> Much of our huge value creation in insurance is attributable to Berkshire’s good luck in my 1986 hiring of Ajit Jain. We first met on a Saturday morning, and I quickly asked Ajit what his insurance experience had been. He replied, “None.”
> I said, “Nobody’s perfect,” and hired him. That was my lucky day: Ajit actually was as perfect a choice as could have been made. Better yet, he continues to be – 35 years later.
This made me laugh. I wish my hiring process was this robust! I'd be curious to know more about why he actually chose him.
>Ajit Jain is an older cousin of Anshu Jain, who was the former Co-CEO of Deutsche Bank.
Connections
>He did his schooling at Stewart School, Cuttack. In 1972, Jain graduated from the IIT Kharagpur in India with a BTech degree in Mechanical Engineering.[4][5]
Tough degree
> where he earned an MBA from Harvard University and joined McKinsey & Co
A second tough degree at Harvard, plus connections from Harvard and McKinsey
>Jain was invited by his former boss, Michael Goldberg, who had left McKinsey & Co. to join Berkshire Hathaway in 1982
Referral by a former boss
I'd say insurance experience played a very small part in why he got the job
I agree he had the solid foundation [1] [2], but it is still not that simple.
.
Most importantly at this level Buffet would have hundreds of people in his target pool of similar profiles Goldman Sacks, BCG, McKinsey and ofcourse insurance guys with similar Harvard/Stanford/Yale/MIT kind of ivy league education .
Selecting the right person would still be hard.
The pedigree of this kind of education and job helps in filtering out a ton of candidates, and keeping the pool to high quality, however it won't be a selection criteria.
[1] His academic credentials are impressive, but just to keep in mind IIT in 1972 didn't have the same reputation( guys like Jain created that their achievements) as later on especially terms of difficulty getting in - saying this as late 2000s IITb grad
[2] His younger cousin was definitely not factor in 1982 when getting hired , he wasn't Deutsche Bank CEO then
I haven't met him - but I've heard Ajit Jain is insanely smart and hard working.
If I trusted Mr X, and Mr X said "hey that little startup insurance thing you want to do could be run by Mr Y who is the smartest, hardest working guy I've ever met", and I met Mr Y, and he seemed to be everything that trusted Mr X had said, and had gone to IIT, Harvard and worked at McKinsey, I'd hire him on the spot too.
Also keep in mind - Buffett wasn't the god like figure he is today then.
In late 1970s he was worth $67M by 1982 it was $370M , $670M in 1983 and billonare in 1986 at age 56.[1]
He bought control of Berkshire Hathaway in 1965 about 17 years prior to hiring Jain. His model and name were well known in the right circles by then.
In the investment world and cricles where he would be searching for talent in early 80s he had demigod status, making that kind of returns as pure investor without being a founder of tech company like Apple/MS was unheard of .
He was not as popular with general public , it wasn't as big a story for middle aged man making money by investing in boring stocks as compared to 20-30yr old tech rock stars with more colourful life like Jobs/Gates and type of products Apple /MS were building at that time. General public popularity came much later when he became the richest in the world
---
[1] It is very very hard to 20x $50M by just investing in lower risk diversified assets. We don't fully grasp how rich billionaires are. Tom Scott video https://youtu.be/8YUWDrLazCg comes to mind
Yup, and he got an amazing hire. But he wasn't looking for an investment hire, he was looking for an operating guy, and he wouldn't have had the same level of interest as he would now.
His hiring is a rather nonevent. Buffet obviously thought him smart and hardworking and probably a good “fit” in terms of investment thinking. After that, he could have easily been fired in a year or 2 if he didn’t come up with some good investment thesis. He was hired to go into an unknown market and obviously figured out a good enough plan for doing so and his ideas received investment and he kept his job. Staying employed says much more than getting hired. Many/most people are just rolling the dice when hiring.
Buffett has mentioned on more than one occasion that Jain is a near genius, if not one. I remember watching him say that he’s one of the smartest people he’s ever met. Given Buffet’s wide network of people, Jain is clearly extraordinarily special, something that would have shined through in an interview.
If you were in India, the last name Jain is enough of a brand if you need someone who can grow the business. The community/ last name is synonymous with successful businesspeople.
