Investors refer to Warren Buffett as the “Oracle of Omaha” for a reason. Like the oracles of Ancient Greece, he shares wisdom that can be as eyebrow-raising as it is informative. In one example, dating back to Berkshire Hathaway’s (BRK.B) 1979 shareholder letter, he compared building trust with shareholders to a restaurant setting its menu.
“A restaurant could seek a given clientele – patrons of fast foods, elegant dining… – and eventually obtain an appropriate group of devotees. If the job were expertly done, that clientele, pleased with the service, menu, and price level offered, would return consistently. But the restaurant could not change its character constantly and end up with a happy and stable clientele. If the business vacillated between French cuisine and take-out chicken, the result would be a revolving door of confused and dissatisfied customers.”
Buffett’s analogy makes sense. A restaurant patron who loves an establishment for its fried chicken would be disappointed to visit and find that the menu had been scratched and the chef was serving up high-end French cuisine. Would they come back another time to see if fried chicken had made it back onto the menu?
Maybe. But a restaurant that is constantly changing its strategy will eventually drive away even its most loyal diners.
Buffett argues that the same is true for public companies. He further wrote in 1979, “You can’t be all things to all men, simultaneously seeking different owners whose primary interests run from high current yield to long-term capital growth to stock market pyrotechnics, etc.”
A Restaurant Analogy or a Prescient Warning for Digital Asset Treasury Companies?
Although Bitcoin (BTCUSD) was many decades from existence when Buffett penned this shareholder letter in 1979, his words likely echo true for many readers today. Perhaps the best examples of companies seeking everything from long-term capital growth to “pyrotechnics” these days are so-called digital asset treasury companies.
These businesses, with origins in everything from biotechnology to theme park merchandise or agriculture, are abandoning their roots and instead loading their balance sheets with cryptocurrencies like Bitcoin, Ethereum (ETHUSD), Solana (SOLUSD), and even meme coins like BONK. These pivots are great for a quick – and huge – pop in the share price, but the experts at Barchart warn that they do little to change a company’s fundamentals. Declining revenue and negative earnings aren’t going away.
Buffett back then didn’t understand such companies, writing that “such managements are saying that they want a good many of the existing clientele continually to desert them in favor of new ones,” which was against his philosophy for managing Berkshire Hathaway.
So who will come out on top? The nonagenarian or the red-hot, flash-in-the-pan treasury companies? With Berkshire shares up 802% over the past 20 years, it’s hard to imagine Buffett doing anything but taking home the gold.
