Berkshire Hathaway 2018 Annual Meeting Audience Question # 44

The culture of Berkshire is very, very strong

Warren Buffett:

OK, Gregg.

Gregg Warren:

Warren, you’ve noted time and again that there is a strong common culture shared across Berkshire subsidiaries built on a commitment to honesty and integrity, a focus on the long-term, and an emphasis on customer care. And it’s also critical to find cultures that mesh well with Berkshire’s when acquiring operating companies.

In most cases, the managers that are currently running these subsidiaries are the same individuals who are members of the families that originally sold their firms to Berkshire, leaving them with a vested interest in the businesses they are running and a strong connection to the culture they tend to share in common with Berkshire.

It seems to me that the greater challenge is in ensuring that the large publicly-traded firms that have been acquired and account for a meaningful and growing amount of Berkshire’s overall value, stay the course. Could you comment on whether or not this is the case and what the greatest challenge is for you and Charlie when it comes to not only maintaining Berkshire’s culture but in finding firms that would fit in well with what you’ve built?

Warren Buffett:

Yeah, I think the culture is very, very strong. And I think it gets reinforced… frankly, I think it gets reinforced by the shareholders we have. I mean, we have a different body
of shareholders and we look at those shareholders, I think, in a somewhat different way than a good many other companies do.

I mean, I think there are a fair number of public companies that wish they didn’t have, you know, public shareholders. We’re happy to have public shareholders. And we like having individual shareholders. And we don’t favor institutions. And we’re not going to, you know, give guidance and talk especially to them on investor calls and all that sort of thing. We want our… we want it to be directly with… we want shareholders who are partners, basically.

And it begins with that. It goes to the directors. We have directors who are not… well, I’ve been on 19 boards, and I’ve never seen another board like ours. And I think it’s terrific that we’ve got the people who represent, in many cases, lots of shares themselves. They didn’t gets special deals. It’s a group of owner-oriented, Berkshire-conscious, business-savvy owners.

And we don’t have anybody on the board because they’re a leading, you know, educator or whatever it may be. We want people who, basically, think about how to run a business well for themselves and for their partners. And we’ve got managers who fit into that culture, who have chosen that culture in coming with us.

And sometimes we have the second or the third or fourth generation, say at the Nebraska Furniture Mart, that share that. Is it perfect? No, it’s far from perfect. I mean, you don’t get everybody thinking the same way. We have people… we have people that are very independently minded running a lot of businesses. And some of them have different political beliefs, they have different… they see through different lenses than we do, to some degree.

But in terms of having a common, strong, positive culture, I don’t think there’s any big public company that has it any better than Berkshire. And I think that will continue because people opt into it to a great deal. Cultures get passed along. You do things that are consistent with the culture, so you do… what you talk about is what you do.

And you don’t find people saying, you know, “We’re a wonderful partnership,” and then voting themselves, you know, huge options. And then a whole bunch of other people will say options beneath them because they can’t look like they’re taking it all for themselves, and arranging… I read about some deal where it could pay off with many, many, many billions of dollars, the other day. We won’t name names.

But we’ve got as good a culture as you can get. And I would say, net, it grows stronger. We have a few people all of the time that really don’t buy into it entirely. I mean, it is not 100 percent. But it’s as close to it.

And I think it gets closer all the time as we go along. And we will keep… we will try to keep behaving in a way that reinforces it and doesn’t dilute it. And I think that will not only work for Charlie and me but it will work for our successors very well. It won’t be perfect.

Charlie?

Charlie Munger:

Every time I come to one of these meetings and sit in the manager’s luncheon, I feel more strongly at the end of the luncheon that the culture and values of Berkshire Hathaway will go on and on for a long time after the present management is gone.

In fact, I think it’ll go on after all of the present managers are gone. I think we’ve started something here that will work well enough that it will last. And one of the reasons it will last is it’s not that damned easy to duplicate.

So the one that is present is likely to just keep going and going. Think of how little direct copying of the Berkshire system there’s been.

Warren Buffett:

But it won’t produce the returns it’s produced in the past even.

Charlie Munger:

No, I think it’s going to last a long time for a very simple reason. It’s going to…

Warren Buffett:

It works.

Charlie Munger:

… deserve to last a long time.

Warren Buffett:

It works.

Charlie Munger:

And it’s going to work.

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