Left the meeting sad and depressed

I’m a long time Berkshire shareholder and fan.
I bought the second and third charity lunches with Warren Buffett in 2001 and 2002, and have attended almost all meetings in the past 25 years.
So much of my life and financial standing is directly a result of my exposure to WEB and BRK.
Which is why it pains me to write this.

  1. The first 2 hours of the meeting were a total embarrassment.
    Warren was slow, rambling and off on tangents that were ridiculous.
    In the past 3-4 in person meetings, it took Warren a half hour or so “to get warmed up” and during this time there would be a lot of uh’, uh’ uh.
    Yesterday was a two full hours and he never made any point in anything near a clear and concise way.
    You could feel Becky melting up there on stage, watching this happen.
    Things got better around 11:00am and the afternoon was decent but not remarkable. In the past past you were late shaking your head after every single question thinking" Can you believe this guy is xx years old? He is sharp a tack!". Not yesterday.Warren looked and sounded every day of his 91 years of age.

That being said, Charlie was totally on top of his game. Just amazing to listen to.

  1. The answer from Greg was really unacceptable. He sounded like a politician trying to B.S. his audience. He also seemed utterly unprepared for the question. If this guy is going to accept mediocre results in comparison to the competition, then Berkshire does not have a rosy future. Yes, he proved himself to be an amazing deal maker building Mid American but this appearance was very troubling.

  2. It seems like there is a weak bench at Berkshire. Matt Rose retired as head of BNSF, probably because he was passed over as heir apparent. Is Greg taking his place in addition to overseeing all operating businesses? Does not seem right.

Ajit’s response was dead on. It’s obvious that GEICO under Tony Nicely ran behind in technology compared to Progressive. Ajit plainly stated this. He is on it and is righting the ship, but do we have no one who is actually thinking about GEICO and just GEICO every moment of every day. Is Ajit now in charge of GEICO in addition to all his other insurance operations? Does not seem right.

Warren built BRK with the idea you hav ajob for life as the head of your division. It seems this strategy is now coming back to haunt us.

Also, it’s absolutely ridiculous in my opinion that Warren and Charlie are not passing the baton to their successors while they are still alive. It would man so much more to these people vs inheriting a position due to death. It’s really not fair or good business.

It will be interesting to see if the entire media world gives Warren a pass on his embarrassing performance/appearance yesterday. I don’t expect CNBC to say anything negative due to their entrenched partnership, but will others?

I’m not running out and selling on Monday, the positive forces and huge Berkshire might and momentum will most likely carry it for a while, but I certainly have no confidence in what BRK will be 20 years from now in this rapidly changing world we live in.

As someone that has lived with complete confidence on the 20 year future of BRK for almost my entire adult life, this is personally unsettling as I confess to not having the confidence to make big moves with big money on my own. I guess all great things must come to pass.

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It seems like there is a weak bench at Berkshire

Berkshire they way it is structured now, doesn’t attract top talent. They end up having some top talent via acquisitions but they were primarily structured to run the business, and send the cash to HQ for Warren to create alpha.

After Buffett that alpha creation will vanish, even though many think T&T can sustain/ continue that, I doubt it. Most folks don’t totally realize how exceptionally unique WEB is, how extremely hard to generate $100 B alpha from investments.

There are businesses with great household recognition like SBUX do not have $100 B market cap. Berkshire will exist after Buffett, but the level of success enjoyed during these years are going to be very, very hard to replicate.

At some point, post Buffett, shareholder base will change.

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Really great post - thanks for taking the time to lay that all out there.

I see a lot of people expressing frustration with the “weakness” of Greg’s answer on the BNSF question. To me, it seemed like he was trying to be very diplomatic in saying that BNSF was not going to follow the other railroads into Precision Scheduled Railroading, which is essentially what the question was asking and is what Greg was addressing. When he keeps repeating “customer centric” and focusing on serving our customers - that is a diplomatic way to say “No PSR at BNSF.” PSR is not popular with customers. It is also very disruptive, which was Warren’s point at the end of Greg’s comment. Just because the competition is doing something and reporting leaner ratios, doesn’t mean BNSF’s management believes it is the right decision long term. BNSF can be run like a private company and can make decisions that appear unconventional compared to the publicly traded peers. I suspect BNSF is spending more than their public peers to build a better network for the very long term. PSR also may not be as well suited to the longer routes BNSF runs or some of the qualities that are unique to BNSF.

