1982 Letter to Shareholders

To the Shareholders of Berkshire Hathaway Inc.

In 1982, we passed on most opportunities. Interest rates were high, making all investments less attractive. Rather than force the action, we waited.

"The most important decision in investing is knowing when to do nothing. Every dollar we don't invest in mediocre opportunities is a dollar available for excellent ones."

Why We Passed

In 1982, high interest rates made many investments unattractive. When the risk-free rate exceeds 10%, only exceptional businesses justify the risk of equity ownership.

We found few businesses that met our criteria. Rather than lower our standards, we held cash. This discipline is difficult—waiting is not exciting—but it protects against the mistakes that destroy capital.

The Cost of Forcing Action

Most investors feel pressure to be doing something. This pressure leads to mediocre investments and, ultimately, mediocre results.

The solution is to understand that waiting is not inaction; it is a positive decision to preserve capital for better opportunities. Every dollar we don't invest in mediocre opportunities is a dollar available for excellent ones.

Looking Forward

Our approach is simple:

1. We maintain standards — We will not lower our criteria for any market condition
2. We are patient — The best opportunities come to those who wait
3. We preserve capital — Cash is oxygen; it gives us flexibility to act
4. We think independently — The crowd's optimism is our danger; the crowd's pessimism is our opportunity

Warren E. Buffett February 1983