Did Buffett Invest in a Madman?

If an up-and-coming Chinese company has its way, you might soon buy your computer and your car from the same manufacturer.

The last name you'd expect
Yesterday, the Wall Street Journal described how Microsoft, Intel (Nasdaq: INTC  ) , Google (Nasdaq: GOOG  ) , and Dell (Nasdaq: DELL  ) are responding to Apple's (Nasdaq: AAPL  ) opening salvo in the iPad wars. While listing the hordes threatening to tread on Apple's turf, the Journal calmly reported that over in China, a little company named BYD is gearing up to offer its own version of the tablet PC. The PC in question, says BYD, would retail for under $300, be powered by an Intel chip, and hit the market early next year.

The first time most of us heard of this tiny, future Chinese automotive superpower, I suspect, was when Warren Buffett -- at Charlie Munger's urging -- famously deployed Berkshire Hathaway's (NYSE: BRK-B  ) cash hoard to purchase 10% of BYD back in 2008. Initially an established maker of cell phone batteries, BYD had begun to leverage its strength there to build an electric car that could challenge the entire auto industry. The move marked BYD founder Wang Chuan-Fu as a visionary in Munger's opinion, and a man who merited Berkshire's multimillion-dollar bet.

Is Wang truly a genius? A visionary? Or just clinically insane? I mean, established computer makers like Dell and Hewlett-Packard will already have their hands full trying to catch up with Apple's iPad momentum in the tablet arena. What hope does a battery maker, or even an upstart automotive magnate, have?

A brave new world
Quite a lot, I suspect. As technology accelerates, cars -- which began as complex, specialized machines, powered by controlled explosions of petroleum products and maneuvered by a system of interlocking parts -- are evolving more into appliances powered by electricity, and maneuvered according to the instructions of their on-board computers. (This isn't necessarily always a good thing. For example, Toyota is discovering that its "sudden acceleration" problem would be a lot simpler to fix if it stemmed from a simple mechanical defect, rather than the software glitch that seems to be the culprit.)

As companies like BYD, Ford (NYSE: F  ) , GM, and Nissan develop functional, highway-rated electric cars, we'll probably see a lot more convergence across multiple industries that once seemed wildly separated. Google's pursuing its own tablet, investing in windfarms, and considering becoming a telecom. Apple wants to improve your television experience. Cisco aims to sell you a stereo system.

In that light, why wouldn't BYD manufacture any appliance with good growth potential -- whether it's a computer or a car? Given BYD's basis in batteries, a tablet PC actually makes a lot of sense, provided the company can make breakthroughs that increase mobile computers' battery life.

Everything's converging, and everything's changing. Investing in this new landscape will be one heck of a fun ride.

Fool contributor Rich Smith owns shares of Google. Check out his latest stock recommendations on Motley Fool CAPS.

Berkshire Hathaway, Intel, and Microsoft are Motley Fool Inside Value recommendations. Google is a Motley Fool Rule Breakers selection. Apple, Berkshire Hathaway, and Ford are Motley Fool Stock Advisor picks. The Fool has created a covered strangle position on Intel. Motley Fool Options has recommended buying calls on Intel. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Berkshire Hathaway. The Motley Fool has a disclosure policy.


Read/Post Comments (8) | Recommend This Article (17)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 02, 2010, at 6:27 PM, PSU69 wrote:

    My e-bikes have an operating system. Yes, a bicycle with a Lithium Ion battery. The battery for the bike is made in the same factory where Porsche makes their Lithium Ion battery that is a $2,500 option to save weight on the new Spyder. This Chinese innovation and manufacturing technology is being treated unfairly by the western press and the endless comic jokes about lead paint on toys. Pay attention and watch the electric vehicle revolution. www.hybelec.com

  • Report this Comment On June 02, 2010, at 7:42 PM, jerryguru69 wrote:

    A battery company trying to make a tablet PC makes perfect sense. A battery company trying to make a car is laughable.

  • Report this Comment On June 02, 2010, at 10:19 PM, summersnowflake wrote:

    I have a lot of respect for BYD because I know this company and many of their senior executives personally. However, after reading this article, I think success have gone to their heads. To be successful in tablet PCs require a completely different type of skills than batteries and cars.

  • Report this Comment On June 03, 2010, at 11:52 AM, lwbaum wrote:

    Regarding the comments above, "A battery company trying to make a car is laughable," I would have thought so, too. But BYD has become one of the biggest car makers in China in just a few years.

  • Report this Comment On June 03, 2010, at 12:01 PM, Glycomix wrote:

    What's next? Solar powered cars?

    Please pardon my skepticism, However, stranger things have happened. Would someone from MIT, UC-Berkley, Oxford or the Sorbonne care to speak on this?

  • Report this Comment On June 03, 2010, at 2:01 PM, TMFDitty wrote:

    @Glycomix: You think you are joking, but...

    http://www.nissanusa.com/leaf-electric-car/feature/pricing_i...

    :-)

    TMFDitty

  • Report this Comment On June 04, 2010, at 1:48 PM, aubsdes wrote:

    How does one invest in BYD? Is it publicly traded?

  • Report this Comment On June 04, 2010, at 7:42 PM, TrackGoldmanSach wrote:

    @aubsdes: It is publicly traded on the Pink Sheets as BYDDF. Brokers vary in how they deal with such stocks, though. Before buying, you might want to shoot yours an email or give 'em a call to find out the best (cheapest) way to buy shares.

    TMFDitty

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