To the Shareholders of Berkshire Hathaway Inc.:

     Our per-share book value increased 14.3% during 1993.  Over 
the last 29 years (that is, since present management took over) 
book value has grown from $19 to $8,854, or at a rate of 23.3% 
compounded annually.

     During the year, Berkshire's net worth increased by $1.5 
billion, a figure affected by two negative and two positive non-
operating items.  For the sake of completeness, I'll explain them 
here.  If you aren't thrilled by accounting, however, feel free 
to fast-forward through this discussion:

     1.     The first negative was produced by a change in 
            Generally Accepted Accounting Principles (GAAP) 
            having to do with the taxes we accrue against 
            unrealized appreciation in the securities we 
            carry at market value.  The old rule said that 
            the tax rate used should be the one in effect 
            when the appreciation took place.  Therefore, 
            at the end of 1992, we were using a rate of 34% 
            on the $6.4 billion of gains generated after 
            1986 and 28% on the $1.2 billion of gains 
            generated before that.  The new rule stipulates 
            that the current tax rate should be applied to 
            all gains.  The rate in the first quarter of 
            1993, when this rule went into effect, was 34%. 
            Applying that rate to our pre-1987 gains 
            reduced net worth by $70 million.

     2.     The second negative, related to the first, came 
            about because the corporate tax rate was raised 
            in the third quarter of 1993 to 35%.  This 
            change required us to make an additional charge 
            of 1% against all of our unrealized gains, and 
            that charge penalized net worth by $75 million. 
            Oddly, GAAP required both this charge and the 
            one described above to be deducted from the 
            earnings we report, even though the unrealized 
            appreciation that gave rise to the charges was 
            never included in earnings, but rather was 
            credited directly to net worth.

     3.     Another 1993 change in GAAP affects the value 
            at which we carry the securities that we own.  
            In recent years, both the common stocks and 
            certain common-equivalent securities held by 
            our insurance companies have been valued at 
            market, whereas equities held by our non-
            insurance subsidiaries or by the parent company 
            were carried at their aggregate cost or market, 
            whichever was lower.  Now GAAP says that all 
            common stocks should be carried at market, a 
            rule we began following in the fourth quarter 
            of 1993.  This change produced a gain in 
            Berkshire's reported net worth of about $172 

     4.     Finally, we issued some stock last year.  In a 
            transaction described in last year's Annual 
            Report, we issued 3,944 shares in early 
            January, 1993 upon the conversion of $46 
            million convertible debentures that we had 
            called for redemption.  Additionally, we issued 
            25,203 shares when we acquired Dexter Shoe, a 
            purchase discussed later in this report.  The 
            overall result was that our shares outstanding 
            increased by 29,147 and our net worth by about 
            $478 million.  Per-share book value also grew, 
            because the shares issued in these transactions 
            carried a price above their book value.

     Of course, it's per-share intrinsic value, not book value, 
that counts.  Book value is an accounting term that measures the 
capital, including retained earnings, that has been put into a 
business.  Intrinsic value is a present-value estimate of the 
cash that can be taken out of a business during its remaining 
life.  At most companies, the two values are unrelated.  
Berkshire, however, is an exception:  Our book value, though 
significantly below our intrinsic value, serves as a useful 
device for tracking that key figure.  In 1993, each measure grew 
by roughly 14%, advances that I would call satisfactory but 

     These gains, however, were outstripped by a much larger gain 
- 39% - in Berkshire's market price.  Over time, of course, 
market price and intrinsic value will arrive at about the same 
destination.  But in the short run the two often diverge in a 
major way, a phenomenon I've discussed in the past.  Two years 
ago, Coca-Cola and Gillette, both large holdings of ours, enjoyed 
market price increases that dramatically outpaced their earnings 
gains.  In the 1991 Annual Report, I said that the stocks of 
these companies could not continuously overperform their 

     From 1991 to 1993, Coke and Gillette increased their annual 
operating earnings per share by 38% and 37% respectively, but 
their market prices moved up only 11% and 6%.  In other words, 
the companies overperformed their stocks, a result that no doubt 
partly reflects Wall Street's new apprehension about brand names. 
Whatever the reason, what will count over time is the earnings 
performance of these companies.  If they prosper, Berkshire will 
also prosper, though not in a lock-step manner.

     Let me add a lesson from history:  Coke went public in 1919 
at $40 per share.  By the end of 1920 the market, coldly 
reevaluating Coke's future prospects, had battered the stock down 
by more than 50%, to $19.50.  At yearend 1993, that single share, 
with dividends reinvested, was worth more than $2.1 million.  As 
Ben Graham said:  "In the short-run, the market is a voting 
machine - reflecting a voter-registration test that requires only 
money, not intelligence or emotional stability - but in the long-
run, the market is a weighing machine."

     So how should Berkshire's over-performance in the market 
last year be viewed?  Clearly, Berkshire was selling at a higher 
percentage of intrinsic value at the end of 1993 than was the 
case at the beginning of the year.  On the other hand, in a world 
of 6% or 7% long-term interest rates, Berkshire's market price 
was not inappropriate if - and you should understand that this is 
a huge if - Charlie Munger, Berkshire's Vice Chairman, and I can 
attain our long-standing goal of increasing Berkshire's per-share 
intrinsic value at an average annual rate of 15%.  We have not 
retreated from this goal.  But we again emphasize, as we have for 
many years, that the growth in our capital base makes 15% an 
ever-more difficult target to hit.

     What we have going for us is a growing collection of good-
sized operating businesses that possess economic characteristics 
ranging from good to terrific, run by managers whose performance 
ranges from terrific to terrific.  You need have no worries about 
this group.

     The capital-allocation work that Charlie and I do at the 
parent company, using the funds that our managers deliver to us, 
has a less certain outcome:  It is not easy to find new 
businesses and managers comparable to those we have.  Despite 
that difficulty, Charlie and I relish the search, and we are 
happy to report an important success in 1993.

Dexter Shoe

     What we did last year was build on our 1991 purchase of H. 
H. Brown, a superbly-run manufacturer of work shoes, boots and 
other footwear.  Brown has been a real winner:  Though we had 
high hopes to begin with, these expectations have been 
considerably exceeded thanks to Frank Rooney, Jim Issler and the 
talented managers who work with them.  Because of our confidence 
in Frank's team, we next acquired Lowell Shoe, at the end of 
1992.  Lowell was a long-established manufacturer of women's and 
nurses' shoes, but its business needed some fixing.  Again, 
results have surpassed our expectations.  So we promptly jumped 
at the chance last year to acquire Dexter Shoe of Dexter, Maine, 
which manufactures popular-priced men's and women's shoes.  
Dexter, I can assure you, needs no fixing:  It is one of the 
best-managed companies Charlie and I have seen in our business 

     Harold Alfond, who started working in a shoe factory at 25 
cents an hour when he was 20, founded Dexter in 1956 with $10,000 
of capital.  He was joined in 1958 by Peter Lunder, his nephew.  
The two of them have since built a business that now produces over 
7.5 million pairs of shoes annually, most of them made in Maine 
and the balance in Puerto Rico.  As you probably know, the 
domestic shoe industry is generally thought to be unable to 
compete with imports from low-wage countries.  But someone forgot 
to tell this to the ingenious managements of Dexter and H. H. 
Brown and to their skilled labor forces, which together make the 
U.S. plants of both companies highly competitive against all 

     Dexter's business includes 77 retail outlets, located 
primarily in the Northeast.  The company is also a major 
manufacturer of golf shoes, producing about 15% of U.S. output.  
Its bread and butter, though, is the manufacture of traditional 
shoes for traditional retailers, a job at which it excels:  Last 
year both Nordstrom and J.C. Penney bestowed special awards upon 
Dexter for its performance as a supplier during 1992.

