Tao of Charlie Munger: A Compilation of Quotes from Berkshire Hathaway's Vice Chairman on Life, Business, and the Pursuit of Wealth With Commentary by David Clark

by David Clark

“How is [Berkshire] organized? I don’t think in [the] history of the world has anything Berkshire’s size [been] organized in so decentralized a fashion.” – The one thing that Charlie and Warren did that is unique in the world of corporate conglomerates was to dismiss the idea of synergy. What happens, happens, but the heads of each of Berkshire’s subsidiaries are free to do business with whomever they want, whenever they want, even if it is a competitor of one of Berkshire’s other subsidiaries. Unlike most corporate conglomerates, Berkshire does not have a quota system imposed by headquarters requiring the subsidiaries to meet HQ’s numbers. At Berkshire the CEO running the subsidiary calls the shots and sets the projections. Berkshire’s culture is also unique in that it will let businesses run out, which means that instead of selling a subsidiary with declining revenue and future prospects, it will keep on running the business until it’s time to shut the doors, as we did with Berkshire’s textile operations. There is no discarding a wholly owned Berkshire subsidiary company because it is doing poorly, as CEO Jack Welch used to do at General Electric. This strategy of decentralization almost to the point of abdication frees Berkshire’s subsidiary managers—the people with the best knowledge—to adapt their businesses to the economic environment as they see fit, without being meddled with by a less knowledgeable home office. It also allows Charlie and Warren to avoid the financ...