Alex Morris, TSOH & Author of "Buffett and Munger Unscripted", talks 2024 Berkshire Annual Letter
Summary
The 2025 annual letter may read like preparation for Warren Buffett’s eventual handoff to Greg Abel, but this was speculative. Buffett’s direct line—“it won’t be long before Greg replaces me as CEO and we’ll be writing the annual letters”—plus references to his age and cane led Morris to wonder whether Buffett might announce his retirement at the annual meeting. Walker separately read the insurance, culture and America-focused passages as future-setting.
Berkshire’s cash buildup and retreat from equities look at least directionally bearish, even if Buffett avoided saying so. Although 2024 was “better than I expected,” 53% of Berkshire’s 189 operating businesses reported lower earnings; meanwhile, marketable equities fell from $354 billion to $272 billion and repurchases virtually disappeared. Morris said Buffett “really avoided having the conversation” and used a reason that was “not entirely logical” to walk away from discussing what the shrinking public portfolio and excess cash imply.
The next leadership team will probably need a capital-allocation policy materially different from Buffett’s historical playbook. Berkshire’s scale has made meaningful minority investments extraordinarily scarce, while retaining every dollar could eventually produce an unwieldy company dominated by cash and punished with a conglomerate discount. Morris therefore struggles to believe the next generation will keep accumulating excess liquidity indefinitely; he expects “a pretty significant change” in capital allocation.
Occidental Petroleum is an unresolved tell because Buffett largely stopped buying after repeatedly supporting OXY below $60. At a price in the mid-to-high $40s during the recording, Berkshire’s purchases had dwindled to occasional small amounts rather than hundreds of millions of dollars. Morris offered two hedged explanations—an ownership ceiling or dissatisfaction with changed M&A and growth priorities—but stressed that he had not followed the situation closely.
Buffett’s willingness to discuss mistakes remains culturally valuable, but the letter rarely explains them deeply enough to teach shareholders. Morris’s best example is GEICO, a Berkshire “gem” that needed “major repolishing”: shareholders can infer issues involving telematics and GEICO’s poor relative performance versus Progressive over roughly five years, yet Buffett never really explains what Berkshire missed. The specific callout of Amazon’s 2021 report as a rare example of corporate candor also left both speakers “reading the tea leaves.”
Andrew Walker challenged Buffett’s framing of the Japanese investments as an easy dividend-versus-interest spread. Berkshire expects roughly $812 million of dividends against $135 million of interest, but Walker argued that this presentation understates the two-sided investment risk and the inflexibility of long-dated debt. Morris’s broader objection was editorial: the roughly $23.5 billion Japanese portfolio received nearly a full page while BNSF and Berkshire Hathaway Energy received only cursory treatment.
Insurance is already carrying far more of Berkshire’s economics, making managerial succession there as important as portfolio succession. Average annual pre-tax underwriting profit plus net investment income was roughly $5 billion from 2010 through 2020, versus about $25 billion in 2024; float also grew from $66 billion around the start of 2010 to $171 billion. That engine is powerful, but Morris said the durability of these advantages under Ajit Jain’s businesses, Todd Combs’s possible GEICO role and future managers remains “an ongoing discussion.”
Deep dive
1. The letter reads like a handoff document, though Morris would not call it proof
Morris’s initial reaction was that the 2025 annual letter covered unusually broad ground: conventional shareholder reporting, seemingly deliberate cultural reminders and several passages whose inclusion mattered as much as their literal content. The recurring question was, “Who is he talking to?”—particularly when Buffett promised that Berkshire’s five Japanese holdings were “for the very long term” and that the company was committed to supporting their boards.
Walker saw a possible final-letter architecture: insurance as Berkshire’s future, the RV-dealership story as a lesson in paying fairly and trusting partners, and a reminder that most capital will remain invested in America. Walker recalled Buffett saying that the American government needed to maintain a stable policy or “fertile field,” though he was uncertain of the exact wording, and interpreted the point as partly directed toward policymakers.
