Asked at the recent Berkshire Hathaway annual shareholder meeting whether they have a family office, and if not, whether they plan to set up one, Buffett replied: “We’d be the last guys in the world to have a family office.”
That may be the case, but perhaps Munger’s response was more germane – he said: “We already have a family office, it’s sitting right here.”
It’s difficult to know exactly what Munger meant by his comment, but in the most literal sense, he’s exactly right. Buffett and Munger’s business Berkshire Hathaway is arguably one of the world’s biggest and most successful family offices. That’s if the definition of a family office is an entity that manages the financial affairs of a family, or a group of families – and there is no exclusion to being one if the business is listed or not listed.
OK, Berkshire Hathaway doesn’t describe itself as a family office, and clearly, Buffett, from his above comment, wouldn’t describe it as one. In fact, Berkshire Hathaway doesn’t describe itself as anything. If you go to its website, there’s no “about us”, nor is there a description anywhere else on the website.
In the past, it’s been described as a conglomerate holding company – and that looks to be right in that Berkshire owns companies outright as well as minority shares in them across the world. Berkshire is listed, so outside investors can buy shares in the business.
But here’s the thing – take away the public shareholding in Berkshire Hathaway and you pretty much have a single-family office, or at least that’s how many family offices across the world might view it. Because pretty much all family offices are trying to emulate the investment success of Berkshire Hathaway by acquiring stakes in successful businesses, both public and private. Most of them say they are committed to helping these businesses over the long term and aren’t interested in flipping their stakes like traditional private equity groups do, or at least, did in the past. Many see themselves as classic “Buffett/Munger” long-term value investors.
So, if Berkshire Hathaway is the role model to many of them, doesn’t it at least bear some resemblance to a family office? That might help to explain why Munger responded in the way he did to the question about a family office.