1979-03-26 Warren Buffett's Letters to Berkshire Shareholders

To the Shareholders of Berkshire Hathaway Inc.:

致伯克希尔·哈撒韦公司全体股东：

First, a few words about accounting. The merger with Diversified Retailing Company, Inc. at yearend adds two new complications in the presentation of our financial results. After the merger, our ownership of Blue Chip Stamps increased to approximately 58% and, therefore, the accounts of that company must be fully consolidated in the Balance Sheet and Statement of Earnings presentation of Berkshire. In previous reports, our share of the net earnings only of Blue Chip had been included as a single item on Berkshire’s Statement of Earnings, and there had been a similar one-line inclusion on our Balance Sheet of our share of their net assets.

首先，先说几句会计问题。年末与 Diversified Retailing Company, Inc. 的合并，使我们财务结果的呈现增加了两个新的复杂因素。合并之后，我们对 Blue Chip Stamps 的持股比例提高到约58%，因此，该公司的账目必须在 Berkshire 的资产负债表和收益表中进行全面合并。在以往的报告中，我们只把 Blue Chip 的净利润中属于我们的部分，作为单独一项列入 Berkshire 的收益表；在资产负债表中，也同样只用一行列入我们所占其净资产的份额。

This full consolidation of sales, expenses, receivables, inventories, debt, etc. produces an aggregation of figures from many diverse businesses—textiles, insurance, candy, newspapers, trading stamps—with dramatically different economic characteristics. In some of these your ownership is 100% but, in those businesses which are owned by Blue Chip but fully consolidated, your ownership as a Berkshire shareholder is only 58%. (Ownership by others of the balance of these businesses is accounted for by the large minority interest item on the liability side of the Balance Sheet.) Such a grouping of Balance Sheet and Earnings items—some wholly owned, some partly owned—tends to obscure economic reality more than illuminate it. In fact, it represents a form of presentation that we never prepare for internal use during the year and which is of no value to us in any management activities.

这种对销售、费用、应收款、存货、债务等项目的全面合并，会把许多性质迥异的业务——纺织、保险、糖果、报纸、交易印花——的数字汇总到一起，而这些业务的经济特征截然不同。其中有些业务你们拥有100%的权益，但那些由 Blue Chip 持有并被全面合并进来的业务，作为 Berkshire 股东，你们的实际权益只有58%。（这些业务中其余由他人持有的权益，通过资产负债表负债一侧的大额少数股东权益项目来反映。）这种把资产负债表和收益表项目混在一起的列报方式——有些是全资拥有，有些只是部分拥有——往往遮蔽经济现实多于揭示经济现实。事实上，这种列报形式我们在全年内部管理中从不使用，对我们的任何管理活动也没有价值。

For that reason, throughout the report we provide much separate financial information and commentary on the various segments of the business to help you evaluate Berkshire’s performance and prospects. Much of this segmented information is mandated by SEC disclosure rules and covered in “Management’s Discussion” on pages 29 to 34. And in this letter we try to present to you a view of our various operating entities from the same perspective that we view them managerially.

因此，在整份报告中，我们提供了大量关于各业务分部的单独财务信息和评论，以帮助你们评估 Berkshire 的业绩和前景。其中许多分部信息是 SEC 披露规则所要求的，并载于第29至34页的“管理层讨论”中。而在这封信里，我们试图从与管理上看待这些经营实体相同的视角，把它们呈现给你们。

A second complication arising from the merger is that the 1977 figures shown in this report are different from the 1977 figures shown in the report we mailed to you last year. Accounting convention requires that when two entities such as Diversified and Berkshire are merged, all financial data subsequently must be presented as if the companies had been merged at the time they were formed rather than just recently. So the enclosed financial statements, in effect, pretend that in 1977 (and earlier years) the Diversified-Berkshire merger already had taken place, even though the actual merger date was December 30, 1978. This shifting base makes comparative commentary confusing and, from time to time in our narrative report, we will talk of figures and performance for Berkshire shareholders as historically reported to you rather than as restated after the Diversified merger.

合并带来的第二个复杂因素是，本报告中列示的1977年数字，与我们去年寄给你们的报告中列示的1977年数字不同。会计惯例要求，当 Diversified 和 Berkshire 这样的两个实体合并时，此后所有财务数据都必须假定两家公司从成立之日起就已经合并，而不是刚刚合并。因此，随附的财务报表实际上是假装在1977年（以及更早年份）Diversified-Berkshire 的合并已经发生，尽管实际合并日期是1978年12月30日。这个基准的移动会使比较性评论变得混乱，因此，在叙述性报告中，我们有时会按照历史上向 Berkshire 股东报告过的口径，而不是按照 Diversified 合并后重述的口径，来谈论相关数字和业绩。

With that preamble it can be stated that, with or without restated figures, 1978 was a good year. Operating earnings, exclusive of capital gains, at 19.4% of beginning shareholders’ investment were within a fraction of our 1972 record. While we believe it is improper to include capital gains or losses in evaluating the performance of a single year, they are an important component of the longer term record. Because of such gains, Berkshire’s long-term growth in equity per share has been greater than would be indicated by compounding the returns from operating earnings that we have reported annually.

