The preview webinar of Berkshire AGM was held by Yahoo Finance this week. The webinar mostly discussed the achievement and success of Berkshire Hathaway and how it is different from other investment firms. Many believe it was largely associated with Berkshire Hathaway’s business culture.
What is the Berkshire culture?
We all heard of Buffett, but not a lot of people can answer the question of what the Berkshire culture is.
Based on the poll result, most people believe that permanence and long time horizon is the most distinctive aspect of Berkshire culture.
Permanence and long-term focus business objective
Raised by the most famous long-term investor Warren Buffet, Berkshire Hathaway is a true long-term focused investment firm. During the meeting, one of the attendance said: many other investment companies who try to copy the success of Berkshire failed as they could not keep long-term oriented and turn to short-term objectives.
Trust-based business culture
Berkshire’s reputation is guarded by this culture for many years. Buffet himself explained:
[Some organizations] with the biggest compliance departments, like Wall Street, have the most scandals. It’s not so simple that you can make your behavior better automatically just by making the compliance department bigger. The greatest institutions... select very trustworthy people, and they trust them a lot... There’s so much self-respect you get from [being] trusted and [being] worthy of the trust that [the] best compliance cultures are the ones which have this attitude of trust. This general culture of trust is what works. Berkshire hasn’t had that many scandals of consequence, and I don’t think we’re going to get huge numbers either.
Decentralized/ Autonomous managers
Buffett keeps Berkshire so simple that there is not even an organizational chart. If there is, it would be similar to the chart shown, which is primitive compared to other enterprises of this size. As a company grows ever larger, no manager can master everything. Autonomous decentralization keeps the company efficient and effective decision-making by having managers closest to the issue.
Last but not least, quality long-term shareholders are also essential to Berkshire’s achievement. Berkshire has nearly 30% of individual investors who held their Berkshire stocks for years. They stood with the company even when the company didn’t perform as expected. And Berkshire has brought them substantial investment returns.
Time is the friend of the wonderful company, the enemy of the mediocre.
The excellent culture of the Berkshire company has been proven to be effective and is the essential component to the great success of the Berkshire conglomerate. As we study the experience of Berkshire, it’s inspirational to see how they become the evergreen tree of investment.