So how does our float affect intrinsic value? When Berkshire’s book value is calculated, the full amount of our float is deducted as a liability, just as if we had to pay it out tomorrow and could not replenish it. But to think of float as a typical liability is a major mistake. It should instead be viewed as a revolving fund. Daily, we pay old claims and related expenses — a huge $27 billion to more than six million claimants in 2016 — and that reduces float. Just as surely, we each day write new business that will soon generate its own claims, adding to float. If our revolving float is both
...more
