Everybody is wondering what Warren Buffett will buy next. With more than $100 billion in cash, aspirations for another megadeal and an 89th birthday approaching, the Sage of Omaha says he’s on the prowl for big targets.
One wonders, though, if the investment world is looking in the wrong direction. The focus on Buffett, the man and the legend, is about more than nostalgia, of course. In today’s chaotic and disorienting economic climate, the next big move by this value-investment icon will turn many heads.
But 6,000 miles away from Nebraska, SoftBank’s Masayoshi Son is pioneering a new era of value investing. Whether Japan’s richest man can live up to the Buffett-of-Japan hype is anyone’s guess. The report card on the $100 billion Vision Fund he rolled out in 2016 is incomplete, at best. And that’s vital to keep in mind as Son ups his firepower to the $200 billion mark.
Before launching a second $100 billion fund, Son might want to convince the globe that his first one hit his own intended targets. Son can start by answering three questions.
One: What’s the theme here? Don’t get me wrong–Japan needs more risk-takers like Son. Prime Minister Shinzo Abe spent the last six-plus years urging ultra-conservative Japan Inc. to rekindle the innovative mojo that drove the nation to such great heights in the 1970s and 1980s. By becoming the world’s top venture capitalist, Son, 61, is showing peers in Asia’s No. 2 economy how it’s done.
Well, we hope so. His splashy investments smash the Japanese CEO mold. But they also raise questions about the grander strategy at play. SoftBank’s journey from software company in 1981 to telecom titan–gobbling up Vodafone and Sprint–has a certain Buffett-esque logic. His aggressive bets on everything from Uber to WeWork to messaging system Slack to online lender SoFi to robot-pizza-maker Zume to Fortress Investment to food-deliverer DoorDash to solar panels to AI (artificial intelligence) to indoor farms to satellite makers, though, are as scattershot as you’ll find among today’s billionaires.
Son doesn’t often swing for the fences the way Buffett does at times. Buffett’s 2016 megadeal purchase of Precision Castparts for $37 billion is a case in point. Consider Son more of a “Moneyball” player who tried to recreate the Buffett-like income streams in the aggregate. Still, investors are anxious to know how dominating the ride-sharing space, betting $3.3 billion on money-manager Fortress and overpaying for startups around the globe can gel together in profitable ways.
Two: Where’s Son’s General Re? One year ago, a tantalizing story swept the markets: Son might be buying a nearly $10 billion stake in Swiss Re AG. It seemed classic Buffett to stabilize Son’s broader constellation of futurist bets the way General Re helps anchor the sprawling Berkshire Hathaway. What better way to reconcile the gap between an increasingly eclectic balance sheet, a discounted SoftBank share price and Son’s global ambitions?
Those ambitions have their roots in a 2000 investment Son made in a then-little-known Chinese visionary. The $20 million Son wagered on Jack Ma helped seed Alibaba. It paid off spectacularly, too. By 2014, when Ma took his e-commerce juggernaut public, Son’s bet was worth some $50 billion. The Vision Fund aims to recreate that success in the aggregate, as many times over as possible.
Anchors are important, though. Son’s talks with Swiss Re ultimately failed. Yet it’s time to build in some Vision Fund cash-flow stability.
In 2016, here’s how Son explained his strategy: “I think I’m better than others at sniffing out things that will bear fruit in 10 or 20 years, while they’re still at the seed stage, and I’m more willing to take the risks that entails.”
Great, so long as there are ample shock absorbers for when some of those risks go awry. The need becomes greater as Son’s arsenal doubles to $200 billion.
Three: How to finesse the Saudi dilemma? A major source of Vision Fund’s seed money–$45 billion–resulted from a September 2016 meeting between Son and Muhammad bin Salman. The Saudi Arabian crown prince, you might’ve noticed, has been in a few headlines since then. None flattering, and it’s not a great look for SoftBank.
The apparent murder of dissident and Washington Post contributorJamal Khashoggi in a Saudi consulate put a cloud over Riyadh. That, coupled with a gruesome war in Yemen and locking up relatives, made MBS, as the prince is known, a less appealing business partner. In late October, a who’s-who of chieftains dropped out of MBS’s “Davos in the Desert” conference–from JPMorgan’s Jamie Dimon to HSBC’s John Flint.
Can SoftBank avoid the taint? Time will tell, but Son may have another Saudi challenge on his hands: divergent visions. So many of Son’s Vision Fund bets are in the renewable energy space. How, though, does that track?
The Saudi royal family has expressed a desire to diversify its fossil-fuel-reliant economy. And yet that effectively means replacing the industry from which Saudi royals derive their wealth. If MBS changed his mind, restoring the primacy of the petrodollar model, the source of Son’s liquidity dries up.
Perhaps Son can indeed reconcile this disconnect. There’s a great deal riding on Son’s ability to juggle–and ultimately answer–these three questions. I’m certainly rooting for him. Few visionaries are doing more, at this very moment, to empower startups with the potential to alter humankind’s trajectory.
A key Son priority, for example, is helping seismically-active nations from Japan to India replace nuclear reactors with safer renewables. If Son and his ilk succeed, future generations won’t know from petrostates, oil rigs or gas stations. Cars, airplanes, ships and indeed buildings will be powered by batteries or other clean-energy sources.
Getting there, though, requires out-of-the-box thinking and even bigger risk-taking. That’s why the trajectory of the global economy will likely owe more to Son’s moves than Buffett’s.