Berkshire Hathaway’s Annual Report Remains Well Worth Reading

The 2014 Annual Report from Berkshire Hathaway came out recently. I always look forward to reading Warren Buffett’s letter to shareholders, but I found this year’s report especially worth reading.

2015 is the fiftieth anniversary of Buffett Partnership Ltd. taking control Berkshire Hathaway (then a faltering textile manufacturer). The textile manufacturing part of the business has been gone since the 1980s, but Buffett seems to be doing just fine.

A few points specifically stood out while I was reading.

  • Buffet doesn’t like a lot of the standard numbers used to calculate a company’s worth (even though the companies owned by Berkshire Hathaway tend to be successful by those metrics). He’s clearly comfortable with all sorts of financial metrics, but keeps score by his own numbers. That’s a set of characteristics well worth copying.
  • Berkshire Hathaway owns nine companies that, if those companies were independent, would be members of the Fortune 500. Berkshire Hathaway also owns BNSF, which transports about 15 percent of all intercity freight in the U.S. (more than any other company in the country).
  • Airbnb got a mention as a viable option for travelers to Omaha for Berkshire Hathaway’s annual meeting, which drew 39,000 people last year. I wonder just how much that mention is worth to Airbnb — and how many of Berkshire Hathaway’s shareholders were willing to use Airbnb before that subtle endorsement.
  • Berkshire Hathaway’s federal income tax return runs 24,100 pages. The company files an additional 3,400 state income tax returns. Even more impressive? Those documents are prepared by the Berkshire Hathaway office in Omaha, which has a staff of 25. The same 25 people are responsible for setting up an annual meeting for 39,000 attendees and a few other minor matters.
  • That huge stack of paperwork, however, would be far larger if all of Berkshire Hathaway’s subsidiaries operated independently. Buffett’s approach to running companies is as bare bones as possible. I expect that sort of lean leadership to be a major trend in years to come.

In honor of the 50th anniversary, Buffett wrote a more extended look at Berkshire Hathaway’s past then he normally does in these letters. He admitted a few crucial mistakes that he learned from, making this letter perhaps more valuable to read than most years. Berkshire Hathaway’s annual report from 1964 is also included at the end of this year’s.

If you’re an entrepreneur who hopes to grow your business beyond just covering your own expenses, read this year’s report — and maybe check into some of the past reports.

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