The Essays of Warren Buffett

Lawrence A. Cunningham is the Tucker Research Professor at George Washington University in Washington DC and New York City and Director of its Quality Shareholders Initiative. A leading authority on corporate culture and quality investing, Cunningham's dozen books include Quality Investing, Quality Shareholders, Dear Shareholders, and Margin of Trust.

Editors Note xi Introduction xiii Governance xvi Investing xx Alternatives xxvi Common Stock xxviii Acquisitions xxxi Valuation xxxiii Accounting xxxvi Taxation xxxvii History xxxviii Coda xxxviii Prologue: Owner-Related Business Principles xli I. Governance 1 A. Full and Fair Disclosure 2 B. Boards and Managers 5 C. The Anxieties of Business Change 17 D. Social Compacts 24 E. An Owner-Based Approach to Corporate Charity 26 F. A Principled Approach to Executive Pay 32 G. Risk, Reputation and Climate Change 42 H. Corporate Culture 45 II. Investing 47 A. Farms, Real Estate and Stock 48 B. Mr. Market 52 C. Arbitrage 56 D. Debunking Standard Dogma 62 E. Value Investing: A Redundancy 71 F. Intelligent Investing 78 G. Cigar Butts and the Institutional Imperative 84 H. Life, Debt and Swoons 88 III. Alternatives 93 A. Surveying the Field 94 B. Junk Bonds and the Dagger Thesis 98 C. Zero-Coupon Bonds and Ski Masks 105 D. Preferred Stock 111 E. Derivatives 122 F. Foreign Currencies and Equities 131 G. Home Ownership: Practice and Policy 137 H. Business Partnerships 140 IV. Common Stock 145 A. Beating Costs with Indexing 146 B. Attracting Quality Shareholders 154 C. Stock Splits and the Invisible Foot 157 D. Berkshires Dual Class: Thwarting Clones 162 E. Buybacks and Rationality 166 F. Dividends and Capital Allocation 173 V. Acquisitions 183 A. Bad Motives and High Prices 184 B. Sensible Share Repurchases Versus Greenmail 195 C. Leveraged Buyouts 195 D. Sound Acquisition Policies 198 E. On Selling Ones Business 201 F. The Buyer of Choice 205 VI. Valuation 209 A. Aesop and Inefficient Bush Theory 210 B. Intrinsic Value, Book Value, and Market Price 213 C. Look-Through Earnings 220 D. Economic versus Accounting Goodwill 225 E. Owner Earnings and the Cash Flow Fallacy 235 F. Option Valuation 242 VII. Accounting 247 A. Satire 248 B. Standard Setting 255 C. Audit Committees 256 D. Adjusted Earnings 258 E. Pension Estimates and Retiree Benefits 266 F. Realization Events 269 G. Investments 270 VIII. Taxation 273 A. Distribution of the Corporate Tax Burden 274 B. Taxation and Investment Philosophy 277 IX. History 281 A. The American Miracle 282 B. Productivity Growth 284 C. Tailwinds 289 X. Coda 293 A. Buffett on Berkshire Culture 293 B. Munger on The Berkshire System 306 C. Methuselahs Estate 312 Concept Glossary 315 Disposition Summary 317 Index 319