     Our 1993 results include Dexter only from our date of 
merger, November 7th.  In 1994, we expect Berkshire's shoe 
operations to have more than $550 million in sales, and we would 
not be surprised if the combined pre-tax earnings of these 
businesses topped $85 million.  Five years ago we had no thought 
of getting into shoes.  Now we have 7,200 employees in that 
industry, and I sing "There's No Business Like Shoe Business" as 
I drive to work.  So much for strategic plans.

     At Berkshire, we have no view of the future that dictates 
what businesses or industries we will enter.  Indeed, we think 
it's usually poison for a corporate giant's shareholders if it 
embarks upon new ventures pursuant to some grand vision.  We 
prefer instead to focus on the economic characteristics of 
businesses that we wish to own and the personal characteristics 
of managers with whom we wish to associate - and then to hope we 
get lucky in finding the two in combination.  At Dexter, we did.

                   * * * * * * * * * * * *

     And now we pause for a short commercial:  Though they owned 
a business jewel, we believe that Harold and Peter (who were not 
interested in cash) made a sound decision in exchanging their 
Dexter stock for shares of Berkshire.  What they did, in effect, 
was trade a 100% interest in a single terrific business for a 
smaller interest in a large group of terrific businesses.  They 
incurred no tax on this exchange and now own a security that can 
be easily used for charitable or personal gifts, or that can be 
converted to cash in amounts, and at times, of their own 
choosing.  Should members of their families desire to, they can 
pursue varying financial paths without running into the 
complications that often arise when assets are concentrated in a 
private business.

     For tax and other reasons, private companies also often find 
it difficult to diversify outside their industries.  Berkshire, 
in contrast, can diversify with ease.  So in shifting their 
ownership to Berkshire, Dexter's shareholders solved a 
reinvestment problem.  Moreover, though Harold and Peter now have 
non-controlling shares in Berkshire, rather than controlling 
shares in Dexter, they know they will be treated as partners and 
that we will follow owner-oriented practices.  If they elect to 
retain their Berkshire shares, their investment result from the 
merger date forward will exactly parallel my own result.  Since I 
have a huge percentage of my net worth committed for life to 
Berkshire shares - and since the company will issue me neither 
restricted shares nor stock options - my gain-loss equation will 
always match that of all other owners.

     Additionally, Harold and Peter know that at Berkshire we can 
keep our promises:  There will be no changes of control or 
culture at Berkshire for many decades to come.  Finally, and of 
paramount importance, Harold and Peter can be sure that they will 
get to run their business - an activity they dearly love - 
exactly as they did before the merger.  At Berkshire, we do not 
tell .400 hitters how to swing.

     What made sense for Harold and Peter probably makes sense 
for a few other owners of large private businesses.  So, if you 
have a business that might fit, let me hear from you.  Our 
acquisition criteria are set forth in the appendix on page 22.

Sources of Reported Earnings

     The table below shows the major sources of Berkshire's 
reported earnings.  In this presentation, amortization of 
Goodwill and other major purchase-price accounting adjustments 
are not charged against the specific businesses to which they 
apply, but are instead aggregated and shown separately.  This 
procedure lets you view the earnings of our businesses as they 
would have been reported had we not purchased them.  I've 
explained in past reports why this form of presentation seems to 
us to be more useful to investors and managers than one utilizing 
GAAP, which requires purchase-price adjustments to be made on a 
business-by-business basis.  The total net earnings we show in 
the table are, of course, identical to the GAAP total in our 
audited financial statements.

                                               (000s omitted)               
                                                          Berkshire's Share  
                                                           of Net Earnings  
                                                          (after taxes and  
                                    Pre-Tax Earnings     minority interests)  
                                 ----------------------  ------------------
                                    1993        1992       1993       1992 
                                 ----------  ----------  --------  --------
Operating Earnings:
  Insurance Group:
    Underwriting ...............   $ 30,876  $(108,961)  $ 20,156  $(71,141)	
    Net Investment Income ......    375,946     355,067   321,321   305,763 
  H. H. Brown, Lowell, 
      and Dexter ...............     44,025*     27,883    28,829    17,340 	
  Buffalo News .................     50,962      47,863    29,696    28,163 
  Commercial & Consumer Finance      22,695      19,836    14,161    12,664 
  Fechheimer ...................     13,442      13,698     6,931     7,267 
  Kirby ........................     39,147      35,653    25,056    22,795 
  Nebraska Furniture Mart ......     21,540      17,110    10,398     8,072 
  Scott Fetzer Manufacturing Group   38,196      31,954    23,809    19,883 	
  See's Candies ................     41,150      42,357    24,367    25,501 
  World Book ...................     19,915      29,044    13,537    19,503 
  Purchase-Price Accounting & 
      Goodwill Charges .........    (17,033)    (12,087)  (13,996)  (13,070)	
  Interest Expense** ...........    (56,545)    (98,643)  (35,614)  (62,899)
      Contributions ............     (9,448)     (7,634)   (5,994)   (4,913)	
  Other ........................     28,428      67,540    15,094    32,798 
                                 ----------  ----------  --------  --------  
Operating Earnings .............    643,296     460,680   477,751   347,726 
Sales of Securities ............    546,422      89,937   356,702    59,559 
Tax Accruals Caused by 
   New Accounting Rules ........      ---         ---    (146,332)    ---   
                                 ----------  ----------  --------  --------
Total Earnings - All Entities .. $1,189,718   $ 550,617  $688,121  $407,285 

* Includes Dexter's earnings only from the date it was acquired, 
  November 7, 1993.

**Excludes interest expense of Commercial and Consumer Finance 
  businesses.  In 1992 includes $22.5 million of premiums paid on 
  the early redemption of debt.

     A large amount of information about these businesses is given 
on pages 38-49, where you will also find our segment earnings 
reported on a GAAP basis.  In addition, on pages 52-59, we have 
rearranged Berkshire's financial data into four segments on a non-
GAAP basis, a presentation that corresponds to the way Charlie and 
I think about the company.  Our intent is to supply you with the 
financial information that we would wish you to give us if our 
positions were reversed.

"Look-Through" Earnings

     We've previously discussed look-through earnings, which we 
believe more accurately portray the earnings of Berkshire than does 
our GAAP result.  As we calculate them, look-through earnings 
consist of: (1) the operating earnings reported in the previous 
section, plus; (2) the retained operating earnings of major 
investees that, under GAAP accounting, are not reflected in our 
profits, less; (3) an allowance for the tax that would be paid by 
Berkshire if these retained earnings of investees had instead been 
distributed to us.  The "operating earnings" of which we speak here 
exclude capital gains, special accounting items and major 
restructuring charges.

     Over time, our look-through earnings need to increase at about 
15% annually if our intrinsic value is to grow at that rate.  Last 
year, I explained that we had to increase these earnings to about 
$1.8 billion in the year 2000, were we to meet the 15% goal.  
Because we issued additional shares in 1993, the amount needed has 
risen to about $1.85 billion.

