Warren Buffett crushed the S&P 500
Categories: VC, Startup, Product
Summary
Warren Buffett's Berkshire Hathaway delivered a 39,000x return (19% CAGR) versus the S&P 500's 405x return (10% CAGR) from 1965-2025—proving that while index funds beat most professionals, exceptional operators can dramatically outperform through disciplined, long-term capital allocation.
Key Takeaways
- S&P 500 index funds generated 10% compound annual growth rate over 60 years, delivering a 405x return—this should be the benchmark founders compare their capital deployment against.
- Berkshire Hathaway's 19% CAGR (39,000x return) demonstrates the power of operational excellence and focus—a 9 percentage point annual advantage compounds to 96x outperformance over 60 years.
- Buffett paradoxically endorsed index funds for most investors while proving himself the exception—founders should recognize when they have genuine competitive advantages before betting on beating the market.
- The 405x vs 39,000x comparison illustrates why operational efficiency matters more than market selection—founders optimizing unit economics and capital efficiency can compound returns at multiples of industry averages.
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Transcript Excerpt
Warren Buffett implicitly endorsed Jack and Vanguard in the 1996 Berkshire annual shareholder letter where he wrote, "The best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results delivered by the great majority of investment professionals." Now, interestingly, >> if you had invested in Berkshire, it would have been a much, much better investment [laughter] than just buy the index. Berkshire was the exception. >> From 1965 to 2025, if you had invested in the S&P 500, you would have, kind of unbelievably, a 10% compound annual growth rate. That's a 405x return. Berkshire was a 19% compound annual growth rate for a 39,000x return. 405 versus 39,000. >> Who got the truth? Is it you? [music] Is it you?…