schin

Awhile back I use to get the Walker's Manual looking for these small bank stocks like Trinity Bank and Burke & Herbert bank, I struggled to get a large position as it can take months to build it... and it was harder to get out. It can be a great long term, buy and hold forever.. but, their thinly traded market is hard.

@Brett - Do you feel anyone is doing the type of due diligence and early activism he did? Are you planning to do something similar to Charlie's partnership?

@Brett - Thanks. I'll look forward to it. Please remember the little people on theCOBF when you become famous.... that's all we ask.

@Brett Your book reminds me of this book about Warren's early investments. Have you read this and do you delve more in certain areas? https://www.amazon.com/Deals-Warren-Buffett-First-100M/dp/B07V5NVRNQ/ref=sr_1_1?crid=3U9AOZ8X8447O&dib=eyJ2IjoiMSJ9.CIyUYcC3FjK_Z53MyKpdESDGkIvPbTH39RZpKO3nZqWiOjyvhiZkf4bYb2sogvCiic_Yt3tXDD1BzvSNwG0Rn7AI_9JDGHRVdurW4egCF3VppnEwViQPq2qnRV4qZN6O0sz7RlfLo3Qj6CQ2VEMWbqrzboJ45rJvErv2PT1oMYBXF_OPJ5xMbaPzVYnW-K1F0XcJJKLS71rzJBUN5yvq6XSJj0Q71_UCumbF2fiptcs.-CQfrtZfu9_33xGfkjnNCZpbKSUOIkV7ZhHDeDqSHew&dib_tag=se&keywords=The+Deals+of+Warren+Buffett&qid=1728412392&s=books&sprefix=the+deals+of+warren+buffett%2Cstripbooks%2C1175&sr=1-1

I'm all about laissez-faire governance... But, when some level of leadership and guidance is needed, it has to be nipped in the bud early, or it'll fester and the snowball on technical/admin debt starts accumulating the wrong way.

@DooDiligence - It's sad. They are probably getting feedback from customers, BRK loyalist like you, and just cannot get out of their own way. I often tell my teams... the money is actually the easy part.. the management and implementation is the hardest part of any business...

@Hektor - I believe so too. I think GEICO and BSNF is different because they're so large that writing them off -- even gradually is not acceptable... but, their problems are about IT and under management.... unlike Salomon, which was about fixing a culture and integrity.... The IT systems were not flawed.... the people were.... because of lax IT controls? But, the main point is BRK is not engineer to provide management talent... or fixers... it's not their business model, but it is turning out to be the case. Is Greg Abel the ultimate management consultant? The Marvin Bower of McKinsey's heyday? But, there's only 1-3 people at corporate to save a whole portfolio of companies. It doesn't scale.

@Hektor - I am based out of Maryland and I know the GEICO HQ and have people who have worked there. There's a lot of technical debt and antiquated systems in there. It's almost like the regulatory and compliance updates that are happening at big banks (Citibank, WFC, Chase, EU banks (like DB)). Know-Your-Customer and Anti-Money-Laundering directives are not baked into banking systems, so there's a lot retrofitting that needs to happen into legacy systems. It's not the funniest investment management likes to make, but essential to the sustain of the business model. So for relative to GEICO, there's a lot of telematic and analytics systems that are relevant that has not be weaved into their fabric. It's tech, so it is scary to them... and a lot of these systems are mainframe that are not well documented. I feel there are a lot of "old style" businesses under the BRK umbrella that has not modernized as well under BRK, that would be better suited in the market.. because the spotlight of analysts would be on them. Sun as a disinfectant. Great business still need great management... and I do not think succession in these subs have worked out well. It's showing at BSNF and also, GEICO. If Meta can create Threads to be a X/Twitter alternative... why can't GEICO create their own telematic systems? Precision scheduling is not new to railroading and one cannot say UNP, NSC, CNI is better financially than BSNF.... the only other alternative is they have better management and strategy... and that's crazy to say BRK/BSNF cannot outbuy that great management talent or strategy. So, I do believe things have been lax for too long. When you look at the portfolio of companies.... I have not seen any world class businesses like Hermes, LVMH, Google, Amazon, Toyota in the portfolio like I've seen with Softbanks.. where they spawned Alibaba, Coupang, ARM Holding... Again, they are playing early start-up... but, again, the manta with Softbank and BRK should be to dominant the industry and nurture the best talent with the best infrastructure and everything takes care of itself. BRK all started as great businesses but have drifted to good businesses. I see more things die naturally under BRK like Scott Feltzer/WorldBooks, Blue Chips, Dexter Shoe, Buffalo News, Washington Post...that have drifted and the landscape changed on them..but, I see WSJ and NY Times figuring it out. I see Christian Louboutian, OnCloud, Brooks making their products viable, but not Dexter Shoes.... because they left Dexter as a commodity product instead of a differentiated offering. I see more long-in-the-tooth businesses... that have been underinvested and undermanaged.

