DJX

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1960.2 61.1 61.7 62.1 62.7 62.12 63.1 63.7 63.11 63.12 64.1 64.7 65.1 65.7 65.11 66.1 66.7 66.11 67.1 67.7 67.10 67.11 68.1 68.7 68.11 69.1 69.5 Brk
1959.2.11 (this is the 3rd year in operations) 原文 BUFFETT PARTNER LETTERS DJIA
The general stock market in 1958
I make no attempt to forecast the general market - my efforts are devoted to finding undervalued securities. However,I do believe that widespread public belief in the inevitability of profits from investment in stocks will lead to eventual trouble. 我不试图预测大盘，而是致力于发现被低估的证券。我认为大众普遍的投资必赚信念终究会导致麻烦。

Results in 1958
The DJIA advanced from 435 to 583 which,after adding back dividends of about 20 points,gave an overall gain of 38.5% from the Dow-Jones unit.The five partnerships that operated throughout the entire year obtained reults averaging slightly better than 38.5%.......I will continue to forecast that our results will be above average in a declining or level market,but it will be all we can do to keep pace with a rising market. 我继续预计我们的业绩：当大盘下降或走平时，将超越大盘；当大盘走牛时，能跟大盘同步。

A typical situation
Last year I referred to our largest holding which comprised 10% to 20% of the assets of the various partnerships.......This stock was the Commonwealth Trust Co. of Union City,New Jersey. At the time we started to purchase the stock,it had an intrinsic value of $125 per share computed on a conservative basis.However,for good reasons,it paid no cash dividend at all despite earnings of about $10 per share,which was largely responsible for a depressed price of about $50 per share.So here we had a very well managed bank with substantial earning power selling at a large discount from intrinsic value. Management was friendly to us as a new shareholder and risk of ultimate loss seem minimal. 去年我提及的，我们的最大持股占合伙人资产的10%到20%，是一家管理良好的银行，保守估计内在价值为125美元/股,利润10美元/股，由于不分红（而大多数股票都分红），市价低至50美元/股。PE低至5倍，合理价值PE在12倍．

Commonwealth was 25.5% owned by a larger bank(Commonwealth had assets of about $50 million -- about half the size of the First National or U.S. National in Omaha),which had desired a merger for many years. Such a merger was prevented for personal resons,but there was evidence that this situation would not continue indefinitely. Thus we had a combination of:(1) Very strong defensive characteristics;(2) Good solid value building up at a satisfactory pace and;(3) Evidence to the effect that eventually this value would be unlocked although it might be one year or ten years. If the latter were true,the value would presumably have been built up to a considerably larger figure,say, $250 per share. 若被并购，该股票可能被锁1--10年，若等10年才能套现，价钱应有250美元/股。1.175^10=5.

Over a period of a year or so,we were successful in obtaining about 12% of the bank at a price averaging about $51 per share. Obviously it was definitely to our advantage to have the stock remain dormant in price. Our block of stock increased in value as its size grew,particully after we become the second largest stockholder with sufficient voting power to warrant consultation on any merger proposal. Commonwealth only had about 300 stockholders and probably averaged two trades or so per month,......通过1年左右的购买，我们累积了大约12%的股份，均价51美元/股。作为第2大股东能参与合并决策。Commonwealth 约有300名股东，平均每月2笔交易。 Unfortunately we did run into some competition on buying,which raised the price to about $65 where we were neither buyers nor sellers. Very small buying orders can create price changes of this magnitude in an inactive stock,which explains the importance of not having any "Leakage" regarding our portfolio holdings. 不幸地是，有买家竞争把股价推高到65美元/股，我们既不买也不卖。

Late in the year we were successful in finding a special situation where we could become the Largest holders at an attractive price,so we sold our block of Commonwealth,obtaining $80 per share although the quote market was about 20% lower at the time. 去年末，我们发现了以吸引人的价格成为一家公司最大股东的机会，我们将Commonwealth以80美元/股卖出。

It is obvious that we could still be sitting with a $50 stock patiently buying in dribs and drabs,and i would be quite happy with such a program although our performance relative to the market last year would have looked poor. ......At $80 with intrinsic value of $135 is quite different from a price of $50 with an intrinsic value of $125,and it seemed to me that our capital could bet be employed in the situation which replaced it.This new situation is somewhat larger than Commonwealth and represents about 25% of the assets of the various partnerships.......买$50： $125，卖$80： $135，重新配置资金，我们新的最大持股约占合伙人资产的25%

A current situation 现状
The higher the level of the market,the fewer the undervalued securities and I am finding some difficulty in occuring an adequate number of attractive investments. I would prefer to increase the percentage of assets in work-outs,but these are very difficult to find on the right terms. To the extent possible,therefore, I am attempting to create my own work-outs by acquiring large positions in several undervalued securities. 市价高涨，难以发现被低估的证券。宁愿增加套利的百分比，但时机难以把握。在可能的范围内，我尝试着高比例购入几只被低估的证券来套利。

1960.02.20
The general stock market in 1959
Despite DJIA showed an overall gain of 19.9%,more stocks declined than advanced on the NYSE during the year by a margin of 710 to 628. Both the Dow-Jones Railroad Average and Utility Average registered declines. Both the Dow-Jones Railroad Average and Utility Average registered declines.道琼斯工业指数年增19.9%，纽约证券交易所涨跌股比率却是628：710。Tri-continental Corp.,the nation's largest closed-end investment company(total asset $400 million) had an overall gain of about 5.7% for the year.......Massachusetts Investors Trust,the country's largest mutual fund with assets of $1.5 billon showed an overall gain of a about 9% for the year. 美国最大的封闭式基金，资产4亿美元，年利润率5.7%；美国最大的开放式基金，资产15亿美元，年利润率9%；Perhaps other standards of valuation are evolving which will permanently replace the old standards. I don't think so. 价值标准变了吗？我认为不。

Results in 1959
The six partnerships that operated throughout the year achieved overall net gains ranging from 22.3% to 30.0%,and averaging about 25.9%. 6个合伙人年增25.9%

The present portfolio:
Presently,this investment is about 35% of assets. This is an unusually large percentage,but has been made for strong reasons. In effect,this Company is partially an investment trust owning some thirty or forty other securities of high quality. Our investment was made and is carried at a substantial diacount from asset value based on market value of their securities and a conservative appraisal of the operating business. 我们资产的35%持有1只股票！我们买入价是：该公司3、40只证券的市场价和保守评估的营运资产价格之和的较大折扣价。We are the Company's largest stockholder by a consider able margin,and the two other large holders agree with our idea. The probability is extremely high that the performance of this investment will be superior to that of the general market until its disposition,and i am hopeful that this will take place this year. 我们是该公司压倒性的第一大股东，另2大股东与我们意见一致。我们“配置”（估计在今年）该公司的利润率将高于大盘涨幅。The remaining 65% of the portfolio is in securities which i consider undervalued and work-out operations.To the extent possible,i continue to attempt to invest in situations at least partially insulated from the behavior of the general market. 剩余的65%资产，买低估的股票和套利，尽可能尝试与大盘绝缘的（至少部分的）投资。

1961.01.30
A General Stock Market in 1960:
A year ago, I commented on the somewhat faulty picture presented in 1959 by the Dow-Jones Industrial Average which had advanced from 583 to 679, or 16.4%. Although practically all investment companies showed gains for that year, less than 10% of them were able to match or better the record of the Industrial Average. The Dow-Jones Utility Average had a small decline and the Railroad Average recorded a substantial one. 1959年，所有投资公司中，胜过道琼斯工业指数年增长率19.9%（16.4%+红利率）的少于10%。道琼斯公用事业指数小跌，道琼斯铁路指数跌得较多。

In 1960, the picture was revered. The Industrial Average declined from 679 to 616, or 9.3%. Adding back the dividends which would have been received through the ownership of the Average still left it with an overall loss of 6.3%. On the other hand, the Utility Average showed a good gain and, while all the results are not now available, my guess is that about 90% of all investment companies out-performed the Industrial Average. The majority of investment companies appear to have ended the year with overall results in the range of plus or minus 5%. On the New York Stock Exchange, 653 common stocks registered losses for the year while 404 showed gains. 1960年,所有投资公司中,胜过道琼斯工业指数年下跌6.3%（9.3%-红利率）的估计约90%,道琼斯公用事业指数涨得较多。纽约证券交易所涨跌股比率是404：653。

Results in 1960: 经营结果
My continual objective in managing partnership funds is to achieve a long-term performance record superior to that of the Industrial Average. I believe this Average, over a period of years, will more or less parallel the results of leading investment companies. Unless we do achieve this superior performance there is no reason for existence of the partnerships.如果我们不能超越道指,就没有存在的理由。

However, I have pointed out that any superior record which we might accomplish should not be expected to be evidence by a relatively constant advantage in performance compared to the Average. Rather it is likely that if such an advantage is achieved, it will be through better-than-average performance in stable or declining markets and average, or perhaps even poorer-than-average performance in rising markets.

I would consider a year in which we declined 15% and the Average 30% to be much superior to a year when both we and the Average advanced 20%. Over a period of time there are going to be good and bad years; there is nothing to be gained by getting enthused or depressed about the sequence in which they occur. The important thing is to be beating par; a four on a par three hole is not as good as a five on a par five hole and it is unrealistic to assume we are not going to have our share of both par three's and par five's. 重要的是超越平均。

The above dose of philosophy is being dispensed since we have a number of new partners this year and I want to make sure they understand my objectives, my measure of attainment of these objectives, and some of my known limitations.

With this background it is not unexpected that 1960 was a better-than-average year for us. As contrasted with an overall loss of 6.2% for the industrial Average, we had a 22.8% gain for the seven partnerships operating throughout the year. Our results for the four complete years of partnership operation after expenses but before interest to limited partners or allocation to the general partner are:

年份
Partnerships Operating Entire Year
Partnership Gain合伙人年利润率(向总合伙人分配前)
Dow-Jones Gain道琼斯指数年增长率

1957
共3 群合伙人
10.4%
-8.4%

1958
共5 群合伙人
40.9%
38.5%

1959
共6 群合伙人
25.9%
19.9%

1960
共7 群合伙人
22.8%
-6.3%

It should be emphasized again that these are the net results to the partnership; the net results to the limited partners would depend on the partnership agreement that they had selected.

The overall gain or loss is computed on a market to market basis. After allowing for any money added or withdrawn, such a method gives results based upon what would have been realized upon liquidation of the partnership at the beginning of the year and what would have been realized upon liquidation and is different, of course, from our tax results which value securities at cost and realize gains or losses only when securities are actually sold. 结算损益与应纳税损益是不同的。

On a compound basis, the cumulative results have been: 累积业绩：

Year
Partnership Gain 合伙人复合年利润率
Dow-Jones Gain 道琼斯指数复合年增长率

1957
10.4%
-8.4%

1958
55.6%
26.9%

1959
95.9%
52.2%

1960
140.6%
42.6%

Although four years is entirely too short a period from which to make deductions, what evidence there is points toward confirming the preposition that our results should be relatively better in moderately declining or static markets. To the extent that this is true, it indicates that our portfolio may be more conservatively, although decidedly less conventionally, invested than if we owned “blue-chip” securities. During a strongly rising market for the latter, we might have real difficulty in matching their performance.

Multiplicity of Partnerships: 多群合伙人的多样性
A preceding table shows that the family is growing. There has been no partnership which has had a consistently superior or inferior record compared to our group average, but there has been some variance each year despite my efforts to keep all partnerships invested in the same securities and in about the same proportions. This variation, of course, could be eliminated by combining the present partnerships into one large partnership. Such a move would also eliminate much detail and a moderate amount of expense.各群合伙人复合年利润率与上表显示的平均数有所差异,合并能消除差异,减少成本。

Frankly, I am hopeful of doing something along this line in the next few years. The problem is that various partners have expressed preferences for varying partnership arrangements. Nothing will be done without unanimous consent of partners. 要合伙人们一致同意，才能实行。

Advance Payments: 预付投资款
Several partners have inquired about adding money during the year to their partnership. Although an exception has been made, it is too difficult to amend partnership agreements during mid-year where we have more than one family represented among the limited partners. Therefore, in mixed partnerships additional interest can only be acquired at the end of the year.

We do accept advance payments during the year toward partnership interest and pay interest at 6% on this payment from the time received until the end of the year. At that time, subject to amendment of the agreement by the partners, the payment plus interest is added to the partnership capital and thereafter participates in profits and losses.

Sanborn Map: 我们35%的资金投到了这家公司
Last year mention was made of an investment which accounted for a very high and unusual proportion (35%) of our new assets along with the comment that I had some hope this investment would be concluded in 1960. This hope materialized. The history of an investment of this magnitude may be of interest you.

Sanborn Map Co. is engaged in the publication and continuous revision of extremely detailed maps of all cities in the United States. For example, the volumes mapping Omaha would weigh perhaps fifty pounds and provide minute details on each structure. The map would be revised by the paste-over method of showing new construction, changed occupancy, new fire protected facilities, changed structural materials, etc. These revisions would be done approximately annually and a new map would be published every twenty or thirty years when further paste-over became impractical. The cost of keeping the map revised to the Omaha customer would run around $100 a year. 公司Sanborn提供全美所有城市的详细地图服务。

This detailed information showing diameter of water remains underlying streets, location of fire hydrants, composition of roof, etc., was primarily of use to fire insurance companies. Their underwriting departments, located in a central office, could evaluate business by agents nationally. The theory was that “a picture was worth a thousand words” and such evaluation would decide whether the risk was properly rated, the degree conflagration exposure in an area, advisable reinsurance procedure, etc. The bulk of Sanborn's business was done with about thirty insurance companies although maps were also sold to customers outside the insurance industry such as public utilities, mortgage companies, and taxing authorities. 主要客户为大约30家保险公司，也为共用事业、抵押贷款公司、税收当局等提供详细地图服务。

For seventy-five years the business operated in a more or less monopolistic manner with profits realized in every year accompanied by almost complete immunity to recession and lack of need for any sales effort. In the earlier years of the business, the insurance industry became fearful that Sanborn's profits would become too great and placed a number of prominent insurance men on Sanborn's board of directors to acts in a watch-dog capacity. 该公司过去75年的经营以或多或少的方式获取垄断利润，不惧萧条，无需营销。 保险业惧怕Sanborn制图公司盈利过多，派了很多人加入Sanborn董事会，以监控Sanborn的盈利能力。

In the early 1950's, a competitive method of underwriting known as “carding” made inroads on Sanborn's business and after-tax profits of the map business fell from an average annual level of over $500,000 in the late 1930's to under $100,000 in 1958 and 1959. Considering the upward bias in the economy during this period, this amounted to an almost complete elimination of what had been sizable, stable earning power. 1950年代，保险业“carding”竞争方式严重消减了Sanborn的利润，Sanborn从1930年代年盈利50万美元减少到1958、59年10万美元。

However, during the early 1930's Sanborn had begun to accumulate an investment portfolio. There were no capital requirements to the business so that any retained earning could be devoted to this project. Over a period of time about $2.5 million was invested, roughly half in bonds and half in stocks. Thus, in the last decade particularly, the investment portfolio blossomed while the operating map business wilted. 1930年代Sanborn就开始累积有价证券。特别是近10年，当制图业务萎靡不振之际，有价证券投资硕果累累。

Let me give you some idea of the extreme divergence of these two factors. In 1938 when the Dow-Jones Industrial Average was in the 100-120 range, Sanborn sold at $110 per share. In 1958 with the Average in the 550 area, Sanborn sold at $45 per share. Yet during that same period the value of the Sanborn investment portfolio increased from about $20 per share to $65 per share. This means, in effect, that the buyer from Sanborn's stock in 1938 was placing a positive valuation of $90 per share on the map business. ($110 less than the $20 value of the investment, unrelated to the map business) in a year of depressed business and stock market conditions. In the tremendously more vigorous climate of 1958 the same map business was evaluated at a minus $20 with the buyer of the stock unwilling to pay more than 70 cents on the dollar for the investment portfolio with the map business thrown in for nothing. 1938年，道琼斯工业指数是100-120点，Sanborn股价110美元，1958年，道指550点，Sanborn股价45美元。 这20年间，Sanborn的有价证券投资从每股20美元增长到65美元。

How could this come out? Sanborn in 1958 as well as 1938 possessed a wealth of information of substantial value to the insurance industry. To reproduce the detailed information they gathered over the years would cost tens of millions of dollars. Despite “carding,” over $500 million of fire premiums were underwritten by “mapping” companies. However, the means of selling and packaging Sanborn's product, information had remained unchanged throughout the years and finally this inertia was reflected in the earnings.

The very fact that the investment portfolio had done so well served to minimize in the eyes of most directors the need for rejuvenation of the map business. Sanborn had a sales volume of about $2½ million per year and owned about $7 million worth of marketable securities. The income from the investment portfolio was substantial, the business had no possible financial worries, the insurance companies were satisfied with the price paid for maps, and the stockholders still received dividend. However, these dividends were cut five times in eight years although I could never find any record of suggestions pertaining to cutting salaries or director's and committee fees. 公司Sanborn年销售量250万美元，拥有7百万市值的证券。保险公司对Sanborn公司的地图服务是满意的。我没有发现Sanborn公司有削减工资的任何提议，但红利分配在8年间降到原来的5分之1。

Prior to my entry on the Board, of the fourteen directors, none were prominent men from the insurance industry who combined held 46 shares of stock out of 105,000 shares out standing. Despite their top positions with very large companies which would suggest the financial wherewithal to make at least a modest commitment, the largest holding company in this group was ten shares. In several cases, the insurance companies these men owned small blocks of stocks but these were token investments in relation to the portfolios in which they were held. For the decade the insurance companies had been only sellers in any transactions involving Sanborn stock. 董事会共有14名董事，9名来自保险业的董事持有105000股中的46股。（105000×45=472.5万$）

The tenth director was the company attorney, who held ten shares. The eleventh was a banker with ten shares who recognized the problems of the company, actively pointed them out, and later added to his holdings. The next two directors were the top officers of Sanborn who owned about 300 shares combined. The officers were capable, aware of the problems of the business but kept in a subservient role by the Board of Directors. The final member of our act was a son of a deceased president of Sanborn. The widow owned about 15,000 shares of stock. 第10名董事是公司律师，拥有10股。第11名董事，拥有10股，认识到公司的问题并指出来，后来增持股份。第11名董事是公司首席执行官，拥有300股附和于董事会。最后1名董事是已故董事长的儿子，他妈妈拥有15000股。

In late 1958, the son, unhappy with the trend of the business, demanded the top position in the company, was turned down and submitted his resignation, which was accepted. Shortly thereafter we made a bid to his mother for her block of stock which was accepted. At the time there were two other large holdings, one of about 10,000 shares (dispersed among customers of a brokerage firm) and one of about 8,000. These people were quite unhappy with the situation and desired a separation of the investment portfolio from the map business, as did we. 已故董事长的儿子对生意不满，1958年，要当一把手，不成功而辞了职。随后，我们竞得了他妈妈的股份。另外有18000股的持有人与我们意见一致。

Subsequently our holdings (including associates) were increased through open market purchase to about 24,000 shares and the total represented by the three groups increased to 46,000 shares. We hoped to separate the two businesses, realize the fair value of the investment portfolio and work to reestablish the earning power of the map business. There appeared to be a real opportunity to multiply map profits through utilization of Sanborn's wealth of raw material in conjunction with electronic means of converting this data to the most usable form for the customer. 15000+9000(公开市场购买)=24000股，联合另2个持股集团，共代表46000股。我们希望分拆企业。

