5 Highlights of Warren Buffett and Jorge Paulo Lemann Interview at Harvard Business School – April 2017

These are five highlights of Dean Nitin Nohria’s (Harvard Business School) one hour interview of Warren Buffett and Jorge Paulo Lemann (April 2017).

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jorge paulo Warren Buffett 3G Capital

By Fundação Estudar (You Tube (15 m 10 s)) [CC BY 3.0], via Wikimedia Commons

(1) Warren Buffett seeks to invest in companies with businesses he can understand, are within his circle of competence, and will do well 10 to 20 years from now.  They are like a castle protected by a moat.  He likes products that cost 1 cent, sell for 1 dollar, and are habit forming.  Coca-Cola is an example.  Usually, companies that meet this criteria are regulated.

(2) Coca-Cola travels well (sells well in other countries), but Hershey and Cadbury do not.  See’s Candy sells well in California, but not on the East Coast.  If someone wants a Snickers bar they will be willing to pay a higher price than for a similar substitute.

(3) Jorge Paulo Lemann:  3G Capital (Brazil) builds companies to run for the long run.  Beer is not growing in the U.S. and Europe.  But Africa presents a growth opportunity (Anheuser-Busch InBev) with the acquisition of SAB Miller. Africa has a rapidly growing population of young people and has a hot climate — ideal for selling beer.  3G Capital plans to become an expert in marketing and in developing new products.  There is not much more to be done in the beer market through acquisitions, but there is a lot to be done in the food area.

(4) A student asked whether the largest companies in the U.S. by market capitalization, technology companies (Apple, Google (Alphabet), Amazon, Facebook), are likely to remain the largest in the future.  Buffett noted that these companies have no tangible assets and no receivables and together have a market capitalization of $2 trillion.  This is a very different business model from previous decades.  (Also, the candy business does not require capital.)  But with technology, things change fast.

(5) Buffett mentioned that free trade is extremely important.  It is the market system for the world.  Those who are hurt by it would be helped through an earned income tax credit.



About the Author

Dr. David Kass
David I Kass Clinical Associate Professor, Department of Finance Ph.D., Harvard University Robert H. Smith School of Business 4412 Van Munching Hall University of Maryland College Park, MD 20742-1815 Phone: 301-405-9683 Email: dkass@rhsmith.umd.edu (link sends e-mail) Dr. David Kass has published articles in corporate finance, industrial organization, and health economics. He currently teaches Advanced Financial Management and Business Finance, and is the Faculty Champion for the Accelerated Finance Fellows. Prior to joining the faculty of the Smith School in 2004, he held senior positions with the Federal Government (Federal Trade Commission, General Accounting Office, Department of Defense, and the Bureau of Economic Analysis). Dr. Kass has recently appeared on Bloomberg TV, CNBC, PBS Nightly Business Report, Maryland Public Television, Business News Network TV (Canada), Fox TV, American Public Media's Marketplace Radio, and WYPR Radio (Baltimore), and has been quoted on numerous occasions by Bloomberg News and The Wall Street Journal, where he has primarily discussed Warren Buffett and Berkshire Hathaway. He has also launched a Smith School “Warren Buffett” blog. Dr. Kass has accompanied MBA students on trips to Omaha for private meetings with Warren Buffett, and Finance Fellows to Berkshire Hathaway’s annual meetings. He is an officer of the Harvard Business School Club of Washington, DC, and is a member of the investment and budget committees of a local nonprofit organization. Dr. Kass received a Smith School “Top 15% Teaching Award” for the 2009-2010 academic year.