How Buffet’s Annual Letter Applies to Strategy

Chairman Warren Buffet's annual letter to Berkshire Hathaway shareholders dropped this morning and, as always, the 140+ page document is much-anticipated for the economic insights it includes. Buffet's narrative comments in his annual letter (pages 3 through 11) and embedded throughout the descriptions and analysis of financial results are what get the most attention.

Buffet notes the turbulence of 2022, especially extreme weather events and geopolitical conflicts, saying this about the latter:

"…geopolitical conflicts, including the Russia-Ukraine conflict, developed in 2022 and are continuing in 2023. We cannot reliably predict future economic effects of these events on our businesses. Nor can we reliably predict how these events will alter the future consumption patterns of consumers and businesses we serve."

He goes on to refract this unpredictability through the lens of Berkshire's longtime investment philosophy, stated earlier in the letter:

"Our job is to manage Berkshire’s operations and finances in a manner that will achieve an acceptable result over time and that will preserve the company’s unmatched staying power when financial panics or severe worldwide recessions occur."

We think this applies to many sectors, including education where we focus our consulting work. Strategy is less about timing the market or predicting the future than preserving the institution's staying power when the inevitable bad stuff happens.