I also think it’s important to note that Greg Abel doesn’t run the railroad. Katie Farmer does. Just like when the BNSF CEO reported to Warren, the CEO is still the CEO and they get to run their business without much interference from headquarters.

On GEICO, I think you are probably aware that Todd Combs is the CEO of GEICO. I don’t love this arrangement either as GEICO is important enough to deserve a full-time, experienced and talented Chief Executive. Ajit is a wonderful insurance executive, but like Greg, he is not running GEICO - the CEO is. Ajit also doesn’t strike me as a manager with much flair for running a consumer business like GEICO. GEICO stuck with what was working for them in setting rates for many years and after a while it became apparent that Progressive and others using telematics might be taking the cream of the crop and leaving GEICO with a form of adverse selection of less safe drivers. I know I personally don’t sign up for telematics because I drive very fast and don’t want my insurance company to know that (I use USAA for auto insurance). But telematics was more costly to institute early on when it needed a device plugged in to your car’s OBDII port - something that likely gave GEICO pause early on. Modern telematics can be less expensive if customers are willing to use an app on their smart phone.

I am more puzzled by GEICO continuing to be very aggressive on price quotes currently. I have heard multiple stories of GEICO quotes coming in very low recently, compared to the discount/direct competition. PGR is raising rates as they have wall street combing over their results monthly. GEICO appears to be making a calculated decision to forgo profitability in this period and has reduced both headcount and advertising spend in Q1, which was unexpected (to me).

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It will be interesting to see if the entire media world gives Warren a pass on his embarrassing performance/appearance yesterday. I don’t expect CNBC to say anything negative due to their entrenched partnership, but will others?

I’m sorry you found the meeting embarrassing and depressed about Berkshire’s future. It’s not a view I share having watched it.

The key thing is to use the appropriate “base-case” for comparison. If your point of comparison is Warren as he was when younger then inevitably this was a rather free flowing and rambling performance from a much older man still running the meeting in a format he developed for his particular skillset when much younger. However if your point of comparison is any other CEO of any age who conducts a free form 4-5 hour meeting then I think you might be a bit harsh in judging him.

Munger appears sharper partly because he speaks a lot less and does not talk through the key capital allocation decisions Buffett takes time to go through in detail ( while often going of on a tangent lately).

The crucial question is of what relevance is the performance in this meeting format to Berkshire as an investment. I would argue not very much at all. Very few other companies conduct sessions with their CEO like this and my takeaway is that it may be time to retire this format of 4-5 hour free format discussion and questions. The content is fairly predictable, previous meetings are all available on demand and the key characters are clearly coming to the end of their abilities to sustain this effectively. The prospect of spending dollars to travel up to listen to 4-5 hours of Abel and Jain is a very tough sell. Some version of what Constellation Software does ( frequent answers on the website to questions submitted by shareholders) might be the answer.

That being said, none of this makes a difference to Berkshire as a business. Buffett is still performing very well as a capital allocator, is as sharp as ever has cut out virtually all TV interviews and no longer runs the operations which are delegated. There are questions I too have about the bench but having seen Buffett’s faculties in his latest appearances I do not see any evidence of deterioration in anything apart from precision in verbal communication.

I suspect a lot of the disillusion comes from having very high expectations of a “show” on AGM day.

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may be time to retire this format of 4-5 hour free format discussion and questions.
I think local economy gets a great boost from this. It is one of the consideration weighing on Buffett’s mind.

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The prospect of spending dollars to travel up to listen to 4-5 hours of Abel and Jain is a very tough sell.

Berkshire has mastered the art of the Annual meeting. This is not about the company but about Buffett. Now it is fair that post-WEB world AM is not going to be great. Separately, it may be beneficial to hear from Ajit on the Insurance business, you can actually learn lot of insights. I doubt we will learn much from Abel, irrespective of this command of the subject.

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It’s clearly WEBs canvas, he thinks about it day and night, the bench come across as corporate and siloed and don’t have the “big picture” vision, it’s ashame and the end of an era.

