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Breaking up Berkshire?


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Just read the opinion piece on the FT about breaking up Berkshire Hathaway whenever Mr. Buffett is no longer around. (https://www.ft.com/content/89ca1c10-85ac-4d88-8361-ee6b6be1384f).

 

In general, I agree with the concept that conglomerates are shitty investments - they end up hiding weaker divisions behind the strengths of profitable ones. Yet, the benefit of investing in a Berkshire is partially the fact that it is a US global conglomerate.

 

Any general thought on this as a concept?

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Anybody proposing that doesn't understand Berkshire. A good part of the value is how the cashflow of the cash cow with limited growth is used to buy growth elsewhere or to provide capital for the insurances companies. If you breakup  Berkshire you destroy that superb capital re-allocation machine.

 

There may be a problem in future with the votes of index fund and the votes of institutional shareholder who invest in ticker instead of companies. 

 

 “For the most valuable public company in the world, three individuals can in principle swing the vote of 17 percent of its shares. Generally, a significant fraction of shareholders do not vote, even if in contested battles. As a result, the 17 percent actually represents more like 25 percent or more of the likely votes in contested votes. That share of the vote will generally be pivotal.” In fact, the Big Three cast roughly 25 percent of the votes in S&P 500 companies.

 

https://www.theatlantic.com/ideas/archive/2021/04/the-autopilot-economy/618497/

 

These three individuals are the one voting the shares of index funds of Vanguard, BlackRock and State Street. These are the kind of shareholders who wants to remove Buffett from the chairman seats and replace it by someone who can't care as much as Buffett for the company

 

 

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