Berkshire's Corporate Performance vs. the S&P 500
| Year | Annual Percentage Change | Relative Results (1)-(2) | ||
| in Per-Share Book Value of Berkshire (1) | in S&P 500 with Dividends Included (2) | |||
| 1965 | ...... | 23.8 | 10.0 | 13.8 |
| 1966 | ...... | 20.3 | (11.7) | 32.0 |
| 1967 | ...... | 11.0 | 30.9 | (19.9) |
| 1968 | ...... | 19.0 | 11.0 | 8.0 |
| 1969 | ...... | 16.2 | (8.4) | 24.6 |
| 1970 | ...... | 12.0 | 3.9 | 8.1 |
| 1971 | ...... | 16.4 | 14.6 | 1.8 |
| 1972 | ...... | 21.7 | 18.9 | 2.8 |
| 1973 | ...... | 4.7 | (14.8) | 19.5 |
| 1974 | ...... | 5.5 | (26.4) | 31.9 |
| 1975 | ...... | 21.9 | 37.2 | (15.3) |
| 1976 | ...... | 59.3 | 23.6 | 35.7 |
| 1977 | ...... | 31.9 | (7.4) | 39.3 |
| 1978 | ...... | 24.0 | 6.4 | 17.6 |
| 1979 | ...... | 35.7 | 18.2 | 17.5 |
| 1980 | ...... | 19.3 | 32.3 | (13.0) |
| 1981 | ...... | 31.4 | (5.0) | 36.4 |
| 1982 | ...... | 40.0 | 21.4 | 18.6 |
| 1983 | ...... | 32.3 | 22.4 | 9.9 |
| 1984 | ...... | 13.6 | 6.1 | 7.5 |
| 1985 | ...... | 48.2 | 31.6 | 16.6 |
| 1986 | ...... | 26.1 | 18.6 | 7.5 |
| 1987 | ...... | 19.5 | 5.1 | 14.4 |
| 1988 | ...... | 20.1 | 16.6 | 3.5 |
| 1989 | ...... | 44.4 | 31.7 | 12.7 |
| 1990 | ...... | 7.4 | (3.1) | 10.5 |
| 1991 | ...... | 39.6 | 30.5 | 9.1 |
| 1992 | ...... | 20.3 | 7.6 | 12.7 |
| 1993 | ...... | 14.3 | 10.1 | 4.2 |
| 1994 | ...... | 13.9 | 1.3 | 12.6 |
| 1995 | ...... | 43.1 | 37.6 | 5.5 |
| 1996 | ...... | 31.8 | 23.0 | 8.8 |
| 1997 | ...... | 34.1 | 33.4 | .7 |
| 1998 | ...... | 48.3 | 28.6 | 19.7 |
| 1999 | ...... | .5 | 21.0 | (20.5) |
| 2000 | ...... | 6.5 | (9.1) | 15.6 |
| Average Annual Gain – 1965-2000 | 23.6% | 11.8% | 11.8% | |
| Overall Gain – 1964-2000 | 207,821% | 5,383% | 202,438% | |
Notes: Data are for calendar years with these exceptions: 1965 and 1966, year ended 9/30; 1967, 15 months ended 12/31.
Starting in 1979, accounting rules required insurance companies to value the equity securities they hold at market rather than at the lower of cost or market, which was previously the requirement. In this table, Berkshire's results through 1978 have been restated to conform to the changed rules. In all other respects, the results are calculated using the numbers originally reported.
The S&P 500 numbers are pre-tax whereas the Berkshire numbers are after-tax. If a corporation such as Berkshire were simply to have owned the S&P 500 and accrued the appropriate taxes, its results would have lagged the S&P 500 in years when that index showed a positive return, but would have exceeded the S&P in years when the index showed a negative return. Over the years, the tax costs would have caused the aggregate lag to be substantial.
BERKSHIRE HATHAWAY INC.
To the Shareholders of Berkshire Hathaway Inc.:
Our gain in net worth during 2000 was \$3.96 billion, which increased the per-share book value of both our Class A and Class B stock by 6.5%. Over the last 36 years (that is, since present management took over) per-share book value has grown from \$19 to \$40,442, a gain of 23.6% compounded annually.*
Overall, we had a decent year, our book-value gain having outpaced the performance of the S&P 500. And, though this judgment is necessarily subjective, we believe Berkshire's gain in per-share intrinsic value moderately exceeded its gain in book value. (Intrinsic value, as well as other key investment and accounting terms and concepts, are explained in our Owner's Manual on pages 59-66. Intrinsic value is discussed on page 64.)
Furthermore, we completed two significant acquisitions that we negotiated in 1999 and initiated six more. All told, these purchases have cost us about \$8 billion, with 97% of that amount paid in cash and 3% in stock. The eight businesses we’ve acquired have aggregate sales of about \$13 billion and employ 58,000 people. Still, we incurred no debt in making these purchases, and our shares outstanding have increased only $\frac{1}{3}$ of 1%. Better yet, we remain awash in liquid assets and are both eager and ready for even larger acquisitions.
I will detail our purchases in the next section of the report. But I will tell you now that we have embraced the 21 $^{st}$ century by entering such cutting-edge industries as brick, carpet, insulation and paint. Try to control your excitement.
On the minus side, policyholder growth at GEICO slowed to a halt as the year progressed. It has become much more expensive to obtain new business. I told you last year that we would get our money's worth from stepped-up advertising at GEICO in 2000, but I was wrong. We'll examine the reasons later in the report.
Another negative — which has persisted for several years — is that we see our equity portfolio as only mildly attractive. We own stocks of some excellent businesses, but most of our holdings are fully priced and are unlikely to deliver more than moderate returns in the future. We’re not alone in facing this problem: The long-term prospect for equities in general is far from exciting.
Finally, there is the negative that recurs annually: Charlie Munger, Berkshire's Vice Chairman and my partner, and I are a year older than when we last reported to you. Mitigating this adverse development is the indisputable fact that the age of your top managers is increasing at a considerably lower rate — percentage-wise — than is the case at almost all other major corporations. Better yet, this differential will widen in the future.
Charlie and I continue to aim at increasing Berkshire's per-share value at a rate that, over time, will modestly exceed the gain from owning the S&P 500. As the table on the facing page shows, a small annual advantage in our favor can, if sustained, produce an anything-but-small long-term advantage. To reach our goal we will need to add a few good businesses to Berkshire's stable each year, have the businesses we own generally gain in value, and avoid any material increase in our outstanding shares. We are confident about meeting the last two objectives; the first will require some luck.
It’s appropriate here to thank two groups that made my job both easy and fun last year — just as they do every year. First, our operating managers continue to run their businesses in splendid fashion, which allows me to spend my time allocating capital rather than supervising them. (I wouldn’t be good at that anyway.)
Our managers are a very special breed. At most large companies, the truly talented divisional managers seldom have the job they really want. Instead they yearn to become CEOs, either at their present employer or elsewhere. Indeed, if they stay put, they and their colleagues are likely to feel they have failed.
At Berkshire, our all-stars have exactly the jobs they want, ones that they hope and expect to keep throughout their business lifetimes. They therefore concentrate solely on maximizing the long-term value of the businesses that they “own” and love. If the businesses succeed, they have succeeded. And they stick with us: In our last 36 years, Berkshire has never had a manager of a significant subsidiary voluntarily leave to join another business.
The other group to which I owe enormous thanks is the home-office staff. After the eight acquisitions more than doubled our worldwide workforce to about 112,000, Charlie and I went soft last year and added one more person at headquarters. (Charlie, bless him, never lets me forget Ben Franklin's advice: “A small leak can sink a great ship.”) Now we have 13.8 people.
This tiny band works miracles. In 2000 it handled all of the details connected with our eight acquisitions, processed extensive regulatory and tax filings (our tax return covers 4,896 pages), smoothly produced an annual meeting to which 25,000 tickets were issued, and accurately dispensed checks to 3,660 charities designated by our shareholders. In addition, the group dealt with all the routine tasks served up by a company with a revenue run-rate of \$40 billion and more than 300,000 owners. And, to add to all of this, the other 12.8 are a delight to be around.
I should pay to have my job.
Acquisitions of 2000
Our acquisition technique at Berkshire is simplicity itself: We answer the phone. I'm also glad to report that it rings a bit more often now, because owners and/or managers increasingly wish to join their companies with Berkshire. Our acquisition criteria are set forth on page 23, and the number to call is 402-346-1400.
Let me tell you a bit about the businesses we have purchased during the past 14 months, starting with the two transactions that were initiated in 1999, but closed in 2000. (This list excludes some smaller purchases that were made by the managers of our subsidiaries and that, in most cases, will be integrated into their operations.)
- I described the first purchase — 76% of MidAmerican Energy — in last year's report. Because of regulatory constraints on our voting privileges, we perform only a “one-line” consolidation of MidAmerican’s earnings and equity in our financial statements. If we instead fully consolidated the company’s figures, our revenues in 2000 would have been \$5 billion greater than we reported, though net income would remain the same.
- On November 23, 1999, I received a one-page fax from Bruce Cort that appended a Washington Post article describing an aborted buyout of CORT Business Services. Despite his name, Bruce has no connection with CORT. Rather, he is an airplane broker who had sold Berkshire a jet in 1986 and who, before the fax, had not been in touch with me for about ten years.
I knew nothing about CORT, but I immediately printed out its SEC filings and liked what I saw. That same day I told Bruce I had a possible interest and asked him to arrange a meeting with Paul Arnold, CORT's CEO. Paul and I got together on November 29, and I knew at once that we had the right ingredients for a purchase: a fine though unglamorous business, an outstanding manager, and a price (going by that on the failed deal) that made sense.
Operating out of 117 showrooms, CORT is the national leader in “rent-to-rent” furniture, primarily used in offices but also by temporary occupants of apartments. This business, it should be noted, has no similarity to “rent-to-own” operations, which usually involve the sale of home furnishings and electronics to people having limited income and poor credit.
We quickly purchased CORT for Wesco, our 80%-owned subsidiary, paying about \$386 million in cash. You will find more details about CORT's operations in Wesco's 1999 and 2000 annual reports. Both Charlie and I enjoy working with Paul, and CORT looks like a good bet to beat our original expectations.
- Early last year, Ron Ferguson of General Re put me in contact with Bob Berry, whose family had owned U.S. Liability for 49 years. This insurer, along with two sister companies, is a medium-sized, highly-respected writer of unusual risks — “excess and surplus lines” in insurance jargon. After Bob and I got in touch, we agreed by phone on a half-stock, half-cash deal.
In recent years, Tom Nerney has managed the operation for the Berry family and has achieved a rare combination of excellent growth and unusual profitability. Tom is a powerhouse in other ways as well. In addition to having four adopted children (two from Russia), he has an extended family: the Philadelphia Belles, a young-teen girls basketball team that Tom coaches. The team had a 62-4 record last year and finished second in the AAU national tournament.
Few property-casualty companies are outstanding businesses. We have far more than our share, and U.S. Liability adds luster to the collection.
- Ben Bridge Jeweler was another purchase we made by phone, prior to any face-to-face meeting between me and the management. Ed Bridge, who with his cousin, Jon, manages this 65-store West Coast retailer, is a friend of Barnett Helzberg, from whom we bought Helzberg Diamonds in 1995. Upon learning that the Bridge family proposed to sell its company, Barnett gave Berkshire a strong recommendation. Ed then called and explained his business to me, also sending some figures, and we made a deal, again half for cash and half for stock.
Ed and Jon are fourth generation owner-managers of a business started 89 years ago in Seattle. Both the business and the family—including Herb and Bob, the fathers of Jon and Ed—enjoy extraordinary reputations. Same-store sales have increased by 9%, 11%, 13%, 10%, 12%, 21% and 7% over the past seven years, a truly remarkable record.
It was vital to the family that the company operate in the future as in the past. No one wanted another jewelry chain to come in and decimate the organization with ideas about synergy and cost saving (which, though they would never work, were certain to be tried). I told Ed and Jon that they would be in charge, and they knew I could be believed: After all, it's obvious that your Chairman would be a disaster at actually running a store or selling jewelry (though there are members of his family who have earned black belts as purchasers).
In their typically classy way, the Bridges allocated a substantial portion of the proceeds from their sale to the hundreds of co-workers who had helped the company achieve its success. We're proud to be associated with both the family and the company.
- In July we acquired Justin Industries, the leading maker of Western boots — including the Justin, Tony Lama, Nocona, and Chippewa brands — and the premier producer of brick in Texas and five neighboring states.
Here again, our acquisition involved serendipity. On May 4th, I received a fax from Mark Jones, a stranger to me, proposing that Berkshire join a group to acquire an unnamed company. I faxed him back, explaining that with rare exceptions we don't invest with others, but would happily pay him a commission if he sent details and we later made a purchase. He replied that the “mystery company” was Justin. I then went to Fort Worth to meet John Roach, chairman of the company and John Justin, who had built the business and was its major shareholder. Soon after, we bought Justin for \$570 million in cash.
John Justin loved Justin Industries but had been forced to retire because of severe health problems (which sadly led to his death in late February). John was a class act — as a citizen, businessman and human being. Fortunately, he had groomed two outstanding managers, Harrold Melton at Acme and Randy Watson at Justin Boot, each of whom runs his company autonomously.
Acme, the larger of the two operations, produces more than one billion bricks per year at its 22 plants, about $11.7\%$ of the industry's national output. The brick business, however, is necessarily regional, and in its territory Acme enjoys unquestioned leadership. When Texans are asked to name a brand of brick, $75\%$ respond Acme, compared to $16\%$ for the runner-up. (Before our purchase, I couldn't have named a brand of brick. Could you have?) This brand recognition is not only due to Acme's product quality, but also reflects many decades of extraordinary community service by both the company and John Justin.
I can't resist pointing out that Berkshire — whose top management has long been mired in the $19^{\text{th}}$ century — is now one of the very few authentic “clicks-and-bricks” businesses around. We went into 2000 with GEICO doing significant business on the Internet, and then we added Acme. You can bet this move by Berkshire is making them sweat in Silicon Valley.
- In June, Bob Shaw, CEO of Shaw Industries, the world's largest carpet manufacturer, came to see me with his partner, Julian Saul, and the CEO of a second company with which Shaw was mulling a merger. The potential partner, however, faced huge asbestos liabilities from past activities, and any deal depended on these being eliminated through insurance.
The executives visiting me wanted Berkshire to provide a policy that would pay all future asbestos costs. I explained that though we could write an exceptionally large policy — far larger than any other insurer would ever think of offering — we would never issue a policy that lacked a cap.
Bob and Julian decided that if we didn't want to bet the ranch on the extent of the acquiree's liability, neither did they. So their deal died. But my interest in Shaw was sparked, and a few months later Charlie and I met with Bob to work out a purchase by Berkshire. A key feature of the deal was that both Bob and Julian were to continue owning at least $5\%$ of Shaw. This leaves us associated with the best in the business as shown by Bob and Julian's record: Each built a large, successful carpet business before joining forces in 1998.
Shaw has annual sales of about \$4 billion, and we own 87.3% of the company. Leaving aside our insurance operation, Shaw is by far our largest business. Now, if people walk all over us, we won't mind.
- In July, Bob Mundheim, a director of Benjamin Moore Paint, called to ask if Berkshire might be interested in acquiring it. I knew Bob from Salomon, where he was general counsel during some difficult times, and held him in very high regard. So my answer was “Tell me more.”
In late August, Charlie and I met with Richard Roob and Yvan Dupuy, past and present CEOs of Benjamin Moore. We liked them; we liked the business; and we made a \$1 billion cash offer on the spot. In October, their board approved the transaction, and we completed it in December. Benjamin Moore has been making paint for 117 years and has thousands of independent dealers that are a vital asset to its business. Make sure you specify our product for your next paint job.
- Finally, in late December, we agreed to buy Johns Manville Corp. for about \$1.8 billion. This company's incredible odyssey over the last few decades — too multifaceted to be chronicled here — was shaped by its long history as a manufacturer of asbestos products. The much-publicized health problems that affected many people exposed to asbestos led to JM's declaring bankruptcy in 1982.
Subsequently, the bankruptcy court established a trust for victims, the major asset of which was a controlling interest in JM. The trust, which sensibly wanted to diversify its assets, agreed last June to sell the business to an LBO buyer. In the end, though, the LBO group was unable to obtain financing.
Consequently, the deal was called off on Friday, December 8 $^{th}$ . The following Monday, Charlie and I called Bob Felise, chairman of the trust, and made an all-cash offer with no financing contingencies. The next day the trustees voted tentatively to accept our offer, and a week later we signed a contract.
JM is the nation's leading producer of commercial and industrial insulation and also has major positions in roofing systems and a variety of engineered products. The company's sales exceed \$2 billion and the business has earned good, if cyclical, returns. Jerry Henry, JM's CEO, had announced his retirement plans a year ago, but I'm happy to report that Charlie and I have convinced him to stick around.
