Introduction
I should make clear at the outset that my goal is not to trivialize the benefits of a formal education. Particularly at the top business schools, a graduate degree can open many doors. It is no accident that we see the same schools show up again and again when reading the biographies of extremely successful people. I would never discourage anyone determined to pursue a business degree from a top school.
The main problem with a graduate business degree is the cost. Direct financial costs of tuition and living expenses are impossible to ignore but there is usually a steep opportunity cost as well. Unlike many graduate degrees, most business schools require incoming students to have a few years of work experience. The type of students accepted at top business schools are very likely to already earn high incomes.
A young person aspiring to become a doctor has no choice but to enroll in medical school. Not only would it be immoral (and illegal) to practice medicine without a formal education, it would be impossible to approach the level of knowledge and skill that comes with a medical degree. At least in terms of knowledge, I do not believe that the same is true when it comes to business. Many successful businesspeople and investors are self-taught and have never earned formal degrees. This does not mean that the MBA is useless, but it does mean that it is just one of many paths.
I earned an undergraduate degree in finance and intended to pursue a graduate degree but I ended up on a different career trajectory. However, I started to earn an alternate “degree” in business when I began reading about Warren Buffett and Berkshire Hathaway. I did not realize that I was earning a degree at the time I started, but this became clear as time went on. A quarter century later, I feel qualified to provide suggestions to young people interested in earning “The Berkshire Hathaway MBA.”
This article is a set of recommendations that I think should be pursued roughly in order and can be completed in well under a year. In fact, if you start today and commit to a serious program of study, you might aim to “graduate” at the Berkshire Hathaway annual meeting scheduled on May 4, 2024.
Note: There are numerous excellent books and resources about Warren Buffett, Charlie Munger, and Berkshire Hathaway that I have not included in this article. Their omission should not be regarded as a negative statement about those books. To list every available book and resource would only serve to overwhelm someone new to the subject. I have published over a hundred book reviews, many of which are worthwhile for a business education and I created a Berkshire Hathaway resource page with many other articles.
Read a Buffett Biography
The first step can be completed without making a serious commitment. It just requires reading a book. If you are going to base your business education on Berkshire Hathaway, it only makes sense to start with Warren Buffett.
When I read Roger Lowenstein’s Buffett: The Making of an American Capitalist in the late summer of 1995, I was immediately captivated and highly motivated to learn more. Although Lowenstein’s book is now twenty-seven years old, I think it is still a very good choice. If you’re looking for something more recent, Alice Schroeder’s The Snowball: Warren Buffett and the Business of Life was published in 2008.
Although I do not think it is essential, a comparative study of both books is not a waste of time. Schroeder’s book has an additional thirteen years of perspective and includes far more personal details. However, I do not regard a study of Warren Buffett’s personal life to be necessary for this program of study.
David Senra’s Founders podcast is very well done and he has made episodes on the Schroeder and Lowenstein biographies. However, this should supplement rather than serve as a replacement for reading one of the biographies for yourself.
If you do not find at least one of these biographies very interesting, if will be difficult to stay motivated long enough to follow the rest of the suggestions in this article.
Basic Accounting
To borrow a phrase from Charlie Munger, trying to succeed in business without understanding accounting would be like being a one-legged man in an ass-kicking competition. It simply isn’t possible. Imagine a medical doctor who is unfamiliar with basic human anatomy. It is similarly absurd to try to understand business if you do not understand the language of business. You must learn basic accounting.
There are many books that cover accounting. Reading is a great way to learn many subjects but, at least in my experience, it was not enough to learn accounting. Initially I found the vocabulary of accounting quite confusing.1 Accounting is so important that it makes sense to spend the time to take at least one formal course. Fortunately, nearly all community colleges offer introductory accounting at minimal cost.
As an investor, the goal of learning accounting is to understand how to read financial statements as well as management’s statements related to financial results. Those involved in running a business have to be able to communicate with accountants and understand the accounting implications of their decisions. It is not necessary to be an accounting expert but it is necessary to know the basics.
Buffett’s Shareholder Letters
Warren Buffett’s shareholder letters are a treasure trove of wisdom about business and allow the reader to walk through Berkshire Hathaway’s history over nearly six decades. However, reading all of the letters sequentially is likely to be overwhelming for someone new to the company. Fortunately, there is an excellent compilation of the Buffett letters organized thematically. Lawrence Cunningham’s The Essays of Warren Buffett presents the letters by topic rather than chronologically. This book should be read cover-to-cover and you should read actively and take notes.
The next step is to read all of the shareholder letters in order. Shareholder letters from 1977 to 2022 are available on Berkshire Hathaway’s website but I recommend purchasing the kindle version of the letters edited by Max Olson which costs just $3.99. In addition to providing annual letters from 1965 to 1976 that are not available on Berkshire’s website, having the kindle version makes it very easy to search and take notes on the entire collection of letters.
