All of Jeff Bezos’ Amazon Letters to Shareholders together in one PDF

For your reading pleasure and business edification, here’s the complete set of Amazon Shareholder Letters penned by CEO and founder Jeff Bezos in one handy PDF file:

Jeff Bezos – Compilation of Amazon Shareholder Letters 1997-2016 – FINAL.pdf

This volume starts with the classic and first 1997 letter to the 2016 letter, which just came out. Bezos is known for his clear and profound thinking about business generally, how to delight customers, and how to build and sustain an incredibly innovative enterprise.

(Special thanks go to the good people that maintain the free version of PDF Split and Merge which I used to compile this, and to whomever already did the work for letters from 1997 – 2012.)

How does your credit score stack up against the average for your age group?

I ran across this article while trying to find some data on average/median credit scores by age group.  They had a handy graph (see below), courtesy of my favorite free FICO-like credit score site, Credit Karma.

Why should you care about your credit score?

As financial writers like Ramit Sethi have pointed out, your credit score is crucial when it comes to saving BIG BUCKS on loans (via a lower interest rate) for items like cars & homes.  Additionally, folks ranging from landlords to employers to cable companies are using credit score to evaluate you, so keep your credit score high!

What the data says

As you might expect, credit scores tend to increase with age.  Those aged 25 – 34 have an average credit score of about 650, while those over 55 have an average of about 725.

Another useful metric is the FICO median credit score for the US, which is 723.  (‘Median’ means 50% of people have a score below 723, and 50% have one above, whereas average just combines everyone’s score & divides by the total population, which allows really bad, or really good, scores to move the average a lot more than they’d move the median.)

Since the median method of calculation keeps terrible scores from dragging down the average (which is probably why it’s higher than the average score shown in the chart below), this is probably a better measure to benchmark yourself against if you’ve never had any terrible credit history (default, bankruptcy, foreclosure, etc.)

So, where do you rank?

I recommend you get your credit score by signing up (quickly, and with no hassles or gimmicks!) for a free account at  (I’ve used them to check my score every year or so for the past few years, and have been very happy with their site.)

Anything over 750 range is good, with a good goal being around 780 or above.

Check out the above-linked article from Ramit Sethi on how to improve your credit score if it needs a boost!

Highlights from the Berkshire Hathaway shareholder’s meeting 2012

I finally got around to visiting Omaha to hear superinvestor & ‘world’s 3rd richest man’ Warren Buffett and his business partner Charlie Munger hold forth at the annual Berkshire Hathaway shareholder’s meeting on May 5th, 2012.  For those of you who aren’t Buffett fanatics (you should be; start with this, then this, and then read these), Berkshire Hathaway is a conglomerate of insurance companies & other businesses that Warren Buffett has presided over for some 35+ years, and has returned ludicrous results to its investors (which are NOT likely to be repeated, mind you!)

Every year, thousands (about 35,000 this year) flock to Omaha to hear about the condition of their beloved company, to shop at Berkshire subsidiaries like See’s candies and GEICO, and to catch the pearls of wit & wisdom that drop from the mouths of Buffett and Munger.

Watching the dynamic of Buffett & Munger as they each added their ‘2 cents’ to the varied discussions was highly entertaining, and often elucidating.  Buffett, long-spoken, friendly, upbeat, and literary, was contrasted and complimented by Munger’s laconic, pessimistic (he might say realistic), and sharp-tongued (and often hilarious) responses.

My notes

Lest such pearls escape me, I furiously scibbled notes during the 5 hour question & answer session during which Buffett and Munger deftly responded to questions from investors, media, and analysts on a host of topics ranging from investing to politics to ethics.

Here’s the ‘best of’ what I was able to catch and jot down.  Please note that while I often tried to capture exact quotes, a good deal of even the quoted material may not be ‘word perfect.’