There was considerable opposition on the Board to change of any type, particularly when initiated by an “outsider,” although management was in complete accord with our plan and a similar plan had been recommended by Booz, Allen & Hamilton, Management Experts. To avoid a proxy fight (which very probably would not have been forthcoming and which we would have been certain of winning) and to avoid time delay with a large portion of Sanborn's money tied up in blue chip stocks which I didn't care for at current prices, a plan was evolved taking out all stockholders at fair value who wanted out. The SEC ruled favorably on the fairness of the plan. About 72% of the Sanborn stock, including 50% of the 1,600 stockholders, was exchanged for portfolio securities at fair value. The map business was left with over $1¼ million in government and municipal bonds as a reserve find, and a potential corporate capital gains tax of over $1million was eliminated. The remaining stockholders were left with a slightly improved asset value, substantially higher earnings per share, and an increased dividend rate. 证监会通过股东们的提案，72%的股票，1600名股东的一半，按公平价格兑换有价证券。

Necessarily, the above little melodrama is a very abbreviated description of this investment operation. However, it does point up the necessity for secrecy regarding our portfolio operations as well as the futility of measuring results over a short span of time such as a year. Such “control situations” may occur very infrequently. Our bread-and-butter business is buying undervalued securities and selling when the undervaluation is corrected along with investment in “special situations” where the profit is dependent on corporate rather than market action. To the extent that partnership finds continue to grow, it is possible that more opportunities will be available in “control situations.” 上述简短的描述说明：1.持股要保密。2.短期利润评估无用。3.利润主要靠公司作为，而不是市场价格。

The auditors should be mailing your financial statement and tax information within about a week. If you have any questions at all regarding either their report or this letter, be sure to let me know. 审计师将在1周内邮寄财务报告和税收资料给你们。对那些报告或这封信内容有任何疑问，请告诉我。

1961.07.22
One year is far too short a period to form any kind of an opinion as to investment performance,...... My own thinking is much more geared to five year performance, preferably with tests of relative results in both strong and weak markets. 评估投资业绩，1年时间太短，以5年为期，评估大盘呈现涨势以及跌势时的相对表现要合适得多，

（A）.A merger of all partnership based on market value at yearend....(B).A division of profits between the limited parter and general partner,with the first 6% per year to partner based upon beginning capital at market,and any excess divided one-fourth to the general partner and three-four to all partners proportional to their capital. Any deficiencies in earnings below the 6% would be carried forward against future earnings,but would not be carried back.总合伙人与受限合伙人的利润分配：超出年利6%的部分，总合伙人分得1/4。年利不足6%，结转下一年,但不冲抵旧账。Presently,there are three prifit arrangments which have been optional to imcoming partners. 现在，有如下3种分配方案可选：
interest provision; excess to Gen. partner; excess to Ltd. partner
(1) 6% ................1/3...............................2/3
(2) 4%.................1/4...............................3/4
(3) none ..............1/6...............................5/6
In the event of profits,the new division will obviously have to be better for limited partners than the first two arrangements. Regarding the third,the new arrangement will be superior up to 18% per year;but above this rate the limited partners would do better under the present agreement. About 80% of total partnership assets have selected the first two arrangements,and i am hopeful,would we average better than 18% yearly,partners present under the third arrangement will not feel short-changed under the new agreement;
(c). In the event of losses,there will be no carry against amounts previously credited to me as general partner although there will be a carry-forward against future excess earnings. However,my wife and i will have the largest,single investment in the new partnership,probably about one-sixth of total partnership assets,and thereby a grand dollar stake in losses than any other partner or family group. I am inserting a provision in the partnership agreement which will prohibit the purchase by me or my family of any marketable securities. In other words ,the new partnership will represent my entire investment option in marketable securities,so that my results will have be directly proportional to yours,subject to the advance I obtain if we do better than 6%;
(d)
(e)
(f) ...
The minimum investment for new partners is currently $25000,but,of couse,this does not apply to present partners. Our menthod of opertation will enable the partners to add or withdraw amounts of any size (in round $100) at yearend. Estimated total assets of the partnership will be in the neighborhood 4 million,which enables us to consider investments such as the one mentioned earlier in this letter,which we would have had to pass several years ago. 新加入的合伙人最小投资额2.5万美元。估计合伙人总资产约达4百万美元，这使得我们有能力投资前面提到的项目（以前不得不放弃）。
1962.1.24 巴菲特1962年1月致合伙人的信 Warren Buffett Partnership Letter of 1962.1.24
Our Performance in 1961 经营情况，看下面3个表格
I have consistently told partners that it is my expectation and hope (it's always hard to tell which is which) that we will do relatively well compared to the general market in down or static markets, but that we may not look so good in advancing markets. In strongly advancing market I expect to have real difficulties keeping up with the general market.

Although 1961 was certainly a good year for the general market and, in addition, a very good year for us on both an absolute and relative basis, the expectations in the previous paragraph remains unchanged.

During 1961, the general market as measured by the Dow-Jones Industrial Average (hereinafter called the “Dow”) showed an over-all gain of 22.2% including dividends received through ownership of the Dow. The gain for all partners operating throughout the entire year, after all expenses of operation but because payments to limited partners or accrual to the general partner, averaged 45% The details of this gain by partnership are shown in the appendix along with results for the partnerships started during the year.

We have now completed five full years of partnership operation, and the results of these five years are shown below on a year-by-year basis and also on a cumulative or compound basis. These results are stated on the basis described in the preceding paragraph; after expenses, but before division of gains among partners or payments to partners.

Year

Partnerships Operating Entire Year

Partnership Gain

Dow-Jones Gain *

1957

3

10.4%

-8.4%

1958

5

40.9%

38.5%

1959

6

25.9%

19.9%

1960

7

22.8%

-6.3%

1961

8

45.9%

22.2%

*--including dividends received through ownership of the Dow.

On a compound basis, the cumulative results have been:

Year

Partnership Gain

Dow-Jones Gain

1957

10.4%

-8.4%

1957-8

55.6%

26.9%

1957-9

95.9%

52.2%

1967-60

140.6%

42.6%

1957-61

251.0%

74.3%

These results do not measure the gain to the limited partner, which, of course, is the figure in which you are most interested. Because of the varying partnership arrangements that have existed in the past, I have used the over-all net gain (based on market values at the beginning and end of the year) to the partnership as being the fairest measure of over-all performance.

On a pro-forma basis adjusted to the division of gains entailed in our present Buffett Partnership, Ltd. agreement, the results would have been:

Year

Limited Partnership Gain

Dow Gain

1957

9.3%

-8.4%

1958

32.2%

38.5%

1959

20.9%

19.9%

1960

18.6%

-6.3%

1961

35.9%

22.2%

COMPOUNDED

1957

9.3%

-8.4%

1957-8

44.5%

26.9%

1957-9

74.7%

52.2%

1957-60

107.2%

42.6%

1957-61

181.6%

74.3%

A Word About Par 标准
The outstanding item of importance in my selection of partners, as well as in the subsequent relations with them, has been the determination that we use the same yardstick. If my performance is poor, I expect the partners to withdraw, and indeed, I should look for a new source of investment for my own funds. If the performance is good, I am assured of doing splendidly, a state of affairs to which I am sure I can adjust.

The rub, then is in being sure that we all have the same ideas of what is good and what is poor. I believe in establishing yardsticks prior to the act; retrospectively, almost anything can be made to look good in relation to something or other.

I have continuously used the Dow-Jones Industrial Average as our measure of par. It is my feeling that three years is a very minimal test of performance, and the best test consists of a period at lest that long where the terminal level of the Dow is reasonably close to the initial level.

While the Dow is not perfect (nor is anything else) as a measure of performance it has the advantage of being widely known, has a long period of continuity and reflects with reasonable accuracy the experience of investors generally with the market. I have no objection to any other method of measurement of general market performance being used, which as other stock market averages, leading diversified mutual stock funds, bank common trust finds, etc.

You may feel I have established an unduly short yardstick in that it perhaps appears quite simple to do better than an unmanaged index of 30 leading common stocks. Actually, this index has generally proven to be a reasonably tough competitor. Arthur Wiesenberger's classic book on investment companies lists performance for the 15 years, 1946-1960, for all leading mutual funds, so the experience of these funds represents, collectively, the experience of many million investors. My own belief, though the figures are not obtainable, is that portfolios of some lending investment council organizations and bank trust departments have achieved results similar to these mutual finds.

Wiesenberger lists 70 funds in his “Charts & Statistics” with continuous records since 1946. I have excluded 32 of these funds for various reasons since there were balanced funds (therefore not participating fully in the general market specialized industry funds, etc. Of the 32 excluded because I felt a comparison would not be fair, 31 did poorer than the Dow, so there were certainly not excluded to slant the conclusions below.

Of the remaining 38 mutual funds whose method of operation I felt was such a make a comparison with the Dow reasonable, 32 did poorer than the Dow, and 6 did better. The 6 doing better at the end of 1960 had assets of about $1 million and the 32 doing poorer had assets of about $6-1/2 billion. None of the six that were superior beat the Dow by more than a few percentage points a year.

Below I present the year-by-year results for our period of operation (excluding 1961 for which I don't have the exact data, although rough figures indicate no varying from the 1957-1960 figures) for the two largest common stock open-end investment companies (mutual funds) and the two largest closed-end investment companies.

Year

Mass Inv. Trust

Investors Stock

Lehman

Tri-Cont.

Dow

Limited Partners

1957

-12.0%

-12.4%

-11.4%

-2.4%

-8.4%

+9.3%

1958

+44.1%

+47.6%

+40.8%

+33.2%

+38.5%

+32.2%

1959

+8.2%

+10.3%

+8.1%

+8.4%

+19.9%

+20.9%

1960

-0.9%

-0.1%

+2.6%

+2.6%

-6.3%

+18.6%

(From Moody's Banks & Finance Manual, 1961)

COMPOUNDED

Year

Mass Inv. Trust

Investors Stock

Lehman

Tri-Cont.

Dow

Limited Partners

1957

-12.0%

-12.4%

-11.4%

-2.4%

-8.4%

+9.3%

1957-8

+26.8%

+29.3%

+24.7

+30.0%

+26.9%

+44.5%

1957-9

+37.2%

+46.6%

+34.8%

+40.9%

+52.2%

+74.7%

1957-60

+36.0%

+42.5%

+38.3%

+44.8%

+42.6%

+107.2%

Massachusetts Investors Trust has net assets of about $1.8 billion; Investors Stock Fund about $1 billion; Tri-Continental Corporation about $.5 billion; and Lehman Corporation about $350 million; or a total of over $3.5 billion.

I do not present the about tabulations and information with the idea of indicting investment companies. My own record of investing such huge sums of money with restrictions on the degree of activity I might take in companies where we had investments, would be no better, if as good. I present this data to indicate the Dow as an investment competitor is no pushover, and the great bulk of investment funds in the country are going to have difficulty in bettering, or performance even matching, its performance.

Our portfolio is very different from that of the Dow. Our method of operation is substantially different from that of mutual funds. 我们的持股与Dow成份股不同。我们的方法与共同基金差别很大。

However, most partners, as an alternative to their investment in the partnership, would probably have their funds invested in a media producing results compared to the Dow, therefore, I feel it is a fair test of performance.

Our Method of Operation 我们的方法
Our avenues of investment break down into three categories. These categories have different behavior characteristics, and the way our money is divided among them will have an important effect on our results, relative to the Dow in any given year. The actual percentage division amount categories is to so degree panned, but to a great extent, accidental, based upon availability factors. 分3类。

The first section consists of generally undervalued securities 常规低估的证券(hereinafter considered “general” where we have nothing to say about corporate policies and to time table as to when the undervaluation may correct itself. Over the years, this has been our largest category of investment, and more money has been made here tan in either of the other categories. We usually have fairly large portions (5% to 10% of our total assets) in each of five or six generals, with smaller positions in another ten or fifteen.

Sometimes these work out very fast; many times they take years. It is difficult at the time of purchase to know any specific reason why they should appreciate in price. However, because of this lack of glamour or anything pending which might create immediate favorable market action, they are available at very cheap prices. A lot of value can be obtained for the price paid. This substantial excess of value creates a comfortable margin of safety in each transaction. This individual margin of safety, coupled with a diversity of commitments creates a most attractive package of safety and appreciation potential. Over the years our timing of purchases has been considerably better than our timing of sales. We do not go into these generals with the idea of getting the last nickel, but are usually quite content selling out at some intermediate level between our purchase price and what we regard as fair value to a private owner.

The generals tend to behave market-wise very much in sympathy with the Dow. Just because something is cheap does not mean it is not going to go down. With abrupt downward movements in the market, this segment may very well down percentage-wise just as much as the Dow, and during sharply advancing years like 1961, this is the section of our portfolio that turns in the best results. It is, of course, also the most vulnerable in a declining market.

Out second category consists of “work-outs.” 套利 These are securities whose financial results depend on corporate action rather than supply and demand factors created by buyers and sellers of securities. In other words, they are securities with a timetable where we can predict, within reasonable error limits, when we will get how much and what might upset the applecart. Corporate events such as mergers, liquidations, reorganizations, spin-offs, eventually lead to work-outs. An important source in recent years has been sell-outs and oil producers to major integrated oil companies.

This category will produce reasonably stable earnings from year to year, the large extent irrespective of the Dow. Obviously, of we operated throughout a year with a large portion of our portfolio in work-outs, we will look extremely good if it turns out to be a declining year for the Dow or quite bad if it is a strongly advancing year. Over the years, work-outs have produced our second largest category. At any given time, we may be in ten to fifteen of these; some just beginning and others in the late stage of their development. I believe in using borrowed money to offset a portion of our work-out portfolio since there is a high degree of safety in this category in terms of both even results and intermediate market behavior. Results, excluding the benefits revived from the use of borrowed money, usually fall in the 10% to 20% range. My self-imposed limit regarding borrowing is 25% of partnership net worth. Oftentimes we own no money and when we do borrow, it is only as an offset against work-outs.

The final category is “control” 掌控被低估的企业 situations where we either control the company or take a very large position and attempt to influence policies of the company. Such operations should definitely be measured on the basis of several years; a given year, they may produce nothing as it is usually to our advantage to the stock be stagnant market-wise for a long period while we are acquiring stocks. These situations, too have relatively little in common with the behavior of the Dow. Sometimes, of course, we buy into a general with the though in mind that it might develop into a control situation. If the price remains low enough, for a long period, this might very well happen. If it moves up before we have a substantial percentage of the company's stock, we sell at higher levels and complete a successful general operation. We are presently acquiring stock in what may turn out to be control situations several years hence.

Dempster Mill Manufacturing Company
We are presently involved in the control of Dempster Mill Manufacturing Company of Beatrice, Nebraska. Our first stock was purchased as a generally undervalued security five years ago. In August, 1961, we obtained majority control, which is indicative of the fact that many of our operations are not exactly of the “overnight” variety.

Presently we own 70% of the stock of Dempster with another 10% held by a few associates. With only 150 or so other stockholders, a market on the stock is virtually non-existent, and in any case, would have no meaning for a controlled block. Our own actions in such a market could drastically affect the quoted performance. 5年前开始买该股，现在拥有其70%的股份。

Therefore, it is necessary for me to estimate the value at yearend of our controlling interest. This is of particular importance since, in effect, new partners are buying in based upon this price, and old partners are selling a portion of their interest based upon the same price. The estimated value should not be what we hope it would be worth, or what it might be worth to an eager buyer, etc., but what I would estimate our interest would bring if sold under current conditions in a reasonably short period of time. Our efforts will be devoted toward increasing this value, and we feel there are decent prospects of doing better.

Dempster is a manufacturer of farm implements and water systems with salaries in 1961 of about $9 million. Operations have produced only nominal profits in relation to invested capital during recent years. This reflected a poor management situation, along with a fairly tough industry situation. Presently, consolidated net worth (book value) is about $4.5 million, or $75 per share, consolidated working capital about $50 per share, and at yearend we valued our interest at $35 per share. While I claim no oracular vision in a matter such as this, I think this is a fair valuation to both new and old partners. Certainly, if even moderate earning power can be restored, a higher valuation will be justifies, and even if it cannot, Dempster should work out a higher figure. Our control interest was acquired at an average price of about $29, and this holding currently represents 21% of partnership net assets based on the $35 value. 每股净值$75，营运资本$50，我们自己估价$35（占合伙人总资产的21%），买价$29。

Of course, this section of our portfolio is not going to be worth more money merely because General Motors, U. S. Steel, etc., sell higher. In a raging bull market, operations in control situations will seem like a very difficult time to make money, compared to just buying the general market. However, I am more conscious of the dangers presented at current market levels than the opportunities. Control situations, along with work-outs, provide a means of insulating a portion of our portfolio from these dangers.

The Question of Conservatism 保守？
The above description of our various areas of operation may provide some clues as to how conservatively our portfolio was invested. Many people some years back thought they were behaving in the most conservative manner by purchasing medium or long-term municipal or government bonds. This policy had produced substantial market depreciation in many cases, and most certainly has failed to maintain or increase real buying power.

Conscious, perhaps overly conscious, of inflation, many people now feel that they are behaving in a conservative manner by buying blue chip securities although regardless of price-earnings ratios, dividend yield, etc. Without the benefits of hindsight as in the bond example, I feel this course of action is fraught with danger. There is nothing at all conservative, in my opinion, about speculating as to just how high a multiplier a greedy and capricious public will put on earnings.

You will not be right simply because a large number of people momentarily agree with you. You will not be right simply because importance people agree with you. In many quarters the simultaneous occurrence of the two above factors is enough to make a course of action meet the test of conservatism. You will be right, over the course of many transactions, of you hypothesis is correct, you facts are correct, and your reasoning is correct. True conservatism is only possible through knowledge and reason. I might add that in no way does the fact that our portfolio is bit conventional price that we are more conservative or less conservative that standard meters of investing. This can only be determined by examining the methods or examining the results. 假设靠得住，事实存在，推理正确，你就是对的。

I feel the most objective test as to just how conservative our manner of investing is arises through evaluation of performance in down markets. Preferably these should involve a substantial decline the Dow. Our performance in these rather mild declines of 1957 and 1960 would confirm my hypothesis that we invest in an extremely conservative manner. I would welcome any partner's suggesting objective tests as to conservatism to see how we stack up. We have never suffered a realized loss of more than ½ of 1% of total net assets, and our ratio of total dollars of realized gains to total realized losses is something like 100 to 1. Of course, this reflects the fact that on balance we have been operating in an up market. However, there have been many opportunities for loss transactions even in markets such as these (you may have found out about a few of these yourselves) so I think the above facts have some significance.

The Question of Size 规模问题
Aside from the question as to what happens upon my death (which with a mental/physical twist, is a subject of keen interest to me), I am probably asked more than often: “What affect is the rapid growth of partnership finds going to have under this performance?”

Larger funds tug in two directions. From the standpoint of “passive” investments, where we do not attempt by the size of our investment to influence corporate policies, larger sums hurt results. For the mutual fund or trust department investing in securities with very broad markets, the effect of large sums should be to penalize results only very slightly. Buying 10,000 shares of General Motors is only slightly more costly (on the basis of mathematical expectancy) than buying 1,000 or 100 shares.

However, in the case of control situations increased finds are a definite advantage. A “Sanborn Map” cannot be accomplished without the wherewithal. My definite belief is that the opportunities increase in this field as the funds increase. This is due top the sharp fall-off in competition as the ante mounts plus the important positive correlation that exists between increased size of company and lack of concentrated ownership of that company's stock.

Which is more important—the decreasing prospects of profitability in passive investments or the increasing prospects in control investment？ I can't give a definite answer to this since to a great extent it depends on the type or market in which we are operating. My present opinion is that there is no reason to think these should not be offsetting factors; if my position should change, you will be told. I can say, most assuredly, that our results in 1960 and 1961 would not have been better if we had been operating with the much smaller sums of 1956 and 1957.

