Betting on the future

Warren Buffett released Berkshire Hathaway’s Annual Report 2016 over the weekend. Media has covered extensively his comments on S&P Index Funds outperforming complex products and sector funds.

I was actually looking for more than the numbers in this 125 pages report. After all, the Oracle of Omaha will have something to say beyond numbers. And there it was, Page 23 under a section heading “The Bet”.

Somewhere in early 2000s, Wired editor Kevin Kelly and a couple of others, seeded by Jeff Bezos set up a non-profit foundation “The Arena for Accountable Predictions”. Longbets was set with a simple idea & I quote “The idea is simple. If someone makes a grandiose claim, any skeptic can challenge it — “Would you bet on that?” — and the Long Bets Foundation will keep tabs on the wager, whether it takes five years or five decades to come to pass. If proven right, a predictor can relish the victory; if wrong, the challenger gets the glory.”

So Warren Buffett set up a prediction in 2008 that ““Over a ten-year period commencing on January 1, 2008, and ending on December 31, 2017, the S&P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs and expenses.” No one challenged him. Nope, Wall Street did not. Till Protege Partners decided to challenge the Oracle of Omaha and the stake is for 1 million dollars-to be donated to a charity of choice of the winner.

In this year’s Berkshire Hathaway Annual Report, Buffett talks of this wager. He is winning by a huge margin as on date.

The numbers do not interest me. What interests me is — when thinkers of the world are waging bets on our future, who needs a crystal bowl?

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