The newspaper business

One shareholder asked Buffett about the recent purchase of a (print) newspaper, the Omaha-World Herald.  Given the declining economics of print media, the shareholder was (quite rightly) concerned about the future of newspapers.  Buffett responsed that he “believes in newspapers where there’s a sense of community.”  And explained that papers must have “primacy” (primary importance) in an area that the people who read it are interested in.

He described how traditional domains of newspapers (stock prices, classified ads, real estate listings) no longer have ‘primacy’ for their readership, who have largely moved on to the internet as the primary source for such info.  However, Buffett believes that community papers with local issues (like obituaries) can still thrive in the digital age, so long as those papers can remain as the most important source of that community-centric information for the paper’s readers.

Management of Berkshire’s businesses

Buffett often talks about the quality of management hired to run Berkshire’s subsidiaries.  Buffett claims to do nothing more than 1) make capital allocation decisions with the cash that Berkshire’s subsidiaries create and 2) create an environment (including compensation arrangements) to retain and attract top-quality managers.

Commenting on how independently competent Berkshire’s managers must be when it comes to running their operations, Buffett commented that “if we thought the success of our investment [in a subsidiary] depended on our advice [to management], we wouldn’t make the investment.”  In describing the work environment for managers that he tries to create, Buffett noted that he “can’t create passion in someone, but he can take it away [through a bad management structure.]”

One aspect of creating a good management structure is appropriate compensation. Berkshire has hired two former hedge fund managers to invest funds for Berkshire’s own portfolio.  These managers will receive 10% of any 3-year rolling gains above the S&P 500, incentivizing them to beat the stock market average, but also making sure they have to do it on a long-term basis.  Additionally, 80% of each individual’s bonus will come from his own efforts, but 20% will come from that of the other guy’s performance, as an incentive for them to work together and share investment ideas.

Munger added that “90% of those in the investment business would starve to death on that [compensation] formula.”  (Although I’ll add that each of those two Berkshire investment managers also receive a ‘base’ salary of $1 million per year, so ‘starvation’ probably shouldn’t be taken literally.  Interestingly, any employees or other expenses that these managers create must come out of that $1 million, which I thought was a nice way to sync incentives between the managers and Berkshire.)

Buffett also talked about how Berkshire didn’t use ‘compensation consultants’, who, in Buffett’s opinion, generally just tell CEOs and boards what they want to hear anyway.  In straight-faced monotone, Munger opined that “prostitution would be a step up” from compensation consultant, to which Buffett quickly added “Charlie’s in charge of diplomacy at Berkshire too.”

Creating shareholder value

When asked why Berkshire wasn’t paying a dividend, Buffett answered that “we feel we can create more than $1 of present value per $1 retained.”  Munger said he thought that “Warren’s learned new things each decade, resulting in much better results” at Berkshire than expected at the outset of their venture.  Munger, 88 years old & 7 years Buffetts senior, then added wryly, “but he’s getting old; I’m worried about him.”

Competitive advantages

“We sort of buy[s] barriers to entry; we don’t build them”, said Munger.  Buffett gave the example of the brand strength of Coca Cola, and how virtually impossible it would be to take away their market power.  Richard Branson, found of Virgin Airlines, and other Virgin companies, started ‘Virgin Cola’, which failed.  Buffett made the remark that “people say a brand is a promise.  I’m not sure what [Branson] was promising” with his cola brand.


Buffett noted that “if you caress an ounce of gold for 100 years, you’ll still have one ounce of gold”, and then compared that to the huge growth in what you’d have from growing businesses that pay out and reinvest cash, or to farmland that produces valuable crops every year.

This fundamental principle, that gold doesn’t actually ‘produce’ anything, is behind the fact that only periodic and unanticipated demand for it can drive the price up.  This also explains why, despite the last several years of the run up in gold prices, gold’s real return (after inflation) has only been slightly positive.

