May 22, 2013

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Berkshire’s Dividend Policy: Part II

posted by William Bratton

Part I of this post left off with the 2011 Berkshire Annual Report, included in Larry Cunningham’s third edition of The Essays of Warren Buffett: Lessons for Corporate America.   There the story of Berkshire payout policy took an historic turn. Berkshire finally announced itself ready to repurchase, provided (1) that the per share market price stood at no more than 110% of book value per share, and (2) that cash-equivalent holdings ready for reinvestment or acquisitions equaled at least $20 billion.  

Events then took still another turn.  It seems that the 110% rule was relaxed to 120%, with Berkshire purchasing a big block of stock at 116% during 2012.  (See BRK News Release here.) A look at the cash flow statement gives the totals: $1.296 billion repurchased in 2012 versus $67 million in the previous year and 0 the year before that.

Yet there is apparent dissatisfaction: this year’s Annual Report notes that “a number of Berkshire shareholders – including some of my good friends – would like Berkshire to pay a cash dividend.”  Why?  Cash and cash equivalents on the 2012 Berkshire balance sheet total $49.992 billion, far north of the $20 billion minimum cited a year earlier.

Meanwhile, the annual Berkshire vs. S&P 500 comparison favors the S&P 500 for the third time in four years.  Maybe the 120% plus full disclosure test is thought to leave open too small a payout window.  If Berkshire stock refuses to cooperate with the payout policy by holding its value, there’s only one alternative: the old-fashioned mode of dividend.

Thus does Buffett mount the battlements to make the case for the historic no dividends policy.  I hope Larry won’t mind if I anticipate his fourth edition and quote it in full (from this year’s Annual Report): Read the rest of this post »

  May 22, 2013 at 3:00 pm   Posted in: Symposium (The Essays of Warren Buffett: Lessons for Corporate America)   Print This Post   Comments (0)

The Varying Use of Legal Scholarship by the U.S. Supreme Court across Issues

posted by David Schwartz

While patent law is my core area of scholarly interest, I have also studied the use of legal scholarship by the courts. My co-author Lee Petherbridge from Loyola-LA and I have conducted several comprehensive empirical studies using large datasets on the issue. More precisely, we have analyzed how often federal courts cite to law review articles in their decisions. We have empirically analyzed the issue from a variety of angles. We have studied the use of legal scholarship by the U.S. Supreme Court (available here), by the regional U.S. Courts of Appeals (study available here), and by the Federal Circuit (available here). I won’t recount the finding of those studies here. Instead, I will report some new information and ask readers for potential explanations of the data.

Read the rest of this post »

  May 22, 2013 at 2:13 pm  Tags: citation, empirical legal studies, legal scholarship, Supreme Court  Posted in: Courts, Empirical Analysis of Law, Supreme Court   Print This Post   Comments (1)

Berkshire’s Dividend Policy: Part I

posted by William Bratton

Way back in 1996, when Larry Cunningham asked me to contribute a paper to his original Warren Buffett symposium at Cardozo Law School, I picked dividends as my topic.  I had two reasons, (1) I had always wanted to write a paper on dividends and was looking for an excuse, and (2) Berkshire Hathaway’s absolutist policy against dividends presented the best possible excuse for a paper.  The no dividends policy provided a great start point, for, while posing theoretical problems, it went hand in glove with Berkshire’s unparalleled growth record and relentless long-termism, not to mention Buffett’s status as a capitalist folk hero.  I later put out a second paper on dividends, written on the occasion of the Bush tax cuts.

So it’s no surprise that I went straight for to dividend chapter when I opened Larry’s third edition of The Essays of Warren Buffett: Lessons for Corporate America.  I had a feeling that times were going to have changed, and they have done so.   Where payout policy was once a bedrock point at Berkshire Hathaway, there is now an incipient sense of stress.  Things are changing, so much so that the third edition cannot keep up.  To put together an account of treatments of payout policy in the essays in Berkshire’s Annual Reports, reference also must be made to this spring’s review of 2012.  Take that together with the excerpts in Larry’s third edition and a cloudy picture emerges.

Let us trace Buffett’s views on payouts as it evolves from edition to edition of The Essays of Warren Buffett: Lessons for Corporate America. Read the rest of this post »

  May 22, 2013 at 11:00 am   Posted in: Symposium (The Essays of Warren Buffett: Lessons for Corporate America)   Print This Post   Comments (0)

Warren Buffett: Practical Philosopher of Capitalism

posted by Guy Spier

Lawrence Cunningham’s Essays of Warren Buffett is a useful and well-ordered collection of Buffett’s thinking on a number of topics.  As such, it serves as a profoundly useful textbook of clear thinking for corporate America.

