2015: How can investors judge Berkshire's culture after Buffett?

AUDIENCE MEMBER: Dear Warren, dear Charlie. I’m Lawrence from Germany, and in my home country, you two are regarded as role models for integrity. And at Berkshire, its culture is its most important competitive edge.

Hence, my question: how can we, as outside investors, judge the state of Berkshire’s culture long after you depart from the company?

WARREN BUFFETT: Well, I think it’s fair that you do, you know, come with a questioning mind to the culture, post-me and Charlie, but I think you’re going to be very — I don’t think you should be surprised, but I think you will be very pleased with the outcome.

The culture — I think Berkshire’s culture runs as deep as any large company could be in the world.

It’s interesting you’re from Germany, because just three or four days ago, we closed on a transaction with a woman named Mrs. Louis, in Germany.

And she and her husband had built a business [Detlev Louis Motorrad-Vertriebs GmbH]. Over 35 years, they’d spent developing this business of retail shops, dealing with motorcycle owners, and lovingly, had built this business.

Her husband died a couple years ago. And Mrs. Louis, in Germany — it came about in sort of a roundabout way — but she wanted to sell to Berkshire Hathaway. And, you know, that would not have been the case 30 or 40 years ago.

So it does — it’s a vital part of Berkshire to have a clearly defined, deeply embedded culture that pervades the parent company, the subsidiary companies. It’s even reflected in our shareholders.

And, you know, when you have 97 percent of the shareholders vote and say we don’t want a dividend, I don’t think there’s another company like that in the world.

So we have a — our directors sign on for it and, there again, we behave consistently. Instead of having a bunch of directors who are — love to be a director because they’d like to get $2- or $300,000 a year for showing up four times a year, we have directors who look at it as a great opportunity for stewardship, and who want their ownership, and have their ownership, represented by buying stock in the market, exactly like you do.

So we — it’s — we try to make clear and define that culture in every way possible, and it’s gotten reinforced over the years to an extreme degree. People who join us believe in it; people who shun us don’t believe in it, so we — it’s self-reinforcing.

And I think it’s a virtual certainty to continue and to become even stronger, because once Charlie and I aren’t around, it will be so clear that it’s not the force of personality, but it’s the — it’s institutionalized that, you know, nobody will doubt that it will really continue for decades and decades and decades to come.

Charlie?

CHARLIE MUNGER: Well, as I said in the annual report, I think Berkshire is going to do fine after we’re gone. In fact, it will do a lot better, in dollars. But, percentage-wise, it will never gain at the rate we did in the early years, and that’s all right. There’s worse tragedies in life than having Berkshire’s assets and have the growth rates slow a little.

WARREN BUFFETT: Name one. (Laughter)

CHARLIE MUNGER: Warren and I have one not very far ahead.

WARREN BUFFETT: OK. Yeah, yeah. (Laughter)

OK. Andrew?

I should say culture is everything at Berkshire. And if you run into a terrible culture, it’s — you know, the Salomon thing was up there on the screen, and it would be hard to turn Salomon into a Berkshire. I don’t think we could have done it, Charlie.

CHARLIE MUNGER: I don’t think anybody’s ever done it on Wall Street.

WARREN BUFFETT: No. It’s just — it’s a different world.

And that doesn’t mean that Berkshire is a monastery, by any means, but it does mean that — I can guarantee you that Charlie and I, and a great, great many of our managers, are more concerned — and Carrie Sova who put this meeting together and everything — they are more concerned about getting a good job done for Berkshire than what they get out of it themselves.

And, you know, it’s great to work around people like that.