There are many companies which have given fantastic, scorching returns. Microsoft, GE, Berkshire Hathway….are some examples. Berkshire Hathway, well er is a fund..or so you thought. Let me tell you, it is not. Mr. Buffet is a brilliant businessman, fantastic stock picker, (fantastic bargain picker – look at the recent offer to pick good bonds at bargain prices), a great human being, a great philanthrophist, BUT not a fund manager.

He runs a big, huge 800-pound gorilla of an insurance company, where people like Mr. Jain can buy an risk -at the appropriate premium. In fact Mr. Buffet can buy a small stake in a company, can buy more stake, can merge it with Berkshire Hathway – things which a normal fund manager cannot even think of doing.

Berkshire Hathway is a fantastic company with a great 28 year track record. However over the past 2-3 years it has underperformed the index. Yes you read right, it has underperformed the index. How come it is not there in the index – well it is not traded enough, so perhaps the impact cost could be an issue.

So in my finance class if I ask you to name a great fund manager, you will get a zero if you said “Warren Buffet”. However if I asked you to name a great businessman, a great philanthropist, or a great business communicator and you said “WB” you would get a 10/10.

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  1. Sir, but Warren buffett did run a partnership for around 13 years from 1957-1970 and he did a spectacular job, that job was managing other people money aka a fund manager. i have read his letters to partners during those period. So i believe you are harsh in giving him a zero as a fund manager!!

  2. please read carefully, I have not said i will give WB zero. I said i will give my students a zero for calling him a fund manager.

    HE IS NOT A FUND MANAGER…WB has full control over his company. He is more like Mukesh Ambani or Ratan Tata not like Naren Sankaran or Prashant Jain.

  3. okies. Its really nice to read your posts, i have added your website on google reader, i am currently reading “The warren buffett way” and your post comes in related to him. Serendipity! 🙂

  4. something to ponder. What part of a business man’s success comes from ‘managing’ his environment. Reliance in India and Berkshire in US are sterling examples. Have rarely seen Reliance do anything or succeed out of India. Seemingly same for Mr.Buffett whose company wants to sell motor insurance in India. Of course I may be a complete idiot and not understand the ‘strategy’ but when some one says Moodys is right and then shows up to have a significant stake in the entity, am a bit perplexed…

  5. sir,
    i like to ask you something about the private placements program, …, is it legally approved in india
    becs iam wondering about the % returns , is it real .. or another ponzi

  6. much bigger than TIC in size, but yes you are kinda right. Remember Tatas have Tata Industries, Tata Sons, Tata Capital, it is more difficult to understand.

  7. sir thnks 4 the information. plse can u write an detail article regrading thse programs,love to hear tht , becs all thse articles helped me a lot

  8. @suresh. i agree.most of buffet’s financial sector investments(except ajit jain’s superb insurance business) are based on insider connections,influence with washington and not fundamentals.if it were about fundamentals he would have shorted his own companies.he has turned into a crony corporatist in the last decade.he just did a fund raiser for obama for 10000 usd can be sure when 2 oligarchs (obama/buffet) meet and discuss,the rest of us can be sure to be shafted.buying BoA and Goldman -knowing very well the bailout which he so desperately pushed -that was the last straw for me.i was glad to notice the clay feet this idol of mine was too good to be true -saint warren has no halo.alas.

  9. WB has in a way improvised on his guru, Ben Graham’s lessons. Graham was a fund manager, if I am not wrong. But WB extended his approach to valuing and buying whole businesses and not just their shares. Another of his virtues is he doesn’t micro-manage and lets people run businesses that they created, even after selling it. And of course he accepts his mistakes and makes suitable amends. BH was a textile biz that he bought but couldn’t run for long. Only the name remains now.

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