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Warren Buffett, Chariman, Berkshire Hathaway Investment Group | Terry Leadership Speaker Series

October 10, 2019


good morning It certainly got quiet quickly. That surprised me. can you hear me are you they’re back well for business school you know it
doesn’t get much better than this having the world’s greatest investor
come to our campus is quite bored office German berkshire hathaway holding
company’s investments range from backup insurance American Express coca-cola portions
jewelry stories whole town braska mr. Baumann has been described as
God value investors Michael Jordan of
investing game he began his first investment
partnership mid-nineteen fifties with 100 hours of his own money a few years later he began investing
struggling Massachusetts textile mill called berkshire hathaway through birth
anniversary started putting capital into other businesses seeking insurance which
generate cash streams for more investments which have done very well
indeed as well share prices about eighteen dollars in
1965 berkshire today traits around sixty nine thousand one hundred dollars a
share over time the company’s annualized
performances more than double that of the S&P 500 and berkshire today is worth
more than 100 billion dollars but mr. Buffett is known as much for his
unpretentious style at as far as lofty success he has become a champion of investors is
legendary for his aversion to corporate double speak is rare among CEOs and that
he cheerfully admits his mistakes three years ago he wrote in his annual
report that butcher would have done better if you’d simply gone to the
movies are great work very many years like that since nineteen sixty-five
believe me berkshire was proudly even the finally
absent from the dot , stereo the last few years and now that the bubble has
burst as we all know it’s warren buffett is having the last laugh his most recent letter to shareholders
he wrote quote we have embraced the 21st century by entering such cutting-edge
industries as brick carpet installation and paint try to control your excitement my buddy you know i am personally from reading
his letters it’s just a joy it’s it’s it’s a it’s a
business lesson in itself i encourage it whenever you get an opportunity to take
one side and and read it carefully you’ll learn a tremendous amount his
wisdom and insights or so value that some investors buy a share purchase
stock just so they can hear him his legendary annual meeting or as he calls
it Woodstock for capitalists he doesn’t
make speaking of periods as often and we are extremely fortunate to have him with
us today Earl entered of coca-cola and our
distinguished executive-in-residence had a lot to do with a thorough and we’re
deeply indebted to you for helping to raise us thank you very much our format today will be primarily
questions and answers mr. Buffett will make some brief remarks at the beginning
and then we’ll move into your face we will have a microphone setup over
here we would like you to come around we were videotaping we’d like it use a
microphone play so go ahead and begin to line up over there to ask your questions so would you please give a very warm
welcome to the Oracle of Omaha warrant yeah good night testing 1 million two million three okay I I came from Nebraska today and that
you’re probably all familiar with us mainly by our football team we have
those fellows with the the bingo white helmets with those red hands on I asked one of our starters the other
day what’s the end stand when he said knowledge ok we can make a ton of though I mean
that you know coaster Nebraska just because you’re a football player
with that they made your in agricultural economics and there’s a to question
final for all of the fires and first question is what are all mcdonald have
and they were giving that to one of our
potential Heisman Trophy winners the other day and he started this swept
finally right now is a farm pressure in the light of course you don’t want to
find a Heisman candidate uh so I said now he said you’re halfway home he said just one more question how do
you spell far I think I really starts to sweat and he
looks at the ceiling and he looks around five his face by itself he says he I all so much for that guy
sure it will be done right now I look I really want to talk about what
side your mind so we’re going to do a Q&A and the men and I I there’s a couple
questions i always get asked you know I always did always say well we should i
go to work for when i get out then I’ve got a very simple answer we we may
elaborate more on this as we go along but another the real thing to do is to
get going in first some institution or individual that you
admire I mean it’s crazy to take in between
jobs just because they look good on your resume or because you get a little
higher starting pay i was up at Harvard while back and very nice young guys pick
me up at the airport Harvard Business School attending and he
said look he said I went to undergrad here and then I worked for x and y and z
and now I’ve come here and he said I thought it would really round up my
resume perfectly if I want to work now for a big management consulting firm and
I said what is that what you want to do he said nobody said that’s the perfect
resume and I said well what are you going to start doing what you like and
he said well I’ll get to that someday and I said well you know I said your
plan sounds to me a lot like saving up sex for your old age it just doesn’t make a lot of sex head I told that same girl I said you’re
not going to work for every admire the most and I said you can’t get a bad
result of jump out of bed in the morning and you’ll be having fun being called me
up a couple weeks later said what you tell us gets he said they’re all
becoming self-employed so you’ve got you’ve got a temper that advice a little
bit ah play one game a little bit with me
for just a minute and then roll up that will get to your questions and I’d like
for the moment to have you a lot that heavy pretend i made you a great offer
and I’ve told you that you could pick any one of your classmates in you now
know each other probably pretty well after being here
for a while you can thank you have 24 hours to think it over and you can pick
any one of your classmates and you get ten percent of their earnings for the
rest of their lives and I ask you what goes through your mind in determining
which one of those who would pick you can pick the one with the richest father
that doesn’t count on me you gotta gotta do this on merit but you probably
wouldn’t pick the person against the highest grades in the class I mean that at all we’re getting is
grades in the class but that that’s not that isn’t going to be the quality that
but that sets apart a big winner from the rest of the pack think about who we would pick and why
and I think you’ll find when you get through you’ll pick some individual you’ve all
got the ability you wouldn’t be here otherwise you’ve all got the energy I mean you’ve got it out here did the
initiative is here the intelligence is here throughout the
class but some of your going to be bigger winners and others had it gets
down to a bunch of qualities that interestingly enough you are our self
made I mean it’s not how tall you are not
willing to kick a football 60 yards is not whether you could run the
hundred-yard dash ten seconds it’s that whether the
best-looking person in the room it’s a whole bunch of qualities that
really come out of Ben Franklin or the Boy Scout colder so whatever it may be I
mean it’sit’s its integrity is honesty it’s its generosity it’s it’s being
willing to do more than your share its it’s just all those qualities that are
self selected and then if you look on the other side of the ledger because
there’s always a catch to these you know free gifts in June a joke so you’ll also
have to this is the fun part you also have to sell short one of your
classmates and pay ten percent of what they do so what do you think is going to do the
worst in the class is a great more fun and think about it again and again it
wasn’t the plan but it isn’t the person with the lowest grades or anything of
the sort it’s the person who just doesn’t shape
up in the character department when we look for three things when we hire
people we look for intelligence we look friend for initiative or energy and we
look for integrity and if they don’t have the ladder the first tool kill you because if
you’re going to get somebody without integrity you want to be lazy and down I mean you don’t want to get a lot of
smart and energetic self is that third quality and but everything about that
quality is your choice you know you you can’t change the way
you are wired much but you can change a lot of what you do with that wiring and
it’s the habits that you generate now on those qualities or those negative
qualities i mean the person the person who always you know claimed credit for
things they didn’t do that always cuts corners that the can’t count on getting
it in the end those those are habit patterns and the
time to form the right habits is one year when you’re your age I mean it duh it doesn’t do me much good to get golf
lessons now if I got the golf lessons when I was your age I might be a decent
offer but but it someone once said the chains of habit or
two are too light to be felt until they’re too heavy to be broken and i see
that all the time i see people with have a patterns that her self destructive when they’re 50 or
60 and they think they really can’t change their imprisoned by that but
you’re not in prison by anything so when you write down the qualities of that
person that you’d like to buy to ten percent of look at that list and ask
yourself is there anything on that list i couldn’t do the answers there are there won’t be and when you
look at the person yourself short and you look at those qualities that you
don’t like if you see any of those in yourself he could tell them whatever maybe
selfishness you can get rid of that I mean that is not ordained and if you
follow that you and Ben Franklin did this in my old boss Ben Graham did this
of early ages in their young teens they just been grand looked around and he
said who I admire you know and you want to be admired himself and he said you
know why do i buy these other people and he said if I admire them for these
reasons maybe other people will admire me if I behave in a similar manner any
and he decided what kind of a person who wanted to be and if you follow that at
the end you’ll be the person you love my ten percent of I mean that’s the goal in
the end and it’s it’s something that’s achievable by by everybody in this room
so that’s the end of the sermon knowledge let’s talk about what’s on
your mind and the you’re going to ask anything the only thing I won’t tell you is what
we’re buying or selling her about let’s say yeah i don’t i don’t even tell
myself that I mean I i write it down that I like the coca-cola formula you
know there’s only two people can get into the trust Department and find out
what they are and I don’t know the two are so it at its we don’t talk about
what we’re buying or selling but anything else is fair game personal
business anything you’d like to talk about and
actually the top of the questions are the more interesting of this for me so
don’t don’t spare my feelings i may just thrown at my head add that and with that let’s I guess we
got a microphone is this the only microphone is there one on feeling like
ok here is my ceiling I’m gonna do microphone to stand in line
them and i’ll be Regis Philbin and you can yes i have an old-fashioned belief that
i can only should expect to make money and things that I understand when I say
understand I don’t understand it you know what the product does or
anything like that I didn’t understand what the economics
of the business are likely to look at look like 10 years in our 20 years and
now i know in general what the economics of a Wrigley chewing gum will look like
10 years now the internet is going to change the way
people should come it isn’t going to change which come they