I attended the meeting with my 29 year old son. His first meeting. Wanted him to see these guys before they die. Had a good time.

Asked him what he thought after the meeting.

Son: “I thought Mr. Buffett rambled a lot.”

Me: “Was there anything you liked?”

Son: “Of course, seeing Bill Murray in person next to the Jimmy Buffett boat.”

He did observe Bill Murray, Tim Cook and others sitting and listening intently in the V.I.P. seating section. Maybe that made an impression.

I thought the talk of nuclear destruction put a dark tone over the meeting pretty early.

Munger lightened things up with the following: “I do know a man that claims if a nuclear conflict begins, I’m going to crawl beneath my desk and kiss my ass goodbye.” He added: “Berkshire has no means to save lots of the world from nuclear conflict.”

To which Buffett quickly added: “Charlie is in charge of Berkshire’s risk management.” :grin:

Not a bad comeback for a 91 year old. Don’t think he’s lost all of his marbles…yet.

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Munger lightened things up with the following: “I do know a man that claims if a nuclear conflict begins, I’m going to crawl beneath my desk and kiss my ass goodbye.”

That may be true for a full-grown man, but what about the children? I was in grade school in the 1950’s and we children were instructed to shelter under our wooden desks. The implication is that this would keep us safe. If it was not true, could they have said it?

Lewis Black was a child back then and remembers the same thing. His takeaway was that if the school playground was turned into the same temperature as the sun, teachers and monkeys would be thrown through the air, but the children would be safe. They would be writing poems and playing flutes under the kindling that was their desk. I have two 1950 era wooden school desks in the garage. In case of nuclear war, that is where my wife and I are headed.

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It’s interesting to see so many people unsettled or dismayed with AM this year. For me, this was the first in person meeting I have had to miss since 1998, so I was wondering whether it was in part a matter of watching the live stream versus being there in person.
My own perception is that Warren has deliberately dialed back all the CNBC interviews and other media since the pandemic started. He would typically spend a morning post release of the annual letter on tv and always post A.M. weekend. Note that in the Charlie Rose interview he would not speak about the “current situation”
My main concern is why is he avoiding subjects or soft peddling the answers?
For example, the young girl who was a freshman and on her 5th meeting asked a pointed question about which stocks would be better in an inflationary period and if he has to choose just one……The answer he gave was to invest in your own skill set. That is a nice piece of wisdom but not at all what she was asking.

You might remember from previous meetings that he would say with pride that nothing was off the table other than what they were buying or selling.

Does he not want to be quoted about how bad things could get? Is he concerned about essentially throwing gas on the inflationary expectations wildfire?

I was thinking initially when Gates resigned from the BRK board and Warren dialed back his appearances around Covid that he may have similar motives related to not having people relying on his insights when things were so uncertain in his eyes. Obviously, Gates had lots of other personal issues going on and has become a controversial figure in many people’s eyes (not mine per se).

Could it be related to his difficulty getting the massive amounts of capital deployed and he has decided not to be as helpful to a world full of competitors hanging on his every word?
He discussed the political blow back at the subsidiaries from his personal views occasionally. I remember years ago when the pampered chef had issues with home parties due to the shareholder’s selecting certain charities for donations and he ended that program as a result.

If I had to put money on it right now (which none of us do), I’d say he sees that things could become a real sh*t show with rampant inflation while we have such huge debt levels. He’ll probably continue keeping his cards close to his vest. This would also jive with how fast he seems to be wanting to put cash to work in E&P Oil companies.
I don’t think the FED could do anything like Volker did at this juncture in our history.
It’s a topic worth kicking around for sure.
Best,
Ish

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Don’t be ridiculous. If you think WEB is mentally declined a lot, try to get answer from him about what stocks he’s buying or what’s his view on Biden’s latest tax policy etc… you will get a lot of rumbling back. He’s as sharp as ever.

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For example, the young girl who was a freshman and on her 5th meeting asked a pointed question about which stocks would be better in an inflationary period and if he has to choose just one……The answer he gave was to invest in your own skill set. That is a nice piece of wisdom but not at all what she was asking.

