— Greg Abel, 2026 Letter to Berkshire Hathaway Shareholders

I often say that Berkshire Hathaway is a “low maintenance” investment because all a longtime shareholder needs to do in order to stay abreast with the business is to dedicate one weekend each year to careful study of the annual report. Those who like to get “into the weeds” might spend an additional day with each quarterly report, although that is not strictly required. It takes a long time to understand Berkshire at first, but ongoing “maintenance” of this understanding is not very demanding.

Berkshire is often criticized for failing to hold quarterly conference calls and provide “guidance” to analysts. Those who were anticipating a change in this policy had their hopes dashed when Greg Abel reaffirmed his commitment to maintaining Berkshire’s traditional policy of annual communications from the CEO. Reading an annual letter from Mr. Abel should be sufficient, and if there are serious adverse developments, he will likely issue press releases as Warren Buffett has done on rare occasions over the years. Demanding quarterly letters from the CEO along with conference calls only serves as a massive distraction.

While I am always interested in Berkshire’s business results, this year I was even more focused on the tone that Mr. Abel set in his letter regarding the company’s culture. When I wrote about Mr. Abel’s unique challenge last year, I focused on culture before turning my attention to quantitative matters. This is because Berkshire’s historical success was founded on a seamless web of deserved trust, and an evaporation of that culture would, over time, erode the company’s foundation. I doubt that anyone would seriously question Mr. Abel’s abilities as an executive capable of managing the business, but the big unknown has been whether he has the unquantifiable ability to maintain something as amorphous as culture.

The truth is that we cannot know for sure whether Mr. Abel has the capacity to maintain Berkshire’s culture over the two decades that he hopes to serve as CEO. That will only be apparent in the fullness of time, perhaps not until a full decade has passed. A good culture is like a large bank balance and can continue for some time in a progressively depleted state before the “account” is fully exhausted. Few people who have been willing to comment publicly know Mr. Abel well enough to opine on whether he has what it takes to keep the culture, but Charlie Munger certainly thought so in 2021 when he inadvertently disclosed Berkshire’s succession plan. That was obviously a huge vote of confidence.

As I read the letter, I was happy to see that Mr. Abel chose to focus on “Culture and Foundational Values” before he discussed the business. This section took the form of excerpts from a letter he had sent to Berkshire’s employees emphasizing the importance of culture. His intent was obviously to communicate a sense of continuity to make sure that Berkshire’s nearly 400,000 employees realize that a management transition will not be accompanied by a radical change in how the business has operated in the past.

I have not engaged in enough “scuttlebutt” to know what the typical Berkshire employee thought of Warren Buffett’s leadership or Berkshire’s partnership model with owners. I suspect that Berkshire’s employee base, given its large size, is reflective of society as a whole and plenty of cynical people read Mr. Abel’s letter with eye rolls and indifference, if they read it at all. But Berkshire could not have achieved its financial results over decades without a core group within the operating businesses who bought into the vision articulated by Warren Buffett and Charlie Munger and, for that core group, I think Mr. Abel’s words resonated.

Berkshire under Mr. Abel’s leadership will operate much as it has in the past with a decentralized model for running operating businesses, but one in which autonomy is “grounded in deserved trust.” This is a key point: decentralization can only work when accompanied by accountability. Mr. Buffett often spoke, I believe somewhat facetiously, about delegating almost to the point of “abdication.” Clearly, Mr. Abel intends to be a more hands-on CEO, but he strives to retain the decentralized model whenever possible.

When it comes to capital allocation, however, Berkshire’s model is one of centralization. The job of the operating businesses is to maximize their long-term earnings power, consistent with acting with integrity. Often, this might include capital allocation within the operating business, but one of Berkshire’s key advantages is the ability to allocate capital between operating businesses in a tax-efficient manner. To facilitate this, operating managers must seek approval for large capital expenditures.

On the subject of capital discipline, Mr. Abel reiterated Berkshire’s long-standing goal of expansion through acquisition of new operating businesses and expansion of existing businesses if it makes sense to do so. He mentioned that share repurchases could be another important capital allocation option when shares trade “below our estimate of intrinsic value, conservatively determined.” Mr. Abel must consult with Mr. Buffett when it comes to share repurchases, something that I previously assumed but has now been codified as policy by Berkshire’s board. I believe that the same will go for declaration of cash dividends, although Mr. Abel implies that dividends are unlikely to be paid anytime soon.

The buck stops with Mr. Abel when it comes to risk, as he definitively affirmed that he is the Chief Risk Officer and that no other duty is more important. This is reassuring given Berkshire’s large insurance operations. While Mr. Abel gives Ajit Jain due credit for his masterful handling of risk within the insurance business, the ultimate responsibility now resides with Mr. Abel. The same is true for managing Berkshire’s large portfolio of marketable securities. Aside from the 6% of investments managed by Ted Weschler, Mr. Abel now takes sole responsibility for Berkshire’s securities. However, given that Mr. Buffett continues to go to the office five days per week, I suspect that Mr. Abel will have Mr. Buffett’s help if he asks for it.

Mr. Abel did not ignore the need to improve Berkshire’s business operations, another factor that I considered when writing about the CEO succession last year. I was happy to read that the CEOs of operating businesses are expected to relentlessly pursue operational excellence and close performance gaps. While operational excellence is a subjective term, closing performance gaps can be quantified. For example, Mr. Abel is not happy with BNSF’s performance and believes that it should be able to close the gap with Union Pacific. Specifically, he notes that each percentage point improvement in operating margin generates approximately $230 million of incremental operating cash flow for shareholders.

There are many opportunities for improvement within Berkshire’s sprawling Manufacturing, Service, and Retailing group and I am actually more confident that Greg Abel will address these issues than I would be if Warren Buffett had continued serving as CEO. While Mr. Buffett is almost certainly a superior capital allocator, Mr. Abel is almost certainly a stronger operating manager. With Mr. Buffett continuing to actively serve as Chairman, shareholders might enjoy the best of both worlds, hopefully for several years to come.

Berkshire is complex but can be understood by intelligent investors with some effort. Better yet, it is not particularly difficult to project where the company might be several years in the future. Ten years ago, I wrote an article predicting that Berkshire would exceed a trillion dollar market cap by 2026. I say this not to brag, but to point out that Berkshire’s businesses are, for the most part, relatively predictable. There is no way I could know what Berkshire’s book value or earnings will look like at the end of 2026, but I have a rough idea of where things are likely to be five or ten years down the road, assuming continued expansion of the U.S. economy (and no massive catastrophes like nuclear war that would decimate all businesses.)

Mr. Abel strongly alludes to the hope that he will have a multi-decade run at Berkshire, and I look forward to observing how his management of the business evolves over time. He passed the first test of his leadership quite well with this letter and watching him as the main figure on stage at the upcoming annual meeting will be interesting. I suspect that in 2040, Berkshire shareholders will likely view Mr. Abel’s tenure with the same admiration that Apple shareholders no doubt view Tim Cook’s strong record. In fact, I can think of no one better to take a board seat at Berkshire Hathaway than Tim Cook, although maybe Berkshire’s large ownership of Apple shares would complicate such an appointment.

At this point, I’ll let others comment on Berkshire’s 2025 results in greater depth. My basic takeaway is that the company continues to compound intrinsic value at a satisfactory rate when measured by book value and operating earnings growth. Berkshire’s shares trade at a fuller valuation than at most times since the 2008-2009 financial crisis, but not at an unreasonable level. Over five or ten years, returns to shareholders will depend much more on how quickly intrinsic value grows than on whether the current share price is modestly below intrinsic value, approximates intrinsic value, or is modestly above intrinsic value.

Berkshire shares represent a solid way to stay rich, but not a quick way for those with limited capital to get rich. I trust that Mr. Abel is fully attuned to the wishes of Berkshire’s longtime shareholders and will resist temptations to cater to those who will attempt to alter Berkshire’s conservative and defensive qualities.

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Nothing in this article constitutes investment advice and all content is subject to the copyright and disclaimer policy of The Rational Walk LLC.  The Rational Walk is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

Individuals associated with The Rational Walk LLC own shares of Berkshire Hathaway.

— Charlie Munger, 2021 Berkshire Hathaway Annual Meeting

When Roger Lowenstein published Buffett: The Making of an American Capitalist in 1995, Warren Buffett was sixty-five years old, an age when most CEOs are getting ready to pass the baton to a younger executive. It was well known that Mr. Buffett had no intention of retiring soon, but I doubt Mr. Lowenstein (or anyone else) suspected that Mr. Buffett’s tenure as CEO of Berkshire Hathaway was only at its halfway point! When I read the book shortly after publication, my impression was that the biography told a story that was pretty much in the rear view mirror. When I finally purchased shares of Berkshire Hathaway in early 2000, I thought that I might be buying five more years of Mr. Buffett’s leadership, if I was very lucky.

On this final day of 2025, Mr. Buffett will conclude a tenure of more than six decades at the helm of a company that underwent a transformation so profound that he is properly regarded as the founder of Berkshire Hathaway. Mr. Buffett’s accomplishments have been dissected in great detail over the years, including on this website, and one would hope that Mr. Lowenstein will entertain the idea of writing a sequel someday. Mr. Buffett’s life and career will be studied for decades to come, but right now the focus for Berkshire shareholders should be squarely on the formidable challenge facing his successor.

When Charlie Munger revealed the identity of Mr. Buffett’s successor in 2021, Greg Abel was fifty-eight years old. Mr. Abel is now sixty-three, nearly as old as Mr. Buffett was in 1995. However, Mr. Abel clearly has no plans to retire soon. In a letter published last month, Mr. Buffett clearly stated that Berkshire must avoid hiring CEOs “whose goal is to retire at 65, to become look-at-me rich or to initiate a dynasty.” Mr. Buffett hopes that Berkshire might have only five or six CEOs over the next century. Clearly, the pressure is on Mr. Abel to be the first in a string of exceptional successors carrying forward Mr. Buffett’s legacy.

Mr. Abel’s first challenge is to somehow retain Berkshire Hathaway’s unique corporate culture which is based on what Charlie Munger called a seamless web of deserved trust.

Berkshire’s decentralized approach all but requires a very high level of trust without which the system would quickly fall into chaos. The foundation of Berkshire’s seamless web of deserved trust was the relationship between Warren Buffett and Charlie Munger, but this level of trust did not develop instantly. The two men hit it off immediately when they met in 1959 and cooperated on business ventures throughout the 1960s, but it was only in the 1970s that the two truly became business partners.

Trust takes time to develop and can be easily lost.

It is clear that both Warren Buffett and Charlie Munger had a great deal of trust in Greg Abel’s abilities to name him as Berkshire’s next CEO. Mr. Abel has been at Berkshire for over a quarter century, managing the company’s energy subsidiary for many years before becoming Vice Chairman of non-insurance operations in 2018 and once again proving his management skills in that role. It is fair to suppose that a seamless web of deserved trust currently exists between Berkshire’s board and Mr. Abel. However, the seamless web needs to extend down into Berkshire’s hundreds of subsidiaries to make its decentralized system work in the years and decades to come.

During the first half of Mr. Buffett’s tenure are CEO, most acquisitions were handshake deals with founders or longtime managers of subsidiaries. These subsidiary leaders had tremendous trust in Mr. Buffett and, in return, he allowed the managers to operate with minimal supervision. This system worked very well for decades even though there were inevitably unfortunate exceptions. However, in recent years, Berkshire’s size has increased to the point where any future acquisition that “moves the needle” must be very large. The possibility of acquiring privately held subsidiaries of adequate size run by founders or their families diminishes every year. Under present conditions, Mr. Munger’s seamless web of deserved trust is likely to transition into Ronald Reagan’s maxim of “trust, but verify.” Mr. Abel is a much more hands-on manager than Mr. Buffett and seems uniquely suited to creating such an environment of earned and deserved trust.

Mr. Abel’s second challenge is closely related to the first: He must attempt to improve the performance of Berkshire’s laggards while simultaneously sustaining the culture.

One of the most obvious current examples is the situation at Pilot, now a wholly owned subsidiary that Berkshire acquired from the founding family over a period of several years. At a surface level, the Pilot acquisition was right out of Mr. Buffett’s playbook. The Haslam family built Pilot over several decades into a successful business familiar to anyone who has driven on America’s interstate highway system. However, a very ugly lawsuit two years ago illustrated all that can go wrong with handshake deals. Berkshire assumed a certain level of good faith that failed to materialize. To make matters worse, the performance of the business has lagged badly ever since Berkshire assumed full ownership.

Mr. Abel appointed a new CEO and management structure at Pilot. The company is investing in improving its locations and continues to own real estate along America’s interstates that cannot be replicated. But the verdict on this acquisition will not be in for many years to come. Mr. Abel must manage the situation at Pilot knowing that the managers of other Berkshire subsidiaries are paying close attention. Good managers are not afraid of ambitious goals and do not shy away from accountability, so making such demands at Pilot is not going to hurt Berkshire’s culture. What could hurt is a sense of arbitrariness, unfairness, or a short-term focus that managers of other subsidiaries take as a signal of what may happen to their businesses.

Pilot is an example that is almost certainly fixable in the long run, but this is not necessarily the case for all of Berkshire’s subsidiaries, particularly some of the smaller businesses that were acquired decades ago under very different economic conditions. Mr. Abel must learn from Mr. Buffett’s mistake of keeping the textile mills operating for decades after it became clear that they would never produce acceptable returns on capital. Mr. Buffett has always said that Berkshire will tolerate underperforming subsidiaries as long as they do not consume capital. It would be risky for Mr. Abel to embark upon a program of “optimization” that includes major divestitures of businesses that are merely sub-par, but he shouldn’t be tolerant of large laggards if they appear to be unfixable.

Mr. Abel’s third challenge is to manage Berkshire’s overall capital allocation. In many ways, this will be the greatest challenge of all because of the shoes he is stepping into. At the risk of stating the obvious, Mr. Abel should not attempt to fill those shoes completely.

Warren Buffett has unique skills when it comes to capital allocation because of his background as both an investor and a businessman, honed through eighty years of experience. He also had the great fortune to partner with Charlie Munger, perhaps the only businessman of his time who could equal Mr. Buffett in raw intellect. The Buffett-Munger duo produced Lollapalooza results that will simply not be repeated.

Mr. Abel’s background is as a businessman, not as an investor, yet he now takes the reins of a company with over $354 billion of cash on the balance sheet generating tens of billions of dollars of additional free cash flow annually. In addition to deploying this massive pile of cash, Mr. Abel is also responsible for Berkshire’s $283 billion equity portfolio. The departure of Todd Combs leaves Mr. Abel with just one investment manager, Ted Weschler, although Mr. Buffett will still be serving as Chairman and presumably will be available to assist with investing duties, at least for the foreseeable future.

Berkshire has been a net seller of equity securities in recent quarters and overall market valuations continue to be elevated. This could change very quickly, but for now it seems like large allocations of cash toward publicly traded stocks is not in the cards. Acquiring a privately held business large enough to move the needle at Berkshire will also be very difficult. A company like Chick-fil-A or Mars would be an ideal fit for Berkshire if purchased for a sensible price. It is not inconceivable that such a deal could happen at some point over the next decade, but I consider this quite unlikely.

Berkshire last disclosed repurchasing its own stock in May 2024. After many years of trading at bargain levels, Berkshire finally started trading at a higher valuation last year and there are reasons to believe that Mr. Buffett might regard Berkshire’s current price as reasonably valued. Naturally, Mr. Buffett likes to buy back stock at bargain levels rather than at “reasonable” levels, but we should be aware of the risk of anchoring on a nominal price level. As Berkshire continues to post earnings quarter after quarter and retain all of the earnings, a static stock price can quickly fall into bargain territory again. As a result, Mr. Abel may well have opportunities to repurchase Berkshire stock in the coming years.

When will Berkshire pay a dividend?

This is a perennial controversy among longtime Berkshire Hathaway shareholders. Throughout most of its history, Berkshire shareholders would have been far poorer if Mr. Buffett had paid dividends to shareholders. This is because Berkshire has historically been able to act as a compounding machine, deploying retained earnings within the conglomerate at high to reasonable rates of return in a manner that shielded shareholders from immediate personal income tax consequences.

It is true that any shareholder who wishes to have income can “create their own dividend” by periodically selling shares, transforming Berkshire into an income stock. This works well as long as shares are trading at reasonable levels and shareholders do not become forced sellers. However, this is a personal finance matter that should not concern management so long as attractive internal reinvestment is possible.

With Mr. Buffett at the helm, shareholders have been more tolerant regarding retention of cash on the balance sheet than they are likely to be in the future. The optionality of Mr. Buffett having an enormous pile of cash to work with in a crisis can perhaps justify the low rates of return available on cash and treasury bills. With Mr. Buffett still in the picture as Chairman, this tolerance might continue for a period of time, but eventually Berkshire will have to adopt a more typical policy of returning cash to shareholders. This could take the form of repurchases, if shares are available at reasonable prices, or it could take the form of a dividend. Dividends could come either as regular quarterly cash payouts, as periodic special dividends, or as a combination of the two. It seems inevitable that Berkshire will declare some form of a cash dividend within the next five to ten years unless very large repurchases are possible at reasonable prices.

Berkshire Hathaway is a unique company due not only to Mr. Buffett’s exemplary leadership but because of shareholders who have held the stock for many decades.

I agree with Mr. Buffett’s assessment that “Berkshire has less chance of a devastating disaster than any business I know.” For this reason, Berkshire has been my most important investment for over a quarter century. The fact that the vast majority of my shares are in taxable accounts with large embedded capital gains creates a strong bias for inaction, but one I believe is justified based on the company’s prospects under Greg Abel’s leadership. I am taking Charlie Munger’s advice and holding on to my stock.

The real test for Mr. Abel might not come immediately but when Mr. Buffett is no longer serving as Chairman, either due to poor health or death. Hopefully that day is many years from now, but the reality is that it will almost certainly come within the next decade. Once Mr. Buffett dies, his shares will be given to philanthropic interests very quickly. Within a decade of his death, the voting picture will change dramatically even if his children remain on the board, or his grandchildren take board seats. At that point, probably in the 2040s and hopefully still under Mr. Abel’s leadership, Berkshire will face a much greater inflection point.

But that’s a concern for another day. For now, I’m sure that I join all Berkshire shareholders in wishing Greg Abel the best of luck as he takes over as Chief Executive Officer in 2026!

Copyright, Disclosures, and Privacy Information

Nothing in this article constitutes investment advice and all content is subject to the copyright and disclaimer policy of The Rational Walk LLC.  The Rational Walk is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

Individuals associated with The Rational Walk LLC own shares of Berkshire Hathaway.

— Warren Buffett, November 10, 2025

It takes a great deal of wisdom to know when to make one’s presence known and when it is necessary to withdraw from the limelight. For many years, I began watching the Berkshire Hathaway annual meeting webcast with some trepidation, assuming that Mr. Buffett would announce his retirement at the start of a meeting. For this reason, his retirement announcement at the end of the 2025 annual meeting was a bit of a shock. But the genius of that move quickly became apparent after some reflection. Announcing his retirement at the start of the meeting would have made the entire question and answer session about Mr. Buffett, but he wanted the focus to be on Berkshire Hathaway rather than on himself.

