Charlie Munger – The Architect of Berkshire Hathaway
Charlie Munger died on November 28, just 33 days before his 100 $^{th}$ birthday.
Though born and raised in Omaha, he spent 80% of his life domiciled elsewhere. Consequently, it was not until 1959 when he was 35 that I first met him. In 1962, he decided that he should take up money management.
Three years later he told me – correctly! – that I had made a dumb decision in buying control of Berkshire. But, he assured me, since I had already made the move, he would tell me how to correct my mistake.
In what I next relate, bear in mind that Charlie and his family did not have a dime invested in the small investing partnership that I was then managing and whose money I had used for the Berkshire purchase. Moreover, neither of us expected that Charlie would ever own a share of Berkshire stock.
Nevertheless, Charlie, in 1965, promptly advised me: “Warren, forget about ever buying another company like Berkshire. But now that you control Berkshire, add to it wonderful businesses purchased at fair prices and give up buying fair businesses at wonderful prices. In other words, abandon everything you learned from your hero, Ben Graham. It works but only when practiced at small scale.” With much back-sliding I subsequently followed his instructions.
Many years later, Charlie became my partner in running Berkshire and, repeatedly, jerked me back to sanity when my old habits surfaced. Until his death, he continued in this role and together we, along with those who early on invested with us, ended up far better off than Charlie and I had ever dreamed possible.
In reality, Charlie was the “architect” of the present Berkshire, and I acted as the “general contractor” to carry out the day-by-day construction of his vision.
Charlie never sought to take credit for his role as creator but instead let me take the bows and receive the accolades. In a way his relationship with me was part older brother, part loving father. Even when he knew he was right, he gave me the reins, and when I blundered he never – never –reminded me of my mistake.
In the physical world, great buildings are linked to their architect while those who had poured the concrete or installed the windows are soon forgotten. Berkshire has become a great company. Though I have long been in charge of the construction crew; Charlie should forever be credited with being the architect.
BERKSHIRE HATHAWAY INC.
To the Shareholders of Berkshire Hathaway Inc.:
Berkshire has more than three million shareholder accounts. I am charged with writing a letter every year that will be useful to this diverse and ever-changing group of owners, many of whom wish to learn more about their investment.
Charlie Munger, for decades my partner in managing Berkshire, viewed this obligation identically and would expect me to communicate with you this year in the regular manner. He and I were of one mind regarding our responsibilities to Berkshire shareholders.
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Writers find it useful to picture the reader they seek, and often they are hoping to attract a mass audience. At Berkshire, we have a more limited target: investors who trust Berkshire with their savings without any expectation of resale (resembling in attitude people who save in order to buy a farm or rental property rather than people who prefer using their excess funds to purchase lottery tickets or “hot” stocks).
Over the years, Berkshire has attracted an unusual number of such “lifetime” shareholders and their heirs. We cherish their presence and believe they are entitled to hear every year both the good and bad news, delivered directly from their CEO and not from an investor-relations officer or communications consultant forever serving up optimism and syrupy mush.
In visualizing the owners that Berkshire seeks, I am lucky to have the perfect mental model, my sister, Bertie. Let me introduce her.
For openers, Bertie is smart, wise and likes to challenge my thinking. We have never, however, had a shouting match or anything close to a ruptured relationship. We never will.
Furthermore, Bertie, and her three daughters as well, have a large portion of their savings in Berkshire shares. Their ownership spans decades, and every year Bertie will read what I have to say. My job is to anticipate her questions and give her honest answers.
Bertie, like most of you, understands many accounting terms, but she is not ready for a CPA exam. She follows business news – reading four newspapers daily – but doesn’t consider herself an economic expert. She is sensible – very sensible – instinctively knowing that pundits should always be ignored. After all, if she could reliably predict tomorrow’s winners, would she freely share her valuable insights and thereby increase competitive buying? That would be like finding gold and then handing a map to the neighbors showing its location.
Bertie understands the power – for good or bad – of incentives, the weaknesses of humans, the “tells” that can be recognized when observing human behavior. She knows who is “selling” and who can be trusted. In short, she is nobody’s fool.
So, what would interest Bertie this year?
Operating Results, Fact and Fiction
Let's begin with the numbers. The official annual report begins on K-1 and extends for 124 pages. It is filled with a vast amount of information – some important, some trivial.
Among its disclosures many owners, along with financial reporters, will focus on page K-72. There, they will find the proverbial “bottom line” labeled “Net earnings (loss).” The numbers read \$90 billion for 2021, (\$23 billion) for 2022 and \$96 billion for 2023.
What in the world is going on?
You seek guidance and are told that the procedures for calculating these “earnings” are promulgated by a sober and credentialed Financial Accounting Standards Board (“FASB”), mandated by a dedicated and hard-working Securities and Exchange Commission (“SEC”) and audited by the world-class professionals at Deloitte & Touche (“D&T”). On page K-67, D&T pulls no punches: “In our opinion, the financial statements . . . . present fairly, in all material respects (italics mine), the financial position of the Company . . . . and the results of its operations . . . . for each of the three years in the period ended December 31, 2023 . . . .”
So sanctified, this worse-than-useless “net income” figure quickly gets transmitted throughout the world via the internet and media. All parties believe they have done their job – and, legally, they have.
We, however, are left uncomfortable. At Berkshire, our view is that “earnings” should be a sensible concept that Bertie will find somewhat useful – but only as a starting point – in evaluating a business. Accordingly, Berkshire also reports to Bertie and you what we call “operating earnings.” Here is the story they tell: \$27.6 billion for 2021; \$30.9 billion for 2022 and \$37.4 billion for 2023.
The primary difference between the mandated figures and the ones Berkshire prefers is that we exclude unrealized capital gains or losses that at times can exceed \$5 billion a day. Ironically, our preference was pretty much the rule until 2018, when the “improvement” was mandated. Galileo’s experience, several centuries ago, should have taught us not to mess with mandates from on high. But, at Berkshire, we can be stubborn.
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Make no mistake about the significance of capital gains: I expect them to be a very important component of Berkshire's value accretion during the decades ahead. Why else would we commit huge dollar amounts of your money (and Bertie's) to marketable equities just as I have been doing with my own funds throughout my investing lifetime?
I can't remember a period since March 11, 1942 – the date of my first stock purchase – that I have not had a majority of my net worth in equities, U.S.-based equities. And so far, so good. The Dow Jones Industrial Average fell below 100 on that fateful day in 1942 when I “pulled the trigger.” I was down about \$5 by the time school was out. Soon, things turned around and now that index hovers around 38,000. America has been a terrific country for investors. All they have needed to do is sit quietly, listening to no one.
It is more than silly, however, to make judgments about Berkshire's investment value based on “earnings” that incorporate the capricious day-by-day and, yes, even year-by-year movements of the stock market. As Ben Graham taught me, “In the short run the market acts as a voting machine; in the long run it becomes a weighing machine.”
What We Do
Our goal at Berkshire is simple: We want to own either all or a portion of businesses that enjoy good economics that are fundamental and enduring. Within capitalism, some businesses will flourish for a very long time while others will prove to be sinkholes. It’s harder than you would think to predict which will be the winners and losers. And those who tell you they know the answer are usually either self-delusional or snake-oil salesmen.
At Berkshire, we particularly favor the rare enterprise that can deploy additional capital at high returns in the future. Owning only one of these companies – and simply sitting tight – can deliver wealth almost beyond measure. Even heirs to such a holding can – ugh! – sometimes live a lifetime of leisure.
We also hope these favored businesses are run by able and trustworthy managers, though that is a more difficult judgment to make, however, and Berkshire has had its share of disappointments.
In 1863, Hugh McCulloch, the first Comptroller of the United States, sent a letter to all national banks. His instructions included this warning: “Never deal with a rascal under the expectation that you can prevent him from cheating you.” Many bankers who thought they could “manage” the rascal problem have learned the wisdom of Mr. McCulloch’s advice – and I have as well. People are not that easy to read. Sincerity and empathy can easily be faked. That is as true now as it was in 1863.
This combination of the two necessities I've described for acquiring businesses has for long been our goal in purchases and, for a while, we had an abundance of candidates to evaluate. If I missed one – and I missed plenty – another always came along.
Those days are long behind us; size did us in, though increased competition for purchases was also a factor.
Berkshire now has – by far – the largest GAAP net worth recorded by any American business. Record operating income and a strong stock market led to a yearend figure of \$561 billion. The total GAAP net worth for the other 499 S&P companies – a who’s who of American business – was \$8.9 trillion in 2022. (The 2023 number for the S&P has not yet been tallied but is unlikely to materially exceed \$9.5 trillion.)
By this measure, Berkshire now occupies nearly 6% of the universe in which it operates. Doubling our huge base is simply not possible within, say, a five-year period, particularly because we are highly averse to issuing shares (an act that immediately juices net worth).
There remain only a handful of companies in this country capable of truly moving the needle at Berkshire, and they have been endlessly picked over by us and by others. Some we can value; some we can't. And, if we can, they have to be attractively priced. Outside the U.S., there are essentially no candidates that are meaningful options for capital deployment at Berkshire. All in all, we have no possibility of eye-popping performance.
