ENGLISH
BERKSHIRE HATHAWAY INC.
February 26, 1982
To the Shareholders of Berkshire Hathaway Inc.:
Operating earnings of $39.7 million in 1981 amounted to
15.2% of beginning equity capital (valuing securities at cost)
compared to 17.8% in 1980. Our new plan that allows stockholders
to designate corporate charitable contributions (detailed later)
reduced earnings by about $900,000 in 1981. This program, which
we expect to continue subject to annual evaluation of our
corporate tax position, had not been initiated in 1980.
Non-Controlled Ownership Earnings
In the 1980 annual report we discussed extensively the
concept of non-controlled ownership earnings, i.e., Berkshire’s
share of the undistributed earnings of companies we don’t control
or significantly influence but in which we, nevertheless, have
important investments. (We will be glad to make available to new
or prospective shareholders copies of that discussion or others
from earlier reports to which we refer in this report.) No
portion of those undistributed earnings is included in the
operating earnings of Berkshire.
However, our belief is that, in aggregate, those
undistributed and, therefore, unrecorded earnings will be
translated into tangible value for Berkshire shareholders just as
surely as if subsidiaries we control had earned, retained - and
reported - similar earnings.
We know that this translation of non-controlled ownership
earnings into corresponding realized and unrealized capital gains
for Berkshire will be extremely irregular as to time of
occurrence. While market values track business values quite well
over long periods, in any given year the relationship can gyrate
capriciously. Market recognition of retained earnings also will
be unevenly realized among companies. It will be disappointingly
low or negative in cases where earnings are employed non-
productively, and far greater than dollar-for-dollar of retained
earnings in cases of companies that achieve high returns with
their augmented capital. Overall, if a group of non-controlled
companies is selected with reasonable skill, the group result
should be quite satisfactory.
In aggregate, our non-controlled business interests have
more favorable underlying economic characteristics than our
controlled businesses. That’s understandable; the area of choice
has been far wider. Small portions of exceptionally good
businesses are usually available in the securities markets at
reasonable prices. But such businesses are available for
purchase in their entirety only rarely, and then almost always at
high prices.
General Acquisition Behavior
As our history indicates, we are comfortable both with total
ownership of businesses and with marketable securities
representing small portions of businesses. We continually look
for ways to employ large sums in each area. (But we try to avoid
small commitments - “If something’s not worth doing at all, it’s
not worth doing well”.) Indeed, the liquidity requirements of our
insurance and trading stamp businesses mandate major investments
in marketable securities.
Our acquisition decisions will be aimed at maximizing real
economic benefits, not at maximizing either managerial domain or
reported numbers for accounting purposes. (In the long run,
managements stressing accounting appearance over economic
substance usually achieve little of either.)
Regardless of the impact upon immediately reportable
earnings, we would rather buy 10% of Wonderful Business T at X
per share than 100% of T at 2X per share. Most corporate
managers prefer just the reverse, and have no shortage of stated
rationales for their behavior.
However, we suspect three motivations - usually unspoken -
to be, singly or in combination, the important ones in most high-
premium takeovers:
(1) Leaders, business or otherwise, seldom are deficient in
animal spirits and often relish increased activity and
challenge. At Berkshire, the corporate pulse never
beats faster than when an acquisition is in prospect.
(2) Most organizations, business or otherwise, measure
themselves, are measured by others, and compensate their
managers far more by the yardstick of size than by any
other yardstick. (Ask a Fortune 500 manager where his
corporation stands on that famous list and, invariably,
the number responded will be from the list ranked by
size of sales; he may well not even know where his
corporation places on the list Fortune just as
faithfully compiles ranking the same 500 corporations by
profitability.)
(3) Many managements apparently were overexposed in
impressionable childhood years to the story in which the
imprisoned handsome prince is released from a toad’s
body by a kiss from a beautiful princess. Consequently,
they are certain their managerial kiss will do wonders
for the profitability of Company T(arget).
Such optimism is essential. Absent that rosy view,
why else should the shareholders of Company A(cquisitor)
want to own an interest in T at the 2X takeover cost
rather than at the X market price they would pay if they
made direct purchases on their own?
In other words, investors can always buy toads at the
going price for toads. If investors instead bankroll
princesses who wish to pay double for the right to kiss
the toad, those kisses had better pack some real
dynamite. We’ve observed many kisses but very few
miracles. Nevertheless, many managerial princesses
remain serenely confident about the future potency of
their kisses - even after their corporate backyards are
knee-deep in unresponsive toads.
In fairness, we should acknowledge that some acquisition
records have been dazzling. Two major categories stand out.
The first involves companies that, through design or
accident, have purchased only businesses that are particularly
well adapted to an inflationary environment. Such favored
business must have two characteristics: (1) an ability to
increase prices rather easily (even when product demand is flat
and capacity is not fully utilized) without fear of significant
loss of either market share or unit volume, and (2) an ability to
accommodate large dollar volume increases in business (often
produced more by inflation than by real growth) with only minor
additional investment of capital. Managers of ordinary ability,
focusing solely on acquisition possibilities meeting these tests,
have achieved excellent results in recent decades. However, very
few enterprises possess both characteristics, and competition to
buy those that do has now become fierce to the point of being
self-defeating.
The second category involves the managerial superstars - men
who can recognize that rare prince who is disguised as a toad,
and who have managerial abilities that enable them to peel away
the disguise. We salute such managers as Ben Heineman at
Northwest Industries, Henry Singleton at Teledyne, Erwin Zaban at
National Service Industries, and especially Tom Murphy at Capital
Cities Communications (a real managerial “twofer”, whose
acquisition efforts have been properly focused in Category 1 and
whose operating talents also make him a leader of Category 2).
From both direct and vicarious experience, we recognize the
difficulty and rarity of these executives’ achievements. (So do
they; these champs have made very few deals in recent years, and
often have found repurchase of their own shares to be the most
sensible employment of corporate capital.)
Your Chairman, unfortunately, does not qualify for Category
2. And, despite a reasonably good understanding of the economic
factors compelling concentration in Category 1, our actual
acquisition activity in that category has been sporadic and
inadequate. Our preaching was better than our performance. (We
neglected the Noah principle: predicting rain doesn’t count,
building arks does.)
We have tried occasionally to buy toads at bargain prices
with results that have been chronicled in past reports. Clearly
our kisses fell flat. We have done well with a couple of princes
- but they were princes when purchased. At least our kisses
didn’t turn them into toads. And, finally, we have occasionally
been quite successful in purchasing fractional interests in
easily-identifiable princes at toad-like prices.
Berkshire Acquisition Objectives
We will continue to seek the acquisition of businesses in
their entirety at prices that will make sense, even should the
future of the acquired enterprise develop much along the lines of
its past. We may very well pay a fairly fancy price for a
Category 1 business if we are reasonably confident of what we are
getting. But we will not normally pay a lot in any purchase for
what we are supposed to bring to the party - for we find that we
ordinarily don’t bring a lot.
During 1981 we came quite close to a major purchase
involving both a business and a manager we liked very much.
However, the price finally demanded, considering alternative uses
for the funds involved, would have left our owners worse off than
before the purchase. The empire would have been larger, but the
citizenry would have been poorer.
Although we had no success in 1981, from time to time in the
future we will be able to purchase 100% of businesses meeting our
standards. Additionally, we expect an occasional offering of a
major “non-voting partnership” as discussed under the Pinkerton’s
heading on page 47 of this report. We welcome suggestions
regarding such companies where we, as a substantial junior
partner, can achieve good economic results while furthering the
long-term objectives of present owners and managers.
Currently, we find values most easily obtained through the
open-market purchase of fractional positions in companies with
excellent business franchises and competent, honest managements.
We never expect to run these companies, but we do expect to
profit from them.
We expect that undistributed earnings from such companies
will produce full value (subject to tax when realized) for
Berkshire and its shareholders. If they don’t, we have made
mistakes as to either: (1) the management we have elected to
join; (2) the future economics of the business; or (3) the price
we have paid.
We have made plenty of such mistakes - both in the purchase
of non-controlling and controlling interests in businesses.
Category (2) miscalculations are the most common. Of course, it
is necessary to dig deep into our history to find illustrations
of such mistakes - sometimes as deep as two or three months back.
For example, last year your Chairman volunteered his expert
opinion on the rosy future of the aluminum business. Several
minor adjustments to that opinion - now aggregating approximately
180 degrees - have since been required.
