The story of Berkshire Hathaway is one of the most remarkable transformations in business history. What began as a struggling New England textile manufacturer became, under the leadership of Warren Buffett, one of the largest and most successful conglomerates in the world. The journey of Berkshire Hathaway is not merely a tale of financial growth; it is a case study in patience, discipline, rational decision-making, and long-term thinking. At its center stands Warren Buffett, whose investment philosophy reshaped the company and left a lasting imprint on global capitalism.
Origins: A Failing Textile Company
Berkshire Hathaway traces its roots to the 19th century, when it operated as a textile manufacturer in New England. By the mid-20th century, however, the American textile industry was in decline. Rising labor costs, outdated equipment, and competition from overseas producers left many textile mills struggling to survive.
In 1955, two textile companies—Berkshire Fine Spinning Associates and Hathaway Manufacturing—merged to form Berkshire Hathaway, Inc. Despite the merger, the business continued to deteriorate. By the early 1960s, Berkshire Hathaway was losing money and closing mills, offering little promise as an operating business.
It was into this bleak situation that a young Warren Buffett entered.
Warren Buffett’s Initial Investment
Warren Buffett first noticed Berkshire Hathaway in the early 1960s because it appeared statistically cheap. The company was trading below the value of its assets—a classic “cigar-butt” investment, as Buffett would later describe it: a business with one last puff of value left.
Buffett began buying shares in 1962. His intention was not to build a corporate empire, but to profit from what he believed was a temporary mispricing. When Berkshire announced a tender offer to repurchase shares at a certain price, Buffett expected to sell his holdings and move on.
However, when the offer came in slightly lower than what Buffett believed had been promised, he felt insulted. In response, he did something that would later become legendary: instead of selling, he bought more shares and eventually took control of the company in 1965.
Buffett would later call this decision one of his greatest mistakes—not because it failed financially, but because the textile business itself was fundamentally flawed. Nevertheless, that mistake became the foundation of something extraordinary.
Shutting Down Textiles and Changing Direction
Buffett attempted to keep the textile business alive for several years, hoping improved management and capital investment might turn it around. But the economics of textiles were relentless. The business consumed capital without generating meaningful returns.
By the mid-1980s, Buffett finally shut down Berkshire’s textile operations entirely. While emotionally difficult, this decision reflected one of Buffett’s core principles: capital should flow to its most productive use. Hanging onto a failing business out of sentiment would only destroy value.
Importantly, the cash flows from the textile operations in earlier years were not wasted. Buffett used them as seed capital to invest in other businesses—an early glimpse of Berkshire’s future role as a holding company.
The Insurance Breakthrough
The turning point in Berkshire Hathaway’s history came with insurance.
In 1967, Berkshire acquired National Indemnity Company, an insurance business. This purchase changed everything. Insurance companies generate “float”—premium money collected today that may not be paid out in claims until years later. If managed wisely, float can be invested, effectively providing low-cost (or even cost-free) capital.
Buffett immediately recognized the power of this model. Unlike the textile business, insurance—when underwritten properly—could generate both profits and investable funds.
Over time, Berkshire acquired or built several insurance operations, including GEICO, which would become one of its crown jewels. The float from these businesses gave Buffett a growing pool of capital to invest in stocks and companies, amplifying Berkshire’s growth.
The Evolution of an Investment Powerhouse
With insurance float as fuel, Berkshire Hathaway evolved into an investment powerhouse. Buffett, often working alongside his longtime partner Charlie Munger, invested in high-quality businesses with strong competitive advantages, honest management, and the ability to generate consistent cash flows.
In the early years, Buffett focused on undervalued stocks, influenced by his mentor Benjamin Graham. Over time, however, Munger helped push Buffett toward a more qualitative approach—buying wonderful businesses at fair prices rather than fair businesses at wonderful prices.
This shift led Berkshire to invest in iconic companies such as Coca-Cola, American Express, and later Apple. These investments were held for the long term, allowing compounding to work its magic.
Acquiring Entire Businesses
Beyond stock investments, Berkshire began acquiring entire businesses outright. Buffett preferred companies with simple operations, strong brands, and management teams willing to stay in place.
Some notable acquisitions include:
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See’s Candies, which demonstrated the power of brand loyalty and pricing power
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Nebraska Furniture Mart, a family-run business built on trust and low margins
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BNSF Railway, one of the largest railroad operators in North America
These companies were allowed to operate independently, with minimal interference from headquarters. Buffett believed decentralization encouraged entrepreneurship and accountability.
This hands-off approach became a defining feature of Berkshire’s culture.
Corporate Culture and Philosophy
Berkshire Hathaway’s culture is deeply shaped by Buffett’s values. The company emphasizes integrity, rationality, and long-term thinking. Managers are trusted, but expectations are clear: act as if the business were your own and think in decades, not quarters.
