Returning a significant amount of that money to investors might have been “disastrous,” Buffett wrote, because the three businesses that he and Vice Chairman Charles Munger oversaw when they started had made little money, incurred losses or shrank to a fraction of their original size two decades later.

“It’s been like overcoming a misspent youth,” Buffett said of their effort to expand into the insurance industry, newspaper publishing and chocolate-making. “Clearly, diversification has served us well.”

Buffett has continued to find better ways of investing Berkshire’s extra cash. During the last three decades, he’s amassed the biggest stakes in companies including International Business Machines Corp., Wells Fargo & Co. and Coca-Cola Co. He’s also bought whole companies, including railroad Burlington Northern Santa Fe and reinsurer General Re.

This month, he joined Jorge Paulo Lemann’s 3G Capital in a $23 billion deal to take ketchup maker HJ Heinz Co. private. The transaction will give Berkshire $4.1 billion in equity and $8 billion in preferred stock that pays a 9 percent dividend, according to a regulatory filing.

Munger’s Wish

Buffett uses his letters to call out his own blunders and praise managers at operating units such as reinsurance chief Ajit Jain and Matt Rose, the CEO of BNSF. The billionaire relies on the heads of subsidiaries to oversee day-to-day operations, leaving him and Munger time to allocate the profits.

Berkshire’s size could make a dividend necessary at some point because there may be no better way to invest the funds, Munger said at a 2011 meeting in Pasadena, California.

“I think that some of you will live to see Berkshire pay a dividend, but I hope I don’t,” Munger, then 87, said in response to an audience member’s question. “You’re saying, ‘Do you predict failure?’ And I suppose I do.”

Buffett said in last year’s letter that the board had selected a manager to be the next CEO, without identifying the person. The billionaire has also been ceding more oversight of the company’s $88 billion stock portfolio to investment managers Todd Combs and Ted Weschler.

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