Alice Schroeder interview

[OracleofCarolina]

Motley Fool Conversations latest podcast is with Alice.

I'll let someone else post the link. I think you will enjoy

as I learned some new things in the 1/2interview.

[scorpioncapital]

http://media.libsyn.com/media/mfconversations/10_28_2009_Motley_Fool_Conversations.mp3

 

 

[Guest kawikaho]

I really enjoyed that interview.  Thanks for posting that.  It clears up some myths about the legend.  I'm now very tempted to read Snowball.

[woodstove]

That's a great interview.  Bits of note...

 

- Time efficiency, compounding of time investment.

 

- Insurance company acquisitions lose money afterwards - probably more cautious reserving.

 

I also get a better impression of Alice Schroeder than from just reading about her.

 

Thanks for posting the link.

[shalab]

This was an exchange between prez barack obama and veryearly in the yahoo board. It is great because it examines the biases of the snowball author and I think it is right on the ball.

 

---

A few examples, from Schroeder article:

 

Buffett considered the top grading the company's "most precious asset," something he would never do anything to endanger. He has downplayed the loss of the rating in public, but a motive of the Burlington deal is that it allows Buffett to protect his legacy by diluting Berkshire's exposure to financial services.I do not think that Buffett thinks that way. He did not have a motive of protecting berkshire's rating, which is what is implied. He found a deal he liked, and he would throw away the AAA rating in  a heartbeat if it made economic sense.

 

Buffett has to be thinking about what that means for his successor, yet another motive. For some time, he has been floating the name of David Sokol, who runs his utility business and NetJets, as a trial balloon (meaning he can yank the string back at any time).

He is not floating trial ballons. he has an envelop in his desk. He knows he might get hit by a bus tomorrow. That is not rescindable. Buffett doesn't do trial balloons anyway. He answers to no one.

 

A final motive I am confident about is that Buffett finally has a plausible excuse to split Berkshire's B shares.

 

That's total BS. I know I am talking about it too, but if Buffett wants in the S&P, he would just call them hat in hand, ask what they need, and comply. It is just too easy to do. Actually, he already knows what's needed and he could have made the leap at any moment in the past 20 years if he chose to do so. If this deal includes getting into the S&P, it is not some veiled excuse, a rationalization. No way. If it does happen as a result of this, it can only be because he already made the deal and is simply executing his part of it.

 

Buffett would never admit to wanting Berkshire to join the S&P, but becoming an acknowledged peer to other major companies is part of the path to his legacy.

I question who is trying desperately to build or establish a legacy. I say it is the writer. Berkshire is already the greatest company every, and Buffett, the greatest manager ever. His non-membership in the S&P is an embarrassment to the S&P organization and every company in it.

 

Of course, this is about Buffett's ego, but then so are most great achievements.

Uh, no, it is not about his ego. The man is as humble as can be. A man who says "I do not know if I would be a thief because I have never been poor enough to have to steal" and "I won the ovarian lottery by being born in the USA and being wired for economics, if I were bron in India I would be poor as dirt still.", is not ego-driven. He feels humble and lucky beyond normal human measure.

 

I could go on and on. Not that I do not like her, I actually do. But I have to  reverse-filter everything she says with my own anti-filters to undo her particular corruption of the facts that she witnesses.

 

-p

 

 

 

 

--- In chucks_angels@yahoogroups.com, "veryearly1" <veryearly1@...> wrote:

>

> --- In chucks_angels@yahoogroups.com, "prez_barack_obama" prez_geo_w_bush@ wrote:

> >

> > After listening to Alice, and reading more of her work, I am beginning to wonder if she really made such a perfect assessment of Buffett's inner character. You know, we all exercise psychological projection in our daily lives. Maybe she has projected a little more of herself upon Buffett than is really there?

>

> That's an interesting point. I thought the same as I read Snowball.

>

> What specifically did you disagree with, just out of curiousity?

>

> I agree with her commentary today on Bloomberg about why he bought BNI. First and foremost, it's a good investment.

>

> But I was also thinking that Buffett probably wants to make BRK as idiot-proof as possible before he goes, and that means deploying all the capital if not a little bit more (borrow some so they don't have excess cash too soon).

>

> I think his move in supercat is driven by opportunity and price, but one can argue that that is also a part of making BRK idiot-proof, as Buffett is perfectly willing to accept large event risk, but his successor(s) may not be.

>

> VE

>

 

 

[arbitragr]

Never realized he neglected his children and family that much due to work.

I remember a Charlie Rose interview with Peter Buffett, how he was so distant to his father when he was younger ... and that after Susie died he started to "come around". Never knew it was that bad.