The book also highlights an aspect of Warren Buffett to which less attention is paid now than will be in the future. That is of Warren Buffett as history’s greatest Philosopher of Practical Capitalism.   

In the last decade many people have lost trust in our capitalist system.   Yes, we like the material abundance that it generates, but who can subscribe to and defend the rampant, unchecked, and amoral version of capitalism that we have seen recently?

We are all too familiar with the cast of ugly characters:  The bankers who lost millions while still collecting their outsized bonuses, Bernie Madoff who masqueraded behind his façade of public spirited financier and philanthropist while he was actually ripping off widows and orphans.

How can we subscribe to a version of capitalism that seems to regularly allow the greedy to endlessly and senselessly enrich themselves while bringing the rest of us to the brink of financial ruin?  Although many of us were brought up on Adam Smith’s invisible hand and the free market of Milton Friedman that delivers goods, services, welfare and justice to all, the way this has played out practically over the last decade is indefensible. 

In a bygone era this unpleasant side of free market capitalism was at least part of what drove Karl Marx to write Das Kapital, and what led to whole societies practicing Socialism, creating so much of the human misery of the last century.

For those of us who still believe in capitalism, free markets and maximum individual liberty as expounded by John Stuart Mill, what is the answer to these excesses? Can we not find a new Milton Friedman, Hayek or Adam Smith for this century? Someone who intelligently and charismatically clarifies why big government and more regulation are not the answer. Read the rest of this post »

  May 22, 2013 at 8:00 am   Posted in: Symposium (The Essays of Warren Buffett: Lessons for Corporate America)   Print This Post   Comments (5)

May 21, 2013

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Berkshire’s Enigmatic Secret Sauce

posted by Jill Fisch

A former student of mine is working on a project that seeks to identify the factors that lead to sustained superior business performance.  Her task brings to mind Warren Buffett, both for his philosophy and his experiences.

Berkshire Hathaway is surely the dominant example of a company that has delivered consistent superior returns throughout its history.  Buffett states, in his letters compiled into The Essays of Warren Buffett, that his returns, first at Buffett Partnership and then Berkshire Hathaway, have averaged 20% per year, as compared to the 10% return delivered by the general market.  Buffett himself notes that this differential is likely to be considered “statistically significant.”

Understanding how to think about Buffett’s remarkable success is challenging, however.  Buffett offers a broad-based set of investment principles that are easily embraced by the average investor – do not try to time the market, invest for the long term, minimize your transaction costs, and invest in businesses that you can understand.  Over time, empirical studies confirm that these strategies are likely to generate better returns than alternatives.

Yet, they fail to explain Buffett’s remarkable investment success.  Buffett himself explains that investors cannot expect to generate, on the average, a better return that the market, and that his strategy is more suited to avoiding egregious mistakes than identifying big winners.  Buffett’s track record belies this conservatism, and his letters suggest that it is possible to outperform the market over time, by identifying outstanding businesses and investing for the long term.

Buffett’s investment performance is difficult to explain, in part, because Berkshire Hathaway defies easy categorization.  The company is a curious hybrid between an investment fund and an operating company.   Berkshire Hathaway owns a substantial number of minority positions in publicly-traded companies, positions that have a current market value of around $90 billion.  These positions include large pieces of companies such as Coca-Cola, Wells Fargo and American Express.  Read the rest of this post »

  May 21, 2013 at 1:00 pm   Posted in: Symposium (The Essays of Warren Buffett: Lessons for Corporate America)   Print This Post   Comments (0)

Could There Be More Berkshire Hathaways?

posted by Kelli Alces

Berkshire Hathaway is a hybrid between an investment firm and an operating company, akin to a publicly traded partnership that actively owns operating companies.  Berkshire’s management, guided by Warren Buffett and Charlie Munger, chooses a diverse portfolio of firms to invest in, then monitors those firms as an active, attentive owner would.  Berkshire shareholders are treated as co-owners of the firm and managers of subsidiaries are expected to act as though they were the sole owners of their divisions.  Everyone is expected to have a long-term time horizon.  Everyone is expected to pay attention. 

Despite being operated very differently from most modern, publicly traded corporations, Berkshire Hathaway is remarkably successful.  Some might attribute the firm’s great success to the particular business acumen of Buffett and Munger.  Others might attribute it to the fact that the firm is run by its controlling shareholders.  In letters to shareholders, edited by Larry Cunningham into essays in The Essays of Warren Buffett: Lessons for Corporate America, Buffett himself attributes the firm’s success to a number of his business philosophies that define every part of Berkshire’s operations from executive compensation to corporate charitable giving to bookkeeping and communication with shareholders.