     That is a tough goal, but one that we expect you to hold us 
to.  In the past, we've criticized the managerial practice of 
shooting the arrow of performance and then painting the target, 
centering it on whatever point the arrow happened to hit.  We will 
instead risk embarrassment by painting first and shooting later.

     If we are to hit the bull's-eye, we will need markets that 
allow the purchase of businesses and securities on sensible terms. 
Right now, markets are difficult, but they can - and will - change 
in unexpected ways and at unexpected times.  In the meantime, we'll 
try to resist the temptation to do something marginal simply 
because we are long on cash.  There's no use running if you're on 
the wrong road.

     The following table shows how we calculate look-through 
earnings, though I warn you that the figures are necessarily very 
rough.  (The dividends paid to us by these investees have been 
included in the operating earnings itemized on page 8, mostly 
under "Insurance Group:  Net Investment Income.") 

                                                         Berkshire's Share 
                                                          of Undistributed 
                              Berkshire's Approximate    Operating Earnings
Berkshire's Major Investees    Ownership at Yearend        (in millions) 
---------------------------   -----------------------   --------------------
                                  1993      1992           1993      1992
                                 ------    ------         ------    ------   
Capital Cities/ABC, Inc. .....    13.0%     18.2%         $ 83(2)   $ 70
The Coca-Cola Company ........     7.2%      7.1%           94        82
Federal Home Loan Mortgage Corp.   6.8%(1)   8.2%(1)        41(2)     29(2)
GEICO Corp. ..................    48.4%     48.1%           76(3)     34(3)
General Dynamics Corp. .......    13.9%     14.1%           25        11(2)
The Gillette Company .........    10.9%     10.9%           44        38
Guinness PLC .................     1.9%      2.0%            8         7
The Washington Post Company ..    14.8%     14.6%           15        11
Wells Fargo & Company ........    12.2%     11.5%           53(2)     16(2)

Berkshire's share of undistributed 
   earnings of major investees                            $439      $298
Hypothetical tax on these undistributed 
   investee earnings(4)                                    (61)      (42)
Reported operating earnings of Berkshire                   478       348 
      Total look-through earnings of Berkshire            $856      $604 

     (1) Does not include shares allocable to the minority interest 
         at Wesco
     (2) Calculated on average ownership for the year
     (3) Excludes realized capital gains, which have been both 
         recurring and significant
     (4) The tax rate used is 14%, which is the rate Berkshire pays 
         on the dividends it receives

     We have told you that we expect the undistributed, 
hypothetically-taxed earnings of our investees to produce at least 
equivalent gains in Berkshire's intrinsic value.  To date, we have 
far exceeded that expectation.  For example, in 1986 we bought 
three million shares of Capital Cities/ABC for $172.50 per share 
and late last year sold one-third of that holding for $630 per 
share.  After paying 35% capital gains taxes, we realized a $297 
million profit from the sale.  In contrast, during the eight years 
we held these shares, the retained earnings of Cap Cities 
attributable to them - hypothetically taxed at a lower 14% in 
accordance with our look-through method - were only $152 million.  
In other words, we paid a much larger tax bill than our look-
through presentations to you have assumed and nonetheless realized 
a gain that far exceeded the undistributed earnings allocable to 
these shares.

     We expect such pleasant outcomes to recur often in the future 
and therefore believe our look-through earnings to be a 
conservative representation of Berkshire's true economic earnings.


     As our Cap Cities sale emphasizes, Berkshire is a substantial 
payer of federal income taxes.  In aggregate, we will pay 1993 
federal income taxes of $390 million, about $200 million of that 
attributable to operating earnings and $190 million to realized 
capital gains.  Furthermore, our share of the 1993 federal and 
foreign income taxes paid by our investees is well over $400 
million, a figure you don't see on our financial statements but 
that is nonetheless real.  Directly and indirectly, Berkshire's 
1993 federal income tax payments will be about 1/2 of 1% of the total 
paid last year by all American corporations.

     Speaking for our own shares, Charlie and I have absolutely no 
complaint about these taxes.  We know we work in a market-based 
economy that rewards our efforts far more bountifully than it does 
the efforts of others whose output is of equal or greater benefit 
to society.  Taxation should, and does, partially redress this 
inequity.  But we still remain extraordinarily well-treated.

     Berkshire and its shareholders, in combination, would pay a 
much smaller tax if Berkshire operated as a partnership or "S" 
corporation, two structures often used for business activities.  
For a variety of reasons, that's not feasible for Berkshire to do. 
However, the penalty our corporate form imposes is mitigated - 
though far from eliminated - by our strategy of investing for the 
long term.  Charlie and I would follow a buy-and-hold policy even 
if we ran a tax-exempt institution.  We think it the soundest way 
to invest, and it also goes down the grain of our personalities.  A 
third reason to favor this policy, however, is the fact that taxes 
are due only when gains are realized.

     Through my favorite comic strip, Li'l Abner, I got a chance 
during my youth to see the benefits of delayed taxes, though I 
missed the lesson at the time.  Making his readers feel superior, 
Li'l Abner bungled happily, but moronically, through life in 
Dogpatch.  At one point he became infatuated with a New York 
temptress, Appassionatta Van Climax, but despaired of marrying her 
because he had only a single silver dollar and she was interested 
solely in millionaires.  Dejected, Abner took his problem to Old 
Man Mose, the font of all knowledge in Dogpatch.  Said the sage:  
Double your money 20 times and Appassionatta will be yours (1, 2, 
4, 8 . . . . 1,048,576).

     My last memory of the strip is Abner entering a roadhouse, 
dropping his dollar into a slot machine, and hitting a jackpot that 
spilled money all over the floor.  Meticulously following Mose's 
advice, Abner picked up two dollars and went off to find his next 
double.  Whereupon I dumped Abner and began reading Ben Graham.

     Mose clearly was overrated as a guru:  Besides failing to 
anticipate Abner's slavish obedience to instructions, he also 
forgot about taxes.  Had Abner been subject, say, to the 35% 
federal tax rate that Berkshire pays, and had he managed one double 
annually, he would after 20 years only have accumulated $22,370.  
Indeed, had he kept on both getting his annual doubles and paying a 
35% tax on each, he would have needed 7 1/2 years more to reach the 
$1 million required to win Appassionatta.

     But what if Abner had instead put his dollar in a single 
investment and held it until it doubled the same 27 1/2 times?  In 
that case, he would have realized about $200 million pre-tax or, 
after paying a $70 million tax in the final year, about $130 
million after-tax.  For that, Appassionatta would have crawled to 
Dogpatch.  Of course, with 27 1/2 years having passed, how 
Appassionatta would have looked to a fellow sitting on $130 million 
is another question.

     What this little tale tells us is that tax-paying investors 
will realize a far, far greater sum from a single investment that 
compounds internally at a given rate than from a succession of 
investments compounding at the same rate.  But I suspect many 
Berkshire shareholders figured that out long ago.

Insurance Operations

     At this point in the report we've customarily provided you 
with a table showing the annual "combined ratio" of the insurance 
industry for the preceding decade.  This ratio compares total 
insurance costs (losses incurred plus expenses) to revenue from 
premiums.  For many years, the ratio has been above 100, a level 
indicating an underwriting loss.  That is, the industry has taken 
in less money each year from its policyholders than it has had to 
pay for operating expenses and for loss events that occurred during 
the year.

