Book Review > The Essays of Warren Buffett - Lessons for Investors and Managers

The success of Warren Buffett and of Berkshire Hathaway over the years has bemused those of the "traditional" school of managing and investing; Buffett's approach has defied the market to continually add value to the company in what Buffett calls "a long term partnership concept with shareholders".
It is the principles of fundamental valuation analysis that guide investment decisions, albeit that Buffett defied those principles in the acquisition of what became Berkshire Hathaway in the first place!
This fundamental analysis is linked to sound management principles where managers are the "stewards of investment capital", and that their rewards are tied directly to the results that they have achieved in their particular area of responsibility, rather than that of the organisation as a whole. These rewards are based upon the return on capital, and not on the increases in retained earnings, which Buffett argues is earnings withheld from owners.
Managers must think like owners when making investment decisions and always have shareholder interest foremost. This is not to say that managers are shareholder's puppets, but that they consider long term growth measured on a per share basis.
Buffett's long term goal is to maximise share value by owning a diversified group of businesses that generate cash and above average returns. Companies must be able to report on how much the company is worth, how it is to meet its future obligations and how well managers are doing in the business.
So what makes Buffett so successful and so much an individual by market comparison? His philosophy is based upon teachings of Benjamin Graham and David Dodd, who espoused fundamental value analysis as the basis of all investment decisions. This is often ignored by investors who chase the quick return or fashionable stock, in the hope that their ship will come in.
In his enterprise, Buffett has consistently developed quality assets to increase value - sound management and simple businesses that consistently earn good returns on equity.
There is also a certain sense of style that pervades Buffet's writings, in which he takes each decision personally and in consideration of the welfare of all stakeholders. In a sense, he must, as most of his wealth is linked to the success of the company. It is a pity that more managers of enterprises do not share his approach!
The Essays of Warren Buffett is a collection of reports to shareholders, presented by Lawrence Cunningham in a logical and themed format. The subjects covered range from corporate governance to taxation, with repetition of the sound principles that have made Buffett such an enormous success.
This book enhances those written about the success of Warren Buffett and Berkshire Hathaway, and is recommended reading for those wishing to further understand his investment philosophy and common sense approach to share and company analysis.