I actually agree that prices may be inflated/overhyped but the lack of specificity in Buffett's statement kind of irks me. He doesn't even define what a social network is (Facebook, Zynga, and Groupon are all remarkably different companies and not everyone would consider all of them to be social networks).
He's a brilliant investor but at the end of the day statements made without any indication of real analysis or research should be taken with a grain of salt...even from the Oracle of Omaha.
Buffett: "One of the things we try very hard to do at Berkshire, is to stay within what I call our circle of competence."[1] It would surprise me greatly if the social network sphere is within Buffett's circle of competence, and it would surprise me even more if he thought it was, and so I would interpret his comments about it accordingly.
Everything you say is accurate. At the same time it's worth listening. Buffet's got a great understanding of business models in general and knows a lot more about high tech than people give him credit for -- starting with a close friendship with Bill Gates. Yes, it was a very general statement and I would love to know more but take it for what it is: he's recognizing a couple patterns (most stocks badly overvalued, hard to pick winners) that he's seen; and it seems like nobody's convinced him yet that they're on the short list of winners [or he probably would have mentioned them]. So, while he's not necessarily right, it's still very valuable input from a strategy perspective.
He's a brilliant investor but at the end of the day statements made without any indication of real analysis or research should be taken with a grain of salt...even from the Oracle of Omaha.