I chose to read The Essays of Warren Buffett: Lessons for Corporate America because it was on a list by Investopedia named Top 5 Books Every Young Investor Must Read. I put it on my Personal Finance Goals of 2018 list of books to read. So far, I have read two other books on my list of five and you’re welcome to read the book review I have for those books as well: The Dhando Investor and Rule #1: The Simple Strategy for Successful Investing in Only 15 Minutes a Week.
The Essays of Warren Buffett: Lessons for Corporate America was collated, edited, and published by Lawrence A. Cunningham, a professor at the George Washington Unversity Law School. He created it in 1996 and there have been a number of revisions and editions since then, with the most recent one by the 4th Edition, which celebrated the 50th year of Berkshire Hathaway.
Warren Buffett is the world’s greatest investor and everyone wants to get ‘behind the scenes’ on what goes on in his brilliant investing mind. It is no secret that I am a huge fan of Warren Buffett, but obviously not such a huge fan that I have read every annual letter from him (unlike my husband who has).
The book basically consists of all of Warren Buffett’s annual letters to the shareholders of Berkshire Hathaway from 1979 to 2014- but with excerpts organized into single-subject chapters.
The excerpts are hand picked for different topics pertaining to investing and business, such as:
- Corporate Governance
- Finance and Investing
- Investment Alternatives
- Common Stock
- Mergers and Acquisitions
- Valuation and Accounting
- Accounting Shenanigans
- Berkshire at Fifty and Beyond
Some Great Quotes In The Essays of Warren Buffett
There were some great quotes in the book of course. Warren Buffett is so quotable! Here are a few of my favourite, you have probably heard or read of these quotes.
On DIY investing:
“Should you choose, however, to construct your own portfolio, there are a few thoughts worth remembering. Intelligent investing is not complex, though that is far from saying that it is easy. What an investor needs is the ability to correctly evaluate selected businesses. Note that word “selected”: You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.”
On psychology during stock market corrections and crashes:
“Occasional outbreaks of those two super-contagious diseases, fear and greed, will forever occur in the investment community. The timing of these epidemics will be unpredictable. And the market aberrations produced by them will be equally unpredictable, both as to duration and degree. Therefore, we never try to anticipate the arrival or departure of either disease. Our goal is more modest: we simply try to be fearful when others are greedy and to be greedy only when others are fearful.”
On making sure you have cash on hand and not leveraging your investing:
“By being so cautious in respect to leverage, we penalize our returns by a minor amount. Having loads of liquidity, though, lets us sleep well. Moreover, during the episodes of financial chaos that occasionally erupt in our economy, we will be equipped both financially and emotionally to play offense while others scramble for survival.”
My Thoughts On The Essays of Warren Buffett
I really liked the book and it provided great insight on different topics pertaining to Corporate America and how businesses are structured. I thought there would be a bit more of his ‘folksy wisdom’ scattered in the book, but it was quite straight to the point and related to businesses- specifically what makes a good business and what makes a bad business.
One downside to the book was that I couldn’t’ tell which annual letter or which year Warren Buffett was referring to, as Lawrence Cunningham blended everything so well together that you basically could barely tell which year Warren Buffett is referring to! However, to rectify this problem (or my problem as I’m sure other readers would appreciate that it is so well blended), you can look in the back of the book and there is a chart detailing which year the chapter’s annual letters originate from.
The last section has an excerpt by Charlie Munger (I am also a Charlie Munger groupie) on “The Berkshire System” and it was a great read. The section hailed the merits of Warren Buffett, of course, and his devotion to being Berkshire Hathaway’s dedicated Chairman. He also summarized what he thought, made Berkshire Hathaway so successful. He talked about how Buffett’s skill with investing and finding good businesses to acquire continued to get better and better over 50 years.
I would recommend this book if you’re interested in understanding why dividends are not always wonderful, why accounting practices can yield very different results, why there are some corrupt CEO’s out there who do not have their company’s best interest at heart (and instead have their own interest at heart), and how to best approach paying company executives.
For other best dividend investing books to read, check out this list.
Readers, what are your thoughts on this book?
GYM is a 30 something millennial interested in achieving financial freedom through disciplined saving, dividend and ETF investing, and living a minimalist lifestyle. Before you go, check out my recommendations page of financial tools I use to save and invest money. Don’t forget to subscribe for blog updates, a free dividend yield spreadsheet, and the free Young Money Bootcamp eCourse.
8 thoughts on “Book Review: The Essays of Warren Buffett- Lessons for Corporate America”
This sounds like my kind of book GYM. I just don’t have the attention span to read many books cover to cover. So, I like the way this one is dividend up into more stand alone topics. Thanks for bringing it up. Tom
@Tom- Its a pretty good book! I’m reading Security Analysis right now (much thicker book than Essays of Warren Buffett!) and it’s much tougher to read but the chapters are short.
GYM, well explained by Warren Buffett about Fear and Greed. With cash at hand and not leveraging the investing is a great idea. Who doesn’t like a peace of mind? Charlie Munger is very good, too. Thanks for sharing.
@Helen- Peace of mind is great but a lot of people like to leverage 🙂
Sounds like a great book! I find Buffett and Munger to be so very fascinating. Wise men and when put together, almost a comedy act haha.
I like the point about having cash to play offense when needed and also for a sound sleep. My style exactly!
@Dr. Defined Sight- They are so wise. I can watch them talk and banter for hours (well, we did when we watched the Berkshire AGM haha).
Thanks for this review GYM. It sounds a good book to know about Warren Buffet’s view on how businesses should be structured. I really like that Buffet quote you picked from the book, ‘We simply try to be fearful when others are greedy and to be greedy only when others are fearful.” I think that’s how we all should view investing, to go against the grain sort of speak.
@Kris- It’s easier said than done! Hehe 🙂 human nature is a strong force.