BH - Biglari Holdings

[ragu]

Either way, raising the cap would be consistent with my experience with Sardar. 

 

onyx1,

 

Interesting to hear that you were part of Sardar's group that filed together during the SNS proxy contest. Could you please elaborate on the statement above? What happened then that causes you to think this? Many thanks in advance.

 

Best,

Ragu

[onyx1]

Either way, raising the cap would be consistent with my experience with Sardar. 

 

What happened then that causes you to think this?

 

 

    Sardar is in a hurry to get rich, and no one within the organization stands in his path.  Shareholder pushing back on the two class voting structure?  It's easy, just find a workaround like the silly licensing deal.  I laughed at this!  Really, how does a functioning BOD allow this?  Shareholders can't effectively protect themselves if the BOD is not doing their job.  With Sardar as Chairman & CEO the only potential voice against overreach is Phil Cooley.  Instead of the "voice of reason", Cooley has acted like a cheerleader.    Where was he when Sardar got into an argument over compensation with shareholders?  Cooley was MIA.  I tried several times to reach him during the shareholder revolt, all unsuccessful.  I discussed the problems with Sardar for hours, but logic and reason didn't matter as there was no persuading him to temper his position.    In the end,  Sardar pushed his shareholder "partners" to the limit and got his 25% over 6% and agreed on a $10mm hard cap.  The cap has now become a binding constraint on Sardars personal wealth, and it is only a matter of time before tortured logic is presented to justify raising it or eliminating it altogether.  And the BOD will support it!  Despite the pleasant sounding platitudes about respect for shareholders in this annual letters, Sardar's actions have demonstrated that his desire for personal wealth far exceeds his desire to enrich shareholders.   

 

    My point to those trying to judge the IV of BH in the medium term, is that they need to factor in an elimination/increase in the cap going forward.  The more difficult question is to what degree will Sardar's unchecked arrogance have on the long term IV of the firm?  On this measure the potential downside is large.

 

    Arrogance has a way of bringing out the schadenfreude in others and I have witnessed first hand the breathtaking downward spiral of careers because of it.  I once worked for a man who was listed on the Forbes 400.  Two years later he was in the middle class after his arrogant treatment of bank regulators backfired and his S&L was put into receivership.  Another boss of mine was universally considered as brilliant.  He was a tenured professor at Wharton at age 28, and became one of the youngest GS partners after only four years in the business.  He treated people around him with terrible arrogance, and would never allow himself to lose any argument.  Four years later, he entered federal prison for mismarking his book.  He was turned into the authorities by one of his own employees.  (BTW, it works both ways:  I also supervised an intern for two summers.  He was very smart, but also humble and respectful to others.  Today he enjoys life in Greenwich, CT as a hedge fund manager and is worth at least a billion dollars).

 

    Extreme examples?  Yes, not every arrogant person implodes.  But it is a matter of degree, since arrogance as a personality trait almost always turns out to be a net negative.  With Sardar, time will tell us how much.

 

 

 

[Grenville]

Either way, raising the cap would be consistent with my experience with Sardar. 

 

What happened then that causes you to think this?

 

 

    Sardar is in a hurry to get rich, and no one within the organization stands in his path.  Shareholder pushing back on the two class voting structure?  It's easy, just find a workaround like the silly licensing deal.  I laughed at this!  Really, how does a functioning BOD allow this?  Shareholders can't effectively protect themselves if the BOD is not doing their job.  With Sardar as Chairman & CEO the only potential voice against overreach is Phil Cooley.  Instead of the "voice of reason", Cooley has acted like a cheerleader.    Where was he when Sardar got into an argument over compensation with shareholders?  Cooley was MIA.  I tried several times to reach him during the shareholder revolt, all unsuccessful.  I discussed the problems with Sardar for hours, but logic and reason didn't matter as there was no persuading him to temper his position.    In the end,  Sardar pushed his shareholder "partners" to the limit and got his 25% over 6% and agreed on a $10mm hard cap.  The cap has now become a binding constraint on Sardars personal wealth, and it is only a matter of time before tortured logic is presented to justify raising it or eliminating it altogether.  And the BOD will support it!  Despite the pleasant sounding platitudes about respect for shareholders in this annual letters, Sardar's actions have demonstrated that his desire for personal wealth far exceeds his desire to enrich shareholders.   

