Opportunity cost of capital
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“This show is usually exceptionally solid with regard to economic principles. However on the 29-Nov-2023 show Dave Meyer refers to zero cost of capital for Berkshire Hathaway since they use mostly money from premiums from the insurance parts of the organization.
Money (use of it as capital) from insurance premiums is not free. It's part of the premium. All insurance companies count on that part of the value of the premiums.
Your competitors will price their premiums the same way based on the opportunity cost. So you can't count on the insured to give you that aspect of the premium for free. There is no free lunch. So the characterization that this capital is free (0 cost of capital) and hence the notion that you don't "need" a return on that is simply wrong.”Read full review »
Lammk0tt via Apple Podcasts ·
United States of America ·
11/30/23
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United States of America ·
08/14/12
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08/05/09
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D. Generate via Apple Podcasts ·
Great Britain ·
05/03/11
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