The Essays of Warren Buffett: Lessons for Corporate America

Overview
A thematically organized distillation of Berkshire Hathaway shareholder letters through the mid-1990s, The Essays of Warren Buffett: Lessons for Corporate America articulates a coherent philosophy of business, investing, and governance. Buffett writes as a business owner addressing partners, explaining how to create long-term value by aligning management with owners, allocating capital rationally, and judging performance with candor. The result is a practical blueprint for managers, directors, and investors: focus on durable business economics, resist market fads, and measure success by growth in per-share intrinsic value rather than reported earnings or stock-price moves.

Owner-Oriented Governance
Buffett’s starting point is owner capitalism. Shareholders should be treated as partners, with managers acting as stewards of their capital. Boards exist to safeguard owners’ interests, not to rubber-stamp CEOs. Director incentives should come from meaningful share ownership, not symbolic fees, and governance should emphasize independence of mind over box-ticking. Managerial compensation must tie to what managers control and to per-share results, not to conglomerate averages or budget games. Above all, he champions managerial candor: forthright communication about mistakes builds trust and improves decision-making.

Intrinsic Value and Capital Allocation
Intrinsic value is the discounted value of cash that a business can distribute over its life. Book value and reported earnings are, at best, rough guides; economic reality matters more. Capital allocation is a CEO’s central job: retain a dollar only if it is likely to create more than a dollar of market value, otherwise return it. Repurchase shares when they trade below intrinsic value, but never to manipulate metrics. Issue shares only when receiving equal or greater value in return. The correct yardstick is growth in per-share intrinsic value, not aggregate size.

Investing Principles
Buffett urges focus on understandable businesses within one’s circle of competence, purchased at sensible prices relative to their durable competitive advantages. He favors wonderful businesses at fair prices over fair businesses at wonderful prices, seeks a margin of safety, and treats volatility as opportunity rather than risk. Mr. Market is a partner with mood swings, not a guide. Time is the friend of the great business; compounding requires patience and low frictional costs. Forecasting macro variables is far less important than appraising microeconomics and managerial integrity.

Mergers, Stock, and Debt
Acquisitions should be rare, friendly, and permanent, and only pursued when the target’s intrinsic value comfortably exceeds the price. Empire-building and synergy promises often destroy value, especially when fueled by overvalued stock. He disfavors paying with shares unless Berkshire receives at least as much intrinsic value as it gives. Debt is a potentially fatal temptation: financial strength protects compounding and enables opportunistic moves in downturns. Dividends and repurchases are tools, not doctrines; the right choice depends on opportunity cost and valuation.

Accounting, Reporting, and Measurement
Economic reality must trump accounting form. Buffett differentiates between reported earnings and “look-through” earnings that reflect Berkshire’s proportional share of investees’ undistributed profits. He criticizes metrics that ignore capital intensity or real costs, preferring owner earnings as a cash-based measure. Goodwill amortization and other GAAP conventions can obscure genuine economics, while option grants are real expenses and should be treated as such. He advocates plain-English reporting, disclosure of business drivers, and performance measures that align with owner outcomes rather than cosmetic optics.

Insurance and the Berkshire Model
Berkshire’s engine is insurance float, funds temporarily held from policyholders. Float is valuable only if its long-term cost is less than zero, which requires underwriting discipline and a refusal to chase volume. Berkshire’s structure marries decentralized operating autonomy with centralized capital allocation, letting superior managers run their businesses while headquarters deploys cash to its best uses. The culture prizes integrity, thrift, and permanence, aiming to buy good businesses, keep them, and compound quietly for decades while treating partners fairly and thinking like owners.