Warren Buffett gave a talk to Columbia business school students in late 2001 or early 2002, the last question that was asked was, “What is your secret?” And Buffett replied, picking up a big pile of papers, ”I read 500 pages a week, and anyone can do it. It’s like compound knowledge, so if you start today, it will build up over time.”

Watch Todd Combs, Buffett’s hand picked portfolio manager retell the story here:

For some reason, others have mistakenly heard 500 pages per day, and have written about it, which I too had believed. But they are making a mistake. That is why it is important to read direct from the original source. When reading a blog, make sure the author correctly references the original author or material and provides a link to it. If not, it’s best to avoid them.

If you tried to read 500 pages per day, I guarantee your quality of reading will deteriorate. Remember: quality over quantity! Plus you will be taking notes as you read.

The purpose is to cultivate quality reading. Reading to gain knowledge — not collect information or gather data — and the process will involve slowing down the number of words you read per minute. Of course the two overlap, but by first understanding that differences exist, it allows us to acknowledge our own ignorance and develop new skills. 

Reading an annual report is different from reading a newspaper. You should be able to comprehend reading a newspaper, online article or magazine without much effort. As you do, you become more informed, but to be informed means simply that something is the case.

Reading an annual report is to read to understand; this requires an enlightenment; What does it mean? What’s it all about? Why is it the case? What connections are there with other facts, in what respect is it the same and different, and so forth.

The process of reading to understand is a slow deliberate process!

Take an CEO’s letter to shareholders for instance. 

“The art of reading, in short, includes all the same skills that are involved in the art of discovery: Keenness of observation, readily available memory, range of imagination, and, of course, a reason trained analysis and reflection.” Mortimer

Mortimer advises that you start by selecting the important words and paragraph’s, and then trying to understand them, question them and try and make some connections.

For example read these two simple statements made by two different CEOs:

Did you spot the subtle differences?

The use of vague language is present in No. 1. The use of these buzz words “systematically” and “diversified growth” are meaningless.

In the case of No. 2, there is a big difference in the language used, and there much more information contained in that one paragraph.

For instance, the first sentence clearly states and anchors in tangible terms that their actions now and over the years will have real consequences for their share price and shareholders.

He then explains to the reader how their decisions — the capital allocation and human allocation decisions — made today will determine future profitability.

The first paragraph was written by Richard Fuld, chairman and CEO of the now defunct Lehman Brothers, and the second was written by Jamie Dimon, chairman and CEO of JPMorgan Chase (JPM) (no wonder Buffett recommends you read Dimon’s letters).