Golden Ideas from 1979 Berkshire Hathaway Inc. Letter to shareholders (part 5/5)

• Managing the large number of Berkshire Hathaway subsidies

Warren Buffett principles of management seems to be genially simple (do not confuse with easy). As he stated in his Letter to shareholders in 1979:

�Your company is run on the principle of centralization of financial decisions at the top (the very top, it may be added), and rather extreme delegation of operating authority to a number of key managers at the individual company or business unit level.�

No wonder than that with such level of delegation the Berkshire Hathaway headquarters employs only enough people to “just field a basketball team�. Obviously there are some pros and cons in leaving most of the operational responsibility with the key management. As suggested:

�This approach produces occasional major mistake that might have been eliminated or minimized through closer operating controls. But it also eliminates large layers of costs and dramatically speeds decision-making. Most important of all, it enables us to attract and retain some extraordinarily talented individuals – people who simply can’t be hired in the normal course of events - who find working for Berkshire to be almost identical to running their own show.�

Understandably Buffett is than left with enough time to do what he does best - analyzing potential takeover deals and investment opportunities.

Source: http://berkshirehathaway.com/letters/1979.html

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