有了上述说明，可以说，无论采用重述后的数字还是未重述的数字，1978年都是好年份。不包括资本利得的经营收益，相当于期初股东投资的19.4%，几乎追平了我们1972年的纪录。虽然我们认为，在评价单一年份的经营表现时纳入资本利得或损失是不恰当的，但它们是长期记录中的重要组成部分。由于这些利得的存在，Berkshire 每股权益的长期增长，高于单纯按照我们每年报告的经营收益率复合计算所显示的结果。

For example, over the last three years—generally a bonanza period for the insurance industry, our largest profit producer—Berkshire’s per share net worth virtually has doubled, thereby compounding at about 25% annually through a combination of good operating earnings and fairly substantial capital gains. Neither this 25% equity gain from all sources nor the 19.4% equity gain from operating earnings in 1978 is sustainable. The insurance cycle has turned downward in 1979, and it is almost certain that operating earnings measured by return on equity will fall this year. However, operating earnings measured in dollars are likely to increase on the much larger shareholders’ equity now employed in the business.

例如，过去三年——总体上是保险业的黄金时期，而保险又是我们最大的利润来源——Berkshire 的每股净值几乎翻了一番，通过良好的经营收益和相当可观的资本利得相结合，年复合增长约为25%。无论是来自所有来源的这25%权益增长，还是1978年经营收益带来的19.4%权益增长，都不可持续。保险周期已在1979年转向下行，按股本回报率衡量的经营收益今年几乎肯定会下降。不过，由于现在投入业务的股东权益规模大得多，以美元金额衡量的经营收益很可能会增加。

In contrast to this cautious view about near term return from operations, we are optimistic about prospects for long term return from major equity investments held by our insurance companies. We make no attempt to predict how security markets will behave; successfully forecasting short term stock price movements is something we think neither we nor anyone else can do. In the longer run, however, we feel that many of our major equity holdings are going to be worth considerably more money than we paid, and that investment gains will add significantly to the operating returns of the insurance group.

与这种对近期经营回报的谨慎看法相反，我们对保险公司所持主要股权投资的长期回报前景持乐观态度。我们不试图预测证券市场会如何表现；成功预测短期股价波动这件事，我们认为无论是我们还是其他任何人都做不到。然而，从更长期看，我们认为，我们许多主要股权持仓的价值将远高于我们的买入成本，而投资收益将显著增加保险集团的经营回报。

Sources of Earnings

报告收益的来源

To give you a better picture of just where Berkshire’s earnings are produced, we show below a table which requires a little explanation. Berkshire owns close to 58% of Blue Chip which, in addition to 100% ownership of several businesses, owns 80% of Wesco Financial Corporation. Thus, Berkshire’s equity in Wesco’s earnings is about 46%. In aggregate, businesses that we control have about 7,000 full-time employees and generate revenues of over $500 million.

为了让你们更清楚地看到 Berkshire 的利润究竟来自哪里，我们在下面列出了一张表格，这张表需要稍作说明。Berkshire 持有 Blue Chip 接近58%的股份；Blue Chip 除了100%拥有若干业务外，还持有 Wesco Financial Corporation 80%的股份。因此，Berkshire 在 Wesco 利润中的权益约为46%。合计来看，我们控制的企业拥有约7,000名全职员工，收入超过5亿美元。

The table shows the overall earnings of each major operating category on a pre-tax basis (several of the businesses have low tax rates because of significant amounts of tax-exempt interest and dividend income), as well as the share of those earnings belonging to Berkshire both on a pre-tax and after-tax basis. Significant capital gains or losses attributable to any of the businesses are not shown in the operating earnings figure, but are aggregated on the “Realized Securities Gain” line at the bottom of the table. Because of various accounting and tax intricacies, the figures in the table should not be treated as holy writ, but rather viewed as close approximations of the 1977 and 1978 earnings contributions of our constituent businesses.

这张表按税前口径列示了每个主要经营类别的总体利润（其中若干业务由于拥有大量免税利息和股息收入，税率较低），同时也列示了这些利润中属于 Berkshire 的部分，分别按税前和税后口径列示。归属于任何业务的重大资本利得或损失，并未列入经营收益数字，而是汇总列在表格底部的“已实现证券利得”一行。由于存在各种会计和税务上的复杂细节，表中的数字不应被当作神圣不可更改的经文，而应被视为对我们各组成业务在1977年和1978年利润贡献的近似估计。

Blue Chip and Wesco are public companies with reporting requirements of their own. Later in this report we are reproducing the narrative reports of the principal executives of both companies, describing their 1978 operations. Some of the figures they utilize will not match to the penny the ones we use in this report, again because of accounting and tax complexities. But their comments should be helpful to you in understanding the underlying economic characteristics of these important partly-owned businesses. A copy of the full annual report of either company will be mailed to any shareholder of Berkshire upon request to Mr. Robert H. Bird for Blue Chips Stamps, 5801 South Eastern Avenue, Los Angeles, California 90040, or to Mrs. Bette Deckard for Wesco Financial Corporation, 315 East Colorado Boulevard, Pasadena, California 91109.