I think it is a great advice. There are many pundits out there who will tell you which industry has pricing power, invest in Oil, metals, yada, yada, yada. For such a young person, the advice of your skill will get paid regardless of what economy does is great insight.

For most people, still their craft/ skill are the primary source of wealth building.

The real benefit is you are picking the brain of someone who accumulated knowledge and gained deep wisdom by applying that knowledge over 7 or 8 decades is the most valuable think.

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If I had to put money on it right now (which none of us do), I’d say he sees that things could become a real sh*t show with rampant inflation </>

I got the opposite conclusion from watching him. I think he is saying there are different kind of inflations, but the current one resulted people having more money to spend, and companies and people are getting richer because of it. So he’s buying stocks (and he tries hard not to reveal that in the AGM). He is not worrying about inflation (he worries about about deflation , nuclear war etc, and praised Powell for printing money).

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Interesting take.

What if Buffett REALLY loses it…turns Berkshire into a Hedge Fund, makes crazy leveraged bets that scares every investor out of Berkshire, runs it into the ground forcing him out of the business for good, and then spends his final years running infomercials pitching himself as a legendary investor, charging people money for 1 fantastic stock pick. Crazy, right?

And, finally, Warren turns to message boards posting concerns about OTHER managers’ questionable futures? That would be the last straw for me.

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The board response is the same as it has been for the near 30 years or so I’ve been on one forum or another.

  1. Buffett doesn’t understand (in this case mostly crypto)
  2. Buffett is faultering mentally, stumbling around aimlessly
  3. Buffett led meetings are now boring compared to the past

The older we get, the better it was back then.

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Here’s an example of the kind of candor I think was missing from Saturday’s meeting given current market action. This was a follow up interview with CNBC from 2019, but this type of discourse was common in years past, especially in the meeting:

