In one sentence: A rerun of 091: the audio is the same episode, recorded in January 2017 (Phil wishes listeners a happy 2017), so only the small differences are recorded here.
Key ideas
- This is a rerun of 091. Read 091 for the full content: Buffett and John Mackey as role-model CEOs, the 2015 Berkshire letter (book value versus intrinsic value, the 120%-of-book buyback signal), the four traits of a Rule #1 CEO (customer focus, no cutting corners, intellectual honesty, a culture of integrity), and judging management on the four growth rates over three years. [00:00–31:00]
- Worth re-stating: check promises against results. Read old annual reports and see whether the plans in them happened. Phil's examples are a Caterpillar five-year plan that stopped being mentioned and IBM's Ginni Rometty admitting a predecessor's goal would be missed. [23:00–26:00]
- A reason for the "boring" repetition. Phil defends repeating the four principles by comparing it to a basketball coach making star players take the same short shot; his point is that fundamentals are what you fall back on. [02:00–04:00]
- One extra detail. Danielle presses on whether the Buffett letter admits mistakes; Phil says other years do, but doesn't find an example in the 2015 letter during the recording. [19:00–20:00]
How it maps to RuleOne
- Same as 091: the Big Four growth rates and ROIC are on the stock page, while management quality remains a reading task.
Buffett, Munger and Graham links
Words to know
- Nothing new. See 091: book value, intrinsic value, capital allocation.
Try this
Do the exercise in 091 on a different company: take a 10-K from three years ago, write down two things management said it would do, and check whether the latest report says they happened.
Check yourself
- What is the value of reading old annual reports when judging a CEO?
Answer
You can compare what management promised with what happened, which tests honesty and follow-through. - Why does Phil keep repeating Munger's four principles?
Answer
They are fundamentals; if you don't have them embedded you drift outside them and hurt your returns.
Short quotes
"Integrity ahead of the stock price." (Phil, ~25:30, auto-transcribed, trimmed)