For personal as well as more objective reasons, however, we
generally have been able to correct such mistakes far more
quickly in the case of non-controlled businesses (marketable
securities) than in the case of controlled subsidiaries. Lack of
control, in effect, often has turned out to be an economic plus.
As we mentioned last year, the magnitude of our non-recorded
“ownership” earnings has grown to the point where their total is
greater than our reported operating earnings. We expect this
situation will continue. In just four ownership positions in
this category - GEICO Corporation, General Foods Corporation, R.
J. Reynolds Industries, Inc. and The Washington Post Company -
our share of undistributed and therefore unrecorded earnings
probably will total well over $35 million in 1982. The
accounting rules that entirely ignore these undistributed
earnings diminish the utility of our annual return on equity
calculation, or any other single year measure of economic
performance.
Long-Term Corporate Performance
In measuring long-term economic performance, equities held
by our insurance subsidiaries are valued at market subject to a
charge reflecting the amount of taxes that would have to be paid
if unrealized gains were actually realized. If we are correct in
the premise stressed in the preceding section of this report, our
unreported ownership earnings will find their way, irregularly
but inevitably, into our net worth. To date, this has been the
case.
An even purer calculation of performance would involve a
valuation of bonds and non-insurance held equities at market.
However, GAAP accounting does not prescribe this procedure, and
the added purity would change results only very slightly. Should
any valuation difference widen to significant proportions, as it
has at most major insurance companies, we will report its effect
to you.
On a GAAP basis, during the present management’s term of
seventeen years, book value has increased from $19.46 per share
to $526.02 per share, or 21.1% compounded annually. This rate of
return number is highly likely to drift downward in future years.
We hope, however, that it can be maintained significantly above
the rate of return achieved by the average large American
corporation.
Over half of the large gain in Berkshire’s net worth during
1981 - it totaled $124 million, or about 31% - resulted from the
market performance of a single investment, GEICO Corporation. In
aggregate, our market gain from securities during the year
considerably outstripped the gain in underlying business values.
Such market variations will not always be on the pleasant side.
In past reports we have explained how inflation has caused
our apparently satisfactory long-term corporate performance to be
illusory as a measure of true investment results for our owners.
We applaud the efforts of Federal Reserve Chairman Volcker and
note the currently more moderate increases in various price
indices. Nevertheless, our views regarding long-term
inflationary trends are as negative as ever. Like virginity, a
stable price level seems capable of maintenance, but not of
restoration.
Despite the overriding importance of inflation in the
investment equation, we will not punish you further with another
full recital of our views; inflation itself will be punishment
enough. (Copies of previous discussions are available for
masochists.) But, because of the unrelenting destruction of
currency values, our corporate efforts will continue to do a much
better job of filling your wallet than of filling your stomach.
Equity Value-Added
An additional factor should further subdue any residual
enthusiasm you may retain regarding our long-term rate of return.
The economic case justifying equity investment is that, in
aggregate, additional earnings above passive investment returns -
interest on fixed-income securities - will be derived through the
employment of managerial and entrepreneurial skills in
conjunction with that equity capital. Furthermore, the case says
that since the equity capital position is associated with greater
risk than passive forms of investment, it is “entitled” to higher
returns. A “value-added” bonus from equity capital seems natural
and certain.
But is it? Several decades back, a return on equity of as
little as 10% enabled a corporation to be classified as a “good”
business - i.e., one in which a dollar reinvested in the business
logically could be expected to be valued by the market at more
than one hundred cents. For, with long-term taxable bonds
yielding 5% and long-term tax-exempt bonds 3%, a business
operation that could utilize equity capital at 10% clearly was
worth some premium to investors over the equity capital employed.
That was true even though a combination of taxes on dividends and
on capital gains would reduce the 10% earned by the corporation
to perhaps 6%-8% in the hands of the individual investor.
Investment markets recognized this truth. During that
earlier period, American business earned an average of 11% or so
on equity capital employed and stocks, in aggregate, sold at
valuations far above that equity capital (book value), averaging
over 150 cents on the dollar. Most businesses were “good”
businesses because they earned far more than their keep (the
return on long-term passive money). The value-added produced by
equity investment, in aggregate, was substantial.
That day is gone. But the lessons learned during its
existence are difficult to discard. While investors and managers
must place their feet in the future, their memories and nervous
systems often remain plugged into the past. It is much easier
for investors to utilize historic p/e ratios or for managers to
utilize historic business valuation yardsticks than it is for
either group to rethink their premises daily. When change is
slow, constant rethinking is actually undesirable; it achieves
little and slows response time. But when change is great,
yesterday’s assumptions can be retained only at great cost. And
the pace of economic change has become breathtaking.
During the past year, long-term taxable bond yields exceeded
16% and long-term tax-exempts 14%. The total return achieved
from such tax-exempts, of course, goes directly into the pocket
of the individual owner. Meanwhile, American business is
producing earnings of only about 14% on equity. And this 14%
will be substantially reduced by taxation before it can be banked
by the individual owner. The extent of such shrinkage depends
upon the dividend policy of the corporation and the tax rates
applicable to the investor.
Thus, with interest rates on passive investments at late
1981 levels, a typical American business is no longer worth one
hundred cents on the dollar to owners who are individuals. (If
the business is owned by pension funds or other tax-exempt
investors, the arithmetic, although still unenticing, changes
substantially for the better.) Assume an investor in a 50% tax
bracket; if our typical company pays out all earnings, the income
return to the investor will be equivalent to that from a 7% tax-
exempt bond. And, if conditions persist - if all earnings are
paid out and return on equity stays at 14% - the 7% tax-exempt
equivalent to the higher-bracket individual investor is just as
frozen as is the coupon on a tax-exempt bond. Such a perpetual
7% tax-exempt bond might be worth fifty cents on the dollar as
this is written.
If, on the other hand, all earnings of our typical American
business are retained and return on equity again remains
constant, earnings will grow at 14% per year. If the p/e ratio
remains constant, the price of our typical stock will also grow
at 14% per year. But that 14% is not yet in the pocket of the
shareholder. Putting it there will require the payment of a
capital gains tax, presently assessed at a maximum rate of 20%.
This net return, of course, works out to a poorer rate of return
than the currently available passive after-tax rate.
Unless passive rates fall, companies achieving 14% per year
gains in earnings per share while paying no cash dividend are an
economic failure for their individual shareholders. The returns
from passive capital outstrip the returns from active capital.
This is an unpleasant fact for both investors and corporate
managers and, therefore, one they may wish to ignore. But facts
do not cease to exist, either because they are unpleasant or
because they are ignored.
Most American businesses pay out a significant portion of
their earnings and thus fall between the two examples. And most
American businesses are currently “bad” businesses economically -
producing less for their individual investors after-tax than the
tax-exempt passive rate of return on money. Of course, some
high-return businesses still remain attractive, even under
present conditions. But American equity capital, in aggregate,
produces no value-added for individual investors.
It should be stressed that this depressing situation does
not occur because corporations are jumping, economically, less
high than previously. In fact, they are jumping somewhat higher:
return on equity has improved a few points in the past decade.
But the crossbar of passive return has been elevated much faster.
Unhappily, most companies can do little but hope that the bar
will be lowered significantly; there are few industries in which
the prospects seem bright for substantial gains in return on
equity.
Inflationary experience and expectations will be major (but
not the only) factors affecting the height of the crossbar in
future years. If the causes of long-term inflation can be
tempered, passive returns are likely to fall and the intrinsic
position of American equity capital should significantly improve.
Many businesses that now must be classified as economically “bad”
would be restored to the “good” category under such
circumstances.
A further, particularly ironic, punishment is inflicted by
an inflationary environment upon the owners of the “bad”
business. To continue operating in its present mode, such a low-
return business usually must retain much of its earnings - no
matter what penalty such a policy produces for shareholders.
Reason, of course, would prescribe just the opposite policy.
An individual, stuck with a 5% bond with many years to run before
maturity, does not take the coupons from that bond and pay one
hundred cents on the dollar for more 5% bonds while similar bonds
are available at, say, forty cents on the dollar. Instead, he
takes those coupons from his low-return bond and - if inclined to
reinvest - looks for the highest return with safety currently
available. Good money is not thrown after bad.
