WARREN BUFFETT: The--shares when we bought ‘em, at least,
were much more reasonable in relation to current earnings.
Apple didn’t have to do a lot better in the future
than they were doing at the current time.
When you get into-- a Google and Amazon
you’re paying for the future more. But that may--
they may well have— a better future.
I mean that may be more than justified.
But
-- and Apple--
I wouldn’t say is easier for me to understand than Google now,
perhaps, or Amazon now,
but--
certainly would have been five years ago.
It’s amazing where-- Apple’s and-- or-- well, where-- yeah,
Apple’s ended up with consumers. I mean
I--can very easily determine the competitive position
of Apple now and--who’s trying to chase ‘em,
and how easy it is to chase ’em.
We happen to be well situated in terms of having these massive
home furnishing stores, and
I can learn very easily how consumers react to different things-- there.
Probably easier than I can--
trying to pick out what’s really happening at Amazon at any given time.
BECKY QUICK: So you use your research at the Nebraska Furniture Mart to--
tell you that consumers prefer Apple over Samsung or--
I mean what type of thing are you--?
WARREN BUFFETT: Well, the interesting thing is it--
if you come in to buy a TV set
at the Furniture Mart-- price is extremely important.
Now, obviously picture is-- there’s all those great pictures,
just sitting up there. So you can have Samsung.
You can have all these different-- ones.
if you put on a sale-- and you drop the price of Samsung 10%,
we can fill that department with people who come out for it.
You can’t move people by price--
in the smart phone market remotely like you can move ’em in
appliances or all kinds of things.
people want the product. They don’t want the cheapest product.
And--
the loyalty is huge. Now, that doesn’t mean somebody can’t come along with a product
that--
that just jumps the field in some way. But--
and then once you have the product,
the degree to which it sort of controls your life, I mean
it’s a very, very, very valuable product to the people that build their lives around it
And that’s true of eight years old and it’s true of 80-year-olds.
BECKY QUICK: People who have questioned Apple’s future have said things like,
“Well, right now people are paying $800 for a smart phone.”
And--
the other reality in technology is that prices eventually come down.
And unless you’re adding more and more value to that product,
the price will come down. So what happens
if people-- I mean I guess the question is
will people always be willing to pay $800 or more for a phone,
or will that wind up being a cost that comes down and down—
BECKY QUICK: --just as technology changes--?
WARREN BUFFETT: --it can be that way, but-- it--
usually because there’s competition between different products.
And some manufacturer decides that they can’t beat, say, Apple on their own terms,
so drop it 100 bucks or 200 bucks.
Some products are very susceptible to that,
and other products are not. And
-- so far-- I mean you’ve had smart phones and big differences in price categories.
And
-- people come back in and-- if they had an Apple before,
you can have a much cheaper cell phone--
selling right next to the smart phone, selling right next to it.
And-- I’ll look at it.
You have a cheaper TV. The picture’s looking at you and-- you say,
“What-- wait, wait.” I say, “What’s the difference?”
BECKY QUICK: Right.
WARREN BUFFETT: And you buy the cheaper TV. And--that’s true of--
I mean most items are price-sensitive.
And it’s not to say that-- an Apple isn’t-- has somewhat price sensitivity.
It’s very, very-- very little.
WARREN BUFFETT: That-- but somebody could come along and leapfrog
something in the way of the technology and add some benefits
that--
as-- that would be the more competitive threat to me than price competition.
It would be benefit competition.
BECKY QUICK: Yeah, I don’t know what that is,
but then-- you know, Apple gave me a whole lot of things that I never realized I needed--
BECKY QUICK: --until they came up with them.
WARREN BUFFETT: And somebody else is tryin’ to think of some
other things to give you along the same line.
BECKY QUICK: Right. Let’s-- talk about just the stock price again.
You said that it made sense to you when you started buying into it.
Shares have appreciated since then--
WARREN BUFFETT: That’s the problem.
I’m cheap. It-- and there’s always an anchoring problem with buying stocks.
We used to buy ‘em, at X and actually it’s harder to buy ’em at higher prices.
BECKY QUICK: So does that signify that you’ve stopped buying in Apple
because of where prices have —
WARREN BUFFETT: Well-- maybe, maybe that.
BECKY QUICK: Okay.
WARREN BUFFETT: But-- you slid it in there nice, so—
BECKY QUICK: Yeah, I tried.
I guess when you see things like the earnings that came out--
you had mentioned to us the other day that you weren’t bothered
or disappointed by the earnings. When you see—
WARREN BUFFETT: Not at all.
BECKY QUICK: --stock price pull back,
you let-- you probably like it at that point?
WARREN BUFFETT: Oh yeah.
I mean
Apple, with a non-new product, I think they sold something like 50 million.
You know, or something that’s a lotta units to sell of something at $700, and
a lot of those are going to people that they’re actually replacing a present Apple.
But they do know that a new product’s gonna be out in six months or something,
and,
who knows. maybe they got promised Apple for their birthday or their graduation.
But I would be tempted, if I were going to buy one,
to wait until a new model comes out.
I-- what do I lose by doing it except the use of one in between?
That’s a lotta product to sell.
What--a new model coming out, when
you think about $15 million.