Investing

上謂公卿曰：「昔禹鑿山治水而民無謗讟者，與人同利故也。秦始皇營宮室而民怨叛者，病人以利己故也。夫靡麗珍奇，固人之所欲，若縱之不已，則危亡立至。朕欲營一殿，材用已具，鑒秦而止。王公已下，宜體朕此意。」由是二十年間，風俗素樸，衣無錦繡，公私富給。

上謂黃門侍郎王珪曰：「開皇十四年大旱，隋文帝不許賑給，而令百姓就食山東，比至末年，天下儲積可供五十年。煬帝恃其富饒，侈心無厭，卒亡天下。但使倉廩之積足以備凶年，其餘何用哉！」

甲寅，高昌王麴文泰入朝。西域諸國鹹欲因文泰使入貢，上遣文泰之臣厭怛紇干往迎之。魏徵諫曰：「昔光武不聽西域送侍子，置都護，以為不以蠻夷勞中國。今天下初定，前者文泰之來，所過勞費已甚，今借使十國入貢，其徒旅不減千人。邊民荒耗，將不勝其弊。若聽其商賈往來，與邊民交市，則可矣，倘以賓客遇之，非中國之利也。…

辛丑，以突厥拓設阿史那社爾為左驍衛大將軍。社爾，處羅可汗之子也，年十一，以智略聞。可汗以為拓設，建牙於磧北，與欲谷設分統敕勒諸部，居官十年，未嘗有所賦斂。諸設或鄙其不能為富貴，社爾曰：「部落苟豐，於我足矣。」諸設慚服。及薛延陀叛，攻破欲谷設，社爾兵亦敗，將其餘眾走保西陲。頡利可汗既亡，西突厥亦亂，…

帝復為文刻之石，稱「皇后節儉，遺言薄葬，以為『盜賊之心，止求珍貨，既無珍貨，復何所求。』朕之本志，亦復如此。王者以天下為家，何必物在陵中，乃為己有。今因九嵕山為陵，鑿石之工才百餘人，數十日而畢。不藏金玉，人馬、器皿，皆用土木，形具而已，庶幾奸盜息心，存沒無累。當使百世子孫奉以為法。」

治書侍御史權萬紀上言：「宣、饒二州銀大發采之，歲可得數百萬緡。」上曰：「朕貴為天子，所乏者非財也，但恨無嘉言可以利民耳。與其多得數百萬緡，何如得一賢才！卿未嘗進一賢，退一不肖，而專言稅銀之利。昔堯、舜抵璧於山，投珠於谷，漢之桓、靈乃聚錢為私藏，卿欲以桓、靈俟我邪！」是日。黜萬紀，使還家。

五月，壬申，魏徵上疏，以為：「陛下欲善之志不及於昔時，聞過必改少虧於曩日，譴罰積多，威怒微厲。乃知貴不期驕，富不期侈，非虛言也。且以隋之府庫、倉廩、戶口、甲兵之盛，考之今日，安得擬倫！然隋以富強動之而危，我以寡弱靜之而安；安危之理，皎然在目。昔隋之未亂也，自謂必無亂；其未亡也，自謂必無亡。故賦役無…

薛延陀真珠可汗使其侄突利設來納幣，獻馬五萬匹，牛、橐駝萬頭，羊十萬口。庚申，突利設獻饌，上御相思殿，大饗群臣，設十部樂，突利設再拜上壽，賜賚甚厚。

先是，諸州長官或上佐歲首親奉貢物入京師，謂之朝集使，亦謂之考使；京師無邸，率僦屋與商賈雜居。上始命有司為之作邸。

諸軍所虜高麗民萬四千口，先集幽州，將以賞軍士，上愍其父子夫婦離散，命有司平其直，悉以錢布贖為民，歡呼之聲，三日不息。十一月，辛未，車駕至幽州，高麗民迎於城東，拜舞號呼，宛轉於地，塵埃彌望。

壬申，上幸漢故甘泉宮，詔以「戎、狄與天地俱生，上皇並列，流殃構禍，乃自運初。朕聊命偏師，遂擒頡利；始弘廟略，已滅延陀。鐵勒百餘萬戶，散處北溟，遠遣使人，委身內屬，請同編列，並為州郡；混元以降，殊未前聞，宜備禮告廟，仍頒示普天。」

丁丑，詔以「隋末喪亂，邊民多為戎、狄所掠，今鐵勒歸化，宜遣使詣燕然等州，與都督相知，訪求沒落之人，贖以貨財，給糧遞還本貫；其室韋、烏羅護、靺鞨三部人為薛延陀所掠者，亦令贖還。」

辛未，骨利幹遣使入貢；丙戌，以骨利幹為玄闕州，拜其俟斤為刺史。骨利幹於鐵勒諸部為最遠，晝長夜短，日沒後，天色正曛，煮羊脾適熟，日已復出矣。

是歲大稔，洛州粟米斗兩錢半，粳米斗十一錢。

阿史那賀魯既被擒，謂蕭嗣業曰：「我本亡虜，為先帝所存，先帝遇我厚而我負之，今日之敗，天所怒也。吾聞中國刑人必於市，願刑我於昭陵之前以謝先帝。」上聞而憐之。賀魯至京師，甲午，獻於昭陵。敕免其死，分其種落為六都督府，其所役屬諸國皆置州府，西盡波斯，並隸安西都護府。賀魯尋死，葬於頡利墓側。

冬，十月，丙午，太子加元服，赦天下。初，太宗疾山東士人自矜門地，昏姻多責資財，命修《氏族志》例降一等；王妃、主婿皆取勳臣家，不議山東之族。而魏徵、房玄齡、李勣家皆盛與為昏，常左右之，由是舊望不減，或一姓之中，更分某房某眷，高下懸隔。李義府為其子求昏不獲，恨之，故以先帝之旨，勸上矯其弊。壬戌，詔後魏…