Those who hoped that Mr. Buffett would appear on stage along with Greg Abel at future annual meetings might have envisioned that Mr. Buffett would take on the role of “elder statesman” and perhaps emulate some of Charlie Munger’s famous wit and wisdom. But even a few moments of reflection makes it obvious that this would never work. There was never any doubt that Warren Buffett was in charge when he appeared on stage with Charlie Munger. In contrast, Mr. Buffett’s continued appearance on stage at the annual meeting would only serve to overshadow Greg Abel and make shareholders question whether Mr. Abel’s elevation to CEO was in name only. In light of this reality, Mr. Buffett has chosen to withdraw not only from the annual meeting but from writing letters to shareholders as part of Berkshire’s annual report.

Mr. Buffett’s Thanksgiving Letter makes it more clear why he has chosen to retire. At the age of 95, he finally feels old with his balance, eyesight, hearing, and memory “all on a persistently downward slope.” He is wise enough to recognize that “Father Time” has arrived at his doorstep and signs of decline cannot be denied. Fortunately, he still feels good enough to go to the office five days a week. From his performance at the annual meeting six months ago, it is clear that Mr. Buffett is still capable of serving as CEO today, but he obviously does not want to push the envelope and stay on the job too long. It takes a great deal of humility and wisdom to step aside from a job you love while you are still capable of doing it.

As Mr. Buffett wrote, he is “going quiet … sort of.” Rather than writing a letter coinciding with the annual report, he prefers to write to shareholders via his annual Thanksgiving letter in which he announces donations to the family foundations run by his children. This year’s letter is a rambling discourse down memory lane that sheds more light on Mr. Buffett’s past and highlights the many influences that shaped him, especially in Omaha. He advises us to “get the right heroes and copy them” and that we should start with Tom Murphy. I can think of no better place to start. Emulation of men like Warren Buffett, Charlie Munger, and Tom Murphy is simple common sense advice for those who want to rise in the world.

Mr. Buffett concludes with some thoughts on Berkshire Hathaway. While he believes that Berkshire’s businesses, in aggregate, have “moderately better-than-average prospects,” he cautions that many companies will inevitably do better in the coming decades due to Berkshire’s large size. This is simply inevitable, but the more important point is that Berkshire is far less likely to suffer from a “devastating disaster” than any business Mr. Buffett knows of. Berkshire also has a far more shareholder friendly management and board than “almost any” other company.

In an age of vomit-inducing proxy statements full of egregious compensation packages and vapid PR-speak, Berkshire will remain a bastion of good governance in the future. Berkshire is likely to serve as an excellent vehicle for steadily compounding wealth over time. While it is not an investment for those who want to get rich quickly, it is a great choice for those who are already rich and wish to protect their wealth, as well as those who are in the process of steadily building wealth over many decades.

Berkshire Hathaway shareholders are fortunate to have a CEO who has the wisdom to know when to turn the job over to a younger leader. Mr. Buffett clearly has a great deal of confidence in Greg Abel. When he steps into the spotlight on New Year’s Day, Mr. Abel will have big shoes to fill but I suspect that Mr. Buffett is correct in saying that it will not take shareholders long to gain confidence in his leadership.

Copyright, Disclosures, and Privacy Information

Nothing in this article constitutes investment advice and all content is subject to the copyright and disclaimer policy of The Rational Walk LLC.  The Rational Walk is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

Individuals associated with The Rational Walk LLC own shares of Berkshire Hathaway.

Mr. Munger’s long history with the company sparked the interest of many Berkshire Hathaway shareholders and other investors. Although I have never owned shares of Daily Journal, I have followed the company for more than fifteen years. Unsurprisingly, the company was run in a highly unconventional manner with Mr. Munger serving as Chairman for decades alongside longtime CEO Gerald Salzman who recently passed away at the age of 86, only a few years after retiring from the company. Given Mr. Munger’s insistence on the highest levels of integrity, accusations of accounting irregularities should be viewed with skepticism.

Steven Myhill-Jones, the current CEO who was selected by Mr. Munger, presented his thoughts on the controversy in a note submitted with the announcement. The activist investor, Alexander E. Parker, has accused the company of improperly accounting for software development costs. In a series of letters initiated on July 14, Mr. Parker became increasingly insistent that his firm should be engaged on a consulting basis to rectify the problems. In addition, he demanded two board seats.

Mr. Parker claims that he can “unlock” $160 million of value. In exchange for his consulting services, Mr. Parker’s firm would be awarded up to $24 million of Daily Journal stock should the company’s market value rise by up to $160 million for any reason. When Daily Journal opted to hire another consultant to evaluate its accounting methodology, Mr. Parker reported the company to the Securities and Exchange Commission.

The substance of Mr. Parker’s complaint is hardly news to longtime readers of Daily Journal’s filings. I noted the company’s accounting policy regarding software development costs several times in my 2023 report.

Daily Journal opts to expense software development costs rather than capitalizing such costs. This has the effect of increasing current period expenses, thereby reducing current period net income. If the company instead capitalizes all or part of software development costs, the funds spent would appear as an asset on the balance sheet amortized over the useful life of the software. Initially, an accounting change involving capitalizing software development costs would boost earnings and book value. Presumably, this is why Mr. Parker believes that $160 million of “value” can be “unlocked.”

But the idea that informed investors do not already understand Daily Journal’s policy on this matter and would suddenly revalue the company by $160 million simply due to an accounting change seems like an absurdity. Conservative accounting is one of the hallmarks of Charlie Munger’s legacy. As Mr. Myhill-Jones pointed out in his email to Mr. Parker on July 18, the key point in making an expense vs. capitalization decision involves when the software reaches “technological feasibility.” Mr. Myhill-Jones asserts that the nature of Daily Journal’s process means that technological feasibility is reached concurrent with general release of software which obviates the need to capitalize costs.

It appears that little has changed regarding this accounting standard since I was involved in providing input on “technological feasibility” in my research and development role at a small private software company in the mid to late 2000s. I was responsible for vertical market software applications, like Daily Journal’s products, and my experience was that the process was highly iterative and required close consultation with clients before “technological feasibility” could be determined. Often, that nearly coincided with production release of software. As a result, conservatism on capitalization decisions was simply common sense.

The opposite approach of aggressively capitalizing software costs often leads to write downs. Daily Journal is no stranger to this problem. When the company acquired its software businesses in the late 1990s, it came with capitalized costs. This policy was apparently continued in 2000 and a large write down occurred in 2001, as discussed in my report:

“In addition to capitalized costs of $3 million recognized at the time of the acquisition, Daily Journal invested $6.9 million in fiscal 2000 to develop the software product. In fiscal 2001, an additional $8.1 million was invested in software development. In April 2001, management discovered that the software was not functioning properly. In the fiscal 2001 10-K, management reported ‘the software development project was both seriously flawed and seriously behind schedule … and was, therefore, of virtually zero commercial value. As a result, the company wrote off and expensed in fiscal 2001 capitalized software development costs aggregating $15,048,000.’”

I think Charlie Munger fully supported the conservative accounting policy regarding the current expensing of software development costs and any knowledgeable shareholder who bothers to read the company’s filings has known about the policy for years. From the materials that Daily Journal released, Mr. Parker’s campaign against the company is full of demands (including seeking to dictate the timing of board meetings and other company deliberations) that hardly seem reasonable. I doubt he will gain any traction with the company’s shareholders if he launches a proxy campaign.

Like so many others, I greatly miss Charlie Munger’s wit and wisdom. I can only imagine the zingers that he would come up with if he was able to comment on this accounting controversy. Come to think of it, we can probably ask “AI” to predict what he would say!

Copyright, Disclosures, and Privacy Information

Nothing in this article constitutes investment advice and all content is subject to the copyright and disclaimer policy of The Rational Walk LLC.  The Rational Walk is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

No position in Daily Journal Corporation.

This article is a new installment in a series of “mini reviews” of my reading. Previous installments in the series, along with other compilations, appear below:

2025: Q1
2024: Q1 • Q2 • Q3 • Q4
2023: Q1 • Q2 • Q3 • Q4 
2022: Q1 • Q2 • Q3 • Q4  
2021: Q3 • Q4  
2020: Complete Reading List • Summer Book Recommendations
2019: Holiday Book Recommendations
2018: Holiday Book Recommendations

Full Listing of All Book Reviews Published Since 2009

The Snowball: Warren Buffett and the Business of Life

Author: Alice Schroeder
Year of Publication: 2008
Length: 935 pages

In January 1999, Alice Schroeder wrote an extensive report on Berkshire Hathaway entitledThe Ultimate Conglomerate Discount. As an analyst at PaineWebber, Ms. Schroder impressed Warren Buffett with her knowledge of the insurance industry as well as her talent for writing. Her 1999 report was groundbreaking in terms of its explanation of the power of Berkshire’s float. A few years later, Mr. Buffett encouraged Ms. Schroeder to write his biography by providing generous access to his personal and professional papers as well as encouraging his friends, family, and business associates to cooperate with the project. The Snowball was published in the fall of 2008, right in the midst of the worst phase of the financial crisis.

I read The Snowball soon after it was published but I was no doubt distracted by the financial crisis and the demands of the job I had at the time. When Mr. Buffett announced his retirement as CEO of Berkshire at the annual meeting in May, I decided that it would be a good time to revisit his biography. I have often found that revisiting books that I read earlier in my life yield new insights. When I first read The Snowball, I was amusingly focused on how I might replicate Mr. Buffett’s investment success. The book certainly went into details about his investment approach, but this is not an investing book. As a biographer, Ms. Schroder appropriately sought to write a book covering Mr. Buffett’s entire life. While I found the personal details interesting, I did not find much that I didn’t already know about Mr. Buffett’s investment approach.

Having long since given up any delusions about replicating Mr. Buffett’s investment record, this time around I was more interested in learning who he was as a younger man and how he changed as he progressed through middle age. Ms. Schroeder’s work has been the subject of some criticism regarding the details of Mr. Buffett’s life that she uncovered in the course of extensive interviews. However, it is very interesting to know the personal challenges facing an individual along with the business activities they were engaged with at the same time. For example, Mr. Buffett’s ability to deal with challenges such as the Buffalo News and the complexities of merging Diversified Retailing and Blue Chip into Berkshire are even more impressive when one understands the turmoil in his personal life during that period.

I suspect that neither the author nor the subject of the book expected that the story was nowhere near its conclusion in 2008. It is obvious that another biography of Warren Buffett remains to be written to cover the massive growth of Berkshire Hathaway since 2008. Alice Schroeder accomplished a great deal by interviewing so many of Mr. Buffett’s contemporaries who are sadly no longer alive today. No future biographer will have that kind of access, but the early years are now well documented.

I suggest taking the time to read the endnotes since they provide additional context that is very interesting, at least to Berkshire Hathaway “cult members” and nerds who never get tired of getting into the weeds.

The Best of Jonathan Clements

Author: Jonathan Clements
Editors: Christine Benz, William Bernstein, Allan Roth, and Jason Zweig
Year of Publication: 2025
Length: 236 pages

After writing about investing for decades at the Wall Street Journal, Jonathan Clements founded Humble Dollar, a blog about personal finance. I do not know Jonathan, but when you read someone’s work for decades, you feel like you almost know them. So I was shocked and saddened to read of Jonathan’s stage four cancer diagnosis when he wrote about it a year ago. It is particularly terrible to read about cancer impacting someone who is only in his early sixties and has written about his own meticulous retirement planning.

Over the past year, I have continued to follow Jonathan’s articles on Humble Dollar and when I read about the publication of a book that compiled his best articles, I immediately ordered it. The book contains a selection of his articles written over the past three decades, all of which retain relevance today. The articles appear to be published as initially written, although I noticed that the editors made some useful changes such as updating details like the estate tax exemption to make it more useful for current readers.

All of the proceeds from the book are going to a new charitable initiative called The Jonathan Clements Getting Going on Savings Initiative which is run by The John C. Bogle Center for Financial Literacy.

The Haywire Heart

Authors: Christopher J. Case, John Mandrola, and Lennar Zinn
Year of Publication: 2017
Length: 294 pages

The obesity epidemic makes it clear that the vast majority of Americans are getting far too little exercise, and nearly everyone could benefit from increasing their commitment to being active. However, for a small subset of endurance athletes, there is a danger of exerting the heart to the point where dangerous arrhythmias and other exercise-driven heart adaptations can develop over long periods of time and result in consequences that range from merely annoying to life-threatening.

Although I was never overweight, until my mid-thirties my level of exercise consisted of getting out for a jog a few times a week, if I was lucky. My stress level was through the roof and my diet was abysmal. Although retiring at a very early age is a mixed bag, there is no doubt that I had far more time to focus on my health after I quit my job in 2009. I began to train for a marathon, a long-held goal, and promptly injured myself. However, I eventually got into long distance running and completed eight marathons, posting finishing times that were respectable although frustratingly short of qualifying for the Boston Marathon.

I read this book because I was concerned that my current habit of running ~200 miles per month could be too much, especially in light of other heart-related risk factors for someone in his early-fifties. My conclusion is that my level of training is well short of the individuals profiled in the book, especially since I no longer run marathons. However, I might still cut back a little because I am exercising far in excess of what’s needed for heart health. I would suggest this book for anyone who does a lot of cardiovascular exercise, especially long distance cyclists, swimmers, or triathletes. Many of the victims of arrhythmias were in their fifties which seems to be the point at which decades of slow changes can become symptomatic.

Plato’s Republic

Author: Plato
Translator: Desmond Lee (Penguin Classics)
Year of Publication: ~375 BC
Length: 416 pages

My first attempt to read Plato’s Republic was in early 2024 and I wrote an article about the first two books of this lengthy and complicated work. I decided that my attempt was premature and thought that a better understanding of Ancient Greek culture would allow me to better appreciate Plato’s arguments. This led me to read the Greek tragedies and comedies in 2024 and early 2025.

In April, I started reading The Republic at the beginning and, with the excellent introductions and notes provided by Desmond Lee in the Penguin Classics edition, I was able to follow the entire dialog to its conclusion. To say that I was shocked by Plato’s vision of an optimal society is an understatement. Many people seem to believe that Plato’s Republic was some kind of precursor to modern-day republics such as the United States. This is certainly not the case. Plato’s ultimate vision of the Philosopher-King ruler has little in common with our modern notions of what a republican form of government means.

That is not to say that Plato has nothing useful to tell us. Through the mouth of Socrates, Plato develops many complex philosophical ideas regarding education, justice, virtue, honor, what it means to live a good life, and the afterlife. However, it is hard to get past some of his extreme communal ideas, such as essentially banning the family unit, at least among the elite guardian class. The form of eugenics involved in the “breeding” of the guardian class would no doubt horrify almost everyone who reads it today.

I have more than twenty-five pages of notes and reflections on The Republic and will most likely return to it again at some point in the future. However, after spending well over a month on it, reading most sections multiple times, I set it aside for now and certainly won’t hazard making more comments in public at this point. My recommendation is to start with other works of Plato, such as the collection in the Penguin Classics The Last Days of Socrates which I wrote about in last quarter’s summary of my reading.

The Fall of the Roman Republic

Americans of all political persuasions have been concerned about the potential fall of our republic in recent years, and I share this concern. It has become common to compare the United States of the early twenty-first century to the final decades of the Roman Republic, but I sometimes wonder if people making these comparisons understand the degree of violence and brutality of the Roman Republic’s final years. Nothing that has taken place since our Civil War approaches what took place in the finals decades in Rome.

I would recommend the following books for those interested in the long process that eventually led to the collapse of the Roman Republic. I returned to both of these books in the second quarter for a second time:

• The Storm Before the Storm by Mike Duncan. I wrote up some thoughts about this book when I first read it in the third quarter of 2022. It covers the period from 144 BC to 78 BC, seeking to set the fall of the Republic as a story that goes back more than a century before the final fall.

• Rubicon by Tom Holland. This book focuses most of its attention on the fall of the Republic, centering the story on Julius Caesar’s famous crossing of the Rubicon river in 49 BC. However, it also contains a summary of earlier events, including touching on the populist movement of the Gracchi brothers where Mike Duncan begins his narrative.

I also read some of the brief biographical sketches of the main characters by Plutarch and found the profiles of the Gracchi brothers most interesting. Plutarch lived from 46 to 120 AD and collected fascinating information about a wide range of individuals, drawing on some source material that has since been lost. All contemporary accounts of the Roman Republic draw heavily on Plutarch and other ancient sources.

How to Make Friends and Influence People

Author: Dale Carnegie
Year of Publication: 1936
Length: 275 pages

As I read through this classic, I kept asking myself why I failed to read it three decades ago when it would have made a major difference in my life. Dale Carnegie’s common sense approach for dealing with people is just as valid in 2025 as it was in the 1930s when the book was first published. One could say that it is all simple common sense, but it is also clear that very few people employ the strategies he advocates.

While the book is most often categorized as “self-help” or “career development” it is also a work of basic human psychology and I was frequently reminded of Influence: The Psychology of Persuasion by Robert Cialdini. As is the case with Cialdini’s techniques, one could attempt to use Carnegie’s approach to disingenuously manipulate people, but Carnegie did not think such an approach would work. In his view, sincerity is something that can be easily detected by most people. He stressed that he was advocating adopting an entirely new way of life, not simply a listing of “tricks” to get what you want.

Warren Buffett took a Dale Carnegie public speaking course in the early 1950s which changed his life. I am sure that he also read this book very early in his life. As I read the book, it was obvious that Mr. Buffett has adopted many of the techniques in the book, especially when dealing with sellers of businesses and managers of Berkshire’s operating companies.

The King James Bible

Year of Publication: 1611
Pages: 1,484

I decided to read the King James Bible after listening to a Books of Titans podcast by Erik Rostad. It occurred to me that making the effort to understand this translation of the Bible could help me understand the form of language that Shakespeare used in his plays. Although I did not plan to read Shakespeare anytime soon, I might change my mind after reading the King James Bible. I found the translation not only very readable but far more elegant than other translations I have read. There is something about the language, which was elevated even at the time it was written, that makes the experience memorable.

The version I read, which I linked to above, is not a “study bible” but it does have extensive cross-references and provides useful notes in cases where the archaic language could lead to misunderstanding. Since I have read many translations of the Bible over the past fifteen years, I am already very familiar with the scriptures and could have probably figured out the obscure wording myself, but having the notes within this book helped ease the process significantly. Reading any translation of the Bible in three months is a challenge, but it worked out to about sixteen pages per day, on average, and it was a pleasure to read.

I would not suggest the King James Bible to someone who has never read the Bible before. A more modern translation such as the ESV or RSV is easier to comprehend. But if you have read these modern translations and plan to read the Bible again, the King James Bible is worth considering.

God’s Secretaries: The Making of the King James Bible

Author: Adam Nicolson
Year of Publication: 2005
Length: 271 pages

I decided to read this book after listening to another Books of Titan’s podcast. Erik Rostad recommended this book for those interested in how the King James Bible was created. This book does get into the “weeds” of politics in the late sixteenth and early seventeenth centuries, as well as controversies within Protestantism at the time. King James commissioned a group to translate the Bible, drawing on earlier English translations that were already popular at the time. Although the King James Bible was not initially as popular as earlier translations, especially the Geneva Bible which was favored by the Puritans, the King James translation survived the test of time. It remains one of the most widely read English translations over four centuries after initial publication.

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I could be helpful, I believe, in certain respects if we ran into periods of great opportunity or anything. … But Greg would have the tickets. Whether it’s acquisitions – I think the board would be more welcome to giving him more authority on large acquisitions probably if they knew I was around. But Greg would be the chief executive, period.”