Blue Chip 和 Wesco 都是上市公司，各自有自己的报告要求。在本报告后面，我们转载了两家公司主要负责人的叙述性报告，说明它们1978年的经营情况。由于会计和税务上的复杂性，他们使用的一些数字不会与我们在本报告中使用的数字精确到每一分钱都一致。但他们的评论应有助于你们理解这些重要的部分持股企业背后的经济特征。任何 Berkshire 股东如有需要，都可以向以下人士索取任一公司的完整年报：Blue Chips Stamps 请联系 Robert H. Bird 先生，地址为 5801 South Eastern Avenue, Los Angeles, California 90040；Wesco Financial Corporation 请联系 Bette Deckard 女士，地址为 315 East Colorado Boulevard, Pasadena, California

Textiles

纺织业务

Earnings of $1.3 million in 1978, while much improved from 1977, still represent a low return on the $17 million of capital employed in this business. Textile plant and equipment are on the books for a very small fraction of what it would cost to replace such equipment today. And, despite the age of the equipment, much of it is functionally similar to new equipment being installed by the industry. But despite this “bargain cost” of fixed assets, capital turnover is relatively low reflecting required high investment levels in receivables and inventory compared to sales. Slow capital turnover, coupled with low profit margins on sales, inevitably produces inadequate returns on capital. Obvious approaches to improved profit margins involve differentiation of product, lowered manufacturing costs through more efficient equipment or better utilization of people, redirection toward fabrics enjoying stronger market trends, etc. Our management is diligent in pursuing such objectives. The problem, of course, is that our competitors are just as diligently doing the same thing.

1978年盈利130万美元，虽然较1977年大有改善，但相对于这项业务所占用的1,700万美元资本而言，回报率仍然很低。纺织厂房和设备在账面上的价值，只相当于今天重置这些设备所需成本的很小一部分。而且，尽管设备已有年头，其中许多在功能上仍与行业正在安装的新设备相近。但即便固定资产有这种“便宜成本”，资本周转率仍然相对较低，原因是相对于销售额，应收款和存货需要占用很高水平的资本。缓慢的资本周转，再加上销售利润率低，必然导致资本回报不足。提高利润率的显而易见方法包括：产品差异化；通过更高效的设备或更好地使用人员来降低制造成本；转向市场趋势更强的织物，等等。我们的管理层正勤勉地追求这些目标。当然，问题在于，我们的竞争对手也同样勤勉地在做这些事。

The textile industry illustrates in textbook style how producers of relatively undifferentiated goods in capital intensive businesses must earn inadequate returns except under conditions of tight supply or real shortage. As long as excess productive capacity exists, prices tend to reflect direct operating costs rather than capital employed. Such a supply-excess condition appears likely to prevail most of the time in the textile industry, and our expectations are for profits of relatively modest amounts in relation to capital.

纺织行业以教科书般的方式说明，在资本密集型业务中，生产相对无差异商品的企业，除非处于供应紧张或真正短缺的环境，否则必然只能获得不足的回报。只要过剩产能存在，价格往往反映的是直接运营成本，而不是所投入的资本。这种供给过剩的状况看来很可能在纺织行业的大部分时间里存在，因此，我们预期相对于资本而言，利润金额会比较有限。

We hope we don’t get into too many more businesses with such tough economic characteristics. But, as we have stated before: (1) our textile businesses are very important employers in their communities, (2) management has been straightforward in reporting on problems and energetic in attacking them, (3) labor has been cooperative and understanding in facing our common problems, and (4) the business should average modest cash returns relative to investment. As long as these conditions prevail—and we expect that they will—we intend to continue to support our textile business despite more attractive alternative uses for capital.

我们希望不要再进入太多具有如此艰难经济特征的业务。不过，正如我们以前所说：（1）我们的纺织业务是所在社区非常重要的雇主；（2）管理层在报告问题时坦率直接，并且在解决问题时积极有力；（3）劳工在面对我们的共同问题时合作且理解；（4）相对于投资而言，这项业务平均应能产生适度的现金回报。只要这些条件继续存在——而我们预期它们会继续存在——即使资本还有更有吸引力的替代用途，我们也打算继续支持我们的纺织业务。

Insurance Underwriting

保险承保业务

The number one contributor to Berkshire’s overall excellent results in 1978 was the segment of National Indemnity Company’s insurance operation run by Phil Liesche. On about $90 million of earned premiums, an underwriting profit of approximately $11 million was realized, a truly extraordinary achievement even against the background of excellent industry conditions. Under Phil’s leadership, with outstanding assistance by Roland Miller in Underwriting and Bill Lyons in Claims, this segment of National Indemnity (including National Fire and Marine Insurance Company, which operates as a running mate) had one of its best years in a long history of performances which, in aggregate, far outshine those of the industry. Present successes reflect credit not only upon present managers, but equally upon the business talents of Jack Ringwalt, founder of National Indemnity, whose operating philosophy remains etched upon the company.

