Last week, I was in New York for a conversation with Warren Buffett at Columbia University.
Warren Buffett’s new annual letter to Berkshire Hathaway’s shareholders hasn’t received nearly as much attention as it deserves. I wonder if that’s because financial journalists feel like they just can’t write another story about how wise Warren is. Fortunately, I don’t have any such limitation.
I have read all 50 of Warren’s letters and feel this is the most important one he has ever written. It’s really three letters in one. First there’s his usual look back at Berkshire’s performance in 2014. Then, because this is the 50th anniversary of his buying Berkshire, there’s a separate section where he goes through the history of his leadership. Finally, his colleague Charlie Munger writes his own look at the company, which is also excellent.
I highly recommend reading at least the 50-year history, “Berkshire – Past, Present and Future.” It is fascinating even if you never read annual reports and know nothing about the company.
The thing that struck me for the first time in this letter was the value of experience. And not just Warren’s experience—although that is pretty unbelievable, because he has studied so many businesses over the years and knows so much about profitability. Warren creates that same situation for the people who run Berkshire companies. They stay in place for decades, often past the normal retirement age. He gives them flexibility and takes away parts of the job they may not like. The Berkshire system maximizes having very experienced people run their businesses, giving them autonomy, and letting them do it for decades at a time. Even if they make a few mistakes, they know that Warren will stick with them. That’s how he has put together a mind-blowingly good set of business managers.
I am lucky to call Warren a friend and to be able to learn from him personally. (I also serve on Berkshire’s board and own stock in the company.) The fact that everyone who cares about business and finance can benefit from his wisdom—just by reading these annual letters—is pretty amazing.