— Warren Buffett

Warren Buffett’s announcement at conclusion of the Berkshire Hathaway annual meeting on May 3 took nearly everyone by surprise. While there were some signs that a change might be coming prior to the meeting, many shareholders assumed that a major announcement would occur at the beginning of the meeting, so it was a shock when Mr. Buffett made his announcement right before adjourning. Initially, it was not clear whether Mr. Buffett would remain Chairman, although this was cleared up a couple of days later.

We have since learned that Mr. Buffett decided to retire after finally feeling the effects of his age. Apparently, his energy level has declined in recent years and it has become more difficult to read printed materials, including newspapers. While Mr. Buffett acknowledged forgetting names occasionally, he appeared entirely capable of discussing the business during more than four hours of questions at the annual meeting, although it was impossible to miss that he was struggling with a raspy voice.

As I wrote two weeks ago, I’ll take Mr. Buffett at his word regarding his reasons for stepping down as CEO. It is inconceivable that anything material is being hidden regarding his health given his prior willingness to disclose health conditions in 2000 and 2012 and his criticism of companies that fail to provide health disclosures. If Mr. Buffett is facing any health crisis likely to impact his performance between now and yearend, he would have told shareholders at the annual meeting and most likely would have opted to step down immediately rather than after eight more months.

Starting in 2026, Mr. Buffett will no longer be under any obligation to make detailed disclosures of his health status, and perhaps that is part of his motivation. The last thing most of us want to do is air our medical challenges in public, but that’s one of the obligations of being the chief executive of a public company.

How active will Warren Buffett be as Chairman of Berkshire Hathaway? This has been an open question over the past two weeks. As Mr. Buffett said at the meeting, he will remain involved, especially when large opportunities arise in times of crisis. Subsequent media reports revealed that he will continue going to the office. How will this work in practice? Will Greg Abel relocate to Omaha and work alongside Mr. Buffett? Will Mr. Abel feel a need to “clear” major decisions with Mr. Buffett? Regardless of what Mr. Buffett might say, I can see how Mr. Abel would feel an obligation to Berkshire’s Chairman and largest shareholder.

Perhaps these open questions being raised by shareholders led to Mr. Buffett decision to no longer appear on stage at future annual meetings. The spotlight will now be on Greg Abel, with Mr. Buffett sitting in the front row of the audience with the rest of Berkshire’s Board of Directors and executives. Presumably, Mr. Abel will want to continue having Ajit Jain appear on stage to answer questions regarding the insurance business and Mr. Buffett’s daughter, Susan, will also be on stage to answer questions.

While Mr. Buffett’s decision to no longer take questions is disappointing to many shareholders, it makes sense if the reins are truly being handed over to Mr. Abel. As long as Mr. Buffett is on stage, he will inevitably be looked upon as Berkshire’s leader and nearly all audience questions will be directed to him rather than to Mr. Abel. The audience questions are just as likely to be about “life advice” and other topics totally unrelated to Berkshire’s business. With Mr. Abel under the spotlight, it is likely that nearly all questions will pertain to Berkshire’s business which will improve the overall quality of the annual meeting.

Actions speak louder than words. By stepping back, Mr. Buffett is sending a strong message to Mr. Abel that he will truly be Berkshire’s face to the public and will be fully in charge starting on January 1, 2026.

This does not mean that Mr. Abel will have quite as much authority as Mr. Buffett had as CEO, especially when it comes to acquisitions. On many occasions, Berkshire’s board only learned about a major acquisition once it was already a fait accompli. This was acceptable with Mr. Buffett as CEO, given his sixty year track record and status as the company’s largest shareholder, but it would be poor corporate governance for any other CEO, including Mr. Abel. Mr. Abel will have to determine when it is appropriate to chart his own course and when he should consult with Mr. Buffett and the rest of the board.

What about dividends and repurchases? It seems likely that Mr. Buffett has shared his detailed thinking about intrinsic value with the board, so the policy regarding share repurchases is not likely to change materially, at least for the foreseeable future. Mr. Buffett’s views on dividends are clearly negative, and the board will be responsible for declaring dividends. Mr. Abel will be able to provide his input on these matters, but ultimately Mr. Buffett will continue to have the normal influence of a board chairman on these policies. He will also continue to control ~30% of the vote, providing a virtual veto on proposals he disagrees with.

When it comes to being a shareholder of Berkshire Hathaway, many things that might initially seem odd make sense in the fullness of time. My initial reaction on May 3 was that Mr. Buffett should have announced his decision at the start of the meeting rather than at the end. However, if he had done so, nearly every question would have been about succession rather than the operations of the business which would have been undesirable. I also was disappointed when I read that Mr. Buffett will no longer be on stage at future annual meetings, but this also makes sense if Mr. Abel is to feel like he’s truly in charge.

Mr. Buffett’s daughter said that it was “way better” for her father to retire now rather than to serve until his death, which was the previous plan. She also said that her father has no regrets about the decision. While many details remain unknown, especially regarding the management structure Mr. Abel will put in place once he is in charge, shareholders have reason for confidence based on decisions made so far.

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Individuals associated with The Rational Walk LLC own shares of Berkshire Hathaway.

— Warren Buffett

For some reason, I assumed that any major announcement would come at the beginning of the Berkshire Hathaway annual meeting rather than at the end, so I was very surprised when Warren Buffett gave us the big news after the end of the question and answer session. Mr. Buffett will be stepping down as Chief Executive Officer at the end of the year, passing the baton to Vice Chairman Greg Abel. As I wrote last week, there were signs that a major announcement could be coming, but it still caught me off guard.

Mr. Buffett’s statement on Saturday was not entirely clear regarding his future role, although he did indicate that he would remain involved if he could be helpful with major opportunities. However, he made it crystal clear that Mr. Abel would be calling the shots, both from an operational and capital allocation standpoint. In a press release this morning, Berkshire clarified that Mr. Buffett will remain Chairman of the Board. and CNBC anchor Becky Quick wrote that Mr. Buffett plans to continue going to the office every day.

This news marks the end of an era. Warren Buffett has long viewed Berkshire as his masterpiece and treasured working on the canvas every day. Stepping down as CEO means that Mr. Buffett will have to come to terms with ceding much of his authority to Greg Abel. No matter how confident Mr. Buffett is in Mr. Abel’s abilities, letting go of control cannot be easy after sixty years at the helm. Mr. Abel has already been managing Berkshire’s non-insurance subsidiaries on a day-to-day basis, and he will now assume oversight of the insurance business as well as Berkshire’s capital allocation. Presumably Vice Chairman Ajit Jain will remain with Berkshire and will continue to manage the insurance operations on a day-to-day basis.

There is not much that I have to say about this transition because I have already written about it several times in recent years. My main concern remains the preservation of Berkshire Hathaway’s unique culture. Mr. Abel is likely to be in charge of Berkshire Hathaway for at least a decade and could remain in place well into the 2040s. Eventually, he will hand the reins to another executive, perhaps someone who never had a chance to work with Warren Buffett. Over the same timeframe, Berkshire’s shareholder base will change dramatically as Warren Buffett’s estate is eventually distributed and voting control shifts to institutions. There will be pressure to break up the company and to “optimize” it in ways that alter Mr. Buffett’s canvas.

I am grateful that Mr. Buffett will remain as Chairman. Aside from a somewhat weaker voice than in years past, Mr. Buffett seemed to be in good health during the annual meeting. He rambled at times but always remained coherent and his diversions from questions had a purpose. Few men in their fifties or sixties could handle being on stage and under the spotlight for over four hours.

While Mr. Buffett did not reveal the specific reason for his decision to step down as CEO, I am confident that he would tell shareholders if he had any major health problems. He has done so on at least two occasions in the past, in 2000 and in 2012. In 2009, Mr. Buffett was critical of Apple’s decision to not disclose more about the health of Steve Jobs after a surgery. He pledged to always tell Berkshire shareholders if he faced a serious condition:

“If I have any serious illness, or something coming up of an important nature, an operation or anything like that, I think the thing to do is just tell the … Berkshire shareholders about it. I work for ’em. Some people might think I’m important to the company. Certainly Steve Jobs is important to Apple. So it’s a material fact. Whether he is facing serious surgery or not is a material fact. Whether I’m facing serious surgery is a material fact. Whether (General Electric CEO) Jeff Immelt is, I mean, so I think that’s important.”

My guess is that Mr. Buffett is feeling the normal effects of the aging process and wanted to leave the CEO position on his own terms rather than being forced to by future circumstances that might be out of his control. In doing so, he is providing Berkshire shareholders will a sense of continuity that would be absent if the transition took place suddenly due to his incapacity or death.

In the coming months, Mr. Buffett and Mr. Abel will presumably collaborate on major operational and capital allocation decisions. Starting on January 1, 2026, Mr. Abel will be fully in charge. However, I expect that the board will exert more oversight of Mr. Abel than has been the case with Mr. Buffett especially when it comes to major capital allocation decisions. There have been many occasions when Mr. Buffett committed Berkshire to large acquisitions without the board even being aware of the situation. It is highly doubtful that Mr. Abel would have the same flexibility. As Chairman of the Board, Mr. Buffett will still be in the loop when it comes to large acquisitions and, as he said during the meeting, his presence could bring many deals to Berkshire especially during times of crisis.

It seems like many of the mainstream media reports on this news repurposed pre-written obituaries to write about Mr. Buffett’s life and career as if it was entirely in the rear view mirror. But I am hopeful that the last chapter is yet to be written and the final brushstrokes have yet to be made. It is impossible to thank Warren Buffett sufficiently for what he has done for shareholders. The letter I sent him this morning will no doubt be one of hundreds, if not thousands, that will flood Berkshire’s headquarters in the weeks to come.

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Individuals associated with The Rational Walk LLC own shares of Berkshire Hathaway.

For all practical purposes, Mr. Buffett should be considered the founder of the company even though the business he inherited dates back to the nineteenth century. In just a few years, Berkshire Hathaway began its transformation into a diversified conglomerate, a story that is told exceptionally well in Capital Allocation: The Financials of a New England Textile Mill by Jacob McDonough. It is certain that Berkshire would be long dead today if it had remained a textile manufacturer. Instead, shareholders attending the 2025 annual meeting will celebrate an incredible milestone.

Over the past sixteen years, I have written over three hundred articles about Berkshire Hathaway. As I look back at some of the early articles, it is obvious that I never expected Warren Buffett to be running Berkshire at the age of ninety-four. Succession planning has been a concern for decades. Consider that nearly half of Mr. Buffett’s sixty years at Berkshire came after he reached the typical retirement age of sixty-five!

Succession planning has long been a concern for Berkshire shareholders. Four years ago, Charlie Munger revealed that Greg Abel has been chosen to serve as the company’s next CEO. The question of timing remains. Mr. Buffett’s statements over the years have indicated a desire to remain in charge as long as he is capable of doing the job. Over the years, we have seen fewer public appearances but his performance at the 2024 annual meeting reassured most shareholders that he’s more than capable of doing the job.

Much has been made of a slight reduction in the time allowed for the question and answer session for the upcoming meeting but, at over four hours, the session will still be far longer than nearly any other public company. Anyone who has been on stage in front of an audience for even one hour will understand how much mental and physical stamina is required to be “under the spotlight” for so long. This is “proof of work” and rightly inspires much confidence in Mr. Buffett’s continued ability to serve as CEO. However, every year that passes brings with it the possibility of physical and mental decline. Anyone who has spent time with elderly friends and relatives knows that things can change very quickly for the worse.

There have been some recent signs that could be interpreted as preparing the shareholder community for a change in the near term.

On November 25, 2024, Mr. Buffett issued a press release announcing additional gifts to four family foundations. This followed changes to his estate plan in June 2024 announced in conjunction with annual gifts to the family foundations as well as the Gates Foundation. In the November press release, Mr. Buffett wrote that he’s grateful for his longevity but expects “Father Time” to get around to him “before long.”

A couple of months later, Mr. Buffett wrote: “At 94, it won’t be long before Greg Abel replaces me as CEO and will be writing the annual letters.” This raised some eyebrows, but obviously could simply mean that the actuarial tables make it likely that succession will occur within a few years.

Perhaps most intriguing was Berkshire’s decision to significantly changes its policy regarding director qualifications. The 2025 proxy statement revealed that directors, with a few exceptions, must retire at the age of eighty. I wrote about this decision in more detail last month. While this change attracted little attention in the financial media, it seems very much at odds with Berkshire’s policies in the past. Many of Berkshire’s most important directors in recent decades served well past their eightieth birthday.

There is no doubt that Berkshire Hathaway will change significantly when Warren Buffett finally steps down and shareholders are rightly concerned about the long term sustainability of the company’s culture. However, it is important to realize that certain aspects of how Berkshire has been run historically may not be the best way to run the company in the future. Warren Buffett is an exceptional individual, as was the late Charlie Munger. They will never be replaced. Neither will the close circle of Mr. Buffett’s business associates who served on Berkshire’s board for decades well into their nineties. Mr. Buffett’s decision to impose a retirement age for directors is best viewed as preparation for Berkshire after his departure.

We should keep in mind how difficult Greg Abel’s job will be when he eventually becomes CEO. Every decision he makes that breaks with how Warren Buffett managed the company will be scrutinized. Every time he institutes a policy that seems at odds with Mr. Buffett’s philosophy, he will be criticized. Many will question whether the company’s culture is being abandoned. In light of this reality, it is possible that Mr. Buffett is taking steps to institute changes that Mr. Abel would otherwise have to implement.

Will Warren Buffett step down as CEO during the annual meeting?

This is a possibility, but assuming that he is still in good health, the question is what role he would play at Berkshire going forward. He could remain as Chairman, but would he handle capital allocation or leave all decisions to Greg Abel? Would Mr. Abel feel comfortable making capital allocation decisions without consulting Mr. Buffett? If Mr. Buffett continues to handle capital allocation, Mr. Abel would be constrained.

It is not as if Greg Abel is an inexperienced capital allocator. He has decades of experience allocating capital for Berkshire Hathaway Energy and, since 2018, he has been in charge of Berkshire’s non-insurance operations, including decisions regarding whether to reinvest capital within operating businesses, in consultation with Mr. Buffett. However, I think it is fair to say that Berkshire shareholders might not feel the same way about Mr. Abel sitting on $300+ billion of cash for long periods of time.

This brings me to the “third rail” of dividend policy. Few topics are more controversial given how many longtime shareholders greatly value the fact that Berkshire does not generate taxable income. I count myself among those shareholders who have long preferred that cash should be reallocated within the business or used to fund repurchases. However, at a certain point, we are going to have to face the reality that cash must be distributed to shareholders via dividends, especially if Berkshire shares continue to trade at a valuation that makes Mr. Buffett unwilling to repurchase shares.

Many shareholders I have spoken to over the years doubt that a dividend will be declared during Mr. Buffett’s lifetime due to the significant personal tax liability this would impose on him. However, the problem with this assumption is that Mr. Buffett would make decisions for all of his partner-shareholders based on his own personal tax situation. I find that idea contrary to Mr. Buffett’s overall attitude toward managing the company for the benefit of all owners. In the past, both Mr. Buffett and Mr. Munger have stated that Berkshire would pay out cash if it could not be put to good use. Ultimately, there are only a few things that management can do with free cash flow and dividends are not automatically irrational.

If Warren Buffett thinks that a dividend is likely to make sense within a few years, it is possible that he might want to set the policy himself, both to have a chance to put his personal imprint on the policy and to deflect criticism that Greg Abel would otherwise inevitably have to deal with. In my opinion, the odds of a dividend announcement at the meeting are quite low, but far higher than at any time in the past.

The most logical dividend policy would be to avoid regular payouts in favor of special dividends when they make sense. However, a more practical approach might be a small dividend, perhaps around 1%, with additional payouts made as needed, with ample notice given to shareholders to aid in their tax planning.

While a regular dividend is not strictly optimal, it could have the effect of lengthening the time that longtime individual shareholders retain Class A stock. Without a dividend, many Class A shareholders who wish to raise cash choose to convert their shares to Class B stock to avoid realizing large capital gains.¹ A small dividend might reduce pressure on these Class A shareholders to convert to Class B. This could stabilize the Class A shareholder base which will already be changing massively as the Buffett family foundations liquidate Berkshire Class A stock (either through direct Class A sales or conversions to Class B followed by Class B sales) in the ten to fifteen years following Mr. Buffett’s death. I have written about my concerns regarding the ownership of Class A stock in the past, most notably in my article advocating a split of the Class A stock, another “third rail” that might need to be touched at some point in the future.

Hopefully, Mr. Buffett will appear as healthy as ever this weekend and joke about breaking Methuselah’s record for longevity. But even if that is the case, I’m sure that many succession questions will come up. For the first time in many years, I will not be watching the annual meeting webcast live due to family obligations over the weekend, but I hope to watch the replay of the meeting early next week.

Copyright, Disclosures, and Privacy Information

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Individuals associated with The Rational Walk LLC own both share classes of Berkshire Hathaway stock.

1. Each Class A share is convertible into 1,500 Class B shares. Each Class B share has 1/1500 the economic rights of a Class A share but only 1/10,000 of the voting rights. Therefore, a Class A shareholder who converts to Class B is giving up voting power by exercising the conversion privilege. Many longtime Class A shareholders have a very low cost basis on a stock trading at ~$800,000. Shareholders who wish to raise less than $800,000 of cash often opt to convert to 1,500 Class B shares so they can only sell the amount they need, thereby reducing the taxes owed on the sale. ︎

— Mortimer Adler, How to Read a Book

Communication is an essential skill which is why so much time and energy is spent to teach children how to express themselves verbally and in writing. How else can we convey our thoughts and ideas to others? 

The communication revolution of the past three decades started by making it possible for anyone to reach large audiences through writing. By the 2010s, plentiful bandwidth and mobile devices made video communication cheap and effective. Today, anyone with an internet connection can share ideas in a variety of formats. The field is crowded because there are no barriers to entry, but this also creates optionality for enterprising people. Being “discovered” is a very real possibility even in a crowded landscape.

The potential rewards of breaking through online has focused a great deal of attention on writing for public consumption. The bar for presenting ideas to the public should be high. On more than one occasion, I can recall sitting down to write about a topic and struggling to make progress. Usually, this meant that I either lacked underlying knowledge of the subject or had failed to spend enough time to come up with a defensible opinion. Having writer’s block is a signal to do more work or, perhaps more often, take a long walk to just think through an issue to the point where it can be explained to others.

But knowing what you want to express is just the starting point when it comes to writing in public, or at least it should be the starting point. The first draft of an idea usually exposes gaping holes that must be filled, and even when all the substance is there, what seems clear to the author might not be clear to the reader. Good writing, especially in the age of artificial intelligence, also has to embody a certain human style in order to be compelling. This does not come naturally to most writers. The bottom line is that writing in public involves many steps beyond knowing the topic and what you want to communicate.

I have published articles at slower cadence in 2025 than in recent years, but this only represents writing that I have shared in public. I have written far more in private than in prior years and simply made the decision to not hit the publish button as often. I cannot think of a single day this year when I have not spent at least half an hour writing, and on many days I write for several hours. Nearly all of this writing involves using a pen and a notebook. I have found that most of the benefits of writing in public extend to writing privately. I am forced to think through subjects more carefully and often discover that I do not really understand what I am writing about. This results in additional reading or contemplation.

Why have I chosen to write more in private? The main reason is that I have been spending much more time on my Great Books reading project and less time analyzing companies and investment opportunities. I find it much easier to write about investing, which is within my circle of competence, compared to the classics where I often feel like a total amateur. In 2024, I published many articles about the Great Books and each one took a great deal of time and effort, far beyond the point at which I felt like I understood the material. 

