Pure [comedy] gold

Buffett highlights the paradoxes of being Warren

Berkshire Hathaway's boss has highlighted the paradoxes of being Warren Buffett. The Sage of Omaha packed yet more of his famous folksy wisdom into his shareholder letter marking 50 years atop the conglomerate. He also, though, revealed a number of contradictions.

The usual old-fashioned smart advice includes advising executives not to pay for a deal with stock whose value is "greater than the intrinsic value of the business you receive." The same logic applies to buying back shares.

Buffett cites his own mistake - paying stock for the $433 million purchase of Dexter Shoes in 1993. The company soon collapsed, but the shares he handed over are now worth $5.7 billion. He rightly suggests that analysing how deals fare compared to their projections - currently the rarity in boardrooms - should be the norm.

The 84-year-old reserved some of his choicest comments for investment bankers. He calls their use of "customary premiums to market price" an "absolutely asinine way to evaluate the attractiveness of an acquisition." Along with lawyers, accountants and private equity executives, he says bankers are always ready to "suspend disbelief," are "mouths with expensive tastes" and "money-shufflers [that] don't come cheap".

It's good stuff and has more than a grain of truth. Yet Buffett doesn't acknowledge that he is one of them. First, he's more than willing to invest in middlemen. He helped prop up Goldman Sachs in 2008 and Salomon Brothers almost two decades earlier. Rating agency Moody's is one of his top long-term holdings. Bashing go-betweens clearly does not preclude owning them.

Berkshire's entire business model, meanwhile, relies on shuffling money. His acquisitive company would be nothing without the cash thrown off by its insurance units, leaving $84 billion in the bank at the end of last year which can be used to finance deals.

Even what initially smacks of good governance has a twist. Buffett appears to like the idea of companies separating the chairman and chief executive. Yet he rarely if ever pushes for it and holds both roles himself. A post-Warren Berkshire, he reckons, should split them. But he wants his son Howard to be chairman.

Success, it seems, requires a good dollop of inconsistency.