 

    My point to those trying to judge the IV of BH in the medium term, is that they need to factor in an elimination/increase in the cap going forward.  The more difficult question is to what degree will Sardar's unchecked arrogance have on the long term IV of the firm?  On this measure the potential downside is large.

 

    Arrogance has a way of bringing out the schadenfreude in others and I have witnessed first hand the breathtaking downward spiral of careers because of it.  I once worked for a man who was listed on the Forbes 400.  Two years later he was in the middle class after his arrogant treatment of bank regulators backfired and his S&L was put into receivership.  Another boss of mine was universally considered as brilliant.  He was a tenured professor at Wharton at age 28, and became one of the youngest GS partners after only four years in the business.  He treated people around him with terrible arrogance, and would never allow himself to lose any argument.  Four years later, he entered federal prison for mismarking his book.  He was turned into the authorities by one of his own employees.  (BTW, it works both ways:  I also supervised an intern for two summers.  He was very smart, but also humble and respectful to others.  Today he enjoys life in Greenwich, CT as a hedge fund manager and is worth at least a billion dollars).

 

    Extreme examples?  Yes, not every arrogant person implodes.  But it is a matter of degree, since arrogance as a personality trait almost always turns out to be a net negative.  With Sardar, time will tell us how much.

 

Appreciate the color and the other stories of arrogance or lack of!

[giofranchi]

 

    Sardar is in a hurry to get rich, and no one within the organization stands in his path. 

 

If it is so, I guess he is smart enough to understand that the safest way to get and stay rich is to increase the value of BH at the fastest rate compatible with a margin of safety. Any other way won’t do it. I am positive he knows this very well.

 

 

    My point to those trying to judge the IV of BH in the medium term, is that they need to factor in an elimination/increase in the cap going forward.  The more difficult question is to what degree will Sardar's unchecked arrogance have on the long term IV of the firm?  On this measure the potential downside is large.

 

As far as arrogance is concerned, the same things could have surely been said about Mr. Malone or Mr. Icahn some decades ago. Personal character traits are very difficult to judge, and might be misleading.

The evidence, though, is clear enough: Mr. Biglari has successfully built and controls a compounding machine like no one else his age, at least that I know of. Until now he has been much more successful than the great majority of his peers, despite the obstacle that his arrogance might represent.

Like all of us, he has some strengths and some weaknesses. As long as his strengths outnumber his weaknesses, I think BH will be fine. Time will tell. :)

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

[Hielko]

If it is so, I guess he is smart enough to understand that the safest way to get and stay rich is to increase the value of BH at the fastest rate compatible with a margin of safety. Any other way won’t do it. I am positive he knows this very well.

The fastest and easiest way to get rich is to extract as much money as possible from outside investors. That doesn't necessarily mean that the IV of BH needs to grow at the fastest rate possible, or he might be able to grow the IV but dilute outside investors at an even faster rate. There are almost an infinite amount of possible ways for BH to increase his wealth without increasing the wealth of outside investors.

The evidence, though, is clear enough: Mr. Biglari has successfully built and controls a compounding machine like no one else his age, at least that I know of. Until now he has been much more successful than the great majority of his peers, despite the obstacle that his arrogance might represent.

Is the evidence really that clear? He made a few leveraged bets that worked out. How many BH's exist that followed a similar strategy and never made it past the first or second bet?

[giofranchi]

The fastest and easiest way to get rich is to extract as much money as possible from outside investors. That doesn't necessarily mean that the IV of BH needs to grow at the fastest rate possible, or he might be able to grow the IV but dilute outside investors at an even faster rate. There are almost an infinite amount of possible ways for BH to increase his wealth without increasing the wealth of outside investors.

 

Well, “fastest” and “easiest” perhaps, although I seriously doubt it!, but surely you also want “safest” and “very long lasting”. If so, the ONLY way is to increase IV. I speak out of experience: not that I have ever tried to deceive my partners… ;D, but sometimes I have made the mistake to act or to make a choice, without explaining the facts underlining my reasoning in details to my partners. Some sort of trouble always ensued… Any time, without exception. And my partners are just family members and close friends! And I have never even dreamt of doing something dishonest! I just had the superficiality of not explaining myself clearly enough (mistake that I won’t commit anymore!). Running a productive business, you will never get rich and stay rich without transparency and honest behavior.

