Berkshire Hathaway

My taste in financial advice runs toward the simple and the lessons I’ve learned the hard way. But I still like reading about investing/finance, and I recently read through the 2014 annual report for Berkshire Hathaway.

Given that it was the 50th anniversary of Warren Buffett taking charge of Berkshire, I have to admit that I expected more nuggets of wisdom. I did have two favorite quotes though. On page 19, Buffett writes “Huge institutional investors, viewed as a group, have long underperformed the unsophisticated index-fund investor who simply sits tight for decades.” So take it from Warren Buffett: broad-based index funds with low fees will outperform most active management. That’s something that most people saving for retirement–which should be almost everyone–should keep in mind.

The other quote I liked was on page 35: “In our view, it is madness to risk losing what you need in pursuing what you simply desire.” That’s some serious life wisdom there, not just good financial sense.

I have to say though, I was troubled by a recent report from the Center for Public Integrity and the Seattle Times. The report contends that Clayton Homes, a subsidiary of Berkshire, preys on vulnerable people in all kinds of ways, including predatory sales and lending practices. The article is long, but it’s worth reading all of it.

A follow-up post digs into Berkshire’s response to the story.

28 Responses to Berkshire Hathaway (Leave a comment)

  1. “We will never play financial Russian roulette with the funds you’ve entrusted to us, even if the metaphorical gun has 100 chambers and only one bullet. In our view, it is madness to risk losing what you need in pursuing what you simply desire.”

    Lesson: Don’t tell your wife that she’s blocking your view of the cricket

  2. Hi Matt,

    Great article! Thank you for clarifying the chaos so that I can actually make a financial planning decision. I always felt like financial planners would have no interest in helping someone with a small starting investment. I’ve never trusted them. I made the yacht connection between the planners and the investors in my mind. The stock market always seemed like a scam to me. After watching documentaries about the most recent financial melt down I really don’t trust stock brokers or financial planners.

    I love index funds as you’ve described them. I love the municipal bonds as you’ve described them.

    I started reading Forbes cover to cover for approximately 10 years starting in high school. I also starting working (baby sitting, cleaning houses, washing cars, mowing lawns) when I was 11 years old. I had no personal time or work life balance from 11 years old until now and still work nearly every working moment nearly every day of the year. Coming from an extremely poor family and living with different families as a child created lots of instability. I didn’t have a parent who gave me any kind of financial advice.

    I wish someone had told me to go in the military or concentrate on my grades so I could get a scholarship rather than working every waking hour of my life and 3 jobs in the summer trying to feed and cloth myself in elementary school, middle school, high school and put myself through college. I had no idea that I had any options other than working very second of my life because I didn’t have time to talk to anyone about these matters and didn’t research what I didn’t know.

    I mention this because even though I was reading all of those articles in Forbes and falling in love with companies and stocks I had virtually no money to invest. On top of that I felt paralyzed by the random disappearance in the value of a stock or the entire stock market as I witnessed recessions and the stock market collapse over the decades. I would, like a Fantasy Football Player, choose stocks as I read Forbes and imagine buying x number of dollars only to find out that the stocks went up astronomically or nearly lost all of their value. My favorite stocks were now out of my league at astronomical prices per share. The losers were valueless and the thought of my hard earned money vanishing was horrifying.

    Clearly I should have been reading the books you and other commenters have mentioned rather than Forbes. The more I read Forbes the more confused I was and the more I viewed the stock market as you described (a sideshow designed to separate a person from their money).

    Eventually I stopped reading Forbes. From time to time I think I need to do something about my financial future and start reading information only to become more confused because of all of the options. Thank you for sorting this mess out for me. I feel safe with the index funds now. I love the idea of tax free investing as you’ve described.

    My question and concern is about municipal bonds. What if a state goes bankrupt? The news at one point said California might go bankrupt. Of course nothing is 100% safe, but I over analyze and then make no decision and it’s time for me to take action. All of the invested money in a municipal bond for a state could vanish if that state went bankrupt, right? I hate risk. I’m not a gambler. I like and trust real estate. It doesn’t just disappear or or loose all of it’s value when I’m sleeping.

