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This chapter describes the beginning of Warren Buffet’s relationship with Berkshire Hathaway. In 1956, twenty-six-year-old Buffett formed the investment firm Buffett Partnership Ltd., which later acquired Berkshire Hathaway, Inc. in 1965. At the time of its acquisition, Berkshire Hathaway was a New England textile manufacturer. The local press portrayed Buffett’s acquisition of Berkshire Hathaway as a hostile bid, stoking rumors that he was a takeover artist prepared to hasten the liquidation of the struggling company. Buffett recoiled at having a reputation as a liquidator and took pains to avoid acting like one. Yet Berkshire’s textile operations continued to decline for years as the forces of globalization hammered the industry. It was forced to curtail gradually operations through the 1970s, with Buffett finally shuttering the mills for good in 1985. Buffett’s acquisition of Berkshire was a great learning experience for him—learning what not to do. From then on, he made it Berkshire policy never to engage in hostile takeovers and vowed never to liquidate an acquired subsidiary. As a rule, Berkshire would acquire only companies with top management in place, to avoid having to arrange managerial shuffles. Above all, Berkshire would seek businesses with long-term economic value and willingly pay a fair price for them. The remainder of the chapter details Berkshire’s acquisitions from the 1960s through the 1980s.

This chapter considers Berkshire’s future beyond Buffett, a question that has nagged the company’s constituents for two decades. The concern was that the fate of the man and the company he built were one. With Buffett’s demise went Berkshire. But Buffett has institutionalized Berkshire’s attitudes and practices so that it is poised to endure long after his departure. Buffett and the Berkshire board have formalized a succession plan. As updated in 2006, the plan prescribes splitting Buffett’s job in two: management (a chief executive officer) and investment (one or more investment officers). Berkshire’s succession plan also addresses ownership, as Buffett has been Berkshire’s controlling shareholder since 1965. Buffett most recently held 34 percent of Berkshire’s voting power and 21 percent of its economic interest, always representing 99 percent of his net worth. He has been slowly reducing his stake by planned annual transfers to charitable foundations, a process that will continue for many years after his death.

Chapter 3 explores in more depth the tax- and Social Security-related words and actions of four particular billionaires—Warren Buffett, John Menard Jr., Carl Icahn, and David Koch. These four were carefully selected to provide methodological leverage on issues of causal inference, causal mechanisms, and possible measurement errors, so that a closer look at them provides further confirmation of our stealth politics theory. Intensive analyses of these four cases confirm the stealth politics theory and suggest that our systematic quantitative analyses do not suffer from major measurement error issues. Beyond their methodological purposes, the cases are also of interest in themselves. They happen to represent nearly the full range of political philosophies that are embraced by US billionaires. Buffett occupies a center-left position on the liberal/conservative continuum, not far from the views of average Americans. Menard is a hard-line economic conservative; Koch a libertarian; and Icahn a sort of populist who served as an advisor to Donald Trump. Missing—not by accident—is any billionaire who can be called a thoroughgoing liberal on both social and economic issues. In the United States, economically liberal billionaires are very rare.

This chapter presents some final thoughts. This book has examined Berkshire and its subsidiaries to generate a picture of Berkshire’s corporate culture. It has shown that in all these subsidiaries—despite their number and diversity—are shared values. There is also a common outlook of permanency among all these companies, many of which had faced the travails of serial ownership by corporate parents, leveraged buyout operators, or private equity firms. Once Buffett leaves Berkshire, deals are expected to be handled differently, shareholder letters will strike a different tone, and the annual meetings will feel odd. But Berkshire will always acquire new businesses, readers will continue to study Berkshire’ annual shareholder letters, and shareholders will still flock to the annual meetings. As a new guard leads the evolution of Berkshire beyond Buffett, they will set its course and the company will never be the same. Yet the core values that define it have proven to offer unique sustaining value.

This chapter considers some of the challenges that Buffett’s potential successors might face. One of these is realizing that Buffett’s unique approach to acquisitions, which has served Berkshire well, is difficult to emulate. Most corporations adopt a formal plan charting desired sectors in which to expand, sometimes even naming acquisition targets. In contrast, Buffett calls Berkshire’s acquisition strategy “haphazard” and “serendipitous,” neither “carefully crafted” nor “sophisticated.” Another challenge is to recognize that, even if all of Berkshire’s traits are desirable, the values will inevitably conflict. Berkshire culture offers guidance on the trade-offs within its own value system. Managers have authority over all decisions except those affecting Berkshire’s reputation or capital allocation.

