Warren Buffett’s long-time business partner, Charlie Munger, suggested early last year that they invest in an obscure Chinese battery, mobile phone, and electric car company, despite Buffett’s general misgivings about investing in a company you don’t understand, according to Fortune magazine.
However, Buffett became increasingly interested as Munger described CEO Wang Chuan-Fu as a “combination of Thomas Edison and Jack Welch–something like Edison in solving technical problems, and something like Welch in getting done what he needs to do. I have never seen anything like it,” Fortune’s Marc Gunther reports.
Buffett liked what he heard and spoke with another friend, David Sokol, chairman of a Berkshire-owned utility company called MidAmerican Energy, to travel to China and take a closer look at BYD, Fortune magazine reports.
What he found resulted in Berkshire Hathaway purchasing 10 percent of BYD for $230 million. While the deal didn’t receive much attention at the time, Buffett, Munger, and Sokol thought otherwise. They believe BYD has a chance to become the world’s largest automaker, primarily by selling electric cars, as well as a leader in the fast-growing solar power industry.
In acquiring a stake in BYD, Buffett broke a couple of his own rules. “I don’t know a thing about cellphones or batteries,” he told Fortune. “And I don’t know how cars work.” But, he added, “Charlie Munger and Dave Sokol are smart guys, and they do understand it. And there’s no question that what’s been accomplished since 1995 at BYD is extraordinary.”
Gunther also noted another reassuring factor for Buffett was that when Berkshire Hathaway first tried to buy 25 percent of BYD, Wang turned them down. ”This was a man who didn’t want to sell his company,” Buffett says. “That was a good sign.”