    My other question is that I read that Google was changing the algorithm for mobile readers. Your blog doesn’t seem to convert to mobile (I can’t enlarge the type without scrolling the lines constantly from left to right). Are you going to change that so you won’t be penalized by the new Google algorithm or should I skip worrying about that?

    I have a blogger site and have the same mobile issue that I have when reading your blog (having to scroll from side which is annoying). It’s been so long since I signed in to be able to comment on your blog I don’t recall where your blog is, but I think it’s WordPress?

    So my next question is why you have a WordPress blog instead of Blogger when you’re a Googler? Every web designer that I talk to loves WordPress but it was so much more complicated to set up than Blogger so I haven’t changed to WordPress.

    I feel like Google ranks my Blogger blog as not as good as a WordPress blog. I also hear that WordPress is better than Blgger for SEO when I go to work conventions and listen to speakers on the topic.

    Your thoughts?

    • Hello my main blog is on Blogger and it ranks well for the most part. The thing with Blogger is that you don’t have as much control over it as you do on a Self Hosted WordPress Blog and one of the main reasons for this is that it is also open source. Now of course Blogger could be improved with a number of things and they do improve them over time such as before we were not even able to add in meta data, which we now can and a few other things.

      I suggest you try using a custom Blogger theme and write loads of content and if you are linking out to use nofollow links ect.

      The reason why Matt uses WordPress instead of Blogger has been a mystery for the ages and some toss back and forth the idea behind his reasons, but I think for the most part Matt isn’t really about Organic SEO on his own blog because people are looking for him anyways and the other reason is that he also likes having full control over his blog, which isn’t work related as he states this is his personal blog.

      I feel that the only reason why WP ranks better though is because of all of the customization you can do with it such as add in SEO Plugins, edit the code easy and create SEO Friendly Urls ect, but none the less you can rank a Blogger on the first page for hard to rank terms I know because I have done it… of course via White Hat SEO Matt 🙂

      I hope this helps you in some way in my point of view and of course I can not speak for Matt himself, but feel that maybe this will help you understand a little bit better.

  3. Whoops, was trying to comment on your financial blog that I just read and your comment section wouldn’t let me comment (said I might be spam?). I backed out and tried again but ended up commenting on this financial post instead of the one I meant to (Lessons I’ve Learned the Hard Way). Sorry about that.

  4. Wow, that Berkshire Hathaway article about Clayton Homes is really disturbing. It up ends Warren Buffett’s image as rock solid dependable and trust worthy. What a disappointment. And those poor people who have been taken advantage of! All of those sham businesses owned by Clayton Homes is misleading. Disgraceful and unconscionable!

  5. Great quotes, something I will surely hold onto for awhile.

  6. billybob linux

    This quote from your post: “In our view, it is madness to risk losing what you need in pursuing what you simply desire.” should probably be more widely used as it is a good form of reality check summed up in a few words. I guess if you can’t afford to lose it then don’t risk it.

    I am not a finance expert but my view would be if someone does have the money to put into something for a return in the longer term then maybe something more tangible such as property or land rather than stocks and shares as such.
    I have a friend who collects limited edition and vintage whisky, it is his hobby and he enjoys visiting distilleries here (OK this is Scotland so there are a few!) and it makes a talking point when this or that whisky is brought out with the full story about it.

    As for retirement many people here have a company pension plan or plans of some sort but those schemes are for the long haul anyway.

  7. Index funds are all very well but there are some markets where good active funds beat trackers and have done so for decades. Japan and the UK are two examples.

    Index funds must hold all the stocks in the index so you would have had to buy enron or the Banks when an active fund can dump a stock it feels is to risky – its noticeable one of my funds dumped Tesco before it crashed which mr Buffet caught out on.

    Index funds also can never go 100% invested as they have to retain cash so they will always underperform compared to a 100% invested closed ended fund.

    Also ask yourself where do the Rosthchilds keep their money its not in a FSE 100 tracker but in an Active Fund (RIT Capital Partners)

  8. Great article!

    Thanks to Matt

  9. “Nine hard-won lessons about money and investing” is an excellent article. On the other hand, I am surprised by what you wrote just above. But I grew up in a very poor family and a very bad neighborhood, so I’m possibly more sensitive to some issues.

