Berkshire – Past, Present and Future

Berkshire’s gain in net worth during 2014 was $18.3 billion, which increased the per-share book value of both our Class A and Class B stock by 8.3%. Over the last 50 years (that is, since present management took over), per-share book value has grown from $19 to $146,186, a rate of 19.4% compounded annually.

[ … ] Not shown: The year’s results; the essay opens on a 1964 tender offer.

Berkshire was then a northern textile manufacturer mired in a terrible business. The industry in which it operated was heading south, both metaphorically and physically. And Berkshire, for a variety of reasons, was unable to change course.

[ … ] Not shown: How Buffett came to take control of Berkshire in 1965.

Then the honeymoon ended. During the 18 years following 1966, we struggled unremittingly with the textile business, all to no avail. But stubbornness – stupidity? – has its limits. In 1985, I finally threw in the towel and closed the operation.¹ (Editorial note 1)Editorial · 1Known at the timeBuffett opens a 50-year victory lap with his own errors. The 18 years he kept the mills running become the evidence for the essay’s main argument: a manager tied to one industry is slow to pull capital out of it. He is his own example.

[ … ] Not shown: National Indemnity, a second textile mill, and meeting Munger.

From my perspective, though, Charlie’s most important architectural feat was the design of today’s Berkshire. The blueprint he gave me was simple: Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices.

[ … ] Not shown: See’s Candy, Dexter Shoe, and paying for deals in shares.

Post mortems of acquisitions, in which reality is honestly compared to the original projections, are rare in American boardrooms. They should instead be standard practice.² (Fact note 2)Fact · 2With hindsightBerkshire’s own reports record how one later deal went. Heinz merged with Kraft in 2015, leaving Berkshire with about 27% of Kraft Heinz at a cost of $9.8 billion. Its 2018 results include a $3.0 billion non-cash impairment “arising almost entirely” from Kraft Heinz, and a further $3,760 million after tax in the second quarter of 2025. Greg Abel’s first letter as CEO calls the investment “disappointing”.SourcesBerkshire Hathaway, 2015 annual reportTo the Shareholders of Berkshire Hathaway Inc.:Feb 2016Berkshire Hathaway, 2018 annual reportTo the Shareholders of Berkshire Hathaway Inc.:Feb 2019Berkshire Hathaway, news releaseSecond Quarter Earnings 20252 Aug 2025Berkshire Hathaway, 2025 annual reportTo My Fellow Berkshire Shareholders,Feb 2026

I can promise you that long after I’m gone, Berkshire’s CEO and Board will carefully make intrinsic value calculations before issuing shares in any acquisitions. You can’t get rich trading a hundred-dollar bill for eight tens (even if your advisor has handed you an expensive “fairness” opinion endorsing that swap).

[ … ] Not shown: Why conglomerates earned a bad name in the 1960s.

So what do Charlie and I find so attractive about Berkshire’s conglomerate structure? To put the case simply: If the conglomerate form is used judiciously, it is an ideal structure for maximizing long-term capital growth.³ (Editorial note 3)Editorial · 3Known at the timeThe case is conditional: “used judiciously”. Some advantages the essay lists come from the structure itself, such as tax credits its utilities can use because other units earn taxable income. Others, such as moving cash between businesses or buying stocks instead, depend on the judgement of whoever allocates at the top. The essay’s turn to succession follows from that.

[ … ] Not shown: Markets usually allocate capital well, with exceptions.

Nevertheless, there are often obstacles to the rational movement of capital. As those 1954 Berkshire minutes made clear, capital withdrawals within the textile industry that should have been obvious were delayed for decades because of the vain hopes and self-interest of managements. Indeed, I myself delayed abandoning our obsolete textile mills for far too long.

[ … ] Not shown: Single-industry managers and investors redeploy poorly; Berkshire’s other advantages; spin-offs.

We could do that because we always maintain at least $20 billion – and usually far more – in cash equivalents.⁴ (Fact note 4)Fact · 4With hindsightThe floor of $20 billion has become small beside the holding. Berkshire held $112 billion in Treasury bills and other cash equivalents at the end of 2018, and Abel wrote in February 2026 that its cash and U.S. Treasury holdings “now exceed $370 billion”.SourcesBerkshire Hathaway, 2018 annual reportTo the Shareholders of Berkshire Hathaway Inc.:Feb 2019Berkshire Hathaway, 2025 annual reportTo My Fellow Berkshire Shareholders,Feb 2026 And by that we mean U.S. Treasury bills, not other substitutes for cash that are claimed to deliver liquidity and actually do so, except when it is truly needed. When bills come due, only cash is legal tender. Don’t leave home without it.

[ … ] Not shown: No sudden cash demands or derivatives; earning power should still grow.

