This introductory chapter provides a general discussion of Berkshire Hathaway and the secret behind its tremendous success. From its humble roots in 1965, Berkshire has become one of the largest corporations the world has ever seen. Its cash alone—$40 billion or more in recent years—exceeds the total assets of all but the largest one hundred American corporations. What has remained a mystery is how Berkshire functions so successfully given that it is made up of such a diverse group of subsidiaries. The Berkshire corporate empire encompasses more than five hundred entities engaged in hundreds of different lines of business. But diverse as they are, a close look at Berkshire’s subsidiaries and the company’s goals in acquiring them reveals distinctive common traits. The most important filter Berkshire applies when evaluating a potential acquisition is whether a company has ways to protect its ability to earn profits. Management experts refer to these as “barriers to entry,” making it difficult for competitors to take market share away. Warren Buffett draws on medieval imagery, portraying a business as a “castle” and such barriers and advantages as “moats.” Berkshire’s moat is its distinctive corporate culture. Berkshire spent the last five decades acquiring a group of wholly owned subsidiaries of bewildering variety but united by a set of distinctive core values. The result is a corporate culture unlike any other.
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