In light of the tremendous success of Berkshire Hathaway as a whole, and its various subsidiaries individually, I have often wondered why there are not more firms like it.  Of course, there is only one Warren Buffett, a point Berkshire shareholders apparently make every year at the annual meeting.  But why are more firms not adopting Buffett’s business philosophies and strategies?  Berkshire might provide a model for investment firms trying to build a diverse portfolio of firms to offer their investors.  It may also teach institutional shareholders how to monitor the managers of the firms in which they have invested.  Officers and directors could learn how they should operate a firm for long-term success and how managers should be compensated to encourage optimum performance without giving them perverse incentives. Read the rest of this post »

  May 21, 2013 at 1:00 pm   Posted in: Symposium (The Essays of Warren Buffett: Lessons for Corporate America)   Print This Post   Comments (0)

UCLA Law Review Vol. 60, Discourse

posted by UCLA Law Review

Volume 60, Discourse
Discourse

Custody Rights of Lesbian and Gay Parents Redux: The Irrelevance of Constitutional Principles	Nancy D. Polikoff	226
Backlash to the Future? From Roe to Perry	Linda Greenhouse & Reva B. Siegel	240
Will We Sanction Discrimination?: Can “Heterosexuals Only” Be Among the Signs of Today?	Louise Melling	248

  May 21, 2013 at 12:36 pm   Posted in: Uncategorized   Print This Post   Comments (0)

Harvard Law Review Privacy Symposium Issue

posted by Daniel Solove

The privacy symposium issue of the Harvard Law Review is hot off the presses.  Here are the articles:

SYMPOSIUM
PRIVACY AND TECHNOLOGY
Introduction: Privacy Self-Management and the Consent Dilemmas
Daniel J. Solove

What Privacy is For
Julie E. Cohen

The Dangers of Surveillance
Neil M. Richards

The EU-U.S. Privacy Collision: A Turn to Institutions and Procedures
Paul M. Schwartz

Toward a Positive Theory of Privacy Law
Lior Jacob Strahilevitz

  May 21, 2013 at 10:52 am   Posted in: Articles and Books, Privacy, Privacy (Consumer Privacy), Privacy (Law Enforcement), Privacy (Medical)   Print This Post   Comments (0)

Privacy Self-Management and the Consent Dilemma

posted by Daniel Solove

I’m pleased to share with you my new article in Harvard Law Review entitled Privacy Self-Management and the Consent Dilemma, 126 Harvard Law Review 1880 (2013). You can download it for free on SSRN. This is a short piece (24 pages) so you can read it in one sitting.

Here are some key points in the Article:

1. The current regulatory approach for protecting privacy involves what I refer to as “privacy self-management” – the law provides people with a set of rights to enable them to decide how to weigh the costs and benefits of the collection, use, or disclosure of their information. People’s consent legitimizes nearly any form of collection, use, and disclosure of personal data. Unfortunately, privacy self-management is being asked to do work beyond its capabilities. Privacy self-management does not provide meaningful control over personal data.

2. Empirical and social science research has undermined key assumptions about how people make decisions regarding their data, assumptions that underpin and legitimize the privacy self-management model.

3. People cannot appropriately self-manage their privacy due to a series of structural problems. There are too many entities collecting and using personal data to make it feasible for people to manage their privacy separately with each entity. Moreover, many privacy harms are the result of an aggregation of pieces of data over a period of time by different entities. It is virtually impossible for people to weigh the costs and benefits of revealing information or permitting its use or transfer without an understanding of the potential downstream uses.

4. Privacy self-management addresses privacy in a series of isolated transactions guided by particular individuals. Privacy costs and benefits, however, are more appropriately assessed cumulatively and holistically — not merely at the individual level.

5. In order to advance, privacy law and policy must confront a complex and confounding dilemma with consent. Consent to collection, use, and disclosure of personal data is often not meaningful, and the most apparent solution – paternalistic measures – even more directly denies people the freedom to make consensual choices about their data.

6. The way forward involves (1) developing a coherent approach to consent, one that accounts for the social science discoveries about how people make decisions about personal data; (2) recognizing that people can engage in privacy self-management only selectively; (3) adjusting privacy law’s timing to focus on downstream uses; and (4) developing more substantive privacy rules.

The full article is here.

Cross-posted on LinkedIn.

  May 21, 2013 at 10:49 am   Posted in: Articles and Books, Consumer Protection Law, Privacy, Privacy (Consumer Privacy), Privacy (Medical), Technology   Print This Post   Comments (1)

Deals without Bankers: Salomon and Benjamin Moore

posted by Robert Mundheim

Warren Buffett has a reputation for not relying heavily on investment bankers in doing transactions.

A. Salomon, Inc.  The first time I personally experienced this aspect of Buffet’s approach occurred in connection with the sale of Salomon, Inc. to Travelers. Salomon was a major investment bank which had a near death experience in 1991. Berkshire was a very substantial shareholder of Salomon and Buffett played a significant role in its rebuilding.

