SAN DIEGO – If you want to become an attorney, you read law.
To become an authority on life science or psychology, you crack open the books and pore through the databases.
And if you want to learn some basics of business or finance, a good first step is to read the writings of investor Warren Buffett. The chairman and CEO of Berkshire Hathaway (NYSE: BRK.A and BRK.B) composes a famous annual shareholder letter.
High school students will tackle a number of the letters under some just-introduced curriculum backed by San Diego-based LPL Financial (Nasdaq: LPLA).
“We’re studying one of the greatest investors of all time,” said Rob Pettman, an executive with LPL Financial who is involved with the program.
Pettman was one of its early teachers as it was being developed during the COVID-19 pandemic. The curriculum had a remarkable impact on students and generated positive feedback from parents.
“It’s shocking how well-received a program like this is,” said Pettman, who is LPL’s executive vice president for wealth management solutions.
LPL’s goal is to increase financial literacy among students, including those from low-income households.
“As Fred Ebb wrote, ‘money makes the world go around,’” said Ralph Bender, CEO and founder of Enduring Wealth Advisors of Temecula. “People who understand how to handle money are more likely to succeed than others. And since compounding works over time, the earlier one discovers how to get and stay on the right side of it, the greater their chances for opportunity.”
‘A Near-Perfect Capitalist’
The topics of Buffett’s letters are the business landscape in general and Berkshire Hathaway in particular. Today the conglomerate owns GEICO and several other insurance businesses as well as BNSF Railway and See’s Candies.
Over the years, Berkshire Hathaway has held large stakes in other successful companies such as American Express (NYSE: AXP), Apple (Nasdaq: AAPL) and Coca-Cola (NYSE: KO).
The letters are not the easiest of reading, but students are encouraged to persevere and instructors can fill in the gaps.
Curriculum drawn up by a group of Harvard Business School alumni, called World of Business Reading Group (WBRG), provides structure for the six-week class series – including the reading, video clips, writing assignments and discussion topics. WBRG is a pro-bono project of Collaborative Gain, a 20-year-old organization made up of executives from pioneering internet companies.
The teaching materials describe Buffett as “a near-perfect capitalist — the kind of citizen capitalist who follows a principled, fair approach. And we need more citizen capitalists.”
During the six-week course, students mull questions such as the definition of a good company, how markets work and the value of good management. They explore the concept of return on equity. They dip into business fundamentals, accounting terminology (including GAAP and non-GAAP earnings) and concepts such as the compound annual growth rate (CAGR).
The course takes up the topic of business ethics.
Buffett’s 2022 shareholder letter is the first that the students approach. In it, Buffett notes that “about a dozen truly good decisions” have been responsible for Berkshire Hathaway’s success. In 58 years of management, “most of my capital-allocation decisions have been no better than so-so,” he wrote. Buffett also acknowledges making mistakes in investing.
LPL calls the curriculum a unique way for its financial advisers to strengthen their relationships within the communities where they live and work.
LPL advisers might choose to use the curriculum to teach the children or the grandchildren of clients.
“We have 22,000 advisers nationwide who can benefit from program like this,” said Pettman.
Separately, LPL is providing funds for the pro-bono team at WBRG to deliver the program to high schools with a large percentage of low-income students. Financial terms of LPL’s participation were not disclosed.
Forty Years of Market History
Some of the letters studied are several decades old, thus providing a window to another time. The 1983 letter is considered a classic; the 1995 letter is also covered.
The letters are great conversation-starters for a group, Pettman said, recalling “a richness in the dialogue” from his classes.
What’s more, actual case studies are better than anything hypothetical, the executive said.
Students touch on topics such as the power of compounding, market behavior and Noah’s Rule (that is, predicting rain doesn’t count, building arks does).
As part of the course, students get to read the maxims of Buffett’s late partner, Charlie Munger, who died in November at age 99. These include, “Don’t bail away in a sinking boat if you can swim to one that is seaworthy.”
Pettman said the short course might open doors for students to get internships.
The course, he said, is “a really interesting way to teach students early and create a pipeline of talent for the future.”
“The WBRG teaches a long-run mindset,” said Bender, the adviser from Temecula, “and the kids who adopt that view are the most likely to grow into future leaders in any walk of life they choose to pursue.”
CEO: Dan Arnold
HEADQUARTERS: University Towne Center area
BUSINESS: Financial services
REVENEUE: $10.05 billion (2023)
STOCK: LPLA (Nasdaq)
SOCIAL IMPACT: Over 20% of LPL Financial’s board seats are held by women
NOTABLE: Q4 gross profit was up $1 billion, up 4% from the prior year.