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Notes from a review of the most recent annual report and proxy: When O'Shaugnessy was hired as CEO in 2014, Don Graham made a big show in the annual report about the stock option package being tied to a 5% annual hurdle. The grant was for 77,258 options (1% of the company) with 10 year duration and the CABO spin-adjusted price of those options that expire 11/3/24 is $719.15. On 9/10/20, O'Shaughnessy was awarded a brand new 10 year stock option package for the same number of options (77,258 - now over 1.6% of company due to share repurchases) with expiration 9/10/26. This time there is no hurdle and the strike price is $426.86. There has been no mention by Graham or O'Shaughnessy of this apparent change in philosophy and literal lowering of the hurdle that I have seen. Alas, O'Shaugnessey did not make a fortune on his last grant, as Graham had hoped, because GHC stock returns have been terrible. In summary, O'Shaughnessy was way underwater on his old options so they gave him a heapload of new ones at a far lower strike, many years later, without commenting on it. It's poor governance. GHC 2014 annual report commentary by Don Graham: https://www.ghco.com/static-files/8179d51c-f45e-42e2-885a-b0031e9aa73c "A key part of Tim’s compensation is a unique stock option. He joined the Company on November 3, 2014. The stock closed at $787. Tim’s option is at $1,111—the closing price the day he joined plus 3.5% a year for ten years. Adding our dividend (then roughly 1.3%), Tim won’t get any reward unless shareholders first gain about 5% per year over the life of his option. This is quite different from more common stock options, typically granted at the market price of the company on the day of the grant. As Warren has pointed out for years: companies retain some of their earnings, and by earning a normal—or even a slightly subnormal—amount on their capital employed (including retained earnings), executives can earn quite a bit over ten years even if shareholders get no reward at all. Tim will have an option on nearly 1% of our stock, but won’t begin getting rewarded for it until shareholders do. You and I should hope he makes a fortune."

I enjoy The Real Deal on real estate, published monthly in print. It has pretty broad coverage of the national real estate market and there are usually pretty good longer articles on various topics. I look forward to getting it. https://therealdeal.com/

Leaf was probably a terrible acquisition. It was public and they acquired it in June 2021. If you look at any competitors (say RedBubble), their stocks have tanked since then as a lot of the 2020/2021 e-commerce boom looks like it was more one-time due to Covid. Clyde's Restaurant Group - oof - no real discussion of that by them. Code3 was co-founded by Laura Graham O-Shaughnessey, the CEO's wife and Don Graham's daughter. Have you ever tried telling your wife it's time to shut down her money-losing company? Again, I don't think he's totally clueless. The manufacturing & healthcare acquisitions look okay, and auto dealerships seem reasonable. Don Graham would speak at the UBS conference in December when he was CEO, he no longer participates in that kind of investor stuff. There is an argument that Don Graham's CEO record was pretty mediocre as well. I believe that WPO/GHC underperformed the S&P during his tenure. He rode the newspaper into the ground. The big area of capital allocation for them, acquiring education companies, which absorbed a few billion dollars, was a huge bust. That's two pretty important whiffs. The two wins - cable & broadcasting, had a lot to do with Buffett. When Tom Murphy bought ABC in 1986, Capital Cities had to divest their cable operations as a condition for the deal to go through. Buffett arranged for a sweetheart deal where WPO got the only look and was able to buy them for $350 million, a lowball price (I believe this is detailed in the Thorndike book and one of Capital Cities books). So good for him for purchasing it, but it was with more than a little help from a friend. Even with that, he underperformed. This is an interesting topic in general. Don't get me started on this generation of the Tisches at Loews. To get good results, you can be like Berkshire and buy good businesses and hold them. Or you can be like Leucadia and buy bad businesses and sell them well. But you can't buy bad businesses and hold them.

I find the GHC CEO to be unimpressive. For starters, note how they handed him the big option package in 2014 and then announced the CABO spin (which people had been asking for for years) a month later, with a big pop in the stock. I also find his communications with shareholders to be weak. For example, in the December 2021 investor day, someone asks him point blank about capital allocation with GHC being down 10% since the CABO spin in 2015 and the S&P being up big. He gives some hand wavy answer about a better starting point being 6 months after the spin after the stock had "settled back down" and then says they have a 5% CAGR from there. This is nonsense. The earnings releases are telling. They are a mess, with page after page of numbers and adjustments without the important numbers being listed clearly, which are the Adj Operating Earnings of each business and how much capital is employed in each one. I just get a sense that he isn't that smart and is all over the place. I don't think he would be within a mile of this job if he wasn't married to Graham's daughter. I have owned this in the past. They have some good assets and it got crazy cheap in 2020. I think the mediocre results under the CEO's tenure are not just bad luck and are largely an accurate report card on how well he was done his job.

For anyone looking for good stuff on Simpson, there is a chapter on him in The Warren Buffett CEO by Robert Miles, which came out in 2003. I read this book a long time ago but recall it being quite good with chapters on many of the important managers of the 1980's/1990's: Nicely, Jain, Simpson, etc. https://www.amazon.com/Warren-Buffett-CEO-Berkshire-Hathaway/dp/0471430455

See's earned $24m pretax in 1982 and $27m pretax in 1983. Corporate tax rates at the time were 46%, so if Berkshire sold they would be doing so for something like 5x pretax 1983 earnings or 5-6x aftertax proceeds (say 46% tax on $100m net gain = $79m aftertax proceeds vs. $14m net income in 1983. It wasn't an overwhelming offer, more indicative of how well the business had performed.

