1. Entrust Capital Allocation to a Single, Capable Leader
Centralize Around the CEO: As Berkshire grows, the ultimate call on “where to put the next $10 B+” belongs with the chief executive—Greg Abel will decide both big acquisitions and stock buys, backed by a brain-trusted board.
Avoid Fragmentation: Splitting billions among dozens of small managers dilutes accountability. One strong allocator can move quickly when others are frozen by uncertainty.
2. Distribution Is a Service, Not a “Wonderful” Moat
Thin Economic Moat: IT and parts distributors (e.g. Tech Data) serve a role—connecting maker to user without tying up capital—but their margins aren’t structurally huge.
People Still Matter: Only a top-notch management team (like TTI’s Paul Andrews) can turn a middling distribution model into a durable cash-machine.
3. Stay Patient & Keep Dry Powder Ready
Opportunities Come and Go: Buffett’s best “all-in” moments—2008–09 railroads, 2020 Apple, 2023 Occidental—happened when others were paralyzed, not when “value” was easy.
Don’t Force Deals: Even with $140 B in cash, Berkshire passes on hundreds of smaller/or overpriced targets—waiting for truly needle-moving chances.
4. Cultivate “Apperceptive Mass” for Conviction Buys
Build a Broad Base First: Years studying department stores, candy, insurance, oil, consumer tech… all fed Buffett’s ability to “see” Apple’s—and later Occidental’s—true value in one decisive flash.
Strike When the Lightbulb Goes On: That sudden, overwhelming clarity (“this is a generational business”) comes only when your mind has quietly absorbed a thousand prior lessons.
5. Own Your Mistakes—Then Move On
Paramount Loss: Buffett alone decided the Paramount bet, sold out at a loss, and publicly owned up to it—showing you can be wrong without wrecking your career.
Focus on Learning, Not Blame: Every setback—from the Baltimore department store buy to the one-off media miscue—became a source of deeper insight into consumer behavior and corporate economics.
6. Buy Hard-to-Replicate, “Essential” Assets
Railroads Are Country-Building: BNSF (and UP) sit on millions of acres of right-of-way and capture a fifth of all freight—an oligopoly you can’t rebuild overnight.
Price vs. Replacement Cost: Even modest profit margins on irreplaceable infrastructure can generate huge returns over decades.
7. Scale Dictates Strategy
Small Pot, Big Returns: With ≤ $1 M you can pore over Moody’s manuals to spot “cigar‐butt” mispricings and compound at 50 % /yr—but not with $150 B.
Large Pool, Large Deals: Big pools need fewer, bigger shots: billion-dollar takeovers or multi-$B stock buys, not thousands of tiny trades.
8. Learn by Doing—even Failed Experiments
Furniture Mart Flop → Consumer Insight: Buffett’s first retail foray stumbled, but taught him the power of a winning retail experience and local brand gravity.
See’s Candy Success: Reinvest every dollar of early candy profits into more candy, instead of chasing sexy industries, to build one of the most dependable cash machines ever.
9. Understand Human Nature & Align Incentives
Psychology Is Power: Munger cataloged dozens of ways people manipulate each other—know them cold so you resist, never to “toy” with customers yourself.
Defer Consumption, Reward Others: As a shareholder base, Buffett admires those who live well but don’t overspend, then quietly fund doctors’ scholarships and universities for decades.
10. Let Compounding Do the Heavy Lifting
Defer, Don’t Deny, Consumption: True wealth grows when you spend modestly, reinvest the excess, and let decades of compounding work its magic.
Pass It On: If you’re fortunate enough to ride a compounding juggernaut, channel most of it into bettering others’ lives—just as Berkshire’s early shareholders have done anonymously, “piece of paper” by piece of paper.
Guarantees Matter: When depositors doubt your solvency, even a fundamentally healthy bank can crumble—explicit government backing of deposits transforms “run risk” into mere “fear risk.”
Keep Dry Powder: Holding ample cash/T-bills (Berkshire: ~$128 B) isn’t “inactive”—it’s insurance against a sudden freeze in the banking system.
2. Align Incentives and Enforce Accountability
Punish Mismanagement: CEOs and directors who load up on reckless, off-balance-sheet risks (e.g. ultra-long fixed mortgages at First Republic) must face career and financial consequences.
Reward Sound Stewardship: High returns with low volatility (think old-school regional banks that avoid speculative CDOs) merit extra autonomy and compensation.
