I recently had a chance to talk with Warren Buffett biographer Alice Schroeder, author of The Snowball: Warren Buffett and the Business of Life. In this fourth of five installments, we talk about Berkshire Hathaway's (NYSE: BRK-A) (NYSE: BRK-B) future returns.

Mac Greer: In the past, Buffett has cited Berkshire's size as an obstacle to his ability to significantly beat the market, yet he has still been able to significantly beat the market.  Berkshire now has a market cap of around $200 billion. Has Buffett finally reached the point where that size will limit his returns?

Alice Schroeder: Well, it is a real dangerous thing to ever answer that question "yes" because over and over, he has struck deals that have defied that size barrier. And of course, the way he has done that has been through the power of superior negotiation and by being able to prey on the temporary weakness of someone else -- things like the Goldman deal. He has done what he can to try to wire the company that even if someone else were running it, and not particularly well, it could perform decently.

With that said, so much will depend on who is allocating the capital in the future and the opportunities there.  But Warren likes to buy companies that are as close to permanent investments as possible: shoes, bricks, paint. That gives him a tremendous advantage.

Greer: And let's talk about one of his big deals, the Burlington Northern deal. Buffett acquires the railroad company, Burlington Northern, which is roughly the size of Nike. In doing so, he buys a capital-intensive business that promises only, quote, and this is his quote, "decent returns." Now some have speculated that Buffett did this to ease the capital allocation decisions that his successor would have to make. Do you think, with the Burlington Northern acquisition, that Buffett is managing from beyond the grave or is he just being coy about the upside of Burlington Northern?

Schroeder: Yes. (Laughs.)

Greer: Both.

Schroeder: Yeah, I think he has done a number of things that would amount to managing from beyond the grave, including things like putting Bill Gates on the board and having his son be on the board, but here he has tied up the company's capital, a huge chunk of it, for the foreseeable future, which unquestionably ties the hands of his successor if it were to transition today.

On the other hand, I do believe that he sees a number of advantages in the Burlington deal--- that it is going to do well as a business, even if the U.S. economy doesn't perform stellarly, because if we continue to import, it will do well; if the economy recovers, it will do well.

The thing that struck me about it was the price and the fact that he paid for it with stock. He has done that in the past, and historically when he has invested in things using stock, typically they have not worked out as well as his other investments.

In the final installment of our interview, I ask Alice who Buffett's successor will be.  Check out the first three articles.

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Mac Greer does not have a financial position in any of the stocks mentioned in this article. The Motley Fool has a disclosure policy.