#WARREN BUFFETT SUCCESS STORY SUMMARY MANUAL#

We will only do with your money what we would do with our own… I’ve never believed in risking what my family and friends have and need in order to pursue what they don’t have and don’t need. The financial calculus that Charlie and I employ would never permit our trading a good night’s sleep for a shot at a few extra points of return. We use debt sparingly and, when we do borrow, we attempt to structure our loans on a long-term fixed-rate basis. In aggregate and over time, we expect the unreported earnings to be fully reflected in our intrinsic business value through capital gains. Charlie and I pay a great deal of attention to how well our businesses are doing, and we also work to understand the environment in which each business is operating. Our preference would be to reach our goal by directly owning a diversified group of businesses that generate cash and constantly earn above-average returns on capital. Our long-term economic goal is to maximize Berkshire’s average annual rate of grain in intrinsic business value on a per-share basis. …most of our directors have a major portion of their net worth invested in the company. Although our form is corporate, our attitude is partnership. Prologue: Owner-Related Business Principles

The ultimate point to understand about accounting is that it is a form.

Buffett emphasizes that useful financial statements must enable a user to answer three basic questions about a business: approximately how much a company is worth, its likely ability to meet its future obligations, and how good a job its managers are doing in operating the business.

Earnings retention is justified only when “capital retained produces incremental earnings equal to, or above, those generally available to investors.”.

Buffett laments, “as happens in Wall Street all too often, what the wise do in the beginning, fools do in the end.”.

The commonsense rule instructs investors to consider investments only concerning businesses they are capable of understanding with a modicum of effort. The circle of competence principle is the third leg of the Graham/Buffett stool of intelligent investing, along with Mr.Strategies that do not employ this comparison between price and value do not amount to investing at all, but to speculation-the hope that price will rise, rather than the conviction that the price being paid is lower than the value being obtained. All true investing must be based on an assessment of the relationship between price and value. …the term “value investing” is a redundancy.Buffett follows the principle devotedly, noting that Graham had said that if forced to distill the secret of sound investment into three words, they would be: margin of safety.Long-term investment success depends not on studying betas and maintaining a diversified portfolio, but on recognizing that as an investor, one is the owner of a business.Many professionals still believe that stock market prices always accurately reflect fundamental values, that the only risk that matters is the volatility of prices….Better yet, as at Berkshire, stock options should simply not be part of an executive’s compensation.Moreover, once granted, stock options are often irrevocable, unconditional, and benefit managers without regard to individual performance. Stock options thus often rob shareholders of wealth and allocate the booths to executives. As Buffett explains, however, simply by retaining and reinvesting earnings, managers can report annual earnings increases without so much as lifting a finger to improve real returns on capital.Having first-rate people on the team is more important than designing hierarchies and clarifying who reports to whom about what and at what times.

#WARREN BUFFETT SUCCESS STORY SUMMARY MANUAL#

As organized, the essays constitute an elegant and instructive manual on management, investment, finance, and accounting.As the book Buffett autographs most, its popularity and longevity attest to the widespread appetite for this unique compilation of Buffett’s thoughts that is at once comprehensive, non-repetitive, and digestible.My summary and notes include the key lessons and most important insights from the book. This is my book summary of The Essays of Warren Buffett by Lawrence Cunningham. Learn everything you ever wanted to know about management, investment, finance and accounting from one of the world’s smartest businessmen and investors. The most comprehensive book on Buffett that I’ve read (out of half a dozen).

Warren buffett success story summary