Buffett Vs Iran: Betting On The Future Of Israel

What could a horse with a 38-1 shot of winning, and a small country with only 7 million people surrounded by enemies, have in common? The answer: They are both longshots and underdogs that have prevailed and flourished despite predictions to the contrary. For those not familiar, the horse Da’ Tara, won Saturday’s running of the Belmont Stakes, spoiling Big Brown’s attempt at winning horse racings triple crown. Big Brown was considered a lock to be the first horse to capture the elusive triple crown in 30 years. Instead, he was upstaged by a horse that no one had paid any attention to.

Likewise, the tiny country of Israel, has flourished despite predictions of destruction. In a great article in The New York Times, Thomas Friedman asks the following question: “Question: What do America’s premier investor, Warren Buffett, and Iran’s toxic president, Mahmoud Ahmadinejad, have in common? Answer: They’ve both made a bet about Israel’s future.”

He writes about how Iranian madman Ahmadinejad predicts that Israel will be wiped off the map. Conversely, he shows how Buffet has taken a long term approach to his investment in tool maker Iscar, which to remind you is his largest international investment ever. Friedman writes, “I asked Iscar’s chairman, Eitan Wertheimer, what was Buffett’s reaction when he found out that he had just paid $4 billion for an Israeli company and a few days later Hezbollah rockets were landing outside its parking lot.

Buffett just brushed it off with a wave, recalled Wertheimer: “He said, ‘I’m not interested in the next quarter. I’m interested in the next 20 years.’ ”

So apparently Buffet is of the opinion that Israel will still exist in a few decades, and he is willing to put his money where his mouth is.

Friedman goes on to talk about many of the statistics that IOI mentions regularly. The large amount of VC money that comes into Israel, the fact that the world’s largest companies have already or are planning to have R&D centers in Israel. All of the investion that has taken place in Israel as opposed to Iran which despite making boatloads of money from high oil prices has double digit unemployment and has invented nothing of global importance in the last 30 years.

He ends the article with his handicap of the competition: “Iran’s economic and military clout today is largely dependent on extracting oil from the ground. Israel’s economic and military power today is entirely dependent on extracting intelligence from its people. Israel’s economic power is endlessly renewable. Iran’s is a dwindling resource based on fossil fuels made from dead dinosaurs.

So who will be here in 20 years? I’m with Buffett: I’ll bet on the people who bet on their people — not the people who bet on dead dinosaurs.”

I’ll place $5 on Israel to win please.

Disclosure: Author’s fund has no position in any other stock mentioned as of 6/9/08.

Posted in Categories: Contributor, Economy, External Research, USA.

Subscribe by RSS Subscribe by Email