主题： Other Businesses

For many years, I’ve had little confidence in the earnings numbers reported by most corporations. I’m not talking about Enron and WorldCom—examples of outright crookedness. Rather, I am referring to the legal, but improper, accounting methods used by chief executives to inflate reported earnings.

When there’s a problem, I have this formula. It’s get it right, get it fast, get it out, get it over. It’s the rinse cycle where you find out how dirty the laundry has been. We’re in the rinse cycle of Corporate America, and we’re finding out that there was more dirty laundry than we care to admit.

Whatever the merits of options may be, their accounting treatment is outrageous. Think for a moment of that $190 million we are going to spend for advertising at GEICO this year. Suppose that instead of paying cash for our ads, we paid the media in 10-year, at-the-market Berkshire options. Would anyone then care to argue that Berkshire had not borne a cost for advertising, or should not be charged this cost on its books?

Most CEOs, it should be noted, are men and women you would be happy to have as trustees for your children’s assets or as next-door neighbors. Too many of these people, however, have in recent years behaved badly at the office, fudging numbers and drawing obscene pay for mediocre business achievements. These otherwise decent people simply followed the career path of Mae West: “I was Snow White but I drifted.”

As long as human beings run institutions, including financial institutions, there will be people that take undue risks, there will sometimes be people that steal, there will be—you know, there will be people that don’t understand the risks they’re taking. It’s just the nature of business.

You only learn who has been swimming naked when the tide goes out. Former senator alan Simpson famously said: “Those who travel the high road in Washington need not fear heavy traffic.” If he had sought truly deserted streets, however, the Senator should have looked to Corporate America’s accounting.

Gillette is marvelous. Gillette supplies over 60 percent of the dollar value of razor blades in the world. When I go to bed at night and I think of all those billions of males sitting there with their hair growing on their faces while I sleep, that can put you to sleep very comfortably.

The highest priced daily newspaper in the United States, with any circulation at all, is the Daily Racing Form. It sells about 150,000 copies a day, and it has for about 50 years, and it’s either $2.00 or $2.25 (they keep raising prices) and it’s essential. If you’re heading to the racetrack and you’ve got a choice between … Joe’s Little Green Sheet, and the Daily Racing Form, if you’re a serious racing handicapper, you want the Form. You can charge $2.00 for the Form, you can charge $1.50, you can charge $2.50, and people are going to buy it. It’s like selling needles to addicts, basically. It’s an essential business.

Look at what Walt Disney was worth on the stock market in the first half of 1966. The price per share was $53, and this didn’t look especially cheap, but on that basis you could buy the whole company for $80 million when Snow White, Swiss Family Robinson, and some other cartoons, which had been written off the books, were worth that much. And then you had Disneyland and Walt Disney, a genius, as a partner.

We bought 5 percent of the Walt Disney Company in 1966. It cost us four million dollars. Eighty million bucks was the valuation of the whole thing…. There were no residual values placed on the value of any Disney picture up through the ’60s. So [you got all of this] for eighty million bucks, and you got Walt Disney to work for you. It was incredible…. And the reason was, in 1966 people said, “Well, Mary Poppins is terrific this year, but they’re not going to have another Mary Poppins next year, so the earnings will be down.” I don’t care if the earnings are down like that. You know you’ve still got Mary Poppins to throw out in seven more years, assuming kids squawk a little. I mean there’s no better system than to have something where, essentially, you get a new crop every seven years and you get to charge more each time.