Henry: And now we’re going to talk about Berkshire Hathaway. For many of our clients this may be an eye-glazing moment. You’ve heard most of this before but we’re going to try and come up with some new insights. Linda and I have owned Berkshire for clients since the 1980’s. We bought the first shares in the late-80’s at somewhere around $3,000 per share. And now we own Berkshire at obviously much higher price. The question is why, what have we learned. It’s been a tremendous experience learning from Buffett over the years. Originally all we had were the hard copies of the annual reports. We always keep one or two on the coffee table. We couldn’t go online to read them because there was no online. We started to go to meetings in the 1990’s and we’ve been to a number of them. If fact, we all went pre-COVID to Omaha. We did pretty well in the 5k…Bobby I seem to remember you finished a little ahead of the rest of us.
Linda: Going to a Berkshire meeting is like going to Church.
Henry: Temple for the rest of us.
Linda: It’s like you’re revisiting the essential Truth.
Jeff: We talk about building good habits for our clients. Henry and Linda, introducing us to Berkshire, and having that be such a big part of the culture here, reading, listening to their talks, and going there has been all about building good habits for ourselves.
Henry: What does Berkshire represent? It’s an emotional and intellectual shorthand for us here. If we did a word cloud with Berkshire, what would we come up with.
Group: Rationality, Reason, Principles, Integrity.
Henry: If we think about it that way, how does it affect the way we look at a business. It’s looking at relationships, looking at the partnerships they form. Looking at the strength of the business. For instance, if you look at something as simple as a railroad, what would you do if someone gave you all of the money on the planet to build another transcontinental railroad, how would you do it in a lifetime? How would you get all of the approvals, and accumulate all of the land, and deal with all of the individual localities. You couldn’t do it. So there’s an underlying value to businesses like Burlington Northern, that was not part of Berkshire when we bought it for most of our clients.
Bobby: If anyone wants to see how difficult it is to build a railroad there is a highspeed line being built in Florida (Brightline) and it’s been going for the better part of a decade now. They’ve just in the past couple of year gotten it to go from West Palm Beach to Miami.
Henry: Well that’s better than the second avenue subway that took forty years and they’ve got three stops.
Linda: So many of the businesses that are part of Berkshire were not part of Berkshire when we bought. So it’s everchanging, it’s not a stodgy business model.
Jeff: We’ve been asked before about Berkshire’s dividend, or lake thereof. Part of that is, ok they are not paying a dividend, what are they doing with the money? And part of it is acquiring and growing these new businesses. Since you guys initially invested, from then to today, the list of those businesses is ginormous.
Henry: A few years ago they used the image/metaphor of a grove to describe the business areas they are active in. From the time that we bought Berkshire, they’ve added all of the major components of the company. They started with the core of an insurance businesses. And Buffett had wanted to buy this one business when he was very young, and the guy didn’t want to sell. A friend said that once a year he’s in the mood to sell, and Buffett said “well call me that day.” And he literally called this guy, Jack Ringwalt, and the story is he was late because he didn’t want to put money into the parking meter, he wanted to find one that had time left, and that convinced Buffett he was frugal enough to be part of Berkshire. But the businesses that have been added are the utilities which is enormous, the railroad which is enormous, over $100 billion of Apple which by any standard is enormous. And it goes on and on and on. So businesses aren’t static. The price of Berkshire, or of Google, or Amazon, or Starbucks, isn’t higher today compared to where it was because you are paying for the same business activity. They have grown, they have changed, they have evolved. This is a very dynamic process, and we are just along for the ride and enjoying it.