Over the weekend, Warren Buffett and his team hosted some 40,000 people in Omaha for Berkshire Hathaway's annual shareholder meeting. And during the event the 94-year-old announced that he would be retiring at the end of the year. This is after 55 years as CEO, which makes him the longest-serving chief executive of an S&P 500 company.

What a run. Thanks for all the wisdom that you have shared over the years, Warren. In honor of this milestone, I decided to go back and reread his last shareholder letter (which was published back in February). His comments on the insurance industry are particularly interesting, and naturally relevant to real estate.

Over the decades, Warren has talked a lot about the benefits of owning insurance companies, namely the "money-up-front, loss-payments-later" model. It creates a "float" of cash that can be invested in the interim. But the flip side of this benefit is that it can sometimes conceal a shitty business.

As a business, if you have to pay your costs up front before you sell your products or services, then it's pretty easy to determine if you're not making any money. But in insurance, there's a long-tail of liabilities that can be far more insidious and that may not appear for many years, or even decades according to Warren.

There's also climate change bringing more uncertainty:

In general, property-casualty (“P/C”) insurance pricing strengthened during 2024, reflecting a major increase in damage from convective storms. Climate change may have been announcing its arrival. However, no “monster” event occurred during 2024. Someday, any day, a truly staggering insurance loss will occur – and there is no guarantee that there will be only one per annum.

Think back only 135 years when the world had no autos, trucks or airplanes. Now there are 300 million vehicles in the U.S. alone, a massive fleet causing huge damage daily. Property damage arising from hurricanes, tornadoes and wildfires is massive, growing and increasingly unpredictable in their patterns and eventual costs.

In a perverse way, all of this is good for the insurance business. More economic risk means higher premiums and a greater overall need for insurance products. But you have to accurately underwrite this risk:

Properly pricing P/C insurance is part art, part science and is definitely not a business for optimists. Mike Goldberg, the Berkshire executive who recruited Ajit, said it best: “We want our underwriters to daily come to work nervous, but not paralyzed.”

This reminds me. I was speaking with one of our insurance advisors a few years ago and he made a comment that he was going to be "on risk for the project." I responded by half-jokingly saying "it's funny, you see only risk, and I see an opportunity to create something special for the city." Both of us then laughed, but there's obviously some truth to these two perspectives.

I guess I chose the right profession.

Cover photo by Chris Nguyen on Unsplash

Ski and snowboard resorts have people known as snow reporters. Their job is to get up at an ungodly hour, check out the snow, and then report on the conditions, so that would-be patrons can decide if they want to spend their time and money on it. The snow reporter at a resort called Sugarbush in Vermont is a young lady by the name of Lucy Welch (who in her official bio explains that she has, sadly, no relation to the "mighty Fruit Snack Empire").

On the morning of March 1 -- the day that JD Vance was trying to ski at Sugarbush -- she decided to courageously commandeer the resort's "platform" to deliver a message. Every snow report subscriber got her letter in their inbox (though I'm told it was quickly pulled from the resort's website). And since she has a great literary voice, she speaks eloquently about skiing and the mountains, and she delivers a crucial and timely message, I'm sharing it in full with all of you today.

It may have been pulled from Sugarbush's website, but this blog lives on a blockchain that cannot be censored and that is intended to act as permanent storage. Its mission is to preserve "humanity's most important data" and so I'd like to make sure that her actions and this letter do not get erased over time. Here it is:

Mar 1st, 2025, 6:49 AM: Today of all days, I would like to reflect on what Sugarbush means to me. This mountain has brought me endless days of joy, adventure, challenges, new experiences, beauty, community, and peace. I’ve found that nothing cures a racing mind quite like skiing through the trees and stopping to take a deep breath of that fresh forest air. The world around us might be a scary place, but these little moments of tranquility, moments I’ve been fortunate enough to enjoy as a direct result of my employment here, give me, and I’d guess you, too, a sense of strength and stability.

This fresh forest air, is, more specifically fresh National Forest air. Sugarbush operates on 1745 acres of the Green Mountain National Forest. Right now, National Forest lands and National Parks are under direct attack by the current Administration, who is swiftly terminating the positions of dedicated employees who devote their lives to protecting the land we love, and to protecting us while we are enjoying that land.

This Administration also neglects to address the danger, or even the existence of, climate change, the biggest threat to the future of our industry, and the skiing we all so much enjoy here. Burlington, VT is one of the fastest-warming cities in the country, and Vermont is the 9th fastest-warming state. The National Oceanic and Atmospheric Association (NOAA), a resource I use every day for snow reporting, is crucial in monitoring extreme weather events and informing public safety measures, and is also experiencing widespread layoffs and defunding at the hands of the Administration.

