UK

Thanks. You are right, angst is not necessary and I need to be more patient, because, on the other hand, how could one even complain, with FFH up like 50+ per cent YTD, after a few up years before:)

And the story of how Xerox and it's PARC became so powerful and later failed is no less interesting: https://www.gatesnotes.com/Business-Adventures-Free-Chapter-Download https://www.gatesnotes.com/Business-Adventures One of Brooks’s most instructive stories is “Xerox Xerox Xerox Xerox.” (The headline alone belongs in the Journalism Hall of Fame.) The example of Xerox is one that everyone in the tech industry should study. Starting in the early ’70s, the company funded a huge amount of R&D that wasn’t directly related to copiers, including research that led to Ethernet networks and the first graphical user interface (the look you know today as Windows or OS X). But because Xerox executives didn’t think these ideas fit their core business, they chose not to turn them into marketable products. Others stepped in and went to market with products based on the research that Xerox had done. Both Apple and Microsoft, for example, drew on Xerox’s work on graphical user interfaces. I know I’m not alone in seeing this decision as a mistake on Xerox’s part. I was certainly determined to avoid it at Microsoft. I pushed hard to make sure that we kept thinking big about the opportunities created by our research in areas like computer vision and speech recognition. Many other journalists have written about Xerox, but Brooks’s article tells an important part of the company’s early story. He shows how it was built on original, outside-the-box thinking, which makes it all the more surprising that as Xerox matured, it would miss out on unconventional ideas developed by its own researchers. And then: https://youtu.be/_15DReQKbt8?si=Vc2bdixPvdhMnH75 There’s no doubt that the antitrust lawsuit was bad for Microsoft. We would have been more focused on creating the phone operating system so that instead of using Android today, you would be using Windows Mobile. If it hadn’t been for the antitrust case, Microsoft would have… You’re convinced? Oh we were so close. I was just too distracted. I screwed that up because of the distraction. We were just three months too late with a release that Motorola would have used on a phone, so yes, it’s a winner-take-all game, that is for sure. Now nobody here has ever heard of Windows Mobile, but oh well. That’s a few hundred billion here or there.

Re 1: I think there is so much information on tech companies that it is almost to much:). Like from daily news to books dedicated to a particular company. For me the best sources were: a. books: e.g. Jobs biography / Apple, In the Plex / Google, Everything Store / Amazon etc. Not that I get any clear answers from them, on the contrary, my main take away was maybe how hard it is to predict the future and how astonishingly accidental sometimes success could be. Like when Jobs saw the idea of the graphical OS interface (invented at Xerox PARC and he did knew what to do with it, and so Apple made it into the life, but than only Gates ans Microsoft made a real money (and monopoly) from it, also by copying the idea, but additionally by opening it to others (contrary to Apple's closed system). So a lot of stories like this, really good for not to have a too firm opinion on ones ability to know all the answers etc b. I really like to hear or read what other investors I respect has to say or write about tech companies they own. c. and then there is some quite quality sources, like stratechery.com, which I like to read. Re 2: So I did not really invested much into tech before last year (except the mistakes of following Buffett into IBM in 2012 and later trying luck with China's big tech in 2021), and it was quite a headwind not to own them like from 2015 to 2021, to say the least:), but last year I just thought it was irresistible not to buy some of these big tech companies and I ended the year with like 4 of them (and 3 in a major way) and some leverage to do this. After all reading and thinking, I came to the conclusion (and generally still think the same) that the best way for me is to go only with these really big leading tech companies which are understandable and investable for me enough not to be afraid to buy or to hold while they are not so popular, because all other/smaller/challengers or all these tech companies without profits etc are just too hard for me. This kind of rationale also really stuck with me: https://stratechery.com/2020/the-end-of-the-beginning/. So basically a universe of AAPL, MSFT, GOOG, META, AMZN, all from Magnificent 7 or 8, except for the TSLA, NFLX, NVDA. And maybe also Tencent and TSM, if I was not afraid of geopolitical and China risks (maybe someday). So any of these big 5 or 7 I am prepared to buy and own, depending on the valuation and situation, but currently I own only META (~60 per cent of original stake) and some AAPL indirectly via BRK. Also, I am not sure if payment companies qualifies as tech in your question, but currently some of these (e.g. PYPL or STNE) looks really attractive for me, but so far I do not have enough conviction to make them into a large positions (I am not comfortable with the risk, that Google, Apple or some other big whale could eat them alive:)).

Thanks Viking! And yet CB trades at almost 1.8 BV vs FFH at 1+ BV. I know, I know: everybody else has a better story, reputation, moat and never makes any mistakes etc...except you will not see this in their recent results or track record:)

Thanks. Again, then it is quite ironic and bizzare situation. Looking forward it to be fixed:)

Thanks. Sure. But how did this reputation was any better in 2016 vs 2023? This makes no sense to me? So OK, maybe it is still far from perfect in the eyes of the market, maybe only halfway to being perfect, everybody is entitled to have an opinion, but it seems to me, anyway you look, reputation should be way better now, than in 2016? But valuation is not.