true now if you own the chewing gum market in a big way and you’ve got
double mint experiment and juicy fruit those brands will be there 10 years
analysis I can’t pinpoint exactly what the
numbers are gonna look like I’m really but i’m not going to be way off if I try
to look forward on something like that that evaluating that company is within
when i call my circle of competence I understand what they do i understand the
economics of and I understand the competitive aspects of the business there can be all kinds of companies that
have wonderful futures but i don’t know which ones they are and I given talks in the past where I
carry with me a a 70-page tightly printed list and it shows two thousand
auto companies now for the start of the 20th century you had seen what the auto
was going to do to this country the impact it would have on the lives and
then your children and grandchildren and so on that what it just it transformed
the American landscape but of those two thousand companies you know three
basically survive and they haven’t done that well I had many times so how do you pick three winners out of
2,000 I mean it’s not so easy to do it’s easy when you look back but it’s not so
easy looking forward so you could have been dead right on on the fact that the
auto industry fact he probably could have predicted how big impact it would
have but you wouldn’t have if you want companies across the board you wouldn’t
have made any money because the economic characteristics of that business we’re
not easy to define i said i’d always said the easier thing to do is figure
out who loses and what you really should have done in 1900 five or so when you
saw what was going to happen with the auto is you should have gone short
horses there were 20 million horses and 1900 there’s about four million horses
now so it’s easy to figure out the losers get the losers the horse but the
winner was the auto overall but 2,000 companies just about fail with you
merged out and so on there were three companies auto
companies in the Dow Industrials in the nineteen twenties and thirties
Studebaker Nash Combinator and Hudson motor those names are all familiar to me
and maybe some more familiar to you but they’re not making any cars you know
they didn’t make money i had at one time they were in the dowel 30 they were the aristocrats of American
business and they got creamed so figuring out the economic
characteristics about the winners in a wonderful business and it is not easy in
north carolina in a horrible and Roberto golf I guess or we’ll talk often we’re
watching i have been Wilbur but if you could have seen the future of
the airline business from that point forward and how that would transform
things you know it would blow you away that’s excited people incidentally ever
since but if they’re going to capitalist the
kitty hawk he should have shot horrible down I mean it because it’s nothing but cost
investors money there were 400 airplane companies in the nineteen twenties and
thirties along there was an all the hall there was a Nebraska we were the silicon
valley of America apparently very graft and they all disappeared in a terrible
business at the end of nineteen ninety-one if you added up the aggregate
earnings from all airline companies with billions board in since Wilbur and
Orville were down there they came to less than zero number of
passengers went up every year the importance of the industry was
dramatically increased decade by decade and nobody made any money it so figuring out the economic
consequences TV I think there’s I don’t know 20 25
million sensei years old the United States I don’t think is one of them made in the
United States anymore I mean it’s a TV set manufacturer what a wonderful
business site everybody and nobody a TV in nineteen
fifty are there about 45 to 50 everybody has multiple sets now nobody
is in the United States and made any real money making the sense that they’re
all out of business in the magnet boxes the rca’s all of those companies radio
was the equivalent of 20 over 500 companies making radios in nineteen
twenties again I don’t think there’s a us radio manufacturer at the present
time but coca-cola you know I was eighteen eighty for
jacob’s pharmacy or whatever and fellow comes up with something a lot of cock
copiers over the years but now you’ve got a company that is selling roughly
1.1 billion a tout servings of its product not all cloaks writing some
other daily throughout the world honoured 17 years later so understanding
the economic characteristics of a business is different than predicting
the fact that an interest is going to do wonderfully so I look at
the internet businesses are looking at tech mrs. i say this is a marvelous
thing I love to play around on the computer and it now i order my books
from amazon and all kinds of things but I don’t know who’s going to win unless I
know who’s going to win I’m not interested in the best thing
i’ll just play around on the computer at defining your circle of competence is
the most important aspect of investing it’s not how important how large your
circle is you don’t have to be an expert on everything but knowing where the
perimeter of that circle of what you know what you don’t know is and staying
inside of it is all important Tom Watson senior started IBM said in
his book he said it I’m no genius said but I’m smart in
spots I stay around those spots and you know
that is the key so if I understand a few things and I
stick in that arena I’ll do okay and if I don’t understand
something but I got all excited about it because my neighbors are talking about
stocks are going up everything they start fooling around someplace else eventually I’ll get cream and I should
so now let’s go over here a little bit I got two short questions one is how do
you find intrinsic value in a company while intrinsic value is what is the
number that if you were all knowing about the future and could predict all
the cash that a bit of business would give you between now and judgement day discounted at the proper discount rate
that number is what the intrinsic value of businesses in other words the only
reason for making investment laying out money now is to get more money later on
right that’s that’s what investing is all about now when you look at the stock when you
look at the bottom so Miss United States government is very easy tom what you’re
going to get back it says it right on the bond it says
when you get the interest payments so when you get the principal so it’s very easy to figure out the
value of a body could change tomorrow of interest rates change but you are the
cash flows are printed on the bond the cash flows are printed on a stock
certificate that’s the job of the animals is to print out change that stock
certificate which represents an interest in the business and change that into a
bond and say this is what I think it’s going to play out in the future when we
buy you know some machine for Shaw it to make carpet that’s what we’re thinking about
obviously and you know you all learned that in business school but it’s the
same thing for a big business it if you by coca-cola today the company is
selling for about a hundred and ten to fifteen billion dollars in the market
the question is if you had a hundred and ten or fifteen billion you would be
listening to me but I didn’t listen to you it’s nothing but the question is
would you lay it out today to get what the coca-cola company is going to
deliver to you over the next two or three hundred years discount rate doesn’t make much
difference after as you get further out but and that is a question how much cash
they are going to give you it isn’t a question of you know that is the
question of how many analysts are going to recommend that or what the volume of
the stock is or what the chart looks like running it’s a question how much cash is going
to give you that you only read the true with if you’re buying a farm – if you’re buying an apartment house
any financial asset for oil in the ground you’re laying out Cashin how to get your
cash back later on and the question is how much you’re going to get one here to
get it and how sure are you and when i calculate intrinsic value of
a business when we buy businesses and whether we’re buying all of a business
or a little piece of the business i always think we’re buying the whole
business because that’s my approach to it I look at it and say what what will come
out of this business and when and what you really like of course of them to be
able to use the money they earn and are higher returns on it as you go along I
mean Berkshires never distributed anything to shareholders but its ability
to distribute goes up as the value of the businesses we own increases we can
compound it internally but the real question berkshire selling for will say a hundred
and five or so billion now uh what can we distribute from that hundred and if
you’re going to buy the whole company 405 million now can we distribute enough
cash to you soon enough to make a sensible at present interest rates to lay out
that cash now and that’s that’s what he gets out doing at the end if you can’t
answer that question you can’t buy the stock you know you can
gamble in the stock if you want to your neighbors can buy it but if you don’t
answer that question I can’t answer that for for internet companies for example
that a lot of companies that all kinds of me so I can ask for but I just stay
away from those number two so you get formula is involved in
finding intrinsic values and circumference and you got a mathematical
this is that just got a present value of future cash show segments for question
is why haven’t you written down your set of formulas or your strategies in
written form so you can share with everyone else well i think i actually have written
about that oh and if you read the annual reports over the years back the most
recent and report I i use what I’ve just been talking to
use the illustration of Esau because here he stopped was in 600 BC smart man
was smart enough to know it was 600 BC though I mean it will take a little
foresight that but he stopped you know it between tortoises and hair is always
other things he found time to write about you know Bert and he said a bird
in the hand is worth two in the bush now there isn’t quite complete because
the question is how sure are you that there are two in the bush and how long you have to wait to get
them out now they probably knew that but he just
didn’t have time because he had all these other problems to write and had to
get on with it so but he was halfway there and 600 BC that’s all there is to
investing is how many birds in the bush what are you going to get them out and
how sure are you now if interest rates are fifteen
percent roughly you’ve got to get two birds out of the
bush and five years equal the bird in the hand but if interest rates are three
percent and you can get two birds out in 20 years it still makes sense to give up
the bird in the hand because it’s all gets back to discounting against an
interest on interest rate that Hamish often you don’t know you know not only
how many birds in the bush put in the case the Internet companies there
weren’t any birds in the bush but that but they still take the bird that you
give them from the hand that but it’s but I i actually have written about this
sort of thing and stealing have away from the top of the rotor some 2,600
years ago but I’ve been behind on my reading yeah yeah good morning huh I know you’re
vain for your success but i was curious is there any particular moments in your
life that or mistakes or failures that you’ve made that were particularly
memorable what you may have learned from them and
if you have any particular advice for the students here in dealing with the
with the discouraging circle yeah I well I may have made a lot of mistakes
biggest mistake i exalt while and not the biggest not necessarily the biggest
but the by Berkshire Hathaway itself was a mistake because virtually lousy
textile business and I brought a very cheap I’ve been taught by Ben Graham to buy
things on a quantitative basis look around for things that are cheap and
