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Some thoughts of Tariffs

I think tariffs is just another form of tax.

It’s shared by buyers and sellers and is a tax on consumption, especially lower-end consumption – as the outsourced/imported products should proportionally be more lower-end.

It’s actually a more onerous “tax” on low to mid income US people, assuming that high-end consumers care more about high-end products which are not produced in China etc.

And it does increase gov income. Instead of higher taxes on wealthier people, this form of “tax” is more shared across average consumers.

Separately, tariff will income US mfg jobs.

However, who will do these jobs? With the current wave of AI, you could imagine more average “white collar” workers will be replaced by AI and maybe they shall go to manufacturing.

I think we should say all jobs are created equal – however, if you look back, when those manufacturers jobs were transferred out of the US, US was in the dominating position in the world. No one could force the US to get rid of “good jobs” and keep “bad jobs” back then – I could only imagine that those outsourced jobs were considered “worse”.

So now more people in the US will pick up those “bad jobs”. That’s not a very comforting vision for many average people in the US – probably more dangerous, more exposed to health issues, more repetitive (well white collar jobs can be repetitive). However, this should do good for US overall.

[Reading Buffett] 2007

CEO & company – “a terrific CEO is a huge asset for any enterprise”, but “if a business requires a superstar to produce great results, the business itself cannot be deemed great”.

Truly great businesses, earning huge returns on tangible assets, can’t reinvest internally with high ROIC for a long time.

FlightSafety is a “put-up-more-to-earn-more” type of business – good but not extraordinary.

Buffett acknowledged the mistake in investing in the shoe business, using equity.

“Overall, we are delighted by the business performance of our investees. In 2007, American Express, Coca-Cola and Procter & Gamble, three of our four largest holdings, increased per-share earnings by 12%, 14% and 14%. The fourth, Wells Fargo, had a small decline in earnings because of the popping of the real estate bubble.”

Buffett sold PetroChina in 2007.

Buffett also did well in currencies.

Investing in China: little differentiation != real competition

Sometimes, it does seem that even SOEs in China doesn’t have monopoly. For example, there are 3 telecom companies, and multiple banks.

However, there are also no real market competitions. E.g. you don’t see China telecom operators competing for customers by offering differentiating product offerings.

Consumers didn’t get a wider range of choices via these seemingly “competing” businesses. 

How these businesses “split” profits looks more like a “political” question, rather than a economical one.

[Reading Buffett] 2006

Buffett talked about the trade deficits US occurred – “Making these purchases that weren’t reciprocated by sales, the U.S. necessarily transferred ownership of its
assets or IOUs to the rest of the world. Like a very wealthy but self-indulgent family, we peeled off a bit of what we owned in order to consume more than we produced”.

And the “reverse compounding” of more interests on interests.

Those two problems, mentioned in 2006, are now the focus of US gov.

Buffett had some other issues to consider – how to retain talents.

[Reading Buffett] 2005

It does seem that Buffett’s reputation has helped him a lot in acquiring businesses – the access to deal flows is unparalleled.

Buffett is question if climate changes have happened so that the frequency of hurricanes (or other natural disasters) rises, which costs insurance companies a lot more. Berkshire decided to raise prices for those mega-cat policies.

Buffet again showed his dislike for of all sorts of “helpers”.

On succession – “When their abilities ebb, so usually do their powers of self-assessment. Someone else often needs to blow the whistle. ” “If I become a candidate for that message, however, our board will be doing me a favor by
delivering it.”