Maurice Chevalier Tweet

Checkout more about Maurice Chevalier at the Maurice Chevalier Fan Website. See other famous tweets from history or movies: Lincoln, Farmer Hoggett.

How to Write a Shareholder Letter: Buffett vs. Lampert

Here's what a big geek I am. I spent the weekend reading shareholder letters written by Warren Buffett and Eddie Lampert. I saw a few similarities between the two and of course some extreme differences. Let's start with the common points.

2008 WAS DISAPPOINTING

Both started with an overview of the economy and how their companies performed within that context. Here's how Buffett started:

Our decrease in net worth during 2008 was $11.5 billion, which reduced the per-share book value of both our Class A and Class B stock by 9.6%. Over the last 44 years (that is, since present management took over) book value has grown from $19 to $70,530, a rate of 20.3% compounded annually.* The table on the preceding page, recording both the 44-year performance of Berkshire’s book value and the S&P 500 index, shows that 2008 was the worst year for each. The period was devastating as well for corporate and municipal bonds, real estate and commodities. By yearend, investors of all stripes were bloodied and confused, much as if they were small birds that had strayed into a badminton game.

Lampert focused more on retail, which makes sense being this was the shareholder letter for Sears Holding Company:

This past year was a very difficult year for the world economies and for retail in the United States, and 2009 needs to be the year of restoring confidence and trust in our financial system. We have witnessed the weeding out process that inevitably accompanies difficult economic times, with retail companies like Circuit City, Mervyn’s, Linens ’n Things, and Fortunoff not just filing for bankruptcy, but undertaking complete liquidation. Other retail companies, many of whom are highly regarded, have seen their plans and expectations thwarted by events ranging from consumer distress and the tightening of credit markets to rating agency concerns, all of which have upset normal expectations about how a retail business should be run.

STAY TRUE TO OUR GOALS

Both chairmen showed confidence by reassuring their shareholders that they will continue to focus on things they can control. Buffett shared his focus this way:

In good years and bad, Charlie and I simply focus on four goals:

1. maintaining Berkshire’s Gibraltar-like financial position, which features huge amounts of excess liquidity, near-term obligations that are modest, and dozens of sources of earnings and cash;
2. widening the “moats” around our operating businesses that give them durable competitive advantages;
3. acquiring and developing new and varied streams of earnings;
4. expanding and nurturing the cadre of outstanding operating managers who, over the years, have delivered Berkshire exceptional results.

I always enjoy the folksy way that Buffett shares his perspective. Here Lampert used the same focus on the controllable goals strategy, but wrote in language the reads more like generic company speak.

We continue to hone our vision and define what it will take to achieve it. There are five key pillars of our strategy, and I would like to lay them out for you:

1. Creating lasting relationships with customers by empowering them to manage their lives
   
2. Attaining best in class productivity and efficiency
   
3. Building our brands
   
4. Reinventing the company continuously through technology and innovation
   
5. Reinforcing “The SHC Way” by living our values every day

FOCUS EXTERNALLY OR INTERNALLY

The main body of Buffett's letter focused on internal forces:

Now, let’s take a look at the four major operating sectors of Berkshire. Each of these has vastly different balance sheet and income account characteristics. Therefore, lumping them together, as is done in standard financial statements, impedes analysis. So we’ll present them as four separate businesses, which is how Charlie and I view them.

Buffett went on to detail Berkshire Hathaway's separate business units: Regulated Ultility Business; Insurance; Manufacturing, Service and Retailing Operations; and Finance and Financial Products.  Lampert took a different approach by focusing the body of his letter on external forces:

As discussed above, a number of changes in the regulatory environment greatly impacted Sears Holdings and other companies. Three additional areas quickly come to mind.

Then he had a detailed section dedicated to each of those three areas: Short-selling rules; Pension Reform; and Mark-to-Market Accounting.

But the biggest difference between these two captains of industry is Buffett's passion for his annual shareholder meeting.  

If you decide to leave during the day’s question periods, please do so while Charlie is talking. The best reason to exit, of course, is to shop. We will help you do that by filling the 194,300-squarefoot hall that adjoins the meeting area with the products of Berkshire subsidiaries. Last year, the 31,000 people who came to the meeting did their part, and almost every location racked up record sales. But you can do better. (A friendly warning: If I find sales are lagging, I lock the exits)... 

