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3
“Our Main Business
Is Insurance”
The Early Days of
Berkshire Hathaway
W
hen the Buffett Partnership took control of Berkshire Hathaway
in 1965, stockholders’ equity had dropped by half and loss from
operations exceeded $10 million. Buffett and Ken Chace, who
managed the textile group, labored intensely to turn the textile mills
around. Results were disappointing; returns on equity struggled to reach
double digits.
Amid the gloom, there was one bright spot, a sign of things to
come: Buffett ’s deft handling of the company’s common stock portfo-
lio. When Buffett took over, the corporation had $2.9 million in mar-
ketable securities. By the end of the f irst year, Buffett had enlarged the
securities account to $5.4 million. In 1967, the dollar return from in-
vesting was three times the return of the entire textile division, which
had ten times the equity base.
Nonetheless, over the next decade Buffett had to come to grips
with certain realities. First, the very nature of the textile business
made high returns on equity improbable. Textiles are commodities