     Offsetting this grim equation is a happier fact:  Insurers get 
to hold on to their policyholders' money for a time before paying 
it out.  This happens because most policies require that premiums 
be prepaid and, more importantly, because it often takes time to 
resolve loss claims.  Indeed, in the case of certain lines of 
insurance, such as product liability or professional malpractice, 
many years may elapse between the loss event and payment.

     To oversimplify the matter somewhat, the total of the funds 
prepaid by policyholders and the funds earmarked for incurred-but-
not-yet-paid claims is called "the float." In the past, the 
industry was able to suffer a combined ratio of 107 to 111 and 
still break even from its insurance writings because of the 
earnings derived from investing this float.

     As interest rates have fallen, however, the value of float has 
substantially declined.  Therefore, the data that we have provided 
in the past are no longer useful for year-to-year comparisons of 
industry profitability.  A company writing at the same combined 
ratio now as in the 1980's today has a far less attractive business 
than it did then.

     Only by making an analysis that incorporates both underwriting 
results and the current risk-free earnings obtainable from float 
can one evaluate the true economics of the business that a 
property-casualty insurer writes.  Of course, the actual investment 
results that an insurer achieves from the use of both float and 
stockholders' funds is also of major importance and should be 
carefully examined when an investor is assessing managerial 
performance.  But that should be a separate analysis from the one 
we are discussing here.  The value of float funds - in effect, 
their transfer price as they move from the insurance operation to 
the investment operation - should be determined simply by the risk-
free, long-term rate of interest.

     On the next page we show the numbers that count in an 
evaluation of Berkshire's insurance business.  We calculate our 
float - which we generate in exceptional amounts relative to our 
premium volume - by adding loss reserves, loss adjustment reserves 
and unearned premium reserves and then subtracting agent's 
balances, prepaid acquisition costs and deferred charges applicable 
to assumed reinsurance.  Our cost of float is determined by our 
underwriting loss or profit.  In those years when we have had an 
underwriting profit, which includes 1993, our cost of float has 
been negative, and we have determined our insurance earnings by 
adding underwriting profit to float income.

                   (1)            (2)                          Yearend Yield
              Underwriting                     Approximate      on Long-Term
                  Loss       Average Float    Cost of Funds     Govt. Bonds 	
              ------------   -------------   ---------------   -------------
                    (In $ Millions)         (Ratio of 1 to 2)

1967             profit          $ 17.3      less than zero        5.50%
1968             profit            19.9      less than zero        5.90%
1969             profit            23.4      less than zero        6.79%
1970             $ 0.37            32.4               1.14%        6.25%
1971             profit            52.5      less than zero        5.81%
1972             profit            69.5      less than zero        5.82%
1973             profit            73.3      less than zero        7.27%
1974               7.36            79.1               9.30%        8.13%
1975              11.35            87.6              12.96%        8.03%
1976             profit           102.6      less than zero        7.30%
1977             profit           139.0      less than zero        7.97%
1978             profit           190.4      less than zero        8.93%
1979             profit           227.3      less than zero       10.08%
1980             profit           237.0      less than zero       11.94%
1981             profit           228.4      less than zero       13.61%
1982              21.56           220.6               9.77%       10.64%
1983              33.87           231.3              14.64%       11.84%
1984              48.06           253.2              18.98%       11.58%
1985              44.23           390.2              11.34%        9.34%
1986              55.84           797.5               7.00%        7.60%
1987              55.43         1,266.7               4.38%        8.95%
1988              11.08         1,497.7               0.74%        9.00%
1989              24.40         1,541.3               1.58%        7.97%
1990              26.65         1,637.3               1.63%        8.24%
1991             119.59         1,895.0               6.31%        7.40%
1992             108.96         2,290.4               4.76%        7.39%
1993             profit         2,624.7      less than zero        6.35%

     As you can see, in our insurance operation last year we had 
the use of $2.6 billion at no cost; in fact we were paid $31 
million, our underwriting profit, to hold these funds.  This sounds 
good  - is good - but is far from as good as it sounds.

     We temper our enthusiasm because we write a large volume of 
"super-cat" policies (which other insurance and reinsurance 
companies buy to recover part of the losses they suffer from mega-
catastrophes) and because last year we had no losses of consequence 
from this activity.  As that suggests, the truly catastrophic 
Midwestern floods of 1993 did not trigger super-cat losses, the 
reason being that very few flood policies are purchased from 
private insurers.

     It would be fallacious, however, to conclude from this single-
year result that the super-cat business is a wonderful one, or even 
a satisfactory one.  A simple example will illustrate the fallacy: 
Suppose there is an event that occurs 25 times in every century.  
If you annually give 5-for-1 odds against its occurrence that year, 
you will have many more winning years than losers.  Indeed, you may 
go a straight six, seven or more years without loss.  You also will 
eventually go broke.

     At Berkshire, we naturally believe we are obtaining adequate 
premiums and giving more like 3 1/2-for-1 odds.  But there is no way 
for us - or anyone else - to calculate the true odds on super-cat 
coverages.  In fact, it will take decades for us to find out 
whether our underwriting judgment has been sound.

     What we do know is that when a loss comes, it's likely to be a 
lulu.  There may well be years when Berkshire will suffer losses 
from the super-cat business equal to three or four times what we 
earned from it in 1993.  When Hurricane Andrew blew in 1992, we 
paid out about $125 million.  Because we've since expanded our 
super-cat business, a similar storm today could cost us $600 

     So far, we have been lucky in 1994.  As I write this letter, 
we are estimating that our losses from the Los Angeles earthquake 
will be nominal.  But if the quake had been a 7.5 instead of a 6.8, 
it would have been a different story.

     Berkshire is ideally positioned to write super-cat policies.  
In Ajit Jain, we have by far the best manager in this business.  
Additionally, companies writing these policies need enormous 
capital, and our net worth is ten to twenty times larger than that 
of our main competitors.  In most lines of insurance, huge 
resources aren't that important:  An insurer can diversify the 
risks it writes and, if necessary, can lay off risks to reduce 
concentration in its portfolio.  That isn't possible in the super-
cat business.  So these competitors are forced into offering far 
smaller limits than those we can provide.  Were they bolder, they 
would run the risk that a mega-catastrophe - or a confluence of 
smaller catastrophes - would wipe them out.

     One indication of our premier strength and reputation is that 
each of the four largest reinsurance companies in the world buys 
very significant reinsurance coverage from Berkshire.  Better than 
anyone else, these giants understand that the test of a reinsurer 
is its ability and willingness to pay losses under trying 
circumstances, not its readiness to accept premiums when things 
look rosy.

     One caution:  There has recently been a substantial increase 
in reinsurance capacity.  Close to $5 billion of equity capital has 
been raised by reinsurers, almost all of them newly-formed 
entities.  Naturally these new entrants are hungry to write 
business so that they can justify the projections they utilized in 
attracting capital.  This new competition won't affect our 1994 
operations; we're filled up there, primarily with business written 
in 1993.  But we are now seeing signs of price deterioration.  If 
this trend continues, we will resign ourselves to much-reduced 
volume, keeping ourselves available, though, for the large, 
sophisticated buyer who requires a super-cat insurer with large 
capacity and a sure ability to pay losses.

     In other areas of our insurance business, our homestate 
operation, led by Rod Eldred; our workers' compensation business, 
headed by Brad Kinstler; our credit-card operation, managed by the 
Kizer family; and National Indemnity's traditional auto and general 
liability business, led by Don Wurster, all achieved excellent 
results.  In combination, these four units produced a significant 
underwriting profit and substantial float.

