Bad relative results become bad absolute results
“Relative results are what concern us: Over time, bad relative numbers will produce unsatisfactory absolute results.”
Investing
Warren Buffett's 1999 letter to Berkshire shareholders, one of the letters in Berkshire Hathaway Shareholder Letters, 1971–2025.
Goodwill amortization is not economic goodwill
“[Goodwill amortization] is an accounting matter having nothing to do with true economic goodwill, which increases in most years.”
Wealthy managers who work for love
“[Berkshire's managers] work neither because they need the money nor because they are contractually obligated to — we have no contracts at Berkshire. Rather, they work long and hard because they love their businesses.”
Run the company as the family's sole asset
“We simply ask our managers to run their companies as if these are the sole asset of their families and will remain so for the next century.”
Rivals can copy the model, not the economics
“Others may copy our model, but they will be unable to replicate our economics.”
Waiting for the phone to ring
“At B erkshire, our carefully-crafted acquisition strategy is simply to wait for the phone to ring.”
Most accounting charges track real events
“For acco unting rules to mandate amortization that will, in the usual case, conflict with reality is deepl y troublesome: Most accounting charges relate to what’s going on, even if they don’t precisely measure it.”
Economic goodwill behaves much like land
“In character, economic goodwill is much like land: The value of both assets is sure to fluctuate, but the direction in which value is going to go is in no way ordained.”
Most mergers are really purchases
“The reality of merging is usually far different: There is indisputably an acquirer and a n acquiree, and the latter has been ‘purchased,’ no matter how the deal has been structured.”
Stock-for-stock deals worst for acquirers
“From th e economic standpoint of the acquiring company, the worst deal of all is a stock-for-stock acquisition.”
No insight into durable tech advantages
“Our problem — which we can’t solve by studying up — is that we have no insights into which participants in the tech field possess a truly durable competitive advantage.”
Knowing the edge of competence
“If we have a strength, it is in recognizing when we are operating well within our circle of competence and when we are approaching the perimeter.”
Sticking with what they understand
“If others claim predictive skill in [industries beyond our perimeter] — and seem to have their claims validated by the behavior of the stock market — we neither envy nor emulate them. Instead, we just stick with what we understand.”
No attempt to forecast the market
“We have never att empted to forecast what the stock market is going to do in the next month or the next year, and we are no t trying to do that now.”
Corporate profits largely track GDP
“We see the growth in corporate profits as being largely tied to the business done in the country (GDP), and we see GDP growing at a real rate of about 3%.”
Return to realism means painful correction
“If investor expectations become more realistic — and they almost certainly will — the market adjustment is apt to be severe, particularly in sectors in which speculation has been concentrated.”
Buybacks often made to pump prices
“Now, repurchases are all the rage, but are all too often made for an unstated and, in our view, ignoble reason: to pump or support the stock price.”
Overpriced buybacks hurt remaining shareholders
“Buying dollar bills for $1.10 is not good business for those who stick around.”
Buyback and issuance decisions stand alone
“Rationally, a company’s decision to repurchase shares or to issue them should stand on its own feet.”