(Question)
WARREN BUFFETT: Well, we’ve read a lot of reports,
I will tell you that.
And
we — well,
we start by looking at the reports of companies
that we think
we can understand.
So
we hope to find
— we hope to be reading reports
—and I do read hundreds of them every year —
we hope to be reading reports of businesses
that are understandable to us.
And then we see
from that report
whether the management is telling us about the things
that we would want to know about
if we owned a hundred percent of the company.
And when we find a management
that does tell us about those things,
and that is
candid in the same way that a manager
of a subsidiary would be candid with us,
and talks in language that we can understand,
it definitely improves our feeling about
about investing in such a business.
And the reverse turns us off, to some extent.
So if we read a bunch of public relations gobbledygook,
you know,
and we see lots of pictures and no facts,
it has some effect on our attitude
toward a business.
We want to understand the business
better when we get through with the annual report
than when we picked it up.
And that is not difficult for a management to do
if they want to do it.
If they don’t want to do it,
you know, we think that is a factor
in whether we want to be their partners
over a ten-year period or so.
But we’ve learned a lot from annual reports.
For example, I would say that
the Coca-Cola annual report
over the last good many years
is an enormously informative document.
I mean, I can’t
I can’t think of any way if I’d
have a conversation with Roberto Goizueta,
or now Doug Ivester,
and they were telling me about the business,
they would not be telling me more than
I get from reading that annual report.
We bought that stock based on an annual report.
We did not buy it based on any conversation
of any kind with the top management of Coca-Cola
before we bought our interest.
We simply bought it based on reading the annual report,
plus our knowledge of how the business worked.
Charlie?
CHARLIE MUNGER: Yeah. I do think the —
if you’ve got a standardized bunch of popular
jargon that looks like it came out of the
same consulting firm,
I do think it’s a big turnoff.
That’s not to say that
some of the consulting
mantras aren’t right.
But
I think there’s a lot — that for a sort of candid,
simple, coherent prose —
a lot to be said for it.
WARREN BUFFETT: Almost every business has problems,
and we’d just as soon the manager
would tell us about them.
We would like that in the businesses we run.
In fact, one of the things,
we give very little advice to our managers,
but one thing we always do say is
to tell us the bad news immediately.
And I don’t see why that isn’t good advice for the
manager of a public company.
Over time,
you know, I’m positive it’s the best policy.
But
a lot of companies, for example, have investor relations people,
and they are dying just to pump out
what they think is good news all the time.
And they have this attitude that, you know,
you’ve got a bunch of animals out there to be fed.
And that they’re going
to feed them what they want to eat all the time.
And over time the animals learn.
So, we’ve tried to stay away from businesses like that.
CHARLIE MUNGER: What you seldom see in an annual report
is a sentence like this:
“This is a very serious problem and we haven’t quite figured out yet how to handle it.”
(Laughter)
But believe me, that is an accurate
statement much of the time.
VOICE: — just a moment.
(Buffett leaves the table after someone tells him something in his ear.)
(sub)