In case you don't know Buffett or his company, he is an enormously successful investor whom Forbes called the richest person in the world in the middle of last year. He has been associated with Berkshire Hathaway for 44 years.
Berkshire is a holding company, investing primarily in insurance and utility companies, although it holds more than 8% of Coca Cola, 13% of American Express, and 18% of the Washington Post. According to Wikipedia, Berkshire's "Class A shares sold for $96,600 as of December 31, 2008, making them the highest-priced shares on the New York Stock Exchange."
The New York Times alerted me to Buffett's letter, which I found here on the company's website.
Early in the letter to his shareholders, Buffett says:
By the fourth quarter, the credit crisis, coupled with tumbling home and stock prices, had produced a paralyzing fear that engulfed the country. A freefall in business activity ensued, accelerating at a pace that I have never before witnessed. The U.S.--and much of the world--became trapped in a vicious negative-feedback cycle. Fear led to business contraction, and that in turn led to even greater fear.He then offers this optimistic viewpoint:
Amid this bad news, however, never forget that our country has faced far worse travails in the past. In the 20th century alone, we've dealt with two great wars (one of which we initially appeared to be losing); a dozen or so panics and recessions; virulent inflation that led to a 21 1/2% prime rate in 1980; and the Great Depression of the 1930s, when unemployment ranged between 15% and 25% for many years. America has had no shortage of challenges.Buffett's sense of humor never fails to tickle me. In talking about Berkshire's acquisition of PacifiCorp in 2006, he says:
Without fail, however, we've overcome them . . . America's best days lie ahead.
. . . when we purchased PacifiCorp in 2006, we moved aggressively to expand wind generation. Wind capacity was then 33 megawatts. It's now 794, with more coming. (Arriving at PacifiCorp, we found "wind" of a different sort: The company had 98 committees that met frequently. Now there are 28. Meanwhile we generate and deliver considerably more electricity, doing so with 2% fewer employees.At this point, I'd like to play with Buffett's words. In talking about the investments Berkshire Hathaway holds, he made statements that I couldn't help but apply to the publishing industry. Below I am going to list the statements, replacing some of his words with my own (shown in bolded text):
The music industry fiasco should have served as a canary-in-the-coal-mine warning for the publishing industry. But publishers and author trade groups learned exactly nothing from the DRM debacle. Instead, in an eerie rerun of that disaster, the same mistakes were repeated.
By yearend 2008, the half dozen or so publishers and bookstore chains that had been the major players in this business had . . . fallen into big trouble.
The type of fallacy involved in projecting costs from a universe of traditional print publishing onto a deceptively-similar universe in which electronic books are produced pops up all over New York. "Back-tested" models of many kinds are susceptible to this sort of error. Nevertheless they are frequently touted by traditional print publishers as guides to future action.
While I modified Mr. Buffett's sentences mostly for my amusement, I'm dead serious about the need for the publishing industry, including authors, to reexamine itself and rethink some of their hard-and-fast stances on copyright and DRM.
Power is shifting from publisher to reader. Readers will control the future of the industry. Authors stand to gain in that shifting of power . . . if they can accommodate a concomitant shift in attitude.
I share Mr. Buffett's optimism for the world and for publishing. But then happily-ever-after endings are my stock-in-trade.
I'll be back on Monday. I'm taking tomorrow off.