that i was taught that same 1949-50 made a big impression on me so I went around
looking for what i call you cigar bunch of stocks and the cigar butt approach to
buying stocks is that you walk down the street and you’re looking around for
cigar butts and you find this honestly that’s terrible-looking soggy
ugly-looking cigar one pot left in it but you pick it up and you get your one
puff disgusting is right away but it’s free I mean it’s cheap and then you look
around for another soggy you know one puff cigarettes well that’s
what I did for years it’s a mistake ah although we make money
doing it but you can’t make it with big money so much easier just to by
wonderful businesses so now i would rather buy a wonderful business at a
fair price that a fair business with a wonderful price but in those days I was
buying cheap stocks and berkshire was selling below its working capital for
sure you have plans for nothing at the machinery for nothing you get the inventory and receivables of
the discount is cheap so i bought it and twenty years later I was still running a
lousy business and that money did not compound you really want to be a
wonderful business because at that time is the friend of the wonderful business
you keep compounding it keeps doing more business and you keep making more money
time is the enemy of the lousy business I could have sold berkshire perhaps
liquidated it and made a quick little profit you know one puff but staying with those
kind of businesses is this is a big mistake so you might say I learned something out
of that mistake and I would have been way better off taking what i did with
Berkshires I kept buying but better businesses I started insurance business sees candy
the Buffalo and all kinds of things i would have been way better doing that
with a with a brand-new little entity that I’d set up rather than using
berkshire the platform now I’ve had a lot of fun out of it I mean everything in life seems to turn
out for the better so I I don’t have any complaints about that but it was a dumb
thing to do I went in the US air i bought a
preferred stock in 1989 ah as soon as my check cleared the
company went into the red never got out I mean it was it that really done I mean a dead I’ve got an 800 number i
call now whenever I think about buying an airline stock i call them up any our
that fortunately i call it three in the morning and I just dial it myself my
name is Warren I’m a narrow holic and I’m thinking about buying this thing and
then they talked me down many things happened thanks takes hours sometimes but it’s
worth it flipping if you ever think about that
era of buying an airline stock call me and i’ll give you the 800 number because
I don’t know you don’t want to do it but we got lucky
in terms of how we eventually came out on it but it was a dumb dumb decision all mine and I’ve done I biggest biggest step in terms of
events that in terms of opportunity cause eventually cost I brought half interest in a Sinclair
filling station was about 20 with a guy was in the national guard with out of my
ten thousand dollars then I put two thousand dollars in and I lost it all so that was twenty percent and that
means that the opportunity cost is now six billion dollars of that of that
filling station which is a big price to pay for you know getting the white with
your windows in the fields Hannah windshields and things like that so actually I like it when berkshire goes
down does it reduce the cost of that mistake on an opportunity to us but the
biggest mistakes we made by far I’ve made not we’ve made the biggest mistakes
I’ve made by far our mistakes of omission and not coalition me it’s the
things I knew enough to do they were within my circle of competence and I was
sucking my thumb and that is really those are the ones that her they don’t
show up any place I probably cost berkshire at least five billion dollars
for example by sucking my thumb twenty years ago are close to one Fannie
Mae was was having some troubles and forget about the whole company for
practically nothing and I don’t worry about that if it’s microsoft because I
don’t know what was microsoft isn’t in my circle of compliments that’s why I I don’t have any reason to
think I’m entitled to make money out of Microsoft or out of cocoa beans or
whatever but I didn’t know enough to understand Fannie Mae and I bullet and
that never shows up under conventional county but the call i know the cost of
it I know I know you know that I passed it up and those are the big big mistakes and I’ve had plenty of them at and you
unless I tell you about them in the annual report and I resist the
temptation sometimes as I tell you about him in the annual report you’re not going to know it because it
doesn’t show up under conventional county but automation is way bigger than
accomplished there is a big opportunities in life have to be seized
out we don’t do very many things but when we get the chance to do something
that’s right a big we’ve got to do it and even to do it on
a small scale is just as big a mistake almost is not doing it at all I mean
you’ve really gotta you gotta grab them when they come and that because they are
not going to get 500 great opportunities you would be better off if when you got
out of school here you gotta punch card with 20 punches on
it and every big financial every financial decision you made you used up
a punch you get very rich because you think through very hard each one of you want to a cocktail party
and somebody talk about a company didn’t even understand what they did he
couldn’t pronounce the name but they made some money last week and another
one like it you wouldn’t buy it if you only had 24
inches on that card there’s a temptation to dabble if particularly during all markets in
socks is so easy you know easier now than ever because you can do it online you know just you click it then and
maybe goes up to . get excited about that you buy another one the next day
and so on you can’t make any money over time doing
that but if you have a punch card with only 20 punches we’re going to get another one of us to
your life you would think a long time before every investment decision and you
would make good ones and you make big ones and you probably wouldn’t even use
all 20 punches at the in your lifetime but you would need to yeah mr. perfect morning and in your
comments about making mistakes and errors like that you talk a little about
your self discipline when you’re in a position and you you feel like it’s no
longer good in what criteria to use to you just finally abandoned it yeah when I started out the South
situation has changed over the years because when i started out and why ideas
the money and i would go through movies manual i went through it page by page
and then I went through it again by page and i found stocks in there that
i could understand that we’re selling a bike to time journeys even one time
servings well when you don’t have 10,000 bucks
that i can get a little frustrating and and if you don’t like to borrow money
which I never like to borrow money so I was always coming up with more ideas
than i had money so i had to sell whatever I likes least to buy something
new that just was compelling to me and it for a long time i was in that mode
and now our problems we have more money than ideas so where when if you look at our annual report which
is on the internet under in our home base furniture out of the way . com you’ll see something in the back call
the economic principles of Berkshire and you will see which I believe in setting
out for my my partner’s they are my partner’s I don’t look at my share of my
partners and I got my partners for life so I want to tell them how I think and
if they don’t just agree with the way I think that’s fine but I don’t want them
that I don’t be disappointed in me so ah i lay out there and I say in terms
of are wholly owned businesses we’re not going to sell no matter how
much anybody offers this for me I mean if somebody offers three times what
something is worth that sees candy the buffalo news for showers whatever maybe
we’re not gonna sell it I may be wrong and having that approach
i know i’m not wrong with my own daughter percent of aperture because
that’s the way I want to live my life I’ve got all the money could possibly
need you know just amounts to which a change
in the newspaper story on my obituary and the amount of money the foundation
has and the break off relationships with people i like and people that have
joined me because they think it’s a permanent home to do that simply because
somebody waits a big check at me would be like something for my children
because up to a big shot I won’t do that and I want to tell my
partner’s I won’t do it so that they’re not disappointed me more and more with
certain stocks we’ve got that approach now if we were
chronically short of funds and all kinds of opportunities coming we might have a
somewhat different approach but our inclination is not the cell things
unless we get really discouraged perhaps with
the management or we think the economic characteristics of the business change
in a big way I mean and that happens so what I’m
going to sell simply because it looks too high yep in all likelihood that mean that I
can’t make that a hundred percent but it’s it’s that’s that’s that’s the principle under
which we operate we’re generating right now five billion of cashier at least so it’s
a hundred million bucks every week and you know just met we’ve been talking about half an hour
and i’m not a damn thing so since you know I think the real question is how do
you put it out intelligent by the ad and if we were selling things would be just
that much more so they make their money there may come a time when that would
change but what we want to and I have partners Cheryl were partners who would say if
you can get three times what sees candies worth why don’t you sell it and
that’s why I want to be sure before they come in they know how I think on that I
mean they’re they’re entitled to know that that you really want to thank for
meta you know if you’re going to get married and you want to mary’s that’s
going to last initially the happiest married you know
or one that that Martha Stewart will talk about anything that you want a
marriage is gonna last what quality you look for in a spouse
one quality good for brains you look for humor you look for
character to look for beauty now you look for low expectations that that is the marriage is gonna watch them both have low expectations i made it and
I want my partners to be on the low side on expectations coming in because i want
the marriage classes the financial marriage when I join me at virtual and I
don’t want him to think i’m going to do things that I’m i’m not going to do so
that’s that’s our guiding principle the device is all free in your medical
advice everything next time good morning it mr. Babbitt I
have a question regarding evaluation of the sounds of investment in recent years
appears that the use of tax sheltering in preparation is increasing and such
you know reputable companies like UPS and others involved in a cold part of
silver shoulders with IRS and as we know most of these transactions are very
artificial but yet there is the profit there from the investor perspective do
you think it’s beneficial for investor that the company that they invest a
involved no see charters and if so do you think would be
helpful is it built in such that disclosed in statements and immediately no statement not sure I got that a
hundred percent George to you that i will repeat that it and they are all the
Giants shot at it they if you think that the involvement
of a corporation that you invest or anybody for that matter invest in tax
shelter which is by some definition of that attack showers right I’ve never used one yeah i know i wanna
go out to it saying so I’m asking if you know that the corporation is involved in
such activity that is beneficial in charts pattern would you would think
that that’s helpful for investments what does that mean there there’s but
