The Digest #178
Berkshire countersues Pilot's founders, Meta targeting teens, Title Insurance, Moats and capital allocation, CAVA's origin story, VISA's history, Business lessons from Tom Murphy, and more ...
Note to Readers: The Digest #177, published yesterday, was dedicated to articles and podcasts about Charlie Munger. Today’s installment includes items that I put together earlier this week. The Digest generally doesn’t run on two consecutive days, which is too frequent, but I made an exception this week. Thanks for reading.
Berkshire Countersues Pilot’s Founders
Earlier this month, I wrote an article about a lawsuit between the founders of Pilot and Berkshire Hathaway. The dispute involves the manner in which earnings will be calculated for 2023. This will impact the price of the Haslam family’s remaining 20% stake should they decide to exercise an option to sell it to Berkshire during the first sixty days of 2024. The trial will occur early next year.
In a countersuit, Berkshire said that it learned this month that Jimmy Haslam had, as early as March, devised a scheme to secretly promise "massive side payments" to high-level Pilot employees, in order to inflate short-term profits.
The following excerpt is from a Reuters article:
“Berkshire said it believes the promised payments affected the employees' day-to-day decision-making, giving them incentives to make short-term decisions that would boost the Haslams' profit at the expense of Pilot's long-term value. It also said Haslam then hid those payments, including from its National Indemnity Co unit, known as NICO.
"By secretly distorting the incentives of [Pilot] employees for personal gain, Haslam breached the fiduciary duties he owes to [Pilot] and NICO," Berkshire said.
"Haslam's outrageous and illegitimate scheme has harmed and threatens to further harm [Pilot] and, by extension, NICO and Berkshire," it added.
My article has further details about the dispute over “pushdown accounting” and the impact of the accounting change on earnings:
Articles
Meta Designed Products to Capitalize on Teen Vulnerabilities, States Allege by Jeff Horwitz, November 25, 2022. Manipulated by social media firms, the mental health of an entire generation of kids is being seriously harmed: “Teens are insatiable when it comes to ‘feel good’ dopamine effects,” the Meta presentation shows, according to the unredacted filing, describing the company’s existing product as already well-suited to providing the sort of stimuli that trigger the potent neurotransmitter. “And every time one of our teen users finds something unexpected their brains deliver them a dopamine hit.” (WSJ)
Washington Quietly Scrapped a Plan to Save Homeowners Thousands of Dollars by Andrew Ackerman, November 22, 2023. The title insurance industry scuttled a proposal that could have saved homeowners significant money. Most people purchase homes rarely and, since title insurance is a small percentage of the home cost and always presented as the “default choice”, few people challenge the expense. (WSJ)
Title Insurance, June 27, 2022. A survey of the industry. (The Rational Walk)
Investors Title Company, June 30, 2023. A detailed profile of one of the smaller players in the title insurance industry. (The Rational Walk)
Warren Buffett Tackles The Deficit by
, November 28, 2023. On July 1, 1984, Warren Buffett wrote an article in the Washington Post to bring attention to the federal budget deficit. From the perspective of today’s annual deficit and national debt, the sums involved four decades ago seem almost quaintly small. (Kingswell), November 21, 2023. “Outsiders may be forgiven for thinking that investors have a peculiar fetish for medieval fortification. Moats are commonly discussed in investor circles. In the literal sense, a moat is a deep and wide trench surrounding the base of a castle and is populated with water.” (Investment Talk)Gratitude, Admiration, and Your Life in 10,000 Days by
, November 23, 2023. An insightful essay about how to think of your life as three stages, each spanning roughly 10,000 days, or 28 years. The first stage is for exploration, or “going wide”. The second stage is for “going deep” in your career and relationships. In the final stage we regain the freedom to “go wide” again. (The Alchemy of Money)Frugal vs. Independent by Morgan Housel, November 29, 2023. “Most people are wired to seek status and success, not necessarily happiness. It’s remarkable to watch someone fight back against that trend. From the outside they appear frugal. But in fact they’ve rejected what the world tells them they should want and looked deeper, finding their happiness elsewhere.” (Collaborative Fund)
