Liberty

Good numbers. Stock down -0.79 right now though.

And it's not like the kind of default that is on the table right now would reduce debt obligations. The US would still pay its debts in most likely scenarios, but only after creating a crisis of confidence among its debtors. How is that good, I'm not sure...

Argentina or Greece defaulting isn't quite the same as the US defaulting, though, is it? When you're at the bottom and a relatively small economy, you can't go much lower, but when you're AAA and the biggest economy in the world, you have much more to lose and there's going to be a lot more uncertainty about how market will take it.

Thanks for sharing your experience. I think it probably depends a lot of how much you care about resolution/sound quality, and how much you've invested in a home theater setup. I know people who are the exact opposite and pretty much stream everything, and can't wait for the selection there to get better so they can drop DVDs altogether.

I'm 100% invested right now, and plowing new cash in as it comes in because there are at least 3 businesses that I like that are cheap (two of them being really cheap). I have no idea where macro will go, what matters to me is that whatever I'm buying is cheap and has good downside protection. Right now I feel more scared of letting some fat pitches pass and missing good opportunities than of seeing my portfolio go down for a while (I'm not planning to sell anytime soon, and most of the corps I invest in have little debt and have shown that they allocates capital very well in downturns, so they should come out strong on the other side).

Thanks for posting, I just watched it and it's a pretty good overview.

Out of curiosity, why is something like 6-7 bucks per month that big of a deal? Isn't the value provided by Netflix much more than that? I've heard many people threaten to cancel because of it, but I'm having trouble understanding why. I'm not a netflix subscriber, but if I was, the difference between 10 and 16$ for unlimited movies and TV series doesn't seem like that big a deal. I'm sure Reeds bundled stream for free with the other subscriptions to help it catch on (a kind of risk free trial -- or as drugs dealers say, the first hit is free but once you're hooked...) and because there were no doubt higher margins in streaming than in shipping DVDs, but I never though that it would stay "free" forever, especially as more people use it and they start paying more for content. The recent price increase is big as a %, but the total amounts are still pretty small compared to the value provided (rent all those movies and TV series separately and see how much it costs).

I think Warren's point is that it doesn't make sense to threaten not to pay your bills and default every time there's an internal debate about the proper level of spending. Can you imagine if every country did things like that, potentially defaulting every time politicians are split?

I think the most important insight is what this tells us about the commercial culture in China. That someone with enough resources to do this thought this was a good idea... Wow.

Walter Isaacson (a great biographer! but he doesn't get to say much here because Summers is a talking-machine) interviews Larry Summers: http://tech.fortune.cnn.com/2011/07/19/brainstorm-tech-video-larry-summers-transcript/

http://www.politico.com/news/stories/0711/59335.html

MSFT apparently dropping out of Hulu bidding: http://www.bloomberg.com/news/2011-07-19/microsoft-is-said-to-drop-out-of-auction-for-hulu-online-streaming-service.html

I'm now in 7 public businesses, with my top 2 representing over 60% of my portfolio.

http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201107181157dowjonesdjonline000171&title=president-obama-meets-with-more-than-a-dozen-business-leaders

There's a market for both. I'm the exact opposite; I find Office painful to use, bloated, expensive, etc, while Google Docs just does what I need and all my stuff is available from any computer or device instantly, easy to share and collaborate with others, etc. I always have a browser open, so I can access any document in about a second, which is better than launching a new software app that probably takes half a gig of RAM just to write a letter.. From a business perspective, one thing to consider is that almost all Google Docs users will be former MS Office customers, while most Office 365 customers will be former MS Office customers. Office software is quite mature, and I have little doubt that in a few years Google Apps will be where MS is now when it comes to functionality, while MS stuff will still pretty much be where it is now because new features for Office stuff are few and far in between. I've explained in another thread what I think about the disappearance of the lock in features that created such a network effect for MS.. Anyway, it'll be interesting to watch this develop.

