Moneybags Buffett on ditching Oracle stake: I don't think I understand where the cloud is going Warren Buffett has told the world he was behind Berkshire Hathaway's decision to ditch its £2.1bn Oracle stake – just a quarter after buying it – because he felt he didn't understand where cloud computing is headed. The investment firm's stake in the legacy vendor had been sold off by the close of Berkshire Hathaway's Q3, …
I think it's been clear for quite a while that Amazon and MS are going to seriously outperform Oracle in this game, for a while at least. But having accepted that Oracle's only going to get the last little slice of the pie there's still a lot of room for speculation in how big the pie is going to turn out to be.
What I took away from this is in this day and age it's quite refreshing to see a powerful and influential person actually publicly say,"Yeah, know what? I don't know."
Perhaps, but buying them in the first place (especially IBM, considering stories passim, in El Reg and others) was one of his significantly less better calls. The research power of us lowly commentards doesn't even come close to the Sage of Omaha(tm) but even we can see IBM for the fantasy shit show it clearly is.
As said further up, respect that he admitted his mistake in thinking he understood something when he didn't; but considering his excellent calls in the past it's surprising he thought he understood it in the first place.
Indeed, Cloud was always nothing more than hype. It was sold cheaply in the beginning, and with almost no SLAs or redundancy or flexibility.
Beancuounters jumped on it, and all the while the providers were improving reliability and features and jacking up the price.
In a "gotcha" moment many companies found they had been sucked into using someone else's expensive computer, and they had lost control of their platform, patch levels, disaster recovery, sovereignty, security etc, etc, etc.
Where's your evidence? See https://cloudhesive.com/blog/amazon-continues-cut-aws-prices/ for a discussion of how AWS in particular dropped its prices more than 60 times in its first decade - other providers have done the same (they had to or go out of business). SLAs have been there from the start, although whether the penalties they'd have to pay to you for any outage are worth it to you is a personal choice. Redundancy and flexibility have been the most important benefits of cloud since day 1. I'd argue that costs - at least OpEx costs - are the least important reason to go to the cloud, and that the flexibility and redundancy you can get there are the most important, along with the changes in your CapEx costs.
I don't always agree with Buffett's statements but when I look back at his actions over the years he's never been that wrong. If you don't understand an environment that you'd be just gambling to invest or work in it. Most modern "investment" companies act like legalized gambling companies, "Give us your money and we'll make you rich (unless of course - check the small print - we don't)."
I don't always agree with Buffett's statements but when I look back at his actions over the years he's never been that wrong.
I think it's more accurate to say that he's been a lot more right than wrong. Buffett invests in what he can understand, which is IMHO something that everyone ought to do but is rarely the case (just look at how many investors could be lured last year by just adding the word "blockchain" somewhere).
I think he still had a few glitches ('coz it's the stockmarket), but in teh main he has spectacular returns exactly because he sticks to what he knows, and he plans long term. The latter seems almost incompatible with the tech world, but it makes picking stocks more interesting.
All IMHO, I'm no expert.
to and fro... When I had my first computer course, there was a big HP 3000 in some part of the building, and we had 'terminals'. Along comes the PC, breaking up the big mainframe into smaller modules. We've gone from big honkin' iron in the closet, to mini silicon under the desk to big honkin' iron in the cloud, which could be another room in the building. It's not that hard of a concept.... the great material continuum. What was once old is new and vice versa.
do not use "big honkin' iron" they basically use lots and lots of PCs
Tied together into what effectively looks like a single system, especially from the outside. In much the same way as the S/370s that I used to (sort of) write code for - we had 6 processor complexes attached to it that, to the outside world (and from a code viewpoint), looked like a single mainframe.
>We've gone from big honkin' iron in the closet, to mini silicon under the desk to big honkin' iron in the cloud, which could be another room in the building. It's not that hard of a concept
Except once upon a time you paid $$$ for the big iron if you used it or not, $$$ for the OS licence, $$$ for the room it went in and $$$ for the AC/Power/maintenance etc
If mainframe companies offered to install almost unlimited capacity, manage the real estate and HVAC but only charged you for what you used - there might be more of them still in business.
Even back in the 2000s we had to guess how many customers we would have for the next quarter and try and buy/install enough Suns and cram in enough racks to keep ahead of demand, without running out of money. Being able to scale a data center from a keyboard minute-minute is very nice.
Oracle still thinks it is becoming a cloud vendor, while in reality they are a tool vendor with a hardware compartment and identity problems ...
Cloud is the reason they they are losing territory due to detoriating tool quality and byzantine licensing terms & conditions in non-cloud and foreign-cloud environments .
It's a good thing Mr Buffet admits to himself he does not really understand the market and draws the correct consequences.