From the mid 1960s to the mid 1970s, the letters are fairly brief and restricted to Berkshire Hathaway’s operations. By the late 1970s, the letters get longer and start to delve into more general business topics. For this reason, it will take far less time to read the early letter than the later letters. Still, I think it is perfectly reasonable to set a goal of reading one letter per day. You will come back to the letters in the future, so at this point the goal is to read them through initially to gain familiarity.
Warren Buffett delves into accounting topics at times but never without presenting the necessary background. His goal has long been to write his letters in a manner that can be understood by any intelligent person, not only those with a business background. As a result, the letters can certainly be read concurrently with a course in accounting if time permits. In fact, doing so could be a motivating factor since an accounting course inevitably includes some less than exciting material.
The Financial History of Berkshire Hathaway
Armed with basic accounting knowledge and having read all of Warren Buffett’s shareholder letters, it is now time to gain a more comprehensive understanding of how Berkshire Hathaway evolved from the mid-1960s to the present day. This is an ambitious goal, especially for years prior to the internet. However, we are fortunate to have access to several excellent resources to help us in this process.
I would recommend starting with a complete read of Jacob McDonough’s book, Capital Allocation: The Financial of a New England Textile Mill, which I reviewed when it was released in 2020. This is a relatively short book but it is packed with information about how Warren Buffett was able to transform Berkshire Hathaway from a dying textile mill to a conglomerate powerhouse in just two decades. This book contains data that would be very difficult to find online along with a cohesive narrative.
After reading McDonough’s book, I suggest purchasing Adam Mead’s The Complete Financial History of Berkshire Hathaway. This outstanding book leads the reader through literally all of Berkshire’s financial history with voluminous data on a year-to-year basis. It is an invaluable resource particularly for years prior to the mid-1990s when the SEC’s Edgar system was created. I cannot imagine the amount of time and effort required to track down the annual reports and supplemental resources required to compile the data to say nothing of writing the accompanying narrative.
As good as Adam Mead’s book is, I would not suggest sitting down and reading it from cover to cover without incorporating the letters. Instead, I suggest the following plan for each year starting in 1965:
- Read Buffett’s letter to shareholders for the year in question and take notes.
- Read the relevant section in The Complete Financial History of Berkshire Hathaway.
- Read the relevant section of Capital Allocation (for years up to 1985).
- Review your notes and write down your own summary of the year.
I am not suggesting reading every Berkshire Hathaway annual report and 10-K from cover to cover for the past half century, although you should read at least several annual reports in full. I’ve read every annual report since the late 1990s as they were released online but I have not read reports for years prior to the SEC’s Edgar system. I wrote an article with some suggestions for how to approach reading a 10-K.
This is a project that will take many months to complete but I think it is the central way to internalize the education offered by Warren Buffett and Berkshire Hathaway. You will get an excellent sense of how Berkshire grew year-to-year and how compounding worked its magic over a long period of time.
Charlie Munger
When you get to the early 1970s, it’s time to start learning about Charlie Munger’s influence on Warren Buffett and his contributions to Berkshire Hathaway. This can be done concurrently with a study of Berkshire’s financial history. I would start with the only full length biography of Charlie Munger, Damn Right: Behind the Scenes with Charlie Munger, which was written by Janet Lowe in 2000. I posted my own thoughts on the book earlier this year after rereading it. Although this book is now over twenty years old, it provides the important details of Charlie Munger’s contributions to Berkshire’s early development during the 1970s and 1980s.
Poor Charlie’s Almanack is a unique reading experience. Presented in the form of a large coffee table book, it is colorfully illustrated and contains much of the worldly wisdom that Charlie Munger is known for. The book also includes many speeches and other material extending far beyond the realm of business and investing. One of the most important subjects that any investor or businessperson must learn is psychology, specifically the psychology of human misjudgment. Charlie Munger identified twenty-five areas of common misjudgment, several of which I have written about.
Charlie Munger officially joined Berkshire Hathaway in the late 1970s but his business partnership with Warren Buffett extends back to the 1960s. I particularly recommend studying Charlie Munger’s letters to shareholders of Blue Chip Stamps, a company that was eventually merged into Berkshire Hathaway in 1983. However, for more than a decade prior to the merger, Blue Chip was controlled by Warren Buffett and Charlie Munger and was the investment vehicle for critical acquisitions including See’s Candies and The Buffalo News. In the case of The Buffalo News, the letters are amazingly candid when it comes to the potential for loss and management’s mistakes. I provided some history related to this subject in a book review a few years ago.
