Book Review > Warren Buffett on Business: Principles from the Sage of Omaha

Warren Buffett is one of the most successful investors in history and in 2008 was ranked by Forbes as the richest person in the world with an estimated net worth of approximately US$62 billion.  Although Buffett has never written a book, he is a very readable financial author and every year personally writes a Chairman's letter to his Berkshire Hathaway shareholders. While all of these letters are freely available from the Berkshire website, you may find the long bits of detailed financial discussions detract from the gems of wisdom that you are looking for. 
                   
Connors' book brings us Buffett’s managerial principles and practices primarily using extracts from these annual letters. A significant amount of material in this book is about acting ethically as a businessperson — a principle that Buffett has espoused throughout his career. Buffet is that strange combination - a frugal billionaire, and he clearly and honestly tells the truth as he sees it in jargon free phrases. Buffet reminds us to "think like an owner"; invest only in management that you "like, trust, and admire"; and buy pieces of business when they costs less than the intrinsic value.

There are excellent statements of managerial accountability, business valuation, and capital structure plus warnings on accounting shenanigans such as EBITDA. For clarity and common sense, there are few business writers to match Warren Buffet - plus he can make you laugh.

Aside from a few pages of acknowledgements and introduction, every word in the book is from Buffett or from his partner Charlie Munger.  The three hundred or so extracts are arranged in eighteen chapters by topics such as treating "Shareholders as Partners", "Management Principles and Practices"  and "Executive Behaviour" plus nine appendices including the "Berkshire Hathaway Owner's Manual", "Berkshire Hathaway Code of Business Conduct and Ethics" and a transcript of a talk on "The superinvestors of Graham-and-Doddsville."

There is no editing or commenting on the extracts and this is both a strength and weakness of the book. A strength in that we hear directly from Buffett but a weakness in that some context is lost especially if you are not familiar with the history of Buffett's companies. Also it helps to understand baseball analogies - do you know whether batting .246 is good or bad?  Some repetition in letters that span 30 years covering similar topics can easily be forgiven but the selections could have done more to avoid these. Even though the advice may be excellent such as "  .. measure every act against not only what is legal but also what we would be happy to have written about on the front page of a national newspaper..." perhaps reading it once or even twice would have been enough.

The idea of publishing extracts from the Berkshire letters is not new and, if you can't manage the original letters, this book is an easy read. If you like the idea, you might also like to try The Essays of Warren Buffett: Lessons for Corporate America, Second Edition by Lawrence A. Cunningham published in 2008 which is reputedly highly recommended by Buffett.

Tony Reardon is a member of the AIA.