Larry Cunningham's Berkshire Beyond Buffett is the kind of book I might expect to see produced by a business school academic; it is unsurprising to see that it has been published by an excellent business school press.  The book is oriented around an extremely interesting question: does Berkshire offers some sort of competitive advantage beyond that provided by its once-in-a-generation-brilliant chairman Warren Buffett? 

Berkshire has invested in a vast array of businesses; in each of those businesses Buffett looks for a "moat."  That is, he looks for a market position that will deter competitors from appearing, prevent customers from disappearing, and retain contracting advantages over suppliers, workers, and other inputs.

But what is Berkshire’s moat?  Is it the fact that it is good at finding moats?  Or is it something else?  Larry answers this question in a way that gets at a division in business schools between management-oriented approaches to scholarship and finance-oriented ones.  Financial analysis would focus on the existence of barriers to entry (moats); it might also focus on the low cost of capital that Berkshire Hathaway enjoys, given, among other things, its stellar track record.  Management departments might look to something else: a strong corporate culture.  In this case, Larry reads more as a management scholar than a finance scholar.  Larry's describes, through case studies on a number of Berkshire’s subsidiaries, an ethos that focuses on:

• long time horizons
• an approach to management that is hands off but investor-oriented
• an eschewal of complicated financial engineering
• a preference for straightforward products and quiet but respected branding. 

In his view, it is this ethos that makes Berkshire a better manager of firms than most.

Can corporate culture explain business success?  It is difficult to measure, but obviously it must play some role.  If culture was meaningless we could evaluate the quality of a workplace without setting foot inside it, and nobody does that.  In my mind, the more difficult question is this: is Berkshire’s culture replicable?  Although Larry has developed a translatable story about what works for Berkshire, implementing it may require a certain set of special skills that most managers simply do not enjoy or possess – to describe, in this view, would not result in the ability to do.

Along the way I learned some interesting things about Berkshire.  For example, and for what's it worth:

• The firm is not secretly an insurance company with a hobby in acquiring other firms.  Insurance revenues form a minority of the revenues of the conglomerate.
• Nor is it a hedge fund, although it does take positions in numerous companies that it does not own.  Those revenues, however, are dwarfed by the revenues provided by the firms it does own.
• Nor is Berkshire a story about a few winning companies saddled to a bunch of modest losers, or, at least, it does not seem to be.  In its extremely diversified way, the company has enjoyed productivity from almost unit.

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