1978年，Berkshire 整体优异业绩的第一大贡献者，是 National Indemnity Company 保险业务中由 Phil Liesche 负责的那个分部。在约9,000万美元的已赚保费基础上，实现了承保利润约1,100万美元；即便放在行业状况极佳的背景下，这也是一项真正非凡的成就。在 Phil 的领导下，并得到承保方面 Roland Miller 和理赔方面 Bill Lyons 的杰出协助，National Indemnity 的这一分部（包括作为搭档运营的 National Fire and Marine Insurance Company）取得了其漫长历史中最好的年份之一；从总体看，它过往的业绩远远超过行业水平。当前的成功，不仅要归功于现在的管理者，也同样要归功于 National Indemnity 创始人 Jack Ringwalt 的商业才能；他的经营哲学仍深深刻在公司之中。

Home and Automobile Insurance Company had its best year since John Seward stepped in and straightened things out in 1975. Its results are combined in this report with those of Phil Liesche’s operation under the insurance category entitled “Specialized Auto and General Liability”.

Home and Automobile Insurance Company 取得了自 John Seward 在1975年接手并整顿业务以来的最好成绩。在本报告中，它的业绩与 Phil Liesche 负责的业务合并列入保险类别下的“专业汽车及一般责任保险”。

Worker’s Compensation was a mixed bag in 1978. In its first year as a subsidiary, Cypress Insurance Company, managed by Milt Thornton, turned in outstanding results. The worker’s compensation line can cause large underwriting losses when rapid inflation interacts with changing social concepts, but Milt has a cautious and highly professional staff to cope with these problems. His performance in 1978 has reinforced our very good feelings about this purchase.

工人赔偿保险在1978年的表现好坏参半。Cypress Insurance Company 在成为子公司的第一年，在 Milt Thornton 的管理下交出了出色成绩。工人赔偿险这一险种，在快速通胀与社会观念变化相互作用时，可能造成巨大的承保亏损；但 Milt 拥有一支谨慎且高度专业的团队来应对这些问题。他在1978年的表现，进一步强化了我们对这项收购的良好看法。

Frank DeNardo came with us in the spring of 1978 to straighten out National Indemnity’s California Worker’s Compensation business which, up to that point, had been a disaster. Frank has the experience and intellect needed to correct the major problems of the Los Angeles office. Our volume in this department now is running only about 25% of what it was eighteen months ago, and early indications are that Frank is making good progress.

Frank DeNardo 于1978年春天加入我们，负责整顿 National Indemnity 在 California 的工人赔偿保险业务；在那之前，这项业务一直是一场灾难。Frank 具备纠正 Los Angeles 办公室主要问题所需的经验和智力。我们这个部门目前的业务量只有18个月前的约25%，早期迹象显示 Frank 正在取得良好进展。

George Young’s reinsurance department continues to produce very large sums for investment relative to premium volume, and thus gives us reasonably satisfactory overall results. However, underwriting results still are not what they should be and can be. It is very easy to fool yourself regarding underwriting results in reinsurance (particularly in casualty lines involving long delays in settlement), and we believe this situation prevails with many of our competitors. Unfortunately, self-delusion in company reserving almost always leads to inadequate industry rate levels. If major factors in the market don’t know their true costs, the competitive “fall-out” hits all—even those with adequate cost knowledge. George is quite willing to reduce volume significantly, if needed, to achieve satisfactory underwriting, and we have a great deal of confidence in the long term soundness of this business under his direction.

George Young 的再保险部门继续相对于保费规模产生大量可供投资的资金，因此给我们带来还算令人满意的整体结果。不过，承保结果仍未达到其应有、也能够达到的水平。在再保险业务中，尤其是涉及长期延迟结案的意外险种，很容易在承保结果上自欺欺人；我们认为，许多竞争对手正处于这种状态。不幸的是，公司在准备金上的自我欺骗，几乎总会导致行业费率水平不足。如果市场中的主要参与者不知道自己的真实成本，竞争性的“余波”会冲击所有人——即使那些清楚知道自己成本的人也不能幸免。George 非常愿意在必要时大幅削减业务量，以实现令人满意的承保结果；对于这项业务在他领导下的长期稳健性，我们很有信心。

The homestate operation was disappointing in 1978. Our unsatisfactory underwriting, even though partially explained by an unusual incidence of Midwestern storms, is particularly worrisome against the backdrop of very favorable industry results in the conventional lines written by our homestate group. We have confidence in John Ringwalt’s ability to correct this situation. The bright spot in the group was the performance of Kansas Fire and Casualty in its first full year of business. Under Floyd Taylor, this subsidiary got off to a truly remarkable start. Of course, it takes at least several years to evaluate underwriting results, but the early signs are encouraging and Floyd’s operation achieved the best loss ratio among the homestate companies in 1978.

