Warren Buffett's last letter in full: I was "just lucky," but "Father Time" has caught up, and I will "remain silent."

Written by: Ye Zhen, reprinted by Wall Street Insights: White55, Mars Finance

Warren Buffett announced to his shareholders that he is about to “fade into the background,” marking the end of his brilliant 60-year career leading Berkshire Hathaway and ushering in a historic turning point for the corporate empire he built.

In a letter to shareholders released on Monday, Buffett announced a significant change in his career with the British expression “I’m ‘going quiet’”. The 95-year-old Buffett made it clear that he will step down as CEO by the end of this year and officially exit the company's daily management.

Buffett also confirmed that the next annual letter to shareholders, which is highly anticipated by global investors, will be written by someone else. However, Buffett stated that he will continue to communicate with shareholders about his charitable endeavors through the letter released every Thanksgiving.

This succession plan has impacted market sentiment. Since Buffett first announced his retirement plan in May of this year, Berkshire's Class A shares have fallen by about 8%. In his letter, Buffett stated that to ensure a smooth transition for his successor Greg Abel, he will continue to hold “a significant portion” of Berkshire's Class A shares.

While announcing his personal role change, Buffett also used this letter to convey his iconic business maxims and ethical warnings. He harshly criticized the greed prevailing in the corporate world, particularly the excessive comparison of executive compensation, leaving a profound lesson for his successor and the entire business community.

A Word to the Successor

In the letter, Buffett issued a clear warning to future leaders, directly targeting corporate greed. He pointed out that the requirements for disclosing executive compensation have had unintended negative effects, instead triggering a competition among corporate leaders over “who earns more.”

“What often troubles those very wealthy CEOs is that other CEOs become even wealthier,” Buffett wrote, “Jealousy and greed go hand in hand.” He emphasized that Berkshire should especially avoid hiring CEOs who expect to retire at 65, crave to become “look-at-me-rich,” or attempt to create a “dynasty.”

Stick to long-termism

Warren Buffett's investment philosophy stands in stark contrast to the evolution of the financial industry over the past few decades. In an era where speculative assets like cryptocurrencies have emerged and trading times have been reduced to milliseconds, his advocacy for long-term value investing is particularly unique. His candid communication with shareholders, whether through annual letters or the marathon Q&A sessions at the Omaha annual shareholder meeting, has become a hallmark of his tenure.

Since its initial investment in the troubled textile company Berkshire in 1962, Buffett has developed it into a massive business empire, with operations spanning well-known consumer brands such as Dairy Queen and Fruit of the Loom, as well as insurance, manufacturing, utilities, and one of North America's largest railway companies. He wrote, “Berkshire's way of operating will forever make it an asset to America and avoid activities that could lead it to become a beggar.”

Sustained charity work

While announcing a career transition, Buffett also revealed his latest charitable donation. According to the letter, he has donated 2.7 million shares of Berkshire Class B stock, worth approximately $1.3 billion, to four family foundations managed by his children. This is in line with his charitable giving plan announced in recent years in his Thanksgiving letters.

Warren Buffett first pledged in 2006 to donate all of his Berkshire shares to charity. Since then, he has co-founded the “Giving Pledge” with Bill Gates and Melinda French Gates, advocating for the world's wealthiest individuals to donate more than half of their wealth to charity.

Click the link to read the full text of Buffett's letter to shareholders, below is the Chinese translation:

Dear shareholders:

I will no longer write Berkshire's annual report, nor will I speak at length at the annual meeting. In the words of the English, I will “remain silent.”

I suppose so.

Greg Abel will take over at the end of the year. He is an outstanding manager, a tireless worker, and a candid communicator. Wishing him a long tenure.

I will continue to talk to you and my children about Berkshire's situation through my annual Thanksgiving address. Berkshire's individual shareholders are a very special group of people who always generously share their profits with those who are less fortunate than themselves. I enjoy the opportunity to stay in touch with you. This year, please allow me to first reminisce about the past. After that, I will discuss my plans for the allocation of my Berkshire shares. Finally, I will share some insights on business and personal matters.

