Warren Buffett's $160B+ Apple Bet: A History
The story behind how Warren Buffett shunned tech for decades, before making (probably) the greatest tech investment ever.
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Today, we’re talking about the retirement of Warren “Big Daddy” Buffett and a fun history of his most successful bet ever: Apple.
Also this week:
Baller Buffett Links
Is Google Search Toast?
…and them wild posts (including Pope stuff)
As you may have seen from 87,765 notifications on the CNBC app over the past week, Warren Buffett will retire and pass over the CEO title of Berkshire Hathaway to Greg Abel at the end of the year (Warren will stay on as Chair, a position his son Howard will take on after him).
The 94-year old investing legend made the announcement at the company’s annual general meeting (AGM) at Omaha Arena aka “The Woodstock of Capitalism”.
Buffett’s retirement came as a surprise for his own board of directors. The moment led to 20,000 Berkshire acolytes throwing up a standing ovation that was probably the finance world’s rock equivalent of people going HAM for Freddie Mercury’s 23-minute performance at Wembley Stadium in 1985.
I definitely regret not going.
Berkshire’s AGM has been on my to-do list for years and I just never got around to it. Ugh, the ship has sailed.
The Oracle of Omaha is hanging up his spreadsheets as the greatest investor and capital allocator in history. He fully took over the textile manufacturer Berkshire Hathaway in 1965 and turned it into a $1.1 trillion conglomerate over the next 60 years. From 1965 through 2024, Berkshire Hathaway delivered a return of +5,502,284% compared to the S&P 500 benchmark performance of +39,054% (and my stock picking record of -18,765%). NOT BAD!!!!
Those gainzzzzzzzz have been wrapped in endless nuggets of wisdom perfectly distilled by Buffett and his equally legendary partner Charlie Munger (RIP).
Anyone in Omaha last week could quickly serenade you with the greatest hits:
“Hey man, did you know it’s only when the tide goes out, that you see who’s swimming naked. Also, it’s not about timing the market, it’s about time in the market. Furthermore, price is what you pay but value is what you get. Oh, btw, be greedy when others are fearful and be fearful when others are greedy. Don’t forget that the best holding period is forever. Finally, remember these two rules: Rule #1 is Never lose money. Rule #2 is Never forget Rule #1.”
As with any advice, it’s all context dependent.
The reality is that no one is going to ever repeat Buffett’s performance at his scale. He (really really really) figured out the US stock market when other participants were fairly unsophisticated. He then rode the economic tailwind of the richest nation to ever exist with an ever-expanding capital market that soaked in funds from increasingly wealthy investors from around the world.
It’s worth noting that Buffett made decisions that didn’t always jive with his folksy wise grandpa demeanour. He said it was “outrageous” that his secretary paid more taxes than him (but also used every tool available to minimize Berkshire’s corporate tax bill; one popular move was to execute acquisitions by swapping shares instead of paying cash). He often called out financial misbehaviour (but also bailed out serial offender Goldman Sachs in 2008; the Berkshire argument being that his vote of confidence rescued Wall Street on the precipice). Further, Buffett has made a number of investments in easily-critiqued industries (Coca-Cola, coal-fired power plants).
To be sure, Buffett has never said his investing record or personal life was perfect.
I have a simple rule for studying notable figures: understand the story and the context, then pick and choose what works for me (Buffett has many worthwhile lessons).
My favourite takeaway from Buffett’s career is Berkshire’s $160B+ Apple bet.
I really went down the rabbit hole after posting this semi-joke tweet 3 years ago.
Anytime you say “the best” or “the greatest” on Twitter, you’re inviting disagreement.
And this tweet definitely triggered some people.
Objections to Buffett as the “best tech investor ever” fell into a few buckets: 1) “there are better tech bets”; 2) “Buffett has historically sucked at tech investing”; 3) “don’t judge investments by absolute-dollar gains”; and 4) “your tweets suck”.
These were all good points.
In a longer write-up — which I used as the base for this article — I clarified my statement to “Buffett’s bet on Apple is the greatest public market tech investment ever”.
The updated details: Berkshire Hathaway started building its Apple position in 2016 and plowed $36B into the company by the end of 2018. That stake reached a peak of $178B in December 2023 (~6% of Apple), at which point Berkshire had already sold $13B+ of AAPL and was booking insane Apple dividends of $700m+ a year. In 2024, Berkshire sold 2/3rd of its Apple stake for an estimated $90B and its remaining position is currently worth ~$60B.
Taking together the realized gains ($13B + $90B) and unrealized gain ($60B), Berkshire hit $163B on that OG $36B bet…so a gain of $127B.
The Apple stake once accounted for 22% of Berkshire’s total value and is still the conglomerate’s largest single stock holding.
The numbers aren’t even the best part. For me, it’s the incredible irony of Buffett being the person that made the “greatest public market tech investment”.