Once you have built up a sizable audience, it can be intimidating to publish articles. This has become more of a psychological impediment with the increasing popularity of Substack and other platforms that automatically send emails to subscribers. In the old days of blogging, a writer could put something up on the internet and readers would have to find their way to the material. Today, publishing seems inherently more intrusive due to email distribution. When your email list represents nearly 20,000 people and you know that half of the recipients will actually open the email, the bar should be high before publishing. 

Mortimer Adler emphasized that reading should not be a passive activity. At least for any book worth studying in detail, the reader needs to actively engage with the author. This can start with writing in the book itself, an act that many find objectionable but has the beneficial effect of putting the reader in direct communication with the writer. In the course of marking up a book, the reader starts to formulate his or her own ideas based on the subject the author is writing about. I find it very helpful to extend this practice to writing journal entries after a reading session. This does not need to take any specific form, but I prefer pen and paper to writing on a computer since there are zero distractions if electronics are out of the picture.

I have found time to do more meaningful writing in private by abandoning my old morning pages routine and doing more focused writing first thing in the morning. Over the past few years, I have started the day with some type of daily reading, usually from the Bible but also from notable thinkers like Leo Tolstoy, C.S. Lewis, and Timothy Keller who published material that can now be found in “daily reading” formats. Last year, I filled a two hundred page notebook based on observations from reading the ESV Study Bible. Each entry required about thirty to forty-five minutes and often revealed gaping holes in my understanding. 

In addition to this morning routine, I have another notebook for writing about my Great Books reading project. I have filled several notebooks with entries covering each of the plays of Aeschylus, Sophocles, Euripides, and Aristophanes, in addition to entries about writings by Plato and Xenophon. It took about an hour or two to write a few pages about each of the plays. This helped solidify the plot in my mind and has been a useful reference. Just the other day, I read a reference to Hippolytus and only vaguely recalled reading the play by Euripides. My journal entry took a few minutes to read and fully refreshed my memory.

Writing about each of the plays of Ancient Greece for public consumption would require far more time than writing in private. I know this because I did write a few such articles in 2024, including one on The Oresteia that took a couple of days to complete. While the article may have added value for readers, and perhaps some people went on to read the trilogy for themselves, I am sure that my analysis and commentary was amateurish given that I am not a classicist or in any way specially qualified to write on the topic!

In contrast, I can write rapidly and (hopefully) provide value when it comes to topics squarely in my circle of competence. For example, I recently wrote about Berkshire Hathaway’s 2025 proxy statement. I maintain a spreadsheet that I was updating anyway for my own use and it only took a couple of hours to write the article. If it had required two days of effort rather than two hours, I would not have published the article.

The problem with writing about investments in public is that it comes with undesirable baggage. Several years ago, I wrote about the negative effects of such writing. For the most part, the problem comes down to human psychology. When you write about an investment idea in public, it becomes more difficult to change your mind when circumstances change that might invalidate your original thesis. In addition, giving away ideas in a competitive world is not exactly a brilliant idea, particularly in the small cap world.

What’s the point of publishing this article?

It is important to write whether the goal is to publish or not. The benefits of writing are so great that it is folly to fail to do so simply because you might not aspire to write for others. Reading widely is a prerequisite for wisdom, as Charlie Munger so often said, but it is important to read well which means reading actively. 

Prior to 2015, when I was first exposed to Mortimer Adler’s ideas, I read passively and never marked up books except when I planned to write book reviews. When I look back at my reading log for earlier years, I recognize the books but often cannot remember much about them. From 2015 to 2019, I read more actively but did not actively write privately in journals, so I recall more of what I read but there are still many holes in my memory. Since 2020, I have a far better recollection of my reading and I think that I have been able to synthesize more ideas across books.

No technology is needed to start writing beyond a pen and paper, but few people seem to bother with this practice. In a competitive world, this is a good way to gain an advantage over your peers.

Copyright, Disclosures, and Privacy Information

Nothing in this article constitutes investment advice and all content is subject to the copyright and disclaimer policy of The Rational Walk LLC.  The Rational Walk is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

Before proceeding, I should note that Mr. Buffett’s article was written over two decades ago and we cannot be certain whether he still supports the same policies. In addition, there have been some false reports of Mr. Buffett “endorsing” the recent tariffs which Berkshire Hathaway had to repudiate in a brief press release last week. All I am trying to do in this article is to discuss what Mr. Buffett actually wrote in 2003, and in no way am I suggesting that he currently supports tariffs in general or President Trump’s tariffs in particular. I would encourage everyone to read Mr. Buffett’s article in full for themselves. It is quite brief.

Mr. Buffett begins by admitting that his record as a forecaster of macroeconomics is “far from inspiring.” He points to his “excessive” fear of inflation and his prior concerns about the trade deficit. I don’t think that this is false humility. As I wrote in a series of articles two years ago, Mr. Buffett underestimated the severity of the inflation of the 1970s when he wrote his final letter to investors in the Buffett Partnership in 1970. Perhaps his “excessive” fear of inflation in the 1980s and 1990s was due to the terrible impact on fixed maturity investments of the sort he recommended to his partners in 1970. Mr. Buffett’s great skill is as a businessman and investor, not as a macroeconomic forecaster.

Caveats aside, Mr. Buffett felt a need to speak out in 2003 regarding what he believed were unsustainable trade deficits that he thought would negatively impact the value of the dollar in the long run, leading to his decision to begin investing in foreign currencies. As he wrote at the time, “to hold other currencies is to believe that the dollar will decline.” He thought that the dollar might not merely decline but “plunge” and that Berkshire’s foreign currency investments would only offer a partial offset to the harm done to shareholders.

Thriftville and Squanderville

Taking a step back, why are trade deficits a problem to begin with? The first part of the article attempts to simplify the situation by describing the actions of two primitive economies: Thriftville and Squanderville. Initially, both are “closed economies” and citizens produce what they consume which makes them entirely self-sufficient. However, citizens of Thriftville eventually decide to work harder. They start to produce more goods than they consume so they can export their surplus to Squanderville. In exchange, Squanderville issues Squanderbucks, representing debt, to citizens of Thriftville. Over time, citizens of Thriftville end up owning a greater stock of “claim checks” against Squanderville’s future production.

Since Thriftville citizens are smart, they eventually come to doubt that Squanderville will make good on their debt, so they start buying up land in Squanderville. Eventually, citizens of Squanderville no longer own their land and they must work harder and harder to sustain themselves while servicing debt and paying rent on the land they need to produce food. The situation ends in impoverishment of Squanderville, although the process might take a long time and the people who ultimately pay might be future generations of Squanderville citizens rather than those who enjoyed the initial party of debt-fueled overconsumption.

The government of Squanderville eventually finds itself in an untenable position. They cannot simply inflate their way out of the problem since Thriftville owns not only their bonds but also owns the land. To confiscate land would be a step too far for most governments. As Mr. Buffett writes, “theft by stealth [inflation] is preferred to theft by force [outright confiscation].”

Import Certificates

Following the story of Thriftville and Squanderville, Mr. Buffett briefly turns his attention to the trade deficit as it stood in 2003, making the case that foreign ownership of U.S. assets would increase in the coming years if the trade deficit was allowed to persist at recent levels. This is regrettable because annual net investment income would be flowing out of the country at ever-increasing rates which Mr. Buffett compares to negative compounding. The same rationale seems to hold today, although readers should review the article for themselves and I will not go into the specific figures he cites from 2003.

Rather than propose explicit tariffs, either globally or on a country-by-country basis, Mr. Buffett proposed the idea of issuing “import certificates” to U.S. exporters. An exporter sending $1 million of products abroad would be issued $1 million worth of import certificates by the government. These import certificates could be sold to an importer bringing $1 million of products into the United States from abroad. The result would be an overall trade balance since, by definition, every dollar worth of imports would require a certificate that could only be earned by another company exporting goods of equivalent value.

Mr. Buffett acknowledged that this idea amounts to a tariff in terms of its effect. The importer of goods would face higher costs because of the need to purchase import certificates and, depending on competitive factors, would either have to pass along some or all of the impact of that cost to consumers or accept lower profits. However, the exporter of goods would face lower costs due to the sale of import certificates which could lead to price cuts for consumers or higher profits for the exporter.

Under Mr. Buffett’s proposal, the overall plan would not raise revenue for the government because the import certificates would be given to exporters without charge. However, it would be easy enough to adapt the plan to generate government revenue if the import certificates were auctioned off to importers, albeit at the cost of potentially higher inflation because exporters would not enjoy the lower costs made possible by selling the import certificates they would have been issued. In other words, adapting the import certificate plan to raise revenue for the government would increase the impact of the tax.

Benefits of the Plan

In my opinion, the benefit of Mr. Buffett’s proposal is that it sets an overall policy objective of balanced trade without being overly prescriptive regarding how balance is to be accomplished or appearing punitive against any particular trading partner. Importantly, there is no reason for trade to be precisely balanced on a country-by-country basis under his plan. The United States could run trade deficits with certain countries provided that offsetting trade surpluses are run with other countries. Who decides? Market forces would dictate exactly how it all plays out rather than being decided by government officials.

Insisting on balanced trade with every country seems unwise because there are lower income countries in the world that can provide the United States with affordable low value-added products but cannot afford commensurate imports of our products on a dollar-for-dollar basis. If we insist on balanced trade with poorer countries, the result could very well be a large reduction in trading volume benefitting no one.

Mr. Buffett also allows for a transition period in which we deliberately accept a smaller trade deficit to avoid shocks to the system. This could be accomplished by issuing “bonus” import certificates or giving them away to less developed countries which, admittedly, would be a form of foreign aid. When fully implemented, perhaps over period of a few years, the plan would assure balanced trade in aggregate.

Conclusion

The principle of government setting goals and frameworks without being overly prescriptive or punitive has a great deal of appeal. In a free market economy, decisions regarding how to best achieve an objective are best left to market participants, not government bureaucrats. No one individual or even a group of individuals in Washington D.C. has the wisdom to micromanage the economy, no matter how good their intentions might be, and in our sad reality, we cannot assume good intentions among politicians.

I wrote at the outset that the point of this article is to highlight Warren Buffett’s ideas rather than my own, but I will say that I generally agree with his concerns expressed in 2003 and find his plan to be interesting and at least worthy of discussion. I have no idea whether Mr. Buffett still believes that his proposal makes sense and it is unfortunate that we are unlikely to find out. Due to the poisonous political environment of recent years, he has all but completely withdrawn from policy debates. The country is poorer as a result.

Copyright, Disclosures, and Privacy Information

Nothing in this article constitutes investment advice and all content is subject to the copyright and disclaimer policy of The Rational Walk LLC.  The Rational Walk is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

Individuals associated with The Rational Walk LLC own shares of Berkshire Hathaway.

This article is a new installment in a series of “mini reviews” of my reading. Previous installments in the series, along with other compilations, appear below:

2024: Q1 • Q2 • Q3 • Q4
2023: Q1 • Q2 • Q3 • Q4 
2022: Q1 • Q2 • Q3 • Q4  
2021: Q3 • Q4  
2020: Complete Reading List • Summer Book Recommendations
2019: Holiday Book Recommendations
2018: Holiday Book Recommendations

Full Listing of All Book Reviews Published Since 2009

The Lessons of History

Authors: Will and Ariel Durant
Year of Publication: 1968
Length: 102 pages

Will and Ariel Durant spent nearly a half century working on The Story of Civilization, an eleven-part series published between 1935 and 1975. The series was intended to make history accessible to everyone rather than just to academics. Although the books were very successful when initially published, they have been out of print for many years. My only prior exposure to the Durants was a few years ago when I read Fallen Leaves, a compilation of essays written by Will Durant and published long after his death in 1981.

The Durants wrote this short book after a lifetime of historical inquiry to serve as a sort of summary or distillation of what they learned. Of particular interest was whether the lessons from history can be useful when it comes to predicting future events. To the extent that human nature changes slowly over time, our behavior can be predicted to some extent, but as technology advances far more quickly than adaptations to human nature, predictions can only be taken so far.

The book is divided into chapters that could be read as stand-alone essays. The chapter on war is very interesting. The authors note that war has been nearly constant in human history. Of the 3,421 years of recorded history up to the time of publication in 1968, only 268 years saw no war. The decades since the book was published have seen constant war, yet somehow the world has avoided nuclear Armageddon so far. There is no evidence to suggest that our luck will hold out indefinitely without constant vigilance.

American Journey

Author: Wes Davis
Year of Publication: 2023
Length: 308 pages

The personal mobility made possible by the automobile transformed American life during the first quarter of the twentieth century. This book tells the story of the automobile adventures shared by Henry Ford, Thomas Edison, Harvey Firestone, and John Burroughs during the 1910s, a time when road travel was primitive and far more risky than it is today. Trains still reigned supreme for long distance travel.

Almost everyone familiar with business history knows about the careers of Henry Ford, Thomas Edison, and Harvey Firestone. John Burroughs is a more obscure name for many twenty-first century readers. A naturalist and author, Burroughs knew luminaries such as Walt Whitman, Ralph Waldo Emerson, and John Muir. Born in 1837, Burroughs was very much a man of the nineteenth century and he was highly skeptical of the automobile in his writing. This distressed Henry Ford who was a longtime admirer of Burroughs, so Ford decided to send the naturalist a Model T as a present. After initial skepticism, Burroughs came to appreciate the mobility offered by the Model T given that age made it hard to get around on foot.

The book is not a history of Ford Motor Company or a replacement for reading Henry Ford’s autobiography which I reviewed two years ago and recommend. But there is quite a bit of interesting business history mixed in with the story of the journeys the men took. However, the personal aspect of the relationship between the men is the best part of the book. Although they had different backgrounds and political views, there was mutual respect and tolerance for dissent that often doesn’t exist in our time.

Much of the controversy of the mid-1910s was related to America’s entry into the First World War. Edison and Burroughs were in favor of U.S. involvement while Ford was not. However, once war broke out, Ford was instrumental in wartime production. Unfortunately, this period also saw the emergence of Henry Ford’s notorious antisemitism, arguably the biggest stain on an otherwise remarkable life.

Xenophon

Xenophon was a man of many talents who lived from 430 BC to 355 BC. As a young man, Xenophon participated in an audacious expedition of mercenaries hired to help Cyrus overthrow his brother and claim the throne of Persia. During a long expedition through lands currently known as Turkey, Syria, and Iraq, the ten thousand Greek mercenaries fought bravely but Cyrus was killed in battle. The duplicity of the Persians allied to the Greek force soon became apparent and the Greeks found themselves stranded in the desert over a thousand miles from the Greek-speaking world. They could not return the way they came because they had depleted the land of supplies as they marched forward, so they had to take the long way back, through modern-day Kurdistan and Armenia where they faced vicious opposition. Xenophon took on a leadership role as one of the generals and published a book known as Anabasis as his memoir.

In addition to his military background, Xenophon was also a philosopher heavily influenced by Socrates, who he knew as a young man prior to the Persian expedition. Socrates left no written record of his work and Plato is most known for preserving Socrates’ philosophy in writing. However, Xenophon also recorded much interesting information about Socrates and, in the process, expressed his own thoughts as well.

Xenophon might be best known for Hellenika which starts as a continuation of the history of the Peloponnesian War at the point where Thucydides abruptly ended his account in 411 BC. Xenophon extends his history to 362 BC, covering several decades after the conclusion of the Peloponnesian War in 404 BC. He was well placed to write this history as a participant with many perspectives. Although Xenophon was Athenian, he was exiled and given refuge by the Spartans.

• The Expedition of Cyrus (Anabasis). Translated by Robin Waterfield. 224 pages. This edition is published by Penguin Classics. I would have preferred the Landmark edition but it is out of print. Landmark’s editions of Thucydides and Herodotus are excellent, especially the detailed maps.

• Conversations of Socrates. Translated by Hugh Tredennick and Robin Waterfield. 362 pages. This volume contains Socrates’ Defense, Memoirs of Socrates, The Dinner Party, and Estate Manager.

• Hellenika. Translated by John Marincola. 501 pages. Published by Landmark, this book contains excellent maps in multiple locations of the text along with numerous footnotes, making the history much easier to follow. There are also several helpful essays in the appendix.

The Last Days of Socrates

Author: Plato
Translator: Christopher Rowe
Year of Publication: 2010
Length: 211 pages

This Penguin Classics volume contains four of Plato’s Socratic dialogues which relate to the trial and death of Socrates: Euthyphro, The Apology of Socrates, Crito, and Phaedo. Although I previously read and wrote about The Apology and Crito, I decided to read them again along with the others included in this book. My motivation was to compare Plato and Xenophon’s depictions of Socrates. Although Plato’s later dialogues are often suspected of putting words into the mouth of Socrates that more accurately represent Plato’s world view, it seems like the events surrounding Socrates’ death are historically accurate. Phaedo is particularly interesting since it represents that final day of Socrates’ life which he spends doing what he most loved: engaging in philosophical debate with his friends right up to the point of drinking the hemlock.

Read my article on Plato’s Apology and Crito

Gateway to the Great Books, Volume 3

Editors: Mortimer Adler and Robert Hutchins
Year of Publication: 1963
Length: 727 pages

In 1963, Gateway to the Great Books was published “to lead you on, to fortify you, to encourage you, to seduce you into the habit of reading, and in particular into the habit of reading Great Books of the Western World.” Robert Hutchins explains that the ten volume set is meant to serve as an “attractive, instructive, entertaining interlude or supplement” to those who are interested in the Great Books.

At times during the quarter, I found myself with an hour to read which isn’t quite enough time to really get into many of the longer works on my list. So I turned to this volume of the Gateway set which is dedicated to “imaginative literature” and, for the most part, contains shorter works that can be read in an hour or two.

The volume contains works by a variety of authors. I particularly enjoyed Herman Melville’s Billy Budd, Fyodor Dostoevsky’s White Nights, F. Scott Fitzgerald’s The Diamond as Big as the Ritz, Alexander Pushkin’s The Queen of Spades, and although “enjoyed” is definitely not the right word, I appreciated reading the always haunting The Death of Ivan Ilyich by Leo Tolstoy for the second time.

Buffett & Munger Unscripted

Author: Alex Morris
Year of Publication: 2025
Length: 473 pages

We are fortunate that Alex Morris decided to take on the task of reviewing every Berkshire Hathaway meeting going back to 1994, distilling the material, and organizing it in a logical way that can be easily referred to. As he writes in the preface of the book, his goal was to unlock this material for the benefit of investors and the business community. He chose to focus on business and investing topics exclusively, which omits many topics related to politics and life lessons. I never get tired of reading about Berkshire Hathaway and thoroughly enjoyed the book.

Read my full review of Buffett and Munger Unscripted

Autobiography of Jack Ringwalt

Author: Jack Ringwalt
Year of publication: 1990
Length: 50 pages

A reader kindly sent me a scanned PDF copy of Jack Ringwalt’s autobiography which was published in 1990 on the fiftieth anniversary of National Indemnity Company’s founding. The book was published in memory of Jack Ringwalt who died in 1984. The story of how Warren Buffett purchased National Indemnity is well known to those familiar with Berkshire Hathaway:

“I really do not believe that our conversation took over fifteen minutes and no price was mentioned by either of us except the $50. I, of course, wondered what would have happened if I would have mentioned $60 or $75, but I am sure that Mr. Buffett will never tell me.”

