Warren Buffett's billion-dollar memo

  @FortuneMagazine August 15, 2013: 7:15 AM ET
GAN02 buffett graham

When Warren Buffett offers you investing advice, take it. That may not qualify as a revelatory insight. But a decision to do just that more than three decades ago means the Washington Post Co.'s pension fund now has $2.4 billion in assets -- and only $1.4 billion in obligations. That billion-dollar surplus trounces the average corporate pension plan, which can meet 90% of its commitments, according to actuarial firm Milliman.

In 1975, Buffett, who had recently joined the company's board, wrote a 19-page memo to then chairman and CEO Katharine Graham. He argued that most companies were largely ignoring their pension accounts, even though those assets equaled half the net worth of some big U.S. firms. "If a company had $100 million invested in its engine division earning 12% by managerial zeal and ingenuity," he wrote, "why tolerate $100 million in its pension fund 'division' poking along at only 4%?" (You can read the full letter here.)

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