"Recognizing that **it is not the size of an equity investment that determines its value, but how the undistributed earnings are deployed,** Buffett develops the concept of look-through earnings to gauge Berkshire's economic performance. Look-through earnings add to Berkshire's own net earnings **the undistributed earnings in investee companies, less an incremental amount for taxes**. Look-through earnings are not different from [[GAAP]] earnings for many businesses. But they are for Berkshire and probably are for many individual investors. Accordingly, individuals can adopt a similar approach for their own portfolios and try to design a portfolio that delivers the highest possible look-through earnings over the long term. "([Location 565](https://readwise.io/to_kindle?action=open&asin=B01J2SLA5O&location=565)) *** **Tags** — [[quotes]], [[look-through-earnings]], [[operating-earnings]], **See Also** -- [[Warren Buffett]], [[Charlie Munger]] **Source** — [[202308141129 — B — The Essays of Warren Buffett]]