Decades after avoiding technology stocks, Buffett's first major tech bet in 2011 — a $10.7 billion stake in IBM — turns into one of his worst investments, undercutting the myth that Buffett simply 'doesn't do tech.'

The IBM investment came four years after the App Store and years after AWS defined cloud computing.
Buffett justified it based on IBM's 'defensible client relationships,' not technology.
Berkshire held the position until 2018, ultimately losing about $2 billion.
The episode shows Buffett's tech aversion wasn't principled avoidance so much as poor timing when he finally engaged.

“hit between the eyes by how great IBM is and how strong and defensible its client relationships are.”
Warren Buffett (quoted) · 2:01:00

#ibm#mistakes#technology investing

Hot Take· 2

Hot Take1:04:30

Munger's 'Raisins and Turds' Takedown of the Dot-Com Bubble

At the 2000 annual meeting, facing shareholder pressure to buy tech stocks, Charlie Munger delivers one of his bluntest and most famous lines about the dot-com bubble's contagion risk.

Shareholders pressed Buffett and Munger on why they wouldn't buy soaring tech stocks.
Buffett called the market a Ponzi scheme; Munger warned that bad companies would drag good ones down with them.
The hosts later calculated that Berkshire's stock actually outperformed even Microsoft if bought at the exact top of the bubble.

“The reason we use the phrase wretched excess is because it produces wretched consequences. It's irrational. If you mix raisins with turds, they're still turds.”
Charlie Munger (quoted) · 1:04:30

#dot-com bubble#charlie munger#tech stocks

Hot Take2:20:00

Bull vs. Bear Case for Berkshire After Buffett

The hosts debate whether Berkshire will thrive or fade once Buffett is no longer running the show, weighing the 'Buffett halo effect,' capital allocation constraints, and Ted/Todd's strong recent returns.

Bull case: successors Greg Abel, Ajit Jain, Ted Weschler and Todd Combs could be less conservative and more effective than an aging Buffett.
Bear case: Berkshire benefits heavily from an intangible 'Buffett halo' that drives favorable deal terms and shareholder loyalty.
Berkshire lacks meaningful internal growth engines, forcing it to keep shopping externally or buy back its own stock.
The debate concludes Berkshire risks becoming 'just an investment' rather than the quasi-religious institution it is today.

“Berkshire Hathaway is a religion and an investment. And the bare case is that at some point it just becomes an investment.”
Ben Gilbert · 2:23:30

“the only growth engine that Berkshire really has, like meaningful growth engine, is Geico, and that's not a real growth engine.”
Ben Gilbert · 2:24:00

#succession#greg abel#future outlook

Explainer· 2

Explainer50:30

The General Re Disaster: Berkshire's Costliest Acquisition

Berkshire's largest-ever deal at the time, a $22B all-stock purchase of reinsurer General Re, immediately ran into a fraud scandal, box-office losses, 9/11 losses, and an AIG accounting scandal.

Buffett paid with 20% of Berkshire's market cap in stock, betting Berkshire shares were overvalued.
Within a week of closing, Gen Re took a $300M loss from the Unicover fraud scheme.
Gen Re also lost money on Hollywood box-office insurance, 9/11 claims, and got entangled in an AIG accounting scandal.
Buffett eventually fired management and handed the business to insurance star Ajit Jain in 2016.

“very late in the game on this one”
Charlie Munger (quoted) · 52:00

“strictly hands off”
Warren Buffett (quoted) · 58:30

#general re#insurance#acquisitions#mistakes

Explainer54:30

Ajit Jain and the Birth of Super-Cat Insurance

Buffett's best-ever hire, Ajit Jain, builds Berkshire's reinsurance business from scratch by aggressively pricing the world's largest and strangest risks that other insurers wouldn't touch.

Jain joined Berkshire in 1985 from McKinsey with no prior insurance experience.
He took out magazine ads seeking casualty risks with premiums over $1 million.
His 'super-cat' (super catastrophic) policies targeted the highest-value premiums other reinsurers avoided.
He nightly briefed Buffett by phone on the insurance portfolio for decades.

“we are looking for more, more casualty risks where the premium exceeds 1 million dollars.”
56:30

“He is jet jack ring roll reincarnate.”
David Rosenthal · 55:00

#ajit jain#insurance#underwriting

Story· 7

Story09:30

Warren Buffett Meets Bill Gates at Bainbridge Island

Kay Graham engineers a 1991 Fourth of July gathering where a reluctant Warren Buffett and an even more reluctant Bill Gates end up talking all day and night, forming a lasting friendship.

Both Buffett and Gates initially had little interest in attending the gathering.
When asked what factor mattered most to success, both men independently answered 'focus.'
Gates convinced Buffett to buy Microsoft and Intel and avoid IBM, though Buffett only personally bought 100 Microsoft shares.
The friendship led to Gates joining the Berkshire board and, later, to the Buffett-Gates philanthropic partnership.

“anything for Kay”
Warren Buffett · 09:30

“as I told my mom, I don't know about meeting a guy who just invests in money and picks stocks.”
Bill Gates · 10:00

#bill gates#friendship#microsoft#history

Story21:30

Coca-Cola: From Neighbor to Board Member to White Knight

A decades-long Omaha neighbor connection to Coke's future president, combined with the New Coke disaster and activist rumors, sets up one of Buffett's most iconic investments.

Buffett's Omaha neighbor Don Keough rose to become president of Coca-Cola.
Keough converted Buffett from Pepsi to Cherry Coke, sparking his interest in the stock.
After the New Coke fiasco tanked the share price, Buffett bought 6% of Coke for $1.2 billion in 1987.
Buffett declared his 'favorite holding period is forever' for the position.