What makes sense for the bondholder makes sense for the
shareholder. Logically, a company with historic and prospective
high returns on equity should retain much or all of its earnings
so that shareholders can earn premium returns on enhanced
capital. Conversely, low returns on corporate equity would
suggest a very high dividend payout so that owners could direct
capital toward more attractive areas. (The Scriptures concur. In
the parable of the talents, the two high-earning servants are
rewarded with 100% retention of earnings and encouraged to expand
their operations. However, the non-earning third servant is not
only chastised - “wicked and slothful” - but also is required to
redirect all of his capital to the top performer. Matthew 25:
14-30)
But inflation takes us through the looking glass into the
upside-down world of Alice in Wonderland. When prices
continuously rise, the “bad” business must retain every nickel
that it can. Not because it is attractive as a repository for
equity capital, but precisely because it is so unattractive, the
low-return business must follow a high retention policy. If it
wishes to continue operating in the future as it has in the past
- and most entities, including businesses, do - it simply has no
choice.
For inflation acts as a gigantic corporate tapeworm. That
tapeworm preemptively consumes its requisite daily diet of
investment dollars regardless of the health of the host organism.
Whatever the level of reported profits (even if nil), more
dollars for receivables, inventory and fixed assets are
continuously required by the business in order to merely match
the unit volume of the previous year. The less prosperous the
enterprise, the greater the proportion of available sustenance
claimed by the tapeworm.
Under present conditions, a business earning 8% or 10% on
equity often has no leftovers for expansion, debt reduction or
“real” dividends. The tapeworm of inflation simply cleans the
plate. (The low-return company’s inability to pay dividends,
understandably, is often disguised. Corporate America
increasingly is turning to dividend reinvestment plans, sometimes
even embodying a discount arrangement that all but forces
shareholders to reinvest. Other companies sell newly issued
shares to Peter in order to pay dividends to Paul. Beware of
“dividends” that can be paid out only if someone promises to
replace the capital distributed.)
Berkshire continues to retain its earnings for offensive,
not defensive or obligatory, reasons. But in no way are we
immune from the pressures that escalating passive returns exert
on equity capital. We continue to clear the crossbar of after-
tax passive return - but barely. Our historic 21% return - not
at all assured for the future - still provides, after the current
capital gain tax rate (which we expect to rise considerably in
future years), a modest margin over current after-tax rates on
passive money. It would be a bit humiliating to have our
corporate value-added turn negative. But it can happen here as
it has elsewhere, either from events outside anyone’s control or
from poor relative adaptation on our part.
Sources of Reported Earnings
The table below shows the sources of Berkshire’s reported
earnings. Berkshire owns about 60% of Blue Chip Stamps which, in
turn, owns 80% of Wesco Financial Corporation. The table
displays aggregate operating earnings of the various business
entities, as well as Berkshire’s share of those earnings. All of
the significant gains and losses attributable to unusual sales of
assets by any of the business entities are aggregated with
securities transactions in the line near the bottom of the table
and are not included in operating earnings.
Net Earnings
Earnings Before Income Taxes After Tax
-------------------------------------- ------------------
Total Berkshire Share Berkshire Share
------------------ ------------------ ------------------
1981 1980 1981 1980 1981 1980
-------- -------- -------- -------- -------- --------
(000s omitted)
Operating Earnings:
Insurance Group:
Underwriting ............ $ 1,478 $ 6,738 $ 1,478 $ 6,737 $ 798 $ 3,637
Net Investment Income ... 38,823 30,939 38,823 30,927 32,401 25,607
Berkshire-Waumbec Textiles (2,669) (508) (2,669) (508) (1,493) 202
Associated Retail Stores .. 1,763 2,440 1,763 2,440 759 1,169
See’s Candies ............. 21,891 15,475 13,046 9,223 6,289 4,459
Buffalo Evening News ...... (1,057) (2,777) (630) (1,655) (276) (800)
Blue Chip Stamps - Parent 3,642 7,699 2,171 4,588 2,134 3,060
Wesco Financial - Parent .. 4,495 2,916 2,145 1,392 1,590 1,044
Mutual Savings and Loan ... 1,605 5,814 766 2,775 1,536 1,974
Precision Steel ........... 3,453 2,833 1,648 1,352 841 656
Interest on Debt .......... (14,656) (12,230) (12,649) (9,390) (6,671) (4,809)
Other* .................... 1,895 1,698 1,344 1,308 1,513 992
-------- -------- -------- -------- -------- --------
Sub-total - Continuing
Operations ............. $ 60,663 $ 61,037 $ 47,236 $ 49,189 $ 39,421 $ 37,191
Illinois National Bank** .. -- 5,324 -- 5,200 -- 4,731
-------- -------- -------- -------- -------- --------
Operating Earnings .......... 60,663 66,361 47,236 54,389 39,421 41,922
Sales of securities and
unusual sales of assets .. 37,801 19,584 33,150 15,757 23,183 11,200
-------- -------- -------- -------- -------- --------
Total Earnings - all entities $ 98,464 $ 85,945 $ 80,386 $ 70,146 $ 62,604 $ 53,122
======== ======== ======== ======== ======== ========
*Amortization of intangibles arising in accounting for
purchases of businesses (i.e. See’s, Mutual and Buffalo
Evening News) is reflected in the category designated as
“Other”.
**Berkshire divested itself of its ownership of the Illinois
National Bank on December 31, 1980.
Blue Chip Stamps and Wesco are public companies with
reporting requirements of their own. On pages 38-50 of this
report we have reproduced the narrative reports of the principal
executives of both companies, in which they describe 1981
operations. A copy of the full annual report of either company
will be mailed to any Berkshire shareholder upon request to Mr.
Robert H. Bird for Blue Chip Stamps, 5801 South Eastern Avenue,
Los Angeles, California 90040, or to Mrs. Jeanne Leach for Wesco
Financial Corporation, 315 East Colorado Boulevard, Pasadena,
California 91109.
As we indicated earlier, undistributed earnings in companies
we do not control are now fully as important as the reported
operating earnings detailed in the preceding table. The
distributed portion of earnings, of course, finds its way into
the table primarily through the net investment income segment of
Insurance Group earnings.
We show below Berkshire’s proportional holdings in those
non-controlled businesses for which only distributed earnings
(dividends) are included in our earnings.
No. of Shares Cost Market
------------- ---------- ----------
(000s omitted)
451,650 (a) Affiliated Publications, Inc. ........ $ 3,297 $ 14,114
703,634 (a) Aluminum Company of America .......... 19,359 18,031
420,441 (a) Arcata Corporation
(including common equivalents) ..... 14,076 15,136
475,217 (b) Cleveland-Cliffs Iron Company ........ 12,942 14,362
441,522 (a) GATX Corporation ..................... 17,147 13,466
2,101,244 (b) General Foods, Inc. .................. 66,277 66,714
7,200,000 (a) GEICO Corporation .................... 47,138 199,800
2,015,000 (a) Handy & Harman ....................... 21,825 36,270
711,180 (a) Interpublic Group of Companies, Inc. 4,531 23,202
282,500 (a) Media General ........................ 4,545 11,088
391,400 (a) Ogilvy & Mather International Inc. ... 3,709 12,329
370,088 (b) Pinkerton’s, Inc. .................... 12,144 19,675
1,764,824 (b) R. J. Reynolds Industries, Inc. ...... 76,668 83,127
785,225 (b) SAFECO Corporation ................... 21,329 31,016
1,868,600 (a) The Washington Post Company .......... 10,628 58,160
---------- ----------
$335,615 $616,490
All Other Common Stockholdings ...................... 16,131 22,739
---------- ----------
Total Common Stocks ................................. $351,746 $639,229
========== ==========
(a) All owned by Berkshire or its insurance subsidiaries.
(b) Blue Chip and/or Wesco own shares of these companies. All
numbers represent Berkshire’s net interest in the larger
gross holdings of the group.
Our controlled and non-controlled businesses operate over
such a wide spectrum of activities that detailed commentary here
would prove too lengthy. Much additional financial information
is included in Management’s Discussion on pages 34-37 and in the
narrative reports on pages 38-50. However, our largest area of
both controlled and non-controlled activity has been, and almost
certainly will continue to be, the property-casualty insurance
area, and commentary on important developments in that industry
is appropriate.
Insurance Industry Conditions
“Forecasts”, said Sam Goldwyn, “are dangerous, particularly
those about the future.” (Berkshire shareholders may have reached
a similar conclusion after rereading our past annual reports
featuring your Chairman’s prescient analysis of textile
prospects.)
There is no danger, however, in forecasting that 1982 will
be the worst year in recent history for insurance underwriting.
That result already has been guaranteed by present pricing
behavior, coupled with the term nature of the insurance contract.
