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Lessons from Warren Buffett’s ...

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It’s not enough that Warren Buffett has become one of the richest men in the world. He’s also a world-class storyteller.

If it’s any consolation, he seems to struggle with this Twitter thing, flinging out nine missives since 2013.

 

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Stumbling across Buffett’s Wikipedia profile, which happens to include a citation from one of my bylined pieces, I decided to revisit his storytelling expertise where it’s best on public display — his annual letter to shareholders.

Raking through his latest shareholder letter and one from the archives (2009), certain characteristics that we would term storytelling techniques surface time and time again:

  • Conversational language
  • Accountability (with a touch of self-deprecation)
  • Anecdotes teased out as back stories
  • Levity
  • Metaphors and analogies
  • Word choice

His 6,000-plus word narratives — close to qualifying as a novella — in the guise of a shareholder letter take care of the requisite financial housekeeping, but that’s not the end game.

Instead, Mr. Buffett wants to provide a window into what makes Berkshire Hathaway tick and its perspectives on the economy, investing and business in general. He also wants you to trust him. We don’t trust what we don’t know, which explains why his shareholder letters give a sense of the man himself.

I’ve captured examples of his storytelling techniques in action:

 

Conversational Language

Buffett converses like a real human being. There’s something about a position of power that often causes perfectly normal executives to embrace “corporate speak.”

In contrast, look at how Buffett explains his philosophy of empowerment:

We tend to let our many subsidiaries operate on their own, without our supervising and monitoring them to any degree. That means we are sometimes late in spotting management problems and that both operating and capital decisions are occasionally made with which Charlie and I would have disagreed had we been consulted.

He goes on to share that this hands-off approach creates an “owner-oriented attitude” that far outweighs the periodic downside:

We would rather suffer the visible costs of a few bad decisions than incur the many invisible costs that come from decisions made too slowly — or not at all — because of a stifling bureaucracy.

You don’t need an MBA to understand that Buffett believes in nimbleness over micromanaging.

Also like the way he summarizes his disdain for hedge funds:

The bottom line: When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients. Both large and small investors should stick with low-cost index funds.

 

Accountability (with a touch of self-deprecation)

Buffett takes ownership for what he bluntly calls “a very expensive business fiasco” in which he cajoled GEICO’s management to create a credit card product. By the time Buffett woke up — his words, not mine — to the mounting losses, GEICO could only get 55 cents on the dollar in unloading its $98 million credit card portfolio.

In the shareholder letter, Buffett lets the world know that accountability for the $44 million mistake rests with him:

GEICO’s managers, it should be emphasized, were never enthusiastic about my idea. They warned me that instead of getting the cream of GEICO’s customers we would get the – – – – – well, let’s call it the non-cream. I subtly indicated that I was older and wiser. I was just older.

Forget the shareholders. Imagine how this mea culpa played with the GEICO’s executives who were originally overruled. There’s something about seeing the big boss fall on his sword that allows everyone to move on. This is quintessential Buffett, turning to self-deprecation as a mechanism to disarm.

As another example, Buffet shares mistakes in judgment, but pays it off with:

I will commit more efforts; you can count on that. Fortunately, Charlie — never bashful — is around to say “no” to my worst ideas.”

Nothing says “We’re all in this together” like a leader uttering the three words, “I was wrong.”

 

Anecdotes Teased Out as Back Stories

 

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You don’t always need 200 pages or 90 minutes on the silver screen to tell a story. Enter the anecdote, stage left.

Look at how Buffett sings the praises of the individual who heads BH Reinsurance Group.

When Ajit entered Berkshire’s office on a Saturday in 1986, he did not have a day’s experience in the insurance business. Nevertheless, Mike Goldberg, then our manager of insurance, handed him the keys to our small and struggling reinsurance business. With that move, Mike achieved sainthood: Since then, Ajit has created tens of billions of value for Berkshire shareholders. If there were ever to be another Ajit and you could swap me for him, don’t hesitate. Make the trade!

Note the requisite failure, “struggling reinsurance business,” with a dash of self-deprecation.

