Warren Buffett praised investors for their support of philanthropy in his annual letter to Berkshire Hathaway shareholders.
When Warren Buffett, one of the world‘s most respected investors, speaks, everyone should be listening. Buffett, the 92-year-old chief executive of sprawling conglomerate Berkshire Hathaway, rarely has time for interviews these days, so his open letter to the company’s shareholders is a big deal on Wall Street.
Buffett is known for his passion for teaching others. He typically not only discusses Berkshire Hathaway’s performance in his open letters, but also advises young investors, dissects key themes in the market in detail, and sometimes criticizes chief executives for misconduct. This year’s open letter is no exception. In this 11-page open letter, the octogenarian Buffett first briefly analyzed the changes in people’s attitudes towards savings and intergenerational wealth.
In his letter, he wrote that the previous traditional concept believed that saving was to “maintain the standard of living after retirement”, and that the inheritance after death would be left to family and friends. But now, Buffett sees a new trend emerging, and he sees Berkshire Hathaway investors as harbingers of it. Simply put, he’s proud of his and his investors’ support of philanthropic causes.
He wrote: “Our experience has been different. We believe that every shareholder in Berkshire is basically a ‘save for one time, save for life’ type. Although these people have a good life, they will end up with most of the money. donate their assets to charity.”
Buffett said Berkshire’s goal is to create more wealth for these “dedicated savers,” who in turn will donate most of their wealth to charity after their death. They are not as keen as previous investors to “build empires” or buy flashy “conspicuous assets” such as cars and jewelry. Instead, Buffett sees their goal as accumulating wealth and enjoying a good life.
Do you want to learn from others?
Berkshire Hathaway investors appear to be following Buffett’s example in their approach to intergenerational wealth and philanthropy. In 2006, Buffett decided to “gradually” donate all the shares he held in Berkshire Hathaway, giving up leaving assets to his children and grandchildren to build a business empire. Those stocks make up a large chunk of Buffett’s $106 billion net worth.
Warren Buffett and Bill Gates.
In 2010, Buffett co-founded the Giving Pledge with Microsoft co-founder Bill Gates, pledging to give away 99 percent of his wealth during his lifetime or “after his death.” His goal is to call on other billionaires to make a similar pledge, and more than 120 have joined him so far.
Now, Buffett’s loyal followers at Berkshire seem to be joining the trend of donating their personal wealth, and Buffett is very happy about it. “How one handles money reveals one’s nature,” he wrote. “Who wouldn’t enjoy working for shareholders like us?”
But it’s not just Berkshire investors who are changing the “empire building” mentality. With longer life spans and more people looking to leave charitable legacies, the practice of bequeathing wealth to future generations has fallen out of fashion.
According to market research firm Cerulli Associates, the baby boomers have left about $84 trillion in wealth to Gen Xers and millennials over the past decade. But some $12 trillion of that has already gone to philanthropy. Jason van der Rohe, head of financial planning and marketing at Edelman Financial Engines, said only 37 percent of wealthy Americans plan to leave their wealth to their families.
He told CNBC in December 2022: “As parents, we are always struggling with how to support our children.” The wealth, you should also work hard” mentality is becoming more and more popular. That may be an unhelpful consolation to their children (mostly millennials), since the New York Federal Reserve recently found that 30-somethings are burdened by rising student loans. Debt totaled a record $3.8 trillion. With home prices skyrocketing historicly, Millennials and Gen Z are less likely to own a home at the same age as their parents.
Lessons From Warren Buffett’s Annual Shareholder Letter
In addition to praising Berkshire Hathaway investors’ frugal life attitude and willingness to donate to charity, Buffett’s latest shareholder open letter also contains some interesting news related to the market and the economy.
Despite hyperinflation and rate hikes in the U.S., Buffett expressed optimism in his letter, arguing that despite fears of a recession, it’s never a good idea to be bearish on the U.S. economy.
“I’ve been investing for 80 years, which is more than a third of the history of the United States. As much as we’ve always loved, even loved, self-criticism and self-doubt, I’ve never seen long-term shorting of the United States make sense.” he wrote. “And I highly doubt readers of this letter will have a different experience in the future.”
But Buffett also issued an “important warning” to corporate executives in the U.S., arguing that some executives are falsifying financial results to impress analysts, which could cause serious problems for investors.
He writes: “This behavior is disgusting. Falsifying financial results requires no talent: just a strong desire to deceive others. A CEO once described his ruse to me as ‘bold and imaginative accounting behavior’, which has become one of the disgraces of capitalism.”
Buffett also conducted a little retrospective analysis, calling himself a “so-so” manager. He admitted that the reason why he has been able to achieve “satisfactory performance” since 1965 is mainly due to his investment in Coca-Cola (Coca-Cola). More than a dozen major investments in companies such as American Express and American Express.
“In the 58 years I’ve run Berkshire, most of my capital allocation decisions have been so-so,” he said. “Furthermore, in some cases, I’ve been saved by a great deal of luck. .”
Buffett says the lesson for investors from his mistakes is simple: Just a few successful investments can “make magic.”
