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Excerpt from Rational Walk today (re the BRK 2023 proxy statement):

"As a longtime shareholder with a great deal of skin in the game, I care not a bit about 'diversity' on the board as a goal in and of itself. I care about business acumen and ownership when it comes to selecting the men and women responsible for representing my interests and overseeing management charged with maximizing my long-term wealth. I care about skin in the game, not skin color."

--sutton

Some interesting points.

I have a slightly different take on a couple of them.

First, I think Susan Decker's relatively modest holding in light of her role as lead independent director ought to be explained better. I am pretty sure some of us on this board have a bigger sized holding than her.
If I recall correctly, this is not a recent development. She has always been the director with the lowest personal stake in Berkshire.
Also when Abel takes over, I would expect him to become the board member with the largest stake. This isn't the case at the moment after cashing out the BHE stake.

Secondly, my issue with diversity on the Berkshire board has nothing to do with gender or skin colour but the fact that the talk does not match the walk in one area. Two of the additions have been the Buffett kids. Neither has any independent business record that qualifies them to provide governance and robust challenge when required to the Berkshire executive team. They are there purely by virtue of inherited holdings despire Buffett's frequent comments on inherited. I don't think the other recent additions have been particularly strong but at least they have a chance of bringing some outside the cult inputs from time to time.

"
Secondly, my issue with diversity on the Berkshire board has nothing to do with gender or skin colour but the fact that the talk does not match the walk in one area. Two of the additions have been the Buffett kids. Neither has any independent business record that qualifies them to provide governance and robust challenge when required to the Berkshire executive team. They are there purely by virtue of inherited holdings despite Buffett's frequent comments on inherited. "


Precisely. Not one but two!

Nepotism

Excerpt from Rational Walk today (re the BRK 2023 proxy statement):

"Share Repurchases

Shareholders of record as of the close of business on March 8, 2023 are entitled to vote at the meeting and the company announced that there were 590,238 Class A shares and 1,298,190,161 Class B shares on that date. Class A stock has one vote per share while Class B stock has 1/10,000 of a vote per share. As I wrote last year, Berkshire's future will depend on voting control, with Class A shares having a major advantage.

Based on this disclosure, we can calculate that Berkshire had 1,455,698 Class A equivalent shares outstanding on March 8.

...

Berkshire had 1,459,733 Class A equivalents outstanding on December 31, 2022, a figure also disclosed in the annual report. This indicates that Berkshire repurchased 1,498 Class A equivalents between January 1 and February 13.

Adding up these figures, Berkshire has reduced its share count by 4,035 Class A equivalents this year. Eyeballing the stock chart, it seems like $470,000 per share might approximate an average cost. This implies a cost of around $1.9 billion.

We will know the precise number of shares and amount spent when the first quarter report is released in late April or early May. Class A shares closed at $442,765 on Friday, March 17, well below the cost of recent repurchases, so perhaps Warren Buffett will accelerate the pace between now and March 31. However, Mr. Buffett might prefer buying shares of Occidental Petroleum and perhaps he is finding other opportunities based on market dislocations caused by recent bank failures ' either in banks or in other securities that have declined over the past week. Time will tell.

https://rationalwalk.substack.com/p/berkshire-hath...

I care about business acumen and ownership when it comes to selecting the men and women responsible for representing my interests and overseeing management charged with maximizing my long-term wealth. I care about skin in the game, not skin color."

Since we're talking about the Board of Directors, let's talk about this.

I find the language here to be particularly amusing: particularly the men and women part of the phraseology.

It wasn't so long ago that the words 'and women' would be omitted, and not just consciously, it wouldn't even occur to many to include it in the first place. I have done some reading of late about the composition of boards, and as recently as the 1970s the boards of (Fortune 500) American corporations were over 96% male. I can't find the percent of minority representation, but I would suspect it would be even less than 4%.

Owing to a lot of banging of pots and pans, street demonstrations, signs on sticks and other devices as have espoused once unpopular views, the percentage of women on boards has climbed to ' about 16%. Which, incidentally, puts Berkshire exactly average.

