Conservative
Type 40
excerpt from the 1985 Berkshire Hathaway Shareholder letter where he describes the shutdown of the textile operations...
T&T Capital Management: 1985 Berkshire Hathaway textiles versus 2011 Sears Holdings
Sounds exactly like what Bain Capital does. If it works and is profitable, it stays. If it doesn't work and is not profitable, it goes.
Of course, Warren Buffet isn't running against Barack Obama, so he's not an evil, greedy, leech. Right, libtards???
T&T Capital Management: 1985 Berkshire Hathaway textiles versus 2011 Sears Holdings
Further diversification for Berkshire followed, and gradually the textile operations depressing effect on our overall return diminished as the business became a progressively
smaller portion of the corporation.
Though 1979 was moderately profitable, the business thereafter consumed major
amounts of cash. By mid-1985 it became clear, even to me, that this condition was almost sure to continue. Could we have found a buyer who would continue operations, I would have certainly preferred to sell the business rather than liquidate it, even if that meant somewhat lower proceeds for us. But the economics that were finally obvious to me were also obvious to others, and interest was nil.
I wont close down businesses of sub-normal profitability merely to add a fraction of a point to our corporate rate of return. However, I also feel it inappropriate for even an exceptionally profitable company to fund an operation once it appears to have unending losses in prospect.
Trying to achieve sustainable profitability, they reworked product lines, machinery
configurations and distribution arrangements. We also made a major acquisition, Waumbec Mills, with the expectation of important synergy (a term widely used in business to explain an acquisition that otherwise makes no sense). But in the end nothing worked and I should be faulted for not quitting sooner.
Thus, we faced a miserable choice: huge capital investment would have helped to keep our textile business alive, but would have left us with terrible returns on ever-growing amounts of capital. After the investment, moreover, the foreign competition
would still have retained a major, continuing advantage in labor costs. A refusal to invest, however, would make us increasingly non-competitive, even measured against domestic textile manufacturers.
My conclusion from my own experiences and from much observation of other businesses is that a good managerial record (measured by economic returns) is far more a function of what business boat you get into than it is of how effectively you row
(though intelligence and effort help considerably, of course, in any business, good or bad). Some years ago I wrote: When a management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact. Nothing has since changed my point of view on that matter. Should you find yourself in a chronically-leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.
Sounds exactly like what Bain Capital does. If it works and is profitable, it stays. If it doesn't work and is not profitable, it goes.
Of course, Warren Buffet isn't running against Barack Obama, so he's not an evil, greedy, leech. Right, libtards???