    Anyway, can you really expect from someone that he becomes a multimillionaire without harming a whole lot of people across the world in the process? It’s mathematically impossible. Half the world just survive on less than two dollars a day. In my home country, a Western European country, 1 person among 10 “lives” below the poverty line (8% in 2011, 10% in 2015). In the US, it’s 16% of the population.

    How, “if All the Guys in the World…” But Paul Fort is out of print, and the word of the day is everything’s for sale.

  10. I just hope this Warren Buffet quote, “Huge institutional investors, viewed as a group, have long underperformed the unsophisticated index-fund investor who simply sits tight for decades.” is not taken literally by big investors, I think core lesson is to invest wise and keep patient and do not rush into any thing in short term.

  11. I’m not sure I totally agree with your assessment of Buffett’s position, “In our view, it is madness to risk losing what you need in pursuing what you simply desire.”

    Like Maya, I come from a modest background, and was in foster care from 10th-12th grade. Unlike Maya, I kept my grades up and I got into to Penn/undergrad Wharton where I studied business because this seemed like the best way I could guarantee I’d be employable after college. However, I ended up starting a business right after I graduated (which is trendy now, but wasn’t in 1990). It could be argued that I desired to do this, even though I needed to pay my bills.

    After bouncing between odd jobs for 18th months, I scratched the itch of desire again, and started another business. It was very hand to mouth for 7 years, but I eventually sold the business for enough to have a lot financial flexibility, and while I don’t have enough to retire or buy yachts, I have enough to fund semi-expensive habits like ice skating lessons and trips to Europe, as well s fund my son’s college education. Further, I am still self employed, so I have control over how I spend my time.

    Everyone in my family told me I was crazy when I started down this path, and while there was a 90% chance I’d fail and I faced many bleak moments, the fact of the matter is if I hadn’t taken a risk and chased my desires, I wouldn’t be as secure in meeting my needs or happy now.

  12. Thanks for this Matt. I just started investing. I know the risk but I am for long-term. For me, investing is the only way where I can retire having enough money for my golden years.

  13. eIf you have a question about your site specifically or a general question about search, your best bet is to post in our Webmaster Help Forum linked from
    If you comment, please use your personal name, not your business name. Business names can sound salesy or spammy, and I would like to try people leaving their actual name instead.

  14. Great advice.

  15. Hi Matt,

    If you are reading BRK reports, than you must read The Intelligent Investor
    by Benjamin Graham ! one of influencing books !


  16. Wow, I guess I didn’t realize how much Berkshire Hathaway had its hands in: energy, real estate, news agencies, manufacturing… Reading through that report made me wonder how in the world any one person can keep up with all of those enough to make effective executive decisions.

    Here’s one of my favorite quotes from that report: “You can’t get rich trading a hundred-dollar bill for eight tens.” Seems like legit advice to me.

    Regarding simple financial advice, I’ve always enjoyed listening to Dave Ramsey and Clarke Howard, both of whom find themselves addressing “common sense”-related problems that indicate that there is a demand in American society for sound financial decision making that’s based upon reason and intelligence rather than hype and impulse.

    Thanks for the reference to the annual report. I’ve never read through something like that before, but it’s actually pretty stimulating reading, and it will have some impact on my attitude towards investing.


  17. Haha, I work for a subsidiary of Berkshire and should probably do some additional research. I do, however, love the second quote and need to read more of Buffett’s writings as well. So much to do!

  18. Hi Matt

    Where are you now ? Why not have new article this time ?

  19. Hi Matt,
    I am Reza from Iran, I have two questions:
    First question: Why the numbers of click counts on Google reports are different. For example daily click counts of a website on search analytics report of webmaster tools is 655 and in search queries reports is 260, Also we have different number on Google Analytics.

    Second question: why google shows nofollow links in webmaster tools? Are these links affects on Google’s SERP?

    Thank you

  20. Hi Matt,

    I recently read on some reputed SEO blogs that you’re working on a new algo. Is the news true? This new algo will be targeted to which kind of websites.