Now it's possible that it doesn't matter at all who is on the board, but a reasonable argument can be made that since 50% of the population is women, and that women buy lots of stuff, perhaps they should have a voice in the rooms where what gets sold and how those companies operate gets decided. That seems pretty fair to me, and while that 16% figure is a lot lower than 50%, I can see that might be an artifact of the lower participation in the workforce for women through the 80's and 90's.

I could make the same argument about minorities, who comprise over 40% of the US population today, and I would further say I think it's possible to advocate for 'more representation' without getting twisted into knots about 'quota systems'. In some industries having a diverse board probably doesn't matter much, but in many, particularly those which are consumer facing, I think it very well might.

Now it's possible that it doesn't matter at all who is on the board, but a reasonable argument can be made that since 50% of the population is women, and that women buy lots of stuff, perhaps they should have a voice in the rooms where what gets sold and how those companies operate gets decided. That seems pretty fair to me, and while that 16% figure is a lot lower than 50%, I can see that might be an artifact of the lower participation in the workforce for women through the 80's and 90's.


I don't think the function of a company's board is to accurately represent the target market of its customers. I'm not even sure it is good for there to be a lot of diversity on the board, whether it is male/female, racial, age, nationality, sexual orientation, etc. You want to have directors on the board who are competent, honest, hard-working and who are prepared to challenge the performance of the company's employees, most notably the CEO, but to the extent that the board has such people, I don't care if they are all black or white, or whether they are all American or Japanese, or all over 60, and I particularly don't care whether they are men or women and what their sexual preferences are.

Berkshire has done a good job of outlining the kind of people they want (business-oriented, skin in the game) and I would be more upset if they started packing the board with obvious diversity picks than if they ended up with a bunch of geriatric white males that have big ownership stakes and think independently about the business. And I have no fear that they would ignore a suitable candidate who happens to be black or female or same-sex orientation. In other words, I am very happy with the Berkshire board and I wish more companies were like Berkshire, as politically incorrect and non-diverse as it may be. And if we need to have 'a voice in the room' about what gets sold, to teenagers for instance, that room doesn't have to be the boardroom, and there doesn't need to be a teenager on the board. Focus groups and talking to managers and market testing are for that, but please leave the business decisions to businesspeople.

dtb

I don't think the function of a company's board is to accurately represent the target market of its customers.

I don't think I said that, or if that was the takeaway then I said it badly. I do think a board should have a diversity of interests , and that may - and often does - come from people with different backgrounds. It's possible that the board of a women's clothing company could be all men, but generally I don't think that's a good idea, you see? But nor do I think it should necessarily be all women; the board isn't designing the clothes, obviously.

I don't care if they are all black or white, or whether they are all American or Japanese, or all over 60, and I particularly don't care whether they are men or women and what their sexual preferences are.

This is so easy to say, yet it doesn't seem to work that way - and that was the point of my original post. I was simply struck by the outsize balance of corporate boards by men, yet how easy to mouth platitudes about looking for 'men and women' without really bothering to notice how that doesn't correspond to reality.

I offer no prescription for repair, the verbiage just struck me (having taken a shallow dive on 'Boards' these past few days. FWIW I have been on the board of two non-profits, both with more than 20 members. Barely a handful had 'relevant industry experience' - because there was barely any such industries - but all brought *something* to the party.)

I'm not even sure it is good for there to be a lot of diversity on the board, whether it is male/female, racial, age, nationality, sexual orientation, etc. You want to have directors on the board who are competent, honest, hard-working and who are prepared to challenge the performance of the company's employees, most notably the CEO, but to the extent that the board has such people, I don't care if they are all black or white, or whether they are all American or Japanese, or all over 60, and I particularly don't care whether they are men or women and what their sexual preferences are."

Why not both?

https://knowyourmeme.com/memes/why-not-both-why-do...

