Wisdom Never Grows Old

3/6/2023

Each year, Warren Buffett writes a letter to shareholders outlining Berkshire Hathaway’s financial performance, as well as his thoughts on the economy and investing. Warren’s letters are highly anticipated by investors and business leaders. The letters are also one of my favorite topics! 

The 2023 letter was released recently. Here are some of Warren’s ‘pearls of wisdom’: 

• Berkshire is not a stock picker but selects businesses based on their long-term prospects. 
• “Efficient” markets exist only in textbooks. Stocks often trade at foolish prices, both high and low.  
• In 58 years of investing most of Warren’s decisions have only been “so-so.” The satisfactory results, overall, have been the product of about a dozen truly good decisions – about one every five years.
  • The lesson for investors: the weeds will wither away as the flowers bloom. A few winners will work wonders over time. And yes, it helps to start early and live into your 90s! 
• Berkshire has directly increased its shareholders’ interest in its collection of businesses by repurchasing some of the outstanding shares. The math is not complicated. When the share count goes down, the remaining shareholder interest goes up. “When you are told that all repurchases are harmful to shareholders, or the country, or particularly beneficial to CEOs, you are listening to either an economic illiterate or a silver-tongued demagogue (characters that are not mutually exclusive).” 
• The keys to Warren’s success are a combination of continuous savings, the power of compounding, the avoidance of major mistakes, and, most important of all, the American tailwind. 
• During the decade ending in 2021, the US Treasury received about $32 trillion in taxes. Berkshire’s contribution via corporate taxes was about $32 billion, or one-tenth of 1% of all receipts. Had there been just 1000 other Berkshires, no other corporation or individual would have had to pay any taxes.
  • To put $32 billion into perspective, if represented by a stack of $100 bills it would reach over 21 miles into the sky! 

Warren’s partner, Charlie Munger, is now 99 years old. He pays tribute to some of Charlie’s quotes: 

• “The world is full of foolish gamblers who will not do as well as the patient investor.” 
• “If you don’t care whether you are rational or not, you won’t work on it. Then you will stay irrational and get lousy results.” 
• “Patience can be learned. Having a long attention span and the ability to concentrate on one thing for a long time is a huge advantage.” 
• “Warren and I don’t focus on the froth of the market. We seek out good long-term investments and stubbornly hold them for a long time.” 
• “There is no such thing as a 100% sure thing when investing. Thus, the use of leverage is dangerous. A string of wonderful numbers times zero will always equal zero. Don’t count on getting rich twice.” 
• “You have to keep learning if you want to become a great investor. When the world changes, you must change.” 

The last one is my favorite. What’s yours? 

Nick Hoffman