Book on Warren Buffett Kicks Conventional Thinking Out The Door

Book on Warren Buffett Kicks Conventional Thinking Out The Door
By USA White House [Public domain], via Wikimedia Commons

“A fundamental principle: It is better to be approximately right than precisely wrong.” ~Warren Buffett

Lawrence A. Cunningham’s spectacular book, The Essays of Warren Buffett: Lessons for Corporate America, outlines the mind and investment strategies of Warren Buffett.

Book on Warren Buffett Kicks Conventional Thinking Out The Door

Seth Klarman’s 2021 Letter: Baupost’s “Never-Ending” Hunt For Information

Baupost's investment process involves "never-ending" gleaning of facts to help support investment ideas Seth Klarman writes in his end-of-year letter to investors. In the letter, a copy of which ValueWalk has been able to review, the value investor describes the Baupost Group's process to identify ideas and answer the most critical questions about its potential Read More

Cunningham’s work expertly welds together chunks of Buffett’s educational essays on topics that span the entire continuum of issues that investors face (see his guest post on ValueWalk,  Origins and Value of The Essays of Warren Buffett: Lessons for Corporate America).

Whether you’re curious about which organizational designs constitute the best business practices, the way a business should structure its stock options and compensation plans, or simply the thought processes of a successful investor, Buffett manages to explain extremely difficult, complex principles in a succinct and clear way.

Buffett’s material informative and amusing

Throughout each essay, you’ll find empirical examples, relevant quotes, and sometimes lessons from Buffett’s mentors Benjamin Graham and David Dodd. To top it off, some of his material is quite amusing and caused me to literally laugh out loud even in the midst of learning a great amount.

As each page turns, Buffett’s viewpoints grow more compelling as he not only continually mounts justifications for his perspective, but also reminds the reader that he has adopted his unique mentality as a result of considerable experience and initial hardship. This point is quite important because many of Buffett’s views are completely distinct from most contemporary schools of thought, especially the rigid, detached assertions of the academics who love the Efficient Market Theory.

The twist to Buffett’s approach happens on both sides of the investment game.

Warren Buffett despises “revolving-door” investments

As a business owner, he despises the “revolving-door” type of investment situation, where investors quickly buy and sell stock and are then quickly replaced by other interested investors, who repeat the process. Instead, Warren Buffett seeks out investors who will consider themselves life-long owners of the business. In fact, Buffet notes how “over 98 percent of the shares outstanding [in Berkshire] are held by people who also were shareholders at the beginning of the year.”

When the stock market crashes, best time to buy

As an investor, Buffett believes that “all true investing must be based on an assessment of the relationship between value and price.” Consequently, Buffett defies contrary wisdom by suggesting that when the stock market crashes, it’s the best time for investors to buy stocks. Entire companies are sold at greatly reduced prices. The academic wisdom, on the other hand, judges these situations as extremely dangerous because of the level of volatility that the stock is showing. Academics strongly suggest avoiding all stocks that express a high degree of volatility, whether up or down.

The truth and strength of Warren Buffett’s approach, however, are proven through his repeated successes and his standing as the third richest man in the world.

This book is a must-read for anyone trying to reach the same levels of financial security through investing. Check it out here  The Essays of Warren Buffett: Lessons for Corporate America

Updated on

No posts to display