Why? Because you could not find someone less tech-y than Buffett:
He doesn’t have a computer in his office and has sent single-digit emails in his life (he’s definitely never played GTA)
He didn’t get his first iPhone until 2018
He made the Apple investment when he was 86-years old, which is far afield from the “tech as a young person’s game” mythology (Apple was 40 years old and already worth $550B+ in 2016, with Berkshire seeing the iPhone maker reach a peak of ~$4T before a pullback in the past year)
He avoided tech investments for decades despite being BFF with Bill Gates
He (unsurprisingly) didn’t come up with the trade
So, how did Buffett pull off his best bet 51 years into his career? Today, we’ll break it down:
Why Buffett Shunned Tech
Meeting Todd Combs and Ted Weschler
The Case for Apple
Tim Cook Cold Calls Buffett
Ranking the Best Tech Investments
Calling the Apple Top (?)
Why Buffett Shunned Tech
Buffett has popularized many investing concepts, including “the circle of competence”. He first wrote about the idea in Berkshire Hathaway’s 1996 shareholder letter:
“What an investor needs is the ability to correctly evaluate selected businesses. Note that word ‘selected’: You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.”
Buffett’s circle of competence includes many things like banks, insurance, newspapers, consumer goods (Coca-Cola, See’s Candies) and things I regularly ate at 3am after clubbing at University (Cherry Coke and cheeseburgers).
However, Buffett never grasped tech and has been very open about his ignorance on the topic:
As far back as 1967 he said “I know as much about semiconductors or integrated circuits as I do of the mating habits of the chrzaszcz [a Polish beetle]. We will not go into businesses where technology is way over my head [or] crucial to the investment decision.” (Author’s note: I’m calling Buffett out on this one…if you know the existence of the word “chrzaszcz”, you def know intimate details about beetles)
In the aforementioned 1996 annual letter, he wrote “many companies in high-tech businesses or embryonic industries will grow much faster in percentage terms…But I would rather be certain of a good result than hopeful of a great one.”
At Berkshire’s annual general meeting in 2012 he said he’d never buy Apple or Google because he “just didn’t know how to value them.”
Before Apple, his most notable tech plays were both duds. The first was a sin of omission (Microsoft) and the second was a sin of commission (IBM).
Microsoft: When Bill Gates took his software firm public in 1986, Buffett bought a few hundred shares to “keep track of what the young kid was doing.” The two would meet 5 years later after Gates’ mom invited Buffett to Seattle for an Independence Day lunch.
As Gates recounts on his blog, he tried to shake Buffett by telling his mom he was “too busy” and didn’t think highly of the Omaha-based investor:
"I didn't even want to meet Warren because I thought, 'Hey this guy buys and sells things, and so he found imperfections in terms of markets, that's not value added to society, that's a zero-sum game that is almost parasitic.' That was my view before I met him … he wasn't going to tell me about inventing something."
But the two ended up speaking for hours and struck what became a multi-decade friendship. Through the 1990s, Gates and his execs tried to explain Microsoft’s business to Buffett but he never bit. Afterwards, Buffett eschewed investing in Microsoft because Gates joined Berkshire’s board in 2004 (he left in 2020).
IBM: In 2011, Buffett invested in Big Blue. He thought the old school tech business had a strong lock-in effect with enterprise clients (“It’s a company that helps IT departments do their job better. There is a lot of continuity to it.”) He was very wrong and a $10.7B bet ended down at least 20% (Berkshire unloaded the position by 2018).
Other Big Tech: To a lesser extent — since he didn’t have the relationship — Buffett also whiffed on Amazon (“I was too dumb to realize. I did not think [Bezos] could succeed on the scale he has”) and Google. The latter was a bit more painful as Berkshire’s insurance subsidiary GEICO was paying $10 for a mouse click on search ads when Google went public in 2004, giving Buffett a view into the incredibly lucrative auction search business (“we blew it”).
With Buffett’s spotty tech history, how did the Apple investment come together?
Meeting Todd Combs and Ted Weschler
Buffett met his long-time investing partner Charlie Munger in 1959. For nearly half-a-century, the two were responsible for all of Berkshire’s investments.
Munger passed away in November 2023 — 33 days before his 100th birthday — and Buffett wrote a tribute to him a few months later.
Prior to Munger, Buffett was a pure value investor and willing to buy any company that seemed undervalued using techniques he learned from financial analysis pioneer Benjamin Graham. This included subpar companies that were like “a cigar butt found on the street, which may only have one puff left in it and may not offer much of a smoke…but the bargain purchase price will make that puff all profit."
According to Buffett, this is how Munger’s influence changed the calculus:
Though born and raised in Omaha, [Munger] spent 80% of his life domiciled elsewhere. Consequently, it was not until 1959 when he was 35 that I first met him. In 1962, he decided that he should take up money management.
Three years later he told me – correctly! – that I had made a dumb decision in buying control of Berkshire. But, he assured me, since I had already made the move, he would tell me how to correct my mistake.
In 1965, he promptly advised me: “Warren, forget about ever buying another company like Berkshire. But now that you control Berkshire, add to it wonderful businesses purchased at fair prices and give up buying fair businesses at wonderful prices. In other words, abandon everything you learned from your hero, Ben Graham. It works but only when practiced at small scale.” […]
In reality, Charlie was the “architect” of the present Berkshire, and I acted as the “general contractor” to carry out the day-by-day construction of his vision.
Charlie never sought to take credit for his role as creator but instead let me take the bows and receive the accolades. In a way his relationship with me was part older brother, part loving father. Even when he knew he was right, he gave me the reins, and when I blundered he never — never — reminded me of my mistake.
