Magazine article Management Today

Three Steps to Heaven

Magazine article Management Today

Three Steps to Heaven

Article excerpt

Choosing what to read on the subject of investment can be as difficult a business as investing itself. Alistair Blair recommends three books you can't afford to be without

If you compare the investment records of Messrs Soros and Buffett, it's a close run thing as to which of the pair invests better.

What is not in doubt, however, is who is the better writer. George Soros, author of two books on investment which you can buy in any decent book shop, may be a spectacular investor but the writing - well, he should leave it to others. Warren Buffett, on the other hand, with not one book to his name, makes fantastic reading. The evidence? His Letters to Shareholders, the 15 pages he has written at the front of every annual report of his company, Berkshire Hathaway. Buffett's brilliant annual effort is one of the three essential readings that anyone thinking of embarking on an investment 'adventure' should get their hands on before parting with their cash.

In the mid-70s, Buffett served on an official commission into company reporting. Arising out of this, he decided that shareholders deserved a better deal and that Berkshire Hathaway's were going to get one. Starting in 1977, he came up with a style of report which is strikingly honest, often gives some of the thinking behind his investments, and for good measure tosses in his views on the financial, investment and managerial issues of the day. Best of all, he's hugely readable and extremely droll.

When you're as successful as Buffett, it must be a lot easier to be open and self-critical about your mistakes. Clearly it would be impossible for ordinary company bosses to follow Buffett's example. But that's all the more reason why they and their shareholders should read his Letters.

Here, from the 1990 report, is Buffett's account of that mysterious force of 'overwhelming importance in business', the institutional imperative: 'As if governed by Newton's First Law of Motion, an institution will resist any change in its current direction. Just as work expands to fill available time, corporate projects or acquisitions will materialise to soak up available funds. Any business craving of the leader, however foolish, will be quickly supported by detailed rate of return and strategic studies prepared by his troops. The behaviour of peer companies, whether they are expanding, acquiring, setting executive compensation or whatever, will be mindlessly imitated.'

Buffett must no doubt have turned down Archeresque sums from publishers for the rights to his Letters. But they are not difficult to obtain - the current one can be found on the Internet (www. …

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