I am in the process of reading Alice Schroeder’s book entitled The Snowball: Warren Buffett and the Business of Life. The book is a massive source of information about the life of Warren Buffett. Needless to say the book is unbelievable! I love to read about the life of people who, in my opinion, have lived a valuable and influential life.
At the beginning of the book Alice recounts an event from the Sun Valley Conference in Hailey, Idaho. Allen & Company, a boutique investment firm in Hollywood handles the event inviting such notables as Bill Gates, Oprah Winfrey, and Rupert Murdoch.
In 1999 Warren Buffett was asked to be the keynote speaker to end the conference. This was a special year because the conference was filled with Internet tycoons ready to embark on billion dollar ventures in the new year. They were invited and were making the most of rubbing shoulders with the richest individuals around the world.
The Internet tycoons walked into the conference room that day hoping for a glowing reception and the blessings from one of the greatest investors of our time. What they received was quite the opposite.
Warren Buffett practically dismantled the belief in the new Internet startup companies. He likens the Internet Boom to that of the airline industry:
“…So I submit to you: I really like to think that if I had been down there at Kitty Hawk, I would have been farsighted enough and public-spirited enough to have shot Orville down, I owed it to future capitalists.”
“It’s wonderful to promote new industries, because they are very promotable. It’s very hard to promote investment in a mundane product. It’s much easier to promote an esoteric product, even particularly one with loses, because there’s no quantitative guideline.”
Warren Buffett, pg 19.
Most of the venture capitalists and entrepreneurs left the meeting slightly chuckling at “old Warren’s mistake.” They found out later that he was exactly right.
Web 2.0 companies should listen to Warren Buffett. He has always cautioned the vamping of over-promoted companies and increasing investment in techonolgy companies with no substance.
“You can get in way more trouble with a good idea than a bad idea, because you forget that the good idea has limits.” -Warren Buffett, page 21
I have always been a skeptic of increasing investment in social media and web 2.0. I do love the sites and I love the fact that they are free. I have a problem with the valuation of multiple billions of dollars for the site like Twitter.
This is a dangerous game we are playing when it comes to the multitude of millions of dollars invested in Internet startups. I am afraid we never learned to begin with.
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the prophet kyle lacy.
If investors learned anything from the dot com implosion is that they should invest in something more concrete than a great idea. Babysteps.
Good warning. Awareness will become a mantra in 2010, at least by the survivors.
Wow. He must have had some shocked faces in the crowd. I don't get the airplane reference though? Is he saying nobody's made any money in the air travel industry?