Omaha, Nebraska
Berkshire Hathaway Inc.
3555 Farnam Street · Official Home Page
Folio the First
The Annual Letter
From the Letter to the Shareholders of Berkshire Hathaway Inc., accompanying the annual report for 1987 — Warren E. Buffett, Chairman, on the subject of Mr. Market.
en Graham, my friend and teacher, long ago described the mental attitude toward market fluctuations that I believe to be most conducive to investment success. He said that you should imagine market quotations as coming from a remarkably accommodating fellow named Mr. Market who is your partner in a private business. Without fail, Mr. Market appears daily and names a price at which he will either buy your interest or sell you his.
Even though the business that the two of you own may have economic characteristics that are stable, Mr. Market’s quotations will be anything but. For, sad to say, the poor fellow has incurable emotional problems. At times he feels euphoric and can see only the favorable factors affecting the business. When in that mood, he names a very high buy-sell price because he fears that you will snap up his interest and rob him of imminent gains. At other times he is depressed and can see nothing but trouble ahead for both the business and the world. On these occasions he will name a very low price, since he is terrified that you will unload your interest on him.
Mr. Market has another endearing characteristic: He doesn’t mind being ignored. If his quotation is uninteresting to you today, he will be back with a new one tomorrow. Transactions are strictly at your option. Under these conditions, the more manic-depressive his behavior, the better for you. But, like Cinderella at the ball, you must heed one warning or everything will turn into pumpkins and mice: Mr. Market is there to serve you, not to guide you. It is his pocketbook, not his wisdom, that you will find useful. If he shows up some day in a particularly foolish mood, you are free to either ignore him or to take advantage of him, but it will be disastrous if you fall under his influence.
— Omaha, February 29, 1988
Folio the Second
Operating Companies
A quiet index of American industry. Each entry a chapter; each chapter left alone to run.
- GeicoAutomobile insurance, sold direct.
- BNSF RailwayThirty-two thousand miles of western railroad.
- Berkshire Hathaway EnergyPower, pipelines, and wind across the Midwest.
- See’s CandiesCandy kitchens; black-and-white shops.
- Nebraska Furniture MartThe largest home-furnishings store in the country.
- Dairy QueenSoft serve, since the first store on Sherb Noble’s corner.
- Precision CastpartsForged and cast metal for flight.
- LubrizolSpecialty chemicals, quietly everywhere.
- MarmonAn assembly of industry in itself.
- Fruit of the LoomUnderwear and imprintables, by the bale.
- NetJetsFractional ownership of aircraft.
- Clayton HomesHousing, built and financed.
- Pilot Travel CentersFuel and rest along the interstates.
- Benjamin MoorePaint, mixed to order.
- Brooks RunningShoes for the long run.
- DuracellThe copper-top battery.
- McLane CompanyGrocery and food-service distribution.
- Johns ManvilleInsulation and roofing.
- Shaw IndustriesCarpet and flooring, by the acre.
- Acme BrickBrick for a century of houses.
- BorsheimsFine jewelry, under Mrs. B.’s roof.
… and some sixty more, each with its own press and its own ink.
Folio the Third
The Owner’s Manual
In 1996, Mr. Buffett set down fifteen owner-related business principles for Berkshire’s shareholders. Eleven are set here, in fine print, as befits an owner’s manual.
- I.
Although our form is corporate, our attitude is partnership. We do not view the company itself as the ultimate owner of our business assets, but instead view the company as a conduit through which our shareholders own the assets.
- II.
In line with Berkshire’s owner-orientation, most of our directors have a major portion of their net worth invested in the company. We eat our own cooking.
- III.
Our long-term economic goal is to maximize Berkshire’s average annual rate of gain in intrinsic business value on a per-share basis. We do not measure the economic significance or performance of Berkshire by its size; we measure by per-share progress.
- IV.
Our preference is to reach this goal by directly owning a diversified group of businesses that generate cash and consistently earn above-average returns on capital. Our second choice is to own parts of similar businesses, attained chiefly through purchases of marketable common stocks.
- V.
Accounting consequences do not influence our operating or capital-allocation decisions. When acquisition costs are similar, we much prefer to purchase two dollars of earnings that is not reportable under standard accounting principles than to purchase one dollar of earnings that is reportable.
- VI.
We use debt sparingly and, when we do borrow, we attempt to structure our loans on a long-term, fixed-rate basis. We will reject interesting opportunities rather than over-leverage our balance sheet.
- VII.
A managerial “wish list” will not be filled at shareholder expense. We will only do with your money what we would do with our own, weighing fully the values you can obtain by diversifying your own portfolios through direct purchases in the stock market.
- VIII.
We feel noble intentions should be checked periodically against results. We test the wisdom of retaining earnings by assessing whether retention, over time, delivers shareholders at least one dollar of market value for each dollar retained.
- IX.
We will issue common stock only when we receive as much in business value as we give.
- X.
Regardless of price, we have no interest at all in selling any good businesses that Berkshire owns. We have studied the gin-rummy behavior of managers who jump from one business to another; we will not join them.
- XI.
We will be candid in our reporting to you, emphasizing the pluses and minuses important in appraising business value. Our guideline is to tell you the business facts that we would want to know if our positions were reversed. We owe you no less.
Set with the compiler’s apologies for the four principles left standing in the rack.
Folio the Fourth
The Library
The archive, shelved. Every letter since 1977, and the governance shelf beside it.
- Warren E. Buffett — Letters to Shareholders
- 1977–2024 · forty-eight letters, from the textile mill to the trillion-dollar shelf.
- Greg Abel — Letters to Shareholders
- 2025– · the new hand; the first letter, for 2025, delivered February 2026.
- Annual & Interim Reports
- The reports themselves, bound yearly; the letters ride inside them.
- Charlie Munger — Letters to Wesco Shareholders
- The vice-chairman’s own shelf; nothing half-said.
- Special Letters — Warren & Charlie
- On the past, the present, and the future; the 2014 pair for the fiftieth year.
- Corporate Governance
- Committees, codes, and conduct — the binding on the binding.
- Common Stock & Meeting Information
- Class A and Class B; credentials for the first Saturday in May.
Folio the Fifth
The Pilgrimage
Every year, on the first Saturday in May, Omaha fills.
They call it Woodstock for Capitalists, which undersells it: nobody at Woodstock queued at dawn for a microphone to ask about float. Tens of thousands of owner-partners descend on the CHI Health Center in downtown Omaha; the doors open at seven in the morning, an unlisted movie plays, and then the stage is given over to hours of unscripted questions and answers — the annual meeting of Berkshire Hathaway Inc.
All weekend the exhibit hall runs as a bazaar of the operating companies: See’s sells candy by the crate, Brooks laces shoes, Clayton parks a house inside the arena, and the Fruit of the Loom underwear moves briskly, as it has for decades. On Sunday morning the Invest in Yourself five-kilometre run finishes what the steak dinner at Gorat’s began.
There is no keynote. There is no slide deck. There is a microphone, a pair of folding chairs, peanut brittle, and the faith — renewed annually, like a subscription — that a business is a thing you own, not a price you watch.
First Saturday in May · CHI Health Center · Omaha, Nebraska