Interesting link. Thanks for sharing that.

My favorite businesses?

So far, Internet Marketing. Partly because it fits my current lifestyle (I have 3 young kids) and it allows me to work at home.

That part is priceless.

Also, because Internet marketing has such low start up costs, it’s insanely profitable if you do it right.

But this is not to say what types of businesses I would get the most enjoyment from.

Down the line, I’d like to possibly open a nightclub or a restaurant. I worked in a nightclub for several years when I was in my early 20’s and loved the experience.

Now, I know that nightclubs and restaurants are notoriously tough businesses to run, and have large start up costs.

Both of those, in addition to the fact that I care for kids most of the day at the current stage of my life, prohibits me from pursuing these ventures at the current time.

I am also in a radical expansion of my Internet marketing training service to a level that I never dreamed of. Whether it’s successful or not remains to be seen. But I have the right partners now that’s for sure.

If it becomes extremely successful and I am flush with cash, then I may pursue the nightclub and/or restaurant idea (and probably lose it all right back!) :)

Regards,
Dan

Believe it or not, even General Motors used to earn good returns on capital. Check it out here:

http://books.google.com/books?id=uj6te3wYm_0C&pg=PA234&lpg=PA234&dq=General+motors+annual+report,+1950&source=bl&ots=BOOEtJmk_k&sig=1OIZULl2vzx1ESLCTtcuLx8v-Us&hl=en&ei=IiUISpr3L5PoMKjsxZcG&sa=X&oi=book_result&ct=result&resnum=2#PPA238,M1

(Sorry for the long link, but my blog editor has some limitations)

As far as businesses that I’ve been involved with I am most happy with where I’m at right now - in terms of being positioned to invest in distressed assets (like real estate) and heavily discounted stocks.

I enjoyed the vending machine business a lot as well. That company didn’t scale as nicely as I thought it would, but margins were great and I enjoyed having a cash business - not having to worry about collections. Also, week after week the machines were like a little army of cash generators - not a lot of up and down cash flow. Although employee problems were tough, decentralized autonomy was beneficial in great customer service.

How about you?

Actually, it’s not more response than I was looking for. I, too, often consider thoughts just like that which you proposed.

Admittedly, I haven’t followed Buffett’s career too closely. I have a couple of books about him and his investing strategies and will listen to what he says when he gets media coverage, but that’s about the extent of it.

I would be curious to know what his politics were before he was rich and famous. Was he still the big government advocate?

In any event, I judge people by their actions, not their words. If I can’t see their actions, then I will default to what they say.

If Buffett thinks taxing the rich is a good thing because the government needs the revenue, then he should sell his stocks at the end of each year he has gains on them so he can incur as high of a tax penalty as possible and help out good ‘ole Uncle Sam.

But we know his strategy is to actually buy good businesses and perferably own them forever. So, obviously his actions belie what he advocates verbally.

I should hope that if I were ever in a position where going against what I believed inwardly enriched me financially, I would stay true to my convictions. I believe money is important and a very good thing, but, of course, it certainly isn’t everything.

And certainly not worth compromising one’s integrity to attain.

That’s interesting what you say about returns on capital intensive businesses. I didn’t realize they were higher in the beginning. But, it does actually make sense.

Out of all of the business endeavors that you’ve personally been involved in, what were your favorites?

Dan

Thanks a lot for commenting. I always look forward to your take.

I have a conspiracy theory with regard to Buffett’s politics. I suspect that some of his views are geared toward continuing to build the Berkshire Empire.

What I mean is, if he were to come out and take more conservative stances on things (e.g. less government involvement in private enterprise, lower taxes, etc.) he would look like a huge bully. He would look like the rich man who “just doesn’t have enough.” Popular opinion would abhor his stances and he would lose chances at buying the $1 Billion+ family owned gem businesses (a la Clayton, Iscar, Flight Safety, etc.) By joining the ‘party of the little man’, he has a softer side to the brutal swashbuckling capitalist that many might otherwise view him as.

Again, just a thought.

As far as capital intensive businesses go, I am afraid I must also concur with you and Buffett.

I don’t think capital intensive businesses start out achieving low returns on capital. Think of the auto industry in its first 30-40 years, the airline industry in its first 20-30 years (Howard Hughes vs. Juan Tripp) and many others. As industries mature, returns on capital employed tend to decline as increases in productivity are forced through the companies to the end customer, resulting in lower prices for goods like textiles amid huge Capex and lower profits for the manufacturer. Increasing competition also drives returns in these industries down, as patents expire and sophisticated manufacturing processes are learned and adopted by competitors.

Anyway, more than you probably were looking for in response - but this is fun stuff!

Glad to see you back. Sounds like you had some fun. Thanks for the summation.

As you can probably imagine, I’m not a big fan of Warren’s politics or his belief that the bailouts were a net positive thing. Then again, the nature of capitalism is you can be one of the best capitalists in the world and not appreciate or even really understand the theory of it.

Obviously, Buffett is a business genius, no disputing that.

I really enjoyed the Q and A of their preference of non-capital intensive businesses. I couldn’t agree with that more. In fact, when I look back at my business history, it’s always been the things that cost the least that made the most.

And, it’s always been those things that required the biggest capital outlay that produced the least (or worse, lost money).

Regards,
Dan