Berkshire Hathaway: Ordinary Things by Exceptional People via 1992-1996 Letters
"Ben Graham taught me 45 years ago that in investing it is not necessary to do extraordinary things to get extraordinary results.” - Warren Buffett
The following is part of the premium newsletter exploring owner-operators and cultures of publicly traded companies. Keep in mind I may own or have owned the company discussed. None of this is investment advice, do your own due diligence.
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This is Part Five of my exploration of Warren Buffett’s shareholder letters and annual meetings (as of 1994). While most letters and questions focus on his financial analysis and investment advice, I wanted to pull out elements that showed his analysis of people—something he doesn’t get enough credit for.
Here are my writing on preceding letters:
Pre-Berkshire Hathaway: Buffett Partnership Letters 1957 - 1969
Berkshire Hathaway: Acquiring People it Deserves via 1971 - 1980 Letters
Berkshire Hathaway: Financially Sub-Optimal Yet Optimally Human via 1981-1986 Letters
Berkshire Hathaway: Families of the Sainted Seven via 1987-1991 Letters
The five-year span from 1992 to 1996 covered includes the acquisition of GEICO, the issuance of Berkshire B-class shares, and—most importantly—the year your writer was born. I jest. Though, the sentimental soul in me starts feeling a pinch of excitement as the years become more relatable. Adding to the excitement was the availability of Berkshire’s annual meeting videos. All meetings as of 1994 were made available in the CNBC archives and the 4-hour meetings have been a complementary source to the nuggets pulled from the letters.
Berkshire continued making acquisitions and growing. Per Buffett’s yardstick of book value per share, Berkshire compounded at 23.8% over the 32 years ending in 1996. At ~$36,000 per share, Buffett and Berkshire’s success hit its stride with biographical accounts of his journey as an investor. The rise in fame was evident in direct questions about his fame, people asking when he will write a book about his philosophy (I guess people didn’t want to read all his letter), and various people asking him about investing principles so they can be as wealthy as him.
Buffett pointed out, repeatedly, that Berkshire would not be the right business for those looking for a triple in the price of its stock in a year. He emphasized the goal of doubling the value of Berkshire every five years and communicated this objective in meetings and letters. By the end of 1996, it had a ~$52bn market capitalization. It would ~12x over the next 15 years, outperforming Buffett’s estimates.
Some may think Buffett was too conservative. Yet, that may be the result of an operation that focuses on doing ordinary things exceptionally well. By the mid-90s Berkshire asserted itself as an insurance operation with a portfolio of ordinary businesses.
That made it an operation where management excellence became a necessity to overcome the mediocrity of the industry the businesses were in. But the exceptional people didn’t succeed through extraordinary tactics or results. They focused on the basic and ordinary.