Buffett Beyond Value: Why Warren Buffett Looks to Growth and Management When Investing

Chapter 2. 1965–2009: Lessons from Significant Events in Berkshire History

History is philosophy teaching by examples.

—Thucydides, an ancient Greek historian

When Warren Buffett took control of Berkshire Hathaway in 1965, it was a small textile manufacturing company in New England. The prospects of the textile industry at the time were rather bleak. Buffett has transformed Berkshire into a large insurance, utility, manufacturing, and retailing conglomerate. In 44 years, the company's book value has grown from $19 to $70,530 per class A share, and the stock price has correspondingly grown from about $8 to $96,600. The following list of significant events in Berkshire history serves two purposes. First, it is important to learn from the examples others have set; and second, it presents a quick look at many of Buffett's principles. In later chapters, we will explore these principles further.

1965: Not Throwing Good Money after Bad

Event Warren Buffett is listed as a Berkshire director for the first time, although he is not yet the chief executive of the company. Starting to accumulate Berkshire shares in 1962 at $7.60 per share, Buffett acquired a controlling interest in the company by 1965 with an overall average cost of $14.86 per share.

Lesson Revenues at Berkshire have been declining, from $64 million to $49 million, in the prior 16 years. However, the company did not invest much to prop up the declining textile business. The decision not to invest in a declining business is a good ...