Why not have a board that is full of "competent, honest, hard-working and who are prepared to challenge the performance of the company's employees, most notably the CEO" but are also diverse?

The positive that diversity brings to a board is differing backgrounds can bring differing points of view and differing types of experience.

Now it's possible that it doesn't matter at all who is on the board, but a reasonable argument can be made that since 50% of the population is women, and that women buy lots of stuff, perhaps they should have a voice in the rooms where what gets sold and how those companies operate gets decided. That seems pretty fair to me, and while that 16% figure is a lot lower than 50%, I can see that might be an artifact of the lower participation in the workforce for women through the 80's and 90's.

I don't think Buffett, I, or anyone actually concerned with running businesses would consider "reasonable" an argument that if you want to market to a demographic that the world's expert at marketing to that demographic is particularly likely to be in that demographic. This argument is to marketing as Lamarckian acquired traits is to evolution.

The vast majority of surgeries are done on people who could not get a surgery degree. A lot of tone deaf people with uninspiring voices listen to music. A lot of short pudgy lazy people watch a lot of NBA basketball. A lot of people who have never written a two page story watch hours of media. NONE of us want the average demographic consumer of something to PRODUCE the thing that we would want to buy. Only the most confused among us even think we want something like that.

The idea that skin color, national origin, religion, lack of wealth, political party, or family name are more important or even equally important or even comparably important as actual competence is the memetic equivalent of a virus infecting western civilization at the moment. So far it hasn't killed us, but it sure as poop is not helping us, and not wanting to protect ourselves against such idiotic ideas does not bode well for the long term survival of western civilization. It sure seems like the kind of bad idea that COULD strike at the heart of what makes western civilization a winner, which is, essentially, science, engineering, competence, and realistic thinking.

R:)

"The idea that skin color, national origin, religion, lack of wealth, political party, or family name are more important or even equally important or even comparably important as actual competence is the memetic equivalent of a virus infecting western civilization at the moment."

Who made that argument?

The idea that skin color, national origin, religion, lack of wealth, political party, or family name are more important or even equally important or even comparably important as actual competence is the memetic equivalent of a virus infecting western civilization at the moment."
========
Who made that argument?

I think you know who made that argument. Does this ring a bell?

a reasonable argument can be made that since 50% of the population is women, and that women buy lots of stuff, perhaps they should have a voice in the rooms where what gets sold and how those companies operate gets decided.

dtb

"The idea that skin color, national origin, religion, lack of wealth, political party, or family name are more important or even equally important or even comparably important as actual competence is the memetic equivalent of a virus infecting western civilization at the moment."

At the risk of getting flamed, I should point out that this is a false distinction: in fact it is possible to have competence and diversity at the same time, and companies that manage to do so tend to perform better than those that don't (BRK obviously a high performing exception.) It's a generalization, sure, but so is the counter-generalization that people of diverse backgrounds are not likely to be competent. What you call a virus is in fact just the repudiation of an old way of thinking and a recognition of reality. BRK may not need a shakeup, but a lot of boards do.

abromber

"I think you know who made that argument. Does this ring a bell?

a reasonable argument can be made that since 50% of the population is women, and that women buy lots of stuff, perhaps they should have a voice in the rooms where what gets sold and how those companies operate gets decided."

Yes, I know when he said that. What I asked was where did he say though that "skin color, national origin, religion, lack of wealth, political party, or family name are more important or even equally important or even comparably important as actual competence"?

Pushing to have a more diverse board does not mean bringing in incompetent people. I think hiring competent people actually goes without saying. Literally, it shouldn't even need to be said in the discussion.

So given that it is important that Berkshire hire competent people for their board, what is the harm in aiming to have that board have diversified backgrounds?

I think you know who made that argument. Does this ring a bell?

a reasonable argument can be made that since 50% of the population is women, and that women buy lots of stuff, perhaps they should have a voice in the rooms where what gets sold and how those companies operate gets decided.

