Berkshire Hathaway Annual Letter – 1978

“Successfully forecasting short term stock price movements is something we think neither we nor anyone else can do”

“Obvious approaches to improved profit margins involve differentiation of product, lowered manufacturing costs………………the problem, of course, is that our competitors are just as diligently doing the same thing.”

“As long as excess productive capacity exists, prices tend to reflect direct operating costs rather than capital employed”

“It is not easy to buy a good insurance business, but our experience has been that it is easier to buy one than create one. However, we will continue to try both approaches, since the rewards for success in this field can be exceptional.”

“We continue to find for our insurance portfolios small portions of really outstanding businesses that are available, through the auction pricing mechanism of security markets”

“Our policy is to concentrate holdings. We try to avoid buying a little of this or that when we are only lukewarm about the business or its price. When are are convinced as to attractiveness, we believe in buying worthwhile amounts”

“There is no way to start a new operation – with necessarily uncertain prospects – at less than 100 cents on the dollar”

“While there may be less excitement and prestige in sitting back and letting others do the work, we think that is all one loses by accepting a passive participation in excellent management”

“Our experience has been that the manager of an already high-cost operation frequently is uncommonly resourceful in finding new ways to add to overhead, while the manager of a tightly-run operation usually continues to find additional methods to curtail costs, even when his costs are already well below those of his competitors”

“It is a real pleasure to work with managers who enjoy coming to work each morning and, once there, instinctively and unerringly think like owners”