It's a better world than it has ever been

Person working on a calculator looking at charts

Those are the words of Warren Buffett, answering a question during the 2023 Berkshire Hathaway shareholders meeting in May. Buffett has always been an optimist, so that observation is not surprising. Technology has made consumer goods available that the richest tycoons of 100 years ago could not imagine, let alone have. On the other hand, in the short term, there could be some economic pain ahead. “The majority of our businesses will report lower earnings this year than last year,” Buffett said, and his partner Charlie Munger added, “Get used to making less.” Inflation has been pushing up costs for many businesses, including labor costs, and not all of these increases can be passed along to consumers in final pricing.

Although Buffett has an enviable record of investment success, he readily admits that most of his decisions have been average. In his annual shareholder letter this year, he said that he’s made about 12 really good decisions over the past 60 years—that is, about one every five years. These 12 investments, including early purchases of Coca-Cola and American Express, account for the bulk of the market-beating returns of Berkshire Hathaway.

One question put to Buffett and Munger was whether they were concerned that Berkshire’s stock portfolio was now over 30% in Apple, due to price increases since the shares were purchased. The questioner pointed out that some prominent advisers suggest that no more than 20% of a portfolio should be invested in a single company. Mr. Munger’s pungent reply: “I think he’s out of his mind.”

© 2023 M.A. Co.