2000: Will Berkshire's newspapers successfully transition to the internet?

AUDIENCE MEMBER: Good morning, gentleman. David Winters, Mountain Lakes, New Jersey.

Thanks again for Berkshire Fest 2000 and having it on Saturday, for those of us who tap dance to work on Monday. (Buffett laughs)

You know, over the previous 30 years or so, Berkshire has been a tactical participant in the insurance business. With the acquisition of Gen Re and the broadening of GEICO’s scope, the company’s been transformed into a mainstream activity.

How will this transformation result in growth and low cost float over time? I.e., how do you avoid becoming average?

And to follow on with the very perceptive 10-year-old from California’s question, will Berkshire’s newspaper interest be able to make the successful transformation to the new electronic world, especially the unique content of the Washington Post? Thank you.

WARREN BUFFETT: Those are both good questions. I think, to answer your second one, I think the Buffalo News will do just as well as, if you take the top 50 papers in the country, in making a transition. How well the top 50 will do is really an open question.

And — but there is — you know, the industry factors will, in my view, just overwhelm any specific strategy. Because any strategy is —

It’s so easy to copy in the internet. That’s one of the problems of the internet. It’s one of the problems of capitalism.

I mean, if you open a restaurant that’s successful, somebody’s going to come in and figure out what your menu is and how — you know, the whole thing. And then they’re going to try to do it in a little bit better location, or at a lower price, or whatever. That’s what capitalism’s all about and it’s terrific for consumers.

The internet accentuates that process. I mean, it gives everybody in the world real estate. You know, there are no prime locations to speak of. I mean, I can give you the argument for how you develop one and all of that, but it really changes the world in a big way.

You know, if you were at 16th and Farnam in Omaha in the ’20s, with Woolworth — that’s the place where the streetcar tracks crossed, you know, and a whole bunch of them were going north/south there and east/west — and there wasn’t any better real estate in town.

I’m not sure if that’s worth as much now in nominal dollars as it was in the 1920s. But — and that looked permanent, incidentally. Who was going to rip up the streetcar tracks or — in 1910 or whenever it was?

So now, you rip up the tracks every day. You know, and so the fluidity is incredible, in terms of moving economic resources around compared to what it was.

The newspaper industry is going to try and figure out how to be a very important information source in a new medium. And it may solve that problem, to a degree, and still have lousy economics. That’s — you know, that’s — unfortunately, the newspaper industry’s always —

Historically, the way the industry structure worked, once you got into the majority of households and everything, somebody else could bring out a way better paper, but it wasn’t going to go any place against you.

I mean, you had such structural advantages that you could, you know — you could put your idiot nephew in and he would do fine — wonderfully — you know. And nothing could happen to him except when this different medium came along.

Now you can put in a genius and whether that will make any difference is an open question. I would say that it’s quite doubtful. If you own a newspaper, you want to do everything that you can think of and, fortunately, everything anybody else can think of, because you can copy them so fast.

And it may work in terms of product and it may not work in terms of product. And it may work in terms of product and still not work in terms of economics very well. And I don’t know the answer to that question.

I know that we will play it out — at the Buffalo News, for example — as strongly as we can. I don’t think other people are going to get way better results than we are. I don’t know what the other people are — what their results are going to be and how it will work.

It would be crazy to sit on the sidelines and simply ignore what’s going on. So we will do our darnedest to have good economics when this is all through. But nobody knows how it’s going to play out, in my view.