Buffett draws a sharp line between assets that produce something and those valued only for what someone else might later pay. Gold and other inert stores of value hold their allure precisely because governments cannot print them, yet they generate nothing and, over decades, may merely keep pace with the passive holder while productive reinvestment does the real work. These passages capture his skeptical, truth-first view of shiny assets as a substitute for owning businesses that earn.
One friendly but sharp-eyed commentator on Berkshire has pointed out that our book value at the end of 1964 would have bought about one-half ounce of gold and, fifteen years later, after we have plowed back all earnings along with much blood, sweat and tears, the book value produced will buy about the same half ounce. A similar comparison could be drawn with Middle Eastern oil. The rub has been that government has been exceptionally able in printing money and creating promises, but is unable to print gold or create oil.
The second major category of investments involves assets that will never produce anything, but that are purchased in the buyer's hope that someone else - who also knows that the assets will be forever unproductive - will pay more for them in the future.
Today the world's gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce - gold's price as I write this - its value would be $9.6 trillion.
But in the end, alchemy, whether it is metallurgical or financial, fails. A base business can not be transformed into a golden business by tricks of accounting or capital structure.
Buffett in his own words on camera. Transcribed from the interview; click through to watch the moment.
I don't have any Bitcoin. No, I do not own one. I don't own any cryptocurrency. I never will. And, you know, in the end, I may start a Warren currency.
Bitcoin, it's ingenious, and blockchain is important, but Bitcoin has no unique value at all. It doesn't produce anything. It's a delusion, basically.
I don't want to be the Bitcoin spokesman.