In the physical world, great buildings are linked to their architect while those who had poured the concrete or installed the windows are soon forgotten. Berkshire has become a great company. Though I have long been in charge of the construction crew; Charlie should forever be credited with being the architect.
As the calendar turned to the 2000s, Buffett and Munger started thinking about potential successors for the Berkshire investing portfolio. They eventually hired two hedge fund managers. Todd Combs, Ted Weschler.
These two men joined Berkshire in the most opposite ways possible: one by cold-calling Munger (Combs) and the other by spending $5m+ on Buffett’s charity lunch auctions (Weschler).
In a 2017 interview with Yahoo, Buffett said he valued the hires for “ability and character”. Another important quality was a big reading appetite. Munger described himself as “a book with legs” while Buffett said that Combs and Weschler were the “only two guys we could find that read as much as we did.”
Here’s how they joined Berkshire:
Combs’ cold call
Combs, 54, is a Florida native who worked in the hedge fund industry after graduating from Columbia Business School (where Buffett received a Masters in Econ). He joined Berkshire in 2010 after reaching out to Munger:
“I called Charlie up just randomly. I had always wanted to meet him. And we hit it off. We had breakfast for three or four hours. And luckily he called me a couple weeks later, and we continued discussions. And this kinda went back and forth for a couple months.”
Weschler’s $5m+ auction bids
Buffett famously holds a lunch auction every year for charity. Before joining Berkshire in 2012, Weschler put up the winning auction bid in consecutive years totalling $5.25m.
After the second lunch, Buffett offered Weschler — now 62 years old — a job:
“At the end of the lunch and a very interesting conversation he, out of nowhere, said: ‘Is there any way I can encourage you to come to Berkshire Hathaway?’ And that was the last thing I ever expected. I was running a $2B [hedge fund], just myself, my secretary and a research assistant. I lived in Charlottesville, Virginia. I had a nice set up. And then I had the opportunity to work with somebody I had a great deal of respect for.”
Combs and Weschler will run the entire investment portfolio when Buffett leaves (along with Abel as CEO and Ajit Jain working his magic on the insurance side).
But the pair had a lot of independence from the start:
Funds: Each man was initially given $2B (now they manage ~$30B)
Full control: They green light their owns bets (Per Buffett, “they don't have to check in before they buy or sell anything…it's entirely their decision.”)
Meeting schedule: Every Monday, Buffett and Munger would lunch with the “3Ts” aka Todd, Ted and Tracy Britt Cool, who was Buffett’s deputy for a decade before leaving Berkshire in 2020 (Side note: on the infinitesimal chance you’re reading this Warren, you may like the first letter of my first name).
Ultimately, Combs and Weschler convinced Buffett to pull the trigger on Apple.
The Case for Apple
Berkshire opened its Apple position in 2016, almost a decade after the release of the first iPhone.
The initial buy order was for 9.8m shares totalling $1B. By the end of 2018, Buffett had piled into the trade with Berkshire owning 255m shares, at a cost of $36B (average price of $35 per share post-split).
How did Combs and Weschler convince Big Daddy Buffett — who doesn’t have a computer and wouldn’t even use his first iPhone until 2018 — to go all-in on Apple?
In the previous section of this article, we talked about “the circle of competence”.
While tech is out of Buffett’s circle, there is another key business attribute that is very much within his competence circle: understanding monopolies (and their related moats).
Buffett loves them! Monopolies and moats! M&MS!
Here is a fantastic table from Kai Wu (Sparkline Capital) of all the “monopoly”-type businesses that Berkshire has owned over the years.
Buffett has never been comfortable evaluating tech businesses. But Apple’s monopoly 9 years into the iPhone era was quite easy to grok. By then, Weschler had started buying some Apple stock for Berkshire with his funds. In an interview with a German business magazine in 2016, Weschler explained the rationale behind Berkshire’s Apple investment:
“Once you are fully invested in the [Apple] App ecosystem and you have got your thousands of photographs up in the cloud and you are used to the keystrokes and functionality and where everything is, you become a sticky consumer.”
Apple’s monopoly is the iPhone and its surrounding ecosystem.
A year earlier in 2015 — when Apple released the first Watch — the company had 569m iPhone users. Today, there are 1.4B active iPhone users and these customers have tacked on an additional 280m+ Watches and 550m+ AirPods. Over the same span, Apple’s App Store gross revenue has grown from $20B to $103B (speaking of monopolies, the US antitrust lawsuit recently forced Apple to allow alternatives to its App Store and the 30% App Store fee).
The Apple ecosystem is a slightly less ominous version of the Hotel California. Once you enter, it’s very very hard to leave (my closet full of empty Apple boxes I keep for no reason agrees with the last sentence statement).
According to the Wall Street Journal’s Greg Zuckerman, Combs had also identified Apple as a potential Berkshire investment using a Buffett stock screen:
Buffett asked Combs to identify a stock in the S&P 500 that met three criteria. The first: a reasonably cheap price/earnings multiple of no more than 15, based on the next 12 months’ projected earnings. The stock also had to be one the managers were at least 90% sure would enjoy higher earnings over the next five years. And they had to be at least 50% confident that the company’s earnings would grow by at least 7% annually for five years or longer.
