Lately, I’ve been on a kick of reading selections from Warren Buffett’s famous “Letters to Shareholders.”

In case you don’t know, Warren Buffett is a legendary investor who is known for his remarkable success in the stock market and for his leadership, along with his right-hand man, the late Charlie Munger, of the multinational conglomerate holding company Berkshire Hathaway.

Buffett’s approach focuses on buying undervalued companies with strong fundamentals and holding them long-term, a strategy that has made him one of the wealthiest people in the world. As of March 2024, at the age of 93, he had a net worth of $134 billion.

Every year, he writes his “Letters to Shareholders” to the shareholders of Berkshire Hathaway.

What interests me about Warren Buffett is his remarkable ability to communicate the values and strategies that underlie his decisions.

I know nothing about finance, and I’m not reading those letters for investment advice, but because I so admire his ability to turn a phrase, to use a metaphor from everyday life, or to use a little joke or aside to make his point clearer and more persuasive.

For instance, I love a Secret of Adulthood, a concise aphorism, and here are some that stood out to me from those letters:

“Speculation is most dangerous when it looks easiest.”

“If you can’t tell whose side someone is on, they are not on yours.”

“Our motto is: ‘If at first you do succeed, quit trying.’”

“Managers that always promise to ‘make the numbers’ will at some point be tempted to make up the numbers.”

“The man claiming to be a financial alchemist may become rich. But gullible investors rather than business achievements will usually be the source of his wealth.”

“Those who cannot fill your pocket will confidently fill your ear.”

[Of managers] “Good jockeys will do well on good horses, but not on broken-down nags.”

Sometimes Warren Buffett throws in an old joke, to underscore a point in a lighthearted way. For instance,

“Why potential buyers even look at projections prepared by sellers baffles me. Charlie and I never give them a glance, but instead keep in mind the story of the man with an ailing horse. Visiting the vet he said: ‘Can you help me? Sometimes my horse walks just fine and sometimes he limps.’ The vet’s reply was pointed: ‘No problem—when he’s walking fine, sell him.’”

He often draws humorous comparisons in a way that makes his points clear:

“In the long run, of course, trouble awaits managements that paper over operating problems with accounting maneuvers. Eventually, managements of this kind achieve the same result as the seriously-ill patient who tells his doctor: ‘I can’t afford the operation, but would you accept a small payment to touch up the x-rays?’”

“Berkshire’s past rates of gain in both book value and business value were achieved under circumstances far different from those that now exist. Anyone ignoring these differences makes the same mistake that a baseball manager would were he to judge the future prospects of a 42-year-old center fielder on the basis of his lifetime batting average.”

“Our goal is to find an outstanding business at a sensible price, not a mediocre business at a bargain price. Charlie and I have found that making silk purses out of silk is the best that we can do; with sow’s ears, we fail.”

“Fresh ideas, new products, innovative processes and the like cause our country’s standard of living to rise, and that’s clearly good. As investors, however, our reaction to a fermenting industry is much like our attitude toward space exploration: We applaud the endeavor but prefer to skip the ride.”

I particularly admire this last example, because it shows how Warren Buffett introduces an idea that might sound confusing, but he pairs it with an example that instantly clarifies his point.       

“Many of our competitors, both domestic and foreign, were stepping up to the same kind of expenditures and, once enough companies did so, their reduced costs became the baseline for reduced prices industrywide. Viewed individually, each company’s capital investment decision appeared cost-effective and rational; viewed collectively, the decisions neutralized each other and were irrational (just as happens when each person watching a parade decides he can see a little better if he stands on tiptoes).”

I highly recommend the Letters to Shareholders (Amazon, Bookshop).