 

The biggest suprise was how hard he works - he works like a demon just staying on top of the market.

Makes me realize that I probably should stick my capital in some index funds (or companies with good jockeys), b/c the amount of work and time it takes to cover and read everything is too much. He makes it look easy when it's not at all.

[arbitragr]

Is it just me?

Or does anyone else find WEB contradictory? And I mean ALOT ...

 

He says you should care about your inner scorecard ... but then when he talks to his managers he says "we can't afford to lose an ounce of reputation" and reputation is like china, once broken ... etc etc ...

 

He had huge problems investing in Salomon ... but then he goes and invests in Goldman, knowing that the same problems (i.e. management and excessive compensation, and trading risks) could present themselves once again.

 

And a big one ... he preaches buy and hold, but trades.

 

???

[value-is-what-you-get]

Is it just me?

Or does anyone else find WEB contradictory? And I mean ALOT ...

 

He says you should care about your inner scorecard ... but then when he talks to his managers he says "we can't afford to lose an ounce of reputation" and reputation is like china, once broken ... etc etc ...

 

He had huge problems investing in Salomon ... but then he goes and invests in Goldman, knowing that the same problems (i.e. management and excessive compensation, and trading risks) could present themselves once again.

 

And a big one ... he preaches buy and hold, but trades.

 

???

 

I think you could see these things as contradictory with a superficial glance.  On closer inspection though his integrity remains intact.  When he tells his managers to not do anything to lose reputation it is because he knows that most people do not operate on an inner scorecard.  In fact the world operates on an external scorecard - houses with brick on the front and vinyl around back etc.  He realizes it works this way - he doesn't but most others do.  He ran Salomon in a turnaround situation.  Goldman was and is a preferred share investment on a huge scale betting that they will still be standing and increasingly propserous from industry consolidation.  It's two very different things.  I've never heard him say buy and hold.  I've heard him say his favorite holding period is forever but that first and foremost he's a capital allocator (move it from the overpriced to the underpriced, hold, rinse, repeat.)  Hey don't forget about derivatives - the media says WB says they're weapons of mass destruction and yet he owns them - actually writes them after he says that.  What's up with that???  They are weapons of mass destruction when little consideration is given to the underlying risk - when it's in your favour they are tools of wealth creation. There's my 2 cents.

[philassor]

The 70 companies  he purchased ( Add BNI to the collection) are not exactly short term trading. Neither are the majority of his heavy stock holdings (KO, AXP,WFC etc...) When it comes to a dollar weighted observation, his investments are almost purely long term.

 

As to Goldman, he had an opportunity to offer capital for high compensation at a low risk at the peak of panick. It was plainly a great opportunity.

 

Is it just me?

Or does anyone else find WEB contradictory? And I mean ALOT ...

 

He says you should care about your inner scorecard ... but then when he talks to his managers he says "we can't afford to lose an ounce of reputation" and reputation is like china, once broken ... etc etc ...

 

He had huge problems investing in Salomon ... but then he goes and invests in Goldman, knowing that the same problems (i.e. management and excessive compensation, and trading risks) could present themselves once again.

 

And a big one ... he preaches buy and hold, but trades.

 

???

[arbitragr]

Hey don't forget about derivatives - the media says WB says they're weapons of mass destruction and yet he owns them - actually writes them after he says that.  What's up with that???  They are weapons of mass destruction when little consideration is given to the underlying risk - when it's in your favour they are tools of wealth creation. There's my 2 cents.

 

Yeah I forgot about that one.

 

Re; the "inner scorecard" ... And let's not forget how he's trying to sell off his Moody's stake quietly. Hush hush ...  ;)

 

I guess it all goes along well with him wanting to be teacher. Teaching people to try and do the right things. i.e. Do as I say, not as I do.

[Guest dealraker]

Hello arb,

 

I'll give you some different views.  I'm in the later stages of life and long ago my Father who owned a newspaper told me that he felt like he was a good judge of people.  He liked this financial fellow because he said he could tell the guy was smart by reading his "stuff" as my dad would call it.

 

I inherited from my parents at an early age unfortunately.  I've held the Berkshire stock probably about as long as anyone on this board.  Never bought any or sold any, just watched.  Along the way I've seen lots of people write about Berkshire.  I see all kinds of stuff written and almost none of it says anything at all worthy of reading about the business of Berkshire.

 

What the writers do expose is a lot about themselves.  Of all the writers on this board that I've seen your comments about the CEO of Berkshire reveal stuff about you that isn't attractive.

 

 

[value-is-what-you-get]

Hello arb,

 

I'll give you some different views.  I'm in the later stages of life and long ago my Father who owned a newspaper told me that he felt like he was a good judge of people.  He liked this financial fellow because he said he could tell the guy was smart by reading his "stuff" as my dad would call it.