* * * * * * * * * * * *
Two economic factors probably contributed to the rush of acquisition activity we experienced last year. First, many managers and owners foresaw near-term slowdowns in their businesses — and, in fact, we purchased several companies whose earnings will almost certainly decline this year from peaks they reached in 1999 or 2000. The declines make no difference to us, given that we expect all of our businesses to now and then have ups and downs. (Only in the sales presentations of investment banks do earnings move forever upward.) We don’t care about the bumps; what matters are the overall results. But the decisions of other people are sometimes affected by the near-term outlook, which can both spur sellers and temper the enthusiasm of purchasers who might otherwise compete with us.
A second factor that helped us in 2000 was that the market for junk bonds dried up as the year progressed. In the two preceding years, junk bond purchasers had relaxed their standards, buying the obligations of ever-weaker issuers at inappropriate prices. The effects of this laxity were felt last year in a ballooning of defaults. In this environment, “financial” buyers of businesses — those who wish to buy using only a sliver of equity — became unable to borrow all they thought they needed. What they could still borrow, moreover, came at a high price. Consequently, LBO operators became less aggressive in their bidding when businesses came up for sale last year. Because we analyze purchases on an all-equity basis, our evaluations did not change, which means we became considerably more competitive.
Aside from the economic factors that benefited us, we now enjoy a major and growing advantage in making acquisitions in that we are often the buyer of choice for the seller. That fact, of course, doesn't assure a deal — sellers have to like our price, and we have to like their business and management — but it does help.
We find it meaningful when an owner cares about whom he sells to. We like to do business with someone who loves his company, not just the money that a sale will bring him (though we certainly understand why he likes that as well). When this emotional attachment exists, it signals that important qualities will likely be found within the business: honest accounting, pride of product, respect for customers, and a loyal group of associates having a strong sense of direction. The reverse is apt to be true, also. When an owner auctions off his business, exhibiting a total lack of interest in what follows, you will frequently find that it has been dressed up for sale, particularly when the seller is a “financial owner.” And if owners behave with little regard for their business and its people, their conduct will often contaminate attitudes and practices throughout the company.
When a business masterpiece has been created by a lifetime — or several lifetimes — of unstinting care and exceptional talent, it should be important to the owner what corporation is entrusted to carry on its history. Charlie and I believe Berkshire provides an almost unique home. We take our obligations to the people who created a business very seriously, and Berkshire’s ownership structure ensures that we can fulfill our promises. When we tell John Justin that his business will remain headquartered in Fort Worth, or assure the Bridge family that its operation will not be merged with another jeweler, these sellers can take those promises to the bank.
How much better it is for the “painter” of a business Rembrandt to personally select its permanent home than to have a trust officer or uninterested heirs auction it off. Throughout the years we have had great experiences with those who recognize that truth and apply it to their business creations. We’ll leave the auctions to others.
The Economics of Property/Casualty Insurance
Our main business — though we have others of great importance — is insurance. To understand Berkshire, therefore, it is necessary that you understand how to evaluate an insurance company. The key determinants are: (1) the amount of float that the business generates; (2) its cost; and (3) most critical of all, the long-term outlook for both of these factors.
To begin with, float is money we hold but don't own. In an insurance operation, float arises because premiums are received before losses are paid, an interval that sometimes extends over many years. During that time, the insurer invests the money. This pleasant activity typically carries with it a downside: The premiums that an insurer takes in usually do not cover the losses and expenses it eventually must pay. That leaves it running an "underwriting loss," which is the cost of float. An insurance business has value if its cost of float over time is less than the cost the company would otherwise incur to obtain funds. But the business is a lemon if its cost of float is higher than market rates for money.
A caution is appropriate here: Because loss costs must be estimated, insurers have enormous latitude in figuring their underwriting results, and that makes it very difficult for investors to calculate a company's true cost of float. Errors of estimation, usually innocent but sometimes not, can be huge. The consequences of these miscalculations flow directly into earnings. An experienced observer can usually detect large-scale errors in reserving, but the general public can typically do no more than accept what's presented, and at times I have been amazed by the numbers that big-name auditors have implicitly blessed. Both the income statements and balance sheets of insurers can be minefields.
At Berkshire, we strive to be both consistent and conservative in our reserving. But we will make mistakes. And we warn you that there is nothing symmetrical about surprises in the insurance business: They almost always are unpleasant.
The table that follows shows (at intervals) the float generated by the various segments of Berkshire's insurance operations since we entered the business 34 years ago upon acquiring National Indemnity Company (whose traditional lines are included in the segment “Other Primary”). For the table we have calculated our float — which we generate in large amounts relative to our premium volume — by adding net loss reserves, loss adjustment reserves, funds held under reinsurance assumed and unearned premium reserves, and then subtracting insurance-related receivables, prepaid acquisition costs, prepaid taxes and deferred charges applicable to assumed reinsurance. (Don’t panic, there won’t be a quiz.)
Yearend Float (in \$ millions)
| Year | GEICO | General Re | Other Reinsurance | Other Primary | Total |
| 1967 | 20 | 20 | |||
| 1977 | 40 | 131 | 171 | ||
| 1987 | 701 | 807 | 1,508 | ||
| 1997 | 2,917 | 4,014 | 455 | 7,386 | |
| 1998 | 3,125 | 14,909 | 4,305 | 415 | 22,754 |
| 1999 | 3,444 | 15,166 | 6,285 | 403 | 25,298 |
| 2000 | 3,943 | 15,525 | 7,805 | 598 | 27,871 |
We're pleased by the growth in our float during 2000 but not happy with its cost. Over the years, our cost of float has been very close to zero, with the underwriting profits realized in most years offsetting the occasional terrible year such as 1984, when our cost was a staggering $19\%$ . In 2000, however, we had an underwriting loss of \$1.6 billion, which gave us a float cost of $6\%$ . Absent a mega-catastrophe, we expect our float cost to fall in 2001 — perhaps substantially — in large part because of corrections in pricing at General Re that should increasingly be felt as the year progresses. On a smaller scale, GEICO may experience the same improving trend.
There are two factors affecting our cost of float that are very rare at other insurers but that now loom large at Berkshire. First, a few insurers that are currently experiencing large losses have offloaded a significant portion of these on us in a manner that penalizes our current earnings but gives us float we can use for many years to come. After the loss that we incur in the first year of the policy, there are no further costs attached to this business.
When these policies are properly priced, we welcome the pain-today, gain-tomorrow effects they have. In 1999, \$400 million of our underwriting loss (about 27.8% of the total) came from business of this kind and in 2000 the figure was \$482 million (34.4% of our loss). We have no way of predicting how much similar business we will write in the future, but what we do get will typically be in large chunks. Because these transactions can materially distort our figures, we will tell you about them as they occur.
Other reinsurers have little taste for this insurance. They simply can't stomach what huge underwriting losses do to their reported results, even though these losses are produced by policies whose overall economics are certain to be favorable. You should be careful, therefore, in comparing our underwriting results with those of other insurers.
An even more significant item in our numbers — which, again, you won’t find much of elsewhere — arises from transactions in which we assume past losses of a company that wants to put its troubles behind it. To illustrate, the XYZ insurance company might have last year bought a policy obligating us to pay the first \$1 billion of losses and loss adjustment expenses from events that happened in, say, 1995 and earlier years. These contracts can be very large, though we always require a cap on our exposure. We entered into a number of such transactions in 2000 and expect to close several more in 2001.
Under GAAP accounting, this “retroactive” insurance neither benefits nor penalizes our current earnings. Instead, we set up an asset called “deferred charges applicable to assumed reinsurance,” in an amount reflecting the difference between the premium we receive and the (higher) losses we expect to pay (for which reserves are immediately established). We then amortize this asset by making annual charges to earnings that create equivalent underwriting losses. You will find the amount of the loss that we incur from these transactions in both our quarterly and annual management discussion. By their nature, these losses will continue for many years, often stretching into decades. As an offset, though, we have the use of float — lots of it.
Clearly, float carrying an annual cost of this kind is not as desirable as float we generate from policies that are expected to produce an underwriting profit (of which we have plenty). Nevertheless, this retroactive insurance should be decent business for us.
The net of all this is that a) I expect our cost of float to be very attractive in the future but b) rarely to return to a “no-cost” mode because of the annual charge that retroactive reinsurance will lay on us. Also — obviously — the ultimate benefits that we derive from float will depend not only on its cost but, fully as important, how effectively we deploy it.
Our retroactive business is almost single-handedly the work of Ajit Jain, whose praises I sing annually. It is impossible to overstate how valuable Ajit is to Berkshire. Don't worry about my health; worry about his.
Last year, Ajit brought home a \$2.4 billion reinsurance premium, perhaps the largest in history, from a policy that retroactively covers a major U.K. company. Subsequently, he wrote a large policy protecting the Texas Rangers from the possibility that Alex Rodriguez will become permanently disabled. As sports fans know, “A-Rod” was signed for \$252 million, a record, and we think that our policy probably also set a record for disability insurance. We cover many other sports figures as well.
In another example of his versatility, Ajit last fall negotiated a very interesting deal with Grab.com, an Internet company whose goal was to attract millions of people to its site and there to extract information from them that would be useful to marketers. To lure these people, Grab.com held out the possibility of a \$1 billion prize (having a \$170 million present value) and we insured its payment. A message on the site explained that the chance of anyone winning the prize was low, and indeed no one won. But the possibility of a win was far from nil.
Writing such a policy, we receive a modest premium, face the possibility of a huge loss, and get good odds. Very few insurers like that equation. And they're unable to cure their unhappiness by reinsurance. Because each policy has unusual — and sometimes unique — characteristics, insurers can't lay off the occasional shock loss through their standard reinsurance arrangements. Therefore, any insurance CEO doing a piece of business like this must run the small, but real, risk of a horrible quarterly earnings number, one that he would not enjoy explaining to his board or shareholders. Charlie and I, however, like any proposition that makes compelling mathematical sense, regardless of its effect on reported earnings.
At General Re, the news has turned considerably better: Ron Ferguson, along with Joe Brandon, Tad Montross, and a talented supporting cast took many actions during 2000 to bring that company's profitability back to past standards. Though our pricing is not fully corrected, we have significantly repriced business that was severely unprofitable or dropped it altogether. If there's no mega-catastrophe in 2001, General Re's float cost should fall materially.
The last couple of years haven't been any fun for Ron and his crew. But they have stepped up to tough decisions, and Charlie and I applaud them for these. General Re has several important and enduring business advantages. Better yet, it has managers who will make the most of them.
In aggregate, our smaller insurance operations produced an excellent underwriting profit in 2000 while generating significant float — just as they have done for more than a decade. If these companies were a single and separate operation, people would consider it an outstanding insurer. Because the companies instead reside in an enterprise as large as Berkshire, the world may not appreciate their accomplishments — but I sure do. Last year I thanked Rod Eldred, John Kizer, Don Towle and Don Wurster, and I again do so. In addition, we now also owe thanks to Tom Nerney at U.S. Liability and Michael Stearns, the new head of Cypress.
You may notice that Brad Kinstler, who was CEO of Cypress and whose praises I’ve sung in the past, is no longer in the list above. That’s because we needed a new manager at Fechheimer Bros., our Cincinnati-based uniform company, and called on Brad. We seldom move Berkshire managers from one enterprise to another, but maybe we should try it more often: Brad is hitting home runs in his new job, just as he always did at Cypress.
GEICO (1-800-847-7536 or GEICO.com)
We show below the usual table detailing GEICO's growth. Last year I enthusiastically told you that we would step up our expenditures on advertising in 2000 and that the added dollars were the best investment that GEICO could make. I was wrong: The extra money we spent did not produce a commensurate increase in inquiries. Additionally, the percentage of inquiries that we converted into sales fell for the first time in many years. These negative developments combined to produce a sharp increase in our per-policy acquisition cost.
| Years | New AutoPolicies(1) | Auto PoliciesIn-Force(1) |
| 1993 | 346,882 | 2,011,055 |
| 1994 | 384,217 | 2,147,549 |
| 1995 | 443,539 | 2,310,037 |
| 1996 | 592,300 | 2,543,699 |
| 1997 | 868,430 | 2,949,439 |
| 1998 | 1,249,875 | 3,562,644 |
| 1999 | 1,648,095 | 4,328,900 |
| 2000 | 1,472,853 | 4,696,842 |
(1) “Voluntary” only; excludes assigned risks and the like.
Agonizing over errors is a mistake. But acknowledging and analyzing them can be useful, though that practice is rare in corporate boardrooms. There, Charlie and I have almost never witnessed a candid post-mortem of a failed decision, particularly one involving an acquisition. A notable exception to this never-look-back approach is that of The Washington Post Company, which unfailingly and objectively reviews its acquisitions three years after they are made. Elsewhere, triumphs are trumpeted, but dumb decisions either get no follow-up or are rationalized.
The financial consequences of these boners are regularly dumped into massive restructuring charges or write-offs that are casually waved off as “nonrecurring.” Managements just love these. Indeed, in recent years it has seemed that no earnings statement is complete without them. The origins of these charges, though, are never explored. When it comes to corporate blunders, CEOs invoke the concept of the Virgin Birth.
To get back to our examination of GEICO: There are at least four factors that could account for the increased costs we experienced in obtaining new business last year, and all probably contributed in some manner.
First, in our advertising we have pushed “frequency” very hard, and we probably overstepped in certain media. We’ve always known that increasing the number of messages through any medium would eventually produce diminishing returns. The third ad in an hour on a given cable channel is simply not going to be as effective as the first.
Second, we may have already picked much of the low-hanging fruit. Clearly, the willingness to do business with a direct marketer of insurance varies widely among individuals: Indeed, some percentage of Americans — particularly older ones — are reluctant to make direct purchases of any kind. Over the years, however, this reluctance will ebb. A new generation with new habits will find the savings from direct purchase of their auto insurance too compelling to ignore.
Another factor that surely decreased the conversion of inquiries into sales was stricter underwriting by GEICO. Both the frequency and severity of losses increased during the year, and rates in certain areas became inadequate, in some cases substantially so. In these instances, we necessarily tightened our underwriting standards. This tightening, as well as the many rate increases we put in during the year, made our offerings less attractive to some prospects.
A high percentage of callers, it should be emphasized, can still save money by insuring with us. Understandably, however, some prospects will switch to save \$200 per year but will not switch to save \$50. Therefore, rate increases that bring our prices closer to those of our competitors will hurt our acceptance rate, even when we continue to offer the best deal.
Finally, the competitive picture changed in at least one important respect: State Farm — by far the largest personal auto insurer, with about 19% of the market — has been very slow to raise prices. Its costs, however, are clearly increasing right along with those of the rest of the industry. Consequently, State Farm had an underwriting loss last year from auto insurance (including rebates to policyholders) of 18% of premiums, compared to 4% at GEICO. Our loss produced a float cost for us of 6.1%, an unsatisfactory result. (Indeed, at GEICO we expect float, over time, to be free.) But we estimate that State Farm’s float cost in 2000 was about 23%. The willingness of the largest player in the industry to tolerate such a cost makes the economics difficult for other participants.
That does not take away from the fact that State Farm is one of America's greatest business stories. I've urged that the company be studied at business schools because it has achieved fabulous success while following a path that in many ways defies the dogma of those institutions. Studying counter-evidence is a highly useful activity, though not one always greeted with enthusiasm at citadels of learning.
State Farm was launched in 1922, by a 45-year-old, semi-retired Illinois farmer, to compete with long-established insurers — haughty institutions in New York, Philadelphia and Hartford — that possessed overwhelming advantages in capital, reputation, and distribution. Because State Farm is a mutual company, its board members and managers could not be owners, and it had no access to capital markets during its years of fast growth. Similarly, the business never had the stock options or lavish salaries that many people think vital if an American enterprise is to attract able managers and thrive.
In the end, however, State Farm eclipsed all its competitors. In fact, by 1999 the company had amassed a tangible net worth exceeding that of all but four American businesses. If you want to read how this happened, get a copy of The Farmer from Merna.
Despite State Farm's strengths, however, GEICO has much the better business model, one that embodies significantly lower operating costs. And, when a company is selling a product with commodity-like economic characteristics, being the low-cost producer is all-important. This enduring competitive advantage of GEICO — one it possessed in 1951 when, as a 20-year-old student, I first became enamored with its stock — is the reason that over time it will inevitably increase its market share significantly while simultaneously achieving excellent profits. Our growth will be slow, however, if State Farm elects to continue bearing the underwriting losses that it is now suffering.
Tony Nicely, GEICO's CEO, remains an owner's dream. Everything he does makes sense. He never engages in wishful thinking or otherwise distorts reality, as so many managers do when the unexpected happens. As 2000 unfolded, Tony cut back on advertising that was not cost-effective, and he will continue to do that in 2001 if cutbacks are called for (though we will always maintain a massive media presence). Tony has also aggressively filed for price increases where we need them. He looks at the loss reports every day and is never behind the curve. To steal a line from a competitor, we are in good hands with Tony.
