Guest post by Lawrence A. Cunningham, author of the best-seller, The Essays of Warren Buffett: Lessons for Corporate America, and an upcoming book, Berkshire Beyond Buffett: The Enduring Value of Values
Berkshire’s All Stars: The Enduring Value of Values by Lawrence A. Cunningham
A recent headline in USA Today trumpeted “New Book Rewrites Buffett Legacy in Three Ways,” referring to my upcoming book, Berkshire Beyond Buffett: The Enduring Value of Values. The book explains why Warren Buffett’s place in American history is even more significant than currently assumed. Besides being a “legendary investor,” he has built a formidable corporation, demonstrated unsung managerial prowess, and chartered an ethical course for American capitalism that widens the meaning of value investing.
ValueWalk's Raul Panganiban interviews William Burckart, The Investment Integration Project’s President and COO, and discuss his recent book that he co-authored, “21st Century Investing: Redirecting Financial Strategies to Drive System Change”. Q1 2021 hedge fund letters, conferences and more The following is a computer generated transcript and may contain some errors.
While my interest in Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) dates back two decades to when I first published The Essays of Warren Buffett: Lessons for Corporate America, my work on this book gelled after Berkshire Hathaway’s 2013 annual meeting with a note to Warren. Despite Buffett’s copious shareholder letters and extensive writings about him and Berkshire, I wrote, I found one topic widely misunderstood: the nature and significance of Berkshire’s corporate culture to its identity, durability, and succession plan. I said I might want to write a book about that and asked what he thought. Warren replied that it sounded good to him, so I got to work, and the book will be released in October.
In recent years, widespread praise for Buffett became paradoxical: his goal has been to build Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) into a lasting corporation and yet even great admirers say the company cannot survive without him. What I found, instead, is that the companies that make up Berkshire—fifty-plus direct subsidiaries—each enjoy a strong and definite corporate culture formed and nurtured by great leadership which, when brought together, are a force with permanent strength.
To explain Berkshire’s corporate culture, I started at the top—with Buffett and his writings, with which many people are familiar—but found that the real work and the most interesting discoveries lie deep inside the subsidiaries and their founders, leaders, businesses, histories, triumphs and tribulations. So I gathered and studied information about each subsidiary—biographies, autobiographies, research reports, encyclopedic entries, press releases, public filings. I surveyed all current Berkshire subsidiary chief executives and interviewed many along with former managers and large shareholders of subsidiaries.
The clues quickly added up and a pattern emerged: as I profiled each subsidiary, the same traits began to appear repeatedly, nine altogether, including budget-consciousness, earnestness, kinship, entrepreneurship, autonomy, and a sense of permanence. Not every subsidiary had all nine, but many did, and most manifested at least five of the nine. Moreover, the traits shared a common feature: all are intangible values that managers transform into economic value. A portrait of Berkshire culture crystalized, one that is distinctive, durable and, ultimately, will allow the company to thrive even after Buffett’s departure.
While the publisher puts the finishing touches on the book this summer, here is an overview. The opening chapters cover Berkshire’s origins and foundations, with a few surprises even for those most familiar with this terrain, including particularly rich connections between Berkshire’s early acquisitions and the conglomerate that has resulted today. While Berkshire today appears vast, diverse, and sprawling, this synthesis of corporate culture shows instead a close-knit organization linked by discrete values.
The middle chapters, the heart of the book, take a series of deep dives into fifty Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) subsidiaries to illuminate each of the traits and how they ultimately operate together to give Berkshire its identity and destiny. I was delighted that, when circulating the manuscript for comment among Berkshire devotees, even the most avid readers found new facts, fresh insights, and a whole new way of thinking not only about Berkshire but about Buffett.
The closing chapters reflect on what Berkshire’s corporate culture means for Buffett’s legacy. They explore the elaborate succession plan at Berkshire, which most people misunderstand, and identify challenges Berkshire will face. I also draw specific lessons for investors, managers, and entrepreneurs who can benefit from Berkshire’s distinctive approach.
I had more fun working on this book than on anything else I’ve written. My wife, who has seen me struggle with innumerable writing projects, correctly observed that the words for this one just flowed naturally out of me. In part that was because, once I noticed how the same traits characterized all the subsidiaries, it became blindingly obvious and straightforward to narrate. In part, it was also because, having observed Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) and Buffett for decades through most of the acquisitions, the pieces of the puzzle fell naturally into place.
Lawrence A. Cunningham, Henry St. George Tucker III Research Professor
George Washington University
Follow Me on Twitter: @CunninghamProf