In this edition of LEARNING OF THE WEEK, we will cover the key learnings from Berkshire Hathaway’s annual letter to investors for 2024.
“Never stop learning—each new piece of knowledge compounds, shaping your success in ways you cannot yet imagine.”
~ Mr. Warren Buffet (The Oracle of Omaha)
This highly anticipated letter, written by Warren Buffett at age 93, marks nearly 60 years since he took control of Berkshire Hathaway in 1965. What began as a struggling textile business has grown into a $1 trillion empire, housing some of the world’s most successful companies. Over the decades, Berkshire’s stock has compounded at ~20% annually, nearly doubling the S&P 500’s average annual return of ~10%, turning long-term shareholders into multi-millionaires.
This extraordinary growth is a testament to Buffett’s disciplined capital allocation, long-term mindset, and unwavering focus on business fundamentals.
The 2024 letter continues Buffett’s legacy of honesty, wisdom, and timeless investment principles. In an era where corporate leaders rarely acknowledge mistakes, his candid approach remains refreshing—offering invaluable lessons for investors at all levels. As he prepares for the eventual leadership transition to Greg Abel, this letter reflects on decades of success while imparting wisdom to guide future generations of investors.
Here are the five key learnings from Berkshire Hathaway’s annual letter to investors for 2024.
1. The Value of Acknowledging Mistakes:
Unlike most corporate leaders who stick to optimistic narratives, Buffett openly admits his mistakes. From 2019-2023, he used “mistake” or “error” 16 times in his letters, something only a few CEOs would dare to do. He highlights two key errors: a) misjudging a business’s future economics and b) overestimating a manager’s ability or integrity. But for Buffett, the real mistake isn’t making errors – it’s failing to correct them quickly. As Charlie Munger put it, “thumb-sucking” only prolongs the damage.
For investors, the lesson here is clear: mistakes are inevitable, but failing to act on rectifying them is the real risk. Many hold onto losing investments while selling winners too soon—the opposite of how one leads life. A temporary underperformance (1-2 years) isn’t necessarily a mistake; true errors stem from fundamental misjudgments about a BUSINESS or its LEADERSHIP.
2. The Power of a Single Great Decision:
A single great decision, whether in business or investing – can drive extraordinary long-term value. Buffett acknowledges that while mistakes are inevitable, one exceptional choice can more than make up for all of them. He points to GEICO, Ajit Jain, and Charlie Munger as prime examples, each decision that shaped Berkshire’s success. As Buffett puts it, “Mistakes fade away; winners can forever blossom.”
In his recent appearance on Money Mindset, Mohnish Pabrai illustrates this principle with a striking example: He shared that if an investor had allocated just 2% of his/her portfolio to Walmart in the early 1970s and never touched it, even if the other 49 stocks in the Nifty Fifty went to zero, the portfolio would still have delivered strong returns. This highlights Buffett’s lesson, a few great investments can more than make up for several mistakes, but only if held with conviction. Watch Mr. Pabrai explain this concept below (watch from 35:03).
For investors, the takeaway is simple: don’t let the fear of mistakes hold you back from making bold, high-conviction bets. A few great investments, held patiently, can outweigh several missteps and define long-term success.
3. Innate Talent Over Formal Education:
Buffett highlights the story of Pete Liegl, founder of Forest River, who created billions in shareholder value for Berkshire—not through elite education, but through natural business acumen and integrity. When selecting CEOs, Buffett is clear: “I never look at where a candidate has gone to school. Never!” While top schools produce capable managers, Buffett emphasizes that success often stems from innate talent rather than formal credentials, just as it did for Bill Gates, who prioritized hands-on experience over a degree.
For investors, this reinforces the need to focus on ability, integrity, and results over credentials when evaluating business leaders and opportunities. India offers similar examples—Dhirubhai Ambani, who started with just Rs. 500, and Karsanbhai Patel, who built a detergent empire from his backyard. Their success came from sharp instincts, execution, and an unrelenting drive.
4. The Magic of Long-Term Investing:
Buffett’s approach to investing is built on patience and compounding. In 60 years, Berkshire has paid just one dividend (10¢ per share) in 1967, instead of reinvesting earnings. The result? A staggering 5,502,284% return since 1964, compared to 39,054% for the S&P 500. This underscores the power of long-term thinking and disciplined capital allocation.
For investors, the lesson is simple: avoid excessive trading and focus on owning great businesses. Buffett warns that “paper money can see its value evaporate if fiscal folly prevails,” but businesses that provide real value tend to endure. Timing the market requires getting two decisions right—when to sell and when to buy again—a near-impossible task to perform consistently. Instead of chasing short-term moves, let compounding work for you.
5. Focus on Business Fundamentals, Not Market Noise:
Buffett stresses that investing success comes from owning businesses with clear models and durable economics, not reacting to short-term market noise. He warns against chasing cheap stocks in struggling industries, noting that if a business has no future, no price makes it a good investment. Instead, the best companies have straightforward operations, reliable cash flows, and lasting consumer demand. Before investing, ask: Can I explain how this business makes money? Will people still need its products decades from now? If you cannot do so, it’s best to walk away.
A recent example is Polycab India, which sharply declined after an income tax raid. While short-sighted investors panicked, its fundamentals remained intact—it continued to grow and dominate the wires and cables market. Buffett’s lesson is clear: filter out distractions, focus on strong businesses, and let time do the heavy lifting.
These insights from Buffett’s letter aren’t groundbreaking or complex – they are simple, proven, and incredibly effective. Yet, few investors have the patience and discipline to follow them. Ultimately, success isn’t only about knowing what to do—it’s about having the conviction to stick with it.
Disclaimer: These insights are based on our observations and interpretations, which might not be complete or accurate. This newsletter is for educational purposes only and is not intended to provide any kind of investment advice. Please conduct your own research and consult your financial advisor before making any investment decisions based on the information shared in this newsletter.
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