Berkshire Hathaway Inc. has almost a â€œpersonality cultâ€ organizational culture which essentially revolves around one man and his investing prowess. The manâ€™s name is Warren Buffett, the â€œOracle of Omaha.â€ Historically, Berkshire Hathawayâ€™s business model has been to purchase insurance companies. One great thing about insurance companies is the â€œcash float,â€ which works as follows. Suppose that a person purchases a $100,000 whole life insurance policy from Berkshire Hathaway and pays premiums of $4,000 per year to Berkshire for this policy. The Berkshire Hathaway company is obligated to pay the $100,000 death benefit when the person dies; in the meantime it gets to invest the $4,000 per year â€œfloat.â€ Warren Buffett, who has been a very savvy investor, has made a huge fortune from investing this float money. But recently, Berkshire Hathaway has been moving away from purchasing insurance companies with large floats and has been buying major industrial businesses instead. In 2010, for example, it completed a $44 billion purchase of one of the nationâ€™s largest railroads, Burlington Northern Santa Fe (BNSF). Berkshire paid for this acquisition with $15.8 billion in cash it had on hand, and the remainder in Berkshire Hathaway stock. Mr. Buffett, who was born in 1930, is now well beyond the age when most workers retire.
For this activity, answer:
- How does Mr. Buffettâ€™s age affect Berkshire Hathawayâ€™s recent strategic moves such as buying Burlington Northern Santa Fe Railroad instead of another large insurance company?
- What does Berkshire Hathawayâ€™s purchase of BNSF Railroad say about where Buffett thinks the price of energy (oil and gasoline) is going to be in the future?
- How does the energy efficiency of shipping goods via rail compare with shipping goods via truck or airplane?
- Your case study should be two to three pages in length (not including title and reference pages).
- Your paper should be double-spaced, with 1-inch margins, in-text citations and references for all resources following proper APA formatting.