Berkshire Beyond Buffett(97)

Above all, stress integrity, central to so many Berkshire stories, including how Clayton Homes watches out for its customers; how NICO provides ironclad insurance promises; and how people like the Pritzkers from the Marmon Group—and Warren Buffett—have made their word their bond.




Many people are interested in replicating Berkshire. They dream of creating conglomerates in its image in much the way proverbial literary types want to write the next great novel. It is unlikely to be done on the same scale or with the same results, but rewards are available from establishing mini-Berkshires. There are quite a few of these, including several Berkshire subsidiaries: Berkshire Hathaway Energy, MiTek, the Marmon Group, and Scott Fetzer. There are also companies that have consciously adapted the Berkshire model.

A prominent example is Markel Corporation, a third-generation Richmond, Virginia, business with deep and enduring roots in the insurance field. In addition to being a sizable investor in Berkshire since 1990, the multi-billion-dollar public company manages an impressive securities investment portfolio and, since 2005, has acquired a dozen operating companies. These subsidiaries engage in an array of activities—manufacturing, consumer, healthcare, business services, and financial services—and were acquired under a value system that closely resembles that of Berkshire.6 Chief among these is its commitment to provide “permanent capital.”

Adapting the Berkshire model, Markel and others create a competitive advantage over rivals in the acquisition market such as private equity firms and leveraged buyout operators. The advantage arises because these firms use their own corporate capital to invest, whereas rivals deploy money staked by others expecting payback over short periods of time. For example, private equity firms are short term by design, as they create funds with ten-year lives (five to sow then five to reap), and investors start looking for their payback in year six. Proponents have explained the virtues of such business models, which arise from features such as discipline and expertise.7 Berkshire and its progeny compete by offering autonomy, permanence, and other valuable non-monetary benefits.

For public companies, the most important value to import from Berkshire is its long-term outlook. Under the constant surveillance of analysts and activist shareholders hounding them on the latest quarter, public company managers face intense pressure to deliver short-term results. Yet the long-term gains of overlooking short-term hiccups compound over time. Investing in a reputation for serious long-term focus—and delivering the results over rolling periods of five and ten years—can be a valuable achievement for a public company.




Buffett famously jokes that his job is so wonderful that he tap dances to work; he quotes Ronald Reagan’s quip: “They say hard work never killed anyone, but I figure, why take the chance.” Yet whatever conditions might be at the helm of Berkshire, those prevailing in the corner offices of its subsidiaries are often taxing. Building and sustaining the kinds of businesses we have reviewed puts heavy demands on a company’s founders and leaders, often at some cost to the personal side of living. We’ve seen several leaders emphasize the importance of balance, explicitly when Doris Christopher created the Pampered Chef to enable squaring career with family life and when Barnett Helzberg Jr. cut his workload after his seven-year-old son innocently criticized his workaholic tendencies.

Rose Blumkin was a workaholic. Aside from her family, her life consisted entirely of running Nebraska Furniture Mart, and as a family business in which many members also worked, there was scant separation between family and business. Her store was her existence, and she spent most waking hours in it. Late in life, she acknowledged: “I live alone now, and so that’s why I work. I hate to go home. I work to avoid the grave.”8 Many marvel at such stamina, and some consider it worthy of emulation. But most would say there is more to life than work, no matter how rewarding toil might be.

Jim Clayton, in his memoirs, celebrates a vaunted career but also makes note of his three marriages.9 Scions inherit both the advantages and the woes of family businesses, the latter often meaning complicated personal relationships and confusing expectations that can lead to alcohol abuse, addictive gambling, or other negative coping mechanisms. This reportedly occurred to Terry Watanabe, the second generation owner-manager of Oriental Trading, who in 2007 accumulated losses of $127 million in Las Vegas casinos, eroding his personal fortune.10 Harry See took the opposite approach, staying out of the family chocolate business altogether, in favor of tending his vineyard.

Randy Watson, chief executive of Justin Brands, offers sage advice: “Working hard is good. But please, if you have children, attend all their events. You can have thirty or even fifty years with a company, but your kids only go through first grade once.”11 Marla Gottschalk, the Pampered Chef’s former chief executive, who embraces the “work hard, play hard” motto, echoed Watson’s advice, noting that it holds throughout children’s lives: “After work, I go support my daughters at their swimming practice.”12