The Warren Buffett Way

The story of Buffett, recommended by Investire Semplicemente. A decent book that gets pretty generic toward the end, but it still reads well. It tells Buffett’s story (who, since childhood, was very adept at business) and analyzes some of his best moves, like The Washington Post and Coca-Cola. His method is simple:

Calm, patience, find good undervalued companies and hold them for a long time. He has 12 core principles, divided into Business, Management, Financial, and Market:

1. Be simple and understandable;
2. Have a consistent history of operations;
3. Have favorable long-term prospects.
4. Rationality;
5. Transparency;
6. The institutional imperative.
7. Return on equity;
8. Owner earnings and profit margins;
9. The “one dollar” premise.
10. Determine the value of the business;
11. Buy at an attractive price;
12. Anatomy of the long-term price.

He does not always follow them, but he generally looks for simple businesses with excellent managers (that makes a big difference).

The ending is a bit dull, but what stood out to me is how it explains that managers are now evaluated on the short term, year after year, making it hard to follow Buffett’s strategy, which may underperform for quite some time. There is pressure, and they mostly aim to follow the trend to stay on top and avoid being fired: mediocrity is rewarded.

I learned Warren Buffett’s strategy and why it is so hard to follow; not bad, a book that does its job.