Berkshire Hathaway 2016 Annual Letter

Key Lessons by Warren Buffett to Investors in his annual Shareholder Letter.
Same as with last year, we summarised some of the key points to note from the Legendary Investor's Annual Letter to his Shareholders (and fellow investors!)
The full 2015 annual report is available HERE.
Key lessons for 2014 available HERE.

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1) Low Growth? No Problem - as long as population growth remains low.
2% annual economic growth coupled with 0.8% annual population growth means a net 1.2% per capita growth, and such growth is actually good enough - especially when compounded over long periods like over a decade.


2) Life today is better than John D Rockefeller's times - even though he had more money.
We enjoy a better standard of living today than the past: medical, transportation, communication, entertainment, etc.
How the wealth will be distributed, however, would continue to be the problem that needs to be solved by the government.


3) Efficiency means increasing output per hour of employment
Productivity is linked to prosperity.
It allows for more goods and services to be created with less manpower required, allowing more people to do other things, creating new goods and services.
While many have lost their jobs to machines, this is inevitable improvements that will occur to improve society as a whole.
Examples are given in his report:

     a) Farming Industry
         1900 America - 11 million worked in the farming industry, 90 million acres of land devoted to corn farming yielding 30 bushels per acre.
         2015 America - 3 million working in the farming industry, 85 million acres of land devoted to corn farming yielding 150 bushels per acre.

     b) Rail Road Industry
         1947 America - 1.35 million worked in the railroad industry, revenue ton-miles of freight moved by Class I railroads that year totalled 655 billion.
         2014 America - 187,000 working in the railroad industry, revenue ton-miles of freight moved by Class I railroads totalled 1.85 trillion.
         The improve in productivity resulted in a 55% inflation-adjusted price drop for moving a ton-mile of freight.

     c) Energy Industry
         1999 Iowa - Berkshire Hathaway Energy unit acquired Iowa utility. It produced 19 million megawatt-hours of electricity while employing 3,700 people.
         2015 Iowa - Berkshire Hathaway Energy unit Iowa utility produces 29 million megawatt-hours of electricity while employing 3,500 people.
         The increase in efficiency allowed BHE to not raise prices for 16 years while the industry rate increased by 44%.


4) "the early bird gets the worm, the second mouse gets the cheese."


5) 2016 Annual Shareholder Meeting can be watched Online
Berkshire Hathaway's 2016 Annual Shareholder Meeting will be streamed online for the first time on https://finance.yahoo.com/brklivestream .
Date of the meeting is April 30th 9am (US time).



For more on Warren Buffett letters, see below:



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