Annual Letters

I’ve been reading Warren Buffett’s Annual Letters. You can access them back to 1977 at Berkshire Hathaway’s website, or you can buy a book with the full unedited collection going back to the start (1965).

They’re excellent. I’ve learned a lot, not just about investing but financial and economic history as well. It’s one thing to read about stagflation in the ’70s in an economics book and another to hear someone trying to generate returns in a business talk about it as it was happening.

I was curious who else writes thoughtful annual letters and learned from an excellent post by Ben Horowitz about CEOs that Jeff Bezos does. 

Horowitz referenced Bezos’s 1997 letter (the first one after its IPO) as an excellent example of how a CEO gives a company a strategy and a story. All of Bezos’s letters are well done and worth reading. You can find them here

I’m going to write more about what I learn from all of this reading, but for now I just wanted to note the power of writing these letters. They’re an excellent way to organize your thinking, both retrospectively, allowing you to share what happened and why, and prospectively, describing what you plan to do. 

In Buffett’s own words (from a lecture he gave at Notre Dame):

I proposed this to the stock exchange some years ago: that everybody be able to write out “I am buying 100 shares of Coca Cola Company, market value $32 billion, because…” and they wouldn’t take your order until you filled that thing out. 

I find this very useful when I write my annual report. I learn while I think when I write it out. Some of the things I think I think, I find don’t make any sense when I start trying to write them down and explain them to people. You ought to be able to explain why you’re taking the job you’re taking, why you’re making the investment you’re making, or whatever it may be. And if it can’t stand applying pencil to paper, you’d better think it through some more.

Bezos has clearly taken this idea of writing’s ability to help you think even further. At the beginning of every meeting of senior executives, the entire team sits in silence for thirty minutes reading a six page memo discussing various aspects of the issue at hand. 

From Fortune:

Amazon executives call these documents “narratives,” and even Bezos realizes that for the uninitiated—and fans of the PowerPoint presentation—the process is a bit odd. “For new employees, it’s a strange initial experience,” he tells Fortune. “They’re just not accustomed to sitting silently in a room and doing study hall with a bunch of executives.” Bezos says the act of communal reading guarantees the group’s undivided attention. Writing a memo is an even more important skill to master. “Full sentences are harder to write,” he says. “They have verbs. The paragraphs have topic sentences. There is no way to write a six-page, narratively structured memo and not have clear thinking.”