Published on April 19, 2009

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.

essayswarrenbuffettGiven 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.

Categorization and Context

One of the interesting aspects of reading Buffett’s letters in chronological order is that one can combine knowledge of the timeframe in which the letter was written and read the document with that context in mind.  Not only that, but with benefit of hindsight, it is possible to appreciate Buffett’s statements regarding Berkshire and the business environment in general.  However, while the chronological review is useful for understanding the evolution of Berkshire Hathaway and Buffett’s thinking, it leaves something to be desired in terms of consolidating Buffett’s thoughts on specific subjects.  This is where Cunningham’s arrangement comes in.

Cunningham includes an introductory section that provides a great deal of information regarding Buffett’s background and would be useful for those who are new to Berkshire Hathaway.  He then arranges Buffett’s letters into seven major themes and then includes excerpts from Buffett’s letters over the years as they relate to each theme.  Essentially, this takes shareholder letters intended to be read at a given point in time for a particular audience and transforms it into a well organized book.  The following major themes are addressed:

  1. Corporate Governance
  2. Corporate Finance and Investing
  3. Alternatives to Common Stock
  4. Common Stock
  5. Mergers and Acquisitions
  6. Accounting and Valuation
  7. Accounting Policy and Tax Matters

Timeless Information in Context

In the second edition, Cunningham supplements the prior book with Buffett’s thoughts on a wide array of subjects including the momentous events of the past decade.  Of particular interest are the sections on stock option, executive pay, and the role of a board of directors.  However, all of the sections contain information likely to make readers better investors.  Cunningham uses extensive footnotes to draw attention to the specific letters that were used to come up with the compilation so this additional context is not lost.

One of the Classics on Investing

This book deserves to be considered a “must read” for anyone interested in investments or business in general.  If investors read nothing but Benjamin Graham’s Security Analysis, The Intelligent Investor, and Cunningham’s arrangement of Buffett’s letters, they will definitely avoid many of the major pitfalls that can result in poor returns.  Avoiding poor returns and permanent loss of capital is the first requirement for investing success.  These books have also served as the intellectual underpinnings of many successful value investors over the years who seek to beat the market over long periods of time.  Even those who have read all of Buffett’s letters over the years would be well served to read Cunningham’s compilation of essays.

The Essays of Warren Buffett: Convenient Arrangement of Shareholder Letters

2 thoughts on “The Essays of Warren Buffett: Convenient Arrangement of Shareholder Letters

  • April 20, 2009 at 2:52 am
    Permalink

    Great review. I excerpted a bit of it on the Guru Five, so hopefully more readers will find it from there. One question: where would you place this book in order of importance with the others written on Buffett?

    • April 20, 2009 at 8:39 am
      Permalink

      I would place this (and the shareholder letters) at the top of the list given that these are the views of Buffett himself. Cunningham does add quite a bit of value. In terms of other Buffett books, I would recommend Roger Lowenstein’s 1995 biography “The Making of American Capitalist” and also Schroeder’s 2008 biography “Snowball”. The latter has many personal details about Buffett that were previously unreported while I think Lowenstein covers Buffett’s early years in a more streamlined manner.

Comments are closed.

X

Forgot Password?

Join Us

Password Reset
Please enter your e-mail address. You will receive a new password via e-mail.