An Owner's Manual

Author: Warren E. Buffett Published: 1996 (originally), reaffirmed in 2011 Source: Berkshire Hathaway

Overview

Buffett's "Owner's Manual" outlines 13 core principles guiding Berkshire Hathaway's operations. These principles define the partnership-like relationship between Berkshire's management and its shareholders.

The 13 Owner-Related Business Principles

1. Partnership Attitude

"Although our form is corporate, our attitude is partnership."

Buffett and Munger view shareholders as owner-partners, not merely stock tickers. They encourage long-term thinking: "We hope you visualize yourself as a part owner of a business that you expect to stay with indefinitely."

2. Directors' Ownership

"Our directors have a significant portion of their net worth invested in the company. We eat our own cooking."

Charlie's family: 80%+ net worth in Berkshire
Buffett: 98%+ net worth in Berkshire

3. Per-Share Progress

"Our long-term economic goal is to maximize Berkshire's average annual rate of gain in intrinsic business value on a per-share basis."

Size is not the metric—per-share progress is what matters.

4. Two-Pronged Business Ownership

Berkshire pursues returns through:

Direct ownership of diversified businesses generating cash and above-average returns
Marketable securities (via insurance subsidiaries) in similar businesses

5. Ignore Consolidated Earnings

"Consolidated reported earnings may reveal relatively little about our true economic performance."

Buffett and Munger focus on individual business performance, not accounting aggregates.

6-13 (Summary)

The remaining principles cover:

Capital allocation priorities
Treatment of shareholders as partners
Compensation aligned with shareholder interests
No options or special "edges" for management
No acquisitions purely for growth
Transparent communication
Independent thinking from Wall Street consensus
Focus on intrinsic value, not accounting profits

Key Buffett Sayings Embedded

"When the market plummets—as it will from time to time—don't panic or mourn. It's good news for Berkshire."

Buffett views market crashes as opportunities, like a regular food shopper welcomes declining prices.

Legacy

These 13 principles remain unchanged since 1983, demonstrating Buffett's consistent commitment to shareholder alignment and long-term thinking.

Related Concepts

Source

Warren E. Buffett, Berkshire Hathaway, 1996/2011.