Although Delaware decisions in the wake of Smith v. van Gorkum suggested the advisability of the board of directors of a company being sold getting a fairness opinion from an outside investment banker, Salomon did not get such a fairness opinion to validate the price its shareholders received in the sale of the company. It did put Salomon Brothers investment bankers to work getting the same type of information and analysis which would normally be given to a board of directors in connection with a business combination for which Salomon Brothers had been retained to give a fairness opinion.

Salomon considered the advisability of securing a fairness opinion, but as the proxy states “ . . . a fairness opinion would have provided little, if any, incremental value to the deliberations of the Salomon Board given the insurance and securities industry expertise of the officers and directors of Salomon and its subsidiaries who were evaluating the Merger from a financial point of view.”

B. Benjamin Moore. My next experience with Warren Buffett and his willingness to do transactions without involving an outside investment banker occurred when I was an outside director of Benjamin Moore. Benjamin Moore was essentially a family- controlled corporation which had acquired enough other shareholders to be traded in the over-the-counter market. The company decided that it was time either to go public or be sold. It retained an investment banker to advise it. After studying the company, the investment banker determined that the company should be able to command a price of $X. It then tried to find buyers at that price, but proved unable to do so. Read the rest of this post »

  May 21, 2013 at 9:00 am   Posted in: Symposium (The Essays of Warren Buffett: Lessons for Corporate America)   Print This Post   Comments (0)

The Skeptical Principal

posted by Deborah DeMott

As the Essays note, Berkshire is unusual in several ways. These include the diverse range of businesses that it controls or in which it holds a significant ownership interest, its large proportion of non-controlling equity held long-term by individual shareholders, and its no-dividend pattern. These characteristics—plus the enduring management success of its controlling shareholders—may well be linked to the skeptical voice evident in the Essays.         

Consider first how the Essays recount the process through which Berkshire acquired Scott Fetzer. A “major investment banking house” had undertaken to sell it but failed despite offering Scott Fetzer “widely.” Learning of this failure Mr. Buffett wrote Scott Fetzer’s CEO (whom he had never met), expressing interest, and “within a week we had a deal.” But “[u]nfortunately, Scott Fetzer’s letter of engagement with the investment bank provided it a $2.5 million fee upon sale, even it had nothing to do with finding the buyer.” (Essays at 217).

To be sure, this account may slight the investment bank’s contribution because its unsuccessful marketing effort preceded Mr. Buffett’s awareness of Scott Fetzer as an acquisition target. Nonetheless the incident exemplifies the Essays’ skepticism of the value of external intermediaries and deal-facilitators, at least most of the time. Instead, identifying acquisition targets and determining the terms on which a deal might be possible can be handled internally and more simply. Read the rest of this post »

  May 21, 2013 at 9:00 am   Posted in: Symposium (The Essays of Warren Buffett: Lessons for Corporate America)   Print This Post   Comments (0)

May 20, 2013

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Mr. Buffett Joins a Board

posted by Donald Graham

In September 1974, I joined the board of The Washington Post Company.  Two other directors were elected at roughly the same time:  George J. Gillespie III, a partner at Cravath, Swaine and Moore; and Warren E. Buffett, ceo of Berkshire Hathaway.   Adding Warren to the board was one of the best decisions (in a life full of great ones) for Katharine Graham, the ceo of The Washington Post Company, and my mother.  (George’s contributions are a story for another day).

I’m pretty certain that Kay was, at the time, the only woman ceo in the Fortune 1,000.  Her autobiography, Personal History, won the Pulitzer Prize for biography in 1998 and was a number one bestseller.  Her book emphasized how utterly uncertain she was at all times, how unsure of her own judgment, how modest.  If conceit normally enters the bloodstream when one takes on the title ceo, Kay was an exception.

There were two people she worked with who gave my mother the belief that she could do the job:  Ben Bradlee, the executive editor of the Post, and Warren Buffett (later Meg Greenfield, the Post’s editorial page editor, would be added to the group).

Kay Graham, who had never heard of Mr. Buffett before he bought stock in her company, quickly figured out after meeting Buffett and Charlie Munger, Berkshire vice chairman, that they were the two smartest business people she’d ever met. Many advisers told her not to put Warren on the board; she ignored their advice and in effect made him her lead director.

Warren was an active, smart director from the first meeting.  He had more time then than now; he advised her on basic corporate matters; on management choices; and on acquisitions (the story of his input on acquisitions for The Washington Post Company is told in wonderful detail in Personal History).

