2012: Could someone copy and replicate Berkshire?

AUDIENCE MEMBER: Hi. This is Hector from (inaudible) Industry Fund Management Company in China.

My question is, you mentioned acquiring insurance float with zero, or even negative cost, is one of the key competitive advantages of Berkshire Hathaway. And we also found that an average leverage of Berkshire always about 100 percent.

I guess the net asset growth will significantly decline without using that leverage.

Therefore, to own an insurance company acquiring insurance float would be an important strategy if (inaudible) want to copy Berkshire business model. Would you please give me a comment?

WARREN BUFFETT: Charlie, I didn’t get all that so you —

CHARLIE MUNGER: I didn’t get it all, either. (Laughter)

But, we have a very peculiar model, and it works very well for us. I think it’s very hard for other people to get the same result.

WARREN BUFFETT: Yeah, I think it’s almost impossible. Besides, I mean, it’s taken a long, long time to get here. It’s taken a great amount of consistency, and that consistency has been allowed because, basically, we’ve had a controlling shareholder during that time.

So we’ve not had to bow to any of the urgings of Wall Street or, you know, whatever may be the fad of the day. But we have had a culture that — where we could write out 13 or 14 principles more than 30 years ago, and we’ve been able to stick with them.

And that’s very hard to do for most American corporations, and I think it’s very hard to do when managers come and go and they have small shareholdings. I think it takes a very unusual structure to be able to do it.

And, you know, it took a long time to get to the point where people with large private businesses in this country really cared about where those businesses were lodged after they gave up their stewardship. Took a long time to have it get so that a great many of those people would think of Berkshire first.

And the nice thing about it is, if they think of Berkshire first they don’t think of anybody second, so we get the call.

We don’t do well buying businesses at auction. I mean, if somebody’s only interest is to get the top price for their business, you know, seldom we’ll get one.

We did buy one at auction, I mean, but it was an add-on. The Dutch company we bought yesterday, we bought at auction. But that sometimes happens with our smaller acquisitions.

But the big private acquisitions are going to come to Berkshire because they want to come to Berkshire. And that’s a significant competitive edge, and I don’t see how anybody really challenges us on that.

CHARLIE MUNGER: Well, not only do I think other people will have a hard time copying it effectively, I think if Warren went back to being 30 years of age with a modest amount of capital and not much else, he’d have a hell of a time doing it again, too.

WARREN BUFFETT: I’d like to try. (Laughter)