Subject: Re: Just to be provocative
I think the key observations about Berkshire's future performance can be boiled down to something simple: the era of meaningful outperformance is probably, finally, over. Within rounding error.

The top level reasoning goes like this:

Berkshire's operating companies are fine firms, but there are lots of fine firms out there. There is no reason to think that as a collection they will rise in value measurably faster than a random set of plausibly good US firms. Maybe a little bit at the margin if, and to the extent that, they are slightly better than average firms, but nothing material. As a collection they don't have noteworthy returns on incrementally invested capital.

The other side is investments: the portfolio, and the changes to the portfolio. To within rounding error, the rules of investing large portfolios is: if your name is Warren Buffett you can beat the market materially over time, and if it isn't you can't. He will be leaving the office for the last time in the not distant future, so that era is essentially over. The portfolio will be market tracking in future.

Taking the two sides together, one can observe that the trend in value growth per share has been basically constant for the last 27 years, but the sensible expectation is that it's now over. A kink is coming.

As others noted recently, the Apple trade was the greatest single trade in the history of investing, and even with that included in the recent results, Berkshire was merely able to keep up the trend for a few more years. It was a miracle, but we basically can't see any more miracles. There just can't BE a miracle that big again, and nothing short of a move that was both bigger and just as successful could allow Berkshire's value growth to maintain its pace up till now.

Berkshire still has a few advantages, but they are not big in percentage terms. The quality of the insurance arm is one, and the float it offers. And the mere fact of a tradition of rational capital allocation is another...no "sterilizing" stock grants with buybacks of shares while they're wildly overpriced, or ego driven overpriced acquisitions. And of course a very low risk because of the fortress like balance sheet, a tradition I don't foresee changing. But I don't think one can reasonably expect those to offer an advantage of more than 0.5% to 1.0% per year relative to a diversified dartboard portfolio of US equities.

I guess that leaves one last question - if performance were 0.5% to 1.0% better than a broad swath of US equities, what should one expect from a broad swath of US equities? In short, what is the reasonable expectation of the future for US businesses and equities starting from the current valuation and business environments. Much poorer than an average year in the past, possibly for a very long time. We have seen a golden age, but the sun is getting low on the horizon.

Jim