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As Thanksgiving approaches, I feel both grateful and surprised to have lived to 95. When I was younger, such an outcome seemed unlikely. Earlier, I almost died.

It was 1938, when the citizens of Omaha believed that local hospitals were either Catholic or Protestant, a classification that seemed very natural at the time.

Our family doctor, Harley Hots, is a friendly Catholic who always carries a black medical bag when he comes to see patients. Dr. Hots calls me “Little Captain,” and his fees for home visits are not high. In 1938, I had a terrible stomachache, and after examining me, Dr. Hots told me I would feel better by the next morning.

Later he went home for dinner and played some bridge. However, Dr. Hotz could never forget my rather peculiar symptoms, and later that night, he sent me to St. Catherine's Hospital for an emergency appendectomy. Over the next three weeks, I felt as if I were in a monastery, and I started to like my new “pulpit.” I enjoyed talking - that's right, I did back then too - the nuns were very kind to me.

The best part was that Ms. Madison, the third-grade teacher, had all 30 students in the class write me a letter. I probably threw away the boys' letters, but I read the girls' letters many times; there are benefits to being in the hospital.

The happiest thing during my recovery — in fact, the first week was quite dangerous — was the gift my dear Aunt Eddie sent me. She brought me a very professional-looking fingerprint collection kit, and I immediately collected fingerprints from the nuns who were taking care of me. (I might be the first Protestant child they have ever seen at St. Catherine's Hospital, and they didn't know what to expect from me.)

My thought—of course completely fanciful—is that one day a nun will commit a crime, and the FBI will find out that they haven't even collected fingerprints from nuns. The FBI and its director J. Edgar Hoover were admired by Americans in the 1930s, and I imagine Mr. Hoover personally coming to Omaha to examine my precious collection of fingerprints. I also fantasize that J. Edgar and I would quickly identify and arrest that fallen nun. A national reputation seems within reach.

Clearly, my fantasy never came true. But ironically, it was years later that I realized I should have taken fingerprints of J. Edgar himself, as he later fell from grace due to abuse of power.

Well, that was Omaha in the 1930s, when my friends and I all longed for a sled, a bicycle, a baseball glove, and an electric train. Let's take a look at a few other kids from that era who lived nearby and had a significant impact on me, though I didn't know of their existence for a long time.

Let me start with Charlie Munger, who has been my friend for 64 years. In the 1930s, Charlie lived just one block away from the house where I have been living since 1958.

Earlier, I almost became friends with Charlie. Charlie is six and a half years older than me. In the summer of 1940, he worked at his grandfather's grocery store, working 10 hours a day for 2 dollars. (Frugality is a tradition in the Buffett family.) The following year, I also did a similar job at the store, but it wasn't until 1959 that I met Charlie, when he was 35 and I was 28.

After the end of World War II, Charlie graduated from Harvard Law School and then permanently settled in California. However, Charlie has always regarded his early years in Omaha as an important stage in his life. For more than sixty years, Charlie has had a tremendous impact on me; he is a wonderful teacher and also my “big brother” whom I protect dearly. Although we have our differences, we have never had a quarrel. He never says, “I told you so.”

In 1958, I bought my first and only house. Of course, it was in Omaha, about two miles from where I grew up (roughly speaking), less than two blocks from my in-laws' house, and about six blocks from Buffett's grocery store. It took only 6 to 7 minutes to drive to the office building where I worked for 64 years.

Let's talk about another Omaha resident, Stan Lipsky. In 1968, Stan sold the Omaha Sun (a weekly) to Berkshire, and ten years later, at my request, he moved to Buffalo. At that time, the Buffalo Evening News, owned by a subsidiary of Berkshire, was engaged in a life-and-death struggle with the publisher of the city's only weekly newspaper, which was its morning competitor, and we were losing ground.

Stan ultimately created our new “Sunday” product, and for several years thereafter, this investment, which had originally been incurring significant losses every year, achieved a pre-tax return rate of over 100% annually. In the early 1980s, this $33 million investment was an important amount of capital for Berkshire.

