Buffett CNBC transcript

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When he said he bought a test position in Oracle, then upon contemplation realized he didn't really understand the long term dynamics I got two impressions, one good and one bad.

 

Good impression: He asks himself on every investment if he really understands the business model and dynamics. He only invests in what he feels he understands so that there are no really bad surprises at Berkshire.

 

Bad impression: He is unable to expand his circle of competence. This last point I find potentially problematic if Berkshire requires some new big deals to boost gains on top of the existing businesses. I do believe there are other areas of competence other investors have and have done very well. But of course they could in time be wrong as well. Many investors think they know something very well but in the end find out they are just buying something they know maybe 60% or 70% and that part they don't know reduces long term return.

 

To me it's crucial that Berskshire can expand it's circle of competence as the world changes. Maybe the new blood will help with this. And hopefully Apple is an example of a successful expansion of the competence circle.

 

 

I think there is probably more behind the Oracle purchase then he is mentioning publicly. Anyone in the tech industry can tell you Oracle is going no where in the cloud business and Buffett is best friends with Bill Gates, he can get first hand knowledge from the leaders of tech any time he wants. Around the time of the stock purchase Larry Ellison was doing an abnormal amount of media appearances, and Amazon announced they were dropping Oracle internally. Maybe there was speculation of a buyout or deal that fell through.