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William Green's avatar

This is a very nice piece. Thanks. Warm wishes, William Green

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Arthur Clarke's avatar

Kevin, thanks for your commentary. It prompts a couple of stories. It the early days of the personal computer and the ability of spreadsheets to calculate to 3, or more, decimal places, I was invited to give a talk. It had two titles: Why is my computer not registered as an investment advisor? And: Warren, why are you so smart? The answer to the second question was simple: Warren understands significance. Was it Keynes who said that he would rather be roughly right than precisely wrong? Three times I heard someone ask Warren at an annual meeting how he values a company. Each time he explained patiently that the value of a company is the present value of future cash flows/earnings. I vaguely recall that he threw in ‘estimated into infinity’. Each time he asked Charlie for a comment. The first: I’ve no comment; the second, no comment. The third time, he piped up: “In all of the years I’ve known Warren I’ve never seen him calculate a present value.” To this Warren shot back: ya, if I had to, it wouldn’t be worth it. That was a very wise exchange: you have to understand the source of value, which, incidentally, future earnings is not a vintage Graham/value source, but it ought to be obvious to you. I suspect AI might fool many into thinking they have false precision.

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