Berkshire’s Deviation

The passing of an era is rarely marked by quiet calculation. Yet, the departure of Warren Buffett from the daily management of Berkshire Hathaway, a company he built from modest beginnings to a market capitalization exceeding a trillion dollars, demands a dispassionate assessment. For over half a century, Mr. Buffett’s principles – a blend of value investing, long-term horizons, and a preference for understandable businesses – were not merely strategies, but the very character of the company. To suggest these principles were inviolable would be naive; to ignore a recent, costly deviation from them would be a dereliction of historical accuracy.

The aggregate return of nearly 6,100,000% achieved under Mr. Buffett’s stewardship is a statistic easily recited, but difficult to grasp. It speaks to a disciplined approach, a resistance to speculative frenzy, and a consistent application of fundamental analysis. These were not accidental successes, but the predictable outcome of a defined methodology. However, even the most rigorously applied system is susceptible to human fallibility, or, in this instance, a perceived shift in geopolitical risk.

The foundations of Berkshire’s success are deceptively simple. Mr. Buffett favored companies possessing enduring competitive advantages – what he termed ‘moats’ – and a management team demonstrating both competence and integrity. He sought not rapid growth, but consistent profitability, and preferred to hold investments indefinitely, reaping the benefits of compounding returns. Crucially, he understood the inherent unpredictability of markets and avoided attempts to ‘time’ them, instead focusing on acquiring quality assets at reasonable prices. This patience, a virtue increasingly rare in modern finance, was a cornerstone of his strategy.

The recent sale of Berkshire Hathaway’s stake in Taiwan Semiconductor Manufacturing (TSMC) represents a notable departure from these established principles. In the third quarter of 2022, Berkshire acquired 60,060,880 shares of TSMC, a leading manufacturer of advanced semiconductors. The investment appeared logical; TSMC held a dominant position in a critical industry and was poised to benefit from the burgeoning demand for chips, particularly those used in artificial intelligence applications. The price, at the time, offered a reasonable entry point.

However, within months – a timeframe remarkably short by Mr. Buffett’s usual standards – Berkshire began to liquidate its position, exiting completely by the first quarter of 2023. The stated reason, as relayed to analysts, was concern over TSMC’s location – Taiwan – and the potential for geopolitical instability. The passage of the CHIPS and Science Act, intended to bolster domestic semiconductor production, and the subsequent restrictions on exports to China, appear to have been the catalysts for this reassessment.

While caution regarding geopolitical risk is understandable, the timing of this exit proved particularly costly. Demand for semiconductors, driven by the insatiable appetite for AI-powered technologies, has surged. TSMC’s share price has soared, and the company has become a member of the trillion-dollar club. Had Berkshire retained its initial investment, it would now be worth nearly $20 billion – a loss of approximately $16 billion relative to the current valuation. This is not a matter of hindsight; it is a demonstrable consequence of abandoning a long-term strategy in response to short-term anxieties.

The implications of this decision extend beyond a simple financial loss. It raises questions about the future direction of Berkshire Hathaway under its new CEO, Greg Abel. Will he adhere to the principles that guided Mr. Buffett for so long, or will he adopt a more reactive, short-term oriented approach? The answer to this question will determine whether Berkshire Hathaway remains a bastion of rational investment, or becomes just another participant in the prevailing speculative currents. The record, thus far, suggests a willingness to deviate from established norms, and that, for a company built on consistency, is a matter of considerable historical significance.

2026-01-30 12:14

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