they’re perfectly legal ways to show their taxes i mean we we did and still
do but we were the earliest ones to go in for low income tax housing credits
that guy met with President first president Bush about about that one and
that benefits are still mild degree it it’s not a big element of virtue of its
a penis and in terms of pictures overall value but it it is a congressionally
ordained tax benefit I wouldn’t call exactly a shelter it’s a
tax benefit that Congress has decided they’re willing to offer business those and they that because they think
it’s the best way to to generate low-income housing so we participate in
something but that it’s not a it’s not a big factor and and what we do and what I
want there’s no there’s nothing wrong with that then if you get into tax
evasion I mean that’s a whole different game that point they’ll go to jail no but certain businesses some insurance
companies are incorporated in Bermuda I that and add you can save a lot of
taxes you have to meet certain other tests which we wouldn’t want to meet but if we were willing to meet those
other tests there’s nothing illegal or immoral about
us moving to Bermuda we’re not going to do it and what if if the restrictions
were done it that the tax code is the rule book and you follow the rule but I
think some of the things people do in terms of bending that rule book get very
close to frog and sometimes cross the line into fraud and when they do I think
that would be be prosecuted but that’s that’s another game and inside there has
been more pushing on that i would say in the last five years and certainly was my
experience earlier and there are more there’s up I think now is diminished the
last year too but a couple years ago there was very aggressive marketing by
some of the auditing firms and of these even with sure percentage shares of the gain to be paid
to the others i think that those things got fairly dubious and pretty when they
shopped for legal opinions and also that if you got caught doing these things you
can say well I was rely on this legal opinion and therefore I shouldn’t go to
jail but just pay the back taxes so I i don’t know how many anything were
associated with it has done that but I’ve obviously if they push too far we
don’t want to be there yep i was curious with the large number
of people you have now have with the tremendous amounts of wealth what do you
think of the current state of philanthropy well I’ll be out this week and then actually
10 : out flying on to Seattle and then and talking to the United Way group out
there they see how well you hide away raises more per capita I believe in it
either way in the country and and bill gates will be there were talking jointly
his mother was very active and the united way but bill is going to give
away over a billion dollars a year and a lot more later on but right now a
billion and it’s very interesting and he’s very rational about it and he’s
very informed in fact he got somebody I think is primary advisor in the medical
field as fellows with the CDC in Vienna and bill reads 15 books so a month on
this i mean he is thinking just absorbing I i wouldn’t be able to get it
that fast but he just says with a billion dollars he wants to save as many
lives for years you can so how did he get that his objective
he’s it’s just as much a metric of his of his foundation as some other metric
return on capital might be for a business and he says I’m going to spend
a billion dollars or how many how many lives can be saved for that so he’s
gotten very heavily in the vaccines and and AIDS in Africa number of things that
it’s very rational i personally I think I’ve all my 99 . something percent of my
net worth will go to a foundation after the ladder of my wife and i and i am
it’s all going to go to foundation far as i’m concerned i got from society’s
gonna go to society I’ve written a letter to my trustees
I’ve got very few trustees to get a whole bunch of trustees in my view it
they just homogenized themselves down to sort of the lowest common denominator
because he had 30 people in a room and prestigious people but they’re also all
have their particular all modern allow other particular Hospital and it will
become a big trade-off game you know that they like Congress so I have very few people and I don’t give
them anything specific because I tell them their judgment above ground will be
better than my instructions from six feet underground son that I don’t like
to think that but it’s true so I tell him I look the society are the
ones that don’t have an actual funding constituents see you love or are just
damned intractable and very difficult to solve so I don’t I am NOT going to haunt them
at all if they spend big money on some terribly
important problem and they fail because they’re taking on tough problems when I
by businesses i’m buying easy businesses the reason that big problems of society
or big problems is that their damn tough to solve so they’re they’re swinging at
bad pitches I’m swinging it easy pictures in
business but they’re swinging it they have to swing at bad pitches but i tell
him i wanted to try and do it and if they fail it doesn’t bother me at all
and I tell them if they give a million bucks here and a million bucks there in
a million bucks there they’re not going to sleep because I’m
gonna be haunting him I’m going to come back every night you know I did not want
the eyedropper approach used to flying through p but I want them to use their judgment to
look at important problems that do not have a natural funding constituency you know if the government’s going to
find it fine you know I mean they should be funding important problems but we
don’t need to do it the the ball applied to be in my I have
in my opinion is the fun things that don’t have the natural constituents and
that’s what bills doing there isn’t the neck there are a bunch of people around
that you can make an emotional appeal to to make vaccines available to millions
and millions of kids around the world it just doesn’t target anybody’s heart
strange you can make buildings after mean it just isn’t the sort of thing
that you can raise money for on an emotional basis and there’s nothing
wrong with raising money on our emotional basis but that is a problem
will get solved by a funny constituent it was responding to that but bill is
responding to what it is mind is that is the important thing
which is saving lives and he doesn’t care whether it gets his name on a
building or whether anything happens or what everybody knows about it and he
gets published they just because of the scale is on but it he doesn’t care about that i can promise
you that so that’s my philosophy is that I got this money not because i’m a
superior human being not because I’ve done more for society and other people I was wired the right way to be dropped
into the United States at this particular time I mean it’s a huge capitalistic society
and I’m wired no credit to me but it born that way so
that I’m better an asset allocation than other people to some degree just like other people are better at all
kinds of other things and I was with two teachers out of the sun valley they’re doing more for society that I am
and they don’t this market system does nothing for them
market system does all kinds of things for me kate says if I have been born five
thousand years ago you know I have been some animals lunch you know because i can’t run very fast climb trees I mean you know what those
state and I could I could tell that animal is chasing me in a way that we
see how I can allocate assets you know it wouldn’t make any difference so here I am yeah i’m bored out again I
the just very very lucky and at the odds when i was born in nineteen thirty the
odds with 50 to 1 against baby born the United States that’s a terrible set onto the face and
then I was rock down here you know and if I then drop down and / or someplace
ER or China I mean I wouldn’t have a chance so
society is what does it for you and and it should go back and might be with you
go back to society if you’ve been lucky enough to be dropped into a society
where your particular wiring pays off big now it that that’s just luck and and you
know there’s nothing wrong with being like I don’t feel guilty about anything
else but i also don’t feel that I feel like I have a lot of fun doing what I do
but I feel the money should go back into society and it should go back as
intelligently as it can and best way to do it intelligently is to have high
grade and intelligent people administering it at the time and you
don’t know the problems that are going to be out there 10 years from now or 20
years from now or 30 years from now but i do know if I’ve got a small number of
high-grade smart people and high grade is more applied out Oh of if you gave me 20 extra points of
IQ but but cheated a little on the high grade I wouldn’t take it because that
they got to be they got to be there’s somebody chances that to do things in a
petty way or you know do try to make people get supported in their own minds
to their own interests rather than the interest of the institution so I really
want super high-grade people doing it and I’ve got them and I think the money
might do a lot of good it may do no good but it will be operating in fields or if
it doesn’t good that good probably would have been done otherwise yep I’m just wondering there’s a lot of
differences between the recent boom and bust the stock market and one in the
nineteen twenties but there’s also a lot of similarities and the simulators are
allowing people to draw the conclusion that stock prices will be trapped
depressed for some time to come what where do you disagree agree with
that we bought in the the whole century is quite interesting if you take the
20th century it was unbelievable century for the United States the gdp per capita
and that’s the way to think of this per capita sometimes they talk about our gdp
vs Europe’s but if their populations the same every year an artist goes up one
percent you’ve gotta you know in the end of the goods you gotta i have a divisor
as well as the numerator and and so gdp per capita in the 20th century in the
United States one of six hundred and ten percent actually qualitatively went too
far more than that because you can’t really measure you know certain things
and medicine or whatever it may be it and the improvements but just out of
quantitative basis it went up every single decade including
the decade of the thirties so here you have a hundred years when
basically the US citizen really was getting was improving their lot decade
by decade by decade the thirties it was a 13-percent that’s decade was
World War 2 the night the forties 36-percent the worst decade was the
first world war so you get sometimes the analogy I can get in trouble and
analogies but any of that it was it was a huge . interestingly enough there were
six big periods in there for the stock market in both directions there were three big bull market from
1910 1920 one the Dow want from 66 to 70 one less than
a 10-percent move in 20 years less than half a percent here you got
evidence to put a half of it didn’t move from 21 to 29 as you point out at what it went from 71 to a high of 381 in
September of 1929 while five hundred percent well obviously the country well being of
the country thing about five hundred percent during that period and the
well-being of the company in the country about the whole lot more than ten
percent during that first 21 years so he had this very uneven development from 19
from september’s 1929 until the end of 1948 the download from 381 to about a
hundred and eighty was cut in half and that was eighteen long years and yet the
per capita gdp was moving right up during this whole period to the economy
is doing fine for 38 265 the doll one again from about a hundred eighty up to
close to a thousand again 541 which was far outstripping from 65 to 80 1 the
doll went down literally well again per capita to be and then
we’ve had this last period where it’s going to prolifically if you take the
whole hundred years it went up a hundred and eighty-four one every thousand
