Can Warren Buffett, the Oracle of Omaha, still see the future?
Warren Buffett’s ability to pick investments that pay off over the long term has transformed him into a billionaire and made him the world’s most famous investor. But as the planet heats up, his positions on the climate look increasingly short-sighted.
What’s happening: At Berkshire Hathaway’s annual meeting over the weekend, Buffett defended the company’s decision not to release reports on how it’s addressing the risks of climate change. He claimed that Berkshire has a good track record for investing in renewable energy through its utility businesses, and said it would be “asinine” to make all of the group’s numerous companies become more transparent.
But pressure is growing. At the meeting, one investor asked him about Berkshire’s decision to own a big stake in oil giant Chevron given concerns about the climate crisis.
Buffett said he has “no compunction” about owning Chevron, and that he would hate to have all hydrocarbons banned quickly — though he noted that the world is quickly moving away from them.
“If we owned the entire business, I would not feel uncomfortable about being in that business,” Buffett said.
Step back: The company’s shareholders are siding with the 90-year-old CEO. A proposal asking Berkshire Hathaway to address climate change more directly — as well as a measure calling for more disclosure on diversity and inclusion — failed to pass.
Yet it’s not difficult to see which way the winds are blowing. Countries such as the United States and United Kingdom are announcing increasingly ambitious targets for reducing emissions, while hundreds of major corporations have issued net zero commitments and are pouring money into sustainable businesses.
The wider investment community is also rushing in, as clients push fund managers to create sustainability-focused portfolios, while spectacular growth for companies like Tesla is stoking enthusiasm among everyday investors.
Global assets in sustainable funds hit a record high of nearly $2 trillion in the first three months of 2021, up 18% from the previous quarter, according to new data from Morningstar.
Berkshire’s Vice Chairman Greg Abel, who has been tapped as Buffett’s likely successor, said during the meeting that “there’s been a clear commitment to decarbonizing our businesses.” He added that the company will retire all of its coal units by 2050.
Still, that may not be enough to convince skeptics that Buffett, who earned the nickname “Oracle of Omaha,” is properly assessing the risks at the play.
While Chevron has indicated it could rethink parts of its business model in light of climate fears, it remains a $200 billion fossil fuels empire synonymous with the oil-and-gas industry. As efforts to increase reliance on cleaner energy accelerate, its business will face major headwinds. That could be a threat to Berkshire Hathaway, and Buffett’s reputation, too.
Epic v. Apple: Legal fight could remake the digital economy
Ever since it launched in 2008, the Apple App Store has been the sole gatekeeper between apps and iPhones and iPads.
Other platforms, such as Google’s Android, allow apps to be downloaded through third-party stores. But for any developers who want to be on Apple’s mobile devices, the choice is simple — it’s the App Store or nothing.
This gives Apple huge power over the terms it can dictate to app makers, my CNN Business colleague Brian Fung reports. Most notably, any time you buy a digital product or service on many iOS apps, it’s processed on an Apple-run payment system, and Apple collects a 30% fee.
Now, a federal judge is slated to decide: Is Apple’s policy just part of a hugely successful business model, or is it a violation of US antitrust law?
In a trial starting Monday, the judge will consider whether Apple is justified in requiring many app makers — and by extension, consumers — to use the company’s payments technology.
The potentially landmark trial stems from a lawsuit filed by the maker of the hit video game Fortnite. Apple booted Epic from its platform last summer for not complying with its rule.
The high-profile case will involve witnesses including Apple CEO Tim Cook and his top lieutenants. Representatives for Facebook and Microsoft are also expected to testify. Corporate emails and presentations could fuel a fierce courtroom battle over App Store policies, which are increasingly under scrutiny from regulators in Europe, lawmakers in the United States and many others.
Remember: Last Friday, European regulators accused Apple of violating EU antitrust law, saying the company’s rules unfairly restrict rival music services. Taken together with the Epic case, it’s clear the company is playing defense.
Debate grows over banning political discussions at work
Late last month, Basecamp, a project management software company, made an unusual move: It banned political discussions at work.
Given the company’s relatively small size, the decision — announced in a sweeping blog post from CEO Jason Fried — might have gone by with little notice, my CNN Business colleague Sara Ashley O’Brien writes.
But it swiftly generated a backlash. Roughly 20 of Basecamp’s fewer than 60 employees have posted on Twitter that they are leaving the company, with some explicitly pointing to the new policies. The company is offering severance packages for those who opt to depart given the “new direction.”
Not the first: Last fall, cryptocurrency exchange Coinbase made waves when CEO Brian Armstrong said there was no place for engaging in “broader societal issues” or “political causes” outside the company’s core mission.
The decision was criticized by some as deeply misguided and lauded by others. Paul Graham, the venture capitalist and cofounder of the elite Silicon Valley accelerator Y Combinator, tweeted at the time: “I predict most successful companies will follow Coinbase’s lead.”
But diversity and inclusion experts say such moves aren’t courageous, and instead seem motivated by fear of change. Banning politics at work comes across as an attempt to “bottle the genie on woke politics so people can just get away with what they’ve gotten away with before,” according to Y-Vonne Hutchinson, the founder of inclusion consultancy firm ReadySet.
Hutchinson told CNN Business that what the people who are making these decisions are “not realizing — or maybe what they don’t want to realize — is that in an environment where there is literally no separation between your work and your home, and your very existence is political, you can’t really separate the two.”
Up next
Estee Lauder reports results before US markets open. XPO Logistics follows after the close.
Also today: The ISM Manufacturing Index for April posts at 10 a.m. ET.
Coming tomorrow: CVS, Pfizer, Hyatt Hotels, Lyft and Zillow post earnings.