Warren Watch: The electric car’s day will come, students told

In 20 years, all cars on the road will be electric, Warren Buffett told college students visiting Omaha recently.

The Houston Chronicle reported that Jan Goetgeluk, president of the finance club at Rice University’s Jesse H. Jones Graduate School of Business, asked what Buffett thought of the “peak oil theory,” the projection that oil production is at or near its peak and will decline rapidly.

Goetgeluk also asked Buffett what would replace carbon fuel.

Buffett made the all-electric prediction and said his investment in the Chinese battery and auto company BYD is working on technology to make the all-electric auto fleet happen. BYD founder Wang Chuanfu, Buffett said, is a genius.

Buffett also admitted an investment mistake when it came to BYD — namely, that his investment company, Berkshire Hathaway Inc., bought only 10 percent of BYD. Berkshire should have bought 20 percent, Buffett said.

Todd Finkle, a former Omahan who heads Akron University’s entrepreneurship program and brought a group of Ohio students, said Buffett also expects high-speed trains in the United States.

In a question-and-answer session and informally over lunch, Buffett discussed a wide range of topics.

He said the United States still will be the leading economy in 25 years, but by a narrower margin. Success by emerging countries such as China is OK, because growth in their economies helps the U.S. economy, too, he said.

Buffett said his sessions with students are similar to the classes Benjamin Graham taught at Columbia University in the 1950s. Graham taught one class a year and donated his salary to the school.

Buffett said he wants business students to know that ethics and hard work are the most important things, and that people have a responsibility to try to improve society and help other people.

“He’s kind of our idol,” Goetgeluk said. “It’s always interesting to get perspective from the most successful investor in the world.”

Fallout from split?

Berkshire’s plan to split its Class B shares 50 for 1 may add to its price volatility, Peter C. Beller wrote in Forbes magazine.

A study of stock splits by economist Eugene Fama in the 1960s found that stocks performed no differently after a split, but later researchers found that lower prices tend to increase trading volume by drawing in unfamiliar buyers.

“Wild swings in a company’s shares may benefit Wall Street trading desks, but they do no service to long-term holders, as Buffett has acknowledged,” Beller wrote.

But the result might be different for Berkshire because the company already is widely known, he wrote.

In addition, more than two-thirds of Berkshire’s value still is held in Class A shares, which will not be split. Because the Class A shares can be converted into Class B shares, the price of Class B shares won’t stray far from the equivalent Class A price.

Added pay rejected

The Fort Worth Star-Telegram reported that Matt Rose, BNSF chief executive officer, waived more than $20 million in added pay, retirement or stock benefits that could have been triggered by the railroad’s purchase by Berkshire.

Like many CEOs, Rose has an employment contract that lists benefits in case of a “change of control” of the company, and others if he had left the company voluntarily afterward.

Buffett’s purchase plan calls for Rose and the rest of his management team to remain in place after the sale.

Rose has company stock and options that were worth about $133 million before the Berkshire purchase and would be worth about $175 million in cash and Berkshire stock after the purchase.

Management book

Mary Buffett, the ex-wife of Warren Buffett’s son Peter, and investment adviser David Clark have written a sixth book about Buffett.

Due out Dec. 8, “Warren Buffett’s Management Secrets” (Scribner, 160 pages, $25) follows five others dealing mostly with Buffett’s investment strategies.

“In modern business no man has managed a more highly talented group of managers, in so many diverse businesses and delivered such spectacular results,” the book’s introduction says.

The book expands on the basics of Buffett’s management philosophy: Pick the right business; delegate authority; find managers with the right qualities; motivate the work force; plus “Buffett managerial axioms.”

Buffett’s principles would help in life as well as in business, the authors say.

Among the axioms:

Ÿ “The roads of business are riddled with potholes; a plan that requires dodging them all is a plan for disaster.”

Ÿ “You can get into way more trouble with a good idea than a bad idea.”

Ÿ “There is plenty of money to be made in the center of the court. There is no need to play around the edges.”

Ÿ “Only in fairy tales are emperors told they are naked.”

Contact the writer:

444-1080, steve.jordon@owh.com

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