Growth shrinks the field of opportunities
“As Berkshire grows, the universe of opportunities that can significantly influence the company's performance constantly shrinks.”
Investing
Warren Buffett's 1991 letter to Berkshire shareholders, one of the letters in Berkshire Hathaway Shareholder Letters, 1971–2025.
Runs come from watching the field
“In investing, just as in baseball, to put runs on the scoreboard one must watch the playing field, not the scoreboard.”
Three conditions create an economic franchise
“An economic franchise arises from a product or service that: (1) is needed or desired; (2) is thought by its customers to have no close substitute and; (3) is not subject to price regulation.”
Inept managers cannot kill a franchise
“Inept managers may diminish a franchise's profitability, but they cannot inflict mortal damage.”
Media demand is capped by eyeballs and hours
“Unfortunately, demand can't expand in response to [broadened media choices]: 500 million American eyeballs and a 24-hour day are all that's available.”
Most businesses grow only with more capital
“A 'bob-around' pattern is indeed the lot of most businesses, whose income stream grows only if their owners are willing to commit more capital (usually in the form of retained earnings).”
Dollars are dollars, media or steel
“Dollars are dollars whether they are derived from the operation of media properties or of steel mills.”
Judge profit growth against capital required
“For an increase in profits to be evaluated properly, it must be compared with the incremental capital investment required to produce it.”
Accounting maneuvers hide trouble only briefly
“In the long run, of course, trouble awaits managements that paper over operating problems with accounting maneuvers.”
More float helps only when cheap
“We have over that time also substantially increased the amount of funds we hold, which counts as a favorable development but only because the cost of funds has been satisfactory.”
Annual accounts misjudge catastrophe insurance
“In effect, a one-year accounting cycle is ill-suited to the nature of [catastrophe business] - and that is a reality you should be aware of when you assess our annual results.”
Insurers eventually repeat their mistakes
“Insurers, though, like investors, eventually repeat their mistakes. At some point - probably after a few catastrophe-scarce years - innocents will reappear and prices for super-cat policies will plunge to silly levels.”
Writing policies is easier than paying claims
“Thinking insurers know that when 'the big one' comes, many reinsurers who found it easy to write policies will find it difficult to write checks.”
Markets move money to the patient
“Our stay-put behavior reflects our view that the stock market serves as a relocation center at which money is moved from the active to the patient.”
What Berkshire looks for in a business
“We continually search for large businesses with understandable, enduring and mouth-watering economics that are run by able and shareholder-oriented managements.”
Trading mediocre businesses fails at scale
“Charlie and I are simply not smart enough, considering the large sums we work with, to get great results by adroitly buying and selling portions of far-from-great businesses.”
A motto for holding winners
“Our motto is: 'If at first you do succeed, quit trying.'”
The costliest mistakes are invisible omissions
“Typically, our most egregious mistakes fall in the omission, rather than the commission, category. That may spare Charlie and me some embarrassment, since you don't see these errors; but their invisibility does not reduce their cost.”
Airlines have lost money since Kitty Hawk
“There is no tougher job in corporate America than running an airline: Despite the huge amounts of equity capital that have been injected into it, the industry, in aggregate, has posted a net loss since its birth after Kitty Hawk.”