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🚀 Dopamine Hits Issue #1
Berkshire Hathaway 2019 Shareholder Letter
Power of Retained Earnings
A well-managed company does not typically distribute to shareholders all its earned profits. They instead, retain part of the profits to reinvest into the company creating an element of compound interest. Over time, usually years, the real value increases at compound interest, apart from dividends paid out to shareholders.
Buying a business is like marriage. Starts off great with a honeymoon but soon after (in some cases) the trail and tribulations start. Some work well and the marriage is great, blissful, and even surprising. In other instances, I pondered why I even proposed.
Over the years, investing in good marriages with great rates contributed to the expanding portion of Berkshire's capital.
The Road Ahead
Warren Buffet & Charlie Munger speak about their eventual departure.
"Third, Berkshire’s financial affairs will unfailingly be managed in a manner allowing
the company to withstand external shocks of an extreme nature"
This sentence is something to keep an eye on in the next annual shareholder letter. Why, COVID19! I am curious to know how Berkshire Hathaway will respond to the pandemic and if this sentence will hold true or not.
Board of Directors
Buffet served as a director on the board for 21 publicly-owned companies. Most companies Buffett had a large amount of investment in each but a mere two. He goes on to say in the first 30 years or so women were not at the executive tables unless they represented a family. But since the 19th amendment guarantees women's voice is heard more and more women are present.
Find a CEO who has integrity and will stay with the company for the rest of his/her business life. This alone is a challenge for the board, but when they get this right the company is in a greater position.
"It would be an interesting exercise for a company to hire two “expert” acquisition advisors, one pro and one con, to deliver his or her views on a proposed deal to the board – with the winning advisor to receive, say, ten times a token sum paid to
Interesting concept here and thinking about the above point some more, could this be a lucrative business opportunity? Having an agency that specializes in analyzing data with its sole purpose to convince a company to acquire a business or not based on their findings. Or maybe, use some type of AI system to analyze the likely results. If the company were to acquire this other business versus if it does not acquire what are the drawbacks or what opportunities were missed as a result?
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