I've told you about our profit-sharing arrangement at GEICO that targets only two variables — growth in policies and the underwriting results of seasoned business. Despite the headwinds of 2000, we still had a performance that produced an $8.8\%$ profit-sharing payment, amounting to \$40.7 million.
GEICO will be a huge part of Berkshire's future. Because of its rock-bottom operating costs, it offers a great many Americans the cheapest way to purchase a high-ticket product that they must buy. The company then couples this bargain with service that consistently ranks high in independent surveys. That's a combination inevitably producing growth and profitability.
In just the last few years, far more drivers have learned to associate the GEICO brand with saving money on their insurance. We will pound that theme relentlessly until all Americans are aware of the value that we offer.
Investments
Below we present our common stock investments. Those that had a market value of more than \$1 billion at the end of 2000 are itemized.
| 12/31/00 | |||
| Shares | Company | Cost | Market |
| (dollars in millions) | |||
| 151,610,700 | American Express Company | $1,470 | $ 8,329 |
| 200,000,000 | The Coca-Cola Company | 1,299 | 12,188 |
| 96,000,000 | The Gillette Company | 600 | 3,468 |
| 1,727,765 | The Washington Post Company | 11 | 1,066 |
| 55,071,380 | Wells Fargo & Company | 319 | 3,067 |
| Others | 6,703 | 9,501 | |
| Total Common Stocks | $10,402 | $ 37,619 | |
In 2000, we sold nearly all of our Freddie Mac and Fannie Mae shares, established 15% positions in several mid-sized companies, bought the high-yield bonds of a few issuers (very few — the category is not labeled junk without reason) and added to our holdings of high-grade, mortgage-backed securities. There are no “bargains” among our current holdings: We’re content with what we own but far from excited by it.
Many people assume that marketable securities are Berkshire's first choice when allocating capital, but that's not true: Ever since we first published our economic principles in 1983, we have consistently stated that we would rather purchase businesses than stocks. (See number 4 on page 60.) One reason for that preference is personal, in that I love working with our managers. They are high-grade, talented and loyal. And, frankly, I find their business behavior to be more rational and owner-oriented than that prevailing at many public companies.
But there’s also a powerful financial reason behind the preference, and that has to do with taxes. The tax code makes Berkshire’s owning 80% or more of a business far more profitable for us, proportionately, than our owning a smaller share. When a company we own all of earns \$1 million after tax, the entire amount inures to our benefit. If the \$1 million is upstreamed to Berkshire, we owe no tax on the dividend. And, if the earnings are retained and we were to sell the subsidiary — not likely at Berkshire! — for \$1 million more than we paid for it, we would owe no capital gains tax. That’s because our “tax cost” upon sale would include both what we paid for the business and all earnings it subsequently retained.
Contrast that situation to what happens when we own an investment in a marketable security. There, if we own a 10% stake in a business earning \$10 million after tax, our \$1 million share of the earnings is subject to additional state and federal taxes of (1) about \$140,000 if it is distributed to us (our tax rate on most dividends is 14%); or (2) no less than \$350,000 if the \$1 million is retained and subsequently captured by us in the form of a capital gain (on which our tax rate is usually about 35%, though it sometimes approaches 40%). We may defer paying the \$350,000 by not immediately realizing our gain, but eventually we must pay the tax. In effect, the government is our “partner” twice when we own part of a business through a stock investment, but only once when we own at least 80%.
Leaving aside tax factors, the formula we use for evaluating stocks and businesses is identical. Indeed, the formula for valuing all assets that are purchased for financial gain has been unchanged since it was first laid out by a very smart man in about 600 B.C. (though he wasn't smart enough to know it was 600 B.C.).
The oracle was Aesop and his enduring, though somewhat incomplete, investment insight was “a bird in the hand is worth two in the bush.” To flesh out this principle, you must answer only three questions. How certain are you that there are indeed birds in the bush? When will they emerge and how many will there be? What is the risk-free interest rate (which we consider to be the yield on long-term U.S. bonds)? If you can answer these three questions, you will know the maximum value of the bush — and the maximum number of the birds you now possess that should be offered for it. And, of course, don’t literally think birds. Think dollars.
Aesop's investment axiom, thus expanded and converted into dollars, is immutable. It applies to outlays for farms, oil royalties, bonds, stocks, lottery tickets, and manufacturing plants. And neither the advent of the steam engine, the harnessing of electricity nor the creation of the automobile changed the formula one iota — nor will the Internet. Just insert the correct numbers, and you can rank the attractiveness of all possible uses of capital throughout the universe.
Common yardsticks such as dividend yield, the ratio of price to earnings or to book value, and even growth rates have nothing to do with valuation except to the extent they provide clues to the amount and timing of cash flows into and from the business. Indeed, growth can destroy value if it requires cash inputs in the early years of a project or enterprise that exceed the discounted value of the cash that those assets will generate in later years. Market commentators and investment managers who glibly refer to “growth” and “value” styles as contrasting approaches to investment are displaying their ignorance, not their sophistication. Growth is simply a component — usually a plus, sometimes a minus — in the value equation.
Alas, though Aesop's proposition and the third variable — that is, interest rates — are simple, plugging in numbers for the other two variables is a difficult task. Using precise numbers is, in fact, foolish; working with a range of possibilities is the better approach.
Usually, the range must be so wide that no useful conclusion can be reached. Occasionally, though, even very conservative estimates about the future emergence of birds reveal that the price quoted is startlingly low in relation to value. (Let's call this phenomenon the IBT — Inefficient Bush Theory.) To be sure, an investor needs some general understanding of business economics as well as the ability to think independently to reach a well-founded positive conclusion. But the investor does not need brilliance nor blinding insights.
At the other extreme, there are many times when the most brilliant of investors can't muster a conviction about the birds to emerge, not even when a very broad range of estimates is employed. This kind of uncertainty frequently occurs when new businesses and rapidly changing industries are under examination. In cases of this sort, any capital commitment must be labeled speculative.
Now, speculation — in which the focus is not on what an asset will produce but rather on what the next fellow will pay for it — is neither illegal, immoral nor un-American. But it is not a game in which Charlie and I wish to play. We bring nothing to the party, so why should we expect to take anything home?
The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities — that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future — will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands.
Last year, we commented on the exuberance — and, yes, it was irrational — that prevailed, noting that investor expectations had grown to be several multiples of probable returns. One piece of evidence came from a Paine Webber-Gallup survey of investors conducted in December 1999, in which the participants were asked their opinion about the annual returns investors could expect to realize over the decade ahead. Their answers averaged $19\%$ . That, for sure, was an irrational expectation: For American business as a whole, there couldn't possibly be enough birds in the 2009 bush to deliver such a return.
Far more irrational still were the huge valuations that market participants were then putting on businesses almost certain to end up being of modest or no value. Yet investors, mesmerized by soaring stock prices and ignoring all else, piled into these enterprises. It was as if some virus, racing wildly among investment professionals as well as amateurs, induced hallucinations in which the values of stocks in certain sectors became decoupled from the values of the businesses that underlay them.
This surreal scene was accompanied by much loose talk about “value creation.” We readily acknowledge that there has been a huge amount of true value created in the past decade by new or young businesses, and that there is much more to come. But value is destroyed, not created, by any business that loses money over its lifetime, no matter how high its interim valuation may get.
What actually occurs in these cases is wealth transfer, often on a massive scale. By shamelessly merchandising birdless bushes, promoters have in recent years moved billions of dollars from the pockets of the public to their own purses (and to those of their friends and associates). The fact is that a bubble market has allowed the creation of bubble companies, entities designed more with an eye to making money off investors rather than for them. Too often, an IPO, not profits, was the primary goal of a company's promoters. At bottom, the “business model” for these companies has been the old-fashioned chain letter, for which many fee-hungry investment bankers acted as eager postmen.
But a pin lies in wait for every bubble. And when the two eventually meet, a new wave of investors learns some very old lessons: First, many in Wall Street — a community in which quality control is not prized — will sell investors anything they will buy. Second, speculation is most dangerous when it looks easiest.
At Berkshire, we make no attempt to pick the few winners that will emerge from an ocean of unproven enterprises. We're not smart enough to do that, and we know it. Instead, we try to apply Aesop's 2,600-year-old equation to opportunities in which we have reasonable confidence as to how many birds are in the bush and when they will emerge (a formulation that my grandsons would probably update to “A girl in a convertible is worth five in the phonebook.”). Obviously, we can never precisely predict the timing of cash flows in and out of a business or their exact amount. We try, therefore, to keep our estimates conservative and to focus on industries where business surprises are unlikely to wreak havoc on owners. Even so, we make many mistakes: I'm the fellow, remember, who thought he understood the future economics of trading stamps, textiles, shoes and second-tier department stores.
Lately, the most promising “bushes” have been negotiated transactions for entire businesses, and that pleases us. You should clearly understand, however, that these acquisitions will at best provide us only reasonable returns. Really juicy results from negotiated deals can be anticipated only when capital markets are severely constrained and the whole business world is pessimistic. We are 180 degrees from that point.
Sources of Reported Earnings
The table that follows shows the main sources of Berkshire's reported earnings. In this presentation, purchase-accounting adjustments are not assigned to the specific businesses to which they apply, but are instead aggregated and shown separately. This procedure lets you view the earnings of our businesses as they would have been reported had we not purchased them. For the reasons discussed on page 65, this form of presentation seems to us to be more useful to investors and managers than one utilizing generally accepted accounting principles (GAAP), which require purchase-premiums to be charged off business-by-business. The total net earnings we show in the table are, of course, identical to the GAAP total in our audited financial statements.
| (in millions) | ||||
| Pre-Tax Earnings | Berkshire's Share of Net Earnings (after taxes and minority interests) | |||
| 2000 | 1999 | 2000 | 1999 | |
| Operating Earnings: | ||||
| Insurance Group: | ||||
| Underwriting – Reinsurance | $(1,399) | $(1,440) | $(899) | $(927) |
| Underwriting – GEICO | (224) | 24 | (146) | 16 |
| Underwriting – Other Primary | 38 | 22 | 24 | 14 |
| Net Investment Income | 2,747 | 2,482 | 1,929 | 1,764 |
| Finance and Financial Products Business | 556 | 125 | 360 | 86 |
| Flight Services | 213 | 225 | 126 | 132 |
| MidAmerican Energy (76% owned) | 197 | -- | 109 | -- |
| Retail Operations | 175 | 130 | 104 | 77 |
| Scott Fetzer (excluding finance operation) | 122 | 147 | 80 | 92 |
| Other Businesses | 225 | 210 | 134 | 131 |
| Purchase-Accounting Adjustments | (881) | (739) | (843) | (648) |
| Corporate Interest Expense | (92) | (109) | (61) | (70) |
| Shareholder-Designated Contributions | (17) | (17) | (11) | (11) |
| Other | 39 | 25 | 30 | 15 |
| Operating Earnings | 1,699 | 1,085 | 936 | 671 |
| Capital Gains from Investments | 3,955 | 1,365 | 2,392 | 886 |
| Total Earnings – All Entities | $5,654 | $2,450 | $3,328 | $1,557 |
Most of our manufacturing, retailing and service businesses did at least reasonably well last year.
The exception was shoes, particularly at Dexter. In our shoe businesses generally, our attempt to keep the bulk of our production in domestic factories has cost us dearly. We face another very tough year in 2001 also, as we make significant changes in how we do business.
I clearly made a mistake in paying what I did for Dexter in 1993. Furthermore, I compounded that mistake in a huge way by using Berkshire shares in payment. Last year, to recognize my error, we charged off all the remaining accounting goodwill that was attributable to the Dexter transaction. We may regain some economic goodwill at Dexter in the future, but we clearly have none at present.
The managers of our shoe businesses are first-class from both a business and human perspective. They are working very hard at a tough — and often terribly painful — job, even though their personal financial circumstances don’t require them to do so. They have my admiration and thanks.
On a more pleasant note, we continue to be the undisputed leader in two branches of Aircraft Services — pilot training at FlightSafety (FSI) and fractional ownership of business jets at Executive Jet (EJA). Both companies are run by their remarkable founders.
Al Ueltschi at FSI is now 83 and continues to operate at full throttle. Though I am not a fan of stock splits, I am planning to split Al's age 2-for-1 when he hits 100. (If it works, guess who's next.)
We spent \$272 million on flight simulators in 2000, and we'll spend a similar amount this year. Anyone who thinks that the annual charges for depreciation don't reflect a real cost — every bit as real as payroll or raw materials — should get an internship at a simulator company. Every year we spend amounts equal to our depreciation charge simply to stay in the same economic place — and then spend additional sums to grow. And growth is in prospect for FSI as far as the eye can see.
Even faster growth awaits EJA (whose fractional-ownership program is called NetJets®). Rich Santulli is the dynamo behind this business.
Last year I told you that EJA's recurring revenue from monthly management fees and hourly usage grew by $46\%$ in 1999. In 2000 the growth was $49\%$ . I also told you that this was a low-margin business, in which survivors will be few. Margins were indeed slim at EJA last year, in part because of the major costs we are incurring in developing our business in Europe.
Regardless of the cost, you can be sure that EJA's spending on safety will be whatever is needed. Obviously, we would follow this policy under any circumstances, but there's some self-interest here as well: I, my wife, my children, my sisters, my 94-year-old aunt, all but one of our directors, and at least nine Berkshire managers regularly fly in the NetJets program. Given that cargo, I applaud Rich's insistence on unusually high amounts of pilot training (an average of 23 days a year). In addition, our pilots cement their skills by flying 800 or so hours a year. Finally, each flies only one model of aircraft, which means our crews do no switching around among planes with different cockpit and flight characteristics.
EJA's business continues to be constrained by the availability of new aircraft. Still, our customers will take delivery of more than 50 new jets in 2001, $7\%$ of world output. We are confident we will remain the world leader in fractional ownership, in respect to number of planes flying, quality of service, and standards of safety.
* * * * * * * * * *
Additional information about our various businesses is given on pages 42-58, where you will also find our segment earnings reported on a GAAP basis. In addition, on pages 67-73, we have rearranged Berkshire's financial data into four segments on a non-GAAP basis, a presentation that corresponds to the way Charlie and I think about the company.
Look-Through Earnings
Reported earnings are an inadequate measure of economic progress at Berkshire, in part because the numbers shown in the table on page 15 include only the dividends we receive from investees — though these dividends typically represent only a small fraction of the earnings attributable to our ownership. To depict something closer to economic reality at Berkshire than reported earnings, though, we employ the concept of "look-through" earnings. As we calculate these, they consist of: (1) the operating earnings reported on page 15; plus; (2) our share of the retained operating earnings of major investees that, under GAAP accounting, are not reflected in our profits, less; (3) an allowance for the tax that would be paid by Berkshire if these retained earnings of investees had instead been distributed to us. When tabulating "operating earnings" here, we exclude purchase-accounting adjustments as well as capital gains and other major non-recurring items.
The following table sets forth our 2000 look-through earnings, though I warn you that the figures can be no more than approximate, since they are based on a number of judgment calls. (The dividends paid to us by these investees have been included in the operating earnings itemized on page 15, mostly under "Insurance Group: Net Investment Income.")
| Berkshire's Major Investees | Berkshire's Approximate Ownership at Yearend(1) | Berkshire's Share of Undistributed Operating Earnings (in millions)(2) |
| American Express Company | 11.4% | $265 |
| The Coca-Cola Company | 8.1% | 160 |
| Freddie Mac | 0.3% | 106 |
| The Gillette Company | 9.1% | 51 |
| M&T Bank | 7.2% | 23 |
| The Washington Post Company | 18.3% | 18 |
| Wells Fargo & Company | 3.2% | 117 |
| Berkshire's share of undistributed earnings of major investees | 740 | |
| Hypothetical tax on these undistributed investee earnings(3) | (104) | |
| Reported operating earnings of Berkshire | 1,779 | |
| Total look-through earnings of Berkshire | $ 2,415 |
(1) Does not include shares allocable to minority interests
(2) Calculated on average ownership for the year
(3) The tax rate used is 14%, which is the rate Berkshire pays on most dividends it receives
Full and Fair Reporting
At Berkshire, full reporting means giving you the information that we would wish you to give to us if our positions were reversed. What Charlie and I would want under that circumstance would be all the important facts about current operations as well as the CEO's frank view of the long-term economic characteristics of the business. We would expect both a lot of financial details and a discussion of any significant data we would need to interpret what was presented.
When Charlie and I read reports, we have no interest in pictures of personnel, plants or products. References to EBITDA make us shudder — does management think the tooth fairy pays for capital expenditures? We’re very suspicious of accounting methodology that is vague or unclear, since too often that means management wishes to hide something. And we don’t want to read messages that a public relations department or consultant has turned out. Instead, we expect a company’s CEO to explain in his or her own words what’s happening.
