Subject: Re: Some Thoughts - Maybe Too Many
Great post and thread and appreciate you sharing your detailed thoughts and insights into Berkshire.

For me the question is why Berkshire versus an index.

Pros of Berkshire:

1. Management are already rich and have zero interest in paying themselves as much as they can get away with. Given the expected returns, a prudent investor might expect from Berkshire, or the index over the next 20 years might be in the zero to 5% range plus inflation. If you avoid having the typical clip that the average public company is leaking out in excess compensation for often poor performance, or in the case of big tech, just outrageous SBC. It’s a very significant plus being in shareholder friendly Berkshire. I’m no expert on financial markets but I get a clear impression that ‘retail investors’ are viewed as unsophisticated idiots to be taken advantage of at every turn. That includes: excessive compensation; compensation accounting tricks; IPOs when markets are high; excessive fees; lazy and poor management, mind numbing risk taking with other peoples money etc. I often hear that all the smart managers are running businesses for private equity. The public markets are just a place to abuse retail investors and dumb pension schemes managing other people’s money.

2. Berkshire are true value investors and allocate capital in an incredibly rational way and this avoids all kinds of problems that eventually surface in other public companies.

3. Berkshire’s businesses and investments, on the whole, do have sustainable competitive advantages. They may not be of the quality of Microsoft, for example but in many cases they will be around for a very long time. And eventually more and bigger gems will be added.

4. Anti fragile

5. Although excess capital is an issue currently. This can and has changed very quickly many times in the past.

6. At the end of the day, Berkshire just has an unusual ability to avoid interrupting the compounding process over multiple decades. That makes all the difference.

7. The index does have some wonderful businesses in it and many Berkshire does not own and over time the rising stars get added to the index. But the index has more businesses I would not want to own either because of lack of business quality, poor management, valuation, or lack of long term sustainability.

Very happy to have Berkshire as my largest holdings by a mile.

Even apart from the solid financial returns, it’s a great joy for all of us to be part of the positive unselfish culture which has filtered out from Berkshire into our own little lives and careers.