Warren Buffett rarely uses a lot of debts.

Warren Buffett has long defended a conservative financial approach to investment. It is not recommended to take a lot of debts, and certainly does not believe that Berkshire, or anyone, should surpass themselves. But if he does, he says that there is only one smart way to structure. In fact, his guidance about the leverage in BRK.B (BRK.A) (BRK.A) is frank: “We rarely use a lot of debts, and when we do so, we try to structure it on a long -term fixed rate.”

The line appeared for the first time in the shareholders ’speech in Berkchire’s executive for the year 1983, as part of a broader plan for the principles of the manager of the manager who emphasized conservative financing and accountability towards documentary holders, lenders and shareholders. It was identified against the financial environment in the early eighties – when interest rates were volatile, the risk of financing against the mind – the statement was a practical policy, not a slogan. It has been part of Berkshire’s law since then.

The context of the observation is important. Berkshire basic work includes major insurance operations where stability and ability to pay claims are necessary. Avoiding heavy financial lever reduces the chance to undermine short -term financing pressure and long -term promises. Fixing rates when the company borrows reduces exposure to swinging the interest rate and re-financing the main risks of institutions that must remain liquid through the courses. The same section of the 1983 letter displays this discipline as the comparison: the company may give up attractive deals if it requires an unjustified crane.

The credibility behind the line depends on the author’s record and the structure of the company. As president and executive president, Buffett Berkshire has led with multiple interest rates and credit courses, all with insisting on the strength of the paper funded to match the decentralized operating model. In the aftermath of the major disturbances, the company historically gave high liquidity priority and modest obligations in the short term, allowing it to maintain the elasticity of operation when the markets are tense. Ultimately, the 2008 shareholder of Berkshire frams this approach as a permanent goal – maintaining abundant liquidity and modest maturity – which confirms the reason that the company has been equipped with capital again and again, instead of its student, during tension.