Introduction
Berkshire Hathaway (BRK.A, BRK.B) reported their FY2022 figures recently. I’ve read a couple of comments from people who are frustrated that the annual shareholder letter has become shorter and less analytical than in the past. Buffett could spend countless pages talking about goodwill amortization (yes, it was amortized back in the day) and the accounting treatment of management stock options (it wasn’t recorded as a cost before). I understand that people want to hear more from the ‘Oracle of Omaha’, but I also believe that several issues Buffett discussed decades ago are still relevant today. We can simply go back and read about them in his earlier letters. For example, I was hoping that Buffett would write about today’s inflationary environment but he only mentioned inflation once in this year’s letter. However, in the 80s, Buffett wrote several pages on inflation in his shareholder letters and I believe that his statements made back then are still relevant for the environment today. A vivid hamburger fan, Buffett wrote this analogy about inflation in his shareholder letter from the year 1980:
Unfortunately, earnings reported in corporate financial statements are no longer the dominant variable that determines whether there are any real earnings for you, the owner. For only gains in purchasing power represent real earnings on investment. If you (a) forego ten hamburgers to purchase an investment; (b) receive dividends which, after tax, buy two hamburgers; and (c) receive, upon sale of your holdings, after-tax proceeds that will buy eight hamburgers, then (d) you have had no real income from your investment, no matter how much it appreciated in dollars. You may feel richer, but you won’t eat richer.
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