Warren Buffett has long championed a conservative financial approach to investing. He doesn’t advise taking on much debt, and certainly doesn’t think Berkshire, or anyone, should overleverage themselves. But if he does, he says there’s only one smart way to structure it. In fact, his guidance on leverage at Berkshire Hathaway (BRK.B) (BRK.A) is explicit: “We rarely use much debt and, when we do, we attempt to structure it on a long-term fixed rate basis.” 

The line first appeared in the Berkshire executive’s 1983 shareholder letter, as part of a broader outline of manager-owner principles that emphasized conservative financing and accountability to policyholders, lenders, and shareholders. Set against the financial environment of the early 1980s — when interest rates were volatile and refinancing risk was front of mind — the statement served as a practical policy, not a slogan. It has remained part of Berkshire’s canon ever since.

The context of the remark matters. Berkshire’s core business includes large insurance operations where stability and claims-paying capacity are essential. Avoiding heavy leverage lowers the chance that short-term funding pressures undermine long-term promises. Fixing rates when the company does borrow reduces exposure to interest-rate swings and refinancing windows — key risks for institutions that must stay liquid across cycles. The same section of the 1983 letter presents this discipline as a trade-off: the company may forgo attractive deals if they require undue leverage. 

The credibility behind the line rests on both the author’s record and the firm’s structure. As chairman and CEO, Buffett has led Berkshire through multiple interest rate regimes and credit cycles, all while insisting on balance-sheet strength to match a decentralized operating model. In the wake of major dislocations, the company has historically prioritized high liquidity and modest near-term obligations, enabling it to keep operating flexibility when markets are strained. Berkshire’s 2008 shareholder letter eventually framed this approach as a permanent goal — maintain ample liquidity and modest maturities — underscoring why the firm has repeatedly been a provider of capital, rather than a seeker of it, during stress.

That conservative posture shows up in today’s financial profile. Berkshire’s regulated insurance subsidiaries report exceptionally high statutory surplus levels and carry top-tier financial-strength ratings, conditions that are easier to sustain when a parent company avoids aggressive leverage and mismatched funding. The combination of abundant liquid assets and sparing use of debt gives Berkshire the ability to meet obligations while retaining optionality to invest when valuations become attractive. These attributes also help preserve counterparties’ and regulators’ confidence across cycles.

The quote’s relevance is not tied to any single moment; it travels well across market conditions. In periods of rising rates, fixed-rate, long-dated borrowing shields cash flows from interest-expense shocks. When rates fall, the cost of carrying extra liquidity is offset by the strategic value of being able to act quickly without lender constraints. During tight credit, companies with short-term or floating-rate debt can face funding stress precisely when earnings are under pressure; Berkshire’s policy reduces that correlation. And in robust markets, restraint on leverage can prevent overpayment for assets and protect per-share value if optimism later proves cyclical. 

Ultimately, the guiding idea is straightforward: by limiting leverage and controlling duration risk, a diversified conglomerate with long-tail liabilities can compound intrinsic value more predictably and be positioned to deploy capital when others are constrained. That is the operational logic behind Berkshire’s line on debt — and why it remains an instructive benchmark for risk management and capital allocation across the corporate landscape.