Shared-Hardship People Model for Businesses in a Recession

Charlie Munger said at the 2009 Berkshire Hathaway annual meeting:

Some of our businesses have a shared-hardship model, where they don’t layoff, at least not yet. And the businesses with that model tend to be very strongly placed economically. So I guess it shows that Benjamin Franklin was right, when he said, ‘It’s hard for an empty sack to stand upright.’ So we’re all over the map on that, and so is all of industry. But I do think an ideal model would be a business so strong that it could operate in the shared-hardship mode instead of the layoffs.

Warren Buffett agreed,

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Yeah, some are doing that, where you give up hours. But a lot of operations don’t lend themselves to that very well, either. So…in other cases, you basically have to close down whole plants. That’s just the nature of it. You really can’t operate every plant at 50 percent and have it work as effectively as shutting down the least-productive plants.

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