ased its nershin interest last vear in ea of its"Big Four” Express.Coca-CoBMd Wells Fargo.We purchascdtiohr of IBM (increasnu ownership to 84%versus .8%at yearend 2014)and Wells Fargo (going to98%from 94%).At the othe in Ars rais to 15.6%In case you think these seemingly small changes aren't important,consider this math:For the four companies in aggregate,each increase of one percentage point in our ownership raises Berkshire's portion of their annual eamings by about $500 million ssess excellent businesses and are run by managers who are both talented and qity range from exc lent to staggering.At 复steoeaaneopaaaeoEa3o If Berkshire' are used as the marker our on of the "Big Four's"2015 earning pay us-about $1.8 billion last year.But make no mistake:The ne earnings we don't report are every bit as valuable to us as the nortion Rerkshired own stock-a move that increases ture earnings wit us to lay out e retaine the h expect that the per-share eamnings of these four investees.in aggregate will grow substantially over time If gains do indeed materialize,dividends to Berkshire will increase and so,too,will our unrealized capital gains Our flexibility in capital allocation our willingness to invest large sums passively in non-controllec e over companies that limit themse ves ht.In like manner-well not exactly like manner our appetite operating businesses or passive investments doubleso chances of finding sensible uses for Berkshire' seyond that,having a h ho or ma securities gives us a stockpil tapped w an elephant-s ered to us It's an election year,and candidates can't stop speaking about our country's problems(which,of course. of this negative drumbeat,many Americans now believe that their children will not That view is dead wrong:The babies being bom in America today are the luckiest crop in history. American GDP per capita is now about $56,000.As I mentioned last year that-in real terms-is a boma leap far beyond the wildest dreams of my parents Americans in 1930.Rather they work far more efficiently and thereby produce far more This all erful trend i certain to continue:America's economic magic remains alive and well Some commentators hemoan owth in real GDP-and.ves.we would all like to see a higher rate.But let's do some simple math using the much-lamented2%figure.That rate,we will see.delivers astounding gains. > ‹ Berkshire increased its ownership interest last year in each of its “Big Four” investments – American Express, Coca-Cola, IBM and Wells Fargo. We purchased additional shares of IBM (increasing our ownership to 8.4% versus 7.8% at yearend 2014) and Wells Fargo (going to 9.8% from 9.4%). At the other two companies, Coca-Cola and American Express, stock repurchases raised our percentage ownership. Our equity in Coca-Cola grew from 9.2% to 9.3%, and our interest in American Express increased from 14.8% to 15.6%. In case you think these seemingly small changes aren’t important, consider this math: For the four companies in aggregate, each increase of one percentage point in our ownership raises Berkshire’s portion of their annual earnings by about $500 million. These four investees possess excellent businesses and are run by managers who are both talented and shareholder-oriented. Their returns on tangible equity range from excellent to staggering. At Berkshire, we much prefer owning a non-controlling but substantial portion of a wonderful company to owning 100% of a so-so business. It’s better to have a partial interest in the Hope Diamond than to own all of a rhinestone. If Berkshire’s yearend holdings are used as the marker, our portion of the “Big Four’s” 2015 earnings amounted to $4.7 billion. In the earnings we report to you, however, we include only the dividends they pay us – about $1.8 billion last year. But make no mistake: The nearly $3 billion of these companies’ earnings we don’t report are every bit as valuable to us as the portion Berkshire records. The earnings our investees retain are often used for repurchases of their own stock – a move that increases Berkshire’s share of future earnings without requiring us to lay out a dime. The retained earnings of these companies also fund business opportunities that usually turn out to be advantageous. All that leads us to expect that the per-share earnings of these four investees, in aggregate, will grow substantially over time. If gains do indeed materialize, dividends to Berkshire will increase and so, too, will our unrealized capital gains. Our flexibility in capital allocation – our willingness to invest large sums passively in non-controlled businesses – gives us a significant edge over companies that limit themselves to acquisitions they will operate. Woody Allen once explained that the advantage of being bi-sexual is that it doubles your chance of finding a date on Saturday night. In like manner – well, not exactly like manner – our appetite for either operating businesses or passive investments doubles our chances of finding sensible uses for Berkshire’s endless gusher of cash. Beyond that, having a huge portfolio of marketable securities gives us a stockpile of funds that can be tapped when an elephant-sized acquisition is offered to us. ************ It’s an election year, and candidates can’t stop speaking about our country’s problems (which, of course, only they can solve). As a result of this negative drumbeat, many Americans now believe that their children will not live as well as they themselves do. That view is dead wrong: The babies being born in America today are the luckiest crop in history. American GDP per capita is now about $56,000. As I mentioned last year that – in real terms – is a staggering six times the amount in 1930, the year I was born, a leap far beyond the wildest dreams of my parents or their contemporaries. U.S. citizens are not intrinsically more intelligent today, nor do they work harder than did Americans in 1930. Rather, they work far more efficiently and thereby produce far more. This all-powerful trend is certain to continue: America’s economic magic remains alive and well. Some commentators bemoan our current 2% per year growth in real GDP – and, yes, we would all like to see a higher rate. But let’s do some simple math using the much-lamented 2% figure. That rate, we will see, delivers astounding gains. 7