Combs’s research pointed to Apple, the same stock Weschler had already purchased.
Buffett triangulated his lieutenants’ research. Then, he smashed some Cherry Coke and cheeseburgers to meditate on the trade. Then, he backed up the Brinks truck and shovelled $36B into Apple by the end of 2018 (that year, he told CNBC that “Apple has an extraordinary consumer franchise. I see how strong that ecosystem is, to an extraordinary degree. You are very, very, very locked in, at least psychologically and mentally, to the product you are using. [iPhone] is a very sticky product”).
In hindsight, Apple was also a great target because it was large enough to absorb Berkshire’s massive cash pile. The only other bet of that size that Buffett reasonably could have made for the same outcome was probably Bitcoin (which, ugh, he has called “rat poison squared”) or another Mag 7 stock (most have some monopoly attributes as we’ve seen with the recent wave of tech antitrust cases).
By 2020, Buffett was saying that the iPhone-maker is “probably the best business I know in the world.”
Tim Cook Cold Calls Buffett
Tim Cook took over as Apple CEO in August 2011. About a year into the job, he gave Buffett a call. Why? He wanted advice on what to do with Apple’s growing cash pile.
Here’s my guess as to how the call started:
Cook: Mr. Buffett, it’s an honor.
Buffett: What’s cooking, Tim? Haha, get it? Cooking?
Cook: [Nervous laughter]
Buffett: Anyways, call me Warren. Oh, also, I really like the first letter of your first name.
Here’s how it actually went down, per Cook:
“I'd been in the CEO spot maybe a year or so, we had a growing amount of cash, we had crossed the $100B mark, if my memory is correct. When I don't have experience with something, I make a list of the people that I think that are the smartest people that I can contact to get advice.
Warren was on the top of the list. As you can imagine, I hadn't met Warren before. I get his number, I call out in Omaha, and I wasn't sure that he'd take the call. Call out of the blue, he doesn't know me from Adam.
But he took the call, and I had a great conversation with him, and that was the first time that I met Warren. He was very clear to me, he said 'let me just cut through it, if you believe that your stock is undervalued, you should buy your stock. I thought that was just the simplest way to look at it."
It wasn’t a total cold call. Steve Jobs had previously spoken to Buffett about buybacks but never went forward with the plan.
Under Cook, Apple started repurchasing shares in 2012 and billionaire investor Carl Icahn agitated for even more buybacks. Since then, Apple has done over $700B in buybacks and all those shares are extinguished.
So, in addition to Apple’s monopoly attributes, Buffett loved that Berkshire kept getting a larger stake in the Big Tech firm without having to do anything. The buyback program — which Buffett helped to kickstart — has been massively beneficial for Berkshire as Buffett explained in his 2020 annual report:
“Berkshire’s investment in Apple vividly illustrates the power of repurchases. Berkshire now owns 5.4% of Apple. That increase [from a previous lower stake] was costless to us, coming about because Apple has continuously repurchased its shares, thereby substantially shrinking the number it now has outstanding. But that’s far from all of the good news. Because we also repurchased Berkshire shares during the 2 1⁄2 years, you now indirectly own a full 10% more of Apple’s assets and future earnings than you did in July 2018.”
It’s safe to say that Buffett now knows the difference between Tim Cook and some random dude named Adam.
In 2022, he told Bloomberg Businessweek, “Tim may not be able to design a product like Steve [Jobs] but Tim understands the world to a degree that very, very few CEOs I’ve met over the past 60 years could match.”
Buffett doubled-down on his Cook adoration at the 2025 Berkshire Hathaway AGM:
“I'm somewhat embarrassed to say that Tim Cook has made Berkshire a lot more money than I've ever made [for] Berkshire Hathaway. Credit should be given to him.”
“Steve picked Tim to succeed him, and he really made the right decision. Steve died young as you know, and nobody but Steve could have created Apple, but nobody but Tim could have developed it as he has. So on behalf of all of Berkshire, thank you, Tim.”
Without the Apple ownership, Berkshire Hathaway would have underperformed the S&P 500 (instead of outperforming the benchmark, which it did) per analysis by Market Sentiment.
There’s no doubt that Tim cooked for Buffett but — as we’ll discuss shortly — that cooking may not be as tasty in the future.
Ranking The Greatest Tech Investments
The key to settling any “greatest” or “best” debate is to establish what variables matter. Let’s take the tennis GOAT battle between Roger Federer, Rafa Nadal and Novak Djokovic as an example. Here are some variables to determine who is the greatest:
Number of Grand Slams: Obviously, the top men’s tennis players ever are Djokovic (24 Gand Slams), Nadal (22) and Federer (20). Any future player that wants to take the “greatest” crown will probably have to win at least 20 Grand Slams.
Peak performance: Novak is best on hard courts. Federer is best on grass. Nadal is best on clay. BUT Nadal is more dominant on clay than Novak is on hard court or Federer is on grass.
Narrative: Djokovic is still playing and won his first Olympic Gold at 36 years old last year. He’s running away with the Grand Slam record. Federer played until 41 years old and had incredible cultural impact. Nadal’s French Open dominance was insane and he was one of the most physical players ever.
