> Warren Buffett Blog: October 2015

Wednesday, October 28, 2015

Google Alphabet copying Berkshire Hathaway model

Google's recent announcement of a change in corporate structure with the release of "Alphabet" is explained in a simple concept - Alphabet is the farm, and Google is its most successful crop.

Rather than nurturing the Google brand and using its substantial ad revenue to support various cash-bleeding projects, Alphabet will look for each subsidiary to support itself instead of just living off Google.

“Alphabet is an attempt to build a holding company like Berkshire Hathawayout of an existing operating company,” Alphabet CEO Eric Schmidt said, according to one report. “It’s never been done before. We’re trying to push the Alphabet companies to be separate companies, not divisions.|

 Schmidt pointed to the person in charge of self-driving car initiatives, who will become the CEO of that business “and bear the downside and the upside” that comes with it.

This is just like how Warren Buffett runs Berkshire, giving complete autonomy to subsidiaries including Geico, Dairy Queen and Heinz. After how in the world could one person run and fully understand all those disparate businesses?

The heart of Buffett’s investing strategy and Berkshire’s management structure is a long-term value proposition and not quarter-to-quarter shenanigans or interoffice politics. If Google truly embraces this mindset, it could be a very powerful way to both foster innovation and also demand greater accountability from individual pet projects which currently aren’t standing on their own feet.

Of course, don’t think GOOG stock is going to be throwing its own shareholder meetings with the same flair as Buffett with his “Woodstock for Capitalists” in Omaha. For starters, Alphabet is still incredibly reliant on Google ad sales right now and will be for the forseeable future regardless of this posturing. Furthermore, Alphabet Inc. still has a dual stock structure that consolidates power in the hands of a brain trust that includes Schmidt, Larry Page and Sergey Brin. This trio can (and will) continue calling most of the shots for the near-term.

But if you are a long-term investor who believes in the ultimate promise of innovation at Alphabet and GOOG stock, you should be encouraged by the fact that Warren Buffett is the role model Schmidt is aspiring to, and that Berkshire Hathaway is the archetype for the kind of company he wants GOOGL to become.

Monday, October 26, 2015

Wake Forest MBA students meet Warren Buffett

Warren Buffett met with a selected group of Wake Forest University students for a Q&A session.

Buffett emphasized the U.S. must invest in higher education and assure a means to finance that education to ensure a qualified labor force. He referred to innovative ideas in student loans, such as Purdue University’s plan to accept 10 percent of a graduate’s income for 12 years as full payment of their student loan obligation.

What does Buffett say leads to success? Focus and passion. He suggests that mastering both oral and written communication skills are vital. He talked about the importance of honor, integrity, and energy and used his performance as interim chairman at Salomon Brothers as an example of how honesty and integrity prevented a criminal indictment of that firm in 1991.

He advised professional investors to start young, build an audited record, do their work for the fun of it, and base fees on management instead of performance. He advised us to avoid “liquor, ladies, and leverage” as he had found this to be the cause of most ethical and legal problems friends and colleagues had faced over the years. He advised avoidance of risk but also pointed out that if you are following your passion you are already minimizing risk.

Throughout our discussion with Buffett there was a common theme of gratitude for his opportunities and experiences. He spoke of his parents and the influence his father had on his life, relaying he felt the greatest job one could have was being a teacher for your child. His decision to marry his first wife Susie provided stability and direction as she put him together and kept him together. His decision to work with Bill Gates in initiating and promoting the “Giving Pledge” was what he felt would be his greatest contribution to society. I

Warren Buffett also felt many of our greatest advancements would be in healthcare, and in particular in research concerning the brain. He warned the threat of chemical, biological, and nuclear attack was very real. He advocated for the refinement and adoption of renewable and sustainable energy and for government’s active role in that process. He spoke of the necessity of diversity in the workforce and utilization of all individuals’ talents and assets regardless of age, race, or gender.

Monday, October 5, 2015

Wells Fargo stock may be a decent buy

Berkshire Hathaway’s biggest single holding as of June 30, Wells Fargo has a reputation for being one of the most conservatively managed of the biggest U.S. banks, plus it offers a generous 3% dividend yield. The stock recently fell from July highs above $58 to $50 on August 25, and now appears to be retesting that low. The next level of support would be last October’s low of $47.85.

Thursday, October 1, 2015

Warren Buffett making mind blowing money daily

In 2013, Warren Buffett made on average $37 million per DAY — that's more than what Jennifer Lawrence made the entire year.

According to Forbes, Jennifer Lawrence was the second-highest-paid actress in 2013, and she is estimated to have made $34 million that year.

Warren Buffett made $37 million per day in 2013.