So join us at our Woodstock for Capitalists and let us know how you like the new format. Charlie and I look forward to seeing you.

If you're as a big of a geek as me and you would like to read the complete letters, you can find them at these links: Warren Buffet's letter and Eddie Lampert's letter.

Be Essential!

Recently came across this cartoon in Tony Karrer's eLearning Technology blog. Thanks to John Brentlinger at revJohn for introducing me to Tony's blog.

Establish Daily Routines

While reading an article about Robert Caro's work habits in Newsweek Magazine, I got to thinking about my own personal work habits. I've never been one to establish daily routines. I have a fear that they lead to ruts and boredom. So I work to keep things fresh and creative, but you can't argue with success. One of the lessons from reading Snowball, is that Warren Buffet certainly has routines he follows. Many top performers do. Daily Routines is a fascinating blog that shares how "How writers, artists, and other interesting people organize their days."

Routines eliminate the spinning wheels of debate and over thinking. There's no decision, just action. Leo Babauta makes a strong case for daily and weekly routines at Zen Habits, one of Time Magazine's top 25 blogs for 2009. In areas that I have set routines, I feel like I gain time and reduce stress. My wife and I have used routines for bedtimes with our kids for years. The interaction with my children certainly prevents any boredom with those routines.

Perhaps it's time to examine and establish some work day routines. For me, the best place to start is to look at what spinning wheels I want to eliminate. What decisions can I make now, so that I don't have to make them again every day or week. I'll keep you posted. Share your favorite and most effective routines by leaving me a comment.

Smile!

The following clip is a feel good prank from the agents at Improv Everywhere.



I love how in the write-up of the event, one of the agents talked about the joy of watching "victims" smile after the encounter.

Several years ago, I heard that Zig Ziglar's office answered the phone saying "It's a great day at the Ziglar Corporation." I liked that positive attitude and decide to make everyone at the office I was running answer the phone that way, but their hearts weren't in it and several shared how much they disliked being told exactly what to say. I said okay, but here are the critical criteria for answering the phone. You have to:

• Say Shreve Hall (the place we worked at)
• State your name
• Make the person on the other end smile

The team bought into that criteria and each came up with a unique way to encourage a smile. My favorite was a direct young man who simply said, "Smile this is Tim at Shreve Hall." What can you do today to make someone else smile?

Your Defining Brand | Experience vs. Products

"Could you identify yourself with only 5 brands?" That's the engaging question being asked at 5brands on tumblr. Reading through the various responses, I noticed that some of the brands referred to experiences (Starbucks, ESPN, Google), but that most referred to actual products (Nike, Coke, Apple).

Then I remembered Tom Peters call for executives everywhere to manage "The Brand Called You." I saw new life in his brilliant concept when I considered what type of brand was I creating professionally. Do I want to be known for the experience I provide or for the products I produce? Now generally, I'm an experience guy. For us retailers, the only thing that can truly set us apart is the experience. But is that enough for a solid professional reputation?

In an economic climate where over 600,000 jobs were lost in January alone, I wonder which personal brand is more likely to survive a layoff. Experience - he's a great partner that you can count on; or product - his analysis and recommendations are reliable and accurate. My guess is the product brands are easier to demonstrate a return on investment and therefore more secure in their jobs.

Ideally, you find a way to build a brand that's strong in both. Krispy Kreme provides a distinctive in-store experience, and they also make mighty tasty donoughts.

Note to self: start working on improving the product side my brand.

P.S. - here's a fun brand game to play with your loved ones. Have them write down five brands that they think define you and see how they compare to your list. Then you do the same for them.

Best Super Bowl Ads

Wow! What a great game, but more importantly here are my favorite three ads.

#3 Bud Light: Meeting
"How about we stop buying Bud Light for every meeting."



#2 Doritos: Crystal Ball
"I think that's a yes."



#1 Hulu: Alec and Huluwood
"I mean what are you going to do? Turn off your TV and computer?"



What were your favorites?