How did Biglari fool me (us)

[netnet]

In the interests of improving myself and my decision making, I was trying to figure out why and how Biglari fooled me and by extension us.  (I also had the opposite problem in that I was suspicious of Watsa, unjustifiably so.)

 

So I have the following reasons for being fooled:

 

1) I wanted to find a young Buffett, which is not in and of itself a bad thing, but you often think you find what you want or at least twist reality so that you think you have found it.

2) A bit of group think, which is not a critique of this board, as a thinking adult (hopefully) I have to assess for myself whether a stock or the CEO of a company is the "real deal".

3) I must admit I never actually met him.  (Of course, I've never met Buffett either, unless you count going to meetings.)

4) Track record was too short, i.e. not enough evidence.

 

 

I guess the fundamental upshot is the lack of evidence, #4, is the real reason, although all the other reason contributed, group think certainly did play a role.  Other than his over weaning greed and megalomania, he still might be a decent jockey, but Buffett he ain't.

[Guest Bronco]

netnet - I was hoping to find the same, but I wouldn't say I was fooled (although maybe I was but damn I am stubborn).

 

I would say I really liked the story until the name change - my comments here indicate how happy I was with that. 

 

I think it is ok to rely on certain facts and then switch positions when facts change.  You may be right about having a long track record, but that will be the challenge in finding a "young Buffett".  May be tricky balancing the two.

 

If you find the next young Buffett, please let me know.  I too am looking.  And looking.  And looking.

 

The halo was around Lampert - but certainly no Buffett.  Biglari was close, stating he wanted to invest in insurance and maybe utilize float.  Watsa is no spring chicken, and doesn't invest in other companies like Buffett (and even Biglari) is willing to do. 

 

 

[Partner24]

Good post netnet. I appreciate the effort that you put to analyse your mistakes. It's how an investor get better with time. When an investor don't recognize and analyse it's mistakes, tell me how he will not repeat them in the future? So congragulations.

 

Here are my 2 cents on your points:

 

1) There will never be "the next Warren Buffett", just like there will never be the next Wal-Mart, Michael Jackson, Bono, Pavarotti, Madonna, McDonalds, etc. When we try thing about a smaller size copy of something, we undoubtely make a misconception mistake;

2) Group think can be a good thing and a bad thing because the "crowd" can be right or wrong. In the end, you have to be confident enough yourself about something, because in the end you end up with the results. A crowd opinion is not an alternative to good judgement.

3) Usually no need to. Do a BRK shareholder really need to meet Warren Buffett to trust him? Not necessarely. It's a case by case situation.

4) Indeed! Back to point 3, that's usually a good reason to meet the CEO directly or have someone whom you trust it's judgement to meet him. And ask some difficult questions if needed doesn't cost a dime and can avoid someone to save thousands of dollars in financial mistakes. So it can be a very "lucrative" per hour task!

 

A track record can help a lot, but it's not the only thing. A company success is usually a bumpy ride i.e. there is some time when things get more difficult. It's usually when you'll see if the CEO wants to hide it's mistakes or be truly candid about them. Compensation can speak a lot too. When I see huge stock options outstanding, in the end the CEO will be more affected by the score board than what's happening in the playing field. It's job is to focus on the ball, not meet the score board employee too much and try to convince him that he's a good baseball player. Or his overall compensation is quite high, I guess that the guy is not frugal enough. There is some other hint like that too.

 

 

Cheers!

 

 

[Parsad]

Generally, I think most people give either too much or too little value to themselves.  This can manifest itself in various ways, at various times..."I think I'm worth more than that"..."She doesn't work as hard as me"..."If I was in charge, I would run this thing properly"..."Boy I suck"..."Geez, I need to lose some weight!"  Sometimes it can take the form of a tantrum, frustration, ego, fear, insecurity or yes, even greed.  

 

I don't think of people's behaviors in terms of "how did they fool us".  Rather I choose to view it as "what prompted them to behave in such a way?"  Your question should be "Why did Sardar do what he did?"  And the revelation to everyone involved, including Sardar, is simply "Was it worth it?"  Cheers!

[Guest]

I agree with Partner. I don't believe there will be another Warren Buffett. I believe it was Pabrai that echoed these sentiments.