本州业务在1978年令人失望。我们的承保结果不理想，虽然部分可以用 Midwest 异常频繁的风暴来解释，但在本州集团所经营的传统险种中，整个行业结果非常有利，这一背景使我们的不佳表现尤其令人担忧。我们相信 John Ringwalt 有能力纠正这一局面。该集团中的亮点是 Kansas Fire and Casualty 在第一个完整经营年度中的表现。在 Floyd Taylor 的领导下，这家子公司起步确实非同寻常。当然，评估承保结果至少需要几年时间，但早期迹象令人鼓舞，而且 Floyd 的业务在1978年实现了本州各公司中最好的赔付率。

Although some segments were disappointing, overall our insurance operation had an excellent year. But of course we should expect a good year when the industry is flying high, as in 1978. It is a virtual certainty that in 1979 the combined ratio (see definition on page 31) for the industry will move up at least a few points, perhaps enough to throw the industry as a whole into an underwriting loss position. For example, in the auto lines—by far the most important area for the industry and for us—CPI figures indicate rates overall were only 3% higher in January 1979 than a year ago. But the items that make up loss costs—auto repair and medical care costs—were up over 9%. How different than yearend 1976 when rates had advanced over 22% in the preceding twelve months, but costs were up 8%.

虽然有些分部令人失望，但总体而言，我们的保险业务度过了出色的一年。当然，在1978年这样行业高飞的年份，我们本来就应该期待好年份。几乎可以确定的是，1979年行业的综合成本率（定义见第31页）至少会上升几个百分点，甚至可能足以使整个行业陷入承保亏损。例如，在汽车险这一对行业和我们都最重要的领域，CPI 数据显示，1979年1月的整体费率只比一年前高3%。但构成赔付成本的项目——汽车维修和医疗护理成本——上涨超过9%。这与1976年年末的情况大不相同，当时此前12个月费率上涨超过22%，而成本上涨8%。

Margins will remain steady only if rates rise as fast as costs. This assuredly will not be the case in 1979, and conditions probably will worsen in 1980. Our present thinking is that our underwriting performance relative to the industry will improve somewhat in 1979, but every other insurance management probably views its relative prospects with similar optimism—someone is going to be disappointed. Even if we do improve relative to others, we may well have a higher combined ratio and lower underwriting profits in 1979 than we achieved last year.

只有费率上涨速度与成本上涨速度相同，利润率才能保持稳定。1979年肯定不会如此，1980年的情况很可能会进一步恶化。我们目前的想法是，相对于行业而言，我们1979年的承保表现会有所改善；但其他每一家保险公司的管理层大概也都以类似的乐观看待自己的相对前景——总有人会失望。即使我们相对于其他公司有所改善，1979年的综合成本率也很可能高于去年，承保利润也可能低于去年。

We continue to look for ways to expand our insurance operation. But your reaction to this intent should not be unrestrained joy. Some of our expansion efforts—largely initiated by your Chairman have been lackluster, others have been expensive failures. We entered the business in 1967 through purchase of the segment which Phil Liesche now manages, and it still remains, by a large margin, the best portion of our insurance business. It is not easy to buy a good insurance business, but our experience has been that it is easier to buy one than create one. However, we will continue to try both approaches, since the rewards for success in this field can be exceptional.

我们继续寻找扩大保险业务的方法。但你们对这一意图的反应不应是毫无保留的高兴。我们的一些扩张努力——主要由你们的董事长发起——表现平平，另一些则是代价高昂的失败。我们在1967年通过购买 Phil Liesche 现在管理的这个分部进入保险业务，而它至今仍然是我们保险业务中遥遥领先的最佳部分。买到一家好的保险公司并不容易，但我们的经验是，买一家好保险公司，比从头创建一家要容易。不过，我们会继续尝试这两种方法，因为在这一领域取得成功的回报可能非常可观。

Insurance Investments

保险投资业务

We confess considerable optimism regarding our insurance equity investments. Of course, our enthusiasm for stocks is not unconditional. Under some circumstances, common stock investments by insurers make very little sense.

我们承认，我们对保险业务中的股权投资相当乐观。当然，我们对股票的热情并不是无条件的。在某些情况下，保险公司投资普通股并没有多少道理。

We get excited enough to commit a big percentage of insurance company net worth to equities only when we find (1) businesses we can understand, (2) with favorable long-term prospects, (3) operated by honest and competent people, and (4) priced very attractively. We usually can identify a small number of potential investments meeting requirements (1), (2) and (3), but (4) often prevents action. For example, in 1971 our total common stock position at Berkshire’s insurance subsidiaries amounted to only $10.7 million at cost, and $11.7 million at market. There were equities of identifiably excellent companies available—but very few at interesting prices. (An irresistible footnote: in 1971, pension fund managers invested a record 122% of net funds available in equities—at full prices they couldn’t buy enough of them. In 1974, after the bottom had fallen out, they committed a then record low of 21% to stocks.)