And a Prediction 预言
Regular readers (I may be flattering myself) will feel I have left the tracks when I start talking about predictions. This is one thing from which I have always shield away and I still do in the normal sense.

I am certainly not going to predict what general business or the stock market are going to do in the next year or two since I don't have the faintest idea. 我的确不预测宏观经济或股市未来1或2年如何，我完全不清楚。

I think you can be quite sure that over the next ten years there are going to be a few years when the general market is plus 20% or 25%, a few when it is on the same order, and a majority when it is in between. I haven't any notion as to the sequence in which these will occur, nor do I think it is of any great importance for the long-term investor.

Over any long period of years, I think it is likely that the Dow will probably produce something like 5% to 7% per year compounded from a combination of dividends and market value gain. Despite the experience of recent years, anyone expecting substantially better than that from the general market probably faces disappointment. 长期而言，道指可能有5%-7%的年复利。尽管按照近几年的经验，人们指望年复利会高些，这可能会失望的。

Our job is to pile up yearly advantages over the performance of the Dow without worrying too much about whether the absolute results in a gibes year are a plus or a minus. I would consider a year in which we were down 15% and the Dow declined 25% to be much superior to a year when both the partnership and the Dow advanced 20%. I have stressed this point in talking with partners and have watched them nod their heads with varying degrees of enthusiasm. It is most important to me that you fully understand my reasoning in this regard and agree with me not only in your cerebral regions, but also down in the pit of your stomach.

For the reasons outlined in my method of operation, our best years relative to the Dow are likely to be in declining or static markets. Therefore, the advantage we seek will probably some in sharply varying amounts. There are bound to be years when we are surpassed by the Dow, but if over a long period we can average ten percentage points per year better than it, I will feel the result have been satisfactory.我们的目标是：长期而言，超越道指10个百分点。

Specifically, if the market should be down 35% or 40% in a year (and I feel this has a high probability of occurring one year in the next ten—no one knows which one), we should be down only 15% to 20%. If it is more or less unchanged during the year, we would hope to be up about ten percentage points. It if is up 20% or more, we would struggle to be up as much. The consequence of performance such as this over a period of years would mean that if the Dow produced a 5% to 7% per year over-all gain compounded, I would hope our results might be 15% to 17% per year. 如果道指1年下跌35%或40%（我认为道指很有可能在未来10年中的某1年如此，但没有人知道是哪一年）。如果道指1年波动不大，我们希望超越道指10个百分点。如果道指1年升20%以上，我们将努力更上它的升幅。长期而言，如果道指产生5%-7%的年复利，我们希望能达到15%-17%的年复利。

The above expectations may sound somewhat rash, and there is no question but that they may appear very much so when viewed from the vantage point of 1965 or 1970. It may turn out that I am completely wrong. However, I feel the partners are certainly entitled to know what I am thinking in this regard even though the nature of the business is such as to introduce a high probability of error in such expectations. In any one year, the variations may be quite substantial. This happened in 1961, but fortunately the variation was on the pleasant side. They won't all be. 我们的估计可能完全错了。

Miscellaneous
We are now installed in an office at 810 Kiewit Plaza in the first class secretary, Beth Henley, and an associate with considerable experience in my type of securities, Bill Scott. My father is sharing office space with us (he also shares the expenses) and doing a brokerage business in securities. None of our brokerage is done through him so we have no “vicuna coat” situation. Over-all, I expect our overhead, excluding interest on borrowings and Nebraska Intangibles Tax, to run less than .5 of 1% of net assets. We should get our money's with from this expenditure, and you are most cordially invited to drop in and see how the money is being spent.

With over 90 partners and probably 40 or so securities, you can understand that it is quite a welcome relief to me to shake loose from some of the details. 有90多位合伙人，约40只持股。

We presently have partners residing in locations from California to Vermont, and net assets at the beginning of 1962 amounted to $7,178,500.00. Susie and I have an interest in the partnership amounting to $1,025,000.00，and other relatives of mine have a combined interest totaling $782,600.00. The minimum for new partners last year was $25,000, but I am giving some thought to increasing it this year.

Peat, Marwick, Mitchell, & Company did an excellent job of expediting the approving tax figures much earlier than in the past. They assure me this performance can be continued.

Let me hear from you regarding questions you any have on any aspects of this letter, your audit, status of your partnership interest, etc., that may puzzle you.

62.7 The First Half of 1962:
Between yearend and June 20, 1962, the Dow declined from 731 to 561.28. If one had owned the Dow during this period, dividends of approximately $11.00 would have been received so that over-all a loss of 21.7% would have been the result of investing in the Dow. For the statistical minded, Appendix A gives the results of the Dow by years since information of the predecessor partnerships.

As stated above, a declining Dow gives us our chance to shine and pile the percentage advantages which, coupled with only an average performance during advancing markets, will give us quite satisfactory long-term goals. Our target is an approximately ½% decline for each 1% decline in the Dow, and if achieved, means we have a considerably more conservative way for investing in stocks than practically any alternative.

As outlined in Appendix B, showing combined predecessor partnership results, during the first half of 1962 we had one of the best periods in our history achieving a minus 7.5% results before payments to partners, compared to the minus 21.7% over-all result of the Dow. This 14.2 percentage points advantage can be expected to widen during the second half if the decline in the general market continues, but will probably narrow should the market turn upward. Please keep in mind my continuing admonition that six-months or even one-year's period results are not to be taken too seriously. Short periods of measurement exaggerate chance fluctuations in performance. While circumstances contributed to an unusually good first half, there are bound to be periods when we do relatively poorly. The figures for our performance involve no change in the valuation of our controlling interest in Dempster Mill Manufacturing Company, although developments in recent months point toward a probable higher realization.

Investment Companies During the First Half:
Past letters have stressed our belief that the Dow is no pushover as a yardstick for investment performance. To the extent that funds are invested in common stocks, whether the manner of investment be through investment companies, investment counselors, bank trust departments, or do-it-yourself, our belief is that the overwhelming majority will achieve results roughly comparable to the Dow. Our opinion is that the deviation from the Dow are much more likely to be toward a poorer performance that a superior one.

To illustrate this point, we have continually measured the Dow and limited partners' results against the two largest open-end investment companies (mutual funds) following a program of common stock investment and the two largest closed-end investment companies. The tabulation in Appendix C shows the five-years' results, and you will not note the figures are extraordinarily close to those of the Dow. These companies have total assets of about $3.5 billion.

In the interest of getting this letter out promptly, we are mailing it before results are available for the closed-end companies. However, the two mutual funds both did poorer than the Dow, with Massachusetts Investor Trust having a minus 23% over-all performance, and investors Stock Fund in the WALL STREET HOURNAL of June 13, 1962, headed “Funds vs. Market.” Of the 17 large common stock funds studied, every one had a record poorer than the Dow from the peak of the Dow of 734, to the data of the article, although in some cases the margin of inferiority was minimal.

Particularly hard hit in the first have were the so-called “growth” funds which, almost without exception, were down considerably more than the Dow. The three large “ growth” (the quotation marks are more applicant now) funds with the best record in the preceding years, Fidelity Capital Fund, Putnam Growth Fund, and Wellington Equity Fund averaged an over-all minus 32.3% for the first half. It is only fair to point out that because of their excellent records in 1959-61, their over-all performance to date is still better than average, as it may well be in the future. Ironically, however, this earlier superior performance had caused such a rush of new investors to come to them that the poor performance this year was experienced by very many more holders than enjoyed the excellent performance of earlier years. This experience tends to confirm my hypothesis that investment performance must be judged over a period of time with such a period including both advancing and declining markets. There will continue to be both; a point perhaps better understood now than six months ago.

In outlining the results of investment companies, I do so not because we operate in a manner comparable to them or because our investments are similar to theirs. It is done because such finds represent a public batting average of professional, highly-paid investment management handling a very significant $20 billion of securities. Such management, is typical of management handling even larger sums. As an alternative to an interest in the partnership, I believe it reasonable to assume that many partners would have investments managed similarly. 我们与“众”不同。

Asset Values:
The above calculations of results are before allocation to the General Partner and monthly payments to partners. Of course, whenever the over-all results for the year are not plus 6% on a market value basis (with deficiencies carried forward) there is no allocation to the General Partner. Therefore, non-withdrawing partners have had a decrease in their market value equity during the first half of 10.5%. Should our results for the year be less than plus 6% (and unless there should be a material advance in the Dow, this is very probably) partners receiving monthly payments will have a decrease in their market value equity at December 31, 1962. This means that monthly payments at 6% on this new market equity next year will be on a proportionately reduced basis. For example, of our results were an over-all minus 7% for the year, a partner receiving monthly payments who had a market value interest of $100,000 on January 1 st, 1962, would have an equity at December 31, 1962 of $87,000. This reduction would arise from the minus 7% results, or with $87,000 of market equity on January 1 st, 1963, monthly payments next year would be $435.00. 每月支付年初净值0.5%的红利，今年若亏损7%，明年初净值87折。

None of the above, of course, has any applicability to advance payments received during 1962 which do not participate in profits or losses, but earn a straight 6%.

Year-end Amendments:
All partners have the right to withdraw or add any amount (rounded to even $100's) at yearend. This year we hope to get this tended to earlier with the material sent out in October with the right of amendment of intentions any time up to December 31 st. This should minimize the December paper flurry.

Our attorneys have advised us to admit no more than a dozen new partners (several of whom have already expressed their desire) and accordingly, we have increased the minimum amount for new names to $100,000. This is a necessary stop to avoid a more cumbersome method of operation.

I will close with my usual request that should anything at all in this letter not be clear to you, please be sure to let me hear from you. During July and August I expect to be in the metropolitan New York area except for a trip or two back to Omaha. Therefore, you can get in touch with me either through our office in the Kiewit Plaza, or more directly, in care of Tweedy, Browne & Reilly, 52 Wall Street, New York 5, N.Y.

19621224 The following tax imformation is very importment and should either be clearly understood by you if prepare your own return or given to your tax advisor if he prepares you return. ......
19630118
The ground rules
In no sense is any rate of return guaranted to partners. 不保证赚钱。

While I much perfer a five-year test, I feel three years is an absolute minimum for judging performance. It is a certainty that we will have years when the partnership performance is poorer,perhaps substantially so,than the Dow. If any three-year or longer period produces poor results,we all should start looking around for other places to have our money. An exception to the latter statement would be three years covering a speculative explosion in a bull market. 我以为判断投资业绩3年期还短了，我偏爱5年期测试。如果任意3年或更长时间，我们赚的比例比道指少，我们都该撤资。连续3年大牛市例外。

I cannot promise results to partners. What i can and do promise is that: 我不保证赚钱。但我保证：
*a. Our investments will be chosen on the basis of value,not popularity; 投资以价值为基础，而非流行。
*b. That we will attempt to bring risk of permanent capital loss(not short-term quotational loss) to an absolute minimum by obtaining a wide margin of safety in each commitment and a diversity of commitments;and 通过对每笔交易，获得较宽的安全余地，并进行多元化的交易，力争将长期资本损失（不是短期市价损失）的风险降到最小。
*c. My wife,children and I will have virtually our entire net worth invested in the partnership. 我和妻子儿女的所有钱都投到了合伙人中。

Our performance in 1962
1962年度： -7.6% 13.8% 11.9%(after allocation to general partner)
1957-62年复利 8.3% 26.0% 21.1%
I did not feel they（effect of size） penalize performance. I promised to inform partners if my conclusions this should change. At the beginning of 1957,combined limited partners assets totaled $303,726 and grew to $7,178,500 at the beginning of 1962. 我没有感到资金规模庞大拖低了回报率。如果以后我发现如此，我保证通知合伙人。受限合伙人的资产，从1957年初$303,726 增长到了1962年初 $7,178,500

Investment companies
Dow is no pushover as an index of investment achievement.超越大盘不容易。

The joys of compounding
Columbus’Isabella voyage is a “moderately successful utilization of venture capital.” $100,000 compounded at 15% for 30 years = 6,621,140

Our method of operation
......内容与去年相同。

Dempster Mill manufacturing company
Our present control situation -- 73%. Dempster has been primarily in farm implements (mostly items retailing for $1000 or under),water systems,water well supplies and jobbed plumbing lines. The operations for the past decade have been characterized by static sales, low inventory turnover and virtually no profits in relation to invested capital. 我们拥有DMM（农具制造销售）总股份的73%。过去10年，销售平淡，库存周转率低，营运利润无。

We obtained control in August,1961 at an average price of about $28 per share,having bought some stock as low as $16 in earlier years,but the vast majority in an offer of $30.25 in August. <appropriate discounts to the various assets>. Initially,we worked with the old management toward more effective utilization of capital,better operating margins,reduction of overhead,etc. These efforts were completely fruitless. After spinning our wheels for about six months,it become obvious that while lip service was being given to our objective,either through inability or unwillingness,nothing was being accomplished.

A change was necessary. A good friend,whose inclination is not toward enthusiastic descriptions,highly recommended Harry Bottle for our type of problem. On April 17,1962,i met Harry in Los Angeles,presented a deal which provided for rewards to him based upon our objectives being met,and on April 23rd he was sitting in the president's chair in Beatrice. Harry is unquestionably the man of the year. Every goal we have set for Harry has been met, and all the surprises have been on the pleasant side. He has accomplished one thing after another that has been labeled as impossible,and has always taken the tough things first. Our breakeven point has been cut virtually in half ,slow-moving or dead merchandise has been sold or written off, marketing procedures have been revamped, and unprofitable facilitiies have been sold. The results of this program are partially shown in the balance sheet below，which,since it still represents non-earning assets,is valued on the same basis as last year.
Three facts stand out: (1)Although net worth has been reduced somewhat by the housecleaning and writedowns ($550,000 was written out of inventory fixed assets over-all brought more than book value),we have converted assets to cash at a rate far superior to that implied in our year-earlier valuation. (2) To some extent,we have converted the assets from the manufacturing business which has been a poor business, to a business which we think is a good business -- securities. (3) By buying assets at a bargain price,we don't need to pull any rabbits out of a hat to get extremely good percentage gains.This is the cornerstone of our investment philosophy:"Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results. The better sales will be the frosting on the cake."

There is one final point of real significance for BPL. We now have a relationship with an operating man which could be of great benefit in future control situations. Harry had never thought of running an implement company six days before he took over. He is mobile,hardworking and carries out policies once they are set. He likes to get paid well for doing well,and I like dealing with someone who is not trying to figure how to get the fixtures in the executive washroom gold-plated. Harry and I like each other,and his relationship with BPL should be profitable for all of us.

The question of conservatism
In 1962,we did realize a loss on one commitment of 1.0% and our ratio of realized gains to losses was only slightly over 3 to 1.

The usual prediction
...
Miscellaneous
This year marked the transition from the office off the bedroom to one a bit (quite a bit) more conventional.

We are starting off this year with net assets of $9,405,400. At the start of 1962, Susie and I had three "non-marketable security" investments of other than nominal size,and two of these have been sold. The third will be continued indefinitely. From the proceeds of the two sales,we have added our partnership interest so that we now have an interest of $1,377,400. Also,my three children,mother,father,two sisters,two brothers-in-law,father-in-law,three aunts,four cousins,five nieces and nephews have interests directly or indirectly totaling $893,600.

Bill Scott who has fit into our operation splendidly has an interest(with his wife) of $167,400,a very large portion of his net worth. So we are all eating our own cooking.

19630710
Dempster has moved up again due to Bottle’s continued rapid conversion of assets to cash. Buffett’s adjusted net worth figure not stands at $64 per share（评估价$51.26）.BPL owns 71.7% of Dempster acquired at a cost of $1,262,577.27. On June 30, 1963 Dempster had a small safe deposit box at the Omaha National Bank containing securities worth roughly $2,028,415.25。 Our 71.7% share of $2,028,415.25 amounts to roughly $1,454,373.70. Thus, everything above ground (and part of it underground) is profit. My security analyst friends may find this a rather primitive method of accounting,but i must confess that i find a bit more substance in this fingers and toes method than in prayerful reliance that someone will pay me 35 times next year’s earnings. 自己干比依赖别人强。

Advance payments and advance withdrawals......
Taxes......

19631106
I do not consider a 13.2 percentage point margin to be in the cards on a long term basis. A considerably more moderate annual edge over the DOW will be quite satisfactory. 我不认为，长期年复利能超过道指13.2%

19631226
If your estimate for the current year is the same as the actual tax paid for the preceding year,you cannot be penalized for underestimating. 纳税估计。

19640118
Our performance in 1963
1963 -20.7% 38.7% 30.5%(after allocation to general partner)
1957-1963: 10.0% 27.7% 22.3%
It appears that we have completed seven fat years. with apologies to Joseph we shall attempt to ignore the biblical script.(I've never gone overboard for Noah's ideas on diversification either.) In the more serious vein,I would like to emphasize that,in my judgment,our 17.7 margin over the Dow shown above is unattainale over any long period of time. 据我判断：年复利超过道指17.7%是不可持续的。

Investment companies
1957-63: 9.2 8.6 8.8 9.7(four funds) 10.0(DOW)
The above may seem like rather strong medicine,but it offered as a factual presentation and in no way as criticism. Within their institutional framework and handling the many billions of dollars involved,the results achieved are the only ones attainable. To behave unconventionally within this framework is extremely difficult. Therefore,the collective record of such investment media is necessarily tied to the record of corporate America. Their merits,except in the unusual case,do not lie in superior results or greater resistance to decline in value.Rather,I feel they earn their keep by the ease of handling,the freedom from decision making and the automatic diversification they provide,plus,perhaps most impotant,the insulation afforded from temptation to practice patently inferior techniques which seem to entice so many would-be investors. 巨型投资公司非传统作为是极端困难的。......

The joys of compounding
1.2^50=9100

Our method of operation
"literary schizophrenia"......
"Generals": While the quantitative comes first and is essential,the qualitative is important. We like good management --we like a decent industry -- we like a certain amount of "ferment" in apreviously dormant management or stockholder group.......数量优先，质量重要。我们喜欢好的管理--好的行业--平静中某种“酵素”蠢蠢欲动。

"workouts": These are the securities with a timetable. They arise from corporate activity -- sell-outs,mergers,reorganizations,spin-offs,etc.In this category we are not talking about rumors or "inside information" pertaining to such developments,but to publicly announced activities of this sort.We wait until we can read it in the paper.The risk pertains not primarily to general market behavior(although that is sometimes tied in to a degree),but instead to something upsetting the applecart so that the expected development does not materialize. Such killjoys could include anti-trust or other negative government action,stockholder disapproval,withholding of tax rulings,etc. The gross profits in many workouts appear quite small. A friend refers to this as getting the last nickel after the other fellow has made the first ninety-five cents. However,the predictabilty coupled with a short holding period produces quite decent annual rates of return. This category produces more steady absolute profits from year to year than generals do. In years of market decline,it piles up a big edge for us; during bull markets,it is a drag on perfotmance. On a long term basis,I expect it to achieve the same sort of margin over the Dow attained by “generals". “计算套利”：有时间表。与企业活动相关--整体出售、合并、重组、拆分等等。 我们不理会谣言或“内幕消息”，我们等到那些公诸于众。风险主要不是来自大盘，而是期待的事件没有兑现。 这些扫兴的事可能包括：反托拉斯或不利的政策、股东反对、税制扣缴等等。像是在赚最后一角钱。然而，可预测性+短期产生了不错的年度收益率，这种方式赚取利润比"Generals"稳定些。

"Controls":These are rarities,but when they occur they are likely to be of significent size.Unless we start off with the purchase of a sizable block of stock,controls develop from the general category. They result from situations where a cheap security does nothing price-wise for such an extended period of time that we are able to buy a significant percentage of the company's stock.At that point we are probably in a position to assume some degree of,or perhaps complete,control of the company's activities.Whether we become active or remain relatively passive at this point depends upon our assessment of the company's future and the management's capabilities. The general we have been buying the most aggressively in recent months possesses excellent management following policies that appear to make very good sense to us.If our continued buying puts us in a controlling position at some point in the future,we will probably remain very passive regarding the operation of this business.