Hielko, your experience is different from mine? You run a business without full transparency, and still are successful at it? Or, maybe, you personally know someone who does?

 

Is the evidence really that clear? He made a few leveraged bets that worked out. How many BH's exist that followed a similar strategy and never made it past the first or second bet?

 

Well, “concentrated” is very different from “leveraged”. I know that most traders don’t like the idea of being “concentrated” as much as they don’t like the idea of being “leveraged”, but entrepreneurs are not traders. And entrepreneurs are always concentrated. Most of them run just 1 business. Some run 2 or 3, but no more. Once again I speak out of experience: my own firm manages just 2 kinds of operations (engineering services and for profit education), that, by the way, are closely linked. Every entrepreneur with which I do business runs very few operations, only the ones he understands very well. Even when I invest the fcf my firm generates, I choose a concentrated portfolio made of just a few companies that I have studied a lot, and in which I have full confidence. I find it very difficult to switch mindset, and I prefer to stick to what I know. Well, Mr. Biglari behaves like an entrepreneur, and not like a trader. That doesn’t automatically mean he takes foolish risks! I find it very ironic to think that only traders can be “widely diversified”, entrepreneurs don’t have such a “luxury”, and yet there would be no trader without entrepreneurs!!  ;)

Once again, is you experience different from mine? Do you know many entrepreneurs who successfully run 50 different businesses?

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

 

 

 

[Hielko]

The fastest and easiest way to get rich is to extract as much money as possible from outside investors. That doesn't necessarily mean that the IV of BH needs to grow at the fastest rate possible, or he might be able to grow the IV but dilute outside investors at an even faster rate. There are almost an infinite amount of possible ways for BH to increase his wealth without increasing the wealth of outside investors.

 

Well, “fastest” and “easiest” perhaps, although I seriously doubt it!, but surely you also want “safest” and “very long lasting”. If so, the ONLY way is to increase IV. I speak out of experience: not that I have ever tried to deceive my partners… ;D, but sometimes I have made the mistake to act or to make a choice, without explaining the facts underlining my reasoning in details to my partners. Some sort of trouble always ensued… Any time, without exception. And my partners are just family members and close friends! And I have never even dreamt of doing something dishonest! I just had the superficiality of not explaining myself clearly enough (mistake that I won’t commit anymore!). Running a productive business, you will never get rich and stay rich without transparency and honest behavior.

Hielko, your experience is different from mine? You run a business without full transparency, and still are successful at it? Or, maybe, you personally know someone who does?

I don't run a business, but don't be naive: it's VERY common to see management taking the easy route to getting rich and overpaying themselves. Everything Biglari has done in the past seems to indicate that he is trying to maximize his personal compensation without caring too much what 'his partners' think. His compensation agreement in 2010 was approved by just 80% of votes: that's very low when most items on a proxy statement are routinely voted yes. But what does he tell his partners that don't like the excessive compensation? Sell the stock! Yeah, he really cares...

 

Is the evidence really that clear? He made a few leveraged bets that worked out. How many BH's exist that followed a similar strategy and never made it past the first or second bet?

 

Well, “concentrated” is very different from “leveraged”. I know that most traders don’t like the idea of being “concentrated” as much as they don’t like the idea of being “leveraged”, but entrepreneurs are not traders. And entrepreneurs are always concentrated. Most of them run just 1 business. Some run 2 or 3, but no more. Once again I speak out of experience: my own firm manages just 2 kinds of operations (engineering services and for profit education), that, by the way, are closely linked. Every entrepreneur with which I do business runs very few operations, only the ones he understands very well. Even when I invest the fcf my firm generates, I choose a concentrated portfolio made of just a few companies that I have studied a lot, and in which I have full confidence. I find it very difficult to switch mindset, and I prefer to stick to what I know. Well, Mr. Biglari behaves like an entrepreneur, and not like a trader. That doesn’t automatically mean he takes foolish risks! I find it very ironic to think that only traders can be “widely diversified”, entrepreneurs don’t have such a “luxury”, and yet there would be no trader without entrepreneurs!!  ;)

Once again, is you experience different from mine? Do you know many entrepreneurs who successfully run 50 different businesses?

