Wednesday, March 29, 2017

Warren Buffett's Schizophrenic View Of The Internet

Warren Buffett made big news recently what it came out his company, Berkshire Hathaway, sold almost its entire position of Wal-Mart stock in the last quarter of 2016. There had been news in the past that he was selling his Wal-Mart holdings, but the scope of just how much he sold has just been fully disclosed - he sold virtually all of it - almost 90%. I'm willing to bet we'll see the last bit has been sold when Berkshire files its Q1 2017 disclosures.

The articles written about his sales all point to the same reason - he says it's just too hard for traditional retailers to compete with internet companies like Amazon.

Personally, I agree. While I never shop at Wal-Mart because I disagree with the way they treat and pay their employees, I have noticed that I tend to buy more things at Amazon than I do at other traditional retailers. The internet makes it easy to shop for the lowest price (which isn't always at Amazon) and get things delivered straight to your door.

One Eye Open, One Eye Closed

But this is where Buffett's schizophrenia kicks in. He has acknowledged the internet is destroying traditional retailers, yet he can't see that it's doing the same thing to traditional news companies. He still holds large positions in, and is still buying newspaper companies.

Talk about a last century business model! I haven't subscribed to a newspaper in at least a decade and I can't think of anyone I know who currently does.

Granted, Buffett has acknowledged that he has an "unnatural love" for newspapers and he does seem to see the writing on the wall - that only those few newspapers with a viable internet model will survive. However, at what point will he reach the same conclusion about newspapers that he did with retail stores - that the internet will wipe out the vast majority of them? When will we be reading stories about his sale of newspaper companies?


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