In June 1996, Berkshire’s Chairman, Warren E. Buffett, issued a booklet entitled
“An Owner’s Manual”
Berkshire’s Class A and Class B shareholders.
The purpose of the manual was to explain Berkshire’s broad economic principles
An updated version is reproduced on this and the following four pages.
OWNER-RELATED BUSINESS PRINCIPLES
At the time of the Blue Chip merger in 1983, I set down 13 owner-related business principles that I thought would help
new shareholders understand our managerial approach.
As is appropriate for “principles,” all 13 remain alive and well today,
and they are stated here in italics.
Although our form is corporate, our attitude is partnership. Charlie Munger and I think of our shareholders as owner-
partners, and of ourselves as managing partners. (Because of the size of our shareholdings we are also, for better or
worse, controlling partners.)
We do not view the company itself as the ultimate owner of our business assets but
instead view the company as a conduit through which our shareholders own the assets.
Charlie and I hope that you do not think of yourself as merely owning a piece of paper whose price wiggles around
daily and that is a candidate for sale when some economic or political event makes you nervous. We hope you instead
visualize yourself as a part owner of a business that you expect to stay with indefinitely, much as you might if you
owned a farm or apartment house in partnership with members of your family.
For our part, we do not view Berkshire
shareholders as faceless members of an ever-shifting crowd, but rather as co-venturers who have entrusted their funds
to us for what may well turn out to be the remainder of their lives.
The evidence suggests that most Berkshire shareholders have indeed embraced this long-term partnership concept.
The annual percentage turnover in Berkshire’s shares is a small fraction of that occurring in the stocks of other major
American corporations, even when the shares I own are excluded from the calculation.
In effect, our shareholders behave in respect to their Berkshire stock much as Berkshire itself behaves in respect to
companies in which it has an investment.
As owners of, say, Coca-Cola or American Express shares, we think of
Berkshire as being a non-managing partner in two extraordinary businesses, in which we measure our success by the
long-term progress of the companies rather than by the month-to-month movements of their stocks.
In fact, we would
not care in the least if several years went by in which there was no trading, or quotation of prices, in the stocks of those
companies. If we have good long-term expectations, short-term price changes are meaningless for us except to the
extent they offer us an opportunity to increase our ownership at an attractive price.