Buffett is an old white man crapping on tech he doesn't understand

[Guest wellmont]

exact same stuff you heard in the late 90s. that buffett "doesn't get it". meanwhile this is company #2 that MA's venture firm has bought from the corp where he was a sitting director. he also was on bod of HPQ when they bought Software company (his specialty) Autonomy, which was basically a fraud. it seems like every so often, silicon valley is able to con lots and lots of people out of lots and lots of money. bitcoin and kickstarter are latest examples.

[marodq]

Andreessen is good at blowing bubbles and cashing out before they burst, because that's the business he's in (finding greater fools).

 

Andreessen on value investing vs venture capital:

1/Venture capital and value investing fundamentally differ in one key way: VC = long change; VI = short change. However...

2/Otherwise I think venture capital has more in common with value investing than any other kind of investing. For example:

https://twitter.com/pmarca/status/448633135974977536

 

HP bought Autonomy for $10 billion with Andreessen serving on the board.

 

Andreessen serves on the board of Facebook,[3] eBay, Kno,[43] Hewlett-Packard, Stanford Hospital,[44] Bump Technologies, Anki,[45] Oculus VR,[46] and TinyCo.

http://en.wikipedia.org/wiki/Marc_Andreessen

 

And now Oculos is bought by Facebook. Adreessen serves on both boards.

 

http://online.wsj.com/news/articles/SB10001424052702303949704579461812019189626?mod=WSJ_hp_LEFTWhatsNewsCollection&mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702303949704579461812019189626.html%3Fmod%3DWSJ_hp_LEFTWhatsNewsCollection

[stahleyp]

I can't say that I disagree with Andreessen, technically, anyway.

 

Buffett is certainly old, white and a man. I'm guessing he probably doesn't really understand the encryption and all the technicalities of Bitcoin either.

 

I am confident, however, that Buffett knows much more about human psychology and economics though. ;)

 

I dont know where people get this notion that Buffett doesn't understand technology.  I am willing to bet he knows more about the economics of technology than most technology investors.  That is why he stays away from "pure" technology companies.  The earnings cannot be reasonably predicted as far out as Mars, Geico, or WFC. 

 

Every one of his businesses is technology intensive.  The insurance industry operates on computer models, detailed climatic analysis that can only be done by supercomputers, etc.  BNSF uses the latest in communication, and computing to manage its entire business.  Mid-america uses switching systems, sophisticated modelling, solar power, wind power.  Need I go on. 

 

Read Snowball.  He was using a computer to play bridge at the dawn of the public internet.  He was using a cell phone to negotiate the LTCM deal in 1998, before most of us had one.  In Lowenstein he was criticized for not bringing out a Cd version of world book encyclopedia.  Probably the proper decision, for the wrong reasons given the advent of wikipedia which killed the paid encyclopedia business. 

 

Rest assured he understands technology.

 

I don't doubt that understands technology. I apologize if I didn't word my statement correctly. I was simply implying that Buffett didn't understand all the technical aspects of bitcoin, like the encryption or mining standpoint. I was playing along the line from a technicality standpoint.

 

I do agree that Buffett will be right as far as it being a mirage.

[Liberty]

And now Oculos is bought by Facebook. Adreessen serves on both boards.

 

http://online.wsj.com/news/articles/SB10001424052702303949704579461812019189626?mod=WSJ_hp_LEFTWhatsNewsCollection&mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702303949704579461812019189626.html%3Fmod%3DWSJ_hp_LEFTWhatsNewsCollection

 

Not that I'm a big fan of Andreessen, but to be fair:

 

https://twitter.com/pmarca/status/448576195223773184

[marodq]

I can't say that I disagree with Andreessen, technically, anyway.

 

Buffett is certainly old, white and a man. I'm guessing he probably doesn't really understand the encryption and all the technicalities of Bitcoin either.

 

I am confident, however, that Buffett knows much more about human psychology and economics though. ;)

 

I dont know where people get this notion that Buffett doesn't understand technology.  I am willing to bet he knows more about the economics of technology than most technology investors.  That is why he stays away from "pure" technology companies.  The earnings cannot be reasonably predicted as far out as Mars, Geico, or WFC. 

 

Every one of his businesses is technology intensive.  The insurance industry operates on computer models, detailed climatic analysis that can only be done by supercomputers, etc.  BNSF uses the latest in communication, and computing to manage its entire business.  Mid-america uses switching systems, sophisticated modelling, solar power, wind power.  Need I go on. 