回紇酋長婆閏卒，侄比粟毒代領其眾，與同羅、僕固犯邊，詔左武衛大將軍鄭仁泰為鐵勒道行軍大總管，燕然都護劉審禮、左武衛將軍薛仁貴為副，鴻臚卿蕭嗣業為仙萼道行軍總管，右屯衛將軍孫仁師為副，將兵討之。審禮，德威之子也。

富貴非榮，富貴而利濟於世者為榮 貧無可奈，惟求儉。拙亦何妨，只要勤

善處事者，但就是非可否，審定章程而不必利於己 山水是文章化境。煙雲乃富貴幻形

縱容子孫偷安，其後必至耽酒色而敗門庭 專教子孫謀利，其後必至爭貲財而傷骨肉

利之中有害，而趨利之小人，並不顧其為害也 意趣清高，利祿不能動也。誌量遠大，富貴不能淫也

It’s per-share intrinsic value that counts, however, not book value. Here, the news is good: Between 1964 and 2004, Berkshire morphed from a…

Despite their shortcomings, yearly calculations of book value are useful at Berkshire as a slightly understated gauge for measuring the long-term…

However the yearly comparisons work out, Berkshire’s long-term performance versus the S&P remains all-important. Our shareholders can buy the S&P…

Last year, Berkshire’s book-value gain of 10.5% fell short of the index’s 10.9% return. Our lackluster performance was not due to any stumbles by the…

Yet if precision is aided by Berkshire’s financial characteristics, the job of calculating intrinsic value has been made more complex by the mere…

We have attempted to ease this problem by clustering our businesses into four logical groups, each of which we discuss later in this report. In these…

Before we look at our individual businesses, however, let’s review two sets of figures that show where we’ve come from and where we are now. The…

In addition to these marketable securities, which with minor exceptions are held in our insurance companies, we own a wide variety of non-insurance…

We believe that $16.9 billion is a record for a one-year gain in net worth – more than has ever been booked by any American business, leaving aside…

Charlie and I measure Berkshire’s progress and evaluate its intrinsic value in a number of ways. No single criterion is effective in doing these jobs…

In our early years we put most of our retained earnings and insurance float into investments in marketable securities. Because of this emphasis,…

Over the years, however, we have focused more and more on the acquisition of operating businesses. Using our funds for these purchases has both…

That party is over. It’s a certainty that insurance-industry profit margins, including ours, will fall significantly in 2008. Prices are down, and…

Berkshire has two major areas of value. The first is our investments: stocks, bonds and cash equivalents. At yearend these totaled $141 billion…

Insurance float – money we temporarily hold in our insurance operations that does not belong to us – funds $59 billion of our investments. This float…

Berkshire’s second component of value is earnings that come from sources other than investments and insurance. These earnings are delivered by our 66…

The table on the preceding page, recording both the 44-year performance of Berkshire’s book value and the S&P 500 index, shows that 2008 was the…

By the fourth quarter, the credit crisis, coupled with tumbling home and stock prices, had produced a paralyzing fear that engulfed the country. A…

Take a look again at the 44-year table on page 2. In 75% of those years, the S&P stocks recorded a gain. I would guess that a roughly similar…

Most of the Berkshire businesses whose results are significantly affected by the economy earned below their potential last year, and that will be…

A more difficult decision for us was how to measure the progress of Berkshire versus the S&P. There are good arguments for simply using the change in…

We should note that had we instead chosen market prices as our yardstick, Berkshire’s results would look better, showing a gain since the start of…

Summed up, the table on page 2 conveys three messages, two positive and one hugely negative. First, we have never had any five-year period…

Just because Charlie and I can clearly see dramatic growth ahead for an industry does not mean we can judge what its profit margins and returns on…

A “normal year,” of course, is not something that either Charlie Munger, Vice Chairman of Berkshire and my partner, or I can define with anything…

Over time, the movement of goods in the United States will increase, and BNSF should get its full share of the gain. The railroad will need to invest…

Last year – in the face of widespread pessimism about our economy – we demonstrated our enthusiasm for capital investment at Berkshire by spending $6…

In Berkshire’s case, we long ago told you that our job is to increase per-share intrinsic value at a rate greater than the increase (including…

Your Board is equally enthusiastic about my successor as CEO, an individual to whom they have had a great deal of exposure and whose managerial and…

• Our major businesses did well last year. In fact, each of our five largest non-insurance companies – BNSF, Iscar, Lubrizol, Marmon Group and…

• In total, our entire string of operating companies spent $8.2 billion for property, plant and equipment in 2011, smashing our previous record by…

• Our insurance operations continued their delivery of costless capital that funds a myriad of other opportunities. This business produces “float” –…

But subpar it was. For the ninth time in 48 years, Berkshire’s percentage increase in book value was less than the S&P’s percentage gain (a…

One thing of which you can be certain: Whatever Berkshire’s results, my partner Charlie Munger, the company’s Vice Chairman, and I will not change…

Charlie and I believe the gain in Berkshire’s intrinsic value will over time likely surpass the S&P returns by a small margin. We’re confident of…

Our luck, however, changed early this year. In February, we agreed to buy 50% of a holding company that will own all of H. J. Heinz. The other half…

On the facing page, we show our long-standing performance measurement: The yearly change in Berkshire’s per-share book value versus the market…

As I’ve long told you, Berkshire’s intrinsic value far exceeds its book value. Moreover, the difference has widened considerably in recent years.…

Charlie Munger, Berkshire’s vice chairman and my partner, and I believe both Berkshire’s book value and intrinsic value will outperform the S&P in…