5 Life Lessons From Warren Buffett’s Latest Annual Letter

Each year, Warren Buffett — the chairman of Berkshire Hathaway and a man almost universally acclaimed as the greatest investor of all time — writes a letter to Berkshire shareholders.

In the letter, Buffett summarizes the fortunes of Berkshire during the previous year. But he also includes a number of interesting asides about investing and life.

Even folks who have never bought a share of Berkshire stock look forward to reading these letters and mining them for wisdom.

This year’s letter was released to the public on Feb. 24. Here are life lessons everyone can learn from Buffett’s latest musings.

Learn things from smart people

Buffett is widely regarded as the best investor of all time. In fact, his investing prowess has earned him the sobriquet “the Oracle of Omaha.”

But Buffett’s most recent letter suggests that he might get a bit more credit than is his due.

This year’s missive to Berkshire shareholders kicked off with a tribute to Charlie Munger, Buffett’s friend of more than six decades and eventual business partner. Munger (pictured), died in November 2023 at the age of 99.

Buffett was already a success when he and Munger met in 1959. But Buffett’s approach to investing prior to meeting Munger was to look for very cheap companies and buy them, even if the strength of the underlying business was somewhat suspect.

Munger changed Buffett’s thinking. He convinced Buffett to invest in “wonderful businesses purchased at fair prices and give up buying fair businesses at wonderful prices,” as Buffett writes in this year’s letter.

Buffett adds:

“In reality, Charlie was the ‘architect’ of the present Berkshire, and I acted as the ‘general contractor’ to carry out the day-by-day construction of his vision.”

That is quite an acknowledgement, and a reminder that even the most successful people in life usually owe much of their achievement to the help of others.

Ignore pundits’ forecasts

If you get investing advice from the talking heads on CNBC or anyone else predicting the direction of the stock market, you are making a big mistake. At least, that is Buffett’s view.

In this year’s letter, Buffett charmingly introduces readers to his sister Bertie. Like her older brother, Bertie has gotten fabulously wealthy. But contrary to what many might think, she did not grow rich simply by piggybacking on her brother’s success.

Instead, Bertie invested much of her money on her own and — crucially — tuned out stock-market soothsayers along the way.

As Buffett writes:

“She is sensible – very sensible – instinctively knowing that pundits should always be ignored. After all, if she could reliably predict tomorrow’s winners, would she freely share her valuable insights and thereby increase competitive buying?”

Buffett makes a great point: If pundits had an inside edge on getting rich, why would they share that information? Doing so “would be like finding gold and then handing a map to the neighbors showing its location,” Buffett writes.

Don’t expect human nature to change

In this year’s letter, Buffett writes that markets sometimes seize up. They may even vanish for a period, as they did for four months during 1914 and for a few days after the terrorist attacks of 2001.

This happens because despite the many advances of modern life, human nature has not changed, and people have not become more stable. As Buffett writes:

“Speed of communication and the wonders of technology facilitate instant worldwide paralysis, and we have come a long way since smoke signals. Such instant panics won’t happen often — but they will happen.”

So, how should you react when stock market returns suddenly collapse because the housing market implodes or a new virus races across the world? By staying the course.

Buffett writes that those who make a handful of good decisions during a lifetime and avoid serious mistakes will reap the benefits of “the American tailwind and the power of compound interest.”

Watch out for phonies

Buffett says Berkshire’s success has been built on buying good businesses run by trustworthy managers. However, he admits to a few misjudgments along the way.

Making such mistakes is inevitable in a world that contains its fair share of phonies. To illustrate this point, Buffett recounts the contents of a letter that Hugh McCulloch — the first comptroller of the United States — wrote to all national banks in 1863.

It included the following line: “Never deal with a rascal under the expectation that you can prevent him from cheating you.”

Buffett says McCulloch’s warning should echo across the decades and down to our own time:

“Many bankers who thought they could ‘manage’ the rascal problem have learned the wisdom of Mr. McCulloch’s advice — and I have as well. People are not that easy to read. Sincerity and empathy can easily be faked. That is as true now as it was in 1863.”

Always invest in America

It is popular to think the America’s best days are behind it. But Buffett long has been a true believer in the nation and its future.

In this year’s letter, Buffett writes that “America has been a terrific country for investors.” In speeches and interviews, he has consistently insisted that the country’s best days are yet to come.

The Oracle puts his money where his mouth is and has the vast majority of Berkshire’s wealth — and his own — tied up in American business enterprise. As he writes in the letter:

“I can’t remember a period since March 11, 1942 – the date of my first stock purchase – that I have not had a majority of my net worth in equities, U.S.-based equities. And so far, so good.”

For more of Buffett’s wisdom, check out “Warren Buffett’s Sane and Simple Retirement Investing Plan.”