Morris’s explicitly speculative hot take was that Buffett might announce retirement at the annual meeting. He imagined an announcement alongside the morning earnings release, followed by Buffett and Greg Abel sharing the afternoon stage; he cautioned that he “might be reading into all of this way too much.”
Supporting clues included Buffett mentioning his cane and age, plus the direct statement that “it won’t be long before Greg replaces me as CEO.” Walker also noted that Buffett mentioned Todd Combs twice in connection with GEICO but did not mention Ted, unlike earlier letters. The meeting will feature a single retrospective book about Berkshire’s last 60 years, although Morris noted the company published a comparable 50-year book a decade earlier.
2. Berkshire’s numbers imply caution that Buffett’s prose never squarely addresses
Walker’s macro read began with Buffett saying 2024 was “better than I expected” despite earnings declines at 53% of Berkshire’s 189 operating businesses. Paired with record liquidity and limited deployment, that sounded to Walker as though Buffett had expected something closer to a recession; Morris did not reject the interpretation.
The more concrete signal was the public-equity portfolio falling from $354 billion to $272 billion during a strong market year. Buffett counterbalanced that fact by saying controlled, non-quoted businesses increased somewhat in value and remained “far greater” than the quoted portfolio, but Morris viewed those as distinct buckets: the controlled-business value does not answer what happened to the shrinking quoted portfolio.
Repurchases supplied another mixed signal. Fourth-quarter buying had completely dried up; third-quarter activity was immaterial—Morris could not recall whether it was $10 million or $100 million—and the trailing 12-month total was the lowest since Berkshire began repurchasing shares in either the second or third quarter of 2018.
Buffett has previously suggested judging retained excess cash over roughly five years. Morris believes Berkshire is now beyond that test for at least some portion of its liquidity, making it “pretty unlikely” that future managers will preserve the same approach indefinitely.
3. Berkshire’s scale is forcing a new capital-allocation regime
Walker’s reductio ad absurdum was a hypothetical $2 trillion Berkshire eventually holding $800 billion of cash because operating earnings simply keep arriving. At some point, investors would rationally apply an enormous conglomerate discount: the company would be retaining capital that even Buffett could not deploy effectively during a crisis.
Berkshire can still make useful transactions—the remaining 8% of Berkshire Hathaway Energy cost roughly $2.9 billion—but such deals barely move the whole. Morris could imagine Berkshire buying more of an existing holding, yet doubts that Greg Abel or the investment managers would write a $200 billion acquisition check six months into the job.
Morris’s Coca-Cola comparison sharpened the succession question: Berkshire has held the position untouched since Warren last acted in 1994, more than 30 years, and he asked Becky whether the Japanese holdings might similarly be treated as investments that need not be revisited.
American Express illustrates both opportunity and constraint. Berkshire already owns roughly 21%, but outright ownership could create a different regulatory and systemic profile; Walker’s hypothetical combined a $1 trillion insurance catastrophe with stress at a wholly owned card issuer to show why “how big is too big” becomes unavoidable.
Apple was the nearly perfect public-market asset: large enough for Berkshire to build a meaningful position without owning the company. Morris first described the gap as roughly nine years, then reconsidered and said it might be 16 or 17 years; either way, he argued that the universe of investments capable of mattering to Berkshire without creating an enormous ownership percentage has become “incredibly small.”
4. OXY’s lower price has not brought back Buffett’s old buying pattern
Walker remembered Occidental Petroleum as having a “Buffett put”: roughly 18 months earlier, Berkshire appeared repeatedly with hundreds of millions of dollars whenever OXY fell below $60. At the recording’s mid-to-high-$40s price, those purchases had largely stopped, apart from an occasional small buy.
That absence surprised Walker because Buffett had praised Occidental’s assets and Berkshire operates on a longer horizon than short-term oil traders. His inference was deliberately conditional: if Buffett still regarded $48 as a bargain, “I feel like he’d be putting the money down.”
Morris had not followed OXY closely enough for a firm answer. His two best guesses were an explicit or practical ownership limit, or management changing previously communicated capital-allocation and production-growth priorities in connection with a late-2023 acquisition; Buffett might view abandoning disciplined priorities as a negative, as Morris believes the PetroChina history suggests.