 

I think therein lies the key to finding good managers. They'll have similar charteristics, but they'll have their own idiosyncrasies that will help define their image.

 

Buffett wasn't the next Graham and Lampert and Klarman aren't the next Buffett. Over a long period of time, will they be better? I don't know, but I do know that I try to listen and learn from those that are knowledge, smart, long term investors.

[rogermunibond]

Going hostile was the warning to me.  Proxy fights might be fine for Bill Ackman and Tom Hudson (of the late Pirate Capital) but a future WEB-like figure will probably labor quietly away from the glare of newspaper stories.

[shalab]

I am sure people have been searching for the next Newton, Franklin and Einstein for several centuries past but havent run into them yet. So, next Buffett/Munger is as likely as the next Franklin, Newton or Einstein.

 

cheers!

 

[oec2000]

I am sure people have been searching for the next Newton, Franklin and Einstein for several centuries past but havent run into them yet. So, next Buffett/Munger is as likely as the next Franklin, Newton or Einstein.

 

cheers!

 

 

Einstein WAS the next Newton;

 

and, of course, Obama is the next Franklin, right? ;D

[Guest Bronco]

When I think the next Buffett, I think the following:

 

1) Someone who allocates capital to the best source

2) Someone who maintains a great balance sheet

3) Someone who gets float

4) Someone who takes a reasonable salary and is S/H friendly

 

I am not looking for someone to replicate the same results, 23% yoy bv growth, etc...

 

I am looking for someone who can put the same pieces together using the same framework.  Biglari talked the talk...but what a disappointment. 

 

[rogermunibond]

I am sure people have been searching for the next Newton, Franklin and Einstein for several centuries past but havent run into them yet. So, next Buffett/Munger is as likely as the next Franklin, Newton or Einstein.

 

cheers!

 

 

Einstein WAS the next Newton;

 

and, of course, Obama is the next Franklin, right? ;D

 

Feynman was the next Franklin.  Hanging out with strippers in Pasadena is pretty close to courtesans in Paris.

[premfan]

Cant Biglari be similar to buffet with an inflated salary? Only thing that has changed since last year when there was biglari mania is the comp plan. His returns are still pretty stellar. 

[netnet]

Cant Biglari be similar to buffet with an inflated salary? Only thing that has changed since last year when there was biglari mania is the comp plan. His returns are still pretty stellar. 

 

The problem with an inflated salary is that he is stealing from his partners.  And if he does it once, what is going to stop him from going back into the till for seconds?  And yes his returns are good, but he is lopping off shareholder returns to augment his.

[Guest]

Did you guys make any money by investing with him?

[Parsad]

Did you guys make any money by investing with him?

 

Yes, but I also made more money from Fairfax and believe it or not, Overstock.com.  Prem takes a $600K salary and Patrick Byrne takes none.  The one thing I've always said about Sardar and still do, is that he is smart and extremely hard-working.  That still doesn't make his compensation plan ok, or how it was instituted.  Cheers!

[link01]

Did you guys make any money by investing with him?

 

Yes, but I also made more money from Fairfax and believe it or not, Overstock.com. 

 

congrats on your success, ostk especially! i've had some small success trading it, but i've had some big disappointments investing in it    :-\

 

and i'm at it again, thinking (hoping) that ostk has finally turned the corner now that their IT fiasco is behind them & patrick seems to have seen the light about emphasizing character in hiring as well as aptitude. we shall see...

 

sns/bh was a big win for me as well. alas, it was also the most disappointing, considering i had planned to hold it for years & years, til that infamous compensation scheme was dumped on shareholders out of the blue.

[netnet]

I don't think of people's behaviors in terms of "how did they fool us".  Rather I choose to view it as "what prompted them to behave in such a way?"  Your question should be "Why did Sardar do what he did?"  And the revelation to everyone involved, including Sardar, is simply "Was it worth it?"  Cheers!

 

Remember Parsad, to paraphrase Munger, the incentives are often there for CEO's to be too greedy.  So it takes a special CEO not to indulge.  Perhaps the fault was in expecting Sadar not to succumb and be that special CEO.  But the point remains for me why did I not anticipate/see the behavior coming? Or should I expect greedy bastards everywhere?