FT - Breakup Berkshire!

https://www.ft.com/content/89ca1c10-85ac-4d88-8361-ee6b6be13…

“When Warren Buffett inevitably leaves his post after more than 50 years at the helm of Berkshire Hathaway, no one else will be able to run the company as successfully as he has. The behemoth conglomerate should be broken up.”

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“closely held insurance company Alleghany”

whatever… Alleghany’s largest shareholders are Blackrock and Vanguard and nobody owns over 10%.

“He repurchased $1.2bn more in the first two months of 2022.”

Probably approximately $2 Billion but you have to wonder if the author is just making up figures.

“Berkshire Hathaway suddenly sold its newspaper group in 2020 to Lee Enterprises, which was already managing the operation.”

Isn’t every decision “sudden” if described this way? I mean, having Lee Enterprises manage them all for years before selling them the papers sounds about as “gradual” a transition as you get in corporate divestitures…

“If an investor such as Buffett stumbles in deploying Berkshire’s war chest, what are the prospects for a successor?”

About the same? Slightly worse? Some inevitable mistakes and no major f*ck ups?

“Jain and Abel should break Berkshire more explicitly into at least two independent parts — insurance and its investment portfolio in one vehicle and the operating companies in another.”

Obviously this isn’t going to happen, and Buffett has structured the company in a way that would make it extremely difficult if not impossible. The operating subsidiaries are owned by the insurance companies with rare exceptions, they are not owned at the holding company level.

"Abel runs a dog’s breakfast of operating companies that deliver operating income that pales in comparison to the gains of Berkshire’s $350.7bn of equity investments. "

??? Maybe some quarters. Sounds like it’s been a bull market.

“Buffett’s successors could even start a hedge fund to invest “float” gains and charge shareholders “2 and 20” management and performance fees so as to avoid the hassle of owning railroads and random manufacturers.”

Now I am beginning to think this author is purposely writing a satire…

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“When Warren Buffett inevitably leaves his post after more than 50 years at the helm of Berkshire Hathaway, no one else will be able to run the company as successfully as he has. The behemoth conglomerate should be broken up.”

Even were I to grant that no one else will be able to run the company as he has, how would breaking up Berkshire help anything?

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Now I am beginning to think this author is purposely writing a satire…

I read the article with some care, trying to be open minded. (on paper, no less…I’m pretty retro).
Let’s just say that it doesn’t seem to be very deep thinking.
The writer is a teacher…I rather feel sorry for her students.

If an investor such as Buffett stumbles in deploying Berkshire’s war chest…
The worst gaffe is following the canard of calling Mr Buffett a has-been because of his recent losing picks while blithely overlooking the winner picks.
Wouldn’t that make every investor in history look like a dolt?
Doesn’t the average matter a bit more than the extrema?
Everybody has some losers. It’s the total score at the end that matters.

To look even more deeply, it’s interesting to look at the distribution of realized outcomes from Berkshire’s individual investments in the last half century.
Some gigantic winners as a fraction of portfolio size, and precisely zero big losers. Nothing, zip, beyond -1%.
Surprisingly few big losers even in percentage terms.
Potential moral: If you look after the bad times, the good times will take care of themselves.

Jim

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That is the worst newspaper article on Berkshire I have seen in my 25 years following the company.

I think it is the over confidence on a topic that has not been well researched or understood that makes it so bad.

Full of one sided nonsense. The reference to the proceeds from the sale of the newspaper group is just embarrassing. Berkshire has a $733 Billion market capitalisation. The reason for the purchase and sale of the newspaper businesses aside (and it’s likely to be a perfectly rational reason, given the track record), how can this be noteworthy given its irrelevance to Berkshire.

The breakup argument may well be something that will be debated in the coming years. It is a worthy topic and 20 years trading at 50% of book value and failure after failure more might vote for it. But the article scratches the surface with clumsy references to Buffett’s mistake, without the slightest appreciation for the the successes in recent years which somewhat make up for the failures. Shareholders with a large percentage of their net worth in Berkshire have done rather well of late with arguably low risk. Why would we want to take a sledgehammer to the system at this point?

Just awful. I am not a newspaper expert but I presume the logic of the article is to say something, anything, about Berkshire with the AGM coming up. I would have zero issue with a article that challenges Buffett and Berkshire. If I was the editor I would take it down. Falls below the standard of the FT. I like that the FT takes a sceptical stance, which is useful to investors and the public but do it properly. This is just drivel.

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Calm down guys. This is on FT’s “option” section. So there’s all kind of stuffs there. :slight_smile: And they are not representative of the views of FT’s news reporters.

Ah, that makes more sense :joy:

I have not read the FT article so I won’t comment on it. I don’t know when or why, but it seems more likely than not that Berkshire will engage in some form of deconglomerating in the future. It probably will not happen in my lifetime.

I believe someone helped him with the English, but two thousand years ago Lucretius wrote:

“No single thing abides, but all things flow.
Fragment to fragment clings – the things thus grow
Until we know and name them. By degrees
They melt, and are no more the things we know.”

Subsequently, the Buddha is quoted in the The Tibetan Book of Living and Dying:

“It is in the nature of all things that take form to dissolve again.”

Everything changes. But in the case of Berkshire eventually breaking up, I don’t see any fear in it.

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My previous post contained an error. The Buddha preceded Lucretius by about 300 years or so.

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Does anybody actually saw this FT story on the paper version? because I didn’t …
Maybe the FT editor has the good sense of not printing it .

Does anybody actually saw this FT story on the paper version? because I didn’t …
Maybe the FT editor has the good sense of not printing it .

Jim said he read it on dead trees, so I guess they didn’t that good sense we might have hoped for…

Does anybody actually saw this FT story on the paper version? because I didn’t …
Maybe the FT editor has the good sense of not printing it.

Yep, it was there.
But it’s an invitational column/opinion piece, not an FT reporter.

Jim

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You get a lot of these opinion pieces in the days leading upto the AGM. And opinion pieces purporting to be reportage. Offering the usual nuggets about breaking up the company, paying dividends, diversification of BOD etc.

Most don’t have any special insight or understanding of Berkshire. A few exceptions are Lawrence Cunningham and Rational Walk.

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