30 books in 2021
Puming Fang
2. In Matthew 6:3, the Bible instructs us to “Let not the left hand know what the right hand doeth.” Your chairman has clearly behaved as ordered.
3. Three decades ago, my Midwestern friend, Joe Rosenfield, then in his 80s, received an irritating letter from his local newspaper. In blunt words, the paper asked for biographical data it planned to use in Joe’s obituary. Joe didn’t respond. So? A month later, he got a second letter from the paper, this one labeled “URGENT.”
4. Abraham Lincoln once posed the question: “If you call a dog’s tail a leg, how many legs does it have?” and then answered his own query: “Four, because calling a tail a leg doesn’t make it one.” Abe would have felt lonely on Wall Street.
5. You may ask whether an allowance should not also be made for the major tax costs Berkshire would incur if we were to sell certain of our wholly-owned businesses. Forget that thought: It would be foolish for us to sell any of our wonderful companies even if no tax would be payable on its sale. Truly good businesses are exceptionally hard to find. Selling any you are lucky enough to own makes no sense at all.
6. Simply put, insurance is the sale of promises. The “customer” pays money now; the insurer promises to pay money in the future should certain unwanted events occur.Sometimes, the promise will not be tested for decades. (Think of life insurance bought by people in their 20s.) Therefore, both the ability and willingness of the insurer to pay, even if economic chaos prevails when payment time arrives, is all-important.
7. From my perspective, though, Charlie’s most important architectural feat was the design of today’s Berkshire. The blueprint he gave me was simple: Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices.
Character is crucial: A Berkshire CEO must be “all in” for the company, not for himself. (I’m using male pronouns to avoid awkward wording, but gender should never decide who becomes CEO.) He can’t help but earn money far in excess of any possible need for it. But it’s important that neither ego nor avarice motivates him to reach for pay matching his most lavishly-compensated peers, even if his achievements far exceed theirs. A CEO’s behavior has a huge impact on managers down the line: If it’s clear to them that shareholders’ interests are paramount to him, they will, with few exceptions, also embrace that way of thinking.
8. Our main business — though we have others of great importance — is insurance. To understand Berkshire, therefore, it is necessary that you understand how to evaluate an insurance company. The key determinants are: (1) the amount of float that the business generates; (2) its cost; and (3) most critical of all, the long-term outlook for both of these factors.
To begin with, float is money we hold but don't own. In an insurance operation, float arises because premiums are received before losses are paid, an interval that sometimes extends over many years. During that time, the insurer invests the money. This pleasant activity typically carries with it a downside: The premiums that an insurer takes in usually do not cover the losses and expenses it eventually must pay. That leaves it running an "underwriting loss," which is the cost of float. An insurance business has value if its cost of float over time is less than the cost the company would otherwise incur to obtain funds. But the business is a lemon if its cost of float is higher than market rates for money.
A caution is appropriate here: Because loss costs must be estimated, insurers have enormous latitude in figuring their underwriting results, and that makes it very difficult for investors to calculate a company's true cost of float. Errors of estimation, usually innocent but sometimes not, can be huge. The consequences of these miscalculations flow directly into earnings. An experienced observer can usually detect large-scale errors in reserving, but the general public can typically do no more than accepting what's presented, and at times I have been amazed by the numbers that big-name auditors have implicitly blessed. Both the income statements and balance sheets of insurers can be minefields.
9. For example: (1) As if governed by Newton's First Law of Motion, an institution will resist any change in its current direction; (2) Just as work expands to fill available time, corporate projects or acquisitions will materialize to soak up available funds; (3) Any business craving of the leader, however foolish, will be quickly supported by detailed rate-of-return and strategic studies prepared by his troops; and (4) The behavior of peer companies, whether they are expanding, acquiring, setting executive compensation or whatever, will be mindlessly imitated.
10. To quote Robert Benchley, "Having a dog teaches a boy fidelity, perseverance, and to turn around three times before lying down." Such are the shortcomings of experience. Nevertheless, it's a good idea to review past mistakes before committing new ones. So let's take a quick look at the last 25 years.
Excalibur
Puming Fang
Before you make your money, you need to protect it.
Taking classes on advertising, gold, options trading, writing sales letters, foreign-exchange trading, creative financing, foreclosures, asset protection is a good idea.
Three important lessons.
1. Start small. Dream big.
Look at 100 properties before buying one.
Most investments are bad investments, so you need to invest time looking for those rare great deals.
2. Look for cash flow
The more investments you have the more cash flow you generate.
3. Have people send money to you
The financial education taught in schools teaches kids to send their money to the government, retail banks, and investment banks. True financial education teaches you how to have people send money to you.
Unfair Advantage #2: Taxes
- Earned income: highest-taxed income
- Portfolio income: second highest-taxed income
- Passive income: lowest-taxed income, possible zero
- The harder you work for money, the more you pay in taxes.
- The harder your money works for you, the less you pay in taxes.
- The harder other people’s money works for you, the less you pay in taxes. In fact, you may pay nothing, zero, zip, nada, in taxes.
Unfair Advantage #3: Debt
If we stop borrowing, the economy stops running because today all money is debt.
The financial world loves debtors and punishes savers.
The fractional reserve system of banking destroys the purchasing power of your savings.
The advice is to use debt as acquired assets instead of liabilities.
K.B explains that by avoiding risk, people lead lives of extreme risk.
These three courses are important for people who want to be in the B and I quadrants. These three courses reduced your risk and increased your control in the B and I quadrants.
- Learn to sell (control income)
- Learn to invest in real estate (control debt)
- Learn technical investing (control markets)
When a person is successful in serving more people, taxes in debt also swing to their favor.
3. Leverage the power of compounding financial education
Over time, as your education compounds, so do your returns.
When you meet smarter people, you are invested into investments that are called “insider” investments.
Excalibur
Puming Fang
Zero to One by Peter Thiel (3/30)
Three counterintuitive ways to think about starting a business and building a better future.
#1 Bet on a Contrarian Truth
Try to answer the following question:
“What important truth do very few people agree with you on?”
A truth about how people will act in the future in ways they’re either unwilling to admit right now or are just unaware of.
All failed companies are the same: they failed to escape competition.
When you bet your business on a contrarian truth, you’ll dramatically increase your odds of avoiding competition mainly because most people will think you’re crazy and ignore you long enough for you to build a significant lead in a particular market that will make it hard for anyone to catch it.
Make sure you bet on a contrarian truth whose time has come.
Before starting a business, ask yourself “is my success dependent on outworking the competition or courageous enough to bet on a contrarian truth whose time has come?”
#2 Start by Dominating a Small Market
When Jeff Bezos started amazon he had the idea of creating an everything store but he didn’t start by building an everything store, instead, he focused on dominating a small niche market that niche market was online book sales.
When starting your business, don’t try to get one percent of a billion-dollar market, instead, try to get eighty percent of a million-dollar market.
Whoever is first to dominate the most important segment of a market with viral potential will be the last mover in the whole market.
#3 Try to be a Monopoly
Evil monopoly: bully competitors; take advantage of their customer’s lack of choice
Good Monopolies: use excess profits to give back to society; stay in business.
Four Monopoly Methods: brand association; technology; network effects; scale.
Be Unique; Be different; Be a monopoly.
Puming Fang
Book #5: David and Goliath by Malcolm Gladwell