Asset light business can be good providing they are available in the market and are trading at a reasonable valuation. See Candies acquired by Berkshire Hathaway in the mid 1970s was a classic example. Buffett and Munger paid about $25mn for it and over the last five decades it has generated up to $ 1bn in capital returned back to Omaha. However, as size of assets increased, asset light businesses which would move the needle for BRK were not available at a fair price. BRK invested in capital intensive businesses such as Utilities and Railways,
A very good point, and the exact reasoning (I believe) for Buffett's quote on capital light businesses:
"As an investor with small capital, one should prefer businesses that have high returns on capital and that require little incremental investment to grow"
Asset light business can be good providing they are available in the market and are trading at a reasonable valuation. See Candies acquired by Berkshire Hathaway in the mid 1970s was a classic example. Buffett and Munger paid about $25mn for it and over the last five decades it has generated up to $ 1bn in capital returned back to Omaha. However, as size of assets increased, asset light businesses which would move the needle for BRK were not available at a fair price. BRK invested in capital intensive businesses such as Utilities and Railways,
A very good point, and the exact reasoning (I believe) for Buffett's quote on capital light businesses:
"As an investor with small capital, one should prefer businesses that have high returns on capital and that require little incremental investment to grow"