Billionaire CEO of Social Capital venture capital, Chamath Palihapitiya, said in a recent CNBC interview that he believed Amazon CEO Jeff Bezos was a better investor than Omaha’s Oracle, Warren Buffett . He said, “People were shining Jeff Bezos not to be profitable, but when you looked under the hood, he was the best investor of our generation, even better than Buffett, because he would take billions of dollars in free cash flow and invest it in the future. “Say what? Bite your tongue, Mr. Palihapitiya. How could he say such a thing? How did he come to this conclusion? And, better, who is Chamath Palihapitiya?
Chamath Palihapitiya is the founder and CEO of the social capital venture capital company. Palihapitiya was one of the first senior executives of Facebook. He joined the company in 2007 and left in 2011. He is also a minority shareholder and member of the board of directors of Golden State Warriors. He was born in Sri Lanka and moved to Canada with his family as a refugee at the age of six. His father was largely and often unemployed and his mother was a housekeeper and caregiver. The family was on welfare and Palihapitiya did not have his own bedroom, he rather slept on a mattress on the living room floor. He graduated from Lisgar Collegiate Institute at the age of 17. He graduated in electrical engineering from the University of Waterloo in 1999. After college, he worked for a year as a derivatives trader at investment bank BMO Nesbitt Burns. He moved to California to be with his then girlfriend Bridgette Lau.
Palihapitiya became AOL’s youngest vice president when he took a job there in 2004 as head of its instant messaging division. He left AOL in 2005 for Mayfield Fund. Then he left this job and joined Facebook when he was just over a year old. His work at Facebook was trying to augment the fledgling social media site. Palihapitiya also made secondary investments by working at Facebook, including Palantir, Pure Storage, Paydom (purchased later by Disney) and Bumptop (purchased later by Google). In 2011, he left Facebook to create his own Social Capital fund with his wife at the time, Bridgette Lau. The company focuses on technology in healthcare, financial services, education and software as a service startups. Through Social Capital, he has invested in several companies, including Slack. He became a member of the board of directors of Slack in 2017. He resigned from this position in 2019. His venture capital fund has total assets of more than $ 1.1 billion.
Palihapitiya is also a professional poker player. He has three World Series of Poker (WSOP) and two World Poker Tour (WPT) for a total win of $ 175,801. He finished 101st out of 6,865 registrations for the World Series of Poker Main Event in 2011.
OK, so now we know who Palihapitiya is, now why does he think Bezos is a better investor than the legendary Warren Buffett? I mean it sounds like heresy to me! Well, Palihapitiya participated in a long interview with CNBC where he spoke about Tesla and Elon Musk as well as actions of the Federal Reserve, bitcoin and the re-opening of the United States economy in the middle of the coronavirus. He also made a little tirade on share buybacks and called them “fundamentally silly business practice”. Palihapitiya is a big fan of Bezos because Amazon does not participate in the share buyback, by and large. Instead, Amazon invests in building the business.
Palihapitiya specifically cited Amazon’s call for quarterly results, in which Bezos told investors it plans to spend the roughly $ 4 billion it expects second quarter profits on “COVID-related spending to get products to customers and keep employees safe. ” On the other hand, Buffett argued for share buybacks. During the first quarter, Berkshire bought back $ 1.7 billion from its own shares. Palihapitiya said:
“From 2020, I think what we need to achieve is that we have a very fragile economy, a very fragile ecosystem of over-exploited companies. We need to create incentives for these people to save and invest in it is a business case to do in every business to save and / or spend to plan for the future, and instead randomizing it back to the open market is one of the dumbest business decisions you make. may take. “
Hmmm. I’m not sure I bought this from Palihapitiya. After all, Warren Buffett is a member of the Giving Pledge, solidifying its philanthropic heart. Bezos is not and it is revealing that his ex-wife MacKenzie joined the Giving Pledge almost as soon as the ink was dry during their divorce. And Amazon is the company that fired employees who spoke out against the company for unsafe work practices in the era of COVID-19. So although Bezos may have said that when calling for results, it remains to be seen if he will follow him. So match, set, point to Buffett in my opinion as the best investor of our time.