Warren Buffett on Business: Principles from the Sage of Omaha

Introduction

Most books written about Warren Buffett have focused on how he invests and how you can invest just like him. When I am asked "How can I invest like Warren Buffett?," my answer is simple and direct: Buy either Berkshire Class A or Class B stock. In his 1987 Berkshire stockholder letter, Buffett also advised, "If they want to participate in whatever Berkshire is buying they can always purchase Berkshire stock. But perhaps that is too simple."^[] Buffett also says that most individual investors should purchase stock index funds because they are very low cost and they outperform most professional investment managers. In January 2008, to prove his point, Buffett entered into a bet (each side put up roughly $320,000, with the final proceeds going to the winner's favorite charity) with Protege Partners, a fund-of-funds hedge fund, that their handpicked funds will not beat the S&P 500 index over the next 10 years. A principal of Protege said, "Fortunately, for us, we're betting against the S&P's performance, not Buffett's."^[]

For the past three years, I have presented a course on Buffett at the Washington University in St. Louis Lifelong Learning Institute. It all began in April 2006, when I sent a letter to Buffett telling him that I was going to present the course. Four days later, he wrote back encouraging me and supporting the course. I was very excited to receive his letter, but no more than the woman who framed it for display on my office wall. Since then, Buffett and ...