If one compares that to the massive growth of stocks, and even the modest growth of bonds, over long periods of time (not to mention the price swings of precious metals), it’s clear that gold is a very poor investment in itself.


When asked about the prevalence of the corporate political fundraising vehicles called ‘Super PACs’, Buffett stated that, even if donations to such a vehicle would increase Berkshire’s profits, he was morally opposed to it, and wouldn’t do it: “The whole idea of Super PACs is wrong, and relatively huge money [going to politicians] from a few people is wrong.”  While he acknowledged that others might defend their contributions to Super PACs by pointing out that their corporate competitors are doing it, Buffett asserted that “you have to take a stand somewhere.”

Munger added that he might consider giving to a Super PAC if he actually thought he could stop something really bad, and gave legalized gambling as an example of something that “does us no good” as a society.  And that “making the securities market more like gambling” was also going on, and also bad.


Buffett said that the tax code is important in sharing wealth, and that it may be the case that the natural “trend in democracy that pushes toward plutocracy.”  Therefore, we should use the tax code as a “countervailing balance” against this anti-democratic, and yet perhaps expected, outcome of our market-based economy and its liberal principles (I mean ‘liberal’ in the free sense, not in the left-wing sense.)

On corporate taxes, actual taxes paid by corporations were 13% of revenues in 2011, versus the marginal rate of 35%.  Despite the play that US corporate tax rates get in the press, Buffett stated that neither corporate tax rates nor balance sheets nor liquidity were holding back the US economy.  Buffett called medical costs the “tape worm” of American business, and noted that they composed about 17% of GDP, versus a mere 2% for corporate taxes.  Munger also added that he thought a Value Added Tax should probably come into play in the US.

Munger thinks that “Paul Krugman is a genius” but that he maybe too optimistic about “Keynesian economic tricks.”  He also asserted that, in the US (and presumably around the world), we’ve lost a good deal of our “fiscal virtue”.  “Everybody wants fiscal virtue, but not yet.  Like [Saint Augustine], who was willing to give up sex, but not quite yet.”

Energy policy

Munger said he supports subsidies for wind and electric cars “to wean us off oil and gas.”  It “would’ve been better to use up other [countries’] oil” and to have kept our own in the US as a “strategic reserve” over the past decades, said Buffett.  Munger agreed with this, saying “I’m a puritan and believe in suffering now and making the future better.  That’s how I believe grown people should behave.”

I thought this was a great quote, and that it bears on several issues facing the US, such as the ballooning debt that’s being placed on the backs of young people in America.  I personally feel that too much is being done in the US to avoid short-term sacrifice at the expense of future prosperity.

Recent market crises (Europe & also 2007-2008 in the US)

“Alan Greenspan overdosed on Ayn Rand as a youth…  Greenspan was really wrong [on his actions that helped precipitate the 2007-2008 US recession.]  He’d think an ax murder was okay if it happened in a free market.”  Harsh, and humorous, words from Charlie Munger on the former US Federal Reserve chairman.

Due presumably to the low interest-rate environment*, and the fact that yields aren’t significantly higher (in Buffett’s opinion) for long-term vs short-term bonds, Buffett noted that he’d “avoid medium and long-term [US] government bonds.”

* Bond prices move inversely with interest rates, so if rates go up, the prices of existing bonds go down (and vice versa.)  The longer-term a bond is, the more its price is affected by interest-rate changes, hence Buffett’s shyness about longer-term bonds.


Both Buffett and Munger dismissed the investment risk ‘measurements’ used today by many large money managers like sigma (standard deviation, generally of a normal distribution), beta, and value at risk (VaR).  According to Munger, ‘value at risk and such are … some of the dumbest ideas ever’.  They criticized heavily the ‘precise’ (but not necessarily accurate or even useful) mathematical models used by finance and math PhDs to try to predict various events with many decimal places of certainty (think of Long-term Capital Management to understand where Buffett & Munger are coming from.)