 

Read Snowball.  He was using a computer to play bridge at the dawn of the public internet.  He was using a cell phone to negotiate the LTCM deal in 1998, before most of us had one.  In Lowenstein he was criticized for not bringing out a Cd version of world book encyclopedia.  Probably the proper decision, for the wrong reasons given the advent of wikipedia which killed the paid encyclopedia business. 

 

Rest assured he understands technology.

 

+1

 

 

Did you guys ever read this piece by Andreessen?

http://www.businessinsider.com/the-death-of-value-investing-2013-4

His arguments are a misconception of the school of Graham and Dodd. Althought I'd agree with some of his points pertaining to technology, software specifically.

[marodq]

And now Oculos is bought by Facebook. Adreessen serves on both boards.

 

http://online.wsj.com/news/articles/SB10001424052702303949704579461812019189626?mod=WSJ_hp_LEFTWhatsNewsCollection&mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702303949704579461812019189626.html%3Fmod%3DWSJ_hp_LEFTWhatsNewsCollection

 

Not that I'm a big fan of Andreessen, but to be fair:

 

https://twitter.com/pmarca/status/448576195223773184

 

Fair enough Liberty. Thanks!

 

Neither am I a fan. He is a savvy guy though, from his humble beginnings with Mosaic, founding Netscape, etc. The man is smart. 

[mikazo]

I don't think Bitcoin will end up being similar to a traditional currency, but I'm guessing one of the many alternative cryptocurrencies might someday achieve that status. The value of the system comes from the fact that it's fundamentally impossible to print money. No one individual, corporation or government can devalue the currency for their own benefit. If all the technical problems and security problems surrounding the relatively new concept of a cryptocurrency can be solved some day down the road, then they might have a shot at truly widespread use.

[brker_guy]

I don't want to add more fuel to this already inflated Social Media-infused bubble we are living under which reminds me so much of 1999, and that party didn't end so well as you guys might have remembered.

 

However, I want to share with you guys this article.  It's a fascinating read:

 

The Brutal Ageism of Tech

 

http://www.newrepublic.com/article/117088/silicons-valleys-brutal-ageism

 

My least favorite quote of the entire article,

“Young people are just smarter”, Facebook CEO Mark Zuckerberg told an audience at Stanford back in 2007.

 

 

 

[constructive]

I find it really interesting how bubbles always spill over from the capital markets to "real life".

 

People like bitcoin miners and mobile social app developers are the new tulip farmers. Their work is justified and enabled by popular delusions in the market.

[tng]

This reminds me of a video from a talk that Buffett gave to MBA students. When Buffett says he doesn't understand technology, he really means he doesn't understand the economic characteristics of technology. In the talk, he listed several examples.

 

1) The car changed society far more than people could have imagined, but out of 2000 or so automakers, only 3 of them survived (since the financial crisis, GM and Chrysler went down, so Ford is the lone survivor today) and they have not been that great of a business. It is ridiculous to think you can simply pick the 3 winners out of that pile.

 

2) The airplane exceeded all expectations. Nobody would have guessed that it would be a standard way of travelling and shipping stuff. However, in aggregate, if you add up all of the income of all of the airline companies that ever existed, they would still have a net loss despite the billions upon billions of investment dollars being poured into the industry. They can't even get a 1% return.

 

3) Kodak was one of the iconic companies that had a moat wider than Coca Cola's. But the digital camera destroyed the photo film industry. But the digital camera business is a terrible business.

 

Buffett understands bitcoin far better than people give him credit for. He probably understands it to the same level as most software engineers. Just because someone can program computers, it doesn't mean he is any good at one of the narrow computer science topics such as cryptography. They have no advantage over Buffett. What many bitcoin speculators don't realize is that while they understand the technology, they are completely clueless about the economic characteristics of bitcoin, which Buffett understands far better. We might be all be using crypto-currencies in the next 10 years, but the most likely outcome even if that happens is that all the bitcoin investors lose all their money.

 

There are many flaws with bitcoin, which can be addressed by future crypto-currencies and bitcoin would go the way of AOL or MySpace. And assuming that a crypto-currency does gain acceptance, the most likely way it would happen is that it would get the backing of a national government (i.e. you can do stuff like pay taxes using the crypto-currency). There is zero chance that the crypto-currency would be bitcoin, that nation would create a new crypto-currency (it may be a clone of bitcoin) where they control the initial supply. Everybody would drop bitcoin overnight and use that currency because it would provide a legitimate way to convert a significant amount of crypto-currency to real life products.

