巴菲特1978年致股东的信（英文版）

Here is the full text of Buffett's letter to shareholders in 1978:

First, a few words about accounting. The merger with Diversified Retailing Company, Inc. at year - end 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.

For this reason, in the following report, we will provide separate financial numbers and analysis for each individual industry to help you evaluate the actual performance and prospects of Berkshire. Most of this information is required by the SEC for disclosure and can be found in the management's discussion on pages 29 - 34. Here, we will try to analyze the performance of each profit - making unit from the perspective of an operator.

The second impact of the merger is that the 1977 figures shown in this year's report are different from those provided to you for the same year last time. Accounting principles require that when two separate entities like Diversified Retailing and Berkshire are merged, all reported financial numbers must be presented as if the two companies had been together all along. So all the subsequent figures are presented as if the two companies had been merged since 1977 (or even earlier), although the actual merger date was December 30, 1978. This change can easily cause confusion in comparative comments because in previous reports, we told you the historical records of Berkshire, not the figures revised according to the merger with Diversified Retailing.

Nevertheless, even under such circumstances, we can still say that 1978 was a very good year. Operating earnings excluding capital gains were approximately 19.4% of the beginning shareholders' investment cost. Although this is lower than the historical record in 1972, we do not think it is appropriate to include capital gains or losses in evaluating the performance of a single year. However, they are undoubtedly important indicators for measuring long - term performance. Thanks to these gains, the long - term growth rate of Berkshire's per - share equity is much higher than the compound return brought by annual operating earnings.

To let you understand the sources of Berkshire's earnings, let me briefly explain the following table. Berkshire holds approximately 58% of the equity of Blue Chip Stamps, which, in addition to holding 100% of the equity of some enterprises, also owns 80% of the equity of Wesco Financial Corporation. Therefore, Berkshire indirectly holds approximately 46% of Wesco. Overall, our affiliated businesses have approximately 7,000 full - time employees and annual revenues of $500 million.

The textile business is becoming less and less important to Berkshire financially. The return on equity for this segment was only 7.6%, which was a relatively low number in the late 1970s when inflation was high. The book value of the plant and equipment for textiles is much lower than replacement costs, meaning that the return is even lower when looked at this way.

Despite the "bargain cost" of fixed assets, capital turnover is relatively low, reflecting the 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. Our management is diligent in pursuing objectives such as product differentiation, lower manufacturing costs through more efficient equipment or better utilization of people, and redirection toward fabrics enjoying stronger market trends. However, the problem is that our competitors are also working just as hard to do the same things.

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 the capital employed.

The insurance industry has its unique characteristics. The nature of the insurance business magnifies the effect that individual managers have on company performance. We are optimistic about the 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 1978, the insurance operations, led again by the truly outstanding results of Phil Liesche's managerial group at National Indemnity Company, were very good. We believe that the insurance business will continue to play an important role in Berkshire's development.

We select our marketable equity securities in much the same way we would evaluate a business for acquisition in its entirety. We want the business to be (1) one that we can understand, (2) with favorable long - term prospects, (3) operated by honest and competent people, and (4) available at a very attractive price.

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. 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.

We do not believe in diversification for the sake of diversification. Instead, we prefer a concentrated portfolio. We would rather invest a large percentage of our funds in a few high - quality businesses that meet our investment criteria than spread our investments thinly among many companies. We believe that this approach can achieve higher returns at lower risk.

At the end of 1978, our insurance companies held several equity investments with significant market values. For example, we held 953,750 shares of Safeco Corp. Safeco is probably the best - run large property and casualty insurance company in the United States. Their underwriting abilities are superb, their loss reserving is conservative, and their investment policies make great sense. Although we do not have the right to direct or even influence Safeco's management policies with our minor interest, we believe that the company's excellent management will bring good returns to our investment.

In addition, we also discuss the issue of dividends versus retained earnings. 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. Similarly, for companies in which we hold small equity interests, if the record indicates even better prospects for profitable employment of capital, we also support their retention of earnings. We believe that the retained earnings of well - run companies may eventually have a value to shareholders greater than 100 cents on the dollar.

Overall, 1978 was a successful year for Berkshire Hathaway. We achieved good results in various business segments, and our investment portfolio also performed well. We will continue to adhere to our investment philosophy and business strategy, and strive to create greater value for shareholders in the future.

Thank you for your support and trust in Berkshire Hathaway.

Please note that the above translation is for reference only. If you need a more accurate translation, it is recommended to consult a professional translator.