In his letter dated March 3, 1980 for FY1979 to Berkshire Hathaway stakeholders, Warren Buffett said: “Phil Fisher, a respected investor and author, once likened the policies of the corporation in attracting shareholders to those of a restaurant attracting potential customers. A restaurant could seek a given clientele – patrons of fast foods, elegant dining, Oriental food, etc. – and eventually obtain an appropriate group of devotees. If the job were expertly done, that clientele, pleased with the service, menu, and price level offered, would return consistently.”
The letter cautioned that restaurant could not change its character constantly and end up with a happy and stable clientele.
“If the business vacillated between French cuisine and take-out chicken, the result would be a revolving door of confused and dissatisfied customers,” said the letter. “So it is with corporations and the shareholder constituency they seek. You can’t be all things to all men, simultaneously seeking different owners whose primary interests run from high current yield to long-term capital growth to stock market pyrotechnics, etc.”
One thing that Warren Buffett found puzzling is “the reasoning of managements that seek large trading activity in their shares”. “In effect, such managements are saying that they want a good many of the existing clientele continually to desert them in favor of new ones – because you can’t add lots of new owners (with new expectations) without losing lots of former owners,” said the FY1979 letter.
“We much prefer owners who like our service and menu and who return year after year. It would be hard to find a better group
to sit in the Berkshire Hathaway shareholder “seats” than those already occupying them. So we hope to continue to have a very
low turnover among our owners, reflecting a constituency that understands our operation, approves of our policies, and shares
our expectations. And we hope to deliver on those expectations,” said the Warren Buffett letter.