Plain English from Warren Buffett

I enjoy reading and hearing comments from Warren Buffet, CEO of Berkshire Hathaway. I find his business insight educational and candid.

During our MBA studies, we have studied how to attempt to comprehend the often complex financial statements published by companies. The financial statements include the balance sheet, income statement and cash flow along with the company’s comments, referred to as footnotes. As I have learned, these statements are often difficult even to the trained financial professional to understand.

During my studies on financial statements, I came across a letter written by Warren Buffett that served as the preface to ‘A Plain English Handbook’, a book written by the Securities and Exchange Commission. Below, I share Buffet’s comments. I hope you find his straight talk and wisdom on business communications insightful, educational and candid as I did.

‘A Plain English Handbook’ Preface by Warren E. Buffett

This handbook, and Chairman Levitt’s whole drive to encourage ‘plain English’ in disclosure documents, are good news for me. For more than forty years, I’ve studied the documents that public companies file. Too often, I’ve been unable to decipher just what is being said or, worse yet, had to conclude that nothing was being said. If corporate lawyers and their clients follow the advice in this handbook, my life is going to become much easier.

There are several possible explanations as to why I and others sometimes stumble over an accounting note or indenture description. Maybe we simply don’t have the technical knowledge to grasp what the writer wishes to convey. Or perhaps the writer doesn’t understand what he or she is talking about. In some cases, moreover, I suspect that a less-than-scrupulous issuer doesn’t want us to understand a subject it feels legally obligated to touch upon.

Perhaps the most common problem, however, is that a well-intentioned and informed writer simply fails to get the message across to an intelligent, interested reader. In that case, stilted jargon and complex constructions are usually the villains.

This handbook tells you how to free yourself of those impediments to effective communication. Write as this handbook instructs you and you will be amazed at how much smarter your readers will think you have become.

One unoriginal but useful tip: Write with a specific person in mind. When writing Berkshire Hathaway’s annual report, I pretend that I’m talking to my sisters. I have no trouble picturing them: Though highly intelligent, they are not experts in accounting or finance. They will understand plain English, but jargon may puzzle them. My goal is simply to give them the information I would wish them to supply me if our positions were reversed. To succeed, I don’t need to be Shakespeare; I must, though, have a sincere desire to inform.

No siblings to write to? Borrow mine: Just begin with ‘Dear Doris and Bertie.’

Click here to download ‘A Plain English Handbook” by the United States Securities and Exchange Commission.