dollars became a hundred eighty thousand but forty three and a quarter you’re
forty three and three-quarters years with those three big huge bull markets
and fifty six and a quarter years with periods of stagnation all in an economy
that was doing fine you know year after year after your
fifty six and a quarter years net the dow was down a couple other
points during that period and the other forty three and three-quarters years
made up the rest of this move from 66 to 11,000 someone to dallas self-excited
yourself how could it be that you can have a country was doing better and
better and better and better citizens we’re living every every generation was
living better than the one that preceded it but you have these huge changes big
gains a few times long period of stagnation 20 years I mean that’s a long
time to do nothing the answer is that investors behave in
very human ways which is they get very excited during bull markets and they
look in the rearview mirror and they say I made money last year i’m going to make more money this year
so this time I’ll borrow an hour or the neighbor says you know I wasn’t it last
year when that neighbor was dumber than I am a lot of money so i’m going to go
in this year’s they’re always looking at the river where and when they look in the rearview
mirror and they see a lot of money having been made in the last few years
they plow and they just push and push and push on prices and when they look in
the rearview mirror and I see no money having been made they just say this is a lousy place to
be so they don’t care what’s going on in the underlying business and it’s it’s
astounding but that’s that makes for a huge opportunity just huge opportunity I mean I have lived through roughly half
in investing sense about half that . and I’ve had that long period of stagnation
from 48 I mean from 65 to 80 – 17 years I wrote an article for forbes in 1979 I
just how can this be pension funds in the nineteen seventy
put a hundred and some percent of their new money in stock because they were
wild about stocks then they got a lot cheaper and they put our record low in
nine percent of that nobody in the 1970s when stocks for way cheaper people
behave very peculiarly and and in terms of the reactions because they they’re
human beings and they get excited when others get excited they get greedy when
others get greedy they get fearful one other get fearful and they’ll continue
to do so and you will see you know if you will see things you won’t believe in
your lifetime and securities markets and the country will do very well over time
but you will see these huge waves and then and if you can stay objective
throughout that you can detach yourself temperamentally from the crowd you get very rich and you won’t have to
be very bright I mean it I’m sure you are but but that one you know it just it doesn’t
take brains it takes temperament it takes the ability to sit there and
look at something when i started out in nineteen fifty i would go through and
find things at two times earnings and they were perfectly decent businesses
and people want two jobs at those companies and everybody knew they were
going to be around anyone behind with two times earnings and that’s when
interest rates for two and a half percent you know I went to the start
installing security lights 21 and I Kansas City Life Insurance Company have
to be a fairly prominent company in omaha and the policies they sold google
if you’re buying life in church from them had a building and assumption of
two percent interest the stock of kansas city life was selling it less than three times earnings you’re
getting 35% if you bought the stock no question about the sound of the
company I went to the local agent as I figure it out I’ll give yourself him a
few shares of stock I mean think I understand he’s got his whole life
invested in this company with the local agent we’ve been with them for 20 years and as
name is mo size of mr. moose and you know you’re selling these policies with
2% even have a few members of your own family and you can buy into this company
whose paycheck youtube and on every month that you know and whose future you
of your your beneficiaries of his life policy depend on and who you’re selling
them you know a two percent investment on and you get thirty five percent of
your money you know and i’m stuck trying to be good and then I couldn’t I
consultant and I’m i will allow themselves when I mean the world you
have to start with that but but it just blew me away it blew me away I thought sometimes I
used to wonder if I his nuts you know that that but those things the same
thing happened I mean 1964 the dow closed the dates 864 and then a 1981 17 years later later
it closed at age 65 and move one . in 17 years now it’s not a big move and that
you can’t believe the how discouraged people were by that by the during that
period but you know people are looking better so things can go on a long time that don’t make sense and but they don’t
come to an end i mean the internet thing I mean you had these companies selling
for many billions of dollars that had nope really frankly no prospects are making
any money that that’s a that’s a bubble butt hurt sign one time said anything
that can’t go on forever will end now that’s a pretty good but think about that and particularly
think about it next time you’re trying to do something just because the stock’s
gone ball a lot you know many of your neighbors make money or something that
you’ve got to be she’s had to sit and think objectively
and think about what i buy this whole business it’s an Internet companies got a hundred
million shares outstanding a hundred that’s ten billion dollars is it worth
ten billion dollars it’s worth ten billion dollars it’s got
to be able to give you you know seven or eight hundred million next year and if
it doesn’t give you seven or eight hundred million next year he has a good
move maybe ten percent more than that the
year after and continue to him there are a lot of businesses can do
that and people just go crazy and of course it’s fun I mean it’s you know it’s like that sign
they put in doctors offices and says avoid hangover state rock and up that
minute it’s just so much fun to keep like but
yeah you got it you got to do sensible things to get to get that result yeah yeah next well we got three people
standing there so let’s let’s do the three that are standing ok good morning sir hi I i was wondering
what your opinion is the Federal Reserve and their actions taken recently you
feel like done and not to fix the economy yeah well I’m a big fan of alan
greenspan’s over time I’ve known him for a long long time we were on a board
together caption reason Alan is a very very smart
guy he is motivated in my opinion entirely by whatever for the United
States people united states it so you better that you’ve got you
couldn’t have a better person in there and the problem he may have is that that because his
tenure in office has been associated with this incredible all market that
that even though he wouldn’t have claimed credit for that people applied
associated because of the importance of the Fed generally they might associate
with him so they made if things don’t work out so well made blame them as well
but I think his policy is generally been very good you have to understand one thing that
about the Fed is that it’s not as powerful as the mystique would make it it’s a break is better than its gas
pedal when the Fed wants to put on the brakes we go for the windshield I mean how do
you know the economy just wrong yeah and they can put on the brakes Paul
Walker did it he broke inflation by doing it but I
mean when he put on the brakes and that . around nineteen eighty i mean people
hated he was crucified for what is the right thing to do and he could do it he
did it all by himself and these he and and it was the only way because of the
momentum the inflation was generating it was the only thing that was what was
needed then normally unpopular it’s much harder for a Greenspan to put
on the brakes because nobody wants him to put on the brakes busty so visible
but he’s put them on sort of gradually but stepping on the gas pedal he does not necessarily get the same
result it may help but there are a thousand other variables operating and
as you see in Japan you know you can get down to zero
interest rates and you can stimulate anything so it isn’t like the Japanese
haven’t read the same books we read about economics I mean they’ve read
canes and they were the whole thing so we’re not smarter than they are we don’t have any secrets they don’t
have but they don’t know how to get their economy going and you know there –twoGPA has been
going no place you know in the last five years and still problems around so easy
money doesn’t solve everything but Greenspan could very well get blamed for
the fact that that he hasn’t solved everything and it’s just not in his
power to solve it can help in various ways and I’ve I don’t think you could
have anybody but he better and I think he’s done the right thing to this point
but the right thing may not be quite as as effective as as people may help that
would be in economics as always you always want to ask and then what you
read in the paper well what happens if the Japanese start selling government
our government bonds or what happened they dumped the dollar they can’t dump
the dollar there’s a way to dump dollars you could
you can at least dollar assets because the Japanese want to sell government our
government bonds they sell up to us and they get a time
deposit or a demand deposits it here they still own a dollar asset if they
sell them to the French they get it and they may get some answers from the
French but now the French habit I mean the only way you can reduce foreign
investment in the United States is to change it around so they’re consuming
more than from us more than were consuming from that might be one once
when we buy a television set from Japan if we buy more television sets from them
than they buy equivalent consumables from us the exchange of what balances things is
we give them some investment type asset whether it’s cash or US government bonds
or stocks or movie studios are real estate or different things and the only
way that reverses is when we start running a trade surplus which were miles
away from so logically you know if you read classic economics that you would
believe that our currency would have been weak along Earl weaker over the recent years and
that it would be a week now but there are other things operating and that’s
one of the problems about economics is there’s never just one variable there’s usually hundreds of variables
and they operate with different impact at different times I mean it’s a it’s it’s not like a
physics for me if I mean it tho i guess it would be if you get in the Heisenberg
principle or something like that but but the the formula has a lot of the same
variables year after year but the relative importance of those variables
and how they interact with each other is never exactly the same and that’s what
we find out the Japanese find out everybody finds out and and foreign
currency or the currents are the value of a dollar and currency rates are
defying what you would expect based on history but somebody said of history
were perfect guide you know the Forbes 400 would all be librarians you know
she’s going to look it up in the books and it always you know all the answers
but it history doesn’t repeat itself as Mark
Twain said i was going to repeat itself but it rhymes I mean things come back
but they don’t quite come back in the same format will understand all this
perfectly for years why the dollars behave the way it has but I i think it
would be useful net from the US if the dollar was strong yes mr. Buffett thanks for taking my
question my question pertains to small business and my family spending the
truckload sector of transportation for about 50 years and as you talked about
the airline industry and other merchants next week acquisitions and things going on and a
lot of the smaller players being tossed out of the market what do you see for people that like