[Guest hellsten]

Two more examples of VC vs VI:

 

"No maths can justify Facebook’s $19bn purchase of WhatsApp":

http://www.thevalueperspective.co.uk/tvp/archive?id=Notmanyappyreturns

 

Facebook founder Mark Zuckerberg has protested WhatsApp is cheap at $19bn but, while that may be so if you are a multibillionaire, it certainly is not the case in any meaningful sense of the word. When weighing up the implications of mergers and acquisitions and indeed Initial Public Offering’s, which these days are coming thick and fast, investors need to be constantly vigilant.

 

Return to the firing line: Revisiting Tesla and hopefully living to tell the tale!

If the pre-tax operating margin converges on 12% (as assumed in my base case), you would need total revenues of more than $150 billion to justify the current market price.

http://aswathdamodaran.blogspot.com/2014/03/return-to-firing-line-revisiting-tesla.html

 

Andreessen can probably justify Tesla's price by e.g. saying that they can put ads on the steering wheel, panoramic roof, and touch screen. That should give them $150 billion more in revenue…

[fenris]

Andreessen can probably justify Tesla's price by e.g. saying that they can put ads on the steering wheel, panoramic roof, and touch screen. That should give them $150 billion more in revenue…

It's more likely that the planned Tesla Gigafactory will mine the remaining Bitcoin. You can discount that future cash balance and pretty much get the car business for free.. ::)

 

In all seriousness, what bothered me about the quote was the word "white," as if that had anything to do with the point Andreessen was trying to make.

[randomep]

I don't want to add more fuel to this already inflated Social Media-infused bubble we are living under which reminds me so much of 1999, and that party didn't end so well as you guys might have remembered.

 

However, I want to share with you guys this article.  It's a fascinating read:

 

The Brutal Ageism of Tech

 

http://www.newrepublic.com/article/117088/silicons-valleys-brutal-ageism

 

My least favorite quote of the entire article,

“Young people are just smarter”, Facebook CEO Mark Zuckerberg told an audience at Stanford back in 2007.

 

After making computer chips for 15yrs in silicon valley, and just generally getting older, I have found there is no substitute for experience.

 

If you look closely at the world trend, I think you'll find the opposite phenomenon more accurate than what the article says. The world is harder and harder for young people to get ahead.  They lack knowledge and experience and blue collar jobs are harder and harder to get and lower and lower paying. The established and experienced can get richer and more successful. The world favours the incumbent.

 

 

[Rabbitisrich]

I don't want to add more fuel to this already inflated Social Media-infused bubble we are living under which reminds me so much of 1999, and that party didn't end so well as you guys might have remembered.

 

However, I want to share with you guys this article.  It's a fascinating read:

 

The Brutal Ageism of Tech

 

http://www.newrepublic.com/article/117088/silicons-valleys-brutal-ageism

 

My least favorite quote of the entire article,

“Young people are just smarter”, Facebook CEO Mark Zuckerberg told an audience at Stanford back in 2007.

 

After making computer chips for 15yrs in silicon valley, and just generally getting older, I have found there is no substitute for experience.

 

If you look closely at the world trend, I think you'll find the opposite phenomenon more accurate than what the article says. The world is harder and harder for young people to get ahead.  They lack knowledge and experience and blue collar jobs are harder and harder to get and lower and lower paying. The established and experienced can get richer and more successful. The world favours the incumbent.

 

Not necessarily for businesses that emphasize innovation. Young people are "smarter" than older people in specific ways. Think back to when you were 16 and you read something that kept your brain buzzing until you internalized the new thought process. That sensitivity and cognitive agility lessens over time. Of course you pick up other attributes, but those young attributes are especially useful for mold breaking.

[boilermaker75]

I don't want to add more fuel to this already inflated Social Media-infused bubble we are living under which reminds me so much of 1999, and that party didn't end so well as you guys might have remembered.

 

However, I want to share with you guys this article.  It's a fascinating read:

 

The Brutal Ageism of Tech

 

http://www.newrepublic.com/article/117088/silicons-valleys-brutal-ageism

 

My least favorite quote of the entire article,

“Young people are just smarter”, Facebook CEO Mark Zuckerberg told an audience at Stanford back in 2007.

 

After making computer chips for 15yrs in silicon valley, and just generally getting older, I have found there is no substitute for experience.

