Subject: Re: Double digits
Buffett has said that 10% returns long term for Berkshire is an aspirational goal. Why do you think that BRK would return a certain amount over inflation?

I consider the first sentence to be meaningless without quantifying what inflation you're talking about. Only real returns matter.
That's a trivial hurdle, or a huge hurdle, depending on the inflation regime.

As for why I think Berkshire will return a certain amount above inflation, well, because that's what companies do, in general.

If everything is going up in price at the same rate (salaries, taxes, revenues, materials), then so do after tax profits.
Consequently, the profits of the business world in aggregate adjust for inflation more or less perfectly over time.
Some firms will do better or worse than the average, or adapt to changes more or less quickly, or inflation may be concentrated in some sectors, but that's the base line assumption for the typical firm:
The general rule is that earnings rise a certain amount above inflation on average, through high and low inflation periods.

This is true both theoretically and empirically. One study found a 0.93 correlation over time between rise in general prices and rise in corporate profits in the same interval.
Over very long periods it's pretty much a perfect match once the business cycle is smoothed out.
In very round numbers, the average US firm in the average year is likely to generate value somewhere in the rough vicinity of inflation plus 5% - 5.5%.
That figure tends to be relatively predictable over time in real terms, but not in nominal terms, for good solid reasons.
(Long run past US market returns have been higher than that, but then long run US market returns have included a trend of getting slowly more expensive at around 1.5%/year, give or take)

The only exception seems to be when inflation is so high that the economy breaks for a while.
A broken economy is not good for anyone's profits.
But that is not the current situation. For now it doesn't seem to be a likely situation for the foreseeable future.

Berkshire is big and diversified, so what is true about the broad market with inflation is likely to be fairly true about them, and historically has been: it generally gets passed through.
Berkshire will be at a very slight disadvantage to the median firm because it has little long term debt that is eroded in real terms by inflation.
But it is also at a slight advantage because I believe it has a slightly above-average amount of pricing power among its business units.
The coming year or two will be a good test of that thesis.

Anyway, I think BRK from here grows high single digits in share price over the next say 20 years. This is irregardless of what inflation is over the next 20 years.
You may be right.
But assuming so, it doesn't say anything useful for planning--only real returns matter to your wealth : )
That's a good outcome if inflation is (say) 2-3% or lower, a poor outcome if it's (say) 4-5% or higher.

Personally, I expect a return of inflation plus about 7-8% from Berkshire for the next 5-10 years, maybe inflation plus 6-7% thereafter.
A bit less if I'm unlucky, a bit more if I'm lucky, but I'd be surprised to be off by more than around 1%, possibly 1.5%.
I have no forecast for what US inflation might be, nor in fact much interest in it, as I don't expect it to be relevant to my real returns unless it explodes.
The most obvious downside risk is not inflation per se, but a big fall in the US dollar, not all of which would show up as US headline inflation within a reasonable time frame.
Berkshire's revenues are unusually concentrated in US dollars for a big company.
Incidentally, that's a risk no matter where you live. Most "stuff" has a global price.

Jim