this room for students that want to start a small business and maybe they
want to start in a business that is somewhat of a commodity type business
but as businesses the large corporations get larger and their deficiencies
increase how can a small businesses compete it has these people the idea the in many
areas small businesses have an advantage you know another businesses scale has a
huge advantage and I mean you don’t want to be a a tiny carbon steel producer on
the other hand when many miles came along and learn how to use scrap more
effectively that than the the older methods of making steel they actually
had managed to scale is a huge advantage in some businesses it’s you know the largest airlines
haven’t won southwest airlines as one starting with you know just a few planes
flying down there between houston and allison and they have become bigger but
their ambition hasn’t been to be the biggest and you know they they probably
by the fuel of just as cheap as United that we bought it you know when there’s
lots more walmart is a classic example I mean who would have thought 25 years ago
30 years ago i’m here with serious with a hundred
story plus building in Chicago had access to money far cheaper than sample I’m Sam was credit was not as good as
serious every supplier wanted to do business with sears nobody ever heard of
Sam every real-estate developer was developing a new shopping center went
first to sears on Sam got the short end so here’s the guys
starting in bentonville arkansas and he kills them over time just playing kills him and disadvantaged
and buying disadvantage and borrowing disadvantage in real estate advantage Sam Walton and his ability to inspire in
the end hundreds of thousands of people to be enthusiastic about going to work
and doing although doing the right things over time so i would be just as
optimistic about small business generally now there’s certain areas
where scale just as i was just playing important but but I see no disadvantage
we intentionally at Berkshire we have a hundred and twelve thousand employees
more in Georgia than any other state in the Union incidentally we employ a lot
of their don’t and then we put a lot of people are making a guy go ad we
intentionally with our hundred and twelve thousand but we probably have
about how many business units but lots at will have 13.8 people at headquarters I’m not the point agent said that my I
resent it when people like that i have a full but we have one that works four
days a week then that’s all we have at headquarters hundred twelve thousand
people a hundred and five billion market cap but we intentionally keep our units
small we think we want them to have the nimbleness the responsiveness of the
customer particularly that will turn them you know that essentially will more
than offset anything that the scale of having maybe a little more purchasing
power something when the will develop we own a home furnishing with furniture
home furnishings business in utah run by phone bill child he was featured in
Fortune about one issue ago that it did the cover story was God in business it
was and it was Bill was the number one illustration built up that business from
his father-in-law was doing two hundred fifty thousand dollars a year and then I
was over half the business in utah in this field but you’re close to 400
million he built by thinking about the customer and the truth with he was
competing with sears he was competing with rabbits was a huge furniture
retailer the retailer in the past he was competing with everybody but all he thought about from the moment he
got up in the morning was how do I take care of my customer and that wins we have a business in Omaha some of you
may have heard of it’s the largest home furnishing store
in the world in all which only has a SMS a of 650,000 people it’s on 72 acres it’s does 325 million dollars in one
location which happens to be five hundred dollars for every man woman and
child in the SMS a but it draws from beyond that that business comes about
her as resulted from an investment of five hundred dollars in 1937 by a woman
who walked out of Russia in 1921 she’ll and she walked out . on a peanut
boat landed in seattle with a tag around her neck she could speak one word of
English the American Red Cross look at the tag is at Fort Dodge Iowa they got a fort dodge I what she
couldn’t pick up the language she was there two years she said she felt like a dummy so she
came to homo because there were other Russian Jews there and she’s at least
have somebody to talk to her little girl started school Francis Francis would come home at night
and teach her mother the words you learned in school that day that’s how
this woman rose bump can learn the English language but from her from her
daughter from kindergarten on teaching of the words she bought seven siblings
over from Russia one of the time 50 bucks every time she say fifty bucks she
sold used clothing and the works she had her seven siblings over her
mother and father and by 1937 16 years after she got here she saved five
hundred dollars she got out of train went to Chicago to
the American Furniture Mart which was huge impressive things you had this – smart
as hell but she fought like a peasant away and she saw this building she
decided to name her company then browse current you want about five hundred
dollars worth of got about two thousand dollars worth of you merchandise all the way back to Omaha
she worried because she thought I old $1,500 and she only had a
five-hundred-dollar equity so she got to Omaha she took the bed the sofa the refrigerator out of her own home to
sell fast so she could get the money so she can
pay on time she took that business and build it from that start no one would sell to her she went to
court four times because they tried to the carpet manufacturers tried to keep
her from selling the discount and she went into court add told the judge because you figured
out ways to buy this stuff in various nefarious ways from other hand of people
by a foreign she said look at i pay three dollars a yard for this carpet brandeis sells it for 698 is I sell it
for 398 just tell me judge how much you want me
to rob people she defended herself papers wrote it up the judge bought
carpet from her the next day I mean it was no marvelous Brandeis is selling anymore they were
the huge department store , she put everybody out of business and the punch
line she worked till she was a hundred and
three she sold me the business when she was 89 and she didn’t have she didn’t
have an audit I went out this year I want afternoon
took a check out with Nana had because I knew she wanted to do something and I
said mrs. B here’s the money I said I don’t even know what just tell
me where the only money that never open any money since I all those guys back in
nineteen thirty-seven and she said it’s all free and clear she never seen a balance sheet she
didn’t know what accounting terms mad but she understood the nature of the
business and i told her i said i’d rather have I don’t have your word and
other than an order from every one of the big six or bigger or whatever their
word number at the time of the top are turning from sin and she worked till she
was a hundred and three she died a hundred and four she had
three siblings at her funeral I mean those are some genes her son
works there now he’s eighty two or three and the three sisters are all alive but
the punch line is she couldn’t read or write this woman could not read or write
if you told her this room was sixty eight feet by 43 she would tell you how
many square yards it was like that she ever went to school to be in her life
she would tell you how much that wasn’t 598 yards she had the tax she’s not about something that she liked
your looks and that would be it and that was that you know that is the
that that you can’t beat that you know had and you can’t replicate
that at General Motors you can’t institutionalize that that the person
who brings that kind of drive to a business and does it day after day and
thinks about the customer yeah and that’s all she did I can’t and
once you’ve raised four kids in the process to but you can’t hit it can’t
miss and not you don’t have to worry if you’re an entrepreneur in most fields
are some field work you can’t do it because there are some
scale aspects to it but in most fields you know you will kill people by Sean
that which was shocked nobody ever heard of Sean carpet 30
years ago and got forty percent of the business in the country – so don’t I
did it’s a great field of opportunity out
there and i had and i know about trucking specifically but I wish you the
best on it then your you won’t be at a disadvantage in many fields if you’re
small and you’ll actually have an advantage for thank you mr. Buffett thank you very much for
sharing your wisdom and your ideas are wonderful stories with us today we are
truly honored and pleased we’ve had this opportunity to get to know you a little
bit better I’d like to thank a couple people before
we conclude for helping with the logistics associate dean a bob Gatewood
our director of alumni relations and Marie garrison thank both of you David .
and director of communications are a lot of work and everyone into this I thank all of you for all you’ve done
it all again thank you for helping make this possible mr. but we have a parting gift for you
but it needs to be placed into context before we show you what it is in your
most recent letter newsletter – you’re in a report to the shareholders you
discuss some of the things you look for and make with making acquisitions and
one of the things you talked about was owners look for owners who care who they
sell to and that was important to you I like to quote from your report when a
business masterpiece has been created by a lifetime or several lifetimes of
understanding care and exceptional talent it should be important to the owner what
corporation is entrusted to carry on its history a little bit further down you say how
much better it is for the painter of a business Rembrandt to personally select
its permanent home then they have a trust officer or
uninterested airs knocks it off well we believe that many of these words
apply to you as well you two have created a business masterpiece you to
have created a Rembrandt what we have today is a light-hearted portrait a
light-hearted characterization that we hope to capture some of the business
milestones in your career and we hope also captures some of that quick quick
wit and humor that you demonstrated today it was painted by a good friend of
ours and a well-known artist lives here locally alan campbell Allen nice but is
with us and he will help but unveiled today Alan please come down now when we need when he unveils us
please understand that you’re not gonna be able to see the detail of this more
you’re sitting but we invite you to come down and walk
past the as you as you leave today Alan if you’re going to speak over the
microphone place well thank you and and and mr. Buffett
hope you told maintain your sense of humor which appealed to me greatly when reading your corporate report and this
is going to be a test of that famous humor but it is a it is intended to be a
porch or both of you and of your company and of your values and when I was when
Marie garrison my girlfriend the alumni director here told me you
were coming and I read the comments about the Rembrandt’s and lying on your
back you feel like you can allow your back and paint ceiling every day Brooks
here you basically open the door with your
own words so and and just on the side my brother’s one of your pilot’s for
executive jet I think it’s not a reference to the
jewelry , so you can stay this is based only very famous Rembrandt
self-portrait anybody’s information mr. Buffett will sign autographs you’ve got
books with you like in the side will set up a table down front here for the next
15 or 20 minutes would like to take a picture of you got a camera with you
please come on up don’t hesitate and thank you all for coming and
participating today was a wonderful event thank you

