2020: Which small businesses at Berkshire might not reopen after the pandemic?

Becky Quick:
This next question comes from Drew Johnson who says that he’s a longtime shareholder who’s attended a couple of meetings. He says, “In an interview on April 17th, Charlie mentioned that some small businesses owned by Berkshire would not reopen after the pandemic eases. Can you elaborate on which businesses might be impacted?”

Warren Buffett:
We have businesses within businesses. At Marmon don’t we have 97 different businesses, for example?

Greg Abel:
Exactly. Yep.

Warren Buffett:
Yeah. And there are some that’s weren’t doing that well before and I’m not talking about Barman Spivey, but they got a couple of them and there’s a couple of them. And it may be that in effect, what’s happened in the last couple of months has accelerated the decline and of those businesses or their customers are developing different habits. People are developing different habits in retail. There’s no question about that. Now that doesn’t mean we haven’t got a bunch of good retail businesses, but there are businesses that were having problems before and that have even greater problems now. We don’t own our newspapers anymore, but we’re financing the enterprise which does have them. We’ve actually increased our investment in the newspaper business by selling the papers to Lee and then refinancing their debt. And the newspaper business was having plenty of problems with both circulation and advertising before the buyers came along.

Warren Buffett:
But advertising declines every place. Have accelerated fairly dramatically. And when the automobile industry stops, the auto dealers don’t advertise it. It’s made certain businesses that were tough before even tougher now. And there will be management of at least one of the subsidiaries is suggested to us. And so there’ll be some changes in a few businesses, but they’re very small businesses.

Warren Buffett:
Our major businesses and our business of intermediate size, I can’t think of anything that’s of significance that won’t reopen, but it won’t be any fun with the businesses where the world has really changed. You’re seeing a lot of change.

Warren Buffett:
If you own a shopping center, you’ve got a bunch of tenants that don’t want to pay you right now. And the supply and demand for retail space may change fairly significantly. The supply and demand for office space may changed significantly. A lot of people have learned that they can work at home or that there’s other methods of conducting their business than they might’ve thought from what they were doing a couple of years ago. And when change happens in the world, you adjust to it.

Greg Abel:
Yeah. I think the, oh, go ahead.

Warren Buffett:
Becky, I think Greg, one. Yeah.

Becky Quick:
This next question is a follow up one.

Greg Abel:
Well, I was just going to add on the Marmon example, our 97 companies there. For example, we have a food service group which sells equipment to a variety of the restaurants. We have a few businesses that realistically were challenged when the industry was performing really well. And as we come out of the crisis, their economic prospects aren’t going to be better. And in fairness to the teams and the employees in there, they understand that and they’re working through it and there’ll be other opportunities potentially within the company, within Marmon, and things like that. But there’s a very specific answer or example relative to the question.