The Warren Buffett CEO
Interviews with Berkshire subsidiary managers.
Summary
Miles interviewed roughly twenty chief executives of Berkshire Hathaway operating subsidiaries and built the book around what they said about running businesses under Buffett's ownership. The subjects include managers at See's Candies, Nebraska Furniture Mart, Borsheims, GEICO, General Re, Executive Jet, Star Furniture, Justin Industries, Shaw Industries and others.
The consistent finding is about what Berkshire does not do. Subsidiary chief executives report no budget submissions to headquarters, no strategic planning process, no head office staff functions, no imposed capital expenditure approvals below large thresholds, and no interference in hiring, pricing or product decisions. What they do report is a requirement to send cash to Omaha rather than reinvest it, direct access to Buffett by telephone, and compensation arrangements negotiated individually and tied to the specific economics of their business rather than to Berkshire's share price.
Miles draws the conclusion that Berkshire's structure works because it selects managers who would run their businesses the same way whether or not they were being watched, and then removes the reasons such people leave. Several subjects had sold family businesses and stayed on for decades afterward, which is the evidence he emphasises.
The book is admiring and the access was granted, so it has the limitations of authorised material. It reports no failures, and Berkshire has had them. The interviews are also now more than twenty years old and many of the subjects have died or retired, though the structural description of how the holding company operates remains accurate.
Key takeaways 7
- Berkshire subsidiaries submit no budgets, no strategic plans and no routine reports to head office.
- The single obligation placed on subsidiary chief executives is to send excess cash to Omaha rather than reinvest it locally.
- Compensation at each subsidiary is tied to that business's own economics rather than to Berkshire's share price.
- Buffett selects for managers who already behave like owners, then removes the bureaucratic reasons such managers leave.
- Berkshire's head office employs a very small number of people relative to the size of the company it oversees.
- Autonomy functions as compensation, which is why founders who sold their companies stayed for decades afterward.
- Centralising capital allocation while decentralising everything else is the specific division of authority that makes the structure work.
Who should read it
Operators and acquirers of businesses who want a concrete description of how a decentralised holding company actually divides authority.
Where it sits in the reference 2
Who recommended it 1 · 1 direct
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