For the purpose of Buffett and Apple, the first filter I’d use to winnow down the “greatest tech investment ever” is a number: it had to have made a minimum gain of $50B.
It’s a somewhat arbitrary cutoff but creates a nice list:
Big Tech M&A: The most-visible GOAT’ed corporate tech investments are:
Insane VC Checks: The 2 greatest VC investments ever made were early checks into Chinese internet firms:
Naspers invest $32m into Tencent in 2001 (its 26% stake is now worth ~$100B)
Masayoshi Son invested $20m into Alibaba and ultimately made $72B on the deal.
Public Market YOLO: Using our cutoff of $50B, there are two candidates:
Apple: We covered the iPhone maker, so let’s tally up how that ranks with Buffett’s other baller bets. In absolute dollar terms, his most profitable stock gains are Coca-Cola ($20B+), Amex ($20B+) Chevron ($20B+) and BAML ($30B+, after he absolutely bodied the bank with a preferred stock and warrant deal during the Great Financial Crisis)
Arm: Masa strikes again. What’s nuts is that he missed out on a $100B+ gain on Nvidia (he sold his entire 5% stake in 2019 for $3.6B). But smashed a homer on his acquisition of UK chip design firm ARM. Similar to Buffett, he made a huge bet in 2016 ($32B to take ARM private) and still owns 90% of the company, which is back on the public market and worth $122B (Masa’s stake is $110B, which means that he’s up $78B-ish).
For the next variable of this amateur analysis, let’s look at return-on-investment (ROI, aka “performance”) in this table:
On a percent basis, Buffett’s 4.5x gain on Apple is much much less impressive Facebook, Google, Tencent or Alibaba (side note: pretty wild how hard Masa went on ARM, even after the WeWork debacle and Nvidia fumble…shooter’s shoot).
And, yes, I get that — all things equal — some people think it’s “easier” to make $100B+ with a huge cash pile. But Berkshire has had a $100B+ in cash since 2013 and it’s extremely hard to find deals that move the needle at such size.
To wit: Buffett has made some poor big-dollar bets in the past 15 years including $28B for Kraft in 2013 and $37B for Precision Castparts in 2016.
Moving on, let's look at “narrative” as the last variable for the “greatest tech investment ever”. I still can’t get over the irony of Warren “I’ve sent single-digit e-mails and didn’t own an iPhone until Tim Cook flew down to Omaha and gave me one in 2018” Buffett executing the best tech trade ever.
That cosmic joke gets extra extra weight in my analysis.
The only other deal from that list that makes me chuckle is Masa’s bet on Jack Ma and Alibaba. It’s not fully clear Masa even knew what he was investing in:
When Masa made the deal, he told WSJ “we didn’t talk revenue, we didn’t even talk business models".
In a 2014 interview, here’s how Son describes the bet: “It was the look in his eye, it was an ‘animal smell’.” (I’m not a biologist, but I think Son is mixing up body parts and their functions)
In sum: Buffett’s Apple deal is the greatest public market tech investment ever. And the irony dial is turned to 11. But the Big Tech M&A and Insane VC China Deals are more impressive on a ROI basis, while Masa’s Alibaba story is def the funniest.
Calling the Apple Top (?)
Man, I just love it when a legend pulls out a W later in their career. Buffett with Apple at age 86. Or Jack Nicklaus winning the 1986 Master’s at age 46. Or Colonel Sanders quitting a law career to start KFC at age 61. Or Henry Fonda winning his first Best Actor for On Golden Pond when he was age 76 (also gotta add Denzel Washington snagging his first Best Actor for Training Day at age 46).
As you get older, it’s just nice to know you can do wild things by just staying in the game.
One more part of the Buffett Apple trade that takes it to the next level is that he the majority of his AAPL share — sold $90B in 2024 and still has $60B — at basically the exact right time. Berkshire Hathaway is currently sitting on a record of $350B in during a global tariff dispute and potential recession (mostly invested in treasuries, with Berkshire Hathaway owning 5% of all T-Bills…which is more than the Fed itself).
While Berkshire has said it trimmed the position because it was too large a portion of the stock portfolio and that market valuations were a bit stretched, the timing looks incredibly prescient following (at least) three massive Apple Ls.
First, the company’s a major pawn in the grand US and China trade war. Second, the US government’s aforementioned anti-trust clampdown on the iPhone App Store. Third, Cook flopped hard with Apple Vision Pro and then fumbling the Apple Intelligence rollout so badly that the Larry David’s Siri joke in Curb Your Enthusiasm looks preferable.
On the third point, Apple’s SVP of Services Eddy Cue recently took the stand in a Google antitrust case and said that AI is moving so fast that “you may not need an iPhone in 10 years from now as crazy as that sounds…AI is a new technology shift, and it’s creating new opportunities for new entrants.”
Cue made his comment in the context of Apple launching the iPhone to cannibalize the iPod. Obviously, he expects Apple to be the one to replace the iPhone. Probably with the glasses form factor. Apple certainly has chips to play to win the AI/glasses race, especially in its blood feud with Zucky McZuck and Meta. But, remember, the iPhone is literally the greatest-selling consumer product ever. Apple has moved over 2 billion of the devices for sales of more than $1 trillion. Cannibalizing the iPhone is a much different proposition than cannibalizing the iPod.
