2014: Why does Buffett compare Berkshire's book value to the S&P 500?
CAROL LOOMIS: This question comes back a little to a question asked earlier about your annual performance standard that you comparison.
“Mr. Buffett and Mr. Munger, I think of you as running a rational company. But when I look at your annual comparison of Berkshire’s book value per share versus the S&P average, I don’t see any rationality in that at all.”
“What is the logic of comparing a stock market index against the rise in an operating company’s book value? And an operating company is predominantly what Berkshire is these days, so why do you annually make this irrational comparison?”
CHARLIE MUNGER: Let me answer that one.
WARREN BUFFETT: OK. (Laughter)
CHARLIE MUNGER: The answer is you’re totally right, and we do that because Warren wants to make it eccentrically difficult for himself. So if you don’t understand people who like to wear hair shirts, you’ll never figure out why anybody would do such a thing.
It’s a ridiculous way to make a comparison, but it makes it hard for Warren to look good. And he likes to climb mountains that are difficult. But it’s insane, you’re right. (Laughter and applause)
WARREN BUFFETT: Yeah, yeah.
Normally when he goes all wishy washy like that, I like to clarify. But I don’t think I’ll try. (Laughter)