2012: Which Berkshire subsidiary has improved its competitive position the most?
AUDIENCE MEMBER: Mr. Buffett, Mr. Munger, thank you for your inspiration and insight.
When you look at the stable of businesses that Berkshire owns, which business has greatly improved its competitive position over the last five years, and why?
And then conversely, perhaps you might name a business that was not so lucky.
WARREN BUFFETT: Yeah. We don’t like to dump on the ones that aren’t — that haven’t done as well. But there’s no question — and fortunately, the big ones have done well.
There’s no question, even though we didn’t — well, we didn’t own all of it, but we actually have owned a significant piece of Burlington Northern over the last five.
But the railroad business for very fundamental reasons, which I should have figured out earlier, has improved its position dramatically over the last, really, 15 or 20 years, but it continues to this day.
I mean, it is an extremely efficient and environmentally-friendly way of moving a whole lot of things that have to be moved.
And it’s an asset that couldn’t be duplicated for, you name it, three, four, five, six times, you know, what it’s selling for. So that it’s a whole lot better business than it was five or 10 years ago.
Now, GEICO is a whole lot better business than it was five or 10 years ago, although I think you could have predicted that the chances were good that that was going to happen.
But, you know, we have — we’re approaching 10 percent of the market now. And you go back to 1995, we had 2 percent of the market.
We had the ingredients in place to become much larger, and then fortunately, we had [CEO] Tony Nicely who absolutely maximized what was there to be done.
And GEICO’s worth billions and billions and billions of dollars more than when we bought it.
And the Burlington is worth considerable billions more than when we bought it, even though it was recently.
MidAmerican has done a great job. We bought that stock at 34 or so dollars a share in 1999, and I think we appraise it now at around $250 a share, and that’s in the utility business.
So ISCAR has been wonderful since we bought it. We bought that six years ago. And they just don’t stop. You know, they do everything well. And I would not want to compete with them.
So we’ve — there are a number of them. And —
CHARLIE MUNGER: We have 80 percent or so of our businesses, by value, at least, increased their market strength.
WARREN BUFFETT: Yeah. By value, I would say more than 80 percent.
CHARLIE MUNGER: More than, yeah.
WARREN BUFFETT: But not by number, but by value.
CHARLIE MUNGER: By value. We are not suffering at all. We’re never going to get the rate to 100 percent.
WARREN BUFFETT: And the mistakes have been made in the purchasing. I mean, it’s where I misgauged the competitive position of the business.
It isn’t because of the faults of management. It’s because I just — either because I had too much money around or because I was — been drinking too much Cherry Coke or whatever it was — I assessed the future competitive position in a way that was really inappropriate.
But it wasn’t because it really changed on me so much. And, you know, we’ve done some of that.
But the big ones — the big ones have worked out very well.
Gen Re, which took, like, real problems for some years. I mean, Tad [Montross] is running a fabulous operation there.
Ajit [Jain] has created something from nothing that’s worth tens of billions of dollars. You know, he created that out of walking into the office in 1985 and entering the insurance business for the first time, but he just brought brains and energy and character to something, and we backed him with some money, and he’s created a business like nobody I’ve ever seen.
Charlie?
CHARLIE MUNGER: Well, we’ve been very fortunate. And what’s interesting is the good fortune is not going to go away merely because Warren happens to die. (Laughter)
It won’t help him but — (Laughter)
WARREN BUFFETT: You’ll have an explanation of that in the second half of this. (Laughter)