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When I heard last week’s news that Warren Buffett had decided to step down from his mighty Berkshire Hathaway empire, at the age of 94, it reminded me of something that has bothered me for years.
It relates to the great investor’s annual letters to Berkshire shareholders. For decades they have been one of the financial world’s most insightful, cheering and best-read documents. Endlessly quoted. Collected into books. Hugely educational.
Buffett did have help. Financial journalist Carol Loomis edited the letters. Even so, how is it that so many other financial heavyweights, with so many aides and so many resources, repeatedly fail to produce annual letters that match Buffett’s? Many are perceptive, sure. But why don’t more deploy the brevity, wit and humility that makes Buffett’s missives so successful?
I’m guessing many do not want to.
One of the great merits of a Buffett letter is the number of times he admits to, or revels in, something that others pay small armies of Wall Street PR people and lawyers to bury: a blunder.
“During the 2019-23 period, I have used the words ‘mistake’ or ‘error’ 16 times in my letters to you,” he wrote in his latest letter in February, noting the pretence of managerial perfection made him nervous.
Actually he has been writing about his “unforced errors”, dumb decisions and costly mistakes for far longer. But here is a classic from 2021, about an “ugly $11bn writedown” he said was almost all due to Berkshire’s 2016 purchase of the Precision Castparts manufacturing group. “I paid too much,” he wrote, adding this was “far from my first error of that sort. But it’s a big one.”
You might say such admissions are easy if you have spent six decades making so many of your shareholders millionaires. And for all his confessions, readers could still see Buffett’s results were astonishing.
But you could also say that fronting up to mis-steps helps to explain that success. Either way it breeds a degree of trust that is not always accorded to the financial great and good who gather each year at Davos — a meeting Buffett has never attended.
The latest annual letter from BlackRock’s Larry Fink is more typical of the cautious fare served up to shareholders.
It begins with a touch of Buffett-like charm. “Since 1976, when I showed up for my first Wall Street job — sporting long hair, turquoise jewellery, and the world’s ugliest brown suit — investing has become far more fashionable (and, thankfully, so have I).”
It is also admirably free of jargon and the word “mistake” does appear, once. But it refers to what Fink says is a repeat of the financial world’s “historic mistake” of abundant capital deployed too narrowly — not to any error that he or his colossal firm may have made.
The latest shareholder letter from JPMorgan Chase’s Jamie Dimon, on the other hand, has a section headed “mistakes I made”. It reveals he underestimated the importance of cloud technology and mentions the case of the trader known as the London Whale, who lost at least $6bn for the bank in 2012.
Alas, one does not arrive at this section until page 53 of a document that runs to an inexcusable 58 pages. Even Fink managed to contain his thoughts to a mere 27 this year. Buffett’s have averaged just 17 pages over the past 10 years.
There is one chief executive of a huge global company whose commendably brief, readable annual letters do include occasional admissions of failure.
It’s Amazon’s Andy Jassy, who has carried on in the style of Jeff Bezos, the company founder Jassy replaced in 2021.
Still, I cannot imagine any of these leaders will ever write lines quite as memorable as Buffett has, because even if they share his sense of humour, none seem so happy to show it.
My favourite line was in Buffett’s letter for 2007: “If a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.”
I also liked his 1982 observation that “investors can always buy toads at the going price for toads”. And others of its ilk.
But it feels apt to end with his 2023 reminder of how a few investment winners can outweigh disappointments. “The weeds wither away in significance as the flowers bloom,” he wrote. “And, yes, it helps to start early and live into your 90s as well.”