For us, fair reporting means getting information to our 300,000 “partners” simultaneously, or as close to that mark as possible. We therefore put our annual and quarterly financials on the Internet between the close of the market on a Friday and the following morning. By our doing that, shareholders and other interested investors have timely access to these important releases and also have a reasonable amount of time to digest the information they include before the markets open on Monday. This year our quarterly information will be available on the Saturdays of May 12, August 11, and November 10. The 2001 annual report will be posted on March 9.
We applaud the work that Arthur Levitt, Jr., until recently Chairman of the SEC, has done in cracking down on the corporate practice of “selective disclosure” that had spread like cancer in recent years. Indeed, it had become virtually standard practice for major corporations to “guide” analysts or large holders to earnings expectations that were intended either to be on the nose or a tiny bit below what the company truly expected to earn. Through the selectively dispersed hints, winks and nods that companies engaged in, speculatively-minded institutions and advisors were given an information edge over investment-oriented individuals. This was corrupt behavior, unfortunately embraced by both Wall Street and corporate America.
Thanks to Chairman Levitt, whose general efforts on behalf of investors were both tireless and effective, corporations are now required to treat all of their owners equally. The fact that this reform came about because of coercion rather than conscience should be a matter of shame for CEOs and their investor relations departments.
One further thought while I'm on my soapbox: Charlie and I think it is both deceptive and dangerous for CEOs to predict growth rates for their companies. They are, of course, frequently egged on to do so by both analysts and their own investor relations departments. They should resist, however, because too often these predictions lead to trouble.
It's fine for a CEO to have his own internal goals and, in our view, it's even appropriate for the CEO to publicly express some hopes about the future, if these expectations are accompanied by sensible caveats. But for a major corporation to predict that its per-share earnings will grow over the long term at, say, $15\%$ annually is to court trouble.
That's true because a growth rate of that magnitude can only be maintained by a very small percentage of large businesses. Here's a test: Examine the record of, say, the 200 highest earning companies from 1970 or 1980 and tabulate how many have increased per-share earnings by $15\%$ annually since those dates. You will find that only a handful have. I would wager you a very significant sum that fewer than 10 of the 200 most profitable companies in 2000 will attain $15\%$ annual growth in earnings-per-share over the next 20 years.
The problem arising from lofty predictions is not just that they spread unwarranted optimism. Even more troublesome is the fact that they corrode CEO behavior. Over the years, Charlie and I have observed many instances in which CEOs engaged in uneconomic operating maneuvers so that they could meet earnings targets they had announced. Worse still, after exhausting all that operating acrobatics would do, they sometimes played a wide variety of accounting games to “make the numbers.” These accounting shenanigans have a way of snowballing: Once a company moves earnings from one period to another, operating shortfalls that occur thereafter require it to engage in further accounting maneuvers that must be even more “heroic.” These can turn fudging into fraud. (More money, it has been noted, has been stolen with the point of a pen than at the point of a gun.)
Charlie and I tend to be leery of companies run by CEOs who woo investors with fancy predictions. A few of these managers will prove prophetic — but others will turn out to be congenital optimists, or even charlatans. Unfortunately, it’s not easy for investors to know in advance which species they are dealing with.
* * * * * * * * * * * *
I've warned you in the past that you should not believe everything you read or hear about Berkshire — even when it is published or broadcast by a prestigious news organization. Indeed, erroneous reports are particularly dangerous when they are circulated by highly-respected members of the media, simply because most readers and listeners know these outlets to be generally credible and therefore believe what they say.
An example is a glaring error about Berkshire's activities that appeared in the December 29 issue of The Wall Street Journal, a generally excellent paper that I have for all of my life found useful. On the front page (and above the fold, as they say) The Journal published a news brief that said, in unequivocal terms, that we were buying bonds of Conseco and Finova. This item directed the reader to the lead story of the Money and Investing section. There, in the second paragraph of the story, The Journal reported, again without any qualification, that Berkshire was buying Conseco and Finova bonds, adding that Berkshire had invested “several hundred million dollars” in each. Only in the $18^{\text{th}}$ paragraph of the story (which by that point had jumped to an inside page) did the paper hedge a bit, saying that our Conseco purchases had been disclosed by “people familiar with the matter.”
Well, not that familiar. True, we had purchased bonds and bank debt of Finova — though the report was wildly inaccurate as to the amount. But to this day neither Berkshire nor I have ever bought a share of stock or a bond of Conseco.
Berkshire is normally covered by a Journal reporter in Chicago who is both accurate and conscientious. In this case, however, the “scoop” was the product of a New York reporter for the paper. Indeed, the 29 $^{th}$ was a busy day for him: By early afternoon, he had repeated the story on CNBC. Immediately, in lemming-like manner, other respected news organizations, relying solely on the Journal, began relating the same “facts.” The result: Conseco stock advanced sharply during the day on exceptional volume that placed it ninth on the NYSE most-active list.
During all of the story's iterations, I never heard or read the word “rumor.” Apparently reporters and editors, who generally pride themselves on their careful use of language, just can't bring themselves to attach this word to their accounts. But what description would fit more precisely? Certainly not the usual “sources say” or “it has been reported.”
A column entitled “Today’s Rumors,” however, would not equate with the self-image of the many news organizations that think themselves above such stuff. These members of the media would feel that publishing such acknowledged fluff would be akin to L’Osservatore Romano initiating a gossip column. But rumors are what these organizations often publish and broadcast, whatever euphemism they duck behind. At a minimum, readers deserve honest terminology — a warning label that will protect their financial health in the same way that smokers whose physical health is at risk are given a warning.
The Constitution's First Amendment allows the media to print or say almost anything. Journalism's First Principle should require that the media be scrupulous in deciding what that will be.
Miscellaneous
In last year's report we examined the battle then raging over the use of “pooling” in accounting for mergers. It seemed to us that both sides were voicing arguments that were strong in certain respects and seriously flawed in others. We are pleased that the Financial Accounting Standards Board has since gone to an alternative approach that strikes us as very sound.
If the proposed rule becomes final, we will no longer incur a large annual charge for amortization of intangibles. Consequently, our reported earnings will more closely reflect economic reality. (See page 65.) None of this will have an effect on Berkshire's intrinsic value. Your Chairman, however, will personally benefit in that there will be one less item to explain in these letters.
* * * * * * * * * * * *
I'm enclosing a report — generously supplied by Outstanding Investor Digest — of Charlie's remarks at last May's Wesco annual meeting. Charlie thinks about business economics and investment matters better than anyone I know, and I've learned a lot over the years by listening to him. Reading his comments will improve your understanding of Berkshire.
* * * * * * * * * * * *
In 1985, we purchased Scott Fetzer, acquiring not only a fine business but the services of Ralph Schey, a truly outstanding CEO, as well. Ralph was then 61. Most companies, focused on the calendar rather than ability, would have benefited from Ralph's talents for only a few years.
At Berkshire, in contrast, Ralph ran Scott Fetzer for 15 years until his retirement at the end of 2000. Under his leadership, the company distributed \$1.03 billion to Berkshire against our net purchase price of \$230 million. We used these funds, in turn, to purchase other businesses. All told, Ralph's contributions to Berkshire's present value extend well into the billions of dollars.
As a manager, Ralph belongs in Berkshire's Hall of Fame, and Charlie and I welcome him to it.
* * * * * * * * * * * *
A bit of nostalgia: It was exactly 50 years ago that I entered Ben Graham's class at Columbia. During the decade before, I had enjoyed — make that loved $\frac{3}{4}$ analyzing, buying and selling stocks. But my results were no better than average.
Beginning in 1951 my performance improved. No, I hadn't changed my diet or taken up exercise. The only new ingredient was Ben's ideas. Quite simply, a few hours spent at the feet of the master proved far more valuable to me than had ten years of supposedly original thinking.
In addition to being a great teacher, Ben was a wonderful friend. My debt to him is incalculable.
Shareholder-Designated Contributions
About 97% of all eligible shares participated in Berkshire's 2000 shareholder-designated contributions program, with contributions totaling \$16.9 million. A full description of the program appears on pages 74-75.
Cumulatively, over the 20 years of the program, Berkshire has made contributions of \$164 million pursuant to the instructions of our shareholders. The rest of Berkshire's giving is done by our subsidiaries, which stick to the philanthropic patterns that prevailed before they were acquired (except that their former owners themselves take on the responsibility for their personal charities). In aggregate, our subsidiaries made contributions of \$18.3 million in 2000, including in-kind donations of \$3 million.
To participate in future programs, you must own Class A shares that are registered in the name of the actual owner, not the nominee name of a broker, bank or depository. Shares not so registered on August 31, 2001 will be ineligible for the 2001 program. When you get the contributions form from us, return it promptly so that it does not get put aside or forgotten. Designations received after the due date will not be honored.
The Annual Meeting
Last year we moved the annual meeting to the Civic Auditorium, and it worked very well for us. We will meet there again on Saturday, April 28. The doors will open at 7 a.m., the movie will begin at 8:30, and the meeting itself will commence at 9:30. There will be a short break at noon for food, with sandwiches available at the Civic's concession stands. Except for that interlude, Charlie and I will answer questions until 3:30.
For the next couple of years, the Civic is our only choice. We must therefore hold the meeting on either Saturday or Sunday to avoid the traffic and parking nightmare that would occur on a weekday. Shortly, however, Omaha will have a new Convention Center with ample parking. Assuming that the Center is then available to us, I will poll shareholders to see whether you wish to return to a Monday meeting. We will decide that vote based on the wishes of a majority of shareholders, not shares.
An attachment to the proxy material that is enclosed with this report explains how you can obtain the credential you will need for admission to this year's meeting and other events. As for plane, hotel and car reservations, we have again signed up American Express (800-799-6634) to give you special help. In our normal fashion, we will run buses from the larger hotels to the meeting. After the meeting, the buses will make trips back to the hotels and to Nebraska Furniture Mart, Borsheim's and the airport. Even so, you are likely to find a car useful.
We have added so many new companies to Berkshire this year that I'm not going to detail all of the products that we will be selling at the meeting. But come prepared to carry home everything from bricks to candy. One new product, however, deserves special note: Bob Shaw has designed a 3 x 5 rug featuring an excellent likeness of Charlie. Obviously, it would be embarrassing for Charlie — make that humiliating — if slow sales forced us to slash the rug's price, so step up and do your part.
GEICO will have a booth staffed by a number of its top counselors from around the country, all of them ready to supply you with auto insurance quotes. In most cases, GEICO will be able to offer you a special shareholder's discount (usually 8%). Bring the details of your existing insurance and check out whether we can save you some money.
At the Omaha airport on Saturday, we will have the usual array of aircraft from Executive Jet available for your inspection. Just ask an EJA representative at the Civic about viewing any of these planes. If you buy what we consider an appropriate number of items during the weekend, you may well need your own plane to take them home.
At Nebraska Furniture Mart, located on a 75-acre site on 72 $^{nd}$ Street between Dodge and Pacific, we will again be having “Berkshire Weekend” pricing, which means we will be offering our shareholders a discount that is customarily given only to employees. We initiated this special pricing at NFM four years ago and sales during the “Weekend” grew from 5.3 million in 1997 to 9.1 million in 2000.
To get the discount, you must make your purchases between Wednesday, April 25 and Monday, April 30 and also present your meeting credential. The period's special pricing will even apply to the products of several prestige manufacturers that normally have ironclad rules against discounting but that, in the spirit of our shareholder weekend, have made an exception for you. We appreciate their cooperation. NFM is open from 10 a.m. to 9 p.m. on weekdays and 10 a.m. to 6 p.m. on Saturdays and Sundays.
Borsheim's — the largest jewelry store in the country except for Tiffany's Manhattan store — will have two shareholder-only events. The first will be a cocktail reception from 6 p.m. to 10 p.m. on Friday, April 27. The second, the main gala, will be from 9 a.m. to 5 p.m. on Sunday, April 29. Shareholder prices will be available Thursday through Monday, so if you wish to avoid the large crowds that will assemble on Friday evening and Sunday, come at other times and identify yourself as a shareholder. On Saturday, we will be open until 6 p.m. Borsheim's operates on a gross margin that is fully twenty percentage points below that of its major rivals, so the more you buy, the more you save (or at least that's what my family always tells me).
In the mall outside of Borsheim's, we will have local bridge experts available to play with our shareholders on Sunday. Bob Hamman, who normally is with us, will be in Africa this year. He has promised, however, to be on hand in 2002. Patrick Wolff, twice U.S. chess champion, will also be in the mall, taking on all comers — blindfolded! Last year, Patrick played as many as six games simultaneously — with his blindfold securely in place — and demolished his opponents.
As if all this isn't enough to test your skills, our Borsheim's Olympiad this year will also include Bill Robertie, one of only two players to twice win the backgammon world championship. Backgammon can be a big money game, so bring along your stock certificates.
Gorat's —my favorite steakhouse — will again be open exclusively for Berkshire shareholders on Sunday, April 29, and will be serving from 4 p.m. until 10 p.m. Please remember that you can't come to Gorat's on Sunday without a reservation. To make one, call 402-551-3733 on April 2 (but not before). If Sunday is sold out, try Gorat's on one of the other evenings you will be in town. If you order a rare T-bone with a double order of hash browns, you will establish your credentials as an epicure.
The usual baseball game will be held at Rosenblatt Stadium at 7 p.m. on Saturday night. This year the Omaha Golden Spikes will play the New Orleans Zephyrs. Ernie Banks is again going to be on hand to — bravely — face my fastball (once clocked at 95 mpm — miles per month).
My performance last year was not my best: It took me five pitches to throw anything resembling a strike. And, believe me, it gets lonely on the mound when you can't find the plate. Finally, I got one over, and Ernie lashed a line drive to left field. After I was yanked from the game, the many sports writers present asked what I had served up to Ernie. I quoted what Warren Spahn said after Willie Mays hit one of his pitches for a home run (Willie's first in the majors): "It was a helluva pitch for the first sixty feet."
It will be a different story this year. I don't want to tip my hand, so let's just say Ernie will have to deal with a pitch he has never seen before.
Our proxy statement contains instructions about obtaining tickets to the game and also a large quantity of other information that should help you enjoy your visit in Omaha. There will be plenty of action in town. So come for Woodstock Weekend and join our Celebration of Capitalism at the Civic.
