BRK afternoon (2)
The investing strategy is essentially lPO Alternative For Established
B: We like to buy from founders or their families.
B: Know when you are playing a game that you are going to win
C: Not difficult to figure out competence as it may appear. Competency is
relative concept. What I needed to get ahead was you out me against idiots.
Luckily there is a large supply.
B on tech and entrepreneurship – I would today do just what I did when I
was 23. Go into the investment business. Talk to lots of companies and
people. If I got interested in the coal business I would go out and see
8-10 CEOs and just drop in on them. I would ask them a lot. At the end I
would ask 1, if you had to put all their money in any coal company except
their own and go away for 10 years, which would it be and why? And 2, what
if you had to pull short one company for 10 years. It really has to turn
You might find one industry you like, in my case insurance. If you just
keep leaning things you will find something really useful to do.
C: Larry Bird asked every agent who ELSE they would recommend if that agent
didn’t take the deal. They all said the same agent. So he went there.
B: At Salomon, I asked 8 guys “who besides you would you recommend…”
People like to talk. You just have to be open to it. You can learn a lot
C: If it is a really competitive business and requires qualities that you
lack, it should be avoided. I have done that in field after field and there
was only one or two left.
C: Geico like Costco has a holy duty to have a wonderful product at a very
low cost. Companies like that do well over time.
C: Costco is unbelievable.
B: It’s easy to talk the game, but living the game is something else. It’s
against the human nature to get the cost down and keep the service level up.
Columbia B School grad in the house.
B: We could not have done Berkshire in any other country than America.
BRK meeting afternoon (part 3)
Intrinsic value was invented by Aesop. Bird in the hand is worth two in the
bush, 600 BC. The present value of all the cash that would be generated by
the business. But this is hard to estimate.
Graham would say that and value the quantitative factors.
Phil Fisher would look hard at the qualitative factors of the business in
Charlie came along and told me I was too focused on the quantitative
factors. He told me he had learned in the law more than I had learned in
Private equity using debt cheaply to buy companies. There is always going
to be someone competing with us to buy companies, which is what Charlie and
I focus on.
C: Of the old businesses, only one stayed big — Standard Oil,
Rockefeller’s. The ethos and momentum and system is in place. Don’t be too
quick to sell the stock.
B: Why don’t we get more copycats?
C: Reminds me of our old friend Ed Davis. A doctor in Omaha. It does not
look at all easy, and it is slow. There is nothing
B: The slowness deters people more than anything else.
C: (joke about death)
C: Never forget Weimar Germany. We can handle low growth for a little
while. it would be very dangerous to let the politicians print money.
(In Weimar Germany they gave you the mortgage back in the end.)
People who get to be CEOs are not shrinking violets. Their supporting staff
senses their animal spirits. They have people in charge of strategy and
acquisitions. You get all these forces pushing you to do deals. We try very
hard to not get eager to do deals. That would be a lot harder if we had
people pushing us.
C: We have really changed behavior in price fixing by individual
prosecutions. We need more of those in finance.
B: The disaster is that somebody is doing something wrong that reflects
badly on the whole organization. I can tell the managers and they can tell
their people that reputation is important. But we will have a problem of
some sort at some time. 300,000 people are not going to all behave every
B: Individual prosecution, I have written about. If the only fear is that
the company is going to have to write a big check, then you are going to
get a lot less change in behavior.
Corporate activism won’t go away. There are certainly cases where
management should be changed. Can’t have thousands of corporations without
that being the case. The activists are looking for a specific event and
their interest will end. Funds flowing to them are increasing their ability
to play at a bigger scale.
C: Nobody feels immune. Creating more of a stir in management than anything
in years. The activists are making a fair amount of money. It grows like a
beanstalk. If you follow an activist into a company that you wouldn’t
invest, you may find like an activist in the family that you wouldn’t
marry. Oscar Wilde’s definition of the foxhunt: the pursuit of the
uneatable by the unspeakable.
Energy: 12% return on tangible assets for their investments.
Shanghai guy. C: It was dumb to let our schools go to hell.
Hearing joke. I was worried about Charlie’s hearing. So I asked the doc and
he gave me some advice. Stand across the room and say “I think we ought to
buy General Motors at $35 do you agree?” So I do it. No answer. …
C: Removing unnecessary costs is a service to civilization. But it has to
be done with some sensitivity.
B: The better mousetrap will win eventually.
Financial literacy. The Secret Millionaires Club.
C: Very hard to fix the people who have the wrong parents.
B clearly thought Columbia was dumb and full of orthodoxy
C: You would have liked academics better if you had studies physics instead
Interesting sidebar – students requesting a stated greenhouse gas reduction
goals facing the risks to Insurance, Rail, and Energy businesses
ISS and proxy services recommend goals
Many institutional investors recommend
Board recommended against
Knotable testing in progress. Thanks for the help and sorry if you get