Berkshire Hathaway 1994 Annual Meeting Audience Question # 52

What is being done to get World Book back on track

Warren Buffett:

OK?

Audience Member:

Hi, David Winters, from Mountain Lakes, New Jersey.

Just wondering, World Book’s had a tough time lately, and I’m wondering if there’s things you’re doing to try to improve that.

And also, The Buffalo News has been fabulous. And I’m kind of wondering what’s driving The Buffalo News?

Warren Buffett:

Buffalo News is doing what?

Audience Member:

Fabulously.

Warren Buffett:

Yeah, it’s doing well, right. Well, I would say you got to give credit Stan Lipsey… I’m not sure whether Stan’s here right now, but… who’s been running the News.

World Book, in terms of unit sales… as we put in the report… have fallen off significantly the last few years. It’s actually surprising, in a sense, how well the profits have held up because they’ve done a good job, a very good job, in that respect.

And as we put in the report, we don’t know the answer, precisely. We are, Ralph Schey is… has taken some actions… is taking some actions… that he thinks will improve the operations.

Ralph’s record as a manager is absolutely at the top of the list. I mean, it… I wrote about it in the 1992 report.

In 1993, Ralph did even better. I mean, it was a… fabulous. I think, probably, may have been 110 or so million pre-tax on 90-some million of average equity capital, or something of the sort.

So it’s a fabulous record.

But Encyclopedia Britannica, as you probably know, ran at a loss last year. The encyclopedia business has been very… has been poor. Could be due to electronic competition, could be due to recruiting problems for salespeople. Obviously, it can be a combination of many factors.

If we knew the answer, we’d have… you wouldn’t be seeing those figures right now. But it is a top item of attention for Ralph. He takes anything that’s not performing as well as before very seriously. And we will see what happens.

But I don’t have a prediction on it. I wish I knew the answer. I don’t see any variables to, in any intelligent way, tell you or… we put in the report the best we could do on that.

The profitability has, like I say, has been pretty good. But obviously, current trends of new sales will catch up with us at some point, unless we boost unit sales.

I don’t think our market share, if you look at print encyclopedias, has fallen. But I can’t be sure of that, but I think that’s probably true. But there are an awful lot of encyclopedias going out there as part of a bundled product with computer sales.

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