Yes, I said that. Please not I did not say 'since 50% of the population is women ' they should be 50% of the board.' I said they should have a voice . As an example it might be worth noting that just a few years ago fully 90% of American corporations had not a single woman on their board.

This includes packaged food companies whose target market was, at the time, almost entirely housewives shopping for families. Also department store chains. Also, eh, what's the point?

I am sad that people keep using the 'Oh you are saying we have to hire incompetent people.' Nothing could be further from the truth, and if there is an objective standard by which we can measure in advance whether someone will be successful I'm all for it. That, of course, is as ridiculous as those claiming 'competence must be the only criteria', else we should just give everyone a Mensa test and be done with it.

This strawman argument keeps appearing, and it's always wrong. It's amusing perhaps to find that Chevy produce a 'Nova' for Latin markets without realizing No Va means 'Does not go' in Spanish. That Tupperware was saved from extinction by a woman who, before being on the board, convinced one man to engage Tupperware parties over the objections of other advisors. Or, and I cannot believe I have to say this, that Playtex did not have women advisors at the beginning.

For the record, nobody is saying 'hire bad people.' Some of us are saying 'Hire people with different backgrounds and life experiences who are also competent . It's not that hard.

"It's not that hard."

Goofy,

It's not surprising that a Brk board might mishandle your comment or criticism. WEB has quite a fan club here - myself included. I toast your decision to stay in the thread - with civility.

This culture is in the midst of big change. I think you'd agree it will never be a diamond cutting process.
I think the thread moved from an observation on a Buffett comment to the messy process of inclusion. I've also seen the process of shaming effectively calcify two sides of a discussion.

For me, WEB has been pretty clear about what the nation has gained by doubling the talent pool with opening up opportunity to women. At Berkshire, Mrs. B, Tracy Brit, Meryl Witmer & Susan Decker have only been the most visible examples of this conviction. Likewise, Ken Chenault & Ajit Jain bring both extreme competence and diversity. WEB knows first hand what each in this crowd has brought to Brk and his life on the job. I just think WEB is loathe to engage or push back on the media or outside groups pushing the culture along. He refuses to use these friends and colleagues as totems to defend himself or Brk. His unspoken point is; they're here because they are exceptional.

Others in the thread pushed a point that needs to provide sobriety to those pushing social change with such zeal.
We are a very different civilization if identity supplants qualification/expertise in board rooms, ORs, F-16 cockpits and basketball teams. From close proximity to one of the most celebrated public universities in the US, I've witnessed self-censoring of this very point, when opportunity was extended in the name of inclusion first and merit subsequently accepted within a band/range rather than more rigorous and stratified metrics.


All the best !

CmoreBmore

I am sad that people keep using the 'Oh you are saying we have to hire incompetent people.' Nothing could be further from the truth, and if there is an objective standard by which we can measure in advance whether someone will be successful I'm all for it. That, of course, is as ridiculous as those claiming 'competence must be the only criteria', else we should just give everyone a Mensa test and be done with it.

I think this is the nub of where Goofy disagrees with Buffett.

If competence is not the only criterion, then either

A) sometimes competence will suggest one hire while some other criterion will suggest another hire, and we should sometimes go with the less competent hire.

-OR-

B) sometimes competence will suggest one hire while some other criterion will suggest another hire, and we should always go with competence.

I think Buffett and myself are solidly going for B.

I'm guessing, Goofy, that you're writing is meant to suggest you would be going solidly with A. If not, then you want to hire by the same criterion that Buffett talks about, but you would also like to virtue signal that you care about diversity? You tell us what you mean, and if possible why would be great as well. Does it ever make sense to go with Diversity over Competence?

R:

"I think this is the nub of where Goofy disagrees with Buffett.

If competence is not the only criterion, then either

A) sometimes competence will suggest one hire while some other criterion will suggest another hire, and we should sometimes go with the less competent hire.

-OR-

B) sometimes competence will suggest one hire while some other criterion will suggest another hire, and we should always go with competence.

