The company as a conduit for owners
“We do not view the company itself as the ultimate owner of our business assets but, instead, view the company as a conduit through which our shareholders own the assets.”
Investing
Warren Buffett's 1983 letter to Berkshire shareholders, one of the letters in Berkshire Hathaway Shareholder Letters, 1971–2025.
Per-share progress, not size, as the measure
“We do not measure the economic significance or performance of Berkshire by its size; we measure by per-share progress.”
A larger capital base slows growth
“We are certain that the rate of per-share progress will diminish in the future - a greatly enlarged capital base will see to that.”
Unreportable earnings at half the price
“When acquisition costs are similar, we much prefer to purchase $2 of earnings that is not reportable by us under standard accounting principles than to purchase $1 of earnings that is reportable.”
Passing up opportunities to avoid leverage
“We will reject interesting opportunities rather than over-leverage our balance sheet.”
Shareholders' money treated as his own
“We will only do with your money what we would do with our own, weighing fully the values you can obtain by diversifying your own portfolios through direct purchases in the stock market.”
A dollar-for-dollar test for retained earnings
“We test the wisdom of retaining earnings by assessing whether retention, over time, delivers shareholders at least $1 of market value for each $1 retained.”
Issuing shares sells part of the company
“We will not sell small portions of your company - and that is what the issuance of shares amounts to - on a basis inconsistent with the value of the entire enterprise.”
New money in a terrible industry
“(The projections will be dazzling - the advocates will be sincere - but, in the end, major additional investment in a terrible industry usually is about as rewarding as struggling in quicksand.)”
Reporting what he would want to know
“Our guideline is to tell you the business facts that we would want to know if our positions were reversed.”
Misleading others leads to self-deception
“We also believe candor benefits us as managers: the CEO who misleads others in public may eventually mislead himself in private.”
Good investment ideas are rare and stealable
“Good investment ideas are rare, valuable and subject to competitive appropriation just as good product or business acquisition ideas are.”
Selective denials turn silence into confirmation
“If we deny [rumors of our buying] but say ‘no comment’ on other occasions, the no-comments become confirmation.”
Appraising a business by imagining competing with it
“One question I always ask myself in appraising a business is how I would like, assuming I had ample capital and skilled personnel, to compete with it.”
Customer value becomes owner economics
“[Mrs. B’s business]’s the ideal business - one built upon exceptional value to the customer that in turn translates into exceptional economics for its owners.”
A planet's orbit is no business yardstick
“We never take the one-year figure very seriously. After all, why should the time required for a planet to circle the sun synchronize precisely with the time required for business actions to pay off?”
Book value looks back, intrinsic value forward
“Book value tells you what has been put in; intrinsic business value estimates what can be taken out.”
From tangible assets to enduring Goodwill
“Ultimately, business experience, direct and vicarious, produced my present strong preference for businesses that possess large amounts of enduring Goodwill and that utilize a minimum of tangible assets.”
Stable populations read their local paper
“A stable population is more interested and involved in the activities of its community than is a shifting population - and, as a result, is more interested in the content of the local daily paper.”
Product quality regarded as sacred
“In effect, raw material costs are largely beyond our control since we will, as a matter of course, buy the finest ingredients that we can, regardless of changes in their price levels. We regard product quality as sacred.”
Price is what you give
“(In candy, as in stocks, price and value can differ; price is what you give, value is what you get.)”
Rational prices come from rational shareholders
“The key to a rational stock price is rational shareholders, both current and prospective.”
Manic-depressive personalities produce manic-depressive valuations
“Manic-depressive personalities produce manic-depressive valuations.”
Consistent philosophy lets good owners self-select
“In large part, however, we feel that high quality ownership can be attracted and maintained if we consistently communicate our business and ownership philosophy - along with no other conflicting messages - and then let self selection follow its course.”
Owners focused on business results
“We want those who think of themselves as business owners and invest in companies with the intention of staying a long time. And, we want those who keep their eyes focused on business results, not market prices.”
A split attracts inferior buyers
“Were we to split the stock or take other actions focusing on stock price rather than business value, we would attract an entering class of buyers inferior to the exiting class of sellers.”
Non-value buyers become non-value sellers
“People who buy for non-value reasons are likely to sell for non-value reasons. Their presence in the picture will accentuate erratic price swings unrelated to underlying business developments.”
Hyperactive markets pick enterprise's pocket
“A hyperactive stock market is the pickpocket of enterprise.”
Trading divides the pie without enlarging it
“[Flip-flopping and management fees] may decide who eats the pie, but they don’t enlarge it.”
Hyperactive markets subvert capital allocation
“We think that [the pie-expanding argument] is specious and that, on balance, hyperactive equity markets subvert rational capital allocation and act as pie shrinkers.”
Economic Goodwill as capitalized excess return
“The capitalized value of [excess earnings] is economic Goodwill.”
Consumer franchises price on value, not cost
“[A favorable consumer reputation] creates a consumer franchise that allows the value of the product to the purchaser, rather than its production cost, to be the major determinant of selling price. Consumer franchises are a prime source of economic Goodwill.”
Inflation-driven investment buys survival, not prosperity
“The motivation for [inflation-required investment] is the survival of the business, not the prosperity of the owner.”
Asset-light businesses suffer least from inflation
“Any unleveraged business that requires some net tangible assets to operate (and almost all do) is hurt by inflation. Businesses needing little in the way of tangible assets simply are hurt the least.”
Tangible assets are poor inflation protection
“For years the traditional wisdom – long on tradition, short on wisdom – held that inflation protection was best provided by businesses laden with natural resources, plants and machinery, or other tangible assets ('In Goods We Trust'). It doesn’t work that way.”
Goodwill keeps giving during inflation
“During inflation, Goodwill is the gift that keeps giving.”
Returns on tangible assets reveal business quality
“What a business can be expected to earn on unleveraged net tangible assets, excluding any charges against earnings for amortization of Goodwill, is the best guide to the economic attractiveness of the operation.”
A good business versus a good purchase
“A good business is not always a good purchase – although it’s a good place to look for one.”