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Something often ignored or forgotten here: Berkshire Hathaway presently owns roughly $750 billion in productive income-generating assets.

For perspective, Berkshire’s entire market capitalization — including all cash and Treasury holdings — was approximately:

• 1999: $85 billion
• 2004: $135 billion
• 2014: $370 billion
• 2022: $681 billion

Yes, Berkshire is now an enormous company, and its large cash position is well documented. But remove ALL the cash, and you still have the most highly capitalized operating/investment business in Berkshire history prior to just a few years ago and still one of the largest collections of productive businesses and investments in the world today.

The idea that Warren Buffett has been simply “standing in the batter’s box with the bat on his shoulders” ignores the scale and continuing earning power of the assets Berkshire already owns. And the large but infrequent deployments of cash (i.e. $35 Billion in Apple generating $185 Billion of economic value). It’s a baseball game with no called strikes. Where batting averages dictate success.

Berkshire’s existing massive portfolio of productive businesses continues compounding every day whether a major acquisition occurs tomorrow or not.

Berkshire’s existing massive portfolio of productive businesses continues compounding every day whether a major acquisition occurs tomorrow or not.

For compounding to occur, the earnings generated by the operating businesses have to be re-invested in opportunities that generate good returns on the capital deployed. If the majority of the free earnings keep sitting idle for long periods, it will show up in a decreasing rate of compounding for the overall business. Everyone is aware that Berkshire has a large asset base throwing off circa $40b odd in cash flow annually. It is how that is going to be used by Abel that is the core question.

I understand how compounding works, and you may be surprised to learn Warren, Charlie, and Greg do too.

A very large percent of our Berkshire Hathaway present value accumulated over 60 years appears to have been created from capital deployment during the 2009–2014 period — when many people were already claiming…as you are now… Buffett has become “too conservative” to compound.”

Consider what came out of that brief period:

• The full acquisition of BNSF
• Crisis-era preferred stock/warrant deals
• Massive growth in Berkshire Energy
• Continued operating company reinvestment
• And eventually the Apple investment, which Buffett himself has indicated created $185 billion of value for Berkshire

For perspective: Berkshire’s entire market cap in 2004 was only about $135 billion.

Today, Apple gains alone exceed that figure. BNSF alone may approach it.

This is why the “Berkshire can’t compound anymore because of the cash pile” argument misses something fundamental:

Berkshire’s cash does not get deployed in a smooth, quarterly, Wall-Street-friendly manner. It gets deployed in massive, lumpy, highly opportunistic waves. After long investment droughts. We wait very patiently for fat pitches.

Most people simply lack the patience for that model.They always have.

Meanwhile, Berkshire’s existing portfolio of productive businesses and investments continues compounding internally every single day whether a major acquisition happens this quarter or not.

As Ajit pointed out our favorite word at Berkshire is no”. We say no most of the time. Always have. Berkshire has sat on very large chunks of cash for very long periods every decade. At one point even Warren got so bored he closed up shop and then returned all the money back to investors.

This is not for everyone. But enjoy the fruits of 3/4 of a Trillion dollars of productive asset deployment for our benefit. It helps manage the boredom in the meantime.

Berkshire’s cash does not get deployed in a smooth, quarterly, Wall-Street-friendly manner. It gets deployed in massive, lumpy, highly opportunistic waves. After long investment droughts. We wait very patiently for fat pitches.

You might have missed it but there is a completely new person in charge with no individual track record of deploying anything like the sums that need to be deployed. Putting the Buffett nostalgia to one side, please feel free to cite examples that relate to Abel managing deployment of multi hundred of billions across public and private markets.

And by the way, I have been a holder for more than 30 years and have a reasonably sized position and am very familiar with long term holding of business positions. My concerns stem from both the size of the cash pile as well as the retirement of Buffett leading to Abel being the person in charge. Obviously it doesn't bother others as much and that is fine. We can wait and see how it pans out but the my ability to indulge Abel is several orders of magnitude lower than it was with Buffett.

I don’t view this as “Buffett nostalgia” at all. It’s a serious real time take.

My point is actually the opposite: Buffett spent many years deliberately preparing Greg Abel for this role inside Berkshire’s culture and capital allocation framework long before handing him the keys.

Abel has been deeply involved in Berkshire operations and capital discussions for years while directly overseeing the most successful and valuable subsidiaries in the company.

When it comes to Berkshire—I defer to Warren. Buffett has repeatedly stated Abel is exceptionally strong at valuing and evaluating businesses and their intrinsic worth — and has indicated he believes Abel is better at evaluating businesses than most people on Wall Street. That is the core Berkshire skill set. Buffett has also spent decades emphasizing that stocks are simply pieces of businesses. Abel excels at evaluating businesses—he has demonstrated on the job for years.

That distinction matters because Berkshire’s edge has never been quarterly trading activity. It has been disciplined business evaluation combined with opportunistic deployment during periods when others panic or freeze.