How many entrepreneurs do you know who went broke at some point in their lives? Most businesses fail at some point in time (a lot of them early), and that's no problem: it's part of the game, and a successful entrepreneur will simply start from scratch is a business fails. Don't fool yourself and think that this kind of risk is acceptable for most stock portfolio's: those can often not be restarted from scratch and still be big enough to provide for, for example, retirement income. Just because BH was successful doesn't mean that he can't have numerous unsuccessful counterparts.

 

Besides this, my point with leveraged and concentrated bets was mainly that it's simply harder to evaluate if it's luck or not. If a guy wins the lottery it doesn't make him a great lottery number picker, even though he's generating an insane return. But if he picks the winning numbers 10 times in a row we probably should consider that's not luck. The more independent bets in someone tracks record the more it can tell you about his skill.

[giofranchi]

I don't run a business, but don't be naive: it's VERY common to see management taking the easy route to getting rich and overpaying themselves.

 

Yes! That perfectly applies to the kind of managers Mr. Icahn often refers to! Please, take a look at the video I posted in the IEP thread. They are not entrepreneurs. And I don’t think Mr. Biglari is that kind… but I might surely be wrong!

 

How many entrepreneurs do you know who went broke at some point in their lives? Most businesses fail at some point in time (a lot of them early), and that's no problem: it's part of the game, and a successful entrepreneur will simply start from scratch is a business fails. Don't fool yourself and think that this kind of risk is acceptable for most stock portfolio's

 

Why do you think an entrepreneur could restart from scratch if his business fails? Even if he can, why should it be easier for him, than it is for any other investor? An entrepreneur’s job is to shift capital from an area of low returns to an area of higher returns. If he fails in his judgment, he loses the capital at his disposal. Perhaps you think he can easily put it back again the second time?

 

The more independent bets in someone tracks record the more it can tell you about his skill.

 

Again, this is a trader mindset. Nothing wrong with it! But entrepreneurs rarely think in terms of “independent bets”. Usually, they just have a few ideas they understand much better than their competitors, and think they have found much value there. By your standard, the great majority of entrepreneurs never get involved with a sufficient number of different businesses to even build a so-called “track record”! That doesn’t mean you cannot recognize who really has skills from charlatans. The soundness of the process, imo, matters a lot.

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

[Hielko]

Again, this is a trader mindset. Nothing wrong with it! But entrepreneurs rarely think in terms of “independent bets”. Usually, they just have a few ideas they understand much better than their competitors, and think they have found much value there. By your standard, the great majority of entrepreneurs never get involved with a sufficient number of different businesses to even build a so-called “track record”! That doesn’t mean you cannot recognize who really has skills from charlatans. The soundness of the process, imo, matters a lot.

I don't think it's a trader mindset, but I recognize the uncertainty that sits between process and outcome. You can have a great process and get bad results, and a bad process and get good results. And yes: for most entrepreneurs you will never know if they are truly great, or if they just had the right idea at the right time and the right place, and almost anyone could have executed it. Judging the process itself is almost never really possible, because of how complex it often it, and how much intangible factors there are. So there is simply a lot of uncertainty, and stuff that you will never know. That's life, and investing.

 

Why do you think an entrepreneur could restart from scratch if his business fails? Even if he can, why should it be easier for him, than it is for any other investor?

A lot of successful entrepreneurs are serial entrepreneurs. They always have new ideas, and if they have been successful in the past they can usually find new capital for a new business idea. Failure isn't as big a risk for them as for someone who has put his life savings in the stock market. If you have a 'normal' job and saved money for decades there is no way to can replace that money once lost, unless you get really lucky.

[biaggio]

Gio, is BH a 7.5% or 15% holding for you?

 

Its rare to find a good stock jockey/compounder. Probably rare/uncommon to recognize or properly identify them at an early stage. Perhaps especially rare to have with the integrity of WEB or Watsa.

 

Maybe its the Wall Street culture. Maybe its a Hedge Fund culture. Sardar after all is a hedge fund manager (no offence to the fine folks here). He is very young with a lot of success, that does effect your brain i.e cockiness and arrogance.

 

I have to give him credit for being up front. If he is going to "screw"you at least he is going to let you know first, unlike some of our CEO's recently that do it behind secretly (I am thinking Tom Ward, and recently Chad W at FTP). I get the feeling this happens regularily and is acceptable as long as you perform.

