giofranchi

As I imagined, you haven’t added anything I hadn’t already thought about BH… And I firmly believe you are wrong about it. Gio

I don't know and I don't care. I completely overlook those things when I think about a business. Gio

I try to always be as polite as I can… but that post was a very poor one! To endorse it is just as poorly done. The fact is always the same: long term investments might bear wonderful fruits in the long run, but a lot of patience might be required. Because in the short run, instead, they might look like a drag on performance. Therefore, if you think you have a great entrepreneur, who will maximize value in the long run, you want to put him in the conditions to proceed undisturbed. Cheers, Gio

adesigar, I think I know the difference between owners and management… But, as I have said, there are very few general rules in business, and each situation requires its own right course of actions. Therefore, let me ask you: do you know BH? Have you studied the company? Its businesses? Do you feel comfortable your knowledge of BH is clear and deep enough? If your answers are: yes! Then tell me why you should prefer to put Biglari in the same position as the average manager. Instead of making him feel safe and able to carry on his long term plan for value creation. Who knows? You might even tell me something I had not thought before… ;) Gio

The problem imo is very simple and clear: you are going on and on comparing Biglari to Buffett, he instead seems to suggest “if you are looking for the next Berkshire, look somewhere else!”. Biglari knows very well that in business each situation is different, and the right course of action each time is different. Buffett never had to deal with control. Munger referred to Buffett in the early days calling him “the serial acquirer”, but evidently to buy a very large percentage of Berkshire back then was not so expensive as to buy the same percentage of BH today. There is simply no way Biglari could get control over BH buying its equity today. Yet, control is crucial. Anyone who runs a business finds out pretty soon how crucial control actually is! And, as I have always said, I want him to be in charge and to feel safe. The less time he worries about his position and about someone buying a lot of BH and starting questioning his business decisions and actions, the more time he can devote to enhance value. Gio

Well… It is sometime now that I have been thinking about a really awesome patisserie in Milan… I know the owner very well and he is among the very best salespersons that I have encountered… ever! And… oh!... the extraordinary amount of cash he generates selling those delicious croissants!! ;) Cheers, Gio

Yes. But also a for-profit Master School inside the Politecnico of Milan University. That is not consulting, and it is where the bulk of my free cash is coming from these days. Of course, that business is not on auto-pilot… far from it! And I constantly take decisions and oversee its operations. But one thing is taking decisions and overseeing, another is (like I have already said) talking on the phone or sending e-mails all day long! Or whichever operation is required. Those are two very different things. And, if you are not free from performing yourself all the operations necessary to run a business, the truth is you don’t have a business, you have a job! This is an idea you find in [amazonsearch]The E-Myth Revisited[/amazonsearch], and I agree. My experience furthermore is perfectly in line: if in my daily business life, I had to take care of all the operations myself, I wouldn’t be able to put together a portfolio of stocks… nor (obviously!) to post 3266 times on this board!! ;D I take decisions and oversee, then I delegate. Gio

+1! ;) Gio

Thank you for the insight premfan. That hotel's investment is easily retuning your equity capital every year. Congrats! Hey! If this is really the best you can find in the private world… then I must acknowledge how incredibly lucky I have been until now ;D… and also that I am going to encounter great difficulties when the need to add a third business will present itself! ::) Gio

Personally, I have found it amusing and informative. Also in the end the author finds true love and acknowledges how much more fulfilling a life with the person you truly love is than a life of continual dating without a true and deep emotional commitment. The only thing I hope is the same might be true for Ghost: now he is happily married, I hope that these are the days! ;) Gio

Exactly. The problem with the Euro is a structural one: it simply makes Germany too competitive, and leaves Italy, Spain and even France too uncompetitive. If it weakens, Italy, Spain and France can breathe more easily, but Germany’s exports go through the roof. If it gets stronger, Germany’s exports might be kept in check, but Italy, Spain and France slowly slid into depression. There obviously is no easy solution. Unless 1) a fiscal union is finally established, 2) Italy, Spain and France become like Germany… And I don’t know which among the two is more unlikely! Surely, neither 1) nor 2) will happen in a relatively short period of time. It is 6 years now the southern part of Europe has been literally suffering… and it probably is going to get a lot worse, before it gets any better. Gio

