Warren Buffett’s prized world book has become his ‘toughest problem’

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World Book, once one of Warren Buffett’s favorite businesses, has become his “toughest problem”. The encyclopedia maker, which Buffett bought in 1986, was troubled by online learning tools. “It’s not the business of five years ago anymore,” Buffett told investors in 1996. Something is loading.

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One of Warren Buffett’s favorite businesses has become his “toughest problem” less than a decade after it was purchased.

The billionaire investor and CEO of Berkshire Hathaway acquired World Book, a print publisher of encyclopedias, from Scott Fetzer in early 1986.

“It sells more sets in the United States than its top four competitors combined,” Buffett told shareholders in his annual letter, adding that competitive pricing and positive World Book ratings make it a value buy.

Buffett and his business partner, Charlie Munger, also felt a personal connection to the company’s flagship product.

“Charlie and I have a special interest in Operation World Book because we consider his encyclopedia to be something special,” Buffett wrote. “I’ve been a fan (and user) for 25 years, and now have grandkids who check out sets like my kids did.”

Buffett pointed to World Book’s success over the next few years. His encyclopedia sales jumped 45% between 1982 and 1986, he said in his 1986 letter, adding that his books are “extraordinarily well edited and priced” and “a bargain for young and old.” the adults”.

A year later, Buffett touted “the most radically revised edition since 1962” with 10,000 additional color photos, 6,000 revised articles and 840 new contributors. He touted World Book as one of Berkshire’s “Holy Seven” businesses along with See’s Candies and Nebraska Furniture Mart in his 1988 letter, and included it in a “god-together” of businesses in his 1989 letter.

However, World Book’s success proved to be short-lived. Its annual pretax profit peaked at around $32 million in 1990, hovered for a few years, then dipped below $9 million in 1995, two years after Microsoft launched Encarta, its digital encyclopedia.

“Berkshire’s most difficult problem is World Book, which operates in an industry plagued by increasingly stiff competition from CD-ROM and online offerings,” Buffett said in his 1995 letter. in terms of sales and profits have gone in the wrong direction.”

World Book has rushed to cut overheads, revamp its distribution and invest in electronic offerings, giving Buffett hope of a comeback. However, unit volumes fell again in 1996, and the publisher “didn’t find it easy,” Buffett told shareholders.

“It’s not the business of five years ago,” Buffett said at Berkshire’s annual meeting in 1996. “And I don’t think it will be the business of five years ago. years, because the world has changed in some ways on that.”

Encyclopedias have even fallen out of favor at Berkshire’s annual shareholder meetings. Sales of World Books and related products at the event dropped from around $75,000 in 1997 to just over $16,000 in 1999.

World Book could be Buffett’s “quickest mistake,” Daniel Pecaut told ThinkAdvisor in 2019. The Pecaut & Co investment boss, who has attended Berkshire’s annual meeting for more than three decades, said that ‘Encarta and other digital rivals “had just destroyed the company”. “

Read more: David Rubenstein sees Warren Buffett as the ultimate investor. Billionaire Carlyle describes the 12 traits and habits that are essential to Buffett’s success.

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