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

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231–240 of 324 posts

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

#231
post #207

Earlier quoted context omitted.

This is true, but most of the economic historians I am aware of also acknowledge that America wouldn't have been in the position to leverage industrialization that it was without the economic driver of slavery. Disentangling them is very difficult and usually smells of a political motive.

>Disentangling them is very difficult and usually smells of a political motive. Whereas claiming they can't be disentangled is obviously disinterested. Slavery was the rule, not the exception in the world at the time. The African kingdoms mostly practiced it, the Arabs were infamous for it, Mexico ended slavery in the 1830s after American industrialization was well underway, Russia didn't truly end serfdom until arou…

Possibly because they didn't have the large amount of valuable raw materials to process, the way England did from its slaveholding colonies?

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

#232
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…

I don't understand what he's talking about, this place is hell

most would have been better off without the american revolution

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

#233

Earlier quoted context omitted.

Microsoft might have billions of lines of code today, but they would be precisely nowhere without the few K-lines of code that composed microsoft basic for the altair. Its misleading to say that 99%+ of american wealth occured long after slavery etc ended, because it still started there.

True, but I don't know if it's accurate that the United States wouldn't exist without slavery. I wish we could accurately run simulations; a lot of variables.

Sure, but that's a pipe dream so why not study history instead?

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

#234
post #34

Earlier quoted context omitted.

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…

The areas that used slaves the most are now some of the poorest areas of the USA. Maybe slavery didn't have that big of an impact?

Without slavery, much of the colonization of the US would have been economically pointless. Without slavery, much of the non-slaveholding US (and England) would have had little incentive to industrialize.

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

#235

Earlier quoted context omitted.

True, but I don't know if it's accurate that the United States wouldn't exist without slavery. I wish we could accurately run simulations; a lot of variables.

Sure, but that's a pipe dream so why not study history instead?

The question at hand is "Does the American system create massive amounts of wealth?" The comment essentially claimed it only did so because of slavery. I argue that isn't true.

If the American system only works as a result of slavery then it should be discounted. If not, however, it should be understood and replicated where possible.

And we should all study history regardless.

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

#236
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…

Look, it's great and all but 1) it was not a standing start (NY and VA have colonial histories starting over 400 years ago) 2) even at a low rate of return of 4% wealth should have compounded over 12,200% over 240 years (or: assuming a 4% IRR and current $90T valuation, ignoring inflation were the colonies worth $750M?) 3) this spanned the industrial and computer revolutions and all nations benefited. If you don't re…

I agree with the main thrust of your statement. My understanding from my synthesis of reading the experts is that the U.S.' current economic success and international power comes down to:

1) Political stability and the rule of law: No point in investing much in a farm, factory, or infrastructure (fiber!) if it will be burnt down the next day by bandits or seized by someone more powerful (government, the rich family in town, etc.). The same applies to human capital (education): No point in studying computer science if there is no electricity and your life will be a fight for survival with guns and knives.

2) Free people and free markets (as a general principle, not taken to logical extremes): The system that produces the most aggregate wealth from the same labor and capital inputs.

3) Scale: Of developed nations, the U.S. has by far the largest internal market. ~325 million in the US, second is Japan at ~125 million. The UK market is 60 million, for example; that's why the Beatles sang with American accents (AFAIK - and also because the UK and Europe probably were still recovering from two massive wars). Note that Europeans are roughly as productive per capita as Americans. Scale by itself isn't sufficient; China and India have probably always been larger, for example.

4) Geographic security: Protected from enemies by two oceans, and with neighbors too weak to do anything but be friendly. To get a sense of what those oceans mean, look at how hard it was to attack across the English channel in WWII. If the U.S. was in continental Europe, WWI and WWII would have devastated the U.S., twice, just like the rest of Europe - and who would have provided a Marshall Plan to bail out the US along with the Europeans? Instead, thanks to geography, it's only a slight exaggeration to say that not a foreign shot was fired on US soil - and hasn't been since 1812.

5) Geographic economics: According to one geopolitical analyst I read, the U.S. has the largest navigable river system and the largest contiguous area of farmland in the world, and they are in the same place, the Mississippi River basin. Remember that most of the world economy was agricultural for much of U.S. history; imagine the impact of that geography, an almost guaranteed economic engine. Consider how critical controlling New Orleans and the Louisiana Purchase were and are.

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

#237

Earlier quoted context omitted.

> 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 littl…

This basically sums up the debate to me. Great summary.

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

#238
post #90

Earlier quoted context omitted.

> the big boost was started by the industrial revolution Exactly. Now, lets look at some of the causes of the first Industrial Revolution First, large tracts of lands in Britain, largely held in the commons, were stolen from the peasantry and given to private individuals and landlords, as part of the Enclosure movement. This forced the peasants to look for work in cities en masse, providing cheap labor for the capita…

Your first point is interesting. People gloss over how disruptive the industrial Revolution was, and the downward pressure it put on the wages of farm workers. I'm not convinced by your second one. Why didn't states like Portugal industrialise equally quickly? Or within America, why didn't states with more slaves grow faster? Germany has no history of slavery, and the same is true for modern industrialisation transit…

That's because when l the other empires where getting going Germany was a set of small disunited sates.

Also take a look at what happened in the Sud west if you think Colonial Germany didn't have slaves

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

#239
post #10
post #4

"In Berkshire’s 2005 annual report, I argued that active investment management by professionals – in aggregate – would over a period of years underperform the returns achieved by rank amateurs who simply sat still. I explained that the massive fees levied by a variety of “helpers” would leave their clients – again in aggregate – worse off than if the amateurs simply invested in an unmanaged low-cost index fund. ” He…

Hedge funds make perfect sense for people who want to hedge their capital in specific ways. A hedge fund doesn't need to outperform the market to deliver tremendous value to their customers. Secondly, every trade has a counterparty. So somebody necessarily has to be at the loser's end of every trade. For every investment fund that makes oversize profits another fund loses money. It all evens out. That doesn't mean it…

>Secondly, every trade has a counterparty. So somebody necessarily has to be at the loser's end of every trade.

This is not true. There will always be someone who wins less between the two, but it doesnt mean it wasnt a win-win trade. Some things are more valuable to one person than another.

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

#240
post #4

"In Berkshire’s 2005 annual report, I argued that active investment management by professionals – in aggregate – would over a period of years underperform the returns achieved by rank amateurs who simply sat still. I explained that the massive fees levied by a variety of “helpers” would leave their clients – again in aggregate – worse off than if the amateurs simply invested in an unmanaged low-cost index fund. ” He…

> a standard index fund outperforms almost every hedge funds even before extra fees

Hedge funds beat the market before fees [1]. (Mutual funds do not [2].) It's just that hedge fund managers are great at gobbling up that alpha with fees.

One way to look at this is hedge fund investors subsidise the efficient price-discovery function hedge funds provide the market.

[1] http://www.marketwatch.com/story/90-of-fund-managers-beat-th...

[2] https://mobile.nytimes.com/2015/03/15/your-money/how-many-mu...

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