Andrew, I think that's a really good point about the pot calling the kettle black. It’s an assumption in Buffett’s argument that Helpers don’t create value; th

Andrew, I think that's a really good point about the pot calling the kettle black. It’s an assumption in Buffett’s argument that Helpers don’t create value; they just take a portion of the pie. This is a fine assumption to make in an imaginary world, but what it requires is that any opportunities that Helpers invest in, and which go on to create value, would have been spotted by the Gotrocks family. So the Helpers don’t spot any new opportunities; they merely charge for advice on investments that would have been made by the Gotrocks family anyway. How applicable is this assumption to the real world? In the real world, there is no such all-seeing Gotrocks family that spots every new business opportunity that arises, and allocates appropriate capital accordingly. If there had been no venture capitalists (who are one kind of Helper) to invest in Sergey Brin and Larry Page when they were starting Google, say, there is no real world Gotrocks family who would stepped in and invested in them. In the case of Google, the VCs did not just take a portion of the pie that would have been created anyway. The Helpers here are partly responsible for the value that Google created. The actual distinction between a Helper and a non-Helper is not very clear either. If a Helper is an allocator of capital, then all companies are Helpers. VCs allocate capital by buying chunks of companies that, they hope, will create value. Microsoft, say, allocates capital by hiring programmers who, they hope, will create value. Is it possible to draw a distinction between kinds of activities that are value-creating, and kinds that are not? It is hard to see how one could. Perhaps one could try to argue that the activity of buying chunks of companies (as VCs do) is inherently less value-creating than the activity of hiring programmers (as, say, Microsoft does). It doesn’t seem that this argument could work even in principle, as a company that hires programmers, for instance, will frequently pay for them with cash that they have raised from VCs. If the programmers hired by the company create value, the VC is partly responsibility for that. Buffett’s argument is beguilingly simple, and it took me a while to think through what its assumptions are. When you think it through, it really does look like the key assumption is that Helpers don’t create value. And it seems that this assumption could only be true in Buffett’s imagined world if all business opportunities invested in by the Helpers would have been invested in anyway by the Gotrocks. This is the point where Buffett’s model fails to apply to the real world; there is no real world counterpart of the Gotrocks that would find and invest in business opportunities if Helpers did not exist.