Investing
Warren Buffett's 2000 letter to Berkshire shareholders, one of the letters in Berkshire Hathaway Shareholder Letters, 1971–2025.
“At Berkshire, our all-stars have exactly the jobs they want, ones that they hope and expect to keep throughout their business lifetimes. They therefore concentrate solely on maximizing the long-term value of the businesses that they ‘own’ and love.”
“Our acquisition technique at Berkshire is simplicity itself: We answer the phone.”
“(Only in the sales presentations of investment banks do earnings move forever upward.) We don’t care about the bumps; what matters are the overall results.”
“When an owner auctions off his business, exhibiting a total lack of interest in what follows, you will frequently find that it has been dressed up for sale, particularly when the seller is a ‘financial owner.’”
“How much better it is for the ‘painter’ of a business Rembrandt to personally select its permanent home than to have a trust officer or uninterested heirs auction it off.”
“Charlie and I, however, like any proposition that makes compelling mathematical sense, regardless of its effect on reported earnings.”
“Agonizing over errors is a mistake. But acknowledging and analyzing them can be useful, though that practice is rare in corporate boardrooms.”
“The origins of [restructuring charges], though, are never explored. When it comes to corporate blunders, CEOs invoke the concept of the Virgin Birth.”
“Studying counter-evidence is a highly useful activity, though not one always greeted with enthusiasm at citadels of learning.”
“In effect, the government is our ‘partner’ twice when we own part of a business through a stock investment, but only once when we own at least 80%.”
“Aesop’s investment axiom, thus expanded and converted into d ollars, is immutable. It applies to outlays for farms, oil royalties, bonds, stocks, lottery tickets, and manufacturing plants.”
“Indeed, growth can destroy value if it requires cash inputs in the early years of a project or enterprise that exceed the discounted value of the cash that those assets will generate in later years.”
“Market commentators and investment managers who glibly refer to ‘growth’ and ‘value’ styles as contrasting approaches to investment are displaying their ignorance, not their sophistication.”
“Using precise numbers is, in fact, foolish; working with a range of possibilities is the better approach. Usually, the range must be so wide that no useful conclusion can be reached.”
“Now, speculation — in which the focus is not on what an asset will produce but rather on what the next fellow will pay for it — is neither illegal, immoral nor un-American.”
“The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money.”
“The fact is that a bubble market has allowed the creation of bubble companies, entities designed more with an eye to making money off investors rather than for them.”
“At bottom, the ‘business model’ for [bubble companies] has been the old-fashioned chain letter, for which many fee-hungry investment bankers acted as eager postmen.”
“At Berkshire, we make no attempt to pick the few winners that will emerge from an ocean of unproven enterprises. We’re not smart enough to do that, and we know it.”
“Really juicy results from negotiated deals can be anticipated only when capital markets are severely constrained and the whole business world is pessimistic.”
“I clearly made a mistake in paying what I did for Dexter in 1993. Furthermore, I compounded that mistake in a huge way by using Berkshire shares in payment.”
“Anyone who thinks that the annual charges for depreciation don’t reflect a real cost every bit as real as payroll or raw materials should get an internship at a simulator company.”
“References to EBITDA make us shudder does management think the tooth fairy pays for capital expenditures?”
“We’re very suspicious of accounting methodology that is vague or unclear, since too often that means management wishes to hide something.”
“One further thought while I’m on my soapbox: Cha rlie and I think it is both deceptive and dangerous for CEOs to predict growth rates for their companies.”
“The problem arising from lofty predictions is not just that they spread unwarranted optim ism. Even more troublesome is the fact that they corrode CEO behavior.”
“Charlie and I tend to be leery of companies run by CEOs who woo investors with fancy predictions. A few of these managers will prove prophetic — but others will turn out to be congenital optimists, or even charlatans.”
“Indeed, erroneous reports are particularly dangerous when they are circulated by highly-respected members of the media, simply because most readers and listeners know these outlets to be generally credible and therefore believe what they say.”
“At a minimum, readers deserve honest terminology a warning label that will protect their financial health in the same way that smokers whose physical health is at risk are given a warning.”
“The Constitution’s First Amendment allows the media to print or say almost anything. Journalism’s First Principle should require that the media be scrupulous in deciding what that will be.”
“Most companies, focused on the calendar rather than ability, would have benefited from Ralph’s talents for only a few years.”
“Quite simply, a few hours spent at the feet of the master proved far more valuable to me than had ten years of supposedly original thinking.”