The Buffett Letters, Part II: “A Plain English Handbook”
By Robert Walker Cohen
Did you know that the SEC once recruited Warren Buffett to help CEOs stop writing terrible jargon?
I didn’t, until recently. I’m glad they did.
Let’s set the scene —
Jargon plagued corporate filings throughout the 1980’s and 90’s. Over time, the jargon both worsened and became more prevalent, akin to a progressive disease.
Corporate annual reports, quarterly reports, and other such filings — where the CEO was supposed to be updating his less-sophisticated shareholders on the state of the company — had become completely unreadable. Not only to shareholders, but even to executives, professional investors, and regulators.
Here’s an exhibit from a corporate filing from 1997. I advise the reader that they not read much of it, to best enjoy their day.
Unfortunately, this jargon was often used to obfuscate poor results or bad business practices. This created problems for the public markets and danger for investors and shareholders.
The SEC, fed up, established the “Plain English” rules to compel executives to write more clearly and understandably.
To accompany the rules, they chose to publish “A Plain English Handbook,” a guide to help executives write in a way that would comply with the new rules and benefit markets, regulators, and perhaps most importantly, shareholders.
The SEC invited Warren Buffett, the master of the annual letter, to write the preface for this handbook.
At a single page, it’s short and to the point. Given the mission of the handbook, the form matches the function. Perfectly.
From the perspective of a commercial writer, the document is gold. It’s tight, perfectly constructed, and rhetorically powerful.
Enter, an analysis —
Opening paragraph:
”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.”
Often, key stakeholders would rather stay silent than admit they don’t understand something, so as not to appear foolish.
Buffett’s opening is effectively “saying the quiet part out loud.” Its strength is addressing the problem head-on. He is implicitly stating that if even one of the greatest professional investors of all time can’t understand modern corporate filings, the problem must lie with the writer rather than the reader.
Second paragraph:
“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.”
Self-consciously, Buffett admits that sometimes the problem is, in fact, the reader. Other times, the problem may be a lack of understanding on the part of the writer. In the striking closing sentence of the paragraph, he decides to open the question of jargoneer mal intent.
“Opening the question,” rather than directly accusing them, is a classy, generous, and slightly passive-aggressive move on his part.
His passive-aggression is more than justified, in my opinion. Regardless, I appreciate the gentlemanliness of it.
The turn-around:
"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.”After the cliffhanger of the previous section — where Buffett implied the jargoneers may have nefarious intentions — he offers a sort of rhetorical pardon. In effect, he’s stating that all of his may just be a misunderstanding and now we can move forward in a better direction.
The sting of the prior paragraph’s “open question” makes the following points of “perhaps this is all just a misunderstanding” and “here’s a path forward” appear as a kind of soothing balm.
Or, perhaps, a fresh glass of water.
This may especially be the case for anxious or guilty jargoneer readers, given the context of the SEC Plain English rules and that the publisher of the handbook is none other than the SEC.
His gentlemanly charm, in this particular context, is even subtly threatening. Given the amount of bad behavior the jargon was successfully obfuscating, I find this to be justified.
The folksy conclusion:
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.”Buffett’s folksy midwestern rhetoric is integral to his success, especially as a communicator. It has a way of pacifying readers and grounding subjects that can be abstract or challenging.
This final passage is more profound than it may seem. He is embedding a point about business ethics within a rather mundane piece of writerly advice.
“Write with a specific person in mind,” such as a sibling, is not only solid advice. It brings the human element into the conversation and points directly at those who are most affected by negligent jargoneering.
The real victims of corporate jargoneers, regardless of the nature of jargoneer intentions, are everyday shareholders. That would be Doris and Bertie, in this case. Normal people that have invested their savings into stocks and bonds, or their retirement, or their grandchildren’s college fund. Or all of the above.
Of all the different basic writing advice that he could have given, it’s clear that he chose this particular point to underscore the real-world impact of corporate obfuscation.
The final line proves the point. He insists on the advice as being so critical such that he humorously offers his own sisters for those without siblings to write to.
Given the economy of the essay and Buffett’s style, he would not insist if he did not have a reason.
Unsurprisingly, there is more to the prose of Buffett than meets the eye.
Part III of the series will focus on the famous “Berkshire Hathaway Owner’s Manual,” a document shared with all new owners of Berkshire stock.