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100 Comments

  • Reply MAGDALENA October 4, 2016 at 6:56 am

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  • Reply Md kabir October 5, 2016 at 12:19 am

    I have0 an old fashion belief that i can only should expect to make money and things that i understand that i understand when i say understand i dont understand it what the product does or anything like that. i mean understand wqhat the economies of the business are likely to look like in 10 or 20 years.now i know ingenerAL WHAT THE ECONOMICS OF A WRIGLEY CHEWING GUM WILL LOOK LIKE 10 YEARS FROM NOW. internet will not change how people chew gum. it isnt not gonna change which way they chew. if won a chewing gum market and if you have got double mint, juicy fruit brand will be there in ten years time. iam not gonna be way off if i try to look forwards. evaluating that company is within my circle of competece. i understand what they do,i understand the economices of and i understand the competitive aspects of the business. there could be all kinds of companies that i have wonderful futures but i dont understand which ones they are .

  • Reply Md kabir October 5, 2016 at 12:34 am

    for exemple there are two thousand auto industries, the start of 20th century it will impact. it transformed american life. but of those three only survived and they haven't done well as well. so how do you 3 winners out of 2000? so you could bhave been dead right on the fact that the auto industry on the fact he probably could have impacted how big the impact it would have but you would have if you want companies across the board you wouldnt have made any money. because the economices characteristices of that business is easy to to define. i would say the easier thing to do to figure ot out the loser. there were 20m hirses now 4 m horses but the winner was the auto overall but 2000 companies just fails . there were 3 companies in 1920 but they are not making any cars and they didnit make money.

  • Reply Md kabir October 5, 2016 at 12:35 am

    sop figuire it out tjhe economic characteristices about the winners in a wonderful business and it is not easy .

  • Reply Md kabir October 5, 2016 at 12:49 am

    if you could air line business from the point forwards and how that would transform things you know it will blow you away. there were 400 airplane companies in 1920 but they all disappeared. if u add earnings of all airlines companies will be billions since Wilbur and Orville were down, there they came to less than zero number of passengers wet up everyyear the importance of the industry was dramiticallyu increased decade by decade and nobody made any money.

  • Reply Md kabir October 5, 2016 at 12:57 am

    so figuring out of the economic consequence TV. i think there i don't know 20 or 25 millions sets sold in USA. i don't think any of these sets are made in USA anymore. TV set manufacture was what wonderful business it was. nobody had a tv in 1950 now everybody had multiple sets now but nobody has made any money making that sets, they are all out of business.

  • Reply Md kabir October 5, 2016 at 1:00 am

    radoi was the equivalent of 20 overe 500 companies making radios was equivalent of 20 over 500 companies making radois in nine teen twinties again i dont think there is a us radio manufracturer at the present time

  • Reply Md kabir October 5, 2016 at 1:03 am

    cocacola – a lot of copies over the year but now they are selling 1.8b daily

  • Reply Md kabir October 5, 2016 at 1:07 am

    so understanding the economic characteristics of a business is different than predicting the fact that an industry is going to do wonderfully. so i look at the internet businesess are looking at tech industries but i dont know who is gonna win. unless who is gonna win i am not interest into investing.

  • Reply Md kabir October 5, 2016 at 1:22 am

    defining your circle of competence is the most important aspect of investing , its not how important how large your circle is . you don't have to be en expert on everything but knowing where the perimeter of that cycle of what you know what you dont know is and staying inside of it is all important .Tom watson of IBM said in his book-i am no genius but i am in smart in a spots. istay around those spots and you know that is the key . so if yoiu understand a few things and stick in that area i will do okay.

  • Reply Md kabir October 5, 2016 at 1:28 am

    intrinsic vale -intrinsic value is waht is the number that if you all knowing about the future and could predict all the cash that a bit of business would give you between now and judgement day discounted at the proper discount rate that number is what the intrinsic value of businesses in other words the only reason for making investment laying out money now is to get more money later on right that's what investing is all about.

  • Reply Md kabir October 5, 2016 at 1:48 am

    when you look at the bond. it says when you get the interest payments so when you get the principal so it's very easy to figure out the value of the bond. it can change tomorrow if interest rates changes tomorrows , cash flows are printed on the bond the cash flows are printed on a stock certificates.

  • Reply Md kabir October 5, 2016 at 1:58 am

    stocks- cashflows are not printed on the stock certificates that's the job of the analysts is to print out change the stock certificate which represents an interest in the business and change that into a bond and say that is what i think its going to pay out in the future .

  • Reply Md kabir October 5, 2016 at 2:02 am

    when we buy some new machine for shaw to make carpet that's what we are thinking about obviously and you know you all learned that in business school but its the same thing for the big businesses..

  • Reply Md kabir October 5, 2016 at 2:16 am

    Coca-Cola today- company is selling 120 b today. the question is lay it out today to get what the coco cola company is going to deliver to you today to get what the coco cola company is going to deliver to you over the next two or three hundred years discount rate make much difference after as you get farther out but and that is question how much cash they are going to give you. it isnt a question of you know that is the question of how many anlyst are gonna recommand it or what the volume of stocks is or what the char looks like or anything. its a question how much cash is going to give you ant thats the only reason true.

  • Reply Md kabir October 5, 2016 at 3:00 am

    this is true if you are buying a farm and apartment house any financial asset , oil in the ground,–you are paying cash now and how to cash back later on. the question you gonna get, when are gonna get, how sure are gonna get.

  • Reply Md kabir October 5, 2016 at 3:48 am

    and when i calculate intrinsic value of a business when we buy businesses and whether we are buying all of the business or a little piece of the business i always think we are buying the whole business because that's my approach to it. i look at it and say what will come out of this business and when and what you really like them to be able to use the money they earn and ear higher returns on it as you go along

  • Reply Md kabir October 5, 2016 at 3:58 am

    berkshires never distributed anything to shareholders but its ability to distribute goes up as the value of the business we own increases we can compound it internally . but real question is Berkshire is selling 1005 b now what can we distribute from that 105b selling now . can we distribute enough cash to you , soon enough to make sensible at presents interest rates to lay out cash now — that's what you need to do. and if you cannot answer that question you can't buy the stocks.

  • Reply Md kabir October 5, 2016 at 5:14 am

    intrinsic vale present value of future cash. i wrote down it on annual reports over the years. on Esam-a bird on the bush is worth two in the bush.–hat is not quite complete- because the question is how sure ARE YOU THAT there are two in the bush and how long you have to wait to get them out. HE PROBABLY NEW THAT but he didnt have time because so he was half way there. so that all there is how many birds in the bushhen you gonna get them out and how sure are you now if interest rates are 15% roughly you have got to get two birds out of the bush and five years equals the birds in the hand but interest rates are 3% and you can get two birds out in 20 years. it stills makes sense to give up the bird in the hand because it's all gets back to discounting against an interest ate. often you dont know not only how many birds in the bush inthe case of internet companies there wernt any birds in the bush but they still take the birds you give them from the hand.

  • Reply Md kabir October 5, 2016 at 7:17 am

    mistakes- bought a lousy textile business and i bought it very cheap. i have been taught by ben graham to buy things on a quantitative basis look around things that are very cheap- cigar butt approach. its a mistake although we made money doing it but u can't make it with big money. so much easier just to wonderful business so now i would rather buy a wonderful business at a fair price that a fair business with a wonderful price but in those days i was buying cheap stocks and berkhire was selling below its working capital for sure you have plants for nothing, macheinery was for nothing,u get the receivables and inventories and receivables of the discount is cheap.so i bought it and 20 years later i was still running a lousy business that money didnot compound.