That isn't really the case. Jains are of all kinds. From monks to businessmen. He was probably hired because of his IIT + Harvard degree, not his surname.
I’m sure you’re right, but every Jain I’ve ever met has been impeccably ethical which is an attractive trait in a person you’re asking to manage billions.
I've always found it very funny that their first link is a GEICO ad. I think he sees the humor in that too, he's no stoic.
Edit: Just finished the letter and he sure is ever the salesman, closing the letter with "cousin" Jimmy Buffett's pontoon party boat, exclusive 10% discount for shareholders!
When I first started to look into this Berkshire Hathaway company and this Warren Buffett person, of course the first thing I checked out was the website. I was immediately sold. Damn, the world would be a much much better place if all websites are built like this. (And text.npr.org)
I didn't know about this, thanks. I wonder if the origins of this version of the site go back to 9/11 - I remember specifically that CNN had to switch to a text-only website because they were getting hammered with traffic that day. Maybe they kept this around in case another similar event takes place.
They're much more recent than that, dating to about 2017.[0] CNN's main website in 2001 wouldn't have needed a text-only site because it was already so lightweight.[1]
I suspect a component of it is simply that the sort of investors they want don't actually care, and that they're happy not to deal with people who do care enough to not do business with them.
> "If you have any comments about our WEB page, you can write us at the address shown above. However, due to the limited number of personnel in our corporate office, we are unable to provide a direct response."
Reading that from them is hilarious. The message might be about being a bootstrapper and not spending frivolously.... or simply saying they don't care, who knows?
They are famously lean staffed at head office. Something like 40 staff. Apparently if you call at like 7 or 8am you'll sometimes get Buffett answering the phones himself.
I like that approach where you just randomly get the top person. Like anyone could just email Steve Jobs at Apple and sometimes he would personally answer when he felt like it.
FWIW, I've seen a few stories of people - nobodies - sending a letter as a thank for the knowledge provided, the inspiration or what not and getting a genuine letter back. Obviously not a whole spiel, but a sentence or two indicating intent. Despite their massive notoriety, I wouldn't expect he's getting swamped by letters (tho I could be wrong) so I'd find it quite plausible and in-character he'll take the time to read a handful a week (a lifetime of 10-Ks would make anyone a proficient reader) and write back (I guess with some templates to go off from). I'd be surprised if sending a letter to Meta reaches Mark - tho maybe, I guess he receives fewer thankful ones - but that lean HQ culture of Berkshire seems rather unique with a measly single and modestly sized floor to manage one of largest balance sheets out there.
Totally unrelated to BRK's website, but something that it brings to mind:
I sometimes wonder if launching a new B2C startup that provides utility, but that doesn't look that good or modern, might succeed not just in spite of the lack of attention to design, but because of it.
I'm talking 1996-2002 era tables and gifs. Nothing fancy.
Would consumers trust it?
Would the usability be greater or worse if it was just plain HTML?
I'm building https://regattapages.com right now with a similar philosophy to what you described. The majority of my users are highly educated, technical, and over the age of 50 on average. They're not afraid of some monospaced text and a console-like input, when it makes sense.
The majority of my layouts are plain text, HTML tables and forms, and some SVG charts spruced up with a little bit of JS if it's enabled (everything should still work without it).
Performance is fast and it looks modern enough so long as I use modern CSS and some reactive design, but makes people feel at home because it doesn't FEEL like big tech.
I will shamelessly add that this is the first time I've publicly posted https://regattapages.com, and it is still heavily under construction. I did my first live demo at a Regatta this past weekend in St. Petersburg, FL.
I am looking for extremely small seed-level funding so I can continue to build out the site full-time until I am able to sell it to the large number of prospective customers I have (this summer, sailing doesn't happen in the Chicago winter).
A lot of websites from that era are unusable from mobile phones. Whatever your business or marketing strategy, there's a significant chance the first time a new customer clicks on a link to your webpage, he's doing so from a mobile phone.
I think it’s the only time I’ve seen him do it, and it’s the best. One of the richest men in the world. That’s my no-nonsense boy, right there. Love him or hate him, but his no-frills frugality is refreshing.
