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QuestionerThis question is from Ken Scarbeck in Indianapolis. He says, with the full understanding that Warren had no input on the Amazon purchase and that relative to Berkshire, it's likely a small stake, the investment still caught me off guard. I'm wondering if I should begin to think differently about Berkshire looking out, say, 20 years. Might we be seeing a shift in investment philosophy away from value-investing principles that the current management has practiced for 70 years? is a great company, yet it would seem its heady shares 10 years into a bull market appeared to conflict with being fearful when others are greedy. Considering this and other recent investments like Stoneco, should we be preparing for a change in the price versus value decisions that built Berkshire?
WarrenIt's interesting that the term value investing came up, because I can assure you that both managers who and one of them bought some Amazon stock in the last quarter, which will get reported in another week or 10 days. He is a value investor. The idea that value is somehow connected to book value or low price earnings ratios or anything, as Charlie has said, all investing is value investing. I mean, you're putting out some money now to get more later on, and you're making a calculation as to the probabilities of getting that money and when you'll get it and what interest rates will be in between and all the same calculation goes into it whether you're buying some bank at 70% of book value or you're buying Amazon at some very high multiple reported earnings. Amazon, the people making the decision on Amazon are absolutely much value investors as I was when I was looking around for all these things selling below working capital years ago. So that has not changed. The two people that, one of whom made the investment in Amazon, they are looking at many hundreds of securities, and they can look at more than I can because they're managing less money and their universe, possible universe is the greater, but they are looking for things that they feel they understand what will be developed by that business between now and Judgment Day and cash. They are absolutely following value principles. They don't necessarily agree with each other or agree with me, but they are very smart. They are totally committed to Berkshire, and they're very good in human beings on top of it. Warren and I are a little older than some people.
[2:44]
CharlieYeah, you're everybody. And we're not the most flexible, probably in the whole world. And of course, if something as extreme as this Internet development happens, and you don't catch it, why other people are going to blow by you. And I don't mind not having caught Amazon early. The guy is kind of a miracle worker. It's very peculiar. I give myself a pass on that. But I feel like a horse has for not identifying Google better. I think Warren feels the same way.
WarrenYeah. We screwed up. He's saying we blew it.
CharlieYeah. And we did have some. insights into that because we were using them at GEICO and we were seeing the results produced. And we saw that we were paying $10 a click or whatever it might have been for something that had a marginal cost of them of exactly zero. And we saw it was working for us. So we can see in our own operations how well that Google advertising was working. And we just sat there sucking our thumbs. So we're ashamed. We are tone. We're trying to atone. Maybe Apple was not.
WarrenWhen he's sucking her thumbs, I'm just glad he didn't use some other example.