Why does one read? I read for a multitude of reasons ranging from the compounding knowledge it produces, the great (one-sided) conversations that are available to be had with brilliant past thinkers, idea generation, molding a system of personal beliefs, learning from past mistakes and emulating triumphs, seeking worldly wisdom, and simply the relaxation, enjoyment and mind stimulation reading produces. The pursuit of knowledge is an obsessive hobby, some may even call it an addiction, others a simple way of life. The preparation reading disciplines one with is intangible and may be attributed to quick, accurate, definitive answers or actions that are produced by consistent readers.
I have wrote numerous blogs Here, Here and Here about various books that I have found interesting in the past few months and what general knowledge I had pulled from them. Well I am back again with a smaller and more refined list, recommended throughout Berkshire Hathaway Chairman letters over the years by yours truly, Warren Buffett.
1) The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success by William N. Thorndike Jr.
This book is about eight CEOs of various companies, ranging from The Washington Post’s Katharine Graham to Teledyne’s Henry Singleton and their iconoclastic ways of operating business and allocating capital.
Amazon Book Review:
”It is impossible to produce superior performance unless you do something different.” — John Templeton
What makes a successful CEO? Most people call to mind a familiar definition: “a seasoned manager with deep industry expertise.” Others might point to the qualities of today’s so-called celebrity CEOs—charisma, virtuoso communication skills, and a confident management style. But what really matters when you run an organization? What is the hallmark of exceptional CEO performance? Quite simply, it is the returns for the shareholders of that company over the long term.
In this refreshing, counterintuitive book, author Will Thorndike brings to bear the analytical wisdom of a successful career in investing, closely evaluating the performance of companies and their leaders. You will meet eight individualistic CEOs whose firms’ average returns outperformed the S&P 500 by a factor of twenty—in other words, an investment of $10,000 with each of these CEOs, on average, would have been worth over $1.5 million twenty-five years later. You may not know all their names, but you will recognize their companies: General Cinema, Ralston Purina, The Washington Post Company, Berkshire Hathaway, General Dynamics, Capital Cities Broadcasting, TCI, and Teledyne. In The Outsiders, you’ll learn the traits and methods—striking for their consistency and relentless rationality—that helped these unique leaders achieve such exceptional performance.
Humble, unassuming, and often frugal, these “outsiders” shunned Wall Street and the press, and shied away from the hottest new management trends. Instead, they shared specific traits that put them and the companies they led on winning trajectories: a laser-sharp focus on per share value as opposed to earnings or sales growth; an exceptional talent for allocating capital and human resources; and the belief that cash flow, not reported earnings, determines a company’s long-term value.
2) Investing Between the Lines: How to Make Smarter Decisions by Decoding CEO Communication by L.J. Rittenhouse
Amazon Book Review:
Investing Between the Lines introduces a revolutionary method for evaluating the financial integrity of a company. You don’t need special access to “insider” information or a degree in accounting to figure it out. In fact, the secret is right in front of you—in black and white—in the words of every shareholder letter, annual report, and corporate correspondence you receive.
Investing Between the Lines shows you how to:
• Decipher the “FOG” of confusing company communications
• Decode the real meaning behind corporate jargon and platitudes
• Separate the facts from the fluff in annual reports and quarterly earnings calls
• Safeguard your money by investing in companies that steward investor capital
Too often, corporate executives and investment professionals are expected to deliver short-term results. As a result, they are compelled to turn to accounting techniques and unclear language to meet these expectations.
In Investing Between the Lines, L.J. Rittenhouse lays out her time-tested approach for recognizing at-risk businesses before trouble hits. This is the same method she used to predict the collapse of Enron and the fall of Lehman.
From comparing the statements of Ford, GM, and Toyota to revealing why FedEx and Wells Fargo have been so successful, Investing Between the Lines shows that Rittenhouse’s system is one of the most powerful tools a corporate leader or investor can have. Once you learn the clues to decode CEO communications, you will be able to invest between the lines—to figure out exactly what a company’s CEO is or isn’t telling you.
3) The Clash of Cultures: Investment vs. Speculation by Jack C. BogleOver the course of his sixty-year career in the mutual fund industry, Vanguard Group founder John C. Bogle has witnessed a massive shift in the culture of the financial sector. The prudent, value-adding culture of long-term investment has been crowded out by an aggressive, value-destroying culture of short-term speculation. Mr. Bogle has not been merely an eye-witness to these changes, but one of the financial sector’s most active participants. In The Clash of the Cultures, he urges a return to the common sense principles of long-term investing.
Provocative and refreshingly candid, this book discusses Mr. Bogle's views on the changing culture in the mutual fund industry, how speculation has invaded our national retirement system, the failure of our institutional money managers to effectively participate in corporate governance, and the need for a federal standard of fiduciary duty.
Mr. Bogle recounts the history of the index mutual fund, how he created it, and how exchange-traded index funds have altered its original concept of long-term investing. He also presents a first-hand history of Wellington Fund, a real-world case study on the success of investment and the failure of speculation. The book concludes with ten simple rules that will help investors meet their financial goals. Here, he presents a common sense strategy that "may not be the best strategy ever devised. But the number of strategies that are worse is infinite."
4) Sam Walton: Made in America by Sam Walton with John Huey
This book is an absolute must read and the Amazon review is very brief, but this book takes you through the life-long journey and pursuit of building an enduring business based on the fundamentals of low costs passed to the consumer. Walton goes through many trials and tribulations when building Wal-Mart but ultimately ends up in his (un) intended position of global leader. Walton stated 10 rules to adhere to when aiming to run a successful company, of which a few rules should resonate with any manager or business owner. Sharing profits with business partners (associates, shareholders and customers), motivating your partners, communicating everything you possibly can to your partners, appreciating everything your associates do for the business, celebrating success, and listening to everyone within your company are six of the 10 crucial rules Walton had proposed that lead to business success.
5) The Farmer from Merna by Karl Schriftgeisser
A must read for anyone with an interest in the insurance industry and how State Farm came to be the giant it is today. Some of the terminology may be repetitive within the book. Here is what Warren Buffett had to say:
“State Farm was launched in 1922, by a 45-year-old, semi-retired Illinois farmer, to compete with long-established insurers ¾ haughty institutions in New York, Philadelphia and Hartford ¾ that possessed overwhelming advantages in capital, reputation, and distribution. Because State Farm is a mutual company, its board members and managers could not be owners, and it had no access to capital markets during its years of fast growth. Similarly, the business never had the stock options or lavish salaries that many people think vital if an American enterprise is to attract able managers and thrive. In the end, however, State Farm eclipsed all its competitors. In fact, by 1999 the company had amassed a tangible net worth exceeding that of all but four American businesses. If you want to read how this happened, get a copy of The Farmer from Merna.”
I think of reading as a movie in which I am my own director, choosing to pause and rewind when applicable, choosing a personal narrative, pursuing my own interests and discerning the lessons I deem important at the time. As times change and new experiences are learned, new lessons may be drawn from re-examining books previously read. I have found numerous times through past acquisitions of Berkshire Hathaway (like Claymore Homes), Buffett simply based his decision on public finances and a previously read book. Two famous quotes always come to mind when people ask me how I find the time to read so much or why I enjoy reading. One of them is from a household name, Mark Twain. The other an unconventional name, the French philosopher Rene Descartes.
“The reading of all good books is like conversation with the finest men of past centuries.” – Rene Descartes
“The man who does not read good books has no advantage over the man who can’t read them.” – Mark Twain
About the author:
"When you find yourself on the side of the majority, it is time to pause and reflect." - Mark Twain