Why the sad face? Did you short it? I bought GOOG 3 weeks ago. Up 24% since then. That's too short a time period for me to pat myself on the back and have an opinion either way on the correctness of my analysis, but I'm happy with Mr. Market;s mood right now and glad I didn't dither for a few days more...

http://www.bloomberg.com/news/2011-07-15/corporate-america-to-miss-munger-as-mencken-commentary-by-alice-schroeder.html

Looks like MSFT is working on its own social thingy,and they accidentally published part of it to the web (for real, check out: http://www.socl.com/ ). http://venturebeat.com/2011/07/14/microsoft-social-project-tulalip/ We'll see if anything ever comes out of it or if it's another Microsoft Research thing that never ships.

This is great news. Fairfax needs to keep going into sectors of the economy where they have an edge and can identify inefficient prices. India seems like such a place.

I initiated a position in GOOG at $482. They were selling for the first time at the price in late 2006...

http://www.fxstreet.com/fundamental/analysis-reports/gold-investments-market-update/2011/07/11/

Buffett on bloomberg: http://www.bloomberg.com/video/72140684/ Also, this: http://www.bloomberg.com/news/2011-07-08/berkshire-spends-4-billion-on-equities-as-combs-adds-stocks-buffett-says.html

All right, after a (too short) night of sleep, here's the outline of how I see this for GOOG: How does Google prefer to make money? Where have they the highest margins and biggest moat? -Search ads are extremely profitable because 1) They are targeted. You know the intention of the user because they just searched for "stainless steel fridge" so if you show them ads for stainless fridges, you'll get a lot more value than if you show fridge ads on facebook where people's intention is mostly to check up on their friends. That's why some keywords are worth many dollars per click while less targeted ads are often worth fractions of pennies. 2) Ads shown on the Adsense and Doubleclick networks are also profitable, but google has to share money raised in the auction with the publishers. Ads on Google's own sites don't share any of the money. Another reason search is preferable for them. -So how does Android fit into all this? 1) In 2007 when the Google guys saw the iPhone and realized that in the future a lot more of the web was going to be consumed on mobile devices, and that they had to make sure their products were well positioned for that and that those who controlled that mobile platform couldn't harm them, they could have said: "all right, we're going into the phone business and we'll compete directly with Apple" and maybe a year later they could have had a phone like the Nexus One. They could have tried to make money from the hardware and the apps, but the problem would've been: 2) They're a software company. They don't have tons of industrial designers, they don't have a large distribution network and retail outlets, they don't have supplier relationships, etc. So they could have tried to turn the ship around and become a whole other kind of company to compete with Apple, but the problem is, chances of success would be low, and if they became a phone maker they wouldn't just be competing with Apple, they'd also be competing against RIM, Samsung, Motorola, HTC, etc. 3) Maybe they could have licensed their OS to some of these companies, but when you want to make money from the hardware, you don't want to give your secret sauce to everybody. That's why Apple will never license iOS. But maybe GOOG could have skipped the phone and just tried to license a phone OS. Maybe that could have worked, though phone makers up to that point hadn't shown too much interest in licensing other people's OSes. And if you sell it to them, you can't price it too high or they'll go in-house, and you always have to worry that someone else will try to undercut you with a cheaper OS (windows for phones, etc) and that your phonemakers will jump ship, etc. 4) I think Google looked at that kind of business and they decided they'd rather go for maximum scale instead. When you give a quality OS for free, you know you'll get the maximum number of partners possible because you can't be undercut on price and they won't feel you are competing with them, they're partners and if they do well, you do well. I'm sure Google decided that what was most valuable was to have hundreds of millions of devices with a button on the front that took you to search and/or a prominent search bar on the home screen. The only thing more valuable than a search ad is a geo-targeted search ad... and this way they have a lot of influence over how the mobile platform develops and what users expect from phones. Otherwise we might have gotten phones that go "oops, sorry, Microsoft paid us so this phone can only search the web with Bing!" or "sorry, web apps don't work on this phone, only paid downloaded apps work" or whatever BS like that. And trust me, more of that stuff would be plausible if Google was a phonemaker and other phonemakers felt directly in competition with them. 5) So I say without hesitation that Apple is the king of smartphones and tablets. But Android is a solid #2 that might not have happened if Google had taken another strategy, and while I think Apple is a better business right now, I agree with Buffett and Munger that Google has a great moat, and I think that their 'infrastructure' play is stable over the long term. Apple is kind of on a product treadmill, and they need to keep producing great products that people want (they also have some nice infrastructure stuff like iTunes and the App Store, but it's a much smaller part of their business). Meanwhile, Google benefits (via search, adsense or display ads) from every Android, iPhone, RIM, Nokia, Windows phone, iPad, etc... So I wouldn't have any problems investing in AAPL, and I think those here who invested in MSFT probably will also do well over the long term, but GOOG at $482 fit my personal criteria better, so I got in. I'm going to cross-post this in the Google thread because this doesn't have much to do with MSFT anymore. Feel free to continue the discussion over there: http://cornerofberkshireandfairfax.ca/forum/index.php?topic=4442.120 Update: I also forgot to mention that if Google hadn't made Android free, chances are they couldn't have used the Linux foundation because of the GPL license (though I'm not 100% sure, maybe there's a workaround), so it would have been a lot more work to build the OS from scratch rather than on top of an existing foundation.

