David Rosenthal: observation

Transcript context

…It's almost like the notion of the VC founder-friendly thing where we're saying, hey look like, let's take a super long lens here and say that the way that we're going to maximize value for everyone—including ourselves way down the line—is by making sure that management likes us as shareholders, feels that were deferential to them, and not capturing every little bit of value we possibly can out of their company at their expense. He's totally right. This is something I've always wondered from afar looking at Berkshire. They buy these companies that are, if not wholly family-owned businesses, many of them are public companies but have a large family controlling ownership like Wesco, like The Post. They buy these companies and then the family or the current management often stays on and keeps working there. I'm like, why would they do that? This is the key because they're playing the long game. What they really want is great managers who built great companies to stay running them. The way to do that isn't to negotiate every last dollar out of them. Or even if it is, I think we're conflating two things here a little bit. I think Berkshire does make sure they get a great deal when they buy a family-owned business outright. They’re going to buy low. But they either just believe that the business has so much future upside in it that they're willing to meet in the middle on price, or they are very good at identifying managers who have a splinter in their mind to continue to do the work. They're very good at this shrewdly evaluating, even if this person no longer holds a single share of their company, they’re going to show up for work every day because this is their life's mission and purpose. I don't think that's what was going on in the Wesco Financial situation. But I think when they buy these family-owned businesses, there's a lot of that in the evaluation of the business.…

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