Another illustration of Warren's point is that in 1975 the ratio of intangible to tangible assets of the five largest global companies by market cap was $122 billion/$594 billion. In 2018 the ratio of intangible assets to tangible assets was $21.03 trillion/$4.0 trillion(Crouzet, Eberly, Eisfeldt and Papanikolaou). Intangible assets like software, software in a cloud, patents or what is defined as intellectual property, form the lion's share of the assets of the world's largest and most profitable companies' today, as illustrated.
I am really surprised Berkshire hasn’t loaded up on Alphabet yet. They are solving 100k+ searches per second. I don’t think there is any other company serving customers at a rate that comes close. Then take global distribution at very limited additional marginal cost and add on top that GDP growth, generally, grows worldwide - Ever increasing the value of every click as we move along…
Munger has been beating the drum for over 5 years to invest in Alphabet, but Buffett is just excessively conservative. I also think Buffett is very out of touch with consumer behavior, or else Berkshire would have purchased a meaningful amount of Costco a long time ago. I’ve been a Berkshire owner since 2000, and I’m just viewing the facts as coldly rational as I can.
Buffett leans on the conservative side. If it was only his money he was managing he would've been more aggressive. His absolute main focus is on a durable competitive advantage. Unless he sees a competitive advantage of 30-40-50 years he doesn't pull the lever. And it is hard to gauge that long of a competitive advantage for technology companies because by definition technology companies are at higher risk of disruption by competitors. Also the risk of anti trust suits might always be at the back of his mind.
