2021: Will Berkshire increasingly invest in high ROIC businesses?

Becky Quick: This question comes from Michael Lu from California. This is for both Warren and Charlie. In your shareholder letter, you mentioned that the best investment results come from the companies that require minimum assets to conduct high-margin businesses. In today’s world many of these companies tend to be software-driven businesses. While Berkshire has avoided investing in high-growth technology companies in the past, this appears to be slowly changing with your investments in Apple and Snowflake. As shareholders, should we expect that high-margin businesses will begin to constitute a larger proportion of Berkshire’s investment portfolio over time, particularly as Todd and Ted take on larger roles in the investment decision process?

Warren Buffett: Well, we’ve always known that the green business is the one that takes very little capital and grows a lot, and Apple and Google and Microsoft and Facebook are terrific examples of that. I mean, Apple has $ 37 billion in property, plant, equipment. Berkshire has 170 billion or something like that, and they’re going to make a lot more money than we do. They’re in better business. It’s a much better business than we have, and Microsoft’s business is a way better business than we have. Google’s business is a way better business. We’ve known that a long time. We found that out with See’s candy in 1972. I mean, See’s candy just doesn’t require that much capital. It has, obviously, a couple of manufacturing plants. They call them kitchens, but it doesn’t have big inventories, except seasonally for a short period. It doesn’t have a lot of receivables. Those are the kinds of businesses, they’re the best businesses, but they command the best prices, too. There aren’t that many of them, and they don’t always stay that way.

We’re looking for them all the time. We’ve got a few that are pretty darn good, but we don’t have anything as big as the big guy, but that’s what everybody’s looking for. That’s what capitalism is about, people getting a return on capital. The way you get it is having something that doesn’t take too much capital. I mean, if you have to really put out tons and tons of capital… Utility business is that way. It’s not a super high-return business. You just have to put out a lot of capital. You get a return on that capital, but you don’t get fabulous returns. You don’t get Google-like returns or anything remotely close to it. We’re proposing a return in the transaction with the proposition with Texas. I think it’s a 9.3%, isn’t it?

Greg Abel: Yeah, 9.3.

Warren Buffett: If you look at the return on most American businesses on net tangible assets, it’s a lot higher than 9.3, but they aren’t utility businesses either.

Becky Quick: Charlie, did you want to add anything to that?

Charlie Munger: Not a thing.