
Warren Buffett and Charlie Munger FAQ - anton_tarasenko
http://buffettfaq.com/
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nur0n
> So, what we do is take money and move it around into other businesses. The
> newspaper business earned great returns but not on incremental capital. But
> the people in the industry only knew how to reinvest it [so they squandered
> a lot of capital]. But our structure allows us to take excess capital and
> invest it elsewhere, wherever it makes the most sense. It's an enormous
> advantage.

Wow, they are playing the game at a higher order than I have even considered.

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ksec
But Berkshire Hathaway ( or the world in general ) is also at a point where
they have too much capital and there are very little low hanging fruit (
comparatively speaking ).

It is a lot easier to invest a few millions in a few very good small business,
but once you need to invest hundreds of billions, all of a sudden you have
very little choices.

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JackPoach
Wow, thanks for taking time to compile the list. It makes an interesting read.
One thing - I wonder how many things that Warren or Charlie said 20 years ago
they themselves no longer think are true.

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cylinder
> What are the economic characteristics that make Kraft a good business? WB:
> Most big food businesses are good businesses in that they earn good returns
> on tangible assets. If you own important branded assets in this country, and
> you have good assets, it is not easy to take on those products. Just imagine
> Coca-Cola. They sell 1.5 billion servings every day. It has been in
> everyone’s mind since 1886—associated with good value, happiness and
> refreshment. It is virtually impossible to take it on in a huge way. It may
> not be the same with Kraft. Kool-Aid, but I’m not sure I want to take on
> Kool-Aid. To implant RC Cola in people’s minds globally is very, very
> difficult. A brand is a promise. Coca-Cola delivers something to you. Virgin
> Cola — an unusual promise in a product—tried and couldn’t figure it out.
> Whatever it was, it didn’t work. Don Keough would know. Who would buy a can
> for two-cents-a-can less than Coca-Cola? We feel pretty good about branded
> products if they’re leaders in their field. There is nothing unusual about
> Kraft that’s different from Kellogg. Some good factors are price. If you
> don’t pay too much, you will do okay. But you won’t get superrich, as the
> attributes [of a strong brand] are well recognized.

Source: BRK Annual Meeting 2008 Boodell Notes URL: Time: 2008

He was very wrong on this. Kraft just wrote-down $15 billion. Their brands
have lost their "cachet." Nobody wants them nor needs them -- you're either
buying a gourmet, healthy version (i.e. real cheese instead of the plastic
block Velveeta) or a store's private label.

[https://www.irishtimes.com/business/retail-and-
services/warr...](https://www.irishtimes.com/business/retail-and-
services/warren-buffett-was-too-american-to-see-through-kraft-1.3808217)

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paganel
And I'd imagine not many people associate "happiness and refreshment" with
Coca-Cola anymore.

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jjeaff
But maybe they do for Odwalla, Smart water, Dasani, Minute Maid, Vitamin
Water, Zico Coconut Water, Nestea, Poweraid... The list goes on.

They are wealthy and have unprecedented massive distribution. They can buy up
any new upstarts before they even think about becoming a real competitor. And
physical drink distribution is much, much more expensive to scale than
something like an software competitor. It took Coca Cola 100 years to build
their current network.

~~~
paganel
Originally Buffet was saying that he believes and invests in trusted brands, I
was just saying that Coca-Cola the trusted brand is not regarded as highly as
15-20 years ago. And I’ve personally only heard about Nestea from your list of
brands (I’m not an American) and as such I have a really bad opinion of the
product behind said brand (I see it as sugary water masquerading as “tea”).
Otherwise I agree, building a logistics holding company is hard, but Buffet
said he invested in companies like Coca-Cola for their brand value not for
their logistics know-how.

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hisnameismanuel
Yes, you're right - one can dominate the cola industry, but if the cola
industry itself goes away, one has serious problems.

To your other point, Buffett doesn't always have the time to elaborate on each
answer, so perhaps you missed it in this context. In general, a supreme
distribution network is something that he values highly. It's known as having
a 'moat' and is one of his most cited investing principles.

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lotsofpulp
Who would have serious problems if the cola industry goes away, except for the
owners of the cola companies? It would be greatly beneficial to society, at
least with a substantial decrease in healthcare costs.

~~~
jjeaff
Not even the cola companies would care. They would probably just sell more
juice and bottled water. And the bottled water has much higher margins.

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GuillaumeBrdet
This is really cool, for someone trying to keep up with his advise that might
be a great source to keep around.

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tim333
Good stuff. It's going to take a while to look at all 463 of them.

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lkhatter
Another good site is mastersinvest.com

