Warren Buffett is an American investor, industrialist, and philanthropist. He was ranked as the world’s richest person in 2008 and as the third richest in 2011. In the preface to the 1998 US SEC Plain English Handbook, Buffett wrote:
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.
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. (boldfacing supplied)
When the US SEC was crafting its Plain English guidelines for disclosure documents, its then chairman Arthur Levitt asked Buffett to rewrite the following paragraph into Plain English:
|Original paragraph||Buffett’s Plain English revision|
|Maturity and duration management decisions are made in the context of the average maturity orientation for each Fund, as set forth in the Prospectus. The maturity structure of each Portfolio is adjusted in anticipation of cyclical interest rate changes. Such adjustments are not made in an effort to capture short-term, day-to-day movements in the market, but instead are implement-ed in anticipation of longer term, secular shifts in the levels of interest rates (i.e., shifts transcending and/or not inherent to the business cycle).||We will try to profit by correctly predicting future interest rates. When we have no strong opinion, we will generally hold intermediate-term bonds. But when we expect a major and sustained increase in rates, we will concentrate on short-term issues. And, conversely, if we expect a major shift to lower rates, we will buy long bonds. We will focus on the big picture and won’t make moves based on short-term considerations.|
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