3. Pick Your Bank Stakes Sparingly
Know Your Counterparty: Buffett stuck with Bank of America because he trusts its management—he sold other banks when uncertainties mounted.
Size Matters: Even at big discounts, Buffett won’t chase dozens of small bank bets—he’ll concentrate where he has conviction and “rolls the cash” in Treasury bills otherwise.
4. Inflation Is Everyone’s Hidden Tax—Hedge with Human Capital
Skills Over Savvy: No commodity outperforms a unique skill set—doctors, lawyers, artisans command real, inflation-proof pricing power.
Beware Cash & Bonds: Even “risk-free” bonds and cash get “swindled” by inflation over time; focus on businesses that can raise prices without over-investing in new capital.
5. Cultivate a Culture of Truthful Accounting
Ban Earnings Forecasts: Regular guidance becomes an endless cycle of gaming and cover-ups—better to focus on actual results than quarterly promises.
Transparent Mark-to-Market: Know what you own at fair value on your balance sheet—just don’t let the daily “paper P/L” distort your long-term view.
6. Use “Arbitrage” Judiciously—Limited Upside, Material Downside
Workouts vs. “Arb”: Buying Activision post-takeover announcement is appealing only if you’re confident the deal closes—profits cap at the spread, but losses can dwarf them if it fails.
Pick Your Spots: Buffett only rarely “dabbles” in these event-driven trades—save them for irresistible spreads on large, well-financed acquirers.
7. Favor Productive Assets Over Pure Speculation
Farmland vs. “Magic” Tokens: You’d pay up for 1% of U.S. farmland because it grows crops—bitcoin “grows” only through the next greater-fool bid.
Government-Backed Money Wins: The dollar remains the sole global reserve currency; true money must deliver stable purchasing power or an interest-based return.
8. Leverage Insurance Float—Cost-Free Capital with Discipline
Float Is a Loan: Premiums held before claims—if underwritten profitably—become an interest-free deposit you can invest elsewhere.
Underwriting Wins: Berkshire’s float wouldn’t exist if they’d mispriced risks—float only pays when you price losses correctly and maintain reserve strength.
9. Buy Back Shares Only When They’re Mispriced
No Formula, Just Value: If stock trades well below your own intrinsic-value estimate, repurchase; otherwise conserve capital for acquisitions.
Best Use of Excess: Berkshire would prefer a $50 B acquisition to a $50 B buyback—only repurchase when it makes shareholders demonstrably better off.
10. Treat Capital Allocation as Your “Canvas”
Think Like an Artist: View each deployment—acquisition, buyback, new investment—as a brushstroke on an ever-expanding painting of your company’s future.
Learn & Adapt: Don’t stick to one style—if a given stroke (“investment”) misfires, paint over it swiftly; but double-down where your “vision” pays off.
1. Keep Corporate Speech Focused on Shareholders, Not Politics
Speaking out on hot-button issues carries real business risk: it can alienate customers, employees, and even investors who identify with the “other side.”
If you feel compelled to voice personal views, do so entirely as a private citizen—not in your company’s name or at shareholder expense.
2. Don’t Weaponize Your Brand for Political Gain
Corporate political contributions and lobbying should serve clear business necessities (e.g. fair regulation), not personal preferences of executives.
Treat the company as a neutral platform—avoid pressuring suppliers or partners to fund causes you favor.
3. Cultivate a Multidisciplinary “Toolbox”
Learn to apply mental models from diverse fields—economics, psychology, engineering—to avoid treating every problem like a nail just because you’re holding a hammer.
Broad knowledge helps spot value and risk that specialists in one area often miss.
4. Insure Your Portfolio (and Yourself) Against Inflation
Inflation “swindles” almost everyone—bonds, cash, and businesses that require heavy reinvestment lose purchasing power over time.
Favor low-capex, high-margin franchises (e.g. software, consumer brands) that can raise prices without tying up extra capital.
5. Build and Exploit Honest Accounting Cultures
Avoid the “myths” that CEOs preach quarter after quarter—requiring management forecasts invites ever-escalating games and cover-ups.
Insist on transparency: a culture that never tolerates even minor number-tweaking preserves integrity and reduces long-run risk.
When a corporate event (merger, takeover) fixes a future price, commonsense probability work (e.g. Activision at $95/share) can yield attractive returns.
Keep these stakes moderate: profits are capped if deals close, but losses can be large if they unravel.