February 28, 2001
Warren E. Buffett
Chairman of the Board
伯克希尔业绩表现 vs. 标普500
| 年份 | 年度百分比变化 | 相对业绩 (1)-(2) | ||
| 伯克希尔每股账面价值变化 (1) | 含股息标普500变化 (2) | |||
| 1965 | ...... | 23.8 | 10.0 | 13.8 |
| 1966 | ...... | 20.3 | (11.7) | 32.0 |
| 1967 | ...... | 11.0 | 30.9 | (19.9) |
| 1968 | ...... | 19.0 | 11.0 | 8.0 |
| 1969 | ...... | 16.2 | (8.4) | 24.6 |
| 1970 | ...... | 12.0 | 3.9 | 8.1 |
| 1971 | ...... | 16.4 | 14.6 | 1.8 |
| 1972 | ...... | 21.7 | 18.9 | 2.8 |
| 1973 | ...... | 4.7 | (14.8) | 19.5 |
| 1974 | ...... | 5.5 | (26.4) | 31.9 |
| 1975 | ...... | 21.9 | 37.2 | (15.3) |
| 1976 | ...... | 59.3 | 23.6 | 35.7 |
| 1977 | ...... | 31.9 | (7.4) | 39.3 |
| 1978 | ...... | 24.0 | 6.4 | 17.6 |
| 1979 | ...... | 35.7 | 18.2 | 17.5 |
| 1980 | ...... | 19.3 | 32.3 | (13.0) |
| 1981 | ...... | 31.4 | (5.0) | 36.4 |
| 1982 | ...... | 40.0 | 21.4 | 18.6 |
| 1983 | ...... | 32.3 | 22.4 | 9.9 |
| 1984 | ...... | 13.6 | 6.1 | 7.5 |
| 1985 | ...... | 48.2 | 31.6 | 16.6 |
| 1986 | ...... | 26.1 | 18.6 | 7.5 |
| 1987 | ...... | 19.5 | 5.1 | 14.4 |
| 1988 | ...... | 20.1 | 16.6 | 3.5 |
| 1989 | ...... | 44.4 | 31.7 | 12.7 |
| 1990 | ...... | 7.4 | (3.1) | 10.5 |
| 1991 | ...... | 39.6 | 30.5 | 9.1 |
| 1992 | ...... | 20.3 | 7.6 | 12.7 |
| 1993 | ...... | 14.3 | 10.1 | 4.2 |
| 1994 | ...... | 13.9 | 1.3 | 12.6 |
| 1995 | ...... | 43.1 | 37.6 | 5.5 |
| 1996 | ...... | 31.8 | 23.0 | 8.8 |
| 1997 | ...... | 34.1 | 33.4 | .7 |
| 1998 | ...... | 48.3 | 28.6 | 19.7 |
| 1999 | ...... | .5 | 21.0 | (20.5) |
| 2000 | ...... | 6.5 | (9.1) | 15.6 |
| 年均收益率 — 1965-2000 | 23.6% | 11.8% | 11.8% | |
| 累计收益率 — 1964-2000 | 207,821% | 5,383% | 202,438% | |
说明：数据按日历年度列示，但1965年和1966年除外，这两年是截至9月30日；1967年是截至12月31日的15个月。
自1979年起，会计准则要求保险公司将其持有的权益证券按市价而非原先的成本与市价孰低法计量。本表中，伯克希尔截至1978年的业绩已按变更后的规则重新列示。其他方面，业绩均按最初报告的数字计算。
标普500的数据是税前数据，而伯克希尔的数据是税后数据。如果像伯克希尔这样的公司只是简单地持有标普500并计提相应税款，那么在标普500指数上涨的年份，其业绩会落后于标普500；而在指数下跌的年份，则会超过标普500。长年累积下来，税务成本会导致整体落后幅度相当大。
伯克希尔·哈撒韦公司（Berkshire Hathaway Inc.）
致伯克希尔·哈撒韦公司的股东：
2000年我们的净资产增加了39.6亿美元，这使得A类股和B类股的每股账面价值均增长了6.5%。在过去36年（即现任管理层接手以来），每股账面价值从19美元增长至40,442美元，年复合增长率为23.6%。*
总体而言，我们度过了不错的一年，账面价值的增长跑赢了标普500指数。而且，尽管这一判断必然带有主观性，但我们认为伯克希尔每股内在价值的增长适度超过了账面价值的增长。（关于内在价值以及其他重要的投资和会计术语与概念，我们在第59至66页的所有者手册中做了解释。内在价值在第64页讨论。）
此外，我们完成了两笔重大收购，这两笔收购是1999年谈妥的，并启动了另外六笔。总而言之，这些收购花费了我们约80亿美元，其中97%以现金支付，3%以股票支付。我们收购的八家企业总销售额约130亿美元，员工58,000人。即便如此，我们在这些收购中没有背负任何债务，而且流通股仅增加了1%的三分之一（约0.33%）。更妙的是，我们仍然拥有大量流动资产，并且热切期待体量更大的收购。
我将在报告下一节详述我们的收购。但此刻我要告诉各位，我们已拥抱21世纪，进入了诸如砖头、地毯、隔热材料和油漆等"前沿产业"。请控制一下你们的激动情绪。
不利的一面是，随着时间推移，GEICO（政府雇员保险公司）的保单持有人增长逐渐停滞。获取新业务的成本变得高昂得多。去年我告诉过你们，我们会从GEICO增加广告投放中物有所值，但我错了。我们稍后会在报告中分析原因。
另一个不利因素——已经持续了几年——是我们认为股票投资组合的吸引力平平。我们持有一些优秀企业的股票，但大部分持仓都已充分定价，未来不太可能带来超过温和水平的回报。面临这个问题的并非只有我们：总体而言，股票市场的长期前景远谈不上令人兴奋。
最后，还有一个每年重复出现的不利因素：伯克希尔副董事长、我的合伙人Charlie Munger和我，又比上次向各位报告时老了一岁。缓和这一不利进展的是一个无可争辩的事实——按百分比计算，你们两位最高管理层的年龄增长速度远低于几乎所有其他大公司。更妙的是，这个差距未来还会扩大。
Charlie和我继续以提升伯克希尔每股价值为目标，目标是长期内略微超过持有标普500的收益。如对面页表格所示，若我们能维持一个微小的年优势，长期累积起来的效果绝非微不足道。要实现这一目标，我们需要每年为伯克希尔的企业阵营增添几家好企业，让我们现有的企业普遍增值，并避免流通股出现显著增加。我们对后两个目标充满信心；第一个目标则需要一些运气。
这里要感谢两个团队，他们让我的工作去年既轻松又有趣——就像每年一样。首先，我们的业务经理们一如既往地把公司经营得有声有色，让我可以把时间花在资本配置上，而不是去监督他们。（反正我也不擅长那个。）
我们的经理人是非常特殊的一群人。在大多数大公司里，真正有才干的分部经理很少能从事自己真正想要的工作。相反，他们渴望成为CEO，无论是在现任雇主那里还是别处。事实上，如果他们原地不动，他们和同事很可能都会觉得自己失败了。
在伯克希尔（Berkshire），我们的明星经理人做的是他们真正想要的工作——他们希望并期望在整个职业生涯中一直做下去。因此，他们只专注于将那些他们“拥有”并热爱的事业长期价值最大化。如果事业成功，他们就成功了。他们始终与我们在一起：过去36年间，伯克希尔没有一位重要子公司的经理人主动离职加入其他公司。
另一个我欠下巨大感谢的团队是总部员工。在八笔收购使我们的全球员工总数翻番至约112,000人之后，查理和我去年心软了，在总部又添了一个人。（查理，愿上帝保佑他，从不让我忘记本·富兰克林的忠告：“一个小漏洞可以沉没一艘大船。”）现在我们有了13.8个人。
这支小团队创造了奇迹。2000年，他们处理了八笔收购相关的所有细节，处理了广泛的监管和税务申报（我们的纳税申报单长达4,896页），顺利举办了一场发放了25,000张门票的年度股东大会，并准确地向股东指定的3,660家慈善机构寄出了支票。此外，这个团队还处理了一家收入运行率400亿美元、拥有超过30万所有者的公司所带来的所有日常事务。而且，除此之外，另外那12.8个人也是令人愉快的伙伴。
我这份工作应该付钱才能做。
2000年的收购
我们在伯克希尔的收购技巧简单极了：我们接电话。我还很高兴地报告，现在电话响得更频繁了，因为企业主和/或经理人越来越希望将他们公司与伯克希尔合并。我们的收购标准列在第23页，联系电话是402-346-1400。
让我来告诉你一些我们在过去14个月里收购的企业的情况，从1999年启动、但于2000年完成的两笔交易开始。（这份清单不包括我们子公司经理进行的一些规模较小的收购，这些收购大多数情况下将并入他们的业务。）
- 我在去年的报告中描述了第一笔收购——中美能源（MidAmerican Energy）的76%股权。由于监管对我们投票权的限制，我们仅在财务报表中对中美能源的收益和权益进行“单线”合并。如果我们改为完全合并该公司的数据，我们2000年的收入将比已报告的多50亿美元，但净利润保持不变。
- 1999年11月23日，我收到了Bruce Cort传来的一页传真，附有一篇《华盛顿邮报》文章，描述了一起夭折的CORT Business Services收购案。尽管他姓Cort，但Bruce与CORT并无关联。相反，他是一名飞机经纪人，曾在1986年向伯克希尔出售过一架喷气式飞机，在那份传真之前，他已经大约十年没有与我联系了。
我对CORT一无所知，但我立即打印了它的SEC（美国证券交易委员会）文件，并喜欢我所看到的。当天我就告诉Bruce我可能感兴趣，请他安排与CORT的CEO Paul Arnold会面。Paul和我在11月29日见了面，我立刻知道我们具备了收购的正确要素：一项不错但不起眼的业务，一位杰出的经理人，以及一个合理的价格（参照那笔失败交易的价格）。
CORT 通过 117 间展厅开展业务，是"租用租赁"家具领域的全国领军企业（该模式主要面向办公室客户，同时也服务公寓临时住户）。需要说明的是，这类业务与"先租后买"模式截然不同——后者通常面向收入有限、信用记录不佳的人群，销售家居用品和电子产品。
我们通过旗下持股 80% 的子公司 Wesco 迅速收购了 CORT，以约 3.86 亿美元现金成交。关于 CORT 的运营细节，你们可以在 Wesco 1999 年和 2000 年的年报中找到更详细的说明。查理和我都很享受与 Paul 共事，而且 CORT 看起来很有可能超过我们最初的预期。
——去年初，通用再保险的 Ron Ferguson 让我联系上了 Bob Berry，他的家族拥有 U.S. Liability 公司已有 49 年历史。这家保险公司连同两家姊妹公司，是一家中型、备受尊敬的"非寻常风险"承保商——用保险业的行话来说，就是"超额与剩余保险业务"。Bob 和我取得联系后，我们通过电话谈妥了一笔半股票、半现金的交易。
近几年，Tom Nerney 为 Berry 家族管理着这家公司，实现了卓越增长与罕见盈利能力的罕见结合。Tom 在其他方面也是个能量十足的人。除了收养了四个孩子（其中两个来自俄罗斯），他还有一个"大家庭"：费城贝尔斯队——一支由他执教的少女篮球队。该队去年战绩为 62 胜 4 负，并在 AAU 全国锦标赛中夺得亚军。
在产险领域，真正出色的公司屈指可数。我们拥有的优质产险公司远多于同行，而 U.S. Liability 又为我们的收藏增添了光彩。
——Ben Bridge 珠宝是另一笔我在与管理层面谈之前就通过电话达成的收购。Ed Bridge 与他的堂兄 Jon 共同管理这家拥有 65 家门店的西海岸零售商，他是 Barnett Helzberg 的朋友——我们在 1995 年从 Helzberg 手中收购了 Helzberg Diamonds。得知 Bridge 家族打算出售公司后，Barnett 向 Berkshire 大力推荐。Ed 随后打电话向我介绍了他的业务，还寄来了一些数据，我们就此达成了交易，同样是半现金、半股票。
Ed 和 Jon 是这家 89 年前在 Seattle 创立的公司的第四代所有者兼经营者。无论是这家企业，还是这个家族——包括 Jon 和 Ed 各自的父亲 Herb 和 Bob——都享有非凡的声誉。过去七年中，同店销售额分别增长了 9%、11%、13%、10%、12%、21% 和 7%，这实在是一个了不起的记录。
对家族来说至关重要的一点是：公司未来的运营模式必须与过去保持一致。没有人希望另一家珠宝连锁店闯进来，用所谓的"协同效应"和"成本节约"（这些想法从来不会奏效，但一定会有人尝试）将组织搞得支离破碎。我告诉 Ed 和 Jon，他们将继续负责公司运营，而他们知道我的话值得信赖——毕竟，明眼人都看得出，你们的董事长在实际经营门店或销售珠宝方面绝对是一场灾难（虽然他的家族中有几位成员在采购方面堪称"黑带"高手）。
Bridge 家族以他们一贯的高尚方式，将出售所得中的相当一部分分配给了帮助公司取得成功的数百名同事。能与这样的家族和公司为伴，我们深感自豪。
——七月，我们收购了 Justin Industries，该公司是西部靴的领先制造商（旗下品牌包括 Justin、Tony Lama、Nocona 和 Chippewa），也是德克萨斯州及周边五个州最顶尖的砖块生产商。
再次强调，我们的收购带有偶然性。5月4日，我收到一位陌生人Mark Jones的传真，提议伯克希尔加入一个团体收购一家未具名公司。我回传真解释，除极少数例外，我们不与他人合作投资，但如果他提供细节而我们随后确实进行了购买，我们乐意支付他佣金。他回复说"神秘公司"是Justin。于是我前往沃斯堡，会见了公司董事长John Roach以及John Justin——他是这家企业的创始人和主要股东。不久之后，我们以5.7亿美元现金收购了Justin。
John Justin热爱Justin Industries，但因严重的健康问题（不幸的是，他于2月底去世）被迫退休。John是一位高尚的人——无论是作为公民、商人还是作为一个普通人。幸运的是，他培养了两名杰出的管理者——Acme的Harrold Melton和Justin Boot的Randy Watson，两人都各自独立运营自己的公司。
两家公司中规模更大的是Acme，它在22家工厂每年生产超过10亿块砖，约占全国行业产量的11.7%。不过砖块业务具有明显的区域性，而在其区域内，Acme享有毋庸置疑的领导地位。当得克萨斯人被问及一个砖块品牌时，75%的人回答是Acme，而第二名仅为16%。（在我们收购之前，我一个砖块品牌都说不上来。你能吗？）这种品牌认知不仅源于Acme的产品质量，也反映了公司及John Justin数十年来对社区的卓越服务。
我忍不住要指出，伯克希尔——其最高管理层长期以来一直深陷19世纪——现在是少数真正的"点击加砖块"企业之一。我们进入2000年时，GEICO已在互联网上开展大量业务，随后我们又添加了Acme。你可以打赌，伯克希尔的这一举动让硅谷的那些人紧张得直冒汗。
- 6月，世界最大地毯制造商Shaw Industries的CEO Bob Shaw与他的合伙人Julian Saul，以及另一家Shaw正考虑与之合并的公司的CEO一起来见我。那家潜在伙伴因过往经营面临巨大的石棉责任，任何交易都取决于能否通过保险消除这些责任。
来访的高管希望伯克希尔提供一份保单，支付未来所有的石棉费用。我解释说，尽管我们可以承保一张异常巨大的保单——远大于任何其他保险公司可能考虑提供的规模——但我们永远不会签发一份没有上限的保单。
Bob和Julian决定，如果我们不想为收购对象的责任范围押上全部家当，他们也不想。所以他们的交易告吹了。但我的兴趣被Shaw点燃了。几个月后，Charlie和我与Bob会面，商讨由伯克希尔收购Shaw。交易的一个关键特征是，Bob和Julian均需继续持有Shaw至少5%的股份。这让我们与行业中最优秀的人结盟，正如Bob和Julian的业绩所证明的：两人都在1998年联手之前，各自建立了一家成功的大型地毯企业。
Shaw的年销售额约为40亿美元，我们持有其87.3%的股份。撇开我们的保险业务，Shaw是我们迄今为止最大的业务。现在，如果有人从我们身上踩过去，我们也不介意了。
-
