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Comment by lemiant | Hacker News Reader

In general I've always agreed with this view. But I can't help but wonder how studies like this explain Berkshire Berkshire Hathaway.

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Which is funny because BH have literally the opposite bet: http://longbets.org/362/

It seems a bit contradictory, but BH is a holding company versus a hedge fund.

It's not that contradictory. As long as the market for stock pickers overcharges, people can be good at it and a bad deal at the same time.

Right but if you follow the theory if you had alpha greater than fees then you could essentially control all funds available for management (up to the scale where your atrategies stop working). Which is sort of its own reductio ab absurdum.

Berkshire seems to be good at buying and managing companies in order to make money. But not so good at just buying stock:

http://fortune.com/2016/04/29/berkshire-hathaway-stock-warre...

Not sure if this is what you're asking, but if fund returns are random but different, then someone is going to have the best performing fund.

Let's say the best performing fund is (fictional) Xanadu Investments we'd ask, how do we explain Xanadu's performance.

Berkshire Hathaway did well to begin with, but Warren Buffet is able to get really good deals buying companies because he has a reputation as a good manager. Since he is easy to work with, founders sell cheaper.

>Since he is easy to work with, founders sell cheaper.

This requires a source. Many of the companies he purchases are public companies. If they are selling "cheaper" because they like Mr. Buffet, there's a problem.

The important Berkshire acquisitions are entire companies, most of the time private. Sometimes they were public at one point but were taken private before BRK bought them. (ex: Duracell). Sometimes they were public at the point Berkshire bought them (ex: BNSF) but this seems to be the exception.[1]

The public stock acquisitions that they talk about on the 13-F are really a minority of Berkshire's activity, but sometimes he really does get a better price because he's willing and able to negotiate weird deals like the Bank of America warrants.

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