Nevertheless, managing Berkshire is mostly fun and always interesting. On the positive side, after 59 years of assemblage, the company now owns either a portion or 100% of various businesses that, on a weighted basis, have somewhat better prospects than exist at most large American companies. By both luck and pluck, a few huge winners have emerged from a great many dozens of decisions. And we now have a small cadre of long-time managers who never muse about going elsewhere and who regard 65 as just another birthday.
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Berkshire benefits from an unusual constancy and clarity of purpose. While we emphasize treating our employees, communities and suppliers well – who wouldn't wish to do so? – our allegiance will always be to our country and our shareholders. We never forget that, though your money is comingled with ours, it does not belong to us.
With that focus, and with our present mix of businesses, Berkshire should do a bit better than the average American corporation and, more important, should also operate with materially less risk of permanent loss of capital. Anything beyond “slightly better,” though, is wishful thinking. This modest aspiration wasn’t the case when Bertie went all-in on Berkshire – but it is now.
Our Not-So-Secret Weapon
Occasionally, markets and/or the economy will cause stocks and bonds of some large and fundamentally good businesses to be strikingly mispriced. Indeed, markets can – and will – unpredictably seize up or even vanish as they did for four months in 1914 and for a few days in 2001. If you believe that American investors are now more stable than in the past, think back to September 2008. Speed of communication and the wonders of technology facilitate instant worldwide paralysis, and we have come a long way since smoke signals. Such instant panics won’t happen often – but they will happen.
Berkshire's ability to immediately respond to market seizures with both huge sums and certainty of performance may offer us an occasional large-scale opportunity. Though the stock market is massively larger than it was in our early years, today's active participants are neither more emotionally stable nor better taught than when I was in school. For whatever reasons, markets now exhibit far more casino-like behavior than they did when I was young. The casino now resides in many homes and daily tempts the occupants.
One fact of financial life should never be forgotten. Wall Street – to use the term in its figurative sense – would like its customers to make money, but what truly causes its denizens' juices to flow is feverish activity. At such times, whatever foolishness can be marketed will be vigorously marketed – not by everyone but always by someone.
Occasionally, the scene turns ugly. The politicians then become enraged; the most flagrant perpetrators of misdeeds slip away, rich and unpunished; and your friend next door becomes bewildered, poorer and sometimes vengeful. Money, he learns, has trumped morality.
One investment rule at Berkshire has not and will not change: Never risk permanent loss of capital. Thanks to the American tailwind and the power of compound interest, the arena in which we operate has been – and will be – rewarding if you make a couple of good decisions during a lifetime and avoid serious mistakes.
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I believe Berkshire can handle financial disasters of a magnitude beyond any heretofore experienced. This ability is one we will not relinquish. When economic upsets occur, as they will, Berkshire's goal will be to function as an asset to the country – just as it was in a very minor way in 2008-9 – and to help extinguish the financial fire rather than to be among the many companies that, inadvertently or otherwise, ignited the conflagration.
Our goal is realistic. Berkshire's strength comes from its Niagara of diverse earnings delivered after interest costs, taxes and substantial charges for depreciation and amortization (“EBITDA” is a banned measurement at Berkshire). We also operate with minimal requirements for cash, even if the country encounters a prolonged period of global economic weakness, fear and near-paralysis.
Berkshire does not currently pay dividends, and its share repurchases are 100% discretionary. Annual debt maturities are never material.
Your company also holds a cash and U.S. Treasury bill position far in excess of what conventional wisdom deems necessary. During the 2008 panic, Berkshire generated cash from operations and did not rely in any manner on commercial paper, bank lines or debt markets. We did not predict the time of an economic paralysis but we were always prepared for one.
Extreme fiscal conservatism is a corporate pledge we make to those who have joined us in ownership of Berkshire. In most years – indeed in most decades – our caution will likely prove to be unneeded behavior – akin to an insurance policy on a fortress-like building thought to be fireproof. But Berkshire does not want to inflict permanent financial damage – quotational shrinkage for extended periods can’t be avoided – on Bertie or any of the individuals who have trusted us with their savings.
Berkshire is built to last.
Non-controlled Businesses That Leave Us Comfortable
Last year I mentioned two of Berkshire's long-duration partial-ownership positions – Coca-Cola and American Express. These are not huge commitments like our Apple position. Each only accounts for 4-5% of Berkshire's GAAP net worth. But they are meaningful assets and also illustrate our thought processes.
American Express began operations in 1850, and Coca-Cola was launched in an Atlanta drug store in 1886. (Berkshire is not big on newcomers.) Both companies tried expanding into unrelated areas over the years and both found little success in these attempts. In the past – but definitely not now – both were even mismanaged.
But each was hugely successful in its base business, reshaped here and there as conditions called for. And, crucially, their products “traveled.” Both Coke and AMEX became recognizable names worldwide as did their core products, and the consumption of liquids and the need for unquestioned financial trust are timeless essentials of our world.
During 2023, we did not buy or sell a share of either AMEX or Coke – extending our own Rip Van Winkle slumber that has now lasted well over two decades. Both companies again rewarded our inaction last year by increasing their earnings and dividends. Indeed, our share of AMEX earnings in 2023 considerably exceeded the \$1.3 billion cost of our long-ago purchase.
Both AMEX and Coke will almost certainly increase their dividends in 2024 – about 16% in the case of AMEX – and we will most certainly leave our holdings untouched throughout the year. Could I create a better worldwide business than these two enjoy? As Bertie will tell you: “No way.”
Though Berkshire did not purchase shares of either company in 2023, your indirect ownership of both Coke and AMEX increased a bit last year because of share repurchases we made at Berkshire. Such repurchases work to increase your participation in every asset that Berkshire owns. To this obvious but often overlooked truth, I add my usual caveat: All stock repurchases should be price-dependent. What is sensible at a discount to business-value becomes stupid if done at a premium.
The lesson from Coke and AMEX? When you find a truly wonderful business, stick with it. Patience pays, and one wonderful business can offset the many mediocre decisions that are inevitable.
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This year, I would like to describe two other investments that we expect to maintain indefinitely. Like Coke and AMEX, these commitments are not huge relative to our resources. They are worthwhile, however, and we were able to increase both positions during 2023.
At yearend, Berkshire owned $27.8\%$ of Occidental Petroleum's common shares and also owned warrants that, for more than five years, give us the option to materially increase our ownership at a fixed price. Though we very much like our ownership, as well as the option, Berkshire has no interest in purchasing or managing Occidental. We particularly like its vast oil and gas holdings in the United States, as well as its leadership in carbon-capture initiatives, though the economic feasibility of this technique has yet to be proven. Both of these activities are very much in our country's interest.
Not so long ago, the U.S. was woefully dependent on foreign oil, and carbon capture had no meaningful constituency. Indeed, in 1975, U.S. production was eight million barrels of oil-equivalent per day (“BOEPD”), a level far short of the country’s needs. From the favorable energy position that facilitated the U.S. mobilization in World War II, the country had retreated to become heavily dependent on foreign – potentially unstable – suppliers. Further declines in oil production were predicted along with future increases in usage.
For a long time, the pessimism appeared to be correct, with production falling to five million BOEPD by 2007. Meanwhile, the U.S. government created a Strategic Petroleum Reserve (“SPR”) in 1975 to alleviate – though not come close to eliminating – this erosion of American self-sufficiency.
And then – Hallelujah! – shale economics became feasible in 2011, and our energy dependency ended. Now, U.S. production is more than 13 million BOEPD, and OPEC no longer has the upper hand. Occidental itself has annual U.S. oil production that each year comes close to matching the entire inventory of the SPR. Our country would be very – very – nervous today if domestic production had remained at five million BOEPD, and it found itself hugely dependent on non-U.S. sources. At that level, the SPR would have been emptied within months if foreign oil became unavailable.
Under Vicki Hollub's leadership, Occidental is doing the right things for both its country and its owners. No one knows what oil prices will do over the next month, year, or decade. But Vicki does know how to separate oil from rock, and that's an uncommon talent, valuable to her shareholders and to her country.
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Additionally, Berkshire continues to hold its passive and long-term interest in five very large Japanese companies, each of which operates in a highly-diversified manner somewhat similar to the way Berkshire itself is run. We increased our holdings in all five last year after Greg Abel and I made a trip to Tokyo to talk with their managements.
Berkshire now owns about 9% of each of the five. (A minor point: Japanese companies calculate outstanding shares in a manner different from the practice in the U.S.) Berkshire has also pledged to each company that it will not purchase shares that will take our holdings beyond 9.9%. Our cost for the five totals ¥1.6 trillion, and the yearend market value of the five was ¥2.9 trillion. However, the yen has weakened in recent years and our yearend unrealized gain in dollars was 61% or \$8 billion.
