Billionaire investor Warren Buffett, known for his successful investment strategies, has shared his thoughts on artificial intelligence (AI) and its potential impact on investing. In an interview with CNBC in April 2023, Buffett admitted that he doesn’t fully understand AI, stating, I think it’s something I don’t understand at all. However, he acknowledged the impressive capabilities of AI after his friend, Microsoft founder Bill Gates, showed him ChatGPT, a language model that amazed him with its ability to process vast amounts of information. Buffett expressed his awe at how AI could save time and enhance productivity but admitted uncertainty about its future implications.
Buffett also addressed concerns about the risks associated with AI, mentioning former Google CEO Eric Schmidt’s warnings about its existential threats. He stated, If it scares him, it scares me. Buffett’s late partner and Berkshire Hathaway vice-chairman, Charlie Munger, shared a similar view. Munger, who passed away in November 2023, highlighted the importance of AI but cautioned against the hype surrounding it. Munger stated, There’s a lot of crazy hype on the subject… It’s not going to do everything that we want done. And there’s a lot of nonsense in it, too.
When it comes to new technologies and rapidly changing industries, Buffett often prefers to remain on the sidelines. He has faced criticism in the past for not recognizing the value of certain tech companies promptly. However, Berkshire Hathaway, the multinational conglomerate led by Buffett, is now one of the top shareholders in Apple. Buffett’s investment philosophy focuses on determining a company’s competitive advantage and the durability of that advantage, rather than solely assessing how industries will impact society or grow.
Buffett believes that while new industries can significantly change society, they may not necessarily prove rewarding for shareholders. He referenced airlines and auto manufacturers as examples of businesses that transformed the world but have not lived up to investor expectations. Buffett’s skepticism toward new technologies aligns with his view that successful investments lie in identifying enduring competitive advantages.
While AI tools like ChatGPT and Google’s Bard offer conveniences in processing vast amounts of data and providing quick overviews of businesses and investment trends, they may present challenges when it comes to accurate investment judgments. Buffett’s caution also stems from the fact that the success of investments primarily depends on predicting the future, an aspect that AI is unable to accurately forecast. Investors should verify information generated by AI tools before making decisions.
In conclusion, Warren Buffett and his late partner Charlie Munger have expressed differing views on AI and its potential. While Buffett sees the incredible technological advancement of AI, he remains uncertain about its future implications. Munger is skeptical of the hype surrounding AI and emphasizes the importance of old-fashioned intelligence. As investors explore AI tools for investment decisions, verifying information and considering the limitations of AI remain crucial. Buffett’s philosophy of seeking enduring competitive advantages instead of relying solely on industry growth or societal impact continues to shape his investment approach.
