Topics discussed include illegal immigration reform, improvements in teaching and finance departments, capital allocation and charitable giving, the impact of technology on media and entertainment, the portfolio insurance phenomenon and the 1987 stock market crash, potential chaos in currency markets and limitations of the Consumer Price Index, life adjustments in annual reports of large enterprises, Berkshire's recent acquisitions and investments, the decline of the newspaper business, the value of studying successful business people and investors, making money on Sunday, the impact of global warming on hurricane experience and insurance adjustments, the game of business and ethics in health care, buying businesses and net debtor positions, comparing the United States with other countries, fiscal misbehavior and the potential for problems, and the election of directors.
The newspaper industry is facing significant challenges and is unlikely to return to previous levels of profitability due to declining readership and advertising revenue.
The media industry is undergoing disruption and may need to permanently change due to new technology and the internet, requiring investors to approach the industry with caution and consider potential challenges and risks.
Finding mentors and role models in the investment and business world, both in the present and in the past, is crucial for personal and professional growth.
When investing with a long-term goal of building a business and achieving high growth, it is important to consider strategies aligned with those goals and to learn from successful investors in similar situations.
Deep dives
The decline of the newspaper industry
The newspaper industry is facing significant challenges, with declining readership and advertising revenue. The rise of digital media has led to a decrease in circulation and advertising pages. The traditional business model of newspapers is being disrupted, and the industry is struggling to adapt. Multiples on newspaper stocks are high, considering the potential erosion in earnings. The economics of newspapers have changed, and the industry is unlikely to see a return to previous levels of profitability.
The uncertain future of the media industry
The media industry is undergoing significant changes due to new technology and the internet. Traditional forms of media, such as newspapers, magazines, television, movies, and music, are facing disruption and may have to permanently change. The consumer price index (CPI) is not an accurate measure of inflation and may understate the true cost of living. The future of the media industry is uncertain, and the economics do not look promising in the long term. Investors should approach the industry with caution and consider the potential challenges and risks involved.
The importance of finding mentorship
Finding mentors and role models in the investment and business world is crucial for personal and professional growth. While there are many prominent figures in the present day, it is also valuable to study and learn from successful individuals in the past. Tom Murphy and Don Keough are examples of great business leaders who can provide valuable insights. Investing is not a complicated endeavor, and learning from the experiences and lessons of proven investors can be more rewarding than focusing solely on contemporary figures.
Investing in a changing market
In today's market, with a vision of building a business and achieving 20% average growth in value over 40 years, it is important to consider investment strategies that align with long-term goals. Investing in smaller stocks with potential for significant impact can be a viable strategy. However, investing in businesses with a limited capital base may prove challenging due to lack of reputation and resources. It is crucial to study and learn from successful investors in similar situations and to approach investments with caution, considering the rapidly changing market dynamics.
The Role of Brain Power and Energy in Investments
Brain power and energy can greatly amplify small amounts of capital when it comes to investments. The principles of investing in securities remain the same, but the role of brain power and understanding is vital. When managing small sums of money, it is important to find mispriced assets that are well understood. Concentration in investments can be beneficial, as finding one or two strong opportunities can be more valuable than diversification. Modern portfolio theory is criticized for not encompassing these basic principles.
The Importance of Rational Decision Making in Business and Investing
In business and investing, it is important to make rational decisions based on facts and reasoning. Being contrarian doesn't necessarily hold special virtue over being a trend follower. The focus should be on understanding the important and knowable elements of a decision, rather than relying on public opinion or unimportant factors. Graham's concept that the market is there to serve, not instruct, is of great importance. Actions should be based on accurate information and the ability to play out one's hand under any circumstances.
Berkshire's Annual Report and Evaluation of Berkshire
The Berkshire annual report strives to provide the information that shareholders would want if they were in the manager's position. It offers insights into the businesses and investments of Berkshire, including the quality of earnings, resources for future business growth, and investment strategies. The report aims to present the information in an understandable manner and ensure transparency. Evaluating Berkshire's value involves considering the annual earnings, future prospects, and available resources for business expansion. While replicating past success may be challenging, the focus is on doing a reasonable job going forward.