While many auto policies are priced and sold at six-month
intervals - and many property policies are sold for a three-year
term - a weighted average of the duration of all property-
casualty insurance policies probably runs a little under twelve
months. And prices for the insurance coverage, of course, are
frozen for the life of the contract. Thus, this year’s sales
contracts (“premium written” in the parlance of the industry)
determine about one-half of next year’s level of revenue
(“premiums earned”). The remaining half will be determined by
sales contracts written next year that will be about 50% earned
in that year. The profitability consequences are automatic: if
you make a mistake in pricing, you have to live with it for an
uncomfortable period of time.
Note in the table below the year-over-year gain in industry-
wide premiums written and the impact that it has on the current
and following year’s level of underwriting profitability. The
result is exactly as you would expect in an inflationary world.
When the volume gain is well up in double digits, it bodes well
for profitability trends in the current and following year. When
the industry volume gain is small, underwriting experience very
shortly will get worse, no matter how unsatisfactory the current
level.
The Best’s data in the table reflect the experience of
practically the entire industry, including stock, mutual and
reciprocal companies. The combined ratio indicates total
operating and loss costs as compared to premiums; a ratio below
100 indicates an underwriting profit, and one above 100 indicates
a loss.
Yearly Change Yearly Change Combined Ratio
in Premium in Premium after Policy-
Written (%) Earned (%) holder Dividends
------------- ------------- ----------------
1972 ............... 10.2 10.9 96.2
1973 ............... 8.0 8.8 99.2
1974 ............... 6.2 6.9 105.4
1975 ............... 11.0 9.6 107.9
1976 ............... 21.9 19.4 102.4
1977 ............... 19.8 20.5 97.2
1978 ............... 12.8 14.3 97.5
1979 ............... 10.3 10.4 100.6
1980 ............... 6.0 7.8 103.1
1981 ............... 3.6 4.1 105.7
Source: Best’s Aggregates and Averages.
As Pogo would say, “The future isn’t what it used to be.”
Current pricing practices promise devastating results,
particularly if the respite from major natural disasters that the
industry has enjoyed in recent years should end. For
underwriting experience has been getting worse in spite of good
luck, not because of bad luck. In recent years hurricanes have
stayed at sea and motorists have reduced their driving. They
won’t always be so obliging.
And, of course the twin inflations, monetary and “social”
(the tendency of courts and juries to stretch the coverage of
policies beyond what insurers, relying upon contract terminology
and precedent, had expected), are unstoppable. Costs of
repairing both property and people - and the extent to which
these repairs are deemed to be the responsibility of the insurer
- will advance relentlessly.
Absent any bad luck (catastrophes, increased driving, etc.),
an immediate industry volume gain of at least 10% per year
probably is necessary to stabilize the record level of
underwriting losses that will automatically prevail in mid-1982.
(Most underwriters expect incurred losses in aggregate to rise at
least 10% annually; each, of course, counts on getting less than
his share.) Every percentage point of annual premium growth below
the 10% equilibrium figure quickens the pace of deterioration.
Quarterly data in 1981 underscore the conclusion that a terrible
underwriting picture is worsening at an accelerating rate.
In the 1980 annual report we discussed the investment
policies that have destroyed the integrity of many insurers’
balance sheets, forcing them to abandon underwriting discipline
and write business at any price in order to avoid negative cash
flow. It was clear that insurers with large holdings of bonds
valued, for accounting purposes, at nonsensically high prices
would have little choice but to keep the money revolving by
selling large numbers of policies at nonsensically low prices.
Such insurers necessarily fear a major decrease in volume more
than they fear a major underwriting loss.
But, unfortunately, all insurers are affected; it’s
difficult to price much differently than your most threatened
competitor. This pressure continues unabated and adds a new
motivation to the others that drive many insurance managers to
push for business; worship of size over profitability, and the
fear that market share surrendered never can be regained.
Whatever the reasons, we believe it is true that virtually
no major property-casualty insurer - despite protests by the
entire industry that rates are inadequate and great selectivity
should be exercised - has been willing to turn down business to
the point where cash flow has turned significantly negative.
Absent such a willingness, prices will remain under severe
pressure.
Commentators continue to talk of the underwriting cycle,
usually implying a regularity of rhythm and a relatively constant
midpoint of profitability Our own view is different. We believe
that very large, although obviously varying, underwriting losses
will be the norm for the industry, and that the best underwriting
years in the future decade may appear substandard against the
average year of the past decade.
We have no magic formula to insulate our controlled
insurance companies against this deteriorating future. Our
managers, particularly Phil Liesche, Bill Lyons, Roland Miller,
Floyd Taylor and Milt Thornton, have done a magnificent job of
swimming against the tide. We have sacrificed much volume, but
have maintained a substantial underwriting superiority in
relation to industry-wide results. The outlook at Berkshire is
for continued low volume. Our financial position offers us
maximum flexibility, a very rare condition in the property-
casualty insurance industry. And, at some point, should fear
ever prevail throughout the industry, our financial strength
could become an operational asset of immense value.
We believe that GEICO Corporation, our major non-controlled
business operating in this field, is, by virtue of its extreme
and improving operating efficiency, in a considerably more
protected position than almost any other major insurer. GEICO is
a brilliantly run implementation of a very important business
idea.
Shareholder Designated Contributions
Our new program enabling shareholders to designate the
recipients of corporate charitable contributions was greeted with
extraordinary enthusiasm. A copy of the letter sent October 14,
1981 describing this program appears on pages 51-53. Of 932,206
shares eligible for participation (shares where the name of the
actual owner appeared on our stockholder record), 95.6%
responded. Even excluding Buffet-related shares, the response
topped 90%.
In addition, more than 3% of our shareholders voluntarily
wrote letters or notes, all but one approving of the program.
Both the level of participation and of commentary surpass any
shareholder response we have witnessed, even when such response
has been intensively solicited by corporate staff and highly paid
professional proxy organizations. In contrast, your
extraordinary level of response occurred without even the nudge
of a company-provided return envelope. This self-propelled
behavior speaks well for the program, and speaks well for our
shareholders.
Apparently the owners of our corporation like both
possessing and exercising the ability to determine where gifts of
their funds shall be made. The “father-knows-best” school of
corporate governance will be surprised to find that none of our
shareholders sent in a designation sheet with instructions that
the officers of Berkshire - in their superior wisdom, of course -
make the decision on charitable funds applicable to his shares.
Nor did anyone suggest that his share of our charitable funds be
used to match contributions made by our corporate directors to
charities of the directors’ choice (a popular, proliferating and
non-publicized policy at many large corporations).
All told, $1,783,655 of shareholder-designed contributions
were distributed to about 675 charities. In addition, Berkshire
and subsidiaries continue to make certain contributions pursuant
to local level decisions made by our operating managers.
There will be some years, perhaps two or three out of ten,
when contributions by Berkshire will produce substandard tax
deductions - or none at all. In those years we will not effect
our shareholder designated charitable program. In all other
years we expect to inform you about October 10th of the amount
per share that you may designate. A reply form will accompany
the notice, and you will be given about three weeks to respond
with your designation. To qualify, your shares must be
registered in your own name or the name of an owning trust,
corporation, partnership or estate, if applicable, on our
stockholder list of September 30th, or the Friday preceding if
such date falls on a Saturday or Sunday.
Our only disappointment with this program in 1981 was that
some of our shareholders, through no fault of their own, missed
the opportunity to participate. The Treasury Department ruling
allowing us to proceed without tax uncertainty was received early
in October. The ruling did not cover participation by
shareholders whose stock was registered in the name of nominees,
such as brokers, and additionally required that the owners of all
designating shares make certain assurances to Berkshire. These
assurances could not be given us in effective form by nominee
holders.
Under these circumstances, we attempted to communicate with
all of our owners promptly (via the October 14th letter) so that,
if they wished, they could prepare themselves to participate by
the November 13th record date. It was particularly important
that this information be communicated promptly to stockholders
whose holdings were in nominee name, since they would not be
eligible unless they took action to re-register their shares
before the record date.
Unfortunately, communication to such non-record shareholders
could take place only through the nominees. We therefore
strongly urged those nominees, mostly brokerage houses, to
promptly transmit our letter to the real owners. We explained
that their failure to do so could deprive such owners of an
important benefit.
The results from our urgings would not strengthen the case
for private ownership of the U.S. Postal Service. Many of our
shareholders never heard from their brokers (as some shareholders
told us after reading news accounts of the program). Others were
forwarded our letter too late for action.
One of the largest brokerage houses claiming to hold stock
for sixty of its clients (about 4% of our shareholder
population), apparently transmitted our letter about three weeks
after receipt - too late for any of the sixty to participate.
