Warren Buffett is closing in on 60 years in managing Berkshire Hathaway. At 92, the American investor is the world’s fifth-wealthiest person.
Ahead of Berkshire Hathaway’s annual shareholder meeting, Buffett and Charlie Munger, vice chairman for the company, release a letter for shareholders. While it includes detailed financial data, it’s also full of advice for business owners of all types.
- CEOs must manage risk. “Our CEO will always be the Chief Risk Officer – a task it is irresponsible to delegate,” Buffett writes.
- Always stash cash. Buffett says Berkshire will always hold a boatload of cash and U.S. Treasury bills along with a wide array of businesses. “We will also avoid behavior that could result in any uncomfortable cash needs at inconvenient times, including financial panics and unprecedented insurance losses,” he writes.
- Not every decision needs to be a homerun. Buffett says Berkshire’s satisfactory results have been the product of about a dozen truly good decisions. “That would be about one every five years,” he writes.
- Ignore the weeds. Buffet’s lesson for investors: “The weeds wither away in significance as the flowers bloom. Over time, it takes just a few winners to work wonders. And, yes, it helps to start early and live into your 90s as well.”
- Diversify, diversify, diversify. In 1965, Berkshire was a one-trick pony, Buffett writes, the owner of a venerable – but doomed – New England textile operation. “With that business on a death march, Berkshire needed an immediate fresh start,” he says. “Looking back, I was slow to recognize the severity of its problems. Berkshire now enjoys major ownership in an unmatched collection of huge and diversified businesses.”
- Choose a smart partner. Buffett and Munger have worked together for decades. Buffett says Munger is his closest partner and right-hand man. Of Munger, Buffett says: “While he makes me think, he also makes me laugh.” One of Buffett’s top pieces of business advice is: “Find a very smart high-grade partner – preferably slightly older than you – and then listen very carefully to what he says.”