11/6/23-Buffett on USA as a Farm🧑🏼🌾, McKinsey😬, Public ⛅v. On Prem, MAMAA
Truth can be stranger than fiction because fiction is obliged to make some sense.🤪
Welcome back. In a busy world we can be distracted with the trivial many things or we can focus on The Vital Few.
Something that I am thinking about
Warren Buffett & Charlie Munger on the US National Debt imagined as a Family Farm (From 2005 Shareholder Meeting)
As the US continues to run annual budget deficits, piles up more national debt, and interest rates on the debt have risen quickly magnifying the problem, I wanted to give you one of Buffett’s mental tools of how he thinks about this:
.....No, we are truly, in this country, like an incredibly, I mean incredibly, rich family that owns, we’ll say metaphorically, millions of acres of land. They can’t see, they can’t travel to the outer reaches of their domain.
But, nevertheless, they sit on the front porch and wait for the produce to come in from this vast holding, and when they get it all they still want to consume about 6 percent more than everything that’s been produced on the farm.
And they have the ability to do that by simply selling off a little piece of the farm every day, and every year, that they can’t even see. So they don’t feel any poorer at the end of the day or the end of the year, because it’s still, as far as their eyesight can see, they own everything that God ever created.
And they can sell that little piece or they can mortgage it. They can send IOUs to these people that are giving them the extra goods to consume. And we are very, very, very rich family. And we produce a whole lot and we consume a little bit more than we produce.🤔
And we trade away a little bit of the farm or put a little bit of a mortgage on every day and the rest of the world is happy to take a little piece of our farm or take a mortgage on it because it’s such a terrific asset and we’ve behaved so well over the years. And so they’re willing to work a little harder to send us something so that we can consume a little bit more than we produce.
It’s been going on a while. It’s accelerated a lot in the last few years. And more and more the rest of the world is owning part of us and we’re going to have to service that ownership, either through interest if they took it in IOUs, or in some other way.
And it can go on a long time. But if it goes on a long time, the world will own a good bit of us and our children🧒🏽👶🏽 will be paying, one way or another, for the fact that we got to consume more than we produced.
[..] But if people get a little less excited about one — enthused about one side of the equation — it reflects itself in the pricing mechanism. And the world has demonstrated a diminishing enthusiasm for dollars in the last few years as they get flooded with them. We send $2 billion out every day, whether we like it or not and whether they like it or not.
Now, the question is, does that reach some tipping point⌛ at some point or does some exogenous event come about that causes people to want to rush for exits? Who knows?😬
Bravo Warren! I don’t have to salt 🧂Buffett’s cooking 👨🏼🍳👌🏼. If you would like to hear this lesson direct, please see the video link below starting at about the 7 minute mark.
Investing, Companies, Market Past/Future
(I invest in Companies, not in stocks.)
Interesting companies that hosted earnings results or information sessions since my last edition that I reviewed-
Technology- GOOG, MSFT, META, AMZN, AAPL, AMD, TXN, INTC, QCOM, UMC, SNAP, FSLY, NET
Housing & Banking - PHM, SOFI, GRBK
Others- BRK, ABNB, SHOP
(With data and charts it is not what you look at, it is what you see that matters.)
Staying with Buffett and Berkshire one more moment, below are a couple of my visuals to better understand BRK’s recent Q.
META generates almost $2M per employee/yr in 2023, followed by Alphabet and Microsoft.
📘7 Powers⚡️by Hamilton Helmer applied to GOOG 0.00%↑ -
YES- Scale, Network, Switch, Brand MAYBE- Cornered, Process NO- Counter
📘7 Powers⚡by Hamilton Helmer applied to MSFT 0.00%↑ -
YES- Scale, Network, Switch, Brand MAYBE- Cornered, Process NO- Counter
📘7 Powers⚡by Hamilton Helmer applied to AMZN 0.00%↑ -
YES- Scale, Network, Switch, Brand, Process MAYBE- Cornered NO- Counter
📘7 Powers⚡by Hamilton Helmer applied to TXN 0.00%↑ -
YES- Scale, Network, Switch, Brand MAYBE- Cornered, Process NO- Counter
📘7 Powers⚡️by Hamilton Helmer applied to PHM 0.00%↑ -
YES- Scale, Cornered MAYBE- Brand NO- Network, Counter, Switch, Process
Podcasts
Excellent 🔥conversation between 2 thoughtful and opinionated professionals. (60 min) The White House executive order on AI, the accidental lesson of all the analogies to nuclear technology, what Steve Jobs and Bill Gates can teach us about innovation, and a look at the competing systemic priorities that create AI questions without clear answers. ✨
[Use the link above or find it on your podcasting platform of choice by searching Sharp Tech.]
Videos
26 Minute video of John Oliver humorously🤣 roasting elite business consultant firm McKinsey. While it is hysterical, it is also disappointing to hear about some of McKinsey’s behavior. In one example, McKinsey stated😉😏-
.. we bring an unequaled capability based on WHO😉 we know and what we know…
Selling access… Booo! And that is just one example among many that he details in the video. Corruption exists in dark places, it is nice to see Oliver open a window and shine some light🔦 on the situation. Moreover, his delivery is classic.👍🏼
Books and Articles since my last edition
(Books are like loading software on your brain. If I get bored of a book I quit and move on.)
Elon Musk by Walter Isaacson This is probably the best all encompassing biography of Musk with Isaacson having 2 years of full access to Elon.✨ One theme that comes up often in the book is Musk process of approaching a problem (below) → Simplify/Understand Requirements, Delete/Remove Parts, Simplify Design, Accelerate/Speed Up, Automate 🤖🤖 (In that ORDER!)
Number Go Up: Inside Crypto's Wild Rise and Staggering Fall by Zeke Faux Nonfiction, investigative reporting on Sam Bankman-Fried, Tether, Cryptocurrency, NFT, etc. Zeke is a journalist at Bloomberg and he keeps you entertained.😅 Truth can be stranger than fiction because fiction is obliged to make some sense.🤪
Here is a link to many of the books I have read and my 1-5 star rating- Goodreads Books Read
Wild Card🃏
Is Public Cloud Cheaper than On-Prem Datacenter?
The public cloud providers, AWS, MSFT and Google continued to talk some about the pace of their customers cloud cost optimization on the earnings calls.
About every 6 months I update myself with fresh answers to - Is Public Cloud Cheaper than On-Prem Datacenter? The answer continues to be → it depends.
The video below provides one of the best summaries that I have ever encountered. Elias is smart, experienced and quick to the point. He also gives some great real life examples of how you can quickly optimize your spend on a public cloud and save money (but it is up to you.)
Okay, answer the question Nick. Is it cheaper or not? Answer- Through research and reading my SWAG is that 3 out of 4 companies save about 20-30% per year by using a public cloud. 1 out of 4 have a situation where hosting on prem is cheaper or necessary for some business reason.
However, other significant benefits to moving to a public cloud beyond just cost include- Increased agility and scalability, ENHANCED SECURITY, Improved reliability and uptime, Access to innovation, Improved collaboration and Global reach.
If you liked this post from Nick, why not share it and subscribe?
Disclaimer: All of my posts are for informational purposes only. I might own some of the companies discussed in these posts. This is NOT a recommendation to buy or sell securities discussed. Please do your own work before investing your money.
I really like Warren Buffett's explanation of the U.S. deficit because he makes something that seems complicated extremly simple. He also makes it understandable how years of this have run the U.S. into an extremly deep hole.