7月，Benjamin Moore Paint的董事Bob Mundheim打电话询问伯克希尔是否有意收购该公司。我在所罗门任职期间就认识Bob，当时他在一些困难时期担任总法律顾问，我对他评价极高。所以我的回答是："多说点。"
八月下旬，查理和我与Benjamin Moore（本杰明·摩尔）的前任及现任CEO Richard Roob和Yvan Dupuy见了面。我们喜欢他们，也喜欢这门生意，当场就开出了10亿美元的现金收购要约。十月，他们的董事会批准了交易，十二月我们完成了收购。Benjamin Moore已经做了117年油漆，拥有数千家独立经销商，这是其业务的核心资产。你下次刷墙时，一定要指定我们的产品。 -
最后，十二月下旬，我们同意以约18亿美元收购Johns Manville Corp.（约翰斯·曼维尔公司）。这家公司过去几十年的传奇历程——太过复杂，无法在此详述——是其作为石棉产品制造商漫长历史所塑造的。媒体广泛报道的石棉暴露导致许多人健康受损的问题，使得JM在1982年申请破产。
随后，破产法院为受害者设立了一个信托基金，其主要资产是JM的控股权。该信托基金希望分散资产，去年六月同意将公司卖给一家杠杆收购（LBO）买家。但最终，LBO集团未能获得融资。
因此，交易在12月8日（星期五）告吹。接下来的星期一，查理和我打电话给信托基金主席Bob Felise，提出全现金收购，无融资条件。第二天，受托人初步投票接受了我们的报价，一周后我们签了合同。
JM是美国商业和工业绝缘材料领域的龙头，同时在屋顶系统和多种工程产品领域也占据重要地位。公司销售额超过20亿美元，业务回报虽具周期性，但相当不错。JM的CEO Jerry Henry一年前已宣布退休计划，但我很高兴地报告，查理和我说服他留了下来。
去年我们收购活动激增，可能有两个经济因素在起作用。首先，许多管理者和所有者预见到自己业务短期内会放缓——事实上，我们收购的几家公司今年的盈利几乎肯定会从1999年或2000年的峰值下降。这种下滑对我们来说无所谓，因为我们预计所有业务都会时不时经历起伏。（只有在投资银行的销售演示中，盈利才会永远向上。）我们不在乎波动，重要的是整体结果。但其他人的决定有时会受到短期前景的影响，这既可能刺激卖家，也可能抑制本来会与我们竞争的买家的热情。
第二个在2000年帮到我们的因素是，随着时间推移，垃圾债券市场枯竭了。此前两年，垃圾债券购买者放宽了标准，以不合理的价格买入了越来越弱的发行人的债券。这种宽松带来的后果在去年违约激增中显现出来。在这种环境下，那些只想用少量股权收购企业的“金融”买家，无法借到他们认为需要的全部资金。而且，他们能借到的钱代价也很高。因此，当企业去年待售时，LBO操作者在竞标中变得不那么激进了。由于我们是在全股权基础上分析收购，我们的评估没有改变，这意味着我们的竞争力大大增强。
除了对我们有利的经济因素外，我们在收购中还有一个越来越大的优势：我们往往是卖家的首选买家。当然，这并不能保证交易成功——卖家必须喜欢我们的价格，我们必须喜欢他们的业务和管理层——但这确实有帮助。
我们发现，如果一位所有者在意他卖给谁，这件事很有意义。我们喜欢与热爱自己公司的人打交道，而不仅仅是为了出售能带来的钱（当然，我们也理解为什么他们也喜欢钱）。当这种情感纽带存在时，它表明企业内很可能具备重要的品质：诚实的会计、对产品的自豪、对客户的尊重，以及一群目标明确的忠诚伙伴。反之亦然。当一位所有者拍卖掉他的企业，对后续发生的事毫无兴趣时，你常常会发现这家企业已被精心包装以出售，尤其是当卖家是“财务所有者”时。如果所有者对自己的企业及其员工漠不关心，这种行为往往会污染整个公司的态度和做法。
当一件商业杰作由一生——或几代人的一生——倾注的悉心照料和非凡才华造就时，所有者应该重视，哪家企业被委托来传承它的历史。Charlie和我相信，伯克希尔提供了一个几乎独一无二的家。我们非常认真对待对创立企业的人们的责任，伯克希尔的所有权结构确保我们能履行承诺。当我们告诉John Justin，他的企业将继续把总部设在Fort Worth，或者向Bridge家族保证，他们的业务不会与另一家珠宝商合并时，这些卖家可以把这些承诺当作板上钉钉。
对于一家企业的“伦勃朗”来说，由他亲自选择永久居所，而不是由信托经理或不感兴趣的继承人来拍卖掉它，要好得多。多年来，我们与那些认识到这一真理并将其应用于自己企业创造的人有着极好的合作经历。拍卖的事，留给别人吧。
财产/意外险的经济学
我们的主要业务——尽管我们还有其他重要的业务——是保险。因此，要理解伯克希尔，你必须懂得如何评估一家保险公司。关键决定因素是：(1) 该业务产生的浮存金数额；(2) 其成本；以及 (3) 最重要的一点，这两个因素的长期前景。
首先，浮存金是我们持有但不拥有的资金。在保险业务中，浮存金产生的原因是保费在赔付之前收取，这个时间间隔有时会延续多年。在此期间，保险公司将这笔钱进行投资。这种令人愉快的活动通常伴随着一个缺点：保险公司收取的保费通常不足以覆盖它最终必须支付的损失和费用。这导致它出现“承销亏损”，这就是浮存金的成本。如果一家保险公司的浮存金成本长期低于该公司本可通过其他方式获得资金的成本，那么这家保险业务就有价值。但如果浮存金成本高于市场利率，这门生意就是个柠檬。
这里需要提醒一下：由于损失成本需要估算，保险公司在计算其承销结果时有很大的自由度，这使得投资者很难计算一家公司的真实浮存金成本。估算错误——通常是无意，但有时并非如此——可能非常巨大。这些计算错误的后果直接流入盈利。有经验的观察者通常能发现准备金计提中的大规模错误，但普通公众通常只能接受呈现出来的数字，有时我会对大牌审计师们默许的数字感到震惊。保险公司的利润表和资产负债表都可能成为雷区。
在伯克希尔，我们努力在准备金计提上做到一贯和保守。但我们会犯错。我们要提醒你，保险业务中的意外没有对称性：它们几乎总是令人不快的。
下表所示（间隔列出）是我们34年前进入保险业、收购国民赔偿公司（国民赔偿公司的传统险种归入“其他主险”一栏）以来，伯克希尔各保险板块产生的浮存金。表中，我们计算浮存金——相对我们的保费规模而言，产生的浮存金数额巨大——的方法是：加总未决损失准备金、损失调整准备金、假设再保险项下持有的资金、未赚保费准备金，再减去与保险相关的应收款、预付收购成本、预付税款及适用于假设再保险的递延费用。（别慌，不会考。）
年末浮存金（百万美元）
| 年份 | GEICO | 通用再保险 | 其他再保险 | 其他主险 | 合计 |
| 1967 | 20 | 20 | |||
| 1977 | 40 | 131 | 171 | ||
| 1987 | 701 | 807 | 1,508 | ||
| 1997 | 2,917 | 4,014 | 455 | 7,386 | |
| 1998 | 3,125 | 14,909 | 4,305 | 415 | 22,754 |
| 1999 | 3,444 | 15,166 | 6,285 | 403 | 25,298 |
| 2000 | 3,943 | 15,525 | 7,805 | 598 | 27,871 |
我们很高兴2000年浮存金有所增长，但对其成本并不满意。多年来，我们的浮存金成本几乎为零——大多数年份实现的承销利润足以抵消偶尔的糟糕年份，比如1984年，那年成本高达惊人的19%。然而2000年，我们承销亏损16亿美元，浮存金成本达到6%。如果没有超级巨灾，我们预计2001年浮存金成本将会下降——幅度可能不小——很大程度上是因为通用再保险的定价调整，随着今年时间推移，其影响应会日益显现。规模小一些的GEICO，也可能出现同样的改善趋势。
有两个因素影响着我们的浮存金成本，这在其他保险公司极为罕见，但在伯克希尔已经变得举足轻重。第一，目前一些正蒙受巨额亏损的保险公司，以某种方式将相当一部分亏损转嫁给了我们——这损害了我们当前的盈利，却给了我们未来多年可用的浮存金。在保单第一年承担损失之后，这项业务便再无后续成本。
只要这些保单定价合理，我们就欢迎这种“今日痛苦、明日收获”的效果。1999年，我们的承销亏损中有4亿美元（约占总亏损的27.8%）来自此类业务；2000年，这个数字是4.82亿美元（占总亏损的34.4%）。我们无法预测未来会承揽多少类似业务，但一旦获得，通常都是大单。由于这些交易可能严重扭曲我们的数字，一旦发生我们会及时告知各位。
其他再保险公司对这种保险兴趣寥寥。它们根本承受不了巨额承销亏损对报表数字的冲击——即便这些亏损来自那些整体经济性确定有利的保单。因此，在比较我们的承销业绩和其他保险公司时，各位务必谨慎。
我们数据中一个更值得关注的项目——同样，你在其他地方很难看到——来自我们承担那些希望将过去问题抛诸脑后的公司的历史损失的交易。举例来说，XYZ保险公司去年可能购买了一份保单，要求我们支付因1995年及更早年份发生的事件所产生的头10亿美元损失及损失调整费用。这些合约规模可能非常大，不过我们始终对自身风险敞口设置上限。我们在2000年签署了若干此类交易，预计2001年还会再完成几笔。
按照美国通用会计准则，这种"追溯性"保险既不会增加也不会减少我们当前的收益。相反，我们会设立一项名为"承担的再保险相关递延费用"的资产，其金额反映我们收到的保费与我们预期要支付的（更高的）损失（对此我们立即提取准备金）之间的差额。然后，我们通过每年从收益中计提费用来摊销这项资产，从而产生等额的承销损失。你会在我们的季度和年度管理层讨论中找到因这些交易而产生的损失金额。按这些交易的性质，这些损失将持续多年，往往长达数十年。不过，作为抵消，我们拥有了浮存金的使用权——大量的浮存金。
显然，带有这种年度成本的浮存金，不如我们通过预期能产生承销利润（我们有很多这样的业务）的保单所产生的浮存金那么理想。尽管如此，对我们来说，这种追溯性保险应该仍是一项不错的业务。
所有这些综合结果是：a）我预计未来我们的浮存金成本将非常有吸引力，但b）由于追溯性再保险每年给我们带来的费用，它很少会回到"零成本"模式。此外——显然——我们最终从浮存金中获得的收益，不仅取决于它的成本，同样重要的是，还取决于我们如何有效地利用它。
我们的追溯性业务几乎完全是 Ajit Jain 一人所为，我每年都要称赞他。无论怎样强调 Ajit 对伯克希尔的价值都不为过。不用为我的健康担心；还是担心他的健康吧。
去年，Ajit 带回了一份24亿美元的再保险保费，可能是历史上最大的一笔，来自一份为一家大型英国公司提供追溯性保障的保单。随后，他又承保了一份大额保单，为德州游骑兵队（Texas Rangers）防范Alex Rodriguez永久性伤残的可能性。正如体育迷所知，A-Rod签下了2.52亿美元的天价合同，我们觉得我们的保单可能也创下了伤残保险的纪录。我们还为许多其他体育界人士提供保障。
另一个展现他多才多艺的例子是，去年秋天 Ajit 与 Grab.com（一家互联网公司）谈成了一笔非常有趣的交易。Grab.com 的目标是吸引数百万人访问其网站，并从中提取对营销人员有用的信息。为了吸引这些人，Grab.com 提供了获得10亿美元奖金（现值1.7亿美元）的可能性，我们为此承保了奖金的支付。网站上的说明解释了任何人赢得奖金的概率很低，确实没人中奖。但中奖的可能性绝非为零。
承保这样的保单，我们收取适中的保费，面临巨额损失的可能性，但赔率对我们有利。很少有保险公司喜欢这种等式，而且它们也无法通过再保险来消除这种不安。因为每份保单都有不寻常——有时是独特的——特征，保险公司无法通过标准的再保险安排来分散偶尔的巨额损失冲击。因此，任何承揽此类业务的保险公司CEO都必须承受小但真实的风险：一个糟糕的季度收益数字，而这个数字他可不愿意向董事会或股东解释。但查理和我喜欢任何在数学上有充分理由的提议，无论它对报告收益有何影响。
在通用再保险（General Re）方面，情况已明显好转：Ron Ferguson 与 Joe Brandon、Tad Montross 以及一批能干的帮手在 2000 年采取了许多措施，让该公司的盈利能力回到过去水准。虽然我们的定价尚未完全修正，但已对那些严重亏损的业务大幅重新定价，或者干脆将其抛弃。如果 2001 年没有发生超级巨灾，通用再保险的浮存金成本应该会大幅下降。
过去几年对 Ron 及其团队来说并不轻松。但他们勇于做出艰难决策，Charlie 和我为此向他们喝彩。通用再保险拥有几项重要且持久的商业优势。更重要的是，它有一群善于发挥这些优势的管理者。
总体而言，我们规模较小的保险业务在 2000 年取得了优异的承保利润，同时产生了可观的浮存金——正如它们过去十多年所做的那样。如果这些公司是一家独立的运营实体，人们会认为它是一家杰出的保险公司。但因为它们身处伯克希尔这样的大企业集团之下，世人也许并不了解它们的成就——但我心知肚明。去年我感谢了 Rod Eldred、John Kizer、Don Towle 和 Don Wurster，今年我再次向他们致谢。此外，我们现在还要感谢 U.S. Liability 的 Tom Nerney 以及 Cypress 的新负责人 Michael Stearns。
你可能会注意到，Brad Kinstler——前 Cypress 首席执行官，我曾多次表扬过他——已不在上述名单中。那是因为我们需要一位新经理去管理位于辛辛那提的制服公司 Fechheimer Bros.，于是调来了 Brad。我们很少将伯克希尔的管理者从一家企业调到另一家，但也许应该更经常地这样做：Brad 在新岗位上打出了全垒打，就像他以前在 Cypress 时一直做的那样。
GEICO（1-800-847-7536 或 GEICO.com）
下表详细列出了 GEICO 的增长情况。去年我热情地告诉您，我们将在 2000 年增加广告支出，而这些额外投入是 GEICO 能做的最佳投资。我错了：我们多花的钱并没有带来相应的咨询量增长。此外，多年来首次出现咨询转成单的比例下降。这些负面因素叠加在一起，导致我们的单位保单获取成本急剧上升。
| 年度 | 新增车险保单(1) | 生效车险保单(1) |
| 1993 | 346,882 | 2,011,055 |
| 1994 | 384,217 | 2,147,549 |
| 1995 | 443,539 | 2,310,037 |
| 1996 | 592,300 | 2,543,699 |
| 1997 | 868,430 | 2,949,439 |
| 1998 | 1,249,875 | 3,562,644 |
| 1999 | 1,648,095 | 4,328,900 |
| 2000 | 1,472,853 | 4,696,842 |
(1) 仅指“自愿”投保；不含指定风险等。
为错误而痛苦本身是一个错误。但承认并分析错误却是有益的，尽管这种做法在公司董事会里极为罕见。在那里，Charlie 和我几乎从未见过有任何人对一次失败的决策进行坦诚的事后剖析，尤其是涉及收购的决策。一个显著的例外是《华盛顿邮报》公司，它总是在收购三年后客观地进行回顾。在其他地方，胜利被大肆宣扬，而愚蠢的决定要么无人跟进，要么被合理化。
这些愚蠢失误的财务后果，通常被一股脑塞进巨额的重组费用或冲销中，然后被轻描淡写地称为“非经常性”项目。管理层们简直爱死这套把戏了。事实上，近年来似乎没有哪份报表能少了它们。然而，这些费用的根源却从未被探究。一谈到公司失误，CEO 们就祭出“处女怀孕”的概念——仿佛错误是凭空冒出来的。
让我们回到对GEICO的分析：去年我们获取新业务的成本有所上升，至少有四个因素可能造成这种情况，而且所有因素可能都以某种方式起了作用。
第一，在我们的广告中，我们极力追求"频次"，在某些媒体上可能做得过火了。我们一直知道，通过任何媒介增加信息推送次数，最终都会导致回报递减。在一个有线频道的一小时内，第三个广告的效果显然不如第一个。
第二，我们可能已经摘掉了大部分低垂的果实。显然，不同个体与直销保险商做生意的意愿差异很大：事实上，有一部分美国人——尤其是年长者——不愿意进行任何形式的直接购买。不过，随着时间推移，这种抵触情绪会减弱。拥有新习惯的新一代会发现，通过直接购买汽车保险省下的钱太过诱人，令人难以忽视。
另一个肯定降低了咨询到成交转化率的因素是GEICO更严格的承保标准。在这一年里，理赔频率和严重程度都有所上升，某些地区的费率变得不足，有些地方甚至严重不足。在这些情况下，我们不得不收紧承保标准。这种收紧，加上我们当年实施的多次费率上调，使得我们的产品对部分潜在客户的吸引力下降。
需要强调的是，仍有很高比例的来电者通过向我们投保可以省钱。但可以理解的是，一些潜在客户会为了每年省200美元而转换保险公司，却不会为了省50美元而换。因此，当费率上调使我们的价格更接近竞争对手时，即使我们仍然提供最优惠的交易，我们的接受率也会受到影响。
