Warren Buffet Investing in Risky Tech Without Knowing it?

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Rich Tehrani
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Warren Buffet Investing in Risky Tech Without Knowing it?

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As news breaks that Coca-Cola is mulling a $10 million investment in Spotify some people may think back to Warren Buffett’s comments on the tech market – saying he wouldn’t invest in it because he didn’t understand it. While some took this comment at face value, it seems the spirit of the comment was that Buffet is a value investor often holding a company’s shares for years or even more than a decade. Trying to figure out who the tech leaders will be over such a long time is very difficult if not impossible.

Interestingly, Coca-Cola is a great example of a Buffet investment – it is a leader in its space and much of its revenue is derived from Coke and its variants which just happen to be addictive due to their caffeine content.

But I digress. The point is, marketing has evolved into content marketing, meaning now more than ever, companies are blogging, tweeting and hiring others to product content for their websites.

If you are a consumer brand there is a limit to how far you can go with social networking and content. After all, when I need a soda or bottled water I don’t need to research related articles about how good hydration is for your skin before buying. They aren’t selling networking switches so branding is one of the few areas where they can influence their potential customers.

But in a content driven world, having control of content distribution could mean a better ability to utilize said content to build a brand. And this news builds on an earlier announcement that Coca-Cola and Spotify had entered into a strategic sponsorship so one has to assume the beverage company is happy with the results so far.

Getting back to Buffet – as founder of Berkshire Hathaway, his investment company owns about 8.9% of Coke worth over $15 billion or 400M split-adjusted shares at a share price of $38.11.

So in a roundabout way Buffet is investing in tech – to be fair he has made tech investments this past decade but one would imagine there are few investment areas which are as unpredictable over a decade than consumer technology.

For Coke, a company spending millions on branding, this investment could lead to a more cost-effective way to get the message out while also potentially allowing them to profit from an increase in the share price of Spotify.

Disclosures:

  • I am long of Berkshire Hathaway.
  • I am no fan of the Buffett Rule I believe that to help a country’s economy, the more money left in the private sector the better.
  • Warren Buffet wrote a very complimentary letter to TMCnet some years back and I am eternally grateful.
  • TMC currently provides content to a number of websites to help them build their thought leadership and search rank – contact inquiry@tmcnet.com for more.
  • I am CEO of TMC and TMCnet.


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