Warren Buffett on Monday said 3G Capital, its controversial partner on multiple transactions, follows a “standard capitalist formula” when it sweeps away thousands of jobs and imposes deep expense cuts to make the companies it buys more efficient.
‘My defect’
Speaking on CNBC television, Mr. Buffett said, “It’s a defect of mine” that he doesn’t focus as closely on the efficiency of business units at Berkshire Hathaway Inc., the conglomerate he has run since 1965.
Berkshire and 3G control Kraft Heinz Co and recently tried to merge it with Unilever NV for $143 billion, but was rebuffed.
The Brazilian firm is known for “zero-based budgeting,” where it requires managers to periodically defend all of their expenses, and cut waste where possible.
“They have followed the standard capitalist formula ... of trying to do the same business with fewer people,” Mr. Buffett said. “People live better when there is more output per capita.” Nonetheless, he acknowledged that cutting jobs can be a “painful process.”
Separately, Mr. Buffett expressed regret over his failure to invest early in Internet search company Google, now part of Alphabet Inc, saying “I should have some insight into” what became an “extraordinary business” with attributes of a monopoly.
He said he was more comfortable buying shares of Apple Inc, in which Berkshire has disclosed a 133 million share stake.
Mr. Buffett noted that many iPhone purchasers are repeat customers who know a new phone will be introduced regularly, or buy them for such occasions as graduations.
“I can very easily determine the competitive position of Apple now and who is trying to chase them,” he said.
He said “the shares, when we bought them, were much more reasonable” in price.
Separately, on Amazon, he said, “I was too dumb to realise what was going to happen. I did not think (Jeff Bezos) could succeed on the scale that he has ... I underestimated the brilliance of the execution. It takes a lot of ability.”
“It always looked expensive ... and I never thought he would be where he is today.”
Mr. Buffett said he was not bothered by initial U.S. data showing the economy grew at just 0.7 % in the first quarter, saying it was “more or less” growing at 2% a year.
At the Berkshire annual shareholders’ meeting on Saturday, Mr. Buffett admitted he was wrong to think International Business Machines Corp “would do better” six years ago, when he started amassing an 81 million share stake. He disclosed last week that Berkshire had sold about one-third of the IBM stake, even as it bulks up its holdings in Apple Inc.
Succession planning
Mr. Buffett has said Berkshire could have a new chief executive within 24 hours if he died or could not continue, and that nothing had changed just because he praised fewer managers than usual in his February shareholder letter.
He said it may have been harder to single people out because “we have never had more good managers.”
But he also said it would be a “terrible mistake” if capital allocation were not the “main talent” of his successor. Mr. Buffett did lavish much praise on top insurance executive Ajit Jain, who some investors believe could be that successor, saying “nobody could possibly replace Ajit. You can’t come close.”
