Berkshire Hathaway Letters to Shareholders: 1965-2024

by Warren Buffett

In June, Bob Shaw, CEO of Shaw Industries, the world’s largest carpet manufacturer, came to see me with his partner, Julian Saul, and the CEO of a second company with which Shaw was mulling a merger. The potential partner, however, faced huge asbestos liabilities from past activities, and any deal depended on these being eliminated through insurance. The executives visiting me wanted Berkshire to provide a policy that would pay all future asbestos costs. I explained that though we could write an exceptionally large policy — far larger than any other insurer would ever think of offering — we would never issue a policy that lacked a cap. Bob and Julian decided that if we didn’t want to bet the ranch on the extent of the acquiree’s liability, neither did they. So their deal died. But my interest in Shaw was sparked, and a few months later Charlie and I met with Bob to work out a purchase by Berkshire. A key feature of the deal was that both Bob and Julian were to continue owning at least 5% of Shaw. This leaves us associated with the best in the business as shown by Bob and Julian’s record: Each built a large, successful carpet business before joining forces in 1998.