Letters to Shareholders

Letters to shareholders or stakeholders in your company are important.  For startups, I like to see them at least once a quarter.  For startup CEOs it’s a way of maintaining the relationship you worked so hard to establish with investors.  For CEOs like Buffett, a letter can do lots of things.  It can set expectations.  It can signal.  It can communicate to employees and partners.

Most of the time, reading corporate shareholder letters is pretty dry.  I think that’s because it has to go through legal and lawyers never want anyone to tell the exact truth about anything.  Read some corporate annual reports sometime, they get dry.  Another thing they never do is accept responsibility for failure.  A secure CEO tells people when they screw up, and how they are going to pick up the pieces.

My friend Josh Brown sends out a sort of letter to his “shareholders” every year on his birthday.  It happens to coincide with Warren Buffett’s letter.  I don’t agree with every single thing Josh points out, but I think he makes some pretty good points.  He is 100% right that there is “malinvestment” caused by bad central bank policy.  He is 100% right that there are companies operating out there with really crappy business models.  At least the tide is going out and they are starting to be exposed.  I think he is spot on when he talks about social media and its influence on our social attitudes.

We’re electing maniacs. We’re more connected than ever and it’s making everyone feel more alone. Connectivity is giving us a constituency of the like-minded. When you can find think-alikes online, there’s no reason to even have a conversation with anyone who thinks differently. We’re retreating back into our subcultures. The only consensus is that there isn’t one.

One thing that social media, and a lot of internet companies do is create pretty big companies out of niches that used to be unable to be filled.  That’s a good thing.  But, in political debate social media shouts and doesn’t solve.

Buffett released his annual shareholder letter and said something I blogged about the other day.  It’s a great time to be alive if you are really young.  Buffett knows business models.  His company only made $15.4 billion last year.  Wasn’t a record year for Berkshire but it sure wasn’t bad.

Buffett echoes a lot of the things I have been thinking about.  He says, “Nothing rivals the market system in producing what people want – nor, even more so, in delivering what people don’t yet know they want. My parents, when young, could not envision a television set, nor did I, in my 50s, think I needed a personal computer. Both products, once people saw what they could do, quickly revolutionized their lives.”

I don’t agree with Buffett politically, but he is a helluva businessman.  He also has a positive outlook on the future of America.  So do I.