(Such lassitude did not pervade all departments of that firm; it
billed Berkshire for mailing services within six days of that
belated and ineffectual action.)
We recite such horror stories for two reasons: (1) if you
wish to participate in future designated contribution programs,
be sure to have your stock registered in your name well before
September 30th; and (2) even if you don’t care to participate and
prefer to leave your stock in nominee form, it would be wise to
have at least one share registered in your own name. By so
doing, you can be sure that you will be notified of any important
corporate news at the same time as all other shareholders.
The designated-contributions idea, along with many other
ideas that have turned out well for us, was conceived by Charlie
Munger, Vice Chairman of Berkshire and Chairman of Blue Chip.
Irrespective of titles, Charlie and I work as partners in
managing all controlled companies. To almost a sinful degree, we
enjoy our work as managing partners. And we enjoy having you as
our financial partners.
Warren E. Buffett
Chairman of the Board
中文译文
伯克希尔·哈撒韦公司
1982年2月26日
致伯克希尔·哈撒韦公司股东：
1981年经营利润3970万美元，相当于期初股东权益（证券按成本计价）的15.2%，而1980年为17.8%。我们新推出的股东指定公司慈善捐款计划（详情见后文）使1981年利润减少了约90万美元。该计划将在每年评估公司税务状况后决定是否延续，1980年尚未启动。
**非控股所有权收益**
在1980年年报中，我们详细讨论了非控股所有权收益的概念，即伯克希尔在那些我们不控制或不具有重大影响力、但持有重要投资的公司中所占的未分配利润份额。（新股东或潜在股东如需，我们乐于提供该讨论或本报告中引用的早前报告相关内容的副本。）这些未分配利润的任何部分均未计入伯克希尔的经营利润。
然而，我们相信，总体而言，这些未分配因而未记录的利润，将如同我们控制的子公司所赚取、留存并报告的类似利润一样，确凿地转化为伯克希尔股东的有形价值。
我们知道，这种非控股所有权收益转化为伯克希尔相应的已实现和未实现资本收益的过程，在时间上会极不规则。虽然长期来看市场价值与商业价值相当吻合，但在任何给定年份，两者关系都可能反复无常地剧烈波动。市场对留存收益的认可在不同公司间也会不均衡地实现。在收益使用低效的公司中，这种认可可能会低得令人失望甚至为负；而在那些利用增资实现高回报的公司中，则可能远远超过每留存1美元利润所对应的金额。总体而言，如果以合理的技巧选定一组非控股公司，那么这组公司的整体结果应该是相当令人满意的。
总体来看，我们非控股企业权益的潜在经济特征优于我们控股的企业。这可以理解：选择范围要宽广得多。优秀企业的小部分股权通常可以在证券市场上以合理价格买到。但完整购买此类企业的机会很少，而且几乎总是伴随着高价。
**一般收购行为**
正如我们的历史所表明，无论是完全拥有企业，还是持有代表企业一小部分股权的有价证券，我们都觉得自在。我们持续在这两个领域寻找动用大额资金的方式。（但我们尽量避免小额承诺——"如果一件事根本不值得做，那就不值得做好。"）事实上，我们保险和印花券业务的流动性要求迫使我们在有价证券上进行重大投资。
我们的收购决策将以最大化真实经济利益为目标，而不是最大化管理版图或会计目的下的报告数字。（长远来看，强调会计表象而非经济实质的管理层，通常两方面都难有建树。）
无论对当期报告利润有何影响，我们宁愿以每股X的价格购买Wonderful Business T公司10%的股权，也不愿以每股2X的价格购买该公司100%的股权。大多数企业管理者恰恰相反，而且不乏为其行为辩护的种种理由。
然而，我们怀疑，在大多数高溢价收购中，以下三种动机——通常未言明——单独或共同起着重要作用：
（1）领导者，无论是商业领域还是其他领域，很少缺乏好斗精神，往往热衷于增加活动和挑战。在伯克希尔，只有在收购前景出现时，公司的脉搏才会跳得更快。
（2）大多数组织，无论是商业还是其他，都以规模为标准来衡量自己、被他人衡量，并据此对管理者进行补偿，其权重大幅超过其他任何衡量标准。（问问《财富》500强经理人他的公司在那个著名榜单上排名第几，他回答的几乎总是按销售额排序的排名；他很可能甚至不知道公司在《财富》同样忠实编制的按盈利能力排名的同一500强榜单上排第几。）
（3）许多管理层显然在童年时期对"英俊王子被美丽公主一吻从蟾蜍体内解救"的故事过度着迷。因此，他们确信自己的管理之吻会对T（目标）公司的盈利能力产生奇迹。
这种乐观是必不可少的。没有这种玫瑰色的看法，A（收购方）公司的股东们为什么要以2X的收购成本拥有T公司的权益，而不是以X的市场价格——如果他们自己直接购买的话——买入呢？
换句话说，投资者总是可以按蟾蜍的市价买入蟾蜍。如果投资者转而资助那些希望支付双倍价格来亲吻蟾蜍的公主，那么这些吻最好真的蕴含一些威力。我们见过许多吻，但很少见到奇迹。尽管如此，许多管理公主们仍然对自己的吻的未来效力保持平静的自信——即使她们公司的后院已经堆满了毫无反应的蟾蜍。
公平地说，我们承认有些收购记录令人炫目。主要有两类脱颖而出。
第一类涉及那些有意或无意只购买特别适应通货膨胀环境的企业。这类受青睐的企业必须具备两个特征：（1）能够相当容易地提价（即使产品需求平淡、产能未满），且不担心市场份额或销量显著损失；（2）能够以仅需少量额外资本投入，来容纳业务量的大幅增长（通常更多由通胀而非实际增长驱动）。能力平平的管理者，只要专注于满足这些条件的收购机会，近几十年来已取得出色成果。然而，同时具备这两个特征的企业极少，竞争已激烈到适得其反的程度。
第二类涉及管理巨星——那些能识别伪装成蟾蜍的稀世王子，并拥有剥去伪装的管理能力的人。我们向这些管理者致敬，如西北工业的本·海涅曼、Teledyne的亨利·辛格尔顿、National Service Industries的欧文·扎班，以及特别是Capital Cities Communications的汤姆·墨菲（一位真正的管理"双料冠军"——他的收购努力恰当聚焦于第一类，其运营才能又使他成为第二类的佼佼者）。从直接和间接经验中，我们认识到这些高管成就的难度和稀有性。（他们自己也知道；这些冠军们近年来很少做交易，而且常常发现回购自家股份是公司资金最明智的用途。）
不幸的是，你们的董事长并不具备第二类的资格。而且，尽管对迫使集中于第一类的经济因素有相当好的理解，我们在该类的实际收购活动却零星且不足。我们的说教优于实绩。（我们忽略了诺亚原则：预测下雨不算数，建造方舟才算。）
我们偶尔曾试图以低廉价格买入蟾蜍，结果在过去的报告中已有记载。显然我们的吻毫无效果。我们确实与几位王子合作得不错——但他们购买时就是王子。至少我们的吻没把他们变成蟾蜍。最后，我们有时相当成功地在蟾蜍般的价格上买入了易于识别的王子的零星权益。
**伯克希尔收购目标**
我们将继续寻求以合理的价格整体收购企业——即使所收购企业的未来发展与过去大致相同，这个价格也说得过去。对于第一类企业，如果我们对得到的东西相当有信心，我们很可能会支付相当高昂的价格。但在任何收购中，我们通常不会为预期将由我们带来的东西支付高价——因为我们发现我们通常带不来多少东西。
1981年，我们非常接近完成一次重大收购，涉及一家我们非常喜欢的企业和管理者。然而，最终要求的要价，考虑到资金的替代用途，会使我们的股东状况比收购前更差。帝国会更大，但公民会更穷。
尽管1981年没有成功，未来我们仍将不时能够100%收购符合我们标准的企业。此外，我们预计偶尔会提供重大的"非投票合伙"机会，如本报告第47页Pinkerton标题下所讨论。我们欢迎关于此类公司的建议，在这些公司中，作为重要的初级合伙人，我们既能取得良好经济成果，又能促进现有所有者和管理者的长期目标。