Neither Greg nor I believe we can forecast market prices of major currencies. We also don't believe we can hire anyone with this ability. Therefore, Berkshire has financed most of its Japanese position with the proceeds from ¥1.3 trillion of bonds. This debt has been very well-received in Japan, and I believe Berkshire has more yen-denominated debt outstanding than any other American company. The weakened yen has produced a yearend gain for Berkshire of \$1.9 billion, a sum that, pursuant to GAAP rules, has periodically been recognized in income over the 2020-23 period.
In certain important ways, all five companies – Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo – follow shareholder-friendly policies that are much superior to those customarily practiced in the U.S. Since we began our Japanese purchases, each of the five has reduced the number of its outstanding shares at attractive prices.
Meanwhile, the managements of all five companies have been far less aggressive about their own compensation than is typical in the United States. Note as well that each of the five is applying only about $\frac{1}{3}$ of its earnings to dividends. The large sums the five retain are used both to build their many businesses and, to a lesser degree, to repurchase shares. Like Berkshire, the five companies are reluctant to issue shares.
An additional benefit for Berkshire is the possibility that our investment may lead to opportunities for us to partner around the world with five large, well-managed and well-respected companies. Their interests are far more broad than ours. And, on their side, the Japanese CEOs have the comfort of knowing that Berkshire will always possess huge liquid resources that can be instantly available for such partnerships, whatever their size may be.
Our Japanese purchases began on July 4, 2019. Given Berkshire's present size, building positions through open-market purchases takes a lot of patience and an extended period of “friendly” prices. The process is like turning a battleship. That is an important disadvantage which we did not face in our early days at Berkshire.
The Scorecard in 2023
Every quarter we issue a press release that reports our summarized operating earnings (or loss) in a manner similar to what is shown below. Here is the full-year compilation:
| (in $ millions) | ||
| 2023 | 2022 | |
| Insurance-underwriting | $ 5,428 | $ (30) |
| Insurance-investment income | 9,567 | 6,484 |
| Railroad | 5,087 | 5,946 |
| Utilities and energy | 2,331 | 3,904 |
| Other businesses and miscellaneous items | 14,937 | 14,549 |
| Operating earnings | $37,350 | $30,853 |
At Berkshire's annual gathering on May 6, 2023, I presented the first quarter's results which had been released early that morning. I followed with a short summary of the outlook for the full year: (1) most of our non-insurance businesses faced lower earnings in 2023; (2) that decline would be cushioned by decent results at our two largest non-insurance businesses, BNSF and Berkshire Hathaway Energy (“BHE”) which, combined, had accounted for more than 30% of operating earnings in 2022; (3) our investment income was certain to materially grow because the huge U.S. Treasury bill position held by Berkshire had finally begun to pay us far more than the pittance we had been receiving and (4) insurance would likely do well, both because its underwriting earnings are not correlated to earnings elsewhere in the economy and, beyond that, property-casualty insurance prices had strengthened.
Insurance came through as expected. I erred, however, in my expectations for both BNSF and BHE. Let's take a look at each.
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Rail is essential to America's economic future. It is clearly the most efficient way – measured by cost, fuel usage and carbon intensity – of moving heavy materials to distant destinations. Trucking wins for short hauls, but many goods that Americans need must travel to customers many hundreds or even several thousands of miles away. The country can't run without rail, and the industry's capital needs will always be huge. Indeed, compared to most American businesses, railroads eat capital.
BNSF is the largest of six major rail systems that blanket North America. Our railroad carries its 23,759 miles of main track, 99 tunnels, 13,495 bridges, 7,521 locomotives and assorted other fixed assets at \$70 billion on its balance sheet. But my guess is that it would cost at least \$500 billion to replicate those assets and decades to complete the job.
BNSF must annually spend more than its depreciation charge to simply maintain its present level of business. This reality is bad for owners, whatever the industry in which they have invested, but it is particularly disadvantageous in capital-intensive industries.
At BNSF, the outlays in excess of GAAP depreciation charges since our purchase 14 years ago have totaled a staggering \$22 billion or more than \$1 $\frac{1}{2}$ billion annually. Ouch! That sort of gap means BNSF dividends paid to Berkshire, its owner, will regularly fall considerably short of BNSF's reported earnings unless we regularly increase the railroad's debt. And that we do not intend to do.
Consequently, Berkshire is receiving an acceptable return on its purchase price, though less than it might appear, and also a pittance on the replacement value of the property. That's no surprise to me or Berkshire's board of directors. It explains why we could buy BNSF in 2010 at a small fraction of its replacement value.
North America's rail system moves huge quantities of coal, grain, autos, imported and exported goods, etc. one-way for long distances and those trips often create a revenue problem for back-hauls. Weather conditions are extreme and frequently hamper or even stymie the utilization of track, bridges and equipment. Flooding can be a nightmare. None of this is a surprise. While I sit in an always-comfortable office, railroading is an outdoor activity with many employees working under trying and sometimes dangerous conditions.
An evolving problem is that a growing percentage of Americans are not looking for the difficult, and often lonely, employment conditions inherent in some rail operations. Engineers must deal with the fact that among an American population of 335 million, some forlorn or mentally-disturbed Americans are going to elect suicide by lying in front of a 100-car, extraordinarily heavy train that can't be stopped in less than a mile or more. Would you like to be the helpless engineer? This trauma happens about once a day in North America; it is far more common in Europe and will always be with us.
Wage negotiations in the rail industry can end up in the hands of the President and Congress. Additionally, American railroads are required to carry many dangerous products every day that the industry would much rather avoid. The words “common carrier” define railroad responsibilities.
Last year BNSF's earnings declined more than I expected, as revenues fell. Though fuel costs also fell, wage increases, promulgated in Washington, were far beyond the country's inflation goals. This differential may recur in future negotiations.
Though BNSF carries more freight and spends more on capital expenditures than any of the five other major North American railroads, its profit margins have slipped relative to all five since our purchase. I believe that our vast service territory is second to none and that therefore our margin comparisons can and should improve.
I am particularly proud of both BNSF's contribution to the country and the people who work in sub-zero outdoor jobs in North Dakota and Montana winters to keep America's commercial arteries open. Railroads don't get much attention when they are working but, were they unavailable, the void would be noticed immediately throughout America.
A century from now, BNSF will continue to be a major asset of the country and of Berkshire. You can count on that.
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Our second and even more severe earnings disappointment last year occurred at BHE. Most of its large electric-utility businesses, as well as its extensive gas pipelines, performed about as expected. But the regulatory climate in a few states has raised the specter of zero profitability or even bankruptcy (an actual outcome at California's largest utility and a current threat in Hawaii). In such jurisdictions, it is difficult to project both earnings and asset values in what was once regarded as among the most stable industries in America.
For more than a century, electric utilities raised huge sums to finance their growth through a state-by-state promise of a fixed return on equity (sometimes with a small bonus for superior performance). With this approach, massive investments were made for capacity that would likely be required a few years down the road. That forward-looking regulation reflected the reality that utilities build generating and transmission assets that often take many years to construct. BHE's extensive multi-state transmission project in the West was initiated in 2006 and remains some years from completion. Eventually, it will serve 10 states comprising $30\%$ of the acreage in the continental United States.
With this model employed by both private and public-power systems, the lights stayed on, even if population growth or industrial demand exceeded expectations. The “margin of safety” approach seemed sensible to regulators, investors and the public. Now, the fixed-but-satisfactory-return pact has been broken in a few states, and investors are becoming apprehensive that such ruptures may spread. Climate change adds to their worries. Underground transmission may be required but who, a few decades ago, wanted to pay the staggering costs for such construction?
At Berkshire, we have made a best estimate for the amount of losses that have occurred. These costs arose from forest fires, whose frequency and intensity have increased – and will likely continue to increase – if convective storms become more frequent.
It will be many years until we know the final tally from BHE's forest-fire losses and can intelligently make decisions about the desirability of future investments in vulnerable western states. It remains to be seen whether the regulatory environment will change elsewhere.
Other electric utilities may face survival problems resembling those of Pacific Gas and Electric and Hawaiian Electric. A confiscatory resolution of our present problems would obviously be a negative for BHE, but both that company and Berkshire itself are structured to survive negative surprises. We regularly get these in our insurance business, where our basic product is risk assumption, and they will occur elsewhere. Berkshire can sustain financial surprises but we will not knowingly throw good money after bad.
Whatever the case at Berkshire, the final result for the utility industry may be ominous: Certain utilities might no longer attract the savings of American citizens and will be forced to adopt the public-power model. Nebraska made this choice in the 1930s and there are many public-power operations throughout the country. Eventually, voters, taxpayers and users will decide which model they prefer.
When the dust settles, America's power needs and the consequent capital expenditure will be staggering. I did not anticipate or even consider the adverse developments in regulatory returns and, along with Berkshire's two partners at BHE, I made a costly mistake in not doing so.
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Enough about problems: Our insurance business performed exceptionally well last year, setting records in sales, float and underwriting profits. Property-casualty insurance (“P/C”) provides the core of Berkshire’s well-being and growth. We have been in the business for 57 years and despite our nearly 5,000-fold increase in volume – from \$17 million to \$83 billion – we have much room to grow.
