What Can You Learn from Warren Buffett - Book Report/Review Example

?Lessons on Business in What Can You Learn from Warren Buffett: A Book Review The Premise The global community today depends mostly on successful business activities because these would help in determining the projected value of business assets, especially the stocks. As people in the corporate world struggle to compete for business dominance, the rest of the world also continues to observe them and admire their successful business principles while criticizing their not so successful business strategies. Accordingly, on such cases when business strategies fail, both laymen and businesspeople benefit from the lessons that those business failures bring. Considering the complexities of the corporate world, it can be said that success in business is hard-earned as a person needs to work and continually evaluate the productivity and efficiency of existing business practices to ensure that it would maintain its competing advantage in the long-run. In the book What Can You Learn from Warren Buffett, Carpenter, Coyle, and the New Word City editors discuss, evaluate, and analyze the business strategies of Warren Buffett. Additionally, the authors draw information on Warren Buffett’s experiences in business, especially in finance and stock market trades. With this book, the authors aim to share tips and lessons on business, as well as provide a positive side of Buffett’s business failures. The authors also discuss the wit, modest lifestyle, and honesty of Warren Buffett, as well as the influence of those values on Buffett’s financial management styles and strategies. As its main goal, this book aims to bring out the life and business lessons on Warren Buffett and help the rest of the world understand the dealings of the corporate world better. The Author’s Defense While Warren Buffett’s financial management strategies received unfavorable criticisms, he still attained international recognition for his financial management strategies. In fact, Fortune declared Buffett as the winner for their 2011 voting polls for the “People’s Businessperson of the Year” (Dubois n.pag). Although Buffett had undergone several business failures before he became one of the world’s most famous business personalities, his innovative, resourceful, and cautious attitude caused him to overcome his financial crisis and push beyond his limits. Buffett’s success in Berkshire Hathaway and his other financial investments secure for him a stable name in the business world. He worked his way to the top, excelled in leadership strategies, and financial management, especially in investing. Aside from this, it can also be said that Buffett’s life is productive in a sense that his business principles come from his personal life, including the lessons he learned from his father, friends, and business partners. For the reason that Buffett’s business career continues to fascinate the world, his business practices and investing strategies continue to motivate people to continue pursuing a business career. Additionally, his success is due to his ability to learn and unlearn ways, which is a result of his clear-headedness, unwavering focus, and determination. Considering Buffett’s successful business career, it can be said that the book What Can You Learn from Warren Buffett is appropriate to read for those people who are interested in taking an active part in the business world. Personal Learning Financial management is necessary today as it enables people to monitor their finances, which include expenses, savings, investments, and debts. As I go through the book, I realized that financial management is quite easy, but taking the immense leap in investing one’s money entails risks. The first business lesson in this book suggests that investors and aspiring investors should consider investing their income as early as possible because early starters have the potential to gain a competitive advantage over those who started later. Aside from this, it is also necessary to set goals and patiently working one’s way to attain it. Moreover, in this book, Buffett emphasizes that setting a goal is necessary as it develops a sense of direction and focus, which also allows investors to allocate their resources appropriately. The most valuable lesson that I have learned from this book is that thriftiness, hard work, and determination are the essential elements in attaining success in business. Buffett started his business at the age of six selling chewing gums, Coca-cola, and The Saturday Evening Post copies. Throughout his early childhood years, he worked hard and saved his money. He had always been thrifty and considered every dollar as an expandable asset. With the belief that the value of money can increase over time, he invested his money and waited for it to increase. This attitude influenced his principle in investing: “Rule No. 1: Never lose money. Rule No 2: Never forget Rule No 1” (Buffett qtd. in Anderson n.pag.). Based on these rules, it can be said that the bottom line of Buffett’s investing principle is thriftiness, which also conveys that it is necessary to hold on to one’s money and other assets while at the same time finding ways to increase its value over a definite period. Theoretical Basis Buffett’s idea on setting goals is similar to Myers. As proposed by Myers, strategic planning is necessary in business as it helps investors determine the appropriate amount to be allocated for a specific business venture (Myers 126; Jensen 300). Additionally, setting goals is also relevant in risk management because it enables investors to foresee potential risks and problems in their business ventures (Froot, Scharfstein, and Stein 1629), thereby allowing them to design strategies that could prevent or solve those problems. Considering these ideas, it can be said that while Buffett’s idea on setting goals is not new, it is still applicable today considering the costs of establishing a corporation, more so in investing money. As the value of money has the potential to increase its value over time, it is necessary to attain knowledge in basic capital asset pricing models (Graham and Harvey 232) because it would help investors determine the long-term and short-term value of their investments. Aside from the value of money, Buffett also provides an example on the value of asset ownership. This idea is closely associated with Cho’s idea of corporate ownership and partnership. According to Cho, the concepts of corporate partnership and ownership are significant in stock trade as those also determine the value of interests allocated for each investor (104). The idea of corporate ownership is also associated with the resource-based formulation of strategies. In the words of Grant, resource-based formulation of business strategies allows owners to evaluate their resources and manipulate those resources to achieve their business goals (114). Thus, considering these theories in relation to Buffett’s investing principles, it can be said that Buffett is an effective and productive businessman as he is able to apply the necessary theories in his business strategies. Knowledge-based Application As an aspiring businessperson, I am planning to apply Buffett’s business principles in my own business. I would build my business based on Buffett’s business strategies, as well as on the theories of risk management, strategic planning, and corporate ownership. For instance, assuming that my business is in the restaurant industry, two of the most effective ways in promoting my business, aside from media advertising, are food tasting promotions and event sponsorship. While food tasting promotions would ensure that more people will taste the food, event sponsorship ensures that my business would penetrate a wide variety of target markets. The two strategies ensure that my restaurant will enjoy the patronage of the majority of our area’s population because of its delectable food. Should these strategies become insufficient in promoting my business, I would encourage and promote excellent customer service in my staff. For instance, I would gather customer feedbacks as these would provide me with information regarding the customer’s preferences. Lastly, to ensure that my business would continue to prosper, I would apply Buffett’s investment principle, which is to control money, hold it, and try not to spend too much on unnecessary resources. Works Cited Anderson, Joel. “Words of Wisdom from Warren Buffett.” Equities. Equities, 24 Jan. 2012. Web. 10 Feb. 2012. . Cho, Myeong-Hyeon. “Ownership Structure, Investment, and the Corporate Value: An Empirical Analysis.” Journal of Financial Economics 47 (1998): 103-121. Print. DuBois, Shelley. “Warren Buffet: The People’s Businessperson of the Year.” CNNMoney. CNNMoney, 17 Nov. 2011. Web. 10 Jan. 2012. . Froot, Kenneth A, David S. Scharfstein, and Jeremy C. Stein. “Risk Management: Coordinating Corporate Investment and Financing Policies.” The Journal of Finance 48.5 (1993): 1629-1658. Print. Graham, John R., and Campbell R. Harvey. “The Theory and Practice of Corporate Finance: Evidence from the Field.” Journal of Financial Economics 60 (2011): 187-243. Print. Grant, Robert M. “The Resource-Based Theory of Competitive Advantage: Implications for Strategy Formulation.” California Management Review 33.3 (1991): 114-135. Print. Jensen, Michael C. “Value Maximization, Stakeholder Theory, and the Corporate Objective Function.” European Financial Management 7.3 (2001): 297-317. Print. Myers, Stewart C. “Finance Theory and Financial Strategy.” Interfaces 14.1 (1984): 126-137. Print. Read More