The Digest #198
Thoughts on risk, Berkshire recap, Graham's first investment, Marks on debt, Electricity demand, How to spend your days, AI and productivity, Chicken Fiesta, and more ...
Thoughts on Risk
“A Russian- roulette equation — usually win, occasionally die — may make financial sense for someone who gets a piece of a company’s upside but does not share in its downside. But that strategy would be madness for Berkshire. Rational people don’t risk what they have and need for what they don’t have and don’t need.”
“Clearly, all else being equal, people and companies that are indebted are more likely to run into trouble than those that aren’t. And it goes without saying that a home or car that hasn’t been used as collateral for a loan can’t be foreclosed on or repossessed. It’s the presence of debt that creates the possibility of default, foreclosure, and bankruptcy.”
“For if you lay down even a little on a little, and do this often, even that may well grow big. He who adds to what is there, wards off burning hunger. What is stored up at home is not a source of worry; better for things to be in the house, for what is outside is at risk. It is good to take from what is available, but sorrow to the heart to be wanting what is not available. I suggest you reflect on this.”
— Hesiod
Berkshire Hathaway’s Annual Meeting
Berkshire Hathaway’s 2024 Q&A Session, May 4, 2024. This article contains a set of informal notes about a few topics that came up at the meeting along with my own commentary. Warren Buffett was as sharp as ever this year. (The Rational Walk)
VALUExBRK 2024, May 3, 2024. Guy Spier posted a video of his VALUEx event held on the eve of the Berkshire Hathaway annual meeting. “Charlie Munger used to call the Berkshire meeting a celebration. Of course it is. But it’s also so much more. I’ve been making the pilgrimage to Omaha for more than 25 years and I can’t think of a more auspicious opportunity to learn and grow – both as an individual and as an investor.” (YouTube)
Gabelli Berkshire Hathaway Panel, May 3, 2024. This year’s panel included Adam Mead, Chris Bloomstran, Todd Finkle, Jacob McDonough, Pieter Slegers, and Macrae Sykes. A wide-ranging discussion of Berkshire’s past, present, and future. (YouTube)
Markel’s 2024 Omaha Brunch, May 5, 2024. Tom Gayner and his executive team responded to questions for two hours. The first Markel Brunch took place in 1991 as a discussion among six friends. This year, over 2,500 people attended. (YouTube)
Todd Combs on Charlie Munger’s Legacy, May 3, 2024. 27 minutes. “Todd shares anecdotes and insights into Munger's profound influence on the investment world and his unique approach to life and business. From his early meetings with Munger to the invaluable lessons on value investing and rational thinking, Todd provides an intimate look into the wisdom of one of the greatest investors of our time.” (Value Investing with Legends)
, May 12, 2024. Observations about the many side-events taking place in Omaha during the Berkshire Hathaway annual meeting weekend as well as the Berkshire event itself. (Behind the Balance Sheet)Digging Into Berkshire's Quarterly Earnings Report by
, May 10, 2024. A concise recap of selected highlights from Berkshire’s first quarter report. (Kingswell)Other Articles and Podcasts
Ben Graham, Columbia Man, Risked Everything and Lost, May 2024. “Long before protests erupted on the Columbia College campus, the teenaged Benjamin Graham attended Columbia on scholarship and took his first investment risk. Most college students don’t think about investing—they have no cash to spare. That was the case for my grandfather until a chance to make big money fell into his lap.” (Beyond Ben Graham)
The Impact of Debt by Howard Marks, May 8, 2024. I completely agree with Howard Marks about Morgan Housel’s writing. “One of my more interesting sources for readings on practical philosophy – including investment philosophy – is the blog from the Collaborative Fund to which Morgan Housel, a fund partner, is a regular contributor. As I read Housel’s musings, I often find myself saying, ‘that’s right in line with what I think.’ And at other times, I say, as I hope others say after reading my memos, ‘I never thought of it that way.’” (Oaktree)
How I Think About Debt by Morgan Housel, April 30, 2024. This is the article that Howard Marks refers to in his memo. (Collaborative Fund)
In my opinion, debt is best avoided in nearly all cases. My only exception is that I use credit cards to maximize cash back reward points, always paying the balance in full every month to avoid interest, and I will only pay off my 2.75% thirty year fixed rate mortgage if and when I sell my home which was purchased in mid-2021.
There’s Not Enough Power for America’s High-Tech Ambitions by David Uberti, May 12, 2024. This article is about growing demand for electricity in Georgia, but the trends discussed are similar to Greg Abel’s comments at the Berkshire Hathaway meeting when he predicted staggering growth of demand in Utah and Nevada. (WSJ)
, May 11, 2024. Interesting observations about problems at Starbucks and the Berkshire annual meeting. (Eagle Point Capital), May 11, 2024. This is one of the best articles I’ve read about the recent problems at Starbucks. (SatPost), May 11, 2024. This framework will be useful for people balancing how to align their personal interests with the need to deliver sufficient value to society to make a living. This article implicitly illustrates how important it is to achieve financial independence because then it is possible to pursue interests without regard for financial remuneration. (Dr. Paddy Barrett)Why AI Could Lead To Higher Costs And Less Productivity by
, May 12, 2024. Conventional wisdom is that artificial intelligence will improve productivity but this is not necessarily the case. I found the argument compelling. (Investing in AI)The Great Flattening by Ben Thompson, May 13, 2024. This is an interesting article about Apple’s ill-fated iPad advertisement. (Stratechery)
Chicken Fiesta, May 12, 2024. 52 minutes. This is a great success story. Harold Vega immigrated to the United States from Columbia and worked in the restaurant industry for several years before using a $100,000 gain on the sale of his home to open the first Chicken Fiesta location. The business is now a successful chain of seven restaurants located in the Richmond, Virginia area. (Full Disclosure)
The Voyage of Life: Youth
From the National Gallery of Art:
Cole's renowned four-part series traces the journey of an archetypal hero along the "River of Life." Confidently assuming control of his destiny and oblivious to the dangers that await him, the voyager boldly strives to reach an aerial castle, emblematic of the daydreams of "Youth" and its aspirations for glory and fame. As the traveler approaches his goal, the ever-more-turbulent stream deviates from its course and relentlessly carries him toward the next picture in the series, where nature's fury, evil demons, and self-doubt will threaten his very existence.
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