Sunday, December 11, 2005

Keys to Berkshire's Success With Acquisitions

We criticize it [acquisitions], but then we do it. But we have different motivations.

We've been reasonably successful in having people run their businesses with the same passion as before we bought them.

Gillette, the oil companies, etc. all went out and bought a lot of businesses and tried to run them themselves. We're under no illusions that we can do that. We think that having lots of Executive Vice Presidents, directives from headquarters, centralized Human Resources etc. can destroy the incentives of the people who've already gotten rich, and we're counting on them making us rich.

The successor to me will come from Berkshire, knows our system, has seen that it works, and will be surrounded by people who believe in it. So it's not going to be so hard to keep this train going down the tracks at 90 miles per hour.

Munger: Our success has come from the lack of oversight we've provided, and our success will continue to be from a lack of oversight. (Laughter)

But if you're going to provide minimal oversight, you have to buy carefully.

It's a different model from GE's. GE's works - it's just very different from ours.

Buffett: We are a conglomerate - and we hope to become more of a conglomerate.

We're successful because of simplicity itself: We let people who play the game very well keep doing it. Our successor won't change this. The big worry is that the culture is tampered with and there's oversteering. But our board and owners won't allow this.

Excerpt from "2005 Berkshire Hathaway Annual Meeting"

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