 

I inherited from my parents at an early age unfortunately.  I've held the Berkshire stock probably about as long as anyone on this board.  Never bought any or sold any, just watched.  Along the way I've seen lots of people write about Berkshire.  I see all kinds of stuff written and almost none of it says anything at all worthy of reading about the business of Berkshire.

 

What the writers do expose is a lot about themselves.  Of all the writers on this board that I've seen your comments about the CEO of Berkshire reveal stuff about you that isn't attractive.

 

 

 

I concur - and to borrow the words of Charlie Munger "I have nothing further to add"

[RichardGibbons]

This board is great. The board culture is focused on people sharing facts and honest opinions in a respectful manner.  People very frequently disagree, but they do it by presenting contrasting facts or ideas, not by pouring vitriol.  When we see far, it's because we stand on others' shoulders, not jump on their heads with steel-toed boots.

 

The result is that everyone gets to discuss interesting ideas without fear of being smashed. We get to be exposed to contrasting ideas, learn more, and have fun along the way.

[basl1]

I believe  all of us in the public are contradictions - between our private inner selfs and our carefully constructed public images

[arbitragr]

Hello arb,

 

I'll give you some different views.  I'm in the later stages of life and long ago my Father who owned a newspaper told me that he felt like he was a good judge of people.  He liked this financial fellow because he said he could tell the guy was smart by reading his "stuff" as my dad would call it.

 

I inherited from my parents at an early age unfortunately.  I've held the Berkshire stock probably about as long as anyone on this board.  Never bought any or sold any, just watched.  Along the way I've seen lots of people write about Berkshire.  I see all kinds of stuff written and almost none of it says anything at all worthy of reading about the business of Berkshire.

 

What the writers do expose is a lot about themselves.  Of all the writers on this board that I've seen your comments about the CEO of Berkshire reveal stuff about you that isn't attractive.

 

 

 

Hi dealraker,

 

I guess you still want me banned.  :)

 

Look, I'm as much as a Berkshire groupie as anyone. Alot of my networth is in BRK a/b. But I don't want to be naive about Warren in terms of figuring out how he generates such high returns. We're all trying to be better investors, well at least I am. And figuring out how WEB really does things is key. All I am saying is he makes things look easy and he plays down his success and methods, work ethic etc ... when it's really quite hard to replicate what he does. And that there is more than meets the eye when it comes to his investments. That's why I said maybe he was thinking about his personal future, i.e. his health, when he made a big bet on Burlington on that other thread we're you wanted to get me banned.  ;D I guess it was tongue in cheek, and in bad taste, but the issue of age, health and succession is a reality and any concerned shareholder has a right to know what is going on. As is the case with say, Steve Jobs at Apple.

 

Working in the industry, and seeing first hand how hard it is to generate the returns he does ... these underlying issues interest me. And that for those who do manage money professionally, perhaps buying and holding ... plain vanilla ... is NOT the way to go which leads me to think about other asset classes and investment areas seriously that are no-go zones according to Buffett parlance; i.e. credit default swaps, options and derivatives, maybe being a bit more proactive in terms of selling off positions etc etc ... Me myself, I find it hard to wrap my head around some of my options that I hold when WEB talks about derivatives being weapons of mass destruction. Am I right? Or is WEB right? what's up with his derivative positions??

 

If you've been on these boards long enough you'll realize that there's nothing unattractive about me or my comments at all. I've been here since the MSN days before this current board was even up and get along fine with everybody. I think it's unfair that you're judging me based on that one comment and I think you should dig deeper into past posts before judging people and saying "I see all kinds of stuff written ..." ... or "of all the writers on this board that I've seen, your comments ... reveal stuff that isn't attractive".

 

However I am younger than yourself, so maybe healthcare isn't a big issue to me, and unruly comments regarding the topic may be more upsetting to the older more sensitive members of this board.  :-X

And for that I apologize.

 

 

[arbitragr]

 

 

I am the biggest admirer of Buffett you'll ever come across but even I can admit that Buffett contradicts himself when it comes to words and actions.  It's well-known among Buffetteers.  In fact, that's why so many of us differentiate between the "public Warren" and the "private Warren."  There is nothing controversial or "unattractive" about Arb's assertions.

 

... I just knew I wasn't alone in feeling this. I just had a feeling ... the more I find out about WEB, the more I find that I don't know ... and that things are alot more complicated than meets the eye.

[Rabbitisrich]

If anything, you might be giving Warren too much respect in that you are holding his advice as parable. Keep in mind that he often speaks in layman's terms, which takes away from precision. Then you have to look through misunderstandings perpetuated by lazy reporting.

