Warren Buffett is out with his annual letter to shareholders of Berkshire Hathaway, arguable the only annual report that gets any public attention.
It’s a reminder that Buffett not only excels at investing, but communication.
Every year it makes me wonder why more companies don’t follow Berkshire’s lead.
The letter benefits from being short, personable, entertaining and easy to read.
In a stroke of marketing genius, Buffett releases it on a Saturday to avoid competing with other news.
Most companies will tell you how much they want to communicate with investors, regulators and the public. They argue that it’s crucial to tell their story. But then they publish reports that are long, dense, jargon-laden and data-filled.
Buffett tells a story. He entertains. He pokes fun at his long-time partner Charlie Munger.
Goldman’s annual report has sections entitled “Financial Performance” and “Segment Performance.”
Berkshire’s sections are called “What We Do” or “The Secret Sauce” or “58 Years – and a Few Figures.”
One of the most entertaining aspects of a Berkshire’s letter is that Buffett is so understated.
Last year, Berkshire posted a phenomenal performace. Shares gained 4%, compared with an 18% decline in the S&P 500. And yet here is how he describes the results:
“Berkshire had a good year in 2022.”
Compare that with the language Goldman CEO David Solomon used to describe his firm’s performance in 2021.
“There’s no question 2021 was an extraordinary year. It was challenging for everyone — our clients, our people, our communities. But even in an incredibly dynamic market environment, our people came together, we stayed true to our strategy, we put our clients first and though we still have a lot of work to do, I’m proud of the fact that we delivered exceptional results to our shareholders.”
Put side by side, Goldman’s letter seems comically verbose.
The best part of Buffett’s letter this year was the section where he praises Munger, who recently turned 99. It is headlined Nothing Beats Having a Great Partner.
“Charlie and I think pretty much alike. But what it takes me a page to explain, he sums up in a sentence. His version, moreover, is always more clearly reasoned and also more artfully – some might add bluntly – stated.
Here are a few of his thoughts, many lifted from a very recent podcast:
- The world is full of foolish gamblers, and they will not do as well as the patient investor.
- If you don’t see the world the way it is, it’s like judging something through a distorted lens.
- All I want to know is where I’m going to die, so I’ll never go there. And a related thought:
Early on, write your desired obituary – and then behave accordingly.
- If you don’t care whether you are rational or not, you won’t work on it. Then you will stay
irrational and get lousy results.
- Patience can be learned. Having a long attention span and the ability to concentrate on one
thing for a long time is a huge advantage.
- You can learn a lot from dead people. Read of the deceased you admire and detest.
- Don’t bail away in a sinking boat if you can swim to one that is seaworthy.
- A great company keeps working after you are not; a mediocre company won’t do that.
- Warren and I don’t focus on the froth of the market. We seek out good long-term
investments and stubbornly hold them for a long time.
- Ben Graham said, “Day to day, the stock market is a voting machine; in the long term it’s
a weighing machine.” If you keep making something more valuable, then some wise person
is going to notice it and start buying.
- There is no such thing as a 100% sure thing when investing. Thus, the use of leverage is
dangerous. A string of wonderful numbers times zero will always equal zero. Don’t count
on getting rich twice.
- You don’t, however, need to own a lot of things in order to get rich.
- You have to keep learning if you want to become a great investor. When the world changes,
you must change.
- Warren and I hated railroad stocks for decades, but the world changed and finally the
country had four huge railroads of vital importance to the American economy. We were
slow to recognize the change, but better late than never.
- Finally, I will add two short sentences by Charlie that have been his decision-clinchers for
decades: “Warren, think more about it. You’re smart and I’m right.”
And so it goes. I never have a phone call with Charlie without learning something. And, while he makes me think, he also makes me laugh.”
Buffett’s letters — like his investment performance — get a disproporiant amount of attention from investors and the press.
Part of it is because he is Buffett and has a long track record.
But it’s also because he is a better storyteller.