The Allergy to Uncertainty by Lawrence Yeo, November 29, 2023. “Why do we urge people to develop a false confidence about their future, when we could instead teach them how to develop a healthier relationship with the unknown?” (More to That)
, November 22, 2023. “The Internet is boring. We’re bored of it because it is boring. We spend so much time on it, clicking and scrolling and rotating through a perpetual cycle of our default apps and platforms because we are looking for something that we can’t find, something that should be there but isn’t. We’re looking in vain for energy. For signs of life. For a little bit of excitement and authenticity and humanity.” (Soaring Twenties), November 22, 2023. In the weeks following the assassination of her husband, Jacqueline Kennedy wrote two letters. One was to Lyndon Johnson. The other was to Nikita Khrushchev. (Letters of Note)Areopagus Volume LXX by The Cultural Tutor, November 25, 2023. I have recommended Areopagus in the past. A typical issue features sections on art, classical music, a historical figure, architecture, rhetoric, writing, and anecdotes. This issue departs from the usual format to present an essay on the topic of heroes. (Areopagus)
The Cultural Tutor: From McDonald's to Twitter Stardom, August 23, 2023. David Perell interviewed The Cultural Tutor a few months ago. (How I Write)
Continuous glucose monitoring to improve health in non-diabetics by Peter Attia, November 25, 2023. I wrote about my experience with a CGM in January. I found it useful. “Though we know that diet and exercise are important for reasons beyond the control of blood glucose, the use of CGM to inform specific dietary and exercise recommendations may help to serve as a tool for a more personalized and optimal approach to medicine, since general lifestyle recommendations are rarely one-size-fits-all.” (Peter Attia MD)
Podcasts
Tom Murphy (Buffett’s Favorite Manager), November 22, 2023. 47 minutes. Transcript. David Senra talks about the highlights of Tom Murphy’s career based on his reading of William Thorndike’s book, Outsiders. “Warren Buffett said, ‘Tom Murphy and Dan Burke were probably the greatest two-person combination in management that the world has ever seen or maybe ever will see.’” (Founders Podcast)
Business Lessons from Tom Murphy, April 8, 2022. I wrote this tribute to Tom Murphy soon after he resigned from Berkshire Hathaway’s board and prior to his death at the age of 96 on May 25, 2022. (The Rational Walk)
CAVA: Ted Xenohristos and Brett Schulman, November 27, 2023. 1 hour, 18 minutes. “When Ted Xenohristos and two childhood friends opened their first sit-down Greek restaurant in 2006, they had no idea it would eventually grow into CAVA, a sprawling national chain that serves stuffed pita sandwiches and salads.” (How I Built This)
The Complete History & Strategy of Visa, November 27, 2023. 3 hours, 43 minutes. “To paraphrase Visa founder Dee Hock, how many of you know Visa? Great, all of you. Now, how many of you know how it started? Or, for that matter, who started it? Who runs and governs it? Where is it headquartered? What’s its business model?” (Acquired)
Dee Hock's Autobiography of a Restless Mind, August 4, 2022. 40 minutes. Transcript. (Founders Podcast)
Lior Susan — Leave the World Better Than You Found It, 1 hour, 3 minutes. Transcript. “The only way is for both sides to talk about how we can help each other, build businesses, build hospitals, build research organizations, universities, not to constantly fight because you're a Jew and I'm a Muslim and he's Christian. I don't care about that point. They care about that point, the radical Islam people and the people that are pushing them as their proxies. So that's what we can do. I can do that.” (Invest Like the Best)
Steven Pressfield: Every Story Needs a Villain, November 22, 2023. 1 hour, 26 minutes. Video. “If you have discipline and no talent, you're way better off than if you have giant talent and no discipline. The more that you love something, the more resistance you're going to feel, and therefore the more you need to do it.” (How I Write)
Winter Scene at Yosemite
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I find it really sad that the Haslams would risk their reputation for a little more money. They were already fantastically rich.
Another fantastic curation