The story I want to tell in this blog post has to do with Mr. Buffett’s first two interventions in our company’s business life.  Warren extensively advised Kay Graham (in writing, in both cases) to change major corporate policies.  Neither involved reversing policies she herself had been involved in.  Read the rest of this post »

  May 20, 2013 at 4:00 pm   Posted in: Symposium (The Essays of Warren Buffett: Lessons for Corporate America)   Print This Post   Comments (4)

The Many Audiences of Buffett’s Letters

posted by Simon Lorne

In part I of this post, I talked at a basic level about the factors that seem to me to have enabled the financial success of Warren Buffett and Berkshire Hathaway, and the value of his annual letters to stockholders, and their amalgamation in Larry Cunningham’s The Essays of Warren Buffett, now in its third edition.  In examining Buffettonian business principles through those letters, however,  it is good to remember that among his many talents has always been an uncanny ability to recognize how his comments will be perceived by different audiences, combined with an acute sensitivity to those audiences (in this regard, he has sometimes been regarded as differing somewhat from his partner, Charlie Munger).

The audience for the letters of Warren Buffett (as he is well aware) is not limited to the stockholders of Berkshire Hathaway.  The audience also includes other investors and market participants, the managers and other employees of Berkshire and its many subsidiaries, the owners of businesses who might one day want to sell to Berkshire, the regulators and other government officials who can affect the business, its competitors, the news media and others.  Inevitably, then, some part of the content of the letters is intended for those non-stockholder audiences.

To take a simple example, the letters have at times referred to a given operation’s return on book value, in the process of praising the operation’s management for above-market returns.  (Always naming the managers involved: “Praise by name, criticize by category.”  A maxim breached only, to my recollection, by a reference to Ivan Boesky.)  It is fairly apparent that Warren Buffett would not seriously suggest that an appropriate measure of an entity’s worth is book value.  There are simply too many ways and too many circumstances in which book value will understate, and often substantially understate, actual worth.  (Where is the value of the moat to be found on a balance sheet, except in the case of goodwill for a recently-acquired enterprise?   Warren himself notes this—see page 224 in the Essays, for example—whenever he talks about the more rational, if less precise, intrinsic value of an enterprise.)   And by virtue of the necessity of recognizing impairment charges book value should be far more likely to understate than to overstate intrinsic value.  In consequence, an organization’s return, as measured by return on book value, will often overstate the performance of its managers, but in the  pattern of Berkshire Hathaway, to overstate the contribution of managers does little or no harm to stockholders, and may provide a little more job satisfaction, a little more incentive, etc., to the managers involved.

I do not mean to suggest that Warren Buffett would mislead his partner-stockholders—far from it.  That he would avoid like the plague.  In the first place, it’s simply not in his nature.  In the second place (as if a second place were needed) he would immediately realize that misrepresentations would likely be discovered and the reputation he has worked so assiduously to maintain and enhance would be undermined.  But he would, and does, introduce relatively harmless error from time to time when doing so is in one way or another to the longer term benefit of Berkshire Hathaway.  I rather think he expects his stockholders to be able to recognize such excursions and treat them accordingly.  It’s worth recognizing, though, that if in the course of reading the letters, or the Essays, there comes a point when one finds oneself scratching one’s head and saying “that can’t be right,” there is at least a possibility that it isn’t quite right, and was written for a different audience.  Of course, it’s also possible that it is right, and that one just didn’t understand.  It is quite unlikely to be the case that Warren didn’t understand.

It’s an interesting question whether the change in Berkshire’s stockholder body over the last several years has changed the nature of the annual letters (I would guess not—they have always been written to be understood by everyman).  If there have been such changes, that is the kind of nuance that is necessarily lost in the deconstruct-and-reconstruct process of putting together the Essays.  Read the rest of this post »

  May 20, 2013 at 2:00 pm   Posted in: Symposium (The Essays of Warren Buffett: Lessons for Corporate America)   Print This Post   Comments (0)

A Devotee on Three Elements of Buffett’s Success

posted by Simon Lorne

When I was a very young lawyer, Chuck Rickershauser (the law firm’s name was then Munger, Tolles, Hills & Rickershauser, now Munger, Tolles & Olson—and yes, the Munger is Charlie) explained Warren Buffett to me.  “They say,” he said, “that when Mozart looked at the score for a symphony, he could actually hear the music, and hear each of the different instruments working together.  That’s the way Warren is with a financial statement.  He can look at it and visualize the widgets coming off the assembly line, the sales force generating leads, inventories building up and being depleted and all the other activities involved in running the business—including the financial consequences of it all.”

It seems to me that Warren Buffett’s remarkable accomplishments, and this is true of many people who have achieved truly extraordinary success, are the result of a coalescing of at least three factors.  The first is being born into circumstances that are conducive to that success.  This is what Buffett has often referred to as winning the Ovarian lottery.  If Mozart had been born in a remote village in China, instead of Salzburg, we might never have heard of him.

