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Within Berkshire Hathaway's most recent performance report, Chairman Warren Buffett’s letter to shareholders highlighted important lessons in business, including transparency, admitting mistakes, succession planning, metric evaluation and more. He also explained how the company’s structure and investment decisions led them to pay $26.8 billion in federal income tax — the most ever paid by a company in American history.
Despite many in corporate finance having mixed opinions on his approach to business, CFOs across industries and company sizes can extract key takeaways from Buffett’s letter, particularly when developing business strategies, talent identification techniques, succession planning pipelines and shareholder relationship best practices.
1. The importance of transparency to shareholders
Buffett wrote about how many companies today have people in leadership positions who do all they can to paint the best picture of the company for public and shareholder perception, regardless of the company’s actual performance.
“During the 2019-23 period, I have used the words ‘mistake’ or ‘error’ 16 times in my letters to you,” Buffett wrote. “Many other huge companies have never used either word over that span. Amazon, I should acknowledge, made some brutally candid observations in its 2021 letter. Elsewhere, it has generally been happy talk and pictures.”
He implied that companies with a policy of projecting only perfection to analysts and shareholders are making a mistake.
“I have also been a director of large public companies at which ‘mistake’ or ‘wrong’ were forbidden words at board meetings or analyst calls,” he wrote. “That taboo, implying managerial perfection, always made me nervous.”
2. Strength is not in lack of mistakes, but responses to them
Detailing the company’s success journey, Buffett emphasized that his success was not due to a lack of mistakes but rather how they were addressed. While investments like GEICO and Apple drove success, they were just part of many capital allocation decisions — some of which were less than perfect.
“The cardinal sin is delaying the correction of mistakes or what Charlie Munger called ‘thumb-sucking.’ Problems, he would tell me, cannot be wished away,” Buffet wrote. “They require action, however uncomfortable that may be... And our experience is that a single winning decision can make a breathtaking difference over time. (Think GEICO as a business decision, Ajit Jain as a managerial decision and my luck in finding Charlie Munger as a one-of-a-kind partner, personal advisor and steadfast friend.) Mistakes fade away; winners can forever blossom.”
3. Succession planning is critical
Greg Abel, currently the CEO of Berkshire Hathaway Energy, has been set to replace Buffett upon his retirement or death since 2021. Though Abel has extensive experience with the company, Buffett continues to emphasize that Abel was chosen for his approach to business and alignment with Buffett’s philosophy.
“At 94 [years old], it won’t be long before Greg Abel replaces me as CEO and will be writing the annual letters,” Buffett said. “Greg shares the Berkshire creed that a ‘report’ is what a Berkshire CEO annually owes to owners. And he also understands that if you start fooling your shareholders, you will soon believe your own baloney and be fooling yourself as well.”
4. Business talent is “nature swamping nurture”
When evaluating business talent, Buffett highlighted that some of the most successful people he has worked with were not the most educated but had the strongest innate business sense.
While he said he “avidly” believes in lifelong learning, he stressed the value of work experience and entrepreneurship — qualities younger professionals, particularly in finance, are prioritizing over traditional education. Buffett noted that when selecting a CEO, he has never considered their alma mater.
“Of course, there are great managers who attended the most famous schools, but there are plenty such as Pete [Liegl] who may have benefited by attending a less prestigious institution or even by not bothering to finish school,” Buffett wrote. “Look at my friend, Bill Gates, who decided that it was far more important to get underway in an exploding industry that would change the world than it was to stick around for a parchment that he could hang on the wall.”
He didn’t dismiss his own academic experience but credited real-world business experience for his success.
“I was lucky enough to get an education at three fine universities. And I avidly believe in lifelong learning. I’ve observed, however, that a very large portion of business talent is innate, with nature swamping nurture,” he said.
5. Tax as a success metric
Though Berkshire Hathaway has long employed strategies to minimize tax liability, Buffett framed the company’s record-setting federal income tax payment as a sign of success. He argued that an overaggressive approach to tax avoidance can damage a company’s reputation and create regulatory risks that grow with the organization.
“In 1965, the company did not pay a dime of income tax, an embarrassment that had generally prevailed at the company for a decade,” he wrote. “That sort of economic behavior may be understandable for glamorous startups, but it’s a blinking yellow light when it happens at a venerable pillar of American industry. Berkshire was headed for the ash can.”
“Fast forward 60 years and imagine the surprise at the Treasury when that same company — still operating under the name of Berkshire Hathaway — paid far more in corporate income tax than the U.S. government had ever received from any company—even the American tech titans that commanded market values in the trillions,” he said.
Buffett gave an interesting descriptor on the scale of the tax payment:
“If Berkshire had sent the Treasury a $1 million check every 20 minutes throughout all of 2024 — visualize 366 days and nights because 2024 was a leap year — we still would have owed the federal government a significant sum at year-end. Indeed, it would be well into January before the Treasury would tell us that we could take a short breather, get some sleep, and prepare for our 2025 tax payments.”
6. He still hates EBITDA
In classic Buffett fashion, he focused on telling his company’s performance story through operating earnings rather than EBITDA. While the report includes EBITDA earnings as required by GAAP, he dismissed the metric as a “flawed favorite” of Wall Street.
“All told, we recorded operating earnings of $47.4 billion in 2024,” he wrote. “We regularly — endlessly, some readers may groan — emphasize this measure rather than the GAAP-mandated earnings that are reported [further in the letter],” he wrote. “All calculations are after depreciation, amortization,and income tax. EBITDA, a flawed favorite of Wall Street, is not for us.”