As a second example, he decides to challenge the hedge fund jockeys:

Subsequently, I publicly offered to wager $500,000 that no investment pro could select a set of at least five hedge funds — wildly-popular and high-fee investing vehicles — that would over an extended period match the performance of an unmanaged S&P-500 index fund charging only token fees. I suggested a ten-year bet and named a low-cost Vanguard S&P fund as my contender. I then sat back and waited expectantly for a parade of fund managers — who could include their own fund as one of the five — to come forth and defend their occupation. After all, these managers urged others to bet billions on their abilities. Why should they fear putting a little of their own money on the line?

What followed was the sound of silence. Though there are thousands of professional investment managers who have amassed staggering fortunes by touting their stock-selecting prowess, only one man — Ted Seides — stepped up to my challenge.

 

Levity

I’ve always thought of levity as the “killer app” in business communications. Like self-deprecation, levity has a disarming effect.

Buffett recognizes this dynamic, and the fact that if he wants to hold the reader over the course of 20 pages, he damned well better entertain as well as inform.

One of my favorite examples comes in addressing investment bankers trying to rationalize a risky deal as “It’s only a small deal”:

Charlie’s reaction at the time: “Are we supposed to applaud because the dog that fouls our lawn is a Chihuahua rather than a Saint Bernard?”

When he explains that the social activities at the shareholders’ meeting include a 5K run, he shares:

Entrants in the race will find themselves running alongside many of Berkshire’s managers, directors and associates. (Charlie and I, however, will sleep in; the fudge and peanut brittle we eat throughout the Saturday meeting takes its toll.)

To pull the reader through the narratives, Buffett peppers the letters with one-line zingers like:

Charlie and I enjoy issuing Berkshire stock about as much as we relish prepping for a colonoscopy.

But to say that Buffett has honed the art of a sound bite sells him short. There’s method to the big-picture madness.

 

Metaphors and Analogies

Complexity dominates the business of making money.

Buffett leans heavily on metaphors and analogies to shape an inclusive experience. Look at how he explains a philosophy to zig when everyone else zags:

Charlie and I have no magic plan to add earnings except to dream big and to be prepared mentally and financially to act fast when opportunities present themselves. Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons. And that we will do.

 

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Here’s an example of communicating the importance of keeping your eye on the prize:

Be aware, though, that it’s the growth of the Berkshire forest that counts. It would be foolish to focus over-intently on any single tree.

 

Word Choice

Liked every industry, the investment world has its own lexicon.

Buffett makes a conscious decision to use language that sits outside this lexicon and corporate speak as reflected in many of the previous examples.

 

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When he writes, “I’ve made some dumb purchases,” it jars the reader. What investor calls himself dumb? Maybe misguided or unknowledgeable, but not dumb.

Turning to GEICO, his word choice leaves no doubt about how he feels: “The company that set my heart afire 66 years ago.”

He even channels playwright Tennessee Williams writing, “We will never become dependent on the kindness of strangers.”

 

Closing Thoughts

I recognize that when you’ve built a net worth of $92 billion and change, it’s easier to take the road less traveled (right, that’s me channeling poet Robert Frost).

As an antithesis to “control the message,” Buffett essentially serves as the narrator in telling a story with characters, greed, trains and a relatively happy ending. I’m surprised Nashville hasn’t turned Buffett’s narrative into a country song.

Still, for all of us in the business of communications, Buffett brings a simple concept to life: Communications should be entertaining and enlightening as opposed to trying to sound like the smartest person in the room:

As Charlie says, it’s great to have a manager with a 160 IQ — unless he thinks it’s 180.

Side Note: If you enjoyed this post, you might check out “Five Lessons in Counterpunching with Words from Warren Buffett.”


Comments

  • Marsha Collier

    Which is why I watch the livestream of the Berkshire Hathaway Annual Meeting every year. He’s entertaining and humorous – while teaching so much. Great post, Lou

    Reply
    • Lou Hoffman

      Agreed. Shows that humor is the “killer app” in business communications.

      Reply

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