A couple of years ago I got a copy of Warren Buffett's collected annual letters to Berkshire Hathaway shareholders, from 1965-2012. Like many books, it sat on my shelf for some time, calling out to me occasionally for attention. A couple of weekends ago I started making my way through it, and I've now read through 1976. Here are a few initial observations.
- The early letters are pretty dry. He hasn't yet found his sea legs as the "Oracle of Omaha," but you can see wisdom emerging in them. Or maybe I'm just imputing it to the text because I know what he develops into later.
- He never talks about Berkshire Hathaway's stock price. Although in the charts and tables at the beginning of the book (not published by Berkshire Hathaway itself) we can see how the stock did relative to the S&P 500, as well as the growth in its book value (Buffett's preferred metric), he never brings it up.
- In fact, there aren't that many numbers at all. Buffett talks mostly in broad strokes about factors impacting the various operating businesses.
- He is unfailingly gracious. Mostly, he praises the executives running the underlying operating businesses by name. When a business unit has a failure, he doesn't call out people by name.
- Berkshire Hathaway was originally a textiles business, and it was going south already by the time Buffett bought it, but Buffett continued to prop it up because the business was a major employer in the New England towns where it operated. He cites the importance of these businesses as employers explicitly as reasons to keep the businesses going. He was a good guy from the beginning, and outside shareholders weren't pressing him to make profits at all costs from day 1.
- Odd things impact businesses in unexpected ways. Nixon's going off the gold standard and putting in place wage and price freezes in 1971 messed up the textiles business pretty good. More importantly, jury awards in the mid-70s changed what insurers had to pay on policies, effectively extending the liabilities of Berkshire's insurance subsidiaries and screwing with their businesses. Buffett just calls this "social inflation," explains what it is in few words and how it affects the insurance subsidiaries, and gets on with his business. He does not bemoan fate, or call in armies of lobbyists. Or at least he doesn't talk about it.