Yes! Glad you enjoyed this. The most recent Twitter discussion was actually my inspiration. It seems that such questions/discussions come up every few months.
There were/are several other (small) deals I wanted to look into, as well as the investment record of the Buffett Foundation, but some info needs to be hunted down in archives at libraries - so maybe a follow-up piece down the road.
Even in the 80's their stakes in tobacco are relatively small even tho they knew they were brilliant businesses. My guess is they always knew (they read everything) the harmful side but harder for them to pass a great legal deal in the earlier days or not fair?
It’s hard to say exactly. Some of the stakes, while a small % of the companies, were large investments for BRK at the time. I hope one day they will be asked again and are willing to provide even greater clarity on their thought process of the past + present
Good background with regards to "moral" investing. According to the WHO, burning fossil fuels worldwide kills 7 million people prematurely, to say nothing of emissions. Yet Buffet is heavily invested in Occidental Petroleum. Wonder if they see this investment as problematic as tobacco?
BHE, Berkshire Hathaway Energy, invests an absurd amount into renewables. At the same time, I would argue that Buffett's investment in fossil fuels are extremely ethical. While not without downsides, those that strictly focus on downsides without the positives of fossil fuels are assuredly shortsighted. Fossil fuels are responsible for many of the wonderful things in modern life as well as a substantial increase in quality of life for those fortunate to experience its wonders.
@Alex Epstein does an exceptional job highlighting this in his book, Fossil Future, and also writes on Substack: https://alexepstein.substack.com/
Completely agree that fossil fuels bring obviously a lot of benefit to society. Extremely ethical us a bit of a stretch. Fossil fuels also kill more people than the cigarette business and as I mention, the prime source of greenhouse gasses that ate warming the planet.
Berkshire's investment in renewables, primarily wind, is driven, as Charlie Munger relates, purely by government subsidized depreciation which makes it an absurdly profitable investment while taking up vast swaths of land to produce at its core, expensive intermittent energy that requires a stunning amount if mining and fossil fuels and therefore highly environmentally invasive. Yet BHE gets kudos gor an environmental investment.
The point is that there is no highly ethical investment, just a point of view, as you rightly pointed out with the Berkshire background in tobacco investments, only degrees in which individuals see what's ethical and what isn't.
I hear you. I frame it with the alternative: How would the world look without fossil fuels? Lower quality of life across the board and a high likelihood that there'd be higher death rates from losing reliable energy, modern agriculture, construction, and climate mastery. Nothing is black and white, but I think our current world - one with fossil fuels - is far better than one strictly without.
Thank you so much for sharing your perspective, Flugelhorn
BHE, Berkshire Hathaway Energy, invests an absurd amount into renewables. At the same time, I would argue that Buffett's investment in fossil fuels are extremely ethical. While not without downsides, those that strictly focus on downsides without the positives of fossil fuels are assuredly shortsighted. Fossil fuels are responsible for many of the wonderful things in modern life as well as a substantial increase in quality of life for those fortunate to experience its wonders.
Alex Epstein does an exceptional job highlighting this in his book, Fossil Future, and also writes on Substack: https://alexepstein.substack.com/
When Buffett says “we have owned tobacco stocks in the past. We’ve never owned a lot of them”, isn’t he minimizing their stock ownership of RJR in 1982-83? After all, that was Berkshire’s #1 stock holding by cost basis for both years.
Great observation, Tian. And I totally agree. It is very odd to claim to have no qualms about non-controlling stakes while also minimizing the stakes (especially since they weren’t small for BRK at the time!)
What a treat Devin! Really well researched article! I enjoyed reading about Berkshire’s tobacco investments over time and how Buffet and Munger viewed such investments in the 1990’s and 2000’s. I like their humility in recognizing that the way they drew the line wasn’t based on one rational guiding principle, and that everyone needs to make their own difficult moral decisions.
I think the main reason is that Buffett likes his "good guy" image. That image can be favorable in certain circumstances. A company like Altria would fit perfectly into Berkshire. He could funnel the free cashflow into the energy business or the railroad.
On the other hand it would likely drop the share price and credit spread of Berkshire and it s companies. So he has an other rational than a private investor.
I am not sure you read the article. For one, I am a proud shareholder of Berkshire as well as a basket of tobacco companies. Secondly, the piece precisely says:
"But none of this is a critique of the duo or Berkshire specifically; their exceptional track record—including all non-tobacco and tobacco investments alike—speaks for itself. Rather, this poses the question: Where does one draw the line?"
And is later followed by:
"Any type of line begins to look absurd. Charlie was spot-on in describing the impossible endeavor of drawing the line. Messy complexity indeed."
I wanted to look more into it after the discussion on Twitter. Thank you for doing the work, your writing is a treat
Yes! Glad you enjoyed this. The most recent Twitter discussion was actually my inspiration. It seems that such questions/discussions come up every few months.