Munger repeated a story of investor Sandy Gottesman firing a young man who was a major ‘producer’ (i.e.: money maker) at Gottesman’s investment firm.  The producer objected to being fired on the grounds that, despite the alleged riskiness of his investments, he had made a lot of money for Gottesman’s firm.  Gottesman replied “yes, but I’m a rich old man and you make me nervous!”

Buffett equated much of the failure of math-heavy risk management with a poor grasp of history, and of the many investing blow ups of the past.  He said that he keeps copies of newspaper articles from market crashes as a reminder of worst-case scenarios, including one about a man who killed himself in a boiling vat of beer during the May 1901 crash!

Buffett noted in this year’s annual shareholder letter that risk is not the volatility of an asset, but rather the chances of a decline (or unsatisfactory gain, I would say) in purchasing power as the result of an investment.  As a financial advisor that helps clients reach specific goals that rely on the purchasing power of their investments, I agree that this is the only meaningful way to think about financial risk.

He also noted that you shouldn’t “risk what you have & need to get what you don’t have & don’t need.”  Wise words, and applicable to more than just investing.

Avoiding mistakes

“We’re always thinking about worst case scenarios”, said Buffett.  Munger adding “studying other people’s mistakes” was key as well, and that both Buffett & himself were keen students of “folly”.  “People with 180 IQs didn’t have an understanding of human behavior”, noted Buffett when describing the causes of recent blow ups around the turn of the 21st century.

Business schools and how to think about investing

Buffett criticized business schools for teaching ‘fads’, and also suggested he didn’t put much stock (no pun intended) in ‘finance theory’, like that of efficient markets or modern portfolio theory.  Charlie Munger commented that while there was some rationale for these topics, business school teachings on investing were ‘a considerable sin’.  (Despite this, I’d argue from other things each have said that Buffett & Munger do acknowledge some of the more general points of modern finance theory like market efficient MOST of the time.  They take issue with the ‘semi-strong form’ of market efficiency, arguing that publicly available information can be used to make profitable (after controlling for volatility) investments.  I think they also take issue with the use of finance theory as a tool with high predictive value in, say, valuing businesses and stocks.)

Buffett stated that he would have two courses taught to teach students about investing: one on how to value businesses (which I would assume would be done using accounting statements & other means to approximate future cash flows, and then discount those cash flows back to the present.)  The other class would be how to think about markets (e.g.: read Chapter 8 of Benjamin Graham’s ‘The Intelligent Investor‘.)  By thinking about markets, Buffett means that you should treat market prices as random fluctuations that are there to serve you (by sometimes offering prices that are lower than the value of what you are buying), not to guide you (i.e.: causing you to panic and sell when prices fall, or become gleeful when prices rise.)

The result of this business valuation would be to ‘understand’ a business.  To wit: “understanding a business means having a good idea around 1) its competitive position and 2) its earnings power 5 years from now”, said Buffett.

Munger added that if you receive any offer to buy an investment product with a large commission, “don’t read it.”  Instead, he suggested “looking at things other smart people are buying.”  That said, you must make sure you use others’ ideas only as starting points, and do all of your homework to ensure you understand the business, and can value it against its current price, factoring in some ‘margin of safety‘ in case your estimates are wrong.


If you just can’t get enough Buffett/Munger action, or else want to compare the validity of my ‘journalism’ to that of other sources, here’s some alternative coverage of the 2012 Berkshire meeting, along with some other related links:

NY Times considers Buffett’s politics:

Highlights from the meeting from Reuters:

Munger-mania! (Highlights from an awesome 2-hour U of Michigan speech, also available on YouTube) ‘The Motley Fool’:

Buffett talks to MBA students at Florida U in 1998 (great talk in 10 parts):

10 tips on how to get rich from Warren Buffett

Okay, the tips are technically from Buffett’s biographer… as told by Parade magazine.  STILL, it’s a decent list, and as a HUGE Warren Buffett fan, I can’t help but share them.  The original Parade story is HERE.

