Most people have heard of Warren Buffett. As one of the richest men in the world (at the time of writing, he is listed as #2 underneath Bill Gates) and the Chairman of Berkshire Hathaway, he is constantly in the news. Also called the Oracle of Omaha, his company has risen from the depths of near-bankruptcy to being worth around $400 billion in 2016. But, what exactly does Berkshire Hathaway do?
To put it simply, Berkshire Hathaway is what is called a holding company. That means that Berkshire itself doesn’t actually do anything. It doesn’t make any products and it doesn’t offer any services. What Berkshire Hathaway does, to simplify things, is make money by investing in companies, stocks, bonds, and similar things.
If you go a little deeper into the explanation, holding companies like Berkshire basically “hold” investments (including companies and stocks) which have value. The holding company doesn’t actually run the day-to-day operations of any of the companies it owns—they are responsible for themselves—but it does have control over the managers of each company, and it usually keeps a close eye on the balance sheet of each company to make sure that it is still making money.
Aside from Berkshire Hathaway, a few examples of holding companies include Johnson & Johnson, Bank of America, Loews, JP Morgan Chase, and Walton Enterprises. All of these companies own subsidiary companies which make the holding company money. That money is then used to help the business expand and to make more money (often through the purchase of stocks or other companies).
While you can read the whole history of Berkshire Hathaway here, the important thing to know is that Berkshire owns around 60 different companies, many of which would be Fortune 500 companies on their own merit were they not owned by Berkshire. You can see the full list on this page, but a few of the more well-known companies include Dairy Queen, Fruit of the Loom, Borsheims Fine Jewelry, Business Wire, GEICO, Pampered Chef, and Oriental Trading Company. Additionally, Berkshire Hathaway has an impressive stock portfolio, with shares in other conglomerates like Coca-cola, Wells Fargo, Apple, and IBM.