Why the ‘Tech-Avoider’ Bet $31 Billion on Apple
- Buffett avoided tech stocks for 60 years — then made Apple his biggest bet ever
- His trick: He didn’t see Apple as a tech company. He saw it as a brand people love.
- The price was ridiculous: Apple cost 1/3 what similar companies cost
- Result: $31 billion turned into $170+ billion
The Surprise Everyone Saw Coming (Except Nobody Did)
For 60 years, Warren Buffett famously avoided technology stocks. His explanation was always the same:
“We have no insights into which participants in the tech field possess a truly durable competitive advantage.”
Translation: Tech changes too fast. Today’s winner is tomorrow’s has-been. Nokia. BlackBerry. MySpace. Too risky.
Then in 2016, Buffett started buying Apple. A lot of Apple. By 2018, it was his single largest investment — bigger than Coca-Cola, bigger than everything.
What changed?
He Didn’t See Apple as a Tech Company
This is the key insight: Buffett wasn’t buying a technology company. He was buying a brand.
Here’s how he explained it:
“I bought Apple because I understood it as a consumer products company with extremely loyal customers.”
He wasn’t evaluating chip designs or AI capabilities. He was looking at the same things he’d been analyzing his whole career:
- Brand loyalty (like Coca-Cola)
- Customer lock-in (like See’s Candies in California)
- Pricing power (like American Express)
- Emotional connection (like Gillette razors)
These are all things Buffett understands deeply. He just saw them in a “tech” company for the first time.
The Price Was Ridiculous
Look at what Apple cost compared to Google in 2016:
| Company | Price (relative to profits) |
|---|---|
| Apple | 10x profits |
| 32x profits |
Apple cost one-third of what Google cost, relative to their earnings.
Think about that. Apple had: - One of the world’s most valuable brands - An ecosystem customers can’t escape - 94% customer retention (9 out of 10 iPhone users buy another iPhone)
And it was priced like a company everyone had given up on.
What Buffett paid: - Total investment: About $31 billion - Number of purchases: 14 separate buys over time - He kept buying more because it stayed cheap
Where’s the Moat?
You Can’t Escape the Ecosystem
Ted Weschler, the Berkshire analyst who first recommended Apple, put it simply:
“Once you have your thousands of photographs up in the cloud, you’re used to the keystrokes, you know where everything is — you become a sticky consumer.”
Think about switching from iPhone to Android: - You lose your apps — many don’t transfer, others work differently - Your photos are stuck — yes, you can move them, but it’s a hassle - iMessage breaks — your group chats with family become a mess - Your AirPods work worse — same with your Apple Watch
That’s not technology. That’s a trap. A very comfortable trap that people don’t want to leave.
People Would Give Up Their Cars First
Here’s what Buffett noticed:
“People would give up their cars before they give up their smartphones.”
When your product is more essential than a car, you have something special.
94% of iPhone users buy another iPhone. That’s not a phone. That’s a habit.
They Could Charge More (But Don’t)
Buffett observed something interesting:
“The iPhone is underpriced given the utility of the product.”
People use their phones for hours every day. It’s their camera, their wallet, their entertainment, their connection to everyone they know. And it lasts years.
If Apple wanted to charge more, most people would still pay. That’s pricing power.
Why Was Apple So Cheap?
At 10x profits, Apple was priced like a dying business. Why?
“Smartphones are over”
Everyone already has one. Where’s the growth?
“iPhones all look the same now”
The iPhone 7 wasn’t much different from the iPhone 6. Would people keep upgrading?
“China is risky”
Apple depends on China for both manufacturing and sales. What if that relationship sours?
“Android is winning”
More people globally use Android than iPhone. Analysts worried Apple would lose.
“Tech is risky”
After the 2000 dot-com crash, many careful investors avoided anything that looked like tech. Apple was guilty by association.
Buffett saw through all of this. The brand, the ecosystem, the customer loyalty — none of that was going away. Short-term worries created a buying opportunity.
Just like Coca-Cola in 1988.
The Checklist
| Question | Apple |
|---|---|
| Do I understand it? | ✓ Brand + ecosystem = loyal customers |
| Does it have staying power? | ✓ Switching costs are enormous |
| Is management good? | ✓ Tim Cook buys back billions in stock |
| Is the money real? | ✓ $50+ billion in cash every year |
| Is it obviously cheap? | ✓ 10x profits vs. 30x for peers |
The Results
What $31 billion became:
- At peak: Over $170 billion (more than 50% of Berkshire’s stocks)
- Total gain: About $167 billion
- Return: 407%
Then something interesting happened:
Starting in late 2023, Buffett started selling Apple. Not because he changed his mind about the company — but because the price changed.
Apple went from 10x profits to over 33x profits. At that price, the safety cushion disappeared.
This is the discipline in action: buy when obviously cheap, sell when full priced. The business didn’t get worse. The opportunity did.
What This Teaches
You Don’t Need to Understand Everything
Buffett didn’t learn to analyze semiconductor manufacturing. He didn’t study iOS architecture.
He reframed Apple as something he already understood: a brand people love.
You don’t need to understand every aspect of a business. You need to understand what makes customers stay.
The Market Gets It Wrong on Quality
In 2016, Apple was the world’s most valuable company. And the market was pricing it like a failing business.
Everyone “knew” smartphones were over. Everyone was wrong.
Buybacks Are Good (When Done Right)
Apple has bought back over 30% of its own shares since 2016. Every remaining share owns more of the company.
Buffett loves this. It’s why he likes Tim Cook as a manager.
Same Company, Different Price = Different Investment
Apple at 10x profits was a screaming buy. Apple at 33x profits was time to sell.
The company didn’t change. The opportunity did.
At a shareholder meeting, Buffett said something remarkable:
“We own Coca-Cola, which is a wonderful business. And we own Apple, which is an even better business.”
From someone who avoided tech for 60 years, that’s extraordinary.
Apple proves that “circle of competence” is about understanding business dynamics, not industry expertise.
Buffett saw Apple as something he’d been analyzing his whole life: a brand with loyal customers who don’t want to leave.
At 10x profits while similar companies cost 30x, the opportunity screamed. When the price tripled, he started selling.
Same principles. Different industry. Same result.
Next up: Part 13 — The Complete Framework. Everything from this series, condensed into one checklist you can use.
References
Buffett, W. (1999). Berkshire Hathaway Shareholder Letter. Berkshire Hathaway Inc.
CNBC (2018). Warren Buffett on Apple Investment.
Weschler, T. (2016). Interview. Carnegie Invest.