Opinion
Davis: Private equity reporting returns without leverage adjustments is despicable
“It's just despicable that you show your returns, but you don't adjust them for leverage. Like benchmark them to the S and P with the same amount of leverage”
Insight
Davis: Asset manager incentives favor relative preservation over absolute client goals
“One of the really Deep, dark, dirty secrets of money management. Is that, you know, if you were faced with the choice of, you know, you return 10% a year for the next decade, and the market does 12, or you are zero, and the market's down two. Every money manag…”
Insight
Charlie Munger believed the intelligent loss of sales actively improves businesses
“Charlie's phrase was the intelligent loss of sales. He said, you're young and you just think more is better. More is better. More is better, but more is not necessarily better. It's who do you keep out?”
Insight
Davis: Raising kids in luxury creates unhappiness if they cannot maintain it
“What doesn't work is giving your kids a lifestyle where they will feel like a loser if they are unable to maintain that lifestyle on their own merit. I just think that, you know, if you do the Southampton, Palm Beach Aspen, like, you're creating kids that Eith…”
Insight
Davis: Wealthy parents damage kids as much by manufacturing hardship as spoiling
“I've seen just as much damage done by wealthy families trying to build character as I, as I've seen the opposite.”
Opinion
Davis: Trimming fund holdings because they grow too large is a mistake
“If I had simply bought each stock that I ever bought for the funds in a personal account and held it, then I simply never would have sold simply because something was getting too big. Whereas in the funds, I do that all the time, and it's been a terrible mista…”
Prediction Not checkable as stated
Davis: Any writing advantage humans have over AI won't last long
“I don't think it will be more effective. I mean, I think that, or if it is, it's only because I still have a little lead on AI, but Eh, it ain't gonna last for long.”
Prediction Not checkable as stated
Davis: VR and AR will replace smartphones and restore broadsheet-style reading
“It's actually one of the reasons I'm fairly optimistic that whatever replaces this shitty little, you know, five inch rectangle that we all carry around in our pocket, that is a very, very poor way to get information, this tiny little screen. And, you know, wh…”
Insight
Davis: Risking a 100% loss on an investment is rational with proper sizing
“At an individual investment level, you know, risk is about the permanent Loss of capital in that investment, and really over a course of a portfolio, because you can be taking a risk of a hundred percent loss in an investment, and it can be a very rational ris…”
Prediction Not checkable as stated
Davis: The US will only repay its debt by devaluing currency through inflation
“Certainly inflation will have to, the only way we can repay the debts that we've incurred is going to be by, you know, devaluing the currency so we can pay back.”
Opinion
Davis: Capital One at a 14% earnings yield beats single-digit real estate cap rates
“I could buy Capital One at a 14% after tax earnings yield. I mean, what's so great? I don't understand this real estate mindset that still thinks that a single digit cap rate, you know, compensates them for the risk that they're taking.”
Opinion
Davis: Private equity firms focus primarily on exits rather than stewardship
“Private equity loves to tout that they are great managers. They are always looking for the exit”
Assertion Supported
Davis: Credit ratings reliably predict auto insurance accident risk
“Somebody's credit rating is a great predictor of whether they'll crash their car. Well, because they're responsible and they tend not to cheat.”
Insight
Davis: Charlie Munger Dressed Conventionally to Mask His Eccentricity
“Charlie always talked about dressing conventionally, you know, wearing, he said he's so eccentric in other ways that by wearing a suit and tie, people assume that he's more conventional than he is, and that serves him.”
Insight
Davis: Money does not ruin kids, parents and genetics do
“Well, I like what, you know, Charlie said that, that money doesn't ruin kids, you know, parents do, and I would add genetics can too.”
Opinion
Davis: Hewlett-Packard board bears responsibility for decades of bad leadership decisions
“I would certainly argue that both Hewlett Packard and Koch, the boards had a lot of accountability for decades of bad decisions. And it was bad decisions on what is the board responsibility, which is who's in charge.”
Prediction Not checkable as stated
Davis: Oppenheimer Will Probably Attract More People to Physics Than STEM Funding
“Oppenheimer will probably draw more people into physics, you know, than STEM funding in high schools will.”
Insight
Davis: Writing is about what you learn for yourself, not the client
“The writing is not about the product for the client. It's about what you learn by writing for yourself.”
Assertion Not checkable as stated
Davis: Grandfather Levered Up on Margin in 1975 After 80% Drawdown
“My grandfather had been living overseas. He was ambassador from 68 to 75 in Switzerland. And he comes home and he's like, this looks great. Now his net worth was down 80%. You know, huge loss but he hadn't experienced it viscerally. So he just came in and he w…”
Insight
Davis: Banks go illiquid before insolvent; insurers go insolvent before illiquid
“Banks go illiquid before they go insolvent, and insurance companies go insolvent before they go illiquid”
Disclosure
Davis Advisors suffered a 90% single-day dilution on AIG during 2008
“Then bam, one day we're down 90, 90% diluted in a single day. And of course you couldn't, couldn't recover. And by the way, when it was all fully said and done, it was probably more like 95%.”
Disclosure
Davis: De-risking from Wells Fargo to Nestlé in 2008 led to underperformance
“So, we de-risk the portfolio. Now, I had studied my dad enough to know that going to 30% cash was not the right thing to do, but it may have been, you know, selling some wells and buying Nestle. That ensures that if the crisis gets worse, we're gonna own busin…”
Insight
Davis: Max-betting every positive expectation edge guarantees ruin
“It was such an insane theory. To think that, you know, the theory would say bet it all every time that you have an advantage. And if everybody did that, you would get a better outcome net. But of course, it's an insane theory because you're certain to end up a…”
Assertion Not checkable as stated
Davis: Berkshire is managed assuming shareholders have 100% net worth in it
“Berkshire is run with the idea that some, that, that from the very beginning that the people that were invested in Berkshire had a hundred percent of their net worth in Berkshire.”
