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Berkshire Hathaway specimen certificate. This zero-coupon convertible subordinated note raised $ 390 million, net, at an implied interest rate of 5.5 %. The conversion implied a price-to-book ratio of 2.3x.
have exhibited unusual understanding and effort in cooperating with management to achieve a cost structure and product mix which might allow us to maintain a viable operation.” The fate of textiles was coming, but not for several more years.
Reflecting on the past, Buffett considered buying control of Berkshire a colossal mistake. It led his original partnership investors, himself included, to give up a fraction of the ownership of much better businesses acquired through Berkshire, rather than buy them through another entity. And that was to say nothing of the now two decades of frustrations watching an industry decline into oblivion. As Buffett put it, the unpleasant job of shuttering the remnants of Berkshire’ s past was largely completed by July 1985. He was sympathetic to the managers and employees associated with the textile operations, but in the end economics won out. Berkshire couldn’ t remain in a competitively disadvantaged business that required ongoing capital investment at sub-par returns.
The figures were unambiguous. Over the nine years prior to Buffett’ s involvement, Berkshire Hathaway was entirely engaged in textile manufacturing. During that time, it lost $ 10 million on total revenues of $ 530 million. By comparison, See’ s Candies earned $ 2 million on revenues of $ 31 million the first year it was purchased.
Although textiles did deliver some profits in the 1960s, they were not adequate compared to the capital required to produce them. As the years wore on and the competitive disadvantages accrued, it became obvious that the business was not viable.
Buffett praised the division’ s managers, Ken Chace and Garry Morrison, as“ resourceful, energetic and imaginative” in their efforts to operate the Textile Group profitably. The textile business failed not because of them, but despite their monumental efforts. Berkshire’ s employees and their unions were praised too, for accepting below-average wages and understanding the economic position of their employer. Even after the decision to liquidate the mills was made, both management and the employee base performed superbly, said Buffett.
Buffett summed up his predicament in allowing the mills to operate at sub-par levels for so long:
I won’ t close down businesses of sub-normal profitability merely to add a fraction of a point to our corporate rate of return. However, I also feel it inappropriate for even an exceptionally profitable company to fund an operation once it appears to have unending losses in prospect. Adam Smith would disagree with my first proposition, and Karl Marx would disagree with my second; the middle ground is the only position that leaves me comfortable.
Buffett communicated his position to shareholders in the past by reminding them that Berkshire’ s textile workers were largely older and possessed almost no skills outside of textile manufacturing. Many were also foreign-born and spoke very little English and would have been severely hurt by closure of the mills. Many were hurt with the 1985 mill closure, but Buffett could at least point to efforts to cushion the blow. Equipment of enormous importance in prior years was rendered economically useless over time by the onslaught of competitive pressures. In the end it was sold for almost nothing: machinery that had originally cost $ 13 million, and that would have cost $ 30 to $ 50 million to replace in 1985, was carried on the books at a mere $ 866,000 and ultimately sold for liquidation proceeds of just $ 163,000.
Berkshire’ s shareholders would surely have faced the same agonizing decline if it weren’ t for the arrival of Warren Buffett and his capital allocation skills. With the aid of Chace, Morrison and the employees of the textile operations, Berkshire slowly reduced its investment in textiles. Monies raised by selling off plant and equipment, and shrinking investments in receivables and inventories, were recycled into more profitable investments in operating businesses— such as National Indemnity and Illinois National Bank— and into marketable securities.
The liquidation of the textile operations in 1985 and 1986 was the end of an era. What began as an association with the country’ s first mill operators and continued for almost two centuries in various forms ended with a money-losing fire sale. Although its original business of textiles was no longer part of the picture, the story of those who built Berkshire Hathaway will always have a place in history because of Warren Buffett, and because of the Massachusetts mills that gave the company its name.
Adam Mead is the CEO and chief investment officer of Mead Capital Management and the founder of Watchlist Investing. He lives in Derry, New Hampshire. This article has been adapted and condensed, with the author’ s permission, from The Complete Financial History of Berkshire Hathaway( Harriman House, 2026). The text has been lightly edited for length, clarity and continuity.
www. MoAF. org | Fall 2026 | FINANCIAL HISTORY 19