5. Buffett admits mistakes, but shareholders still lack the useful postmortems
Walker contrasted Berkshire with a struggling small company whose stock had fallen 90% while its CEO opened a call by describing how well operations were going. Buffett’s declaration that he is willing to admit mistakes felt refreshing precisely because so many executives cannot acknowledge the world shareholders are experiencing.
Morris’s structural explanation was that Buffett built and earned a uniquely long leash. CEOs facing activists who demand a turnaround or sale within six, 12 or 18 months may predictably “keep my bad news to myself”; Berkshire can instead operate with a culture that tolerates candor and long-duration decisions.
The missing piece is specificity. Buffett has revisited Dexter Shoe and once admitted at a 2006 meeting that he failed to act on Coors around 2000, but Morris wanted a real explanation of why GEICO, once a Berkshire gem, needed “major repolishing,” what Berkshire missed and what role Todd Combs played in the corrective work.
Both speakers were intrigued by Buffett singling out Amazon’s 2021 report as a rare corporate admission of mistakes. Given the scarce space in an 11-to-13-page letter, the specific company and year seemed intentional, yet neither could identify the message; even naming Andy Jassy rather than that specific report would have carried a different implication.
6. Japan was a great trade presented with an incomplete risk frame
Berkshire’s five Japanese holdings have nearly doubled over roughly five years while paying dividends. Buffett highlighted expected annual dividends of about $812 million against only $135 million of interest on yen-denominated debt—a spread that Walker accepted as attractive but called financially unsophisticated when presented without the rest of the risk.
Walker compared the rhetoric with borrowing at an indicated Interactive Brokers margin rate near 4.85% to own stocks yielding about or over 7%. His illustrative list included Altria, Progressive, GEO, Dow, LYB and Crown Castle; he added Verizon at about 7% and Pfizer at 6.5%. His point was not to recommend that trade: a margin loan can be repaid immediately, whereas Berkshire could sell a damaged investment and remain obligated on debt until the bonds become callable. Morris noted that the yen debt is structurally different from a margin loan.
Morris focused on proportionality. The Japanese positions were worth roughly $23.5 billion against more than $1 trillion of Berkshire assets and Apple alone near $75 billion, yet received almost a page; BNSF and Berkshire Hathaway Energy got two sentences saying earnings improved but “both, however, have much left to accomplish.” Perhaps Buffett wants to buy more abroad—or perhaps, Walker joked, he simply wanted to “spike the football.”
7. Insurance strength and voting control are the real post-Buffett tests
Berkshire’s insurance economics have stepped up dramatically: average annual pre-tax underwriting gain plus net investment income was about $5 billion during 2010-2020, versus $25 billion in 2024. Net investment income alone rose from roughly $5 billion in 2020 to nearly $14 billion, while GEICO delivered a particularly strong underwriting year.
Float reached $171 billion from $66 billion around the start of 2010, despite Buffett suggesting around 2012 that it might stop growing and perhaps decline 1%-2% annually. Berkshire has also generated roughly 3.5 cents of underwriting profit per premium dollar over the long term, though acquisitions contributed to the growth and the sustainability of these advantages under Ajit Jain’s businesses, any Todd Combs role at GEICO and future managers will remain an open question.
Walker’s governance risk was a distant but concrete hypothetical: if a future $5 trillion Berkshire had only 5% of its value represented by Class A shares, a buyer might assemble control of that voting pool with perhaps $75 billion of equity and $25 billion of debt. An unscrupulous controller could then impose something resembling a “two-and-twenty” closed-end-fund fee structure.
Morris’s pushback was that not every future activist intervention would be nefarious; if Berkshire’s structure stopped serving shareholders, change might be necessary. Buffett’s own warning supplies the governance standard: a “decent batting average” in personnel is enough, but delaying corrections is the cardinal sin—Charlie Munger’s “thumb-sucking”—and Warren has indicated that his son may ultimately be entrusted to force uncomfortable action.