BECKY QUICK: Hey, Joe, thank you very much. And gentlemen, just taking a look at what we’ve been watching with the markets today. Obviously things are under a little of pressure today. But we have been looking at much higher markets if you go back to the Christmas Eve low. And the concern about what would the Fed might or might not be doing. Since that time the Fed has sounded much more dovish. And I just wonder if you can talk a little bit about your own take on the markets. And Bill, again, I’ve spoken with Warren and Charlie earlier about this a little bit. So how about your take? When you hear that the Federal Reserve is probably not gonna be raising interest rates any time soon, how does that change your outlook on equities or equities versus treasuries?
BILL GATES: Well, the interest rate is like gravity and all these valuations are dramatically affected by it. At the start of the year people didn’t think the ten-year bond would be where it is today. And that’s provided a lot of lift. So it was a big first quarter for U.S. equities. We still, if you look forward, are at these very high valuation levels. And so it’s hard to see that the market will be gaining a lot over the next few years. I think people should have fairly modest expectations on what their portfolios will make in the years in front of us.
BECKY QUICK: Have you changed your positions, I mean, your own portfolio as a result of this? Have you done any major—
BILL GATES: No, it’s a very equity-oriented portfolio. It’s overweight in the U.S. even though it’s got a lot of overseas exposure. You know, it’s a bullish portfolio that the American economy over time will do well. You know, fortunately, even if we have a few years here where markets aren’t doing that well, you know, we’ve been lucky we have a cushion the foundation can continue to spend generously. But I’m amazed at how high the valuations are if you look broadly.
BECKY QUICK: Charlie, do you think that?
CHARLIE MUNGER: Well, sure. I think that if you drive indices down to zero and all the countries print money like crazy, it’s lifted the asset boat for everybody. And I think it really is – they didn’t have anything else to do in the great recession. And so they took the only weapon they had and used it aggressively. I don’t think we should quarrel with that. It did cause the people who are already rich to get richer. But that wasn’t done on purpose or anything like that. And I think that will correct automatically.
BECKY QUICK: Do you think we should still be using that weapon aggressively which is what President Trump would like to see happen. He wants them to cut interest rates again. I think he said by 1%. And also push up quantitative easing once again, build up the balance sheet.
CHARLIE MUNGER: I am so afraid of a democracy getting the idea that you can just print money to solve all problems. And eventually I know that will fail. Singapore which has a marvelous economy has zero debt. If I were running the world I would like the United States to be in that position. That is not the typical. That’s nobody’s position. No, all these politicians here in America have learned to print money.
BECKY QUICK: And if we keep at these extraordinary measures for the Fed – I guess not just the Fed here, but central banks around the globe.
CHARLIE MUNGER: Yes, but who knows when money finally runs out of control? And at the end, if you print too much you end up with something like Venezuela.
BECKY QUICK: You’re not suggesting that happens any time soon?
CHARLIE MUNGER: No, but I don’t like the idea. And both parties, you have politicians that say, “what we’ve learned is we can print all the money we want. We don’t have to raise taxes. We just print.”
BECKY QUICK: Warren, you share those concerns?
WARREN BUFFETT: Yeah. It probably could not have conceived the world as recently as ten years ago – I learned I would not have conceived of a world where you would have full employment, five percent budget deficits, with actually the probability of those rising from that level, and at the same time have the long bond at 3%. I would’ve said that couldn’t happen. And then people now, you have this modern monetary – there’s no question you should borrow – any country should borrow money in its own currency. I mean, that is not like it is some great discovery. Some things have been announced but
CHARLIE MUNGER: No, but it can be overdone.
WARREN BUFFETT: Yeah and that’s the point. I mean, that doesn’t solve anything just to save – it is much safer to borrow money in your own currency. But the convergence of these factors would’ve seemed impossible to me. And generally if I feel something is impossible it’s going to change. Over time, I don’t know in what way, but I don’t think we can continue to have these variables in this relationship. Now if we can, then stocks are ridiculously cheap.
BECKY QUICK: The one thing I will say though is this is a conversation I feel like we’ve had for at least four or five years.
WARREN BUFFETT: Right.
BECKY QUICK: Where you’re watching and continuing to wait for these interest rates, the yields to rise. We’re still sitting at 2.5% on the ten-year, which is shocking.
WARREN BUFFETT: And we’re sitting with very, very little inflation, with a Federal Reserve that put a target for 2% on it not that long ago. And it looks like nirvana. It looks like we found the promised land where we just essentially money doesn’t cost anything and you can print lots of money and have full employment and no inflation. And I would’ve thought that something would’ve happened before now. I don’t know what would’ve happened. But I wouldn’t think you could have these things at these levels – the long-term rates, inflation rates, budget deficits – and have that be a stable situation for a long period of time. And I still believe that. But so far I am wrong.
BECKY QUICK: So in the meantime you haven’t really changed how you—
WARREN BUFFETT: I think stocks are ridiculously cheap compared – if you believe that you’re going to have 3% interest, well, 30-year bonds make sense.
BECKY QUICK: That’s a big if though.
WARREN BUFFETT: That’s what makes going to work interesting.
CHARLIE MUNGER: This threesome is comfortable if everything goes down that way 90%. So we’re now a fair cross section.
BECKY QUICK: I’m sorry, Charlie, what was that?
CHARLIE MUNGER: I say this threesome is comfortable if everything goes down by 90%.
BECKY QUICK: Oh stock prices. Equities know the rest.
CHARLIE MUNGER: It doesn’t really hurt us. Yeah, but we wouldn’t want that kind of a world, I mean, everybody else

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This is a response (I believe also from 2015) to a near identical question the young freshman gal asked. I have regularly submitted questions through CNBC asking Warren to elaborate on this issue since we are now so heavily invested high cap-ex industries. I’m sure it has to do with the sheer volume of capital a railroad and giant wind project can soak up, but it would certainly have been good to hear him elaborate.