7. Steer Clear of Non-Productive “Store-of-Value” Assets
Only a currency backed by an issuing government with tax power can truly circulate as money; bitcoin lacks proprietary return streams.
If someone offered you a slice of all the farmland in America for cheap, you’d pay up—because land produces crops; assets that produce nothing should trade at—or toward—zero.
8. Leverage Insurance “Float” as Cost-Free Capital
Float—the premiums held before claims are paid—can be deployed like an interest-free loan, provided underwriting remains disciplined.
Guard against catastrophe risk: only build float in lines of business where you understand and can price rare, large losses.
9. Repurchase Shares Only When They Trade Below Your Intrinsic-Value Estimate
Buying back stock at a discount concentrates ownership in remaining shareholders and is economically akin to investing in your own best asset.
If you’d rather deploy capital into an acquisition with higher expected return, defer repurchases until repurchase yields beat your next best opportunity.
10. Think of Your Enterprise as a Growing Canvas—Paint Sparingly, but Boldly
View capital allocation as extending an ever-expanding “painting”: you must choose each added brushstroke (acquisition, buyback) carefully.
Over time, natural winners (high-ROIC businesses) occupy more of your canvas; lean into what works, and prune what doesn’t without second-guessing every move.
Share Repurchases Are Moral When Done Below Intrinsic Value
Buying back shares at a price below your estimate of intrinsic value concentrates ownership in those who still believe in the business—and lets those who want cash exit at a fair market price.
Criticism of buybacks often comes from treating them as “fashionable” rather than price-sensitive capital allocation; done right, they’re just a selective dividend.
Don’t Let Tax Rates Drive Your Capital-Return Policy
Berkshire’s owners voted overwhelmingly against a regular dividend—even higher capital gains rates wouldn’t change that, because most shareholders prefer reinvestment.
Tailoring payouts to tax whims undermines your corporate identity; better to stick with the model your owners signed up for.
Keep Politics (and Personal Views) Separate from Corporate Governance
Personal voting choices belong to the individual; company meetings are for shareholder business, not political debate.
Mixing partisan issues into annual meetings only distracts from the core job of capital allocation and oversight.
Your Number-One Risk Is the Wrong Management
Decentralization only works if you deeply trust each subsidiary’s leaders—vet character and competence relentlessly.
A board’s toughest job is firing a poor CEO; don’t underestimate how myth-driven culture and loyalty can let bad bosses persist.
Build a “Fort Knox” Balance Sheet for Optionality
Maintain ample zero-coupon government bills (not commercial paper) so you can seize once-in-a-decade bargains without dance partners.
Liquidity underpins both opportunistic deals and the stamina to weather truly extreme shocks (pandemics, deep recessions).
Master the Psychology of Endurance
Only buy stocks you’d be comfortable holding through repeated 50 %+ declines—if you can’t stand the volatility, skip equities altogether.
Treat your portfolio like a long-lived farm: ignore daily price “noise” and focus on intrinsic productivity over decades.
Don’t Subsidize Poor Businesses with Shareholder Money
If a subsidiary’s prospects justify ongoing cash losses, it belongs to someone else; offload or sell rather than bail it out forever.
Temporary loans to operating units make sense—but only when their long-term economics remain intact.
Allocate Capital Only to Deals You Truly Understand
When the Federal Reserve mopped up panicked funding needs, the few attractive opportunities vanished—waiting for the next real distress is wiser than “doing something.”
Stick within your circle of competence: spectacular quants and arbitrage schemes may dazzle short-term, but opaque risks bite back.
Learn Fast—and Let Winners Naturally Dominate
Honest self-appraisal of past overpayments (e.g., Precision Castparts) is critical; recognize which bets worked and which you over-paid for.
Successful subsidiaries naturally grow into a larger share of the whole—inevitably concentrating your capital in the best businesses if you “buy and hold.”
Seek Businesses That Grow Without Heavy Capital Needs
The dream enterprise earns high margins, throws off cash, and needs little incremental investment—every CEO hunts for “software-like” franchises.
Utility, rail, and energy can deliver reasonable returns, but only low-capex, high-ROIC operations (think consumer brands, tech platforms) compound fastest.
Avoid even the appearance of insider trading. Buffett skips Microsoft despite its merits because any post-purchase move could be misconstrued as tipping from Bill Gates.
Set off-limits lists. Identify securities you’ll never buy, not for lack of attraction, but to prevent conflicts and protect your reputation.
