Earlier quoted context omitted.
The roaring 20s last century came about after a global pandemic
Um and a world war?
And before a crash
2020 Berkshire Hathaway Annual Letter [pdf]
41–50 of 87 posts
Re: 2020 Berkshire Hathaway Annual Letter [pdf]
#42While I'm not of these meme investors who thinks Buffett is "washed up", I confess that I've increasingly wondered if it's just sorta over. In some sense, it's not his fault. Berkshire has grown so large that it has significant scale problems. I joke that Buffett found the investing equivalent of the Donkey Kong kill screen, he basically broke the game. It's incredible. But there have been self-inflicted issues. The…
> seemingly unconditional refusal to explore technology companies
Don't forget they bought a truckload of IBM in 2015, leaving everyone scratching their heads. Probably lots of IBM'ers on here with better insight, but from the outside it appeared they were pooping where they slept: selling off hardware units, dabbling badly in cloud, offshoring key consulting operations and in general hurting their brand. Of course Berkshire sold it all in 2018 and bought more Apple.
Please tell me they didn't think IBM was a consumer company, as an alternate play to Apple in the same space as Apple? Right now it seems to be a poor services company.
Re: 2020 Berkshire Hathaway Annual Letter [pdf]
#43So Berkshire now owns about 10% of Apple, if I buy a $1,000 Macbook $100 of that money goes to Berkshire, what are they doing with that money since Apple is the one doing the R&D and building these products? I know at least some of that money is driving up the business value of Berkshire, it's a great investment on their part but is it good for customers that Macbooks are 11% more expensive than they should be?
Re: 2020 Berkshire Hathaway Annual Letter [pdf]
#44While I'm not of these meme investors who thinks Buffett is "washed up", I confess that I've increasingly wondered if it's just sorta over. In some sense, it's not his fault. Berkshire has grown so large that it has significant scale problems. I joke that Buffett found the investing equivalent of the Donkey Kong kill screen, he basically broke the game. It's incredible. But there have been self-inflicted issues. The…
I think not investing in technology was a sort of inflection point for buffet. His mantra was to understand what he was investing in, and he didn't understand most tech markets. Tech markets got too big to sit out.
5 of the top 10 most profitable companies are technology companies. The rest are financial firms (BRK is actually the most profitable). Most of these tech companies' value is related to network effects, platform control and such. These are "moats" that WB doesn't understand.
So yeah... I think times overtook the man. The space he was operating in shrank. That said, BRK is still doing fine, well run, etc. They also impact the world in ways a vanguard or softbank don't.
Re: 2020 Berkshire Hathaway Annual Letter [pdf]
#45While I'm not of these meme investors who thinks Buffett is "washed up", I confess that I've increasingly wondered if it's just sorta over. In some sense, it's not his fault. Berkshire has grown so large that it has significant scale problems. I joke that Buffett found the investing equivalent of the Donkey Kong kill screen, he basically broke the game. It's incredible. But there have been self-inflicted issues. The…
Warren has addressed not investing in tech. Automobiles were a major tech advancement, but car companies always have struggled. Airplanes were also a major advancement but always struggled. A top technology company can usurped by a new company with better tech. Facebook is faddish, requires acquisitions of Instagram and Whatsapp to stay on top, but that not Warren’s idea of creating value.
Re: 2020 Berkshire Hathaway Annual Letter [pdf]
#46So Berkshire now owns about 10% of Apple, if I buy a $1,000 Macbook $100 of that money goes to Berkshire, what are they doing with that money since Apple is the one doing the R&D and building these products? I know at least some of that money is driving up the business value of Berkshire, it's a great investment on their part but is it good for customers that Macbooks are 11% more expensive than they should be?
Apple pays its employees, utilities, insurance, taxes, bondholders, suppliers etc, their margin is not 100%, more like 25%. Profits ultimately drive company valuations. The cash does not just flow through to Berkshire, the dividend yield is relatively low.
I don't understand what you are trying to say about MacBooks being 11% more expensive?
Re: 2020 Berkshire Hathaway Annual Letter [pdf]
#47So Berkshire now owns about 10% of Apple, if I buy a $1,000 Macbook $100 of that money goes to Berkshire, what are they doing with that money since Apple is the one doing the R&D and building these products? I know at least some of that money is driving up the business value of Berkshire, it's a great investment on their part but is it good for customers that Macbooks are 11% more expensive than they should be?
> So Berkshire now owns about 10% of Apple, if I buy a $1,000 Macbook $100 of that money goes to Berkshire
No, BRK would (eventually) receive 10% of net income, not revenue.
> Is it good for customers that Macbooks are 11% more expensive than they should be?
Would it be better for consumers if the price was cheaper? Well, yes....but the fact that customers are willingly paying for Macbooks implies that they are receiving more value from the product than the cash they pay. Not sure what point you're trying to make.
Re: 2020 Berkshire Hathaway Annual Letter [pdf]
#48Re: 2020 Berkshire Hathaway Annual Letter [pdf]
#49So Berkshire now owns about 10% of Apple, if I buy a $1,000 Macbook $100 of that money goes to Berkshire, what are they doing with that money since Apple is the one doing the R&D and building these products? I know at least some of that money is driving up the business value of Berkshire, it's a great investment on their part but is it good for customers that Macbooks are 11% more expensive than they should be?
Apple pays its employees, utilities, insurance, taxes, bondholders, suppliers etc, their margin is not 100%, more like 25%. Profits ultimately drive company valuations. The cash does not just flow through to Berkshire, the dividend yield is relatively low. I don't understand what you are trying to say about MacBooks being 11% more expensive?
Sure it may not flow directly to Berkshire, but let's take employee compensation for example. If the business value of Apple is 10% higher because it had retained the value it created instead of Berkshire owning it then wouldn't Apple's stock in turn be 10% higher in theory? If so then if I'm an employee at Apple I would be happy with 10% less stock as part of my compensation package and that's money Apple would have had to pay me if that were not the case. So wouldn't this affect the price of Macbook?
Re: 2020 Berkshire Hathaway Annual Letter [pdf]
#50While I'm not of these meme investors who thinks Buffett is "washed up", I confess that I've increasingly wondered if it's just sorta over. In some sense, it's not his fault. Berkshire has grown so large that it has significant scale problems. I joke that Buffett found the investing equivalent of the Donkey Kong kill screen, he basically broke the game. It's incredible. But there have been self-inflicted issues. The…
While I'm also somewhat disappointed he doesn't discuss important topics as much as he used too, I think there are some hidden gems in this letter - especially this one:
"Investing illusions can continue for a surprisingly long time. Wall Street loves the fees that deal-making generates, and the press loves the stories that colorful promoters provide. At a point, also, the soaring price of a promoted stock can itself become the “proof” that an illusion is reality.
Eventually, of course, the party ends, and many business “emperors” are found to have no clothes. Financial history is replete with the names of famous conglomerateurs who were initially lionized as business geniuses by journalists, analysts and investment bankers, but whose creations ended up as business junkyards."
He is using the example of conglomerates, but to me, it sounds like a warning about current valuations.
Regarding his investing performance, I think we should never judge his N last years - he's definitely looking longer term (which is amazing, given his advanced age). Berkshire is sitting on a huge pile of money, waiting for the bubble to pop. It may take a year, maybe 5, maybe even 10 - nobody knows. But when it does, we can safely bet that Buffett will put this money to work - and secure exceptional returns for the following 10-20 years.