This chapter explores the first of the Berkshire values—budget consciousness—through the story of car insurance company GEICO. GEICO, established by former United Services Automobile Association (USAA) insurance manager Leo Goodwin in the 1930s, marketed car insurance directly to customers perceived as the least risky drivers, namely U.S. military officers as well as other federal government employees. Goodwin’s business model was simple: low-cost insurance, sold without agents, to targeted risk pools that were given quality customer service. Buffet became interested in GEICO after learning that his professor at Columbia Business School, Benjamin Graham, was chairman of the company. Never having heard of the company in an industry he knew nothing about, Buffet decided to visit GEICO’s Washington headquarters, where he spent several hours learning about the business from GEICO senior officer Lorimer Davidson. Buffett’s key takeaway: “GEICO’s method of selling—direct marketing— gave it a wide cost advantage over competitors that sold through agents, a form of distribution so ingrained in the business of these insurers that it was impossible for them to give it up.” Inspired by his chat with Davidson, Buffett studied GEICO and the insurance industry carefully. He also bought 350 shares of GEICO stock during 1951 at a cost of $10,282, representing half his net worth.

This introductory chapter provides a general discussion of Berkshire Hathaway and the secret behind its tremendous success. From its humble roots in 1965, Berkshire has become one of the largest corporations the world has ever seen. Its cash alone—$40 billion or more in recent years—exceeds the total assets of all but the largest one hundred American corporations. What has remained a mystery is how Berkshire functions so successfully given that it is made up of such a diverse group of subsidiaries. The Berkshire corporate empire encompasses more than five hundred entities engaged in hundreds of different lines of business. But diverse as they are, a close look at Berkshire’s subsidiaries and the company’s goals in acquiring them reveals distinctive common traits. The most important filter Berkshire applies when evaluating a potential acquisition is whether a company has ways to protect its ability to earn profits. Management experts refer to these as “barriers to entry,” making it difficult for competitors to take market share away. Warren Buffett draws on medieval imagery, portraying a business as a “castle” and such barriers and advantages as “moats.” Berkshire’s moat is its distinctive corporate culture. Berkshire spent the last five decades acquiring a group of wholly owned subsidiaries of bewildering variety but united by a set of distinctive core values. The result is a corporate culture unlike any other.

This chapter discusses Berkshire Hathaway’s corporate culture. Corporate culture is defined by a set of shared beliefs, practices, and outlooks that determine a corporation’s expectations and influence the behavior of its personnel toward colleagues, customers, and owners alike. The tone is set at the top and percolates throughout the organization through daily decisions, challenges, and crises. The values of a company are at the core of its culture, as they establish the standards to achieve its goals. At Berkshire, these values first began to take shape from the acquisition criteria Buffett established to identify potential subsidiaries: proven profitability, good unleveraged returns on equity, management in place, basic businesses, and a fair price. Another formal expression of Berkshire’s tone that helped shape its values is a set of owner-related business principles that define how Berkshire and its subsidiaries relate to its shareholders and other constituents. It is an impressive list of fifteen principles that Berkshire’s chief executive lives by. Examples include conceiving of the organization as a partnership despite using the corporate form, minimizing the use of borrowed money, assessing whether to reinvest earnings or pay dividends based on whether a dollar reinvested will increase shareholder value by at least as much, and holding subsidiaries forever.

This chapter focuses on the diversified business interests of Berkshire Hathaway. By 1986, Berkshire owned a range of companies, from candy to insurance. With the company’s next two acquisitions came further diversification. The first was the Scott Fetzer Company, which brought in a new mix of businesses, including Ginsu knives, Kirby vacuums, and the World Book encyclopedia. Berkshire’s other 1986 acquisition was the Fechheimer Brothers Company, a manufacturer and distributor of uniforms since 1842, catering to the public service industries: corrections, fire, military, police, postal, and transit. Today, Berkshire’s subsidiaries engage in a multitude of unrelated businesses, each contributing in its own way to Berkshire. In an effort to organize the diversity, four business sectors are outlined in Buffett’s annual letter to Berkshire shareholders, and each sector is broken down into further subdivisions. The first sector, insurance, is Berkshire’s oldest and the most important in terms of historical contributions to business value. The second, regulated or capital-intensive industries, is the newest sector and is becoming increasingly important in terms of revenues and earnings. The third sector is finance and financial products, the smallest of the four, though significant in absolute size. The final sector is a broad cluster of companies, encompassing various types of manufacturing, service, and retailing, including Fechheimer and Scott Fetzer.

