Past records cannot forecast results
“Berkshire's 26-year record is meaningless in forecasting future results; so also, we hope, is the one-year record.”
Investing
Warren Buffett's 1990 letter to Berkshire shareholders, one of the letters in Berkshire Hathaway Shareholder Letters, 1971–2025.
Hoping shares sell at intrinsic value
“Ideally, the results of every Berkshire shareholder would closely mirror those of the company during his period of ownership. That is why Charlie Munger, Berkshire's Vice Chairman and my partner, and I hope for Berkshire to sell consistently at about intrinsic value.”
Headquarters' job is spotting managerial talent
“Our job is merely to identify talented managers and provide an environment in which they can do their stuff.”
Earnings are pliable under a charlatan
“In reality, however, earnings can be as pliable as putty when a charlatan heads the company reporting them. Eventually truth will surface, but in the meantime a lot of money can change hands.”
Accounting numbers only start the analysis
“Clearly, investors must always keep their guard up and use accounting numbers as a beginning, not an end, in their attempts to calculate true 'economic earnings' accruing to them.”
Returns flow from managers, not industries
“The explanation is clear: Our extraordinary returns flow from outstanding operating managers, not fortuitous industry economics.”
Low costs win in diamonds too
“Just as Wal-Mart, with its 15% operating costs, sells at prices that high-cost competitors can't touch and thereby constantly increases its market share, so does Borsheim's. What works with diapers works with diamonds.”
Media profits came from pricing power
“The reason media businesses have been so outstanding in the past was not physical growth, but rather the unusual pricing power that most participants wielded.”
A lumpy 15% beats a smooth 12%
“(Charlie and I always have preferred a lumpy 15% return to a smooth 12%.)”
Cost of float reveals insurance value
“Figuring a cost of funds for an insurance business allows anyone analyzing it to determine whether the operation has a positive or negative value for shareholders.”
Insurance mistakes keep sending bills
“Insurance offers a host of opportunities for error, and when opportunity knocked, too often I answered. Many years later, the bills keep arriving for these mistakes: In the insurance business, there is no statute of limitations on stupidity.”
Lethargy as an investment cornerstone
“Lethargy bordering on sloth remains the cornerstone of our investment style: This year we neither bought nor sold a share of five of our six major holdings.”
Bank leverage magnifies small mistakes
“When assets are twenty times equity - a common ratio in [banking] - mistakes that involve only a small portion of assets can destroy a major portion of equity.”
Imitative lending brings a lemming fate
“In their lending, many bankers played follow-the-leader with lemming-like zeal; now they are experiencing a lemming-like fate.”
No cheap price redeems a poorly-managed bank
“Because leverage of 20:1 magnifies the effects of managerial strengths and weaknesses, we have no interest in purchasing shares of a poorly-managed bank at a 'cheap' price.”
Falling prices benefit a perpetual buyer
“Given [our perpetual buying], declining prices for businesses benefit us, and rising prices hurt us.”
Optimism is the rational buyer's enemy
“We want to do business in [times of pessimism], not because we like pessimism but because we like the prices it produces. It's optimism that is the enemy of the rational buyer.”
Thinking rather than polling
“None of [the prices pessimism produces] means, however, that a business or stock is an intelligent purchase simply because it is unpopular; a contrarian approach is just as foolish as a follow-the-crowd strategy. What's required is thinking rather than polling.”
Plans that require dodging every pothole
“The roads of business are riddled with potholes; a plan that requires dodging them all is a plan for disaster.”
Past-performance proofs mislead in finance
“(Beware of past-performance 'proofs' in finance: If history books were the key to riches, the Forbes 400 would consist of librarians.)”
Wall Street's enthusiasm follows revenue, not merit
“As usual, the Street's enthusiasm for an idea was proportional not to its merit, but rather to the revenue it would produce.”
Commodity sellers are bound by the dumbest competitor
“The trouble [kamikaze pricing] has produced for all carriers illustrates an important truth: In a business selling a commodity-type product, it's impossible to be a lot smarter than your dumbest competitor.”
Executives should give their own money
“If your employees, including your CEO, wish to give to their alma maters or other institutions to which they feel a personal attachment, we believe they should use their own money, not yours.”