Warren still thinks technology is outside his “sphere of competence”
Hello. My name is Andy Pollen from Adrian, Michigan. Thank you, once again, for having me to Omaha.
My question is for Warren, but, Charlie, please add your thoughts as well.
Warren, I’ve heard you say many times that you don’t understand technology and that you rely on Bill for that, and that’s fine. And I see from this year’s movie that you’re learning, so that’s good.
I’m also curious to hear what you’ve learned so far about the other information technology companies, such as IBM, Sun Microsystems, Oracle, Dell, EMC, and Intel.
I know… what I’ve learned is I know enough not… to know that I don’t know enough to make an investment decision.
The… Charlie and I have circles of competence that extend to evaluating a number of types of businesses, and there are a whole lot of businesses that we won’t be able to evaluate.
Some of them, I don’t think… I think very few people can evaluate.
I mean, you get outside of… you just get into businesses that… where the future is so likely to be different than the present that maybe there’s a few people that have great insights on it, but we sure don’t.
We are best at the businesses where we can come to a judgment that they’re going to look a good bit like they do now five years from now, ten years from now. They’ll be bigger. They’ll be doing different things, but the fundamentals will be the same.
ISCAR will be a bigger company five years from now. It may be a much bigger company, and we may get a chance to do interesting acquisitions.
But what you saw there, the fundamentals, won’t change. The way the people think won’t change.
I can name a number of businesses that are bound to change dramatically. I mean, when you think of how much the telecom business, for example, has changed over the last 15 or 20 years, it’s startling.
Even with hindsight, it’s a little hard to figure out, you know, who was going to make all the money and so on. There’s just… there’s just games that are too tough.
Charlie says, you know, “We’ve got three boxes at the company: in, out, and too hard.”
And a lot of things end up in the “too hard” pile, and it doesn’t bother us. You know, we don’t have to be able to do everything well.
If you go to the Olympics, you know, if you run the hundred meter well, you don’t have to throw the shotput. You know, some other guy can throw the shotput and you’ll still get a gold ribbon, you know, if you run the hundred meter fast enough.
So, we try to stay within the circle of competence.
Tom Watson, Sr…. I think it was Senior… yeah, Tom Watson, Sr…. many years ago said, “I’m no genius, but I’m smart in spots, and I stay around those spots.”
Well, that was pretty damn smart, you know. And we have found a lot of our managers who don’t think, you know, they can solve every problem in the world, but they run their businesses extraordinarily well.
You do not want to… Frank Martin mentioned Forest River. You do not want to go and compete with Pete Liegl and his business.
He’s going to kill you. He’s very, very, very good.
But he doesn’t come around and try and tell us how to run the insurance business, because that’s not his game.
We look for people that are very good at things they understand. And we don’t get any inferiority complex at all about the fact that… well, I… you mentioned Intel, I believe.
I was virtually there at the birth of Intel because I was on the board of Grinnell, and Bob Noyce was the chairman of the board of Grinnell. And we bought… at Grinnell… we bought $300,000 worth of their original debentures.
And, you know, I knew Bob was always a very, very smart guy, but I wouldn’t have had the faintest idea how to evaluate the future of Intel then, and I really don’t have it now, you know.
And I think they probably had a few surprises themselves in the last few years with AMD and what’s been happening in their business.
But what that’s going to look like in five years, I don’t have any idea. And I’m not so sure, if you’re in the industry, you’d know exactly what it was going to look like in five years. Some businesses just are very, very hard to predict.
Yeah. One of the foreign correspondents last year, after looking at us carefully, said, in effect, “You guys don’t seem smart enough to do so much better than other people as you’re doing.”
Were they looking at me or you, Charlie?
“Have you got an explanation?” And we said, “We know the edge of our competency better than most people do.”
It’s a very useful thing to know the edge of your competency. And I always say it’s not a competency if you don’t know the edge of it.
I’ll have to think about that a little bit.
Bill will explain it to me later.
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