Photo Credit: WSJ Online Edition Swanson Photographer for Reuters
The title comes from a 1971 album by Sly and the Family Stone, whose creator and leader recently passed away. Here we are, over half a century later, speaking of the same phenomenon. These young National Guardsmen are ordinary citizens who may be working or going to school while fulfilling their military obligation when called up. Some of these young men, called up for the LA riots, will suffer injuries and some of these could be serious. This Friday, they are on my mind.
The Incredible Lightness of Gavin Newsom
The Ninth Ninth U.S. Court of Appeals decision gave President Trump control over 4,000 National Guard troops for restoring the civil order,and ending the rioting and destruction of property. One of three conditions had to be satisfied, the Judge noted, and the administration chose only one, “to protect federal employees performing federal functions and to protect federal property.” The arguments and rejoinders from Governor Newsom’s attorneys were procedural nitpicking with no substance. In the judge’s opinion he notes the use of mortar style weapons, chunks of concrete, dumpster trailers, and Molotov cocktails by the rioters.
These professional agitators are tech savvy, and they enlisted Waymo autonomous cars to drive to the desired sites, got out and set fire to the car. For the vehicles’ lithium-ion batteries, this causes what is called thermal runaway, and the batteries eventually fuel another fire which also releases toxic gases. Gawkers, neighborhood residents, and law enforcement were subject to the effects of these gases.
Fighting Yesterday’s Wars
Thinking back to the nine Saudi hijackers and the destruction they wrought on New York City, I’m grateful for all the work done to keep air travel more secure; the TSA sensors and revamped procedures have made things much more convenient.
But, there have been small signs that the next battlegrounds may be more out in the open, at public events like concerts, races and holiday festivals. Disposable cell phones can be used to se off remote incendiary or explosive devices, and ordinary looking people disappearing into panicked crowds will confound local law enforcement.
Meet the New Boss, Same as the Old Boss or Worse
In 2015, President Obama with VP Joe Biden at his side announced the nuclear deal with Iran, making Iran our hegemon in the Middle East, at the expense of our Saudi allies. It was a colossal mistake, giving cover for the development of the Iran nuclear program, while simultaneously letting the Ayatollah to thumb his nose at U.N. inspectors. A decade later, the U.S. is left to talk about regime change as a remedy.
The U.S. has no framework for justifying a regime change in Iran, and it will never work. Let’s suppose we or the Israelis work together to kill the supreme leader, Ayatollah Khomeini, who after returning from exile, replaced the Shah, favored by the West but not within Iran. This event would just unite the Islamic Revolutionary Guard Corps. dedicated to obey and protect the Ayatollah, and the Quds Force, dedicated to foreign operations and subversion. Now a united military dictatorship would succeed a nominal theocracy. Russian participation and support would not be unexpected. This outcome could be worse than the precarious status quo.
Our hapless press asks “Where is the resistance in Iran?” The same place it wasn’t in Afghanistan. Western values of capitalism, social and religious freedoms, and tolerance were anathema to the Afghani populace as they are in Iran. Even after our limited progress in Afghanistan, polls taken around the time of our helter skelter exit, showed that ordinary Afghani citizens saw America as an imperial power, were not in favor of women driving or working, and believed that their society should live under Sharia law.
Let the Girls Play Their Sports
The NCAA has reaffirmed its position against men, or men presenting themselves as women competing in women’s sports because of Title IX protections. Since then, in local sporting events in high school or club level sports, girls continue to have their games taken away from them. Mediocre male athletes who couldn’t excel in men’s track and field are showing up to run in women’s events, winding in higher positions than they had ever been in men’s competitions. The Senate bill “Protection of Women and Girls in Sports” act was filibustered in the Senate, with Democrats voting against as a solid bloc. A pretty gutless performance by our progressive aisle.
Thinking About Berkshire Hathaway
Warren Buffett is stepping down as CEO of BRK at the end of 2025 after 60 years at the helm. His fellow denizen of Omaha, long time friend, and operating partner at BRK, died in 2023 just before his 100th birthday. What they have created is certainly unique among the largest businesses listed on public exchanges.
Companies love to talk about their corporate cultures. Most of the talk is hot air, put out for press releases and for analysts. The cultures reflect the present CEO, and when that person leaves, usually there’s a big sigh, while workers await the new culture. These two founders had a distinctive corporate culture, which was inculcated into all of their subsidiary companies. It is easy to recite, because they have repeated it so often in shareholder letters over decades.
For the two leaders, and especially for Warren Buffett, they make it clear how their partnership works, sharing details about their different personalities and how they look at the world, markets, and at their investment decisions. Amazingly, they speak about their mistakes, and they have certainly made some big errors of commission and omission, e.g. Dexter Shoes and not investing in Walmart.
I have followed Warren Buffett since his graduation from the Columbia Graduate School of Business and his connections to Benjamin Graham, the apostle of value investing. Warren’s curiosity, personal openness and accessibility helped him amass a vast network of company owners, family offices, brokers and investors. So many ideas came to the company through his connections or company owners coming to him directly. Because of his experience, and his mistakes, he could quickly size up whether or not to do a deal and what was important to the seller. He didn’t quibble about pennies if he felt there was a good deal and a good fit in front of him.
Charlie Munger was much more of a polymath. One time he described a mental exercise he did for himself. Coca-Cola was a long time equity holding in their public portfolio, and the equity market valuation of the holding moved it up to #2 in the portfolio. He asked himself the question, “If I were to go back to 25 years ago, could I come up with a reasonable set of market assumptions which yielded the huge valuation currently shown in the portfolio? Not something an MBA prof might ask his class to do, but it sounded intriguing to me. He listed a laundry list of assumptions about how much liquids people consume, share of sugary drinks, who would make the syrup, how to run distribution and so on. At the end he came very close to his actual portfolio. He was happy, while I was amazed. Charlie also believed that understanding investor behavior and market psychology were critical in determining performance for being successful. He explored these issues in depth.
His famous words are “Warren and I do a lot more thinking than acting.” Observing and meeting these gentlemen over the years, those words resonate with me. Finally, as different as they are in approach, Warren has said “Charlie and I have never had an argument.” BRK in one shareholder letter was described as being 1/6th of the entire market in which we compete, namely the entire S&P 500. They were master allocators of capital, and over a sustained basis, that is really impressive.
My suspicion is that with both of these founders gone from the organization, it will be difficult to replicate the long-term outperformance relative to the S&P 500, which has been their legacy.With a single CEO with a pretty standard corporate background, one wonders if the culture slowly decays into something more traditionally corporate. Warren has apparently charged his son Howard with one duty: if the culture is eroding or deteriorating, Howard is free to make any CEO change he deems necessary.
With the recent significant stakes in six large listed Japanese conglomerates, there will surely be some deal flow worthy of BRK’s financing. I believe that without Warren Buffet’s personal involvement and the Japanese CEOs getting comfortable with him personally, this deal would not have happened.
I will continue to reflect on this story over subsequent posts. Have a great week, and let me know what’s on your mind.