I enjoyed the letter thoroughly and though not my favorite it complements the 60+ annual letter collection well (includes BPL in count).
The subtle implication throughout the letter is the almost unrealistic level of capital that will need to be deployed over the next 10 years in order for BRK to have a reasonable shot of beating the market. I think it is becoming clear that a more robust capital return will need to be implemented so as not to hurt investors. Do the simple math and to see the huge challenge that besets the organization at a time when stability will be tested with a likely leadership transition.
In order to compound book value at just 10% implies >$550B will have to be deployed over next 10 years which is 1.6x more than has been deployed in the previous 53 years. At the current P/B this will yield just a 6% IRR assuming P/B is 1x exit. He is almost telling us to read between the lines of what he said about why investors are often left frustrated with money managers besides fees. It is b/c gross returns often suffer as capital levels become larger and larger and the opportunity set remains the same size.
The 53 year BRK record is amazing delivering a 20% IRR but look at the past 10, 15, and 20 year record on the BVPS growth and stock return. BVPS grew 9%, 11.5%, and 10.6% for 20Y/15Y/10Y periods it is no wonder the stock has delivered 8.9%, 11%, and 8.1% IRRs, respectively, over the same period.
Yes it is ahead of the market in by a slim margin in the longer periods but I think this frustrates Buffett more than anyone can imagine. He is the guy that use to crush the market and he knows the margin of outperformance will only grow narrower over time, which at a point will only guarantee in line performance at best.
Btw, 20 year BVPS growth and stock returns match incremental returns on capital given BRK as deployed about $293B which generated about $32.5B in incremental AT earnings or 11.1% ROIIC. Somehow the math always works out in the LT and Buffett understands this better than everyone.