2005 Berkshire Hathaway Annual Meeting

1. Buy Inflation-Resistant Businesses
   • Seek companies that sustain (or grow) real earnings without needing constant, expensive reinvestment (e.g. See’s Candy).
   • Steer clear of capital-heavy industries whose replacement costs balloon in inflationary times (e.g. legacy airlines).
2. Don’t Bet Against America
   • Over centuries, U.S. per-capita GDP has grown ~7× despite wars, policy missteps, and market panics—trust that trend.
   • Focus on finding great businesses at fair prices rather than trying to time macroeconomic cycles.
3. Watch for Hidden Legacy Liabilities
   • Contracts signed in boom times (pensions, retiree health care) can cripple competitiveness when markets shift.
   • Always stress-test a company’s balance sheet for off-balance-sheet or unfunded obligations before investing.
4. Align Insurance Incentives Around Underwriting Quality
   • Guarantee underwriters won’t lose their jobs when premiums dip, so they never chase bad business to hit volume targets.
   • Accept higher expense ratios in soft markets—better than teaching staff to write unprofitable policies.
5. Decentralize & Trust Expert Managers
   • Acquire owner-operators, then give them autonomy rather than imposing heavy-handed “synergy” mandates.
   • Minimal oversight preserves the culture and incentives that made those businesses special in the first place.
6. Invest in People First, Assets Second
   • Recruiting exceptional talent (e.g. Ajit Jain) can outperform even the best asset plays—people compound value.
   • Empower top performers with resources and freedom; their upside often far exceeds any single deal.
7. Stay in Your Circle of Competence
   • Concentrate on industries and business models you truly understand, not wherever the headlines point.
   • Admit what you don’t know—better to sit out or seek advice than chase complex areas beyond your grasp.
8. Keep Dry Powder for Opportunistic Buying
   • Holding cash (or equivalents) lets you pounce on bargains when markets stumble or irrational fears grip investors.
   • Resist the urge to be fully deployed at market highs; patience often yields the best entry points.
9. Differentiate Productive Assets from “Stores of Value”
   • Gold and similar non-yielding assets lack utility and long-term return power—far better to own real businesses.
   • Assess an investment by its ability to generate cash flows, not scarcity or “intrinsic mystique.”
10. Pick Businesses, Not Macro Forecasts

Lessons from this meeting:

• Bottom-up fundamental analysis beats guessing where interest rates or the dollar will be in ten years.
• If a company trades far below your estimate of its intrinsic value, act—no need to await “perfect” timing.