Buffett’s Berkshire Hathaway is the most revered company in the world, with ownership in a wide variety of industries from Insurance to railways to retail. The company has averaged an annual growth in book value of 19% to shareholders since 1965 (Note: This is as good as it would ever get, investment-wise). There is a lot to learn from Warren Buffett and Charles Munger. 

This book is a collection of Buffett’s letters to the shareholders of Berkshire Hathaway over the last 30+ years, segmented into various themes. Somethings that stick out to me:

1. His checklists in selecting a good business are ones: 1) that they understand; 2) with favorable long-term prospects; 3) operated by honest and competent people; 4) available at a very attractive price.

2. He has a very long term view and grants managers of his subsidiaries very high autonomy to be most effective. This helps to attract the sort of businesses that benefit from his type of ownership (which is rare).

3. If you don’t know the landscape well enough, invest in low-cost index fund. This usually generate better return than 80%+ of the active investment managers out there.

4. If you know something about a given industry, put large sums into 2-3 businesses within your circle of competence. There is no need to spread the investment in multiple industries. People need to realistically define what they don’t know. They only need to do very few things right as long as they avoids big mistakes.

5. A useful financial statements must answer these three questions: How much is a company worth? Is it likely to meet future obligations? How good a job are its managers doing in operating the business?

6. Accounting is essential but can easily be misinterpreted and gamed.

7. You need a good manager to be in a good business. Putting a good manager in a ‘chronically leaking boar’ and their energy will be spent patching leaks rather than doing anything else.

8. He readily admits many of the mistakes me made in his working life. It’s fascinating to see how he analyzed these ‘missteps’ and take the learnings forward.

9. He sees the benefit of his conglomerate structure in its ability to allocate capital where it is most effective. For example, he can use ‘floats’ from his insurance business and put them into other investments.

10. As a CEO, there is a need to flight off ABCs of business decay: Arrogance, bureaucracy and complacency.

This is a long read, mostly because there is so much information packed in that I need time to digest. I learn so much about the philosophy of the best investor in our lifetime and it is nice to reflect on my previous (flawed) investment decisions.

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More info: Goodreads