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I think the $105K starting capital is a bit misleading in terms of his capital constraints. He started 1957 with a very small amount of capital in a down market year but was up to around $7 million by 1961, which is $40-$45 million in today's terms. By the end of the partnership he was at almost $600m in today's dollars. There is an enormous difference between running $1 million and running, say, $50 million in today's dollars. If you asked me whether I would consider it more difficult to generate Buffett's 29.5% CAGR given the increase in his capital over the BPL years or 50% CAGR managing only $1m every year for 13 years, I would pick the former.

I agree, but let's say that he wasn't significantly "capital constrained" until he got above $5M in capital, and say for the sake of discussion that this occured in 1960 (I don't have the numbers in front of me). If what he said is accurate, that he could achieve 50% returns with small amounts of capital, he should have had returnd of around 50% from 1957 to 1960. However, he didn't even come close to that, and never visibly achieved rates of return in the vicinity of 50%.

To pick a single year, in 1957 he started with $105,100, and his returns were I believe 10%. One year is not comprehensive, but it supports the point -- this is not a 50% return.

I understand conceptually what he is saying -- in today's market, if you have some unheard of but healthy little company trading at 0.1x NAV, you might expect to get a 50-250% return from that in a short time, and if you can fill up a portfolio with those, you might expect total return of 50% or more in a year. If these opportunities are micro-caps with a market cap of $10-20M with daily dollar volume of $10,000, they are not going to be available to you if you are managing more than say $10 million -- figure 2-3% weighting of each stock, that is $200-300K per stock, which would be 20-30 days of trading volume, maybe not possible. I totally agree with this point and have experienced it first hand.

My quibble is with this 50% figure. To put it simply, if Buffett tells us that he "did achieve", "could achieve", or "could have achieved" (depending on the source of your quote) 50% returns with small amounts of capital, why didn't he?

T
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