Berkshire Hathaway 1998 Annual Report Download - page 57

56
In June 1996, Berkshire's Chairman, Warren E. Buffett, issued a booklet entitled "An Owner's Manual" to
Berkshire's Class A and Class B shareholders. The booklet was reprinted in January 1999 and distributed to all of
Berkshire’s shareholders. The purpose of the manual was to explain Berkshire's broad economic principles of
operation. The Owner's Manual is reproduced on this and the following eight pages.
____________________________________________________________________
INTRODUCTION
Augmented by the General Re merger, Berkshire’s shareholder count has doubled in the past year to about
250,000. Charlie Munger, Berkshire's Vice Chairman and my partner, and I welcome each of you. As a further
greeting, we have prepared a second printing of this booklet to help you understand our business, goals, philosophy
and limitations.
These pages are aimed at explaining our broad principles of operation, not at giving you detail about
Berkshire's many businesses. For more detail and a continuing update on our progress, you should look to our annual
reports. We will be happy to send a copy of our 1997 report to any shareholder requesting it. A great deal of
additional information, including our 1977-1996 annual letters, is available at our Internet site:
www.berkshirehathaway.com.
OWNER-RELATED BUSINESS PRINCIPLES
At the time of the Blue Chip merger in 1983, I set down 13 owner-related business principles that I thought
would help new shareholders understand our managerial approach. As is appropriate for "principles," all 13 remain
alive and well today, and they are stated here in italics. A few words have been changed to bring them up-to-date and
to each I've added a short commentary.
1. Although our form is corporate, our attitude is partnership. Charlie Munger and I think of our
shareholders as owner-partners, and of ourselves as managing partners. (Because of the size of our
shareholdings we are also, for better or worse, controlling partners.) We do not view the company
itself as the ultimate owner of our business assets but instead view the company as a conduit through
which our shareholders own the assets.
Charlie and I hope that you do not think of yourself as merely owning a piece of paper whose price
wiggles around daily and that is a candidate for sale when some economic or political event makes
you nervous. We hope you instead visualize yourself as a part owner of a business that you expect
to stay with indefinitely, much as you might if you owned a farm or apartment house in partnership
with members of your family. For our part, we do not view Berkshire shareholders as faceless
members of an ever-shifting crowd, but rather as co-venturers who have entrusted their funds to us
for what may well turn out to be the remainder of their lives.
The evidence suggests that most Berkshire shareholders have indeed embraced this long-term
partnership concept. The annual percentage turnover in Berkshire's shares is a small fraction of that
occurring in the stocks of other major American corporations, even when the shares I own are
excluded from the calculation.
In effect, our shareholders behave in respect to their Berkshire stock much as Berkshire itself
behaves in respect to companies in which it has an investment. As owners of, say, Coca-Cola or
Gillette shares, we think of Berkshire as being a non-managing partner in two extraordinary
businesses, in which we measure our success by the long-term progress of the companies rather than
by the month-to-month movements of their stocks. In fact, we would not care in the least if several
years went by in which there was no trading, or quotation of prices, in the stocks of those
companies. If we have good long-term expectations, short-term price changes are meaningless for
us except to the extent they offer us an opportunity to increase our ownership at an attractive price.
*Copyright © 1996 By Warren E. Buffett
All Rights Reserved