The rational Mr. Buffett

Warren Buffett is famous worldwide for his investing acumen and lately also for his philanthropy. But his nickname, the Oracle of Omaha, does him something of a disservice. Rather than interpreting messages from on high, Buffet's greatest asset may be his real-world sense, which too many others in executive suites seem to lack.

Each year, many in the investment community await his chairman's letter to Berkshire Hathaway shareholders for hints on how they might imitate his extraordinary success. And each year, Buffett uses the letter to warn about the business world's misplaced enthusiasms and excesses, like outsized executive compensation (which he opposes) and stock options (which he has long insisted should be counted as expenses, as is now required).

Buffett is also against the practice of issuing quarterly earnings guidance, the self-imposed benchmarks that drive executives to sacrifice long-term strategy for a short-term payoff. This month, a Chamber of Commerce commission is expected to urge companies to stop making these predictions. Given how often he is right, investors should take note of his critique this year of the exorbitant fees that hedge funds charge.

Buffett's letters are not only for those with a lot of money or a lot of experience. With a ribald joke here and a quote from Winston Churchill or Benjamin Franklin there, he demystifies rather than confuses. In this year's letter, he confesses that at times, even he is baffled by the footnotes in other companies' annual reports, which too often obscure rather than explain their financial maneuvering. As an example, he suggests trying to decipher a few of Enron's filings, "even after you know how the movie ended."

It would be easy to reduce the man to a folksy cliché, a kindly old investor who preaches fiduciary responsibility. But last week, he also announced that his company made $11 billion in profits last year, up 29 percent from the year before.

Reason enough for the financial community to heed his words.