{"text":[[{"start":5.65,"text":"Greg Abel, the new CEO of Berkshire Hathaway, used his first letter to shareholders to say this about his predecessor Warren Buffett: “Discipline, patience, and judgment define Warren’s investing.” Last week, John Ternus used his first investor call as CEO-elect of Apple to praise his predecessor’s “thoughtfulness, deliberateness and discipline when it comes to the financial decision-making”. This near-perfect echo is non-coincidental. Berkshire and Apple are the two greatest proponents of patience as a corporate strategy. "}],[{"start":37.65,"text":"The implications of this patience for the future at the two companies are very different, however, and the two new bosses face correspondingly different challenges."}],[{"start":46.9,"text":"At Berkshire, strategic patience is manifested on the balance sheet. It holds almost $380bn in net cash, amounting to 30 per cent of its assets (for context, 10 years ago, cash was 10 per cent of Berkshire’s assets). Abel says he is “not anxious to deploy capital into subpar opportunities” but knows “there will be dislocations in markets that again will allow us to act”. That is: he’ll keep folding until he is dealt great cards, then bet big."}],[{"start":76.15,"text":"Apple’s patience shows up on the balance sheet, too: it holds $64bn in net cash despite having, until last week, a policy of “net cash neutrality”. But the more consequential form of patience concerns AI. Unlike big-tech rivals, Apple is not dropping tens of billions of dollars every quarter to join the data centre gold rush. Over the past four quarters, Apple’s capital investment spending has been about 10 per cent of Microsoft’s or Alphabet’s."}],[{"start":105.2,"text":"This has happened before. In internet search, Apple did not try to build a competitor to Google’s dominant technology, as Microsoft did, unsuccessfully. Instead it focused on deepening its hold on the key point of distribution — the personal device — and used Google as its default search engine. Similarly, its AI strategy to date is building a device with the local computing capacity to be an ideal host to others’ AI services, while leaving the expensive work of building full-service data centres and frontier models to others."}],[{"start":138.05,"text":"The underlying strategy remains waiting until an outstanding opportunity comes along, rather than leaping on every hot technology. Since the release of the iPod in 2001, Apple’s core product has remained fundamentally the same: a small networked computer of superior quality and ease of use."}],[{"start":156.5,"text":"It goes without saying that patience has worked well for Berkshire and Apple; they are 10th and third most valuable companies in the world respectively. But patience carries risks, too."}],[{"start":166.8,"text":"For Berkshire, the risk is that the market has changed and the “disruptions” Abel is waiting for are becoming harder to exploit. It’s always been a tough game. Perhaps the ideal point in recent memory to buy Berkshire shares was at the 2007 top, when everyone else was overleveraged and overextended. In the 10 years following that day, Berkshire did manage to outperform the S&P 500 by about 1.4 percentage points a year. And yet in the almost 20 years from that entry point, Berkshire has underperformed the index by almost a percentage point annually (if you start at the 2009 market bottom, Berkshire fares even worse). The world is awash with liquidity, in the form of both private and public capital, all of it waiting for another crisis. Berkshire may never outperform over a long period again. "}],[{"start":214.8,"text":"For Apple, the risk is harder to envision, but it is there. Apple’s stranglehold on the current point of distribution for consumer tech services is all but unbreakable, especially at the higher end of the market. There are 2.5bn Apple devices in use and Apple has successfully made it a terrible nuisance to leave its ecosystem. The worry is that AI changes the point of distribution, the way the mobile internet did two decades ago. What this might look like is anyone’s guess. But if Apple has let others take the lead in core AI technologies, while counting on its distribution chokepoint to keep it relevant, it could be left behind by a seismic change."}],[{"start":256.95,"text":"As they take the reins, Abel and Ternus might frame the risks their companies face in terms of scale. Being big makes life harder for Berkshire by shrinking the number of investments large enough to improve its returns. At the same time, its size and patience make it safe. It has no choice but to be diversified, and even if it cannot outperform over the full cycle, it wins in bad years such as 2022. For Apple, being big and patient gives it cost advantages and makes its products sticky with users, but exposes it to serious damage should a technological revolution arrive. "}],[{"start":298.25,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1778136139_8354.mp3"}