  21. “In our view, it is madness to risk losing what you need in pursuing what you simply desire.” I think I can learn a thing or two from this 😉

  22. Warren buffet is an icon in the investment industry, I saw an interview with him and bill gates both had some very wise words. In regards to the subsidiary companies not doing the right thing unfortunately you will get that in any industry just needs tighter control. I run my own small air conditioning company in Australia and shake my head at some of the stories your hear that are told to consumers. Run a strong honest business with values and you will succeed, I think buffet may have even said that in one of his interviews thanks for taking the time to share your views.

  23. Buffett is a capitalist first and he buys entire companies. What works for Buffett won’t work for the gerernal public buying mutuals, ETFs, indexes, bonds from Wall Street. About the last 6 months we have seen Berkshire Hathaway real estate signs all over. Page 125 of the 2014 Annual Report lists companies they own. Clayton was a darling of investment clubs, even though what you said above was known. If you think Clayton is bad, you should read about SCI. Bloomberg had a story, “Is Funeral Home Chain SCI’s Growth Coming at the Expense of Mourners?”. Why would Wall Street be fighting “fudiciary responsibility” so hard, if they actually wanted to help us save/invest for our future and retirement. I wish more people would educate themselves about saving/investing/Wall Street. The thing that worries me the most, someone is suppose to be a watchdog for corporate activity, but in a deregulatory environment those public institutions are weakened. Individuals are buying mutual funds or indexes or watching charts and graphs, so they aren’t reading annual reports and SEC filings, and money managers just want to make money not be a fiduciary. I have been following Patagonia’s founder Yvon Chouinard. Looking for companies that do good and make a profit, like Dr. Bronner, The Body Shop (trade not aid), SAS (Jim Goodnight). Search for “the sustainable economy”. There are a whole host of folks working on a different corporate structure and defining what “shareholder” means (see Lynn Stouts book reference below). I shop at Costco over Walmart. I have been reading about how Amazon treats people in their warehouses. Darn it … 🙂

    The best you can do, I think, is keep it simple and keep fees lows. The only two companies I know, out of many, are Vanguard and Dimensional (both referenced in Bernstein’s book). The minimal math you should
    know is time value of money, rule of 72, and check out Prof Bartlett’s presentation on Arithmetic, Population, and Energy ( My manager read AAII and when I asked about it, he brought me a stack to read. I joined many years ago. There is also BetterInvesting if you like clubs. I don’t recommend either if you want some semblance of a life outside watching the stock market. But of the two, AAII is probably better or just follow Lowell Herr below.

    Some financial resources:
    William Bernstein: “Four Pillars of Investing” or “The intelligent Asset Allocator”
    These books contain the same material. “Four Pillars” was written second and is suppose to have easier math.
    Lowell Herr (retired physics prof, NAIC club investor):
    Benjamin Graham: “The intelligent investor”
    Carl Richards: “The One-Page Financial Plan”
    Lynn Stout: “The shareholder value myth”
    John Bogle: Everything
    Maggie Mahar: “Bull: A History of the Boom and Bust”, or Nassim Taleb: “The Black Swan”, or
    Burton Malkiel: “A Random Walk Down Wall Street”.
    Frontline:; Also on Frontline Bigger than Enron,
    The warning: Brooksley Born, Money, Power and Wall Street or Nova’s Trillion Dollar Debt.

    PS: I found your blog through a link on tutsplus. I was trying to find your quote on h1 negative margins.

  24. Hi Matt, where have you been now? I missed your fresh great tips about SEO

  25. Hello matt! Thanks for the heads up. It’s been a while! Hope to hear from you soon. On the topic of this article, slow and steady seems the way to go, and always know when to walk away from the table. The New York Times just reported on September 8th, 2015 that Buffett Says Berkshire Hathaway Still Has Cash to Invest, even after the $32 billion acquisition of Precision Castparts, the biggest of his career. $66.6 billion cash was on hand at the end of the second quarter for Berkshire Hathaway. Buffet also claimed that there would never be less than $20 billion cash available. They have also upped their stake in Phillips 66 by 3.5 million shares, resulting in the stock value increase of 0.43% ~ Ethan Kolasinski