That is exactly the way Oracle is not acting.
"I don't think, particularly after my experience with IBM, I don't think I understand exactly where the cloud is going,"
Then why in hell did you invest in Oracle to begin with?
I'm a BH shareholder and a lot of the reason for that is Warren's unwavering (at least until recently) desire to invest in things he understands and believes will hold enduring value. It's not like Warren to make the same mistake twice and I really hope this isn't a sign of declining health. There's no one quite like Warren to show you don't have to be a total asshole to accumulate wealth, help others become financially stable, and share your good fortune.
People make mistakes.
Buffet has a good track record but nobody is infallible.
As for health.. with age comes experience, but also a few more mistakes as the advantage of experience sometimes loses to the inexorable decline in your mental & physical skills
Given Buffet often likes companies with long term viability, maybe hes being polite and seen the writing on the wall for Oracle with the way they antagonize (some may say fleece) customers and plenty of those customers just waiting for a chance to jump ship when they can - and the general bad customer service rep of Oracle does not exactly help them attract new customers.
To be fair, MS, Amazon (& to lesser cloud market share Google, IBM etc.) also do not exactly have the greatest reputations for highly moral behaviour, but they look almost saintly compared to Oracle. But when all the "main" cloud vendors are less than squeaky clean then it comes down to a bit of least worst decision making, and often Oracle will not be seen as the least worse option
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That is all cobblers. Buffet, like many around in the 50's, understands the cloud very well - in many cases better than us young'uns. Mainframes, billing for shared resources... conceptually, none of this is all new.
He's also got form on talking the smelly bovine patter in that folksy Omaha style. He's always tried to make you think exactly what he wants you to think. And in this case, he wants you to think that the lovable befuddled old codger has got a bit confused, made a mistake - but it's OK, he's now rectified it. I call BS. Buffet's way too smart for that.
Buffet didn't make himself one of the wealthiest men on the planet by spending the likes of two billion dollars on an investments he didn't understand.
In much the same way as there was one victor in the 50's (IBM) and maybe an also-ran (DEC perhaps), he also knows that the spoils will go to at most two victors, and that Amazon and Microsoft are so far ahead of the pack as to make the rest of the players look very niche indeed.
Holding an investment for a few months is VERY rare for Buffet. He's the absolute epitome of the long-term buy-and-hold investor. It suggests to me that he's gotten wind of a SERIOUS problem at Oracle. At least, that's how big institutional investors will see this. And they will sell too, just in case, to avoid being the last schmuck in the house. Expect Oracle stock to drop like a lead balloon. When you're personally worth fifty billion dollars and own the world's most successful investment fund, you can move markets with your words and your actions. So Buffet will continue to look like a genius anyway; selling before the stock tanked And the legend goes on...
I think so to.
And unlike all the AC's posting here today (hello corporate PR!) I'm OK with putting my name on a post.
There's many kinds of "not understanding."
There's "not understanding how this market works." There's "not understanding how this company works." There's "not understanding how this company will make money from how this market works." I think it's the last one that Buffet is having a problem with.
And when buffet can't figure out where the money is going to come out of that's usually the point he gets out.
I think quite a few investors would be quite a lot richer if they could admit to themselves "I have no f**king clue how this works and I am completely unable to decide at what price should I consider buying more stock or selling up and taking the profit."
Sorry, maybe I should have said "skillz" ?
Seems there have been a few stories recently where the reporting - and subsequent discussion - completely missed the nuance of what was actually said.
Having seen the interview, my understanding was the Buffet was saying - if you were listening - not that he did not understand the cloud business. Nor was he saying that Oracle didn't. What he was saying was he didn't understand how Oracle were going to make any money from it. Which is a completely different thing altogether.
There are more people in the world who got rich from understanding how to make money out of something than there are people who got rich from understanding that something.
Which is why almost all the cloud providers immediately try to lock you in with their added features. Sure, you can run your regular servers on AWS, but why don't you use this little feature instead of doing that bit yourself, it will be much cheaper. OK, now how about this feature, now this feature...
Before long, your "cloud" systems are something that have really become AWS-only systems, because to move all those services to GCloud, or Azure will require redoing all those specific AWS features either yourself or using GCloud features. To be truly cloud agnostic is difficult, not because its difficult to do stuff in cloud, but because it is too tempting to take the quick win and lock yourself in.
Reading this sounds to me like buffet will be investing in Microsoft in the long term. He has learnt ibm and oracle don't have a clue and praises Aws to keep the Microsoft price down until he is ready to buy.
He knows what he's doing but unlike most investors, he has to justify his decisions to fans just like a celebrity. Think he's using that need to lay the ground for his next cloud adventure.
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