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Outbyte Driver Updater FREEScan for outdated or missing drivers - takes under a minuteDriver Scan →Outbyte PC Repair FREERepair Windows errors before they cause bigger problemsFix Now →Warren Buffett’s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 durable 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’ expectations for broad stock-market returns looked too high. Those were related concerns, but they were not the same prediction.
What did Buffett say about technology stocks in 1999?
Berkshire Hathaway’s official 1999 Chairman’s Letter, dated March 1, 2000 in its reproduced version, says that Berkshire held no technology stocks. Buffett and Munger nevertheless shared the view that technology products and services would transform society. Their difficulty was deciding which companies in the sector could maintain an economic edge.
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“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.”
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Special offer. See more information about Outbyte and uninstall instructions. Please review EULA and Privacy policy.— Warren E. Buffett, Berkshire Hathaway 1999 Chairman’s Letter
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Buffett described the issue as a limit on forecasting the long-term economics of rapidly changing businesses:
“Predicting the long-term economics of companies that operate in fast-changing industries is simply far beyond our perimeter.”
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— Warren E. Buffett, Berkshire Hathaway 1999 Chairman’s Letter
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What did Buffett mean by “circle of competence”?
A circle of competence is the boundary of what an investor believes they can understand well enough to evaluate. It does not mean an investor must know everything about an industry; it means they should be able to assess a business’s economics and prospects with adequate confidence. Buffett’s point was that more study alone would not give Berkshire the insight it felt it needed to distinguish durable winners from other technology companies.
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That was a statement about Buffett and Munger’s judgment and Berkshire’s investment choices, not a universal rule against technology shares. A secondary transcript of Berkshire’s 1999 annual meeting records Buffett saying that, if forced to bet on a technology company, he would choose Microsoft—but that he did not have to make that bet and understood the soft-drink business more clearly. Because this is a third-party transcript rather than an official record, it is best treated as context, not as the controlling source.
How the technology decision differed from the broader market warning
The letter contained two distinct arguments. The technology discussion concerned Berkshire’s ability to judge individual companies. The market warning concerned whether stock prices and investor expectations, across equities generally, were consistent with plausible long-term growth in business earnings.
| Question | Technology-stock decision | Broad market warning |
|---|---|---|
| What was Buffett assessing? | Whether Berkshire could identify tech companies with durable economic advantages. | Whether equity prices and return expectations fit plausible long-run earnings growth. |
| What was the scope? | Buffett and Munger’s circle of competence and Berkshire’s portfolio. | Equity returns generally. |
| What time horizon? | The long-term economics of individual companies. | Long-run returns, not the market’s direction next month or next year. |
| What reasoning did the letter use? | The difficulty of forecasting winners in a fast-changing industry. | Economic and profit growth, an inflation assumption, dividends, and valuation expectations. |
Buffett was explicit that the market argument was not a short-term forecast: “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.”
What was the 1999 warning to investors about returns?
Buffett argued that long-run corporate profits could not grow far faster than the economy indefinitely if profits broadly tracked economic output. If earnings growth had that constraint, stock valuations could not keep rising much faster forever without depending on increasingly demanding expectations. Dividends would contribute to returns, but Buffett’s reasoning still pointed to prospective equity returns below the unusually strong results many investors had recently experienced or expected.
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To illustrate the arithmetic, the letter used real GDP growth of about 3% and a hypothetical 2% inflation rate. Buffett explicitly said he had no particular conviction about the 2% inflation assumption; these were assumptions in his argument, not a precise forecast. His concern was the long-run relationship among economic growth, corporate profits, prices paid for shares, and investor returns—not a call to sell before a specific market event.
Buffett also discussed the subject in a Fortune article. Berkshire’s official annual-report note confirms that the article appeared in the November 22, 1999 issue of Fortune. The accessible full text is a third-party transcription, not a Fortune-hosted original; it opens, “Investors in stocks these days are expecting far too much, and I’m going to explain why.” That secondary text provides context for the broad-return argument, while Berkshire’s letter remains the primary source for Buffett’s position.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What Berkshire’s 1999 results add to the context
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 0.5% figure is Berkshire’s own change in per-share book value—not the return on technology stocks and not a measure of the entire stock market.
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For comparison with Berkshire’s longer record, the letter reported a 24.0% annual compounded increase in per-share book value over the 35 years through 1999, from $19 to $37,987. Those are historical figures, not a forecast or a promise of future returns. The weak relative year helps explain the period’s context, but it does not turn Buffett’s warning into a short-term market-timing call.
What Buffett’s remarks do—and do not—mean today
The 1999 letter offers a framework for thinking about what an investor can confidently evaluate: the economics and competitive position of a business, as well as the price paid for its shares. It does not establish that technology stocks as a category are unattractive now, that every investor should follow Berkshire’s portfolio choices, or that Buffett predicted the timing of a dot-com crash. The remarks belong to their historical market context; any present-day assessment requires current evidence about particular companies, prices, and expected returns.
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