Berkshire was a mighty success in the last fifty year and any long-term shareholder's slice has become much more valuable. Two special letters were written by the Chairman and Vice-Chairman to look fifty years back and fifty ahead. Munger came up with a handy list of the 'Berkshire system' which has some queer similarities with Truppenfuehrung of all things and some of the stuff in the Human face of War. Obviously there are also vast differences between one 'business' and the other, and I'm no fan of, let us say, Clausewitz for Business. Still in some cases the essence is surprisingly similar.
---------------The management system and policies of Berkshire under Buffett (herein together called “the Berkshire system”) were fixed early and are described below:
(1) Berkshire would be a diffuse conglomerate, averse only to activities about which it could not make useful predictions.
(2) Its top company would do almost all business through separately incorporated subsidiaries whose CEOs would operate with very extreme autonomy.
(3) There would be almost nothing at conglomerate headquarters except a tiny office suite containing a Chairman, a CFO, and a few assistants who mostly helped the CFO with auditing, internal control, etc.
(4) Berkshire subsidiaries would always prominently include casualty insurers. Those insurers as a group would be expected to produce, in due course, dependable underwriting gains while also producing substantial “float” (from unpaid insurance liabilities) for investment.
(5) There would be no significant system-wide personnel system, stock option system, other incentive system, retirement system, or the like, because the subsidiaries would have their own systems, often different.
(6) Berkshire’s Chairman would reserve only a few activities for himself. [ For a 'few activities' a rather long and remarkable list follows]
P.S: Could not resist to post a picture of Berkshire's HQ team, which handles many key tasks of company currently Nr. 5 in US market cap with 'unbelievable efficiency' to quote Buffett.Why did Berkshire under Buffett do so well?
Only four large factors occur to me:
(1) The constructive peculiarities of Buffett,
(2) The constructive peculiarities of the Berkshire system,
(3) Good luck, and
(4) The weirdly intense, contagious devotion of some shareholders and other admirers, including some in the
press.
I believe all four factors were present and helpful. But the heavy freight was carried by the constructive peculiarities, the weird devotion, and their interactions.
To be true two could not make it, so it is not quite complete...
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