(Fortune) - Famously frugal Warren Buffett has always been clear his billions won't go to family—it'll be invested in charitable foundations, a fitting end to a career of philanthropy.
It's a process Buffett will have seen more closely this year following the death of his right-hand man and dear friend, Charlie Munger.
The Berkshire Hathaway chairman's 2023 shareholder letter had a reflective tone, looking back at Munger's work and comparing it to the market Wall Street sees before it today.
But despite penning the note spanning everything from Japanese 'sogo shosha' trading houses to the restorative waters of his home city Omaha, Buffett still had time to double down on his distaste for heirs readying themselves to oversee fortunes they haven't worked for.
It came as part of Buffett's broader view on the purpose of Berkshire Hathaway, a conglomerate with a market cap nearing $906 billion. The business which Buffett took on in 1965 has enjoyed a share price increase of more than 4,000,000% since then, owing to stock purchases in some of the world's biggest companies.
This has ranged from Buffett's favorite drink, Coca-Cola, to fast food chain McDonald's and finance giant Bank of America and more recently a run of Japanese trading houses.
But in the letter released this weekend Buffett indicated a link tying the seemingly random pattern together. He wrote: "We want to own either all or a portion of businesses that enjoy good economics that are fundamental and enduring."
"Within capitalism, some businesses will flourish for a very long time while others will prove to be sinkholes," he explained. "It’s harder than you would think to predict which will be the winners and losers. And those who tell you they know the answer are usually either self-delusional or snake-oil salesmen."
Buffett added Berkshire favors enterprises that can also deploy additional capital at high returns in the future. "Owning only one of these companies—and simply sitting tight—can deliver wealth almost beyond measure," he continued.
Then came the jibe: "Even heirs to such a holding can—ugh!—sometimes live a lifetime of leisure."
The man reportedly worth $139 billion then moved on, saying a harder judgement than choosing the right business to invest in is who should manage that organization. Berkshire has "had its share of disappointments" in this regard, Buffett wrote, adding: "People are not that easy to read. Sincerity and empathy can easily be faked."
Buffett's own will
In November last year Buffett also released a rare, unexpected statement on his fortunes in the event of his death. Alongside an announcement that he had donated millions of Berkshire Hathaway shares to four charitable trusts associated with his family, the 93-year-old wrote: “I feel good but fully realize I am playing in extra innings.”
In this release Buffett said his three children are on board with his approach to personal finance—which has entailed the 'Oracle of Omaha' living in the same house he bought some 60 years ago. He said dynastic wealth is “not desirable” adding: "We have had many opportunities to observe that being rich does not make you either wise or evil. We also agree that capitalism—whatever its weaknesses, including the vast disparities in wealth and political influence that it delivers somewhat capriciously to its citizens—has worked wonders and continues to work wonders.”
As such, he confirmed “99%-plus” of his wealth will be donated to his charitable trust, while confirming his three children—now between ages 65 and 70—are the executors of his current will.
Of course, Buffett isn't the only billionaire who has expressed caution around children being born into wealth and automatically inheriting millions. Microsoft co-founder Bill Gates plans to give away 'virtually all' of his money while Amazon founder Jeff Bezos said he and his partner, Lauren Sanchez, are “building the capacity to be able to give away this money.”
This story was originally featured on Fortune.com.
By Eleanor Pringle
February 26, 2024