 

Sardar Bigliari- aggressive, arrogant, ambitious, ruthless, impressive track record, perhaps ego maniac- but do you trust him? Will he change/soften as he matures? Do you trust him less than some of these other guys on Wall street? If he ends up being honest you might be getting a bargain i.e. price of BH discounts this risk.

 

Controversy seems to have started after his hedge fund was acquired. In return he got this sweet pay package  and then the name change and putting picture of himself in all the SNS restaurants-both obnoxious. Having a cap on pay of $10 million is something I could live with it. I might be wrong, but I rationalize this as the price that needed to be paid in order for him to give up the pay he would have gotten running his hedge fund and also to have him committed 100% to BH long term.

 

Months ago my thinking was that I could not partner with his type of personality. Privately I would not- as its not worth money to put up with the stress. But perhaps as part of a portfolio, a smaller amount at the right price

[giofranchi]

Gio, is BH a 7.5% or 15% holding for you?

 

Its rare to find a good stock jockey/compounder. Probably rare/uncommon to recognize or properly identify them at an early stage. Perhaps especially rare to have with the integrity of WEB or Watsa.

 

Maybe its the Wall Street culture. Maybe its a Hedge Fund culture. Sardar after all is a hedge fund manager (no offence to the fine folks here). He is very young with a lot of success, that does effect your brain i.e cockiness and arrogance.

 

I have to give him credit for being up front. If he is going to "screw"you at least he is going to let you know first, unlike some of our CEO's recently that do it behind secretly (I am thinking Tom Ward, and recently Chad W at FTP). I get the feeling this happens regularily and is acceptable as long as you perform.

 

Sardar Bigliari- aggressive, arrogant, ambitious, ruthless, impressive track record, perhaps ego maniac- but do you trust him? Will he change/soften as he matures? Do you trust him less than some of these other guys on Wall street? If he ends up being honest you might be getting a bargain i.e. price of BH discounts this risk.

 

Controversy seems to have started after his hedge fund was acquired. In return he got this sweet pay package  and then the name change and putting picture of himself in all the SNS restaurants-both obnoxious. Having a cap on pay of $10 million is something I could live with it. I might be wrong, but I rationalize this as the price that needed to be paid in order for him to give up the pay he would have gotten running his hedge fund and also to have him committed 100% to BH long term.

 

Months ago my thinking was that I could not partner with his type of personality. Privately I would not- as its not worth money to put up with the stress. But perhaps as part of a portfolio, a smaller amount at the right price

 

Hi biaggio!

Right now it is a 4.5% position (the smallest in my portfolio), that I would gladly increase to 7.5%, if a correction comes.

Here I would also reply to Hielko’s last post.

I tend to focus on the process very much. I really think there are some patterns that I recognize as successful. And I want to partner with entrepreneurs who have molded their business in accordance with those patterns. They are essentially ways of managing operations and ways of deploying capital. In this framework of mine character traits have almost no place. That is because I have an extremely hard time inferring anything from a character trait. I mean, a lot of very successful entrepreneurs have much in common in the ways they manage operations and deploy capital. Yet they might possess very different characters and personalities. Beyond honesty, which is absolutely required for business success, but which I wouldn’t exactly label a character trait, I have a very hard time to judge, for instance, how much humbleness on the one hand and arrogance on the other might influence business success… I dare say sometimes you should be humble, sometimes you should be arrogant… arrogance, for instance, might help you stand your ground when the crowd moves momentarily against you… of course, it would kill you, if because of it you cannot recognize your errors… yet, I am not sure arrogance per sé always keeps you from admitting your mistakes... I have met many arrogant people who weren’t endowed with a bit of self-criticism, but I also know some arrogant people who instead are... Likewise, arrogance per sé won’t certainly give you power of will... You see? Imo, too many shades of grey!

Then, why not a 15% position? Because the patterns I recognize might certainly be incomplete. Just because I cannot infer much from character traits doesn’t automatically mean character traits are not crucial to business success. In fact, a lot of people, that I have much respect for on this board, actually think they are! So, I like how Mr. Biglari manages BH’s operations and how he deploys its capital very much. Yet I must acknowledge my inability to judge how much behavioral flaws might get in the way and spoil things. How have I chosen to cope with that limitation of mine? Capping for now my position in BH at 4.5%.