Chapter 1 begins by stressing the severity of climate change (CC) and showing how, contrary to popular belief, atomic energy is not a viable solution to CC. Many scientists and most market proponents agree that renewable energy and energy efficiencies are better options. The chapter also shows that government subsidies for oil and nuclear power are the result of flawed science, poor ethics, short-term thinking, and special-interest influence. The chapter has 7 sections, the first of which surveys four major components of the energy crisis. These are oil addiction, non-CC-related deaths from fossil-fuel pollution, nuclear-weapons proliferation, and catastrophic CC. The second section summarizes some of the powerful evidence for global CC. The third section uses historical, ahistorical, Rawlsian, and utilitarian ethical principles to show how developed nations, especially the US, are most responsible for human-caused CC. The fourth section shows why climate-change skeptics, such as “deniers” who doubt CC is real, and “delayers” who say that it should not yet be addressed, have no valid objections. Instead, they all err scientifically and ethically. The fifth section illustrates that all modern scientific methods—and scientific consensus since at least 1995—confirm the reality of global CC. Essentially all expert-scientific analyses published in refereed, scientific-professional journals confirm the reality of global CC. The sixth section of the chapter shows how fossil-fuel special interests have contributed to the continued CC debate largely by paying non-experts to deny or challenge CC. The seventh section of the chapter provides an outline of each chapter in the book, noting that this book makes use of both scientific and ethical analyses to show why nuclear proponents’ arguments err, why CC deniers are wrong, and how scientific-methodological understanding can advance sound energy policy—including conservation, renewable energy, and energy efficiencies.

This chapter presents an open letter to Treasury Secretary Paulson, addressing the U.S. Treasury’s request for the authority to spend 700 billion taxpayer-owned dollars. The writer objected to the terms proposed by the Secretary, namely that the only hard restriction on this gift certificate is that it must be redeemed at “a financial institution having its headquarters in the United States” and used to buy “mortgage-related assets.” He further claims that the proposed legislation gives Paulson nearly complete authority to make bad deals in the name of stability—bad deals for taxpayers and good for his brethren on Wall Street. The letter also proposes putting Warren Buffett, and not Henry Paulson, in charge.

This chapter examines another crucial factor for successful investing: contrarianism. Most investors follow trends. Superior investors are the exact opposite. Superior investing requires second-level thinking—a way of thinking that is different from that of others, more complex and more insightful. The judgments of the crowd cannot hold the key to success. Rather, the trend, the consensus view, is something to game against, and the consensus portfolio is one to diverge from. As the pendulum swings or the market goes through its cycles, the key to ultimate success lies in doing the opposite. This is the core of Warren Buffett's oft-quoted advice: “The less prudence with which others conduct their affairs, the greater the prudence with which we should conduct our own affairs.” He is urging us to do the opposite of what others do: to be contrarians. The ultimately most profitable investment actions are by definition contrarian: the investor buys when everyone else sells (and the price is thus low) or they are selling when everyone else is buying (and the price is high).

Critiques leveled against creating jurisdiction to internationally prosecute corporations for genocide fall into three categories: policy, economic, and legal. Policy critiques focus on protecting innocent lower level employees and shareholders. Economic critiques focus on the chilling effect prosecution might have on continuing direct foreign investment in developing countries—thereby dampening their economic growth. Legal critiques focus on procedural, substantive, and cultural norms; specifically with respect to applying the respondeat superior doctrine and the historical avoidance of criminal liability for corporations in the civil law tradition. All of these critiques are individually overcome by specific counter-arguments, and collectively overcome on a balancing of interests. Society’s interest in preventing corporate complicity in genocide is far greater than securing the company’s counterveiling interest in realizing profit.