Book Review

Just finished “Warren Buffet and the Interpretation of Financial Statements.”  While it might sound like a dry read, it was actually quite fascinating.  For starters, the level of discussion in the book is fairly plebian, which is a good thing for me as I never got an MBA or a sound education in investment strategy.  What the book does cover quite well though, is the way Warren Buffett looks at a company’s financials, and what indicators might suggest a durable competitive advantage.  At its core, it seems his investment philosophy is about common sense, patience, and the search for a company that will be competitive for decades rather than years.  He’s looking at stocks as equity bonds with a certain rate of return (earnings per share).  As you move through the book and note where he pays special attention (or doesn’t) you certainly get a sense for how effective this strategy can be, given an insatiable desire to review financial statements and the composure to exercise unbelievable restraint amidst market fluctuations.

I read the book as a way to evaluate my own company’s financials – to ensure that we have, or can create, the indicators of long-term viability.  On the whole, it seems we’re very much on the right track, with one exception being that we’re in a people-driven consulting business, something Warren avoids.  For me, the read was encouraging.  And, as much as entrepreneurs and investors might gripe about service businesses, where your competitive advantage goes up and down in the elevators everyday, I wouldn’t have it any other way.  No other type of business has more heart, more culture, and more subtlety.  When your people are your business, it forces your business practices to be more human, and that’s an advantage that doesn’t show up on the balance sheet.