Every field of endeavour has its heroes or heroines and stories abound about their lives, achievements and impact on society as a whole.
Some professions, especially those that provide entertainment such as soccer, cinema and pop music, produce heroes whose images are familiar to anyone in the street or on the farm.
For example, one cannot write credible or respected history and development of world football in the 20th century without mentioning Brazil’s Pele.
In continental African politics, enduring names include South Africa’s Nelson Mandela, Ghana’s Kwame Nkrumah, and Tanzania’s Julius Nyerere.
When it comes to global businesses and investments, one of the towering figures in the past few decades has been Warren Buffett, who is described by admirers as the “Oracle of Omaha”.
Buffett, 79, has been running a company called Berkshire Hathaway with his 86-year corporate partner, Charlie Munger, since 1965 and has no plans for succession.
Numerous quotations have frequently been attributed to Buffett, but not all of them have been accurate.
For example, in his 2001 annual newsletter, Buffett wrote: “After all, you only find out who is swimming naked when the tide goes out”. Last year alone, I counted 18 cases where this quotation had been cited inaccurately.
So, although I am not a Berkshire Hathaway shareholder, I decided to download Buffett’s latest annual letter to the shareholders, which lists the company’s profits in the past 45 years.
Cited extensively
Buffett has not written his memoirs, but he has been cited extensively by those who have interacted with him.
Alice Schroeder’s recent biography entitled The Snowball: Warren Buffett and the Business of Life, benefits many investors irrespective of where they live.
Having read the book, I thought this letter was the closest thing to Buffett’s memoirs.
While the annual letter points out that Berkshire’s net profit in 2009 was $21.8 billion, and that the company’s book value has grown from $19 to $84,487 in 45 years, I was more interested in Buffett’s overall message than in the statistics.
One of his key messages, which Kenyan investors would benefit from, is that anyone who wants to know the real value of his or her investment has to look into the future.
He claims that he and Munger always avoid businesses whose futures they cannot evaluate, no matter how exciting their products might be. Says he: “At Berkshire, we will stick with businesses whose profit picture for decades to come seems reasonably predictable.”
In the annual letter, Buffett repeats the advice he has given on several occasions previously, that is, good investors should “be fearful when others are greedy and greedy when others are fearful”.
In the recent financial crisis, when many investors were deserting the stock market, Buffett’s company invested heavily into the market. He saw the crisis as a big opportunity to purchase good businesses cheaply. As he observes: “Big opportunities come infrequently. When it’s raining gold, reach for a bucket, not a thimble.”
Buffett’s letter is instructive and inspiring, but its value to investors outside the US and Western countries is limited.
The American values, rules and other dynamics that have enabled Buffett to succeed would be hard to replicate elsewhere.
In the end, we have to accept that business practices, like politics, cannot be transplanted wholesale from one country to another.
Prof Makinda teaches at Murdoch University in Australia.
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