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BERKSHIRE HATHAWAY INC.
1997 Chairman's Letter
To the Shareholders of Berkshire Hathaway Inc.:
       Our gain in net worth during 1997 was $ billion, which increased the per-share book value of both our Class A and Class B stock by %. Over the last 33 years (that is, since present management took over) per-share book value has grown from $19 to $25,488, a rate of % compounded annually.(1)
1. All figures used in this report apply to Berkshire's A shares,
the successor to the only stock that the company had outstanding
before 1996. The B shares have an economic interest equal to 1/30th
that of the A.
       Given our gain of %, it is tempting to declare victory and move on. But last year's performance was no great triumph: Any investor can chalk up large returns when stocks soar, as they did in 1997. In a bull market, one must avoid the error of the preening duck that quacks boastfully after a torrential rainstorm, thinking that its paddling skills have caused it to rise in the world. A right-thinking duck would instead compare its position after the downpour to that of the other ducks on the pond.
       So what's our duck rating for 1997? The table on the facing page shows that though we paddled furiously last year, passive ducks that simply invested in the S&P Index rose almost as fast as we did. Our appraisal of 1997's performance, then: Quack.
       When the market booms, we tend to suffer in comparison with the S&P Index. The Index bears no tax costs, nor do mutual funds, since they pass through all tax liabilities to their owners. Last year, on the other hand, Berkshire paid or accrued $ billion for federal income tax, or about 18% of our beginning net worth.
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       Berkshire will always have corporate taxes to pay, which means it needs to