只有在发现以下对象时，我们才会兴奋到愿意把保险公司净值中很大一部分投入股票：（1）我们能够理解的企业；（2）具有良好长期前景；（3）由诚实且能干的人经营；（4）价格非常有吸引力。我们通常能够找到少数符合第（1）、（2）、（3）项要求的潜在投资对象，但第（4）项往往使我们无法行动。例如，1971年，Berkshire 保险子公司的普通股总持仓按成本只有1,070万美元，按市值为1,170万美元。当时确实可以买到一些明显优秀公司的股票——但很少有价格有意思的。（有一个令人难以抗拒的脚注：1971年，养老基金经理把可用净资金中创纪录的122%投入股票——在价格高昂时，他们怎么也买不够。1974年，在市场彻底崩塌之后，他们投入股票的比例却降到当时创纪录低点的21%。）

The past few years have been a different story for us. At the end of 1975 our insurance subsidiaries held common equities with a market value exactly equal to cost of $39.3 million. At the end of 1978 this position had been increased to equities (including a convertible preferred) with a cost of $129.1 million and a market value of $216.5 million. During the intervening three years we also had realized pre-tax gains from common equities of approximately $24.7 million. Therefore, our overall unrealized and realized pre-tax gains in equities for the three year period came to approximately $112 million. During this same interval the Dow-Jones Industrial Average declined from 852 to 805. It was a marvelous period for the value-oriented equity buyer.

过去几年对我们来说则是另一番景象。1975年底，我们的保险子公司持有普通股，市值正好等于成本，均为3,930万美元。到1978年底，这一头寸已增加到股票（包括一项可转换优先股），成本为1.291亿美元，市值为2.165亿美元。在这三年期间，我们还从普通股中实现了约2,470万美元的税前利得。因此，在这三年中，我们股票投资的已实现和未实现税前利得合计约为1.12亿美元。同期，Dow-Jones Industrial Average 从852点下降到805点。对以价值为导向的股票买家来说，这是一个绝妙时期。

货真价实的选股能力。

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.

我们继续在保险投资组合中发现一些真正出色企业的小部分权益；通过证券市场的拍卖定价机制，这些权益的价格，远低于质量较差企业在协商出售中所获得的估值。

This program of acquisition of small fractions of businesses (common stocks) at bargain prices, for which little enthusiasm exists, contrasts sharply with general corporate acquisition activity, for which much enthusiasm exists. It seems quite clear to us that either corporations are making very significant mistakes in purchasing entire businesses at prices prevailing in negotiated transactions and takeover bids, or that we eventually are going to make considerable sums of money buying small portions of such businesses at the greatly discounted valuations prevailing in the stock market. (A second footnote: in 1978 pension managers, a group that logically should maintain the longest of investment perspectives, put only 9% of net available funds into equities—breaking the record low figure set in 1974 and tied in 1977.)

这种以便宜价格收购企业小部分权益（普通股）的计划，目前几乎没有什么市场热情；这与一般公司收购活动形成鲜明对比，后者则热情高涨。在我们看来，事情相当清楚：要么是企业在协商交易和收购报价中按现行价格购买整家公司时犯下了非常重大的错误；要么是我们最终会通过在股票市场上，以大幅折价的估值购买这些企业的小部分权益而赚到相当多的钱。（第二个脚注：1978年，养老基金经理这个逻辑上本应拥有最长投资视角的群体，只把可用净资金的9%投入股票——打破了1974年创下并在1977年追平的历史低点。）

We are not concerned with whether the market quickly revalues upward securities that we believe are selling at bargain prices. In fact, we prefer just the opposite since, in most years, we expect to have funds available to be a net buyer of securities. And consistent attractive purchasing is likely to prove to be of more eventual benefit to us than any selling opportunities provided by a short-term run up in stock prices to levels at which we are unwilling to continue buying.

我们并不关心市场是否会很快把我们认为以便宜价格出售的证券重新向上定价。事实上，我们更喜欢相反的情况，因为在大多数年份里，我们预计会有可用资金，成为证券的净买入者。而持续以有吸引力的价格买入，最终很可能比短期股价上涨到我们不愿继续买入的水平、从而提供的任何卖出机会，对我们更有利。

Our policy is to concentrate holdings. We try to avoid buying a little of this or that when we are only lukewarm about the business or its price. When we are convinced as to attractiveness, we believe in buying worthwhile amounts.

我们的政策是集中持仓。当我们对企业或其价格只是温和看好时，会尽量避免东买一点、西买一点。只要我们确信其吸引力，就认为应当买入有意义的数量。

Equity holdings of our insurance companies with a market value of over $8 million on December 31, 1978 were as follows:

截至1978年12月31日，我们保险公司持有的、市值超过800万美元的股权如下：

In some cases our indirect interest in earning power is becoming quite substantial. For example, note our holdings of 953,750 shares of SAFECO Corp. SAFECO probably is the best run large property and casualty insurance company in the United States. Their underwriting abilities are simply superb, their loss reserving is conservative, and their investment policies make great sense.