BECKY QUICK: This is a question from John Wells, right here in Omaha, and he says, “You’ve described inflation as a gigantic corporate tapeworm. Which of Berkshire’s businesses are best suited to thrive during a period of high inflation and why? Which will suffer the most and why?”
WARREN BUFFETT: Yeah. Well, the best businesses during inflation are usually the best — they’re the businesses that you buy once and then you don’t have to keep making capital investments subsequently.
So you get — you do not face the problem of continuous reinvestment involving greater and greater dollars because of inflation.
That’s one reason real estate, in general, is good during inflation. If you built your own house 55 years ago like Charlie did, or bought one 55 years ago like I did, it’s a one-time outlay, whereas if you’re — and you get the — you get an inflationary expansion in replacement capital without having to replace yourself.
And if you’ve got something that’s useful to someone else, it tends to be priced in terms of replacement value over time, so you really get the inflationary kick.
Now, if you’re in a business such as the utility business or the railroad business, it just keeps eating up more and more money, and your depreciation charges are inadequate and you’re kidding yourself as to your real economic profits.
So, any business with heavy capital investment tends to be a poor business to be in in inflation and often it’s a poor business to be in generally.
And the business where you buy something once — a brand is a wonderful thing to own during inflation.
You know, See’s Candy built their brand many years ago. Now, we’ve had to nourish it as we’ve gone along, but the value of that brand increases during inflation, just as the value of, really, any strongly branded goods.
Gillette bought the entire radio rights to the World Series in 1939. And as I remember, it cost them $100,000, and for that they got to broadcast the Yankees, I think, versus the Reds in 1939.
And think of the number of impressions they made on minds in 1939 dollars for $100,000, and they were getting in the minds of young guys like myself. I was eight or nine. And millions of people — and they did it in those dollars then.
And, of course, if you were going to go out and try out and do — have similar impressions on millions of minds now, it’d cost a fortune. And part of that is due to inflation. Part of it’s due to other things.
But it was a great investment, which could be made in 1939 dollars that paid off, in terms of selling razors and blades in 1960 and 1970 and 1980 dollars.
So that’s the kind of business you want to own.
Charlie?
CHARLIE MUNGER: Well, yeah, but if the inflation ever goes completely out of control, you have no idea how it’s going to end up.
If it weren’t for the Weimar inflation, we might never have had Adolf Hitler. It was the twosome of the great German inflation followed by the Great Depression that brought us Hitler. And think of the price that the world paid for that one.
We don’t want inflation because it’s good for See’s Candy. (Laughter)
WARREN BUFFETT: I didn’t quite realize I was —
CHARLIE MUNGER: No, I wasn’t criticizing you.
WARREN BUFFETT: What’s good for See’s Candy is good for the United States. (Laughter)

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Yea, just more “proof” that Buffett’s rambles do have wisdom just like the super-duper-incredible “past” we all lust for…

…while we today obsess (div20 here!) that the stock price (the real focus of this board…and actually the only focus) has dropped from B’s at $360 or so to $320 or so.

No, what is boring isn’t Buffett is is the lack of mental energy that produces “My-oh-my…that dude is old and out of it.”

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And if you want real entertainment? Go over to the Saul’s board. Saul just went off on Buffett, his standard tilt when he knows that 99.999999% of his cult has lost not a small amount of money but basically extended their work life yet another 10 years, because he has a 1000% outcome in the last 4 years compared to Berkshire’s 100% or whatever.

Saul, in his infinite wisdom and of course control over his cult, has figure out how to convince them all that the further his portfolio descends the greater his return. Now people that is what we are looking for on the Berkshire board, it is called compliance. Compliance isn’t related to thinking or actual outcomes, it is 100% belief that the man in charge has all the answers at all times.

If not? We are gravely disappointed and saddened. After all we have absolutely no ability on our own to figure things out and aging is beneath us of course. We must be young and believe.

Go Bitcoin!

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we children were instructed to shelter under our wooden desks. The implication is that this would keep us safe. If it was not true, could they have said it?

In a nuclear attack, a lot of people far away will be safe no matter what they do and a lot of people closer in will be dead no matter what they do.

Any defensive measure is designed to change the outcomes that might be changeable.

Certainly, there will be a lot of structures at some distance from ground zero where there will be partial collapse of the structure and things flying through the air in the great overpressure produced by the nuke. I would think being indoors to avoid the overpressure wind and debris, (as well as the bright flash of energy which cleary hurt many in previous nukes). And indoors, I would think sheltering under structures that would give your body more protection from falling debris than, say, your shirt would give you would be a good idea.

People do not naturally understand statistical reasoning. And so they think that suggestions coming from people who do understand statistical reasoning are ludicrously stupid, because how is a school desk going to save you from a nuke that hits your school? But it is not stupid, nor is it a magic bullet.

R:

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