目前，我们发现最易获得价值的途径是通过公开市场购买具有卓越商业特许权且管理层能干诚实的公司的零星股权。我们从不期望经营这些公司，但确实期望从它们身上获利。
我们预计，这类公司的未分配利润将为伯克希尔及其股东创造完整价值（变现时需缴税）。如果没有，那我们在以下方面犯了错误：（1）我们选择参与的管理层；（2）企业未来的经济状况；或（3）我们支付的价格。
我们犯过很多这样的错误——无论是在购买非控股权益还是控股权益时。第（2）类判断错误最为常见。当然，需要深挖我们的历史才能找到这类错误的例子——有时深至两三个月前。例如，去年你们的董事长自愿就铝业的光明前景发表了专家意见。此后，对该意见进行了若干次小幅修正——现在合计大约修正了180度。
然而，出于个人以及更客观的原因，我们通常能够在非控股企业（有价证券）中比在控股子公司中更快地纠正此类错误。实际上，缺乏控制往往反而成为经济上的优势。
正如我们去年提到的，我们未记录的"所有权"收益规模已增长到超过我们报告经营利润的总和。我们预计这种情况将持续。在这个类别中，仅四个持股——GEICO公司、通用食品公司、R.J. Reynolds Industries Inc.和华盛顿邮报公司——我们在1982年的未分配因而未记录的利润份额很可能总计超过3500万美元。完全忽略这些未分配利润的会计准则，削弱了我们年度净资产收益率或任何其他单一经济绩效指标的有用性。
**长期公司绩效**
在衡量长期经济绩效时，我们保险子公司持有的权益证券按市值计价，并扣除如果未实现收益实际变现时所需缴纳的税款。如果我们在本报告上一节强调的前提正确，我们未报告的所有权收益将不规则但必然地进入我们的净资产。迄今为止，情况确实如此。
更纯粹的计算绩效方式是将债券和非保险持有的权益证券按市价估值。然而，GAAP会计准则并未规定这种做法，而增加纯粹性只会使结果发生极微小的变化。如果任何估值差异扩大到显著比例——正如在大多数大型保险公司发生的那样——我们会向你报告其影响。
按GAAP基础，在现任管理层任职的17年间，账面价值从每股19.46美元增加到每股526.02美元，年复合增长率21.1%。这个回报率数字在未来年份很可能会下降。但我们希望它能显著高于美国大型企业平均水平。
1981年伯克希尔净资产的大幅增长——总计1.24亿美元，约31%——有一半以上来自单一投资GEICO公司的市场表现。总体来看，年内我们证券的市场收益远超基础商业价值的增长。这种市场波动并不总是令人愉快的一面。
在过去报告中，我们解释了通货膨胀如何使我们表面上令人满意的长期公司绩效，在衡量股东真实投资结果时具有欺骗性。我们赞扬美联储主席沃尔克的努力，并注意到当前各种价格指数涨幅较为温和。然而，我们对长期通胀趋势的看法一如既往地悲观。如同贞洁一样，稳定的物价水平似乎可以维持，但无法恢复。
尽管通胀在投资方程中具有压倒性的重要性，但我们不会再长篇大论地重复我们的观点来折磨你们了；通胀本身已经足够惩罚。（受虐狂可索取以往讨论的副本。）但由于货币价值的无情摧毁，我们的公司努力将继续在填满你的钱包方面做得比填饱你的肚子好得多。
**权益资本附加值**
另一个因素应进一步抑制你对长期回报率可能残留的任何热情。支撑权益投资的经济逻辑是：总体而言，通过将管理和创业技能与权益资本相结合，可以获得超过被动投资收益（固定收益证券利息）的额外收益。此外，该逻辑认为，由于权益资本地位比被动投资形式承担更大风险，因此它"有权"获得更高回报。权益资本的"附加值"奖励似乎自然而确定。
但果真如此吗？几十年前，低至10%的净资产收益率就足以使公司被归类为"好"企业——即，理论上预期市场上再投资于该企业的每一美元价值会超过100美分。因为当时长期应税债券收益率为5%，长期免税债券为3%，一个能利用权益资本获得10%回报的企业运营显然值得投资者溢价支付。即使考虑到股息税和资本利得税的共同作用会将公司赚取的10%降至个人投资者手中的约6%-8%，情况依然如此。
投资市场认识到了这一事实。在那个较早时期，美国企业平均在权益资本上赚取约11%的回报，股票总体以远高于权益资本（账面价值）的估值出售，平均每1美元账面价值对应超过1.50美元的市场价值。大多数企业都是"好"企业，因为它们赚取的远高于其维持成本（长期被动资金的回报）。权益投资产生的附加值总量可观。
那样的日子一去不复返了。但在其存在期间学到的教训难以丢弃。尽管投资者和管理者必须将脚踏入未来，但他们的记忆和神经系统往往仍与过去相连。投资者利用历史市盈率、管理者利用历史企业估值标尺，比任何一方每天重新思考其前提要容易得多。当变化缓慢时，持续反思实际上并不可取；它收效甚微且减慢响应速度。但当变化剧烈时，昨天的假设只能在付出高昂代价时保留。而经济变化的步伐已变得令人瞠目。
在过去一年中，长期应税债券收益率超过16%，长期免税债券超过14%。当然，从此类免税债券获得的总回报直接进入个人所有者的口袋。与此同时，美国企业仅在权益资本上产生约14%的回报。而这14%在个人所有者存入银行之前还要因税收而大幅缩减。这种缩减的程度取决于公司的股息政策和适用于投资者的税率。
因此，以1981年底被动投资利率水平来看，典型美国企业对个人所有者而言每一美元账面价值已不再值一美元。（如果企业由养老基金或其他免税投资者拥有，计算公式虽然仍不诱人，但会显著好转。）假设投资者处于50%税率档；如果我们的典型公司支付全部利润，投资者获得的收入回报将相当于7%的免税债券。而且，如果情况持续——如果所有利润都支付、净资产收益率保持在14%——则对高税率个人投资者而言的7%免税等价回报就像免税债券的票息一样被冻结。这样的永久性7%免税债券在本文撰写时可能只值50美分。
另一方面，如果我们的典型美国企业的所有利润都被留存，且净资产收益率再次保持不变，利润将以每年14%增长。如果市盈率保持不变，典型股票的价格也将以每年14%增长。但那14%尚未进入股东口袋。要将其放入口袋，需要支付资本利得税，目前最高税率为20%。当然，这个净回报率比当前可获得的被动税后利率要差。
除非被动利率下降，否则实现每股收益14%年增长但不支付现金股息的公司，对其个人股东而言是经济上的失败。被动资本的回报超过了主动资本的回报。这对投资者和企业管理者来说都是令人不快的事实，因此他们可能想忽略它。但事实不会因为令人不快或被忽视而消失。
大多数美国企业支付其利润的很大一部分，因此落在上述两个例子之间。而且大多数美国企业目前在经济上是"坏"企业——对个人投资者而言，税后产生的回报低于金钱的免税被动回报率。当然，一些高回报企业即使在当前条件下仍具吸引力。但美国权益资本总体而言并未为个人投资者创造附加值。
需要强调的是，这种令人沮丧的情况并非因为企业在经济上跳得比以前低了。实际上，它们跳得更高了：过去十年净资产收益率提升了几个百分点。但被动回报的横杆提升得更快。不幸的是，大多数公司除了希望横杆显著降低外，几乎无能为力；很少有行业在净资产收益率大幅提升方面前景光明。
通胀经历和预期将是影响未来年份横杆高度的主要（但不是唯一）因素。如果长期通胀的成因能够缓解，被动回报率很可能下降，美国权益资本的内在地位应显著改善。许多目前必须归类为经济上"坏"的企业，在这种情况下将恢复到"好"的类别。
通胀环境还给"坏"企业的所有者施加了进一步的、特别具有讽刺意味的惩罚。为了以当前模式继续经营，这种低回报企业通常必须留存大部分利润——无论这种政策对股东造成何种惩罚。
当然，理性会主张恰恰相反的政策。一个持有一张5%债券且尚有多年才到期的个人，不会拿那张债券的票息去按面值购买更多5%债券，而类似债券目前可以比如40美分买到。相反，他会拿低回报债券的那些票息——如果倾向于再投资——去寻找目前可获得的具有安全性的最高回报。好钱不会跟着坏钱跑。
对债券持有人合理的做法对股东也合理。逻辑上讲，一个历史上和预期中净资产收益率高的公司应留存大部分或全部利润，以便股东能在扩大的资本上获得溢价回报。相反，公司权益回报率低则表明应实行非常高的股息支付率，以便所有者能将资本导向更有吸引力的领域。（圣经也赞同这一点。在塔兰特寓言中，两位高回报的仆人获得100%的利润留存奖励，并被鼓励扩大经营。然而，那位无回报的第三位仆人不仅受到斥责——"又恶又懒"——还被要求将其所有资本转交给业绩最佳者。马太福音25:14-30）
但通货膨胀将我们带过镜子，进入爱丽丝的颠倒世界。当价格持续上涨时，"坏"企业必须留住它能留住的每一分钱。不是因为它是权益资本的有吸引力的存放处，而是恰恰因为它如此不具吸引力，低回报企业必须遵循高留存政策。如果它希望未来像过去一样继续经营——而大多数实体，包括企业，确实如此——它别无选择。
因为通货膨胀就像一个巨大的企业绦虫。这条绦虫不管宿主的健康状况如何，都会先发制人地消耗其每日所需的投资美元。无论报告利润水平如何（即使为零），企业为了仅仅保持与上一年相同的实物量，持续需要更多的应收账款、存货和固定资产资金。企业越不景气，绦虫夺走的可用营养比例就越大。
在当前条件下，一个净资产收益率为8%或10%的企业通常没有剩余用于扩张、债务削减或"真正"的股息。通胀绦虫只是把盘子舔干净。（低回报公司无力支付股息，可以理解，通常被伪装起来。美国企业越来越多地转向股息再投资计划，有时甚至包含折扣安排，几乎迫使股东再投资。其他公司则向彼得发行新股以向保罗支付股息。要警惕那些只有在有人承诺替换所分配资本时才能支付的"股息"。）
