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ENTITY
🕰3 min read
🎵Wisdom Density:
Moderate
🧭16 concepts
💬2 quotes
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Google

Google (now Alphabet Inc.) is a primary case study in Berkshire’s Errors of Omission, famously missed by Buffett and Munger despite their admiration for its founders and corporate philosophy.

Origin of Relationship

While Berkshire never owned the stock, the relationship began in 2004 when Google co-founders Larry Page and Sergey Brin authored an Owner's Manual for their IPO inspired by Buffett's partner-centric communication style.

Major Milestones

  • 2004: [IPO Philosophy] -> Buffett praised the Google S-1 filing: "I thought it was the most sensible thing one could put in an IPO document."
  • 2004: [Missed Recognition] -> Buffett and Munger discussed the company as a "phenomenally good business" that was "ridiculously easy" to recognize in hindsight as having a massive Moat.
  • 2004: [The "Smartest Young Men" Quote] -> Buffett noted that they were being out-advertised on GEICO search terms by the "smartest young men" who understood the economics of search better than his managers.

Literature Insights

  • The $31 Billion Initiation (2025-2026): In a July 15, 2026, CNBC interview, Buffett revealed that he personally initiated Berkshire's massive investment in Alphabet (Google's parent company), which grew to a $31 billion stake by mid-2026. He admitted that avoiding Google in its earlier asset-light phase was a major mistake. Despite the massive capital expenditure (capex) Google faces in the artificial intelligence race, Buffett defended the investment as a superior long-term bet compared to standard Wall Street offerings ([CNBC Squawk Box Interview 07-15-2026](/wiki/CNBC%20Squawk%20Box%20Interview%2007-15-2026)).

Strategic Importance

Google serves as the "anti-example" of Buffett’s Circle of Competence evolution. Initially dismissed as a complex tech company, it was later recognized as a "capital-light" royalty business on human information. The 2004 IPO manual solidified the Standard Selection of Shareholders as a modern governance value.

Primary Source Fidelity

"Google co-founders wrote an Owner’s Manual for the company... it identifies their prospective owners in a very straightforward manner. I like their prose. I think it’s exactly the kind of thing one person would say to another if you were setting up a partnership." — Warren Buffett, 2004 Meeting

"(On missing the business): We had a front row seat... and we were being out-advertised on GEICO search by people who were making a lot more money on it than we were." — Warren Buffett, 2004 Meeting

Connections

📚 Historical Mentions & Citations (1)

Click a reference document below to expand and read the exact paragraph(s) containing this concept in the archive.

🎙️
2004 MeetingExcerpt Available
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I like the statement that the two fellows at Google made the other day where they essentially said that if numbers are lumpy or peculiar when they get to them, they’re going to be lumpy or peculiar when they get to the public. And if there’s some reason that requires explanation as to why they’re lumpy, that the management should explain them. But the one thing they shouldn’t do is start playing games from quarter to quarter or year to year in terms of moving numbers around. And that became very fashionable. I hope it’s on the way to being moderated and we will continue to — each year, we will give you these questions at the meeting and we will report on the auditor’s answers. WARREN BUFFETT: Well, you put your finger on an interesting mathematical relationship. Because if you’re using a present value discount formula and you put in a growth rate that is higher than the discount rate, as you have postulated, the answer, of course, will be infinity. And there are a lot of managements around who like to think their stocks are worth infinity, but we — (laughs) — haven’t found one yet. That precise subject was covered in a paper called “The St. Petersburg Paradox” by a fellow named [David] Durand probably 30 years ago. And somewhere, we probably have a copy at our office. My guess, if you go to Google and you put in the name Durand and you put in St. Petersburg, you may be able to call up that article, although they aren’t necessarily terrific on old articles. So if you’d like it, we would — if you’ll let somebody know in our office, we’ll look around a little and see if we can find that. It gets very dangerous to project out high growth rates because you get into this paradox.
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