We do not want to get active merely for the sake of being active. Everthing else being equal I would much rather let others do the work. However,when an active role is necessary to optimize the employment of capital,you can be sure we will not be standing in the wings. 有必要时才主动。Active or passive,in a control situation there should be a built-in profit. The sine qua non of this operation is an attractive purchase price. Once control is achieved,the value of our investment is determined by the value of the enterprise,not the oftentimes irrationalities of the marketplace. 一旦控股，投资价值由企业价值决定，而不是时常无理性的市场价格。Our willingness and financial ability to assume a controlling position gives us two-way stretch on many purchases in our group of generals. If the market changes its opinion for the better,the security will advance in price.If it doesn't,we will continue to acquire stock until we can look to the business itself rather than the market for vindication of our judgment. Investment results in the control category have to be measured on the basis of at least several years. Proper buying takes time. If needed,strengthening management,re-directing the utilization of capital,perhaps effecting a satisfactory sale or merger,etc.,are also all factors that make this a business to be measured in years rather than months. For this reason,in controls,we are looking for wide margins of profit--if it looks at all close,we pass. Controls in the buying stage move largely in sympathy with the Dow.In the later stages their behavior is geared more to that of workouts. As I have mentioned in the past,the division of our portfolio among the three categories is largely determined by the accident of availability. Therefore,in a minus year for the Dow,whether we are primarily in generals or workouts is largely a matter of luck, but it will have a great deal to do with our performance relative to the Dow. This is one of many reasons why a single year's performance is of minor importance and,good or bad,should never be taken too seriously. If there is any trend as our assets grow,I would expect it to be toward controls which heretofore have been our smallest category. I may be wrong in this expectation -- a great deal depends,of course,on the future behavior of the market on which your guess is as good as mine(I have none). At this writing,we have a majority of our capital in generals,workouts rank second,and controls are third. 我希望控股企业占多一些份额，这个预期可能办不到----要控股很依赖将来的市场行为（你的猜测和我一样好，我不猜）。

Miscellaneous
We are starting off the year with net assets of $17,454,900. Susie and I have an investment of $2,392,800 in the Partnership. For the first time,I had to withdraw funds in addition to my monthly payments,but it was a choice of this or disappointing the IRS. Susie and I have a few non-markerable(less than 300 holders) securities of nominal size left over from earlier years which in aggregate are worth perhaps 1% of our partnership interest. In addition,we have one non-marketable holding of more material size of a local company purchased in 1960 which we expect to hold indefinitely. Aside from this,all our eggs are in the BPL basket,and they will continue to be. I can't promise results,but i can promise a common destiny. 我不保证结果如何，但我承诺与大家共命运。In addition,that endless stream of relatives of mine,consisting of my three children,mother,father,two sisters,two brothers-in-law,father-in-law,four aunts,four cousins and five nieces and nephews,have interests in BPL directly or indirectly thtalling $1,247,900

Appendix 附件 Texas national petroleum
This situation was a run-of-the-mill workout arising from the number one source of workout in recent years -- the sellouts of oil and gas producing companies. TNP was a relatively small producer with which i had been vaguely familiar for years. Early in 1962 i heard rumors regarding a sellout to Union Oil of California.I never act on such information,but in this case it was correct and substantially more money would have been made if we had gone in at the rumor stage rather than the announced stage. However, that's somebody else's business,not mine.
In early April,1962,the general terms of the deal were announced. TNP had three classes of securities outstanding:
(1) 6.5% debentures callable at 104.25 which would bear interest until the sale transpired and at that time would be called. There were $6.5 million outstanding of which we purchased $264,000 principal amount before the sale closed.
(2) About 3.7 million shares of common stock of which the officers and directors owned about 40%. The proxy statement estimated the proceeds from the liquidation would produce $7.42 per share. We purchased 64,035 shares during the six months or so between announcement and closing.
(3) 650,000 warrants to purchase common stock at $3.50 per share. Using the proxy statement estimate of $7.42 for the workout on the common resulted in $3.92 as a workout on the warrants. We were able to buy 83,200 warrants or about 13% of the entire issue in six months. The risk of stockholder disapproval was nil. The deal was negotiated by the controlling stockholders,and the price was a good one. Any transaction such as this is subject to title searches,legal opinions,etc.,but this risk could also be appraised at virtually nil. There were no anti-trust problems.This absence of legal or anti-trust problems is not always the case,by any means.
The only fly in the ointment was the obtaining of the necessary tax ruling. Union Oil was using a standard ABC production payment method of financing. The University of Southern California was the production payment holder and there was some delay because of their eleemosynary status.
The posed a new problem for the IRS,but we understood USC was willing to waive this status which still left them with a satisfactory profit after they borrowed all the money from a bank. While getting this ironed out created delay,it did not threaten the deal.
When we talked with the company on April 23rd and 24th,their estimate was that the closing would take place in August or September. The proxy material was mailed May 9th and stated the sale "will be consummated during the summer of 1962 and that within a few months thereafter the greater part of the proceeds will be distributed to stockholders in liquidation." As mentioned earlier,the estimate was $7.42 per share.
Bill Scott attended the stockholders meeting in Houston on May 29th where it was stated they still expected to close on September 1st.
The following are excerpts from some of the telephone conversations we had with company officials in ensuing months:
On June 18th the secretary stated,"Union has been told a favorable IRS ruling has been formulated but must be passed on by additional IRS people. Still hoping for fuling in July."
On July 24th the president said that he expected the IRS ruling "early next week."
On August 13th the treasurer informed us that the TNP,Union Oil, and USC people were all in Washington attempting to thrash out a ruling.
On September 18th the treasurer informed us "No news,although the IRS says the ruling could be ready by next week."
The estimate on payment was still $7.42.
The ruling was received in late September,and the sale closed October 31st. Our bonds were called November 13th. We converted our warrants to common stock shortly thereafter and received payments on the common of $3.50 December 14,1962, $3.90 February 4,1963,and 15 cent on April 24,1963. We will probably get another 4 cent in a year or two. On 147,235 shares(after exercise of warrants) even 4 cent per share is meaningful. This illustrates the usual pattern:(1) the deals take longer than originally projected;and (2)the payouts tend to average a little better than estimate. With TNP it took a couple of extra months, and we received a couple of extra percent.

The financial results of TNP were as follows:
（1）On the bonds we invested $260,773 and had an average holding period of slightly under five months. We received 6.5% interest on our money and realized a capital gain of $14,446. This works out to an overall rate of return of approximately 20% per annum.
（2）On the stock and warrants we have realized capital gain of $89,304,and we have stubs presently valued at $2,946. From an investment of $146,000 in April,our holdings ran to $731,000 in October.Based on the time the money was employed,the rate of return was about 22% per annum.
In both cases,the return is computed on an all equity investment. I definitely feel some borrowed money is warranted against a portfolio of workouts,but feel it is a very dangerous practice against generals.
We are not presenting TNP as any earth-shaking triumph. We have had workouts which were much better and some which were poorer. It is typical of our bread-and-butter type of operation. We attempt to obtain all facts possible,continue to keep abreast of developments and evaluate all of this in terms of our experience. We certainly don't go into all the deals that come along--there is considerable variation in their attractiveness. When a workout falls through,the resulting market value shrink is substantial. 典型的生意。
Therefore,you cannot afford many errors,although we fully realize we are going to have them occasionally.

Appendix Dempster mill MFG.
This situation started as a general in 1956. At that time the stock was selling at $18 with about $72 in book value of which $50 per share was in current assets(cash,receivables and inventory)less all liabilities.Dempster had earned good money in the past,but was only breaking even currently.
The qualitative situation was on the negative side (a fairly tough industry and unimpressive management),but the figures were extremely attractive. Experience shows you can buy 100 situations like this and have perhaps 70 or 80 work out to reasonable profits in one to three years. Just why any particular one should do so is hard to say at the time of purchase,but the group expectancy is favorable,whether the impetus is from an improved industry situation,a takeover offer,a change in investor psychology,etc.
We continued to buy the stock in small quantities for five years. During most of this period I was director and was becoming consistently less impressed with the earnings prospects under existing management. However,I also became more familiar with the assets and operations and my evaluation of the quantitative factors remained very favorable.
By mid-1961 we owned about 30% of Dempster(we had made several tender offers with poor results),but in August and September 1961 made several large purchases at $30.25 per share,which coupled with a subsequent tender offer at the same price,brought our holding to over 70%. Our purchases over the previous five years had been in the $16--$25 range.
On assuming control,we elevated the executive vice president to president to see what he would do unfettered by the previous policies. The results were unsatisfactory,and on April 23,1962 we hired Harry Bottle as president. Harry was the perfect man for the job. I have recited his triumphs before and the accompanying comparative balance sheets speak louder than any words in demonstrating the re-employment of capital.

Harry (1) look the inventory from over $4 million (much of it slow moving) to under $1 million reducing carrying costs and obsolescense risks tremendously;
(2) correspondingly freed up capital for marketable security purchases from which we gained over $400,000;
(3) cut administration and selling expense from $150,000 to $75,000 per month;
(4) cut factory overhead burden from $6 to $4.50 per direct labor hour;
(5) closed the five branches operting unprofitably (leaving us with three good ones) and replaced them with more productive distributors;
(6) cleaned up a headache at an auxiliary factory operation at Columbus,Nebraska;
(7) eliminated jobbed lines tying up considerable money(which could be used profitably in securities) while producing no profits;
(8) adjusted prices of repair parts,thereby producing an estimated $200,000 additional profit with virtually no loss of valume; and most important
(9) through these and many other steps,restored the earning capacity to a level commensurate with the capital employed.
In 1963,the heavy corporate taxes we were facing(Harry surprised me by the speed with which he had earned up our tax loss carry-forward) coupled with excess liquid funds within the corporation compelled us to either in some way de-incorporate or to sell the business.
We set out to do either one or the other before the end of 1963. De-incorporating had many problems but would have,in effect,doubled earnings for our partners and also eliminated the problem of corporate capital gain tax on Dempster securities.
At virtually the last minute,after several earlier deals had fallen through at reasonably advanced stages,a sale of assets was made. Although there were a good many wrinkles to the sale,the net effect was to bring approximately book value. This,coupled with the gain we have in our portfolio of marketable securities,gives us a realization of about $80 per share. Dempster(now named First Beatrice Corp.)- we sold the name to the new is down to almost entirely cash and marketable securities now. On BPL's yearend audit,our First Beatrice holdings were valued at net asset value(with securities at market) less a $200,000 reserve for various contingencies.
I mitght mention that we think the buyers will do very well with Dempster. They impress us as people of ability and they have sound plans to expand the business and its profitability. We would have been quite happy to operate Dempster on an unincorporated basis,but we are also quite happy to sell it for a reasonable price. Our business is making excellent purchases -- not making extraordinary sales.
Harry works the same way i do -- he likes big carrots. He is presently a limited partner of BPL, and the next belt-tightening operation we have,he's our man.

The Dempster saga points up several morals:
(1) Our business is one requiring patience. It has little in common with a portfolio of high-flying glamour stocks and during periods of popularity for the latter,we may appear quite stodgy.
It is to our advantage to have securities do nothing price-wise for months,or perhaps years,while we are buying them. This points up the need to measure our results over an adequate period of time. We suggest three years as a minimum. 持续。
(2) We cannot talk about our current investment operations. Such an "open-mouth" policy could never improve our results and in some situations could seriously hurt us. For this reason,should anyone,including partners,ask us whether we are interested in any security,we must plead the "5th Amendment" 保密。

1964.7.8
1st half 1964 10.9 12.0 10.5
Buying activities during the first half were quite satisfactory. This is of particular satisfaction to me since I consider the buying end to be about 90% of this business. Our General category now includes three companies where BPL is the largest single stockholder. These stocks have been bought and are continuing to be bought at prices considerably below their value to a private owner. We have been buying one of these situations for approximately eighteen months and both of the others for about a year. It would not surprise me if we contuinue to do nothing but patiently buy these securities week after week for at least another year, and perhaps even two years or more.
What we really like to see in situations like the three mentioned above is a condition where the company is making substantial progress in terms of improving earnings,increasing asset value,etc.,but where the market price of the stock is doing very little while we continue to acquire it.
It is important to realize,however,that most of our holdings in the General category continue to be securities which we believe to be considerably undervalued,but where there is not the slightest possibility that we could have a controlling position. We expect the market to justify our analyses of such situations in a reasonable period of time,but we do not have the two strings to our bow mentioned in the above paragraph working for us in these securities.

Investment companies
One thing i can promise you. We started out with a 36-inch yardstick and we'll keep it that way. If we don't measure up,we won't change yardsticks. 无论是否合格，都不变换评判标准。

Taxes
We do not play any games to either accelerate or defer taxes. We make investment decisions based on our evaluation of the most profitable combination of probabilties. If this means paying taxes -- fine -- I'm glad the rates on long-term capital gains are as low as they are.

1965.1.18
Our performance in 1964
Nevertheless, I am not depressed. It was a strong year for the general market,and it is always tougher for us to outshine the Dow in such a year. We are certain to have years when the Dow gives us a drubbing and,in some respects, I feel rather fortunate that 1964 wasn't the year. 我们必然会有些年份被道指打败，今年幸免。
1964-------- 18.7 27.8 22.3
1957--1964 11.1 27.7 22.3

Investment companies
......
The question of conservatism
In looking at the table of investment company performance,the question might be asked:"yes,but aren't those companies run more conservatively than the Partnership?" If you asked that question of the investment company managements,they,in absolute honesty,would say they were more conservative. If you asked the first hundred security analysts you met. I am sure that a very large majority of them also would answer for the investment companies. I would disagree. I have over 90% of my net worth in BPL,and most of my family have percentage in that area, but of course,that only demonstrates the sincerity of my view -- not the validity of it. 投资公司管理层、证券分析师认为投资公司和我们谁保守（稳健）些？他们答：投资公司。我不同意。
It is unquestionably ture that the investment companies have their money more conventionally invested than we do. To many people conventionality is indistinguishable from conservatism. In my view,this represents erroneous thinking.Neither a conventional nor an unconventional approach,per se,is conservative. 投资公司更传统。多数人分不清传统和保守（稳健）的差别。我认为，传统或非传统与保守无关。
Truly conservative actions arise from intelligent hypotheses,correct facts and sound reasoning. These qualities may lead to conventional acts, but there have been many times when they have led to unorthodoxy. In some corner of the world they are probably still holding regular meetings of the Flat Earth Society. 真正稳健的行动来自聪明的假说、正确的事实和健全的推理。这样做有时候会导致异端。
We derive no comfort because important people,vocal people,or great numbers of people agree with us. Nor do we derive comfort if they don't. A public opinion poll is no substitute for thought. When we really sit back with a smile on our face is when we run into a situation we can understand,where the facts are ascertainable and clear,and the course of action obvious, In that case -- whether conventional or unconventional -- whether others agree or disagree -- we feel we are progressing in a conservative manner. 无论传统或非传统，无论别人同意或不同意，我们都以保守（稳健）的方式前进。
The above may seem highly subjective. It is. You should prefer an objective approach to the question. I do. My suggestion as to one rational way ......主观、客观，理观......

Our goal
We do not consider it possible on an extended basis to maintain the 16.6 percentage point advantage over the Dow of the Partnership or the 11.2 percentage point edge enjoyed by the limited partners. ......My rather puritanical view is any investment manager should be willing to state unequivocally what he is going to attempt to accomplish and how he proposes to measure the extend to which he gets the job done.

Our method of operation
I now feel that a four - category division is more appropriate. 划分成4个类型更恰当些。
(1) "Generals - private owner basis" ......基于私人拥有
(2) "Generals - relatively undervalued" We demand substantial discrepancies from current valuation standards,but (usually because of large size)do not feel value to a private owner to be a meaningful concept. It is important in this category,of course,that apples be compared to apples - and not to oranges,and we work hard at achieving that end. In the great majority of cases we simply do not know enough about the industry or company to come to sensible judgments -- in that situation we pass. 相对低估。
As mentioned earlier,this new category has been growing and has produced very satisfactory results. We have recently begun to implement a technique which gives promise of very substantially reducing the risk from an overall change in valuation standards;e.g.,we buy something at 12 times earnings when comparable or poorer quality companies sell at 20 times earnings,but then a major revaluation takes place so the latter only sell at 10 times. This risk has always bothered us enormously because of the helpless position in which we could be left compared to the "Generals - Private Owner" or "Workouts" types. With this risk diminished,we think this category has a promising future.
(3)"workouts".......
(4)"controls"......
The division of our portfolio among categories's largely determined by the accident of availability.
To give an example of just how important the accident of division between these categories is. Let me cite the example of the past three years. Using an entirely different method of calculation than that used to measure the performance of BPL in entirety,whereby the average monthly investment at market value by category is utilized,borrowed money and office operating expenses excluded,etc.,(this gives the most accurate basis for intergroup comparisons but does not reflect overall BPL results) the generals (both present categories combined),workouts,and the Dow,shape up as follows:
year Generals Workouts Dow
1962 -1.0% 14.6% -8.6%
1963 20.5% 30.6% 18.4%
1964 27.8% 10.3% 16.7%
We consider all categories to be good businesses and we are very happy we have several to rely on rather than just one. It makes for more discrimination within each category and reduces the chance we will be put completely out of operation by the elimination of opportunities in a single category.

Taxes
We have had a chorus of groans this year regarding partners' tax liabilities.......
So it is going to continue to be the policy of BPL to try to maximize investment gains,not minimize taxes. We will do our level best to create the maximum revenue for the Treasury - at the lowest rates the rules will allow. 创造最多的应税收入，缴纳规则允许的最低的税率。

1965.7.9
1st half 1965 0.8 10.4 9.3
Utilizing a somewhat more restrained lexicon,James H.Lorie,director of the University of Chicago's Center for Research in Security Prices was quoted in the May 25,1965,WALL STREET JOURNAY as saying:"There is no evidence that mutual funds select stocks better than by the random method" “没有证据证明，共同基金（开放式基金）选股比随机选股强”

Advance payment and advance withdrawals ......

Miscellaneous
In the December 21st issue of AUTOMOTIVE NEWS it was reported that Ford Motor Co. plans to spend $700 million in 1965 to add 6,742,000 square feet to its facilities throughout the world. BPL,never far behind,plans to add 227.25 square feet to its facilities in the spring of 1965. 福特公司计划1965年花7亿美元在全球新增62.6万平米场地。我们不落后太远，新增21.1平米。

Our growth in net assets from $105,100(there's no prize for guessing who put in the $100) on May 5,1956,when the first predecessor limited partnership(Buffett Associates,Ltd.)was organized,to $26,074,000 on 1/1/65 creates the need for an occasional reorganization in internal routine. Therefore,roughly contemporaneously with the bold move from 682 to 909.25 我们的净资产1956年5月5日开张时 $105,100（猜猜谁投了100美元，猜中不奖），发展到1965年1月1日$26,074,000，这产生了组织再造的需求，我们大胆的将办公面积从63.4平米扩张到84.5平米。

1965.11.1......
The partnership owns a controlling interest in Berkshire Hathaway,Inc.,a publicly-traded security. As mentioned in my midyear letter,asset values and earning power are the dominant factors affecting the valuation of a controlling interest in a business. Market price,which governs valuation of minority interest positions,is of little or no importance in valuing a controlling interest. We will value our position in Berkshire Hathaway at yearend at a price halfway between net current asset value and book value. Because of the nature of our receivables and inventory this,in effect,amounts to valuation of our current assets at 100 cents on the dollar and fixed assets at 50 cents on the dollar. Such a value,in my opinion,is fair to both adding and withdrawing partners.It may be either higher or lower than market value at the time. 我们控股了伯克夏公司，我们评估它的价值在净流动资产与净资产之间。固定资产5折计算。
As i write this,we are orbiting in quite satisfactory fashion.Our margin over the Dow is well above average,and even those Neanderthal partners who utilize such crude yardsticks as net profit would find performance satisfactory. This is all,of course,subject to substantial change by yearend.