2. Ride Out Political Noise
Ignore day-to-day headlines. America’s business cycle has weathered wars, panics and assassinations—and still delivered sixfold per-capita growth in one lifetime.
Stay invested through ups and downs. When the fundamentals of a company and country remain sound, volatility is opportunity, not a reason to flee.
3. Seek Partner-Minded Managers
Hire for “what can I do for Berkshire?” The best CEOs put company first, not personal gain—even when scaling large, complex businesses like Gen Re or MidAmerican.
Trust, then test. Give talented teams freedom to execute, but reward real performance with meaningful upside—no need for one-size-fits-all comp formulas.
4. Know That Value Isn’t a Formula
Ditch the spreadsheet illusions. True intrinsic value is the present value of future cash flows, not some elegant but misleading academic multiple or EBITDA shortcut.
Mix qualitative with quantitative. Balance hard numbers (e.g. returns on tangible capital) with soft factors (brand strength, customer delight) to decide what’s truly underpriced.
5. Deploy Capital Sparingly—Then Pounce
Keep a war chest. Berkshire holds a minimum $20 billion in cash so it can back up the truck when a once-in-a-decade deal appears.
Don’t force deployment. If suitable large-scale acquisitions won’t come at the right price, return cash via buybacks or dividends instead of overpaying.
6. Buy Back Shares Only When It Makes Sense
Think like an owner. If you’d gladly buy your own business at current prices, buy; if not, don’t—regardless of market trends or peer behavior.
Let buybacks compound your stake. Even a small share of Apple can grow to a much larger position over time purely through disciplined repurchases.
7. Embrace Capital Intensity When Needed
Cap-light is king—until you have more money than cap-light deals. When you outgrow high-ROIC niches, diversify into solid, capital-heavy businesses (railroads, utilities) bought at sensible prices.
Aim for “good enough” returns. A utility yielding mid-teens on equity can be a fine home for idle billions when nothing cheaper’s on offer.
8. Beware Non-Productive Assets
Gold, tulips, crypto = bubble fuel. Assets that produce nothing rely entirely on greater fools—eventually they crash, just like tulip bulbs and various collectables.
Invest in productive capacity. Farms, factories or franchises generate real cash flows and dividends; non-producers merely shuffle wealth among speculators.
9. Offer Low-Cost Index Options
Practice what you preach. Berkshire’s leadership may delegate 401(k) plan design, but every manager should still offer employees a passive, ultra-low-fee index alternative.
Limit concentrated positions. Encourage diversification by capping in-house stock in retirement plans—no one needs 100% in Berkshire or any other single name.
10. Cultivate & Protect an Owner-Centric Culture
Hire partners, not prisoners. Seek businesses whose founders share Berkshire’s ethics: honesty, long-term focus, servant leadership—and let them keep running.
Let culture compound. A strong, self-reinforcing culture attracts like-minded managers and shareholders, ensuring your ethos—and returns—live on long after you’re gone.
Avoid painful turnarounds. Berkshire prefers companies that run efficiently out of the box rather than ones needing massive cost cuts or job layoffs to become profitable.
Focus on growth, not just productivity. By sidestepping “fixer‐uppers,” management can devote its energy to expanding the business rather than wrestling with restructuring.
2. Keep a Healthy Cash Cushion and Deploy with Discipline
Maintain a minimum liquidity buffer. Buffett targets at least $20 billion of “dry powder” so Berkshire can sleep soundly and pounce on large deals when they arise.
Return excess cash when opportunities thin. If you can’t find smart deployments, shift idle capital into buybacks or dividends rather than stretch into overvalued assets.
3. Productivity Drives Long-Term Prosperity
Embrace gains, despite short-term pain. Improvements in output per worker are the engine of rising living standards—even if they require tougher choices today.
Anticipate political and social backlash. Productivity wins can be unpopular (think factory closures), so factor in potential regulatory or reputational headwinds.
4. Partner with Owner-Minded Managers
Hire people who think like shareholders. Todd Combs and Ted Weschler stand out because their first question is “What’s best for Berkshire?” rather than “What’s best for me?”
Don’t over‐load even great leaders. Buffett resisted handing them ever-more capital beyond what they could deploy wisely, rather than diluting their returns.
5. Value Intrinsic Economics—not Accounting Gimmicks
Look past book value and EBITDA. As Berkshire’s footprint shifts from securities to wholly-owned businesses, simple per-share or EBITDA metrics obscure true worth.