I think Buffett and myself are solidly going for B.

I'm guessing, Goofy, that you're writing is meant to suggest you would be going solidly with A. If not, then you want to hire by the same criterion that Buffett talks about, but you would also like to virtue signal that you care about diversity? You tell us what you mean, and if possible why would be great as well. Does it ever make sense to go with Diversity over Competence?"

You are not even close to getting Goofy's point.

You are also creating a false choice.

Here is a test:

Please rank the following people by competence for an open board seat:

Buffett
Munger
Jain
Ted
Todd
Greg Abel

I'm guessing, Goofy, that you're writing is meant to suggest you would be going solidly with A. If not, then you want to hire by the same criterion that Buffett talks about, but you would also like to virtue signal that you care about diversity?

No, and I cannot believe I have to explain in this granularity.

'Competence' is not a statistically verifiable commodity ahead of time . If you interview five people you may find three who you think competent. Unless there is one who is an absolute standout, for whatever reason, then consider other factors such as background, life experience, and so on.

If you have a Rorschach test which will guarantee 'competence' ahead of time, you will make a bazillion trillion, otherwise you're simply avoiding the issue because you find it uncomfortable to confront, for some reason.

I am not saying 'hire less competence.' I am saying 'widen your view, competence comes in many flavors, some outside your own life experience.'

It seems common in society today to confuse diversity of thought with diversity of immutable traits.

Doesn't it seem a bit naive and frankly divisive to assume that just because someone has, for example, a different skin color, that they must think differently?

Ultimately, the benefit diversity brings to a company boils down to one thing: diversity of thought and ideas.

And if the best a company can do to ferret out diversity of thought in potential applicants is to rely on immutable traits, well, that seems like a pretty sad state of affairs.

Of course, this assumes the goal is in fact achieving diversity of thought rather than a ham-fisted, broad brush attempt to right past wrongs. I'm not convinced it is.

Doesn't it seem a bit naive and frankly divisive to assume that just because someone has, for example, a different skin color, that they must think differently?

I am not sure the assumption is that a person thinks differently because of skin color or ethnicity. My assumption is that a person thinks differently based on life experience, and the life experience is probably different based on many factors, some of which have been mentioned and some not mentioned.

Craig

"It seems common in society today to confuse diversity of thought with diversity of immutable traits."

I think that is a very poor and misleading way of summarizing the opinions of the people you are arguing against.

"Doesn't it seem a bit naive and frankly divisive to assume that just because someone has, for example, a different skin color, that they must think differently?"

Yes and no.

Part of making up who we are and how we think is our past experiences. It is generally a good bet that someone with a different skin color (or gender) probably has different past experiences. Those different experiences likely mean that they think about things at least slightly differently.

"Ultimately, the benefit diversity brings to a company boils down to one thing: diversity of thought and ideas.

And if the best a company can do to ferret out diversity of thought in potential applicants is to rely on immutable traits, well, that seems like a pretty sad state of affairs."

You are right in that it is a sad state of affairs, but not just in the way you are hinting at. The part that is sad is that minorities and women make up such a small percentage of the boards of large corporations.

Put it another way (let's invert), assuming that a person believes that business talent, ability, and competence has nothing to do with skin color or gender, then by having BoDs being white male dominated, the business world is losing out on lots of talented, able, and competent females and minorities by hiring less competent directors.

"Of course, this assumes the goal is in fact achieving diversity of thought rather than a ham-fisted, broad brush attempt to right past wrongs. I'm not convinced it is."

Why?

No, and I cannot believe I have to explain in this granularity.

'Competence' is not a statistically verifiable commodity ahead of time . If you interview five people you may find three who you think competent. Unless there is one who is an absolute standout, for whatever reason, then consider other factors such as background, life experience, and so on.

That is clearly stated.

I'll tell you why I prefer Buffett not say this same thing AND when in my own life and career I have thought it important to find individuals of the female or black persuasion because I believed this was actually material to their competence at what I sought from them.

