Of Permanent Value 2010, The Story of Warren Buffett, A Trilogy Edition, written by Andrew Kilpatrick is arguably the best book about Warren Buffett and Berkshire Hathaway. There are so many important things to learn about Warren Buffett and Berkshire Hathaway, and Of Permanent Value is a perfect way to learn them all. This book also covers important people around Warren Buffett which helps me understand how Buffett become the person he is today: his philosophies, his views on life, and how he interact with other people. I learned so much from Of Permanent Value, and over the years, Of Permanent Value (filled with Buffett's teaching/experiences, along with some other books that Warren Buffett recommended) helps me to shape my investing philosphies, develop my competencies, and keeping things in perspective. Simply, this book is a must read for all Warren Buffett fans and all value investor.
Kudos to Andy Kilpatrick for putting this book together and continue to update the story about the greatest value investor of our time. I also appreciate Andy Kilpatrick's and Warren Buffett's sense of humor.
Things you will learn from this book (in addition to Warren Buffett): Charlie Munger, Berkshire operating businesses, Insurance business, Energy business, Bonds, Modern stocks, How Buffett partnership and Berkshire got started, Companies with wide moat, Handling crisis, Buffett's Wit and Wisdom, Physical fitness, and many other interesting topics.
What I also like about this book:
1. More color photos and a photo index
2. Updates on Warren Buffett and Berkshire Hathaway recent activity (Railroad purchase etc)
3. Recent activity in added in early chapters so I get the recent updates right away
4. Table of contents with catchy and interesting chapter titles
5. Chapters are short (a few pages max, many with only one or two pages), and not boring to read
What I would like to see (probably in future edition) is Warren Buffett's mistakes (not focusing on the mistakes itself, but more of how/what he learn from them, and his thought process going into making the decision, and whether the outcome changes his philosophies afterwards). I understand that most of them are mistakes of ommission rather than comission, nonetheless it is interesting and useful to learn them. Some of the examples: Not wanting to pay any more than $25M for Sees candies, Stop accumulating Walmart after the price hit a certain point, Buying and then booking losses on Conoco Phillips, Not booking gains on many of the stock holding when it is way overvalued. I know that Andy has covered many of these topics but probably a few back-to-back chapters or a deeper dive into some of these will be an interesting read.
I learn so much from Of Permanent Value, and I hope you enjoy and learn from this book as much as I do (if not more). I can't wait for the next edition and learn On the various stock selling by Berkshire, and what the conclusion about Goldman situation, and many others interesting topic that is happening this year.
I encourage all berkshire shareholders (and potential/future shareholders) to read this book to know more about the person in charge of your Berkshire investment (Warren is your partner). I also encourage all shareholders to go to the annual meeting while Mr. Buffett is still in charge and see him in action.
Below I added more detail review about the content of the book.
Now about the content of the book. You will learn a lot about Warren Buffett and his life, and not only investing topic (investing decisions that he made throughout his career) but his life principles, family, and business in general as well. You will learn about his first job delivering papers when he was 13 (he filed income tax and deducted the bike as business cost), and how he build his first business (pinball machine business), created Buffett partnership, break it up (liquidate), acquire berkshire mills, creating Berkshire Hathaway as investment vehicle, and many other great investment decision/story that he made (Geico, See's Candies, Dairy Queen, General Re, Coca Cola, Salomon, Washington Post, Gillette etc)
In my opinion, here are the 5 strategies that Warren Buffett uses:
1. Intrinsic Value
2. Margin of Safety
3. Temperament (discipline and understanding Mr.Market)
4. Circle of Competence (knowing what your circle of competence. knowing what you know, and knowing what you don't know)
5. Common Sense (which I think is the most important factor and encapsulate everything about Warren Buffett)
You will learn that Warren is very good with numbers (calculating numbers in his head) and memorizing so many facts and numbers. You will also learn that Warren is a man with a very good sense of humor.
Some of the Warren Buffet quotes/opinions/behaviors that I find very useful:
1. In looking for people to hire, you should look for three qualities: integrity, intelligence , and energy. And if they don't have the first, the other two will kill you
2. Be fearful when others are greedy and greedy when others are fearful
3. Rule No. 1: Never lose money. Rule No. 2: Never forget Rule. No. 1
4. Price is what you pay. Value is what you get
5. It takes 20 years to build a reputation and five minuted to ruin it. If you think about that you'll do things differently
6. It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price
7. You're neither right nor wrong because other people agree with you. You're right because your facts are right and your reasoning is right
8. Risk comes from not knowing what you're doing
9. Do what you love and work for whom you admire the most, and you've given yourself the best chance in life you can
10. The perfect amount of money to leave children is enough money so that they would feel they could do anything, but not so much that they would do nothing
There are so many things/chapters that I like on this book. Here are some of my favorites:
One is when Warren need to make a decision who would run Salomon ($150B institution with 8000 employees) within 2 days during their first crisis. There are 12 top-level managers that he interviewed. "This was the most important hire of my life", said Warren to the Columbia business students. The chapter explain his thought process of this candidate selection in detail. Warren mentioned that the good news (for the students and the candidate) is that he didn't ask what their grades were (laughter). Warren also said, "Somebody once said that in looking for people to hire, you look for three qualities: integrity, intelligence and energy. and if they don't have the first, the other two will kill you. if you think about it, it's true, if you hire somebody without integrity, you want them to be dumb and lazy" (laughter). And he conclude the topic with this statement which I think is very powerful: "Pick the kind of person to work for you that you want to marry your son or daughter. You won't go wrong". By the way, he picked Deryck Maughan by the way for his integrity.
Another chapter that I really like is how Warren put the audience (of more than 2000 people) through Business School in an electrifying two minutes (The chapter about "Generics"). See how Warren answer the question of "Will developments in the generic brand area hurt coca-cola?" which is a very important questions. I'll try not to spill too much and take the joy of reading this chapter yourself but he basically explains in a nutshell (with all the details and numbers) how business and competition works (and using several other example like Gillette, Marlboro, Sam Cola etc) and how he convinced the audience (and me as a reader) that coca cola is considered immune to generics. He explains how one can save $500 for smoking generic brand (vs Marlboro) which is a lot of money. While a man will probably will only save $11 per year by not using Gillette Sensor and probably leave band-aids on his face and an uncomfortable experience for opting for generics/lower quality blades. And for coca cola, the net profit margin is only 1 cents per serving (can) while a lot of the ingredients cost (such as the aluminium close to 6 cents a can, sugar 1.3 ounce per can or 1.75 cents etc) the same regardless for coke or other cola company.
The third chapter that I like is when Warren is being questioned by CEOs about what is his best advice for CEOs/leaders.. expecting to get some standard answers like honesty and loyalty.. Warren actually didn't even touch those areas (which I'm sure Warren do think those are also important).. but what Warren actually said is, "Set your expectation low, and you will rarely get dissapointed".
Last but not least, if I have to sum this book up (and Warren Buffett to some extent) in a word, I would use the word "WISDOM" to describe this book, though I have a strong feeling that Warren will disagree with me and think that the better word to describe is "COMMON SENSE"
Disclosure: I'm a big fan of Warren Buffett (He's one of the very few people that I would work for, for free. On second thought, I'll take the health care benefit, and the 401K benefit :) )