More on this book
Kindle Notes & Highlights
“If you are willing to do dumb things in insurance, the world will find you. You can be in a rowboat in the middle of the Atlantic and just whisper out, ‘I’m willing to write this,’ and then name a dumb price, and you will have brokers swimming to you with their fins showing.”
“The nature of insurance is that the surprises are on the unpleasant side.”
When you are selling insurance against very infrequent events, you can totally misprice them but not know about it for a long time.
“The thing to remember is that the earthquake does not know the premium you received.
We will offer reinsurance at any time in very large quantities at prices that we think make sense. But we won’t do business if we don’t think it makes sense.
CM: “I think Berkshire is basically a very old-fashioned kind of a place, and it tries to exert discipline to stay old-fashioned. And I don’t mean old-fashioned stupid, I mean the eternal verities, so to speak: basic mathematics, basic horse sense, basic fear, basic discriminations regarding human nature; all very old-fashioned. If you just do that with a certain amount of discipline, I think it’s likely to work out quite well.”
CM: “Insurance, and particularly reinsurance, is not that easy. It’s taken us a long time to do it as well as we do. If it weren’t for Ajit, we’d be a lot smaller in the insurance business.”
“The nature of insurance is that the surprises are on the unpleasant side … I think we have a claim at a small workers’ comp company that we have, where the policy goes back twenty-five years or so, and it just popped up to life in the last year. And it costs real money. So it’s a business where the surprises can come big and they can come late. And that will happen even with good management.”
“We avoided the tech stocks because we felt we had no advantage there. And I think it’s a good idea not to play where other people are better.
“Investment is about valuing businesses. That is all there is to it; you sit around and you try to figure out what a business is worth, and if it’s selling below that figure, you buy it.”
CM: “It’s man’s nature to take the progress as a right; not something to be earned or strived for, but something that should automatically just flow in over the transom. That attitude is poison. It doesn’t do anybody any good.”
Picking bottoms is probably impossible, but when you start getting a lot for your money, you buy.
CM: “We have a willful agnosticism on all kinds of things. And that makes us concentrate on certain other things. This is a very good way to think if you’re as lazy as we are.”
I guess it shows Benjamin Franklin was right, when he said, ‘It’s hard for an empty sack to stand upright.’
“We like buying businesses where we feel that there’s some untapped pricing power.
You can learn a lot about the durability of the economics of a business by observing the price behavior.”
“The underwriting profit is really a function of two major variables: one is the expense ratio, and the other is the loss ratio.
“A banker should be more like an engineer. He is more into avoiding trouble than getting rich.”
CM: “Think of how refreshing a board of directors meeting would be if they sat down and said, ‘Now we’ll spend three hours examining all our stupid blunders and how much we’ve blown.’
“When you start concentrating risks in institutions which are highly leveraged, and who intersect with a few other institutions all bearing the same risks, all having the same motivations in the trading departments, to take on more and more esoteric things because they can book more and more immediate profits, you are courting danger. And that’s why I wrote about it. It’s not a prediction, it’s a warning.”
And people used to say about it, ‘If they ever do find any oil, that old man will steal it.’ The motion picture business, only about half of it that has normal commercial morals.”
CM: “I think the movie business is one tough business. That’s my view.”
“Whenever a really bright person goes broke that has a lot of money, it’s because of leverage. It would be almost impossible to go broke without borrowed money in the equation.
“I don’t think consolidation usually solves many problems. If you have two lousy businesses and you put them together, you end up with one big, lousy business, usually. I am not a big fan of consolidation where the theory is that you have two very mediocre businesses and you’re going to wring the costs out of one. It just doesn’t work that way in my experience.”
WB: “If you accumulate a low-cost index fund over ten years with fairly regular sums, I think you will probably do better than 90% of the people who take up investing at a similar time.”
Among public companies, I’d argue a willingness to accept significant and sustained short-term pain as a necessary cost of long-term prosperity is the exception, not the rule (as Tom Russo calls it, “the capacity to suffer”).