 

Just a few words about “serial entrepreneurs”: I had already heard the expression, so my best guess is that they exist… though, if they actually do, I have still to meet one! I agree that failure might be catastrophic for a retiree (of course, then, he shouldn’t have dabbled with stock picking in the first place, and be content buying an index!), but failure is not benign to entrepreneurs either.

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

[Parsad]

Controversy seems to have started after his hedge fund was acquired. In return he got this sweet pay package  and then the name change and putting picture of himself in all the SNS restaurants-both obnoxious. Having a cap on pay of $10 million is something I could live with it. I might be wrong, but I rationalize this as the price that needed to be paid in order for him to give up the pay he would have gotten running his hedge fund and also to have him committed 100% to BH long term.

 

Don't forget "Biglari Designs" as well.  That cap will only stay as long as they don't have the votes to remove it.  It will go eventually. 

 

Incidentally, think about the people who have left Biglari Holdings.  People who were there from the beginning when he wanted to take over Western Sizzlin, then helped him turn around Steak'n Shake, and then the manager whose fund business he bought.  How many people have left Buffett, the Markels, Prem et al?  You can count them on one hand after 20, 30, 40, 50 years of business. 

 

If the stock tanked, I would buy some, regardless of Sardar, because at some point it will be a value.  But once that cap is removed, a greater portion of the intrinsic value of the company gets reallocated to Sardar.  Buyer beware...make sure the margin is adequate with BH.  Cheers!

 

[biaggio]

``Don't forget "Biglari Designs" as well.``

 

Is there some sort of side deal with Sardar

 

Do you think he would need 51% of shares to change cap. Maybe by that time it won t matter , heck he ll own more than half the company. Maybe he ll be older and wiser.

 

At some point a man has to worry about his reputation, have some self respect, especially when you re in the public light- who wants there moms or kids to hear of how much of a douche bag you are. How much is enough. If you re a sociopath then there is not much hope-by definition you have no consideration for others, ever.

 

Having folks quit your team is not a good sign.

 

I really would like to believe that the bad optics are mistakes due to his youth and in 10 or 15 years he will be seen differently.

 

Probably the young, really ethical, trust worthy, compounders of the future were at your Fairfax meeting and are not well known yet.

[Parsad]

``Don't forget "Biglari Designs" as well.``

 

Is there some sort of side deal with Sardar

 

Do you think he would need 51% of shares to change cap. Maybe by that time it won t matter , heck he ll own more than half the company. Maybe he ll be older and wiser.

 

At some point a man has to worry about his reputation, have some self respect, especially when you re in the public light- who wants there moms or kids to hear of how much of a douche bag you are. How much is enough. If you re a sociopath then there is not much hope-by definition you have no consideration for others, ever.

 

Having folks quit your team is not a good sign.

 

I really would like to believe that the bad optics are mistakes due to his youth and in 10 or 15 years he will be seen differently.

 

Probably the young, really ethical, trust worthy, compounders of the future were at your Fairfax meeting and are not well known yet.

 

When you are constantly fearful of others usurping your position, it doesn't matter how old you are.  Every move from when he got control of Steak'n Shake has been to solidify that control.  Buffett created loyal shareholders through mutual respect and enormous humility...as did Prem.  That's not what is going on at BH.

 

What does Berkshire Hathaway's name represent to Buffett...his worst investment mistake!

 

What does Fairfax's name represent to Prem...fair and friendly acquisitions!

 

What does Biglari Holdings name represent to Sardar?  ;D

 

David Lau sent me a quote from Ghandhi yesterday:

 

Keep your thought positive, because your thoughts become YOUR WORDS.

Keep your words positive, because your words become YOUR BEHAVIOR.

Keep your behavior positive, because your behaviour becomes YOUR HABITS.

Keep your habits positive, because your habits become YOUR VALUES.

Keep your values positive, because your values become YOUR DESTINY.

 

If I read that right now, and looked at much of what has transpired at BH outside of the economic gains, I would be shitting myself right now if I was a shareholder!  Cheers!

[giofranchi]

When you are constantly fearful of others usurping your position, it doesn't matter how old you are.  Every move from when he got control of Steak'n Shake has been to solidify that control.  Buffett created loyal shareholders through mutual respect and enormous humility...as did Prem.  That's not what is going on at BH.

