1995: How can investors value Berkshire's subsidiaries?

AUDIENCE MEMBER: Paul Miller (PH) from Kansas City.

First, I’d like to comment on your purchase of Kansas City-based Helzberg Jewelers. You commented about Barnett Helzberg and his — what he’s done, retailing-wise.

For those of us in Kansas City, you’ve also picked up Barnett and Shirley Helzberg, who are the first family in philanthropy in Kansas City.

And for the shareholders in this room, the Helzbergs are wonderful people. And to have them added to this group of companies says miles about Warren Buffett and that they pick companies based upon their management and their people.

So, kudos to Berkshire Hathaway for picking up the Helzbergs, and thanks to the Helzbergs for everything they’ve done to Kansas City. Now, my — (Applause)

WARREN BUFFETT: Appreciate that. (Applause)

AUDIENCE MEMBER: My question relates to value. We can look in the annual report, and we can all see the purchase of a Washington Post, for instance, for $10 million that has a value today of 420 million.

But discerning the value of the other consortium of non-publicly traded businesses, the Nebraska Furniture Marts, the Borsheims, et cetera — the value of their purchase price over the years versus their value today, how can we understand that value and how is it reflected in the annual reports?

WARREN BUFFETT: Yeah, well we try to — that’s a good question. We try to give you the information that we would want in answering that question, in the annual report.

Part of it, we do in those pages where we say it’s not according to GAAP accounting. But there’s a lot of useful information in there.

We’re not — we don’t stick a number on each company. But we try to give you enough information about the capital employ, the margins, and all of that sort of thing on the bigger businesses that you can make estimates that are probably just about as good as ours.

WARREN BUFFETT: Charlie and I would not need more information than is in the report to come up with a pretty good idea of what the controlled businesses are worth. And there’s no information we’re holding back that we think would be of any real importance in evaluating those businesses.

But you’re right, it’s a lot easier with marketable securities than it is — at least in terms of current numbers — than it is with the wholly-owned businesses.

The wholly-owned businesses, generally speaking, some of them are worth a whole lot more than we’ve — than they’re carried on the books for. And we feel pretty good about, essentially, all of them.

But they’re — they’ve turned out remarkably well, I would say that, over the years. And my guess is that they keep working pretty well.

We have managers in a number of those businesses here. I’m not going to introduce them all because we have so many that it would take a considerable period of time.

But you named The Washington Post. In the front row there, close to the front row, we have Don Keough, would you step up, of Coca-Cola? (Applause)

And we have Kay Graham for the Post. (Applause)

And Tom Murphy from Cap Cities. (Applause)

CHARLIE MUNGER: Is Paul Hazen here, too?

WARREN BUFFETT: And I’m going to try and do — well, there’s a whole bunch more. I don’t want to get — but I — but those three were sitting together and I was struck by the fact that if — those three combined, we have about 6 1/2 billion of profit in, so far. (Laughs)

So, I would say that that’s a — (Applause) —

Those are three businesses that have been fantastic. And like — I emphasize “so far” because we’d like to be able to name a bigger number in the future.

But we have a group of managers, both at the controlled companies and at the partly-owned companies, that have just created incredible value for Berkshire.

I mean, Charlie and I sit around and read the paper every day and a lot of magazines and things, watch OJ Simpson or whatever it may be. (Laughter)

And these people are out there creating a ton of value for us. So, we’re not going to change it. That —