Stan grew up about five blocks from my house. One of Stan's neighbors was little Walter Scott. Walter, you might remember, brought China U.S. Energy to Berkshire in 1999. He was also a director at Berkshire until his death in 2021 and was a dear friend of mine. For decades, Walter was a philanthropic leader in Nebraska, leaving a profound impact on Omaha and the entire state.

Walter attended Benson High School, and I originally planned to go to that school as well—until 1942, when my father unexpectedly defeated the four-term incumbent in the congressional election. Life is always full of surprises.

Wait, there's more.

In 1959, Don Keough and his young family lived in a house across the street from my home, about 100 yards from the old Munger residence. At that time, Don was a coffee salesman, but he later became the president of Coca-Cola and a loyal director of Berkshire.

When I met Tang, he earned $12,000 a year, and he and his wife Miki had to raise five children, all of whom had to attend Catholic school (which is not cheap).

The two of us quickly became close friends. Tang came from a farm in the northwest of Iowa and graduated from Creighton University in Omaha. In his early years, he married a girl from Omaha named Mickey. After joining Coca-Cola, Tang quickly gained global fame.

In 1985, while serving as the president of Coca-Cola, Donald introduced the ill-fated New Coke. He delivered a famous speech apologizing to the public and re-launched the “Classic” Coke. This shift occurred after Donald explained that letters sent to the “supreme idiot” would quickly land on his desk. His “retraction” speech is considered classic and can be viewed on YouTube. He happily acknowledged that, in fact, Coca-Cola products belong to the public rather than the company. Sales then surged significantly.

You can watch a wonderful interview with Tang on CharlieRose.com. (Tom Murphy and Kay Graham also have some great content.) Like Charlie Munger, Tang has always been a genuine Midwestern boy, enthusiastic, friendly, and thoroughly embodying American character.

Finally, Ajit Jain, who was born and raised in India, and Greg Abel, who is about to become our CEO and is from Canada, both lived in Omaha for several years at the end of the 20th century. In fact, in the 1990s, Greg lived just a few blocks away from me on Farnam Street, although we never met at that time.

Is there some magical ingredient in the water in Omaha?

************

I lived in Washington D.C. for a few years when I was in my teens (my father was serving in Congress at the time), and in 1954 I found a job in Manhattan that I thought I would have for life. There, Ben Graham and Jerry Newman treated me well, and I made many lifelong friends. New York has a unique charm – it still does. However, just a year and a half later, in 1956, I returned to Omaha and have never left since.

Later, my three children and several grandchildren grew up in Omaha. My children have always attended public schools (graduating from the same high school that educated my father (class of 1921), my first wife Susie (class of 1950), and key figures in the development of Nebraska Furniture Mart such as Charlie, Stan Lipsky, Erv and Ron Blumkin, as well as Jack Lingwall, class of 1923, who founded National Indemnity Company and sold it to Berkshire in 1967, laying the foundation for our large property insurance business).

************

Our country has many great companies, great schools, and great medical institutions, each place has its unique advantages and also talented individuals. But I feel very fortunate to have made many lifelong friends, to have met my two wives, to have received a good education in public schools, to have met many interesting and friendly Omaha adults when I was young, and to have made various friends in the Nebraska National Guard. In short, Nebraska has always been my true home.

Looking back on the past, I feel that the reason Berkshire and I have been able to achieve better results is largely because we are rooted in Omaha. If I had been born somewhere else, the outcome could have been very different. The heart of America is an excellent place to be born, raise a family, and start a business. I was simply lucky when I was born, drawing an unusually long straw.

************

Now let's talk about my advanced age. My genes haven't given me any advantages—the family longevity record (of course, the further back you trace, the more blurry the family records become) was 92 years, until I broke that record. However, I have wise, kind, and diligent doctors in Omaha, starting with Dr. Halley Hotz and continuing to the present. At least three times, my life has been saved by doctors who are not far from home. (However, I no longer let nurses take my fingerprints. A 95-year-old can have many quirks… but there is a limit.)

************

Reaching this old age as a longevity star requires a great deal of luck, as one must avoid slipping on banana peels, natural disasters, drunk or distracted drivers, lightning strikes, and other such dangers every day.

