Original link: https://ljf.com/2023/08/20/1301/
1995 Speech at the Shareholders’ Meeting of Siko Finance
In general, over the past 100 years, there may have been no fewer than 100 active investment banks, but now there are only four or five left.
There is a large amount of capital flowing in the investment bank every day, and even the staff in the back office may take advantage of their positions to embezzle the company’s property. Therefore, the business of investment banking is difficult to do.
In short, investment banking is a difficult business. We are bound to go through ups and downs in making this investment. However, I’m not worried that Seaco will lose money on this investment.
In general, in Berkshire’s culture, we take high leverage at arm’s length. That’s not to say we never borrow a penny.
Shareholders: Over the past 10, 15 years, Berkshire’s insurance float has grown very rapidly. Can Berkshire continue to maintain its past growth rate in the future?
In the past ten years, Berkshire did not develop step by step according to the pre-determined plan, but saw the steps and seized two or three big opportunities to reach the scale it is today. I believe that in the future, Berkshire will still go ahead and seize big opportunities. As for whether Berkshire’s float will continue to grow, that’s hard to say. If Berkshire can seize big opportunities, its float will continue to grow. This requires us to be able to grasp the timing keenly. Float cannot grow by itself.
There are many things that people do that are better not done. As I said before, if someone hands you a thick prospectus, and he earns commissions from it, you’d better not read it. Don’t look even if you might miss a few opportunities. Remember this rule, you can save a lot of losses.
Shareholders: Why are so many people caught in the Foundation for New Era Philanthropy Ponzi scheme? How could they believe they could double their earnings in six months?
To answer this question, one must have a deep understanding of human nature. Why are people with status, status, and smart minds so stupid that they can fall into such an obvious deception? This deserves our in-depth analysis. The scam exploits a phenomenon known in psychology as “social proof.” Seeing two or three famous people take the lead, others believe it. “Even the chairman of Goldman Sachs participated, can there be a fake?” “Even the University of Pennsylvania participated, can there be a fake?” This way of thinking is very dangerous. I don’t have to use my own brains, just go with the flow and blindly follow others.
During my time managing money for other people, I was very small. I have calculated before that only a very small part of all my wealth comes from salaries received in the legal service and money management industries, and most of the other wealth is accumulated by rolling investment of my own funds.
As a poker player, I know that when the odds of winning are very high, bet heavily.
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