1966.1.20
My fallibility as forecaster was quickly demonstrated when the first year fell outside my parameters.
1965---- 14.2 47.2 36.9
1957-65 11.4 29.8 23.9
After last year the question naturally arises,"what do we do for an encore?" A disadvantage of this business is that it does not possess momentum to any significant degree. If GM accounts for 54% of domestic new car registrations in 1965.it is a pretty safe bet that they are going to come fairly close to that figure in 1966 due to owner loyalties,dealer capabilities,productive capacity,comsumer image,etc. Not so for BPL.We start from scratch each year with everything valued at market when the gun goes off. Partners in 1966,new or old,benefit to only a very limited extent from the efforts of 1964 and 1965. Thr success of past methods and ideas does not transfer forward to future ones.......投资业务连续性差。We are going to have lossing years and are going to have years inferior to the Dow --no doubt about it. But I continue to believe we can achieve average performance superior to the Dow in the future. If my expectation regarding this should change,you will hear immediately.

Investment companies
......Finally,setting up the relevant yardsticks ahead of time insures that we will all get out of this business if the results become mediocre (or worse). It means that past successes cannot cloud judgement of current results.It should reduce the chance of ingenious rationalizations of inept performance.(Bad lighting has been bothering me at the bridge table lately.) While this masochistic approach to measurement may not sound like much of an advantage, i can assure you from my observations of business entities that such evaluation would have accomplished a great deal in many investment and industrial organizations.
So if you are evaluationg others (or yourself) in the investment field,think out some standards - apply them - interpret them. If you do not feel our standard (a minimum of a three-year versus the Dow)is an applicable one,you should not be in the Partnership. If you do feel it is applicable,you should be able to take the minus years with equanimity - in the visceral regions as well as the cerebral regions - as long as we are surpassing the results of the Dow.

The Sorrows of compounding
...... I now feel that we ate much closer to the point where increased size($43,645,000) may prove disadvantageous. ......

Trends in our business 业务趋势
Knowing the penalties for cruel and unusual punishments,I will skip a rehash of the characteristics of each category,but merely refer you to last year's letter.......perhaps to give you a better insight into their strengths and weaknesses.
The"workout" business has become very spasmodic 抽筋. We were able to employ an average of only about $6 miiilon during the year in the Workout section,and this involved only a very limited number of situaltions.Although we earned about $1,410,000,or about 23.5% on average capital employed (this is calculated on an all equity basis - borrowed money is appropriate in most Workout situations,and we utilize it,which improves our rate of return above this percentage),over half of this was earned from one situation. I think it unlikely tha a really interesting rate of return can be earned consistently on large sums of money in this business under present conditions. Nevertheless,we will continue to try to remain alert for the occasional important opportunity and probably continue to utilize a few of the smaller opportunities where we like the probabilities.
The "generals - private owner basis" category was very good to us in 1965. Opportunities in this area have become more scarce with a rising Dow,but when they come along,they are often quite significant. I mentioned at the start of last year that we were the largest stockholder of three companies in this category. Our largest yearend 1964 investment in this category was disposed of in 1965 pursuant to a tender offer resulting in a realized gain for BPL of $3,188,000. At yearend 1964 we had unrealized appreciation in this investment of $451,000. Therefore,the economic gain attributable to 1965 for this transaction was only $2,737,000 even though the entire tax effect fell in that year. I mention these figures to illustrate how our realized gain for tax purposes in any year bears no necessary relationship to our economic gain. The fundamental concept underlying the Generals-Private Owner category is demonstrated by the above case.A private owner was quite willing (and in our opinion quite wise)to pay a price for control of the business which isolated stock buyers were not willing to pay for very small fractions of the business. This has been a quite common condition in the securities markets over many years,and although pruchases in this category work out satisfactorily in term of just general stock market behavior,there is the occasional dramatic profit due to corporate action such as the one above.
The"control" section of our business received a transfer member from our "private owner"category. Shares in Berkshire Hathaway had been acquired since November 1962 on much the same line of reasoning as prevailed in the security mentioned above.In the case of Berkshire,however,we ended up purchasing enough stock to assume a controlling position ourselves rather than the more usual case of either selling our stock in the market or to another single buyer.
Our purchases of Berkshire started at a price of $7.60 per share in 1962. This price partially reflected large losses incurred by the prior management in closing some of the mills made obsolete by changing conditions within the textile business(which the old menagement had been quite slow to recognize). In the postwar period the company had slid downhill a considerable distance,having hit a peak in 1948 when about $29.5 million was earned before tax and about 11,000 workers were employed. This reflected output from 11 mills.
At the time we acquired control in spring of 1965,Berkshire was down to two mills and about 2,300 employees. It was a very pleasant surprise to find that the remaining units had excellent management personnel,and we have not had to bring a single man from the outside into the operation.In relation to our beginning acquisition cost of $7.60 per share(the average cost,however,was $14.86 per share,reflecting very heavy purchases in early 1965), the company on December 31,1965,had net working capital alone (before placing any value on the plants and equipment) of about $19 per share.
Berkshire is a delight to own. There is no question that the state of the textile industry is the dominant factor in determining the earning power of the business,but are most fortunate to have Ken Chace running the business in a first-class manner,and we also have several of the best sales people in the business heading up this end of their respective divisions.
While a Berkshire is hardly going to be as profitable as a Xerox,Fairchild Camera or National Video in a hypertensed market,it is a very comfortable sort of thing to own. As my West Coast philosopher says,"It is well to have a diet consisting of oatmeal as well as cream puffs."
Because of our controlling interest,our investment in Berkshire is valued for our audit as a business,not as a marketable security.If Berkshire advances $5 per share in the market,it does BPL no good - our holdings are not going to be sold. Similarly,if it goes down $5 per share,it is not meaningful to us. The value of our holding is determined directly by the value of the business. I receive no divine imspiration in that valuation of our holdings. (Maybe the owners of the three wonder stocks mentioned above do receive such a message in respect to their holdings - I feel i would need something at leasr that reliable to sleep well at present prices.) I attempt to apply a conservative valuation based upon my knowledge of assets,earning power,industry conditions,competitive position,etc. We would not be a seller of our holdings at portfolio at yearend valuations - otherwise,we would already have sold them.
**Our final category is "generals - relatively undervalued." This category has been growing in relative importance as opportunities in the other categories become less frequent.
Frankly,operating in this field is somewhat more ethereal 飘忽的 than operating in the other three categories,and I'm just not an ethereal sort. Therefore,I feel accomplishments here are less solid and perhaps less meaningful for future projections than in the "Relatively Undervalued" group, partly due to implementation of the technique referred to in last year's letter which serves to reduce risk and potentially augment gains. It should reduce risk in any year,and it definitely augmented the gains in 1965. It is necessary to point out that results in this category were greatly affected for the better by only two investments.
Candor also demands I point out that during 1965 we had our worst single investment experience in the history of BPL on one idea in this group.
Overall,we had more than our share of good breaks in 1965. We did not have a great quantity of ideas,but the quality,with the one important exception mentioned above,was very good and circumstances developed which accelerated the timetable in several. I do not have a great flood of good ideas as i go into 1966, although again i believe i have at least several potentially good ideas of substantial size. Much depends on whether market conditions are favorable for obtaining a larger position.
All in all, however,you should recognize that more came out of the pipeline in 1965 than went in.

Diversification
"How much do i put in number one(ranked by expectation of relative performance)? and how much do i put in number eight?" This depends to a great degree on the wideness of the spread between the mathematical expectation of number one versus number eight. It also depends upon the probability that number one could turn in a really poor relative performance. Two securities could have equal mathematical expectations,but one might have .05 chance of performing fifteen percentage points or more worse than the Dow,and the second might have only .01 chance of such performance. The wider range of expectation in the first case reduces the desirability of heavy concentration in it.
The above may make the whole operation sound very precise. It isn't. Nevertheless,our business is that of ascertaining facts and then applying experience and reason to such facts to reach expectations. Imprecise and emotionally influenced as our attempts may be,that is what the business is all about. The results of many years of decision-making in securities will demonstrate how well you are doing on making such calculations - whether you consciously realize you are making the calculations or not. I believe the investor operates at a distinct advantage when he is aware of what path his thought process is following.
There is one thing of which I can assure you. If good performance of the fund is even a minor objective,any portfolio encompassing one hundred stocks(whether the manager is handling one thousand dollars or one billon dollars)is not being operated logically. The addition of the one hundredth stock simply can't reduce the potential variance in portfolio perfotmance sufficiently to compensate for the negative effect its inclusion has on the overall portfolio expectation.......Anyone owning such numbers of securities after presumably studying their investment merit (and i don't care how prestigious their labels) is following what i call the Noah School of Investing - two of everything. Such investors should be piloting arks. While Noah may have been acting in accord with certain time-tested biological principles,the investors have left the track regarding mathematical principles. (I only made it through plane geometry,but with one exception,I have carefully screened out the mathematicians from our Partnership.)

......We probably have had only five or six situations in the nine-year history of the Partnership where we have exceeded 25%......过去9年，我们有5、6只股持仓超过25%。
In selecting the limit to which i will go in any one investment,I attempt to reduce to a tiny figure the probability that the single investment (group,if there is intercorrelation) can produce a result for our total portfolio that would be more than ten percentage points poorer than the Dow.......

We presently have two situations in the over 25% category - one a controlled company,and the other a large company where we will never take an active part. It is worth pointing out that our performance in 1965 was overwhelmingly the product of five investment situations.
All texts counsel"adequate" diversification,but the ones who quantify "adequate" virtually never explain how they arrive at their conclusion. ......"You've got a harem of seventy girls;you don't get to know any of them very well."

Miscellaneous......

1966.7.12
First half 1966......... -8.7 8.2 7.7
1957-First half 1966 9.7 29.0 23.5
If you had invested $100,000 on January 1 equally among - 如果年初你将10万美元等额投资于下面8家最大型的公司。
a>.the world's largest auto company (General Motors);
b>.the world's largest oil company (standard of New Jersey);
c>.the world's largest retailing company (Sears Roebuck);
d>.the world's largest chemical company (duPont);
e>.the world's largest steel company (U.S. Steel);
f>.the world's largest stockholder-owned insurance company (Aetna);
g>.the world's largest public utility company (ATT);
h>.the world's largest bank company (Bank of America);
your total portfolio (including dividends received) would have been worth $83,370 on June 30 for a loss of 16.6%. The total market value on January 1 of these eight giants was well over $100 billion. Every one of them was selling lower on June 30. 到6月30日，仅剩8.337万。这8大公司年初总市值超过1000亿美元。

Investment companies......

Hochschild,Kohn & Co.
During the first half we,and two 10% partners,purchased all of the stock of Hochschild,Kohn & Co., a privately owned Baltimore department store.This is the first time in the history of the Partnership that an entire business has been purchased by negotiation,although we have,from time to time,negotiated purchase of specific important blocks of marketable securities.Howover,no new principles are involved.The quantitative and qualitative aspects of the business are evaluated and weighed against price,both on an absolute basis and relative to other investment opportunities.HK (learn to call it that - i didn't find out how to pronounce it until the deal was conclude stacks up fine in all respects.
We have topnotch people (both from a personal and business standpoint) handle the operation.Despite the edge that my extensive 75c an hour experience a the Penney's store in Omaha some years back gives us(I become an author on the Minmium Wage Act),they will continue to run the business as in the past. Even if the price had been cheaper but the management had been run-of-the-mill,we would not have bought the business.
It is impossible to avoid some public notice when a business with several thousand empolyees is acquired. However,it is important that you do not infer the degree of financial importance to BPL from its news value to the public. We have something over $50 million invested,primarily in market able securities,of which only about 10% is represented by our net investment in HK. We have an investment of over three times this much in a marketable security where our ownership will never come to public attention.This is not to say an HK is not important - a 10% holding definitely is. However,I is not as significant relative to our total operation as it would be easy to think. I still prefer the iceberg approach toward investment disclosure.
It is my intention to value HK at yearend at cost plus our share of retained earnings since purchase. This policy will be followed in future years unless there is a demonstrable change in our position relative to other department stores or in other objective standards of value.Naturally we wouldn't have purchased HK unless we felt the price was quite attractive. Therefore,a valuation policy based upon cost may somewhat undervalue our holdings. Nevertheless,it seems the most objective figure to apply.All of our investments usually appear undervalued to me - otherwise we wouldn't own them.

Market Forecasting -----fuzzy complex ambiguous vague
We don't buy and sell stocks based upon what other people think the stock market is going to do(I never have an opinion) but rather upon what we think the company is going to do. The course of the stock market will determine,to a great degree, when we will be right,but the accuracy of our analysis of the company will largely determine whether we will be right. In other words,we tend to concentrate on what should happen,not when it should happen.
In our department store business i can say with considerable assurance that December will be better than July. (Notice how sophisticated i have already become about retailing.) What really counts is whether December is better than last December by a margin greater than our competitors' and what we are doing to set the stage for future December will be better than July,but i can't even say that December won't produce a very large loss. It sometimes does. Our investments are simply not aware that it takes 365.25 days for the earth to make it around the sun. Even worse,they are not aware that your celestial orientation(and that of the IRS) requires that i report to you upon the conclusion of each orbit (the earth's - not ours). Therefore,we have to use a standard other than the calendar to measure our progress. This yardstick is obviously the general experience in securities as measured by the Dow. We have a strong feeling that this competitor will do quite decently over a period of years (Christmas will come even if it's in July) and if we keep beating our competitor we will have to do something better than "quite decently". It's something like a retailer measuring his sales gains and profit margins against Sears' - beat them every year and somehow you'll see daylight.......
If we start deciding, based on guesses or emotions,whether we will or won't participate in a business where we should have some long run edge,we're in trouble. We will not sell our interests in businesses(stocks) when they are attractively priced just because some astrologer thinks the quotations may go lower even though such forecasts are obviously going to be right some of the time. Similarly,we will not buy fully priced securities beacause "experts" think prices are going higher. Who would think of buying or selling a private business because of someone's guess on the stock market? The availability of a quotation for your business interest (stock)should always be an asset to be utilized if desired. If it gets silly enough in either direction,you take advandage of it.Its availability should never be turned into a liability whereby its periodic aberrations in turn formulate your judgments. A marvelous articulation of this idea is contained in chapter two (The Investor and Stock Market Fluctuations) of Benjamin Graham's "The Intelligent Investor". In my opinion,this chapter has more investment importance than anything else that has been written. 利用市场波动。

1966.11.1
......We have previously used a valuation half way between net current asset value and book value for Berkshire Hathaway. This will most probably produce a figure substantially above yearend market value for minority shares and this same situation is likely to prevail throughout 1967.Early in 1966,the reverse was true. In the midyear letter, we announced our intention to use cost plus subsequent retained earnings for Hochschild,Kohn. 我们对伯克夏的估价是：净流动资产与净资产的平均值，今年底以及1967年全年很可能高于市场价。上封信中，我们使用成本加保留盈余为H-K公司定价。
Recent conditions in the securities and money markets raise the question of whether these formulae would be valid under all cirumstances. The Partnership Agreement charges me with the responsibility for establishing fair value for controlling interests,and this means fair to both adding and withdrawing partners at a specific point in time. Wide changes in the market valuations accorded stocks at some point obviously find reflection in the valuation of businesses,although this factor is of much less importance when asset factors (particularly when current assets are significant) overshadow earning power considerations in the valuation process. Similarly,a dramatic change in the availability(not so much the cost) of money for financing business purchases has some effect on the value of businesses. While such circumstances may only be short term factors,my responsibility is to value our controlling interests as of a given date(yearend) and all factors.(including those mentioned above)existing at that time must be considered.
As conditions stand today,I do not believe any change in our valuation formulae will be appropriate. I intend to carefully consider all factors in late December and possibly decrease our yearend valuation of Berkshire and HK if conditions (particularly those in the security and money markets) dictate such revaluations. Should a valuation decrease be warranted,you will be advised,prior to yearend,in our December 23 letter confirming the status of your Commitment Letter. If such a revision is made,it will not dramatically change the performance reported on the preceding page.

1967.1.25
The first decade
1966-----：-15.6 20.4 16.8
1957-1966： 8.3 28.8 23.2

Investment companies
A few mutual funds and some private investment operations have compiled records vastly superior to the Dow and,in some cases,substantially superior to BPL.Their investment techniques are usually very dissimilar to ours and not within my capabilities. However,they are generally managed by very bright,motivated people and it is only fair that i mention the existence of such superior results in this general discussion of the record of professional investment management. 有些投资者超过了我，他们的投资技巧和我们大不相同，在我的能力之外。

Trends in our business
A keen mind working diligently at interpreting the figures on page one could come to a lot of wrong conclusions.
The results of the first ten years have absolutely no chance of being duplicated or even remotely approximated during the next decade. They may well be achieved by some hungry twenty-five year old working with $105,100 initial partnership capital and operating during a investment philosophy. They will not be achieved by a better fed thirty-six year old working with our $54,065,345 current partnership capital who presently finds perhaps one-fifth to one-tenth as many really good ideas as previously to implement his investment philosophy. 10年，从$105,100到$54,065,345，下一个10年将差得远。
Buffett Associates,Ltd.(predecessor to BPL)was founded on the west banks of the Missouri,May 5,1956 by a hardy little band consisting of four family members,three close friends and $105,100.(I tried to find some brilliant flash of insight regarding our future or present conditions from my first page and a half annual letter of January,1957 to insert as a quote here. However,someone evidently doctored my file copy so as to remove the perceptive remarks i must have made.)
At that time,and for some years subsequently,there were substantial numbers of securities selling at well below the "value to a private owner" criterion we utilized for selection of general market investments. We also experienced a flow of "workout" opportunities where the percentages were very much to our liking. The problem was always which,not what. Accordingly,we were able to own fifteen to twenty-five issues and be enthusiastic about the probabilities inherent in all holdings. 前几年中，低估的股票和套利机会都较多。
***In the last few years this situation has changed dramatically. We now find very few securities that are understandable to me,available in decent size and which offer the expectation of investment performance meeting our yardstick of ten percentage points per annum superior to the Dow. In the last three years we have come up with only two or three new ideas a year that have had such an expectancy of superior perfotmance.Fortunately, in some cases,we have made the most of them. However,in earlier years, a losser effort produced literally dozens of comparable opportunities. It is difficult to be objective about the causes for such diminution of one's own productivity. Three factors that seem apparent are:(1) a some what changed market environment;(2)our increased size;and(3)substantially more competition. 近2、3年，情况发生了戏剧性变化。我们很难找到可理解的、可买到相当数量的、预期能超越道指10个百分点的证券。 近3年，我们1年仅有2、3个机会。早些年，那样的机会很多。 描述引起变化的原因，不带偏见是困难的。 3个似乎明显的因素是：（1） 某种变化的环境；（2）我们增长的规模；（3）更多的竞争。
It is obvious that a business based upon only a trickle of fine ideas has poorer prospects than one based upon a steady flow of such ideas. To date the trickle has provided as much financial nourishment as the flow. This is true because there is only so much one can digest (million dollar ideas are of no great benefit to thousand dollar bank accounts - this was impressed on me in my early days)and because a limited number of ideas causes one to utilize those available more intensively. The latter factor has definitely been operative with us in recent years. However,a trickle has considerably more chance of drying up completely than a flow.
These conditions will not cause me to attempt investment decisions outside my sphere of understanding (I don't go for the "if you can't lick 'em,join 'em" philosophy - my own leaning is toward "if you can't join 'em,lick 'em"). We will not go into businesses where technology which is away over my head is crucial to the investment decision. I know about as much about semi-conductors or integrated circuits as i do of the mating habits of the chrzaszcz. (That's a Polish May bug,students - if you have trouble pronouncing it,rhyme it with thrzaszcz.) 不懂不做。
Furthermore,we will not follow the frequently prevalent approach of investing in securities where an attempt to anticipate market action overrides business valuations. Such so-called "fashion" investing has frequently produced very substantial and quick profits in recent years (and currently as i write this in January). It represents an investment technique whose soundness i can neither affirm nor deny. It does not completely satisfy my intellect (or perhaps my prejudices),and most definitely does not fit my temperament.I will not invest my own money based upon such an approach hence,I will most certainly not do so with your money. 我们不跟随流行的投资方法：预计市场行为，不顾企业商业价值。像“时髦”投资，近几年产生了许多暴利机会，这种投资技巧的稳健性，我既不肯定也不否定，它不能满足我的理性（或偏见），并且很确切的不符合我的性情。
Finally,we will not seek out activity in investment operations,even if offering splendid profit expectations,where major human problems appear to have a substantial chance of developing. 不主动。
What i do promise you,as partners,is that i will work hard to maintain the trickle of ideas and try to get the most out of it that is possible - but if it should dry up completely,you will be informed honestly and promptly so that we may all take alternatice action. 滴干即止。

Analysis of 1966 results
All four main categories of our investment operation worked out well in 1966. Specifically,we had a total overall gain of $8,906,701 derived as follows: 年初4400万美元。

Category
Average investment
Overall gain

Controls
$17,259,342
$1,566,302

Generals- private owner
1,359,340
1,004,362

Generals - relatively undervalued
21,847,045
5,124,254

Workouts
7,666,314
1,714,181

Miscellaneous,including U.S. Treasury Bills
1,332,609
(18,422)

Total income
$9,390,677

less:general expense
483,976

Overall Gain
$8,906,701

The classifications are not iron-clad. Nothing is changed retroactively but the initial decision as to category is sometimes arbitrary. The above figures use a monthly average of market values in calculating the average investment.