I’ve copied the 10 items below with my own take on how to make them actionable in your life.

1. Reinvest your profits
This is key.  When your income goes up, invest/save a large portion of that increase (like, 75% of the gross!)  This keeps your lifestyle in check while allowing you to build more wealth.  For youngish people, continuing to basically live like college students after graduating and getting a ‘real’ job is brilliant.  You don’t feel like your neglecting yourself because you’re used to living cheap, and you can get a great start on retirement, saving for a house, paying off debt, etc.

Another corollary to this rule is to do what I call ‘banking windfalls’.  This just means that when you run into unexpected cash (a bonus at work, an inheritance, or a tax refund check), save it or pay off debt, don’t blow it.  To celebrate, treat yourself to something small like a nice dinner out with your significant other rather than immediately take a vacation or buy a big screen TV.  This allows you to feel good while preserving most of the windfall.

2. Be willing to be different

Buffett talks frequently about the importance of having an ‘Inner Scorecard’, “judging yourself by your own standards and not the world’s”.  This is really key to being financially successful (or successful in many other ways) because success by its very definition usually means doing something that the majority of people have not and will not do.

For personal finance, this means saving a large chunk of your income and investing in a smart-yet-unflashy way (hint: stock index funds!)  It also means forgoing what others might think of as ‘normal’ or at least highly desirable: spending a lot of money going out, driving an expensive car, not talking about money, etc.  Instead, take control of your own money by deciding exactly what’s important to you AND what’s not.  You should splurge on things you love, but make it up by cutting costs aggressively on things that are less important to you, and always keep track of how this spending relates to your financial goals.

3. Never suck your thumb
“Thumb-sucking” is Buffett’s phrase for not taking action when you should be.  Personal finance is full of this behavior.  People ignore their debt, investments and other parts of their financial lives because of mental blocks they have dealing with these areas.  Instead, take action on the areas of your personal finance that you know deep down need work.  If you’re not even sure where to start, read through this blog, talk to a friend who you know is on the way to wealth (it may not be who you think; ask for balance sheets as proof 🙂 ), or contact a professional advisor like me who can help you.

4. Spell out the deal before you start
This means always knowing the price, rates, and any other terms of any financial agreement, formal or informal, small or large.  On the small scale, this means simple stuff like knowing how much drinks or that delicious-sounding special on the menu is going to cost you (AFTER factoring tax and tip.)

(A personal aside: I HATE it when waiters rattle off the specials without telling you how much they are!  I suspect this is because 1) they know you’ll feel like a cheapskate if you ask how much they are and 2) they are usually much more expensive than the ‘regular’ items on the menu.  Same thing with bars that don’t list prices next to alcoholic drinks, what the hell is up with that!?  I want to know what beer is going to cost BEFORE I order it damn it!!)

Large scale financial deals require proportionally more caution.  Understand all the terms of any loan, investment (check expense ratios and other fees), credit card, real estate purchase, job offer, insurance, etc that you buy.

For me, the key things to ALWAYS be aware of are 1) Price, 2) Fees, 3) Interest rates/historical rates of return (investment sellers try to trick you here, so be careful accepting what they seem to indicate you should expect), and 4) periods of payment or any timelines associated with getting or giving a good or service.

5. Watch small expenses

I would note that while this is true, pay even more attention to LARGE expenses and small, recurring expenses that add up to large expenses (think, your cable or cell phone bill.)  An extra $50 per month for a cell phone data plan may not sound like a ton, but that’s $600/year, which is roughly $12,000 in present value (a fancy term for adding up all future payments and discounting them back to the present.)   For comparing recurring expenses to one-time purchases, I use a rule of thumb of multiplying the yearly expense by 20.  So, saving $20/month on your heating bill by turning the thermostat down 3 degrees amounts to $240/year or ~$4,800 in present value (assuming you keep it up for the rest of your life.)

