Essays of Warren Buffett - Lessons For Corporate America by Lawrence Cunningham - The Rabbit Hole
Essays of Warren Buffett - Lessons For Corporate America by Lawrence Cunningham - The Rabbit Hole
Essays of Warren Buffett - Lessons For Corporate America by Lawrence Cunningham - The Rabbit Hole
Key Takeaways
1. Focus on the business with outstanding economic characteristics (favorable and durable moats) and
management
2. People are everything – partner with CEOs who will act well even if they could cheat, who act as if they’re the
sole owner, as if it’s the only asset they hold, as if they can’t sell or merge for 100 years
3. Performance should be the basis for executive pay decisions, as measured by profitability, after profits are
reduced by a charge for the capital employed in the relevant business or earnings retained by. If stock options
are used, it should be related to individual rather than corporate performance, and priced based on business
value
4. True risk is not volatility but permanent loss of capital
5. Rather be approximately right than precisely wrong
6. Put eggs in one basket and watch that basket
7. Price is what you pay, value is what you get
8. The 3 legs of the investing stool – Mr. Market, margin of safety, circle of competence
9. Value investing is a redundancy – aim for focused or intelligent investing
10. Deploying cash requires evaluating 4 commonsense questions based on information rather than rumor
1. the probability of the event occurring
2. The time the funds will be tied up
3. The opportunity cost
4. The downside if the event does not occur
11. Guard against the institutional imperative – CEOs herd-like behavior, producing resistance to change, inertia,
and blindness
12. If you aren’t happy owning business when exchange is closed, you aren’t happy owning it when open
13. Create the business and environment that attracts the people, management, shareholders that you want
14. Useful financial statements must enable a user to answer 3 basic questions about a business
1. Approximately how much a company is worth
2. Its likely ability to meet its future obligations
3. How good a job its managers are doing in operating the business
15. Owner earnings –> cash flow = operating earnings + depreciation expense and other non-cash charges –
required reinvestment in the business (average amount of capitalized expenditures for PPE that the business
requires to fully maintain its long-term competitive position and its unit volume)
16. Intrinsic value = the discounted value of the cash that can be taken out of a business during its remaining life
17. Don’t risk what you have and need for what you don’t have and don’t need
18. Beware weak accounting (EBITDA), unintelligible foot notes, those who trumpet projections
19. Directors must be independent, business savvy, shareholder oriented, have a genuine interest in the business
20. Really only 2 jobs – capital allocation, attract and keep outside management
21. Choose a cold sink (weaker competition) than best management
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12/15/2019 Essays of Warren Buffett: Lessons for Corporate America by Lawrence Cunningham – The Rabbit Hole
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12/15/2019 Essays of Warren Buffett: Lessons for Corporate America by Lawrence Cunningham – The Rabbit Hole
51. Berkshire’s next CEO – temperament is important, independent thinking, emotional stability, and a keen
understanding of both human and institutional behavior is vital to long-term investing success.
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