Warren Buffett Just Wrote His Best Annual Letter • Hacker News Board

Re: Warren Buffett Just Wrote His Best Annual Letter

#71

Post by TheRealDunkirk » Wed, Mar 18, 2015, 5:49 PM UTC

dferlemann wrote: post #57

bostonpete wrote: post #42

Earlier quoted context omitted.

> Often we tend to focus too much on intelligence and > too little on integrity. Maybe because integrity is virtually impossible to objectively evaluate for a candidate who you've got limited time to assess (aside from some extreme examples perhaps). I guess you could incorporate some sort of formal integrity test [1] into your hiring process but my impression is that those are costly and controversial. Do companies…

I agree. Integrity is mostly subjective. It has two meanings: 1. the quality of being honest and having strong moral principles; moral uprightness. 2. the state of being whole and undivided. Some Christians would consider anti-homosexuality as a model for integrity, and how can you argue with that? They in fact are protecting integrity of the Bible. They are at least honest about it. When something is said, it needs…

> Also, I find organizations putting Integrity as part of their motto distasteful.

If you have to officially state that integrity is something you value, you've already lost.

That it was part of a scummy company's "values statement," after they "merged" with my great company -- selling the deal to shareholders on a CEO deal they broke after a year, and then breaking up the company and selling it all off to float their drowning businesses -- was PARTICULARLY galling.

Re: Warren Buffett Just Wrote His Best Annual Letter

#72

Post by asdkl234890 » Wed, Mar 18, 2015, 5:52 PM UTC

beefield wrote: post #51

tootie wrote: post #39

Earlier quoted context omitted.

“I divide my officers into four classes as follows: The clever, the industrious, the lazy, and the stupid. Each officer always possesses two of these qualities. Those who are clever and industrious I appoint to the General Staff. Use can under certain circumstances be made of those who are stupid and lazy. The man who is clever and lazy qualifies for the highest leadership posts. He has the requisite nerves and the m…

I think that the ones you really have to watch are the intelligent and industrious ones. They do not have time to stop wondering whether their goal is sensible or not, and being intelligent, they have means to push towards their goal much further that dumb and lazy will ever be able.

Since we have intelligent vs stupid, I assume industrious is given as the opposite of lazy. So industrious really means hard working.

And hard working can be dangerous. Very, very intelligent workaholics are responsible for some of the most expensive, least efficient work I've ever seen. No matter how hard and difficult, and too complicated things get, they just roll up their sleeves and go to work. And using their super intellect, they can manage it. But everyone else is hurt by that.

Maybe you thought industrious meant inventive, or creative. But if it means only hard working. Then intelligent and hard working is a dangerous combination. Often successful but at a huge cost. Smart and lazy is just as often successful, but without those huge costs.

When smart and lazy people get hard work, they think of ways to make it easier. That's where we get the old saying that civilization advances only thanks to lazy people. Hard working people just put up with however hard or inconvenient work is, lazy people get creative.

Re: Warren Buffett Just Wrote His Best Annual Letter

#73

Post by chc » Wed, Mar 18, 2015, 5:53 PM UTC

beefield wrote: post #51

tootie wrote: post #39

Earlier quoted context omitted.

“I divide my officers into four classes as follows: The clever, the industrious, the lazy, and the stupid. Each officer always possesses two of these qualities. Those who are clever and industrious I appoint to the General Staff. Use can under certain circumstances be made of those who are stupid and lazy. The man who is clever and lazy qualifies for the highest leadership posts. He has the requisite nerves and the m…

I think that the ones you really have to watch are the intelligent and industrious ones. They do not have time to stop wondering whether their goal is sensible or not, and being intelligent, they have means to push towards their goal much further that dumb and lazy will ever be able.

That sounds like the same sort of person Helmuth was describing as "stupid and industrious" — they make a lot of progress in ill-advised directions.

Re: Warren Buffett Just Wrote His Best Annual Letter

#74

Post by malchow » Wed, Mar 18, 2015, 5:57 PM UTC

sreyaNotfilc wrote: post #69

I know this is about Warren, but I have a question... Is it me, or is Bill Gates the coolest person ever after relinquishing his duties at Microsoft? He seems so at peace with everything (except for his charities and philanthropic efforts of course).

Money buys freedom, and freedom buys happiness.

Re: Warren Buffett Just Wrote His Best Annual Letter

#75

Post by tnorthcutt » Wed, Mar 18, 2015, 6:17 PM UTC

lotsofmangos wrote: post #41

tootie wrote: post #39

Earlier quoted context omitted.

“I divide my officers into four classes as follows: The clever, the industrious, the lazy, and the stupid. Each officer always possesses two of these qualities. Those who are clever and industrious I appoint to the General Staff. Use can under certain circumstances be made of those who are stupid and lazy. The man who is clever and lazy qualifies for the highest leadership posts. He has the requisite nerves and the m…

Funny, I had read this quote attributed to Kurt von Hammerstein-Equord by Hans Magnus Enzensberger.

http://quoteinvestigator.com/2014/02/28/clever-lazy/

The earliest evidence located by QI appeared in January 1933 in a periodical called “Army, Navy & Air Force Gazette” based in Great Britain. A passage attributed to German General Kurt von Hammerstein-Equord described the placing of officers into four classes.

Re: Warren Buffett Just Wrote His Best Annual Letter

#76

Post by AndrewKemendo » Wed, Mar 18, 2015, 6:46 PM UTC

hawkice wrote: post #68

AndrewKemendo wrote: post #50

Earlier quoted context omitted.