The account of National Indemnity’s sale only takes a few pages at the end of this short history. It makes for interesting reading and it is unfortunate that the autobiography is not widely available. Unfortunately, I am not able to share the copy I received and will avoid quoting more from it. Perhaps National Indemnity or Berkshire Hathaway might consider reissuing this history at some point.

The Comedies of Aristophanes

Aristophanes lived from 446 BC to 386 BC and wrote at least forty comedies, although only eleven have survived intact. I intended to read one or two of the plays of Aristophanes following my reading of the tragedies of Aeschylus, Sophocles, and Euripides last year. However, I enjoyed reading the first couple of comedies and ended up reading them all. At times, I felt lost but the notes in the books, listed below, usually helped to get reoriented. As with all Ancient Greek plays, we find ourselves swimming in unfamiliar waters, immersed in a culture alien to our own. Humor can be highly subjective while tragic situations seem to translate well over the centuries, making ancient comedies more challenging to understand.

One notable difference between the tragedies and the comedies is that tragedies deal with events from Greek mythology that took place in the distant past from the perspective of the audience while the comedies often dealt with current events directly or indirectly. Comedies were critical of political leaders as well as other notable personalities in Athens, including Socrates. The humor can be crude and strange, but through reading the plays, one can get a better sense of what the Ancient Greeks were like as people. If you know what makes people laugh, you’re on the way to understanding their personalities a little better.

I have been writing journal entries about each of the plays I read over the past several months but stopped publishing articles in public. I have found that writing my thoughts on each play, even privately, helps my understanding in a way that reading passively would not. I also find myself referring back to old journal entries when I come across references to plays that I know that I have read but have since forgotten. My Great Books journey is evolving into a more private enterprise than I anticipated, but the reality is that I’d be out of my depths to attempt to write in public on subjects where I’m a total amateur!

• The Birds and Other Plays. Translated by David Barrett and Alan H. Sommerstein. 336 pages. This volume contains The Knights, Peace, The Birds, Wealth, and The Assemblywomen.

• Frogs and Other Plays. Translated by David Barrett. 275 pages. This volume contains Wasps, Women at the Thesmophoria, and Frogs.

• Lysistrata and Other Plays. Translated by Alan H. Sommerstein. 295 pages. This volume contains The Acharnians, The Clouds, and Lysistrata.

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Nothing in this article constitutes investment advice and all content is subject to the copyright and disclaimer policy of The Rational Walk LLC.  The Rational Walk is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

— Warren Buffett, Letter to Shareholders, February 28, 1989

“Ken Chace has decided not to stand for reelection as a director at our upcoming annual meeting. We have no mandatory retirement age for directors at Berkshire (and won’t!), but Ken, at 75 and living in Maine, simply decided to cut back his activities.”

— Warren Buffett, Letter to Shareholders, March 1, 1991

Berkshire Hathaway has released its annual proxy statement which includes important information for shareholders prior to the annual meeting scheduled for May 3, 2025. It is unfortunate that proxy statements are released a few weeks after annual reports and often receive relatively little attention in the media. For this reason, I wrote articles covering Berkshire’s proxy in 2022, 2023, and 2024.

My focus in those articles was primarily on the “skin in the game” of Berkshire’s board of directors. While still very significant due to Warren Buffett’s holdings, the deaths of Sandy Gottesman in 2022 and Charlie Munger in 2023 removed two longtime directors with multi-billion dollar holdings of Berkshire stock. Such directors simply cannot be replaced, both in terms of business acumen and massive stockholdings.

I have updated the table presented in each of the prior articles covering Berkshire’s proxy statements. Although Berkshire’s proxy lists the number of shares controlled by each director, I find it useful to disaggregate the holdings by type. In many cases, directors control substantial holdings for the benefit of charitable foundations. While I am sure directors with such voting interests take their roles as fiduciaries seriously, charitable holdings do not represent personal wealth. For this reason, I list shares held directly, shares held in trust, and “other holdings” that represent charitable foundations. My categorization is based on an interpretation of the table footnotes on page 11 of the proxy.¹

The columns in orange tie to the share totals listed in the proxy statement and represent the sum of Direct Holdings, Trust Holdings, and Other Holdings. The columns in blue represent the sum of Direct Holdings and Trust Holdings, with the value of the shares calculated based on closing prices as of Friday, March 14.

Warren Buffett’s holdings represent the vast majority of director “skin in the game” and it is appropriate that Greg Abel and Ajit Jain maintain large holdings. All other directors have substantial holdings of Berkshire stock in absolute terms, assuming one considers seven and eight figure holdings to be substantial. However, it seems apparent that certain directors with lengthy business careers, such as Susan Decker and Kenneth Chenault, likely have only a small percentage of their net worth in Berkshire stock.

Since I wrote at length about the importance of “skin in the game” in prior articles covering Berkshire’s proxy, I will not repeat myself here other than to say that any criticism we might have as shareholders regarding individual directors must be seen in the context of Berkshire’s extremely high standards. Directors do not receive stock grants or options and, with the possible exception of Buffett family members who might have received stock as gifts, each director purchased shares on the open market. Anyone familiar with proxy statements of “typical” large companies knows that this is hardly the norm.

I was surprised to see that Berkshire now has an age limitation of 80 for most directors:

Unfortunately, this new policy has forced the retirement of Ronald Olson who owns over $105 million of Berkshire stock. It would be perfectly understandable if Mr. Olson would like to retire at the age of 83, and perhaps that is his wish, but a rigid policy mandating retirement at a fixed age seems like a move contrary to Berkshire’s culture. The typical 80 year old is probably not someone who should be serving on a board, but appearances of Mr. Olson at events related to past Berkshire Hathaway annual meetings seem to indicate that he remains engaged with the company and cognitively sharp. His departure is unfortunate.

The language of the new policy clearly exempts Warren Buffet from the age limit, both because he currently serves as CEO and because he controls far more than 5% of the voting rights. The 5% provision will also allow Mr. Buffett’s children to serve on the board after their 80th birthdays which will occur in about a decade, assuming that by that time they will control the shares left by Warren Buffett to the family foundation. However, it would appear that Ajit Jain will no longer eligible to serve starting in 2032.

I expect that the age limitation will be addressed at the annual meeting due to its seeming contradiction with many of Warren Buffett’s past statements about retirement ages. I personally dislike the new policy, but I’ll keep an open mind regarding its rationale. Perhaps this is intended to protect Berkshire in some way in the distant future, but for now it only increases my concerns about the company’s culture in the long run.

Just yesterday, I wrote about Warren Buffett’s views on stock-based compensation for future Berkshire CEOs in my review of Buffett & Munger Unscripted. In the quotes I presented in the article, Mr. Buffett seemed open to using stock to compensate top executives in the future. However, I forgot that starting in 2024, proxies have indicated that Berkshire never intends to use stock to compensate employees:

“The [Compensation] Committee has established a policy that neither the profitability of Berkshire nor the market value of its stock are to be considered in the compensation of any executive officer. Under the Committee’s compensation policy, Berkshire never intends to use Berkshire stock in compensating employees.” [Emphasis Added]

Presumably this means that Greg Abel’s future compensation will comprised of cash only, although I assume that there will be a base salary and bonus component that is somehow tied to performance. In my view, Mr. Abel has a large enough holding in Berkshire to align his incentives with the company, but it is obviously impossible to know how much stock Mr. Abel’s eventual successor might hold.

I look forward to Berkshire’s webcast on May 3. I might resubmit some of the questions I sent to Becky Quick last year which included one question regarding future CEO compensation.

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Nothing in this article constitutes investment advice and all content is subject to the copyright and disclaimer policy of The Rational Walk LLC.  The Rational Walk is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

Individuals associated with The Rational Walk LLC own shares of Berkshire Hathaway.

1. As I explained in more detail in my article on the 2024 Proxy Statement, I believe that Greg Abel’s shares held in trust most likely relate to family interests. In addition to my interpretation of Greg Abel’s ownership interests, I made similar judgment calls regarding the nature of shares held in trust for Howard Buffett, Susan Buffett, Ajit Jain, Ronald Olson, Wallace Weitz, and Meryl Witmer. The footnotes sometimes refer to “charitable foundations” and other times refers to “private foundations.” I interpret “private foundation” to imply a charity. Other references to “trusts” are assumed to be held for the benefit of the director’s family. Obviously, I could be mistaken regarding the ultimate beneficiaries of “trusts” where the nature of the trust is not specified explicitly. ︎

— Charlie Munger, 1994 Berkshire Hathaway Annual Meeting

I started following Berkshire Hathaway in 1995 shortly after reading Roger Lowenstein’s biography of Warren Buffett, The Making of an American Capitalist. It is no exaggeration to say that reading Lowenstein’s book changed my life. I soon discovered Warren Buffett’s letters to Berkshire Hathaway shareholders and Benjamin Graham’s books. Without this intellectual framework, I surely would have been swept up in the dot com mania of the late 1990s and my limited capital would have vanished.

By the time I purchased my first shares of Berkshire Hathaway in early 2000, I thought that I understood the company and its leaders very well, but I really didn’t have a sense of Warren Buffett’s genius until I attended my first annual meeting in the spring of 2000. That meeting was also my introduction to Charlie Munger, who I knew very little about due to his low public profile at the time. Watching two elderly men answer questions for several hours, seemingly without tiring at all and cracking jokes throughout, was amazing in itself, but it was the substance of their discussion that was truly impressive.

For many decades, the only way to attend an annual meeting was in person. Starting in 2016, annual meetings were webcast live and a few years later, CNBC was authorized to maintain an archive of all annual meetings going back to 1994. This is a treasure trove of wonderful material since we have both video and a transcript for each meeting, but it would be a formidable task to view the hundreds of hours of video, take notes, and distill the material by topic in a useful way.

We are fortunate that Alex Morris decided to take on the task of viewing every meeting going back to 1994, distilling the material, and organizing it in a logical way that can be easily referred to. As he writes in the preface to Buffett & Munger Unscripted, his goal was to unlock this material for the benefit of investors and the business community. He chose to focus on business and investing topics exclusively, which omits many topics related to politics and life lessons.¹

Many readers who have attended multiple annual meetings might be skeptical about reading such a book, but chances are that you’ve long forgotten much of what was said at the meetings. In addition, the organization of the book allows the reader to review comments on a particular topic over time. The ability to change one’s mind is critical as new evidence emerges.

For example, in the section covering GEICO and auto insurance, we can see Warren Buffett initially resist the idea of incorporating telematics into the underwriting process. However, over time it became apparent that Progressive’s pioneering use of technology was becoming a competitive advantage. Eventually, Warren Buffett and Ajit Jain acknowledged the need to invest more heavily in technology.

My favorite part of the book was the section covering corporate governance. Perhaps the comments on executive and director compensation resonated strongly because we are in the midst of proxy season. The common “best practices” of corporate America are totally opposed to the common sense wisdom of Warren Buffett and Charlie Munger, particularly when it comes to stock-based compensation. Their opposition to stock options has been well documented over the years, but the objection was not so much the use of options as the structure of the pay arrangements.

It might surprise some readers to learn that Warren Buffett views stock options for top executives as rational provided that the option’s strike price is adjusted for the cost of capital and retained earnings. In fact, Mr. Buffett has said that Berkshire’s future CEO could logically be paid with options:

“At Berkshire, for those that succeed me and Charlie, anybody that is in the very top position at Berkshire has got the job of allocating resources for the whole place. There could be a logically constructed option plan for that person, and it would make some sense because they are responsible for what takes place overall. But a logically constructed plan would have a cost of capital built into it for every year where we don’t pay dividends. Why should we get money from you for free? We could put it in a savings account and it would grow in value without us doing anything. And a fixed-price option over ten years would accrue dramatic value to whoever was running the place, if they had a large option, for putting the money in a savings account or in government bonds. So there has to be a cost of capital factor in to make options equitable, in my view … They should not be granted at below the intrinsic value of the company.”

— Warren Buffett, 2002 Annual Meeting (p. 140)

I attended the 2002 annual meeting but for some reason I had forgotten Mr. Buffett’s endorsement of the use of stock options, properly structured, for his successor. This is something we should keep in mind when Greg Abel takes over as CEO. Perhaps even more surprisingly, Mr. Buffett also said that it would have been perfectly appropriate for options to have been granted to him and to Charlie Munger:

“There’s nothing wrong with options per se; in terms of Berkshire, it would have been perfectly appropriate if a properly designed option had been given to me or to Charlie. We have responsibility for the whole enterprise, and we believe that any kind of incentive for performance should be related to the area in which you have responsibility.”

— Warren Buffett, 1997 Annual Meeting (p. 148)

So why did Warren Buffett and Charlie Munger never accept stock options? It is clear to me that their restraint was due to a desire to serve as exemplars. Mr. Munger had the following to say in response to Mr. Buffett’s lengthy comments on executive compensation at the 1997 annual meeting:

“We have some wretched excesses in American corporate compensation. I don’t think the excess is necessarily the guy who got the most money. In many cases, I agree with Warren, that the money has been deserved. But such is the envy effect that the practice spreads to everybody else. And then the taxi driver and everybody starts thinking the system is irrational, unfair, crazy. And I think that’s what causes some people, as they rise in American corporations, to, at a certain point of power gaining and wealth gaining, start exercising extreme restraint as a sort of moral duty.”

— Charlie Munger, 1997 Annual Meeting (p. 150)

In other words, it is worth leaving some money on the table when incremental wealth no longer has any possible utility and grasping for every last dollar might cause the overall system grave harm, which would be the case if the majority of the American people come to view capitalism as corrupt or rigged.

It is fascinating to come to the realization that Warren Buffett and Charlie Munger have always been fully aware that their extreme restraint regarding compensation was not necessary from a moral standpoint. It would indeed have been perfectly fair to compensate both men with properly structured options that reflected the tremendous value generated for Berkshire Hathaway shareholders. Instead, they both took symbolic $100,000 annual salaries for decades, leaving enormous wealth on the table.

What if Berkshire had granted options to Warren Buffett and Charlie Munger over the past half century? Obviously, the magnitude of the effect would depend on the specific terms of the grants, but Berkshire’s terrific performance combined with the effects of compounding would no doubt have made the value of those grants astronomical — certainly well into the tens of billions of dollars. What have Berkshire’s shareholders done to deserve this additional wealth, generated by effectively having Warren Buffett and Charlie Munger work for free all of these years? This is one reason for Berkshire’s “cult-like” following. Even those who have not attempted to figure the amount of this gift know that it is very substantial.

In my opinion, every Berkshire Hathaway shareholder would benefit from reading Buffett & Munger Unscripted, no matter how long they have owned shares or how many meetings they have attended. The passage of time tends to dim the memory and we can all use a refresher course from time to time. The book can be read straight through, as I did over the course of several days, or it can be used as a reference since there are sections organized by topic.²

Reading the book might also be an inspiration for readers to view some of the old annual meetings. I appreciated the fact that many of the meetings from the 1990s were heavily quoted. I did not attend meetings prior to 2000 and I now plan to watch the 1990s meetings in the near future.

Copyright, Disclosures, and Privacy Information

Nothing in this article constitutes investment advice and all content is subject to the copyright and disclaimer policy of The Rational Walk LLC.  The Rational Walk is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

Individuals associated with The Rational Walk own shares of Berkshire Hathaway.

1. While some of the “life lesson” questions asked at annual meetings are repetitive, the answers were often insightful and useful for young people in particular. This would be out of place in a business book such as Buffett & Munger Unscripted, but perhaps represents an opportunity for another author to cover the “life lesson” material. It would certainly be more useful than typical “self-help” books. ︎
2. Unfortunately, the printed book lacks an index which would make it even more useful as a reference. I suppose that it would be possible to purchase the Kindle edition and use the search function as an improvised index. Perhaps a future edition of the printed book will include an index. ︎

— Warren Buffett, 2014 letter to shareholders

When I read Warren Buffett’s letter to shareholders a decade ago, the passage reproduced above struck me as particularly important. Mr. Buffett is not one prone to exaggeration, particularly when it comes to setting expectations for the performance of Berkshire Hathaway. He has always been more likely to throw cold water on unrealistic expectations. Yet in his 2014 letter, we are assured that the chance of Berkshire experiencing “financial problems is essentially zero.”

Of course, Mr. Buffett was not saying that Berkshire Hathaway’s stock price will never decline. Berkshire’s stock has declined substantially on many occasions and will decline substantially at times in the future. The point was not that the stock price is impermeable to decline but that the underlying business model is highly resistant to permanent impairment. That’s quite a strong statement!

The usual caveats apply. No company can possibly be immune to the effects of global thermonuclear war and there are certain large-scale natural disasters, such as a massive earthquake in the Pacific Northwest or a supervolcano eruption that carry systemic risks far beyond any insurance liability Berkshire would incur. The risk of terrible things happening in the world, whether caused by humans or by nature, can never be eliminated. Mr. Buffett was only saying that Berkshire is as well positioned as any company can be.

Even if we accept Mr. Buffett’s view regarding the robustness of Berkshire’s business model, this will not prevent many shareholders from worrying about Berkshire’s stock. This has been particularly evident in recent months as some level of optimism has crept into the stock price. While giddy optimism has been the prevailing sentiment in most large and mega-cap stocks in recent years, Berkshire’s valuation has typically remained on the sober side and has often veered off into deep pessimism.

What guidance has Warren Buffett provided regarding investing in Berkshire’s stock?

Let’s return to Mr. Buffett’s 2014 letter to shareholders. The letter was written in early 2015, shortly before the fiftieth anniversary of Mr. Buffett taking control of Berkshire Hathaway. In a section of the letter outlining his expectations for the next fifty years at Berkshire, Mr. Buffett made some striking statements regarding investing in the company. Most importantly, he wrote that “the chance of permanent capital loss for patient Berkshire shareholders is as low as can be found among single-company investments.” He was confident that Berkshire’s per-share intrinsic value is “almost certain” to advance over time.

However, this optimism came with a crucial caveat:

“This cheery prediction comes, however, with an important caution: If an investor’s entry point into Berkshire stock is unusually high – at a price, say, approaching double book value, which Berkshire shares have occasionally reached – it may well be many years before the investor can realize a profit. In other words, a sound investment can morph into a rash speculation if it is bought at an elevated price. Berkshire is not exempt from this truth.” [Emphasis Added]

Here we are given a very specific figure that Mr. Buffett characterized as elevated, a level at which a buyer might not realize a profit for “many years.” The specific figure was double book value. At that price, a buyer might have to wait for a lengthy period of time before realizing any profits at all, much less achieving attractive returns. The implication is that Berkshire Hathaway stock would resemble a “rash speculation” if purchased at such a high valuation, especially if the investor’s time horizon is short.

Let’s apply this idea to Berkshire Hathaway in early 2015. At the time Mr. Buffett’s letter was published on February 28, 2015, the Class A shares had last traded at $221,180. Book value as of December 31, 2014 stood at $146,186 per Class A share. Therefore, the price-to-book ratio at the time Mr. Buffett published the letter was 1.51x book value. Double book value would have been $292,272 per Class A share.

A buyer of one Class A share at the closing price of $221,180 on February 27, 2015 would have realized an annualized return of 13.4% over the subsequent decade based on Berkshire’s Class A stock’s closing price of $775,000 on February 28, 2025. What if Berkshire’s stock had traded at double book value a decade ago rather than 1.51x book value? In that scenario, a buyer would have paid $292,372 for one share. Then the annualized return over the past decade would have been 10.2% rather than 13.4%.

