A board's primary job is succession
“The primary job of a Board of Directors is to see that the right people are running the business and to be sure that the next generation of leaders is identified and ready to take over tomorrow.”
Investing
Warren Buffett's 2011 letter to Berkshire shareholders, one of the letters in Berkshire Hathaway Shareholder Letters, 1971–2025.
Float is others' money invested for Berkshire
“[Insurance] produces ‘float’ – money that doesn’t belong to us, but that we get to invest for Berkshire’s benefit.”
Stock holdings as partnership interests
“We view [our large ownership interests] as partnership interests in wonderful businesses, not as marketable securities to be bought or sold based on their near-term prospects.”
Housing units track households over time
“Over time, the number of housing units necessarily matches the number of households (after allowing for a normal level of vacancies).”
Uncertainty only postpones hitching up
“People may postpone hitching up during uncertain times, but eventually hormones take over.”
Policy cannot create households
“Wise monetary and fiscal policies play an important role in tempering recessions, but these tools don’t create households nor eliminate excess housing units.”
Beating the S&P 500 earns their paychecks
“If our gain over time outstrips the performance of the S&P 500, we have earned our paychecks. If it doesn’t, we are overpaid at any price.”
Buybacks hurt unless below intrinsic value
“Continuing shareholders are hurt unless shares are purchased below intrinsic value.”
Price decides whether allocation is smart
“The first law of capital allocation – whether the money is slated for acquisitions or share repurchases – is that what is smart at one price is dumb at another.”
Unquestionable financial strength comes first
“At Berkshire, financial strength that is unquestionable takes precedence over all else.”
Future buyers cheering rising prices
“[Future net buyers] resemble a commuter who rejoices after the price of gas increases, simply because his tank contains a day’s supply.”
Competition for profit drives industry underwriting losses
“Unfortunately, the wish of all insurers to achieve [an underwriting profit] creates intense competition, so vigorous in most years that it causes the P/C industry as a whole to operate at a significant underwritingloss.”
Insurance invents new ways to lose money
“There are a lot of ways to lose money in insurance, and the industry is resourceful in creating new ones.”
Lasting costless float is a smaller liability
“If float is both costless and long-enduring, the true value of this liability is far lower than the accounting liability.”
Goodwill's cost says nothing of its value
“The cost of the goodwill, however, has no bearing on its true value. If an insurance business produces large and sustained underwriting losses, any goodwill asset attributable to it should be deemed valueless, whatever its original cost.”
Buy commodities, sell brands
“‘Buy commodities, sell brands’ has long been a formula for business success.”
Not worth doing, not worth doing well
“I have made more than my share of mistakes buying small companies. Charlie long ago told me, ‘If something’s not worth doing at all, it’s not worth doing well,’ and I should have listened harder.”
What you see, not what you look at
“As Thoreau said, ‘It’s not what you look at that matters, it’s what you see.’” — Thoreau
Investing is forgoing consumption now
“More succinctly, investing is forgoing consumption now in order to have the ability to consume more at a later date.”
Volatile assets are not necessarily risky
“Assets can fluctuate greatly in price and not be risky as long as they are reasonably certain to deliver increased purchasing power over their holding period.”
Safe currency investments are among the most dangerous
“Most of these currency-based investments are thought of as ‘safe.’ In truth they are among the most dangerous of assets. Their beta may be zero, but their risk is huge.”
Governments determine the value of money
“Governments determine the ultimate value of money, and systemic forces will sometimes cause them to gravitate to policies that produce inflation. From time to time such policies spin out of control.”
The invisible inflation tax outweighs income tax
“It’s noteworthy that the implicit inflation ‘tax’ was more than triple the explicit income tax that our investor probably thought of as his main burden.”
Gold is neither useful nor procreative
“Gold, however, has two significant shortcomings, being neither of much use nor procreative.”
Fear drives money to cash and gold
“Our first two categories enjoy maximum popularity at peaks of fear: Terror over economic collapse drives individuals to currency-based assets, most particularly U.S. obligations, and fear of currency collapse fosters movement to sterile assets such as gold.”