No. of Recommendations: 1
<<<It does make sense to sell or close those that are losing money and are without a solid prospect of making money soon without additional capital infusions.
But merely low returns can probably be supported indefinitely.
My reasoning is that the units involved are generally so small that the benefit from the financial resources freed up would not be worth as much as the "good will" of keeping them, since that good will is a help when negotiating private acquisitions.
Nobody cares if Berkshire has a small amount of very-low-return capital tied up in something like (say) Pampered Chef, other than the next person who might sell such a business to Berkshire. (I have no idea if Pampered Chef is doing well or not, it's just a for-instance)>>>>
Spot on! This hass the approach of "current management" lol! And likely get the incoming CEO shown the door if the good will promise is tampered with too much.
No need to think any harder than current management holding even the dismal Berkshire Hathaway for 20 years, while subjecting it to a capital diet plan (ok, starvation).
All that said, future management is unlikely to hold for 20 years and that is indeed a good thing for shareholders. 20 years may have been okay in 1965, but unlikely to be in 2035.
It'd be an interesting exercise for early shareholders on this forum to estimate the incremental value accretion left on the table of inaction, had Warren shut down the spinning and weaving stuff in 1970 or 75? No need to boggle the mind more than the 21% compounding but it would be a fun exercise.