Alternatively, if Warren Buffett had been born in Salzburg instead of Omaha, his success might have been in a field other than investing.   (Having heard his efforts on a Ukulele, with all due respect, I’m not convinced he would have been a musical success, even in Salzburg, but I’m quite confident he would have been successful.)  Quite a large number of people “win” the Ovarian lottery, but it is a necessary element of success—and even more, unfortunately, don’t win it.  (Before we rush to the assumption that winning that lottery for financial success requires being born in the United States, it’s good to remember that the current leader in the “world’s richest” race was born and has always lived in Mexico.)

The second factor is natural aptitude, and the third is the application of dedicated, focused effort over a long period of time.  (Of course, these two factors also have elements of the genetic lottery at work, but that’s not what the “Ovarian lottery” references are about.)  To achieve financial success at a Buffettonian level probably requires a 10 on a scale of 1 to 10 for each of these factors, but considerable success might well be achieved with scores of 6 on one and 7 on the other.  One with 5% of the wealth of Warren Buffett is still very, very rich.

I would speculate that of the two last factors—aptitude and dedication—the latter is the more important.   Very few people seem to have the willingness, or perhaps capacity, to focus in on the goal, with laser-like intensity, over a sustained period of time, to the exclusion of much of anything else.  In her Buffett biography The Snowball, Alice Schroeder notes that aspect of his success, and compares it with a similar dedication on the part of Bill Gates.  It can also be easily discerned in Walter Isaacson’s biography, Steve Jobs.

It’s not so much that they forced themselves hermit-like to work on the one thing, whether it be investing or software or design, as it is that they enjoy immersing themselves in it completely.  It’s in their DNA.  Given a favorable environment and the necessary quantum of natural ability (the more the better) it seems likely that it is dedication and single-minded pursuit, over a lengthy period of time, that makes the difference.

The coalescence of those factors in the person who is Warren Buffett, in any event, has led to the phenomenal investment success story that is Berkshire Hathaway, and it is a worthy object of study.  Larry Cunningham’s assembly and reordering of the contents of the annual letters to Berkshire’s stockholders to create The Essays of Warren Buffett provides us with a very useful picture of the world of business as Buffett sees it.  Read the rest of this post »

  May 20, 2013 at 11:00 am   Posted in: Symposium (The Essays of Warren Buffett: Lessons for Corporate America)   Print This Post   Comments (0)

An Insider’s View of The Essays of Warren Buffett

posted by Carol Loomis

Warren Buffett’s words in his annual letters to Berkshire Hathaway shareholders are brilliant, and years ago Larry Cunningham took them to a still-higher level by reorganizing what Buffett said into single-subject chapters.  Cunningham’s The Essays of Warren Buffett (whose third edition we are now celebrating) therefore emerged as a book no student of Buffett can do without.  It begins, moreover, with an excellent introduction written by Larry.

After that beginning, the book moves into what Buffett said in his letters—and here I will lay a small claim to being the person participating in this symposium who is most familiar with those words. That’s because I have been the editor of Warren’s annual letter to shareholders for 36 years—since 1977, when he served on a SEC task force studying communications to shareholders and decided to renovate his own letter.

I had then been a friend of Warren’s for about ten years; he knew my work in Fortune; and he sent me a first draft of his letter, saying, “Any suggestions?” Somewhat intimidated—my husband and I were big admirers of Warren and also Berkshire shareholders—I have joked that I suggested changing a “the” to an “a.”  Since that time, I have been his pro bono, but attentive editor. The drill over the years has never changed. He writes, I edit (and sometimes, alas, lose arguments about how a sentence should go).

Fortune and I published our own book about Buffett just a few months ago:  Tap Dancing to Work, Warren Buffett on Practically Everything, 1966-2012.  It is at heart a real-time business biography, containing everything important Fortune published about Buffett in those years (the bulk of it arranged chronologically). Among these articles are speeches he gave and pieces we took from his annual reports (most of which, you will not be surprised to hear, also turn up in Essays).

In the book’s introduction, I praise Buffett for his “consistency of thought” over the years. Cunningham’s book provides constant reminders of how what Buffett thought became what he did—and in this online space, I will present a classic example.  There have been a few exceptions to the general rule, though, and I will supply an example on the inconsistency front as well.
Read the rest of this post »

  May 20, 2013 at 8:00 am   Posted in: Symposium (The Essays of Warren Buffett: Lessons for Corporate America)   Print This Post   Comments (0)

Introducing Symposium: The Essays of Warren Buffett

posted by Lawrence Cunningham

We at Concurring Opinions are delighted to welcome a dozen luminaries and thousands of readers to this week’s on-line symposium featuring The Essays of Warren Buffett: Lessons for Corporate.  