Over a ten year period, a buyer at double book value would have still realized a decent return despite paying a fancy multiple at the outset. However, there would have been many occasions over the first five years where the returns would have been flat or negative, as we can see from the chart below:

There would have been a very limited margin of safety for a buyer of Berkshire at twice book value in early 2015, even over a period of several years. In the very long run, paying a high multiple would have worked out since Berkshire’s intrinsic value advanced steadily over the period. But we should note that the current multiple of price-to-book stands at 1.72x today. This happy scenario would have been more muted if Berkshire’s price-to-book ratio had not expanded and remained at 1.51x at the end of the decade.

In his 2014 letter to shareholders, Mr. Buffett offered “no assurance” that any purchase of Berkshire stock would produce positive returns regardless of the entry price if the investor’s time horizon was only one or two years. This is because movements in the stock market over short periods can heavily influence the price of any stock, including Berkshire. The “voting machine” can overwhelm any advance of intrinsic value over such a short period of time.

If one or two years is too short of a time horizon, what is an acceptable time horizon?

Mr. Buffett recommended that Berkshire shares should only be purchased if the expected holding period is at least five years. In other words, he defined the “short-term” as anything less than five years! For most market participants, one year might qualify as “long-term” and five years seems like an eternity. However, the reality is that five years really should be the minimum time horizon for the purchase of any stock.

If twice book value is “too high” of a price to pay, what is a more reasonable price to pay?

In the 2014 letter, Mr. Buffett wrote the following:

“Purchases of Berkshire that investors make at a price modestly above the level at which the company would repurchase its shares, however, should produce gains within a reasonable period of time. Berkshire’s directors will only authorize repurchases at a price they believe to be well below intrinsic value. (In our view, that is an essential criterion for repurchases that is often ignored by other managements.)” [Emphasis Added]

At the time, Berkshire’s policy allowed for repurchases at 1.2x book value, a level at which Berkshire’s stock almost never traded. In 2018, Berkshire amended its policy to allow repurchases at any level at which Warren Buffett and Charlie Munger believed that shares were trading below a conservative estimate of Berkshire’s intrinsic value. Berkshire soon ramped up its repurchase program significantly.

The relaxation of Berkshire’s repurchase policy was accompanied by Mr. Buffett no longer emphasizing book value in communications with shareholders, which he explained in some detail in his 2018 letter to shareholders. The reason behind the change was that he believed that book value was losing its relevance as an understated indicator of intrinsic value as more of Berkshire’s value derived from operating subsidiaries versus marketable securities. In addition, large-scale repurchases of Berkshire stock would increasingly distort book value over longer periods of time.

In light of the 2018 change de-emphasizing book value, should we still take Mr. Buffett’s comments in his 2014 letter to shareholders into account when considering Berkshire’s valuation? I think that the answer is still a qualified yes. It is not as if book value was relevant in 2017 and became instantly irrelevant in 2018. My view is that book value will gradually lose its relevance, not that it became irrelevant immediately.

Regardless of one’s view of book value, we can look at the prices at which Berkshire has been repurchasing stock recently. Mr. Buffett clearly stated that purchases of the stock “modestly above” where the company repurchases shares should “produce gains within a reasonable period of time.” He did not say that it would be prudent to relax the minimum five year holding period, but in my opinion, purchasing modestly above where Berkshire repurchases shares is likely to result in gains within a few years.

The exhibit below shows Berkshire’s repurchase activity over the past three years:

For each month that Berkshire repurchased stock, the exhibit shows the number of Class A and Class B shares that were purchased, the average price paid, and the total value of the repurchases. In addition, I have calculated the number of Class A equivalents that were purchased (with each Class B share having 1/1500 of the economic rights of one Class A share), the price-to-book ratio of Berkshire’s Class A shares, and the price-to-book ratio paid. Note that the book value used in these calculation is the last publicly known book value at the date of the repurchase and that Mr. Buffett would have had non-public information regarding Berkshire’s ongoing performance during any quarter in which repurchases were made.

From this table, we can see that Mr. Buffett has been price-sensitive in his repurchase activity, but has shown flexibility as well. He has been willing to pay as much as 1.6x trailing book value, but seems far more enthusiastic when he can purchase shares for 1.4x trailing book value or less. Berkshire entirely stopped repurchasing shares starting in June 2024.

Does Mr. Buffett still consider 2x book value to be on the high side?

We can see that repurchases stopped after May 2024 and it seems unlikely that Mr. Buffett is repurchasing shares today at over 1.7x book value. My guess is that he would still consider 2.x book value to be on the high side and a level at which buyers might not realize a return for many years. However, given the fact that Mr. Buffett stopped explicitly referring to book value over five years ago means that we cannot be certain.

Let’s consider Berkshire’s current stock price of $775,000 per Class A share in a little more detail. Given that book value was $451,507 per Class A share as of December 31, 2024, the stock is currently trading at 1.72x book value. The average price-to-book ratio paid for repurchases since 2022 is 1.44x book value which would be approximately $650,000 per Class A share.

In my opinion, Mr. Buffett’s statements in his 2014 letter implies that purchases of Berkshire at or somewhat above $650,000 per Class A share could be expected to produce gains within a “reasonable” period of time. What does “somewhat above” mean? Opinions will vary, but it seems like 1.5x book value would not be much of a stretch, implying a price of $677,000 per Class A share.

Some might suggest that Berkshire was willing to pay 1.6x book value in early 2024 and we should consider that benchmark to be a “reasonable” level for purchase. 1.6x book value would be approximately $722,000 per Class A share today. Since Berkshire will make no repurchases unless the shares are available at less than a conservative estimate of intrinsic value, this position has some level of support.

Ultimately, we should be cautious above making overly precise judgments regarding intrinsic value. Even Warren Buffett and Charlie Munger did not come up with identical intrinsic value estimates when they discussed the matter privately. At best, we can arrive at a range of values that make purchases reasonable.

Thinking About Berkshire’s Stock Price

The majority of market participants are obsessed about short-term market gyrations. There is no way to predict Berkshire’s stock price over the next week, month, or year. However, those who take a longer-term view can consider several factors when considering the returns they are likely to achieve.

Let’s first consider Berkshire’s historic performance in compounding book value per share. When I wrote about Berkshire’s 2024 results, I included a table showing book value per share over the past decade which is presented again below:

We can see that Berkshire has compounded book value at 11.9% over the past decade, which is a strong performance, perhaps higher than what we can expect in the future. Let’s assume that Berkshire compounds book value per share at 8% over the next five to ten years. If this occurs, we could expect book value per share to be approximately $663,000 in five years and $975,000 in ten years.

Let’s say that Berkshire’s price-to-book value declines from the present 1.72x to 1.5x. If this occurs, assuming 8% annualized growth in book value, we can expect Berkshire’s Class A stock to trade at ~$995,000 in five years and ~$1,463,000 in ten years. Given the current price of $775,000, shareholders could expect annualized returns of 5.1% over the next five years and 6.6% over the next ten years.

In other words, if we assume that growth in book value per share to 8% and the price-to-book ratio will contract to 1.5x, returns for shareholders holding the stock from current levels will be materially below 8%. Of course, there is no law that says that the price-to-book ratio will be 1.5x in the future or that growth of book value per share will be 8%. Those who disagree with these assumptions can substitute their own estimates and arrive at their own implied annual returns for the stock starting at its current price.

The Bottom Line

Berkshire’s stock price is trading at levels not seen in many years, as measured by a multiple to book value. Despite Berkshire de-emphasizing book value as a relevant metric over the past several years, I believe that it still makes sense to follow book value as an understated measure of intrinsic value. If book value progresses at a certain rate in the future, intrinsic value is likely to progress at a similar rate. When we combine this assumption with the guidance provided by Berkshire’s willingness to repurchase stock, we can form conclusions regarding the likely return that shareholders can expect from current levels.

Warren Buffett correctly warned shareholders against buying the stock at particularly elevated levels and explicitly mentioned 2x book value as representing a rich price. We are not anywhere near 2x book value, although the current price is materially above where Berkshire has been willing to repurchase shares. All of this warrants caution for those contemplating investing in the stock. For those who already own the stock, it still seems highly likely that we will achieve positive returns over a five to ten year period. However, anything can happen over the next couple of years. Shareholders who need to sell shares over the next year or two might consider doing so now, but we should keep in mind that the current price-to-book ratio of 1.72x is likely to decline in the coming quarters as book value advances due to retention of earnings.¹

This article is NOT investment advice! My purpose is only to help shareholders think about Berkshire’s stock price in a manner that makes sense, with supporting evidence based on Warren Buffett’s statements in his annual letters to shareholders. I would encourage readers to not take the examples of book value growth and future price-to-book ratios in this article too seriously. Instead, consider your own opinions regarding Berkshire’s future and calculate likely future returns based on your assumptions. Then compare the likely returns from Berkshire against other opportunities that you know of, adjusted for risk. Only then can you know whether buying or holding Berkshire at current levels makes sense for you.

Copyright, Disclosures, and Privacy Information

Nothing in this article constitutes investment advice and all content is subject to the copyright and disclaimer policy of The Rational Walk LLC.  The Rational Walk is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

Individuals associated with The Rational Walk own shares of Berkshire Hathaway.

1. Note that the assumptions in this article assume continued retention of all earnings. If Berkshire begins to pay a dividend, this will reduce book value growth, but shareholders will have received cash distributions which would have to be added to stock price appreciation to arrive at a total return. ︎

Last year, I wrote a series of articles covering the 2023 annual report, an effort that took several weeks which was undertaken as part of a paid subscription offering which has since been discontinued. I will not repeat that process this year, but I thought it would be helpful for some readers if I post a shorter article. This post is by no means a comprehensive summary of the report and only includes a few topics that I decided to write about. Readers are encouraged to review Berkshire’s press release and annual report.

Too Much Cash?

Berkshire has an enormous amount of cash on its balance sheet. However, news articles often provide inaccurate figures because they include cash held by the railroad and utility groups that Warren Buffett has typically not included in his discussions of cash in the past. In addition, many analysts and reporters neglect to subtract a liability reflecting amounts due for treasury bill purchases that had not settled at yearend. With these adjustments, Berkshire’s cash balance stood at $318 billion at the end of 2024.

It would be a mistake to regard the entire $318 billion as available for deployment. Berkshire has established a minimum level of $30 billion of cash in the context of its repurchase program. Additionally, Berkshire has a very small allocation to fixed-maturity investments. Historically, the sum of Berkshire’s cash and fixed-maturity investments has approximated insurance policyholder float, as we can see below:

Clearly, Berkshire has excess cash by historical standards and could deploy over $160 billion while still maintaining a 1:1 ratio between cash plus fixed-maturity investments and float. Is this “too much” cash? Mr. Buffett expressed a strong preference for owning equities, whether through shares in the stock of public companies or in wholly owned subsidiaries. He also noted that paper money can experience major erosion through inflation and that “fixed-coupon bonds provide no protection against runaway currency.”

My overall impression is that Berkshire’s cash balance will grow in the coming year unless there is a major market correction that provides attractive opportunities either in the stock market or acquisitions. As I type this article, such conditions seem quite unlikely, but sentiment can change quickly in financial markets and there is a significant amount of macroeconomic uncertainty regarding taxes, trade policy, and spending. Shareholders should take some solace in the fact that Berkshire continues to earn ~4.25% on its treasury bill portfolio while Mr. Buffett waits for a fat pitch.

Repurchase activity has ground to a halt and will likely remain suspended given the reaction of the market to Berkshire’s annual report. I would be surprised to see any repurchases unless the stock declines by at least 15% from current levels and we might need a 20% decline, to about $600,000 on the Class A shares, before Mr. Buffett regains his enthusiasm for large repurchases. Fortunately for shareholders who do not want a taxable event, there was no discussion of Berkshire declaring a dividend.

Drivers of Operating Earnings

The press release presents a useful table of after-tax operating earnings:

By all accounts, Berkshire had a banner year with record operating earnings of $47.4 billion. This was driven by much better insurance underwriting results as well as higher investment income. However, we should note that the “Other” line item includes $1.1 billion of foreign currency exchange gains related to non-U.S. denominated debt in 2024 compared to $211 million of gains for 2023. Results were relatively flat for BNSF while BHE showed some improvement. The sprawling manufacturing, service, and retailing group, represented by the “Other controlled businesses” line, posted slightly lower profits.

If the goal is to look at the drivers of the increase in operating earnings, we should focus on underwriting performance and investment income. I have some comments on underwriting in the next section, but we can look at the simpler situation with investment income here. The table below tells the story of investment income over the past three years:

The increase in interest income is due primarily to large increases in Berkshire’s treasury bill portfolio which was partially offset by slightly lower treasury bill rates during the final quarter of the year. This should be no surprise at all given what we have seen develop with Berkshire’s cash balance over the past four quarters. Meanwhile, dividend income declined due to reductions in the equity security portfolio which was partially offset by higher dividends on certain holdings. Within the corporate structure, a certain percentage of dividend income is excluded from taxation, so as the proportion of Berkshire’s investment income tilts more toward treasury bill interest, we can expect the effective income tax rate to rise.

Berkshire does not provide “guidance” to analysts, but what if we wanted to forecast interest income for 2025? Obviously, this would depend on Berkshire’s average cash and treasury bill balance over the course of the year, which is not knowable, as well as the level of interest rates which, for short-dated treasuries, is tied closely to the Federal Funds rate which is determined by Federal Reserve policy actions. As a result, we cannot realistically forecast interest income for 2025, although I would note that the treasury yield curve currently implies that the Fed will cut rates by around a quarter to half of a percent this year.

Of course, if Berkshire deploys cash, the goal will be to earn returns materially higher than the yield on treasury bills. However, this may or may not show up immediately in other line items of Berkshire’s income statement. If Berkshire uses cash to purchase equity securities, the company will receive dividend income as well as potential capital gains over time, but these returns will be irregular and unpredictable. The acquisition of a new subsidiary would be expected to result in reported operating earnings in excess of treasury bill rates over time, but perhaps not immediately.

GEICO: The Star of the Show!

Insurance underwriting was the other big driver of operating earnings in 2024. Let’s take a look at the results of the overall group:

All of Berkshire’s insurance segments did well in 2024, but GEICO was clearly the star of the show with CEO Todd Combs earning praise from Warren Buffett in his letter to shareholders:

“Our insurance business also delivered a major increase in earnings, led by the performance of GEICO. In five years, Todd Combs has reshaped GEICO in a major way, increasing efficiency and bringing underwriting practices up to date. GEICO was a long-held gem that needed major repolishing, and Todd has worked tirelessly in getting the job done. Though not yet complete, the 2024 improvement was spectacular.”

GEICO has indeed shown major improvement over the past couple of years and $7.8 billion of underwriting profits in a single year is extremely impressive. Here are some high level figures for the past five years:

I’ve written about GEICO in detail several times over the past few years, with the most recent article appearing after the 2023 annual report. The story here is well known to many Berkshire Hathaway shareholders. This gem of a business performed strongly for decades but underinvested in technology which resulted in its main competitor, Progressive, achieving an advantage in underwriting appropriately for risks assumed. As a result, GEICO experienced significant underwriting losses between Q3 2021 and Q4 2022 and also lost market share to Progressive. Management took steps to raise premiums and cut costs which restored underwriting profitability starting in 2023.

The following table shows GEICO’s underwriting results on a quarterly basis since Q1 2020:

The table tells the story, but it is helpful to view the data in charts as well. The following charts show GEICO’s loss ratio and expense ratio since the first quarter of 2018:

In the third quarter of 2022, GEICO’s loss ratio was a catastrophically high 97%, indicating that management set rates at woefully inadequate levels. Fortunately, that was the high water mark for the loss ratio which has declined to under 70% in the latest quarter. GEICO has always had a significant cost advantage over its competitors and management applied this lever even more aggressively in recent quarters, with advertising spending and other expenses severely trimmed. This resulted in an ultra-low expense ratio of under 10% for the full year, although the expense ratio climbed up to 11.6% in the fourth quarter as management felt confident enough to increase advertising spending.

The combined ratio is the sum of the loss and expense ratios, with figures under 100% representing underwriting profit. We can see the trend that resulted in 2024’s exceptional performance in this graph:

Taking a much longer term view, we can see how exceptional 2024 results were compared to prior years. GEICO’s 81.5% combined ratio for the full year was way below the 93.8% average combined ratio for the figures in the following table, showing data since 2001:

It would be highly unrealistic for Berkshire shareholders to regard GEICO’s 2024 underwriting profits to be in any way “normal” given the historically low combined ratio. As we can clearly see from the table above, GEICO’s normal expense ratio is several points higher than it was in 2024, and we can expect the company to begin advertising in earnest to recover market share, assuming that management is confident that premiums are now at levels that will produce an acceptable loss ratio.

What would “normalized” underwriting profits look like for GEICO? Assuming premium volume of, say, $44 billion in 2025, GEICO would post underwriting profits of about $3 billion if it runs at a combined ratio of 93%. However, 93% might be optimistic given that Ajit Jain, at the 2023 annual meeting, disclosed that GEICO’s target combined ratio is 96%. This would imply “normal” underwriting profits of just $1.75 billion.

It is also important to compare GEICO’s performance to Progressive, as I have on numerous occasions in past years. Progressive has been performing admirably in recent years and has steadily picked up market share while avoiding underwriting losses. The following chart displaying earned premiums of GEICO and Progressive shows the result of the competitive battle of the post-pandemic period:

In April 2024, I wrote an article about Progressive “firing on all cylinders” in which I shared its recent results. Performance continued to be strong for the remainder of 2024. While GEICO’s policyholders-in-force count dropped by 0.5% in 2024 and 9.8% in 2023, Progressive has gone in the opposite direction. We have limited data on policies-in-force from GEICO, but very detailed data from Progressive:

It is useful to look at growth in policies-in-force both on a month-to-month sequential basis, as well as on a trailing twelve month basis, as shown in the following table:

The data speaks for itself. Progressive has been shooting the lights out when it comes to market share gain. But what good are market share gains if you lose money? Fortunately for Progressive shareholders, management has not grown at the expense of losses. Quite the contrary, as we can see in the table below:

Progressive has not released its annual report for 2024, but we have monthly data releases from which the above table was derived. Progressive reported a full year combined ratio of 88.8%, which is higher than GEICO’s 81.5% combined ratio but still excellent and well below Progressive’s 96% combined ratio target.

Would we rather have GEICO post a combined ratio in the low 80s with market share stagnation, or a combined ratio in the high 80s or low 90s with robust growth? Historically, Berkshire has been aggressive in terms of seeking growth for GEICO, but with the caveat that inadequate pricing must be rejected.

Hopefully, GEICO’s recent investments in technology will help its underwriters price at a level that can achieve market share growth while still delivering underwriting profits. The problem in recent years was that GEICO’s confidence in its risk assessment declined due to six quarters of terrible results. Advertising spending was slashed and pricing increased. The success we saw in 2024 was welcome news, but it remains to be seen what GEICO’s normalized level of profitability will be and whether market share gains will occur. I think the jury is still out on GEICO’s turnaround.

Miscellaneous Thoughts

My original intent was to potentially cover a couple of other areas of interest, but the discussion of GEICO took more room than anticipated. I would just briefly note that the Manufacturing, Service, and Retailing group, which I covered in much detail last year, revealed some weakness in the service and retailing sectors, which is discussed on pages K-50 to K-53 of the annual report. We can see the weakness in quarterly margin trends, highlighted in yellow below:

The bright spot here is McLane which posted unusually high margins in 2024. Pilot was transferred to the MSR group in 2024 from the Railroad, Utility, and Energy group where it first appeared in 2023 after being consolidated on Berkshire’s balance sheet. Berkshire acquired full ownership of Pilot in early 2024 after a nasty legal dispute with the founding family. I wonder whether Pilot was in Warren Buffett’s mind when he wrote about Berkshire’s mistakes at the beginning of his annual letter.

