2017: Do you view IBM and Apple differently? And what have you learned about investing in technology companies?

ANDREW ROSS SORKIN: Good morning, Warren.

This question comes from a long-time shareholder who I should tell you accosted me last night in the lobby of the Hilton Hotel with this question.

“Warren, for years, you stayed away from technology companies, saying they were too hard to predict and didn’t have moats. Then you seemed to change your view about technology when you invested in IBM, and again when you recently invested in Apple.

“But then on Friday you said IBM had not met your expectations and sold a third of our stake.

“Do you view IBM and Apple differently? And what have you learned about investing in technology companies?”

WARREN BUFFETT: Well, I do view them differently. But, you know, obviously, when I bought the IBM — started buying it six years ago — I thought it would do better in the six years that have elapsed than it has.

And Apple — I regard them as being in quite different businesses. I think Apple is much more of a consumer products business, in terms of the — in terms of sort of analyzing moats around it, and consumer behavior, and all that sort of thing.

It’s obviously a product with all kinds of tech built into it. But in terms of laying out what their prospective customers will do in the future, as opposed to, say, IBM’s customers, it’s a different sort of analysis.

That doesn’t mean it’s correct. And we’ll find out over time. But they are two different types of decisions.

And I was wrong on the first one, and we’ll find out whether I’m right or wrong on the second. But I do not regard them as apples and apples, and I don’t quite regard them as apples and oranges, but they’re — it’s somewhat in between on that.

Charlie?

CHARLIE MUNGER: Well, we avoided the tech stocks, because we felt we had no advantage there and other people did. And I think that’s a good idea not to play where the other people are better.

But, you know, if you ask me, in retrospect, what was our worst mistake in the tech field, I think we were smart enough to figure out Google. Those ads worked so much better in the early days than anything else.

So I would say that we failed you there. And we were smart enough to do it and didn’t do it. We do that all the time, too.

WARREN BUFFETT: Yeah. We were their customer very early on with GEICO, for example. And we saw — I don’t — these figures are way out of date, but I — as I remember, you know, we were paying them 10 or 11 dollars a click or something like that.

And any time you’re paying somebody 10 or 11 bucks every time somebody just punches a little thing where you’ve got no cost at all, you know, that’s a good business, unless somebody’s going to take it away from you.

And so we were close up, seeing the impact of that.

And incidentally, if any of you don’t have anything to do in your hotel rooms tonight, just keep punching Progressive or something. And — (Laughter)

Don’t really do that. (Laughter)

The thought just happened to cross my mind. The — (Laughter)

But, you know, that is — and you’ve never seen a business — almost never seen a business — like it, where —

And I think for LASIK surgery and things like that, I think the figures were, you know, 60 or 70 bucks a click with no incremental — no cost.

So — and I knew the guys. I mean, they actually designed their prospectus. They came to see me. And they — a little bit after the original one, when they went public, a little bit after Berkshire even. And so I had plenty of ways to ask questions or anything of the sort, educate myself. But I blew it — (laughs) — and —

CHARLIE MUNGER: We blew Walmart, too. When it was a total cinch, we were smart enough to figure that out and we didn’t.

WARREN BUFFETT: Yeah, figuring out — execution is what counts. So — (Laughs)

Anyway, we’ll — and I could be making two mistakes on IBM. I mean, the — you know, they’re — they —

It’s harder to predict, in my view, the winners in various items, or how much price competition will enter in to something like cloud services and all of that.

I will — I made a statement the other day, which it’s really remarkable, and I was — I asked Charlie whether he could think of a situation like it — where one person has built an extraordinary economic machine in two really pretty different industries, you know, almost simultaneously, as has happened —

CHARLIE MUNGER: From a standing start at zero.

WARREN BUFFETT: From a standing start at zero, with other — with competitors with lots of capital and everything else.

To do it in retailing and to do it with the cloud, like Jeff Bezos has done, I mean, I —

People like the Mellons invested in a lot of different industries and all of that. But he has been, in effect, the CEO, simultaneously, of two businesses starting from scratch that if — you know, Andy Grove used to use — at Intel — used to say, you know, “Think about if you had a silver bullet and you could shoot it at — and get rid of one of your competitors, who would it be?”

Well, I think that both in the cloud and in retail, there are a lot of people that would aim that silver bullet at Jeff.

And he’s done — it’s a different sort of game — but he’s, you know, at The Washington Post, he’s played that hand as well as anybody I think possibly could.

So it’s a remarkable business achievement, where he’s been involved, actually, in the execution, not just bankrolling it, of two businesses that are probably as feared by their competitors, almost, as any you can find.

It’s — Charlie, you got further thoughts?

CHARLIE MUNGER: Well, we’re sort of like the Mellons, old-fashioned people who done all right. And Jeff Bezos is a different species. (Laughter)

WARREN BUFFETT: And we missed it entirely, incidentally. We never owned a share of Amazon. (Laughs)