I began studying Warren Buffett’s letters to the shareholders of Berkshire Hathaway in 1992 when researching what became my first scholarly article, tracing the intellectual history of efficient market theory.  The letters went against the grain of prevailing academic work, so they served as a sort of contrary exhibit rather than supporting many standard assertions.  

The letters were smart, witty, arresting and expansive, addressing governance, mergers, investing, accounting, taxes and many other topics I would spend my career teaching and writing about. I could not put them down. Yet nor could I, acting alone, give them a place of respect in the academy that I thought they deserved but had not received.

So I decided to host a symposium featuring the letters, gathering a group of 20 scholars to dissect their content. Through Monroe Price, then Dean of Cardozo Law School, where I worked, I contacted Bob Denham, a close Berkshire adviser then and now, who passed along my proposal, which Warren embraced.

The centerpiece of the conference was a collection of Buffett’s letters, which I had rearranged thematically, and would later publish as The Essays. The arrangement both enabled a correspondence between the collection and the panel topics and papers, as well as the emergence of an unmistakable organizing principle: the fundamental idea that price and value are different things.

That meant that stock markets are not so efficient as to invariably produce a price that is a reliable proxy for value. This idea is so deep, and was so contrary to academic literature and classroom teaching, that it received an entire section of the collection and separate panel at the symposium. But it was even larger because pretty much all the other principles in The Essays—about governance, mergers, accounting and so on—followed from that tenet.

Since the conference edition (1997), we published a revised first edition (2001), a second edition (2008) and now a third edition (2013), in each case maintaining the themes that have animated the material from the beginning while adding discussion of contemporary issues that radiate from them.

We have often thought of hosting a reunion symposium on The Essays and this week, thanks to the generosity of a dozen luminaries, we do so.  Following is a run-down of the participants in this week’s symposium, half of whom participated in the original.  They are listed in roughly the order in which their contributions appear (with links to pieces as they have been posted).

[To see all posts in the symposium grouped together, click the following link, which also appears below every post in the symposium: "Symposium: The Essays of Warren Buffett: Lessons for Corporate America."]

Read the rest of this post »

  May 20, 2013 at 7:00 am   Posted in: Symposium (The Essays of Warren Buffett: Lessons for Corporate America)   Print This Post   Comments (0)

May 17, 2013

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Copyright’s Constitutional Chameleon

posted by admin

by John Duffy, Peter Strauss and Michael Herz

Earlier this year, more than 100,000 citizens petitioned the White House to overturn a copyright rule issued by the Librarian of Congress that made unlocking a cell phone a crime.  The White House responded by promising to seek legislation to overturn the Librarian’s rule.  That was the most the President would or could do because “[t]he law gives the Librarian the authority,” and the Administration would “respect that process,” even though the Librarian acted contrary to the Administration’s views.  See here. As the New York Times reported, “because the Library of Congress, and therefore the copyright office, are part of the legislative branch, the White House cannot simply overturn the current ruling.” See here.

There’s only one problem with all of this:  The Department of Justice has been vigorously arguing precisely the contrary constitutional position in the federal courts. Read the rest of this post »

  May 17, 2013 at 3:34 pm   Posted in: Constitutional Law, Intellectual Property   Print This Post   Comments (7)

May 15, 2013

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Kentucky: Boy, 5, Kills Sister, 2

posted by Sarah Waldeck

That’s not my headline.  It was in the New York Times earlier this month, in the section where the paper provides short blurbs about what is happening around the country.

My youngest daughter is in kindergarten.  Here is a list of some of the things that she either cannot do or is not allowed to do: cross a busy street by herself; pour milk from a full gallon jug; ride in a car without a booster seat; and tie her shoes (I know . . . she’s working on that one).  She is, however, a highly capable kid.  So it might be fairer to her if I listed some of what she can do:  get herself ready for school; ride her bike around the block; make her bed; use a variety of electronic devices that begin with an “i”.

But regardless of whether the list is of “cannots” or “cans,” it does not square with this statement from the county coroner in Kentucky:

 Mr. White said that the .22-caliber rifle had been kept in a corner and that the family had not realized a bullet was left inside it. “It’s a Crickett,” Mr. White said, referring to a company that makes guns, clothes and books for children.  “It’s a little rifle for a kid,” he said, adding, “The little boy’s used to shooting the little gun.”

I grew up in a small Wisconsin town.  At my high school, so many teachers and students were absent on the first day of deer season that school might as well have been cancelled.  Today some of my close relatives keep hunting rifles in their closets.  So while I absolutely do not want to suggest that I know anything about the family that suffered this terrible tragedy, I am familiar with the kind of culture in which a .22-caliber rifle is put in a corner.

