WarrenOver the years, we've had probably half a dozen people one time or another proposed that the creation of an all-Berkshire investment company or a unit trust. In other words, an entity that would hold nothing but Berkshire stock and then would parcel out its own shares in smaller denomination pieces to the public. And we have generally discouraged that because we felt that there was considerable potential for abuse in such an arrangement and our discouragement has been successful up until last fall when there was one or there were two proposals that went as far as submission to the SEC for clearance that involved unit trusts and these unit trusts would have owned nothing but Berkshire shares and then been sold to the public small denominations probably with a minimum investment of around $1,000 or so. Charlie and I were worried that a combination of Berkshire's past record which cannot be repeated and high sales commissions and a low denomination and a lot of publicity about Berkshire and myself, which as you've seen this morning, we attempt to discourage, that the, that the a great many people would end up buying these unit trusts holdings without any idea really of what they were buying and with unrealistic, unrealistic expectations as to the future, and that that would, in turn, create a considerable demand because these unit trusts would go out and buy Berkshire shares. That would create a considerable demand against a fixed supply, much of which is almost unavailable because people have a low tax basis and are reluctant to sell and I hope they're reluctant to sell for other reasons. And that the very action of the creation of these and that push on the demand would, might very well create some speculative spurt in the stock, which in turn would induce people who had been approached about the trust to feel they were missing even more of a good thing by rushing in. rising prices in certain kinds of markets create their own kind of demand. It's not a sustained demand, and it's a demand that the reversal of which later on when people become disillusion can cause a lot of problems, but that potential was there with the flood of buyers with unrealistic expectations, high commissions, and a fixed supply. So we attempted to dissuade both of the promoters. one backed away and then came out a few months later with something that was a combination of Berkshire and some other securities which were at least thought to be in our portfolio.
[3:12]
WarrenAnd we started hearing from people that it was clear, had no understanding of what they were buying or the costs involved or the potential tax implications or anything of the sort. So at that time we faced, we had to make a decision and we had to make it rather quickly as to what would be the best solution to this problem that in turn wouldn't create the same sort of thing that we felt had potential harm when being done by these promoters. Obviously we considered a split of the stock, but we were worried that a split would send out signals to all kinds of people who were worried that a split would send out signals to all kinds of people who who want to believe in things that may not be too believable about future performance and that they would look at it as some grand chance to buy in at a lower price. Of course, it wouldn't really be a lower price in relation to value, but it would be a lower denomination. And that, again, against a fixed supply, might very well have created the same kind of problem, maybe even a greater problem than would occur with the unit trust. We came upon the idea of the Class B shares, which would create a supply that would match the demand for, in effect, split shares and that would be offered in a way that did not create special inducements or to create false inducements to people thinking of buying. And one of the things we did was we stuck a commission on it. on the issuance of the Class B shares that was about as low as any I've ever seen in many years in Wall Street. Because we did not want salespeople to have a great inducement to go out and sell the shares. We wanted anyone that was interested to read the prospectus and think about it and make their own decisions. And we did another thing which is quite counter to the normal commercial approach, which is that we said we would issue as many shares as people wanted to buy. And, you know, you do much better in this world if you're selling something to say only one to a customer and you have to get in earlier. You have to know somebody in order to get shares. And that's many new issues are sold that way. And it's very effective. Our hope is that the class B shareholders that we attract are of the same quality as the people in this room, that they have an investment attitude that where they feel they are buying into part of a business, that they expect to stay with it. the indefinite future, maybe the rest of their lives.