Takeaways from the 2016 Berkshire Hathaway Report

warren buffettEach year, Warren Buffett writes a letter to the shareholders of Berkshire Hathaway, one of the country’s largest conglomerates located in Omaha. The company has invested in numerous Nebraska businesses, including Nebraska Furniture Mart and several manufacturers. (Check out previous blog post on manufacturers owned by BH.). So, when Buffett releases his annual letter reporting on the success of the company and its various industries, the world takes note.

There were a few notable moments in the letter for manufacturers, particularly the spots reporting on the success of some major manufacturing acquisitions like the $37.2 billion dollar buyout of aerospace manufacturer Precision Castparts. “We’re getting a decent return on the capital we have deployed for manufacturing businesses,” Buffett said. “Earnings from the group should grow substantially in 2016 as Duracell and Precision Castparts enter the fold.”

Buffett also made some political statements (page 7) noting that the children born in America today have a better chance of success than any previous generation: “It’s an election year, and candidates can’t stop speaking about our country’s problems (which, of course, only they can solve). As a result of this negative drumbeat, many Americans now believe that their children will not live as well as they themselves do. That view is dead wrong: The babies being born in America today are the luckiest crop in history.”

Especially in light of recent manufacturers outsourcing to Mexico and bemoaning America’s lack of innovation, it was delightful to see that Buffett still believes that we are in the golden age of commerce and innovation, and that now is no time to start betting against Americans to succeed.

Interestingly enough, as a blogger from the WSJ pointed out, Buffett’s conversation about efficiency (a top-of-mind issue for many manufacturers) traced a brief existential history of the issue, and concludes that restraining or outlawing actions that increase productivity is never the answer. He gives the example of farming in the early 1900s, which developed a more efficient system but decreased farmhand human labor, and says that without those innovations we wouldn’t have the efficient farming system that we have today.

“The solution . . . is a variety of safety nets aimed at providing a decent life for those who are willing to work but find their specific talents judged of small value because of market forces.” The translation is that he’s speaking to the laborers and skilled workers that fill important roles in factories and on farms who could potentially be replaced by machines. Creating a safety net for those types of laborers is important for our future.

Finally, Buffett jokes that “he and Charlie have finally decided to enter the 21st century,” and will webcast the annual meeting in Omaha for the first time this year. The meeting will be webcast on Saturday, April 30, at 9:00am Central Time.

It’s always fascinating to hear what the Oracle of Omaha has to say about the current state of our economy, especially since he works so frequently with manufacturing industries. We’ll look forward to the annual shareholder’s meeting at the CenturyLink Center again this year, and appreciate all that BH does for Nebraska’s economic development!

photo credit: Warren Buffett via photopin (license)