Odds are against something ever matching the iPhone’s ludicrous success. The vibe is saying that Apple is no longer a sure sure sure thing.
For all of the praise that Buffett feted on Cook, the Apple CEO has spent the past 14 years squeezing every drop out of the iPhone ecosystem and those decisions are starting to bite back all at the same time. Offshoring manufacturing to Foxconn and China delivered scale and margin, but at the expense of resilience. Buybacks made the stock attractive but maybe could have been put to more R&D. Squeezing developers on the App Store maxed out the cash flow, but also pissed off a lot of partners and the government has called it BS. The deal to milk Google for $20B a year as the search default on Safari instead of building a competitor may also get axed by the government.
Apple isn’t the only company at the crossroads. Buffett is leaving Berkshire at what may very well be a peak for the conglomerate. While Greg Abel is extremely competent, there’s no world in which he grows the company 5,500,000% over the next 60 years. ZIRP is over. Berkshire is already worth $1.1T. The conglomerate is closely tied to the US economy — particularly with its rail (BNSF), utility (Berkshire Hathaway Energy), insurance (GEICO) and stock portfolio (Coca-Cola Amex, Chevron, Occidental, Apple) — and should be expected to grow at a comparable rate. It won't be hyper-growth, that's for sure.
Berkshire is sitting on $350B+ of treasuries for crying out loud. More than a 1/4 of the company's entire value. There are no investment opportunities? None?!?! Buffett’s last great trade was probably $14B invested in five Japanese trading companies and that position is now worth $24B. That was done in 2020 and outside of America. A signal no doubt of Buffett’s view on his home country (during the AGM, one of Buffett’s main point was how important it was for America to protect the US Dollar and he was very concerned with recent policies around trade, the deficit and the Fed).
The days of “someone in the 1970s that read a magazine article about Buffett and enjoyed his schtick and put $1000 into Berkshire and is now worth 8-figure” is over.
There will still be opportunities and the methodical Berkshire method will keep compounding. It’s just surrounded by a new investing landscape as compared to the second-half of the 20th century.
Berkshire Hathaway was probably the original meme stock with Buffett as the face of American capitalism. During the depths of any financial crisis, every major bank and asset manager called up Buffett to get the Berkshire stamp and media blitz to stabilize a stock price.
Buffett’s seal of approval is obviously is still platinum but the information environment is totally different. Now, quant funds instantly trade away any edge. Millions of retail investors move stocks based on memes and often divorced from fundamentals. Hell, a single false tariff post from an anonymous X account named Walter Bloomberg led to a short-term $1T rally last month.
Ok, let me wrap this up by torturing you with one more sports analogy.
In the documentary Becoming Warren Buffett, the Oracle talks about his love for baseball. Specifically, he explains how Red Sox legend Ted Williams approached hitting and said the same applies to investing:
"The trick in investing is just to sit there and watch pitch after pitch go by and wait for the one right in your sweet spot. And if people are yelling, 'Swing, you bum!,' ignore them."
For decades, Buffett didn’t swing on the pitches for the biggest tech firms (Microsoft, Amazon, Google). Then he took a hard strike with IBM before smashing the grandest slam ever with Apple.
Here are a few life lessons from this story:
Power Laws Rule: Some form of the 80/20 rule (as in, 80% of the output is equal to 20% of the input). A few massive wins in life will make up for countless losses or negligible outcomes.
Circle of Competence: Focus on a few things but do them extremely well.
“Hey man, did you know it’s only when the tide goes out, that you see who’s swimming naked. Also, it’s not about timing the market, it’s about time in the market. Furthermore, price is what you pay but value is what you get. Oh, btw, be greedy when others are fearful and be fearful when others are greedy. Don’t forget that the best holding period is forever. Finally, remember these two rules: Rule #1 is Never lose money. Rule #2 is Never forget Rule #1.”Stay in the Game: To truly compound anything in life (money, relationships, network, skills), you need to do it for a long time. And to do something for a long time, you actually have to enjoy doing it. If you’re able to find something that keeps you in the game for a while, opportunities will always arise to capitalize. Don’t crash out. Keep playing. Perhaps the most impressive part of last week’s AGM was Buffett STILL holding a 6 hour Q&A while crushing a dozen cans of Coke and dropping zingers and wisdom the entire time. Legend. I can barely sit through a 20-minute Zoom call without turning the camera off once so I can scroll through X.
Strategic Patience: A great piece of wisdom Buffett dropped at the AGM, “Patience is not a constant asset or liability…you don't want to be patient when the time comes to act.”
The last (and most actionable) tech-related lesson: if you’re BFF with Bill Gates in the 1990s, you should definitely invest in Microsoft.
Salute to the Oracle...what an incredible 60-year run and thank you for all the CNBC notifications.
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Other Buffett Links (and Memes)
Best Buffett quotes from the AGM: Ted Merz went to last week’s AGM and rounded up 23 gem quotes from Buffett including “We are not in the business of solving unsolvable problems” and “It's not that I don't have emotions, but I don't have emotions about the price of stocks.”
