Subject: The Stock Market’s Berkshire Problem
"The problem that Berkshire ran into is the same issue that these big-cap tech hyperscalers are dealing with. They have exhausted their asset-light investment opportunities in arenas like media, advertising, hosting, retailing and software. They are now forced to go seek new investment opportunities in a capital-intensive investment called AI to seek their returns, just like Berkshire did with MidAmerican and BNSF. The railroads were poor investments for a long time. Charlie in the 2007 Wesco meeting said, “Railroads have long been a terrible business and have been lousy for investors. We did finally change our minds and invested. We threw out our paradigms…” Buffett and Munger did this to find investment opportunities that fit what they do. It is not different for these tech businesses. The difference is that Buffett and Munger didn’t pay for the railroads when they had the largest financial excitement flowing through, like the 1880s. The investment excitement ratio is massive in this AI capex binge. If businesses that require large capital expenditures didn’t help the greatest investor of all time, why would they help any other investor or the stock market? If it doesn’t help the stock market, we believe returns will go lower compared to the past. This is the Berkshire problem."

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