you're a smart investor, the first will always be less than the second. In that sense, the value of the lessons learned from Buffett's Essays could be far greater than the book's price. --Lou Schuler

Product Description
The definitive work concerning Warren Buffett and intelligent investment philosophy, this is a collection of Buffett's letters to the shareholders of Berkshire Hathaway written over the past few decades that together furnish an enormously valuable informal education. The letters distill in plain words all the basic principles of sound business practices. They are arranged and introduced by a leading apostle of the "value" school and noted author, Lawrence Cunningham. Here in one place are the priceless pearls of business and investment wisdom, woven into a delightful narrative on the major topics concerning both managers and investors. These timeless lessons are ever-more important in the current environment.

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.


Time extremely well investedý.   August 3, 2000
taking a rest
112 out of 119 found this review helpful

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?


Packed with wit, humor, and profound wisdom. Great read!!   August 5, 1998
40 out of 41 found this review helpful

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!


Wisdom from the Heartland   August 9, 2002
dennis wentraub (schenectady, new york USA)
32 out of 32 found this review helpful

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.


Required reading material in an extremely useful format!   May 3, 2001
Richard M. Rockwood (Fishers, IN USA)
27 out of 28 found this review helpful

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.