Quora Answer: What Would Happen if Warren Edward Buffett Turned All His Assets into Cash?

The following is my answer to a Quora question: “What would happen if Warren Edward Buffett turned all his assets into cash?”

Assuming that he can get as close to the value of his holdings, his wealth would be substantially reduced.  Currently, as of latest SEC filings, Warren Edward Buffet personally owns, or directly controls, almost 35% of Class A shares, and more than 10% of Class B shares, of Berkshire Hathaway.

The thing about shares in publicly traded entities is that their value is tied to public sentiment and demand, in addition to the underlying value of the asset.  There is a demand for Berkshire Hathaway shares because people believe in Warren Buffett, and his image is intrinsically tied to the company.

Should Warren Buffett start to liquidate his holdings in Berkshire Hathaway, as the major shareholder and the founder, the public would get a hold of it, and it would make news.  Assuming he sells to a group of investors, they may get a good deal, but will have to placate the market that they can continue to return the same level of growth that Warren Buffett has managed, around 20% growth almost every year for the last 30 years.  The shares will drop in the short term.

If, however, Warren Buffett simply puts it on the market, this would create a panic contagion, and the value of the stock will crash. The wider market is more emotional than logical. Such is the stature of Berkshire Hathaway, the shares of their holdings will also be affected, from Coca-Cola, to GEICO, to Kraft-Heinz.  Billions in capitalisation will be wiped off the market.

Warren Buffett will still be a billionaire, but he will not be close to one of the richest in the world.  Having that amount in cash is both impractical and inefficient . Now, his wealth is subject to currency exposure on a massive scale.  This is assuming, of course, that there is enough cash in circulation for Buffet to keep, perhaps US$30 billion in cash.  That, in itself, is unlikely.