2020 Berkshire Hathaway Annual Letter [pdf] • Hacker News Board

Re: 2020 Berkshire Hathaway Annual Letter [pdf]

#31

Post by secfirstmd » Sat, Feb 27, 2021, 4:02 PM UTC

newsclues wrote: post #23

H8crilA wrote: post #2

If you like them you can read other letters, in particular older letters. The letters for the later part of the 1970s are especially instructive in terms of what is it like to live in an inflationary regime. Buffett is one of the few people that have "seen it all", from deflationary 30s, war 40s, greatest 50s, cultural 60s, inflationary 70s, capitalist 80s, excessive 90s, normal then excessive again 00s, deflationary…

The roaring 20s last century came about after a global pandemic

Um and a world war?

Re: 2020 Berkshire Hathaway Annual Letter [pdf]

#32

Post by umeshunni » Sat, Feb 27, 2021, 4:04 PM UTC

H8crilA wrote: post #2

If you like them you can read other letters, in particular older letters. The letters for the later part of the 1970s are especially instructive in terms of what is it like to live in an inflationary regime. Buffett is one of the few people that have "seen it all", from deflationary 30s, war 40s, greatest 50s, cultural 60s, inflationary 70s, capitalist 80s, excessive 90s, normal then excessive again 00s, deflationary…

Interesting that you describe the 10s as deflationary when there was a large amount of monetary and asset inflation.

Re: 2020 Berkshire Hathaway Annual Letter [pdf]

#33

Post by bedhead » Sat, Feb 27, 2021, 4:13 PM UTC

shawnz wrote: post #26

bedhead wrote: post #6

While I'm not of these meme investors who thinks Buffett is "washed up", I confess that I've increasingly wondered if it's just sorta over. In some sense, it's not his fault. Berkshire has grown so large that it has significant scale problems. I joke that Buffett found the investing equivalent of the Donkey Kong kill screen, he basically broke the game. It's incredible. But there have been self-inflicted issues. The…

> The seemingly unconditional refusal to explore technology companies. ... The allowing of the two new managers to keep breaking Berkshire's rules If you think they are stagnating with their current mindset, then shouldn't breaking their existing rules be a good thing?

That's a fair point. Let me clarify by saying that the IPO's and airlines were two things that Buffett was repeatedly adamant and proud about over many years. These were more hard and fast rules.

The tech thing is different, that was more Buffett just admitting it was outside his area of expertise. I think it's been especially confounding since Buffett has for a long time professed a deep admiration for Bezos and Amazon, yet never really acted on it.

Re: 2020 Berkshire Hathaway Annual Letter [pdf]

#34

Post by ethbr0 » Sat, Feb 27, 2021, 4:22 PM UTC

mettamage wrote: post #28

bedhead wrote: post #6

While I'm not of these meme investors who thinks Buffett is "washed up", I confess that I've increasingly wondered if it's just sorta over. In some sense, it's not his fault. Berkshire has grown so large that it has significant scale problems. I joke that Buffett found the investing equivalent of the Donkey Kong kill screen, he basically broke the game. It's incredible. But there have been self-inflicted issues. The…

Investing and poker have some fun commonalities. One that I want to focus one in this particular case is: always play the game you know well and know how you're going to win it [nuances, 0] In Poker: find the fish, understand why they're fish and exploit it [example, 1]. In investing: find underpriced assets, understand why they're underpriced and exploit it [examples, 2, 3]. From this perspective, Buffett doesn't un…

Obligatory Buffett paraphase: there are no called strikes in investing (ie if you choose not to swing at an opportunity, that then turns out to be good, nobody penalizes you)

As much of Berkshire's success has been based on limiting losses as pushing successes. "Buffett declines to invest in company" is a less sexy headline than "Buffett buys large stake in X" though.

Maybe Buffett's old. Maybe Berkshire is played out. Maybe they miscalled the pandemic churn. Or maybe the market is just so screwed up now that they're declining to swing.

I believe Berkshire has always been a macro-trend company? If we're looking for someone who traded in and out of pandemic dips and bubbles, that's very much not-Berkshire.

