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Three Underrated Reasons for Berkshire Hathaway’s Enormous Success


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3. Remove Ignorance

“See’s has provided us with lots of cash for acquisitions and opened my eyes to the power of brands. We made a lot in Coke partly because of See’s. There’s something about owning one to educate yourself about things you might do in the future. I wouldn’t be at all surprised if we hadn’t owned See’s we wouldn’t have bought Coke.”— Warren Buffett

Diversified Retailing also owned shares in a better business: Blue Chip Stamps, which provided supermarkets and other retailing outlets trading stamps to give their customers that could be exchanged for merchandise.

The contrast between running a good business and a poor one stuck with Munger and Buffett and they decided to pay up for a real quality business. On January 3, 1972 Blue Chip Stamps bought See’s Candies, a West Coast Manufacturer and retailer of boxed-chocolates. See’s is an extraordinary business.

As a great business, most people think that See’s main contribution to Berkshire was its overwhelming financial success. It wasn’t. According to Munger, See’s main contribution was “ignorance removal.”

“We were barely smart enough to buy it,“ he said. See’s taught them a powerful lesson, the value of strong brand names.

Without See’s they never would have purchased Coke shares in the 80s. And without Coke, Berkshire would be a lot less prosperous today as that investment has been one of their best.

“If there’s any secret we have, it’s ignorance removal. And the nice thing is we still have a lot of ignorance left to remove,” Munger said at the 2014 Shareholders meeting.

Removing ignorance is about continuously getting smarter.

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