Warren Buffett’s 1999 technology warning was about the limits of his and Charlie Munger’s ability to identify which fast-changing tech companies could sustain a competitive advantage—not a claim that technology lacked value or that every investor should avoid tech stocks. In the same letter, Buffett made a separate argument: investors appeared to expect too much from equities overall.
What did Buffett say about technology stocks in 1999?
Berkshire Hathaway’s 1999 Chairman’s Letter, dated March 1, 2000 in its reproduced version, says Buffett and Munger owned no technology stocks. They nevertheless shared the view that technology products and services would transform society. Their difficulty was deciding which companies in the sector had an enduring economic edge.
“Our problem — which we can’t solve by studying up — is that we have no insights into which participants in the tech field possess a truly durable competitive advantage.”
— Warren E. Buffett, Berkshire Hathaway 1999 Chairman’s Letter
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Buffett’s point was about predicting business economics, not predicting whether technology would matter. He wrote: “Predicting the long-term economics of companies that operate in fast-changing industries is simply far beyond our perimeter.”
What “circle of competence” meant here
A circle of competence is the boundary of what an investor believes they can understand well enough to evaluate. In this case, Buffett was describing Berkshire’s own boundary: more study would not give him and Munger the confidence they needed to distinguish likely long-term winners from other participants in a rapidly changing sector.
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That is a decision standard, not a universal rule against technology investing. A different investor might have expertise, methods, or a willingness to accept uncertainty that Berkshire did not claim for itself.
Was Buffett telling investors to avoid tech stocks?
No. The letter explains why Berkshire did not buy them; it does not instruct every investor to do the same. A third-party transcript of the 1999 Berkshire annual meeting records Buffett saying that, if forced to bet on a technology company, he would choose Microsoft, while noting that he did not have to make that bet and understood the soft-drink business more clearly. Because this is a secondary transcript rather than an official record, it is best treated as illustrative context, not as the controlling statement of his position.
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The distinction is between recognizing a sector’s importance and believing you can estimate a particular company’s durable economics. Buffett acknowledged the first and said Berkshire lacked the insight to do the second with enough confidence.
How was the technology point different from Buffett’s market warning?
Buffett also argued that stock investors generally seemed to expect too much. That was a separate, market-wide concern about the relationship between business earnings, valuations, and long-run returns—not a claim that technology companies as a group were worthless.
| Dimension | Technology-stock decision | Broad market warning |
|---|---|---|
| Question | Could Berkshire identify which technology companies had durable competitive advantages? | Were prices and expectations consistent with plausible long-run earnings growth? |
| Scope | Buffett and Munger’s circle of competence and Berkshire’s portfolio | Equity returns generally |
| Time horizon | Long-term economics of individual businesses | Long-run returns, not next month’s or next year’s market direction |
| Reasoning in the letter | Uncertainty about which fast-changing businesses would maintain an advantage | GDP and profit growth, an inflation hypothesis, dividends, and valuation expectations |
Buffett made the horizon explicit: “We have never attempted to forecast what the stock market is going to do in the next month or the next year, and we are not trying to do that now.” His letter therefore supports a warning about expectations and long-run returns, not a specific prediction of when the dot-com boom would end.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What assumptions underpinned the long-run return argument?
Buffett reasoned that if corporate profits broadly grew in line with the economy, business valuations could not keep rising much faster than that growth indefinitely. Dividends would contribute to investor returns, but he judged that the resulting long-run returns would still fall short of what many investors had recently experienced or appeared to expect.
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In illustrating the arithmetic, Buffett used real GDP growth of about 3% and hypothesized inflation of 2%. He explicitly said he had no particular conviction in the inflation figure. These were assumptions for his argument in the 1999 letter, not guaranteed forecasts or estimates of today’s growth, inflation, or returns.
Buffett’s discussion of the Fortune article he had pointed readers to began, in a secondary transcription, with the line: “Investors in stocks these days are expecting far too much, and I’m going to explain why.” The transcription says Fortune’s Carol Loomis assembled an account of Buffett’s talks that he reviewed and clarified. Berkshire’s official annual-report note confirms that the referenced article appeared in the November 22, 1999 issue of Fortune; the accessible full text is a third-party transcription, not a Fortune-hosted page.
What did Berkshire’s 1999 results show?
Buffett reported that Berkshire’s net worth increased by $358 million in 1999, while per-share book value rose 0.5%. He called it the worst relative performance of his tenure. That book-value figure describes Berkshire’s own reported measure; it is neither the return on technology stocks nor a measure of the entire stock market.
For longer historical context, the letter reported 24.0% annual compounded growth in Berkshire per-share book value over the 35 years through 1999, from $19 to $37,987. That is a backward-looking figure for Berkshire’s book value, not a forecast of future investor returns.
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What does Buffett’s 1999 warning mean for investors now?
The letter is useful as a framework for asking two different questions: whether you can assess a company’s durable economics, and whether the price you pay leaves room for reasonable long-run returns. Buffett’s 1999 remarks do not establish that technology stocks are overvalued today, nor do they automatically predict a future market decline. They describe his judgment and assumptions in the context of 1999.
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