But Lady Luck is capricious, and—there's no other way to describe it—extremely unfair. In many cases, our leaders and the wealthy receive far more luck than they deserve—often, these fortunate individuals are unwilling to acknowledge this. Some scions of affluent families are granted lifelong financial security from birth, while others face hellish circumstances in their childhood, and even worse, suffer disabilities, losing everything I take for granted. In many densely populated areas of the world, I might live a miserable life, while my sisters would endure even worse days.

I was born in America in 1930, healthy, smart, white, and male. Wow! Thank you, Lady Luck. My sisters are as smart as I am, and their personalities are even better than mine, but their life prospects are vastly different. Lady Luck has favored me for most of my life, but she hasn't had time to take care of those in their nineties. Luck also has its limits.

The Old Man of Time, however, is quite the opposite. As I grow older, he finds me more and more interesting. He is invincible; for him, everyone ultimately counts on his “winners” list. When your sense of balance, vision, hearing, and memory continue to decline, you know the Old Man of Time is nearby.

I entered old age relatively late— the onset of aging varies from person to person— but once it appears, it cannot be denied.

To my surprise, I overall feel good. Although my movements are slow and reading has become increasingly difficult, I still work five days a week in the office, collaborating with outstanding people. Occasionally, I come up with some useful ideas, or someone presents us with proposals that may not have otherwise come up. Due to Berkshire's size and market conditions, good ideas are not plentiful—but they do exist.

************

However, my unexpectedly long life has had a significant and unavoidable impact on my family and the achievement of my charitable goals.

Let's explore them.

What's next?

My children have all exceeded the normal retirement age, at 72, 70, and 67 years old respectively. It is clearly unrealistic to expect that all three of them—who in many ways have already reached their peak—can delay aging like I do. To improve the chances of them handling almost all of my estate before I appoint my designated trustee to replace them, I need to accelerate the lifetime gifts to their three foundations. My children are now at their peak in experience and wisdom, but they have not yet entered old age. This “honeymoon period” will not last forever.

Fortunately, adjusting the direction is easy to execute. However, there is an additional factor to consider: I want to retain a significant amount of Class A shares before the shareholders of Berkshire have confidence in Greg like Charlie and I do. This level of trust shouldn’t take too long. My children are fully supportive of Greg, and so are the directors of Berkshire.

Now these three children have all matured, are bright-minded, energetic, and instinctively capable of managing a large fortune. Even long after my death, they will still be active in the world, which will be their advantage. If necessary, they can adopt both forward-looking and responsive strategies to deal with federal tax policies or other factors affecting the development of charitable enterprises. They will likely need to adapt to the significant changes occurring in the world around them. Remote management after death has always been ineffective, and I have never had such an impulse.

Fortunately, all three children inherited the dominant gene from their mother. As the years went by, I gradually became a better role model for their thinking and behavior. However, I can never compare to their mother.

My children have three alternate guardians in case of any unexpected death or disability. These three alternate guardians are in no particular order and are not tied to any specific child. They are all outstanding individuals with a keen understanding of the world. They have no conflicting motives with each other.

I have assured the children that they do not need to create miracles, nor do they need to fear failure or disappointment. These are all inevitable, and I have experienced them too. They just need to make progress based on the achievements usually made in government activities and/or private charitable endeavors, while also recognizing that there are shortcomings in the ways these wealth redistributions occur.

Earlier, I had envisioned various grand charitable plans. Although I am stubborn by nature, these plans ultimately did not come to fruition. Throughout my long life, I have also witnessed the clumsy wealth transfers by politicians, familial choices, and of course, those incompetent or eccentric philanthropists.

If my kids do well, they can be sure that both their mother and I will be happy. They have good intuition, and each of them has years of practical experience, starting with a very small amount at first, which gradually increased to over 500 million dollars a year.

These three people all enjoy working long hours to help others, but their approaches are different.

************

I have accelerated my donations to the Children's Fund, not because I have any change in my view of Berkshire's prospects. Greg Abel has exceeded my expectations far beyond what I thought he should be as Berkshire's next CEO. His understanding of many of our businesses and personnel far surpasses mine, and he can quickly grasp issues that many CEOs have not even considered. Whether you are talking about a CEO, a management consultant, an academic, or a government official, I can't think of anyone better suited than Greg to manage your and my savings.