There were/are several other (small) deals I wanted to look into, as well as the investment record of the Buffett Foundation, but some info needs to be hunted down in archives at libraries - so maybe a follow-up piece down the road.
Thanks, as always, for reading, Mads
This was a great read. Thanks for doing the research!
Thanks, Six
Even in the 80's their stakes in tobacco are relatively small even tho they knew they were brilliant businesses. My guess is they always knew (they read everything) the harmful side but harder for them to pass a great legal deal in the earlier days or not fair?
It’s hard to say exactly. Some of the stakes, while a small % of the companies, were large investments for BRK at the time. I hope one day they will be asked again and are willing to provide even greater clarity on their thought process of the past + present
Good background with regards to "moral" investing. According to the WHO, burning fossil fuels worldwide kills 7 million people prematurely, to say nothing of emissions. Yet Buffet is heavily invested in Occidental Petroleum. Wonder if they see this investment as problematic as tobacco?
BHE, Berkshire Hathaway Energy, invests an absurd amount into renewables. At the same time, I would argue that Buffett's investment in fossil fuels are extremely ethical. While not without downsides, those that strictly focus on downsides without the positives of fossil fuels are assuredly shortsighted. Fossil fuels are responsible for many of the wonderful things in modern life as well as a substantial increase in quality of life for those fortunate to experience its wonders.
@Alex Epstein does an exceptional job highlighting this in his book, Fossil Future, and also writes on Substack: https://alexepstein.substack.com/
Completely agree that fossil fuels bring obviously a lot of benefit to society. Extremely ethical us a bit of a stretch. Fossil fuels also kill more people than the cigarette business and as I mention, the prime source of greenhouse gasses that ate warming the planet.
Berkshire's investment in renewables, primarily wind, is driven, as Charlie Munger relates, purely by government subsidized depreciation which makes it an absurdly profitable investment while taking up vast swaths of land to produce at its core, expensive intermittent energy that requires a stunning amount if mining and fossil fuels and therefore highly environmentally invasive. Yet BHE gets kudos gor an environmental investment.
The point is that there is no highly ethical investment, just a point of view, as you rightly pointed out with the Berkshire background in tobacco investments, only degrees in which individuals see what's ethical and what isn't.
I hear you. I frame it with the alternative: How would the world look without fossil fuels? Lower quality of life across the board and a high likelihood that there'd be higher death rates from losing reliable energy, modern agriculture, construction, and climate mastery. Nothing is black and white, but I think our current world - one with fossil fuels - is far better than one strictly without.
Thank you so much for sharing your perspective, Flugelhorn
BHE, Berkshire Hathaway Energy, invests an absurd amount into renewables. At the same time, I would argue that Buffett's investment in fossil fuels are extremely ethical. While not without downsides, those that strictly focus on downsides without the positives of fossil fuels are assuredly shortsighted. Fossil fuels are responsible for many of the wonderful things in modern life as well as a substantial increase in quality of life for those fortunate to experience its wonders.
Alex Epstein does an exceptional job highlighting this in his book, Fossil Future, and also writes on Substack: https://alexepstein.substack.com/
When Buffett says “we have owned tobacco stocks in the past. We’ve never owned a lot of them”, isn’t he minimizing their stock ownership of RJR in 1982-83? After all, that was Berkshire’s #1 stock holding by cost basis for both years.
Great observation, Tian. And I totally agree. It is very odd to claim to have no qualms about non-controlling stakes while also minimizing the stakes (especially since they weren’t small for BRK at the time!)
What a treat Devin! Really well researched article! I enjoyed reading about Berkshire’s tobacco investments over time and how Buffet and Munger viewed such investments in the 1990’s and 2000’s. I like their humility in recognizing that the way they drew the line wasn’t based on one rational guiding principle, and that everyone needs to make their own difficult moral decisions.
I always appreciate you reading and sharing your thoughts. Thanks!
You have a nice blog here:).
I think the main reason is that Buffett likes his "good guy" image. That image can be favorable in certain circumstances. A company like Altria would fit perfectly into Berkshire. He could funnel the free cashflow into the energy business or the railroad.
On the other hand it would likely drop the share price and credit spread of Berkshire and it s companies. So he has an other rational than a private investor.
Greetings Ulrich.
I am not sure you read the article. For one, I am a proud shareholder of Berkshire as well as a basket of tobacco companies. Secondly, the piece precisely says:
"But none of this is a critique of the duo or Berkshire specifically; their exceptional track record—including all non-tobacco and tobacco investments alike—speaks for itself. Rather, this poses the question: Where does one draw the line?"
And is later followed by:
"Any type of line begins to look absurd. Charlie was spot-on in describing the impossible endeavor of drawing the line. Messy complexity indeed."