     All in all, we have a first-class insurance business.  Though 
its results will be highly volatile, this operation possesses an 
intrinsic value that exceeds its book value by a large amount - 
larger, in fact, than is the case at any other Berkshire business.

Common Stock Investments

     Below we list our common stockholdings having a value of over 
$250 million.  A small portion of these investments belongs to 
subsidiaries of which Berkshire owns less than 100%.

  Shares    Company                                   Cost         Market
  ------    -------                                ----------    ----------
                                                        (000s omitted)
 2,000,000  Capital Cities/ABC, Inc. ............. $  345,000    $1,239,000
93,400,000  The Coca-Cola Company. ...............  1,023,920     4,167,975
13,654,600  Federal Home Loan Mortgage Corp. 
               ("Freddie Mac") ...................    307,505       681,023	
34,250,000  GEICO Corp. ..........................     45,713     1,759,594
 4,350,000  General Dynamics Corp. ...............     94,938       401,287
24,000,000  The Gillette Company .................    600,000     1,431,000
38,335,000  Guinness PLC .........................    333,019       270,822
 1,727,765  The Washington Post Company. .........      9,731       440,148
 6,791,218  Wells Fargo & Company ................    423,680       878,614

     Considering the similarity of this year's list and the last, 
you may decide your management is hopelessly comatose.  But we 
continue to think that it is usually foolish to part with an 
interest in a business that is both understandable and durably 
wonderful.  Business interests of that kind are simply too hard to 

     Interestingly, corporate managers have no trouble 
understanding that point when they are focusing on a business they 
operate:  A parent company that owns a subsidiary with superb long-
term economics is not likely to sell that entity regardless of 
price.  "Why," the CEO would ask, "should I part with my crown 
jewel?"  Yet that same CEO, when it comes to running his personal 
investment portfolio, will offhandedly - and even impetuously - 
move from business to business when presented with no more than 
superficial arguments by his broker for doing so.  The worst of 
these is perhaps, "You can't go broke taking a profit."  Can you 
imagine a CEO using this line to urge his board to sell a star 
subsidiary?  In our view, what makes sense in business also makes 
sense in stocks:  An investor should ordinarily hold a small piece 
of an outstanding business with the same tenacity that an owner 
would exhibit if he owned all of that business.

     Earlier I mentioned the financial results that could have been 
achieved by investing $40 in The Coca-Cola Co. in 1919.  In 1938, 
more than 50 years after the introduction of Coke, and long after 
the drink was firmly established as an American icon, Fortune did 
an excellent story on the company.  In the second paragraph the 
writer reported:  "Several times every year a weighty and serious 
investor looks long and with profound respect at Coca-Cola's 
record, but comes regretfully to the conclusion that he is looking 
too late.  The specters of saturation and competition rise before 

     Yes, competition there was in 1938 and in 1993 as well.  But 
it's worth noting that in 1938 The Coca-Cola Co. sold 207 million 
cases of soft drinks (if its gallonage then is converted into the 
192-ounce cases used for measurement today) and in 1993 it sold 
about 10.7 billion cases, a 50-fold increase in physical volume 
from a company that in 1938 was already dominant in its very major 
industry.  Nor was the party over in 1938 for an investor:  Though 
the $40 invested in 1919 in one share had (with dividends 
reinvested) turned into $3,277 by the end of 1938, a fresh $40 then 
invested in Coca-Cola stock would have grown to $25,000 by yearend 

     I can't resist one more quote from that 1938 Fortune story:  
"It would be hard to name any company comparable in size to Coca-
Cola and selling, as Coca-Cola does, an unchanged product that can 
point to a ten-year record anything like Coca-Cola's."  In the 55 
years that have since passed, Coke's product line has broadened 
somewhat, but it's remarkable how well that description still fits.

     Charlie and I decided long ago that in an investment lifetime 
it's just too hard to make hundreds of smart decisions.  That 
judgment became ever more compelling as Berkshire's capital 
mushroomed and the universe of investments that could significantly 
affect our results shrank dramatically.  Therefore, we adopted a 
strategy that required our being smart - and not too smart at that 
- only a very few times.  Indeed, we'll now settle for one good 
idea a year.  (Charlie says it's my turn.)

     The strategy we've adopted precludes our following standard 
diversification dogma.  Many pundits would therefore say the 
strategy must be riskier than that employed by more conventional 
investors.  We disagree.  We believe that a policy of portfolio 
concentration may well decrease risk if it raises, as it should,  
both the intensity with which an investor thinks about a business 
and the comfort-level he must feel with its economic characteristics 
before buying into it.  In stating this opinion, we define risk, 
using dictionary terms, as "the possibility of loss or injury."

     Academics, however, like to define investment "risk" 
differently, averring that it is the relative volatility of a stock 
or portfolio of stocks - that is, their volatility as compared to 
that of a large universe of stocks.  Employing data bases and 
statistical skills, these academics compute with precision the 
"beta" of a stock - its relative volatility in the past - and then 
build arcane investment and capital-allocation theories around this 
calculation.  In their hunger for a single statistic to measure 
risk, however, they forget a fundamental principle:  It is better 
to be approximately right than precisely wrong.

     For owners of a business - and that's the way we think of 
shareholders - the academics' definition of risk is far off the 
mark, so much so that it produces absurdities.  For example, under 
beta-based theory, a stock that has dropped very sharply compared 
to the market - as had Washington Post when we bought it in 1973 - 
becomes "riskier" at the lower price than it was at the higher 
price.  Would that description have then made any sense to someone 
who was offered the entire company at a vastly-reduced price?

     In fact, the true investor welcomes volatility.  Ben Graham 
explained why in Chapter 8 of The Intelligent Investor.  There he 
introduced "Mr. Market," an obliging fellow who shows up every day 
to either buy from you or sell to you, whichever you wish.  The 
more manic-depressive this chap is, the greater the opportunities 
available to the investor.  That's true because a wildly 
fluctuating market means that irrationally low prices will 
periodically be attached to solid businesses.  It is impossible to 
see how the availability of such prices can be thought of as 
increasing the hazards for an investor who is totally free to 
either ignore the market or exploit its folly.

     In assessing risk, a beta purist will disdain examining what a 
company produces, what its competitors are doing, or how much 
borrowed money the business employs.  He may even prefer not to 
know the company's name.  What he treasures is the price history of 
its stock.  In contrast, we'll happily forgo knowing the price 
history and instead will seek whatever information will further our 
understanding of the company's business.  After we buy a stock, 
consequently, we would not be disturbed if markets closed for a 
year or two.  We don't need a daily quote on our 100% position in 
See's or H. H. Brown to validate our well-being.  Why, then, should 
we need a quote on our 7% interest in Coke?

     In our opinion, the real risk that an investor must assess is 
whether his aggregate after-tax receipts from an investment 
(including those he receives on sale) will, over his prospective 
holding period, give him at least as much purchasing power as he 
had to begin with, plus a modest rate of interest on that initial 
stake.  Though this risk cannot be calculated with engineering 
precision, it can in some cases be judged with a degree of accuracy 
that is useful.  The primary factors bearing upon this evaluation 

     1) The certainty with which the long-term economic 
        characteristics of the business can be evaluated;

     2) The certainty with which management can be evaluated, 
        both as to its ability to realize the full potential of 
        the business and to wisely employ its cash flows;

     3) The certainty with which management can be counted on 
        to channel the rewards from the business to the 
        shareholders rather than to itself;

     4) The purchase price of the business;

     5) The levels of taxation and inflation that will be 
        experienced and that will determine the degree by which 
        an investor's purchasing-power return is reduced from his 
        gross return.

