He did, and two weeks after Buffett and Brandon met, Berkshire and Alleghany announced that the former would acquire the latter for $ 11.6 billion, part of a large spending in February and March for Berkshire, which has already ensured that Buffett do not have to apologize for lack of action in 2022.
The highlight of this story, when Buffett told about it at Berkshire’s annual meeting last Saturday (apart from the little about “The Music Man,” which he mentioned in an earlier interview with Charlie Rose), seemed to be that serendipity plays a really big role in the life and fortune of the world’s seventh most valuable company. “If he had not sent me the note, it would never have occurred to me to write to him,” Buffett said, and the takeover would not have happened.
Then again, Buffett also mentioned that he had been following Alleghany’s ups and downs for 60 years and had four filing drawers filled with annual reports. When he considered meeting with its CEO, it had not taken him long to develop a clear idea of what the company was worth and what he would pay for it. As Berkshire board member Ron Olson said on CNBC a little later: “I’m not sure it was that random myself.”
This interplay between serendipity and readiness emerged a lot during Saturday’s annual meeting in Omaha, the first held in person since 2019. With a question-and-answer session that lasted more than five hours, a lot of other things also came up. But as a first-time observer (via streaming), I was struck by how often Buffett and Berkshire’s Vice President Charlie Munger returned to express a business philosophy that I suppose can be summed up as:
• Do not plan so much ahead.
• Be prepared to act quickly when the opportunity arises.
The modern history of Berkshire Hathaway has in this narrative been one of “putting one foot in front of the other.” Many of these steps – including Buffett’s takeover of Berkshire in 1965, a struggling textile company in Massachusetts – were probably wrong, but it was OK.
Munger: Part of the trick is to correct your own mistakes.
Buffett: We’re done better with the mistakes than with the good ideas.
Munger: It’s so easy to overestimate a good idea.
The correction of the error, which was Berkshire, began with the 1967 acquisition of National Indemnity, an Omaha insurance company that gave Buffett the first “float” he could invest in the market. Getting the opportunity to buy it “was pure luck,” Buffett said Saturday. Its owner would get tired of regulators once a year or so and decide to sell, only to change his mind. Buffett caught him in one of those moods and threw himself out. “The one thing is that you have to be prepared,” he said. “When the opportunity comes, you really just have to move. Fortunately, I operate in an environment where I can do that.” That is, “if the board had set up a committee to review all major acquisitions,” Berkshire could have missed a lot of opportunities. Then came this exchange:
Munger: The relative absence of bureaucracy in Berkshire has given the company a lot of money.
Buffett: We are extraordinarily well positioned to do exactly what we want with float.
In the midst of this year’s market turmoil, it has involved taking large shares in Chevron Corp., Occidental Petroleum Corp. and HP Inc., as well as buying Alleghany directly and, as Buffett revealed at Saturday’s meeting, adding to Berkshire’s portfolio of Activision Blizzard Inc. in a bet that its announced acquisition of Microsoft Corp. will go through. There could be much more to come: Berkshire still had $ 103 billion in cash and US government bonds at hand per capita. March 31, a drop from $ 144 billion by the end of last year, but still well above the $ 30 billion that Buffett has said is the minimum cushion he is comfortable with.
With Buffett now 91 and Munger 98, this may be the last such major shopping spree in their joint tenure. The gigantic company, which they, according to their own description, have somewhat randomly assembled, will roll on. On Saturday, both expressed their confidence that Berkshire’s “culture” would sustain it for decades to come. But a significant part of that culture has been the ability to make trades quickly and without much board interference. When a shareholder asked if Buffett’s anointed successor Greg Abel wanted the same freedom of action, the honest-sounding answer was probably not. “I’m guessing the board will impose some more restrictions and require some more consultation than they do with me,” Buffett said. “They do not have to, but they will feel they have to.”
This column does not necessarily reflect the opinion of the editorial staff or Bloomberg LP and its owners.
Justin Fox is a Bloomberg Opinion columnist covering business. He was editor-in-chief of the Harvard Business Review and wrote for Time, Fortune and American Banks. He is the author of “The Myth of the Rational Market.”
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