Beyond that, we have learned – too often, painfully – a good deal about what types of insurance business and what sort of people to avoid. The most important lesson is that our underwriters can be thin, fat, male, female, young, old, foreign or domestic. But they can't be optimists at the office, however desirable that quality may generally be in life.
Surprises in the P/C business – which can occur decades after six-month or one-year policies have expired – are almost always negative. The industry’s accounting is designed to recognize this reality, but estimation mistakes can be huge. And when charlatans are involved, detection is often both slow and costly. Berkshire will always attempt to be accurate in its estimates of future loss payments but inflation – both monetary and the “legal” variety – is a wild card.
I've told the story of our insurance operations so many times that I will simply direct newcomers to page 18. Here, I will only repeat that our position would not be what it is if Ajit Jain had not joined Berkshire in 1986. Before that lucky day – aside from an almost unbelievably wonderful experience with GEICO that began early in 1951 and will never end – I was largely wandering in the wilderness, as I struggled to build our insurance operation.
Ajit's achievements since joining Berkshire have been supported by a large cast of hugely-talented insurance executives in our various P/C operations. Their names and faces are unknown to most of the press and the public. Berkshire's lineup of managers, however, is to P/C insurance what Cooperstown's honorees are to baseball.
Bertie, you can feel good about the fact that you own a piece of an incredible P/C operation that now operates worldwide with unmatched financial resources, reputation and talent. It carried the day in 2023.
What is it with Omaha?
Come to Berkshire's annual gathering on May 4, 2024. On stage you will see the three managers who now bear the prime responsibilities for steering your company. What, you may wonder, do the three have in common? They certainly don't look alike. Let's dig deeper.
Greg Abel, who runs all non-insurance operations for Berkshire – and in all respects is ready to be CEO of Berkshire tomorrow – was born and raised in Canada (he still plays hockey). In the 1990s, however, Greg lived for six years in Omaha just a few blocks away from me. During that period, I never met him.
A decade or so earlier, Ajit Jain, who was born, raised and educated in India, lived with his family in Omaha only a mile or so from my home (where I’ve lived since 1958). Both Ajit and his wife, Tinku, have many Omaha friends, though it’s been more than three decades since they moved to New York (in order to be where much of the action in reinsurance takes place).
Missing from the stage this year will be Charlie. He and I were both born in Omaha about two miles from where you will sit at our May get-together. In his first ten years, Charlie lived about a half-mile from where Berkshire has long maintained its office. Both Charlie and I spent our early years in Omaha public schools and were indelibly shaped by our Omaha childhood. We didn’t meet, however, until much later. (A footnote that may surprise you: Charlie lived under 15 of America’s 45 presidents. People refer to President Biden as #46, but that numbering counts Grover Cleveland as both #22 and #24 because his terms were not consecutive. America is a very young country.)
Moving to the corporate level, Berkshire itself relocated in 1970 from its 81 years of residence in New England to settle in Omaha, leaving its troubles behind and blossoming in its new home.
As a final punctuation point to the “Omaha Effect,” Bertie – yes that Bertie – spent her early formative years in a middle-class neighborhood in Omaha and, many decades later, emerged as one of the country’s great investors.
You may be thinking that she put all of her money in Berkshire and then simply sat on it. But that's not true. After starting a family in 1956, Bertie was active financially for 20 years: holding bonds, putting $\frac{1}{3}$ of her funds in a publicly-held mutual fund and trading stocks with some frequency. Her potential remained unnoticed.
Then, in 1980, when 46, and independent of any urgings from her brother, Bertie decided to make her move. Retaining only the mutual fund and Berkshire, she made no new trades during the next 43 years. During that period, she became very rich, even after making large philanthropic gifts (think nine figures).
Millions of American investors could have followed her reasoning which involved only the common sense she had somehow absorbed as a child in Omaha. And, taking no chances, Bertie returns to Omaha every May to be re-energized.
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So what is going on? Is it Omaha's water? Is it Omaha's air? Is it some strange planetary phenomenon akin to that which has produced Jamaica's sprinters, Kenya's marathon runners, or Russia's chess experts? Must we wait until AI someday yields the answer to this puzzle?
Keep an open mind. Come to Omaha in May, inhale the air, drink the water and say “hi” to Bertie and her good-looking daughters. Who knows? There is no downside, and, in any event, you will have a good time and meet a huge crowd of friendly people.
To top things off, we will have available the new $4^{\text{th}}$ edition of Poor Charlie's Almanack. Pick up a copy. Charlie's wisdom will improve your life as it has mine.
February 24, 2024
Warren E. Buffett
Chairman of the Board
| Annual Percentage Change | ||
| Year | in Per-Share Market Value of Berkshire | in S&P 500 with Dividends Included |
| 1965 | 49.5 | 10.0 |
| 1966 | (3.4) | (11.7) |
| 1967 | 13.3 | 30.9 |
| 1968 | 77.8 | 11.0 |
| 1969 | 19.4 | (8.4) |
| 1970 | (4.6) | 3.9 |
| 1971 | 80.5 | 14.6 |
| 1972 | 8.1 | 18.9 |
| 1973 | (2.5) | (14.8) |
| 1974 | (48.7) | (26.4) |
| 1975 | 2.5 | 37.2 |
| 1976 | 129.3 | 23.6 |
| 1977 | 46.8 | (7.4) |
| 1978 | 14.5 | 6.4 |
| 1979 | 102.5 | 18.2 |
| 1980 | 32.8 | 32.3 |
| 1981 | 31.8 | (5.0) |
| 1982 | 38.4 | 21.4 |
| 1983 | 69.0 | 22.4 |
| 1984 | (2.7) | 6.1 |
| 1985 | 93.7 | 31.6 |
| 1986 | 14.2 | 18.6 |
| 1987 | 4.6 | 5.1 |
| 1988 | 59.3 | 16.6 |
| 1989 | 84.6 | 31.7 |
| 1990 | (23.1) | (3.1) |
| 1991 | 35.6 | 30.5 |
| 1992 | 29.8 | 7.6 |
| 1993 | 38.9 | 10.1 |
| 1994 | 25.0 | 1.3 |
| 1995 | 57.4 | 37.6 |
| 1996 | 6.2 | 23.0 |
| 1997 | 34.9 | 33.4 |
| 1998 | 52.2 | 28.6 |
| 1999 | (19.9) | 21.0 |
| 2000 | 26.6 | (9.1) |
| 2001 | 6.5 | (11.9) |
| 2002 | (3.8) | (22.1) |
| 2003 | 15.8 | 28.7 |
| 2004 | 4.3 | 10.9 |
| 2005 | 0.8 | 4.9 |
| 2006 | 24.1 | 15.8 |
| 2007 | 28.7 | 5.5 |
| 2008 | (31.8) | (37.0) |
| 2009 | 2.7 | 26.5 |
| 2010 | 21.4 | 15.1 |
| 2011 | (4.7) | 2.1 |
| 2012 | 16.8 | 16.0 |
| 2013 | 32.7 | 32.4 |
| 2014 | 27.0 | 13.7 |
| 2015 | (12.5) | 1.4 |
| 2016 | 23.4 | 12.0 |
| 2017 | 21.9 | 21.8 |
| 2018 | 2.8 | (4.4) |
| 2019 | 11.0 | 31.5 |
| 2020 | 2.4 | 18.4 |
| 2021 | 29.6 | 28.7 |
| 2022 | 4.0 | (18.1) |
| 2023 | 15.8 | 26.3 |
| Compounded Annual Gain – 1965-2023 | 19.8% | 10.2% |
| Overall Gain – 1964-2023 | 4,384,748% | 31,223% |
Note: Data are for calendar years with these exceptions: 1965 and 1966, year ended 9/30; 1967, 15 months ended 12/31.
