1965 ................ $ 4 $ 4.081975 ................ 159 (6.48)1985 ................ 2,443 18.861995 ................ 22,088 258.20Yearly Growth Rate: 1965-95 33.4% 14.7%These results have not sprung from some master plan that weconcocted in 1965. In a general way, we knew then what we hopedto accomplish but had no idea what specific opportunities mightmake it possible. Today we remain similarly unstructured: Overtime, we expect to improve the figures in both columns but haveno road map to tell us how that will come about.We proceed with two advantages: First, our operatingmanagers are outstanding and, in most cases, have an unusuallystrong attachment to Berkshire. Second, Charlie and I have hadconsiderable experience in allocating capital and try to go atthat job rationally and objectively. The giant disadvantage weface is size: In the early years, we needed only good ideas, butnow we need good
big
ideas. Unfortunately, the difficulty offinding these grows in direct proportion to our financialsuccess, a problem that increasingly erodes our strengths.I will have more to say about Berkshire's prospects later inthis report, when I discuss our proposed recapitalization.
Acquisitions
It may seem strange that we exult over a year in which wemade three acquisitions, given that we have regularly used thesepages to question the acquisition activities of most managers.Rest assured, Charlie and I haven't lost our skepticism: Webelieve most deals do damage to the shareholders of the acquiringcompany. Too often, the words from
HMS Pinafore
apply: "Thingsare seldom what they seem, skim milk masquerades as cream."Specifically, sellers and their representatives invariablypresent financial projections having more entertainment valuethan educational value. In the production of rosy scenarios,Wall Street can hold its own against Washington.In any case, why potential buyers even look at projectionsprepared by sellers baffles me. Charlie and I never give them aglance, but instead keep in mind the story of the man with anailing horse. Visiting the vet, he said: "Can you help me?Sometimes my horse walks just fine and sometimes he limps." Thevet's reply was pointed: "No problem - when he's walking fine,sell him." In the world of mergers and acquisitions, that horsewould be peddled as Secretariat.At Berkshire, we have all the difficulties in perceiving thefuture that other acquisition-minded companies do. Like theyalso, we face the inherent problem that the seller of a businesspractically always knows far more about it than the buyer andalso picks the time of sale - a time when the business is likelyto be walking "just fine."Even so, we do have a few advantages, perhaps the greatestbeing that we
don't
have a strategic plan. Thus we feel no needto proceed in an ordained direction (a course leading almostinvariably to silly purchase prices) but can instead simplydecide what makes sense for our owners. In doing that, we alwaysmentally compare any move we are contemplating with dozens ofother opportunities open to us, including the purchase of smallpieces of the best businesses in the world via the stock market.Our practice of making this comparison - acquisitions againstpassive investments - is a discipline that managers focusedsimply on expansion seldom use.
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