Poetry Matters by Warren Buffett

The highlights of Berkshire Hathaway’s 2017 Annual Report:

– Berkshire’s gain in net worth during 2017 was $65.3B; only $36B came from Berkshire’s operations. The remaining $29B was delivered to us in December when Congress rewrote the US Tax Code.

– “Don’t ask the barber whether you need a haircut,” and “spreadsheets never disappoint”.

– “Charlie and I sleep well”; both of us believe it is insane to risk what you have and need in order to obtain what you don’t need.

– Prior to 2017, Berkshire had recorded 14 consecutive years of underwriting profits. In 2017, it lost $3.2B pre-tax from underwriting.

– Berkshire’s losses from the three hurricanes that hit Texas, Florida and Puerto Rico are estimated to be $3B; keep in mind the words of VJ Dowling: “the loss reserves of an insurer are similar to a self-graded exam. Ignorance, wishful thinking or, occasionally, downright fraud can deliver inaccurate figures about an insurer’s financial condition for a very long time.”

– On a good note – relatively speaking – the $2B net cost from the three hurricanes reduced Berkshire’s GAAP net worth by less than 1%. Elsewhere in the reinsurance industry there were many companies that suffered losses in net worth ranging from 7% to more than 15%.

– “This is a business in which there are no trade secrets, patents, or locational advantages. What counts are brains and capital. The managers of our various insurance companies supply the brains and Berkshire provides the capital.”

– Competition and technology may erode our business franchises and result in lower earnings.

– And then there’s this poem – written by Rudyard Kipling:

“If you can keep your head when all about you are losing theirs…

If you can wait and not be tired by waiting…

If you can think – and not make thoughts your aim…

If you can trust yourself when all men doubt you…

Yours is the Earth and everything that’s in it.”