2015: Could Berkshire repeat its success in insurance if it restarted today?

GARY RANSOM: Thank you.

In his letter, Charlie talked about Berkshire’s insurance success, quote, “being so astoundingly large that I believe that Buffett would now fail to recreate it if he returned to a small base while retaining his smarts and regaining his youth.”

Do you agree that you could not repeat that success today? And if so, what do you think are the conditions in the insurance industry today that would inhibit a repeat of that performance?

WARREN BUFFETT: Well, I had many, many, many pieces of luck, but I had three extraordinary pieces of luck, in terms of the insurance business.

One was, when I was 20 years old, having a fellow on a Saturday, a fellow named Lorimer Davidson, be willing to spend four hours with some 20-year-old kid who he never heard of before, explain the insurance business to him.

So I received an education at age 20 that was — I couldn’t have gotten at any business school in the United States. And that was just pure luck. I mean, I just happened to go to Washington. I had no idea I would run into him. I had no idea whether he would talk to me, and he spent four hours with me. So just chalk that one up, the chance of that happening again.

In 1967, I got lucky again when Jack Ringwalt, who, for about five minutes every year wanted to sell his company, because he would get mad about something, some claim would come in that he didn’t like or something of the sort. And I told my friend Charlie Heider, I said, “Next time Jack is in the mood, be sure to get him to my office.” And Charlie got him up there one day, and we bought National Indemnity.

We couldn’t have done that — we not only couldn’t have done it a day later, we couldn’t have done it an hour later. You know, that — that was lucky.

And then I really got lucky in the mid ’80s when, on a Saturday, some guy came in the office and he said, “I’ve never worked in the insurance business, but maybe I can do you some good.” And that was Ajit Jain. And, you know, how lucky can you get?

So, if you ask me whether we can pull off a trifecta like that again in the future, I’d say the odds are very much against it.

But the whole — the whole thing in business is being open to ideas as they come along, and insurance happened to be something that I could understand. I mean, that was in my sweet spot.

If Lorimer Davidson had talked to me about some other business, you know, it wouldn’t have done any good. But it just so happened he hit a chord with me on that in explaining it. I could understand what he was talking about. And I could understand what National Indemnity was when Jack had it for sale.

And that’s — there’s an awful lot of accident in life, but if you keep yourself open to having good accidents happen, and kind of get past the bad accidents, you know, some good things will happen. Might not happen in insurance — you know, it can happen in some other field — probably would happen in some other field — if you were to start in today.

So, no, we could not have — you couldn’t expect to have three lucky events like that happen, and there were many more along the way.

But, you know, we — I think if we were starting over again, we’d find something else to do. What about it, Charlie?

CHARLIE MUNGER: Yeah. I don’t think we would have that kind of success.

You know, mostly we bought wonderful businesses and nourished them. But the reinsurance division was just created out of whole cloth right here in Omaha, and it’s a huge business. Insurance has been different for us.