     These factors will probably strike many analysts as unbearably 
fuzzy, since they cannot be extracted from a data base of any kind. 
But the difficulty of precisely quantifying these matters does not 
negate their importance nor is it insuperable.  Just as Justice 
Stewart found it impossible to formulate a test for obscenity but 
nevertheless asserted, "I know it when I see it," so also can 
investors - in an inexact but useful way - "see" the risks inherent 
in certain investments without reference to complex equations or 
price histories.

     Is it really so difficult to conclude that Coca-Cola and 
Gillette possess far less business risk over the long term than, 
say, any computer company or retailer?  Worldwide, Coke sells about 
44% of all soft drinks, and Gillette has more than a 60% share (in 
value) of the blade market.  Leaving aside chewing gum, in which 
Wrigley is dominant, I know of no other significant businesses in 
which the leading company has long enjoyed such global power.

     Moreover, both Coke and Gillette have actually increased their 
worldwide shares of market in recent years.  The might of their 
brand names, the attributes of their products, and the strength of 
their distribution systems give them an enormous competitive 
advantage, setting up a protective moat around their economic 
castles.  The average company, in contrast, does battle daily 
without any such means of protection.  As Peter Lynch says, stocks 
of companies selling commodity-like products should come with a 
warning label:  "Competition may prove hazardous to human wealth."

	The competitive strengths of a Coke or Gillette are obvious to 
even the casual observer of business.  Yet the beta of their stocks 
is similar to that of a great many run-of-the-mill companies who 
possess little or no competitive advantage.  Should we conclude 
from this similarity that the competitive strength of Coke and 
Gillette gains them nothing when business risk is being measured?  
Or should we conclude that the risk in owning a piece of a company 
- its stock - is somehow divorced from the long-term risk inherent 
in its business operations?  We believe neither conclusion makes 
sense and that equating beta with investment risk also makes no 

     The theoretician bred on beta has no mechanism for 
differentiating the risk inherent in, say, a single-product toy 
company selling pet rocks or hula hoops from that of another toy 
company whose sole product is Monopoly or Barbie.  But it's quite 
possible for ordinary investors to make such distinctions if they 
have a reasonable understanding of consumer behavior and the 
factors that create long-term competitive strength or weakness.  
Obviously, every investor will make mistakes.  But by confining 
himself to a relatively few, easy-to-understand cases, a reasonably 
intelligent, informed and diligent person can judge investment 
risks with a useful degree of accuracy.

     In many industries, of course, Charlie and I can't determine 
whether we are dealing with a "pet rock" or a "Barbie."  We 
couldn't solve this problem, moreover, even if we were to spend 
years intensely studying those industries.  Sometimes our own 
intellectual shortcomings would stand in the way of understanding, 
and in other cases the nature of the industry would be the 
roadblock.  For example, a business that must deal with fast-moving 
technology is not going to lend itself to reliable evaluations of 
its long-term economics.  Did we foresee thirty years ago what 
would transpire in the television-manufacturing or computer 
industries?  Of course not.  (Nor did most of the investors and 
corporate managers who enthusiastically entered those industries.) 
Why, then, should Charlie and I now think we can predict the 
future of other rapidly-evolving businesses?  We'll stick instead 
with the easy cases.  Why search for a needle buried in a haystack 
when one is sitting in plain sight?

     Of course, some investment strategies - for instance, our 
efforts in arbitrage over the years - require wide diversification. 
If significant risk exists in a single transaction, overall risk 
should be reduced by making that purchase one of many mutually-
independent commitments.  Thus, you may consciously purchase a 
risky investment - one that indeed has a significant possibility of 
causing loss or injury - if you believe that your gain, weighted 
for probabilities, considerably exceeds your loss, comparably 
weighted, and if you can commit to a number of similar, but 
unrelated opportunities.  Most venture capitalists employ this 
strategy.  Should you choose to pursue this course, you should 
adopt the outlook of the casino that owns a roulette wheel, which 
will want to see lots of action because it is favored by 
probabilities, but will refuse to accept a single, huge bet.

     Another situation requiring wide diversification occurs when 
an investor who does not understand the economics of specific 
businesses nevertheless believes it in his interest to be a long-
term owner of American industry.  That investor should both own a 
large number of equities and space out his purchases.  By 
periodically investing in an index fund, for example, the know-
nothing investor can actually out-perform most investment 
professionals.  Paradoxically, when "dumb" money acknowledges its 
limitations, it ceases to be dumb.

     On the other hand, if you are a know-something investor, able 
to understand business economics and to find five to ten sensibly-
priced companies that possess important long-term competitive 
advantages, conventional diversification makes no sense for you.  
It is apt simply to hurt your results and increase your risk.  I 
cannot understand why an investor of that sort elects to put money 
into a business that is his 20th favorite rather than simply adding 
that money to his top choices - the businesses he understands best 
and that present the least risk, along with the greatest profit 
potential.  In the words of the prophet Mae West:  "Too much of a 
good thing can be wonderful."

Corporate Governance

     At our annual meetings, someone usually asks "What happens to 
this place if you get hit by a truck?"  I'm glad they are still 
asking the question in this form.  It won't be too long before the 
query becomes:  "What happens to this place if you don't get hit by 
a truck?"

     Such questions, in any event, raise a reason for me to discuss 
corporate governance, a hot topic during the past year.  In 
general, I believe that directors have stiffened their spines 
recently and that shareholders are now being treated somewhat more 
like true owners than was the case not long ago.  Commentators on 
corporate governance, however, seldom make any distinction among 
three fundamentally different manager/owner situations that exist 
in publicly-held companies.  Though the legal responsibility of 
directors is identical throughout, their ability to effect change 
differs in each of the cases.  Attention usually falls on the first 
case, because it prevails on the corporate scene.  Since Berkshire 
falls into the second category, however, and will someday fall into 
the third, we will discuss all three variations.

     The first, and by far most common, board situation is one in 
which a corporation has no controlling shareholder.  In that case, 
I believe directors should behave as if there is a single absentee 
owner, whose long-term interest they should try to further in all 
proper ways.  Unfortunately, "long-term" gives directors a lot of 
wiggle room.  If they lack either integrity or the ability to think 
independently, directors can do great violence to shareholders 
while still claiming to be acting in their long-term interest.  But 
assume the board is functioning well and must deal with a 
management that is mediocre or worse.  Directors then have the 
responsibility for changing that management, just as an intelligent 
owner would do if he were present.  And if able but greedy managers 
over-reach and try to dip too deeply into the shareholders' 
pockets, directors must slap their hands.

     In this plain-vanilla case, a director who sees something he 
doesn't like should attempt to persuade the other directors of his 
views.  If he is successful, the board will have the muscle to make 
the appropriate change.  Suppose, though, that the unhappy director 
can't get other directors to agree with him.  He should then feel 
free to make his views known to the absentee owners.  Directors 
seldom do that, of course.  The temperament of many directors would 
in fact be incompatible with critical behavior of that sort.  But I 
see nothing improper in such actions, assuming the issues are 
serious.  Naturally, the complaining director can expect a vigorous 
rebuttal from the unpersuaded directors, a prospect that should 
discourage the dissenter from pursuing trivial or non-rational 

     For the boards just discussed, I believe the directors ought 
to be relatively few in number - say, ten or less - and ought to 
come mostly from the outside.  The outside board members should 
establish standards for the CEO's performance and should also 
periodically meet, without his being present, to evaluate his 
performance against those standards.

