Berkshire Hathaway Letters to Shareholders: 1965-2024

by Warren Buffett

This devastating outcome for the shareholders indicates what can happen when much brain power and energy are applied to a faulty premise.

Should you find yourself in a chronically-leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.

The unwillingness of managers to do-unto-outsiders, however, is not matched by an unwillingness to do-unto-themselves. (Negotiating with one’s self seldom produces a barroom brawl.) Managers regularly engineer ten-year, fixed-price options for themselves and associates that, first, totally ignore the fact that retained earnings automatically build value and, second, ignore the carrying cost of capital.

“The future ain’t what it used to be.”

But the trick is to learn most lessons from the experiences of others.

we had learned from Ben Graham that the key to successful investing was the purchase of shares in good businesses when market prices were at a large discount from underlying business values.

academics at prestigious business schools who were preaching a newly-fashioned theory: the stock market was totally efficient, and therefore calculations of business value—and even thought, itself—were of no importance in investment activities. (We are enormously indebted to those academics: what could be more advantageous in an intellectual contest—whether it be bridge, chess, or stock selection than to have opponents who have been taught that thinking is a waste of energy?)

Thus, we experienced a triple dip: the company’s business value soared upward, per-share business value increased considerably faster because of stock repurchases and, with a narrowing of the discount, the stock price outpaced the gain in per-share business value.

excellent soil for a rich financial harvest.

I have told them there will be no surprises, and these agreements put Berkshire’s signature where my mouth is.

characteristic burst of brilliance,

we simply hope that something sensible comes along—and, when it does, we act.

And bring money: Mrs. B promises to have bargains galore if you will pay her a visit at The Nebraska Furniture Mart after the meeting.

our main contribution has been to not get in their way.

We intend to continue our practice of working only with people whom we like and admire. This policy not only maximizes our chances for good results, it also ensures us an extraordinarily good time. On the other hand, working with people who cause your stomach to churn seems much like marrying for money—probably a bad idea under any circumstances, but absolute madness if you are already rich.

However, I know that among our 6,000 shareholders there are those who are thrilled by my essays on accounting—and I hope that both of you enjoy the Appendix.

It’s easy to overlook what I consider to be the critical lesson of the Mrs. B saga: at 93, Omaha based Board Chairmen have yet to reach their peak. Please file this fact away to consult before you mark your ballot at the 2024 annual meeting of Berkshire.

Woody Allen: “While the lamb may lie down with the lion, the lamb shouldn’t count on getting a whole lot of sleep.”

consistently invested in undervalued common stocks that, individually, were unlikely to present him with a permanent loss and that, collectively, were close to risk-free.

those two super-contagious diseases, fear and greed,

Our goal is more modest: we simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.

because of the heavy transaction and investment management costs they bear, stockholders as a whole and over the long term must inevitably underperform the companies they own.

if high interest rates came along; the same rates would probably depress common stocks

reductions in their taxes largely end up in our pockets rather than the pockets of our customers.

We bought a corporate jet last year.

Keynes’s observation: “I would rather be vaguely right than precisely wrong.”

CEOs seldom tell their shareholders that they have assembled a bunch of turkeys to run things.

they usually confer the highest price-earnings ratios on exotic-sounding businesses that hold out the promise of feverish change. That prospect lets investors fantasize about future profitability rather than face today’s business realities.

The record of these 25 companies confirms that making the most of an already strong business franchise, or concentrating on a single winning business theme, is what usually produces exceptional economics.

I’ve persuaded the Board to scrap our mandatory retirement-at-100 policy. (And it’s about time: With every passing year, this policy has seemed sillier to me.)

“Sell cheap and tell the truth.”

To be indispensable, a paper must promptly tell its readers many things they want to know but won’t otherwise learn until much later, if ever.

Charlie and I do not believe in flexible operating budgets,

Indeed, if you aren’t certain that you understand and can value your business far better than Mr. Market, you don’t belong in the game.

“In the short run, the market is a voting machine but in the long run it is a weighing machine.”

We are quite content to hold any security indefinitely, so long as the prospective return on equity capital of the underlying business is satisfactory, management is competent and honest, and the market does not overvalue the business.

we would rather achieve a return of X while associating with people whom we strongly like and admire than realize 110% of X by exchanging these relationships for uninteresting or unpleasant ones.

We really don’t see many fundamental differences between the purchase of a controlled business and the purchase of marketable holdings such as these. In each case we try to buy into businesses with favorable long-term economics. Our goal is to find an outstanding business at a sensible price, not a mediocre business at a bargain price.

I searched for “bargains”—and had the misfortune to find some. My punishment was an education in the economics of short-line farm implement manufacturers, third-place department stores,

heads of many companies are not skilled in capital allocation. Their inadequacy is not surprising.

CEOs who recognize their lack of capital-allocation skills (which not all do) will often try to compensate by turning to their staffs, management consultants, or investment bankers. Charlie and I have frequently observed the consequences of such “help.”

Or would you sell your house to whatever bidder was available at 9:31 on some morning merely because at 9:30 a similar house sold for less than it would have brought on the previous day?

Volatility caused by money managers who speculate irrationally with huge sums will offer the true investor more chances to make intelligent investment moves.

Bonds are no better than the currency in which they are denominated,

When the claim checks outstanding grow sufficiently numerous and when the issuing party can unilaterally determine their purchasing power, the pressure on the issuer to dilute their value by inflating the currency becomes almost irresistible.

our inability to quantify or time the risk does not mean we should ignore it.

stumbled badly, as it pursued the unattainable to the neglect of the achievable.

It has been far safer to steal large sums with a pen than small sums with a gun.

neither a 28% nor a 34% tax liability precisely depicts economic reality at Berkshire since we have no plans to sell the stocks in which

Superb managers are too scarce a resource to be discarded simply because a cake gets crowded with candles.