The bad news is that Berkshire’s long-term gains – measured by percentages, not by dollars – cannot be dramatic and will not come close to those achieved in the past 50 years.⁵ (Fact note 5)Fact · 5With hindsightBerkshire’s own table shows the slowdown. The compounded annual gain in its market value per share was 21.6% for 1965–2014 and 19.7% for 1965–2025; for the S&P 500 with dividends, 9.9% and 10.5%. Abel’s 2025 letter puts it plainly: “At Berkshire’s scale, the math of compounding works against us”.SourcesBerkshire Hathaway, 2014 annual reportTo the Shareholders of Berkshire Hathaway Inc.:Feb 2015Berkshire Hathaway, 2025 annual reportTo My Fellow Berkshire Shareholders,Feb 2026 The numbers have become too big. I think Berkshire will outperform the average American company, but our advantage, if any, won’t be great.

Eventually – probably between ten and twenty years from now – Berkshire’s earnings and capital resources will reach a level that will not allow management to intelligently reinvest all of the company’s earnings. At that time our directors will need to determine whether the best method to distribute the excess earnings is through dividends, share repurchases or both. If Berkshire shares are selling below intrinsic business value, massive repurchases will almost certainly be the best choice.⁶ (Fact note 6)Fact · 6With hindsightBerkshire has kept the dividend stance. The 2024 letter says shareholders received one cash dividend over 1965–2024, paid on 3 January 1967, and the 2025 letter restates that Berkshire will not pay dividends while each retained dollar is likely to create more than a dollar of market value. Berkshire bought about $9.6 billion of its own shares in the third quarter of 2026, and about $14.4 billion in the first nine months.SourcesBerkshire Hathaway, 2024 annual reportTo the Shareholders of Berkshire Hathaway Inc.:Feb 2025Berkshire Hathaway, 2025 annual reportTo My Fellow Berkshire Shareholders,Feb 2026Berkshire Hathaway, news releaseThird Quarter Earnings 20267 Nov 2026

[ … ] Not shown: Shareholder principles and the board’s token pay.

To further ensure continuation of our culture, I have suggested that my son, Howard, succeed me as a non-executive Chairman.⁷ (Fact note 7)Fact · 7With hindsightOn 18 September 2026 Berkshire’s board elected Howard G. Buffett Chairman, “Consistent with the company’s long-standing succession plan”, and named Warren Buffett Chairman Emeritus. In his accompanying letter Warren Buffett wrote: “Greg runs the company; Howard will guard its culture and values”.SourceBerkshire Hathaway, news releaseWarren E. Buffett Becomes Chairman Emeritus, Remains Director; Howard G. Buffett Elected Chairman18 Sep 2026 My only reason for this wish is to make change easier if the wrong CEO should ever be employed and there occurs a need for the Chairman to move forcefully.

[ … ] Not shown: What the next CEO needs, and Berkshire’s decentralised structure.

Our directors believe that our future CEOs should come from internal candidates whom the Berkshire board has grown to know well. Our directors also believe that an incoming CEO should be relatively young, so that he or she can have a long run in the job.

[ … ] Not shown: CEO tenure, and why counterparties must know the CEO.

Both the board and I believe we now have the right person to succeed me as CEO – a successor ready to assume the job the day after I die or step down.⁸ (Fact note 8)Fact · 8With hindsightThe letter names no one. Munger’s essay in the same report called Ajit Jain and Greg Abel “proven performers”. On 4 May 2025 the board voted unanimously to appoint Abel, then Vice Chairman of non-insurance operations, as President and CEO from 1 January 2026, and he signed the 2025 letter as Chief Executive Officer.SourcesBerkshire Hathaway, 2014 annual reportTo the Shareholders of Berkshire Hathaway Inc.:Feb 2015Berkshire Hathaway, news releaseNews Release5 May 2025Berkshire Hathaway, 2025 annual reportTo My Fellow Berkshire Shareholders,Feb 2026 In certain important respects, this person will do a better job than I am doing.

Investments will always be of great importance to Berkshire and will be handled by several specialists.⁹ (Fact note 9)Fact · 9With hindsightThe team of specialists has thinned. Todd Combs, one of the two managers the letter names, resigned in December 2025 to join JPMorgan. Abel’s 2025 letter says Ted Weschler manages about 6% of Berkshire’s investments and that responsibility for equity investments “ultimately resides with me as CEO”.SourcesBerkshire Hathaway, news releaseBerkshire Hathaway Announces Leadership Appointments8 Dec 2025Berkshire Hathaway, 2025 annual reportTo My Fellow Berkshire Shareholders,Feb 2026 They will report to the CEO because their investment decisions, in a broad way, will need to be coordinated with Berkshire’s operating and acquisition programs.

[ … ] Not shown: A 2014 shareholder vote on paying a dividend.

Nevertheless, 98% of the shares voting said, in effect, “Don’t send us a dividend but instead reinvest all of the earnings.”