Money Stuff: Free Wirecard Money Costs SoftBank

A thing that I think about a lot is that when Warren Buffett invests Berkshire Hathaway Inc.’s money in a company, that company’s stock goes up. I don’t mean that it goes up in the long run because he is good at picking stocks (though that too); I mean that it goes up immediately because people admire Warren Buffett and think he is good at picking stocks. When he announces a stake in a company, other people buy the stock too, and it goes up. This is sometimes loosely called the “halo effect.”

This is good for Buffett, since he has an immediate gain on his stock, but not that good. It is mostly good for other people—if Buffett buys 10% of a company and pushes the stock up, 90% of the benefit goes to other shareholders—and anyway Buffett isn’t going to turn around and sell his shares the next day, so he can’t capture the immediate benefit.