Interpretation of Buffett's Sun Valley Speech in 1999 - Global Strict Cryptocurrency Exchange Platforms

Background Introduction: In July 1999, at the Sun Valley Summit in Idaho, Warren Buffett delivered this speech. At that time, it was just before the burst of the US tech and internet bubble, and many “.com” companies had skyrocketed in valuation without profits or even revenue. Buffett, who avoided tech stocks, found his investment returns during the tech bull market quite mediocre, and some media even published sarcastic articles questioning, “Is Buffett too old to eat?”

“Buffett showed another slide, which came from a 70-page list that included all American car companies. The list contained 2,000 car companies: automobiles were the most significant invention of the first half of the 20th century. They had a huge impact on people’s lives. If you had witnessed the birth of the first cars and seen how the country developed because of automobiles, you might say: this is a field I must invest in. However, out of more than 2,000 car companies from decades ago, only three survived. Moreover, at one point, the sale prices of these three companies were below their book value—that is, less than the amount of capital initially invested and retained. Therefore, although automobiles had a tremendous positive impact on America, they had the opposite effect on investors. Sometimes, identifying the failures is much easier. I believe that after this, everyone can draw an obvious conclusion: what you should do is short sell poorly managed companies.”

Buffett has always been reluctant to invest in four-wheeled businesses (later, his investment in BYD was mainly under strong recommendation from Mango), and this speech can be seen as a positive answer. He believes that although cars have brought great positive impacts to people’s lives, most investors in the automotive sector do not make money. So, what is the fundamental reason that causes investors in the automotive field to lose money? I think it is mainly due to the industry being heavy asset, high investment, fierce competition, low profit margins, and cyclical nature. Now, looking at the current competition among China’s new energy vehicle companies and the chip industry chain companies, isn’t it also heavy asset, high investment, with continuous price wars and intense competition? However, none of these companies’ sale prices are below their book value, even many car manufacturers are still operating at a loss today. Can this be understood as higher risk? Today’s investors face an investment environment that cannot be compared to the US investment environment during Buffett’s 1999 speech, but the future outcome of the automotive industry might be similar. Today, with hundreds of companies vying for dominance, tomorrow only a few may survive, and most investments in failed car companies could result in losses.

Looking back at the historical background of Buffett’s 1999 speech, does he resemble today’s young Deng mocking the old Deng who buys Baijiu? Back then, Buffett was ridiculed as an old Deng who only bought consumer stocks, but this old Deng later proved that experience is still valuable. When the tide recedes and the bubble bursts, Buffett’s steady returns are once again praised by the market. I want to offer another perspective: why does Buffett not favor investing in car companies? Because he sees the endgame—only a few can survive, and the vast majority are cannon fodder. So, when he cannot find a true leader, he prefers to avoid being cannon fodder himself. This aligns with his principle of crossing a one-foot fence rather than necessarily choosing a seven-foot fence, and also with his idea that if you can’t hold for ten years, why hold for ten minutes? But today, will most investors in China’s new energy vehicle companies face losses in the future? Or will some still make money? For example, Buffett himself once earned 38 times returns over 17 years by investing in BYD’s new energy vehicles. So, perhaps everyone has their own answer.

Back in the eve of the US tech internet bubble burst, many “.com” companies had sky-high valuations with little or no profits or revenue. Buffett, who avoided tech stocks, found his returns during the tech bull market quite mediocre, even prompting media to publish sarcastic articles like “Buffett is too old to eat?”

“But you know, people still keep investing. This reminds me of a story about an oil prospector. After he died, he went to heaven. ‘I’ve checked your situation, and you meet all the conditions, but there’s one problem,’ God said. ‘We have strict residential laws here, and all oil prospectors are required to stay in one area. As you see, it’s already full, no space for you.’ The prospector said, ‘Do you mind if I say something?’ God said, ‘Go ahead.’ So the oil prospector cupped his hands and shouted loudly, ‘There’s oil in hell.’ As you can imagine, the gates of hell opened, and all the oil prospectors rushed down. God said, ‘That’s a clever trick. Well, go ahead, just like at home—be more casual. This place is all yours.’ The prospector paused and then said, ‘No, I think I’ll stay with them. After all, where there’s smoke, there’s fire.’”

This is how people understand and perceive stocks. It’s easy to believe the saying “where there’s smoke, there’s fire.”

In his speech, Buffett shared the story of “finding oil in hell.” This story first appeared in his 1985 letter to shareholders and was originally a fable by his teacher, the father of value investing, Benjamin Graham. The story profoundly reveals the blind herd behavior of humans, especially secondary market investors. It reminds investors to stay calm and rational, not to be swayed by market emotions and rumors. Buffett repeatedly shares this story to emphasize the importance of independent thinking and rationality in investing. If people are easily convinced by rumors and gossip, just like the oil prospectors in the story, they may ultimately end up in a very bad situation.

In a bear market, it’s already difficult to invest within your circle of competence and adhere to margin of safety. Before 1999, during the US tech stock boom, everyone around was mythologizing overnight wealth, and sticking to principles was very challenging. Buffett is such a person—even if Berkshire Hathaway shareholders oppose his avoidance of tech stocks by selling shares, he remains calm and unmoved. This reflects his understanding of his circle of competence and his faith in his value investing system. Looking at China’s 2024 “924” market rally, which has become a genuine tech bull market by October 16, 2025, traditional consumption stocks like Moutai are still stagnant, lying on the floor, and the market has given these two sides new names: “Young Deng” and “Old Deng.” “Young Deng” stocks, representing the younger generation of tech believers, have soared, while “Old Deng” stocks, represented by traditional value investors like Baijiu, remain stagnant. The highly polarized market situation is very similar to Buffett’s environment in 1999. History often repeats itself in astonishing ways—progressing forward, yet not simply repeating. For example, today’s Chinese tech stocks are very different from the internet bubble of the 1990s in the US. Many high-tech companies in China are supported by solid performance, though there are more fishy companies. Therefore, in such an investment environment, we must better understand our circle of competence, avoid blindly following the voices in our echo chambers, and always maintain independent thinking and judgment.