 

If you look closely at the world trend, I think you'll find the opposite phenomenon more accurate than what the article says. The world is harder and harder for young people to get ahead.  They lack knowledge and experience and blue collar jobs are harder and harder to get and lower and lower paying. The established and experienced can get richer and more successful. The world favours the incumbent.

 

Not necessarily for businesses that emphasize innovation. Young people are "smarter" than older people in specific ways. Think back to when you were 16 and you read something that kept your brain buzzing until you internalized the new thought process. That sensitivity and cognitive agility lessens over time. Of course you pick up other attributes, but those young attributes are especially useful for mold breaking.

 

When I think back to my younger self I think, "how could I have been so naive?" Although I cannot think as fast, I sure feel I am a lot smarter.

 

Zuckerberg doesn't realize he had to be smart and stumble upon the right situation.

[merkhet]

Buffett has been sneered at by these Silicon Valley types before - 15 years ago. That didn't end too well for most dot com investors..

 

+1 That was my first thought as well.

[Guest hellsten]

“Young people are just smarter”, Facebook CEO Mark Zuckerberg told an audience at Stanford back in 2007.

 

Maybe Zuckerberg is confusing luck with intelligence, or maybe he wanted to charm the audience.

 

Older generations can usually find a thousand ways of killing an idea. This can be a good thing to keep "things" stable.

 

Younger generations usually can't find a thousand ways of killing an idea. This is good for innovation.

 

What I'm trying to say is that with an idea or startup a) you don't know where you'll end up b) ignorance is sometimes a good thing c) if you think you're good at implementing ideas and hustling, don't listen to anyone trying to kill your idea, see point a.

 

Young people don't have the experience to kill their ideas and statistically some of them will end up in weird places they didn't plan on going and where older people said they couldn't go.

[oddballstocks]

“Young people are just smarter”, Facebook CEO Mark Zuckerberg told an audience at Stanford back in 2007.

 

Maybe Zuckerberg is confusing luck with intelligence, or maybe he wanted to charm the audience.

 

Older generations can usually find a thousand ways of killing an idea. This can be a good thing to keep "things" stable.

 

Younger generations usually can't find a thousand ways of killing an idea. This is good for innovation.

 

What I'm trying to say is that with an idea or startup a) you don't know where you'll end up b) ignorance is sometimes a good thing c) if you think you're good at implementing ideas and hustling, don't listen to anyone trying to kill your idea, see point a.

 

Young people don't have the experience to kill their ideas and statistically some of them will end up in weird places they didn't plan on going and where older people said they couldn't go.

 

Excellent points.

[yadayada]

If he was an old black man, he would know it all. I learned that from movies, old black janitors usually know everything.

[randomep]

I don't want to add more fuel to this already inflated Social Media-infused bubble we are living under which reminds me so much of 1999, and that party didn't end so well as you guys might have remembered.

 

However, I want to share with you guys this article.  It's a fascinating read:

 

The Brutal Ageism of Tech

 

http://www.newrepublic.com/article/117088/silicons-valleys-brutal-ageism

 

My least favorite quote of the entire article,

“Young people are just smarter”, Facebook CEO Mark Zuckerberg told an audience at Stanford back in 2007.

 

After making computer chips for 15yrs in silicon valley, and just generally getting older, I have found there is no substitute for experience.

 

If you look closely at the world trend, I think you'll find the opposite phenomenon more accurate than what the article says. The world is harder and harder for young people to get ahead.  They lack knowledge and experience and blue collar jobs are harder and harder to get and lower and lower paying. The established and experienced can get richer and more successful. The world favours the incumbent.

 

Not necessarily for businesses that emphasize innovation. Young people are "smarter" than older people in specific ways. Think back to when you were 16 and you read something that kept your brain buzzing until you internalized the new thought process. That sensitivity and cognitive agility lessens over time. Of course you pick up other attributes, but those young attributes are especially useful for mold breaking.

 

 

You may be right about young people being smarter, but that requires a debate on the meaning of smarter.

 

But businesses that emphasize innovation needs young people? Specifically what are we talking about. I really try hard to think of who is innovative? Facebook, I mean step back a bit and call facebook what it really is..... a website and it isn't even the first to make social media or whatever their niche is......

 

Apple? with Jobs? I mean he was old when Apple introduced iPhone and iPod, and even then those are not innovative, Jobs is a real good salesman and I dunno how to describe it.

 

MSFT? with Gates? DOS or Windows were not innovative, and I am amazed at how it gets us to all use it. I am convinced Intel has to make processors more and more powerful only because Windows is so slow, turn any windows machine into a Linux box and you'll know how inferior it is....

