If options aren’t a form of compensation, what are they? If compensation isn’t an expense, what is it? And, if expenses shouldn’t go into the calculation of earnings, where in the world should they go?


A horse that can count to ten is a remarkable horse – not a remarkable mathematician.

Pricing power

The single most important decision in evaluating a business is pricing power. If you have the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by a tenth of a cent, then you’ve got a terrible business.

Those who can count

Our future rates of gain will fall far short of those achieved in the past. Berkshire’s capital base is now simply too large to allow us to earn truly outsized returns. If you believe otherwise, you should consider a career in sales but avoid one in mathematics (bearing in mind that there are really only three kinds of people in the world : those who can count and those who can’t).

Accounting-based frauds

Over the years, Charlie [Munger] and I have observed many accounting-based frauds of staggering size. Few of the perpetrators have been punished ; many have not even been censured. It has been far safer to steal large sums with pen than small sums with a gun.


Take me as an example. I happen to have a talent for allocating capital. But my ability to use that talent is completely dependent on the society I was born into. If I’d been born into a tribe of hunters, this talent of mine would be pretty worthless. I can’t run very fast. I’m not particularly strong. I’d probably end up as some wild animal’s dinner.