Is it really a design choice or is it more that he probably barely knows how to operate PowerPoint or Keynote or even a computer for that matter? I suspect it’s actually the latter, and he’d rather not learn how.
Berkshire continues to sit on cash (144B) with a thesis that productive assets are expensive due to the long period of low interest rates:
'That’s largely because of a truism: Long-term interest rates that are low push the prices of all productive
investments upward, whether these are stocks, apartments, farms, oil wells, whatever. Other factors influence valuations as well, but interest rates will always be important.'
Upcoming interest rate increases may create good opportunities for Berkshire to invest this money and grow.
Yeah I’m a long term investor in GE and the low interest rate is actually painful for them cause of their massive pension liabilities. When the rates are so low, GE has to keep shoring up the pension funds with their own money to make up for the shortfalls. Interest on the pension’s assets just aren’t paying enough to keep up with predicted expenses.
There is a political reason for this. US leaders exempted taxpayer funded defined benefit pension plans from any rules or regulations, but subjected non taxpayer DB pension plans to strict rules and regulations (ERISA 1974 and PPA 2006).
This means GE’s pension plans have to use conservative assumptions and conservative investments, which is all well and good. As an example, GE is required to use the yield curves of high grade corporate bonds to calculate pension liabilities (~4% and lower in recent history).
But for decades, taxpayer funded pensions have been playing fast and loose, assuming enormous return on investments (~8%), underfunding the pensions (to keep taxes low), and of course, investing in riskier and riskier assets to try to make up for the previous years’ of underfunding and corruption.
Of course, politicians want to keep kicking the can down the road, and the best way to do so is to keep deflating the dollar and inflating asset prices. It is not politically feasible to cut defined benefit pension amounts, but it is politically feasible to satisfy the nominal benefits promised while providing a much lower real benefit (i.e. one with reduced purchasing power).
Since I'm not confident I'll be able to figure this out myself from the article, I'll ask you: how exactly are they keeping this "cash"? It is predominantly some kind of treasury security or something, presumably?
short term treasuries - that's almost always the answer when a company says cash. Sometimes it's other things, with almost exactly the same characteristics.
on paper, 7% inflation minus the 1%-2% T-bill interest seems like they're losing 5% per year.
But this fails because of one underlying assumption - that the cash losing value at inflation is an absolute truth. it's not. The reason is that inflation pushes cost of consumption, but the cash Berkshire is holding is not for consumption, but for investment. Investments could be expensive, or cheap, and holding on to cash _without the requirement that the cash be spent on consumption in the future_ means the cash is not hit hard by inflation figures like a household holding cash.
I think you have the causality backwards. Negative interest rates are due to central bank policy. It seems in Denmark they are trying to keep the Krone pegged to the Euro. That is, preventing it from rising.
Would people in Denmark say their money buys more today than in previous years? Including purchases such as land, healthcare, education, and legal services?
Also, we've had a 15 year bull run, arguably the greatest in history. Sooner or later that bubble has to pop. No? Though if we run into stagflation, I wonder how they plan on protecting the value of their cash. Regardless, it's amazing how much cash they've accumulated. You expect tons of cash from APPL, FB, GOOG, etc since they are in tech. But I guess it helps when you don't pay a dividend each quarter.
Warren Buffett and Charlie Munger are 91 and 97 years old respectively and have famously bad diets and do no exercise yet are both healthy and productive. Many other examples, like William Shatner, who is 91. Or Henry Kissinger, 98. I think much of conventional wisdom about weight, diet, health is wrong. Outcomes are influenced much more by genes than anything else. That's how these old guys keep going when the 'conventional health wisdom' by the experts says they should be dead.
The summary as I understood is that hereditary factors will determine about 40% of your ageing rate. Doing the right things (eating your greens etc) will affect maybe 10-15% of your ageing rate if you're generally healthy. Avoiding the bad stuff (obesity, smoking, alcohol) will drastically affect your healthspan and lifespan.
It's hard to take these men as an example not to care. Who knows what genetic cards they were dealt, and who knows how much luck or invisible preparedness they have with their bodies. The conventional health wisdom you mention is borne of millions more examples and unequivocally points in the direction of keeping your body in as good a shape as possible through your whole life.