“Weed wilting is just as important as flowers blooming,” he said. “Of course acting as early as possible and living to 90 years old will also help to create miracles.” (Fortune Chinese Network)
Translator: Liu Jinlong
Reviewer: Wang Hao
When Warren Buffett, one of the most well-respected investors on the planet, speaks (or writes), people pay attention. And since the 92-year-old CEO of Berkshire Hathaway rarely has time for interviews these days, his annual letter to the shareholders of his mega conglomerate is a big event on Wall Street.
Known for his love of teaching, Buffett typically uses his letter not only to discuss Berkshire’s performance, but also to advise younger investors, break down key themes in markets, and sometimes criticize the misbehavior of CEOs. This year’s letter was no different, as the nonagenarian began the 11-page brief with a brief monologue on changing attitudes about saving and generational wealth.
In the past, he wrote, the conventional wisdom was that people saved money in order to “maintain their living standards after retirement,” and any extra money was then left to family and friends. But these days, Buffett claimed a new trend has emerged, and he put Berkshire Hathaway investors at the forefront of it. In short, he’s proud of how philanthropic he and his investors have become.
“Our experience has differed. We believe Berkshire’s individual holders largely to be of the once-a-saver, always-a-saver variety. Though these people live well, they eventually dispense most of their funds to philanthropic organizations,” he wrote.
Buffett said that his goal at Berkshire is to enrich these “dedicated savers,” who, in turn, will give the majority of their wealth to charity upon their death. These investors aren’t interested in “dynasty building” like many of their predecessors, or fancy “look-at-me assets” like cars and jewelry. Instead, their goal is to build wealth and live well, according to Buffett.
Monkey see, monkey do?
Berkshire Hathaway investors seem to be following in Buffett’s footsteps when it comes to their views on generational wealth and philanthropy. In 2006, Buffett decided that he would “gradually” give away all of his Berkshire Hathaway stock—which makes up the bulk of his $106 billion net worth—forgoing building a dynasty by giving the funds to his children.
Then, in 2010, Buffett started the Giving Pledge with Microsoft cofounder Bill Gates, promising to donate 99% of his wealth sometime during his life of “at death.” His goal was to persuade his fellow billionaires to follow suit, and so far, more than 120 have agreed to the cause.
Now Buffett’s loyal following at Berkshire appear to be joining the giving trend—and the billionaire is pleased with the results. “The disposition of money unmasks humans,” he wrote. “Who wouldn’t enjoy working for shareholders like ours?”
But it’s not just Berkshire investors who are changing their minds on “dynasty building.” As life expectancy and the desire to leave a charitable legacy increases, passing wealth onto the next generation is going out of style.
Some $84 trillion could pass from baby boomers to Generation X and millennials over the next decade, according to data from the market research firm Cerulli Associates. But of that, some $12 trillion is already headed to philanthropy. And just 37% of wealthy U.S. adults have a plan in place to transfer their wealth to their families, according to Jason Van de Loo, head of wealth planning and marketing at Edelman Financial Engines.
“As parents, we are struggling with how to support our kids,” he told CNBC in December, adding that there is a growing “I earned this and so should you” mindset among baby boomers. This may be cold comfort to their children, who largely comprise the millennial generation, given that the New York Federal Reserve just found a historic $3.8 trillion in debt has been accumulated by thirtysomething members of that generation as student loans pile up. And with the historic surge in home prices, both millennials and Gen Z are far less likely to own a home than their parents were at the same age.
Notes from Warren Buffett’s annual letter
Beyond lauding Berkshire Hathaway investors’ frugal attitudes and willingness to give to charity, Buffett’s latest shareholder letter contained some fascinating tidbits about markets and the economy.
Despite stubborn inflation and rising interest rates, the billionaire struck an optimistic tone in the letter, contending that even amid recession fears, betting against the American economy is never a good idea.
“I have been investing for 80 years—more than one-third of our country’s lifetime. Despite our citizens’ penchant—almost enthusiasm—for self-criticism and self-doubt, I have yet to see a time when it made sense to make a long-term bet against America,” he wrote. “And I doubt very much that any reader of this letter will have a different experience in the future.”
But the Berkshire CEO also offered “an important warning” to American executives, arguing that some are manipulating financial results to impress analysts, which could lead to serious problems for investors.
“That activity is disgusting. It requires no talent to manipulate numbers: Only a deep desire to deceive is required. ‘Bold imaginative accounting,’ as a CEO once described his deception to me, has become one of the shames of capitalism,” he wrote.
In a bit of retrospective analysis, Buffett then called himself a “so-so” manager, contending that his “satisfactory results” since 1965 have largely been the result of a dozen or so great investments in companies like Coca-Cola and American Express.
“In 58 years of Berkshire management, most of my capital-allocation decisions have been no better than so-so,” he said. “In some cases, also, bad moves by me have been rescued by very large doses of luck.”
Buffett said the lesson for investors within his mistakes is simple: It only takes a few winning investments to “work wonders.”
“The weeds wither away in significance as the flowers bloom,” he said. “And, yes, it helps to start early and live into your 90s as well.”