I used to make nice money writing annual reports, but I can't honestly recommend any of my output as bedside reading. As a copywriter I was paid to follow orders, and the orders were: "Safe, bland, reassuring." There were lawyers and regulators. I did as I was told, and the checks never bounced.
Warren Buffett--CEO of Berkshire Hathaway, the huge insurance company based in Omaha--has no such problems. He gives the orders and he writes his own annual reports, which is why they're unlike any other annual reports you'll ever read. (And, similarly, why BerkshireHathaway.com looks, shall we say, utterly unlike any other Fortune 500 company's web site.)
Now, most CEOs are best advised to stick to the spreadsheets and let pros handle the prose. But Warren Buffett, in addition to being a smart guy, the second-richest man in the world, and a renowned philanthropist, is a hell of a writer. Take a look at the recently published 2006 annual report and you'll see what I mean.
You may at first be surprised by what's missing. Buffett doesn't talk about leveraging our core competencies. He never touts his company's proactive solutions. He's not on speaking terms with impactful or customer-centric.
Here, instead, is what Buffett does so brilliantly:
- He tells stories. Reading a Berkshire annual report is like sitting across a booth in a diner with a great conversationalist possessed of both intelligence and insatiable curiosity. Here's how Buffett introduces a discussion of reinsurance, usually a guaranteed snooze: "Our tale begins around 1688, when Edward Lloyd opened a small coffee house in London. Though no Starbucks, his shop was destined to achieve worldwide fame because of the commercial activities of its clientele--shipowners, merchants and venturesome British capitalists. As these parties sipped Edward's brew, they began to write contracts transferring the risk of a disaster at sea from the owners of ships and their cargo to the capitalists, who wagered that a given voyage would be completed without incident."
- He uses vivid language. Notice, in the passage I just quoted, "Though no Starbucks..." which brings us 21st-century readers into the story. Notice, too, "sipped" instead of the duller "drank" and "brew" instead of "coffee." And notice how none of those usages feels forced. Elsewhere, on the important subject of executive compensation, Buffett writes: "If a CEO bats .300, he gets paid for being a .300 hitter, even if circumstances outside of his control cause Berkshire to perform poorly." That's a clear-as-day metaphor, used convincingly by someone to happens to be a fervent baseball fan.
- He talks about people. It's one thing to say, as almost everyone does, that business is about people. It's another thing entirely to portray those people fully fleshed and full of foibles. Here's an example: "Jack [Ringwalt] was a long-time friend of mine and an excellent, but somewhat eccentric, businessman. For about ten minutes every year he would get the urge to sell his company. But those moods--perhaps brought on by a tiff with regulators or an unfavorable jury verdict--quickly vanished." How can you not keep reading?
- He's generous with humor. Every Berkshire annual brims with jokes (including some groaners), drollery, and wit. "As a cynic has said, 'A rolling loan gathers no loss,'" Buffett writes. He even brings in humor where you'd least expect it, as in this paragraph about one of Berkshire's holdings: "After you've flown NetJets, returning to commercial flights is like going back to holding hands."
- He gets to the point. "Be fearful when others are greedy and greedy when others are fearful," Buffett writes. That's an entire business philosophy in twelve words. Few "mission statements," no matter how labored over, communicate as much essential information.
- His enthusiasm shows. After more than fifty years in business, Buffett still loves going to work every day. He's mindful of succession issues--and has been candid about his plans--but he also reassures his shareholders: "At 76, I feel terrific, and, according to all measurable indicators, am in excellent health. It's amazing what Cherry Cokes and hamburgers will do for a fellow."
A disclosure: I became a Berkshire annual-report reader some years back when I bought a handful of Berkshire shares. ('B" shares, I hasten to add; the "A" shares, which famously have never split, are currently trading at $108,290.) I look forward each March to the report's arrival and I thoroughly enjoy reading every word and chart. So it was with some dismay that, a few years ago, I discovered an error in the text: Buffett had written "vocal chords" instead of "vocal cords"--a common mistake, but lamentable all the same. As a shareholder of record I felt compelled to go straight to the top with my grievance, and so I did. Exactly one week later came the reply on corporate letterhead:
I enjoyed your letter. What we tell people is that we put one mistake in each annual report to encourage annual reading. But if you believe that ...
Warren E. Buffett