Hard to reason from world-famous anecdotes. They could also just have supremely healthy genetics, thus explaining why they’re able and willing to work very hard far beyond the normal retirement age. You’d need large studies to learn more.
This is completely unsupported. Instead of jumping to conclusion that conventional wisdom is wrong, maybe show the evidence about their supposedly bad diets?
The big assumption in this statement is that they have a poor diet but where is your collaborating proof? The only famous bad diet attributed to them is drinking the occasional soft-drink (Coca-Cola) and that can hardly qualify as a bad diet.
Unless you have first-hand knowledge on their diets or detailed second-hand sources that go beyond the occasional soft-drink. Your claim about debunking conventional wisdom on diets such as not over-eating or avoiding excess sugar is totally bonkers.
I'm pretty sure they have a healthy diet, avoiding junk food and such but I may be wrong (since I don't have first-hand knowledge) and so better to post sources when making such contrarian claims such as dismissing the entire consensus of healthy and unhealthy eating.
Buffett is famous for his fast-food heavy diet. Here's one article that quotes Bill Gates:
"Warren Buffett's close friend, billionaire and Microsoft co-founder Bill Gates, says Buffett mostly subsists on a diet of hamburgers, ice cream, and Coke. Celebrating 25 years of their friendship in 2016, Gates wrote in his blog, Gates Notes, "One thing that was surprising to learn about Warren is that he has basically stuck to eating what he liked when he was six years old." He recalled a time when Buffett stayed at his and his wife Melinda Gates' house, and opened a package of Oreo cookies for breakfast."
Anyway, I think the medical establishment is very much aware that genes matter more than diet, exercise, or anything else they can do. I had one extremely socially awkward PCP who, upon intake, was like "Asian? That's good, it means you'll live longer. Good genes." The problem is that such comments are both off-putting, potentially illegal, and completely unhelpful, because patients can't control their genes but can control their diet and exercise. There are a lot of statements that are true but useless, and discourse tends to select against them.
My first-hand experience and conventional scientific-consensus is that diet matters, not only for longevity of life but also for quality of life.
My Dad is addicted to sugary drinks and his feet are already showing signs of pre-diabetic nerve damage and he has lost lots of weight while his fraternal twin, who isn't addicted to sugary drinks has no such nerve problems.
The role of diet and genes can actually be tested on identical twins or studied that way and pretty sure any such study will show diet matters for quality of life and length of life.
The grandparent poster said something like "Conventional wisdom on Diet is wrong" is so vague to the point of almost being meaningless.
No one is disputing that genes matter but to draw a logical line from Buffet saying "hamburgers and oreo are not that bad" to "conventional wisdom on diet is wrong" is a mega-leap in logic which the grandparent poster should apply for the Olympics.
Mcdonalds food (in moderation) is not that unhealthy actually, but the grandparent poster is so vague I'm not sure maybe he is actually saying the same thing. My interpretation of his vague comment is that he is saying diet doesn't matter when it comes to health when there is overwhelming evidence of the perils of excess sugar and over-eating to health.
> I think much of conventional wisdom about weight, diet, health is wrong.
If they weren't alive, it would be a few other old people you would use as examples. Even if conventional wisdom on those topics was bang on, you'd still be able to use this reasoning thanks to survivorship bias.
I'm not sure if you mean this in jest, but yes it is.
So if you meant it as dry humor, you made me chuckle. It's almost too on the nose, considering we're talking about the habits of literal survivors being taken out of context.
I'd posit that more important to longevity than diet, is the relation to retirement and work. It may not be much of a coincidence they're working and living until their nineties. I've noticed too many people decline precipitously after retirement when there was nothing in the way anymore of TV and sedentarism, which is the natural state of things in modernity.
Oddly this letter doesn’t have an overarching lesson. Some of the teaching points are that interest rates are low driving up valuations of everything, adjusted earnings including ebitda are suspect, don’t bet against America, float is under appreciated by gaap.
It was another lousy year for Berkshire Hathaway. Hey, at least this year they matched blind dumb indexing! But no interesting major purchases, no benefit from their cash stockpile despite another extraordinary year of volatility & opportunity, and reading the letter is unimpressive - as much as ever it reads like a rambling copy-paste job from the previous year. One wonders at what point the shareholders should hold a family meeting and take the keys away from great-uncle Warren, and if that point is already past.
