Yes, there are some people who think it is fun to read the 1977 to 1997 Berkshire Hathaway shareholder letters on the Beach. It is not like my days participating(not) in the Hermosa Beach IronMan are long behind me. (That’s run 1 mile, paddle 1 mile, drink a 6-Pack, hold it in.)

I know that I am “generally” tired of the online Buffett worship. But I love to read “old stuff,” and after an afternoon, the love affair and professional Northstar was rekindled. And reading old Berkshire Hathaway is simply the best layperson’s guide to insurance analysis a young person could hope for. The binder is a solid weapon and door holder – stop by our offices if you want it!

Here are some personal highlights:

1977 – Whining about “social inflation” and the lawyers ruining our country is an old story.

1978 – California insurance has been a mess for a long time. And a nod to the concept of cycles, and highly relevant today. “We continue to find for our insurance portfolios small portions of really outstanding businesses that are available through the auction pricing mechanism of security markets at prices dramatically cheaper than the valuations inferior businesses command on negotiated sales.”

1979 – First mention of a good business at a fair price

1980 – No macro-economic genius here, but that doesn’t stop anyone from a long-winded analysis of long-term bonds under water that are held by insurance companies and the consequences on underwriting and net worth for insurers, leaving them frozen in their underwriting ability “for the next ten years.” That was a solid 18 months early of top-ticking the bond bearishness as the long bond peaked 18 months later at 15.2 on the 30-year. He also sold $60mm of 12 ¾ due 2005.

1982 – “Accounting numbers are the beginning, not the end of business valuation.” Buying whole business at negotiated prices “is an extraordinarily difficult job- far more difficult than the purchase at attractive prices of fractional interests.”

1983 – Still blabbing on about how wonderful the Buffalo newspaper is. Combined ratio ex Geico was 121 – note to self that float is not always a positive number. ”Much more active in reinsurance” but still no sign of Ajit. Active trading in stocks – “the invisible foot that trips up a forward-moving economy.”

1984 – “We do not have any big ideas at present, but my experience is that they pop up occasionally.” I know that feeling. Third year in a row of way above 100 CR – 134 this year.
“We believe substantial inflation lies ahead” – nope.

1985 – “Halleys comet” – you will not see a 48% gain in net worth again in my lifetime.”
We don’t worry about short-term math, we can do anything anywhere, we love our work.

1986 – Closed Berkshire Mills, namesake of Cove Street Capital, New Bedford Mass. First big dump on management compensation schemes and option grants. Tie comp to the underlying business, not the stock price. Jack Byrne leaves Geico and goes to Fireman’s Fund. Bronchick buys Fireman’s Fund. ”Some things just take time: you can’t produce a baby in one month by getting 9 women pregnant.” Bought Scott and Fetzer, which was 40% of sales and more of the profits from World Book Encyclopedia. “We have no master strategy, nor corporate planners divining insights about socioeconomic trends, and no staff to investigate a multitude of ideas presented by promoters and intermediaries. Instead, we simply hope that something sensible comes along -and when it does, we act.” Amen Brother. Swaps Coke to Cherry Coke.

1987 – Bought a corporate jet. 450 people at the annual meeting. Now extolling the benefits of control investments vs marketable securities. Did not make a serious new investment in the 1987 crash. Salomon Brothers preferred investment 3 weeks BEFORE the Oct. 19th crash.

1988 – ”Sainted 7” includes World Book. FIRST mention of Ajit Jain. Freddie Mac and Coke.
Still missing this: “We have not lost our aversion to long-term bonds.” NYSE listing.

1989 – “In a finite world, high growth rates must self-destruct.” Makes fun of EBITDA, PIK bonds, and zero coupon issuance. “ Investment bankers: they dispense income and balance sheet projections for companies they had not heard of 3 months prior.”

1990 – Starts biting the bullet on media. Nominates wife Susan to the board.

1991 – Notes that index returns are pretax vs what you achieve on April 15.

1993 – Issued shares to buy Dexter. “The requisites for board membership should be business savvy, interest in the job, and owner orientation. Too often, directors are selected simply because they are prominent or add diversity to the board. That practice is a mistake. Furthermore, mistakes in selecting directors are particularly serious because appointments are so hard to undo. The pleasant but vacuous director need never worry about job security.”

1994 – ”Fear is the foe of the faddist, but the friend of the fundamentalist.” Finally, Ajit Jain gets the “his underwriting skills are the finest” plug. “We try to price rather than time purchases.”

1995 – Buys Helzberg Diamonds with stock. Stole the rest of Geico from me. Baby Berkshire stock is born. ”We couldn’t possibly do that” – triple the size of Berkshire to exceed that of GE – then the highest valued US company.

1996 – Berkshire goes on the internet. And goes long oil derivatives, silver, and zero-coupon Treasuries.

1997 – General Re. “Clearly, the attitude of disrespect that many executives have today for accurate reporting is a business disgrace.”