Re: 2020 Berkshire Hathaway Annual Letter [pdf]

#35

Post by throw0101a » Sat, Feb 27, 2021, 4:25 PM UTC

bedhead wrote: post #6

While I'm not of these meme investors who thinks Buffett is "washed up", I confess that I've increasingly wondered if it's just sorta over. In some sense, it's not his fault. Berkshire has grown so large that it has significant scale problems. I joke that Buffett found the investing equivalent of the Donkey Kong kill screen, he basically broke the game. It's incredible. But there have been self-inflicted issues. The…

> While I'm not of these meme investors who thinks Buffett is "washed up", I confess that I've increasingly wondered if it's just sorta over. In some sense, it's not his fault.

I also think that value investing has been 'automated away' to a certain extent such that him doing it (with staff help) no longer can compete with other market players.

> Berkshire has grown so large that it has significant scale problems.

This topic has actually been studied: (mutual) fund performance of top performing funds can be based on a manager's skill, but after a certain point that skill reaches the end of the runway. The more skilled the manager, the larger the AUM they can still get returns for, but at some point it's just too much.

> For an average fund in the cross-section, we estimate a drop in alpha of 20 basis points if the fund doubles its size over one year. We also find a non-negligible impact of the size of the fund industry, although its magnitude is significantly smaller than the impact of individual fund scale. We reconcile our findings with existing empirical studies. Taken as a whole, our results lend considerable support to theoretical models that build on the premise of decreasing return to scale for active portfolio management.

* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2872385

Discussed in the Rational Reminder podcast:

* https://rationalreminder.ca/podcast/136 (~15m30)

* https://www.youtube.com/watch?v=LhluPwDaNAQ&t=18m30s

Something to consider for anyone piling into (e.g.) ARK:

* https://awealthofcommonsense.com/2020/12/a-short-history-of-...

Re: 2020 Berkshire Hathaway Annual Letter [pdf]

#36

Post by ethbr0 » Sat, Feb 27, 2021, 4:27 PM UTC

nfjrbrnnffk wrote: post #21

tuna-piano wrote: post #12

Just an interesting sidenote. It does feel like the letter is shorter than it used to be, so I plotted the number of pages by year in the PDF fils on their site. Looks like there was a decrease from 20 pages to 15 starting in 2017. Graph: https://imgur.com/a/TQ2oewY

Still two long. And they should have an Instagram account with the same letter tl;dr to a 5 image post, for young investors.

:accountant: :chart: :no-sign: :rocket:

That would sum most of it up.

Re: 2020 Berkshire Hathaway Annual Letter [pdf]

#37

Post by rajivjain » Sat, Feb 27, 2021, 4:29 PM UTC

It’s inspiring to see that Buffett and Munger remain so wonderfully optimistic about the future of the US even when both are 90+ in the current sociopolitical environment. Reading this letter certainly lifted my spirit and put me in a different mood.

Re: 2020 Berkshire Hathaway Annual Letter [pdf]

#38

Post by chmaynard » Sat, Feb 27, 2021, 4:30 PM UTC

neogodless wrote: post #22

See Annual Report as well. https://news.ycombinator.com/item?id=26284669

Looks like the two URLs are different.

Re: 2020 Berkshire Hathaway Annual Letter [pdf]

#39

Post by ethbr0 » Sat, Feb 27, 2021, 4:30 PM UTC

nabla9 wrote: post #9

xeromal wrote: post #3

I always love to make sure their site is still bare bones. Love the raw HTML look.

The modern corporate website: * ethnically diverse happy people stock photos (80% of the page content) * carousels and pages with vague two sentence statements and a link. Link leads to missions statements and values and maybe a short paragraph. * detailed information about what the company sells hidden behind 3-4 clicks at minimum (can be omitted).

Ironically, this was my exact experience trying to figure out what OutSystems [0] sold.

I get it's expected in the B2B "we sell to idiot VPs" world, but jesus... have at least one page somewhere with a tech stack and platform summary.

[0] https://outsystems.com

Re: 2020 Berkshire Hathaway Annual Letter [pdf]

#40

Post by ethbr0 » Sat, Feb 27, 2021, 4:34 PM UTC

smurda wrote: post #27

“When people are fearful, be greedy. When people are greedy, be fearful.” -Buffet quote I think about a lot over the last 12 months

The key point from that quote is "when people are fearful, a pessimistic future is currently priced in" and "when people are greedy, an optimistic future is currently priced in."

So, effectively, it's setting up a win/tie dynamic on change/expected. Vs a lose/tie dynamic on change/expected when investing with the current sentiment.