Buffett also rejected many standard corporate practices. Berkshire pays no dividend, preferring to reinvest earnings. Executive compensation is modest by corporate standards. Shareholder letters are written in plain language, educating investors rather than obscuring the truth.
This transparency and consistency helped build immense trust with shareholders, many of whom have held Berkshire stock for decades.
Performance and Scale
Under Buffett’s leadership, Berkshire Hathaway delivered extraordinary results. From 1965 onward, the company’s per-share book value and market value grew at rates far exceeding the broader stock market.
What began as a failing textile firm became a conglomerate owning insurance companies, railroads, energy utilities, manufacturers, retailers, and one of the largest stock portfolios in the world.
By the 21st century, Berkshire Hathaway was among the most valuable companies on Earth—an outcome few could have imagined when Buffett first bought those undervalued textile shares.
Mistakes and Lessons
Buffett has been unusually candid about his mistakes. He has openly acknowledged errors such as holding onto the textile business too long, missing early investments in technology companies, and occasionally misjudging management.
Yet these mistakes reinforce the broader lesson of Berkshire’s story: success does not come from perfection, but from a disciplined process, emotional control, and the ability to learn over time.
Buffett often emphasizes temperament over intellect, arguing that patience and rationality matter more than complex financial models.
Legacy and the Future
As Warren Buffett aged, questions about succession naturally arose. Berkshire addressed this by building a deep bench of managers and investment leaders, ensuring continuity beyond any single individual.
Perhaps Buffett’s greatest legacy is not merely the wealth Berkshire Hathaway created, but the example it set. The company demonstrated that ethical behavior, long-term thinking, and shareholder alignment can coexist with extraordinary financial success.
Conclusion
The story of Berkshire Hathaway under Warren Buffett is a testament to the power of compounding—of money, of wisdom, and of good decisions repeated over time. From a dying textile company to a global conglomerate, Berkshire’s transformation reflects Buffett’s unique blend of patience, humility, and discipline.
More than a business success story, Berkshire Hathaway stands as a philosophy in action: invest wisely, act ethically, think long-term, and let time do the heavy lifting. That philosophy turned a failing mill into one of the most admired companies in history—and made Warren Buffett a symbol of thoughtful capitalism worldwide.
Introduction: From Textile Mill to Investment Giant
Berkshire Hathaway is one of the most extraordinary corporate success stories in modern business history. What began as a struggling textile manufacturer in New England evolved into a global investment powerhouse and conglomerate under the leadership of Warren Buffett. Buffett transformed the company through a disciplined long-term investment philosophy, patient capital allocation, and a decentralized managerial approach that remains the envy of capitalism.
The Early History of Berkshire Hathaway
Berkshire Hathaway’s roots date back to the late 19th century with two separate textile firms: Hathaway Manufacturing Company and the Berkshire Cotton Manufacturing Company. These companies merged in 1955, forming Berkshire Hathaway, Inc. Despite its size and history in the textile industry, the business struggled badly by the mid-20th century due to declining U.S. textile competitiveness.
By the early 1960s, the company was a failing textile operation with mounting losses and plant closures. Its shrinking earnings and declining asset value made it a target of value investors.
Warren Buffett’s First Investment in Berkshire
Buffett’s connection to Berkshire Hathaway began in the early 1960s, when he started accumulating its stock because it traded at a significant discount to its book value. Buffett’s goal was not to buy a conglomerate but to make a short-term profit from undervaluation.
In 1965, after a contentious share repurchase offer by the company’s management, Buffett acquired a controlling stake and took over the business. Later in life, he described purchasing Berkshire as one of his greatest mistakes—because the textile business had poor economics—but also the foundation for building something far greater.
Shutting Down Textiles and Redefining Purpose
For nearly two decades after taking control, Buffett continued the textile operations, hoping for a turnaround that never materialized. By the mid-1980s, he reluctantly shut down the textile mills, recognizing that the business destroyed capital and distracted from more productive opportunities.
Although closing the textile operations was difficult, Buffett used the remaining cash flows to seed new investments, setting the stage for Berkshire Hathaway’s evolution into an investment holding company.
The Insurance Breakthrough: Float Becomes Fuel
The most transformative decision in Berkshire’s history came in 1967 with the acquisition of National Indemnity Company, an insurance company. Insurance businesses generate “float”—premiums collected before claims are paid—which provides low-cost capital that can be invested elsewhere.
This float became the financial engine that enabled Berkshire to grow. Instead of paying for investments solely with retained earnings or debt, Buffett used insurance float as leverage to pursue acquisitions and build a diversified portfolio.