查理·芒格——伯克希尔·哈撒韦的建筑师
查理·芒格于11月28日去世，距离他百岁生日仅差33天。
虽然他在奥马哈出生长大，但一生中80%的时间都住在别处。因此，直到1959年他35岁时，我才第一次见到他。1962年，他决定开始从事资金管理。
三年后，他告诉我——说得完全正确！——我买下伯克希尔控股权是个愚蠢的决定。但他向我保证，既然我已经迈出了这一步，他会告诉我如何纠正错误。
在接下来的讲述中，请记住，查理和他的家人在我当时管理的那家小型合伙投资企业中一分钱也没投，而我正是用那家企业的资金买下了伯克希尔。而且，我们俩谁也没想过查理有一天会持有伯克希尔的股票。
然而，查利于1965年立即向我建议："沃伦，忘掉再买一家像伯克希尔这样的公司吧。但现在你控制了伯克希尔，就往里添置以合理价格收购的优秀企业，放弃以美妙价格收购普通企业。换句话说，抛弃你从你的英雄本·格雷厄姆那里学到的一切。那些方法虽然管用，但只能在规模很小时使用。"我随后听从了他的指示，虽然过程中有过多次反复。
多年之后，查理成了我经营伯克希尔的合伙人，每当我的老毛病又犯，他总是一再把我从执迷不悟中拉回清醒。直到他去世，他一直扮演这个角色。我们俩，以及那些早期和我们一起投资的人，最终的境遇远远好过查理和我曾经梦想过的任何可能。
事实上，查理是现今伯克希尔的"建筑师"，而我则是"总承包商"，日复一日地将他愿景中的蓝图付诸实现。
查理从不为自己的缔造者角色邀功，而是让我接受掌声和赞誉。在某种程度上，他和我的关系，既有大哥的意味，又像慈父一般。即使他知道自己是对的，他也把缰绳交给我；而当我犯下错误时，他从来没有——从来没有——提醒我我的失误。
在物理世界中，伟大的建筑与其建筑师联系在一起，而那些浇筑混凝土或安装窗户的人很快就被遗忘了。伯克希尔已成为一家伟大的公司。虽然长期负责施工队伍的人是我，但查理将永远作为建筑师而受到赞誉。
伯克希尔·哈撒韦公司
致伯克希尔·哈撒韦公司股东：
伯克希尔拥有超过300万个股东账户。我每年有责任写一封信，能够对这个多元化且不断变化的股东群体有所助益，他们中许多人希望进一步了解自己的投资。
查理·芒格——几十年来我管理伯克希尔的合伙人——对这一义务抱有同样的看法，并且会期待我今年以惯常的方式与各位交流。对于我们对伯克希尔股东的责任，他和我心意相通。
* * * * * * * * * * * *
作家们发现，想象他们想要的读者很有用，而且他们常常希望吸引大众读者。在伯克希尔，我们的目标更为有限：那些将积蓄托付给伯克希尔且不期待转售的投资者（他们的态度类似于攒钱买农场或出租房产的人，而不是喜欢用多余资金购买彩票或"热门"股票的人）。
多年来，伯克希尔吸引了数量可观的这类"终身"股东及其继承人。我们珍视他们的存在，并认为他们有权每年听到好消息和坏消息，这些消息直接来自他们的CEO，而不是来自一个永远只提供乐观和甜腻废话的投资者关系官员或沟通顾问。
在想象伯克希尔想要吸引的所有者时，我很幸运有一个完美的心理模型：我的妹妹Bertie。让我介绍一下她。
开门见山地说，伯蒂聪明睿智，喜欢挑战我的思维。但我们从未发生过争吵，更谈不上关系破裂。今后也绝不会。
此外，伯蒂和她的三个女儿，都将大部分积蓄投在了伯克希尔的股票上。她们持有股票已有数十年，每年伯蒂都会读我写的东西。我的职责就是预判她的问题，并给出诚实的回答。
伯蒂和你们大多数人一样，懂很多会计术语，但还没到能考CPA的份上。她关注商业新闻——每天读四份报纸——但不自诩为经济专家。她非常理智——极其理智——本能地知道永远不该理会那些所谓的权威专家。毕竟，如果她能可靠地预测明天的赢家，她会白白分享自己的宝贵见解，从而加剧竞争性买入吗？这就像找到了金子，然后给邻居发地图告诉他们金矿的位置。
伯蒂懂得激励的力量——无论好坏——也懂得人性的弱点，以及观察人类行为时能识别的“信号”。她知道谁在“推销”，谁值得信任。简而言之，她绝不是好糊弄的人。
那么，今年伯蒂会对什么感兴趣呢？
经营业绩：事实与虚构
先从数字说起。正式年报从K-1页开始，长达124页，里面包含了海量信息——有些重要，有些鸡毛蒜皮。
在这些披露中，许多股东和财经记者会重点关注K-72页。在那里，他们会看到所谓的“底线”——标注为“净利润（亏损）”。数字是：2021年900亿美元，2022年（230亿美元），2023年960亿美元。
这到底是怎么回事？
你寻求指引，得到的答案是：计算这些“收益”的规则是由一个严肃且有资质的机构——财务会计准则委员会（FASB）颁布的，由敬业勤奋的美国证券交易委员会（SEC）强制执行，并由世界级的专业人士——德勤会计师事务所（D&T）审计。在K-67页，德勤直言不讳：“我们认为，财务报表……在所有重大方面（斜体是我加的）公允反映了公司……截至2023年12月31日止三个年度各年的财务状况及经营业绩……”
如此神圣化之后，这个比没用还糟的“净利润”数字迅速通过互联网和媒体传遍全世界。各方都认为自己尽到了职责——从法律角度看，也确实如此。
但我们都感到不安。在伯克希尔，我们认为“收益”应该是一个合理的概念，对伯蒂评估企业多少有些用处——但仅仅是作为一个起点。因此，伯克希尔也向伯蒂和你们报告我们所谓的“经营利润”。它们讲述的故事是：2021年276亿美元；2022年309亿美元；2023年374亿美元。
法定数字与伯克希尔偏好的数字之间的主要区别在于：我们剔除了未实现的资本利得或损失，这些数字有时一天就能超过50亿美元。讽刺的是，我们的偏好直到2018年基本上就是规则，直到那一年“改进”被强制推行。几个世纪前伽利略的经历应该告诫我们，不要违抗来自高层的指令。但伯克希尔可以很固执。
* * * * * * * * * * * *
千万不要误解资本利得的重要性：我预计它们将是未来几十年伯克希尔价值增长的一个非常重要的组成部分。否则，为什么我们要把你们（和伯蒂）的大笔资金投到有价证券上，就像我整个投资生涯中一直在用自己的钱做的那样？
从1942年3月11日——我首次买入股票的那天——起，我不记得有任何时期我的净资产没有大部分投资于股票，美国股票。至今一切顺利。在那个决定命运的1942年，道指跌破100点，我“扣动了扳机”。到放学时，我亏了大约5美元。很快，情况就逆转了，如今该指数徘徊在38,000点附近。美国对投资者来说一直是一个了不起的国家。他们所需要做的只是安静地坐着，不听任何人的话。
然而，根据包含股市反复无常的每日波动——甚至每年波动——的“盈利”来评判伯克希尔的投资价值，这不仅仅是愚蠢。正如Ben Graham教导我的：“短期内市场是一台投票机；长期来看它是一台称重机。”
我们做什么
伯克希尔的目标很简单：我们想要拥有全部或部分拥有良好经济基础且持久的企业。在资本主义中，有些企业会繁荣很长时间，而另一些则会被证明是无底洞。预测哪些会成为赢家、哪些会成为输家，比你想象的要难。而那些告诉你他们知道答案的人，通常要么是自欺欺人，要么是江湖骗子。
在伯克希尔，我们特别青睐那些未来能够以高回报率部署额外资本的罕见企业。仅仅拥有其中一家——然后静静持有——就能带来几乎无法估量的财富。甚至这种企业的继承人也能——呃！——有时能过上终生闲适的生活。
我们也希望这些受青睐的企业由能干且值得信赖的管理者经营，尽管这是一个更难做的判断，伯克希尔也确实有过一些失望。
1863年，美国首位货币监理官Hugh McCulloch致信所有国民银行。他的指示包含这样的警告：“永远不要指望你能阻止一个无赖欺骗你而与他打交道。”许多认为自己可以“对付”无赖问题的银行家已经领悟了McCulloch先生建议的智慧——我也一样。人是很难看透的。真诚和同理心很容易伪装。这一点在1863年如此，现在依然如此。
我所描述的收购企业的这两个必要条件的组合，长期以来一直是我们收购的目标，而且有一段时间，我们有大量的候选标的可以评估。如果我错过了一个——我确实错过了很多——总会有另一个出现。
那些日子早已过去；规模让我们止步，尽管收购竞争的加剧也是一个因素。
伯克希尔现在拥有——远远超过——美国任何企业记录的最大美国通用会计准则净资产。创纪录的经营利润和强劲的股市使年底数字达到5610亿美元。标普500指数中其他499家公司的美国通用会计准则净资产总额——这些公司是美国企业的名人堂——在2022年为8.9万亿美元。（标普500的2023年数据尚未统计，但不太可能大幅超过9.5万亿美元。）
按此衡量，伯克希尔现在占据了其经营领域的近6%。在比如说五年内，将我们庞大的基数翻倍根本不可能，特别是因为我们极其厌恶发行股份（这会立即增加净资产）。