 

It is precisely because he is afraid of and threatened by losing control that his behavior might have been questionable...

I remember Mr. Munger referring to the Mr. Buffett of the early ‘70s as “the serial acquirer”… Probably, way back then it wouldn’t have been pleasant to stand in Mr. Buffett’s way… Mr. Watsa has full control over Fairfax, if not as a majority shareholder, at least through the ownership of voting shares. Right?

I say this not to excuse improper behavior, but just to point out that maybe biaggio is right, and when Mr. Biglari finally gets full control, he will also behave very differently…

In business the threat of losing control is a very real and dangerous one! It is impossible to always be proven right by the market and to always grow with the same high speed… year after year, month after month! And, if you have not full control, it is easy that people, who, instead of focusing on the process, focus just on results (even worse, quarterly results!), might start questioning your judgment and your way of managing operations and deploying capital. Then, you are in serious trouble, the whole organization actually is!

 

Parsad,

Don’t you think this might somehow explain Mr. Biglari’s behavior until now?

 

Thank you,

 

giofranchi

 

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes

 

 

[ragu]

I discussed the problems with Sardar for hours, but logic and reason didn't matter as there was no persuading him to temper his position.   

 

onyx1,

 

Appreciate your response. I misunderstood what you were saying. I thought you'd seen something during the time of the SNS proxy contest that lead to your conclusions re. Sardar.

 

FWIW, the cap doesn't matter to me. Neither does the hurdle rate. I am certain that the incentive agreement will be rescinded in time. And so long as Sardar stays healthy, long-term shareholders will do well.

 

Best,

Ragu

 

 

[Saidal]

Did anyone on the board attend the agm or see any notes posted? I'm curious what was discussed/brought up.

[premfan]

I discussed the problems with Sardar for hours, but logic and reason didn't matter as there was no persuading him to temper his position.   

 

onyx1,

 

Appreciate your response. I misunderstood what you were saying. I thought you'd seen something during the time of the SNS proxy contest that lead to your conclusions re. Sardar.

 

FWIW, the cap doesn't matter to me. Neither does the hurdle rate. I am certain that the incentive agreement will be rescinded in time. And so long as Sardar stays healthy, long-term shareholders will do well.

 

Best,

Ragu

 

I'm thinking i heard something similar on american greed last week.  To each its own man. good luck

[ragu]

I'm thinking i heard something similar on american greed last week.  [...]

 

premfan,

 

I am not sure I understand. Could you elaborate on that?

 

Best,

Ragu

[premfan]

I'm thinking i heard something similar on american greed last week.  [...]

 

premfan,

 

I am not sure I understand. Could you elaborate on that?

 

Best,

Ragu

 

The statement above was a joke :D.  Shareholders dont need to rationalize shady behavior just accept it. Just accept that the people you do business with doesnt matter if they promise riches.  Just be honest and say you are looking for the next brk/luk and actions dont matter.  You did which is great cause most shareholders try to rationalize cognitive dissonance.  Investing in biglari holdings above BV where fairfax is trading around BV is madness if you are looking for compounders and the next brk/luk.  To make money you need leverage. Many types of leverage:  hedge funds, royalty fees, cheap debt, insurance float, and etc  Biglari is the master of leveraging his shareholders for personal income gain. The shareholders are his leverage.  How does biglari use his shareholders? Easy the blueprint is there.  Model Buffet and target market value investors. Biglari holding is his leverage for becoming rich. Yes shareholders will get a little piece of the pie. Beggars cant be choosers. I'm done talking about this topic.

[Parsad]

I'm thinking i heard something similar on american greed last week.  [...]

 

premfan,

 

I am not sure I understand. Could you elaborate on that?

 

Best,

Ragu

 

The statement above was a joke :D.  Shareholders dont need to rationalize shady behavior just accept it. Just accept that the people you do business with doesnt matter if they promise riches.  Just be honest and say you are looking for the next brk/luk and actions dont matter.  You did which is great cause most shareholders try to rationalize cognitive dissonance.  Investing in biglari holdings above BV where fairfax is trading around BV is madness if you are looking for compounders and the next brk/luk.  To make money you need leverage. Many types of leverage:  hedge funds, royalty fees, cheap debt, insurance float, and etc  Biglari is the master of leveraging his shareholders for personal income gain. The shareholders are his leverage.  How does biglari use his shareholders? Easy the blueprint is there.  Model Buffet and target market value investors. Biglari holding is his leverage for becoming rich. Yes shareholders will get a little piece of the pie. Beggars cant be choosers. I'm done talking about this topic.

