1997 Berkshire Hathaway Annual Meeting

Lessons from this meeting:

1. Intrinsic Value Is Future Cash Flows
   • Estimate a business’s owner cash flows over its lifetime and discount them at the risk-free rate.
   • Compare the result to its price—buy only when there’s a meaningful margin of safety.
2. Filter for Understandable Businesses
   • Invest only in companies whose economics and competitive moats you can clearly grasp.
   • Avoid industries where technological or regulatory change makes cash-flow forecasts unreliable.
3. Concentrate via Opportunity Cost
   • Rank all potential investments against your best idea—if it isn’t superior, pass.
   • A focused portfolio of top convictions beats diversifying into mediocre names.
4. Use Treasuries as the Discount Yardstick
   • The government bond rate is your baseline “hurdle” for present-valuing any asset.
   • Even if you never buy bonds, they set the cost of capital for all comparative valuations.
5. Float Is Cheap, But Not Free
   • Insurance premiums held (“float”) fund investments—earn more than the cost of claims.
   • Underwrite only when pricing makes sense; sit out soft markets rather than chase volume.
6. Decentralize & Empower Subsidiaries
   • Let each business unit make its own operational and policy decisions.
   • Headquarters allocates capital and sets capital-charge hurdles, but trusts local managers.
7. Retain Earnings Only If You’ll Beat Payout
   • Keep cash only when you can deploy it for better returns than shareholders could get themselves.
   • Otherwise, return capital via dividends or share buybacks—no point in hoarding idle cash.
8. Share of Mind > Share of Market
   • Strong consumer brands (Coke, Disney) own durable “real estate” in billions of minds.
   • Premium pricing and global scale follow from top-of-mind awareness, not just shelf-space.
9. Learn from Others’ Mistakes & Your Omissions
   • Study big losses and missed opportunities; most Buffett regrets are not buying more of great companies.
   • Cultivate intellectual humility—vicarious learning beats repeating your own errors.
10. Ignore Macro Noise; Focus on Business Fundamentals

• Fed moves, fund flows or trade deficits don’t change what the company itself produces.
• Evaluate each stock as if the market closed for five years—would you still buy it?