It looks like at this point Bershire Hathaway is an Apple wrapper. But I’m not sure they know more about Apple products than an average person younger than them.
They did a bit better than the index - the S&P 500 went up about 21% in 2021, Berkshire Hathaway went up 37%. 37% is a very respectable one-year return for any stock, particularly one that invests conservatively. Also not true that they simply wrap Apple, which went up 32% in 2021. They also beat Tesla, which went up 18%.
Where are you getting 21 vs 37%? I was just looking at their usual history table on pg3 https://www.berkshirehathaway.com/2021ar/2021ar.pdf#page=3 where for 2021, they list "29.6" vs "28.7". As a wrapper around Apple and other assets, and no mention of any incredible 2021 feats in the letter mostly waxing rhapsodic about their past, that sounds entirely plausible. (I also don't see any Berkshire year as high as 37% since 1998, 23 years ago.)
I went to Yahoo Finance and looked at the Jan 1 2022 vs Jan 1 2021 market prices, then plugged them into Google calculator to get a percentage gain. BRK-B = 313.2 / 227.87 = 37.88%, AAPL = 174.78 / 131.96 = 32.82%, S&P 500 = 4515 / 3714 = 21.56%. Not really sure how the table at the beginning of Berkshire's annual report is figured. Perhaps they're only marking the public equity portion of their portfolio to market and holding the private equity portion at the price they paid for it minus depreciation, as a sibling comment here suggested. This'll undercount things significantly since, as the annual report notes, they're the largest owner of private infrastructure in the U.S. Plus they bought many of those private assets in the 70s and 80s when price levels were a lot lower.
He had some lousy years in the dot com bubble too and some investors jumped ship. I think those investors are likely regretting that decision in retrospect.
full picture . they own biggest 'infra' position holding on cash to weather the shit storm . will buy back stock if we fall behind index funds to deliver value .
That depends on whether the linked article has any validity (it doesn't).
> But when the rubber meets the road, Buffett and [JP] Morgan are basically the same person.
Word for word one of the least accurate articles I've ever seen linked on HN. Shallow on content and it gets nothing right, it's an impressive feat. It wasn't even well written, if it were at least it would be well written fiction and there might be something to enjoy in that fantasy aspect.
The character and personalities of Buffett and Morgan are very different and not "basically" the same. How they treated people - including workers - is dramatically different, that alone ends the article.
Rather comically - as one would have to be exceptionally ignorant of history, or a lying clown to miss by so much - the article is pretending to equate the barbarity of the late 19th century labor conflicts (a time during which Morgan thrived), with workers only getting a $2,000 signing bonus and small pay raises each year.
Only a fool would proclaim - on a thin argument at that - to judge a person's 90 year life on one matter. At numerous turns throughout his business career (including in regards to Berkshire Hathaway itself, the textile mills), Buffett delayed or avoided layoffs even when it's exactly what he should have done as a rational business move, missing out on large sums of money by not doing that.
Of course Buffett isn't a Socialist, which is a good thing.
Every billionaire probably should be. The vast wealth they have means they have exceptional power in society to do or not do things that affect many people; a power that can be equal to or greater than that of the actual politicians.
Seems like SPY is more diversified from “tech” than BRK, which would hardly accomplish the goal of balancing away from tech, unless that means going heavy on Apple compared to the other 4 in MAMAA.
You did not read the letter or look at the financials.
Apple makes up about half of the equity portfolio, but there are also massive private ownership stakes (bhe, BNSF, insurance and many more) and ~$144bn in cash
If you calculate by market cap, BRK’s AAPL shares are ~$150B/$713B market cap of BRK = 21% AAPL.
Buying BRK still seems like putting more of your eggs in the AAPL basket than buying SPY, which to me, would be orthogonal to diversifying away from tech.
I guess BRK gives you exposure to Buffet and his team’s management skills, but I would be very surprised if they manage to sidestep a downturn in AAPL’s fortunes.
Berkshire has more or less concentrated their tech exposure to what they view as the very best of the bunch (Apple). You can also make a very reasoned argument that Apple isn't a (pure) tech company. You can't really make that argument about Alphabet or Facebook in my opinion.