     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.

     The second case is that existing at Berkshire, where the 
controlling owner is also the manager.  At some companies, this 
arrangement is facilitated by the existence of two classes of stock 
endowed with disproportionate voting power.  In these situations, 
it's obvious that the board does not act as an agent between owners 
and management and that the directors cannot effect change except 
through persuasion.  Therefore, if the owner/manager is mediocre or 
worse - or is over-reaching - there is little a director can do 
about it except object.  If the directors having no connections to 
the owner/manager make a unified argument, it may well have some 
effect.  More likely it will not.

     If change does not come, and the matter is sufficiently 
serious, the outside directors should resign.  Their resignation 
will signal their doubts about management, and it will emphasize 
that no outsider is in a position to correct the owner/manager's 

     The third governance case occurs when there is a controlling 
owner who is not involved in management.  This case, examples of 
which are Hershey Foods and Dow Jones, puts the outside directors 
in a potentially useful position.  If they become unhappy with 
either the competence or integrity of the manager, they can go 
directly to the owner (who may also be on the board) and report 
their dissatisfaction.  This situation is ideal for an outside 
director, since he need make his case only to a single, presumably 
interested owner, who can forthwith effect change if the argument 
is persuasive.  Even so, the dissatisfied director has only that 
single course of action.  If he remains unsatisfied about a 
critical matter, he has no choice but to resign.

     Logically, the third case should be the most effective in 
insuring first-class management.  In the second case the owner is 
not going to fire himself, and in the first case, directors often 
find it very difficult to deal with mediocrity or mild over-
reaching.  Unless the unhappy directors can win over a majority of 
the board - an awkward social and logistical task, particularly if 
management's behavior is merely odious, not egregious - their hands 
are effectively tied.  In practice, directors trapped in situations 
of this kind usually convince themselves that by staying around 
they can do at least some good.  Meanwhile, management proceeds 

     In the third case, the owner is neither judging himself nor 
burdened with the problem of garnering a majority.  He can also 
insure that outside directors are selected who will bring useful 
qualities to the board.  These directors, in turn, will know that 
the good advice they give will reach the right ears, rather than 
being stifled by a recalcitrant management.  If the controlling 
owner is intelligent and self-confident, he will make decisions in 
respect to management that are meritocratic and pro-shareholder.  
Moreover - and this is critically important - he can readily 
correct any mistake he makes.

     At Berkshire we operate in the second mode now and will for as 
long as I remain functional.  My health, let me add, is excellent. 
For better or worse, you are likely to have me as an owner/manager 
for some time.

     After my death, all of my stock will go to my wife, Susie, 
should she survive me, or to a foundation if she dies before I do. 
In neither case will taxes and bequests require the sale of 
consequential amounts of stock.

     When my stock is transferred to either my wife or the 
foundation, Berkshire will enter the third governance mode, going 
forward with a vitally interested, but non-management, owner and 
with a management that must perform for that owner.  In preparation 
for that time, Susie was elected to the board a few years ago, and 
in 1993 our son, Howard, joined the board.  These family members 
will not be managers of the company in the future, but they will 
represent the controlling interest should anything happen to me.  
Most of our other directors are also significant owners of 
Berkshire stock, and each has a strong owner-orientation.  All in 
all, we're prepared for "the truck."

Shareholder-Designated Contributions

     About 97% of all eligible shares participated in Berkshire's 
1993 shareholder-designated contributions program.  Contributions 
made through the program were $9.4 million and 3,110 charities were 

     Berkshire's practice in respect to discretionary philanthropy 
- as contrasted to its policies regarding contributions that are 
clearly related to the company's business activities - differs 
significantly from that of other publicly-held corporations.  
There, most corporate contributions are made pursuant to the wishes 
of the CEO (who often will be responding to social pressures), 
employees (through matching gifts), or directors (through matching 
gifts or requests they make of the CEO).

     At Berkshire, we believe that the company's money is the 
owners' money, just as it would be in a closely-held corporation, 
partnership, or sole proprietorship.  Therefore, if funds are to be 
given to causes unrelated to Berkshire's business activities, it is 
the charities favored by our owners that should receive them.  
We've yet to find a CEO who believes he should personally fund the 
charities favored by his shareholders.  Why, then, should they foot 
the bill for his picks?

     Let me add that our program is easy to administer.  Last fall, 
for two months, we borrowed one person from National Indemnity to 
help us implement the instructions that came from our 7,500 
registered shareholders.  I'd guess that the average corporate 
program in which employee gifts are matched incurs far greater 
administrative costs.  Indeed, our entire corporate overhead is 
less than half the size of our charitable contributions.  (Charlie, 
however, insists that I tell you that $1.4 million of our $4.9 million overhead is 
attributable to our corporate jet, The Indefensible.)

     Below is a list showing the largest categories to which our 
shareholders have steered their contributions.

     (a) 347 churches and synagogues received 569 gifts
     (b) 283 colleges and universities received 670 gifts
     (c) 244 K-12 schools (about two-thirds secular, one-
         third religious) received 525 gifts
     (d) 288 institutions dedicated to art, culture or the 
         humanities received 447 gifts
     (e) 180 religious social-service organizations (split 
         about equally between Christian and Jewish) received 
         411 gifts 
     (f) 445 secular social-service organizations (about 40% 
         youth-related) received 759 gifts
     (g) 153 hospitals received 261 gifts
     (h) 186 health-related organizations (American Heart 
         Association, American Cancer Society, etc.) received 
         320 gifts

     Three things about this list seem particularly interesting to 
me.  First, to some degree it indicates what people choose to give 
money to when they are acting of their own accord, free of pressure 
from solicitors or emotional appeals from charities.  Second, the 
contributions programs of publicly-held companies almost never 
allow gifts to churches and synagogues, yet clearly these 
institutions are what many shareholders would like to support.  
Third, the gifts made by our shareholders display conflicting 
philosophies:  130 gifts were directed to organizations that 
believe in making abortions readily available for women and 30 
gifts were directed to organizations (other than churches) that 
discourage or are opposed to abortion.

     Last year I told you that I was thinking of raising the amount 
that Berkshire shareholders can give under our designated-
contributions program and asked for your comments.  We received a 
few well-written letters opposing the entire idea, on the grounds 
that it was our job to run the business and not our job to force 
shareholders into making charitable gifts.  Most of the 
shareholders responding, however, noted the tax efficiency of the 
plan and urged us to increase the designated amount.  Several 
shareholders who have given stock to their children or 
grandchildren told me that they consider the program a particularly 
good way to get youngsters thinking at an early age about the 
subject of giving.  These people, in other words, perceive the 
program to be an educational, as well as philanthropic, tool.  The 
bottom line is that we did raise the amount in 1993, from $8 per 
share to $10.

     In addition to the shareholder-designated contributions that 
Berkshire distributes, our operating businesses make contributions, 
including merchandise, averaging about $2.5 million annually.  
These contributions support local charities, such as The United 
Way, and produce roughly commensurate benefits for our businesses.