It is certainly true that when I have looked at candidates we might hire I have generally found more than one candidate "exciting" in the sense that I thought they would be a great hire and would have to work hard to figure out which of them was the best.

I was a professor of electrical engineering at a 2nd tier research university. We had 17 white male faculty during most of the time I was employed. At least one time we were hiring we had an AMAZING female candidate that I would have hired in a heartbeat had she been white and male (or even green and trans). We had other good white male candidates. We did offer the position to the woman, and she did not take it, I think she wound up on the faculty of Stanford. But there was no doubt in my mind that part of the job of a professor was to recruit great students, and I found it more than likely that having a woman on the faculty would certainly make it more likely we would get more and therefore better female students wanting to work with us. In my opinion, I was still hiring for competence, but there were multiple competencies we were hiring for and some candidates checked the boxes better on some than on others.

So if your complaint against Buffett was "I think he underestimates the value of this guys competence which is different in these important ways from the competence he has amply represented on his board" I'd say that is a reasonable concern. Of course to make that case, you would have to go beyond the color of their skin or the body parts you inferred were under their clothing. If your suggestion was "I just have no reason to think that Buffett is smart enough to pick a woman or a black guy because he isn't smart enough to weight properly any diversity of view they have against the other factors", I would likely disagree with you, but I would agree with your approach of thinking it was Buffett's idea to hire competence, and that included not having 18 accountants on the board and no one who knew marketing or actuarial.

But it seems to me that GENERALLY those who push affirmative action hardest REJECT the kind of competence calculus that Buffett or I would like as RACIST and SEXIST. This is of a piece with those anti-racist documents that have shown up now and again where not being on time and objective logic are described as racist. To the extent saying we look for competence, but also diversity, leaves even a crack in the door for that point of view, is worth pedantically resisting with the cry "competence is all the diversity I care about" or whatever it is that Buffett said.

****

So when anti-racism became a thing like 3 years ago or whatever, I had a visceral reaction against it. And I remembered the conversations I had with my grandmother, who was born a poor white girl in a poor section of Brooklyn in 1905. And as I grew up she told me about the importance of being aware of which blocks were controlled by the German-Americans, which the Italian-Americans, and she just always seemed to be a little racist to me. And I wondered, now that I am in my 60s, am I the modern version of my grandmother? How could I tell?

SO I went on youtube to see if there were any black American's who agreed with me. And you know what, there are PLENTY, but that is not the point. The point is, yes, for some things, your sex and your race read on COMPETENCIES you may offer in various circumstances.

And knowing that, if one were to argue that "appointing more black or female directors to Brk's board will increase the hiring pool of black and female employees and expand the likelihood of gaining black and female customers" would be, IMHO, a good reason to argue for diversity in hiring on the board of directors. I would tend to disagree with your conclusion, since in my experience, the average employee of Sees does not even know what Berkshire Hathaway is, let-alone what the racio-sexual make-up of its board of directors is, or even that corporations have boards of directors. But at least it would be a sensible claim that could be discussed based on evidence.

And I would counter "I'm pretty sure that restricting directors to superbly competent directors will have more of an impact on the business than will expanding the racio-sexual diversity. After all, the highly competent candidates for C-suite jobs and directorships actually will know about the board and how it has operated so far, and will love being part of such a thing, I would go so far as to say, regardless of their own racio-sexual backgound".

So thanks for the granularity, I hope you have enjoyed my further granularity at least 1/3 as much as I enjoyed your granularity.

To summarize, if you hire for competence you will get competence, if you hire for diversity you will get diversity, competent systems get what they measure for, and their is not a lot of evidence that Buffett isn't a superb judge of competence so concerns that he is not taking diversity into account enough have an uphill battle.

"But it seems to me that GENERALLY those who push affirmative action hardest REJECT the kind of competence calculus that Buffett or I would like as RACIST and SEXIST."

Why do you say this? What are you basing it on?

My experience is the opposite. Have you actually asked those who push affirmative action the hardest?

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