Warren Buffett has acquired $17bn of Apple stock – even though he doesn't own an iPhone © Getty Images
Warren Buffett has acquired $17bn of Apple stock – even though he doesn't own an iPhone © Getty Images

Warren Buffett: If your ideas are applauded, worry

3 May 2017

It’s often said that Warren Buffett doesn’t negotiate on price. That’s not quite true – it’s just that the ‘Sage of Omaha’ does it his way.

 His message to people who want him to buy their company is clear: tell me what you want for the business. The catch is that, if the American billionaire thinks the asking price is too high, he won’t make a lower offer, he will just walk away.

Buffett can afford to do this because every day brings a new opportunity for the Berkshire Hathaway chairman, but also because he has done his homework.  He will have researched his target, understood how they make – and spend – their money, thought through all possible scenarios and defined the range of outcomes he finds acceptable.

So when, for example, it became clear that the bid by Kraft Heinz, in which he has a $31bn stake, for Unilever could only succeed as a hostile takeover, the offer was withdrawn.

One aspect of Buffett’s success that is often overlooked is his willingness to buck fashion. Operating on the principle that he would never invest in a business that he didn’t understand, he stood aside from the dot-com boom, and was left unscathed when the bubble burst. Buffett has since acquired $17bn of Apple stock – even though he doesn’t own an iPhone.

Asked why, he said: “Because I liked it.”

In truth, Apple fits his investment profile: it generates lots of cash and, although it’s a technology stock, is a strong global brand that has become as much a part of people’s daily lives as Heinz tomato ketchup.

Another of his strengths as a negotiator is knowing when not to negotiate, as he said once: “We don’t get paid for activity, we get paid for being right.”

Buffett’s plain speaking is useful during negotiations. It can break the ice and clarify the issues. And he isn’t fazed by other people’s opinions, saying: “If you’re applauded, worry. Great moves are greeted by yawns.”

Play bridge is his tip for negotiators. “It’s a game of a million inferences. There are a lot of things to take inferences from – cards not played; cards played. They tell you something about the probabilities. It’s the best intellectual exercise there is. You’re seeing through new situations every ten minutes.”

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