 Wallen Buffett is the king of all stock market investors, one of the richest men in the world and he's known as the Oracle of Omaha, the place where he stays in the United States. He's revered by stock market investors and punters across the world for his great insight and ability to pick businesses and stocks. But do you know what Buffett himself considers to be one of his smartest investments? No, it is not just any ordinary company, it's not something that produces something and therefore its stock price goes up. It is an insurance business that he bought some 55 years ago. And after that he bought more insurance businesses and put them together. And now Buffett's company, Berkshire Hathaway, is one of the biggest insurance companies in the world. Now why would he buy an insurance business? Because on the face of it, insurance seems like a loss making business, right? Because people give premiums which are pretty low over a period of time and let's take the example of life insurance. They give us small premium and when they die, their family gets much, much more than the total amount of premium that they've paid and if it's life insurance then the payout is for everyone because everyone ultimately dies, right? The business itself does not change fundamentally whether it is car accident insurance, whether it is property insurance. Yes, the payouts might be lower but the payouts are also faster. So if insurance businesses have to pay out more than the premium they receive, how do they make their money? This is where the concept of insurance float comes in. Now each person who buys an insurance product might be paying a small amount of premium but when you add up hundreds and thousands even millions of people who are buying insurance products and paying premium then the total amount of money coming into an insurance business is huge. And remember this is a stable amount of funds which lasts for a very long time because payouts are not immediate, they take years to come. This huge amount of funds that an insurance business controls is called its float. Do understand that the total cost of a float is usually higher than the premium that comes in. That is over a large period of time but as Warren Buffett's company has shown that if the insurance underwriting or the fact that who are the people who will get an insurance product or an insurance claim is strictly monitored then you can actually make a small modest profit but that is not the reason why Buffett buys these insurance companies or has bought these insurance companies in the past since interest is in the float because it's bit like getting a loan for free in fact getting paid for taking a loan because let's say that you needed a million dollars that you wanted to invest in either buying a company or in a business or even in the stock market you would want to go and take a loan from somewhere and you'd have to pay a high interest rate. What happens when you have an insurance business people are paying you premium to keep that money with you and when you add up everyone you get a million dollars which is free for you to invest. Now most insurance companies tend to be conservative they invest in long-term bonds, stable bonds because they want to be sure that they can pay out. Warren Buffett uses that money to also invest in other businesses partly in government bonds but also in the stock markets to get a higher return so this is a huge investment company a holding company Baksha Hathaway owned partly by Warren Buffett and several other billionaire shareholders and big money rich shareholders who control some of the biggest funds free funds insurance float in the world. This is one of the fundamental conditions of success in capitalism to have access to funds. Capital big gets capital if you have money you're likely to make more money. Now I'm not undermining Warren Buffett's acumen his genius his ability to make money through picking correct stocks and betting on the correct businesses. Without his genius he wouldn't have been Warren Buffett but without the money that he's got the big capital that people handed over to him rich people handed over to him and the float he controls through the insurance business he would not have been Warren Buffett either. As I said those who have capital become even richer under capitalism free market conditions, engender, increase inequality because those who start with higher capital earn and accumulate more. Only government intervention progressive taxes, dole, unemployment benefit can actually stop capitalism from imploding under the weight of the inequality to engenders. The smartest capitalists like Warren Buffett actually know that capitalism can only survive if a little bit is taken from the billionaires from the richest people and then redistributed amongst the poor. Function of government is not something to get bigger it may be in an important way to take care of people who for one reason or another get left behind in a market system. Because without that capitalism cannot be stable. That's the final part of our three-part series on what Warren Buffett knows about capitalism that you don't and why he is rich and you aren't. Keep watching NewsClick, like our channel, subscribe to us, like this video and share it as well.