在某些情况下，我们对盈利能力的间接权益正变得相当可观。例如，请注意我们持有 SAFECO Corp. 的953,750股。SAFECO 很可能是美国经营得最好的大型财产险和意外险公司。它们的承保能力确实卓越，赔款准备金计提保守，投资政策也非常合理。

SAFECO is a much better insurance operation than our own (although we believe certain segments of ours are much better than average), is better than one we could develop and, similarly, is far better than any in which we might negotiate purchase of a controlling interest. Yet our purchase of SAFECO was made at substantially under book value. We paid less than 100 cents on the dollar for the best company in the business, when far more than 100 cents on the dollar is being paid for mediocre companies in corporate transactions. And there is no way to start a new operation—with necessarily uncertain prospects—at less than 100 cents on the dollar.

SAFECO 是一家远好于我们自身的保险运营企业（尽管我们认为自己的某些分部远好于平均水平），也好于我们自己能够发展出来的业务；同样，它也远好于我们可能通过谈判购买控股权的任何保险企业。然而，我们购买 SAFECO 的价格大幅低于账面价值。我们为这个行业中最好的公司支付的价格，低于每1美元账面价值100美分；而在公司收购交易中，平庸公司却能获得远高于每1美元账面价值100美分的价格。并且，没有办法以低于每1美元100美分的成本，启动一个前景必然充满不确定性的新业务。

Of course, with a minor interest we do not have the right to direct or even influence management policies of SAFECO. But why should we wish to do this? The record would indicate that they do a better job of managing their operations than we could do ourselves. While there may be less excitement and prestige in sitting back and letting others do the work, we think that is all one loses by accepting a passive participation in excellent management. Because, quite clearly, if one controlled a company run as well as SAFECO, the proper policy also would be to sit back and let management do its job.

当然，作为小股东，我们没有权利指导、甚至影响 SAFECO 的管理政策。但我们为什么要希望这样做呢？记录表明，他们管理自己业务的水平，比我们亲自去管理还要好。坐在一旁让别人把工作做好，也许少了一些兴奋感和声望，但我们认为，接受对优秀管理层的被动参与，损失的也只有这些。因为很明显，如果一个人控制了一家像 SAFECO 这样经营出色的公司，正确的政策同样会是坐在一旁，让管理层把工作做好。

Earnings attributable to the shares of SAFECO owned by Berkshire at yearend amounted to $6.1 million during 1978, but only the dividends received (about 18% of earnings) are reflected in our operating earnings. We believe the balance, although not reportable, to be just as real in terms of eventual benefit to us as the amount distributed. In fact, SAFECO’s retained earnings (or those of other well-run companies if they have opportunities to employ additional capital advantageously) may well eventually have a value to shareholders greater than 100 cents on the dollar.

1978年，Berkshire 年末所持 SAFECO 股份对应的利润为610万美元，但只有收到的股息（约为利润的18%）反映在我们的经营收益中。我们认为，未分配的余额虽然不能在报表中列示，但就最终给我们带来的利益而言，与已分配金额同样真实。事实上，如果 SAFECO 的留存收益（或者其他经营良好的公司在有机会有利地使用新增资本时的留存收益）得到恰当运用，最终对股东的价值很可能超过每1美元100美分。

We are not at all unhappy when our wholly-owned businesses retain all of their earnings if they can utilize internally those funds at attractive rates. Why should we feel differently about retention of earnings by companies in which we hold small equity interests, but where the record indicates even better prospects for profitable employment of capital? (This proposition cuts the other way, of course, in industries with low capital requirements, or if management has a record of plowing capital into projects of low profitability; then earnings should be paid out or used to repurchase shares—often by far the most attractive option for capital utilization.)

当我们的全资业务保留全部利润，并且能够在内部以有吸引力的回报率使用这些资金时，我们一点也不会不高兴。那么，对于我们只持有少数股权的公司，如果记录显示它们更有希望有利可图地使用资本，我们为什么要对它们留存利润另眼相看呢？（当然，这一命题反过来也成立：在资本需求较低的行业，或者如果管理层有把资本投入低利润项目的记录，那么利润就应当支付出来，或者用于回购股份——这往往是资本使用中最有吸引力的选择。）

The aggregate level of such retained earnings attributable to our equity interests in fine companies is becoming quite substantial. It does not enter into our reported operating earnings, but we feel it well may have equal long-term significance to our shareholders. Our hope is that conditions continue to prevail in securities markets which allow our insurance companies to buy large amounts of underlying earning power for relatively modest outlays. At some point market conditions undoubtedly will again preclude such bargain buying but, in the meantime, we will try to make the most of opportunities.