 

The WMD statement involves both problems. Buffett indulged in some hyperbole to emphasize the danger of derivatives for a broad audience. But he also explained the specific features of derivatives that he viewed as harmful. The media latched onto the hyperbole and never delved into the technical aspects of his argument, much to society's pity.

 

I've also heard Buffett characterized as a hypocrite for his support of taxes despite a consistent emphasis on tax efficiency. Rather than hypocrisy, I view it as a compromise similar to his willingness to purchase tobacco company preferreds. Where do you draw the line between being an exploiter of ignorance versus being prepared for opportunity? My feeling is that he fulfills his moral obligation by speaking out on issues, and that he should be free to take advantage of the rules as they stand.

[Myth465]

It doesnt seem like Warren is contradicting himself. I think you are focusing on the soundbite and not what he is saying.

 

He likes bargians and would prefer to hold them forever (but, wont if there are better deals out there or if the Market Value to Intrinsic value gets out of wack).

 

Derivatives are weapons of destruction primarily because both sides were booking gains and the auditors were comfortable with it. I also think he meant this similarly to most other things such as writing insurance (writing for growth in premiums can be destructive depending on how you do it) 

 

[Guest dealraker]

To all those who say, "Buffett is contradicting himself on derivitives."

 

Seems the following should be obvious, but obviously isn't.

 

The boys and girls at AIG made tons of money pretending to make money with derivitives.  They took home huge compensation and destroyed shareholders and almost America in the process of using fake accounting.

 

Berkshire's situation is just a tiny bit different- just slightly enough to maybe make someone think ---- just a little- but boys particulary don't like to think.  The CEO, that's Warren Buffett, only makes $100,000 a year.  He uses derivitives that involve his money and his shareholders.  He makes billions doing this.  He isn't compensated by the use of fake accounting.

 

I have this suspicion that the envy thing is all its about with the criticisms.  Those who criticize either bought the stock at the wrong time or haven't owned the stock.

 

The same voices were ringing the chimes in the year 2000.  You couldn't get away from them even on the cleanest of so-called value investing boards.  The boards suggested that when Cisco fell from $80 to $65 that Buffett should "admit he was wrong" and jump aboard.  Countless value veterans were falling all over themselves to buy Intel in the $30's and Dell in the $30's saying, "Where's the idiot Warren Buffett to confirm our expertise?"  Same with Citigroup!

 

Making money is simply what it is all about.  The stock price hasn't kept up with the business performance and thus, once again, the criticisms ring loud.

 

Ma

[Rabbitisrich]

I don't know about envy, because many of the people complaining about Buffett on this thread have recently outperformed the Berkshire stock.

 

Buffett will occasionally do things that may seem hypocritical until you realise that he is perfectly okay with telling you what you should do, and then acting as your counterparty if you don't do it.

 

Case in point: Fannie Mae recently tried to sell tax credits at less than 80 cents on the dollar. Berkshire would have bid on those incredibly stupidly priced assets. Ethical? That's ambiguous. But it's not hypocritical for a rational businessman.

[Carvel46]

Michael Norton, Jeana Frost and Dan Ariely (2007), "Less is More: The Lure of Ambiguity, or Why Familiarity Breeds Contempt". Journal of Personality and Social Psychology. Vol. 92, 97-105.

http://web.mit.edu/ariely/www/MIT/Papers/less.pdf

[Uccmal]

If anyone hasn't read this book I highly recommend it.  There is some amazing lore about Buffett's earlier days that isn't in any other biographies.  The book starts to drag about midway through with family stuff that is kind of tedious. 

[arbitragr]

Michael Norton, Jeana Frost and Dan Ariely (2007), "Less is More: The Lure of Ambiguity, or Why Familiarity Breeds Contempt". Journal of Personality and Social Psychology. Vol. 92, 97-105.

http://web.mit.edu/ariely/www/MIT/Papers/less.pdf

 

Haha ... smart alec.

I would disagree with the conclusion however. I still worship WEB, despite figuring out more about him and unravelling his myth. Some of his principles about life and investing I hold dearly on a day to day basis.

 

It's just quite suprising to know from an investment standpoint, how hard he works and sometimes that, he needs to guard his investment ideas closely for case of competition. A bit like a magician never tells his secrets.  ;)

And I think that's quite natural, and understandable to be honest. My overwhelming feeling is that he tries to be a teacher, and wants the masses to invest in a safe and conservative way rather than embarking on risky investments like CDS, derivatives, short term trading, arbitrage etc ... even though he participates in them himself, b/c only he, and other professionals like him are qualified and have the experience to do so.

A bit of paternalism. Which is good, on the whole.