3G background-why Buffett likes them

[Hektor]

9 hours ago, schin said:

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.

Do you feel that things were lax for too long. Further, do you feel that similar problems might exist at other (important) subs?

Edited October 8 by Hektor

[schin]

@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.

[Hektor]

Thanks @schin. I feel more subs will likely come under this underinvestment/undermanagement spotlight, more so when Greg eventually replaces WEB.

[schin]

4 minutes ago, Hektor said:

Thanks @schin. I feel more subs will likely come under this underinvestment/undermanagement spotlight, more so when Greg eventually replaces WEB.

@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]

49 minutes ago, schin said:

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.

Let's hope this doesn't come to pass. This will make BRK just another conglomerate - centralized management functions, synergy etc.  It's the anti-thesis of BRK.

[DooDiligence]

2 hours ago, schin said:

@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.

GEICO does have a telemetrics system. Apparently they don’t know how to use the resulting data. I signed up for their DriveEasy program and gave the app full access to my driving for about 3 months. This was around 2 years ago. I scored damn near perfect and they jacked up my rates anyway. Plain incompetence.

 

I sent an actual letter to Omaha chronicling my time with GEICO and including my participation in DriveEasy. Got no response.

Edited October 8 by DooDiligence

[schin]

19 minutes ago, DooDiligence said:

GEICO does have a telemetrics system. Apparently they don’t know how to use the resulting data. I signed up for their DriveEasy program and gave the app full access to my driving for about 3 months. This was around 2 years ago. I scored damn near perfect and they jacked up my rates anyway. Plain incompetence.

 

I sent an actual letter to Omaha chronicling my time with GEICO and including my participation in DriveEasy. Got no response.

 

@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...

[schin]

1 hour ago, Hektor said:

Let's hope this doesn't come to pass. This will make BRK just another conglomerate - centralized management functions, synergy etc.  It's the anti-thesis of BRK.

 

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.

[xboojum]

4 hours ago, schin said:

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.

 

 

https://www.geico.com/driveeasy/ GEICO has created their own version of telematics. They were just late to the game and aren't using it effectively yet, as far as I can tell. (If Todd can improve things, there's no shame in GEICO running second-best behind Progressive, which seems to be shooting the lights out right now; a lot of the complaints about a less pleasant culture at the GEICO home offices sound like the sorts of things that happen when a company is underperforming and the CEO wants to trim deadwood.)

 

 And say what you will about BNSF, they didn't just wake up and realize, "Oh, precision scheduling is a thing!"; there has been a conscious management decision, going back years, that they don't want it (whether due to the fact that it pisses off customers—which it does—or a desire for better relations with their unions or concerns about regulation, I don't know, or maybe something internal; you'll note that even with Harris parachuting in as an operations consultant, they're not talking about implementing it).

The Ben Simmons comparison is funny, not because anything important at Berkshire has collapsed as thoroughly as The Process, but because I think there's something to the idea that the Buffett of 2024 is afraid to shoot! Things have repeatedly worked out poorly to suboptimally for him over the past decade, offset by the enormous success of Apple and the solid performance at size of the sogo shosha investments. 

[Aurel]

Here is an interview with Jorge Lemann, in which he talks about Buffett and their differences: