Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]

berkshirehathaway.com

Post reply on HN
Print view View original

181–190 of 324 posts

Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]

#181

Post by gizmo »

tptacek wrote: post #177
gizmo wrote: post #149

Earlier quoted context omitted.

If active investment were negative-sum in aggregate then society would be better off if there were no active investors at all and everybody would invest in passive index funds instead. Unfortunately you need active investors to keep the market honest, without active investors index funds wouldn't work! Index funds are needed so investment funds don't overcharge their customers, and investment funds are needed to keep…

I think you and your interlocutors are talking past each other. It's true (and fashionable to point out) that active investment is what makes price discovery, and thus the markets themselves, work. But that doesn't make it a good idea to invest in hedge funds or any other active investment vehicles. Just as Buffett describes earlier in the letter w/r/t the insurance business, active investors can compete the returns…

Perhaps it is fashionable to point that out where you live, but common wisdom I hear is "everybody should just use index funds", without stopping to ask what would happen if everybody actually did.

Worldwide equities are 65 trillion or so. Can you have a functioning stock market if 1T of that is actively managed by prop traders and the remaining 64T is in passive index funds? I'm not so sure.

Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]

#182

Post by thomasthomas »

jdavis703 wrote: post #29
dsacco wrote: post #17

There's one particular passage I'd like to point out, on page 5: Our efforts to materially increase the normalized earnings of Berkshire will be aided – as they have been throughout our managerial tenure – by America’s economic dynamism. One word sums up our country’s achievements: miraculous. From a standing start 240 years ago – a span of time less than triple my days on earth – Americans have combined human ingenu…

they all represent a net gain for Americans from the barren lands, primitive structures and meager output of 1776. Starting from scratch, America has amassed wealth totaling $90 trillion. This was a gain that was achieved not by starting from scratch but by stealing lands from indigenous people and forcing Africans to work that land. I'm not sure if you can describe the kidnapping, murder, rape and ultimately genocid…

Guns, Germs, and Steel

Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]

#183

Post by joshuak »

all_usernames wrote: post #113
thedevil wrote: post #54

Earlier quoted context omitted.

While I think it's important to remember these atrocities, I think that for economic understanding it's important to note that these were not the major drivers of growth. Remember that atrocities like that happened in many places that did not grow into giant economies. Stealing land and enslaving people may have given a head start, but clearly something else delivered the big gains. If you look at the history and the…

> for economic understanding it's important to note that these were not the major drivers of growth. Two hundred years of slavery was not a major driver of economic growth? Edit: Serious question, rephrased: do economic historians really not consider slavery a major driver of growth? If so, that would be highly counterintuitive. We're talking about the free labor of ~10 million people over two centuries, in an econom…

An economy is about the volume of cashflow (value flow), not magnitude of wealth. If you have all the money in the world, you will find there is nothing you can buy.

While a large number of, not free but very low cost, laborers will build individual wealth for the small percentage of the population who use them, those same laborers do not participate in the economy. So you end up with very large supply and very little demand, little or no reason to innovate, and a stalled engine of growth.

Slavery, or even low wage workforce is bad even from the point of view of entirely selfish actors. It erodes the market eventually killing the entire economy.

The lesson is, if you want to get rich don't reduce the cost of your labor force, increase the value of your production.

Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]

#184

Post by MomentarySanity »

all_usernames wrote: post #113
thedevil wrote: post #54

Earlier quoted context omitted.

While I think it's important to remember these atrocities, I think that for economic understanding it's important to note that these were not the major drivers of growth. Remember that atrocities like that happened in many places that did not grow into giant economies. Stealing land and enslaving people may have given a head start, but clearly something else delivered the big gains. If you look at the history and the…

> for economic understanding it's important to note that these were not the major drivers of growth. Two hundred years of slavery was not a major driver of economic growth? Edit: Serious question, rephrased: do economic historians really not consider slavery a major driver of growth? If so, that would be highly counterintuitive. We're talking about the free labor of ~10 million people over two centuries, in an econom…

If you think slavery was the main, or even a large driver of industrial growth, you need to explain the extreme lack of industry in places where slavery was common versus places where there was no slavery. E.g., New England versus the Carolinas, etc.

Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]

#185

Post by gizmo »

tptacek wrote: post #169
gizmo wrote: post #163

Earlier quoted context omitted.

Hedge fund fees have been in a steady decline. > The notion that hedge funds all collect a stereotypical management fee of 2 percent and a performance fee of 20 percent has been dying a slow death in recent years, especially for smaller, newer funds. https://www.bloomberg.com/view/articles/2015-10-27/hedge-fun... Buffet's bet went into effect in January of 2008, so before the crash.

If you re-read the letter, you'll see it ran through the entire crash, and hasn't ended yet.

I said 2/20 fees aren't the norm anymore. You quoted from the letter. I provided a source that shows hedge fund fees are going down and remarked that the Buffett bet started before the 2008 crash when fees were higher then they are now. Because it was a boom period and because index funds that push down management fees have only recently become popular.

Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]

#186

Post by tptacek »

gizmo wrote: post #181
tptacek wrote: post #177

Earlier quoted context omitted.

I think you and your interlocutors are talking past each other. It's true (and fashionable to point out) that active investment is what makes price discovery, and thus the markets themselves, work. But that doesn't make it a good idea to invest in hedge funds or any other active investment vehicles. Just as Buffett describes earlier in the letter w/r/t the insurance business, active investors can compete the returns…

Perhaps it is fashionable to point that out where you live, but common wisdom I hear is "everybody should just use index funds", without stopping to ask what would happen if everybody actually did. Worldwide equities are 65 trillion or so. Can you have a functioning stock market if 1T of that is actively managed by prop traders and the remaining 64T is in passive index funds? I'm not so sure.

Now you're talking past me. It does not follow from the fact that active investment is necessary that people should invest with active investors. Again, fierce competition among active investors can --- and probably have --- created conditions where all the returns on active investing will go to (effectively) proprietary traders.

Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]

#187

Post by tptacek »

caminante wrote: post #178
tptacek wrote: post #176

Earlier quoted context omitted.

That might be true, but you'd make your argument more credible if you cited Bloomberg (or anyone else, but BB is who ZeroHedge cites) rather than ZeroHedge, the InfoWars of finance.

> That might be true, but you'd make your argument more credible if you cited Bloomberg (or anyone else, but BB is who ZeroHedge cites)... Your statement's not "credible." ZH didn't just cite Bloomberg. The ZH post also includes excerpts from the 93 page report (not included in the Bloomberg article) released by the US senate subcommittee, which was highly relevant. Is anything in the ZH post false? Please add it to…

Pointing out that a source isn't credible isn't an ad hominem attack --- or, in my case, even an attack at all. I'm broadly sold on the idea that Renaissance profits largely through tax loopholes.

Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]

#188

Post by MomentarySanity »

oneplane wrote: post #120
quizotic wrote: post #74

Earlier quoted context omitted.

Yes, we took land from indigenous peoples, and enslaved Africans. And yes we did awful things. But isn't it obvious that neither of these things created the wealth we have today? To my thinking, our current wealth derives from technological innovation, process engineering, psychological insight, most of which would not have been possible without welcoming people from other lands, and being willing to work with those…

But aren't you still doing that today? I believe that somewhere in your country, someone wants a big pipe on some land, but the people living there don't want it, yet they force it anyway.

Well, we do have, as most modern countries do, a system for the taking of private property for public use. But that's not even what's happening here, as no property is being taken.

Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]

#189

Post by austenallred »

jdavis703 wrote: post #29
dsacco wrote: post #17

There's one particular passage I'd like to point out, on page 5: Our efforts to materially increase the normalized earnings of Berkshire will be aided – as they have been throughout our managerial tenure – by America’s economic dynamism. One word sums up our country’s achievements: miraculous. From a standing start 240 years ago – a span of time less than triple my days on earth – Americans have combined human ingenu…

they all represent a net gain for Americans from the barren lands, primitive structures and meager output of 1776. Starting from scratch, America has amassed wealth totaling $90 trillion. This was a gain that was achieved not by starting from scratch but by stealing lands from indigenous people and forcing Africans to work that land. I'm not sure if you can describe the kidnapping, murder, rape and ultimately genocid…

While I think it's important to not neglect the horrors of slavery and the theft of lands from indigenous peoples, it's disingenuous to imply that the sole (or a major) cause of America's current and continuous booming economy was either of these.

The easiest way to dispel this notion is to show that the vast, vast majority of American wealth (>99%) came about long after slavery had ended. Indeed, if we could return to the economy at the time slavery was in full swing (even disregarding morals), not one rational person would choose to do so. Another way is to compare the US economy to those that didn't discontinue those practices. Or to show that even in current circumstances the US economy continues to grow rapidly, after hundreds of years of doing so.

So, please don't forget the atrocities caused by the United States. But also don't attribute everything that ever happened in the United States to those atrocities. It may be a cheap way to brush aside the success of the United States, but it isn't an honest argument. Clearly there's something else going on that has made the United States the most wealthy country in the world (per capita).

Re: Warren Buffett's Annual Letter to Berkshire Hathaway Shareholders [pdf]

#190

Post by jgallag8 »

ftlio wrote: post #170
Shubley wrote: post #143

Earlier quoted context omitted.

>the people in it suck, the government they built sucks, and the ideals they aspire to suck, and that the solution is to deal out cruelty to the right kinds of people. Amazing reality inversion. Trump never said anything like any of these. He has said politicians and the political class suck. Not 'Americans'. Hillary and others on that side consistently say Americans suck (deplorables), US traditional culture is evil…

He doesn't think America is great, aye? Hence the imperative that it must be made great... again.

I think its fairly common for people to believe both that the US is the greatest, and it isn't what it used to be. There's obviously some tension between those ideas, noted humorously by Stephen Colbert's book entitled 'America Again: Re-becoming the Greatness We Never Weren't'.
Post reply on HN