Subject: The shoemaker's child
In his 1986 annual letter to shareholders, Mr. Buffett defined "owner earnings".
The context for this was his acquisition of Scott Fetzer. He thought Scott Fetzer
was worth more than reported GAAP earnings and wanted to explain why. He said
these owner earnings represented:

(a) reported earnings plus (b) depreciation, depletion, amortization, and certain
other non-cash charges less (c) the average annual amount of capitalized expenditures
for plant and equipment, etc. that the business requires to fully maintain its long-term
competitive position and its unit volume. (If the business requires additional working
capital to maintain its competitive position and unit volume, the increment also should
be included in (c).

It's clear from the discussion in the 1986 letter that he and Charlie use some form of
owner earnings to value businesses for either part or full purchase. Do they value
Berkshire the same way?

I asked my friend ChatGPT if Mr. Buffett had ever publicly calculated owner earnings
for Berkshire. ChatGPT said yes, he did so in the 2020 annual letter, $51.9 billion.
Not for the first time, ChatGPT was hallucinating.

Out of curiosity, I calculated owner earnings for Berkshire myself. I stayed simple
and conservative by subtracting full capital expenditures from cash from operations.
I compared owner earnings per share to regular old earnings per share and book value
per share for the last 20 years:

https://public.flourish.studio...

Here's the same thing indexed to 100:

https://public.flourish.studio...

I'd be interested to hear how you'd:

1) Calculate owner earnings for Berkshire
2) Normalize those earnings
3) Determine a growth rate for those earnings

Ears