Benjamin Graham and Phil Fisher
It is impossible to read about Warren Buffett’s early years without encountering Benjamin Graham, his great teacher and mentor. Warren Buffett’s early success was based in large part on what Benjamin Graham taught him and reading The Intelligent Investor is an essential rite of passage for any investor. Jason Zweig has done a great job of annotating the book for modern readers without diminishing the original text.
I’ve read two editions of Security Analysis (first and sixth) although I debated whether to include it in this listing. To not include it might be heresy but it is also a project requiring considerable time and modern readers will find the older editions a tough slog. The seventh edition of Security Analysis came out earlier this year. If you’re going to read this book, I suggest buying the latest edition which includes essays written by current practitioners who put Benjamin Graham’s principles into a modern context.
Phil Fisher was a well-known advocate of “growth” investing who influenced Warren Buffett’s thinking, so reading Fisher’s Common Stocks and Uncommon Profits is essential. I reviewed the book several years ago and noted how it contrasts with Benjamin Graham’s approach. The fact is that without the influence of Charlie Munger and Phil Fisher, Warren Buffett would not have made investments such as See’s Candies and Coca Cola. Shifting from “cigar butt” style investments to excellent businesses available at fair prices was a key turning point for Berkshire Hathaway.
Attend a Berkshire Hathaway Annual Meeting
For the price of purchasing one share of Berkshire Hathaway Class B stock, anyone can attend a Berkshire Hathaway meeting. It is well-known that many shareholders request extra tickets and give them to friends so buying a share may not be necessary. No matter how you obtain a ticket, I suggest going to at least one Berkshire Hathaway meeting in person even though the meeting has been webcast for several years.
I attended most of the meetings from 2000 to 2011, years that predated webcasts. Although I did not make special efforts to “network”, I ended up having conversations with other shareholders due to the common experience of waiting in line to enter the meeting venue, buying See’s Candies, and watching the pre-meeting movie. It is also possible to talk to managers of Berkshire’s many subsidiaries and to visit Nebraska Furniture Mart and Borsheims, two of Berkshire’s locally operated businesses.
One of the main benefits of taking an MBA is the opportunity to interact with other students and alumni. Berkshire Hathaway is not a university in the traditional sense, but the annual meeting is an unparalleled opportunity to meet likeminded individuals. In addition to the Berkshire meeting, many other events occur in Omaha on the same weekend including the Markel Group Omaha Brunch.
CNBC’s Warren Buffett Archive contains recordings of all Berkshire Hathaway annual meetings since 1994 so it would be possible to watch each of the question and answer sessions for each year of the shareholder letters. This is something that I plan to do myself the next time I go through the annual letters.
Conclusion
There’s no doubt that a formal MBA program includes far more material than the suggestions covered in this article and students would have more opportunities to make connections that could lead to employment offers. However, the formal MBA has a major financial cost as well as an opportunity cost which must be weighed against the potential benefits.
In contrast, the program of study outlined in this article can be pursued at very minimal cost. Purchasing the books mentioned here would cost a few hundred dollars at the most. Taking an accounting course at a local community college shouldn’t run more than a few hundred dollars. Although costs have skyrocketed in recent years, a weekend in Omaha for the annual meeting should be possible for around $1,000 including airfare if planned well in advance. I cannot imagine how doing everything in this article could cost more than $2,000, a tiny fraction of the cost of an MBA. It can be pursued during evenings and weekends rather than on a full-time basis.
One final suggestion is to make this process active rather than passive. Write about what you have learned and consider doing so in public. Anyone can start a publication on Substack for free. When I started The Rational Walk website in 2009, I was surprised by the number of likeminded individuals who somehow found the articles and wrote encouraging emails. If I had wanted to, I could have pursued employment in the investment industry through contacts developed by writing online.
One of the best ways to learn a subject is to write about it even if you are still in the process of learning. This is the cornerstone of the Feynman Technique that is useful for approaching any subject. The truth is that I have learned a great deal about Berkshire Hathaway because I did not stop when I finished reading a 10-Q or 10-K and attempted to explain the results to readers. It is likely that I benefited from writing far more than my readers, although I hope they have found it useful as well.
Copyright, Disclosures, and Privacy Information
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- I think this confusion was because I viewed the vocabulary of accounting from my perspective as a bank depositor. When you deposit money at the bank, they credit your account. When you withdraw funds, they debit your account. So, in my mind, a credit was “good” in the sense that my account balance went up and a debit was “bad” because that meant my account balance went down. Of course, I was a creditor of the bank and their use of the words debit and credit were from their perspective, not mine. It took me a while to understand why assets have debit balances and liabilities have credit balances. Lest the reader think I’m unusually slow, almost all of my peers experienced similar confusion. [↩]