Buffett report a surprising model of clarity


John Fontaine
Annual report season is upon us... and it's a gloomy one this year.
If a report shows a loss of less than 30 percent, that's good news.
Some funds are down over 50 percent, and the retirement fund for a Wisconsin school district even lost 95 percent of its value.

So take heart, maybe you're not as bad off as you think.

Usually the average person doesn't even read annual reports.
The writing is so dull, complex and legalistic and seems designed to discourage reading.
Many times actually disguises skullduggery as you may have noticed in recent months.

An outstanding exception is the report from Warren Buffett's conglomerate of some 77 diverse companies.
Especially because net worth was down only 9.6 percent.
A mere 96 pages long, the report is a model of clarity.
There are the usual seemingly endless pages of figures and footnotes. Laws and accountants do demand them.

Page 89 should be required reading for those CEOs so recently exposed to the world in all their hubris and greed.
The heading is "Owner-related Business Principles" (Copyright 1996 by Warren Buffett).
There are 13 of them, but the first is like the biblical "summary of the law," and worth reprinting here.

"Although our form is corporate, our attitude is partnership. Charlie Munger (his vice chairman) and I think of our shareholders as owner-partners, and of ourselves as managing partners. (Because of the size of our holdings we are also, for better or worse, controlling partners.)
We do not view the company itself as the ultimate owner of our business assets but instead view the company as a conduit through which our shareholders own the assets."

This first "principle" is followed by a significant commentary:

"Charlie and I hope that you do not think of yourself as merely owning a piece of paper whose price wiggles around daily and is a candidate for sale when some economic or political event makes you nervous.
We hope you instead visualize yourself as part owner of a business that you expect to stay with indefinitely, much as you might if you owned a farm or apartment house in partnership with members of your family.
For our part, we do not view...shareholders as faceless members of an ever-shifting crowd, but rather as co-venturers who have entrusted their funds to us for what may well turn out to be the remainder of their lives."

There are some surprising parts to Buffett's conglomerate and Dairy Queen is a local example. Remember those bland box-like DQs.
Well, check out the stylish new one out on Old Canton Road to see how Buffett burnishes an old image.

A thousand dollars invested with Buffett in 1965 was worth $362,319 at the end of 2008;
Class A stock hit a high of $147,000 a share and Class B $4,858.
There have been no cash dividends since 1967. What do those rich folks live on?