2001: How will Berkshire be different in 20 years?

AUDIENCE MEMBER: Thank you for taking my question. My name is Frank Gurvich (PH). I’m from London, Ontario. It’s great to see all the young people asking questions. I even have my own 11-year-old here, Matthew, this year.

I first want to start by passing on a message from my wife to you, Mr. Buffett. And that is, “Thank you, Mr. Buffett for your autograph that Frank brought back last year. However, quite frankly, the ring in the Borsheims box you autographed was far more precious.”

WARREN BUFFETT: You can repeat that if you’d like. (Laughter)

AUDIENCE MEMBER: My question relates to the future of Berkshire. Back in 1994, there was a PBS video interview of you at the Flagler Business School. And I believe you said Berkshire was not an insurance company.

It appears that’s not quite the case as much anymore, and I suppose insurance acquisitions will provide the financial fuel and the stability the Johns Mansvilles and MidAmerica types of acquisitions will need for their future growth.

But I’m hoping that you and Charlie can describe for us an anticipated future look at, say, 20 years out, of how Berkshire might be different and — from how it is today — and perhaps a couple of the not so obvious problems that Berkshire will need to contend with.

And thank you for all the apparently wonderful acquisitions you’ve made on our behalf in the last year.

WARREN BUFFETT: Well, thank you. I think you ought to take your wife another ring, too. (Laughter) But thank you.

We actually, as long ago as — I don’t remember whether it was in the 1980 annual report, but at least 20 years ago, we did say that we thought insurance would be our most significant business over time.

We had no idea that it would get to be as significant as it is. But we’ve always felt that that was — we would be in many businesses — but that insurance was likely to be our largest business.

Right now, it’s not our largest business in terms of employment. It’s our largest business in terms of revenue. And we would hope it gets a lot bigger over time. We don’t have anything in the works that would make that happen, although we will have natural growth in what we already own.

But we will just keep acquiring things. And sometimes — some years we’ll, you know, we’ll make a big acquisition. Some years we’ll make a few small acquisitions.

We’ll do whatever comes down the pike. I mean, if there’s a phone call waiting when this meeting is over and it’s an interesting acquisition, it’ll get done.

We don’t have a master plan. We don’t — Charlie and I do not sit around and strategize or talk about the future of various industries or do anything of that sort. It just doesn’t happen. We don’t have any reports. We don’t have any staff. We don’t have any of that.

We try to look at what comes in — we try to survey the whole financial field. We try to look at what comes in and look for things we understand, where we think they have a durable, competitive advantage, where we like the management, and where the price is sensible.

And, you know, we had no idea two or three years ago, you know, that we would be the 87 percent owner of the largest carpet company — broadloom carpet company — in the world.

You know, we just don’t — we don’t plan these things. But I would tell you in a general way that 20 or so years from now, we will own a lot more businesses.

I would still think it likely — I mean, I think it’s certain that insurance will be a bigger business for us in 20 years than it is now. Probably much bigger. But I think it’s — and I think it’s also likely it will be our biggest business still. But that could change.

I mean, we could get a deal offered to us tomorrow that, you know, was a 15- or $20 billion deal, and then we’ve got a lot of money in that industry at that point.

So it’s — we have no more master plan now than we had back in 1965 when we bought the textile mill, really.

I mean, we had a lousy business. I didn’t realize it was as lousy as it was when I got into it. And we had to, you know, we just had to start trying to deploy capital in an intelligent way.

But we’ve been deploying capital, you know, since I was 11. And I mean, that’s our business and we enjoy it. And we get opportunities to do it. But the bigger you are, the fewer the opportunities you’re likely to get.

Charlie?

CHARLIE MUNGER: Well, I think it’s almost a sure thing that 20 years from now there’ll be way more strength and value behind each Berkshire share. I also think it is an absolutely sure thing that the annual percentage rate of progress will go way down from what it has been in the past.

WARREN BUFFETT: No question about it.