Sugarbush would not be Sugarbush without our wonderful community. Employees and patrons alike, we are made up of some of the most kind hearted, hardworking people I have ever met. Our community is rich with folks of all different orientations, ethnicities, and walks of life, who all contribute to make this place what it is. They all love Sugarbush because it is a place where they can come to move their bodies, to connect with the land, to challenge themselves, to build character, to nourish their souls with the gift of skiing.

Many of these people are part of the LGBTQI+ community. Many (well, that’s a stretch, we all know this is an incredibly white-washed industry) are people of color. Half are women. Many are veterans or adaptive skiers who, through Vermont Adaptive, are able to access snow sports in part thanks to federal grants through the Department of Veterans Affairs, which is also facing devastating cuts. Many of our beloved employees moved across the world through an exchange program on the J1 visa to help this resort run, and they are not US citizens. ALL of these groups are being targeted, undervalued, and disrespected by the current Administration.

The beauty of National Forest land, is that anyone and everyone is welcome to enjoy it. Anyone and everyone can buy a lift ticket. I also imagine it is incredibly difficult, and likely impossible, to say “No” to the Secret Service. I hope that, instead of faulting Sugarbush management or employees for “allowing this to happen”, you can direct your anger to the source — the Administration that, in my oh-so-humble opinion, is threatening our democracy, our livelihoods, our land.

I want to reiterate how much I admire and respect my fellow employees and managers — they work so hard to make this place operate, to keep you coming back and enjoying it and making lifelong memories. Many of them may feel the same way that I do, but their hands are tied, and for good reason. They have families to support, they have benefits and health insurance to receive, they face far greater and more binding pressure from Corporate. I am in a privileged position here, in that I work only seasonally, I do not rely on this job for health insurance or benefits, and hey, waking up at 4:30 AM isn’t exactly sustainable. Therefore, I am using my relative “platform” as snow reporter, to be disruptive — I don’t have a whole lot to lose. We are living in a really scary and really serious time. What we do or don’t do, matters. This whole shpiel probably won’t change a whole lot, and I can only assume that I will be fired, but at least this will do even just a smidge more than just shutting up and being a sheep.

I am really scared for our future. Acting like nothing is happening here feels way scarier than losing my job. I want to have kids one day, and I want to teach them to ski. The policies and ideals of the current Administration, however, are not conducive to either of these things, because, at least how things look now, I’d never be able to afford a good life for a child anyway, and snow will be a thing of Vermont history. So please, for the sake of our future shredders: Be Better Here. It has truly been a pleasure writing your morning snow reports — I hope this one sticks with you. With love, peace, and hope, Lucy Welch

Lucy, thank you for your bravery.

Cover photo by Joel & Jasmin Førestbird on Unsplash

Here's an excerpt from a recent post by Scott Galloway talking about LA's devastating wildfires:

The question isn’t whether to rebuild, but where. Pacific Palisades is a wonderful place to live, but those amazing views of beautiful topography of foothills, mountains, canyons, and ridgelines are located in fire zones. Early estimates put the total cost of the wildfires at $250 to $275 billion. The property insurance bill is expected to easily top $20 billion. California’s insurance market was already in crisis, as leading insurers had done the math and decided to leave the state or not renew policies in fire-prone areas. California’s state-backed FAIR Plan is the insurer of last resort in these areas. Statewide, the number of FAIR Plan policies in 2024 increased 40% from 2023, and 85% in Pacific Palisades. Continuing to underwrite wood-built craftsman homes in Altadena (median home value: $1.3 million) and mansions along PCH is a wealth transfer from California’s taxpayers to some of its wealthiest people.

This isn’t unique to California; 10 states across the political spectrum, including Florida and Texas, sued a federal flood insurance program after it adjusted premiums to better reflect climate realities. As one meme put it: You may not believe in climate change, but your insurance company does.

He's not wrong, though I'm sure that the impacts of the deadliest and most destructive wildfires in California's history were felt by a broad cross section of people. And, no matter how much money you have, losing your home is going to be traumatizing. My mom's house in New Brunswick burnt down when she was a young girl and she remembers it vividly. You lose things that are priceless. Still, the questions of where and how to rebuild are important ones. Living in a high-risk area has costs associated with it. I do think it's only fair to ask who will be underwriting these costs.