伯克希尔继续留存利润是为了进攻性目的，而非防御性或强制性原因。但我们绝没有对不断上升的被动回报对权益资本施加的压力免疫。我们仍然能够越过税后被动回报的横杆——但只是勉强。我们历史性的21%回报率——未来绝无保证——在目前资本利得税率（我们预计未来几年将大幅上升）下，仍然比当前被动资金的税后利率有适度的优势。如果我们的公司附加值变为负数，那会有点丢人。但这可能发生在这里，如同发生在别处一样，要么是由于外部不可控事件，要么是我们自身适应性较差。
**报告利润来源**
下表显示了伯克希尔报告利润的来源。伯克希尔拥有蓝筹印花约60%的股份，蓝筹印花又拥有韦斯科金融公司80%的股份。该表显示了各企业实体的总经营利润，以及伯克希尔所占份额。所有因任何企业实体异常资产出售而产生的重大损益，与证券交易一起汇总在表格靠近底部的行中，不计入经营利润。
资料来源：（表格格式复杂，将按原样保留，仅翻译表头和公司名）
（表格内容翻译如下，注意保持对齐。由于是文本格式，我将逐行翻译。）
净利润
税前利润 税后
-------------------------------------- ------------------
总计 伯克希尔份额 伯克希尔份额
------------------ ------------------ ------------------
1981 1980 1981 1980 1981 1980
-------- -------- -------- -------- -------- --------
（千美元省略）
经营利润：
保险集团：
承销 ................ $ 1,478 $ 6,738 $ 1,478 $ 6,737 $ 798 $ 3,637
净投资收益 ........... 38,823 30,939 38,823 30,927 32,401 25,607
伯克希尔-旺贝克纺织 .... (2,669) (508) (2,669) (508) (1,493) 202
联合零售商店 .......... 1,763 2,440 1,763 2,440 759 1,169
喜诗糖果 .............. 21,891 15,475 13,046 9,223 6,289 4,459
布法罗晚报 ............ (1,057) (2,777) (630) (1,655) (276) (800)
蓝筹印花-母公司 ........ 3,642 7,699 2,171 4,588 2,134 3,060
韦斯科金融-母公司 ...... 4,495 2,916 2,145 1,392 1,590 1,044
共同储蓄与贷款 ........ 1,605 5,814 766 2,775 1,536 1,974
精密钢铁 .............. 3,453 2,833 1,648 1,352 841 656
债务利息 .............. (14,656) (12,230) (12,649) (9,390) (6,671) (4,809)
其他* ................. 1,895 1,698 1,344 1,308 1,513 992
-------- -------- -------- -------- -------- --------
小计 - 持续经营 ....... $ 60,663 $ 61,037 $ 47,236 $ 49,189 $ 39,421 $ 37,191
伊利诺伊国民银行** ..... -- 5,324 -- 5,200 -- 4,731
-------- -------- -------- -------- -------- --------
经营利润 ............... 60,663 66,361 47,236 54,389 39,421 41,922
证券出售及异常资产出售.. 37,801 19,584 33,150 15,757 23,183 11,200
-------- -------- -------- -------- -------- --------
总利润 - 所有实体 ...... $ 98,464 $ 85,945 $ 80,386 $ 70,146 $ 62,604 $ 53,122
======== ======== ======== ======== ======== ========
*购买企业时产生的无形资产摊销（如喜诗、共同储蓄和布法罗晚报）反映在"其他"类别中。
**伯克希尔于1980年12月31日剥离了伊利诺伊国民银行的所有权。
蓝筹印花和韦斯科是上市公司，有各自的报告要求。在本报告第38-50页，我们转载了两家公司主要高管关于1981年经营情况的叙述性报告。任何伯克希尔股东均可向Robert H. Bird先生（蓝筹印花，地址：5801 South Eastern Avenue, Los Angeles, California 90040）或Jeanne Leach夫人（韦斯科金融公司，地址：315 East Colorado Boulevard, Pasadena, California 91109）索取任一公司的完整年报副本。
正如我们先前所述，在我们不控制的公司中的未分配利润，现在与上表详述的报告经营利润同等重要。当然，利润的分配部分主要通过保险集团收益中的净投资收益进入该表。
下面我们列出伯克希尔在那些非控股企业中的持股比例，这些企业的利润中只有已分配部分（股息）计入我们的利润。
持股数量 成本 市值
------------- ---------- ----------
（千美元省略）
451,650 (a) Affiliated Publications, Inc. ........ $ 3,297 $ 14,114
703,634 (a) Aluminum Company of America .......... 19,359 18,031
420,441 (a) Arcata Corporation （含普通股等价物）.. 14,076 15,136
475,217 (b) Cleveland-Cliffs Iron Company ........ 12,942 14,362
441,522 (a) GATX Corporation ..................... 17,147 13,466
2,101,244 (b) General Foods, Inc. .................. 66,277 66,714
7,200,000 (a) GEICO Corporation .................... 47,138 199,800
2,015,000 (a) Handy & Harman ....................... 21,825 36,270
711,180 (a) Interpublic Group of Companies, Inc. 4,531 23,202
282,500 (a) Media General ........................ 4,545 11,088
391,400 (a) Ogilvy & Mather International Inc. ... 3,709 12,329
370,088 (b) Pinkerton's, Inc. .................... 12,144 19,675
1,764,824 (b) R. J. Reynolds Industries, Inc. ...... 76,668 83,127
785,225 (b) SAFECO Corporation ................... 21,329 31,016
1,868,600 (a) The Washington Post Company .......... 10,628 58,160
---------- ----------
$335,615 $616,490
所有其他普通股持股 ................................ 16,131 22,739
---------- ----------
普通股总计 ....................................... $351,746 $639,229
========== ==========
(a) 全部由伯克希尔或其保险子公司拥有。
(b) 蓝筹印花和/或韦斯科拥有这些公司的股份。所有数字均代表伯克希尔在集团较大总持股中的净权益。
我们控股和非控股的企业经营领域如此广泛，在此详细评论会过于冗长。更多财务信息包含在第34-37页的管理层讨论以及第38-50页的叙述性报告中。然而，我们最大规模的控股和非控股活动领域一直是，而且几乎肯定将继续是，财产意外险领域，因此对该行业的重要发展进行评论是适当的。
