Book SummaryThe Essays of Warren Buffett, by Warren Buffett and Lawrence A. Cunningham

1-Page Summary1-Page Book Summary of The Essays of Warren Buffett

In 2008, Warren Buffett was declared the richest person in the world. As the CEO of Berkshire Hathaway, he commands a business empire that includes insurance companies, media companies, manufacturing, clothing, and even makers of candy and sodas. Yet Buffett has as much a reputation as a teacher as he does as a business tycoon.

The Essays of Warren Buffett is compiled by editor Lawrence A. Cunningham from Buffett’s annual reports to Berkshire Hathaway shareholders. Buffett views his company’s shareholders as his fellow owners and business partners, and he uses his annual report as a platform to educate them on Berkshire’s inner workings, the logic behind his investment decisions, and the fundamental principles and philosophies he applies as his guide to building their wealth.

Therefore, Buffett’s essays provide a window into the mind of the world’s most successful investor, a man whose ideas and values are in stark contrast with the stereotypical Wall Street business mogul. His insights on investing are easy to conceptualize but difficult to put into practice, and his thoughts on the culture of the wider business world shine a light on the ethics (or the lack thereof) that shape the modern financial landscape.

Warren Buffett and Berkshire Hathaway

In Buffett’s official biography, _[The...

The Essays of Warren Buffett Summary How to Invest

For casual and professional investors alike, the most salient insights from Buffett’s essays are his thoughts about the dos and don’ts of the stock market. The key philosophy that Buffett drives home is that owning a stock means owning a piece of an actual, real-world business. Using this “owner mindset” as a starting point, Buffett provides guidance to reasonable expectations, best practices in investing, common economic modes of thought that Buffett believes are utter nonsense, and certain pitfalls to avoid when investing.

In summary, Buffett recommends you identify and invest in a solid, well-run business at a time when that business’s stock is offered at a discount to its overall value. Buffett’s strategy is conceptually simple, though it entails a lot of work for investors to learn how to properly value businesses in order to know if the price is high or low. Once you buy into a good business, Buffett recommends holding on to its stock indefinitely so long as the business remains well-managed and provides a steady return on capital. Because the value of a stock is directly linked to the fortunes of the business itself, **in the long run, stocks can’t provide higher...

The Essays of Warren Buffett Summary How to Run an Investment Business

Though much of Buffett’s writing contains lessons for any investor, a great deal of his work is devoted to the inner workings of Berkshire Hathaway as it compares to other large investment groups. Buffett believes that the Berkshire system stands above others in terms of transparency, rational investing, and creating value for its shareholders. In this section, we’ll contrast Buffett’s depiction of the less-than-ideal practices he sees as the norm in corporate America with Berkshire Hathaway’s values and culture. For each, we’ll look at issues of corporate governance, accountability, acquisitions principles, and commitment to shareholder interests.

The Wall Street Way

In discussing the proper management of investment firms, Buffett puts forth many negative examples as lessons to learn from. Wall Street’s business-as-usual practices highlight many areas in which most investment companies don’t serve the interests of the people whose money they steward. Buffett describes the failings of CEO culture, shady accounting, overpriced acquisitions, and the systemic dangers of financial derivatives.

The chief problem Buffett sees with many CEOs is their lack of any true...

Shortform Exercise: How Do You Think About Investments?

Buffett has many suggestions for applying his basic philosophy of investing. Principal among these are that you should invest for long-term gains, focusing on companies that you understand, and that you should approach buying shares of a business as if you’re buying an ownership stake—because that’s what you’re doing. Consider whether your investing practices align with Buffett’s ideas and if you would make any changes in the future.

Are you a passive investor in retirement plans and mutual funds, or do you actively trade in common stocks? If you are the latter, how often do you trade, and how long do you hold any given stock? How do you think your investing style has affected your wealth over time?