That's correct. It's the part about Google that wasn't. I don't dispute that compared to Apple, they're far behind. But they're not trying to out-Apple Apple. And I'm not a short-term kind of guy, and I think they're on a great trajectory. I'm on a lot of forums and sites where programmers are, and Android is definitely getting more attractive to them and more talked about. Will the average Android user ever spend as much as the average Apple user for apps? No, because Android will go downmarket as well as up. But will the sheer number of users be enough to make the store attractive and for most of the best quality apps that people actually use to be ported there? Sure. It's late and I need to get to bed, but tomorrow I'll try to find some time to write more about how I see each company's strategic position.

The number of questions you want answered in a day and the number of searches you do are two very different numbers. The more convenient it becomes to search, the more the number of searches will approach the number of questions you want answered -- people might not want to go to their computer or open up their laptop everytime they'd like a search, but it might be easy enough to check on a phone (especially with voice search). The search pattern that google showed was the one that they've been seeing for years (makes sense, no: When people aren't at their desk, they use internet search less). But now mobile is being added into the dips of when people aren't at their desks (some mobile searches will replace desktop ones, but many will be searches that wouldn't have happened otherwise). I see it all the time. Group of friends talking, a question is asked, people whip out their phone to search google. Apple is definitely the dominant player there and monetizes hardware and apps much better than anyone else, no question. But I believe Google is in this for the long haul and they are positioning themselves in a way that nobody would have foreseen a few years ago (I mean, Google making OSes? for phones?), and it's going to help them a lot in their core ad business, which is very profitable. Of course they are going for marketshare. They said it themselves. Do you see any other strategy out there competing with Apple? They wouldn't have that many hardware partners and software developers if they weren't running an open platform with very good terms compared to Apple. But now the product is rapidly getting better, the hardware is getting better, and the apps are getting better, and they've pretty much ensured that mobile devices will use open standards (HTML5, etc) and that they're not taken hostage by competitors that control the platform between them and their customers (directly and indirectly -- now that Android offers the open web, it's harder for others to lock things down too much). It's a tradeoff; they could have tried to maximize direct revenue per phone, but that could have meant a much smaller marketshare and influence because of fewer partners, slower development, less ad dollars spent by partners, fewer developers, and over time much smaller revenues. They did it the smart way, IMHO. What matters is where they'll be in 3-5 years, not next quarter. And right now the landgrab for mobile has two winners: Apple and Google. Controlling a platform is extremely valuable. It could easily have been Apple and then everybody else far behind...