|
 |
| ||
The Berkshire Hathaway meeting is always interesting.
Sometimes you learn new things, and sometimes you get important reminders.
Ajit Jain give me one of those reminders that I want to share with you today.
 |
Who is Ajit Jain?
Ajit Jain is the Vice Chairman of Insurance Operations for Berkshire Hathaway.
He’s widely considered the greatest insurance mind in history.
When he joined Berkshire in 1986, he had zero experience in the insurance industry.
Warren Buffett had a single meeting with him, and hired him on the spot.
He said that talking to Ajit for 2 hours before hiring him was ‘like striking gold.’
A $100 Billion Man
Jain essentially built Berkshire’s reinsurance business from scratch.
His specialty is ‘super-cat’ (super-catastrophe) insurance that underwrites massive, complex risks that no other firm in the world has the stomach or the capital to handle.
It is estimated that Jain has created well over $100 billion in value for Berkshire shareholders.
He is the architect of Berkshire’s massive insurance float (premiums collected before claims are paid), that provided the capital for Buffett’s stock investments and acquisitions.
In his 2022 Annual Letter, Buffett wrote that Berkshire’s success was the result of “about a dozen truly good decisions” made over 58 years.
Buffett didn’t provide a list in that letter, but the consensus among Buffett experts (and Charlie Munger) is that hiring Ajit Jain is almost certainly #1.
Charlie Munger famously stated that the search fee Berkshire paid to find Ajit was the single best investment the company ever made.
“If Charlie [Munger], I, and Ajit are ever in a sinking boat and you can only save one, save Ajit.”
-Warren Buffett
Ajit’s Reminder
For those who prefer reading to video (I’m with you), here’s the transcript of what Ajit said.
“You know, insurance, much like investing, is a game that requires patience. And it is very difficult to get people to sit back and do nothing.
When I recruit people, my modus operandi—I tell them right up front—I said, I tell them, ‘Your job is to say no.‘ You will get bombarded with deals day in and day out, but your base case is just say no.
I said every now and then, you will come across a deal that will hit you with a 2x4 and it’ll be screaming money. That’s when you come to me and we’ll make a decision whether to do it or not.
You know, all kidding aside, it is very difficult to sit there and do nothing while everyone else is being wined and dined by brokers and taken to London. So I think the real test of being successful, certainly in insurance and therefore investing as well, is the ability to say no.”
Why Saying ‘No’ Is Important
Having ‘no’ as your base case as an investor is the right position.
Here’s why.
You have limited time.
There are 60,000 stocks in the world.
You can’t possibly look at every single one.
Your first goal should be to find reasons to say ‘no’ as fast as possible.
For each company, you look at, ask:
Do I understand how the company makes money?
Does this company interest me?
Can I make an educated guess about where this company will be in 10 years?
As soon as you say ‘no’ to any of these questions, move on.
Warren Buffett famously went through the Moody’s Manuals page by page.