Forbes 29.02.08, Forbes staff
Warren Buffett’s annual letter to the shareholders of Berkshire Hathaway (nyse: BRKA - news - people ) has become a delicacy of the business world.
It is savored as much by investors who have not enjoyed the 21.1% return compounded annually Buffett and his colleague Charles T. Munger have generated for their shareholders in the 43 years they have run the company, as those who have. All are looking to bite off any investment insights Buffett might reveal, and to relish his dry wit directed at what he sees as the follies of financiers and others.
The full text of his latest letter is here. Selected excerpts of his comments on managing and business follow. Selected excerpts of comments about investing, the stock market and the economy are here.
On the insurance business:
On managers and management:
Susan [Jacques] came to Borsheims 25 years ago as a $4-an-hour saleswoman. Though she lacked a managerial background, I did not hesitate to make her CEO in 1994. She’s smart, she loves the business, and she loves her associates. That beats having an MBA degree any time .... An aside: Charlie and I are not big fans of resumes. Instead, we focus on brains, passion and integrity.
On what makes a great business:
Note that American Express and Wells Fargo (nyse: WFC - news - people ) were both organized by Henry Wells and William Fargo, Amex in 1850 and Wells in 1852. P&G (nyse: PG - news - people ) and Coke began business in 1837 and 1886 respectively. Start-ups are not our game.
A terrific CEO is a huge asset for any enterprise ... But if a business requires a superstar to produce great results, the business itself cannot be deemed great.
A company that needs large increases in capital to engender its growth may well prove to be a satisfactory investment. ... It’s far better to have an ever-increasing stream of earnings with virtually no major capital requirements. Ask Microsoft (nasdaq: MSFT - news - people ) or Google (nasdaq: GOOG - news - people ).
On benchmarks for success:
On his successors:
I’ve reluctantly discarded the notion of my continuing to manage the portfolio after my death – abandoning my hope to give new meaning to the term “thinking outside the box.”