Coincidentally, I was listening to this book (audio) for the first time and just went through this chapter another day:). Yes, I think this is just the right approach to FFH currently. Trust and verify, watch and enjoy:) Another thing I do not understand, but maybe somebody could explain this to me is why despite all it's sins of the first ~5 years of the last ~10 years, in 2014-2017, just when or after most mistakes were made and ZIRP was a never ending new normal, FFH was yet valued by market at 1.2-1.3 BV. And now, with much more clear future (at least for the mid term), better underwriting and with almost perfect track record in investing and everything else of the last 5 years, it trades only at 1 BV? I understand most of these attempts to rationalize current valuation, being cautious or skeptical on its future, or comparing to BRK and what not, but how does FFH of 2016 at ~1.3 BV vs FFH of 2023 at ~1 BV, while at the same time most peers enjoyed increasing valuation metrics, makes any sense? My guess would be a lot of this skepticism is because market participants just concentrate too much on the price chart and it's recent impressive gains vs valuation changes, which also improved somewhat, but not nearly as impressively (because of improving fundamentals).

Maybe will be helpful. ffh brk float.xlsx

On the other hand isn't it always the case, that those with momentum on their side are not keen to negotiate or they demand too much? And btw Ukraine did regained a lot of territory after that. The question is now what? Maybe everything settles into some Korean situation, but will this be so stable and sustainable? On the other hand, it appears far right, with Orban like ideollogy, just won elections perhaps in the most (former) open country in Europe...it is still hard to be very optimistic and sure about the future, at least in this part of the world. But hey, at least that German brigade is coming soon:)))

As I understand he thinks that negotiations between Russia an Ukraine at that initial stage of the conflict could have been successful and they were close to some workable agreement, but Ukraine was encouraged to walk away from it. And today chances of something similar is very low. No trust etc. Not that there is something very new in what he said and I did not listened to the whole interview yet, but find his philosophy (offensive realism?) and worldview quite interesting. Not that I agree with him on everything:), but I think he says a lot of things that makes sense, kind of how everything works etc. Also on US vs China and other issues.

https://www.reuters.com/technology/sam-altmans-ouster-openai-was-precipitated-by-letter-board-about-ai-breakthrough-2023-11-22/ Some at OpenAI believe Q* (pronounced Q-Star) could be a breakthrough in the startup's search for what's known as artificial general intelligence (AGI), one of the people told Reuters. OpenAI defines AGI as autonomous systems that surpass humans in most economically valuable tasks. Given vast computing resources, the new model was able to solve certain mathematical problems, the person said on condition of anonymity because the individual was not authorized to speak on behalf of the company. Though only performing math on the level of grade-school students, acing such tests made researchers very optimistic about Q*’s future success, the source said.

Black enough for me:

I agree with this, more so, if PBV would become more than some 1.2. Also, despite most of us see this decision by them as very smart (which it was) there is some strange alternative perceptions between some market participants, e.g. one big and serious money manager called Prem 'a bit of a cowboy', also because of these TRS. Not sure I would agree:), but maybe understandable to a degree (just because OMG derivatives), because even Buffett was criticized for his index puts?

But except for not reaching for the yield, when interest rates were very low (and I think we all agree this was genius and do not call it macro thinking, but more like sound investing thinking?) is there any evidence of FFH relying on too much macro thinking in the last 5 years and not actually going to the opposite direction? Like not even talking or writing much about it anymore? I will repeat myself, but it feels to me, that the biggest risk for FFH future success is actually outside of managements control and it is possibility of zero interest rates for an extended period again in the future. This might not be necessarily lethal for them, but with majority of float in the fixed income, perhaps it would be hard to avoid or mitigate this somehow completely, leading to an under earning and lower float value to a some degree again, like we have seen already. This would be is my biggest worry with FFH, especially when/if they will be better priced by the market (still not today at 1 BV).