这个国家只剩下少数几家公司能够真正影响伯克希尔的格局，而我们和其他人已经反复考察过它们。有些我们能估值；有些我们不能。而且，如果我们能估值，它们必须定价有吸引力。在美国以外，基本上没有候选标的对于伯克希尔的资本部署是有意义的选择。总而言之，我们不可能取得令人瞠目的业绩表现。
尽管如此，管理伯克希尔多半是件乐事，且始终趣味盎然。往好处看，经过59年的拼装，公司如今拥有多家企业的部分或全部股权，这些企业按加权计算，前景比大多数美国大型公司要略好一些。靠运气加上胆识，从无数个决策中冒出了几个大赢家。我们现在还有一支长期留任的管理者小团队，他们从未想过另谋高就，而且把65岁仅仅看作又一个生日。
伯克希尔受益于一种非同寻常的专注和清晰的目标。虽然我们强调善待员工、社区和供应商——谁不想这么做呢？——但我们的忠诚始终归于国家和股东。我们从未忘记，尽管你的钱和我们的钱混在一起，但它并不属于我们。
秉持这一重点，加上我们现有的业务组合，伯克希尔的业绩应该比美国普通公司略好，而且更重要的是，永久性资本损失的风险应该也小得多。但任何超出“稍好”程度的期望，都是白日梦。当 Bertie 全押伯克希尔时，这种温和的抱负并不成立——但现在已是如此。
我们并非秘密的武器
偶尔，市场和/或经济会导致一些规模庞大、基本面良好的公司的股票和债券出现惊人的错误定价。事实上，市场可以——也将——不可预测地失灵甚至消失，就像1914年持续四个月、2001年持续几天那样。如果你认为美国投资者如今比过去更稳定，不妨回想一下2008年9月。沟通的速度和科技的奇迹助长了全球瞬间瘫痪，而自烟雾信号时代以来，我们已经走了很长的路。这样的瞬间恐慌不会经常发生——但它们会发生。
伯克希尔能够以巨额资金和确定性的执行能力立即应对市场失灵，这或许会为我们提供偶尔的大规模机会。尽管股票市场比我们早期年代庞大得多，但今天的活跃参与者并不比我上学时情绪更稳定，也没有受到更好的教育。无论出于何种原因，现在的市场比我年轻时表现出更多赌场般的行为。赌场如今驻扎在许多家庭中，每天诱惑着住户。
金融生活的一个事实永远不应忘记。华尔街——用这个词的比喻义——希望客户赚钱，但真正让其中居民热血沸腾的是狂热的活动。在那种时候，任何可以推销的愚蠢行为都会被大力推销——不是所有人，但总有人这么做。
偶尔，场面会变得丑陋。政客们随后怒不可遏；最明目张胆的作恶者溜之大吉，带着钱财且不受惩罚；而你隔壁的朋友变得困惑、更穷，有时还心怀报复。他明白了，金钱压倒了道德。
伯克希尔有一条投资规则从未改变，也不会改变：永远不要冒永久性资本损失的风险。感谢美国的顺风以及复利的力量，我们运作的舞台过去是——未来也将是——回报丰厚的，只要你在一生中做出几个好决策，并避免犯下严重错误。
我相信伯克希尔能够应对规模超过以往任何历史水平的金融灾难。这种能力我们不会放弃。当经济动荡发生时，伯克希尔的目标是充当国家的资产——就像2008-2009年间我们在很小程度上所做的那样——帮助扑灭金融之火，而不是成为那些无意或有意点燃大火的众多公司之一。
我们的目标是现实的。伯克希尔的实力源自其如尼亚加拉瀑布般源源不断的多元化收益——这些收益是在扣除利息成本、税费以及大额折旧和摊销费用之后得到的（EBITDA（息税折旧摊销前利润）在伯克希尔是被禁止使用的指标）。我们的运营对现金的需求也极低，即便国家遭遇长期的经济疲软、恐慌和近乎瘫痪。
伯克希尔目前不派发股息，其股份回购完全由管理层自主决定。每年的债务到期规模从未重大。
你们的公司还持有远超传统智慧所认为必要的现金和美国国债头寸。在2008年恐慌期间，伯克希尔通过经营产生现金，没有以任何方式依赖商业票据、银行授信或债务市场。我们并未预测到经济瘫痪何时发生，但始终为之做好了准备。
极端的财务保守主义是我们向所有加入伯克希尔所有权的伙伴们做出的企业承诺。在大多数年份——实际上是在大多数十年里——我们的谨慎很可能会被证明是多余的行为，就像给一座被认为防火的堡垒式建筑买了保险。但伯克希尔不愿对伯蒂（Bertie）或任何将积蓄托付给我们的个人造成永久性的财务损害——报价长期缩水是不可避免的。
伯克希尔生而为持久。
非控股企业——令我们安心的投资
去年我提到了伯克希尔的两个长期部分持股——可口可乐（Coca-Cola）和美国运通（American Express）。它们不像我们持有的苹果（Apple）那样是巨额投资。每只股票仅占伯克希尔美国通用会计准则净资产的4-5%。但它们是有意义的资产，也阐述了我们的思考过程。
美国运通于1850年开始运营，可口可乐于1886年在亚特兰大的一家药店问世（伯克希尔对新面孔不太感冒）。两家公司多年来都曾试图扩张到非相关领域，但都收效甚微。在过去——但肯定不是现在——它们甚至都曾管理不善。
但它们在各自的核心业务上都取得了巨大成功，并根据情况需要随时调整重塑。关键是，它们的产品“走遍了世界”。可口可乐和美国运通及其核心产品都成为了全球家喻户晓的名字，而对液体的消费以及对不容置疑的金融信任的需求，是我们这个世界永恒的本质。
2023年，我们没有买入或卖出一股美国运通或可口可乐的股票——延续了我们自己长达二十多年之久的瑞普·凡·温克尔（Rip Van Winkle）式沉睡。两家公司去年再次以增加盈利和股息来回报我们的不作为。事实上，我们持有的美国运通2023年收益份额，远远超过了我们多年前购买时花费的13亿美元。
美国运通和可口可乐几乎肯定会在2024年提高股息——以美国运通为例约提高16%——而我们全年几乎必定不会动我们的持仓。我能创造出一个比这两家公司所拥有的更好的全球性业务吗？正如伯蒂会告诉你的：“没门。”
尽管伯克希尔在2023年没有买入这两家公司的股票，但去年由于我们在伯克希尔进行的股份回购，你们对可口可乐和美国运通的间接持股比例反而略有增加。这样的回购会增加你们在伯克希尔拥有的每一项资产中的参与比例。对这个显而易见但常被忽略的事实，我再加一句我通常的告诫：所有的股份回购都应该取决于价格。以低于企业价值的价格回购是明智的，但若溢价回购则变成愚蠢之举。
从可口可乐和美国运通得到的教训是什么？当你找到一个真正出色的生意时，坚持持有。耐心会有回报，而一个出色的生意可以抵消许多不可避免的平庸决策。
今年，我想谈谈另外两笔我们预计将无限期持有的投资。和可口可乐、美国运通一样，这些投资相对于我们的资源而言规模并不大。但它们很有价值，而且我们在2023年还增持了这两个仓位。
年末，伯克希尔持有西方石油公司（Occidental Petroleum）普通股的27.8%，同时还持有认股权证，可在五年多的时间内以固定价格大幅增持。尽管我们非常喜欢这些持股以及认股权证，但伯克希尔无意收购或管理西方石油。我们尤其看好其在美国庞大的油气资产，以及在碳捕集项目上的领先地位——尽管这项技术的经济可行性尚未得到证实。这两项活动都非常符合我们国家的利益。
不久之前，美国还严重依赖外国石油，而碳捕集几乎没有任何支持者。事实上，1975年，美国日产量为800万桶油当量（BOEPD），远不能满足国内需求。从二战时助力美国动员的有利能源地位，美国已退化为严重依赖外国——且可能不稳定——的供应商。当时人们预测石油产量将进一步下降，而消费量将持续增长。
很长一段时间里，这种悲观看法似乎是对的：到2007年，产量降至每日500万桶油当量。与此同时，美国政府在1975年建立了战略石油储备（SPR），以缓解——但远未消除——美国自给能力的衰退。
然后——哈利路亚！——2011年页岩油经济变得可行，我们的能源依赖结束了。如今，美国日产量超过1300万桶油当量，欧佩克不再占据上风。西方石油公司每年的美国石油产量，几乎接近整个战略石油储备的总库存。如果今天国内产量仍停留在每日500万桶油当量，且严重依赖外国来源，我们的国家将会非常——非常——紧张。在那种水平下，一旦外国石油供应中断，战略石油储备几个月就会见底。
在Vicki Hollub的领导下，西方石油正在为国家和股东做正确的事情。没人知道未来一个月、一年或十年油价会怎样。但Vicki知道如何从岩石中分离石油，这是一种罕见的才能，对她的股东和她的国家都很有价值。
此外，伯克希尔继续持有对五家日本大型公司的被动且长期的权益，这些公司每家的经营都十分多元化，某种程度上类似于伯克希尔自身的运营方式。去年，在Greg Abel和我前往东京与这些公司的管理层会面后，我们增持了全部五家公司的股份。
伯克希尔目前持有这五家公司各约9%的股份。（一个小细节：日本公司计算流通股的方式与美国不同。）伯克希尔还向每家公司承诺，不会购买使其持股超过9.9%的股份。我们在这五家公司的总成本为1.6万亿日元，年末市值为2.9万亿日元。不过，近年来日元贬值，我们年末以美元计价的未实现收益为61%，即80亿美元。