Controls
There were three main sources of gain during 1966 in respect to controlled companies. These arose through:(1) retained business earnings applicable to our holdings in 1966;(2) open market purchases of additional stock below our controlling interest valuation and; (3) unrealized appreciation in marketable securities held by the controlled companies. The total of all positive items came to $2,600,838 in 1966.
However,due to factors mentioned in my November 1,1966 letter,specific industry conditions,and other relevant items,this gain was reduced by $1,034,780 in arriving at our fair valuation applicable to controlling interests as of December 31,1966. Thus the overall gain in the control category was reduced to $1,566,058 for the year.
We were undoubtedly fortunate that we had a relatively high percentage of net assets invested in businesses and not stocks during 1966. The same money in general market holdings would probably have produced a loss,perhaps substantial,during the year. This was not planned and if the stock market had advanced substantially during the year,this category would have been an important drag on overall performance. The same situation will prevail during 1967. 控股企业价值较少受市场交易价格影响。

Generals - private owner
Our performance here falls in the "twenty-one dollars a day,once a month" category.In the middle of 1965 we started purchasing a very attractive widely held security which was selling far below its value to a private owner. Our hope was that over a two or three year period we could get $10 million or more invested at the favorable prices prevailing. The various businesses that the company operated were understandable and we could check out competitive strengths and weaknesses thoroughly with competitors,distributors,custmomers,suppliers,ex-employees,etc. Market conditions peculiar to the stock gave us hope that,with patience,we could buy substantial quantities of the stock without disturbing the price. 1965年年中，我们开始买1只大幅低估的证券（了解该企业，市场条件有利），希望2、3年后能赚1亿以上。
At yearend 1965 we had invested $1,956,980 and the market value of our holding was $2,358,412 so that $401,432 was contributed to performance during 1965. We would have preferred,of course,to have seen the market below cost since our interest was in additional performance buying,not in selling. This would have dampened BPL's 1965 performance and perhaps reduced the euphoria experienced by limited partners (psychically,the net result to all partners would have been a standoff since the general partner would have been floating) but would have enhanced long term performance. The fact that the stock had risen somewhat above our cost had already slowed down our buying program and thereby reduced ultimate profit. 跌到购入成本之下，继续买进，涨了追买。
An even more dramatic example of the conflict between short term performance and the maximization of long term results occured in 1966. Another party,previously completely unknown to me,issued a tender offer which foreclosed opportunities for future advantageous buying. I made the decision that the wisest course (it may not have been) for us to follow was to dispose of our holdings and we thus realized a total profit of $1,269,181 in February,of which $867,749 was applicable to 1966. 一个完全陌生的单位标购该证券，卖出实现$1,269,181利润，65年$401,432+66年$867,749。
While any gains looked particularly good in the market environment that ultimately developed in 1966,you can be sure I don't delight in going around making molehills out of mountians. The molehill,of course,was reflected in 1966 results. However,we would have been much better off from a long range standpoint if 1966 results had been five percentage points worse and we were continuing to buy substantial quantities of the stock at the depressed prices that might have been expected to prevail in last year's market environment.
If good ideas were a dime a dozen,such a premature ending would not be so unpleasant. There is something to be said,of course,for a business operation where some of the failures produce moderate profits. However, you can see how hard it is to develop repalcement ideas by examining our average investment in the Private Owner category - we came up with nothing during the remainder of the year despite lower stock prices,which should have been conducive to finding such opportunities.难寻标的。

Generals - relatively undervalued 相对低估
Our relative performance in this category was the best we have ever had due to one holding which was our largest investment at yearend 1965 and also yearend 1966. This investment has substantially out-performed the general market for us during each year (1964,65,66)that we have held it. While any single year's performance can be quite erratic,we think the probabilities are highly favorable for superior performance over a three or four year period. The attractiveness and relative certainty of this particular security are what caused me to introduce Ground Rule 7 in November,1965 to allow individual holdings of up to 40% of our net assets. We spend considerable effort continuously evaluating every facet of the company and comstantly testing our hypothesis that this security is superior to alternative investment choices. Such constant evlauation and comparison at shifting prices is absolutely essential to our investment operation.
It would be much more pleasant (indicate a more favorable future) to report that our results in the Generals - Relatively Undervalue category represented fifteen securities in the industries,practically all of which outperformed the market. We simply don't have that many good ideas. As mentioned above,new ideas are continually measured against present ideas and we will not make shifts if the effect is to downgrade expectable performance. This policy has resulted in limited activity in recent years when we have felt so strongly about the relative merits of our largest holding. Such a condition has meant that realized gains have been a much smaller portion of total performance than in earlier years when the flow of good ideas was more substantial.
The sort of concentration we have in this category is bound to produce wide swings in short term performance - some,most certainly,unpleasant. There have already been some of these applicable to shorter time spans than I use in reporting to partners. This is one reason I think frequent reporting to be foolish and potentially misleading in long term oriented business such as ours.
Personally,within the limits expressed in last year's letter on diversification, I am willing to trade the pains(forget about the pleasures) of substantial short term variance in exchange for maximization of long term performance. However, I am not willing to incur risk of substantial permanent capital loss in seeking to better long term performance. To be perfectly clear - under our policy of concentration of holdings, partners should be completely prepared for periods of substantial underperfotmance(far more likely in sharply rising markets) to offset the occasional overperformance such as we have experienced in 1965 and 1966,and as a price we pay for hoped-for good long term performance.
All this talk about the long pull has caused one partner to observe that "even five minutes is a long time if one's head is being held under water." This is the reason,of course ,that we use borrowed money very sparingly in our operation. Average bank borrowings during 1966 were well under 10% of average net worth.
In this section we also had an experience which helped results in 1966 but hurt our long term prospects. We had just one really important new idea in this category in 1966. Our purchasing started in late spring but had only come to about $1.6 million (it could be bought steadily but at only a moderate pace) when outside conditions drove the stock price up to a point where it was not relatively attractive. Though our overall gain was $728,141 on an average holding period of six and a half months in 1966,it would have been much more desirable had the stock done nothing for a long period of time while we accumulated a really substantial position. 今年仅发掘了1个重要的新标的。

Workouts
In last year's letter I forecast reduced importance for workouts. While they were not of the importance of some past years, I was pleasantly surprised by our experience in 1966 during which we kept an average of $7,666,314 employed in this category. Furthermore,we tend to ascribe borrowings to the workout section so that our net equity capital employed was really something under this figure and our return was somewhat better than the 22.4% indicated on page six. Here,too,we ran into substantial variation. At June 30,our overall profit on this category was $16,112 on an average investment of $7,870,151,so that we really had a case of an extraordinarily good second half offsetting a poor first half. 借钱套利。上半年几乎没赚，下半年回报率22.4%
In past years,sometimes as much as 30-40% of our net worth has been invested in workouts, but it is highly unlikely that this condition will prevail in the future. Nevertheless,they may continue to produce some decent return s on the moderate amount of capital employed. 过去有几年，套利份额占我们净值30%-40%，今后很可能要降低比例。

Miscellaneous......

1967.7.12
We begain 1967 on a traumatic note with January turning out to be one of the worst months we have experienced with a plus 3.3% for BPL versus a plus 8.5% for the Dow. Despite this sour start,we finished the half about plus 21% for an edge 9.6 percentage points over the Dow. Again,as throughout 1966,the Dow was a relatively easy competitor(it won't be every year,prevailing thinking to the contrary notwithstanding) and a large majority of investment managers outdid this yardstick. The following table summarizes performance to date on the usual basis:
First half 1967----- 11.4 21.0 17.3
1957-First half 1967 9.1 29.6 23.8
BPL's performance during the first half reflects no change in valuation of our controlled companies and was thus achieved solely by the 63.3% of our net assets invested in marketable securities at the beginning of the year. 上半年业绩仅由年初占净值63.3%的可流通证券完成。Both DRC and B-H made important acquisitions during the first half. The over all progress of DRC (80% owned) and both of its subsidiaries (HK and Asscociaed Cotton Shops) is highly satisfactory. However,B-H is expertencing and faces real difficulties in the textile business. While I don't presently foresee any loss in underlying values, I similarly see no prospect of a good return on the assets employed in the textile business.

Investment companies
The tide continues to be far more important than the swimmers.

Taxes......

1967.10.9 To my partners:
Over the past eleven years, I have consistently set forth as the BPL investment goal an average advantage in our performance of ten percentage points per annum in comparison with the DJIA. Under the environment that existed during that period, I have considered such an objective difficult but obtainable. 过去11年我们投资目标一直是超越道指10个百分点，我认为那是个有难度但可达到的目标。
The following conditions now make a change in yardsticks appropariate: 现状使我们调整上述目标：
1. The market environment has changed progressively over the past decade,resulting in a sharp diminution in the number of obvious quantitatively based investment bargains available;
2. Mushrooming interest in investment performance (which has its ironical aspects since i was among a lonely few preaching the importance of this some years ago) has created a hyper-reactive pattern of market behavior agianst which my analytical techniques have limited value;
3. The enlargement of our capital base to about $65 million when applied against a diminishing trickle of good investment ideas has continued to present the problems mentioned in the January,1967 letter; and
4. My own personal interests dictate a less compulsive approach to superior investment results than when I was younger and leaner.

Let's look at each of these factors in more detail.
The evaluation of securities and businesses for investment purposes has always involved a mixture of qualitative and quantitative factors. At the one extreme,the analyst exclusively oriented to qualitative factors would say,"Buy the right company (with the right prospects,inherent indurtry conditions,management,etc.) and the price will take care of itself." On the other hand,the quantitative spokeman would say,"Buy at the right price and the company (and stock) will take care of itself." As is so often the pleasant result in the securities world,money can be made with either approach. And,of course ,any analyst combines the two to some extent his classification in either school would depend on the relative weight he assigns to the various factors and not to his consideration of one group of factors to the exclusion of the other group.
Interestingly enough,although i consider myself to be primarily in the quantitative school (and as i write this no one has come back from recess - i may be the only one left in the class),the really sensational ideas i have had over the years have been heavily weighted toward the qualitative side where i have had a "high-probability insight". This is what causes the cash register to really sing.However,it is an infrequent occurrence,as insights usually are,and,of course,no insight is required on the quantitative side - the figures should hit you over the head with a baseball bat. So the really big money tends to be made by investors who are right on qualitative decisions but, at least in my opinion,the more sure money tends to be made on the obvious quantitative decisions. 数量vs品质，我个人略偏于数量。
Such statistical bargains have tended to disappear over the years. This may be due to the constant combing and re-combing of investments that has occurred during the past twenty years,without an economic convulsion such as that of the '30s to create a negative bias toward equities and spawn hundreds of new bargain securities. It may be due to the new growing social acceptance,and therefore usage (or maybe it's vice versa - I'll let the behaviorists figure it out) of takeover bids which have a natural tendency to focus on bargain in issues. It may be due to the exploding ranks of security analysts bringing forth an intensified scrutiny of issues far beyond what existed some years ago. Whatever the cause, the result has been the virtual disappearance of the bargain issue as determined quantitatively - and thereby of our bread and butter. There still may be a few from time to time. There will also be the occasional security where I am really competent to make an important qualitative judgment. This will offer our best chance for large profits. Such instances will, however,be rare. Much of our good performance during the past three years has been due to a single idea of this sort. 过去20年不断地投资梳理，数量低估的证券消失了。偶尔我们有能力作出一个重要的品质决断，过去3年我们仅1个这样的主意。
The next point of difficulty is the intensified interest in investment performance. For years i have preached the importance of measurement. Consistently i have told partners that unless our performance was better than average,the money should go elsewhere. In recent years this idea has gained momentum throughout the investment(or more importantly,the investing) community. In the last year or two it has started to look a bit like a tidal wave. I think we are witnessing the distortion of a sound idea.
I have always cautioned partners that i considered three years a minimum in determining whether we were "performing". Naturally,as the investment public has taken the bit in its teeth,the time span of expectations has been consistently reduced to the point where investment performance by large aggregates of money is being measured yearly,quarterly,monthly,and perhaps sometimes even more frequently (leading to what is known as "instant research"). The payoff for superior short term performance has vecome enormous,not only in compensation for results actually achieved,but in the attraction of new money for the nest round. Thus a self-generating type of activity has set in which leads to larger and larger amounts of money participating on a shorter and shorter time span. A disturbing corollary is that the vehicle for participation (the particular companies or stocks) becomes progressively less important - at times virtually incidental - as the activity accelerates.
In my opinion what is resulting is speculation on an increasing scale. This is hardly a new phenomenon; however,a dimension has been added by the growing ranks of professional (in many cases formerly quite docile) investors who feel they must "get aboard". The game is dignified,of course, by appropriate ceremonies,personages and lexicon. To date it has been highly profitable. It may also be that this is going to be the standard nature of the market in the future. Nevertheless,it is an activity at which I am sure I would not do particularly well. ......
Any form of hyper-activity with large amounts of money in securities market can create problems for all participants. I make no attempt to guess the action of the stock market and participants. I make no attempt to guess the action of the stock martket and haven't the foggiest notion as to whether the Dow will be at 600,900 or 1200 a year from now. Even if there are serious consequences resulting from present and future speculative activity,experience suggests estimates of timing are meaningless. However,i do believe certain conditions that now exist are likely to make activity in markets more difficult for us for the intermediate future.换手量过大。
The above may simply be "old - fogeyism"(after all,i am 37). When the game is no longer being played your way,it is only human to say the new approach is all wrong,bound to lead to trouble,etc. I have been scornful of such behavior by others in the past. I have also seen the penalties incurred by those who evaluate conditions as they were - not as they are. Essentially i am out of step with present conditions. On one point,however,i an clear. i will not abandon a previous approach whose logic i understand (although i find it difficult to apply) even though it may mean foregoing large, and apparently easy,profits to embrace an approach which i don't fully understand,have not practiced successfully and which, possibly,could lead to substantial permanent loss of capital.
The third point of difficulty involves our much greater base of capital. For years my investment ideas were anywhere from 110% to 1000% of our capital. It was difficult for me to conceive that a different condition could ever exist. I promised to tell partners when it did and in my January,1967 letter had to make good on that promise. Largely because of the two conditions previously mentioned,our greater capital is now something of a drag on performance. I believe it is the least significant factor of the four mentioned,and that if we were operating with one-tenth of our present capital our performance would be little better. However, increased funds are presently a moderately negative factor.
The final, and most important, consideration concerns personal motivation. When i started the partnership i set the motor that regulated the treadmill at "the points better than the Dow". I was younger, poorer and probably more competitive.Even without the three previously discussed external factors making for poorer performance, I would still feel that changed personal conditions make it advisable to reduce the speed of the treadmill. I have observed many cases of habit patterns in all activities of life, particularly business,continuing(and becoming assentuated as years pass) long after they ceased making sense. Bertrand Russell has related the story of two Lithuanian girls who lived at his manor subsequent to World War I. Regularly each evening after the house was dark,they would sneak our and steal vegetables from the neighbors for hoarding in their rooms; this despite the fact that food was bountiful at the Russell table. Lord Russell explained to the girls that while such behavior may have made a great deal of sense in Lithuania during the war,it was somewhat out of place in the English contryside.He received assenting nods and continued stealing. He finally contented himself with the observation that their behavior,strange as it might seem to the neighbors,was really not so different from that of the elder Rockefeller.
Elementary self-analysis tells me that i will not be capable of less than all-out effort to achieve a publicly proclaimed goal to people who have entrusted their capital to me. All-out effort makes progressively less sense. I would like to have an economic goal which allows for considerable non-economic activity. This may mean activity outside the field of investments of it simply may mean pursuing lines within the investment field that do not promise the greatest economic reward. An example of the latter might be the continued investment in a staisfactory (but far from spectacular)controlled business where I liked the people and the nature of the business even though alternative investments offered an expectable higher rate of ruturn. More money would be made buying businesses at attractive prices,then reselling them.However,it may be more enjoyable(particularly when the personal value of incremental capital is less) to continue to own them and hopefully improve their performance,usually in a minor way,through some decisions involving financial strategy.
Thus,i am likely to limit myself to things which are reasonably easy,safe,profitable and pleasant.This will not make our operation more conservative than in the past since i believe,undoubtedly with some bias,that we have always operated with considerable conservatism. The long-term downside risk will not be less; the upside potential will merely be less.
Specifically,our longer term goal will be to achieve the lesser of 9% per annum or a five percentage point advantage over the Dow. Thus,if the Dow averages -2% over the next five years, I would hope to average +3% but if the Dow averages +12%,I will hope to achieve an average of only +9%. These may be limited objectives,but I consider it no more likely that we will achieve even these more modest results under present conditions than i formerly did that we would achieve our previous goal of a ten percentage point average annual edge over the Dow. Furthermore,i hope limited objectives will make for more limited effort (i'am quite sure the converse is true). 我们现在的5年目标是：年回报不超过9%或超越道指5个百分点，其中较差的一个。
I will incorporate this new goal into the Ground Rules to be mailed you about November 1,along with the 1968 Commitment Letter.I wanted to get this letter off to you prior to that mailing so you would have ample time to consider your personal situation,and if necessary get in touch with me to clear up some of the enclosed,before making a decision on 1968. As always,I intend to continue to leave virtually all of my capital (excluding Data Documents stock),along with that of my family,in BPL. What i consider satisfactory and achievable may well be different from what you consider so. Partners with attractive alternative investment opportunities may logically decide that their funds can be better employed elsewhere,and you can be sure i will be wholly in sympathy with such a decision.
I have always found behavior most distasteful which publicly announces one set of goals and motivations when actually an entirely different set of factors prevails. Therefore,I have always tried to be 100% candid with you about my goals and personal feelings so you aren't making important decisions pursuant to phony proclamations(I've run into a few of these in our investment experience). Obviously all the conditions enumerated in this letter haven't appeared overnight. I have been thinking about some of the points involved for a long period of time. You can understand, I am sure,that I wanted to pick a time when past goals had been achieved to set forth a reduction in future goals. I would not want to reduce the speed of the treadmill unless I had fulfilled my objectives to this point.

