5 ms·

I don't see how it is less relevant. Warren says he understands how much Microsoft is getting off of royalties for Windows but is unsure about his confidence i

• blackflame7000 6y ago
  Very few cash-cows last forever which is why it is important to look at how a company is reinvesting in alternative streams of income when forecasting the long term
  • dcolkitt 6y ago
    I'm gonna disagree with you. Very few companies manage to successfully pivot to a line of business that's substantially outside their original area of core competence. The reality is that different organizations have ingrained cultural DNAs that's usually both optimized for their specific niche and painfully difficult to change. When an industry reaches its inextricable decline, most companies would do better to gracefully return money to shareholders (either in the form of dividends or buybacks). 9 times out of 10, that produces a better outcome for investors than a desperate attempt to reinvent themselves. We tend not to realize this because of survivor bias. But for every Apple, Western Union or AT&T, there's a dozen companies like Polaroid, Sears and DEC littered across history's dustbin.
    • eru 6y ago
      Funny enough, companies that follow this sensible advice often get a lot of flak. Matt Levine had some examples.
      • rocqua 6y ago
        Thing is. Whilst doing stock buybacks and dividends is best for the stockholders, it isn't best for the employees. Nor is it good for other stakeholders in the company. In our modern state of stockholder supremacy, that doesn't tend to matter much. But I think it should matter more.
        • eru 6y ago
          Shareholder capitalism is an aspiration. We have never really tried it. In practice, companies are run for the benefit of management and other insiders. > Whilst doing stock buybacks and dividends is best for the stockholders, it isn't best for the employees. Nor is it good for other stakeholders in the company. Stockholders can invest the money returned to them again in more profitable ventures.
          • blahbhthrow3748 6y ago
            Financial capitalism where everything needs to be consolidated, bundled and sold as an investment vehicle seems like a pretty modern invention. To go to an extreme, look at It's a Wonderful Life. Something like a community bank in the early 20th century was not run aggressively for the sole benefit of shareholders, there was a notion of community involvement. If anything financialization since the 70s has created the fiction that corporations are soulless machines designed to optimize profits at the expense of all others.
            • eru 6y ago
              I would be careful about citing a fictional example of an American bank. I'm not even objecting to the fiction. But more that American unit banking was extremely weird. Basically, many states banned banks from having more than one branch. The result was the world's most fragile financial system. See https://www.alt-m.org/2015/07/29/there-was-no-place-like-canada/ https://www.alt-m.org/2015/07/29/there-was-no-place-like-can... for a comparison of 19th / early 20th century Canadian and American practices.
        • 6y ago
    • blackflame7000 6y ago
      It could be argued that every time a company comes out with a new product they are adding alternative revenue streams. By this definition it happens all the time.
• sangfroid_bio 6y ago
  At that time software's AT&T style winner-take-all and network effect lock-in was still not that obvious. The PC was not yet the golden standard for desktop hardware and words like minicomputers and mainframes were not uncommon terms.
  • postexitus 6y ago
    In 1997, what else was there for desktop hardware? Ok, I was an Amiga buff and waiting for Blizzard PPC to come out - but I was under no impression that mine was the golden standard for desktop hardware.
    • dtech 6y ago
      It was certainly dominant at the time, but not for that long, mostly early 90's. The decades before saw - by today's standards - rapid switching of dominant home, business and server hardware and corresponding OSses. So it was not a safe bet in 1996 that Windows and Microsoft would still exist and be a big market player in 2020.
      • Kronen 6y ago
        You can say the same for 2040 then...
        • dtech 6y ago
          For Windows you can, but Microsoft is diversifying risks and running their software on other OS and hardware, and Office is a major windows-independent revenue stream. So I'd say 2020 -> 2040 Microsoft is a safer bet than 1996 -> 2016 Microsoft.
          • ralfd 6y ago
            I think it is riskier. Microsoft in 1997 had virtually no competitors. That is not the case anymore.
      • 6y ago
• nabla9 6y ago
  Buffet attributes his success into being able to stay within his circle of competence. He is perfectly aware that he is letting many golden opportunities pass, but he is not concerned about that. Unless it falls into his circle of competence, he is not touching it. Today when Berkshire has two younger Vice Chairmans and Todd Combs and Ted Weschler are handling investments the portfolio is changing a little.
• sleavey 6y ago
  To add to your point, he didn't even say it wouldn't be a good investment; in fact he said if someone pointed a gun to his head he would choose to invest. His problem was he couldn't assess the exact likelihood of success (which he nevertheless reckoned was "high"), and he only goes for investments he considers 100% winners.
• BMSmnqXAE4yfe1 6y ago
  He was wrong on MSFT. But at the time there were maybe 100 companies like MSFT, for example Worldcom, Enron, PET.COM etc. So if you average over those 100 companies that he didn't understand and didn't invest in, maybe he was right not getting into unfamiliar waters. There were a lot of risks that he could not foresee - potential rise of a competing OS, the rise of mobile phones (which even BillG did not foresee), anti-monopoly lawsuits etc etc.