Source | LinkedIn :By Seyi Fabode
In 2015, when I sat down to read all of Warren Buffett’s annual letters from the 10 years prior, the world was, shall we say, slightly less interesting. China was or was not in a slowdown, the US stock market was or was not in a bubble and the EU was or was not collapsing. The only thing you can add to those issues above, two years down the line, is that some countries are more, shall we say, nationalistic.
Warren Buffett released the most recent version of his annual letter a few days ago, and I felt it would be a good time to update my learnings by reading the 2015 and 2016 annual letters. So, here goes the (mostly) non-obvious business and life lessons from reading 12 years of Berkshire Hathaway letters to its shareholders.
- Enable the people around you and you’ll be amazed at how far they’ll take you (regardless of what the markets are doing): As much as the letters are about the numbers and how portfolio companies are doing, a lot of text is dedicated to the people behind the numbers. Warren Buffett (and Charlie Munger) have perfected the art of empowering the right people to achieve phenomenal outcomes. It’s unsurprising, it’s the foundation of the relationship between these long term friends. Most investors do not share anecdotes about the people who run their companies, anecdotes abound about Lorimer Davidson of GEICO, Ajit Jain, Tad Mantross, Ted Weschler, James Hambrick of Lubrizol, Frank Ptak of Marmon etc. Warren Buffett considers himself a contractor hired to help these business experts. With a mindset like this his people have no choice but to be inspired to achieve the great things they continue to achieve. The same will serve you and your teams/employee well…
- There is a lot to be said for instinct: this plays out again and again in the selection of the companies in the BRK portfolio. The fundamentals have to be sound, the leadership has to have integrity and the numbers have to make sense. In that order. In almost all of the letters is the statement ‘As much as Charlie and I talk about intrinsic business value, we cannot tell you precisely what that number is for Berkshire shares (nor, in fact, for any other stock).’ in talking about Intrinsic Business Value. For men who are as successful as Warren Buffet and Charlie Munger (if unconstrained by regulations) they could get away with throwing out numbers but it seems to always come back to what they believe. Sometimes numbers just can’t express what you know about value or put another way ‘you can know money but do you know value?’
- You cannot pay too much attention to company culture: This level of attention is obviously paid to BRK culture. When I first wrote the earlier version of this post in 2015, I wondered what Warren Buffett’s views were on Uber and the issues with company culture that the company had back then. Unfortunately, nothing much has changed. The 2010 letter quoted Churchill saying ‘You shape your houses and then they shape you.” Whether you choose to pay attention to it or not, your company has a culture.
- There is wisdom in strong opinions, weakly held: Until Warren Buffett met Charlie Munger he was making money (lots of it) ‘buying fair businesses at wonderful prices’ but Charlie got him to change his mind and focus on ‘buying wonderful businesses at fair prices’. Ponder that, when was the last time you changed your mind and stopped doing something that seemed to be working for you because someone gave you better advice? Might be time to change some things… Sidenote: On strong opinions I’d recommend you read the 2011 letter for why you might not want to be excited when the stock market rises.