Part 15 in our 29-part series (with the new year, soon to be 30-part series) on the Oracle of Omaha focuses on his Letter to Berkshire Hathaway Shareholders for the year 1991. Here's what Warren Buffett had to say for himself...

1991 was another stellar year for Berkshire Hathaway:

Our gain in net worth during 1991 was $2.1 billion, or 39.6%. Over the last 27 years (that is, since present management took over) our per-share book value has grown from $19 to $6,437, or at a rate of 23.7% compounded annually.

As usual, Buffett says his success can not continue at this pace:

As Berkshire grows, the universe of opportunities that can significantly influence the company's performance constantly shrinks. When we were working with capital of $20 million, an idea or business producing $1 million of profit added five percentage points to our return for the year. Now we need a $370 million idea (i.e., one contributing over $550 million of pre-tax profit) to achieve the same result. And there are many more ways to make $1 million than to make $370 million.

Although in 1991 he may have been right, considering...

Our outsized gain in book value in 1991 resulted from a phenomenon not apt to be repeated: a dramatic rise in the price-earnings ratios of Coca-Cola and Gillette. These two stocks accounted for nearly $1.6 billion of our $2.1 billion growth in net worth last year. When we loaded up on Coke three years ago, Berkshire's net worth was $3.4 billion; now our Coke stock alone is worth more than that.

Each year Buffet likes to take the credit away from himself and shine it on his team, and he often illustrates with a story. Here's the story for 1991:

George Mira, the one-time quarterback of the University of Miami, and his coach, Andy Gustafson. Playing Florida and near its goal line, Mira dropped back to pass. He spotted an open receiver but found his right shoulder in the unshakable grasp of a Florida linebacker. The right-handed Mira thereupon switched the ball to his other hand and threw the only left-handed pass of his life - for a touchdown. As the crowd erupted, Gustafson calmly turned to a reporter and declared: "Now that's what I call coaching."

On his loyalty to Berkshire Hathaway:

At the Harvard Business School last year, a student asked me when I planned to retire and I replied, "About five to ten years after I die."

Buffett discusses the problem that many media companies were having in 1991, the proliferation of news and entertainment outlets (and this was pre-Internet!):

Until recently, media properties possessed the three characteristics of a franchise and consequently could both price aggressively and be managed loosely. Now, however, consumers looking for information and entertainment (their primary interest being the latter) enjoy greatly broadened choices as to where to find them. Unfortunately, demand can't expand in response to this new supply: 500 million American eyeballs and a 24-hour day are all that's available. The result is that competition has intensified, markets have fragmented, and the media industry has lost some - though far from all - of its franchise strength.

In 1991, Berkshire Hathaway bought shoe company H.H. Brown (some of their brands today are Born, dexter and Carolina). An interesting take on H.H. Brown's compensation scheme (are they still doing this???):

A distinguishing characteristic of H. H. Brown is one of the most unusual compensation systems I've encountered - but one that warms my heart: A number of key managers are paid an annual salary of $7,800, to which is added a designated percentage of the profits of the company after these are reduced by a charge for capital
employed. These managers therefore truly stand in the shoes of owners. In contrast, most managers talk the talk but don't walk the walk, choosing instead to employ compensation systems that are long on carrots but short on sticks (and that almost invariably treat equity capital as if it were cost-free).

Buffett on the many companies who'd like to be purchased but don't meet Berkshire Hathaway's criteria:

We've found that if you advertise an interest in buying collies, a lot of people will call hoping to sell you their cocker spaniels. A line from a country song expresses our feeling about new ventures, turnarounds, or auction-like sales: "When the phone don't ring, you'll know it's me."

On sticking with companies it likes instead of actively buying and selling:

Our motto is: "If at first you do succeed, quit trying."

Buffett "unburdens" himself of a failure:

Every writer knows it helps to use striking examples, but I wish the one I now present wasn't quite so dramatic: In early 1988, we decided to buy 30 million shares (adjusted for a subsequent split) of Federal National Mortgage Association (Fannie Mae), which would have been a $350-$400 million investment. We had owned the
stock some years earlier and understood the company's business. Furthermore, it was clear to us that David Maxwell, Fannie Mae's CEO, had dealt superbly with some problems that he had inherited and had established the company as a financial powerhouse - with the best yet to come. I visited David in Washington and confirmed that he would not be uncomfortable if we were to take a large position.

After we bought about 7 million shares, the price began to climb. In frustration, I stopped buying (a mistake that,
thankfully, I did not repeat when Coca-Cola stock rose similarly during our purchase program). In an even sillier move, I surrendered to my distaste for holding small positions and sold the 7 million shares we owned.

I wish I could give you a halfway rational explanation for my amateurish behavior vis-a-vis Fannie Mae. But there isn't one. What I can give you is an estimate as of yearend 1991 of the approximate gain that Berkshire didn't make because of your Chairman's mistake: about $1.4 billion.

Finally, Buffett offers his views on the airline business:

There is no tougher job in corporate America than running an airline: Despite the huge amounts of equity capital that have been injected into it, the industry, in aggregate, has posted a net loss since its birth after Kitty Hawk.