格雷格和我都不认为我们能预测主要货币的市场价格。我们也不相信能雇到有这种能力的人。因此，伯克希尔通过发行1.3万亿日元债券的所得为其大部分日本头寸提供了融资。这些债券在日本深受欢迎，我相信伯克希尔持有的日元计价未偿债务比任何其他美国公司都多。日元贬值在2020-23年期间为伯克希尔带来了19亿美元的年度收益，这笔金额按照美国通用会计准则（GAAP）的规定，已定期计入该时期的收入。
在某些重要方面，这五家公司（伊藤忠商事、丸红、三菱商事、三井物产和住友商事）遵循的股东友好政策，远优于美国通常的做法。自从我们开始购买日本股票以来，这五家公司都以诱人的价格减少了其流通股数量。
与此同时，这五家公司的管理层在自身薪酬方面，远不如美国公司那么激进。还要注意，这五家公司都只将约三分之一的收益用于分红。它们留存的巨额资金，一方面用于发展旗下众多业务，另一方面（程度较小）用于回购股份。和伯克希尔一样，这五家公司也不愿发行新股。
伯克希尔的另一个好处是，我们的投资有可能带来机会，让我们与这五家规模庞大、管理良好且备受尊敬的公司，在全球范围内开展合作。它们的业务范围比我们广泛得多。而站在它们那一边，日本的CEO们可以安心地知道，伯克希尔始终拥有庞大的流动性资源，无论合作规模多大，这些资源都能随时用于此类合作。
我们在日本的买入始于2019年7月4日。鉴于伯克希尔目前的规模，通过公开市场购买建立仓位需要极大的耐心和一段较长的“友好”价格时期。这个过程就像转动一艘战舰。这是我们早期在伯克希尔时未曾面对的一个重要劣势。
2023年成绩单
每个季度我们都会发布一份新闻稿，以下列方式报告我们汇总的营业利润（或亏损）。以下是全年数据汇总：
| （单位：百万美元） | ||
| 2023年 | 2022年 | |
| 保险-承销 | $ 5,428 | $ (30) |
| 保险-投资收益 | 9,567 | 6,484 |
| 铁路 | 5,087 | 5,946 |
| 公用事业和能源 | 2,331 | 3,904 |
| 其他业务和杂项 | 14,937 | 14,549 |
| 营业利润 | $37,350 | $30,853 |
在2023年5月6日的伯克希尔年度股东大会上，我公布了当天早些时候发布的第一季度业绩。随后，我对全年前景做了一个简短总结：（1）2023年，我们大部分非保险业务的盈利将下降；（2）这种下降将被我们两家最大的非保险业务——BNSF（北伯林顿铁路公司）和伯克希尔·哈撒韦能源公司（“BHE”）的尚可业绩所缓冲，这两家公司在2022年合计贡献了营业利润的30%以上；（3）我们的投资收益肯定会大幅增长，因为伯克希尔持有的大量美国国债头寸终于开始为我们带来远超以往微薄收益的回报；（4）保险业务可能会表现良好，这既是因为其承保收益与经济其他领域的收益不相关，还因为财产意外险的价格已经走强。
保险业务如预期般表现良好。然而，我对BNSF和BHE的预期都出现了错误。让我们逐一审视。
铁路对美国经济的未来至关重要。无论是从成本、燃料消耗还是碳排放强度来衡量，它都是将重货运往远地最高效的方式。卡车运输在短途上占优，但美国人需要的许多商品必须运送到数百甚至数千英里外的客户手中。美国没有铁路就无法运转，而该行业的资本需求始终巨大。事实上，与大多数美国企业相比，铁路是吞噬资本的巨兽。
BNSF（北伯林顿铁路公司）是覆盖北美洲的六大铁路系统中规模最大的。我们的铁路拥有23,759英里主线、99条隧道、13,495座桥梁、7,521台机车，以及资产负债表上列示的700亿美元其他固定资产。但我的猜测是，要复制这些资产至少需要5,000亿美元，并且要花数十年时间。
BNSF每年必须花费超过其折旧费用的资金，才能勉强维持现有业务水平。这一现实对所有者不利，无论他们投资于哪个行业，但在资本密集型行业中尤为吃亏。
在BNSF，自14年前我们收购以来，超出美国通用会计准则折旧费用的支出累计高达惊人的220亿美元，即每年超过15亿美元。哎哟！这种差距意味着，除非我们定期增加铁路的债务，否则BNSF支付给其所有者伯克希尔的股息将经常远低于BNSF的报告利润。而我们并不打算这么做。
因此，伯克希尔从其收购价格中获得了可接受的回报——尽管比表面看起来要低——同时从资产的替代价值中获得的收益微乎其微。这对我来说或伯克希尔董事会都不意外。这也解释了为什么我们在2010年能以替代价值的一小部分收购BNSF。
北美的铁路系统将大量的煤炭、谷物、汽车、进出口货物等单向长途运输，而这些行程往往带来回程的收入问题。天气条件极端，经常阻碍甚至妨碍轨道、桥梁和设备的利用。洪水可能是一场噩梦。这些都不足为奇。虽然我坐在永远舒适的办公室里，但铁路运输是一项户外活动，许多员工在艰苦甚至危险的条件下工作。
一个日益严重的问题是，越来越多的美国人不愿意从事某些铁路运营固有的艰难、往往孤独的工作条件。火车司机必须面对这样一个事实：在3.35亿美国人口中，一些绝望或精神错乱的美国人会选择躺在一列由100节车厢组成、极其沉重、无法在一英里或更短距离内停下的火车前面自杀。你想成为那个无能为力的司机吗？这种创伤在北美大约每天发生一次；在欧洲要普遍得多，而且将永远伴随我们。
铁路行业的工资谈判最终可能落到总统和国会手中。此外，美国铁路每天必须运输许多该行业宁愿避免的危险产品。"公共承运人"这个词定义了铁路的责任。
去年BNSF的利润下降幅度超过我的预期，原因是收入下降。尽管燃料成本也下降了，但在华盛顿颁布的工资涨幅远远超过了国家的通胀目标。这种差异可能在未来的谈判中再次出现。
尽管BNSF的货运量和资本支出超过北美其他五大铁路中的任何一家，但自我们收购以来，其利润率相对于这五家均有所下滑。我相信我们广阔的服务区域首屈一指，因此我们的利润率比较可以也应该改善。
我特别为BNSF对国家的贡献，以及那些在北达科他州和蒙大拿州冬季的严寒中户外工作、保持美国商业动脉畅通的人们感到骄傲。铁路在正常运行时很少受到关注，但一旦缺位，整个美国会立刻感受到这一真空。
一个世纪后，BNSF仍将是美国和伯克希尔的重要资产。这一点毋庸置疑。
去年我们遭遇的第二项更为严重的盈利失望来自BHE（伯克希尔哈撒韦能源公司）。其大部分大型电力公用事业业务以及庞大的天然气管道业务基本符合预期。但几个州的监管环境引发了零盈利甚至破产的阴霾（这已在加州最大的公用事业公司成为现实，目前也威胁着夏威夷）。在这些司法管辖区，很难预测曾被视为美国最稳定行业之一的盈利和资产价值。
一个多世纪以来，电力公用事业通过各州承诺的固定净资产收益率（有时为优异表现提供少量额外奖励）筹集巨额资金以支持增长。凭借这种方法，他们为推动未来几年可能需要的发电能力进行了大规模投资。这种前瞻性监管反映了公用事业建设往往需要多年才能完成的发电和输电资产的现实。BHE在西部广阔的跨州输电项目始于2006年，至今仍需要数年才能完工。该项目最终将为10个州提供服务，覆盖美国本土大陆$30\%$的面积。
在这种模式下，无论是私营还是公共电力系统，即便人口增长或工业需求超出预期，灯火也始终亮着。“安全边际”的方法在监管者、投资者和公众看来是合理的。如今，固定但令人满意的回报协议已在几个州被打破，投资者开始担忧这种破裂可能蔓延。气候变化加剧了他们的忧虑。或许需要地下输电，但几十年前，又有谁愿意为这样的建设支付惊人成本呢？
在伯克希尔，我们对已发生的损失金额做出了最佳估计。这些成本源于森林火灾，如果对流风暴变得更加频繁，其频率和强度已经增加——并且可能继续增加。
需要很多年我们才能知道BHE森林火灾损失的最终数额，并明智地决定未来在脆弱的西部各州投资的可行性。其他地方的监管环境是否会改变尚需观察。
其他电力公用事业可能面临类似太平洋燃气电力公司（Pacific Gas and Electric）和夏威夷电力公司（Hawaiian Electric）的生存问题。如果目前的解决方案具有没收性质，显然对BHE不利，但无论是BHE还是伯克希尔本身，其结构都能承受负面意外。我们在保险业务中经常遇到这种情况，因为我们的基本产品就是承担风险，而且这种情况也会在其他地方出现。伯克希尔能够承受财务上的意外，但我们不会明知是坏账还继续追加投资。
无论伯克希尔的情况如何，公用事业行业的最终结果可能不容乐观：某些公用事业公司可能不再吸引美国公民的储蓄，并将被迫采用公共电力模式。内布拉斯加州在20世纪30年代就做出了这一选择，目前全美有许多公共电力运营机构。最终，选民、纳税人和用户将决定他们更喜欢哪种模式。
等尘埃落定后，美国的电力需求及随之而来的资本开支将令人瞠目。我没有预料到，甚至完全没有考虑监管回报方面的不利变化，与伯克希尔在BHE（伯克希尔·哈撒韦能源公司）的两位合伙人一起，我犯了一个代价高昂的错误——因为我没能做到这一点。
