Warren Buffett Reveals Old Conversation with Steve Jobs

Warren Buffett, the legendary investor and chairman of Berkshire Hathaway Inc., provided insights into a notable conversation he had with Steve Jobs, the visionary co-founder of Apple Inc., during a 2012 appearance on CNBC’s “Squawk Box.”

In the “Ask Warren” segment, Buffett recounted how Jobs reached out to him seeking advice on Apple’s cash-management strategies. Jobs, known for his transformative leadership in shaping Apple into a global technology powerhouse, was grappling with the company’s substantial cash reserves and sought guidance on potential avenues for deploying it.

Buffett outlined the four primary options for utilising cash: stock buybacks, dividends, acquisitions, or retaining it. Despite Jobs’s acknowledgment that Apple’s stock was undervalued, signalling that buybacks could be a prudent move, he ultimately opted to maintain the company’s cash reserves.

“I went through the logic of each thing,” Buffett recalled. “He told me they would not have the chance to make big acquisitions that would require lots of money. And then I asked him the question, I said, ‘I would use it for buybacks if I thought my stock was undervalued.’ And I said, ‘How do you feel about that?’ The stock was 200-and-something. He said, ‘I think my stock is very undervalued.’ I said, ‘Well, what better to do with your money?'”

Despite Buffett’s endorsement of buybacks, Jobs ultimately favoured maintaining liquidity, interpreting their conversation as Buffett supporting his decision to hold onto the cash.

This dialogue between Jobs and Buffett offers a glimpse into the decision-making process at one of the world’s most valuable companies, highlighting a cautious approach to financial management favoured by Jobs, which contrasts with the more aggressive stock buyback strategy pursued by his successor, Tim Cook.

Under Cook’s leadership, Apple has committed significant resources to stock buybacks, enhancing shareholder value and increasing Berkshire Hathaway’s ownership stake in the tech giant without additional investment. Buffett has publicly supported Apple’s repurchase efforts, emphasising their positive impact on both Berkshire’s holdings and Apple’s broader ecosystem.

While Jobs prioritised financial flexibility, Cook has leveraged Apple’s financial strength to actively manage its capital structure, reinforcing the company’s leadership in the technology sector and delivering value to its shareholders and stakeholders alike.