Treat depreciation as real cost. Ignoring capex via EBITDA is “horror squared”—always ask how much cash the business reinvests to sustain its outlook.
6. Learn More from Bad Businesses than Good Ones
Volunteer for a “lousy” business stint. Facing down adversity exposes you to the limits of pure IQ and theory and teaches invaluable lessons about real‐world risks.
Mine painful experiences. Every failure—whether a shuttered textile mill or department store—cements practical insights far deeper than textbooks ever could.
7. Expand Your Circle of Competence—Cautiously
Don’t dismiss unfamiliar sectors out of hand. Buffett originally shunned tech but ultimately found Apple fit his “consumer franchise” criteria, despite its gadgetry.
Stick to the economics you understand. When you cross into new territory, focus on durable cash flows, pricing power and competitive moats rather than technical details.
8. Exercise Options & Warrants Rationally
Crunch the numbers, not your nerves. Buffett will exercise the Bank of America warrant if the incremental income from common dividends exceeds the preferred’s yield.
Time the conversion close to expiration. A valuable warrant is only worth its upside if you convert—so execute just before it lapses, provided the price remains attractive.
9. Patience Beats Panic in Capital Allocation
Don’t chase deploy-or-perish thinking. With $90+ billion idle in rock-bottom-yield T-bills, Buffett would rather wait for truly great opportunities than overpay.
Remember: best deals often come in downturns. History favors the patient buyer—be prepared that your “big moment” may arrive in a recession or market panic.
10. Be a Lifelong Learner
Stay hungry for new ideas. Buffett credits Phil Fisher’s “scuttlebutt” approach—talking to competitors and customers—as a timeless research tool he still uses.
Unlearn when you must. The hardest but most important skill is shedding outdated beliefs (e.g., “tech is for others”), so you can crystalize fresh, better-informed judgments.
Every business you own is subject to change—rapid or gradual—and you need management teams thinking ahead about how their models must adapt.
Slow (“invisible”) change can be even more dangerous than rapid change because it lulls you into complacency.
Stay Within Your Circle of Competence
Be brutally honest about what you understand deeply versus what you don’t—and resist the urge to stray into areas where your knowledge is weak.
Leverage outside perspectives (trusted friends, partners) to help you identify blind spots in your own expertise.
Intrinsic Value Trumps Market Price
Focus on the present value of all future cash flows (i.e. private‐business value), not short-term earnings or “comps” to indexes.
Qualitative factors (brand strength, management quality) matter as much as quantitative inputs in estimating value.
Don’t Fear Concentration (If You’re Right)
A small number of big positions in your highest‐conviction ideas can outperform a broad, unfocused portfolio—provided the price is attractive.
That said, size constraints inevitably push you toward larger businesses over time; adapt your approach as your capital base grows.
Mistakes Are Your Greatest Teachers
You will make significant errors; what counts is how quickly and effectively you “scramble out” of them and redeploy capital.
Avoid “bet‐the‐company” gambles; mistakes should be manageable, so you can learn without risking the whole enterprise.
Buy Durable Moats, But Price Matters
Owning businesses with strong competitive advantages (brands, network effects, scale) is powerful—just insist on paying a rational price.
Even “moaty” businesses (e.g. Coke, AmEx) face disruption; always ask what could undermine their franchise and build that into your valuation.
Cash-Light, Asset-Light Businesses Thrive in Inflation
If you can buy once (brand, royalty stream, real estate bought long ago) and not keep plowing in more capital, you benefit from inflation.
Capital-intensive businesses (utilities, railroads) constantly need more reinvestment and can see their “real” returns eroded by rising replacement costs.
Patience Beats Aggression
When deploying big sums, you can wait months or years for the right deal—don’t let “analyst impatience” drive you into overpriced opportunities.
If cash piles up, consider share repurchases only when stock is clearly undervalued; otherwise, better to bankroll new acquisitions at fair prices.
Management Quality Is Paramount
You want operators who treat “their” business as if they’ll own it forever, obsess over costs and customers, and honestly confront risks.
A culture of integrity and long-term thinking at the top cascades through the entire organization, minimizing the chance of catastrophes.
Stay Rational—It’s a Moral Imperative
Continually strip away avoidable ignorance; it’s not just smart, it’s honorable to update your beliefs in light of new facts.
Emotional equanimity—never getting too exuberant in booms or too despondent in busts—is your greatest competitive advantage in markets driven by fear and greed.