问题谈够了：去年我们的保险业务表现极其出色，在销售额、浮存金和承销利润上均创下纪录。财产-意外险（P/C）是伯克希尔繁荣与增长的核心。我们涉足这一行业已有57年，尽管业务量增长了近5,000倍（从1,700万美元增至830亿美元），但我们仍有很大的增长空间。
除此之外，我们在哪些类型的保险业务和哪些人应该避开方面，也学到了不少教训——往往惨痛。最重要的教训是：我们的承销员可以是瘦子、胖子、男人、女人、年轻人、老年人、外籍人士或本地人。但在办公室里，他们绝不能是乐观主义者——尽管这种品质在生活中通常很值得拥有。
P/C行业的意外（可能在六个月或一年期保单到期后数十年才显现）几乎总是负面。该行业的会计设计是为了承认这一现实，但估算错误可能非常巨大。而当骗子掺和进来时，发现往往既缓慢又代价高昂。伯克希尔始终会尽力准确估算未来的赔付支出，但通胀——无论是货币通胀还是"法律"类通胀——是一张变数极大的牌。
我讲过太多次我们保险业务的故事了，所以把新读者直接引向第18页。在这里我只重复一点：如果不是Ajit Jain在1986年加入伯克希尔，我们不会有今天的地位。在那个幸运的日子之前——除了从1951年初开始与GEICO（政府雇员保险公司）的一段近乎难以置信、且永远不会结束的美好经历之外——我在努力构建保险业务的过程中，很大程度上是在荒野中徘徊。
Ajit自加入伯克希尔以来的成就，得到了我们各P/C业务中一大群才华横溢的保险高管的支持。他们的名字和面孔对大多数媒体和公众来说是陌生的。然而，伯克希尔的经理阵容之于P/C保险，就像棒球名人堂的入选者之于棒球。
Bertie，你可以感到欣慰的是，你拥有一家令人难以置信的P/C保险业务的部分股份——如今它以无可匹敌的财务资源、声誉和人才在全球运营。它撑起了2023年的大局。
奥马哈到底是怎么回事？
2024年5月4日来参加伯克希尔的年度股东大会吧。在台上你会看到三位现在承担着掌舵公司主要职责的经理人。你可能好奇，这三位有什么共同点？他们长得肯定不像。我们再深入看看。
Greg Abel——他负责伯克希尔所有非保险业务，并且在各方面都已准备好明天就出任伯克希尔的CEO——在加拿大出生并长大（他现在还打冰球）。然而在1990年代，Greg在奥马哈住了六年，离我家只有几个街区。在那段时间里，我从未见过他。
大约在更早十年左右，Ajit Jain——他在印度出生、长大并受教育——曾与家人住在奥马哈，离我家（自1958年以来我一直住在这里）仅一英里左右。Ajit和他的妻子Tinku在奥马哈有很多朋友，尽管他们搬到纽约（为了靠近再保险业务的主战场）已经三十多年了。
今年的股东会上将缺少查理的身影。他和我都出生在奥马哈，距离你们五月聚会时坐的地方大约两英里。在人生的头十年里，查理住的地方离伯克希尔长期设办事处的地点只有半英里左右。我和查理的童年都在奥马哈的公立学校度过，奥马哈的成长经历深刻塑造了我们。不过，我们直到很晚才相识。（一个可能让你惊讶的注脚：查理在美国45位总统中，亲身经历了15位。人们称拜登总统为第46任，但这个编号把格罗弗·克利夫兰算作第22和第24任，因为他的两个任期不连续。美国是一个非常年轻的国家。）
转到公司层面，伯克希尔本尊在1970年从新英格兰地区迁出，结束了在那里81年的定居，落脚奥马哈，抛下麻烦，在新家蓬勃发展。
作为“奥马哈效应”的最后一个注脚——伯蒂——没错，就是那位伯蒂——在奥马哈的一个中产阶级社区度过了她早年的成长岁月，几十年后，成为美国最伟大的投资者之一。
你可能会想，她只是把所有钱投进伯克希尔，然后坐等收成。但事实并非如此。1956年组建家庭后，伯蒂在财务上活跃了20年：持有债券，将三分之一的资金投入一只公开共同基金，并且相当频繁地买卖股票。她的潜力一直未被发现。
然后，在1980年，46岁的她，在没有任何来自她弟弟的敦促下，伯蒂决定出手。她只保留了那只共同基金和伯克希尔，在接下来的43年里没有进行任何新交易。在此期间，她变得非常富有，即使是在进行了大笔慈善捐赠之后（想想九位数）。
数百万美国投资者本可以追随她的思路，这仅仅基于她儿时在奥马哈不知怎么吸收到的常识。而且，为了万无一失，伯蒂每年五月都会回到奥马哈重新充电。
那么，这是怎么回事？是奥马哈的水吗？是奥马哈的空气吗？还是某种类似造就牙买加短跑运动员、肯尼亚马拉松运动员或俄罗斯国际象棋大师的奇怪行星现象？我们必须等到人工智能某天给出这个谜题的答案吗？
保持开放心态。五月来奥马哈，呼吸这里的空气，喝这里的水，跟伯蒂和她漂亮的女儿们打个招呼。谁知道呢？没有坏处，而且无论如何，你会玩得很开心，遇到一大群友善的人。
最棒的是，我们将推出新版《穷查理宝典》第4版。带一本回家。查理的智慧会像改善我的人生一样，改善你的人生。
2024年2月24日
沃伦·E·巴菲特
董事会主席
| 年度百分比变化 | ||
| 年份 | 伯克希尔每股市场价值 | 标普500（含股息） |
| 1965 | 49.5 | 10.0 |
| 1966 | (3.4) | (11.7) |
| 1967 | 13.3 | 30.9 |
| 1968 | 77.8 | 11.0 |
| 1969 | 19.4 | (8.4) |
| 1970 | (4.6) | 3.9 |
| 1971 | 80.5 | 14.6 |
| 1972 | 8.1 | 18.9 |
| 1973 | (2.5) | (14.8) |
| 1974 | (48.7) | (26.4) |
| 1975 | 2.5 | 37.2 |
| 1976 | 129.3 | 23.6 |
| 1977 | 46.8 | (7.4) |
| 1978 | 14.5 | 6.4 |
| 1979 | 102.5 | 18.2 |
| 1980 | 32.8 | 32.3 |
| 1981 | 31.8 | (5.0) |
| 1982 | 38.4 | 21.4 |
| 1983 | 69.0 | 22.4 |
| 1984 | (2.7) | 6.1 |
| 1985 | 93.7 | 31.6 |
| 1986 | 14.2 | 18.6 |
| 1987 | 4.6 | 5.1 |
| 1988 | 59.3 | 16.6 |
| 1989 | 84.6 | 31.7 |
| 1990 | (23.1) | (3.1) |
| 1991 | 35.6 | 30.5 |
| 1992 | 29.8 | 7.6 |
| 1993 | 38.9 | 10.1 |
| 1994 | 25.0 | 1.3 |
| 1995 | 57.4 | 37.6 |
| 1996 | 6.2 | 23.0 |
| 1997 | 34.9 | 33.4 |
| 1998 | 52.2 | 28.6 |
| 1999 | (19.9) | 21.0 |
| 2000 | 26.6 | (9.1) |
| 2001 | 6.5 | (11.9) |
| 2002 | (3.8) | (22.1) |
| 2003 | 15.8 | 28.7 |
| 2004 | 4.3 | 10.9 |
| 2005 | 0.8 | 4.9 |
| 2006 | 24.1 | 15.8 |
| 2007 | 28.7 | 5.5 |
| 2008 | (31.8) | (37.0) |
| 2009 | 2.7 | 26.5 |
| 2010 | 21.4 | 15.1 |
| 2011 | (4.7) | 2.1 |
| 2012 | 16.8 | 16.0 |
| 2013 | 32.7 | 32.4 |
| 2014 | 27.0 | 13.7 |
| 2015 | (12.5) | 1.4 |
| 2016 | 23.4 | 12.0 |
| 2017 | 21.9 | 21.8 |
| 2018 | 2.8 | (4.4) |
| 2019 | 11.0 | 31.5 |
| 2020 | 2.4 | 18.4 |
| 2021 | 29.6 | 28.7 |
| 2022 | 4.0 | (18.1) |
| 2023 | 15.8 | 26.3 |
| 复利年增长率 – 1965-2023 | 19.8% | 10.2% |
| 总体增长率 – 1964-2023 | 4,384,748% | 31,223% |
注：数据对应日历年度，但以下年份例外：1965年和1966年为截至9月30日；1967年为截至12月31日的15个月。