Chairman's Letter - 1982 - Deepstash
Chairman's Letter - 1982

Chairman's Letter - 1982

Curated from: berkshirehathaway.com

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Yardsticks seldom are discarded while yielding favorable readings. But when results deteriorate, most managers favor disposition of the yardstick rather than disposition of the manager.

WARREN BUFFETT

4

38 reads

...dividends received from GEICO of $3.5 million are the only item included in our “accounting”x earnings. An additional $23 million that represents our share of GEICO’s undistributed operating earnings is totally excluded from our reported operating earnings. If GEICO had earned less money ... but had paid additional dividends, our reported earnings would have been larger ... Conversely, if GEICO had earned an additional $100 million - and retained it all - our reported earnings would have been unchanged. Clearly “accounting” earnings can seriously misrepresent economic reality.

WARREN BUFFETT

5

19 reads

We prefer a concept of “economic” earnings that includes all undistributed earnings, regardless of ownership percentage. In our view, the value to all owners of the retained earnings of a business enterprise is determined by the effectiveness with which those earnings are used - and not by the size of one’s ownership percentage.

WARREN BUFFETT

4

16 reads

...investor may select from almost the entire array of major American corporations, including many far superior to virtually any of the businesses that could be bought in their entirety in a negotiated deal. And fractional-interest purchases can be made in an auction market where prices are set by participants with behavior patterns that sometimes resemble those of an army of manic-depressive lemmings.

WARREN BUFFETT

4

13 reads

As we look at the major acquisitions that others made during 1982, our reaction is not envy, but relief that we were non participants. For in many of these acquisitions, managerial intellect wilted in competition with managerial adrenaline. The thrill of the chase blinded the pursuers to the consequences of the catch. Pascal’s observation seems apt: “It has struck me that all men’s misfortunes spring from the single cause that they are unable to stay quietly in one room.”

WARREN BUFFETT

4

7 reads

The market, like the Lord, helps those who help themselves. But, unlike the Lord, the market does not forgive those who know not what they do.

WARREN BUFETT

5

9 reads

... a too-high purchase price for the stock of an excellent company can undo the effects of a subsequent decade of favorable business developments.

WARREN BUFETT

4

10 reads

Even if our partially-owned businesses continue to perform well in an economic sense, there will be years when they perform poorly in the market. At such times our net worth could shrink significantly. We will not be distressed by such a shrinkage; if the businesses continue to look attractive and we have cash available, we simply will add to our holdings at even more favorable prices.

WARREN BUFFETT

4

7 reads

At Berkshire, or any company whose policies we determine, we will issue shares only if our owners receive in business value as much as we give. We will not equate activity with progress or corporate size with owner-wealth.

WARREN BUFFETT

4

11 reads

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