https://stratechery.com/2023/openais-misalignment-and-microsofts-gain/ What is clear is that Altman and Microsoft are in the driver seat of AI. Microsoft has the IP and will soon have the team to combine with its cash and infrastructure, while shedding coordination problems inherent in their partnership with OpenAI previously (and, of course, they are still partners with OpenAI!). I’ve also argued for a while that it made more sense for external companies to build on Azure’s API rather than OpenAI’s; Microsoft is a development platform by nature, whereas OpenAI is fun and exciting but likely to clone your functionality or deprecate old APIs. Now the choice is even more obvious. And, from the Microsoft side, this removes a major reason for enterprise customers, already accustomed to evaluating long-term risks, to avoid Azure because of the OpenAI dependency; Microsoft now owns the full stack. Google, meanwhile, might need to make some significant changes; the company’s latest model, Gemini, has been delayed, and its Cloud business has been slowing as spending shifts to AI, the exact opposite outcome the company had hoped for. How long will the company’s founders and shareholders tolerate the perception that the company is moving too slow, particularly in comparison to the nimbleness and willingness to take risks demonstrated by Microsoft? That leaves Anthropic, which looked like a big winner 12 hours ago, and now feels increasingly tenuous as a standalone entity. The company has struck partnership deals with both Google and Amazon, but it is now facing a competitor in Microsoft with effectively unlimited funds and GPU access; it’s hard not to escape the sense that it makes sense as a part of AWS (and yes, B corps can be acquired, with considerably more ease than a non-profit). Ultimately, though, one could make the argument that not much has changed at all: it has been apparent for a while that AI was, at least in the short to medium-term, a sustaining innovation, not a disruptive one, which is to say it would primarily benefit and be deployed by the biggest companies. The costs are so high that it’s hard for anyone else to get the money, and that’s even before you consider questions around channel and customer acquisition. If there were a company poised to join the ranks of the Big Five it was OpenAI, thanks to ChatGPT, but that seems less likely now (but not impossible). This, in the end, was Nadella’s insight: the key to winning if you are big is not to invent like a startup, but to leverage your size to acquire or fast-follow them; all the better if you can do it for the low price of $0.

https://www.wsj.com/world/tired-ukrainian-troops-fight-to-hold-back-russian-offensive-they-come-like-zombies-9b4a31a1 The attacking Russian infantry are mostly poorly trained, often bunching up and making easy targets, say Ukrainian soldiers fighting here. “They come like zombies. Some wear headlamps—a happy moment for any machine-gunner,” said Pvt. Bohdan Lysenko, who mans the 25 mm automatic cannon on a U.S.-made Bradley Fighting Vehicle with the 47th Brigade. Drone images show fields littered with the bodies of Russian infantry hit by artillery, including U.S.-supplied cluster munitions. But the Russians keep coming. “They’re not stupid. It’s a strategy,” said Cpl. Mykhailo Kotsyurba, a Bradley commander in the same company as Lysenko. “They look for weak points, then go there. We don’t have enough ammunition, but they have enough people.”

I do not think so at all:). I wrote about the same above. Just was interesting to check prices of companies mentioned and found it funny. No need to look at everything very seriously. And btw, for the next 1-3 years (and maybe longer, we will see) my bet is again on FFH vs any of these companies despite their stronger, non owner/culture part of the moat. The ultimate goal is to make money, not just to own moat?

Just for fun...seems good enough to me:)

It is just speculation, but i think if there will be any hints of deflation, just as the last several times, we will get zero interest rates, QE and MMT resurrected all over again or even on a larger scale, if needed. So maybe I am wrong, but zero interest rates again - sure, possible, maybe even probable, but extended deflation - not sure if it is even possible? Can current financial system work under deflation?

I think they have some moat already but even more importantly are on the way or could have it even bigger in the future, something more BRK like: decentralized unique structure, long term owner operator thinking in insurance and investing and perhaps some larger moaty operating companies and lower non float leverage one day? But this kind moat perhaps will never be as strong or fool proof as moat from some brand, network effect or similar and will always depend much on ownership, management, culture, execution etc. But it seems to me FFH is in possession of all these ingredients today and I do not see anything changing in the foreseeable future. However, as others have pointed above, perhaps we also have to admit, that some of the future success of FFH will clearly depend on external circumstances and most importantly, the level of actual interest rates in the next 5, 10 or 20 years. I have no strong opinion myself on this (one can choose what to believe from Howard Marks and his sea change to Cathy Woods and her deflation thesis:)), but the scenario of some extended period of zero rates again somewhere in the future perhaps is not completely unthinkable? In such case what FFH could earn, what float is worth and how market views insurance business would be impacted. I say it half jokingly, but maybe after all they should do some macro again and hedge somehow from extended period of zero rates, if it is possible to do in a reasonable way:)?

Very well said!

https://www.investing.com/news/world-news/taiwans-former-us-envoy-wellknown-in-us-vilified-by-china-named-vp-candidate-3238505 It seems that so far really not much has changed and doubtfully will in the foreseeable future. And just because of elections in Taiwan soon and in US later are coming. It will be interesting to see if that fentanyl will even stop flowing, at least for a moment, from China, as was agreed.

https://www.cnbc.com/2017/05/06/warren-buffett-it-doesnt-take-any-money-to-run-largest-companies.html I do wonder sometimes. Especially since there were at least a few very good periods to do this (last year or at the start of pandemic) and also these companies are large enough for BRK. But perhaps the simplest answer is that they already own like half of their portfolio in Apple and WB just likes and understands it the best. So no need to diworsify?