Warren Buffett on the future of Berkshire

At Berkshire Hathaway’s annual shareholders meeting, streamed live on Yahoo Finance, Warren Buffett and Charlie Munger discuss Berkshire Hathaway’s potential to grow too big to manage.

Video transcript

BECKY FAST: That question comes from Mark Blakely in Tulsa. This is for Warren and Charlie. When we talk about Berkshire we often focus on the insurance activity in the largest non-insurance companies – the Redwoods, as you mentioned in 2019. However, Berkshire has a large number of subsidiaries, most of which are never mentioned.

Is there a point when Berkshire gets too big to manage? And should we be concerned about the lack of information for most Berkshire companies? Is there a time when Berkshire is too big and complex?

WARREN BUFFET: Well, it’s too big to do certain things, that’s for sure. I mean, you know, it’s not– we can’t spend our time looking for $ 100 million acquisitions. But we have wonderful company in Fort Worth. And we had a wonderful man running it and he died recently.

But he ran it – he sold it to me 15 years ago. And he just basically got it, you know? And I couldn’t find the way to the company.

We have – we have this great company that makes recreational vehicles in Elkhart – based in Elkhart, Indiana. And we bought it 15 years ago. I’ve never been there you know

Maybe there is some kind of closet that sends me numbers every month. But I … I think I understand the business pretty well. But I’ve never seen it before. And the guy running it likes it, and he likes it when I keep my nose out of the way. And he lets Greg in a little more than me, because [LAUGHS]

But – but it is – we have a system that works, with wonderful companies and wonderful managers. And it’s up to us to define it. But it is also our job to look after them when we find them. And if you have someone like Paul Andrews who ran TTI who built it from nothing, absolutely nothing, and has never heard of him, and has quadrupled its revenue in the time he ran it for us – And him was happy, the staff were happy. He was a wonderful man. We were happy.

The story goes on

And I’d call him at the end of the year and say, Paul, you know this place is– you turn off the lights and everything. And you should accept a raise.

And he said – or a bonus, or – and he said, well, we’ll talk about that next year, Warren. I mean, he just – he loved – he loved the business. I love Berkshire, he loved the business, and I didn’t mean to add anything by letting him fill out a bunch of reports on how much – how much of carbon he used or something.

You know, it’s just– it’s ridiculous to imagine a guy like Paul Andrews acting antisocial or something. And we would like more of that. And obviously we’ve gotten bigger – they’re harder to buy. But we have a number.

And I don’t think we bought our last one over time. But I certainly don’t see anything in the near future. But we – we increase our interest in those we have a little by buying back stocks. So our shareholders own more of these companies every year, while we – assuming we buy back shares, which is price sensitive. Charlie?

CHARLIE MÜNGER: Yeah, I don’t think we’re going to get too big to manage. Because we’re different from virtually every other large corporation in the United States in that we’re so overly decentralized. We have decentralized so much, and we have so much authority in the subsidiaries, that we can do it for a long, long time as long as it works.

And I would say that our decentralization has so far produced more advantages than shortcomings. But nobody seems to be copying us.

BECKY FAST: Well, but … that’s absolutely true. But I would say that decentralization doesn’t work if you don’t have the right kind of culture to go with it.

CHARLIE MÜNGER: Yes, but we do.

WARREN BUFFET: Yes we do, but–

CHARLIE MÜNGER: And Greg is–

WARREN BUFFET: –but it depends. I mean–

CHARLIE MÜNGER: And Greg will– Greg will keep the culture.

WARREN BUFFET: If we had that – if we had a culture of people trying to make a lot of money at the top over the next five years, it wouldn’t have worked.

CHARLIE MÜNGER: No of course not. And culture is part of it. But assuming we keep the culture, it will – it can go on quite a bit.

WARREN BUFFET: For a long, long time

CHARLIE MÜNGER: Long, long time. I think it can surprise anyone. And besides–

WARREN BUFFET: And Charlie would say to me–

CHARLIE MÜNGER: – the Roman Empire worked, worked for so long because it was so decentralized.

Yes.

Hm.

WARREN BUFFET: Charlie tells me you won’t know. [LAUGHS]

CHARLIE MÜNGER: Yes.

WARREN BUFFET: [LAUGHS]

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