 

When I think of innovation, I think of maybe people talking at TED, are they all young? Einstein did his most brilliant work in his 20's ok.  Black Scholes? The guys who came up with it were all in their 30's at least I believe. I also think of people who invented Ethernet or TCP/IP, but these are all guys sweeting in some university or research lab. They were not led by 20yr old kids.

 

Our society is built on the shoulder of giants, the people who suddenly make a ton of money in business may be some 22yr old who does an IPO, but I hardly think what they do is innovative. They did something cool that caught on...

 

As I get older (in my 40's) I work in places where all my coworkers are above 35...... and we are making the most advanced **whatever(sorry I can't say)** in the world.....

 

I reiterate, the people who control things in our world are mostly old geezers with experience....

 

 

[tng]

The "young people are smarter" trend has actually started to disappear. Since 2000, the age that Nobel Prize winners in physics, chemistry, and medicine did their prize winning work has been going up. For physics, the average age the prize winning work is done is in the late 40s. The illusion that young people are smarter is actually related to how science advances. For example, once quantum mechanics was developed, the biggest physics discoveries were all based on quantum mechanics. However, most of the quantum physicists were young people. Older scientists had their own projects that were still in process that were not based on quantum physics, those experiments may have positive results, but the research is not viewed as ground breaking as the new quantum physics research even though it may be just as intellectually challenging. Some of the old physicists converted into quantum physicists, but the colleges were creating far more young quantum physicists. However, as the field matured, the average age of the scientists making the discovery went higher (now there is the same number of old physicist and young physicist). If there is a new groundbreaking theory, the pattern will happen again.

 

This pattern happened with computer science and other computer related technology because computers became big in the late 90s. Far more young people went to college for computer science, there are many times more computer scientist in the late 90s and 2000s than there were in the 70s or 80s. So obviously, when a discovery is made, it is more likely to be made by a young computer scientist because the young computer scientist outnumber the old ones by maybe 10:1. But as the field matures, the average age will go up. If a field loses popularity, then all the discoveries will be made by old researchers instead of young ones because there are very few young ones.

 

Of course Zuckerberg is going to talk up young talent, because he is a member of the group and most of his employees are too. Also, he wants to recruit the top graduates from the colleges so he is pandering to them too. Just wait 20 years for the field to mature and there will be as many old computer scientists as young computer scientists. Then we'll see that the old guys are doing the same stuff as the young ones.

[randomep]

The "young people are smarter" trend has actually started to disappear. Since 2000, the age that Nobel Prize winners in physics, chemistry, and medicine did their prize winning work has been going up. For physics, the average age the prize winning work is done is in the late 40s. The illusion that young people are smarter is actually related to how science advances. For example, once quantum mechanics was developed, the biggest physics discoveries were all based on quantum mechanics. However, most of the quantum physicists were young people. Older scientists had their own projects that were still in process that were not based on quantum physics, those experiments may have positive results, but the research is not viewed as ground breaking as the new quantum physics research even though it may be just as intellectually challenging. Some of the old physicists converted into quantum physicists, but the colleges were creating far more young quantum physicists. However, as the field matured, the average age of the scientists making the discovery went higher (now there is the same number of old physicist and young physicist). If there is a new groundbreaking theory, the pattern will happen again.

 

This pattern happened with computer science and other computer related technology because computers became big in the late 90s. Far more young people went to college for computer science, there are many times more computer scientist in the late 90s and 2000s than there were in the 70s or 80s. So obviously, when a discovery is made, it is more likely to be made by a young computer scientist because the young computer scientist outnumber the old ones by maybe 10:1. But as the field matures, the average age will go up. If a field loses popularity, then all the discoveries will be made by old researchers instead of young ones because there are very few young ones.

 

Of course Zuckerberg is going to talk up young talent, because he is a member of the group and most of his employees are too. Also, he wants to recruit the top graduates from the colleges so he is pandering to them too. Just wait 20 years for the field to mature and there will be as many old computer scientists as young computer scientists. Then we'll see that the old guys are doing the same stuff as the young ones.

 

Great points, tng. I was starting to think in your way too, but you really solidified my thoughts. I was just thinking is there room for older say 50+ yr old people in tech (computer s/w and h/w). Maybe what I am noticing around me is happening throughout the industry, the average ages in hi tech is getting older.....

 

 

[Palantir]

^That is because experimental physicists mature later. Theorists, nope. Same goes for things like Chess, Magnus Carlsen was ruling the world by age 19.