“we expect to hold these securities, the securities in Coke, for a long time. In fact, when we own portions of outstanding businesses with outstanding…”
Warren Buffett (quoted) · 30:00

“It's good work if you can get it for a ham sandwich.”
David Rosenthal · 31:00

#coca-cola#brand#investing history

Story46:30

Engineering the B-Shares to Outsmart Copycat Trusts

Rather than split Berkshire's soaring stock, Buffett creates a new class of open-ended 'Baby B' tracking shares to stop investors from getting fleeced by unofficial Berkshire-mimicking trusts.

Berkshire's A shares hit $34,000+ making them inaccessible to most retail investors.
Third parties were creating shadow trusts holding real Berkshire shares and reselling fractional interests.
Buffett created an open-ended B share offering at 1/30th the value of an A share so demand couldn't drive up price.
Berkshire priced the offering near an all-time-high valuation, making it a great source of cheap capital.

“Mr. Buffett and Mr. Munger believe that Berkshire's class A common stock is not undervalued at the market price stated above. Neither Mr. Buffett nor…”
49:30

#stock structure#capital markets#berkshire b shares

Story1:32:30

The Fax That Never Came: Buffett and the Lehman Weekend

During the fateful Lehman Brothers collapse weekend, Buffett asked for details by fax at his hotel — and a miscommunication meant he never got the message, only discovering a stray text a year later.

Buffett, on vacation, asked Lehman to send him deal details by fax rather than a phone call.
No fax ever arrived, so Buffett assumed the situation had resolved itself.
A year later his granddaughter found an unread Lehman text message on his flip phone.
Buffett had already passed on backing Lehman back in March 2008 after studying its 10-K.

“Send me a fax to the hotel that I'm staying at with the details of exactly what's going on and exactly what you want me…”
Warren Buffett · 1:33:00

“Dad, there's a text message on your phone.”
Little Susie (Buffett's granddaughter, quoted) · 1:34:00

#lehman brothers#2008 crisis#anecdote

Story1:54:00

The $5.2 Million Lunch That Landed Ted Weschler the Job

After a Wall Street Journal report on a different heir apparent fell through, hedge fund manager Ted Weschler wins a role managing billions at Berkshire by paying millions to have lunch with Buffett — twice.

Buffett had publicly sought young investment manager candidates since 2006.
Wall Street Journal reported Li Lu, Charlie Munger's close friend, was the presumed successor, but a compensation disagreement ended it.
Ted Weschler won Buffett's annual charity lunch auction two years running, paying $5.2 million combined.
Weschler joined at the end of 2010, eventually managing a pool around $13-20 billion.

“an anonymous bidder pays a record $2.6 million for lunch with Warren.”
David Rosenthal · 1:54:00

#succession#ted weschler#hiring

Story1:17:00

Giving It All Away: The Gates Foundation Gift and the Giving Pledge

After his wife Susie's death forces him to confront his fortune's fate, Buffett makes the largest philanthropic gift in history by handing most of his wealth to the Gates Foundation, later co-founding the Giving Pledge.

Susie's 2004 death upended Buffett's assumed plan that she would give away his fortune after his death.
In 2006 Buffett announced giving 85% of his Berkshire stock ($37B) mostly to the Bill and Melinda Gates Foundation.
The move let Buffett offload the operational burden of philanthropy while gaining enormous public goodwill.
The gift catalyzed the 2010 Giving Pledge, making mass wealth-giving a billionaire status symbol.

“he is going to give away 85% of his Berkshire stock, which is worth $37 billion at the time.”
David Rosenthal · 1:17:30

#philanthropy#giving pledge#bill gates

Story1:56:30

The David Sokol Insider Trading Scandal

Berkshire's presumed heir apparent, David Sokol, torpedoes his own succession chances by personally trading Lubrizol shares while helping negotiate Berkshire's acquisition of the company.

Sokol, running Berkshire's energy business, first suggested Berkshire acquire Lubrizol.
He personally bought shares before and during the negotiation process, a clear conflict of interest.
Buffett fired him and publicly expressed disbelief at the decision.
The scandal cleared the way for Sokol's former deputy, Greg Abel, to become the eventual successor.

“David front ran the trade with the acquisition of Luprzall.”
David Rosenthal · 1:57:00

#scandal#succession#governance

Takeaway· 1

Takeaway2:34:30

Grading 63 Years of Buffett: A 22.3% Career IRR

The hosts calculate Buffett's blended track record across the Buffett Partnership years and Berkshire, landing on a staggering long-run return despite a much weaker last three decades.

Combining the 13 partnership years (~29.5% IRR) with 50 Berkshire years (~20% IRR) yields a 22.3% blended IRR across 63 years.
$100 invested in 1959 and held through the full career would be worth over $26 million today.
Berkshire's IRR from 1993 to the present, however, is only about 13.5% — far below the earlier eras.
The last five years alone roughly tracked the S&P 500 even including the Apple windfall.

“A hundred dollars at the beginning of Warren Buffett's career, following him all the way through, is over 26 million dollars.”
Ben Gilbert · 2:35:30

“You get a blended IRR of 22.3% across 63 years of active money management for Warren.”
David Rosenthal · 2:35:00

#performance#irr#track record

Frameworks in this episode

Buffett's Moat Framework

Crisis Fixed-Income Playbook

The Status-Quo Expected-Value Model

Insights & moments

⚡Myth Buster· 1

Buffett Finally Breaks His No-Tech Rule (Badly) With IBM

◆Hot Take· 2