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Why would you use the risk free rate is my question. The risk free rate is used merely to equate one item to another. In other words, we're looking for whatever is the most attractive. But in terms of present valuing anything, we're going to use a number and obviously we can always buy the government bond.
So that becomes the yardstick rate. It doesn't mean we want to buy government bonds. It doesn't mean we want to buy government bonds. If the best thing we can find is only has a present value that's works out at a half percent a year better than the government bond. But it's the appropriate yardstick in our view to simply use to compare across all kinds of investment opportunities.
Oil wells, farms, whatever it may be. Uh now it gets into degree of certainty, too. But it's the yardstick rate. It's not because we want to buy government government bonds. But it does serve to make that a constant throughout the valuation process. In our insurance business, we really have a group of insurance businesses and and they have different characteristics.
The consistent characteristic actually is that they're all very, very good businesses. Some of them are a lot larger and have opportunities to get larger. And some of them are not so large and and have limited opportunities in terms of growth. But every insurance operation we have is a distinct asset to Berkshire.
We've got smaller uh workers comp operation. We've got credit operation credit card operation. We've got a Home State operation. We have all these different business Kansas Bankers Surety, whatever. They're all good businesses. Some of them do don't develop a lot of float relative to uh premium volume.
Uh the nature of Kansas Bankers Surety is that it won't develop a lot of float. It just happens to be the kind of business they write. The nature of comp is that it develops more float because comp claims pay more slowly. You really should think of each one of those having different characteristics.
GEICO is is entirely different to Supercat business. They're both good businesses. In terms of how we invest the money when it comes in, we invest it when it comes in. I mean it it is We'll get a large Supercat premium today. It's invested. Now, if we have a claim tomorrow, then we disinvest it, you know, and in a substantial way.
You take something like Geico, the cash flow is always going to be positive probably on that, you know, we won't have another Hurricane Andrew because we've backed out of the homeowners business to quite an extent. So, month by month the the money comes in at a Geico, and the faster it grows, the more the money that comes in.
We have so much capital that we can basically put that money into whatever makes the most sense for Berkshire. So, we have none of the either the mental or psychological constraints regulatory constraints that that the that many insurance companies operate under. They have many of them think they sort of should have this portion and this and this portion and that and so on.
Investments usually play second fiddle to the insurance business at most companies that are in the insurance business. We look at them as being of equal importance, and we run them as two distinct businesses. We do whatever makes most sense on the investment side, whatever makes the most sense on the insurance side.
We never do anything on the investment side that will impinge on our business on the insurance side. But, you really should look at each one of our businesses separately. Geico has entirely different characteristics than the supercap business. They both call themselves insurance. They both develop float, but in economic terms and in terms of competitive strengths and that sort of thing, they're two two very different businesses.
And our smaller businesses are different businesses. Some of those may grow reasonably well. We'll we'll keep working on them. Charlie? Yeah, but that If you look at a corporate stock, it's obvious you can buy any maturity of government bond you want. So, one opportunity cost of buying the stock is to compare it with the bond, but you may find that half the stocks in America you're so fearful about or know so little about or think so poorly of that you you'd rather have the government bond.
So, on opportunity cost basis, they're taken out of the field. Now, you start finding corporations but you like the stocks way better than than government bonds. You got to compare them one against the other when you find one that you regard as the best opportunity that you can understand as the best opportunity.
Now you've got one to buy. It's a very simple idea and it uses nothing but the most elementary ideas from economics or game theory. It's it's just it's child's play as a mental process. Now it's hard to make the business appraisals. But the mental process is the same. If Charlie and I were forced told we had a choice of buying stock A, B, C, or D and all 2,500 or 3,000 or whatever may be listed on the New York Stock Exchange or buying a 10-year government bond and we had to hold the stock for 10 years or the bond for 10 years.
Probably at least 80% of the cases we we take the 10-year government. You know, in many cases because we didn't understand the business well enough elsewhere secondly we may understand it and still prefer the 10% government. So but we would measure everything that way and and I don't know what do you come up with 80% or what Charlie?
Desert Island 10 years. Get the final of stock certificate or final of government bond, which one you're going to choose? But anyway I think life is a whole series of opportunity cost. Uh you know, you got to marry the best person who is convenient to find who'll have you. Investment is much the same sort of a process. I knew we'd get in trouble after lunch.
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