Are Warren Buffett’s hobbies overtaking his work?

In his latest letter to shareholders, billionaire Warren Buffett offers a much-discussed explanation of the news business, and why he believes newspapers can still be sound investments even after the classified advertising revenues on which they depend have plummeted 90% in a decade.

As a reader and citizen, I’m glad to see him saying this, in a way few other people can. But as an investor, I’m stunned.

What fund manager wants to tell his shareholders — in a letter announcing subpar earnings, no less — that he spends even a fraction of his time buying things he says only bring in extraordinary earnings margins when they enjoy local monopolies?

In his closer, Buffett notes that “it’s only been in the last year or so that other papers, including Berkshire’s, have explored pay arrangements. Whatever works best — and the answer is not yet clear — will be copied widely.”

This man commands an investment company worth tens of billions of dollars. Here he is, telling the people who trust him with their money that after a year in which he failed to make a single major acquisition, he’s spent $344 million buying 28 newspapers without clear business plans.

Buffett’s take on the news business is beside the point. His job isn’t to buy anything that interests him and happens to have okay economics behind it. It’s to buy the BEST assets he can, to create the most shareholder value.

As his colleague Charlie Munger told him half a century ago, it’s better to pay a fair price for a wonderful company than a wonderful price for a fair company.

Maybe it’s no surprise that the Oracle of Omaha is no longer beating the market.

2 Responses to “Are Warren Buffett’s hobbies overtaking his work?”

  1. Josh Levy March 8, 2013 at 7:04 pm #

    It might make sense to invest in the companies – whichever those are – to which major newspapers like the NYT are now outsourcing work that was previously done in-house. Another alternative would be the companies that own psuedo-news programs (e.g., Jon Stewart’s show) or specialized news programs (Spanish language, etc.) which seem to have a brighter future. Or he could invest in tabloid publications, which could include the NY Post (if you’re just looking to make a buck, not if you have any other standards).

    I can’t imagine what he’s thinking by investing in conventional newspapers, though.

    • Lindela June 12, 2013 at 5:12 am #

      Dumping money indiscriminately in any form or fasiohn is never a good idea. And that is perhaps one of the concerns rich people have when it comes to giving a spend-happy non-committal committee-run government free reign with spending the people’s hard-earned money. If they really wanted to step up to the plate, they’d devise real working ways to improve the country and people’s lives with their money. If they’re smart enough to figure out how to make it in the first place, they should be smart enough to figure out how to spend it wisely and altruistically. The problem is the altruism. Oftentimes money-making and helping others in meaningful and effective ways do not go hand in hand the moneymakers have both fists clenching cash and can’t let go.

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