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But, remember, not every quote is applicable: David Taggart replied to one of my X posts with various examples of Buffett often doing something contrary to his famous aphorisms:
When WarrenB has a $300B+ cash pile it is not market timing, but when other managers have cash it is market timing.
When WarrenB does merger arb or in Graham Dodd speak "workouts" it is not short term trading, but when other managers do it then it is.
When WarrenB says "derivatives are financial weapons of mass destruction" then it means never trade derivatives, but when WarrenB sells massive volumes of naked puts in 08 it means never trade derivatives.
When WarrenB says that gold is just an unproductive rock it is wisdom, but when WarrenB buys 1/3 of the traded silver in the late 90's/early 00's it is.
Also wisdom when WarrenB says rule #1 is dont lose money and rule #2 is don't forget rule #1 it is wisdom. But when Munger says "If You Can't Stomach 50% Declines in Your Investment You Will Get the Mediocre Returns You Deserve" then it is.
Also wisdom when WarrenB writes an OpEd for the NYT talking about how his secretary pays a higher tax rate than he does then it is sage advice, but when he spends time in almost every letter for 40 years explaining how to avoid the tax man it is also sage advice.
I love the Omaha gang and there is a LOT to learn from them, but they are also funny.
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“What Warren Buffett Understood About Capitalism”: Aaron Ross Sorkin with a concise 28-minute breakdown of Buffett’s legacy on The NYT Daily Podcast.
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When Did You Know You Were Rich? Sheel Mohnot posted Buffett’s answer to this Q&A question, which hits hard including the last sentences, “You’re rich if you’re working around people you like. You will make money if you are energetic and intelligent. This society lets smart people with drive earn a good living.”
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Bill Gates and Warren Buffet: The Oracle and Microsoft co-founder were famously leaders of the Giving Pledge. Buffett had originally pledged his entire wealth to the Gates Foundation, which has deployed $100B and still has $77B since its founding in 2000. Buffett had contributed 41% of those funds but had a falling out of sorts with Gates after Bill and his ex-wife Melinda divorced in 2021. The elder statesman left board of the Gates Foundation and will now direct his $160B+ to a new charitable trust run by his children. Separately, Gates recently pledged 99% of his remaining $200B fortune over 20 years to the Gates Foundation (which will then shutter).
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Buffett Did A Lot More Than Reading: A large part of the Buffett myth is that he reads 500 pages a day. Frederick Gieschen has a great blog post titled “The Reading Obsession” which shows how Buffett was only able to read all day because he spent decades in his early career networking. Later in his career, he layered on top non-stop reading with one of the finance world’s most insane rolodexes.
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Berkshire’s $24B Japan Bet: One great example of Buffett applying his reading skills is on a series of Japan’s investments in 2019 (that were probably his last great big bet). Berkshire has spent ~$14B for 8-9% of 5 trading houses and position is now $24B.
Buffett found them reading through a book of 3,000 Japanese companies and references Robert Caro’s “turn every page” philosophy on research:
It’s amazing what you can find when you just turn the page. We showed a movie last year about turning every page [HBO’s documentary about Robert Caro “Turn Every Page”]. I would say that turning every page is one important ingredient to bring to the investment field. Very few people do turn every page and the ones who turn every page aren't going to tell you what they're finding. So, you got to do a little of it yourself.
Investor Andrew McDermott has a great piece on this Japan trade. McDermott contrasts investors spending decades trying to get access with the CCP to invest in China with Buffett’s approach of literally just meticulously reading publicly available information and purchasing the asset off an exchange. There’s still alpha in this world from turning the page.
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One more Buffett Technology Story (Lehman Brothers Version): During the Great Financial Crisis, Lehman Brothers reached out to Buffett for a lifeline right before it went bankrupt. But he was vacationing in Alberta. Buffett told his assistant to tell Lehman to fax him an offer to the hotel business lounge. The fax never came.
It turns out that Lehman left Buffett a voicemail on his flip phone, but he didn’t really know how to use the flip phone and he only found the message a year later when his daughter was playing around with the phone.
Buffett said he probably wouldn’t have given Lehman money anyways but it’s the most Buffett story ever.
Links and Memes
Is Google Search Toast? Obviously a hyperbolic question. But Alphabet sold off 7%+ (~$150B) on Wednesday after Apple’s SVP of Services Eddy Cue said that Safari had seen the first decrease in search volume in 22 years and that people using AI was to blame (eg. ChatGPT, Grok, Perplexity, Claude).
Cue’s drop kick came as part of a testimony in the remedy phase of the US government’s antitrust case against Google. Cynically, Cue’s job was to make Google not look like a monopoly so that Apple can keep squeezing the basically 100% margin $20B payment that Google makes be the default search on Safari. Google probably wants to keep paying that, too. It’s clearly been a good deal for both.
Alphabet had to respond after the sell-off, though. It put out a blog post to say:
We continue to see overall query growth in Search. That includes an increase in total queries coming from Apple’s devices and platforms. More generally, as we enhance Search with new features, people are seeing that Google Search is more useful for more of their queries — and they’re accessing it for new things and in new ways, whether from browsers or the Google app, using their voice or Google Lens.