Mr. Market seems to like Berkshire’s results and the stock has been hitting record highs early this week, with the Class A shares reaching $750,000 for the first time. It seems like only yesterday that I wrote an article when the Class A shares hit $600,000 a little over a year ago. Priced at ~1.65x book value, Berkshire shares are trading at a high price-to-book ratio relative to its typical level in the post-financial crisis period, but the stock traded at such levels for long periods in the 2000s:

Warren Buffett stopped focusing on book value several years ago after reporting on that figure for decades. He did so not because he viewed book value as a representation of Berkshire’s intrinsic value, but because he felt that rates of change in book value roughly approximated rates of change in intrinsic value, which he has always said far exceeds book value. For many longtime shareholders, this metric is still worth tracking.

A year ago, Berkshire’s stock rose after the release of the annual report and I wrote Too Clever by Half! to criticize the idea of “trading” the stock. But after a subsequent spike in the stock price in late summer, I failed to take my own advice and sold shares in my retirement accounts, thinking that I would owe no taxes on the sale and shares were getting too expensive. A few weeks later, I reversed my decision and wrote a mea culpa, Just Hold the Goddamn Stock! I was fortunate enough to replace my sold shares at a slightly lower price, but I rediscovered that “trading” is not for me.

Why not trade the stock? Time is the friend of the owner of an excellent business. We should not forget that Berkshire reinvests all of its earnings and has historically compounded book value per share (and intrinsic value per share) at very attractive rates:

There is no law that says that Berkshire will continue to compound at such rates, but in any given year, we can be sure that Berkshire will deliver tens of billions of dollars in after-tax operating income alone, in addition to posting gains on securities on a normalized basis. If Berkshire seems “expensive” today at 1.65x book value, that problem will most likely work itself out in short order as value continues to accrete to owners and management retains all earnings.

As an example, let’s say that you believe that Berkshire’s intrinsic value is $690,000 per Class A share when the stock price is $750,000. This would indicate a modest overvaluation of 8.7%. You could sell your share today, hoping to buy it back at a lower level in the future. But within a year, it is highly likely that Berkshire’s intrinsic value will have “caught up” to today’s “overvaluation” and you could very well never have an opportunity to buy back your position at a lower price.

Some people have a trading mentality while others do not. Personally, I find trading unappealing even when it works out well, as it did for me last summer. It is too mentally taxing to try to jump in and out of a stock simply because its value seems a bit on the high side. The situation would be different if a stock is trading at a level that could plausibly result in no return for five or ten years, but that has never really been the case for Berkshire Hathaway. As a result, it seems better to just hold the stock unless there is a need to raise cash or some clearly superior opportunity comes along that carries reasonable levels of risk.

Conclusion

I should mention that I have received some pushback on my concerns about Berkshire’s culture in the long run, which was the subject of an article last week. I’ll reiterate that I have no short-term or medium-term concerns, but as I discussed at length in the article, Berkshire’s ownership will eventually resemble a “typical” mega-cap company once Warren Buffett’s family foundation eventually ceases operations, which will probably occur 10-15 years after his death.

My “base case” is that a company with a “typical” ownership profile is likely to have a “typical” culture eventually. I hope to be wrong, but we will not know for quite a long time. It seems certain that the small number of remaining Class A shares in existence after the Buffett Foundation winds down will be held almost exclusively by large institutions unless the shares are split at some point in the coming years.

I am very grateful that Warren Buffett remains at the helm of Berkshire at the age of ninety-four. When I purchased my first shares of Berkshire a quarter century ago, I never imagined that Mr. Buffett would still be running the company in 2025 and I still have trouble wrapping my mind around the life-changing compounding that my early investments in Berkshire have delivered. The modest quarterly bonus payments that I regularly invested in Berkshire from 2000-05 could have each bought a very nice vacation or perhaps a living room furniture set at the time. Today, many of those positions could pay for a down payment on a median priced single family home.

The compounding snowball that is Berkshire Hathaway never ceases to amaze me.

Copyright, Disclosures, and Privacy Information

Nothing in this article constitutes investment advice and all content is subject to the copyright and disclaimer policy of The Rational Walk LLC.  The Rational Walk is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

Individuals associated with The Rational Walk own shares of Berkshire Hathaway.

The death of Charlie Munger in late 2023 at the age of ninety-nine was a stark reminder that we are getting close to the end of an era. Warren Buffett will turn ninety-five this year and has increasingly spoken and written about his own mortality, most recently in a press release announcing charitable gifts to family-run foundations in November. It would be ghoulish to try to guess when Mr. Buffett will pass the baton to Vice Chairman Greg Abel, but it would be highly unrealistic to presume that Mr. Buffett’s tenure as an active CEO will last beyond the end of this decade, even if he achieves centenarian status.

When Charlie Munger spilled the beans on CEO succession at the 2021 annual meeting, it was in the context of Greg Abel being fit to maintain Berkshire Hathaway’s unique culture. Mr. Munger was certain that Mr. Abel would be up to this task, and by all accounts Mr. Buffett is in full agreement. Greg Abel is sixty-two years old and Mr. Buffett has made many comments over the years indicating that he expects future CEOs of Berkshire to have long tenures, implying that Mr. Abel is willing to serve well into his seventies.

The future Board of Directors will be led by Mr. Buffett’s son, Howard, who is currently seventy-one years old, and most other board members have a long tenure and significant ownership interests. Mr. Buffett’s three children will not inherit his Berkshire Hathaway stock. Instead, his shares will be donated to a family foundation that his children will run. Over time, Mr. Buffett’s shares will be used to fund philanthropic spending, but it is his firm desire to avoid creating a dynastic foundation, as he reiterated recently:

I’ve never wished to create a dynasty or pursue any plan that extended beyond the children. I know the three well and trust them completely. Future generations are another matter. Who can foresee the priorities, intelligence and fidelity of successive generations to deal with the distribution of extraordinary wealth amid what may be a far different philanthropic landscape? Still, the massive wealth I’ve collected may take longer to deploy than my children live. And tomorrow’s decisions are likely to be better made by three live and well-directed brains than by a dead hand. As such, three potential successor trustees have been designated. Each is well known to my children and makes sense to all of us. They are also somewhat younger than my children. But these successors are on the wait list. I hope Susie, Howie and Peter themselves disburse all of my assets.

Mr. Buffett is well within his rights to dictate the timing of the disbursement of his estate. He has been vocal about doing so in a way that does not harm the interests of Berkshire Hathaway shareholders. Berkshire has a dual class share structure that I have written about in much detail in the past, so I will not repeat the specifics here. Suffice it to say that the Class A shares have disproportionate voting rights and Mr. Buffett’s ownership of Class A shares have allowed him to retain over 30% of the vote while donating well over half of his economic interests to charity since 2006, a subject I discussed in much detail a few years ago.

After Mr. Buffett’s death, his remaining shares will be donated to the family foundation run by his children and will be liquidated over a period of time that I suspect will not last more than fifteen years. The mechanics of this liquidation are straight forward. Mr. Buffett’s Class A shares will be converted to Class B shares prior to being sold to raise cash for philanthropic activities. By converting the Class A shares to Class B, the foundation will ensure that super-voting Class A shares are not available to other shareholders which would dilute the foundation’s vote. This will be integral to the foundation maintaining its voting power for as long as possible. My article on voting control explains the mechanics in more detail.

While it would be ghoulish to try to specify the timing with too much precision, it seems highly probable that his family foundation run by the children will have either wound down entirely by the early to mid 2040s or at least will be so depleted as to no longer be a major player when it comes to voting power. At that point, Mr. Buffett’s wish to not create a dynastic foundation will be fulfilled, but the cost will be that Berkshire will no longer have a very large shareholder controlled by Mr. Buffett’s trusted family members.

By 2045, Greg Abel will be eighty-two years old which might be considered youthful by Buffett and Munger standards but is well past retirement age for nearly all executives. Will Mr. Abel have a desire to run Berkshire Hathaway into his eighties? Will he be healthy enough to run Berkshire even if he has a desire to run it? Nothing in life is certain, but anyone who has seen the effects of old age must understand that it would take a remarkable man to remain equipped to run a company like Berkshire Hathaway well into his eighties. Mr. Abel might well be such a man, but we cannot count on it.

By the 2040s, Berkshire is very likely to have gone through its second CEO transition. Obviously, the identity of the CEO after Greg Abel is impossible to even predict at this point. It certainly will not be Ajit Jain, who is several years older than Mr. Abel, and it could very well be an executive that we have never heard of or has yet to even join Berkshire Hathaway. The best case scenario is that Mr. Abel will run Berkshire into the 2040s and a long-tenured Berkshire executive will emerge long before a transition to act as a second in command, but nothing can be assured.

For many years, I have felt confident that the CEO transition from Mr. Buffett to his direct successor will be smooth. I felt this way even before I knew that Mr. Abel was the successor and I feel even better about the transition knowing that he will be in charge. As I wrote last year, Mr. Abel has overseen important operational improvements at Berkshire’s sprawling MSR group since assuming the Vice Chairman role in 2018, and by all accounts he is an extremely skilled executive. He has also been responsible for capital allocation at Berkshire Hathaway Energy. He is steeped in Berkshire’s culture and will do all he can to uphold it. However, Mr. Abel does not control a meaningful percentage of Berkshire’s vote.

There is no way anyone can look forward two decades to determine what Berkshire’s culture will look like given all of the variables involved. However, we can project that there will not be a dominant shareholder with over 30% of the vote and the Buffett family’s role will be principally one of moral authority once the foundation’s shares are disbursed. We do not know if Mr. Buffett’s grandchildren or great-grandchildren will be included on the board, and his children are all senior citizens already. We do know that other great American companies have faltered once the founders have left the scene, even in cases where family members remained but with little voting control.

Although it is a smaller factor by far, many of Berkshire’s longtime shareholders who purchased Class A shares are getting older and nearing the point where they will be selling or giving away their interests. In many cases, Class A shareholders who are ideologically aligned with Berkshire’s culture will convert their Class A shares to Class B shares before selling or giving away smaller pieces of their holdings. In doing so, these longtime shareholders will dilute their vote.

In the past, I have advocated a potential 50-for-1 split of the Class A shares. I did so not for the typical reasons for stock splits but because a share price under $19,000 for the Class A shares would allow for gifts of one share that falls below the annual gift tax exclusion in the United States. Americans are permitted to give up to $19,000 to any individual each year (adjusted for inflation) without impairing their lifetime estate tax exemption. Many Class A shareholders convert to Class B prior to making gifts of their shares. A 50-for-1 split would allow gifts of Class A shares that fall below the exclusion. This would keep super-voting shares in the hands of people who are more likely to be aligned with Berkshire’s culture.

Mr. Buffett insists on having his foundation liquidate relatively quickly, which is obviously his prerogative, but it should be noted that a more gradual program of giving would extend the voting control of the foundation further into the future. If Berkshire begins to pay dividends in the future, a longer-lived foundation could use dividend payments to fund charitable giving rather than selling shares, thereby preserving voting control for a longer period of time. However, this is a moot point, since Mr. Buffett obviously knows this and is not inclined to risk having his wealth allocated far into future decades by people who he does not personally know and trust, which is perfectly understandable.

I will go out on a limb and make one more prediction that seems like a near certainty: Berkshire will face massive pressure to split up in the future. Wall Street bankers will be circling the company like sharks the day Mr. Buffett leaves the scene. Initially, they will be powerless to win board approval for their proposals since Howard Buffett will rightly tell them to pound sand, just as his father would want. But as the years turn to decades and the foundation’s voting power declines, the sharks will circle closer and closer.

Once Berkshire’s ownership looks like a typical mega-cap company, I think we can predict what is likely to happen. By 2050, Mr. Buffett will be long gone. Even if his children live to a very old age, their ability to protect the conglomerate structure that Mr. Buffett created over the past sixty years will be massively diminished due to the foundation’s policy of winding down its affairs sooner rather than later. Perhaps Mr. Buffett’s grandchildren or great-grandchildren will pick up the baton and serve on the board, but aside from the name and whatever moral authority they can muster, they too will have limited power.

A breakup of Berkshire Hathaway in two or three decades seems more likely than not in my opinion. This would be unfortunate because the Berkshire Hathaway playbook has worked so well for decades, but it will not necessarily be a disaster for shareholders. Wall Street may be full of sharks, but they will have limited ammunition unless the company’s performance falters. If the culture deteriorates over time, the “safety valve” for shareholders might in fact be to break up the conglomerate into units that are easier to manage.

Berkshire Hathaway’s current structure works because of a remarkable culture created by two remarkable men, and it should outlast them by many years, but probably not forever. I’m writing this partly because I would like to look back in a couple of decades and realize that I was entirely wrong!

Copyright, Disclosures, and Privacy Information

Nothing in this article constitutes investment advice and all content is subject to the copyright and disclaimer policy of The Rational Walk LLC.  The Rational Walk is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

Individuals associated with The Rational Walk own shares of Berkshire Hathaway.

— Warren Buffett’s 2018 Letter to Shareholders

For decades, the tried and true formula for a young person seeking financial security was to invest regularly in common stocks and simply stay the course. Starting with little or no net worth, a young investor’s primary “asset” is their own productive potential. By working hard, saving as much as possible, and investing well, it is possible to eventually hit the point at which one’s investments provide cash flow sufficient to reach financial independence. At that point, how you spend your time is entirely up to you.

Will this fortunate state of affairs continue in the decades to come? Nothing is certain in life, but we should not fall into the trap of idealizing the past. A young person starting out fifty years ago was faced with high inflation and a political system shaken to its core by Watergate. However, a simple method of investing in American stocks at low cost was just over the horizon. In 1976, Jack Bogle introduced the first index fund which made it easy for investors to match the broad market.

When it comes to maintaining a program of dollar cost averaging into a broad index fund, I believe that too much knowledge of business and investing can actually be a handicap. Those of us who follow business news on a daily basis process countless pieces of incoming data and must overcome many temptations to trade on our supposed “insights” while the blissfully ignorant can go on living their lives with limited stress, assuming that they rarely check quotes. For such individuals, owning a broad index fund that is made up of hundreds or thousands of companies is fine because they make no attempt to follow the businesses or track valuations.

What if valuations are at historically high levels when a young investor is starting out? Dollar cost averaging without interruption ensures that the investor will benefit from market declines when they inevitably come. It seems better to just get started even if valuations seem lofty at the outset, knowing that future investments will go further if the market declines.

It’s easy enough to preach the virtues of dollar cost averaging into a broad index fund, but the fact is that I did not pursue this approach myself. However, I did pursue a periodic investment program in Berkshire Hathaway. I first purchased shares of Berkshire exactly a quarter century ago. Since I wrote about my experience in quite a bit of detail five years ago, I will not repeat the background here. Instead, I would like to reflect on what made it possible for me to stay the course in Berkshire over such a long period of time when I probably could not have done so in an index fund.

For the “know nothing” investor, owning an index fund is an abstraction comprised of a large collection of businesses, but for a “know something” investor, there is always a temptation to look “under the hood” and examine the components or the valuation of the entire basket. This is particularly hazardous for those of us who read annual reports and proxy statements. Owning a broad index is designed to achieve average results, and even if those results will beat most active strategies, the reality is that it will include many companies that are poorly and unethically run. I have always found executive compensation practices at the typical company to be borderline nauseating. Reading proxy statements is often an exercise in intestinal fortitude. The “know nothing” investor spends his weekends on more pleasant pursuits.

In my case, it has always been easier to stay the course in individual companies rather than in broad index funds. Berkshire Hathaway is the best example of such a company. Since I have followed Berkshire for three decades and owned it for a quarter century, I have a very clear understanding of each area of the conglomerate. Equally important, I trust the man in charge and know with certainty that nothing will be done to take advantage of small shareholders. The seamless web of deserved trust that Charlie Munger often spoke about extends well beyond Berkshire’s managers to shareholders as well.

From 2000 to 2005, I regularly invested in Berkshire and still hold this core position today, although I have bought and sold shares since that time. Almost since the beginning, Berkshire represented my most important investment. During the financial crisis of 2008, I held my shares without fear, psychologically bolstered by knowing exactly what businesses my shares represented and understanding who was managing my capital. When Berkshire’s shares were left for dead in mid-2011, trading not much above book value, I did not panic because I knew what I owned. The same was true during the brief pandemic bear market.

I cannot say with complete confidence that I would have been psychologically able to stay the course if my position in Berkshire Hathaway had instead been invested in the S&P 500 during those periods. Since I was following business news on a daily basis throughout these periods, the temptation to sell at the wrong time would have been ever-present. I certainly had the intellectual knowledge needed to stay the course in a broad index, but I am not prepared to claim that I would have been able to do so. Someone who was blissfully ignorant of the news would not have had this problem.

None of this is to suggest that readers should invest in Berkshire Hathaway today or that my approach over the past quarter century should be emulated, although it did work reasonably well for me. The point that I would like to make is that the best investment program means nothing if you are not able to stay the course. I am skeptical that the typical individual involved in the investment industry is capable of simply dollar cost averaging into an index fund over long periods of time without succumbing to the temptation to made “adjustments,” probably at the worst possible time. However, I do think that most individuals outside the industry should be capable of it, provided that they ignore the financial media.

If we accept the proposition that the typical active investor underperforms the broad market, then we would have to conclude that the “know nothing” investor who dollar cost averages into a broad index will end up with better performance in the long run. This is one of the great ironies of investing!

In my case, choosing to invest in Berkshire Hathaway was the right choice, both in terms of performance and owning an asset that I could understand and identify with over long periods of time. Warren Buffett and Charlie Munger never guaranteed results, but they did guarantee that their economic outcome would match my outcome and I knew with certainty that I would be treated fairly. That knowledge allowed me to stay the course through some very tough periods.

Copyright, Disclosures, and Privacy Information

Nothing in this article constitutes investment advice and all content is subject to the copyright and disclaimer policy of The Rational Walk LLC.  The Rational Walk is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

Individuals associated with The Rational Walk own shares of Berkshire Hathaway.

Most professional investors speak endlessly about how their research process digs deep below obvious statistical data to gain differentiated insights. In a highly competitive world, it is not easy to know more than other market participants who are playing the same game. Despite the seemingly insane gyrations of markets, it is crazy to assume that your competitors are stupid. Most professional investors are intelligent, highly educated, driven, and extremely motivated to earn returns in excess of market averages.

Warren Buffett often speaks about how a good investor should assign himself a “story” to research and use the methods of investigative journalism as part of the process. A good investigative journalist is skeptical of “obvious” facts and experience often breeds a healthy cynicism regarding human motives. The same should be true for investors, but sometimes it seems as if many investors base their decisions on social media chatter and newspaper summaries.

We can see clear evidence of a certain naïveté when stock prices gyrate wildly after earnings are released. One of my pet peeves is that most companies feel a need to release an earnings press release prior to filing quarterly or annual reports. Press releases provide only a summary of earnings and usually highlight whatever “adjusted” earnings figures that management wants investors to focus on. Since full financial statements, along with notes to the financial statements, are not available, investors must make inferences regarding many important factors. Matters get even worse when managements release slide decks to be referred to during earnings calls which are often nothing more than gaslighting propaganda.

