If you classify options as derivatives, then you're right. However, if you use that definition then the Berkshire/Goldman warrants are the simplest derivative

If you classify options as derivatives, then you're right. However, if you use that definition then the Berkshire/Goldman warrants are the simplest derivative that I've ever seen. The Goldman warrants are an option to purchase an additional $5 billion of stock at $115 per share, any time in the next 5 (now 4) years. Basically, they're a plain vanilla call option. What's really interesting about those warrants is that they behave identically to an equity purchase, only without the downside. Berkshire literally can't lose money. Plus, if the warrants are ever exercised, then Berkshire simply gets more equity. It never gets tarted up with default swaps and tranches and triggers and all that crap. The deal is the complete opposite of the 'casino' mentality that Munger is decrying. So, yeah, you might be technically correct. However, you've also got to look at the spirit of the thing.