This statement doesn’t actually dispute Cue’s claim. Rather than talking about Safari, Google says there’s an increase in “Apple devices and platforms” and “new ways” such as voice and Google Lens. Sending search through non-Safari apps is actually a benefit to Google if these are landing on it’s own apps.
While search traffic may still be robust (and says it's still getting the most monetize-able queries), Google has one hell of a challenge to weave in AI without fully compromising it’s search cash cow. NGL, the AI Overview kind of slaps…well, maybe not for the publishers, but for my Google search muscle memory. Still, the Cue testimony is just more fuel for the view that Google won’t be able to stop the inevitable disruption.
On the competition front, OpenAI just hired Fidji Simo; she’s the CEO of Instacart, where she built out its ad business based on her previous experience building Facebook’s newsfeed ad platform…so, um, looks like ads coming to ChatGPT as it really should for any self-respecting consumer software with 500m users.
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Some other links for your weekend consumption:
Would Burrito-Backed Bonds Work? Drayton at Enterprise Value makes an compelling argument that instalment payments for DoorDash orders is a net positive form of financial engineering.
The Anthony Bourdain review of Red Lobster…that we never knew we needed, by comedian Jonathan Kite.
“Pop Mart is now worth more than the makers of Barbie, Hello Kitty, and Transformers — combined” Sherwood breaks down the numbers around China’s leading toymaker.
“Harrison Ford and the Origin of Western Civilization” Ted Gioia with a great write-up on the parallels between one of my all-time favourite films (The Fugitive) and Homer’s Odyssey.
The new Grand Theft Auto Trailer…looks incredible. GTA 6 was recently delayed until 2026, on top of the 10+ years it’s been in the works. Take-Two Interactive — which owns game publisher Rockstar Games — saw its stock sell off on the news. But everyone knows this game will massive. The GTA franchise has already made $10B. So, Rockstar dropped a 2nd trailer for the game and it had 90m views in 2 days and just kept the hype train going. The graphics look amazing but I think it’ll be tough to top the gameplay of 2018’s Red Dead Redemption II, which had “dynamic horse testicle physics”…they shrunk in cold weather. Incredible.
“Amazon now has a ‘Get book’ button in its iOS Kindle app”…this development comes as the US government forced Apple to open up its App Store, per The Verge. Absurd that it took this long tbh. I used this new low-friction feature to pick up a bunch of books on my waitlist including “Meghan Misunderstood: The truth about Meghan Markle” and “Spare by Prince Harry”.
“An 80,000-year history of the tomato”…how industry created the perfect vegetable…well, technically fruit, but you get the point. Did I mention my favourite flavour of chips is ketchup? No? Well, they are.
GE vs. Enron: Former Enron trader John Arnold — who left the firm unscathed and went on to launch become one of America’s youngest billionaires with his own hedge fund — explains how GE and Enron had very similar accounting issues and GE only survived due to a government bailout.
“Cardinals are watching ‘Conclave’ the movie for guidance on the actual conclave”…Politico says the the majority of the 133 cardinals that selected the new Pope (Robert Prevost aka Pope Leo XIV aka the first American Pope) were appointed by Pope Francis and had never experienced a conclave. So, they watched the 2024 film to see how it was done. This was much smarter than decision than watching Eurotrip.
Pope Leo XIV beat the odds...according to Nate Silver, who has a fun write-up on why prediction markets didn't think America would get its first Pope. Separately, my 3 minutes of internet research shows that Pope Leo XIV was a close ally of Pope Francis and is closer to the progressive side of the Church (although also amenable to the conservatives).
Steve Jobs studied parts of the Catholic Church…when structuring Apple. During a 1983 Aspen Design Conference talk, he said “We've observed that the oldest and largest organization in the world has only four layers of management. That's the Catholic Church. And, uh, five if you count the highest order I suppose. So, we see no reason why we need over four layers of management.”
…and them wild posts so so so many Pope ones (including an amazing audio edit of the Pope's introduction...a fantastic film reference...The Simpsons obviously had an old gag...some NFL memes based on the Pope's Chicago origin...two NFL ones actually...a Mcdonald's one...a Linkedin one...a Popeye's one...an academia one...and then first three below:
Finally, there was a pair of Truthy Truth posts from Donald Trump last Sunday. He wants to put tariff on foreign films and re-open Alcatraz prison. Like these consumed a 24-hour news cycle despite both ideas being short on detail and probably not happening anytime soon. The tariff one really doesn’t make a ton of sense: Hollywood “exports” so much media to the rest of the world (75%+ of box office is international). As discussed on The Town podcast, a plausible outcome on that front is tax credits to bring back film production to America. That’s more taxpayer funds for a fairly regulated industry with strong unions. On-shoring of such production would also hurt lower-cost alternatives in Canada, the UK, Australia and New Zealand (these countries could also retaliate).
The most likely rationale comes from Jay Caspian Kang “My theory is he saw ‘escape from Alcaraz’, went ‘man they don’t make them like that anymore’ and then came up with two ideas at once.” Meanwhile, here’s a my plan:
Great post. FYI old school iPhone boxes make great drawer organizers
On the links of pope references, you linked the academia one to the Popeye's one