2022 Letter to Shareholders

To the Shareholders of Berkshire Hathaway Inc.

In 2022, the "experts" predicted doom. They were wrong—as they usually are when they focus on forecasts rather than businesses. Berkshire's intrinsic value increased once again, and our businesses delivered earnings that reflected the resilience of American commerce.

"Inflation tells you to be a buyer of productive assets—businesses, farms, oil wells, whatever—rather than a holder of cash that loses purchasing power."

What Inflation Teaches

The surge in inflation in 2022 reminded investors of an important lesson: businesses with genuine pricing power become more valuable when costs rise. Businesses that must absorb cost increases see their margins squeezed.

Apple is the perfect example. Apple raises prices regularly, and customers pay. Why? Because the value they receive exceeds the price they pay by a wide margin. The company's ecosystem creates switching costs that keep users locked in for years.

Our railroad, utilities, and insurance businesses all have varying degrees of pricing power. Some are rate-regulated, while others can adjust prices to reflect cost changes. Both types performed well in this inflationary environment.

The Insurance Operation

Ajit Jain and the GEICO team delivered outstanding results. GEICO's turnaround—begun in earnest in 2019—continued in 2022. The combination of better underwriting discipline and improved technology allowed GEICO to gain market share while maintaining profitability.

Our reinsurance operations wrote business at margins that reflected our enormous capital base. Competitors simply cannot match our capacity or our willingness to accept volatility.

The float from our insurance operations now exceeds $160 billion. This capital is permanently available for investment at no cost. It is the gift that keeps giving.

The Chevron Investment

In 2022, we made a significant investment in Chevron, a company that fits our criteria perfectly. It has a wide moat rooted in its integrated operations, its deep expertise in energy production, and its strong balance sheet.

Energy is a business that will be essential for decades, even as the world transitions to renewables. The transition will take longer than the enthusiasts predict, and Chevron will be there to provide the oil and gas that the transition requires.

What Charlie Munger Taught Me

At 99 years old, Charlie remains the sharpest mind I know. His advice on living well and thinking clearly is worth more than anything I could write about investing.

Charlie has a gift for cutting through complexity to find the essential truth. He taught me to say "I don't know" when I don't know, rather than making up answers to appear knowledgeable.

"Warren, the main reason to be an optimist is because it works. Pessimism is a cost; optimism is an investment."

Looking Forward

The future is always uncertain, but Berkshire's position has never been stronger:

1. Our businesses are essential — Railroads, utilities, insurance, and retail serve needs that won't disappear
2. Our capital is permanent — Insurance float gives us staying power that competitors lack
3. Our culture is intact — Greg Abel will continue what Charlie and I built
4. America will adapt — We have faced every challenge and emerged stronger

Thank you for your trust.

Warren E. Buffett February 2023