For example, Greg's understanding of the potential benefits and risks of our property and casualty insurance business far exceeds that of many executives who have been in this business for a long time. I hope his health can remain good for decades. If luck is on our side, Berkshire will only need five or six CEOs over the next century. It is especially important to avoid those who are solely focused on retiring at 65, those who just want to become attention-grabbing billionaires, or those who want to establish a family dynasty.

An unpleasant fact is that sometimes the outstanding and loyal CEO of the parent company or subsidiary may suffer from dementia, Alzheimer's disease, or other debilitating and long-term illnesses.

Charlie and I have encountered this issue multiple times, but we did not take action. This failure could lead to significant mistakes. The board must remain vigilant at the CEO level, and the CEO must also remain vigilant at the subsidiary level. It’s easier said than done; I can cite examples from the past involving large companies. All I can suggest is that the directors should stay alert and have the courage to speak up.

During my lifetime, reformers attempted to embarrass CEOs by requiring the disclosure of comparisons between the salaries of CEOs and those of ordinary employees. As a result, the length of proxy statements quickly expanded from around 20 pages to over 100 pages.

However, these goodwill measures have not worked and have instead backfired. From my observations, in most cases, the CEO of Company A hints to the board that he should receive a higher salary after seeing the situation of competitor Company B. Of course, he also raises the salaries of the board members and is particularly cautious in selecting members for the compensation committee. The new regulations have led to jealousy rather than restraint.

This upward spiral trend seems to have a life of its own. What often troubles those very wealthy CEOs is that other CEOs are becoming even richer. Jealousy and greed always go hand in hand. Which advisor would suggest drastically cutting the salaries of CEOs or the compensation of the board?

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Overall, the prospects of Berkshire's subsidiaries are slightly better than average, with several substantial and relatively unrelated gems among them. However, in ten or twenty years, many companies will likely perform better than Berkshire; our size also brings disadvantages.

The likelihood of Berkshire encountering a catastrophic disaster is smaller than that of any company I am aware of. Moreover, Berkshire's management and board of directors are more focused on shareholder interests than almost any company I am familiar with (and I have seen quite a few). Finally, Berkshire's way of doing business will always ensure its existence as a source of wealth for America, rather than engaging in activities that would reduce it to begging. Over time, our managers should become quite wealthy — they bear significant responsibilities — but they do not aspire to build hereditary wealth or pursue that kind of conspicuous wealth.

Our stock price can be volatile, sometimes dropping by around 50%, just like it happened three times over the past 60 years under the current management. Don't be discouraged, the U.S. will recover, and Berkshire's stock will rise again.

Final thoughts

Perhaps this is a self-serving observation. I am happy to say that I am more satisfied with the second half of my life than the first half. My advice is: don't blame yourself for past mistakes—at least learn a lesson from them, and then move on. It's never too late to improve. Find the right role models and emulate them. You can start with Tom Murphy, who is the best.

Do you remember Alfred Nobel? He later became famous for establishing the Nobel Prize. It is said that he once read his own obituary, which was mistakenly published by a newspaper when his brother passed away. The content he read shocked him greatly, and he realized that he needed to change his behavior.

Don't expect the newsroom to make mistakes: think about what you want your obituary to say, and then work hard to live a life that reflects that.

Greatness does not stem from accumulating vast wealth, gaining extensive exposure, or wielding immense power in government. When you help others in thousands of ways, you are helping this world. Acts of kindness do not require a price but are incredibly precious. Whether you are religious or not, the Golden Rule as a code of conduct is hard to surpass.

I write this as someone who has been careless and made many mistakes countless times, but has also been fortunate to learn how to be a better person from some great friends (even though I am still far from perfect). Remember that a cleaning lady and a chairman are both human.

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Happy Thanksgiving to everyone reading this! That's right, including those annoying people; it's never too late to change. Don't forget to thank America for providing you with the greatest opportunities. But America, when it comes to distributing returns, is inevitably fickle and sometimes even profit-driven.

Choose your role models carefully, and then emulate them. You can never achieve perfection, but you can always become better.