It’s rare for a company to capture the imagination of investors and the public alike, but Berkshire Hathaway has done just that. Known for its growth, bold acquisitions, and billionaire investor Warren Buffett, Berkshire Hathaway’s history is as intriguing as its legendary leader. Here, we’re detailing its history and impressive transformation.
When people hear "Berkshire Hathaway," two images often come to mind: the mammoth, $1 trillion conglomerate and its charmingly candid CEO, Warren Buffett . Known as the “Oracle of Omaha,” Nebraska native Buffett has turned Berkshire Hathaway from a struggling textile company into a diversified powerhouse, amassing a devoted fan base along the way. Each year, thousands flock to Omaha for the company’s annual shareholder meeting – dubbed "Woodstock for Capitalists". There, they soak up investment wisdom from Buffett and his late, great right-hand, Charlie Munger.
For those curious about how Berkshire Hathaway went from textile mills to boardrooms, here’s a look back at its surprising history, current operations, and what makes it a truly unique company.
Berkshire Hathaway's early days
Before it became synonymous with investment genius, Berkshire Hathaway was simply a small player in the textile industry. The company actually started as two separate businesses: Berkshire Cotton Manufacturing Company, founded in 1889; and Hathaway Manufacturing, founded in 1888. For decades, these companies operated independently, facing the usual ups and downs of the textile trade.
By 1955, the two companies merged, hoping that joining forces would keep them afloat in a tough industry. But the textile world was changing fast, with international competitors beginning to dominate.
Despite the merger, Berkshire Hathaway was still struggling when a young Warren Buffett discovered it in the early 1960s. Sensing value in the faltering company, Buffett began buying shares – but he never guessed his relationship with Berkshire Hathaway would end up changing his life and the business world.
Why Buffett bought Berkshire Hathaway
The story of Buffett’s takeover is one of his best-known – and it’s a little personal, too.
Buffett had been buying shares in Berkshire Hathaway because he saw value in the company’s assets and stock. (This is a philosophy known as ' value investing ', which Buffett is synonymous with.)
But when Berkshire Hathaway’s then-management made a deal to buy back his shares at $11.50 each, they went back on their word and offered $11.375 instead. It was only a small change, but it didn’t sit right with Buffett. In classic fashion, he decided to take control of the company himself, driven as much by principle as by profits.
By 1965, Buffett held enough shares to have a controlling majority of Berkshire Hathaway – effectively allowing him to run the company. Though he initially tried to keep the textile business going, it quickly became clear that textiles weren’t the future.
Rather than let the business sink, Buffett made a pivotal choice: he would redirect the cash flow from the textile business into other, more promising industries. This decision allowed Buffett to rescue Berkshire Hathaway and set it on the path toward becoming one of the most diversified and profitable companies in the world.
Berkshire Hathaway’s evolution rescue
Buffett’s shift into the insurance business was a game-changer for Berkshire Hathaway.
In 1967, he bought National Indemnity Company, a well-run insurance company that provided him with a steady source of cash known as “float”. This is the pool of premiums insurers collect but don’t have to pay out immediately. The “float” allowed Buffett to invest aggressively in other companies without constantly relying on outside capital. With insurance, Buffett had found Berkshire Hathaway’s golden goose.
From there, Berkshire Hathaway’s journey was a series of strategic investments and acquisitions. Buffett favoured businesses with strong brands, consistent profitability, and the ability to generate steady cash. Over time, he’d buy other investments that built up Berkshire Hathaway’s reputation as a conglomerate with a keen eye for quality.
One of his boldest moves was acquiring Burlington Northern Santa Fe (BNSF) Railway for $26 billion. BNSF Railway wasn’t just a lucrative investment; it was a bet on the future of American infrastructure. Buffett knew that transportation – specifically, railroads – would remain essential to the economy for generations. Effectively, he was saying he believed in the American economy and its long-term potential.
Berkshire Hathaway had officially evolved from a single-industry company into a diversified entity, a conglomerate with businesses in sectors as diverse as insurance, energy, transportation, and consumer goods.
Other significant acquisitions that shaped Berkshire Hathaway
While Berkshire Hathaway owns or holds significant stakes in hundreds of companies, a few acquisitions stand out as defining moments:
- See’s Candies (1972): This company was more than just a sweet buy. It taught Buffett the importance of strong brands and customer loyalty. The company became a model for other acquisitions that would follow.
- GEICO (1996): GEICO represented Buffett’s commitment to insurance, but it was also a personal story. He had long admired the company, and by acquiring it, he solidified Berkshire Hathaway’s position as a leader in the insurance industry.
- Precision Castparts Corp. (2016): In a massive $37 billion deal, Berkshire acquired this manufacturer of aerospace parts, adding to its industrial portfolio and underscoring Buffett’s confidence in sectors that require long-term vision.
Each acquisition reflects Buffett’s strategy of buying companies with strong fundamentals, loyal customers, and a high likelihood of enduring success. It’s why Berkshire Hathaway’s portfolio now includes brands that are not just profitable but part of everyday life.
Berkshire Hathaway today
Jumping to the present day, Berkshire Hathaway has grown into a global giant with interests spanning nearly every major industry. It holds significant stakes in blue-chip companies likeApple, Coca-Cola, and American Express. Apple, which Buffett began investing in around 2016, has become one of his most valuable holdings, marking a successful pivot into the tech sector that Buffett once avoided.
The company also boasts numerous fully-owned businesses, from Berkshire Hathaway Energy to Berkshire Hathaway HomeServices, providing a diversified revenue stream. Meanwhile, GEICO remains one of Berkshire Hathaway’s core holdings, supplying consistent income and insurance float for further investments.
As of late 2024, Berkshire Hathaway’s leadership is still in Buffett’s hands, following the passing of his long-term second-in-command Charlie Munger in 2023. However, succession planning is in place, with Greg Abel likely to take over the reins. Abel, who manages Berkshire Hathaway’s non-insurance operations, reportedly aims to carry forward the culture of long-term value and disciplined investment that Buffett has built over the years.
A legacy built on patience and principles
Berkshire Hathaway’s story isn’t just about dollars and cents; it’s about a philosophy of doing business that values patience, solid fundamentals, and a long-term outlook. Warren Buffett’s approach to business has always emphasised quality over quick returns, and that has historically been reflected in Berkshire Hathaway’s operations. It’s this commitment to long-term growth that has endeared him and Berkshire Hathaway to many long-term investors around the world.
Even as Buffett begins to hand over the reins, the culture he created is expected to remain. After all, Buffett has often said that he invests as if each company in Berkshire Hathaway’s portfolio will be around for the next 100 years. It’s this kind of foresight and dedication to value that has made Berkshire Hathaway a company people in the long-term investing community admire.
Wrapping up on the history of Berkshire Hathaway
Berkshire Hathaway’s journey from textiles to conglomerate is a testament to what’s possible when smart investing meets a disciplined approach. Warren Buffett’s story shows that with patience, focus, a commitment to value, and doubtless a bit of luck, you can build something lasting and meaningful. Whether you’re an experienced investor or just starting, learning from the stories of companies like Berkshire Hathaway can spark inspiration and broaden your understanding of the markets.
Here’s to continuing your own journey in learning and discovering the heroes of the business world!
