WHERE THEY CAME FROM
Berkshire Hathaway was technically born in 1955, when two textile operations, the Hathaway Manufacturing and Berkshire Fine Spinning Associates, merged. But Berkshire as we know it didn’t emerge until the 1970s, when Warren Buffett, who had purchased the enterprise in 1965, spun it into a holding company.

WHAT THEY DO
One of the most admired corporations in the world (and the most valuable, at over $100,000 a share), Berkshire Hathaway is a holding company for a variety of businesses, from car insurance to candy.

More than that, Berkshire is a vehicle for C.E.O. Warren Buffett to execute his investment strategies. The company makes long-term investments in businesses that by Buffett’s measurements are undervalued, meet certain balance sheet requirements, and are simple to understand. He often leaves management structures in place, preferring a hands-off ownership style. These principles have been profitable. For the past 25 years the company has averaged better than a 25 percent annual return and made many millionaires out of its shareholders.

Berkshire Hathaway’s largest business is insurance and reinsurance; it operates through more than 50 insurance concerns, including subsidiaries Geico and General Re. Among its many other subsidiaries are Fruit of the Loom, Nebraska Furniture Mart, See’s Candies, Dairy Queen, and NetJets.
 
Berkshire is also responsible for the Woodstock of Capitalism, also known as the annual shareholders’ meeting, when the Qwest Center, in Omaha, Nebraska, fills with more than 20,000 stockholders and reporters, who come to worship at the altar of the Oracle of Omaha. Each year, Buffett and Charlie Munger, vice chairman of Berkshire Hathaway, sit onstage and answer questions from investors, occasionally joking around with each other.

WHAT THEY GOT RIGHT
The company shuns get-rich-quick ideas; Berkshire’s habit of wading carefully into new waters allowed it to avoid getting swept up in the dotcom boom and subsequent bust.

But this strength is also a weakness: Many investors have criticized Berkshire Hathaway for being slow to invest in new technology (Buffett mostly sticks with old-line industries such as textiles and apparel.) They worry that a refusal to change with the times will eventually hurt returns.

WHAT THEY GOT WRONG
The September 11 attacks cost Berkshire Hathaway’s insurance groups $2.4 billion. In his annual letter to the shareholders, Buffett took responsibility for neglecting to prepare for possible terrorism attacks. “I violated the Noah rule. Predicting rain doesn’t count; building arks does,” he wrote. Hurricanes Katrina and Rita cost Berkshire another $2.02 billion, but the company recovered quickly and posted a $735 profit on premiums in 2006. According to the firm, however, this was dumb luck—the year after Katrina happened to be catastrophe-free.

General Re has had some legal troubles: In 2006 five General Re officials, including chairman Ronald Ferguson, C.F.O. Elizabeth Monrad, and assistant general counsel Robert Graham, were indicted on criminal charges related to alleged phony reinsurance deals between General Re and A.I.G..

WHAT’S NEXT
It’s hard for many to imagine Berkshire Hathaway without Warren Buffett, but that day will eventually arrive. In 2006 the 76-year-old C.E.O. announced that he had chosen a successor, but declined to provide the person’s name. Meanwhile, he continues to seek out business bargains. —Jennifer Close