最后，竞争格局至少在其中一个重要方面发生了变化：State Farm——迄今为止最大的个人汽车保险公司，市场份额约19%——提价动作非常缓慢。然而，它的成本显然也在随着整个行业的成本同步上升。因此，State Farm去年从汽车保险业务中（包括返还给保单持有人的红利）产生了占保费18%的承保亏损，而GEICO的这一比例为4%。我们的亏损为我们带来了6.1%的浮存金成本，这是一个令人不满意的结果。（事实上，在GEICO，我们期望长期来看浮存金是免费的。）但我们估计，State Farm在2000年的浮存金成本约为23%。行业最大玩家愿意容忍如此高的成本，使得其他参与者的经济学变得困难。
但这并不否定一个事实：State Farm是美国最伟大的商业故事之一。我一直在敦促商学院研究这家公司，因为它走的道路在许多方面违背了那些机构的教条，却取得了惊人的成功。研究反证是一种非常有用的活动，尽管在学术堡垒中并不总是受到热烈欢迎。
State Farm成立于1922年，创始人是伊利诺伊州一位45岁、半退休的农民，旨在与那些历史悠久的老牌保险公司竞争——那些傲慢的机构位于纽约、费城和哈特福德，在资本、声誉和分销渠道方面拥有压倒性优势。因为State Farm是一家互助公司，其董事会成员和管理层不能成为所有者，而且在快速增长的年代，它无法进入资本市场。同样，这家公司从未拥有股票期权或高额薪酬——许多人认为，美国企业要吸引优秀管理者并蓬勃发展，这些是必不可少的。
但最终，State Farm超越了所有竞争对手。事实上，到1999年，该公司积累的有形净资产已超过除四家美国企业之外的所有公司。如果你想了解这一切是如何发生的，请找一本《来自Merna的农民》来读。
尽管State Farm（州立农业保险公司）实力雄厚，但GEICO（政府雇员保险公司）的业务模式要好得多，其运营成本显著更低。而当一家公司销售的是具有商品化经济特性的产品时，成为低成本供应商至关重要。这正是GEICO持久的竞争优势——早在1951年，我20岁初次迷恋上它的股票时，它就已具备这一优势——因此随着时间的推移，它必然会大幅提升市场份额，同时实现出色的盈利。不过，如果State Farm选择继续承受目前承销亏损的现状，我们的增长将会放缓。
GEICO的CEO Tony Nicely依然是所有者的梦想。他做的每一件事都合情合理。当意外发生时，他从不像许多管理者那样一厢情愿或歪曲现实。在2000年展开的过程中，Tony削减了那些不具成本效益的广告；如果2001年需要进一步削减，他也会继续这么做（尽管我们始终会保持大规模的媒体曝光）。Tony还在我们需要涨价的地方积极提价申请。他每天查看亏损报告，从未落后于形势。借用一家竞争对手的话来说：有了Tony，我们可以高枕无忧。
我告诉过你们GEICO的利润分成安排，它只关注两个变量——保单增长和成熟业务的承保业绩。尽管2000年面临逆风，我们的表现仍然产生了8.8%比例的利润分成，金额达4,070万美元。
GEICO将成为伯克希尔未来的重要组成部分。凭借其极低的运营成本，它为许多美国人提供了购买其必须购买的这一高价产品的最便宜方式。同时，该公司将这一实惠与独立调查中始终排名靠前的服务相结合。这种组合必然带来增长和盈利能力。
就在过去短短几年间，越来越多的驾驶人已经学会将GEICO品牌与保险省钱联系起来。我们将坚持不懈地宣扬这一主题，直到所有美国人都知道我们提供的价值。
投资
以下列示我们的普通股投资。截至2000年底，市值超过10亿美元的投资项目逐项列出。
| 持股数 | 公司 | 成本 | 市值 |
|---|---|---|---|
| （金额单位：百万美元） | |||
| 151,610,700 | 美国运通公司 (American Express Company) | 1,470美元 | 8,329美元 |
| 200,000,000 | 可口可乐公司 (The Coca-Cola Company) | 1,299美元 | 12,188美元 |
| 96,000,000 | 吉列公司 (The Gillette Company) | 600美元 | 3,468美元 |
| 1,727,765 | 华盛顿邮报公司 (The Washington Post Company) | 11美元 | 1,066美元 |
| 55,071,380 | 富国银行 (Wells Fargo & Company) | 319美元 | 3,067美元 |
| 其他 | 6,703美元 | 9,501美元 | |
| 普通股合计 | 10,402美元 | 37,619美元 |
2000年，我们卖出了几乎全部的房利美和房地美股票，在中型公司中建立了15%的仓位，买入了少数几家发行人的高收益债券（非常少——这个类别被称作“垃圾”并非没有原因），并增持了高等级住房抵押贷款支持证券。我们目前的持仓中没有“便宜货”：我们对所拥有的东西感到满意，但远谈不上兴奋。
很多人以为，伯克希尔在配置资本时，首选是可交易证券，但事实并非如此：自从我们1983年首次公布经济原则以来，我们一直强调，宁愿收购企业，也不买股票。（见第60页第4条。）这个偏好有一个私人原因：我喜欢与旗下经理人共事。他们素质高、有才华且忠诚。而且，坦率地说，我发现他们的商业行为比许多上市公司更理性、更以所有者为导向。
但这一偏好背后还有一个强大的财务原因，与税收有关。税法的规定使得伯克希尔拥有企业80%或以上股份，相比持较小比例，对我们来说利润比例要高得多。当我们全资拥有的公司税后赚了100万美元，这100万美元全部归我们所有。如果这100万美元以股息形式上缴给伯克希尔，我们无需就这笔股息缴税。而且，如果利润留存，我们后来以比买入价高出100万美元的价格出售该子公司——在伯克希尔不太可能发生！——我们也无需缴纳资本利得税。这是因为我们出售时的"税收成本"既包含我们购买该企业所支付的金额，也包含其后所有留存的收益。
对比一下我们持有可交易证券投资时的情况。如果我们持有一家税后盈利1000万美元的企业10%的股份，那么属于我们的100万美元盈利需要额外缴纳州和联邦税：(1) 如果这100万以股息形式分配给我们，需缴纳约14万美元（我们大多数股息的税率是14%）；(2) 如果这100万留存，随后我们以资本利得形式实现（我们的税率通常是35%左右，有时接近40%），则需缴纳不低于35万美元的税款。我们可以通过不立即实现收益来延迟缴纳这35万美元，但最终必须缴纳。实际上，当我们通过股票投资持有一部分企业时，政府是我们的"合伙人"两次；而当我们持有至少80%股份时，政府只当一次合伙人。
抛开税收因素，我们评估股票和企业的公式是相同的。事实上，评估所有以盈利为目的的资产的公式，自公元前600年左右一位非常聪明的人首次提出以来，从未改变过（尽管他聪明得不知道那是公元前600年）。
那位先知是伊索，他历久弥新但略显不完整的投资洞见是："一鸟在手胜过双鸟在林。"要完善这一原则，你只需回答三个问题：你有多确定林子里确实有鸟？它们何时出现，会有多少只？无风险利率是多少（我们视长期美国国债收益率为无风险利率）？如果你能回答这三个问题，你就知道了这片林子的最大价值——以及你现在拥有的、应该拿多少只鸟去换。当然，别真去想鸟，想美元。
伊索的投资公理，经过如此扩展并转化为美元，是不变的。它适用于农场、石油特许权、债券、股票、彩票和制造工厂的支出。蒸汽机的出现、电力的利用或汽车的发明都未改变这个公式一丝一毫——互联网也不会。只需填入正确的数字，你就能对宇宙中所有可能的资本用途的吸引力进行排序。
常见衡量指标如股息率、市盈率、市净率，甚至增长率，都与估值没什么关系——除非它们能提供关于企业未来现金流入和流出时间与金额的线索。的确，如果一项业务或企业在早期需要投入现金，而这些现金的贴现价值超过这些资产在后期所产生的现金，那么增长反而会摧毁价值。那些轻率地将“成长”与“价值”视为两种对立投资风格的市场评论员和投资经理，暴露的是他们的无知，而非他们的老练。在价值方程式中，成长只是一个组成部分——通常是个正数，有时则是负数。
唉，尽管伊索的寓言和第三个变量——也就是利率——很简单，但要给另外两个变量代入数字却是一桩难事。实际上，用精确的数字是愚蠢的；更好的方法是使用一个可能性的范围。
通常，这个范围会宽到无法得出任何有用的结论。但偶尔，即使是对未来的灌木丛中能飞出多少只鸟做出非常保守的估计，也会发现当前报价相对于价值低得惊人。（我们称这种现象为IBT——低效丛林理论）。当然，投资者需要对企业经济有一定的基本理解，还需要具备独立判断的能力，才能得出有理有据的正面结论。但投资者不需要才智过人，也不需要洞见超凡。
相反，很多时候，即使是最聪明的投资者，也无法对灌木丛中会飞出多少只鸟形成确定的信念——甚至在使用了非常宽泛的估计范围时也是如此。这种不确定性在新兴行业和快速变化的行业中尤为常见。在这种情况下，任何资本投入都必须被标注为投机。
现在，投机——其焦点不在于资产将来能产出什么，而在于下一个人愿意出多少钱买——既不违法，也不违背道德，更非反美行为。但这并非查理和我愿意参与的游戏。我们两手空空去赴宴，凭什么指望带走什么？
投资与投机的分界线从来就不清晰，在大多数市场参与者最近都大获成功时，这条线变得更加模糊。没有什么比大笔轻松赚来的钱更能麻痹理智了。在经历过那种令人飘飘然的体验后，通常理智的人会做出类似灰姑娘在舞会上的举动。他们知道，在盛宴上逗留太久——也就是说，继续投机那些估值高得离谱、远超其未来可能产生的现金的公司——最终会迎来南瓜和老鼠。但他们就是不愿意错过这个超级派对的一分一秒。因此，这些飘飘然的参与者都计划在午夜前最后一秒离开。可问题是：他们跳舞的房间里，钟表没有指针。
去年，我们评论了当时弥漫的狂热——没错，是非理性的狂热——并指出投资者的预期已膨胀到可能回报的数倍之多。一个证据来自1999年12月Paine Webber-Gallup对投资者进行的一项调查，其中参与者被问及他们认为未来十年投资者每年能实现的回报率是多少。他们的平均答案是$19\%$。这当然是非理性的预期：对于整个美国企业来说，2009年的灌木丛里根本不可能有那么多鸟来提供这样的回报。
更荒谬的是，市场参与者当时对那些几乎注定只会带来微薄甚至零价值的企业，给出了极高的估值。然而，投资者被飙升的股价迷住了心窍，对其他一切视而不见，蜂拥涌入这些企业。仿佛有一种病毒，在投资专业人士和业余爱好者中疯狂传播，诱发了幻觉，让某些板块的股票价值与其背后的企业价值脱了节。
这场超现实的场景伴随着大量关于“价值创造”的轻率言论。我们欣然承认，过去十年间，新兴或年轻企业确实创造了大量真实价值，未来还会更多。但是，任何一家在其生命周期内持续亏损的企业，无论其估值中途有多高，都是在毁灭价值，而非创造价值。
这些案例中实际发生的是财富转移，且往往规模巨大。近年来，推销者们通过无耻地叫卖“无鸟之树”（指毫无实际价值的企业），将数十亿美元从公众口袋转移到了自己（以及他们的朋友和关联方）的口袋。事实是，泡沫市场催生了泡沫公司——这些实体设计之初就更着眼于从投资者身上赚钱，而非为投资者赚钱。很多时候，IPO（首次公开发行）而非利润，才是公司推销者的首要目标。归根结底，这些公司的“商业模式”就是老式的连环信，而众多贪图手续费的投行家则充当了热心的邮差。
但每个泡沫都有一根针在等着它。当两者最终相遇，新一波投资者就会学到一些非常古老的教训：第一，华尔街这个不重视质量控制的群体，会向投资者兜售任何他们愿意买的东西。第二，投机在看似最安全的时候最为危险。
在伯克希尔，我们从不试图从一片未经证实的企业海洋中挑选出少数赢家。我们没那个本事，我们也知道这一点。相反，我们试图将伊索2600年前的方程式，应用于那些我们有合理信心知道灌木丛中有多少只鸟，以及它们何时会出现的机遇上（这个公式，我的孙子们大概会更新为“一辆敞篷车里的姑娘，顶得上电话本里的五个”）。显然，我们永远无法精确预测一项业务现金流入和流出的时间或确切金额。因此，我们努力让估算偏于保守，并专注于那些业务意外不太可能给所有者带来致命打击的行业。即便如此，我们还是犯了很多错误：请记住，我就是那个曾以为自己理解交易印花、纺织、鞋类和二流百货公司未来经济状况的家伙。
最近，最有希望的“灌木丛”是对整个企业的谈判收购，这让我们感到高兴。但你们应该清楚理解，这些收购充其量只能带给我们合理的回报。只有在资本市场严重受困、整个商业世界悲观时，才能在谈判收购中预期到真正丰厚的成果。而我们目前所处的阶段，与那种情况相差180度。
报告收益来源
下表显示了伯克希尔报告收益的主要来源。在本表中，购买法会计调整未被分配到其适用的具体业务中，而是被汇总并单独列示。这一方式可以让您看到，在我们没有收购这些业务的情况下，它们的收益原本会如何报告。出于第65页讨论的原因，我们认为这种列示形式对投资者和管理者来说，比使用美国通用会计准则（GAAP）要求逐笔业务摊销购买溢价的方法更有用。当然，表中列示的总净收益与我们经审计财务报表中的GAAP总额完全一致。
| (单位：百万美元) | ||||
| 税前利润 | 伯克希尔应占净利润（税后及少数股东权益后） | |||
| 2000 | 1999 | 2000 | 1999 | |
| 经营利润： | ||||
| 保险集团： | ||||
| 承销 – 再保险 | $(1,399) | $(1,440) | $(899) | $(927) |
| 承销 – GEICO | (224) | 24 | (146) | 16 |
| 承销 – 其他主要保险 | 38 | 22 | 24 | 14 |
| 净投资收益 | 2,747 | 2,482 | 1,929 | 1,764 |
| 金融及金融产品业务 | 556 | 125 | 360 | 86 |
| 飞行服务 | 213 | 225 | 126 | 132 |
| 中美能源（持股76%） | 197 | -- | 109 | -- |
| 零售业务 | 175 | 130 | 104 | 77 |
| 斯科特-费策（不含金融业务） | 122 | 147 | 80 | 92 |
| 其他业务 | 225 | 210 | 134 | 131 |
| 收购会计调整 | (881) | (739) | (843) | (648) |
| 公司利息支出 | (92) | (109) | (61) | (70) |
| 股东指定捐赠 | (17) | (17) | (11) | (11) |
| 其他 | 39 | 25 | 30 | 15 |
| 经营利润 | 1,699 | 1,085 | 936 | 671 |
| 投资资本利得 | 3,955 | 1,365 | 2,392 | 886 |
| 所有实体总利润 | $5,654 | $2,450 | $3,328 | $1,557 |
去年，我们的大部分制造、零售和服务业务都表现得至少还算不错。
但鞋子是个例外，尤其是Dexter（德克斯特）。总体而言，我们的鞋业想方设法将大部分生产留在国内工厂，为此付出了惨重代价。2001年我们还将面临又一个非常艰难的年份，因为我们在经营方式上要大动干戈。
我当年为Dexter支付的价格，显然是个错误。更糟的是，我还用了伯克希尔的股票来支付，让这个错误雪上加霜。去年，为了承认这个错误，我们核销了所有剩余与Dexter交易相关的会计商誉。未来Dexter可能还能恢复一些经济商誉，但目前显然一点都没有。
我们的鞋业经理人，无论是从业务能力还是为人品格来看，都是顶级的。尽管个人财务条件早已让他们无需如此，他们仍在兢兢业业地做着一份艰难——而且时常极其痛苦——的工作。我钦佩并感谢他们。
好消息是，我们在航空服务两个领域仍是无可争议的领头羊——FlightSafety（FSI）的飞行员培训和Executive Jet（EJA）的公务机分时所有权。两家公司都由其杰出的创始人掌舵。
FSI的Al Ueltschi（阿尔·乌尔奇）现已83岁，依然全速运转。虽然我不喜欢股票分拆，但我打算在阿尔百岁时把他的年龄来个2比1拆分（如果这招管用，下一个会是谁呢？）
2000年，我们在飞行模拟器上花了2.72亿美元，今年还要花差不多的数。谁要是觉得折旧根本不代表真实成本——跟工资或原材料一样真实的成本——就该去模拟器公司实习实习。我们每年花掉的折旧费，仅仅是为了维持原地踏步，然后还得额外花钱来增长。而就FSI的前景来看，增长将是长远的。
EJA（其分时所有权计划叫NetJets®）的增长还要更快。Rich Santulli是这门生意的发动机。
去年我告诉过你们，EJA来自月度管理费和按时计费的经常性收入在1999年增长了46%。2000年增长了49%。我还告诉过你们，这是门低利润率的生意，能活下来的玩家不会多。EJA去年的利润率确实很薄，部分原因是在欧洲拓展业务时承担了巨额成本。
不管成本多少，你可以放心：EJA在安全上的投入会毫不吝啬。显然，在任何情况下我们都会遵循这一方针，但这其中也有利己的成分：我、我太太、我的孩子们、我的姐妹们、我94岁的姑妈、除一位之外的所有董事，以及至少九位伯克希尔的管理层，都经常乘坐NetJets的飞机。既然载着这群人，我对Rich坚持超高标准飞行员培训（平均每年23天）举双手赞成。此外，我们的飞行员每年大约飞行800小时来巩固技术。最后，每位飞行员只飞一种机型，这意味着机组人员不会在不同驾驶舱和飞行特性的飞机间换来换去。