1967.11.1
You should be aware that not only do we have about $20 million invested in controlled companies,but we also have over $16 million in short-term governments. This makes a present total of over $36 million which clearly will not participate in any upward movement the stock market may have. This does not reflect any market judgment on my part;it simply means I can't find any obviously profitable and safe (from a long-term value standpoint,not a short-term quotational one)places to put the money.We normally enter each year with a few eggs relatively close to hatching;the nest is virtually empty at the moment. This situation could change very fast,or might persist for some time. It is mentioned only to moderate any expectations you might have as to our performance should a strong stock market occur in the near future. 我们有2千万投资在控股企业，1600万短期政府债券投资，这3600万和股市波动无关。与市场判断无关，从长期价值立场出发，我不能找到安全、有利的标的投钱。

1968.1.24
Our overall gain was $19,384,250 which,even under accelerating inflation,will buy a lot of Pepsi. And,due to the sale of some long-standing large positions in marketable securities,we had realized taxable income of $27,376,667,which has nothing to do with 1967 performance but should give all of you a feeling of vigorous participation in The Great Society on April 15th.

The minor thrills described above are tempered by any close observation of what really took place in the stock market during 1967. Probably a greater percentage of participants in the securities markets did substantially better than the Dow last year than in virtually any year in history. In 1967,for many,it rained gold and it paid to be out playing the bass tuba. I don't have a final tabulation at this time but my guess is that at least 95% of investment companies following a common stock program achieved better results than the Dow - in many cases by very substantial amounts. It was a year when profits achieved were in inverse proportion to age - and I am in the geriatric ward,philosophically. 估计95%的投资公司超越了道指。利润率与投资者年龄成反比。
1967， 19.0 35.9 28.4
1957-67 9.3 29.4 23.6

Investment companies
In 1967,many investment organizations performed substantially better than BPL,with gains ranging to over 100%. Because of these spectacular results,money,talent and energy are converging in a maximum effort for the achievement of large and quick stock market profits. It looks to me like greatly intensified speculation with concomitant risks - but many of the advocates insist otherwise.
My mentor,Ben Graham,used to say,"Speculation is neither illegal,immoral nor fattening(financially)." During the past year,it was possible to become fiscally flabby through a steady diet of speculative bon-bons.We continue to eat oatmeal but if indigestion should set in generally,it is unrealistic to expect that we won't have some discomfort.

Analysis of 1967 results
We had our worst performance in history in the "workout" section. The streets were filled with upset applecarts - our applecarts - during 1967. Thus,on an average investment of $17,246,879,our overall gain insulting depths,this represents a return of .89 of 1%. While i don't have complete figures, I doubt that we have been below 10% in any past year. As in other categories,we tend to concentrate our investments in the workout category in just a few situations per year. This technique gives more variation in yearly results than would be the case if we used an across-the-board approach. I believe our approach will result in as great(or greater) profitability on a long-term basis,but you can't prove it by 1967. 套利投资1600多万，几乎没赚，过去都在10%年回报以上。我认为，偶尔的集中长期投资的利润率更高。
Our investment in controlled companies was a similar drag on relative performance in 1967,but this is to be expected in strong markets. On an average investment of $20,192,776,we had an overall gain of $2,894,571. I am pleased with this sort of performance,even though this category will continue to underperform if the market continues strong during 1968. Through our two controlled companies (Diversified Retailing and Berkshire Hathaway ;DRC B-H),we acquired two new enterprises in 1967,Associated Cotton Shops and National Indemnity (along with National Fire & Marine,an affiliated company). These acquisitions couldn't be more gratifying. Everything was as advertised or better. The principal selling executives, Ben Rosner and Jack Ringwalt,have continued to do a superb job (the only kind they know),and in every respect have far more than lived up to their end of the bargain. 投资于控股公司的2千万，年获利290万。
The satisfying nature of our activity in controlled companies is a minor reason for the moderated investment objectives discussed in the October 9th letter. When i am dealing with people i like,in businesses i find stimulating(what business isn't?),and achieving worthwhile overall returns on capital employed (say,10-12%),it seems foolish to rush from situation to sitution to earn a few more percentage points. It also does not seem sensible to me to trade known pleasant personal relationships with high grade people,at a decent rate of return,for possible irritation,aggravation or worse at potentially higher returns. Hence,we will continue to keep a portion of our capital (but not over 40% because of the possible liquidity requirements arising from the nature of our partnership agreement) invested in controlled operating businesses at an expected rate of return below that inherent in an aggressive stock market operation.
With a combined total of $37,439,655 in workouts and controls producing an overall gain of only $3,047,844,the more alert members of the class will have already concluded we had a whale of a year in the "Generals - Relatively Undervalued" category. On a net average investment of $19,487,996 we had an overall gain of $14,096,593,or 72%. Last year I referred to one investment which substantially outperformed the general market in 1964,1965 and 1966 and because of its size (the largest proporation we have ever had in anything - we hit our 40% limit) had a very material impact on our overall results and,even more so,this category. This excellent performance accounted for by this single security. Our holdings of this security have been very substantially reduced and we have nothing in this group remotely approaching the size or potential which formerly existed in this investment. 去年我提过1只证券1964，65，66年都超越了大盘，67年1900多万又涨了1400万，现在差不多卖光了。
The "Generals - Private Owner" section produced good results last year ($1,297,215 on $5,141,710 average investment),and we have some mildly interesting possibilities in this area at present. 25.2%

Miscellaneous
We begin the new year with net assets of $68,108,088. We had partners with capital of about $1,600,000 withdraw at yearend, primarily because of the reduced objectives announced in the October 9th letter. This makes good sense for them,since most of them have the ability and motivation to surpass our objectives and i am relieved from pushing for results that i probably can't attain under present conditions.
Some of those who withdrew(and many who didn't) asked me,"what do you really mean?" after receiving the October 9th letter. This sort of a question is a little bruising to any author,but i assured them i meant exactly what i had said. I was also asked whether this was an initial stage in the phasing out of the partnership. The answer to this is,"Definitely,no". As long as partners want to put up their capital alongside of mine and the business is operationally pleasant (and it couldn't be better),I intend to continue to do business with those who have backed me since tennis shoes.
Gladys Kaiser has joined us and is doing the same sort of top-notch job that we have long received from Donna,Bill and John. The office group,spouses and children have over $15 million invested in BPL on January 1,1968,so we have not had a need for NoDoz during business hours. 员工持股超过20%。

1968.7.11
First half 1968----， 0.9 16.0 13.5
1957-First half 1968 8.9 29.6 23.8
Although we revise valuations of our controlled companies only at yearend,it presently appears that our share of their 1968 earnings will be something over $3 million. Those with primary responsibility for their operations,Ken Chace at B-H, Louis Kohn at H-K,Jack Ringwalt at National Indemnity and Ben Rosner at Associated Cotton Shops,continue to meld effort and ability into results.
This year,Diversified retailing company(owner of Hochschild Kohn and Associated Cotton Shops) issued its first published annual report. This was occasioned by the public sale of debentures to approximately 1000 investors last December. Thus,DRC is in the rather unusual position of being a public from a creditors' viewpiont,but a private one (there are three stockholders - BPL owns 80%) for ownership purposes. I am enclosing the DRC report with this letter(except where duplicates go to one household) and plan to continue to send them along with future mid-year letters.
As I have mentioned before,we cannot make the same sort of money out of permanent ownership of controlled businesses that can be made from buying and re-selling such businesses, or from skilled investment in marketable securities. Nevertheless,they offer a pleasant long term form of activity (when conducted in conjunction with high grade,able people) at satisfactory rates of return.

Investment companies
Due to a sluggish performance by the Dow in the last few years,the four big funds now have,on average,about a one-half point per annum advantage over the Dow for the full period. 投资公司普遍超越道指。

The present environment
I make no effort to predict the course of general business or the stock market. Period. However,currently there are practices snow-balling in the security markets and business world which,while devoid of short term predictive value,bother me as to possible long term comsequences.
I know that some of you are not particularly interested (and shouldn't be) in what is taking place on the financial stage. For those who are, I am enclosing a reprint of an unusually clear and simple article which lays bare just,what is occurring on a mushrooming scale. Spectacular amounts of money are being made by those participating(whether as originators,top employees,professional advisors,investment bankers,stock speculators,etc.)in the chain-letter type stock-promotion vogue. The game is being played by the gullible, the self-hypnotized,and the cynical. To create the proper illusions,it frequently requires accounting distortions(one particularly progressive entrepreneur told me he believed in "bold,imaginative accounting"),tricks of capitalization and camouflage of the true nature of the operating businesses involved. The end product is popular,respectable and immensely profitable (I'll let the philosophers figure in which order those adjectives should be placed).
Quite candidly,our own performance has been substantially improved on an indirect basis because of the fall-out from such activities. To create an ever-widening circle of chain letters requires increasing amounts of corporate stocks to come to life. When we have been the owners of such stocks, we have reaped market rewards much more promptly than might otherwise have been the case. The appetite for such companies,however,trends to substantially diminish the number of fundamentally attractive investments which remain.
I believe the odds are good that,when the stock market and business history of this period is being written,the phenomenon described in Mr. May's article will be regarded as of major importance,and perhaps characterized as a mania. You should realize,however,that his" The Emperor Has No Clothes" approach is at odds (or dismissed with a"so what?" or an "Enjoy,Enjoy!")with the views of most investment banking houses and currently successful managers. We lived in an investment world,populated not by those who must be logically persuaded to believe,but by the hopeful,credulous and greedy,grasping for an excuse to believe.
Finally,for a magnificent account of the current financial scene,you should hurry out and get a copy of "The Money Game" by Adam Smith. It is loaded with insights and supreme wit. (Note :Despite my current "Support Your Local Postmaster" drive. I am not enclosing the book with this letter - it retails for $6.95).

Taxes......

1968.11.1
At yearend,we intend to value our eighty percent interest in DRC at $8,800,000. This compares to $7,200,000 last year and an original cost of $4,800,000. Our valuation method is consistent with that employed last year which,roughly,approximates cost plus our equity in retained earnings. 计价：成本+保留盈余。
Our yearend valuation for our seventy percent interest in B-K will be $31 per share. As i have mentioned in previous letters,market price,which governs valuation of minority interest positions,is of virtually no importance in valuing a controlling interest. The dominant factors in such a controlling interest valuation (which is a business valuation - not a stock market one)are asset values and earning power. B-K has made important values and earning power. B-K has made important progress during the year,warranting the increase from $25 per share used last year in valuing our position to the $31 figure this year. As an indication of the unimportance of market values,it may be noted that the $25 figure last year was somewhat above market value at the time,whereas the $31 price is somewhat below market quotations as i write this letter......我们年底将估值控股7成的伯克夏公司31美元（比现在市价低），去年底估值25美元（比当时市价高）。
Result this year continue to be better than i expected. Despite unusually large holdings of cash equivalent securities throuthout much of the year and only a bare trickle of worthwhile ideas,we have managed to achieve reasonably good results measured by the old standards as well as the new ones. The Dow is currently plus about 8%，and our margin over Dow is now somewhat wider than the 15% edge that we had at mid-year. Our backlog of potentially profitable ideas for 1969 is virtually nil. 业绩好于预期。尽管全年持有大量的现金等价物，仅有1个勉强值得做的想法。年中超越道指15%。明年怎么做，脑袋空空。

1969.1.22
Everyone makes mistakes. 人人皆犯错误。
At the beginning of 1968,i felt prospects for BPL performance looked poorer than at any time in our history. However,due in considerable measure to one simple but sound idea whose time had come (investment ideas,like women,are often more exciting than punctual),we recorded an overall gain of $40,032,691. 在68年初，我感觉业绩可能比我们过去任何一年都差。然而，由于大量投资的一个简单而有力的想法（投资想法像女人，突现比准时更激动人心），赚了4千万。
Naturally,you all possess sufficient intellectual purity to dismiss the dollar result and demand an accounting of performance relative to the DJIA. ... This result should be treated as a freak - like picking up thirteen spades in a bridge game. You bid the slam,make it,look modest,pocket the money and then get back to work on the part scores. We will also have our share of hands when we go set. 这是运气异常好。

On a cumulative or compounded basis,the results are:

Investment companies
...The investment management business,which i used to severely chastise in this section for excessive lethargy,has now swung in many quarters to acute hypertension. 我常因嗜睡而遭严惩的投资管理行业，现在的一些岗位活动急剧紧张。
...... When practiced by large and increasing numbers of highly motivated people with huge amounts of money on a limited quantity of suitable securities, the result becomes highly unpredictable. In some ways it is fascinating to watch - and on other ways it is appalling. 人潮、钱潮汹汹，结果很难预测。从某些方面看，它是迷人的，另一些方面看它是可怕的。

Analysis of 1968 results

The classifications are not iron-clad. Nothing is changed retroactively but the initial decision as to category is sometimes arbitrary. The above figures use a monthly average of market values in calculating the average investment.....

Controls
DRC(80% owned) and B-K(70% owned) had combined after-tax earnings of over $5 million. Particularly outstanding performances were turned in by Associated Cotton Shops,a subsidiary of B-H run by Jack Ringwalt. Both of these companies earned about 20% on capital employed in thier businesses. Among Fortune's "500" (the largest manufacturing entities in the country,starting with GM),only 37 companies achieved this figure in 1967,and our boys outshone such mildly better-known (but not better-appreciated) companies as IBM,GE,GM,P&G,DuPont,Control Data,HP,etc. 我们的控股公司税后利润率23%。财富500强仅37家公司超过20%，我们的宝贝超越了著名企业IBM,GE,GM,P&G,DuPont,Control Data,HP等。
I still sometimes get comments from partners like:"Say,Berkshire is up four points - that's great!",or "what's happening to us,Bershire was down three last week?" Market price is irrelevant to us in the valuation of our controlling interests. We valued B-H at 25 at yearend 1957 when the market was about 20,and 31 at yearend 1968 when the market was about 37. We would have done the same thing if the markets had been 15 and 50,respectively. ("Price is what you pay,value is what you get"). We will prosper or suffer in controlled investments in relation to the operating performances of our businesses - we will not attempt to profit by playing various games in the securities markets. 市场价格与我们控股公司的评估价值无关。1957年我们评估25元/股，市价20；1968年我们评估31元/股，市价37。上述市价如果分别是15和50，我们的评估价也一样。付出价格，得到价值。我们的兴衰与控股企业经营表现相关--我们不打算在证券市场玩各种游戏牟利。

Generals - Private Owner
Over the years this has been our best category,measured by average return,and has also maintained by far the best percentage of profitable transactions. This approach was the way i was taught the business,and it formerly accounted for a large proportion of all our investment ideas. Our total individual profits in this category during the twelve year BPL history are probably fifty times or more our total losses. The cash register really rang on one simple industry idea (implemented in several ways) in this area in 1968. We even received a substantial fee (included in Other Income in the audit) for some work in this field.
Our total investment in this category (which is where i feel by far the greatest certainty regarding consistently decent results) is presently under $2 million,and i have nothing at all in the hopper to bolster this. What came through like the Johnstown flood in 1968 looks more like a leaky faucet in Altoona for 1969. 现在持仓少于2百万，我完全没“种子”播撒以支撑本类投资。68年的大洪水在69年可能变成水管滴漏。

Generals - relatively undervalued
This category produced about two-thirds of the overall gain in 1966 and 1967 combined. I mentioned last year that the great two-year performance here had largely come from one idea. I also said,"we have nothing in this group remotely approaching the size or potential which formerly existed in this investment." It gives me great pleasure to announce that this statement was absolutely correct. It gives me somewhtat less pleasure to announce that it must be repeated this year.

Workouts
This category,which was a disaster in 1967,did well during 1968. Our relatively heavy concentration in just a few situations per year (some of the large arbitrage houses may become involved in fifty or more workouts per annum) gives more variation in yearly results than an across-the-board approach. I feel the average profitability will be as good with our policy,and 1968 makes me feel better about that conclusion than 1967 did.
It should again be stated that our results in the Workout area(as well as in other categories) are somewhat understated,compared to the more common method of determining results computed on an initial base figure and utilizing borrowed money (which is often a sensible part of the Workout business).

****** I can't emphasize too strongly that the quality and quantity of ideas is presently at an all time low - the product of the factors mentioned in my October 9th,1967 letter,which have largely been intensified since then.
Sometimes i feel we should have a plaque in our office like the one at the headquarters of Texas Instruments in Dallas which reads:"we don't believe in miracles,we rely on them." It is possible for an old,overweight ball player,whose legs and batting eye are gone,to tag a fast ball on the nose for a pinch-hit home run,but you don't change your line-up because of it.
We have a number of important negatives operating on our future and,while they shouldn't add up to futility,they certainly don't add up to more than an average of quite moderate profitability.

Memorabilia
As one of my older friends says,"Nostalgia just isn't what it used to be." Let's take a stab at it,anyway.
Buffett Associates,Ltd.,the initial predecessor partnership,was formed May 5,1956 with seven limited partners (four family,three close friends),contributing $105,000,and the General Partner putting his money where his mouth was by investing $100. Two additional single-family limited partnerships were formed during 1956,so that on January 1,1957 combined net assets were $303,726. During 1957,we had a gain of $31,615.97, leading to the 10.4% figure shown on page one. During 1968 i would guess NYSE was open around 1200 hours,giving us a gain of about $33,000 per hour (sort of makes you wish they had stayed with the 5.5 hour,5 day week,doesn't it),or roughly the same as the full year gain in 1957.
On January 1,1962 we consolidated the predecessor limited partnerships,moved out of the bedroom,and hired our first full-time employees. Net assets at that time were $7,178,500. From that point to our present net assets of $104,429,431,we have added one person to the payroll. Since 1963 (Asset $9,405,400),rent has gone from $3,947 to $5,823(Ben Rosner would never have forgiven me if i had signed a percentage lease),travel from $3,206 to $3,603,and dues and subscriptions from $900 to $994. If one of Parkinson's Laws is operating,at least the situation hasn't gotten completely out of control. 1962年，合并了多个合伙人群，搬出卧室，雇佣了第一个全时雇员。那时净值是$7,178,500，现在净值$104,429,431，2个雇员。房租从$3,947涨到$5,823。
In making our retrospective survey of our financial assets,our conclusion need not parallel that of Gypsy Rose Lee who opined,when reviewing her physical assets on her fifty-fifth birthday:"i have everything i had twenty years ago - it's just that it's all lower."

Miscellaneous
Although the investment environment is difficult,the office environment is superb. With Donna,Gladys,Bill and John,we have an organization that functions speedily,efficiently and pleasantly. They are the best.
The office group,along with spouses(one apiece - i still haven't figured out how i should handle that plural) and children have over $27 million invested in BPL on January 1, 1969. Assorted sizes and shapes of aunts,uncle,parents,in-laws,brothers,sisters and cousins make the BPL membership list read like "Our Crowd" - which,so far as i am concerned is exactly what it is.

1969.5.29 To My Partners:
About eighteen months ago I wrote to you regarding changed environmental and personal factors causing me to modify our future performance objectives.

