Monday, April 7, 2014

Mr. Buffett's chemists (not really)

I'm not a member of The Cult Of Warren Buffet, but I enjoy reading Berkshire Hathaway's annual report. It's eminently readable as far as annual reports go -- you can imagine Warren Buffett sitting there, happily typing away on his computer. My favorite quote from Buffett was from the 2010 letter, where he publishes his advice to his managers on potentially questionable business moves (emphasis mine):
If you see anything whose propriety or legality causes you to hesitate, be sure to give me a call.
However, it’s very likely that if a given course of action evokes such hesitation, it’s too close to the line and should be abandoned. There’s plenty of money to be made in the center of the court. If it’s questionable whether some action is close to the line, just assume it is outside and forget it.
I just got done reading this year's report (via this article that talks about Berkshire falling behind the S&P 500 of late) and I was struck by this list of Berkshire's largest stock holdings. Sure seems like they're invested in a lot of chemists:
Of course, of these, only a couple (Proctor and Gamble, Sanofi) can truly have chemists at the center of their business models. (I wonder what it is about Sanofi, of all the pharma companies, that seems to hold Berkshire's interest?)

*I took the title from my mental nickname for the Burlington Northern Santa Fe railroad, which is owned by Berkshire Hathaway. BNSF trains interrupt my sleep and conversations on a regular basis.  

8 comments:

  1. "(Proctor and Gamble) can truly have chemists at the center of their business models"

    could, but choses not to. The center of that universe revolves around marketeers and engineers.

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  2. Lubrizol is another Berkshire Hathaway company that is big on chemistry and chemists.

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  3. Behind every good chemical engineer there is a chemist. The engineers can only engineer what a chemist has already created. While ExxonMobil and Phillips 66 employ engineers by the trainload and chemists by the carload (Mini Coopers at that), there still is chemistry at the center of the business model.

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    Replies
    1. Can you explain this fact to the engineers? ;-)

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  4. Concrete DovetailApril 8, 2014 at 9:56 AM

    Buffet shoots at what he considers very easy targets. Processing raw materials into products is something that will also have some value associated with it. There is certainly nothing fuzzy about the importance of chemistry to the world economy. But to make more jobs for high level chemists, you need innovation, or a willingness to seek innovation. In at least some cases I have seen high level people within a company prefer to hire people who are less ambitious (at least on paper by virtue of their CV), and I assume this is because they do not want to be outshined.

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  5. Concrete DovetailApril 8, 2014 at 10:11 AM

    Didn't Buffet buy Henkel or some adhesives company last year?

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  6. I'm not sure there are many chemists left at Exxon-Mobil. I've been to a number of their facilities.

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