
What is it like to be owned by Warren Buffett? - Oatseller
http://www.gsb.stanford.edu/insights/what-it-be-owned-warren-buffett
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fiatmoney
This is partially selected for based on the kinds of businesses Berkshire
invests in. They love high free-cash-flow businesses with significant
regulatory or operational barriers to entry; the cash flow is then available
to finance other acquisitions when opportunities arise, at a very low cost of
capital.

In those kinds of businesses, there tend to be easy-to-understand performance
metrics that can actually be optimized for on a longer term. The bet on the
business model has already happened and there is limited ability to make
company-risking bets or engage in empire-building.

One notable thing about Berkshire businesses is that internally they tend to
be extremely "thrifty". Their insurance operations have one of the lowest
expense ratios (operational expenses as a fraction of premiums) in the
business, and are some of the only ones to actually make a profit off of the
premiums directly rather than off of investing their float.

~~~
oxide
wait, insurance companies don't usually make an actual profit directly from
premiums?

what a world we live in, that's an eye-opener for me.

~~~
fiatmoney
They typically make money from investing the money in between when it's
received, and when they pay out claims - imagine a life insurer holding the
cash between the start of the policy and the insured's death.

~~~
ant6n
If your insurance provider can make money without investing the premiums, then
I'd say you're paying too much for premiums.

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AaronM
Maybe it's just me, but I find it obvious that they did better because they
focused on long term goals, instead of short term profits.

~~~
AndrewKemendo
It's not just you, it's their entire investment strategy.

I did some study of Buffett/BH/Graham in college and resoundingly they do
"value investing" which is predicated on the notion that true gains are made
in longevity. Highly recommend the intelligent investor as a starting point in
understanding the BH ethos.

That said, BH has done some short term deals - and was taken to task in 2008
for their involvement in CDO trading. So it's not all peaches and cream.

~~~
Retric
CDO's are actually a useful tool for highly competent investors. However, the
overwhelming majority of investors aren't.

The reality is 10's of trillions in assets are managed by people who don't
know what there doing and have little incentive to learn. Because, when your
playing with other peoples money managing more has better ROI than managing
well.

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jcdavis
For those interested, I highly recommend reading Berkshire Beyond Buffet
([http://www.amazon.com/Berkshire-Beyond-Buffett-Enduring-
Valu...](http://www.amazon.com/Berkshire-Beyond-Buffett-Enduring-
Values/dp/0231170041)), which talks a lot about all the individual businesses
before & after being acquired. A little repetitive, but good reading.

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Oatseller
study linked in article: [http://www.gsb.stanford.edu/faculty-
research/publications/tr...](http://www.gsb.stanford.edu/faculty-
research/publications/trust-consequences-survey-berkshire-hathaway-operating-
managers)

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mring33621
So companies that are acquired by Berkshire Hathaway get improved management
'for free' (in that there was no HR/recruiting work required). Sounds like a
good deal if you have pre-acquisition ownership in one of them.

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kirk21
His letters to shareholders are worth a read:
[http://amzn.to/1XTv2Xj](http://amzn.to/1XTv2Xj)

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bcx
This is a timely comparison to how we could imagine Alphabet/Google in the
future. Provide a shield from the market to allow long term thinking.