When people say Berkshire diversifies you away from tech, they mean that you are diversifying away from the dozens of tech companies in SPY of varying quality.
> You can also make a very reasoned argument that Apple isn't a (pure) tech company.
I cannot envision what this argument could be and be congruent with my working definition of “tech company”.
> When people say Berkshire diversifies you away from tech, they mean that you are diversifying away from the dozens of tech companies in SPY of varying quality.
I can see that as a possibility. I did, possibly erroneously, assume in the original post I replied to that tech was shorthand mostly for MAMAA, so I guess we would need voidfunc to weigh in on what they meant.
> Also, a significant portion of the dollars that Todd and Ted manage are lodged in various pension plans of Berkshire-owned businesses, with the assets of these plans not included in this table.
Perhaps this is poorly worded, but can someone explain how that's not a conflict of interest?
The best place on the Internet for Berkshire Hathaway news and discussion is on Reddit: r/brkb
It has more than two dozen value investor moderators and it was created by the legendary and eccentric u/100_PERCENT_BRKB... somewhat of a jerk, but he runs a tight subreddit.
Until we get the electricity from green sources, an EV won't matter.
I attended a talk from an energy research group at my uni a few years ago and the TLDR was "the energy from the grid in this region is so dirty that driving a Tesla has more emissions/mile than a fuel efficient car". Really colored my views on EVs. I still think the message is wrong to reject EVs, but instead that modernizing the grid would instantly improve all EV cars in the region, without needed to coordinate with thousands of drivers to upgrade.
Which is also a masterful advertisement for private business owners in a similar situation to sell to Berkshire Hathaway, for less money than they might otherwise get.
This is not a criticism: if I wanted to sell a private business and didn't trust any of the obvious trade buyers (nor private equity), I can imagine myself happily selling to Berkshire for less.
I think that's a big part of their humanism. They understand that the folks that they want to invest in aren't in it entirely for the money. In return, they make it easy to to sell to them: they'll give you a dollar amount, and close nine figure deals inside of a month.
When I looked at that I got the impression he was just wrong rather than evil i.e. it feels like a boomer-y "touch grass rather than go to therapy" ideal of social housing where people are "forced" to mingle.
That was my impression of the most recent design, maybe the older ones are more brazen.
If you are considering investing keep in mind that Berkshire is trading at 1.5 price-to-book ratio. Is there an actual reason to buy the stock instead of roughly replicating their portfolio and maybe periodically rebalancing? You might get slightly different returns but you are not paying a massive 50% premium + fees.
Also Buffet and Munger are in their 90s and I am not sure how the stock will react when the inevitable happens. Personally I would stay away
That’s why I said “rouglhy”, the vast majority of the portfolio is publicly traded companies and half of it is Apple. Is exposure to those few private assets worth 50%?
"vast majority" isn't right though. The market cap of the company is $700 bill. The equities are worth around $350 bill. So people who spend all day figuring the value of Berkshire think the other assets make up 50% of the value. The book value of those private assets (worth about $350 billion) isn't especially meaningful. Amazon book value is $100 bill or something, the company is valued at $1.5T or so. Apple is less than 100 bill book value, market cap 2.5 trill or so.
One could effectively arb out the 350 bill of equities, and they'd be paying 350 bill for a set of assets which have a book value of 100-150 bill. So what? It says nothing.
Aren’t the private assets held at book value (historical purchase price less goodwill and depreciation) and so likely dramatically understate market value?
Yup, the book value is almost certainly understating what the assets are worth. But that isn't always the case. So, it basically means nothing. Folks have to do the analysis, and in this case they have.
Even if they only hold stock positions that you could replicate, you would be buying when Berskshire is already done buying and selling when they are done selling. For example, the recent Bershire's position in Activision was disclosed when Microsoft already made the acquisition offer, so it was too late to replicate it.
they have a huge cash position and when where they chose to invest it will create a halo effect causing it to get bigger .... also they can and will do stock buy backs if they cant a better investment.
> I said, “Nobody’s perfect,” and hired him. That was my lucky day: Ajit actually was as perfect a choice as could have been made. Better yet, he continues to be – 35 years later.
This made me laugh. I wish my hiring process was this robust! I'd be curious to know more about why he actually chose him.