To the Shareholders of Berkshire Hathaway

# 2008 Letter to Shareholders ## To the Shareholders of Berkshire Hathaway Inc.: In 2008, Berkshire's net worth fell by $11.5 billion, a decline of 9.6%. This was only the second decline in our 44 years of stewardship. Our per-share book value has still grown from $19.46 in 1965 to $70,530 at year-end 2008, a rate of 20.3% compounded annually. ## The Financial Crisis 2008 was a year of **financial crisis** unlike any we have seen since the Great Depression. The collapse of Lehman Brothers, the government takeover of Fannie Mae and Freddie Mac, and the near-collapse of the global financial system created panic in the markets. **Mr. Market** was not just depressed—he was suicidal. Prices of excellent businesses fell to levels that made no sense based on underlying value. ## Liquidity and Capital One lesson from this crisis is the importance of **liquidity**. Businesses and investors who relied on short-term financing or excessive leverage were destroyed. Those with strong balance sheets and access to capital survived and thrived. Berkshire entered the crisis with enormous liquidity and no meaningful debt. This allowed us to invest when others were forced to sell. ## Opportunities in Crisis > "Be fearful when others are greedy, and greedy when others are fearful." In the panic of 2008, we put this principle into practice. We made investments in [[Goldman Sachs]] and other quality businesses at prices that will produce excellent long-term returns. ## Capital Allocation The most important job of management is **capital allocation**—deciding what to do with the cash the business generates. During the crisis, we allocated capital to opportunities that panic had created. ## Conclusion Crises are painful, but they create opportunities for prepared investors. We will continue to maintain Berkshire's financial strength so that we can be buyers when others are sellers. Warren E. Buffett Chairman of the Board