The investing environment I discussed at that time (and on which I have commented in various other letters) has generally become more negative and frustrating as time has passed. Maybe I am merely suffering from a lack of mental flexibility. (One observer commenting on security analysts over forty stated: “They know too many things that are no longer true.”)

However, it seems to me that: (1) opportunities for investment that are open to the analyst who stresses quantitative factors have virtually disappeared, after rather steadily drying up over the past twenty years; (2) our $100 million of assets further eliminates a large portion of this seemingly barren investment world, since commitments of less than about $3 million can not have a real impact on our overall performance, and this virtually rules out companies with less than about $100 million of common stock at market value; and (3) a swelling interest in investment performance has created an increasingly short-term oriented and (in my opinion) more speculative market.我感觉好像： ㈠ 经过20年不断地发掘，对强调数量因素的分析师敞开的投资机会，已经消失了。㈡ 我们的1亿美元资产更多地排除了这个貌似贫瘠的投资世界的大部分机会。因为1单3百万美元以下的交易，对我们的总业绩影响太小，这实质上排除了普通股市值在1亿美元以下的公司。㈢ 对投资绩效日益高涨的兴趣，已经创造了越来越短期导向和（在我看来）投机的市场。

The October 9 th, 1967 letter stated that personal considerations were the more important factor among those causing me to modify our objectives. I expressed a desire to be relieved of the (self-imposed) necessity of focusing 100% on BLP. I have flunked this test completely during the last eighteen months. The letter said: “I hope limited objectives will make for more limited effort.” It hasn't worked out that way. As long as I am “on stage”, publishing a regular record and assuming responsibility for management of what amounts to virtually 100% of the net worth of many partners, I will never be able to put sustained effort into any non-BLP activity. If I am going to participate publicity, I can't help being competitive. I know I don't want to be totally occupied with out-pacing an investment rabbit all of my life. The only way to slow down is to stop. 1967年10月的信中表述，个人的考虑是引起我修改目标的更重要因素。我希望从完全投入BPL中放松下来，18个月来，完全失败了。 只要我“在场上”，定期发布报告和承担对许多合伙人来说是全部家当的资产的管理责任,我就不能长期效力于非BPL的事。如果我参与公共事务，就不能保持BPL的竞争力。我不想将整个生命为超越投资兔子而被全部占用。慢下来的唯一方法是停止。

Therefore, before yearend, I intend to give all limited partners the required formal notice of my intention to retire. There are, of course, a number of tax and legal problems in connection with liquidating the Partnership, but overall, I am concerned with working out a plan that attains the following objectives: 退休，清算BPL。计划：

1. The most important item is that I have an alternative regarding money management to suggest to the many partners who do not want to handle this themselves. Some partners, of course, have alternatives of their own in which they have confidence and find quite acceptable. To the others, however, I will not hand over their money with a “good luck”. I intend to suggest an alternative money manager to whom I will entrust funds of my relatives and others for whom I have lifetime financial responsibility. This manager has integrity and ability, and will probably perform as well or better than I would in the future (although nowhere close to what he or I have achieved in the past). He will be available to any partner, so that no minimum size for accounts will cause any of you a problem. I intend, in the future, to keep in general touch with what he is doing, but only on an infrequent basis, with any advice on my part largely limited to a negative type. 对不愿自己理财，还未选定理财人的合伙人，我不把他们的钱交给“好运”。我推荐了一位理财人，我将亲戚们和对其负有终生财务责任的人的钱托付给此人管理。此人正直、能干，他的业绩将可能与我一样好或更好（尽管远远落后于他和我过去的业绩）......

2. I want all partners to have the option of receiving cash and possibly readily marketable securities (there will probably be only one where this will apply) where I like both the prospects and price but which partners will able to freely convert to cash if they wish.

3. However, I also want all partners to have the option of maintaining their proportional interests in our two controlled companies (Diversified Retailing Company Inc. and Berkshire Hathaway Inc.) and one other small “restricted” holding. Because these securities will be valued unilaterally by me at fair value, I feel it is essential that, if you wish, you can maintain your proportionate interest at such valuation.

However, these securities are not freely marketable (various SEC restrictions apply to “control” stock and non-registered stock) and they will probably be both non-transferable and non-income-producing for a considerable period of time. Therefore, I want you to be able to go either way in our liquidation – either stock with the restricted securities or take cash equivalent. I strongly like all of the people running our controlled business (joined now by the Illinois National Bank and Trust Company of Rockford, Illinois, a $100 million plus, extremely well-run bank, purchased by Berkshire Hathaway earlier this year), and want the relationship to be life-long. I certainly have no desire at all to sell a good controlled business run by people I like and admire, merely to obtain a fancy price. However, specific condition may cause the sale of one operating unit at some point. 合伙人可选择现金、证券，或我们的2家控股企业.......证监会对控股企业股票、未注册股票有限制，它们可能不能流通或没有分红。我确定不会仅仅因为异常高的价格而卖出我喜欢并尊敬的人们经营的企业（特例除外）。

I believe that we will have a liquidation program which will accomplish the above objectives. Our activities in this regard should cause no change in your tax planning for 1969.

One final objective I would like very much to achieve (but which just isn't going to happen) is to go out with a bang. I hate to end with a poor year, but we are going to have one in 1969. My best guess is that at yearend, allowing for a substantial increase in value of controlled companies (against which all partners except me will have the option of taking cash), we will show a break even result for 1969 before any monthly payments to partners. This will be true even if the market should advance substantially between now and yearend, since we will not be in any important position which will expose us to much upside potential. ...我的最好猜测是，年终控股企业持股增加（所有合伙人除我之外都可选择兑成现金），全年回报率6%，股市若大涨，也是如此，因为现在持股很少。

Our experience in workouts this year has been atrocious – during this period I have felt like the bird that inadvertently flew into the middle of a badminton game. We are not alone in such experience, but it came at a time when we were toward the upper limit of what has been our historical range of percentage commitment in this category. 今年套利情况很差--两面挨耳光，不独我们如此，然而今年我们的套利资金量达到历史上限水平。

Documenting one's boners is unpleasant business. I find “selective reporting” even more distasteful. Our poor experience this year is 100% my fault. It did not reflect bad luck, but rather an improper assessment of a very fast-developing governmental trend. Paradoxically, I have long believed the government should have been doing (in terms of the problem attacked – not necessarily the means utilized) what it finally did – in other words, on an overall basis, I believe the general goal of the activity which has cost us substantial money is socially desirable and have so preached for some time. Nevertheless, I didn't think it would happen. I never believe in mixing what I think should happen (socially) with what I think will happen in making decisions – in this case, we would be some millions better off if I had. .....今年业绩差完全是我的错。不是运气不好，而是错估了快速变化的政策趋势......决策没厘清应该发生与将发生.....

Quite frankly, in spite of any factors set forth on the earlier pages, I would continue to operate the Partnership in 1970, or even 1971, if I had some really first class ideas. Not because I want to, but simply because I would so much rather end with a good year than a poor one. However, I just don't see anything available that gives any reasonable hoping to “get lucky” with other people's money. I am not attuned to this market environment, and I don't want to spoil a decent record by trying to play a game I don't understand just so I can go out a hero. 我不适应现在的市场环境，不想逞英雄，去玩我不懂的游戏。

Therefore, we will be liquidating holdings throughout the year, working toward a residual of the controlled companies, the one “investment letter” security, the one marketable security with favorable long-term prospects, and the miscellaneous “stubs”, etc. of small total value which will take several years to clean up in the Workout category.

I have written this letter a little early in lieu of the mid-year letter. Once I made a decision, I wanted you to know. I also wanted to be available in Omaha for a period after you received this letter to clear up anything that may be confusing in it. In July, I expect to be in California.

Some of you are going to ask, “What do you plan to do?” I don't have the answer to that question. I do know that when I am 60, I should be attempting to achieve different personal goals than those which had priority at age 20. Therefore, unless I divorce myself from the activity that has consumed virtually all of my time and energies during the first eighteen years of my adult life, I am unlikely to develop activities that will be appropriate to new circumstances in subsequent years. 不摆脱旧我，不能适应新环境。

We will have a letter out in the Fall, probably October, elaborating on the liquidation procedure, the investment advisor suggestion, etc.

Cordially, Warren E. Buffett 巴菲特在谈到上个世纪初他父亲失败的投资时讲，那时有很多汽车公司，大家不知道投哪个好，但是有一点投资者应该看到，马车工业要完蛋了。巴菲特为他的父亲没有注意到这一点而感到遗憾。

红杉基金（ the Sequoia Fund ）经理是比尔 · 鲁安（ Bill Ruane ）， 1951 年我们在格雷厄姆的课程中结识。他从哈佛商学院毕业后进入华尔街工作，他在工作中意识到自己需要接受一种真正的商业教育，于是报名参加了格雷厄姆在哥伦比亚大学的投资课程， 1951 年年初我们正是在那里相识。从 1951 年到 1970 年间，比尔所管理的资金规模相对于平均水平而言小得多，但投资业绩却远远超过平均水平。当我结束巴菲特合伙公司时，我问鲁安能否成立一家基金公司以吸收巴菲特合伙公司原来合伙人的资金，于是他就设立了红杉基金。他设立这只基金的时候恰恰在我结束合伙公司之时，这是一个非常糟糕的市场时机，遭遇了价值投资者相对业绩表现非常差劲的困难时期。比尔是我当时推荐给合伙人的唯一人选，当时我就表示，如果他能取得高出标准普尔指数 4 个百分点的投资业绩就非常不错了。但尽管他所管理的资金规模不断扩大，比尔的投资业绩却远胜于此。资金规模越大，投资管理越困难，资金规模是投资业绩增长的绊脚石。

Warren Buffett Timeline --- A Chronological History of the Oracle of Omaha: 1930-1989 在某种程度上,有些东西和价格是没关系的,或者说,不是以价格为导向的。

• August 30, 1930: Warren Edward Buffett is born to his parents, Howard and Leila Buffett, in Nebraska.
• 1941: At eleven years old, Warren buys his first stock. He purchases 6 shares of Cities Service preferred stock [3 shares for himself, 3 for his sister, Doris], at a cost of $38 per share. The company falls to $27 but shortly climbs back to $40. Warren & Doris sell their stock. Almost immediately, it shoots up to over $200 per share.
• 1943: Warren declares to a friend of the family that he will be a millionaire by the time he turns thirty, or "[I'll] jump off the tallest building in Omaha."
• 1945: Warren is making $175 monthly delivering Washington Post newspapers. At fourteen years old, he invests $1,200 of his savings into 40 acres of farmland.
• 1947: In his senior year of high school, Warren and a friend purchase a used pinball machine at a cost of $25. Buffett begins to think about the potential profit, and places it in a nearby Barber Shop. Within months, he owns three machines in three different locations. The business is sold later in the year for $1,200 to a War Veteran.
• 1947: Warren has earned over $5,000 delivering newspapers. His father presses him to attend college, a suggestion Warren does not take well. Nevertheless, that year, he enrolls as a freshman at the Wharton School of Finance and Commerce in Pennsylvania. Buffett hates it, complaining he knows more than the teachers.
• 1949: Classmates return to find that Warren is no longer enrolled at Wharton. He has transferred to the University of Nebraska.
• 1949: Warren is enrolled in classes, but has already begun his life. He is offered a job at J.C. Penny's after college, but turns it down. He graduates from college in only three years by taking his last three credits over the summer. His savings have reached $9,800.

  当我只有 1 万块钱的时候，我投资了两千在汽修厂，而且肉包子打狗，那笔机会成本高达 60 个亿（笑）。

• 1950: Buffett applies for admission to Harvard Business School and is turned down. He eventually enrolls at Columbia after learning that Ben Graham and David Dodd, two well-known security analysts, are professors.
• 1951: Warren discovers Graham is on the Board of GEICO insurance. He takes a train to Washington, D.C., and knocks on the door of its headquarters until a janitor lets him in. After asking if anyone is working, he find a man on the sixth floor, who ends up being high up in the company. They talk for hours while Warren questions him on the business and insurance in general. [Buffett now owns GEICO entirely].
• 1951: Buffett graduates and wants to go to work on Wall Street. Both his father [Howard] and mentor [Graham] urge him not to. Warren offers to work for Ben Graham for free but Graham refuses.
• 1951: Warren returns home and begins dating Susan Thompson.
• 1951: Buffett purchases a Texaco station as a side investment. It doesn't work out as well as he hopes. Meanwhile, he is working as a stockbroker
• 1951: Buffett takes a Dale Carnegie public speaking course. Using what he learnt, he began to teach a night class at the University of Nebraska, "Investment Principles". The students were twice his age [he was only 21 at the time].
• April, 1952: Warren and Susie get married. They rent an apartment for $65 a month, and have their first child, also Susie.
• 1954: Ben Graham calls Warren and offers him a job at his partnership. Buffett's starting salary is $12,000 a year.
• 1956: Graham retires and folds up his partnership. Since leaving college six years earlier, Warren's personal savings have grown from $9,800 to over $140,000.
• 1956: The Buffett family returns home to Omaha. On May 1, Warren created Buffett Associates, Ltd. Seven family members and friends put in a total of $105,000. Buffett himself invested only $100. He was now running his own partnership, and would never again work for anyone else. Over the course of the year, he opened two additional partnership, eventually bringing the number under his management to three. Years later, they would all be consolidated into one.
• 1957: Buffett adds two more partnerships to his collection. He is now managing five investment partnerships from his home.
• 1957: With Susan about to have her third child, Warren purchases a five-bedroom, stucco house on Farnam street. It cost $31,500.
• 1958: The third year of the partnership completed, Buffett doubles the partner's money.
• 1959: Warren is introduced to Charlie Munger, who will eventually become the Vice Chairman of Berkshire Hathaway, and an integral part of the company's success. The two get along immediately.
• 1960: Warren asks one of his partners, a doctor, to find ten other doctors who will be willing to invest $10,000 each into his partnership. Eventually, eleven doctors agreed to invest.
• 1961: With the partnerships now worth millions, Buffett made his first $1 million dollar investment in a windmill manufacturing company.
• 1962: Buffett returns to New York with Susie for a few weeks to raise capital from his old acquaintances. During the trip, he picks up a few partners and several hundred thousand dollars.
• 1962: The Buffett Partnership, which had begun with $105,000, was now worth $7.2 million. Warren and Susie personally own over $1 million of the assets. Buffett merges all of the partnerships into one entity known simply as Buffett Partnerships, Ltd. The operations are moved to Kiewit plaza, a functional but less-than-grand office, where they remain to this day. The minimum investment is raised from $25,000 to $100,000.
• 1962: Buffett consults Munger on Dempster, the windmill manufacturing company. Munger recommends Harry Bottle to Warren; a move that would turn out to be very profitable. Bottle cut costs, laid off workers, and caused the company to generate cash.
• 1962: Warren discovers a textile manufacturing firm, Berkshire Hathaway, that is selling for under $8 per share. He begins to buy the stock. （股价<净值产的一半，且其有大量存款）
• 1963: Buffett sells Dempster for 3x the amount he invested [The almost worthless company had built a portfolio of stocks worth over $2 million alone during the time of Buffett's investment].
• 1963: The Buffett partnerships becomes the largest shareholder of Berkshire Hathaway.
• 1964: Due to a fraud scandal, American Express shares fall to $35. While the world is selling the stock, Buffett begins to buy shares en masse.
• 1965: Warren's father, Howard, dies.
• 1965: Buffett begins to purchase shares in Walt Disney Co. after meeting with Walt personally. Warren invested $4 million [which was equal to around 5% of the company].
• 1965: The American Express shares which were purchased shortly before are selling for more than double the price Warren paid for the them.
• 1965: Buffett arranges a business coup - taking control of Berkshire Hathaway at the board meeting and naming a new President, Ken Chace, to run the company.
• 1966: Warren's personal investment in the partnership reaches $6,849,936.
• 1967: Berkshire pays out its first and only dividend of 10 cents.
• 1967: In October, Warren writes to his partners and tells them he finds no bargains in the roaring stock market of the '60s. His partnership is now worth $65 million.
• 1967: Buffett is worth, personally, more than $10 million. He briefly considers leaving investing and pursuing other interests.
• 1967: American Express hits over $180 per share, making the partnership $20 million in profit on a $13 million investment.
• 1967: Berkshire Hathaway acquires National Indemnity insurance at Buffett's direction. It pays $8.6 million.
• 1968: The Buffett Partnership earns more than $40 million, bringing the total value to $104 million.
• 1969: Following his most successful year, Buffett closes the partnership and liquidates its assets to his partners. Among the assets paid out are shares of Berkshire Hathaway. Warren's personal stake now stands at $25 million. He is only 39 years old. 持有477166股/1528217，其妻持34476股。1956-1969，13年复利30.4%（同期DOW8.6%）
• 1970: The Buffett Partnership is now completely dissolved and divested of its assets. Warren now owns 29% of the stock outstanding in Berkshire Hathaway. He names himself chairman and begins writing the annual letter to shareholders.
• 1970: Berkshire makes $45,000 from textile operations, and $4.7 million in insurance, banking, and investments. Warren's side investments are making more than the actual company itself.
• 1971: Warren [at his wife's request], purchases a $150,000 summer home at Laguna Beach.
• 1973: Stock prices begin to drop; Warren is euphoric. At his direction, Berkshire issues notes at 8%.
• 1973: Berkshire begins to acquire stock in the Washington Post Company. {1063万$买了10%，pe8倍，之后2年又跌了20%多}
• 1974: Due to falling stock prices, the value of Berkshire's stock portfolio began to fall. Warren's personal wealth was cut by over 50%.
• 1974: The SEC opens a formal investigation into Warren Buffett and one of Berkshire's mergers. Nothing ever comes of it.
• 1977: Berkshire indirectly purchases the Buffalo Evening News for $32.5 million. He would later be brought up on antitrust charges by a competing paper.
• 1977: Susie leaves Warren, although not officially divorcing him. Warren is crushed.
• 1978: Susie introduces Warren to Astrid, who eventually moves in with him.
• 1979: Berkshire trades at $290 per share. Warren's personal fortune is approximately $140 million, but he was living solely on a salary of $50,000 per year.
• 1979: Berkshire begins to acquire stock in ABC.
• 1981: Munger and Buffett create the Berkshire Charitable Contribution plan, allowing each shareholder to donate some of the company's profits to his or her personal charities.
• 1983: Berkshire ends the year with $1.3 billion in its corporate stock portfolio.
• 1983: Berkshire begins the year at $775 per share, and ends at $1,310. Warren's personal net worth is $620 million. He makes the Forbes list for the first time.
• 1983: Buffett purchases Nebraska Furniture Mart for $60 million. It turns out to be one of his best investments yet.
• 1985: Buffett finally shuts down the Berkshire textile mills after years of sustaining it. He refuses to allow it to drain capital from shareholders.
• 1985: Warren helps orchestrate the merger between ABC and Cap Cities. He is forced to leave the Board of the Washington Post [Federal legislation prohibited him sitting on the Boards of both Capital Cities and Kay Graham's Washington Post.
• 1985: Buffett purchases Scott & Fetzer for Berkshire's collection of businesses. It costs around $315 million, and boasts such products as Kirby vacuums and the World Book Encyclopedia.
• 1986: Berkshire breaks $3,000 per share.
• 1987: In the immediate crash and aftermath of October, Berkshire loses 25% of its value, dropping from $4,230 per share to around $3,170. The day of the crash, Buffett loses $342 million personally.
• 1988: Buffett begins buying stock in Coca-Cola, eventually purchasing up to 7 percent of the company for $1.02 billion. It will turn out to be one of Berkshire's most lucrative investments.
• 1989: Berkshire rises from $4,800 per share to over $8,000. Warren now has a personal fortune of $3.8 billion.
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