Malone discussed discounts to NAV a few years ago at the Liberty Investor Day. He said something along the lines of, "A discount to NAV is a deferred asset" and an intelligent management can take advantage of both discounts to NAV and premiums to NAV over time (or more simply, undervaluation or overvaluation) through shrewd capital allocation. He then went on to say that his companies had repurchased shares in the 38 out of 40 years in his career. As a function of math, if you ultimately realize value in a company (say through a sale) at some high point in NAV, then repurchases at discounts to NAV along the way well increase returns to shareholders, sometimes greatly. The key is to buy in when the NAV is relatively low and the discount is relatively high. An example is News Corporation, which repurchased tens of billions of dollars of stock at large discounts to NAV from 2011 through its acquisition by Disney in 2019. People kvetched for many years about the discount, but its existence provided outstanding returns to some investors though both a cheap initial price and repurchases by the company at subsequent low prices. When Murdoch eventually pulled the ripcord, those shareholders benefited greatly..

If you value McLane at 10x pretax earnings, or $2.55 billion now, then the unlevered IRR for Berkshire on the purchase is over 15%. McLane has earned a lot of money for a long time (over $400m EBT annually from 2012-2016, for instance), and it's since 2016 that earnings have come under pressure from competition. EBT has been above $200 million every year since purchase, and total net income from 2003 through 2020 is over $3.8 billion. I don't see how one can accurately define this as a "crappy purchase".

The Giants have nothing to do with MSGE. That's the Rangers & Knicks.

Fatal Risk by Roddy Boyd on AIG and its blowup is excellent and exactly covers the topics you describe. https://www.amazon.com/Fatal-Risk-Cautionary-Corporate-Suicide/dp/0470889802

There is an interview on Yahoo Finance with Andy Serwer (former editor of Fortune) from 2019 where he talks about it. https://finance.yahoo.com/news/charlie-munger-common-sense-berkshire-hathaway-succession-112631602.html ANDY SERWER: How do you make the decision to step back if you may not have the mental acuity to make that decision? CHARLIE MUNGER: Well, I think you’ll be surprised at how well both Warren and I are capable of stepping back when we feel our powers are too far deteriorated. ANDY SERWER: Have you talked about that? CHARLIE MUNGER: Sure. And Warren has told people to speak up when the time comes. If we’ve been rational all this way, do you think we’re not going to try to be rational right to the bitter end?

Why would he? If she can do deals that are too small for BRK, the gains won’t be material. If she were to compete with BRK he doesn’t have a reason to invest in her vehicle either. Where did you guys see this? His personal account is way smaller so I would imagine he would invest with her if he thought she would do better. Look at Munger and Li Lu. It was in the stories the day of the announcement. From WSJ: "Mr. Buffett said he understood Ms. Britt Cool’s decision because he also left a job he loved, at his mentor Benjamin Graham’s investment firm, to work for himself in 1956. He added that he doesn’t intend for Berkshire to invest in Ms. Britt Cool’s new venture." I think he may have said that more reasons than that he didn't think she would succeed. First, he didn't say that he wouldn't invest, but that Berkshire wouldn't invest. We have no idea what he does personally; my guess is that he does not invest in other people's funds based on his history. Can anyone recall a single instance when he did that? He has never been one to outsource his personal investing. Second, if Berkshire invested in Britt's new vehicle, that might set a bad precedent. Buffett doesn't want to give an incentive for people to leave Berkshire, and he probably doesn't want to be in a position of having people leave and investing in some but not others.

Thank you, that is very helpful.

Not sure if this is addressed anywhere, but does anyone know if it is possible to block or hide certain general categories? The main way I use the site is by logging on and seeing the 25 most recent posts in the "Corner of Berkshire & Fairfax message Board - Info Center" on the front page. If possible, I would like to see this, but filtering out things like the "Politics" category or certain threads like "FNMA and FMCC preferreds. In search of the elusive 10 bagger." I find that stuff like this gets posted in high volume and tends to crowd out posts on other companies that I miss. Perhaps there is an easier way to accomplish what I am trying to do. Thanks for any help.

With the Old Breed: At Peleliu and Okinawa is an excellent and unflinching World War II memoir that goes deep into the details of the psychological cost of war on soldiers. It was written by Eugene Sledge and was one of the books that the HBO mini-series The Pacific was based on. The audiobook is excellent and is narrated by the actor who played Sledge in the series. https://www.amazon.com/Old-Breed-At-Peleliu-Okinawa/dp/0891419195

Confusingly, there area a few successful businessmen named Gurdon W. Wattles. Gurdon Wallaces Wattles (1855-1932), who you are referring to, was a leading Omaha businessman in the early 20th century, but not the man cited in The Snowball. https://en.wikipedia.org/wiki/Gurdon_Wattles Gurdon Weller Wattles (1902-2004), who The Snowball refers to, was a very successful investment banker and active investor. http://www.newjerseyhills.com/gurdon-weller-wattles-was-leading-investment-banker/article_0e8a9982-08ff-53c2-b321-b0298abcfc97.html To further add to it, both appear to have sons also named Gurdon Wattles. My guess is that Buffett ran across Wattles because Wattles was a very smart investor doing enterprising things and the companies he was involved in were cheap due to the complexity and thus Buffett ran across them when poking around. I would bet Ben Graham was aware of him from NYC investing circles.

Does anyone who uses Rocket Financial know what the price is to add the International? Thanks.

Google Finance finally just pulled the old version for me today. All my bookmarks to portfolios are gone.

There is a good primer on the web called Analyzing and Investing in Community Bank Stocks by David B. Moore that runs 236 pages. Do a Google search and you should be able to find a link to a pdf.