Lessons from the Essays of Warren Buffett

Every year, Warren Buffett writes an annual letter to Berkshire’s shareholders, and these letters have since become the gospel for not only value investors, but for anyone serious about learning how to not only become a better investor, but also a better businessman, a better executive, and a more effective leader. I personally have gained a lot of lessons from reading the Essays of Warren Buffett, and here’s the first of them!

Lesson #1 — See yourself as a (private) business owner, not as a equity/security owner.

This lesson may seem simple to many (including myself before this), but is actually one of the most profound that I got from reading The Essays of Warren Buffett.

I have always viewed myself as a business owner when I bought into equities, and am ready to hold the businesses for long (of the 11 companies that I have bought and become a partial owner since two years ago, I have only divested one so far due to certain reasons), but this wisdom of seeing myself as a business owner and acting accordingly only really sinks in after I read this book and realised the inconsistency of many of my thoughts and actions with a business owner mindset/perspective.

So here’s a profound wisdom from Buffett’s letter in 1987 — View yourself as a business analyst, not a security analyst!

“Whenever Charlie and I buy common stocks for Berkshire’s insurance companies (leaving aside arbitrage purchases, discussed [in the next essay]) we approach the transaction as if we were buying into a private business. We look at the economic prospects of the business, the people in charge of running it, and the price we must pay. We do not have in mind any time or price for sale. Indeed, we are willing to hold a stock indefinitely so long as we expect the business to increase in intrinsic value at a satisfactory rate. When investing, we view ourselves as business analysts — not as market analysts, not as macroeconomic analysts, and not even as security analysts.”
- The Essays of Warren Buffett, The Fourth Edition

P.S. If you want to learn more about investing, check out the other lessons that I got from the Essays of Warren Buffett here! Happy investing! :)