Since newspaper accounts of earnings must be published within hours of a company’s release, journalists can only refer to the press release and earnings call when attempting to summarize the situation. However, even if full quarterly or annual reports are available simultaneously, it is simply unrealistic to expect a reporter for the Wall Street Journal or Financial Times to read dozens or hundreds of pages of material prior to their deadline. While the leading newspapers often do publish longer form articles focusing on specific developments at a company, their coverage of earnings is next to useless for intelligent investors.

The unfortunate reality is that investors who are not willing to go to primary sources when researching a company are better off buying index funds. The need to go to primary sources continues after an investment decision has been made. Some attention is required for each company that is in one’s portfolio on at least a quarterly basis. The time demands can add up quickly. The “maintenance” needs for a typical 20 stock portfolio might require anywhere from one to two weeks of full time effort on a quarterly basis, and perhaps even more time when annual reports are released. This represents table stakes for professionals but can be difficult for individual investors busy with their careers in other fields.

What counts as a primary source?

Quarterly reports on Form 10-Q and annual reports on Form 10-K represent the bare minimum. In addition, investors should be reading proxy statements on a regular basis to keep track of how management and the board performs over time. Most proxy statements make for torturous reading, full of virtue signaling, excessively fancy graphics, and self-congratulatory rhetoric, but they must be read anyway. Several years of these reports must be read prior to making an initial investment. Press releases, for all of their limitations, also represent a primary source in the sense that we should study how management communicates with investors over time, with particular focus on narratives that conveniently change, metrics that are altered or dropped, and similar red flags. The same is true for conference call transcripts.

It is not logical to invest in any company without repeating this process for all of its key competitors. How can an intelligent investor evaluate a company in isolation from its competitors? It is surprising how many investors seem to form strong opinions about their holdings but have no real insight into competitors. In addition to reading the primary sources published by competitors, it is useful to consult industry publications that report statistics. For example, industry associations such as The Association of American Railroads provide useful data on all companies in an industry. While articles published by such associations are not primary sources, they usually offer much more insight than can be found in financial newspapers.

The need to go to primary sources extends well beyond investing. It is an essential skill to have in order to be an informed citizen, especially at a time when the mainstream media has lost a great deal of credibility. The problem is that there is no replacement for the mainstream media that provides information in a convenient and easily accessible package for busy people.

Elon Musk has positioned X/Twitter as an alternate source of information and he deserves credit for restoring free speech on his platform. However, there will always be a tremendous amount of noise and nonsense on any social media platform. Community Notes and similar features that allow crowdsourced “fact checking” are useful but hardly foolproof when it comes to making serious decisions, either as an investor or as a citizen. In addition, social media algorithms tend to serve up content to users based on their inferred interests which often makes a feed more like an echo chamber than a real debate.

Fortunately, it is possible to consult primary sources as a citizen just as we can as investors. If a court ruling is released, anyone can read the ruling with the judge’s reasoning rather than rely on journalists or random social media users. If a CPI report is released, there is no reason not to go to the actual press release on the Bureau of Labor Statistics website rather than read the Wall Street Journal’s coverage. The same applies to executive orders signed by the President and legislation introduced in Congress. In recent months, I have often found that going to the primary source on political matters led me to a totally different conclusion than my original “gut reaction” based on a Wall Street Journal article or chatter on social media.

Many people will claim that it takes too much time to consult primary sources.

It boils down to priorities.

Most of us are reading nearly constantly on our smartphones. In fact, it is likely that Americans have never read more words per day. The problem is that the words we read in text messages and social media posts are next to useless when it comes to being informed citizens, and in many cases, the algorithmic models make us much dumber by delivering material that only pounds in our preconceived ideas. While there is no upside if our fellow citizens become dumber given this sad state of affairs, there is potential upside for investors who consult primary sources while their competitors are reacting to mere chatter!

Copyright, Disclosures, and Privacy Information

Nothing in this article constitutes investment advice and all content is subject to the copyright and disclaimer policy of The Rational Walk LLC.  The Rational Walk is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

In the short run, it is very difficult to separate luck from skill, although it is possible to judge a new investor’s thought process. I would think more highly of an inexperienced investor with a good thought process who happened to trail the S&P 500 last year compared to a speculator who somehow quadrupled his money in Fartcoin. Unfortunately, it is very possible for an investor to have a seemingly sound process but still fail to add value in the long run. Only time truly separates skill from luck.

My New Year’s Day tradition is to review investment performance over the past year. I will admit to feeling a brief boost to my ego if I manage to outperform the S&P 500, but I know that one year proves nothing, so my analysis also looks at my cumulative track record since I began actively investing using a value-oriented approach at the beginning of 2000. The end of 2024 marked a full quarter century, so I took more time than usual to assess the results.

When Warren Buffett announced that he was closing his investment partnership in a May 1969 letter to investors, he wrote that he did not know exactly what the future would bring, but he knew that he should not be pursuing the same activities at the age of sixty that he pursued at the age of twenty. He did not want to “be totally occupied with out-pacing an investment rabbit all my life.” While I have not been anywhere close to as successful as Warren Buffett, I feel the same way today and have far less of an inclination to actively manage my own account or to write about investing in public.

I have never presented my investment results in the past because I am a very private person and I have no desire to manage money professionally. However, I have been writing about investing for nearly sixteen years, in many cases about individual companies that I have invested in. In particular, I have written hundreds of articles about Berkshire Hathaway which has long been my most important investment. Readers might naturally wonder if the person writing these articles has had decent performance in his own portfolio over the years, so I have decided to post my personal track record in this article.

Before sharing the numbers, I need to emphasize that I am not trying to attract investor capital (I would decline offers to manage money professionally) and I am not trying to sell any kind of investment service. The numbers I am reporting are pre-tax and unaudited.

The table below shows my portfolio’s performance for each year, the total return of the S&P 500, and my relative performance. From 2000 to early 2009, I was a part-time investor with a demanding full-time job. In 2009, I retired from my job to focus on investing on a full-time basis and I started The Rational Walk at the same time. Over the past few years, I have been far less active in terms of managing my capital.

I should note that from 2000 to 2008, I regularly invested (dollar cost averaged) into a 401k plan through index funds while investing the majority of my after-tax pay in individual stocks. The performance statistics include only my individual stock picks, not the results of my 401k. In early 2009, I rolled over the 401k into an IRA, liquidated the index funds, and deployed the cash into individual stock picks.

As I wrote a few years ago in Pitfalls of Early Success, I actually started my investment journey in the second half of the 1990s, but it took me a while to adopt anything resembling a coherent value-oriented approach. My exposure to Warren Buffett’s letters and Benjamin Graham’s writings eventually caused me to “see the light,” and not a moment too soon. In early 2000, I sold my stake in more speculative stocks, most notably Intel, and became an investor in Berkshire Hathaway for the first time. I have to attribute luck rather than skill to my timing in 2000. I attended my first Berkshire Hathaway annual meeting and made investments in other beaten down value stocks that were left for dead during the dot com bubble. Unfortunately, I was working with a very small amount of capital at the time!

Looking at the big picture, I am most pleased with the fact that I posted negative returns in only two years while the S&P 500 posted negative returns in six years. However, looking at the long-run obscures how agonizing the short-run can be. The 29% loss for full-year 2008 might have been less severe than the decline of the S&P 500, but this masks the fact that my portfolio declined by nearly 50% from its peak in September 2008 to its bottom in March 2009. I made the decision to leave my job in September 2008 and when I walked out the door for the last time, my portfolio and net worth was a shadow of what it had been.

It is easy to look back at a graph of the stock market starting in 2009 and think that it was a no-brainer to back up the truck and buy at the time. I assure you that it was anything but obvious that early 2009 was the time to buy. Plenty of commentators thought that we were in for a second Great Depression and bearishness was pervasive. I’m proud of the fact that I wrote intelligently about coping with market meltdowns very close to the bottom tick. But while I did not panic and sell everything, I also became extremely risk averse. This cost me dearly as I underperformed the market as it snapped back later in 2009.

No one rings the bell at market bottoms, but it is usually true that the early stages of a bull market rewards the most precariously positioned companies. As it became increasingly clear that we were not in for a major depression, the lower quality names skyrocketed while the safer companies I opted for lagged far behind. In retrospect, it is easy to say this was a mistake. However, the real mistake was probably not finding another job for another year or two. Instead, having lost half of my peak capital base, I was extremely nervous until success in the mid 2010s made it clear that I was on a sustainable course.

It would be misleading to simply compound performance for a quarter century to come up with an average annual return of 14.3% because I was working with very small sums in the early years. However, it is good to observe that my portfolio’s dollar-weighted internal rate of return has been 12.5% over the quarter century, comfortably in excess of the performance of the S&P 500 based on a popular S&P 500 return calculator:

In The Most Important Thing, Howard Marks wrote about how we can determine whether an investor is adding value. The two-by-two matrix that he presented told the story in broad strokes:

Is a quarter century enough time to separate luck from skill? I like to think that I fall into the lower right hand quadrant of a defensive investor with skill. Obviously, there is no proof of skill. A lucky streak can go on for a very long time for certain individuals, but eventually most investors operating on luck alone will blow up.

If I have a certain amount of skill, it is reasonable to believe that active investing in the future could outperform the S&P 500, especially given the elevated valuation of the index in early 2025 which is even more extreme than when I wrote about the topic in early 2024. I am not about to sell my long-held investments and put the after-tax proceeds into the S&P 500 or any other broad-based index fund. I have a good understanding of what I own and believe my portfolio provides more value than the index, especially given the power of tax-deferred compounding. My plan is to basically “coffee can” my portfolio, although I remain open to acting if any of the dozen or so companies on my watch list fall to attractive levels.

Over the next quarter century, I care much less about whether I beat the S&P 500 than achieving reasonable real after-tax returns on my portfolio. I have zero desire to fly on private jets, own a Manhattan penthouse with a view of Central Park, a second home in Jackson Hole, or to consume the items that seem to drive most people in the investing world. While many readers would shrug at my net worth, it is sufficient when compared with spending desires. Far more importantly, it provides financial freedom and security, at least in terms of security that money is capable of buying.

It is interesting to reflect on whether I would make the same choices again if I could rewind back to 2000. I don’t think that very many people are lucky enough to have no regrets. I was far too obsessively focused on money for many years, especially while I still had a full-time job. My only goal was to accumulate enough to “retire” and manage my account on a full-time basis. I did not realize that the main problem was the specific employment situation that I was in, not being employed in general. Life would have been less stressful if I had taken another job in 2009 and worked for another five years. In retrospect, I did not leave enough of a margin of safety and the financial crisis and bear market of 2008-09 hit at exactly the worst time!

For investors considering embarking on active management of their personal funds, my advice is to take the process seriously on a part-time basis for at least a full market cycle to determine if you have demonstrable skill. Accumulate enough financial resources to avoid stress even if you face a fifty percent drawdown before starting to invest on a full-time basis. Remember that money is limited in terms of its utility. There are a huge number of things in life that cannot be purchased at any price. For this reason, even if you achieve great success financially, far in excess of your needs, it would be delusional to think that all of your problems will be solved. While I do not have money problems in 2025 thanks to my investment performance, I still have problems that cannot be addressed with money at all.

Copyright, Disclosures, and Privacy Information

Nothing in this article constitutes investment advice and all content is subject to the copyright and disclaimer policy of The Rational Walk LLC.  The Rational Walk is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

This article is a new installment in a series of “mini reviews” of my reading. Previous installments in the series, along with other compilations, appear below:

2024: Q1 • Q2 • Q3 • Q4
2023: Q1 • Q2 • Q3 • Q4 
2022: Q1 • Q2 • Q3 • Q4  
2021: Q3 • Q4  
2020: Complete Reading List • Summer Book Recommendations
2019: Holiday Book Recommendations
2018: Holiday Book Recommendations

Full Listing of All Book Reviews Published Since 2009

The Plays of Euripides

Euripides lived from 480 to 406 BC and wrote approximately ninety-two plays over his long lifetime. However, only nineteen plays have survived intact, and even these plays have sections that could be later interpolations. Along with Aeschylus and Sophocles, Euripides wrote tragedies that have survived the test of time because they have retained the power to move audiences for nearly 2,500 years. Greek tragedies place characters in impossible situations that often lack any happy resolution. Despite their setting in a distant past full of mythological concepts quite alien to modern readers, we still empathize with their struggles.

During the second and third quarters, I wrote several articles about my reading of Aeschylus and Sophocles. While writing these articles helped solidify my comprehension, doing so was extremely time consuming and awkward. I am a novice reader of the classics, not an academic scholar, so my thoughts on these plays are probably amateurish at best. When it came to Euripides, I decided to continue writing, but I did so in a personal journal rather than in public. I did not reduce the intensity of my work, but not hitting the publish button meant that I could write more for myself than for others which is less time consuming.

I learned a great deal from reading the full collection of surviving plays of the Ancient Greek tragedians. Society and technology can change in major ways over the centuries, but human nature itself has barely changed. The passage of 2,500 years means very little in terms of how our minds operate and evolve. The problems that faced humans in Ancient Greece have changed in terms of the specifics, but we are still dealing with the fallen nature of mankind. Aside from learning important life lessons, these plays deserve to be read purely for entertainment value as well. Almost all of them can be read in two to three hours — about the length of a modern movie. Reading The Iliad and The Odyssey first would be very helpful since the Trojan War forms the backdrop for many plays. It is also useful to have a basic understanding of Greek Mythology.

I read the following volumes covering Euripides. In almost all cases, I read the plays more than one time. After a first reading, I sat down with my journal to read the play again in more depth. In a few cases, I read a play a third time in a different translation. Here are the books I read for this project. All of these volumes have useful introductions, a glossary, and helpful end notes:

• Medea and Other Plays. Translated by Philip Vellacott. 205 pages. This volume contains a very readable verse translation of Medea, Electra, Heracles, and Hecabe.

• Medea and Other Plays. Translated by John Davie. 206 pages. This volume contains a prose translation of Alcestis, Medea, The Children of Heracles, and Hippolytus.

• Electra and Other Plays. Translated by John Davie. 267 pages. This volume contains a prose translation of Andromache, Hecabe, Suppliant Women, Electra, and Trojan Women.

• Heracles and Other Plays. Translated by John Davie. 307 pages. This volume contains a prose translation of Heracles, Iphigenia Among the Taurians, Ion, Helen, and Cyclops.

• The Bacchae and Other Plays. Translated by John Davie. 360 pages. This volume contains a prose translation of Phoenician Women, Orestes, Bacchae, Iphigenia at Aulis, and Rhesus.

Marcus Aurelius: The Stoic Emperor

Author: Donald J. Robertson
Year of Publication: 2024
Length: 248 pages

I previously read How to Think Like a Roman Emperor by the same author when I was sent a review copy by the publisher. Since I found his previous book interesting, I decided to purchase a copy of this brief biography. Robertson does a good job providing an overview of Marcus’ life and the book included some details that I was not previously aware of. Of course, none of these secondary sources are substitutes for reading Meditations itself, but we should keep in mind that Marcus was not attempting to write an autobiography. In fact, he did not intend for Meditations, which was a personal journal, to ever be published at all!

For more information on the life of Marcus Aurelius, I would recommend reading the following articles I wrote several years ago since anything I write here would be redundant:

• How to Think Like a Roman Emperor
• Meditations by Marcus Aurelius

The Intelligent Investor, 75th Anniversary Edition

Authors: Benjamin Graham and Jason Zweig
Year of Publication: 2024
Length: 583 pages

Last month, I wrote Stepping into the River based on my impressions of reading the latest edition of The Intelligent Investor. That article was not so much a book review as a reflection on why it is important to read certain books more than once. In the case of The Intelligent Investor, it is a good idea to return to the book every few years. It is like going to the church of value investing. Circumstances change but the principles presented by Benjamin Graham are truly perennial.

Jason Zweig deserves tremendous credit for skillfully editing the book and writing original commentary that brings the concepts into the 2020s. I find it remarkable that Zweig did not reuse any of his commentary from the 2003 edition, instead opting to rewrite everything from scratch. When I read the latest edition, I also went back to read his commentary from 2003. I suggest this procedure for everyone because it illustrates how Graham’s concepts applied just as well to the aftermath of the dot com bubble as they do to today’s overheated markets.

Benjamin Graham’s words are presented as they were in his final 1973 edition and there are certainly many specifics that are outdated. Critics can latch on to these obvious cases in an effort to dismiss his entire investment philosophy, but to do so would be the height of folly. Zweig’s main service is demonstrating that the concepts remain true today. Newer investors will especially benefit from the contemporary examples.

The Trail: A Novel

Author: Ethan Gallogly
Year of Publication: 2022
Length: 364 pages

The story is about an older man who has been diagnosed with terminal cancer and has a dream of hiking the John Muir Trail in the Sierra Nevada Mountains of California. His longtime hiking buddy has already died, but he is able to convince his friend’s son to go on the hike. Due to age and frailty, they travel very slowly, taking twenty-eight days to hike around two hundred miles. The journey is both a wilderness trek as well as a spiritual journey, as a young man at the start of his adult life learns from a man approaching the end.

I have hiked the John Muir Trail several times and I found the descriptions of the trail to be accurate. The people encountered during the journey are realistic “types” of hikers I have met over the years, but the author does a good job of not applying stereotypes in a lazy manner. This is definitely not a trail guide or just an adventure story. There are historical interludes throughout the book about the history of the Sierra Nevada mountains as well as digressions into philosophy. The philosophical discussions were particularly interesting because the older man knew much about Eastern philosophy, a subject that I’m unfamiliar with.

For someone who has hiked the trail many times, the book was like a virtual journey since I know all of the places that were described very well. I suspect that readers who are at least somewhat interested in wilderness travel will like this book, although the philosophical discourses will not be to everyone’s tastes.

ESV Study Bible

Publisher: Crossway
Year of Publication: 2008
Length: 1,512 pages (Proverbs to Revelation plus essays)

I read the first half of the ESV Study Bible during the third quarter and completed the book just a few days ago. As I wrote last quarter, this Study Bible does an excellent job of explaining both the old and new testaments in a way that is understandable to the modern reader. In addition to introductions for each book, there are extensive footnotes, maps, and illustrations that greatly help with comprehension.

This project has been very time consuming, but I have no regrets. In addition to my daily readings, I spent an additional fifteen to thirty minutes writing every day. The end result is that I have a reference of my thoughts about the Bible that I can refer to in the future. I would probably recommend taking a full year for this project for most readers, although a half year is possible with a time commitment of at least ninety minutes per day.

I’ve written before than it is essential to understand the Bible if we are to have any hope of understanding Western Civilization. However, the Bible is more than a history book. In its pages, we are presented with moral standards for living a good life and we are given warnings for what to avoid. There are many obscure and seemingly obsolete teachings in the Bible that require context. This is where the ESV Study Bible really shines. The notes tell us what the authors were referring to and how it fit into the context of their times. In many cases, this helps apply the principles to modern life.

I should again note that the ESV Study Bible presents both the old and new testaments in the context of Protestant Christianity. This obviously differs from how Judaism views the Hebrew Bible but it also differs in material ways from Catholicism. The essays at the end of the Study Bible help clarify many theological points and also contrasts the evangelical Protestant viewpoint with other Christian groups. I am sure Roman Catholics and other Christians would beg to differ on many theological points, but that is what makes the study of religion interesting.

Copyright, Disclosures, and Privacy Information

Nothing in this article constitutes investment advice and all content is subject to the copyright and disclaimer policy of The Rational Walk LLC.  The Rational Walk is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.