EJA的业务继续受制于新飞机的交付。不过，2001年我们的客户将接收超过50架新飞机，占全球产量的7%。我们确信，无论是在飞飞机数量、服务质量还是安全标准上，我们仍将是分时所有权领域的全球领导者。
关于我们各业务部门的更多信息，请参见第42-58页，那里还列示了按美国通用会计准则（GAAP）编制的分部收益。此外，在第67-73页，我们按非GAAP口径将伯克希尔的财务数据重新整理为四个分部，这个呈现方式更符合查理和我对公司的看法。
透视盈余
报告的盈余并不能充分衡量伯克希尔的经济进展，部分原因是第15页表格中显示的金额只包含我们从被投资公司收到的股息——尽管这些股息通常只占我们所有权应占收益的一小部分。然而，为了比报告盈余更接近伯克希尔的经济现实，我们采用了“透视盈余”的概念。按我们的计算，透视盈余包括：(1) 第15页报告的经营利润；加上；(2) 我们在主要被投资公司中留存的经营收益（根据GAAP会计处理，这部分未反映在我们的利润中）；减去；(3) 若这些被投资公司的留存收益已作为股息分配给我们，伯克希尔本应缴纳的税款拨备。在此处汇总“经营利润”时，我们剔除了购买法会计调整、资本利得及其他重大非经常性项目。
下表列示了我们2000年的透视盈余，不过我提醒你，这些数字只能是近似值，因为它们基于许多主观判断。（这些被投资公司支付给我们的股息已包含在第15页列示的经营利润中，主要体现在“保险集团：净投资收益”项下。）
| 伯克希尔主要投资公司 | 伯克希尔年末持股比例（近似值）(1) | 伯克希尔享有的未分配经营利润份额（单位：百万美元）(2) |
| 美国运通公司 | 11.4% | $265 |
| 可口可乐公司 | 8.1% | 160 |
| 房地美 | 0.3% | 106 |
| 吉列公司 | 9.1% | 51 |
| M&T银行 | 7.2% | 23 |
| 华盛顿邮报公司 | 18.3% | 18 |
| 富国银行公司 | 3.2% | 117 |
| 伯克希尔享有的主要投资公司未分配利润份额 | 740 | |
| 对这些未分配被投资公司收益的假设税金(3) | （104） | |
| 伯克希尔报告的经营利润 | 1,779 | |
| 伯克希尔透视盈余总额 | $2,415 |
（1）不包括可分配给少数股权的股份
（2）按当年平均持股比例计算
（3）使用的税率为14%，这是伯克希尔对收到的大部分股息所支付的税率
充分与公平的报告
在伯克希尔，充分报告意味着向你们提供——如果我们角色互换——我们希望你提供给我们的信息。在这种情况下，查理和我会希望得到所有关于当前经营的重要事实，以及CEO对企业长期经济特征的坦率看法。我们既期待大量财务细节，也期待对解读这些信息所需的任何重要数据的讨论。
当查理和我阅读报告时，对人员、厂房或产品的照片毫无兴趣。提到EBITDA就让我们不寒而栗——管理层难道认为牙仙会为资本开支买单？我们对含糊不清的会计方法非常怀疑，因为这往往意味着管理层想隐瞒什么。我们也绝不想读到公关部或顾问炮制的内容。相反，我们期望公司CEO用自己的话解释正在发生的事情。
对我们而言，公平报告意味着要将信息同时送达我们的30万"合伙人"，或者尽可能接近这一目标。因此，我们在周五收盘后至次日早晨之间，将年度和季度财报发布在互联网上。这样，股东及其他感兴趣的投资者能及时获取这些重要信息，并且在周一开盘前有合理的时间消化其中的内容。今年，我们的季度信息将在5月12日、8月11日和11月10日的星期六发布。2001年年报将在3月9日发布。
我们赞赏小阿瑟·莱维特（Arthur Levitt, Jr.）——直至最近仍担任美国证券交易委员会主席——在打击近年如癌症般蔓延的企业"选择性披露"行为方面所做的工作。事实上，大公司几乎已形成标准做法：通过"引导"分析师或大股东，使其盈利预期要么恰好命中、要么略低于公司真实预期收益。通过公司有选择性地散布的暗示、眼色和点头，投机性机构及顾问们获得了相对于以投资为导向的个人的信息优势。这是腐败行为，令人遗憾的是，华尔街和公司美国都欣然接受。
感谢莱维特主席，他代表投资者所做的不懈而有效的努力，使得如今公司被要求平等对待所有所有者。这项改革是由于强制而非良心而实现，这一事实应是CEO及其投资者关系部门的耻辱。
借着这个机会我不吐不快：查理和我认为，CEO们为自己的公司预测增长率既是一种误导，也是一种危险行为。当然，分析师和他们自己公司的投资者关系部门常常怂恿他们这样做。但他们应该抵制这种诱惑，因为这些预测往往招致麻烦。
CEO有自己的内部目标完全没问题，在我们看来，如果这些期望伴随着合理的谨慎说明，CEO甚至可以在公开场合表达一些对未来的期许。但对于一家大公司来说，预测其每股收益能在长期内以每年15%的速度增长，那就是在自找麻烦。
这是因为，如此高的增长率只有极少数大企业才能保持。不妨做个测试：看看1970年或1980年盈利能力最强的200家公司，统计一下从那时起有多少家实现了每股收益年增长15%。你会发现只有寥寥几家。我可以和你打一个很大的赌：在2000年最赚钱的200家公司中，20年内能实现每股收益年增长15%的，不会超过10家。
过高的预测带来的问题不仅仅是传播了毫无根据的乐观情绪。更麻烦的是，它们会腐蚀CEO的行为。多年来，查理和我观察到许多案例，CEO们为了达到自己公布的盈利目标，不惜采取不经济的经营手段。更糟糕的是，在耗尽了所有经营上的"杂技动作"之后，他们有时还会使用各种会计把戏来"凑数"。这些会计上的猫腻会像雪球一样越滚越大：一旦公司把盈利从一个期间挪到另一个期间，此后出现经营缺口时，它就需要更进一步的会计操作，而这些操作必须更加"勇猛"。这样一来，弄虚作假就可能演变成欺诈。（有句话说得好，用笔尖偷走的钱比用枪口抢走的还多。）
查理和我对那些用华丽预测来吸引投资者的CEO所经营的公司总是心存警惕。这些管理者中，少数几个后来被证明有先见之明——但其他人要么是天生的乐观主义者，要么干脆就是江湖骗子。不幸的是，投资者很难事先知道自己面对的是哪一类人。
* * * * * * * * * * * *
我以前就警告过你们，不要相信你们读到或听到的关于伯克希尔的一切——即使它们是由知名新闻机构出版或播出的。事实上，当错误报道由备受尊敬的媒体传播时尤其危险，原因很简单：大多数读者和听众知道这些媒体通常可信，因此相信他们所说的一切。
一个例子是《华尔街日报》（这是一份整体上非常优秀的报纸，我一生都觉得它很有用）在12月29日刊登的关于伯克希尔活动的明显错误。在头版（而且是"折页以上"的显眼位置），《华尔街日报》发布了一条新闻简报，毫不含糊地说我们在买入Conseco（康塞科）和Finova（菲诺瓦）的债券。这条消息将读者引导至"金钱与投资"版面的主要报道。在那篇报道的第二段，《华尔街日报》再次毫无保留地报道伯克希尔正在买入Conseco和Finova的债券，并补充说伯克希尔对每家公司都投资了"数亿美元"。直到报道的第18段（此时报道已经跳转到内页），《华尔街日报》才稍微留了些余地，称我们买入Conseco债券的消息是由"知情人士"透露的。
嗯，这倒也不是那么熟悉。没错，我们确实买过Finova的债券和银行贷款——虽然那篇报道对金额的描述极其离谱。但时至今日，无论是伯克希尔还是我个人，都从未买过Conseco的任何股票或债券。
通常，《华尔街日报》驻芝加哥的记者对伯克希尔的报道既准确又认真。不过这次，"独家新闻"出自该报纽约分社的一位记者之手。实际上，29日那天他可忙坏了：下午刚过不久，他就把这则消息在CNBC上又播了一遍。紧接着，其他一些受人尊敬的新闻机构像旅鼠一样，仅凭《华尔街日报》的报道就开始转述同样的"事实"。结果：Conseco的股票当日放量大涨，成交量排进纽交所活跃股第九名。
在整个事件的各种版本流传中，我从未听到或读到过"谣言"这个词。显然，那些通常以用语严谨自居的记者和编辑，就是不肯把这个字眼用到自己的报道里。但还有什么描述比"谣言"更贴切呢？肯定不是常用的"据消息人士称"或者"据报"。
要是标题换成"今日谣言"，又跟那些自认为不屑于这类东西的新闻机构的自我定位不符。这些媒体觉得，刊登这种明摆着是花边新闻的东西，就好比《罗马观察报》要开个八卦专栏。但不管他们躲在什么委婉说法后面，这些机构经常刊登和播出的其实就是谣言。至少，读者理应得到诚实的用词——一个警示标签，保护他们的财务健康，就像保护身体健康、处于风险的烟民得到警告一样。
宪法第一修正案允许媒体印刷或说出几乎任何东西。新闻业的首要原则应该要求媒体在决定要说什么时慎之又慎。
杂项
在去年的年报中，我们探讨了当时围绕并购会计处理中"权益结合法"的激烈争论。在我们看来，双方的观点在某些方面很有力，在另一些方面则存在严重缺陷。我们很高兴财务会计准则委员会随后采用了另一种方法，在我们看来非常合理。
如果拟议的规则最终通过，我们将不再需要承担每年大额的无形资产摊销费用。因此，我们报告的盈利将更贴近经济现实。（见第65页。）这一切都不会对伯克希尔的内在价值产生影响。不过，你主席本人会从中受益，因为以后这些信里又会少一个需要解释的项目。
* * * * * * * * * * * *
随函附上《杰出投资者文摘》慷慨提供的一份资料——查理在去年5月韦斯科年会上的一番讲话。查理在思考商业经济和投资问题上比我认识的任何人都要出色，这些年来我通过听他讲话学到了很多。读读他的评论，会让你更了解伯克希尔。
* * * * * * * * * * * *
1985年，我们收购了斯科特·费策，不仅得到了一桩好生意，还得到了拉尔夫·谢伊的服务——一位真正杰出的CEO。拉尔夫当时61岁。大多数公司只看重年龄而非能力，原本只能从拉尔夫的才干中获益短短几年。
但在伯克希尔，拉尔夫却管理斯科特·费策长达15年，直到2000年底退休。在他的领导下，公司向伯克希尔分红了10.3亿美元，而我们的净收购成本仅为2.3亿美元。我们用这些资金又购买了其他企业。总而言之，拉尔夫对伯克希尔当前价值的贡献高达数十亿美元。
作为一位管理者，拉尔夫完全配得上伯克希尔的名人堂，查理和我都很欢迎他加入。
聊点怀旧的事：整整50年前，我走进哥伦比亚大学，上了本·格雷厄姆的课。在那之前的十年里，我享受——应该说是热爱——分析、买卖股票。但我的成绩只算平平。
从1951年开始，我的表现有了起色。不，我没有改变饮食习惯，也没开始锻炼。唯一的新元素是本的思想。说简单点，在这位大师门下学的那几个小时，比我自己那十年所谓的原创思考价值高得多。
本不仅是一位伟大的老师，更是一位极好的朋友。我欠他的恩情无法估量。
股东指定捐款项目
2000年，伯克希尔约97%的合格股份参与了股东指定捐款项目，捐款总额为1690万美元。该项目的完整说明见第74-75页。
累计下来，项目运行20年，伯克希尔已按照股东指示捐款1.64亿美元。伯克希尔其余捐款由我们的子公司完成，它们遵循被收购前的慈善模式（只是其原所有者自己承担个人慈善责任）。总体而言，2000年我们的子公司捐款1830万美元，其中包括300万美元的实物捐赠。
要参与未来的项目，你必须是A类股的实际持有人，且股票以实际持有人的名义登记，而不能是券商、银行或存管机构的代名人名义。在2001年8月31日之前没有这样登记的股份，将没有资格参与2001年的项目。当你收到我们寄来的捐款表格时，请及时寄回，不要放在一边或忘记。逾期收到的指定将不被视为有效。
年度股东大会
去年我们将年会移至市政礼堂举行，效果很好。我们将于今年4月28日（星期六）再次在那里聚会。早上7点开门，8点半开始放映影片，9点半会议正式开始。中午短暂休息供用餐，市政礼堂的摊位会有三明治出售。除了这段间歇，查理和我会一直回答提问直到下午3点半。
未来几年，市政礼堂是我们唯一的选择。因此，我们必须把会议定在周六或周日，以避免工作日可能出现的交通和停车噩梦。不过，奥马哈很快会有一个新的会展中心，停车位充足。如果会展中心届时可供我们使用，我会向股东征求意见，看看你们是否愿意回到周一开会。我们将根据大多数股东（而非股份数量）的意愿来决定投票结果。
随本报告附上的股东委托材料中有一份附件，说明如何获取今年会议及其他活动的入场凭证。至于机票、酒店和租车，我们再次与运通（800-799-6634）签约，为你提供特别帮助。按照惯例，我们会在大型酒店安排巴士前往会场。会后，巴士将返回酒店，并前往内布拉斯加家具城、博希姆珠宝店和机场。即便如此，你可能还是觉得有辆车更方便。
今年伯克希尔新增了这么多公司，我不打算详细列举会上将出售的所有产品。但请准备好把从砖头到糖果的一切都搬回家。不过，有一款新产品值得特别一提：鲍勃·肖设计了一块3乘5英尺的地毯，上面有查理极其逼真的肖像。显然，如果滞销迫使我们必须大幅降价，那对查理来说会很尴尬——应该说很丢脸——所以请行动起来，尽你的一份力。
GEICO（政府雇员保险公司）将设立展位，由来自全国各地的多位顶级顾问提供服务，随时准备为您提供车险报价。在大多数情况下，GEICO 能为您提供专享的股东折扣（通常为 8%）。带上您现有保险的详细信息，看看我们能否帮您省钱。
周六，奥马哈机场将照常展示 Executive Jet（行政喷气机公司）的全系列飞机，供您参观。您只需在 Civic 会场向 EJA 代表询问即可安排登机查看。如果您这个周末买的玩意儿够多（在我们看来够多的话），那很可能得买架自己的飞机才能运回家。
内布拉斯加家具城（Nebraska Furniture Mart）位于道奇街与太平洋街之间的 72 街上，占地 75 英亩。我们将再次推出“伯克希尔周末”特价，这意味着股东将享受通常只有员工才有的折扣。我们四年前在 NFM 首次推出这项特价活动，周末期间的销售额从 1997 年的 530 万美元增长到 2000 年的 910 万美元。
要享受折扣，您必须在4月25日（周三）至4月30日（周一）期间购物，并出示参会证件。这个特价期间，即便是几个通常铁面无私、禁止打折的高端品牌，也在我们股东周末的感召下破例为您提供优惠。我们感谢他们的合作。NFM 工作日营业时间为上午 10 点至晚上 9 点，周六和周日为上午 10 点至下午 6 点。
波仙珠宝（Borsheim's）——全美除蒂芙尼曼哈顿店之外最大的珠宝店——将举办两场股东专属活动。第一场是4月27日（周五）下午6点至10点的鸡尾酒会。第二场是4月29日（周日）上午9点至下午5点的主庆典。股东优惠价从周四一直延续到周一，所以如果您想避开周五晚上和周日的拥挤人群，不妨在其他时间光临，并告知您是股东。周六我们营业至下午6点。波仙的毛利率比其主要竞争对手整整低20个百分点，所以您买得越多，省得越多（至少我家里人总是这么跟我说）。
在波仙门外的商场里，周日我们将安排本地桥牌高手与股东对弈。平时总来捧场的 Bob Hamman 今年要去非洲，不过他承诺2002年一定到场。两届美国国际象棋冠军 Patrick Wolff 也会在商场摆擂，蒙眼接受所有人的挑战！去年，Patrick 同时迎战多达六位对手——戴着严严实实的眼罩——并且把对手打得落花流水。
如果这些还不够您施展才华，今年波仙奥林匹克盛会还邀请了 Bill Robertie——仅有的两位两次赢得世界双陆棋锦标赛的棋手之一。双陆棋可是个能输赢大钱的游戏，所以带上您的股票凭证吧。
哥拉特牛排馆（Gorat's）——我最爱的牛排馆——将于4月29日（周日）再次为伯克希尔股东独家开放，营业时间从下午4点到晚上10点。请记住，周日去哥拉特必须提前预订。预订电话 402-551-3733，4月2日开始接受（别打早了）。如果周日订满了，您在其他日子到访也可以去哥拉特试试。要是您点一份三分熟的 T 骨牛排，再加双份土豆煎饼，那您就算是个地道的美食家了。
周六晚上7点，罗森布拉特体育场（Rosenblatt Stadium）将照常举行棒球赛。今年奥马哈金钉队（Omaha Golden Spikes）将对阵新奥尔良西风队（New Orleans Zephyrs）。Ernie Banks 将再次到场——勇敢地——面对我的快球（曾被测速为每月95英里——mpm）。
我去年表现不算最佳：连投了五球才投出像样的好球。而且，相信我，当你找不到好球区时，站在投手丘上真是孤独得很。最后总算有一球进了好球区，Ernie却一记平飞球打向左外野。我被换下场后，在场众多体育记者问我给Ernie投了什么球。我引用了Warren Spahn（沃伦·斯潘）在Willie Mays（威利·梅斯）把他一球轰成全垒打（威利大联盟生涯首轰）后说的话："前六十英尺这球投得真够劲。"
今年可就是另一回事了。我不想露底牌，所以姑且这么说吧——Ernie得面对一个他从未见过的球路。
我们的股东委托书中附有获取观赛门票的说明，以及其他大量有助于您在奥马哈愉快观光的信息。城里届时活动丰富。所以欢迎来参加伍德斯托克周末，和我们一起在市政中心共庆资本主义盛典。
2001年2月28日
沃伦·E·巴菲特
董事会主席