Berkshire Hathaway Annual Letter to Shareholders 2023

Warren Buffett argued in his 2023 annual letter that GAAP-mandated net income — which swung from $90B in 2021 to -$23B in 2022 to $96B in 2023 — is "worse-than-useless" for evaluating Berkshire, because it includes unrealized capital gains and losses that can exceed $5B in a single day. Buffett said operating earnings of $37.4B in 2023 (up from $30.9B in 2022) are the more meaningful figure, and that capital gains remain a critical long-term component of value creation, not a quarterly scorecard. On individual businesses, Buffett acknowledged two disappointments: BNSF earnings declined as revenues fell while Washington-mandated wage increases outpaced inflation, and Berkshire Hathaway Energy faced a regulatory breakdown in several states that raised the prospect of zero profitability or bankruptcy, a mistake Buffett said he and his partners made by not anticipating the shift. Insurance, by contrast, set records in sales, float, and underwriting profit. Buffett also highlighted Berkshire's 27.8% stake in Occidental Petroleum and its ~9% positions in five Japanese trading companies — Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo — noting a combined yen-denominated unrealized gain of $8B at year-end 2023. Buffett credited the late Charlie Munger as the "architect" of the modern Berkshire, describing Munger's 1965 instruction to abandon Ben Graham's "fair businesses at wonderful prices" approach in favor of "wonderful businesses at fair prices" as the foundational insight that shaped the company. The letter's connective thread is Buffett's insistence that durable business economics, extreme fiscal conservatism, and patience — not quarterly earnings optics — are what make Berkshire built to last.