     We suggest that new shareholders read the description of our 
shareholder-designated contributions program that appears on pages 
50-51.  To participate in future programs, you must make sure your 
shares are registered in the name of the actual owner, not in the 
nominee name of a broker, bank or depository.  Shares not so 
registered on August 31, 1994 will be ineligible for the 1994 

A Few Personal Items

     Mrs. B - Rose Blumkin - had her 100th birthday on December 3, 
1993.  (The candles cost more than the cake.)  That was a day on 
which the store was scheduled to be open in the evening.  Mrs. B, 
who works seven days a week, for however many hours the store 
operates, found the proper decision quite obvious:  She simply 
postponed her party until an evening when the store was closed.

     Mrs. B's story is well-known but worth telling again.  She 
came to the United States 77 years ago, unable to speak English and 
devoid of formal schooling.  In 1937, she founded the Nebraska 
Furniture Mart with $500.  Last year the store had sales of $200 
million, a larger amount by far than that recorded by any other 
home furnishings store in the United States.  Our part in all of 
this began ten years ago when Mrs. B sold control of the business 
to Berkshire Hathaway, a deal we completed without obtaining 
audited financial statements, checking real estate records, or 
getting any warranties.  In short, her word was good enough for us.

     Naturally, I was delighted to attend Mrs. B's birthday party. 
After all, she's promised to attend my 100th.

                     * * * * * * * * * * * *

     Katharine Graham retired last year as the chairman of The 
Washington Post Company, having relinquished the CEO title three 
years ago.  In 1973, we purchased our stock in her company for 
about $10 million.  Our holding now garners $7 million a year in 
dividends and is worth over $400 million.  At the time of our 
purchase, we knew that the economic prospects of the company were 
good.  But equally important, Charlie and I concluded that Kay 
would prove to be an outstanding manager and would treat all 
shareholders honorably.  That latter consideration was particularly 
important because The Washington Post Company has two classes of 
stock, a structure that we've seen some managers abuse.

     All of our judgments about this investment have been validated 
by events.  Kay's skills as a manager were underscored this past 
year when she was elected by Fortune's Board of Editors to the 
Business Hall of Fame.  On behalf of our shareholders, Charlie and 
I had long ago put her in Berkshire's Hall of Fame.

                     * * * * * * * * * * * *

     Another of last year's retirees was Don Keough of Coca-Cola, 
although, as he puts it, his retirement lasted "about 14 hours."  
Don is one of the most extraordinary human beings I've ever known - 
a man of enormous business talent, but, even more important, a man 
who brings out the absolute best in everyone lucky enough to 
associate with him.  Coca-Cola wants its product to be present at 
the happy times of a person's life.  Don Keough, as an individual, 
invariably increases the happiness of those around him.  It's 
impossible to think about Don without feeling good.

     I will edge up to how I met Don by slipping in a plug for my 
neighborhood in Omaha:  Though Charlie has lived in California for 
45 years, his home as a boy was about 200 feet away from the house 
where I now live; my wife, Susie, grew up 1 1/2 blocks away; and we 
have about 125 Berkshire shareholders in the zip code.  As for Don, 
in 1958 he bought the house directly across the street from mine.  
He was then a coffee salesman with a big family and a small income.

     The impressions I formed in those days about Don were a factor 
in my decision to have Berkshire make a record $1 billion 
investment in Coca-Cola in 1988-89.  Roberto Goizueta had become 
CEO of Coke in 1981, with Don alongside as his partner.  The two of 
them took hold of a company that had stagnated during the previous 
decade and moved it from $4.4 billion of market value to $58 
billion in less than 13 years.  What a difference a pair of 
managers like this makes, even when their product has been around 
for 100 years.

                      * * * * * * * * * * * *

     Frank Rooney did double duty last year.  In addition to 
leading H. H. Brown to record profits - 35% above the 1992 high - 
he also was key to our merger with Dexter.

     Frank has known Harold Alfond and Peter Lunder for decades, 
and shortly after our purchase of H. H. Brown, told me what a 
wonderful operation they managed.  He encouraged us to get together 
and in due course we made a deal.  Frank told Harold and Peter that 
Berkshire would provide an ideal corporate "home" for Dexter, and 
that assurance undoubtedly contributed to their decision to join 
with us.

     I've told you in the past of Frank's extraordinary record in 
building Melville Corp. during his 23 year tenure as CEO.  Now, at 
72, he's setting an even faster pace at Berkshire.  Frank has a 
low-key, relaxed style, but don't let that fool you.  When he 
swings, the ball disappears far over the fence.

The Annual Meeting

     This year the Annual Meeting will be held at the Orpheum 
Theater in downtown Omaha at 9:30 a.m. on Monday, April 25, 1994.  
A record 2,200 people turned up for the meeting last year, but the 
theater can handle many more.  We will have a display in the lobby 
featuring many of our consumer products - candy, spray guns, shoes, 
cutlery, encyclopedias, and the like.  Among my favorites slated to 
be there is a See's candy assortment that commemorates Mrs. B's 
100th birthday and that features her picture, rather than Mrs. 
See's, on the package.

     We recommend that you promptly get hotel reservations at one 
of these hotels: (1) The Radisson-Redick Tower, a small (88 rooms) 
but nice hotel across the street from the Orpheum; (2) the much 
larger Red Lion Hotel, located about a five-minute walk from the 
Orpheum; or (3) the Marriott, located in West Omaha about 100 yards 
from Borsheim's, which is a twenty-minute drive from downtown. We 
will have buses at the Marriott that will leave at 8:30 and 8:45 
for the meeting and return after it ends.

     An attachment to our proxy material explains how you can 
obtain the card you will need for admission to the meeting.  With 
the admission card, we will enclose information about parking 
facilities located near the Orpheum.  If you are driving, come a 
little early.  Nearby lots fill up quickly and you may have to walk 
a few blocks.

     As usual, we will have buses to take you to Nebraska Furniture 
Mart and Borsheim's after the meeting and to take you from there to 
downtown hotels or the airport later.  Those of you arriving early 
can visit the Furniture Mart any day of the week; it is open from 
10 a.m. to 5:30 p.m. on Saturdays and from noon to 5:30 p.m. on 
Sundays.  Borsheim's normally is closed on Sunday but will be open 
for shareholders and their guests from noon to 6 p.m. on Sunday, 
April 24.

     In past trips to Borsheim's, many of you have met Susan 
Jacques.  Early in 1994, Susan was made President and CEO of the 
company, having risen in 11 years from a $4-an-hour job that she 
took at the store when she was 23.  Susan will be joined at 
Borsheim's on Sunday by many of the managers of our other 
businesses, and Charlie and I will be there as well.

     On the previous evening, Saturday, April 23, there will be a 
baseball game at Rosenblatt Stadium between the Omaha Royals and 
the Nashville Sounds (which could turn out to be Michael Jordan's 
team).  As you may know, a few years ago I bought 25% of the Royals 
(a capital-allocation decision for which I will not become famous) 
and this year the league has cooperatively scheduled a home stand 
at Annual Meeting time.

     I will throw the first pitch on the 23rd, and it's a certainty 
that I will improve on last year's humiliating performance.  On 
that occasion, the catcher inexplicably called for my "sinker" and 
I dutifully delivered a pitch that barely missed my foot.  This 
year, I will go with my high hard one regardless of what the 
catcher signals, so bring your speed-timing devices.  The proxy 
statement will include information about obtaining tickets to the 
game.  I regret to report that you won't have to buy them from 

                                    Warren E. Buffett
March 1, 1994                       Chairman of the Board