When Warren Buffett Saw The Terror Threat | The Acquirer's Multiple®

During their latest episode of the VALUE: After Hours Podcast, Brewster, Taylor, and Carlisle discussed When Warren Buffett Saw The Terror Threat. Here’s an excerpt from the episode:

Tobias: I like those ideas. I get a few comments on that. Using that precautionary principle, he realized that he had too much concentration of risk in the World Trade Center, in the towers. And so, you know that story a little bit better than I. He asked the insurers to take down some of that. Can you tell that story?

Jake: Yeah, the telling comes from Alice Schroeder probably talking out of school a little bit. She said that Buffett didn’t know, obviously, that terrorists were going to blow up the World Trade Center. Like you said, he was worried about it and the aggregation of risk there. And so, he told Ajit and then he told whoever at the time was running General Re that he wanted those contracts wound down, not resigned like, “I want to get out of this. I don’t like the risk. We’re not getting paid enough for it.” Ajit followed the orders. Whoever it was at generally did not. They ended up on the hook for, I think, it was a couple billion dollars of losses there. And apparently, Buffett was just furious, like cold fury, which not too many people have ever probably seen that side of him, but I think he does have that side. So, that’s the story.

Tobias: I think if you read the letters from around that period too, he heaps praise on Ajit in about 2002 or one of those– Like the following year, he heaps praise on Ajit and he’s obviously not mentioning the other gentleman because we don’t even know his name.

Bill: This 1890s insurance thing that I’m researching a bit. I came across this thing, there was this guy, Wiley, and he– [crosstalk]

Jake: Wile E. Coyote?

Bill: Not him. He did not respect risk enough. This was New York– [crosstalk]

Tobias: He’s indestructible though.

Bill: New York in the 1890s, and this guy was like– Or maybe it was the 1880s, whatever it was, before the big fire in New York. He would not insure any building over 80ft in height because he was like, “We can’t put the fire out and you’re going to be screwed.” And a lot of PNC companies did take that risk, and then they were wiped out. I tweeted out a little passage of this thing that I’m reading, and I said, “Imagine having the mental flexibility to be both a good underwriter and a good equity investor.” And then I said, “In 40 years, people would probably look at you and reduce you to some levered quality bet like people do to Buffett.”

[laughter]

Bill: I think he’s just like kind of guy that can both see the upside in American Express when it still is not a limited liability company, and he could come to the table with that risk, and also look at the World Trade and say, “We need to reduce our risk.” The guy’s freaking genius, man. People may say, “We nerd out over him.” You’re all wrong. People don’t talk about him enough.

Jake: Yeah, he’s underappreciated even still somehow.

Bill: Yeah, the guy’s a beast.

You can find out more about the VALUE: After Hours Podcast here – VALUE: After Hours Podcast. You can also listen to the podcast on your favorite podcast platforms here:

Apple Podcasts