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Who Warren Buffett is, what these famous letters are, and how to read this book. No finance background needed.
One letter a year, turned into a chapter you can actually read
Every year since 1977, one of the world's great investors has written a plain-spoken letter about how his company did. This book turns each letter into an illustrated chapter.
You do not need to know anything about money or investing to enjoy them. That is the whole point. Buffett writes for ordinary owners of his company, in everyday language, and we have kept it that way: pictures, examples, and plain words. This short prologue gets you ready. Then Chapter 01 opens with the 1977 letter, where the run begins.
Meet Warren Buffett
Warren Buffett is an American investor and businessman, widely thought of as one of the most successful investors who ever lived. But his real gift might be teaching.
For decades he has done one simple thing extraordinarily well: buy good businesses at fair prices, then hold them patiently for a very long time. No tricks, no rush. What made him famous beyond the world of money is how he explains it. He can take a knotty financial idea and make it clear with a story about a savings account, a candy shop, or the wind at your back.
Think of him as a brilliant investor who happens to write like a friendly, funny uncle. People with zero interest in finance read his letters anyway, simply because they are such good company.
What is Berkshire Hathaway?
Berkshire Hathaway is the company Buffett runs, and it is an unusual one. Most companies make a single thing. Berkshire owns many different businesses at once.
It owns some businesses outright, the whole thing, top to bottom: insurance companies, a bank, a candy maker, and more. It also owns small slices of other companies by buying their shares on the stock market. Picture Berkshire as a big basket holding lots of businesses, some whole and some in pieces. Oddly enough, it began life as a maker of cloth, and Buffett slowly turned it into this basket.
A few words to know
Here are the only basic words you need before we begin. Everything else gets explained the moment it appears, inside the chapter where it matters.
A tiny slice of ownership in a company. Own one share and you own a sliver of everything that company has.
A person who owns shares of a company. Buffett's letters are written directly to Berkshire's shareholders, its owners.
What is left over after a business pays all its costs. The whole reason to own a business is to earn a profit.
Cash a company chooses to mail out to its shareholders, often once a year, as their share of the profit.
The marketplace where shares are bought and sold. Prices there bounce around every single day, often for no good reason.
How fast something grows each year, when every year's gain builds on the last. Picture a snowball rolling downhill: it keeps folding into a bigger and bigger pile, so it grows faster the longer it rolls. If a stake doubles over four years, that works out to about 19% a year (19% piled on 19%, piled on 19% again, gets you there). It is the quiet engine behind nearly every fortune Buffett admires.
What are these letters?
Once a year, Buffett writes to Berkshire's shareholders to tell them how the company did. He reports the good and the bad, owns up to his mistakes, and almost always slips in a lesson or two.
These letters became so loved that investors around the world read them like a yearly tradition, the way others wait for a favorite author's next book. They are honest, often funny, and refreshingly free of jargon. The collected letters in this book begin with 1977, and that is where our story starts.
"Even a totally dormant savings account will produce steadily rising interest earnings each year because of compounding."
A taste of Buffett · from the 1977 letter, Chapter 01How to read this book
Each chapter is one year's letter. Read them in order to watch the story grow, or jump straight to any year that interests you. The chapters do not depend on each other.
Inside every chapter you will meet the same friendly, repeating pattern. We state a simple idea, show the real business that proves it, and then picture it with an everyday comparison. Once you know the rhythm, the whole book reads easily.
That is everything you need.
Turn to Chapter 01 and meet the 1977 letter, where Buffett's famous run begins. It quietly lays out the way of thinking that runs through every letter after it.