@longterminvestor - One of the major advantages of being purchased by BRK is its low cost of capital. It's so abundant that you should have an advantage from your competitors. Deep pockets and the 1-2% cost advantage should extend your lead. It's like Masa/Softbank in providing financing so you can dominate. The AAA credit rating at the BRK/parent level should provide some value. When BRK looked into BNSF relative to UNP/NSC/CNI/CSX, I thought Warren would focus on the best management team and give them the advantage of low cost capital/float. Not free, but lower than if they went to Citibank, Chase, WFC, etc. The removal of an extra layer of fees from IBs alone should give the company an unfair, yet legal advantage. If Warren was looking at an average cost operator with great management, you remove the quarterly SEC filing/compliance department overhead and reducing their cost of capital, you should get the lowest cost provider. He could have purchased UNP, NSC, CNI, respectively and made them a king maker. I sold out of my UNP and NSC accordingly -- because of this. I tendered my shares in BNSF too. UNP has kept up with BNSF and might be better... even with the drag of reporting and higher cost of capital.. Progressive has too.... what makes Progressive so special that GEICO cannot replicate or how they insure better? Progressive should not have as much human and financial capital as any BRK sub. Who would have thought GEICO couldn't outspend them or introduced their own version of engine data analysis chip shortly afterwards? In what world, would one supposedly have the best management team with deep financial pockets and still not dominate or be number one? As for Greg, Ajit, and Todd airlifting themselves into BNSF and GEICO. The whole point of BRK is the corporate shouldn't off have the capabilities to manage the sub's business. BRK doesn't consolidate purchasing at the parent level.... essentially, they are offering capital allocation at that level only.. and the subs are left alone to manage accordingly. The fact that Greg, Ajit, and Todd are providing that expertise is not the original playbook. That's not the strategy. Great management plus cheap, ample capital should equal long term dominance and competitive advantage.... that's not what I see in BNSF and GEICO. There's management drift or some mis-management there. I do not see Greg actively managing See's Candy... nor should he. He cannot scale like that.. It's like having a team of Peyton Mannings, Tom Bradys, LeBron James... do they need coaches to tell them how to play? BNSF and GEICO is like Ben Simmons of the Nets or Jordan Poole of the Wizards, if anyone follows the NBA.

@longterminvestor - "If GEICO needed capital, it is a click away and capital would fall from the sky from headquarters. " That is what he has said, but I don't know if that's what has happened in reality. I would not call GEICO and BNSF as "decent" businesses. Considering how he has touted their prior management and how they were investing in marketing and all these things that has not panned out. Anyone with BRK as a parent should be able to "outspend" any competitor and make strategic investments... yet, I do not know how UNP and Progressive has higher cost of capital yet been able to take 1st place over BNSF and GEICO, respectively.... the only variable is management... and being outplayed on the court.

This makes me think... if Warren underinvests in all his businesses... I know he loves low-cap businesses (See's) and touts his heavy investments in NetJets and MidAmerica -- but, there seems to be more under-invested businesses like GEICO, BNSF that are not keeping up with CapEx. He's talked about making long term CapEx investments and exec having access to cheap capital, but do they? I see more business slowly dying under BRK... and the frugal culture leads to creative destruction in their markets.

Here is his original thoughts on 3G in 2013, which is positive of 3G: In 2017, they started to recognize the strategy is all focused on extreme cost cutting.... Charlie is more skeptical.

I know he touted Jack Welch at GE and also, 3G... and back in the day, there was Al Dunlop with Sunbeam. It works until it doesn't work.

I felt it was weird that certain important investment like Buffett's 3G, Lubrizol, Precision Castparts, and Iscar don't get talked about much... but had a lot of fanfare for a period of time. I am not saying all went bad... just dunno... the stories never get revisited.

@dealraker @UK I thought Hunter Harrison and his concepts on precision railroading have been used by all in the industry. It should have been table stakes now. It amazes me that BNSF can be so mismanaged now. The point of the BNSF acquisition was they would have cheap, ample capital from BRK.A -- so, they can keep up and possibly, over invest to dominate. Was Matthew Rose then, CEO ... so, good...that it blew up after his retirement? I don't understand how BNSF, GEICO can be so dry-rotted in their current state.