归属于我们在优秀公司股权权益的这类留存收益总额，正变得相当可观。它并不会进入我们报告的经营收益，但我们认为，它对股东的长期意义很可能同样重大。我们希望证券市场继续保持这样的环境，使我们的保险公司能够用相对有限的支出，买到大量底层盈利能力。毫无疑问，在某个时候，市场条件会再次使这种便宜买入不再可能；但在此之前，我们会努力充分利用机会。

Banking

银行业务

Under Gene Abegg and Pete Jeffrey, the Illinois National Bank and Trust Company in Rockford continues to establish new records. Last year’s earnings amounted to approximately 2.1% of average assets, about three times the level averaged by major banks. In our opinion, this extraordinary level of earnings is being achieved while maintaining significantly less asset risk than prevails at most of the larger banks.

在 Gene Abegg 和 Pete Jeffrey 的领导下，位于 Rockford 的 Illinois National Bank and Trust Company 继续创下新纪录。去年利润约相当于平均资产的2.1%，大约是大型银行平均水平的三倍。在我们看来，这种非凡的盈利水平，是在资产风险显著低于多数大型银行的情况下实现的。

We purchased the Illinois National Bank in March 1969. It was a first-class operation then, just as it had been ever since Gene Abegg opened the doors in 1931. Since 1968, consumer time deposits have quadrupled, net income has tripled and trust department income has more than doubled, while costs have been closely controlled.

我们在1969年3月买入 Illinois National Bank。它当时就是一流的业务，就像 Gene Abegg 自1931年开门营业以来一直如此。自1968年以来，消费者定期存款增长到四倍，净利润增长到三倍，信托部门收入增长超过一倍，同时成本得到了严格控制。

Our experience has been that the manager of an already high-cost operation frequently is uncommonly resourceful in finding new ways to add to overhead, while the manager of a tightly-run operation usually continues to find additional methods to curtail costs, even when his costs are already well below those of his competitors. No one has demonstrated this latter ability better than Gene Abegg.

我们的经验是，一个已经高成本运营的经理人，常常会异常机敏地找到增加管理费用的新方法；而一个运营紧凑的经理人，通常会继续找到更多削减成本的方法，即使他的成本已经远低于竞争对手。没有人比 Gene Abegg 更好地展示了后一种能力。

We are required to divest our bank by December 31, 1980. The most likely approach is to spin it off to Berkshire shareholders some time in the second half of 1980.

我们被要求必须在 1980 年 12 月 31 日以前剥离银行业务，最有可能的方式是在 1980 年中将银行股份依持股比例分配给伯克希尔的股东。

Retailing

零售业务

Upon merging with Diversified, we acquired 100% ownership of Associated Retail Stores, Inc., a chain of about 75 popular priced women’s apparel stores. Associated was launched in Chicago on March 7,1931 with one store, $3200, and two extraordinary partners, Ben Rosner and Leo Simon. After Mr. Simon’s death, the business was offered to Diversified for cash in 1967. Ben was to continue running the business - and run it, he has.

与 Diversified 合并后，我们取得了 Associated Retail Stores, Inc. 100%的所有权；这是一家约有75家大众价位女装店的连锁企业。Associated 于1931年3月7日在 Chicago 创立，当时只有一家店、3,200美元，以及两位非凡的合伙人 Ben Rosner 和 Leo Simon。Simon 先生去世后，这项业务于1967年以现金方式出售给 Diversified。Ben 将继续经营这项业务——而他确实经营得很好。

Associated’s business has not grown, and it consistently has faced adverse demographic and retailing trends. But Ben’s combination of merchandising, real estate and cost-containment skills has produced an outstanding record of profitability, with returns on capital necessarily employed in the business often in the 20% after-tax area.

Associated 的业务并没有增长，并且持续面对不利的人口结构和零售趋势。但 Ben 在商品经营、房地产和成本控制方面的综合能力，创造了出色的盈利记录；这项业务所必需投入资本的税后回报率，常常处于20%左右。

Ben is now 75 and, like Gene Abegg, 81, at Illinois National and Louie Vincenti, 73, at Wesco, continues daily to bring an almost passionately proprietary attitude to the business. This group of top managers must appear to an outsider to be an overreaction on our part to an OEO bulletin on age discrimination. While unorthodox, these relationships have been exceptionally rewarding, both financially and personally. It is a real pleasure to work with managers who enjoy coming to work each morning and, once there, instinctively and unerringly think like owners. We are associated with some of the very best.

Ben 现在75岁；就像 Illinois National 的 Gene Abegg 81岁、Wesco 的 Louie Vincenti 73岁一样，他每天仍以近乎强烈的主人翁态度投入业务。在外人看来，我们这群顶尖经理人的年龄结构，可能像是我们对 OEO 一份关于年龄歧视公告反应过度的结果。虽然这种关系并不传统，但无论在财务上还是个人层面，都给我们带来了非同寻常的回报。能与那些每天早晨乐于来上班、到岗后又本能且准确地像所有者一样思考的经理人共事，确实是一种真正的快乐。我们合作的是其中最优秀的一批。

Warren E. Buffett, Chairman

March 26, 1979

1979-03-26 Warren Buffett's Letters to Berkshire Shareholders

1979-03-26 Warren Buffett's Letters to Berkshire Shareholders

Sources of Earnings

Textiles

Insurance Underwriting

Insurance Investments

Banking

Retailing

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