Berkshire after Buffett, Sandy Gottesman

This is from a video interview with Sandy Gottesman‘Becoming Warren Buffett’, 47:21 min in he said this regarding the long term of Berkshire Hathaway:

“I don’t know of a better investment for my children and my grandchildren and maybe a couple of people that come after than Berkshire, as long as the culture remains the same. That is the most important thing.

I know that the people that are coming along and that we are thinking about as potential replacements for Warren some day, have a very strong sense of culture and have a very strong sense of obligation to Warren and everything Warren stands for.

I have no doubt that for 25 years afterwards the culture isn’t going to change and meanwhile you own a group of companies that are extraordinary. And maybe, maybe management will do a few things that Warren might not have done. They are going to be very strong value oriented people and very decent, honest individuals.

Any time Warren says something, you can take it to the bank. I think people understand that.

Berkshire’s culture, what it stands for is complete decency and honesty.”

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EVBMM

That Gottesman interview is one of a series of interviews with both the kids and other directors.

Unfortunately my prior computer was blown up by a lightening strike and I’m still having trouble retrieving my old bookmarks.

If anyone can help, please do. They were great interviews.

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Texirish

If you Google/video ‘the making of Warren Buffett’

Or search for same on YouTube all the interviews are there.

I had seen the edited documentary a few years ago but hadn’t seen all the hours and hours of interviews with Howard, Suzie and Gottesman etc which I am enjoying now!

All such high class people

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Thanks EVBMM. Appreciate the help.

I’ve seen them all, but usually pick up something new when I re-watch.

Highly recommended. Better than many annual meetings.

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They’re all the videos here that currently say they were posted 5 months ago. They are all wonderful.

https://www.youtube.com/channel/UCvvR2wp795uqsmh6F-Rq6TA/vid…

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“ I have no doubt that for 25 years afterwards the culture isn’t going to change and meanwhile you own a group of companies that are extraordinary. And maybe, maybe management will do a few things that Warren might not have done. They are going to be very strong value oriented people and very decent, honest individuals. ”

Strong words but WEB and CTM have given the same opinion. So much of the heavy lifting and decision making has been done with the long-term in mind. They always underpromise and seem to overdeliver in my experience.

Yes! I also really enjoyed watching All of those additional clips and made me even more appreciate the huge influence of his wife Susie. Without her huge support and influence on WEB, there may be no Berkshire as we know it. The kids interviews really reveal this imo.

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“group of companies that are extraordinary“

I realise on social media the extreme views tend to surface but I don’t get the impression that the world views the Berkshire businesses as extraordinary?

If you graphed the world’s largest businesses by historic (5, 10, 20 years) free cash flow growth rates against current adjusted price to owner earnings multiple. Berkshire would look odd. It would look like a growth company with a relatively low market ratings I presume?

Is Berkshire extraordinary?

Apply - yes (although reflected in price)

Energy - regulated 9% returns with lots of opportunity to grow. (Pretty good! But not extraordinary. But suits a whale like Berkshire perfectly. Master stroke by Buffett and co).

Railroad - I don’t know enough about this. I can see how it’s hard too impossible to replace. But takes a lot of capex to maintain? Not sure about extraordinary? Clearly another master stroke by Buffett and Munger. Post acquisition, profits and value of this business exploded. Not really sure why but I remember something about double stacking and all kinds of efficiency tricks. But that feels like a one off boost.

Insurance - I have heard the view that this is a dangerous business and requires brilliant management. But I personally think of Berkshire’s insurance businesses as extraordinary. There are just too many advantages and momentum now. The strategy is very well understood by all stakeholders so I see no reason why it does not continue for a very long time and perhaps deserves the extraordinary label.

Lots of other extraordinary businesses and stocks but not large enough to matter.

But perhaps it’s the whole Berkshire Hathaway capital allocation machine and network that is deserving of the extraordinary business label. If you are looking at the performance over multiple business and economic cycles it produces extraordinary results.

Imagine if the only information you had on the company was the annual operating free cash flow from when Buffett took over and how it was allocated. You might wonder if this extraordinary growth can continue. What is the total addressable market? And then you realise this extraordinary business has unlimited capital allocation opportunities. Any business, any asset class and any country. Anything and everything is under consideration. That a pretty big TAM.

But then you notice that the returns on capital have been declining. And that’s the rub. It’s maybe an ‘extraordinary large business’. An elephant that can dance better than the other elephants.

Diversification, sustainability, anti fragile and not a fraud are other features.

No matter what way I cut it, I agree with Sandy Gottesman, I can’t think of a better investment going into the next few decades for me personally.

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Railroad as a long term investment? A CPA friend, who is quite interested in this type thing now that he’s retired but mentally energetic, and I looked in to my grandfather’s investment in what is now Norfolk Southern. It went through my dad’s estate then to 4 of us equally in quarters.

The return not counting the dividend is almost exactly 11% annual, so the total return is of course higher. My grandfather, who owned the newspaper before my father, invested $300 and about 80 years later my 1/4 is worth almost $500k today. I’ve never reinvested dividends.

By the way, as a note of less success given I do post about long term things I inherited, I also received all my dad’s share of North Carolina Railroad when he died. North Carolina Railroad over time basically bought/owned the land for the railroad and other entities along the line from Charlotte to Morehead City and leased that land. The state of NC owned 75%, private shareholders 25%.

In 1998 the state of NC bought us out paying a fraction of what our investment was worth…we got screwed big time. The investment firm I worked with, McDaniel Lewis and Company out of Greensboro, made a market in NC Railroad stock. We also produced an annual review as to what we considered the investment to be worth based on an independent real estate apprisers opinion.

Didn’t matter in the end, we guess we got at most us 25% private owners got 20% of market value from NC. They lease the land to Norfolk very cheaply and of course it does to some degree benefit our state.

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