The legendary investor Warren Buffett and his firm Berkshire Hathaway knew about Google way ago. They had direct information early on about how lucrative its business would be but decided to pass on investing in the Internet search giant.
Buffett says he’s really regretting that decision now. Google has become one of the very few $1 trillion dollar market cap U.S. companies. You could count them all on one hand.
An investment of $500 million in 2013 would have grown in value to nearly $2.5 billion today. Is Warren Buffett repeating the same mistake all over again with Bitcoin? Or even making a far more costly investment blunder?
Passing On Google, And Knowing Better Too
“Just imagine having something that every time you just hit a click the cash register rung somewhere around California.”
A year later he told CNBC: “I should have got Google… It’s great to find something that costs a penny and sells for a dollar and is habit forming… This doesn’t cost anything … and it’s very useful.”
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Buffett’s holding company, Berkshire Hathaway actually had an insider’s view of Google’s potential and still missed out. In 1996, Berkshire acquired GEICO. But the gecko commercials on TV weren’t the only key to its massive scaling operations. GEICO relied heavily on Google advertising.
Warren Buffett could see they were paying $10 a click, and that it was costing Sergey Brin and Larry Page next to nothing. But he still sat on his hands and missed out.
Is Buffett Blowing Another Opportunity with Bitcoin?
Longtime Buffett partner, Charlie Munger told Berkshire shareholders:
“We could see in our own operations how well that Google advertising was working. And we just sat there sucking our thumbs… I feel like a horse’s ass for not identifying Google. I think Warren feels the same way. We screwed up.”
Buffett added: “He’s saying, ‘We blew it,'”
“The trouble is I saw that Google was skipping past AltaVista, and I then wondered if anybody could skip past Google.” Buffet then explains the reason why they ultimately passed on Google.
Today Google is one of those rare, powerful brands whose name has become a verb.
Buffet’s Cold Attitude To Bitcoin
Bitcoin could be another one of those once-in-a-lifetime brand powerhouses with some of the properties of a lucrative natural monopoly. But Warren Buffett doesn’t have the same respect for Bitcoin that he had for Google, even when he decided not to invest in it.
He’s called Bitcoin “probably rat poison squared.” And added confidently, “I can say with almost certainty that they will come to a bad ending.” But Bitcoin is similar to Google in how it leverages digital computation to create highly valuable, real-world effects at a trivial cost.
There is one important way it’s different though. Bitcoin isn’t regulated like Google. It never has been. It’s also worth noting that Bitcoin is not a company, it’s not making revenues and it doesn’t have annual financial reports or forecasts. But if Google was a manifestation of the world wide web, then surely Bitcoin is a manifestation of blockchain technology.
Disclaimer: This article is the opinion of the author, and does not represent professional financial or investing advice.