Improving your credit score to secure a lower mortgage interest rate in the future will similarly save you dramatic amounts of money in interest payments saved.  Buying a cheaper model of used car vs an expensive used or new car will similarly make a huge difference in your finances.

6. Limit what you borrow
Try to never incur high-interest debt like that associated with credit cards or car loans.  I recommend always paying cash for cars, and never financing a house with less than 20% down.  In both instances this forces you to avoid buying things that cost too much relative to your saving ability, and to keep interest payments low.  Keep lower-interest debt like that associated with student loans and mortgages to the bare minimum too.  You want to have your money making interest for you by investing in stocks and bonds, rather than letting someone else (bank, credit card company) use their money to keep you paying them.

7. Be persistent
Stick to financial goals.  The easiest way to do this is through automatic investing and debt-paying.  Use direct deposit and paycheck withdrawals to fund savings and retirement.  401k plans are great for this.  Set up automatic transfers that take money out of your paycheck BEFORE the rest of it goes into an account for you to spend on discretionary items.  (You’ve probably heard of this rule as ‘pay yourself first’.)

Being persistent also means continuing with a well-thought out plan in the face of adversity.  When the stock market tanked in 2008 and 2009, did you keep you money in there and keep investing?  I and many others did, and it paid huge dividends.

8. Know when to quit

Just like a bad relationship, you need to break off financial deals when they aren’t working.  This might mean giving up smoking to improve your health and wealth, switching to a no-fee credit card or checking account, or moving your money from high-priced, broker-pushed mutual funds or annuities into index funds, perhaps with the help of a no-commission financial advisor.  It could also mean asking for a raise, leaving a job where you’re underpaid (find out if you are here), or getting a new job where you’re paid more.

9. Assess the risks
Know the potential risks of decisions you make.  This does NOT mean avoid risks.  On the contrary, it means taking appropriate risks for your situation.  My entire retirement portfolio is in stocks.  Is this risky?  For me, absolutely not.  I don’t plan to retire for at least 20 – 30 years, so what do I care when the market dives in between this period?  (In fact, I viewed ‘bad markets’ as great opportunities for youngish investors like me to buy more of the market at a cheap price.)  On the other hand, if I was a widow(er) living on a social security and some small personal savings, having ANY amount of money in the stock market might be too risky.

Take risks that you can afford that have large upside and only moderate downside (or downside that can be mediated) given your situation.  When you’re young and living well below your means, you can afford to take more risks to make you even better off.

Just make sure you’re being honest about the upside of your investments and not just abusing the notion of ‘taking risks’ to gamble in negative expectation situations (casino gambling, lotteries, penny stocks, picking individual stocks, etc.)  Even though I’m in an all-st0ck retirement portfolio, that money is safely invested across thousands of companies and in the hands of a secure financial company.

10. Know what success really means

For me, being wealthy doesn’t mean having a huge house, expensive car, wine collection, etc.  It means being able to live in comfort and security and do the things I really care about doing: spending time with my family & friends, traveling (on a modest budget), eating well for cheap, reading, and savoring the world’s greatest beers.  This essentially boils down to being able to control how I spend my time, rather than slaving away at some job I don’t like just to pay for an expensive lifestyle that doesn’t make me any happier than I would be without it.

Lest you think wealth has to only be about you, I also would like to have efficiently given away a large sum of money to help those most in need by the end of my life.  Whatever your philanthropic impulses, I encourage you to factor them into your financial plan as well.

I’ll leave you with a great quote by Mr. Buffett himself on this subject (bolding mine):

“I know people who have a lot of money,” he says, “and they get testimonial dinners and hospital wings named after them. But the truth is that nobody in the world loves them. When you get to my age, you’ll measure your success in life by how many of the people you want to have love you actually do love you. That’s the ultimate test of how you’ve lived your life.”

%d bloggers like this: