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Good find. Thanks for posting it. With respect to the CEOs of the subsidiaries, I wonder if that potential problem is one of the reasons that BRK has moved some dramatically to acquisitions of larger private firms. For the most part, over the past decade, after ISCAR, the smaller acquisitions have been tuck-ins and bolt-ons. The only exceptions I spotted are tiny: newspapers and Oriental Trading Company. The big acquisitions have been taking public companies private, where the founder CEO issues don't arise. Marmon had already worked through the death of the founder/CEO issues, I believe. As have some of the longer term subsidiaries, such as See's. In the scheme of BRK, those type of CEO sales are interesting narrative but increasingly less important. Maybe that's cyclical and I don't think Buffett would reject a well priced terrific business from a CEO-owner to avoid the potential problem. But in understanding BRK, the economics don't necessarily follow the narrative.

Initially, I thought it odd as well that BRK didn't buy the paper. But I believe it is just more evidence that Buffett's vision for the future of newspapers is not marquise assets in metropolis or national or international papers. If that was the target, the Boston Globe would have made sense. If I understand what Buffett has been trying to say about the newspapers that are attractive to BRK is that they must be in markets where there is limited competition to report the community news. I wonder as well if one of the goals is to save newspapers where they might otherwise fold, and the Post, Globe and their ilk are not yet in danger of collapse. Finally, I am intrigued by Bezos' plans for distribution. Amazon's capabilities could be a game changer.

I agree the discussion of Henry Singleton at the meeting was interesting. I generally follow netnet's interpretation, but found it to contain further insight into how WEB views his shareholders and, more significantly for the future, how BRK's culture is different from other companies. WEB has said and written it hundreds of times, but it wasn't until reading the transcript from this year's meeting that I realized how significant it is that WEB views his shareholders as partners. It caused me to understand better BRK's reluctance to buyback stock. It also caused me to rethink the significance of WEB knowing personally many (most?) of longtime shareholders. It may be as well that the stability of the Class A shareholder base is significant to WEB, allow BRK to take the outsized insurance risks without fear of the Street's reaction. Of course, given the liquidity of the Class B shares, I'm not sure that the duty WEB evidently feels to his shareholders is reciprocated by Class B. I was also struck by Charlie's remark that Singleton wanted BRK to buy Teledyne. That would have been quite a mouthful for BRK back then.

Jay21: You have captured well my frustration with the desire to "be fair" to all shareholders. If shareholders want to sell, there is sufficient market for them to sell in any event whether to BRK or a third party. If some current shareholder isn't dissuaded by the fact that WEB is buying his or her shares, then I don't see the benefit of trying to protect them from themselves. I'm hoping, but don't expect, that share buybacks will become an ever larger arrow in BRK's quiver. I believe that well timed share buybacks are one of the largest advantages BRK possesses over a mutual fund or ETF. Indeed, I'm hoping the company goes to an even more pronounced discipine - horde cash and wait for profound market dislocations like 2008. In the interim, buyback shares and grow existing organic businesses. We've seen enough market dislocations in the last 15 years to suggest that another one will come around soon enough. To the topic, I think that formula can payoff handsome long term but may well make it hard to consistently grow BV above the SP rate. I believe that such an approach would grow IV soundly above the rate of the SP - albeit, as WEB points out, likely by muting the down years dramatically and lagging in the super hot years.

Thanks. That was very clear and helpful.

Thanks, Jay21. Interesting notes. Can you explain in more detail what you meant in your last paragraph with respect to needing to understand the HoldCo debt to understand the ROE, please? Again, many thanks for sharing your good work.

From the press release, it is approximately 4:00 p.m. OMAHA, NE—Berkshire Hathaway Inc.’s 2012 Annual Report to the shareholders and its Form 10-K will be posted on the Internet on Friday March 1, 2013, at approximately 4:00 p.m. eastern time where they can be accessed at www.berkshirehathaway.com. The Annual Report will include Warren E. Buffett’s annual letter to shareholders and other information about Berkshire’s financial position and results of operations. Concurrent with the posting of the Annual Report and 10-K, Berkshire will also issue an earnings release. We'll see how robust the server is.

We have to wait this year. It will be released next Friday, after trading. http://blogs.wsj.com/deals/2013/02/19/buffetts-annual-berkshire-letter-to-come-on-friday-march-1/

Wellmont and Zarley have hit upon what Schroeder was trying to highlight. Characterizing the $8 billion of preferred as debt may be technically correct as an accounting conclusion but pointing to it as indiction that the deal is akin to a highly leveraged MBO, as the WSJ did today, is misleading. 3G and BRK are the two parties for whom the distinction between debt and equity for $8 billion matter; to third parties the preferreds are effectively equity. (Perhaps as well the IRS, if I understood Wellmont's suggestion.) As noted above, the granting of warrants to BRK as part of the preferred structure makes this even more interesting. 3G are big boys and they reportedly pitched the idea to Buffett but I concur with Schroeder that they seem to bear disproportionate risk given BRKs ability to capture the upside, if any, through exercise of the warrants. Has any information been reported about the number and pricing of the warrants?

Zarley: thanks for the summary, which adds a nice perspective. It will be interesting to see the specifics on the Preferreds. It makes the economics of the partnership fascinating, as is generally the decision to team up with 3G/Lemann. It sounds as if the management expertisement was a significant enticement for BRK - similar to deals with Leucadia. Also wonder at the timing - Is there any reason why the deal couldn't have been struck earlier at a lower price? It will be interesting to watch 3G's role going forward, especially if there are other acquisitions down the road.

Thanks for the heads up. Two chapters in and I can't put it down. The book is fascinating and thought provoking.

In fact, the GE warrants are priced at $22.25, so they show nearly $1 billion in profit from the $3 billion loan. Very nice return indeed given the 10% interest. Assuming GE's pricing holds up, it will be interesting to see if BRK buys and holds the stock (perhaps hoping for dividend growth) or sells the options. GS options have hovered around par. That will be interesting to watch over the next 10 months or so.

I appreciate the discussion. I've been asking these questions of myself for over a past decade and haven't yet cracked the nut. I suspect our depth of understanding the strategy will deepen over the decades until, in retrospect, the genius seems obvious. The thoughts above have helped me further that process. With that as caveat, here are some reflections: Float may play a role in the initial acquisition, but if I am thinking about this right, not in the subsequent capital investment, which appears to be funded from funds from operations. However, a similar (albeit not quite as cheap) approach for both MidAmerican and BNSF is to add non-recourse leverage to the mix to boost their ROE. With energy, the periodic tax incentives for certain types of energy also add a layer of complexity and enhance returns. With railroads, the long-lived nature of the assets must be attractive. The depreciation rate doesn't fully cover the necessary replacement capex true, but the depreciation rate also doesn't track the true life of the asset. And I agree that railroad transport looks to be becoming ever more competitive with trucks and planes, which competitive advantage seems likely to grow annually. Finally, a component of the attractiveness of both BNSF and MidAmerican is the predictably of returns. Those can be goosed, opportunistically, with tuck-in acquisitions. The Constellation venture is a good example. But fundamentally, BRK can predict a range of cash flow with a solid low-end estimate. The unknown part of the range is to the upside. Positive thoughts aside, I do hope that Buffett will be asked to explain in greater detail than he has the nearly flat performance of MidAmerican since the 2006 acquisition (excluding the one-time gain on Constellation), despite heavy capex. It may well be building value, but the results aren't showing up in enhanced earnings so far as I can tell.