Unrecorded growth is still owned growth
“If a tree grows in a forest partially owned by us, but we don’t record the growth in our financial statements, we still own part of the tree.”
Investing
Warren Buffett's 1980 letter to Berkshire shareholders, one of the letters in Berkshire Hathaway Shareholder Letters, 1971–2025.
Competition for acquisitions forces full prices
“The competitive nature of corporate acquisition activity almost guarantees the payment of a full - frequently more than full price when a company buys the entire ownership of another enterprise.”
Only purchasing power gains are real earnings
“Unfortunately, earnings reported in corporate financial statements are no longer the dominant variable that determines whether there are any real earnings for you, the owner. For only gains in purchasing power represent real earnings on investment.”
High inflation acts as a tax on capital
“High rates of inflation create a tax on capital that makes much corporate investment unwise - at least if measured by the criterion of a positive real investment return to owners.”
Investors running up a down escalator
“The average tax-paying investor is now running up a down escalator whose pace has accelerated to the point where his upward progress is nil.”
Income taxes alone cannot make owner returns negative
“Explicit income taxes alone, unaccompanied by any implicit inflation tax, never can turn a positive corporate return into a negative owner return.”
True indexing requires rising return on equity
“For capital to be truly indexed, return on equity must rise, i.e., business earnings consistently must increase in proportion to the increase in the price level without any need for the business to add to capital - including working capital - employed.”
Rare advantage joined to skilled capital allocators
“GEICO represents the best of all investment worlds - the coupling of a very important and very hard to duplicate business advantage with an extraordinary management whose skills in operations are matched by skills in capital allocation.”
Poor business economics usually outlast brilliant managers
“Our conclusion is that, with few exceptions, when a management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact.”
Price forecasts reveal the forecaster, not the future
“(We believe that short-term forecasts of stock or bond prices are useless. The forecasts may tell you a great deal about the forecaster; they tell you nothing about the future.)”
Financially troubled competitors who sell at any price
“Right behind having financial problems yourself, the next worst plight is to have a large group of competitors with financial problems that they can defer by a ‘sell-at-any-price’ policy.”
Suspended underwriting discipline is hard to regain
“We enormously admire the National Indemnity underwriting discipline - embedded from origin by the founder, Jack Ringwalt - and know that this discipline, if suspended, probably could not be fully regained.”
Reinsurance brings early cash and late claims
“Reinsurance is characterized by extreme ease of entry, large premium payments in advance, and much-delayed loss reports and loss payments. Initially, the morning mail brings lots of cash and few claims.”
Every insurer expects better than average results
“We expect underwriting experience somewhat superior to that of the industry but, of course, so does most of the industry.”
Best opportunities may come when credit is scarce
“The most attractive opportunities may present themselves at a time when credit is extremely expensive - or even unavailable. At such a time we want to have plenty of financial firepower.”
Preferring businesses that generate cash under inflation
“Our acquisition preferences run toward businesses that generate cash, not those that consume it. As inflation intensifies, more and more companies find that they must spend all funds they generate internally just to maintain their existing physical volume of business.”
A seller who stays on reveals himself
“You learn a great deal about a person when you purchase a business from him and he then stays on to run it as an employee rather than as an owner.”