Money flows toward opportunity
“Money will always flow toward opportunity, and there is an abundance of that in America.”
Investing
Warren Buffett's 2010 letter to Berkshire shareholders, one of the letters in Berkshire Hathaway Shareholder Letters, 1971–2025.
Doom talk versus rising living standards
“Throughout my lifetime, politicians and pundits have constantly moaned about terrifying problems facing America. Yet our citizens now live an astonishing six times better than when I was born.”
Painting the bull's-eye after the shot
“Lacking [performance goals], managements are tempted to shoot the arrow of performance and then paint the bull’s-eye around wherever it lands.”
Huge capital rules out exceptional performance
“The huge sums of capital we currently manage eliminate any chance of exceptional performance.”
Business results ignore the calendar year
“The pace of the earth’s movement around the sun is not synchronized with the time required for either investment ideas or operating decisions to bear fruit.”
Market price and intrinsic value eventually meet
“Market price and intrinsic value often follow very different paths – sometimes for extended periods – but eventually they meet.”
A CEO's reinvestment skill changes value
“If a CEO can be expected to do [reinvesting earnings] well, the reinvestment prospects add to the company’s current value; if the CEO’s talents or motives are suspect, today’s value must be discounted.”
Trust in people rather than process
“Our trust is in people rather than process. A ‘hire well, manage little’ code suits both [our managers] and me.”
Staying in one industry shrinks choices
“[Reinvesting within the industry] often restricts [most companies], however, to a ‘universe’ for capital allocation that is both tiny and quite inferior to what is available in the wider world.”
Buying securities when businesses are overpriced
“Often, businesses are priced ridiculously high against what can likely be earned from investments in stocks or bonds. At such moments, we buy securities and bide our time.”
Bureaucracy and palaces breed more of themselves
“Bureaucratic procedures beget more bureaucracy, and imperial corporate palaces induce imperious behavior.”
Careful owners encourage careful managers
“As long as Charlie and I treat your money as if it were our own, Berkshire’s managers are likely to be careful with it as well.”
Pressure for volume leads to underpricing
“The urgings of Wall Street, pressures from the agency force and brokers, or simply a refusal by a testosterone-driven CEO to accept shrinking volumes has led too many insurers to write business at inadequate prices.”
Copying competitors spells trouble in insurance
“‘The other guy is doing it so we must as well’ spells trouble in any business, but none more so than insurance.”
Looking decades ahead, with imperfect eyesight
“I try to look out ten or twenty years when making an acquisition, but sometimes my eyesight has been poor.”
A time horizon of forever
“At Berkshire, our time horizon is forever.”
Down payments and sensible payments kept buyers housed
“Our approach was simply to get a meaningful down-payment and gear fixed monthly payments to a sensible percentage of income. This policy kept Clayton solvent and also kept buyers in their homes.”
A home as a great investment beyond money
“All things considered, the third best investment I ever made was the purchase of my home, though I would have made far more money had I instead rented and used the purchase money to buy stocks.”
Affordable homes over dream homes
“Our country’s social goal should not be to put families into the house of their dreams, but rather to put them into a house they can afford.”
Retained earnings show up as market gains
“In our experience – and, for that matter, in the experience of investors over the past century – undistributed earnings have been either matched or exceeded by market gains, albeit in a highly irregular manner.”
How a record was achieved matters
“How the record has been achieved is crucial, as is the manager’s understanding of – and sensitivity to – risk (which in no way should be measured by beta, the choice of too many academics).”
Berkshire's only style box is smart
“(Fund consultants like to require style boxes such as ‘long-short,’ ‘macro,’ ‘international equities.’ At Berkshire our only style box is ‘smart.’)”
Pay that rewards success and fosters cooperation
“We want a compensation system that pays off big for individual success but that also fosters cooperation, not competition.”
Great investors were once little-known
“I wonder how many of [the commentators] would have known of Lou in 1979, Ajit in 1985, or, for that matter, Charlie in 1959. Our goal was to find a 2-year-old Secretariat, not a 10-year-old Seabiscuit.”
Berkshire's net income can be set at will
“Regardless of how our businesses might be doing, Charlie and I could – quite legally – cause net income in any given period to be almost any number we would like.”
Deep disgust for game playing with numbers
“We both have a deep disgust for ‘game playing’ with numbers, a practice that was rampant throughout corporate America in the 1990s and still persists, though it occurs less frequently and less blatantly than it used to.”
Approximately right beats precisely wrong
“Our inability to pinpoint a number doesn’t bother us: We would rather be approximately right than precisely wrong.”
Finance departments cling to graduate-school ideas
“John Kenneth Galbraith once slyly observed that economists were most economical with ideas: They made the ones learned in graduate school last a lifetime. University finance departments often behave similarly.”
Investing means valuing businesses, not options
“You can be highly successful as an investor without having the slightest ability to value an option. What students should be learning is how to value a business. That’s what investing is all about.”
To finish first, you must first finish
“The fundamental principle of auto racing is that to finish first, you must first finish. That dictum is equally applicable to business and guides our every action at Berkshire.”
Leverage produces zeroes even for smart people
“History tells us that leverage all too often produces zeroes, even when it is employed by very smart people.”
Reaching for yield loses more than robbery
“We agree with investment writer Ray DeVoe’s observation, ‘More money has been lost reaching for yield than at the point of a gun.’”
Liquidity lets you play offense in chaos
“Having loads of liquidity, though, lets us sleep well. Moreover, during the episodes of financial chaos that occasionally erupt in our economy, we will be equipped both financially and emotionally to play offense while others scramble for survival.”