Warren Buffett: Why we don't invest in Nike stock 👟 Charlie Munger: We will never buy Nike stock 🏀

You mentioned earlier that Berkshire’s shoe business was great, but that other shoe businesses were not so good.

What are the uncertainties of the global brand leaders that Berkshire seems to like? They like Coke and Gillette. The global brand leaders in the shoe business being Nike and Reebok.

What are their uncertainties, in terms of long-term competitive advantage, business economics, consumer behavior, and the other risk factors that you mentioned in the annual report this year? Thank you.

WARREN BUFFETT: So, you’re really asking about the future prospects of Nike and Reebok?

Yeah. I don’t know that much about those businesses. We do have one person in this audience, at least, who owns a lot of Reebok.

But I am not expressing a negative view in any way on that. I just — I don’t understand that — I don’t understand their competitive position and the likelihood of permanence of their competitive position over a 10 or 20 year period as well as I think I understand the position of Brown and Dexter.

I think we’ve got very good businesses. But I — I’m not — I haven’t done the work and I’m not sure if I did the work I would understand them.

I think they are harder to understand, frankly, and to develop a fix on, than our kinds. But, they may be easier for other people who just have a better insight into that kind of business.

Some businesses are a lot easier to understand than others. And Charlie and I don’t like difficult problems. I mean, we — if something is hard to figure, you know, we’d rather multiply by three than by pi. I mean it’s just easier for us.

AUDIENCE MEMBER: Good afternoon. My name is Fred Costano (PH) from Detroit, Michigan. My question concerns Nike.

Nike is a company experiencing some short-term problems, but it’s a great company with an excellent track record. Phil Knight is similar to Bill Gates in the respect that he’s a marketing genius and is a very hard worker.

Making sneakers is a very simple business with high margins.

How do you view Nike and what do you think of the company?

WARREN BUFFETT: Well, I think Phil Knight is a terrific operator. I think — and he’s a competitor. He’s got a lot of money in Nike.

But as terms of what we think of the stock, you know, we keep all of those views to ourselves pretty much.

AUDIENCE MEMBER: My name’s Ed Boyle (PH) and I’m from Chicago. My question’s for Warren and Charlie.

Do you ever have any plans, or would you be interested, in buying a professional sport team — or sports equipment manufacturing company, being that we’re — sports is in a global world today? Or is this out of the Berkshire game?

WARREN BUFFETT: I owned a quarter of a major — a minor-league team, but it’s not responsible for my position on the Forbes 400.
The answer to your question about buying a sports team is no. In fact, if — Charlie and I — if you read that either one of us is buying a sports team, it may be time to talk about successors.

We are — we do — sports equipment has generally not been a very good business, although, you know, obviously Nike’s done incredibly well in its overall operation.

But — we own Spalding. We own Russell. And you know, Spalding has been around a long, long time. A.G. Spalding, I forget when the hell he was — I think he was trying to take baseball to the rest of the world back in the, I don’t know, the 1880s or something like that.

But it’s — generally speaking, if you look at the people that have made golf equipment, footballs, helmets particularly, baseball gloves, baseballs, it’s not been a particularly profitable business.

And certain aspects of it, like helmets, you know — the last thing Berkshire should do is own a helmet company. A helmet company should be owned by some guy that owes about a million dollars and doesn’t have a dime to his name, because, you know, he is not going to be a target. And we would be the ultimate target.

That’s the reason — we used to be involved in Pinkerton, but we’d had no interest in — and we got offered the chance to buy the whole place, and the idea of owning a business that provided guards at airports, you know, when anything went wrong, you know, you’re going to say that it was the guard’s fault. And here’s this super-rich corporation around there that is a perfect target.

I mean, a guard company at airports, again, should be owned by somebody whose net worth does not get out to two figures.
So, you won’t see much of us in the sports arena.

But Charlie here, are you looking at the Clippers or —?

Now I’m worried that he is.

CHARLIE MUNGER: Whatever Warren thinks about sports teams ownership, I like it less.

[frankedwardark]

3 years ago, I started investing with $300k, but I've only made about 6% total, or 2% per year, which my friends say is very low. I also put $800k into a 401k with a financial advisor, and it's now worth about $1.2 million after 10 years. I think I need to revamp my portfolio. Any advice on what to do with my money would be greatly appreciated.

[Matthew-mboy]

What are the best strategies to protect my portfolio? I've heard that a downturn will devastate the financial market, so I'm concerned about my $200k stock portfolio.

[reallymakesyouthink]

"we'd rather multiply by 3 than by pi". Love that.

[ianbernardoful]

RIP Charlie. This guy taught us so much. Incalculable

[joannsmith]

"you don't have to do exceptional things to get exceptional results" is my new mantra

[chinito]

These two were like business soulmates

[JasonFiske]

These interactions are pure gold. Bravo and well done Charlie. Thank you.

[bjkarana]

The man speaks in the language of mental models, but but conveys them in such a practical manner. I'm so glad I've been able to learn from both Warren Buffett and the late Charlie Munger.

[pepleatherlab]

Long story short: There are a LOT of brands with convoluted structures and it makes their 'true value' hard to estimate. If Nike were just a footwear company, the estimation would be easier, ..but they're not. Buying convoluted companies is like rolling the dice. Buying companies you understand because they have understandable products is always better.

[LWRC]

Charlie's wisdom and dry humor are priceless....we really miss him!!!

[joso]

His remarks make total sense.
Nobody should invest their own money in a business they don’t understand themselves.
And regarding Nike, Phil Knight may have been and still be a marketing genius, but what about 25 years from now ? What guarantees that Nike will have another marketing genius to lead them?? Many past major sports brands vanished or shrunk considerably. Profit margins are high as long as your brand and products are highly desired, but they will drop considerably if you lose the Mojo… Unfortunately, attractiveness is very subjective, volatile and trend depending. Sounds like a risky business.

[finnovator]

One of the best formatted and edited Buffet videos I have ever seen, I love your username too.

[popinjay]

I love their idea, never put your self in the position where the general public could target you or try and milk you!

[jeremyjohnson]

4:06, and yet Buffett was wrong about Dexter Shoe. Warren and Charlie never actually answer "Why we don't invest in Nike stock" nor do they say "We will never buy Nike stock"

[firstal]

Lol the question was so convoluted. Love how Warren sets him straight

[stevo]

For me it's especially value to hear warrens monologue about why berkshire is not good in owning a helmet company, because they could be a target if the security of the helmet fails. You could see it with all the clams of damages 3M is confronted at the moment and there are lot's of companies which this applies. The rise of the big tech companies could also end very drastically when they have to split because of their monopoly they acually have.

[UTUBEJC]

I like how Charlie is just chillin for the beginning going, YEP.

[soup]

Dexter Shoes was a disaster! Berkshire would have been smarter buying Nike shares

[JK-brmu]

Nike's business model, that's hard to understand for Buffett, with good reason shoes for $5 overseas, sell them in the US for $150, and spend $100 on advertising per shoe, just to use up some of that excess margin you have after production.

[rocking]

Big thing to do is to avoid being wrong!❤