2015: Is 3G’s management method congruent with Berkshire's?

ANDREW ROSS SORKIN: This is a toughy, and I should say we’ve probably got — or at least I got — several dozen emails on 3G, and so this is a follow-up to what you talked about on 3G earlier.

And specifically, actually, it’s two questions in one that actually came from the audience after your response about 3G. So just to put it in perspective, those shareholders are in the audience, and they asked not to be named, so here we go.

This shareholder writes, “I intend no disrespect to 3G’s money making abilities and, as a Berkshire shareholder, like the partnership very much. However, you took more than a decade to shut down the Berkshire mills.

“You take great pride in letting Berkshire’s managers run their companies for you, and as Charlie says, almost to the point of abdication. And that approach has made Berkshire a very attractive home for companies.

“You’ve even bought newspaper groups in the face of the internet tidal wave, and acknowledged they didn’t have the same investment characteristics of other Berkshire businesses.

“Are you actually saying 3G’s management method is congruent with yours?

“Asked another way, if 3G ran Berkshire, would there not be significant layoffs and consolidation among the companies and intense focus on short-term profits?”

WARREN BUFFETT: No. I think there would be — there would be some companies they’d make changes in. But I would say that GEICO, for example, 33,000 employees, or whatever the number is, is run just as efficiently as 3G would run it.

I would say our home office, with 25 people — we could have a home office with 500 people. We could have floors devoted to strategy, and floors devoted to human resources and comparing the salaries of everybody at all our different companies, and so on.

If they walked into that situation, they’d cut it back. I don’t know whether they’d get it down to the 25 we have, but we do not believe in having extra people around.

And our newspapers, you know, unfortunately, you know, they have had to cut back, as revenue has kept shrinking.

And the idea that you run a fat operation just because you’re making a lot of money — we cut back on our textile business — I closed the Waumbec mill considerably before we closed the Berkshire mills. It was only when it became apparent that it was just hopeless, we gave up on it.

But in the meantime, every time at Berkshire — I had a drawer full of proposals that said if we put in this kind of a loom, we’ll be able to get rid of eight people, and we put in the loom.

I mean, we were trying to reduce our labor complement all the time because we were in competition with people that were doing the same thing.

So I don’t think there’s any — I don’t think there’s anything in — we do have some businesses that probably have more people than we need, and I don’t do something about it.

But I don’t encourage it in any way and most of our managers don’t operate that way.

And it’s true, if 3G were running our operations, they would get more active at that than I will. But that doesn’t mean that I endorse it. It just means that I basically tolerate it where I’ve got a manager that I think well of.

I think better of the 3G way — method — of operation than I do of our operators where they really have excess people in it. We’ve got very few of those, but we do have a few.

So, I would never advocate running a business at a loss. If you — where it’s going to continue. And you’ll see that in our economic principles that’s been in the back of the book — back of the annual report — for 30 years or so.

And the same goes for having excess people around, and I think you’ll see our attitude toward excess people best expressed in our office here that has 25 people, and Charlie’s office in Los Angeles that has two, counting him.

CHARLIE MUNGER: I’d say we’ve got two-thirds of one. (Laughter)

We’re getting by with practically nothing.

WARREN BUFFETT: Yeah.