Make money with other people's money.

Read the poor Charlie Collection P 1 12.

Introduction: I have always been curious about what Munger is doing so much business. It was not until I saw the word "floating gold" that I realized that making money with other people's money is the best measure to reduce risks.

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Berkshire is an excellent enterprise. We are like hedgehogs (as Professor Berlin said). We only know one big truth: if you can withdraw floating deposits at the interest rate of 3% (referring to the cash premium income that Berkshire can invest before paying) and then invest in a company that can bring 13% income, then this is a good business.

The pre-tax rate of return that Berkshire can bring us is 13%, which may be a little more. Since the interest rate of the cost of capital is only 3%-this capital is someone else's money, which is obtained in the form of floating deposits-this is a great deal. Therefore, Berkshire's shareholders need not despair at all. In terms of compound rate of return, although Berkshire is not as good as before, it is still an excellent enterprise.

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This passage says that Berkshire earned a profit of 10% with floating funds.

So what is floating gold?

Cha Du Niang said: Floating margin refers to the premium paid by the insured to the insurance company. The premium paid by the insured is not the assets of the insurance company, but should be included in the "accounts payable" in the financial statements, which belongs to the company's liabilities. When the insured is in danger, he will take it out and give it to the insured for settlement.

These funds can be invested after the insurance company leaves a certain proportion of recent claims or payments. The investment income belongs to the insurance company (otherwise agreed with the insured, the investment income will be shared by the two people according to the agreed proportion).

Then it is clear here that Charlie invests with the investor's insurance money, uses his investment skills to make use of the capital, and divides the money in proportion after making money.

This is really a good business. If you make money, you can share it. If you lose money, you can only pay a lower percentage of the insurance premium. In this way, most investment risks are avoided.

Some friends often get calls from people in the stock market. These people often tell you about investment knowledge, and then say that they will provide you with quality services, and then take everyone to speculate in stocks and coins. With their profound knowledge and grasp of the current situation, they will make you earn a little money frequently in the stock market campaign, then enlarge your ambition, tease your desire, let you join insurance or funds, agree to share the investment, and they will lead the investment, thus unconsciously achieving the cause mentioned by Munger.

Even if you don't put money into their insurance, as long as you invest with them, they will always be far-sighted in risk. Finally, when you deliver the package, you will pick up the last stick and leave on the grounds that the market is not good. Your friendship boat has capsized so far, and you can't say anything. I can only blame myself for being stupid.

So in the investment market, investors always cooperate with smart people and do business with people who are dumber than him.

There is no pie in the world, what they earn is the reward of knowledge. If you lack knowledge in related fields, you can only drink soup behind you, or the northwest wind.

From the author's point of view, if you encounter this kind of thing in investment, you should learn some basic knowledge from them and then invest yourself. Don't follow the crowd and be influenced by other people's opinions and lose the fun of investing.