BCA Interviews David Sokol

Found via My Investing Notebook.

BCA: Buffett told shareholders, "I failed you in letting NetJets descend into this condition." But what could he have done differently? Nobody saw a downturn of this magnitude coming.

Sokol: At Berkshire, we let the management team run the business. But that means sometimes when that team doesn't make the transitions it should, we will be slower to step in.

Starting in late 2006, 2007, you could see that the capital being expended was exceeding the returns coming with it. There were commitments to acquire too many airplanes when you'd already seen a leveling off in the industry — things that a pure entrepreneur often won't see, because they tend to want to grow the business forever no matter what.

I think Warren saw those things, but wanted to give them a chance to figure it out. Then the fall of '08 happened, and there still wasn't enough reaction to that, and I think he felt: Time.

Of Berkshire's 40 acquisitions in the last 20 years, 38 have outperformed any expectations, and two have stumbled a little bit. That's a pretty good track record.

You want to err on the side of giving the management team the opportunity, and I think he meant he probably gave it more than he should.

BCA: So NetJets didn't pull back quickly enough?

Sokol: That's right.

BCA: What was the other business that stumbled?

Sokol: Dexter Shoes.