Tap Dancing to… What?

I’m about halfway through an audio-book of Tap Dancing to Work, a compilation of Fortune magazine articles over the years about (or by) Warren Buffett.

I don’t get it. What’s the value of a stock that doesn’t pay dividends? It only has value because everyone around you says it has value. If you pay $175,000 for a share of Berkshire Hathaway stock, you only can get your money back if someone else agrees that it has that value. What would be dividends are poured back into the company, which helps the book value of the stock, but the book value of the stock doesn’t help me if I want to buy a house or pay someone’s college tuition.

Warren Buffett nominally practices “value investment.” He invests in companies whose book value compares nicely with their market capitalization. So, suppose part of your ownership of Berkshire Hathaway includes a fractional ownership of a wonderfully undervalued stock. How does that help you? Can you claim some of that intrinsic value to put into a home’s down payment?

I’m also underwhelmed by his ownership of the same home he bought fifty or more years ago. He also has (or had) a vacation home more in keeping with his wealth. People talk about his long marriage to his first wife, but at least some sources report that they lived apart for decades. I suppose I shouldn’t begrudge a man his privacy, but where’s the line between privacy and hypocrisy?

Finally, the friendship between Buffett and Bill Gates doesn’t seem as odd as people think. I don’t regard Gates as a technical genius. I regard him as someone who had an early and lucrative position in an inelastic market and then leveraged that position to unseemly gains.

I respect and admire the premise of “value investing,” but I still am puzzled by the execution of the idea and by some of the biases and quirks of this famous, respected man. Has Buffett really contributed to the GDP of this country in a way that validates his wealth and fame?


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