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“Although our form is corporate, our attitude is partnership. Charlie and I think of our shareholders as owner-partners, and of ourselves as managing partners.”
— Warren Buffett, 1983 Letter to Shareholders
Key Takeaways
In 1983, Buffett wrote down a set of principles describing exactly how he’d treat his shareholders
No other public-company CEO had done this in such plain English before
The list has been reprinted, almost unchanged, in nearly every annual letter since
Read it carefully, then ask: how many of the companies you own actually act this way?
The document other CEOs didn’t write
Hi Compounders,
In the 1983 letter, Buffett did something no other public-company CEO had done before. He wrote down, in plain English, exactly how he and Charlie Munger would run Berkshire — not what their strategy was, but how they would treat the people who had entrusted them with capital.
He called them “a few broad principles.” He kept adding to them over the following years. By 1988, the list had crystallized into roughly a dozen rules that he would then reprint, almost word-for-word, in nearly every annual letter for the next 40 years.
Eventually Berkshire bound them together into a formal document called the Owner’s Manual — distributed to every new shareholder as an introduction to what they were actually joining.
The radical part wasn’t the content. Many of the principles sound sensible in isolation. The radical part was that Buffett was binding himself to them in public, forever. Most CEOs operate on vague norms they can bend when it’s convenient. Buffett handed his shareholders a document they could hold him to, and then he lived by it for four decades.
The principles, grouped
The full list runs to about 15 principles. They fall into four natural themes.
1. The partnership frame
“Although our form is corporate, our attitude is partnership. We think of our shareholders as owner-partners, and ourselves as managing partners.”
“Most of our directors have a major portion of their net worth invested in the company. We eat our own cooking.”
“Our long-term goal is to maximize Berkshire’s rate of gain in intrinsic business value on a per-share basis — not the size of the company.”
The whole relationship between management and shareholder is reframed here. The corporation is just a legal wrapper. The real relationship is partnership — and partners don’t do things to each other that corporate boards sometimes do to shareholders.
2. How capital gets allocated
“We will not issue Berkshire shares to make acquisitions — in effect, we will not sell a dollar for less than a dollar.”
“We will not do deals that reduce per-share intrinsic value, period.”
“We will reinvest earnings as long as we can produce at least one dollar of market value for each dollar retained. Otherwise, we will pay dividends.”
That first principle — we will not sell a dollar for less than a dollar — is why Berkshire’s share count has barely moved in 40 years. Compare that to any big modern company whose share count drifts upward every quarter from stock-based compensation. Buffett will not dilute his partners. Full stop.
The third principle is why Berkshire has never paid a dividend. Buffett’s bar is: if I can turn each retained dollar into more than a dollar of market value, I keep it and compound. He’s always cleared that bar, so he’s never paid a dividend. The day he can’t, he will.
3. How we talk to you
“We will tell you the business facts you would want to know if our positions were reversed.”
“We will be candid in our reporting of mistakes.”
“We will try to use plain English in all our communications.”
“We will not provide quarterly earnings forecasts — they encourage short-term thinking by management and by the market.”
This is the honesty principle from Season 1 written into formal policy. Most CEOs promise honesty. Buffett wrote down specific behaviors he’d follow and then followed them for 40 years — naming mistakes by division and dollar amount, writing in plain English, refusing to play the quarterly guidance game.
4. How we treat you if you want to sell
“We know that attempting to attract shareholders who buy for the short term is counter to our interest.”
“We hope Berkshire shares trade in a narrow range around intrinsic value — not too high, not too low.”
Read that twice. Buffett is explicitly saying he doesn’t want his stock to be overpriced. Most CEOs want the opposite. Why Buffett’s position? Because every speculator who buys an overpriced stock and gets burned is a former partner. He doesn’t want former partners who feel burned. He wants his stock priced fairly, so new partners come in on fair terms and stay for the long run.
The uncomfortable question
Read those four groups again. Now think about any company you own.
Does their management act like partners, or like hired hands?
Have they been diluting your ownership through endless stock-based compensation?
Do they tell you about their mistakes candidly, or bury them in footnotes?
Do they try to pump their stock price, or help you understand its real value?
For most companies in most portfolios, the honest answer to all four is no.
Buffett wasn’t just writing a rulebook for Berkshire in 1983. He was writing an implicit indictment of how most public companies treat their shareholders. He’s been publishing it, in his annual letter, for 40 years, in plain sight. Almost no other CEO has copied it.
That alone tells you how unusual Berkshire is.
What to actually do with this
Two practical takeaways:
1. Look for shareholder letters that read like Buffett’s. Not literal imitators — that would be fake. But written in plain English, admitting mistakes, explaining capital allocation choices, treating readers as adults. There are a handful of such CEOs out there. Mark Leonard at Constellation Software. The teams at Fairfax and Markel. A few others. When you find one, pay attention — their letters are a signal that the business is run differently.
2. Read every proxy statement with the Owner’s Manual in mind. Is management compensated for per-share value creation, or for raw company size? Are option grants quietly ballooning the share count? Do board members have real skin in the game? The proxy will tell you how your company really thinks about you — not what the investor-relations deck says.
The Owner’s Manual isn’t a quaint document from 1983. It’s a template for distinguishing businesses whose management is actually on your side from businesses whose management treats you as a tolerated cost of doing business.
Most companies you’ll ever evaluate are the second kind. Buffett spent 60 years proving the first kind is possible — and then wrote down exactly what it looks like.
Coming next
Issue #10 — The Mr. Market Allegory
In the 1987 letter, Buffett reintroduced an allegory from Ben Graham that may be the single most useful mental model for surviving in markets. “Mr. Market” shows up at your door every day with a different mood and a different price — and almost everything about long-term investment success depends on understanding him correctly. We’ll walk through the story, and the one rule it teaches that most investors violate every single day.
Read more about SpaceX IPO here
Forget NVIDIA — These 5 Stocks Could Be Next
Looking beyond NVIDIA for your next stock idea?
MarketBeat just identified five highly rated companies worth a closer look. Get the full list, completely free, along with the bull and bear case for each stock, so you can see where the opportunity may be hiding.
Until next week, keep compounding …
Disclaimer: The information provided on this website is for educational and informational purposes only and does not constitute financial, investment, or trading advice. Investing in securities involves risk, including the potential loss of principal; always conduct your own research and consult a qualified financial professional before making investment decisions.
