Prompt Cast
The Future of Berkshire Hathaway and Warren Buffett's Investments
TLDR This episode explores the future of Berkshire Hathaway under new leadership, including potential changes in investment strategy and concerns about decision-making and culture. It also highlights Warren Buffett's successful investments, such as Coca-Cola and Apple, and discusses the challenges faced by someone starting a career in investing today.
Timestamped Summary
00:00
This episode is the final part of a trilogy about Berkshire Hathaway, focusing on the large and mature company and what the future holds for the next generation.
08:47
Warren Buffett and Bill Gates meet at a gathering in Bainbridge, where Gates is initially reluctant to attend but is forced to by his mother, and they discuss investing in stocks and the future of newspapers.
16:50
Warren Buffett buys 100 shares of Microsoft to keep up with his friend Bill Gates, despite not buying any shares of Intel, and invites Gates to join the Graham group; Gates accurately predicts the future of media and television in 1992.
25:24
Warren Buffett buys a significant amount of Coca-Cola stock after the New Coke disaster and the company's international expansion, resulting in a 10x return in the first decade and a 3.5x return in the next 25 years.
33:55
In 1997, at the Allen and Company Sun Valley Conference, Bill Gates criticizes Warren Buffett and the CEOs of Coca-Cola for not being able to navigate the constant change in the technology business, which marks a major transition point in business and the rise of tech and the Internet.
42:15
Warren Buffett decides to do a stock offering for a new class of shares called the baby B class, which will track one thirtieth of the value of the A shares, have diminished voting rights, and will be sold in an open-ended offering to prevent microeconomic forces from driving up the price.
50:10
In 1998, Berkshire Hathaway announces its largest acquisition ever, purchasing re-insurer January for $22 billion in an all-stock deal, which ultimately does not go well.
58:44
Berkshire Hathaway experiences significant financial losses and reputational damage due to bad deals, 9-11, and an accounting scandal, but eventually manages to turn things around under new management.
01:07:31
At the height of the tech bubble, investing a dollar in Berkshire Hathaway stock would have outperformed the NASDAQ, the S&P, and Microsoft, except for a narrow window of time.
01:15:45
Warren Buffett announces that he will give away 85% of his Berkshire stock, worth $37 billion, with the majority going to the Bill and Melinda Gates Foundation, creating the giving pledge and making philanthropy a status symbol for billionaires.
01:24:19
During the financial crisis in 2008, Berkshire Hathaway pursued a strategy of making debt and preferred equity fixed income investments in companies that needed capital, such as Mars acquiring Wrigley, in order to avoid being the major primary equity holder during a crisis and to have downside protection.
01:32:46
During the financial crisis in 2008, Berkshire Hathaway deployed $18 billion of its cash on hand to make various investments, including $5 billion in Goldman Sachs and $3 billion in GE, ultimately making about $3 billion on the Goldman investment and losing money on the GE investment.
01:42:23
Berkshire Hathaway deployed $18 billion in 2008 and ultimately made about $25 billion in net returns from those investments, including a $26 billion profit on the Bank of America deal in 2011.
01:51:49
Warren Buffett hires Ted Wetzler as an investment manager at Berkshire Hathaway after Ted impresses him during two charity lunches that Ted paid a total of $5.2 million for, and Ted ends up outperforming Buffett in the years that follow.
02:01:08
Warren Buffett's investment in IBM, precision cast parts, and the airlines were all major losses, but his investment in Apple turned out to be incredibly successful, generating $89 billion in gains in just five years.
02:10:45
Warren Buffett's investment in Apple, despite not fully understanding the company or its technology, resulted in $89 billion in gains and is one of the greatest investment returns in history.
02:19:35
The bull case for Berkshire Hathaway is that they could potentially do better under Greg, be less conservative, and make more investments, while the bear case is that Warren Buffett's style of investing may still be successful in the future and that Berkshire Hathaway relies heavily on the Warren Buffett halo effect.
02:27:48
Berkshire Hathaway's structure as an operating company with an infinite time horizon, no fees, and aligned incentives, along with its flexible structure, sets it up for potential success under new leadership, despite concerns about decision-making and culture.
02:37:30
Despite the success of Warren Buffett's career, it would be difficult for someone starting a career in investing today to achieve the same level of success without taking on more risk or leverage due to increased competition in the market.
02:46:32
The host concludes the episode by reflecting on what they have learned from studying Warren Buffett and expresses their belief in the future of the internet as a place to invest money.
Categories:
Technology
Business
