Letter to Shareholders

# 2020 Letter to Shareholders ## To the Shareholders of Berkshire Hathaway Inc. In 2020, Berkshire earned $42.5 billion. Of this amount, $21.9 billion came from operating businesses, $4.9 billion from our insurance underwriting operations, $26.7 billion from investments, and we incurred a $10.0 billion loss from changes in the value of our holdings. ## The Pandemic The COVID-19 pandemic that struck in March 2020 was an unprecedented event. Much of our economy was forced to shut down. The human suffering has been immense, and the economic damage severe. Berkshire's businesses were not immune. Our railroad [[BNSF]] saw volumes decline. Our retail operations suffered from closures. Our insurance businesses faced uncertainty about claims. Yet through it all, Berkshire remained strong. We had prepared for the worst, and when the worst came, we were ready. Our massive cash position gave us the flexibility to weather any storm. > "Nothing is more important to Berkshire's future than the continued strength of our insurance operations. We will never risk that strength for short-term gain." ## The American Resilience In my lifetime, the United States has faced numerous crises: World War II, the Korean War, the Vietnam War, the Cold War, multiple recessions, the 9/11 attacks, the 2008 financial crisis, and now a global pandemic. Through all of these challenges, America has persevered. Our economic system has proven remarkably resilient. Human ingenuity and the power of markets have overcome every obstacle. [[Charlie Munger]] and I have always believed in America. Our entire investment philosophy is built on the premise that American business will continue to thrive over the long term. Events of 2020 reinforced that belief. ## Our Major Holdings [[Apple]] remains our largest equity holding. We own 5.4% of Apple, a stake that cost $31 billion and is now worth far more. Apple's products are deeply embedded in people's lives. The company has created an ecosystem that users find invaluable. Our railroad [[BNSF]] and our energy business are both critical to the American economy. They provide essential services that will be needed regardless of what happens. These are not glamorous businesses, but they are dependable businesses. Our insurance operations, led by [[Ajit Jain]], continue to generate enormous float. This float is a source of investment capital that costs us nothing, provided we maintain underwriting discipline. Ajit's operation is unique in the insurance world. ## Succession [[Greg Abel]] is ready to be CEO of Berkshire tomorrow morning. He knows our businesses inside and out. He has the judgment and character to lead Berkshire for decades to come. Our board has complete confidence in Greg. He will continue the culture that [[Charlie Munger]] and I have built over 56 years. Berkshire's future is in excellent hands. ## The Power of Compounding The magic of **compounding** has built Berkshire. Over 56 years, we have never paid a dividend. We have retained every dollar of earnings and reinvested it. This simple strategy, applied consistently over decades, has created enormous wealth. Consider this: If you had invested $1,000 in Berkshire in 1965, your investment would be worth millions today. This result was not achieved through brilliant timing or exotic strategies. It was achieved through patient compounding. ## Looking Forward We do not know what the future holds. We do know that crises will come, markets will fluctuate, and businesses will face challenges. But we also know that: 1. **America will endure** — Our economic system has proven resilient for over two centuries 2. **Berkshire will remain strong** — We will never risk our financial fortress 3. **Time is our friend** — Compounding works over decades, not days 4. **Quality matters** — We own wonderful businesses run by wonderful people These certainties give us confidence. We will continue to build Berkshire for the long term, just as we have for 56 years. Warren E. Buffett February 2021