For the second year in a row I attended the Berkshire Hathaway (NYSE:BRK.A) annual meeting, aka Woodstock for Capitalists. This year the group included John Steven, Richard Bejtlich and Andre Durand. You can read Richard's "False Precision" and Andre's "Buffet the Anti-Trump" notes. Here are some of mine:
* First off Warren Buffett and Charlie Munger answered questions for six hours and only presented one slide. (The slide as you might expect was pretty interesting it showed a T bill they purchased in Dec 08 that paid out a *negative* yield in April 09)
* One theme throughout was simplicity. If you need a computer to figure it out then just put it in the "too hard" pile, plenty of money to be made with lower risk doing things you can understand. (one quote I keep on my security checklists is from Buffett - "the sign above the players' entrance to the field at Notre Dame reads 'Play Like a Champion Today.' I sometimes joke that the sign at Nebraska reads 'Remember Your Helmet.' Charlie and I are 'Remember Your Helmet' kind of guys. We like to keep it simple.)
* Munger said a lot of the new regulations wouldn't be needed if accountants had simply done their job
* Buffett said if he ran a business school there would be two courses 1) how to value a business 2) how to think about markets. You can get most of this from Ben Graham's Intelligent Investor. Instead MBAs are trained on fairy tales like efficient market theory which leads to madness like excess leverage, derivatives and all the rest. As Buffett said "I would have to have to teach efficient market theory. You stand up in class the first day facing all these eager fresh young minds, and you say 'well everything is priced perfectly', what do you do the rest of the semester?"
After the big meeting on Saturday, I spent Sunday morning listening to Tom Gayner and Steve Markel from Markel, I wrote up the notes here. One thing I neglected in the earlier post was Gayner's comments on being careful about bi-modal outcomes. He gave the example of several financial companies and said, well they are trading in single digits now, and there is tremendous upside if they come out Ok. But you don't know what will happen and there is a bi-modal outcome problem where they could be worth $50/share and you could make 8-10x your money or they could be worth zero. It struck me that many of our security architectures have bi-modal outcomes - either things work perfectly or they break wide open, instead we should strive for defense in depth.
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