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Warren Buffett Just Wrote His Best Annual Letter

gatesnotes.com

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Re: Warren Buffett Just Wrote His Best Annual Letter

#81

Post by webehere »

ldec wrote: post #30
pokoleo wrote: post #2

I had a chance to read the letter - I went from knowing nothing about Buffet's businesses to knowing a lot, very quickly. On a related note, I wonder if Gates writing this praise was spurred by something, maybe some news about Buffet. He's relatively senior (84), and has been running Berkshire for a while now. Maybe he's getting ready to give up the reins. In fact, he builds up the reputation his menagerie of "very e…

"I wonder if Gates writing this praise was spurred by something" - it was likely spurred by criticism in the economist: http://www.economist.com/news/business/21645746-warren-buffe...

Criticism was valid. Why not name a successor? Otherwise, the Economists's review read more like a critique of Yellow Submarine - I mean, "Worst Beatles Album" is hardly a critique, and more of a "worst of a great bunch" type of commentary.

Re: Warren Buffett Just Wrote His Best Annual Letter

#82

Post by ethbro »

foobarqux wrote: post #78
ethbro wrote: post #70

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. 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.

That would be National Indemnity and Life, p10.

"Let’s look first at insurance, Berkshire’s core operation. That industry has been the engine that has propelled our expansion since 1967, when we acquired National Indemnity and its sister company, National Fire & Marine, for $8.6 million. Though that purchase had monumental consequences for Berkshire, its execution was simplicity itself.

Jack Ringwalt, a friend of mine who was the controlling shareholder of the two companies, came to my office saying he would like to sell. Fifteen minutes later, we had a deal. Neither of Jack’s companies had ever had an audit by a public accounting firm, and I didn’t ask for one. My reasoning: (1) Jack was honest and (2) He was also a bit quirky and likely to walk away if the deal became at all complicated.

On pages 128-129, we reproduce the 11⁄2-page purchase agreement we used to finalize the transaction. That contract was homemade: Neither side used a lawyer. Per page, this has to be Berkshire’s best deal: National Indemnity today has GAAP (generally accepted accounting principles) net worth of $111 billion, which exceeds that of any other insurer in the world."

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