Is it reasonable to question whether anyone can replicate Buffett’s record? Of course. Buffett is unique.

But there’s a difference between acknowledging that reality and assuming Berkshire suddenly loses its capital allocation discipline the day Buffett steps aside.

Especially when the existing portfolio of productive businesses continues compounding internally every single day regardless of whether a massive acquisition occurs this quarter.

Look, I’m not going to say your comments come from a lack of understanding of Berkshire even though I’ve been an owner more than 50% longer than you’re have. I respect your opinions. And yeah, I know Greg’s new on the job and he’s not Warren. I get it.

Is it reasonable to question whether anyone can replicate Buffett’s record? Of course. Buffett is unique.

But there’s a difference between acknowledging that reality and assuming Berkshire suddenly loses its capital allocation discipline the day Buffett steps aside.



That's fair. Cash awaiting allocation has more than doubled in the last 2 years.

I'm all for giving Abel time to show how he can use this to shareholder advantage.

I am just acknowledging that there has been a fundamental change in Berkshire leadership with Abel taking charge and his skills are very different. I think capital allocation is an area of risk going forward. I am just conscious of the fact that this is a situation that can lead to mistakes ( new person in charge, diminishing faculties for Buffett who still seems to be involved day to day and a historically large amount of cash needing to be deployed). We will all discover together how well he manages to steer Berkshire through this transition.
Some buybacks might be a good start.

At the beginning of this interview Buffett says there were only 5 juicy years out of 60 for deploying capital. Warren didn’t sound very good in the morning when he spoke, but this afternoon interview with Becky he seems sharp as ever. He is still very involved in capital allocation for Berkshire!


https://youtu.be/QQOWQcnNmr0?si=ZafgDnz6gfQbae0P

Everyone is aware that Berkshire has a large asset base throwing off circa $40b odd in cash flow annually. It is how that is going to be used by Abel that is the core question.

Sure glad you've rejoined the conversations ppant. I've been trying to hammer on this same subject. And we're not alone.

Hope isn't a plan. But holding on for a major market downturn can be. I just read a Fortune article on Apple News but the link in behind a subscription wall. It said, after looking at 400 years of recessions histories, that they aren't forecatable. It's always an unanticipated shock. But wars and energy shocks are prominent in history. The author did the bulk of the work on his own, but is now the chief economist for XOM. Does this one qualify?

So that might provide the next opportunity.

There's also some 2025 developments in regulations for PE firms that could improve the outlook. But I'm still digging deeper to be sure I understand. They involve how PE firms can reinvest float from insurance operations.

A consistent buyback as long as the stock is under 1.6x book would be fine.

You could buy back at ten billion a quarter and the cash would not change. I believe a dutch auction for 25% of the company is the best way to effectively retire shares in quantity.

Jk

Going around in circles.

Group A:
- We wait very patiently for fat pitches.
- Hope isn't a plan. But holding on for a major market downturn can be.
=> The great story might(?) continue.

Group B:
- You could buy back at ten billion a quarter and the cash would not change.
- scale ... A $30–50 billion deployment ... wouldn’t by itself solve a $374 billion reserve. The question is ... whether Berkshire ... can repeatedly deploy or return capital at a pace that keeps up with the size of the problem.
- Dividends
- dutch auction for 25% of the company
=> It can´t and it won´t continue.

Group C:
- Abel ... He may create plenty of value by improving Berkshire’s operating businesses
- Abel ... highlighted our operating managers and emphasized EXECUTION. And that connects directly to where I’ve argued our value creation comes from next.
=> The great story ended, but the future might be ok.

Conclusion: None - of course not 😂

Personal take: Don´t be in Berkshire if you want to get rich (but eventually if you already are).


P.S.: Apologies to all posters I quoted above. The quotes are out of context, distort and over-simplify what they said. By purpose: Being a simple mind I just wanted to illustrate what I see in a simple way.

I believe a dutch auction for 25% of the company is the best way to effectively retire shares in quantity.

Please explain how the Dutch auction retires the shares. What is being auctioned?

Please explain how the Dutch auction retires the shares. What is being auctioned?

In effect, what is being auctioned is the price at which the buyback will happen.

People submit various prices, and how many shares they'd be willing to sell at the price they've named. All those entries are sorted ascending by price, and the shares counted up from the lowest price named upwards till you get to the aggregate number of shares that management wants to buy, the cutoff price. Everybody who bid a price lower than that cutoff gets the cutoff price and sells their shares, and all but one of them gets a price higher than what they named. People who named prices above the cutoff don't sell any shares.

Jim

A Dutch auction tender offer would allow brk to set a range for repurchase, and an amount of shares desired. For example between 450 and 470 per b share,and a quantity of shares to be repurchased with an end date. All shares would tender at the lowest price to achieve the volume required. At least thats my understanding. If that’s wrong, I’m sure others will be along to correct the explanation.There is x billion earning 4ish percent, and this would deploy massive amounts of it.

Jk

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