 

Fantastic post!  I couldn't agree more. 

 

Investors are choosing BH at above book, compared to Fairfax at or below book...crazy!  Prem or Sardar?  Hands down there is only one rational choice there!  Especially when one has the enormous advantage of float and their team has a far superior record to creating shareholder value.  You don't even have to consider ethics...just common sense would dictate you pick Fairfax over BH!  Cheers!

[ragu]

You did which is great cause most shareholders try to rationalize cognitive dissonance. 

 

premfan,

 

I don't believe you understand me. I didn't say Sardar's actions don't matter. Of course they do. And, in my assessment (and those of his longest-tenured partners), the intent behind those actions is fine.

 

Buffett has oft spoken about the importance of an "internal scorecard". IMO, Biglari has a pretty good (and functioning) internal scorecard. I don't worry about Biglari's integrity not because it doesn't matter, but because he has it.

 

Best,

Ragu

[rranjan]

I don't worry about Biglari's integrity not because it doesn't matter, but because he has it.

 

Best,

Ragu

 

Bilgari and having integrity? I guess you have different scale of integrity then.

[giofranchi]

I'm thinking i heard something similar on american greed last week.  [...]

 

premfan,

 

I am not sure I understand. Could you elaborate on that?

 

Best,

Ragu

 

The statement above was a joke :D.  Shareholders dont need to rationalize shady behavior just accept it. Just accept that the people you do business with doesnt matter if they promise riches.  Just be honest and say you are looking for the next brk/luk and actions dont matter.  You did which is great cause most shareholders try to rationalize cognitive dissonance.  Investing in biglari holdings above BV where fairfax is trading around BV is madness if you are looking for compounders and the next brk/luk.  To make money you need leverage. Many types of leverage:  hedge funds, royalty fees, cheap debt, insurance float, and etc  Biglari is the master of leveraging his shareholders for personal income gain. The shareholders are his leverage.  How does biglari use his shareholders? Easy the blueprint is there.  Model Buffet and target market value investors. Biglari holding is his leverage for becoming rich. Yes shareholders will get a little piece of the pie. Beggars cant be choosers. I'm done talking about this topic.

 

Fantastic post!  I couldn't agree more. 

 

Investors are choosing BH at above book, compared to Fairfax at or below book...crazy!  Prem or Sardar?  Hands down there is only one rational choice there!  Especially when one has the enormous advantage of float and their team has a far superior record to creating shareholder value.  You don't even have to consider ethics...just common sense would dictate you pick Fairfax over BH!  Cheers!

 

Parsad & premfan,

no one is saying buy BH instead of FFH! My firm’s portfolio is 31.1% in FFH and only 4.8% in BH.

But what I call “the man at the helm risk” should always be considered.

 

If I could trade like Eric, whose portfolio was 0% in FFH 4 months ago, whose portfolio now is 50% in FFH, and whose portfolio will yet again be 0% in FFH after the next crisis, well, I wouldn’t care at all about “the man at the helm risk”! Yet, unfortunately…, I am not like Eric! Think of it: to trade like Eric, you not only have to get the big picture right, you must also get it more right than Mr. Watsa. Your timing must be better than Mr. Watsa’s. Otherwise, why bother jumping in and out FFH?! Clearly, I am not that person.

 

Instead, when I make an investment, or when I start a new business venture, I always think in terms of 10 years at least, and I always ask myself: what’s the quality of the people I am partnering with? How long will the partnership last? Alas, the answer to the second question is always at best only a guess. For instance, even young, talented, and trustworthy people cannot control illness or accident…

 

Therefore, you must have some diversification. That’s the only reason I put some capital in my second, third, fourth, etc. best ideas.

Do you think it is so crazy?

 

Thank you! :)

 

giofranchi

 

[ragu]

Bilgari and having integrity? I guess you have different scale of integrity then.

 

The moral high horse you are riding on is blind to reason.

 

Best,

Ragu