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Comment by tdees40 | Hacker News Reader

I'm genuinely fascinated by this comment. You're saying that mutuals offer lower prices (not typically true), but they were out-competed by private companies? I'm not sure that makes sense. In my sector (life insurance), there's no real pattern to mutual vs public company pricing, but maybe it's different in auto insurance, for instance.

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It goes beyond pricing. Mutual insurance policy owners were paid dividends based on principle investment. Berkshire pays dividends to shareholders, i.e. Warren Buffet, while policy holders get nothing but insurance coverage.

> Berkshire pays dividends to shareholders

Berkshire has never paid a dime of dividends to anybody.

Capital gains are equivalent to dividends, just with better tax treatment. You are "technically" correct though, which is of course the best kind.

Not only has Berkshire never paid dividends, as another comment noted, Buffett decided three decades ago to give all of his wealth away to the benefit of less fortunate people.

What's your next premise?

In the abstract, giving away the proceeds to a cause you support isn't really a tremendous excuse for bad behavior.

I'm not evaluating Buffett either way with that statement, just pointing out that it is possible and probably necessary to evaluate his behavior without giving consideration to his pledge.

I was wrong, replace dividends with stock buybacks and buying up other companies, it's the same impact on the policy holder, who will still see no financial gain from holding the policy. Did you consider that some of those less fortunate people that he donates to might be less fortunate because they've been paying into an insurance system that for 40+ years years has provided them no return?

If you want an investment you can invest, if you want insurance you can get insurance. I'm not sure why you think overpaying for insurance and getting a dividend back sounds like a great way to do both. If you pay for insurance for 40+ years you certainly got something out of it--you have been insured for 40+ years!

>> If you want an investment you can invest, if you want insurance you can get insurance.

Most people used to do both at the same time and it seemed to work pretty well before Buffett came along. And there's a good analogy to your last point - someone who rents an apartment for 40 years when they could have bought an equivalently valued home two times over. They shouldn't complain when they die with a net worth of zero, they had a roof over their head for 40 years!

Also, mutual policy holders don't "overpay" for insurance as all dividends are returned to them. Only a private insurance company policy holder could overpay. Just thinking about it now, Buffett wouldn't be so rich if his policy holders weren't overpaying, as you're implying.

They didn't just have a roof over their head, they had a roof over their head without bearing the risk of fluctuating real estate value.

Insurance and investment are two different things. Why combine them?

Buffet decoupled investments from insurance, because he thought (IMO rightly) they should be different products. And his companies only win to the degree that consumers choose them.

That’s a great thing.

Consumers don't as a group "choose" anything independently in the sense that their biases and psychological faults and the structure of incentives in our society are all used to make consumers act against their own interests and the interests of the whole. When our "best and brightest" are only committed to profit, we cannibalize ourselves. It isn't progressive. There is no scenario where shitting on the masses to help yourself results in a win for humankind. Not at this stage in history.

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