Transcription
Berkshire Hathaway now holds a more than $31 billion stake in Alphabet. That's a position that the conglomerate started to build in the third quarter of 2025, but it really ramped up this year after Greg Abel took over as CEO of Berkshire. In fact, just last month, it added $10 billion as part of a private stock purchase of those Alphabet shares.
Now, there's been a lot of speculation as to who decided to rep to purchase those shares, with many pointing to the stake as a sign of how Greg Abel will be putting his mark on the Berkshire portfolio. I asked Buffett whose idea it was to buy the tech giant.
"I appreciate it. I mean, I normally wouldn't give you an answer on something like that, but I will because it and but we I am not doing anything that he doesn't approve of. He's not doing anything. I don't approve of it. We we talk all the time. He's, you know, he's uh uh well, every day, I mean, and and and but he he is the decider. And uh getting back to um Alphabet or Google, uh it's probably number five or six."
"Well, I thought it was number three, if you consider uh the $10 billion private placement that would go along with that because that would put it north of $31 billion."
"Yeah. But we we we've got we've got the Burlington Northern Railroad which is certainly worth far more money than."
"Okay. So you're count you're counting fully owned."
"Absolutely. I mean we are always making the choice between whether well by marketable securities are come. We look at them the same way. There's there are some minor exceptions to that. We can't we can't set dividend policy, for example, if we don't own it. But the chances of those being material, the important thing is to buy a good business and to buy it on the right terms and to get the right person to run it."
"Okay. But you've quickly grown a north of $30 billion investment in in Alphabet. That puts it in terms of those companies that you own pieces of um behind only Apple and."
"American Express."
"and American Express."
"So Coca-Cola would be smaller, Bank of America would be smaller. Kind of close and and [clears throat] it uh but but if you take Coca-Cola which we've owned you know 45 years whatever it may be uh you know we we we don't have a thing to do with running that business and but it's a very good business and I [clears throat] when I say a very good business I mean something that you can expect to own earn high returns on capital over a long period of time. Now the question is when you get into Google is [clears throat] or any of the AI companies you're putting out huge amounts of money and I can put huge amounts of money into government bonds and get you know 20 or 30 or 40 billion dollars a year in terms of payments from them. Uh so a good business is one that earns a lot more than than and [clears throat] has prospects of continuing to earn a lot more than the the returns on on uh on essentially riskless investments which you could define as treasuries. But if you take something like American Express, you know, there are most of the banks earn 13, 14% on on on capital. If I asked everybody to guess uh what American Express would they would they would they would come up with some figure similar but it's so different that it earns 30% plus on capital and does not incur more risk in doing so than the banks that earn 13 or 14% and that the trick in life is to find I mean in investing is to find businesses that are going to earn high returns on capital for an extended period of time and that's what happened with with Berkshire for a long period of time long period of time gets to be very important because those doubles later on of of very big numbers but Charlie Munger my my partner for many for decades he just he just pounded the idea that it it wasn't a good business just because it it was doing sexy things or whatever it might But if I wasn't earning real cash that it would or be expected to do it in a very short period of time and and to be able to distribute it if it wanted to. Better yet, if it could redeploy it as a business, it was even better than one that had had the ability to earn high returns. But you couldn't deploy the excess capital of those returns."
"Okay. Let me ask you though, forever people have thought of you as somebody who doesn't invest in technology. And by the way, you've described yourself as somebody who doesn't invest in technology. Obviously, the biggest position in the Berkshire portfolio is Apple, a position that you put on, but at the time you called that a consumer company. Google you just called an AI company. So, what happened with."
"Google? The real question with Google and all of its competitors now because they they're all laying out hundreds of billions. I mean that."
"they're big capex spenders."
"Yeah. And that and that's real money. I mean that's if our railroad were to lay out 300 million or billion or 200 billion, you know, that that kind of money wasn't even put in the railroad business, you know, in terms of developing it. So and and they are that's the game they're they're they're playing now. They weren't playing that game with with with uh computer software."
"No. So when they were asset light, you didn't like them and the markets love them. Now that they are I made a mistake spending heavily on capex, a lot of shareholders don't like them as much because they don't."
"I think they're more likely to be a winner based on the record than they're probably 90% or 95% of what gets merchandised through Wall Street. Wall Street is interested to whether they can sell something."
"And uh I can't recall a report on Wall Street that really gets into the internal rates of return that a business is actually earning that what what's more important than what a business is earning. But they ask all these questions about what'll happen next quarter or you know it's just it's ridiculous. But, you know, investing is is coming up with well the probably the close to the most successful long-term investor was was was Rockefeller and but look at what oil and gas has done over 150 or a couple of hundred years. So, he kept compounding at a very good rate. Not as good a rate as Geico would have achieved in his early years because it's easier to do when you're small. Getting to do it when you're large is you got the whole world looking at you trying to figure out you know how how come those guys are doing it we're not doing it."
"Why do you like Alphabet above all others and what made you initiate this position? What was the Eureka?"
"I I would say that uh I don't like it as well as."
"at least four or five other businesses that we own."
"other than Apple the railroad."
"Well, American Express, you're not going to get the whole ought to be but uh uh and of course."
"but you like it enough to make it a huge."
"I like Berkshire that way. I mean, Berkshire earned high returns on capital without without I'm not talking about using the tricks of leverage or that sort of thing. I'm all."
"but I'm talking about why Alphabet versus the other uh Magnificent 7 or the other, you know, hyperscalers who are doing the same thing, spending a lot of money."
"Yeah."
"Amazon, Microsoft, whoever it may be."
"to try and win in this position of AI."
"No. Well, I don't want to sit around knocking the others. They don't have any choice. Yeah, you."
"to spend like this. You."
"Yeah. They're now playing a game in many cases where they or some cases where they're playing a game they don't want to play. IBM would have loved it if they just kept playing the game that IBM was playing in the 30s or the 40s or the 50s and the 60s, you know, and then somebody came along with and said we'll get a better result for you achieving the objective of all the customers you have because that's all you're going to have is you're either going to have happy customers, you don't have customers over time and uh the customer is not dumb. Wall Street can be very dumb and in terms of they they can [clears throat] dream, but a guy with a grocery store can't dream. I mean, I I worked at my grandfather's grocery store and we saw well, we had one store in 1869 and we had one store in 1969 [laughter] and and other people were earning high returns on capital uh some on a national scale. A&P, which people don't associate the with anymore in the 1930s. I mean, they were they were number one, enemy number one of trustbusters in in in Washington. And they they they had a very [clears throat] very very good hand and that hand disappeared."
"So, it's a different game. Um, and you like this game, you understand this game more than you understood the game they were playing before. Is that."
"Well, there's all kinds of games I don't understand. Sure."
"Yeah."
"But this game."
"why why should I expect to make money in all kinds of things I don't understand?"
"And."
"but that's what I'm getting at. What do you understand about this game at this point? Because most people would say he's never going to buy any technology stocks. And I think you've said the same thing yourself in the past."
"Yeah. But I I've done it. And actually one of the most successful companies I was associated with."
"going back to 1958."
"right."
"was we started a company called Data Documents, right?"
"We started Data Documents because a couple pals of mine read in the paper that IBM had settled an antitrust suit by divesting. They had to divest 50% of the capacity of what was their best business and everybody knew it was their best business. Now it so happens it ran out after 10 or 15 years and I I knew some of the people that caused it to run out. But if you have a wonderful business, you are going to be subject to attack. So you it's not a question of whether it's it was wonderful yesterday. It's it's the question is how long is it going to be wonderful?"