**保险行业状况**
"预测"，塞缪尔·高德温说，"是危险的，尤其是关于未来的预测。"（伯克希尔股东在重读我们过去年报中你的董事长对纺织前景的精辟分析后，可能也得出了类似结论。）
然而，预测1982年将是保险承销近年来最糟糕的一年，这并不危险。这一结果已由当前的定价行为以及保险合同的期限性质所保证。
虽然许多汽车保单以六个月为间隔定价和销售——许多财产保单以三年为期销售——但所有财产意外险保单期限的加权平均可能略低于十二个月。当然，保险的价格在合同有效期内是固定的。因此，今年的销售合同（业内称为"已收保费"）决定了明年收入水平（"已赚保费"）的大约一半。另一半将由明年签订的销售合同决定，这些合同将在那年赚取约50%。盈利能力后果是自动的：如果你在定价上犯了错误，就必须在不舒服的时期忍受它。
请注意下表中全行业已收保费的年同比增幅及其对当前和次年承保盈利能力水平的影响。结果正如你在通胀世界中预期的那样。当保费量增长远高于两位数时，预示着当前和次年盈利趋势良好。当行业保费量增长较小时，承保业绩很快就会恶化——无论当前水平多么不令人满意。
表中的Best's数据反映了几乎整个行业的经验，包括股份公司、相互公司和互惠公司。综合成本率表示相对于保费的总运营和损失成本；低于100表示承保利润，高于100表示亏损。
已收保费年变化(%) 已赚保费年变化(%) 保单持有人红利后综合成本率
------------- ------------- ----------------
1972 ............... 10.2 10.9 96.2
1973 ............... 8.0 8.8 99.2
1974 ............... 6.2 6.9 105.4
1975 ............... 11.0 9.6 107.9
1976 ............... 21.9 19.4 102.4
1977 ............... 19.8 20.5 97.2
1978 ............... 12.8 14.3 97.5
1979 ............... 10.3 10.4 100.6
1980 ............... 6.0 7.8 103.1
1981 ............... 3.6 4.1 105.7
来源：Best's Aggregates and Averages。
正如波戈会说的："未来已不再是过去的样子。"当前的定价实践预示着灾难性的后果，尤其是如果该行业近年来享受的远离重大自然灾害的喘息期结束的话。因为承保业绩一直在恶化，尽管运气不错，而非由于运气不好。近年来飓风停留在海上，驾车者减少了驾驶。他们不会总是这么配合。
当然，双重通胀——货币通胀和"社会"通胀（法院和陪审团倾向于将保单覆盖范围扩大到超出保险公司基于合同术语和先例所预期的范围）——是无法阻止的。修复财产和人的成本——以及这些修复被认定为保险公司责任的程度——将无情地增长。
在没有任何坏运气（灾难、驾驶增加等）的情况下，行业保费量立即达到至少每年10%的增长，可能才足以稳定1982年中将自动达到的历史最高承保损失水平。（大多数承保人预计总已发生损失每年至少上升10%；当然，每个人都指望自己分得的份额少于平均。）年度保费增长每低于10%均衡点一个百分点，就会加快恶化速度。1981年的季度数据更加突出了一个结论：糟糕的承保局面正以加速的速度恶化。
在1980年年报中，我们讨论了投资政策如何破坏了许多保险公司资产负债表的完整性，迫使它们放弃承保纪律，以任何价格承保业务以避免负现金流。显然，那些持有大量按会计目的以荒谬高价估值的债券的保险公司，除了通过以荒谬低价出售大量保单来保持资金流转之外，几乎别无选择。这些保险公司必然更害怕业务量大幅下降，而非害怕重大承保损失。
但不幸的是，所有保险公司都受到影响；很难定价与最具威胁的竞争对手相差太多。这种压力有增无减，并给驱使许多保险经理人推动业务的其它动机增添了新动力：崇拜规模胜过盈利能力，以及担心失去的市场份额永远无法恢复。
不管原因如何，我们认为实际上没有一家大型财产意外险公司——尽管整个行业抗议费率不足、应谨慎选择——愿意拒绝业务到使现金流显著为负的程度。如果没有这种意愿，价格将承受严重压力。
评论员们继续谈论承保周期，通常暗示一种有规律的节奏和相对恒定的利润中点。我们自己的观点不同。我们认为，非常大的——尽管显然会变化——承保损失将成为行业的常态，并且未来十年中最好的承保年份，与过去十年的平均水平相比，可能显得逊色。
我们没有神奇配方来使我们控股的保险公司免受这种恶化的未来影响。我们的经理人，特别是Phil Liesche、Bill Lyons、Roland Miller、Floyd Taylor和Milt Thornton，在逆水行舟方面做得非常出色。我们牺牲了大量业务量，但在与全行业结果相比方面保持了显著承保优势。伯克希尔的前景是业务量持续低迷。我们的财务状况提供了最大的灵活性，这在财产意外险行业非常罕见。而且，在某个时刻，如果恐惧在整个行业蔓延，我们的财务实力可能成为具有巨大价值的运营资产。
我们相信GEICO公司，我们在该领域的主要非控股企业，凭借其极端且不断提升的运营效率，其受保护地位远胜于几乎所有其他主要保险公司。GEICO是对一个非常重要的商业理念的出色执行。
**股东指定捐款**
我们的新计划——使股东能够指定公司慈善捐款的接受者——受到了极大的热情欢迎。1981年10月14日寄出的描述该计划的信件副本见第51-53页。在符合参与资格的932,206股股票中（即实际所有者姓名出现在我们股东名册上的股份），95.6%做出了回应。即使排除巴菲特相关股份，回应率也超过90%。
此外，超过3%的股东自愿写信或便条，除一人外均赞同该计划。无论是参与率还是评论数量，都超过了我们所见过的任何股东回应，即使是在公司员工和高薪专业代理机构大力争取的回应中。相比之下，你们这种非同寻常的回应率甚至是在没有公司提供回邮信封的情况下实现的。这种自发的行为既说明了该计划的好处，也说明了我们的股东素质。
显然，我们公司的所有者既喜欢拥有也喜欢行使决定其资金捐赠去向的能力。那些认为"父亲最知道"的公司治理学派会惊讶地发现，没有一个股东寄来指定表格，指示伯克希尔高管——当然以他们的卓越智慧——为他的股份决定慈善资金用途。也没有人建议将他那份慈善资金用于匹配公司董事们对他们所选慈善机构的捐款（这是许多大公司流行且不断扩大的非公开政策）。
总共，1,783,655美元的股东指定捐款分配给了约675家慈善机构。此外，伯克希尔及其子公司继续根据我们运营经理在地方层面做出的决定进行某些捐款。
在某些年份，也许十年中有两三年，伯克希尔的捐款将产生低于标准的税收减免——或者根本没有。在那些年份，我们将不执行股东指定慈善计划。在所有其他年份，我们预计在10月10日左右通知您每股可供指定的金额。通知将附有回复表格，您将有大约三周时间回复您的指定。要符合资格，您的股票必须在9月30日（如果该日落在周六或周日，则为前一个周五）以您自己的名义或在适用情况下以拥有信托、公司、合伙或遗产的名义登记在我们的股东名册上。
1981年该计划令我们唯一失望的是，一些股东并非由于自身过错而错过了参与机会。使我们能够在没有税务不确定性的情况下进行的财政部裁决于10月初收到。该裁决不包括以代名人（如经纪商）名义登记股票的股东参与，并且还要求所有指定股票的股东向伯克希尔做出某些保证。代名人持有人无法以有效形式向我们提供这些保证。
在这种情况下，我们试图立即与所有股东沟通（通过10月14日的信函），以便他们如果愿意，可以在11月13日的记录日期前做好准备参与。对于以代名人名义持股的股东来说，及时传达这些信息尤为重要，因为除非他们在记录日期前采取行动重新登记股票，否则他们不具备资格。
不幸的是，与这些非记录股东的联系只能通过代名人进行。因此，我们强烈敦促那些代名人（主要是经纪公司）立即将我们的信件转交给真正的所有者。我们解释说，如果他们未能这样做，可能会剥夺这些所有者的一项重要利益。
我们敦促的结果不会加强美国邮政私营化的论据。许多股东从未收到经纪人的消息（正如一些股东在阅读该计划的新闻报道后告诉我们的那样）。其他人收到我们信件的时间太晚，无法采取行动。
一家最大的经纪公司声称为其60位客户（约占我们股东人数的4%）持有股票，显然在收到后约三周才转交我们的信件——使这60位客户中的任何一位都来不及参与。（这种懈怠并未遍及该公司的所有部门；它在延迟且无效的行动后六天内就向伯克希尔寄出了邮寄服务账单。）
我们讲述这些恐怖故事有两个原因：（1）如果您希望参与未来的指定捐款计划，请务必在9月30日前将您的股票以您自己的名义登记；（2）即使您不想参与并且更愿意将股票以代名人形式持有，明智的做法是至少持有一股以您自己名义登记的股票。这样，您可以确保与其他所有股东同时收到任何重要公司消息的通知。
指定捐款的想法，以及对我们来说结果良好的许多其他想法，是由查理·芒格（Charlie Munger）构思的，他是伯克希尔副董事长兼蓝筹印花董事长。不论头衔如何，查理和我以合伙人身份共同管理所有控股公司。几乎是到了有罪的程度，我们享受作为管理合伙人的工作。而且我们享受有你们作为我们的财务合伙人。
沃伦·E·巴菲特
董事会主席