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Warren Buffett Didn’t Invest in Microsoft IPO on John Malone’s Advice

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  • Warren Buffett potentially missed out on Microsoft’s IPO because of Liberty Media’s John Malone.
  • Malone told the investor that he wouldn’t buy the software stock due to competitive threats.
  • The media mogul later said he’d be “bigger than Warren Buffett” if he spun off fewer companies.
  • See more stories on Insider’s business page.

Warren Buffett may have declined to invest in Microsoft’s IPO because of a media mogul’s bad advice.

John Malone, the billionaire chairman of Liberty Media, cautioned the investor against buying a piece of the software company during a CEO retreat in the mid-1980s, he told The Telegraph in 2018. Microsoft cofounder Bill Gates had just finished pitching his fledgling business to a crowd of executives.

“Warren and I are sitting there, and we hear Bill’s presentation. Warren says, ‘John, you know something about these technology companies, would you invest in that?'” Malone recalled.

“And I said, ‘S—, I don’t think so, Warren. It would be too easy for other people to compete with it. I don’t see the barriers to entry,'” he added.

Read more: Warren Buffett’s Berkshire Hathaway has $140 billion in cash, yet it pulled billions out of Apple, Costco, and Chevron. Veteran investor Chris Bloomstran explains why the cash pile isn’t excessive and the sales made sense.

Malone was dead wrong in hindsight. If Buffett had put $1 million into Microsoft’s IPO and never reinvested a single dividend, his stake would be worth $2.5 billion today — a 250,000% gain in 35 years.

Of course, Buffett might have ignored Malone even if he’d recommended buying Microsoft stock. The Berkshire Hathaway CEO famously operates within his “circle of competence,” only investing in things he understands. He also hunts for bargains and avoids expensive technology stocks — with the notable exception of Apple in recent years.

Even if Buffett had invested in Microsoft’s IPO, he probably would have sold his stock a few years later, once he became good friends with Gates. The pair play online bridge together, Buffett donates billions of dollars in Berkshire stock to the Gates Foundation annually, and Gates was a Berkshire board member for several years.

Buffett officially ruled out buying Microsoft stock a few years ago, citing the potential for accusations that Gates was feeding him inside information, and vice versa.

Read more: A 20-year markets veteran breaks down his formula for finding stocks with the most growth potential

It’s worth noting that Buffett didn’t miss the Microsoft boat entirely. He bought 100 shares of Gates’ company shortly after meeting him “just to keep track of what this young kid was doing,” the investor said in a 2016 interview.

Bigger than Buffett

Malone has taken a different approach to Buffett throughout his career, spinning out scores of businesses instead of building a single conglomerate. He would be richer and more influential than Buffett if he’d kept his empire intact, he said at an investor event in 2017, according to Deadline.

“I’d be bigger than Warren Buffett today if I hadn’t spun shit off,” Malone said. The executive’s famous quip is “the store is always open,” meaning he’s never opposed to selling his assets at the right price.

Liberty Media has carved out DirecTV, Starz, and many other subsidiaries over the years. Its key holdings today are SiriusXM, Formula One, and the Atlanta Braves baseball team.

In contrast, Buffett has been collecting businesses under the Berkshire umbrella for more than 50 years. The conglomerate counts Geico, See’s Candies, Fruit of the Loom, Precision Castparts, Dairy Queen, and the BNSF Railway among its subsidiaries.

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