They concentrate and overemphasize the diversity of the businesses and underappreciate and sometimes overlook the cultural unity. Berkshire subsidiaries engage in a wide range of totally unrelated businesses, insurance and paint, energy and housing, transportation and food, jewelry and pig-feeding equipment.
Profit margins are all over the place, stretching from 1% at McLane, the logistics supply chain manager, to 25% at BNSF Railway. Berkshire subsidiaries were acquired at prices all over the map, way less than a billion for Justin boots, 2 billion for Shaw carpets, 9 billion for the Marmom group, the conglomerate that Jay and Robert Pritzker built.
They were acquired at varying multiples, from cheap bargains for the maker of Garanimals to princely premiums for the likes of BH Energy. And Berkshire subsidiaries are headquartered all over the map. Beneath that slide is a map of the United States of America that in this picture are not showing up, but they are in Massachusetts, North Carolina, Tennessee,
That model grows market share, increases total premiums, and enlarges aggregate profits. All Berkshire subsidiaries embrace the golden rule. Do unto others as you would have them do unto you.
or entrepreneurs wanting security. The most dramatic are subsidiaries I call corporate orphans, those that were owned serially by leveraged buyout operators, private equity firms, or bankruptcy trustees.
So if they deteriorate economically, culturally, or for other reasons, they're sold. And that explains the subsidiaries . All but one are American companies based in America with managerial affinity to things Berkshire has been doing for a long time and understands.
"The Street Car Conspiracy" by the author and former US and antitrust attorney Bradford Snell refers to the allegations that GM and other companies like Firestone, through subsidiaries , purchased and dismantled trams, trolleys, and electric trains in many cities across the United States in order to eliminate the car industry's number one competitor. Others argue that the fall of public transportation was due to the culmination of other factors, such as the Depression, labor unrest, market forces,
Today, the mix is the other way around. 80% of Berkshire's value is in its 50 operating subsidiaries and only 20% in common stocks. Berkshire is today America's fifth largest corporation.
Berkshire is thoroughly decentralized, with subsidiary CEOs having virtually unbridled discretion over all operational and strategic decisions. Autonomy starts at the top and trickles down throughout the subsidiaries and in most subsidiaries , it tends to trickle down across that. A conspicuous example is The Pampered Chef, which sells its kitchen gadgetry through 70,000 independent distributors, all of whom call their own shots.
in the UK or Luxembourg or elsewhere, where the Icelandic banks had operations. We did not have any access to data from the subsidiaries . The Luxembourgian authorities supplied us with two data points, where we could see that the maturity of the loan books of the subsidiaries
The problem with that is they're very global-- I'll show you an interconnected map across the world-- and they live globally but die locally. So to die, if you have 2,000 subsidiaries , each one of these has to go into a bankruptcy procedure, depending on the law in that country and that's a mess. And that's what happened with Lehman.
but Berkshire has a distinctive one, based on a core set of shared values. In my research, I probed Berkshire's fifty main subsidiaries , seeking to identify their corporate cultures, looking at the practices and beliefs that define them, through legends, lore, and the trials of transitions.
That would be a breach, I think, of Berkshire culture. And if that kind of decision were made, the CEO began selling off subsidiaries , that would destroy Berkshire, it would undermine, at least, a very important fundamental principle.
And my response, thanks to my wife, was there's only one Warren Buffett. anymore, and began to micromanage the CEOs, to sell subsidiaries , or to skate
I then scrutinized these profiles, and as I did a pattern emerged. I saw recurring traits across all of them, nine altogether, all being intangible traits that the subsidiaries turn into economic gain.
Excellent question. Thanks. I would first draw a distinction between common stock investments like those two that you mentioned, where Berkshire buys a minority interest and doesn't have the full control over those enterprises, and on the other hand, the subsidiaries that it does fully own and fully control. So the commitment of permanence is to those companies that it fully controls and fully owns.
And my response, thanks to my wife, was there's only one Warren Buffett. Does Berkshire look for companies that already bring the same cultural values to it, or do the subsidiaries evolve to that same point?
We did not have any access to data from the subsidiaries . The Luxembourgian authorities supplied us with two data points, where we could see that the maturity of the loan books of the subsidiaries were also somehow connected to ISK risk, so dismissing this statement that the growth was primarily
People prize autonomy and complex businesses gain value from hands-off oversight. Berkshire is thoroughly decentralized, with subsidiary CEOs having virtually unbridled discretion over all operational and strategic decisions. Autonomy starts at the top and trickles down throughout the subsidiaries and in most subsidiaries , it tends to trickle down across that.