Pornacle of Omaha
The Oracle of Omaha, Warren Buffett, chief executive officer of Berkshire Hathaway (BRK-A), was speaking at an event in Toronto before 300 chief executives back in February when, according to Bloomberg, someone in the audience asked what makes people want to sell their companies to him as opposed to a (formerly - remember, this was back in February) deal-hungry private equity outfit.
The answer, Buffett said, was that Berkshire treats companies they are interested in as "works of art," the implication being a certain degree of curating and care-taking goes on at Berkshire above and beyond cosmetic touch-ups and refinishing. But wait, Buffett apparently didn't conclude the metaphor there:
"You can sell it to Berkshire,' Buffett said, "Or, you can sell it to some porn shop operator, and he'll take the painting and he'll make the boobs a little bigger and he'll stick it up in the window, and some other guy will come along in a raincoat, and he'll buy it.''
Like me, I know what you're thinking: "Wow, now that guy knows a lot about running a porn shop. Maybe even just a bit too much. He even got the raincoat part right!"
Nevertheless, the episode underscores something important about Buffett and Berkshire: the methodology by which they acquire companies and the increasing complexity of the company itself.
According to that same Bloomberg article, Buffett now owns 76 companies - 200 if the recently acquired Marmon subsidiaries are included. Berkshire has raked in $2.3 billion in pretax earnings over the past five years through foreign exchange bets. As of March, according to Bloomberg, the company had allocated tens of billions of dollars to credit default swaps on certain high-yield bonds and put options that have been sold on four stock indexes.
It's not that any of that is a particularly big deal -- the Berkshire record of shareholder return speaks for itself, even if it is slowing -- it's that the complexity of the behemoth that is Berkshire runs somewhat contrary to the image of Buffett that has been carefully crafted over the years; practical, down-to-earth, folksy, adhering to simple value investing principles that are easy to understand. As it turns out, simple, folksy and down-to-earth are better marketing tools than complex investment management principles.
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Did you have to go for the porn shop and the raincoat. I don't think Kramer would have appreciated that comment!!!
BTW, what was your last great accomplishment???
Ooooh! Ooooh! Ooooh! I wanna be one of the people you can't write about critically!
My mommy always said I was really smart, and my daughter thinks I can sing (OK, she's 1 and her critical skills aren't fully developed). Are those sufficient accomplishments?
