As a former academic I’ve reviewed many books, but none as long, expensive and (potentially) valuable as Adam Mead’s The Complete Financial History of Berkshire Hathaway, published in April 2021 by Harriman House.
Before outlining my response to the book based on a ‘quick’ read lasting a few weeks, it’s important to declare that I have no direct investment in Berkshire Hathaway. I have a small holding in the London-listed AVI Global Trust which in turn has a small position in Berkshire. My closest connection to the volume is having been in the same Philosophy, Politics and Economics student cohort as noted investor Guy Spier, who endorses the book on the cover (he and I never spoke, but must have sat in the same lectures).
To be of enduring value, any work of non-fiction must pass three tests:
- Does it offer new information about the topic?
- Does it prompt fresh thinking about wider subjects?
- Will be it worth referring to again?
Adam Mead’s 744 page text passes these tests most
emphatically.
Firstly, the book provides page after page of facts about
Berkshire Hathaway arranged chronologically, segmented into sections
summarising each year, and chapters spanning a decade at a time. Particularly
noteworthy is the revelation (to me at least) that Berkshire Hathaway not only
owes its origin to Berkshire Fine Spinning Associates and Hathaway
Manufacturing, but that these original businesses survive only in the company’s
name, all vestiges having been abandoned in the 1980s. Failed investment in
textiles is thus inscribed into the very identity of BRK – a salutary reminder
of the necessity of evolution and humility if a corporation is to have a long
life.
The general reader of Adam Mead’s painstaking research needs to appreciate that the numbers are the narrative in his way of relating the Berkshire Hathaway story. Reading the book quite rapidly is akin to watching the time-lapse photography of a natural history documentary. In the mind’s eye it feels like an ever-widening spreadsheet is unfolding as the history of the business is told and tabulated through the chapters.
The numbers are not simply cut and pasted from the Berkshire Hathaway reports. Adam Mead provides his own calculations of the company’s underlying value and lays out the implied multiples paid for major acquisitions. He also explains some of the intricacies of the insurance and reinsurance businesses that provide the capital, the ‘float’, for deployment in the wide array of investments that have come to define Berkshire Hathaway.
The keyword in the book’s title is financial: this is a financial history, primarily a quantitative biography of Berkshire as a business. A complete historical understanding of Berkshire Hathaway would need to complement this book with the character-focused Buffett biographies of Roger Lowenstein or Alice Schroeder, and writings by/on Charlie Munger such as Poor Charlie's Almanack or the summary by Tren Griffin.
The second test mentioned above – stimulating fresh thinking
about broader subjects – is also passed, but for me in ways with which the
author might not entirely sympathise.
It’s clear that Adam Mead has a deep admiration for Berkshire Hathaway. I wouldn’t say love is blind, but by the end of the book I started yearning for more critical questioning.
How are capital allocation decisions made today, and by whom? What is the role of the Berkshire Hathaway Board? What can be learnt from some of Berkshire’s investment mistakes e.g. the $444m loss on the UK supermarket Tesco; not investing at speed and scale in March 2020; investing into and then exiting the airline industry? Is Berkshire’s response to environmental considerations fit for twenty-first century purpose?
I also started contemplating whether Berkshire Hathaway has become too diverse, too sprawling, to be coherent?
Perhaps the most interesting question the book provoked is: If you were starting a holding company today, what approach would you take?
A comparative analysis of Berkshire Hathaway with other holding companies would be instructive. Examples might include Kinnevik, the Stockholm-listed vehicle for the Stenbeck family; Investor AB, the Wallenberg family controlled holding company; more controversially perhaps Softbank.
Does the large-scale investment vehicle of today need
greater thematic focus and a greater willingness to embrace disruptive digital technologies?
Does the growing tendency of companies to postpone public
listing require a differently structured investment vehicle to exploit those opportunities: a
private equity or SPAC element?
But here I’m starting to project my reservations about Berkshire Hathaway onto the book, and expecting things it did not set out to provide.
Finally, is the book worth referring to again?
Despite the above reservations, since reaching page 744 I’ve already dipped into parts of the book once more: to reflect on Buffett’s remarks from the 1980 annual letter on the pernicious effects of inflation; to understand how Berkshire Hathaway through its sheer longevity provides a living reminder that all investment involves a combination of capital allocation and risk mitigation.
Reaching the end of the book hasn’t made it any more likely that I’ll invest in Berkshire Hathaway, but I’ve attained a deeper appreciation of what an extraordinary legacy Buffett and Munger will leave when they depart. As that time draws nearer the value of Adam Mead’s immense achievement in documenting their work so assiduously will become more evident. Anyone seeking to understand Berkshire Hathaway will need to read and re-read this book, and the companion website The Oracle's Classroom.
The Complete Financial History of Berkshire Hathaway has an intrinsic value well in excess of the costly initial investment required, and will generate compound growth in the investing wisdom of the attentive reader.
- Several interviews in which Adam Mead discusses the book are available on YouTube, for example with Tobias Carlisle on The Acquirer's Podcast
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