My Days of .Com
Future of Interactive Advertising

Some Buffet Wisdom

Written by Mihai Dragan on Wednesday, March 3rd, 2010 ( Start discussion )
Tags: insurance, investment, money, warren buffet

Although it’s not the focus of this blog I sometimes read things regarding investment. And who else is better to read than Warren Buffet. While I was reading  his annual letter to Berkshire Hathaway (thanks Lee for pointing it out) I’ve stumbled across some interesting view on the Insurance industry:

“Insurers receive premiums upfront and pay claims later. In extreme cases, such as those arising from certain workers’ compensation accidents, payments can stretch over decades. This collect-now, pay-later model leaves us holding large sums – money we call “float” – that will eventually go to others. Meanwhile, we get to invest this float for Berkshire’s benefit. Though individual policies and claims come and go, the amount of float we hold remains remarkably stable in relation to premium volume. Consequently, as our business grows, so does our float.

If premiums exceed the total of expenses and eventual losses, we register an underwriting profit that adds to the investment income produced from the float. This combination allows us to enjoy the use of free money – and, better yet, get paid for holding it.

Insurers receive premiums upfront and pay claims later. In extreme cases, such as those arising fromcertain workers’ compensation accidents, payments can stretch over decades. This collect-now, pay-later modelleaves us holding large sums – money we call “float” – that will eventually go to others. Meanwhile, we get toinvest this float for Berkshire’s benefit. Though individual policies and claims come and go, the amount of floatwe hold remains remarkably stable in relation to premium volume. Consequently, as our business grows, so doesour float.If premiums exceed the total of expenses and eventual losses, we register an underwriting profit thatadds to the investment income produced from the float. This combination allows us to enjoy the use of free money – and, better yet, get paid for holding it.”

Recession as the Status Quo

Written by Mihai Dragan on Tuesday, November 25th, 2008 ( 4 responses )
Tags: money, recession, status quo, value, vision

Two years ago I’ve started my business with no capital. Just hard work and decent reinvestment of the profit. No credit, no investor, no nothing. I was knocking on the doors, meeting 3-5 clients a day, getting a new one every week. It was hard work and I had to do everything. I designed, developed, sold, invoiced, managed the account, report, met the client. Everything.

In two months it was too hard for me to do it all by myself and I had to work with a colleague freelancer, mr. Buga who later became a partner in the company. Andrei was the first actually, even before Alex, and we formed a nice little team. We had lots of fun together and launched some pretty cool projects.

… But cash was hard to get and every penny was carefully managed to pay the rent, the salaries, the incentives and others. I had many sleepless nights wondering how will I manage to get the payments in time, pay the salaries and keep everybody happy and motivated.

I always thought that, with time, it gets easier. It doesn’t. These game is not for the weak. There is always something that keeps you awake at night and there is always something that doesn’t go according to plan. But I had something that kept me going.

That was my promise to myself and to the world that someday we will be the best Interactive Agency in the world. It was the hope and the dream that kept me going. It was every campaign, website or product we’ve launched and every time we got together and congratulated each other on the work we’ve done, only to start again next day.

It was NOT the money. It never is. Businesses (and Interactive Agencies are businesses) are ran by people. Not by money. They are build with hard work. Not with money. They offer the world ideas, satisfaction and solve problems. It sounds idealistic but it isn’t. Check the economy manuals. Money is virtual. The thing that matters is value and value is not affected by the recession. It survives bubbles, it survives recession.

You see, some people, like me, think of recession as the status quo. Because, in the words of Steve Jobs you must “stay hungry, stay foolish”.