Sincerely, I hope this might never happen. Two reasons: 1) It won’t solve the Euro problem, for obvious reasons! 2) Though my cash is in USD, my free cash flow keeps coming in EUR! ;) Gio

Good luck, my friend! :) I am sure you will be wildly successful! Gio

I agree 100%. And I am always present at key customer meetings with important (and also less important) clients. But in my business I also have a person who practically does nothing else than talking on the phone and sending e-mails all day long. He also enjoys what he does very much! :) It is that kind of activity I was referring to. Though it certainly is necessary, no doubt about that, I have never felt comfortable doing it myself… I am not saying it wouldn’t be better if I performed that task too. All I am suggesting is, if your own personality doesn’t fit well with some necessary activity, you can find a solution. The true danger imo is the tendency to believe that what we don’t like to do ourselves could therefore be superfluous… If we don’t fall victim to such a wrong and misleading assumption, a solution can be found. A solution that, though maybe not the best and most effective one, might still be good enough. Gio

original mungerville, are you starting an investment management business? ;) Gio

If that turns out to be the case, my idea of keeping all the cash in USD will be proven not so dumb after all… Gio

I agree. And thank you for the book tip. I think you could also hire good sales and marketing people. In my experience you should enjoy the process of selling… If you don’t, because you find it time consuming, time you’d like to devote to other activities, a good enough alternative solution is to hire someone who truly likes selling. ;) Gio

Yes. And besides the number of employees I would also care much about the “kind” of employees a business requires. Generally, I prefer a business which doesn’t require highly skilled employees. The less skilled employees are, the easier it is to replace them… should it become necessary to do so! Gio

Thank you! Always a good read. :) Gio

I think GDP is also a measure of how broad the economy you are operating in actually is. And I guess the basic idea follows: the broader the economy you are operating in, the more opportunities you get to accumulate wealth. Therefore you cannot compare Rockefeller’s $1 billion wealth with Buffett’s $63 billion wealth, unless you have some measure to put those two numbers in their respective right contexts. You might argue the net worth of a nation should be used as a more accurate measure… but I guess the net worth of the US is simply much more difficult to assess with the same level of accuracy than its GDP. Finally, you can also look at it through the P/S ratio lens: we are used to value the net worth of a company as a multiple of its sales. The same logic could therefore be applied to the net worth of a nation. But, being a relative comparison, of course the multiple could be ignored: you are then left with sales only, in other words GDP. ;) Gio

+1! ;) I really like their continued focus on buying wholly owned insurance companies. Imo it is the best place to invest new capital these days. And a strategy that will shine over anything else should a serious market correction come. It is exactly what I would be doing if I were in their shoes! Cheers, Gio

+1! Very interestig! :) Gio

Well, if I sell my apartment tomorrow, I will find someone willing to give 7,000 - 8,000 Euros per square meter. It might certainly be only a false impression of mine... But my feeling is I won't be able to find many people willing to pay that sum and sleep in the cold hard ground... Sometime, when you are selling an apartment, you are actually selling opportunities and a way of living. For that the building is as necessary as the land underneath. Gio PS Btw, it is not an impression of mine... We have just worked for a real-estate developer in a not far location, and for the land he paid 2,000 Euros per square meter. ;)

Great point. Pro-cyclicality is exactly what I meant by "volatile earnings". Yeah! Great point... Except you have not understood I am not suggesting what to do! I don’t care. All I am saying is: know the true value of what you own… because sometimes numbers on the Balance Sheet might not make much sense… That’s all! Gio Ok. Then I really misunderstood you, sorry. I have referred to IFRS only as an example of a standard that requires securities to be marked to market... But I don’t agree, nor disagree with it either… For instance, also mark to market might cause discrepancies between numbers on the Balance Sheet and true values, should the securities you own be much overvalued or vice versa undervalued... In this case also you should be on the look-out for numbers that make little sense! Gio

Great point. Pro-cyclicality is exactly what I meant by "volatile earnings". Yeah! Great point... Except you have not understood I am not suggesting what to do! I don’t care. All I am saying is: know the true value of what you own… because sometimes numbers on the Balance Sheet might not make much sense… That’s all! Gio