Subject: Re: Sell BAM, buy BN?
I cannot remember the last time Mr. Flatt acknowledged a mistake. And yet we know he has made some because he is human. In any field, when one hears an uninterrupted cascade of self-promotion interspersed with grievance, the grounded listener may become suspicious.

Excellent post by you, as readers are getting used to ultimatespinache. Just a narrow observation within it: Baybrooke citied specifically no evidence of substantial fraud, as distinct from humility. Corruption has basically no relation whatsoever to the culture of admitting mistakes or not, as appealing as the latter is as a personality type.

We know people who have a personality type admitting mistakes and others that like to talk about their mistake. Yet do you know which is the two might be prone to conducting fraud? In fact I think observing humility is a poor predictor of dishonesty as dishonest people tend to master the art of appearing the opposite.

The way to observe corruption I don't believe is the complexity of their business also, which is continually cited as a very negative point for owning the firm.

Brookfield Corporation have a culture of financial optimisation, and almost brag about it, bordering upon obsession. They really - as they like to remind - like having access to capital; and the reason seems healthy enough given that it is central to keeping their bank relationships positive and partners confident - they don't want to be desperate for such during market declines for multiple reasons. Not just for balance sheet loss by forced liquidation but more importantly for their reputation. Their financial reputation is actually extremely strong where it matters (with banks, and with partners) through this isn't cited much.

From my reading into each little optimisation decision to add some complexity, I admit many I miss though sheer boredom but the ones I research, each time seems to be purposeful and sensible either in creating some, even if meagre, opportunities for future IV gain.

The byproduct of all these little financial optimisations is a lot do complexity when this is iterated month after month over 20 years. You can view it as hiding something but I tend to view it as a byproduct.

Berkshire Hathaway has a culture of deliberately seeking simplicity, partnership non-interference - Buffet is almost anarchistic - and emphasising exactly the opposite of optimisation. For example they don't sell Coke because they want a relationship with partners to be business-like, even when it is owned within their portfolio rather than directly owned. This doesn't make Buffett more honest than someone who things this is ridiculous, but is just Buffet's psychologically tendency.

A not bad test at all for BN's management integrity is the massive scale of transactions, along with changes in structure. You can get away with some fraud if you have a highly centralised accountancy office (ironically, like Berkshire's, or Madoff's) but it is harder to hide corruption with as many transactions, separate banks, massive number of separate partners, that Brookfield deals with daily.

More risky problem in my view is the question of their robustness to financial turbulence and rare events, or the capacity for a few really bad decisions to land them in sudden danger. For this I'm extremely grateful for a lot of bad luck within just 15 years. It exposed whether they are just talkers or if their actions are truly meaningful. In this time we have enormous aggregate intrinsic value gains on a per-share basis, despite passing through the two worst situations for debt-loaded commercial property in the last century (2009 and the recent pandemic in 2020 with real state shut down for months).

- Manlobbi