3 ms·

Couldn't disagree more. His story about building BH into a powerhouse centered on valuing things at more than just book value (notably, See's Candy, which was o

by hawkice 12y ago

Couldn't disagree more. His story about building BH into a powerhouse centered on valuing things at more than just book value (notably, See's Candy, which was one of their first amazing investments, which he was worried about purchasing for 3x net tangible assets, but notes that it was only because he wasn't yet skilled at Munger's investment style yet). One of the durable advantages he looks for is having a strong brand (as he says in the letter) -- Coke is not that atypical an investment for them. His reason for being largely extremely-low-tech is that he loves to understand the businesses he invests in really, really well (probably his big competitive advantage), and by his own admission, he doesn't really understand tech.

AndrewKemendo 12y ago
Right, the brand thing is what I was trying to drive at as being a large factor for purchase decision outside of just tangible assets. I have also read enough of Buffet to know that while he likes to put on the hat of gump old man, he has teams of people who he relies on for things he "doesn't understand" - and we aren't talking about nuclear technology here. Especially if you are making brand decisions, Google is a huge brand, and the technology is not esoteric nor is the business model. The difference though is that google is software based, while IBM is hardware. At least that's how it has historically been...I am curious what BH will do as IBM moves toward more software/people centered.
mike_hearn 12y ago
That part of the letter seemed unsatisfying to me. Perhaps there's some obvious backstory here I'm unaware of (I never heard of See's Candy), but all the letter says is that it had a big and strong competitive advantage, without bothering to say what that was. Brand? I can't think of many other candidates beyond some amazing one-off deal with suppliers. It's a chocolate company. How powerful can the brand really be? Why would their brand be so much better than any others? And why was it so obvious to Buffet that this brand was great yet apparently not to anyone else? This story doesn't really tell us anything about his investment strategy at all.
- HeyLaughingBoy 12y ago
  IIRC, in Snowball, he mentions that the competitive advantage of See's was that it was exceptionally good quality candy. I don't remember the details very well, but it's likely that he realized that with better management and marketing, they could produce far more value than the company cost at the time.

by hawkice 12y ago

AndrewKemendo 12y ago

Right, the brand thing is what I was trying to drive at as being a large factor for purchase decision outside of just tangible assets. I have also read enough of Buffet to know that while he likes to put on the hat of gump old man, he has teams of people who he relies on for things he "doesn't understand" - and we aren't talking about nuclear technology here. Especially if you are making brand decisions, Google is a huge brand, and the technology is not esoteric nor is the business model. The difference though is that google is software based, while IBM is hardware. At least that's how it has historically been...I am curious what BH will do as IBM moves toward more software/people centered.

mike_hearn 12y ago

That part of the letter seemed unsatisfying to me. Perhaps there's some obvious backstory here I'm unaware of (I never heard of See's Candy), but all the letter says is that it had a big and strong competitive advantage, without bothering to say what that was. Brand? I can't think of many other candidates beyond some amazing one-off deal with suppliers. It's a chocolate company. How powerful can the brand really be? Why would their brand be so much better than any others? And why was it so obvious to Buffet that this brand was great yet apparently not to anyone else? This story doesn't really tell us anything about his investment strategy at all.

HeyLaughingBoy 12y ago
IIRC, in Snowball, he mentions that the competitive advantage of See's was that it was exceptionally good quality candy. I don't remember the details very well, but it's likely that he realized that with better management and marketing, they could produce far more value than the company cost at the time.