Which is not to say that I wasn’t jarred by the phrase “a company that makes guns, clothes and books for children.”  Or that I expected, when I visited Crickett’s website, to see child-sized guns in bright blue and pink.   And watch out Joe Camel, because Crickett’s mascot is a jolly green frog sporting a rifle, boots, and a hunting cap.

Footbinding, smoking, drunk driving—these are all legend among law and norms scholars.  But with few exceptions, almost no one talks about trying to change gun culture through the sort of small, incremental changes that have made such a difference elsewhere.  Certainly it is daunting to even think about how to spark change.  And it’s also true that those whose ideas would make a difference would only receive posthumous gratification, because change might not actually be realized until my kindergartener has great-grandchildren.

But Boy, 5, Kills Sister, 2.

  May 15, 2013 at 10:29 am   Posted in: Culture, Second Amendment   Print This Post   Comments (17)

Franks on “How to Feel Like a Woman, or Why Punishment Is a Drag”

posted by Danielle Citron

Professor Mary Anne Franks and fantastic guest blogger makes an important contribution with her latest work “How to Feel Like a Woman, or Why Punishment Is A Drag” (forthcoming UCLA Law Review). Professor Franks focuses on the sexual abuse of men in prison to help us better understand sexual and domestic abuse more generally. As Franks writes:

If a man in prison claims he was made “to feel like a woman,” this is commonly understood to mean that was degraded, dehumanized, and sexualized. This association of femininity with punishment has significant implications for the way our society understands not only the sexual abuse of men in prison, but sexual abuse generally. These important implications are usually overlooked, however, because law and society typically regard prison feminization as a problem of gender transposition: that is, as a problem of men being treated like women. This Article argues that feminization is punitive for both men and women: it is as unnatural and as wrong for women to be degraded, dehumanized, and sexualized under coercive circumstances as it is for men to be. This Article suggests that examining the sexual abuse of men in prisons can help disrupt the persistent and uncritical linking of feminization and women. By reading the sexualized abuse of men in prison as a form of forced drag, this Article hopes to expose the artificiality and violence of compelled feminization. The proper approach to assessing forced feminization is to focus on its oppressive structure, not on the gender of its victims. When we do so, we can see what all victims along the spectrum of sexual and domestic abuse have in common, and to form our social and legal responses accordingly. The phenomenon of male sexual abuse in prison thus provides a potentially illuminating opportunity to think about the structure and consequences of sexual abuse in general. This is significant not least because social and legal responses to sexual abuse outside of the prison setting – where sexual abuse is overwhelmingly experienced by women and committed by men – are constrained by pernicious gender stereotypes and a massive failure of empathy. Understanding the phenomenon of male prison sexual abuse is thus essential not only for addressing a specific problem in carceral institutions, but forces law and society to consider sexual abuse in a productively counter-intuitive way.

Also, as my co-blogger Kaimi notes in our Asides, there is a write up of Prof. Franks in Ocean Drive that captures the force of her intelligence and personal strength.

  May 15, 2013 at 9:13 am   Posted in: Criminal Law, Feminism and Gender   Print This Post   Comments (2)

Friedman and Lakier on Limiting Commerce Power

posted by Danielle Citron

Professor Barry Friedman and NYU-graduate and Genevieve Lakier have made an important contribution to our understanding of Commerce Clause power in their piece “‘To Regulate,” Not “To Prohibit:’ Limiting the Commerce Clause.” In the piece, just posted on SSRN, the authors debunk the long-standing and critically unexamined assumption that congressional power to regulate commerce entails the power to shut commerce down:

Today it is taken for granted that Congress’s power “to regulate . . . Commerce among the several States” includes the power to shut interstate markets down. That is why, for example, Congress is understood to have the power to ban the possession and use of marijuana, even though twenty states have expressed contrary preferences, either for the medicinal or recreational use of the drug. This Article argues that as a matter of constitutional history and theory both, this familiar assumption about congressional power is wrong. First, the Article demonstrates that the original understanding, which prevailed for over one hundred years, did not grant Congress the power to ban markets. Congress could pass “helper” statutes to facilitate state choices, and it could even ban particular goods (such as diseased cattle) “in service” of the interstate market; but it could not simply prohibit all commerce in products of which it disapproved. Second, the Article demonstrates that although this understanding changed following the 1903 Supreme Court decision in Champion v. Ames, none of the reasons supporting the change justify Congress possessing the power today. Finally, this Article examines theoretical justifications for congressional power grounded in law and economics and constitutional theory to suggest that the power “to regulate” interstate commerce should not be understood to include the power to prohibit it. The argument has implications for national bans on articles and activities such as interstate gambling, drugs, raw milk products and assault weapons.

  May 15, 2013 at 8:53 am   Posted in: Constitutional Law   Print This Post   Comments (0)

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