I don't think they are really comparable to be honest. If you look at the type of businesses that BH is involved in, it's things that have "book value," in other words tangible assets that can be inventoried, depreciate and are generally considered durable goods. In "Tech" the vast majority of assets are human capital and it is too "fickle" and companies are very easily supplanted for the really long game that BH pla…

Couldn't disagree more. His story about building BH into a powerhouse centered on valuing things at more than just book value (notably, See's Candy, which was one of their first amazing investments, which he was worried about purchasing for 3x net tangible assets, but notes that it was only because he wasn't yet skilled at Munger's investment style yet). One of the durable advantages he looks for is having a strong b…

Right, the brand thing is what I was trying to drive at as being a large factor for purchase decision outside of just tangible assets.

I have also read enough of Buffet to know that while he likes to put on the hat of gump old man, he has teams of people who he relies on for things he "doesn't understand" - and we aren't talking about nuclear technology here.

Especially if you are making brand decisions, Google is a huge brand, and the technology is not esoteric nor is the business model. The difference though is that google is software based, while IBM is hardware. At least that's how it has historically been...I am curious what BH will do as IBM moves toward more software/people centered.

Re: Warren Buffett Just Wrote His Best Annual Letter

#77

Post by mike_hearn » Wed, Mar 18, 2015, 7:31 PM UTC

hawkice wrote: post #68

AndrewKemendo wrote: post #50

Earlier quoted context omitted.

I don't think they are really comparable to be honest. If you look at the type of businesses that BH is involved in, it's things that have "book value," in other words tangible assets that can be inventoried, depreciate and are generally considered durable goods. In "Tech" the vast majority of assets are human capital and it is too "fickle" and companies are very easily supplanted for the really long game that BH pla…

Couldn't disagree more. His story about building BH into a powerhouse centered on valuing things at more than just book value (notably, See's Candy, which was one of their first amazing investments, which he was worried about purchasing for 3x net tangible assets, but notes that it was only because he wasn't yet skilled at Munger's investment style yet). One of the durable advantages he looks for is having a strong b…

That part of the letter seemed unsatisfying to me. Perhaps there's some obvious backstory here I'm unaware of (I never heard of See's Candy), but all the letter says is that it had a big and strong competitive advantage, without bothering to say what that was. Brand? I can't think of many other candidates beyond some amazing one-off deal with suppliers. It's a chocolate company. How powerful can the brand really be? Why would their brand be so much better than any others? And why was it so obvious to Buffet that this brand was great yet apparently not to anyone else? This story doesn't really tell us anything about his investment strategy at all.

Re: Warren Buffett Just Wrote His Best Annual Letter

#78

Post by foobarqux » Wed, Mar 18, 2015, 8:58 PM UTC

ethbro wrote: post #70

foobarqux wrote: post #55

Earlier quoted context omitted.

Integrity also means different things to Warren Buffett than it does to other people. Ripping someone's face off in a business transaction is a desirable quality to Warren Buffett.

> Integrity also means different things to Warren Buffett than it does to other people. Ripping someone's face off in a business transaction is a desirable quality to Warren Buffett. From the letter Gates was talking about (I've read about the 1st 1/3 of it over the last couple of days), integrity would be why Warren Buffett bought a major insurance company on a handshake and a one page document. No pre-audit. No fin…

I don't know which deal you are talking about but Buffett likes quick handshake deals because the longer he waits the more likely the seller will retain professional M&A advice and therefore raise the price (to something more fair for the seller).

One of Buffett's proudest achievements was paying pennies on the dollar for an immigrant's bootstrapped furniture business.

Re: Warren Buffett Just Wrote His Best Annual Letter

#79

Post by lomnakkus » Wed, Mar 18, 2015, 9:05 PM UTC

TheRealDunkirk wrote: post #71

dferlemann wrote: post #57

Earlier quoted context omitted.

I agree. Integrity is mostly subjective. It has two meanings: 1. the quality of being honest and having strong moral principles; moral uprightness. 2. the state of being whole and undivided. Some Christians would consider anti-homosexuality as a model for integrity, and how can you argue with that? They in fact are protecting integrity of the Bible. They are at least honest about it. When something is said, it needs…

> Also, I find organizations putting Integrity as part of their motto distasteful. If you have to officially state that integrity is something you value, you've already lost. That it was part of a scummy company's "values statement," after they "merged" with my great company -- selling the deal to shareholders on a CEO deal they broke after a year, and then breaking up the company and selling it all off to float thei…

Exactly. It's like explictly stating that you're "a people person". There mere act of saying it indicates that you're probably not[1].

[1] Unless you're unbelievably naïve, I suppose, but I don't want unbelievably naïve people working for/with me.

Re: Warren Buffett Just Wrote His Best Annual Letter

#80

Post by HeyLaughingBoy » Wed, Mar 18, 2015, 9:37 PM UTC

mike_hearn wrote: post #77

hawkice wrote: post #68

Earlier quoted context omitted.

Couldn't disagree more. His story about building BH into a powerhouse centered on valuing things at more than just book value (notably, See's Candy, which was one of their first amazing investments, which he was worried about purchasing for 3x net tangible assets, but notes that it was only because he wasn't yet skilled at Munger's investment style yet). One of the durable advantages he looks for is having a strong b…

That part of the letter seemed unsatisfying to me. Perhaps there's some obvious backstory here I'm unaware of (I never heard of See's Candy), but all the letter says is that it had a big and strong competitive advantage, without bothering to say what that was. Brand? I can't think of many other candidates beyond some amazing one-off deal with suppliers. It's a chocolate company. How powerful can the brand really be?…

IIRC, in Snowball, he mentions that the competitive advantage of See's was that it was exceptionally good quality candy. I don't remember the details very well, but it's likely that he realized that with better management and marketing, they could produce far more value than the company cost at the time.