In subsequent years, Berkshire added more insurance operations, including GEICO and General Reinsurance, establishing insurance as the financial core of the company.
The Investment Philosophy: Value and Quality
Buffett’s investment philosophy evolved over time. Early on, he adopted the value investing principles of his mentor Benjamin Graham, focusing on companies trading below intrinsic value. However, his collaboration with Charlie Munger—his longtime partner and vice chairman—shifted this approach toward buying outstanding businesses at reasonable prices rather than just cheap ones.
This philosophy led to significant stakes in companies such as American Express, Coca-Cola, and later Apple—names that became synonymous with Berkshire’s portfolio.
Buffett’s emphasis on understanding businesses, backing strong management, and thinking long-term became defining traits of the Berkshire model. Instead of frequent trading, Buffett typically held positions for decades, allowing compounding to drive value creation.
Strategic Acquisitions and Subsidiaries
Beyond stock investments, Berkshire bought entire businesses outright across a range of industries. These acquisitions reflected Buffett’s preference for companies with durable competitive advantages, consistent cash flows, and strong management.
Iconic Acquisitions
Some of Berkshire Hathaway’s most notable acquisitions include:
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See’s Candies (1972) – A family-run confectionery business that demonstrated the value of consumer brands with loyal customers.
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GEICO (first stake in the 1970s; full acquisition in 1996) – A key insurance business critical to Berkshire’s insurance float growth.
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Dairy Queen (1998) and NetJets (1998) – Diversifying the portfolio into consumer and service sectors.
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BNSF Railway (2010) – The largest acquisition in company history, bringing a major U.S. railroad under Berkshire’s umbrella.
These acquisitions, among many others, helped Berkshire build a diversified conglomerate spanning insurance, transportation, retail, manufacturing, and energy sectors.
Investment Stakes and Portfolio Holdings
In addition to full acquisitions, Berkshire holds significant equity stakes in major public companies. Its largest stock investments have included American Express, Bank of America, Coca-Cola, and Apple.
Apple, first acquired in 2016, became one of Berkshire’s largest holdings by market value, reflecting Buffett’s willingness to adapt his philosophy to changing economic landscapes.
These stakes generate dividend income and capital gains, further boosting Berkshire’s cash flows and investment capabilities.
Corporate Culture and Management Style
A hallmark of Berkshire Hathaway is its corporate culture: decentralized management, minimal bureaucracy, and a high degree of trust in subsidiary leadership. Buffett rarely interferes with day-to-day operations, allowing managers to run their businesses as if they own them.
This approach encourages entrepreneurial spirit and accountability. Subsidiaries are expected to generate their own growth and profits, while Berkshire provides strategic capital allocation and financial discipline.
Moreover, Berkshire’s policies—such as not paying dividends and reinvesting earnings—reflect Buffett’s belief that long-term capital allocation creates greater value for shareholders.
Performance and Scale
Under Buffett’s leadership, Berkshire Hathaway delivered remarkable performance. Its compounded annual returns far exceeded those of broad market indexes, and the company’s intrinsic value grew exponentially over decades.
By the early 21st century, Berkshire had become one of the most valuable companies in the world, with a conglomerate portfolio spanning multiple industries and a market capitalization exceeding one trillion U.S. dollars.
Challenges and Lessons Learned
Even the greatest investors make mistakes. Buffett has publicly acknowledged several missteps, including certain failed investments and business acquisitions. These admissions highlight his disciplined honesty and willingness to learn—a rarity among corporate leaders.
Furthermore, Berkshire’s success does not rely on unpredictably timing markets but on a consistent application of fundamental principles: conservative financing, rational investment decisions, and patience.
Succession and the Future
In May 2025, Buffett announced his retirement as CEO of Berkshire Hathaway after more than 60 years at the helm, entrusting the role to Greg Abel, his vice chairman overseeing non-insurance operations. Buffett will remain as chairman, helping guide transition and continuity.
Abel’s promotion represents years of succession planning, ensuring decades of stability, culture preservation, and continued application of Berkshire’s investment philosophy.
This transition marks the end of a legendary chapter but also the beginning of the next era in Berkshire’s journey—one still anchored in Buffett’s core principles of integrity, discipline, and long-term thinking.
Conclusion: A Legacy of Value
The story of Berkshire Hathaway under Warren Buffett is more than a corporate transformation—it is a blueprint for value-driven investment and principled leadership. From a declining textile mill to a diversified global powerhouse, Berkshire’s evolution reflects the power of compounding, patient capital, and disciplined decision-making.
Buffett’s legacy extends beyond financial success; it reshaped how investors and business leaders think about capital, competition, and corporate governance. His life’s work at Berkshire Hathaway will continue to influence generations of entrepreneurs, investors, and corporate stewards.
Ahmad Nor,
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