The best way to start reading Warren Buffett is to gather up ten or twenty years' worth of his annual letters to Berkshire Hathaway shareholders (these "Chairman's letters" make up the bulk of the company's annual reports, and copies are available on the Internet), which may be the only documents of their type whose prose is worth poring over even for those who have no stake in the appended balance sheets. Buffett's choice of such a dreary medium as the primary showcase for his thoughts has always sent a message in itself. While the Trumps and Iacoccas of the world prefer to present themselves in garish books with jackets featuring large color photos of their own faces, Buffett, the legendary midwestern cheapskate with a knack for discovering hidden value in cookware clubs (The Pampered Chef) and encyclopedia publishers (World Book), has reclaimed a form of junk mail for his collected works.
Buffett's penny-pinching persona doesn't allow for lavish photos or graphics; the reports are all text, and they're printed in black-and-white. They customarily open with a few sentences on the corporation's financial performance, which is almost always dazzling. Any other CEO would trumpet such numbers with eye-catching graphs, but Buffett tends, if anything, to play them down. Year after year, and especially in his best years, he warns the shareholders that Berkshire's results are not likely to be repeated. When they are repeated, which happens more often than not, he expresses no surprise, just gratitude, and then slips back into his chronic pessimism. In 1992, for example, after citing an increase in Berkshire's per-share book value of more than 20 percent, Buffett made a gloomy general market prediction that couldn't have been more wrong: "The return over the next decade from an investment in the S&P index will be far less than that of the past decade." He went on to remark that his firm's own rate of growth, which continued to be superb, had a perverse dark side: "The drag exerted by Berkshire's expanding capital base will substantially reduce our historical advantage relative to the index."
Such are the boring parts of the reports, composed in the dusty language of the business page. They do exhibit a certain buttoned-down wit, though. Like a multibillionaire Jack Benny, the thrifty Buffett just can't stop worrying. He can't stop finding the bad news in the good. Because we know how well he's done and how well he'll do, his nervousness is amusing and disarming. And by avoiding emotion in his expression at moments when others in his position would be euphoric, he also caricatures his well-known suspicion of moody reactions to short-term market swings. When things look up, he doesn't celebrate, and when things look down, he's not surprised—that's the pose, at least. The truth, we suspect, is that such a cautious outlook is a luxury of the financially untouchable, and that Buffett fully understands this. For himself he feels no anxiety at all—he only pretends to, out of compassion for us, the vulnerable public. The hidden message is a subtle one: I, who don't have to, am keeping my guard up as a way of reminding all of you that you can't afford to let yours down.
Such gestures betray an underlying arrogance. Biographers and magazine writers love to detail Buffett's austerity—his middle-class house, his bare-bones corporate headquarters, his decision to stay put in Omaha—but they make a mistake when they accuse him of modesty. In a man worth tens of billions of dollars, self-deprecation is a boast. When, after returning from a high-profile rescue mission at the scandal-plagued bond firm Salomon Brothers, Buffett joked in his 1992 report that Berkshire "didn't miss me while I was gone," he was complimenting himself for creating a company so successful, so replete with its founder's systems, methods, and attitudes, that it could beat the Street on autopilot.
Buffett's false modesty would be annoying if it weren't so clearly an act—an act meant to instruct rather than to deceive, and one that his followers are eager to learn from in the hope of getting rich themselves. By calling himself "your Chairman" in the reports, by endlessly dissecting his own investment mistakes even when they've done his firm no damage, and by constantly pointing up the unattractiveness of the stock that accounts for his stupendous $40 billion net worth, Buffett is using a form of show-and-tell—exaggerated, dramatic, humorous—to teach lessons about humility, skepticism, and other qualities that he believes are crucial to profitable long-term investing. That is, he's playing the part of Warren Buffett, and a lot of the time he's hamming it up, one senses, in the spirit of Clemens playing Twain.
Once he has dispensed with reporting on Berkshire's performance, Buffett likes to spread out as a writer and indulge his flair for aphorism. "Fear is the foe of the faddist," he wrote in the 1994 report, "but the friend of the fundamentalist." This is the soul of the Buffett program: Stay cool. Exploit the follies of the crowd. It's the oldest investment advice there is, but Buffett has personalized it over the years by showing a certain contempt for the financial markets themselves, which he likes to portray as dens of waste and vanity rather than basically efficient systems for allotting capital. It's one of the reasons he's adored: he treats his shareholders as fellow members of a morally solid, wised-up in crowd surrounded by ethically wayward crazy people. It's us against them, the sane versus the mad, the prudent versus the greedy, and it's our right, perhaps even our duty, to grab the money from their trembling, sweaty hands. After all, left to their own unsound devices, they'd only fritter it away.