2001

Click here to read the letter.

---

🧠 Key Takeaways

• By ignoring real, unavoidable costs like depreciation, interest, and taxes, EBITDA tends to paint an unrealistically flattering picture of a company’s profitability. But that’s the point—it’s not just misleading by accident.

---

✍️ Memorable Quotes

“Bad terminology is the enemy of good thinking. When companies or investment professionals use terms such as “EBITDA” and “pro forma,” they want you to unthinkingly accept concepts that are dangerously flawed. (In golf, my score is frequently below par on a pro forma basis: I have firm plans to “restructure” my putting stroke and therefore only count the swings I take before reaching the green.)”

Warren and Charlie have always been pretty vocal about their dislike of made-up metrics like EBITDA—Charlie famously called it “bull$h1t earnings” and “horror squared.” In their eyes, metrics like these are designed to make weak businesses look stronger than they actually are.

By ignoring real, unavoidable costs like depreciation, interest, and taxes, EBITDA tends to paint an unrealistically flattering picture of a company’s profitability. But that’s the point—it’s not just misleading by accident.

Warren and Charlie see it as a deliberate way to fluff up the numbers, which ultimately distracts investors from a company’s actual cash flow and financial fortitude.

---