Berkshire Hathaway’s $570 million bet on Snowflake shows Warren Buffett completely trusts his deputies

Berkshire Hathaway’s plan to invest about $570 million in Snowflake‘s IPO shows that CEO Warren Buffett has complete faith in his deputies. Buffett has given full agency to his lieutenants, Todd Combs and Ted Weschler. A high-profile tech IPO is a resounding confirmation that Buffett’s actions match his words. Any lingering doubts that Combs and Weschler get to invest however they want has been extinguished.

Berkshire Hathaway’s bet on Snowflake, despite Buffett’s historical aversion to public listings, loss-making tech companies, and lofty valuations, demonstrates that he has total trust in Combs and Weschler. Buffett has emphasized in the past that Combs and Weschler, who managed about $14 billion each at the last count, are free to make their own investment decisions. Combs and Weschler do not have to check with Buffett before they buy or sell anything.

It is entirely Combs’ and Weschler’s decision. Snowflake is seeking a $24 billion valuation, more than 78 times its revenue last year.

Yet Berkshire Hathaway’s investment in the cloud-data platform is not a betrayal of Buffett’s signature value-investing approach.

Value can come in a lot of flavors, just because something is not statistically cheap does not mean it can not be mispriced. Growth is a component of value, a business can be be undervalued if the market underestimates its future earnings growth. Buffett voiced a similar view at Berkshire’s shareholder meeting last year. All investing is value investing.

You are putting out some money now to get more later on. All the same calculation goes into it, whether you are buying some bank at 70% of book value, or you are buying Amazon at some very high multiple of reported earnings.