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[Reading Buffett] 2002

“An insurance business has value if its cost of float over time is less than the cost the company would otherwise incur to obtain funds.”

Buffett didn’t like derivatives –

  1. it’s hard to know true earnings (economics) leads to “weak” numbers; easy for frauds or near-frauds to rise
  2. it may increase short-term cash illiquidity problems
  3. it creates chain risks in the system (counterparty risks)

[Reading Buffett] 2001

By focusing on experience, insurance companies received no premium on terrorism risks.

“Predicting rain doesn’t count; building arks does.”

If a company is focused on “winning” market share too much and loses sight on profits, there will be problems.

Buffett recognized several previous mistakes – those happened in General Re, and some in investments like Dexter (shoes).

Where are talents?

If talents are born randomly, each year he or she could be anyone that is born anywhere in the world.

Even if China has 1/6 of global population, its newborn is less than that. In 2024, 132mn babies were born. In 2023, China has 9mn newborns.

That makes ~7% of global new born, less than half of the 17% population weight.

 

[Reading Buffett] 2000

Buffett made a joke on “clicks-and-bricks”. This phrase was popular back then? And this is just like O2O in the 2010s in China I guess.

Berkshire would “never issue a policy that lacked a cap”.

No fear of near-term result decline – declines “spur sellers and temper the enthusiasm of purchasers who might otherwise compete”.

Market condition changed – junk bonds market dried up, making fewer LBOs.

When an owner cares about whom he sells to, the business usually associates with better qualities.

“Market commentators and investment managers who glibly refer to “growth” and “value” styles as contrasting approaches to investment are displaying their ignorance, not their sophistication.”

What’s good for next q earnings may not be economic operating maneuvers.

 

Chinese businesses give more weight to culture

As the go-go period ended in China, it’s no longer the era of the fastest runner.

Surprisingly, good culture now matters in China.

1/ Culture matters to employees.

Trip.com founder & CEO James Liang advocates for “hybrid” work mode – employees can choose to have two days WFH during a week.

2/ Culture matters to customers.

PDL (Pangdonglai) is very popular and has a growing influence in China as a retailer – an industry that most people ignore nowadays. PDL is famous for its “customer service, quality and integrity“; the at PDL work 7-hour days, have weekends off, get a string of perks and are entitled to 30-40 days of annual leave.