{"id":3186,"date":"2015-02-28T10:22:17","date_gmt":"2015-02-28T18:22:17","guid":{"rendered":"https:\/\/masonmyers.com\/?p=3186"},"modified":"2015-03-02T09:56:26","modified_gmt":"2015-03-02T17:56:26","slug":"2014-berkshire-hathaway-shareholder-letter-buffett-and-munger-observations-from-50-years","status":"publish","type":"post","link":"https:\/\/masonmyers.com\/2014-berkshire-hathaway-shareholder-letter-buffett-and-munger-observations-from-50-years\/","title":{"rendered":"2014 Berkshire Hathaway Annual Letter – Buffett and Munger Observations From 50 Years"},"content":{"rendered":"

Saturday, Feb. 28, 2015, Berkshire Hathaway posted their 2014 Berkshire Hathaway annual\u00a0letter<\/a>.\u00a0\"2014As this is the 50th anniversary of Warren Buffett taking control of Berkshire, this letter included two extra sections. Both Buffett and Vice Chairman Charlie Munger wrote about their observations about the first fifty years of Berkshire Hathaway and what each expects in the next fifty years.<\/p>\n

I have come to think of the Berkshire Hathaway strategy as an “open source” strategy — they provide an open book about their strategy and are willing to share it with anyone who will listen. It remains a mystery why more people do not attempt the strategy because it is there for anyone to use: it does not require particular intelligence, and is not particularly difficult to accomplish pieces of the puzzle. The probable answer is that it is unconventional (better to fail conventionally than succeed unconventionally?), and it takes time to get the various components put together properly. Thus, the results do not appear quickly and it is difficult to have the patience for the strategy, even though compounding means the results compound immensely later on.<\/p>\n

Nonetheless, I am happy to say that I am on track building a strategy based on the “open source” components of Berkshire Hathaway at my investment fund, Greybull Stewardship<\/a>. I am forever grateful to Berkshire for being such an open book, and I am doing my best to use the source code wisely. Here are some of the observations from Buffett and Munger about what made and makes their strategy work.<\/p>\n

2014 Berkshire Hathaway Annual Letter<\/h3>\n

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Observations From Buffett on Reasons for the Success of Berkshire Hathaway:<\/span><\/h5>\n

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  1. Efficient allocation of capital among portfolio companies.<\/strong> \u00a0This is the first thing that he writes showing why the Berkshire structure and strategy are so attractive. Buffett writes, “we can — without incurring taxes or much in the way of other costs — move huge sums from businesses that have limited opportunities for incremental investment to other sectors with greater promise.” This sounds simple, but most other investment structures cannot do this or it is very difficult. Traditional private equity funds cannot usually do this. Deal-by-deal investment strategies cannot do this. Buffett even writes of the difficulty that tax-exempt investors such as pension funds have in accomplishing this.\n