  • Reply Md kabir October 5, 2016 at 7:22 am

    you really want a wonderful business because time is a friend of the wonderful business you keep compounding it keeps doing more business and you keep making more money . time is the enemy of the lousy business . i could have sold Berkshire perhaps liquided it made quick little profits .you know one puff but staying with those kinds of business is a big mistake.

  • Reply Md kabir October 5, 2016 at 7:42 am

    i could have been way better off buying better businesses. the biggest mistakes i have made by far our mistakes of omission , its the things i knew enough to do they were within my circle of competence and i was sucking of my thumb and that is really those are the ones that hurt, they dont show up any place i probably cost berkshire at least 5b dollars by sucking my thumb 20 years ago, when Fannie may having trouble and whole company for practical nothing . i did understand funny May enough and i blued it.there is a big opportunity in life have to be seized , when we got the chance to do something that is right and big we have got to do it. you would be better off if when you gotta punch card with 20 punches on it and every big financial decisions you made you used up a punch you get very rich since you think through very hard.

  • Reply Md kabir October 5, 2016 at 7:54 am

    modie mannual pages by pages and i found stocks that i could understand that were selling 2 times 0r 1 times of earning. when you have 10000 dollars and you dont want to borrow money, i was always coming up with ideas than i had money. so i had to sell whatever i likes least to buy something new that just was compelling to me and it i was for a long time i was in that mode and now now we have more money than ideas. the economic principles of Bershire that interms of whol;ly owned business we are not going to sell no matter how much anybody offers this for me i mean if they offers 3 times what something worth sees candy-buffolo news whatever we are not gonna sell. i may be wrong having this approach. thats the way i want to lead my life.

  • Reply Md kabir October 5, 2016 at 8:01 am

    we only sell when we really get discouraged perhaps with the management or we think the economic characteristics of the business change in big way i mean and that happens. so we are going to sell simply because it looks too high.thats the principle under which we operate.

  • Reply Md kabir October 5, 2016 at 8:09 am

    we are generating 5b cash at least or 100m dollars every weeks . we are not going to sell if somebody sells it for three time . if u want to marry u look for brains, humor, character, beauty, now you look for low expectations that is the marriage is gonna lasts.you both have low expectations.

  • Reply Md kabir October 6, 2016 at 7:25 am

    20th century: GDP per capital went up 106% but qualitatively went very very high. it went up every single decade including 1930s. in 1930s it went up 13% .. in1940s it went up 36% in WW1,. there were 6 big periods for stock markets in both directions, there were 3 big booms ———————-from 1900 to 1920 the dow went fron 66 to 77 less than 10 percent in 20 years so t was .5% every year. so it didnt move———————-form 1921 t0 1929 dow went from 71 to 381 which is 500%—————————————from 1921 to 1948 dow went down from 381 to 180 cut in half that was 18 long year but per capial GDp during that whole period the economy ok————–from1948 to 1965 dow went up from 180 to 1000 again 5 for 1 which was far outstripping—————from 1965 to 1981 dow went down again but per capital GDp was ok—————————–then last quarter went very good——————-if take the whole 100 years dow went up 180 for 1 that means every 1000dollar became 180000 dollars.

    but 43 and 3/4 years with those huge bull markets and 56 and 1/4 years with periods of stagnation-—all in an economy doing fine year after year and after year—–56 and 1/4 years net the dow was down 200 points and other 43 and 3/4 years made up the rest of this move from 66 to 11000 ——so the excitement is that how can this country be doing better and better and better and better , citizens were living better than every previous generations. that is a huge change with some few big gain changes long time of stagnation for 20 years. that's a long time to do nothing– the answer is that investors behave in a very human ways which is they get very excited during bull markets and they say i made money last year i am going to make more money this year so this time i will borrow.- they always look at the rear mirror and push and push and push the price and they look at the rear mirror and they say that no money to make then they just say this a lousy place to be so they don't care whats going on in underlying business and its astounding but that's makes for a huge opportunity just huge opportunity. i have had a long period of stagnation from 65-80-17 years . pension fund put a lot of new money in stock but they got a lot of cheaper for shares -they get greedy others get greedy they get fearful others get fearful. you will see things you wont believe in your lifetime and securities markets and the countries will do very well overtimes but you will see these huge waves and then if you can stay objective throughout that you can detach yourself temperamentally from the crowd you get very rich and you won't have to be very bright. it doesn't take brains it takes temperament. it takes the ability to sit there and look at.

  • Reply Alex Norway October 14, 2016 at 3:31 am

    4:17 🙂

  • Reply Aktien mit Kopf October 23, 2016 at 7:09 pm

    this is one of the best Warren Buffett Videos

  • Reply narumol jongsawat February 5, 2017 at 12:10 pm

    money to use price in vac to use price in vac to duser' FED in flat.

  • Reply milan dzepina February 10, 2017 at 9:29 am

    Like he said , " You can't beat that and you can't replicate that"….Great !

  • Reply holla vince February 10, 2017 at 10:01 am

    Imagine if Warren bought Fredie Mac lol

  • Reply interests10 June 21, 2017 at 1:20 pm

    What is two and half times earnings??

  • Reply Troy Dvorak July 14, 2017 at 12:54 pm

    Sadly the closed captioning is not very good.

  • Reply rickwtz August 11, 2017 at 6:22 pm

    20:08 very important.

  • Reply Andrew - December 20, 2017 at 5:01 pm

    Every word in this video makes complete sense

  • Reply Bharat Raghavan December 24, 2017 at 7:01 pm

    this was a management masterclass!!!! learned more seeing this than in any management class i attended

  • Reply igor555 December 30, 2017 at 6:00 am

    Alan Greenspan LOL

  • Reply Andrew - January 5, 2018 at 12:48 pm

    skip the boring guy: 4:18

  • Reply john doe January 20, 2018 at 12:21 am

    I'm a huge fan of Warren Buffett but when he says that Alan Greenspan was a great Fed Chairman he is absolutely wrong. Greenspan may very well be the worst.

  • Reply Sasa Kaba February 11, 2018 at 11:27 pm

    Although I don't agree with everything that Warren does, but I have to admit that he is definitely a wise man indeed ~

  • Reply johnny v March 11, 2018 at 7:47 am

    Watched this at least 10 times

  • Reply Shah Kz April 2, 2018 at 7:32 pm

    01:08:39 billion dollars fart

  • Reply Matthew Smith April 15, 2018 at 4:09 pm

    Warren Buffett > [ Intelligence ] + [ Energy ] + [ Integrity ] = 9:57

  • Reply Denzil Poh May 8, 2018 at 12:38 pm

    36:05 wisdom about marriage

  • Reply Care Air May 11, 2018 at 4:27 pm

    ETHICS of people are the RAREST to find and it’s the best of any VALUE investing.
    The ones that really generate returns.
    There are a lot of interesting qualities to look out for.
    Hahaha. Beautiful.

  • Reply Book Thammakul May 19, 2018 at 5:36 am

    Intrinsic Value 20:00

  • Reply Tez July 27, 2018 at 4:02 pm

    Every single thing WB says is FACTUAL.. this video was made when I was 7 years old and many people still get excited about certain sectors

  • Reply MATGO September 25, 2018 at 8:58 pm

    What a speech!!!! Excellent…you really have too wonder who are the fuckers that gave this a thumbs down!!! You cunts…

  • Reply Mark Cun September 27, 2018 at 2:57 am

    God, continue to bless Warren Buffett !!

  • Reply Patel Vidhu October 13, 2018 at 12:08 pm

    Great Buffett video. Good advise.

  • Reply Jatin Lalwani November 4, 2018 at 2:55 pm

    So remember, A business that you are getting for about 10 billion should produce about 700 to 800 million free cash flow next year. @ around 57:00

  • Reply Bmayo27 November 6, 2018 at 12:12 pm

    48:25 ; what a memory!! Quoting all that without notes. Just an amazing AMAZING man.

  • Reply K x December 8, 2018 at 4:59 pm

    How interesting that he mentions his regret not buying Fannie Mae, seven years before it goes into full conservatorship.

  • Reply Dark Stories December 27, 2018 at 2:21 am

    Infinite ass rape. That is what I like

  • Reply Bossnian January 5, 2019 at 7:42 am

    11:55 wise words

  • Reply Goh Kee Khai January 7, 2019 at 3:22 pm

    I'm in a small business and the final part really inspires me

  • Reply Deepak Iyer February 8, 2019 at 1:16 pm

    one word for warren : humble

  • Reply Ramon Garcia February 13, 2019 at 8:29 pm

    Im here cause o want get rich

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  • Reply Leon Ng March 27, 2019 at 10:51 pm

    Thanks you Mr Buffett. Lesson is learn.

  • Reply Fast Eddy Love April 16, 2019 at 4:55 pm

    OK, have to ask this dumb investment question. Berkshire Hathaway trading @ $316,466.94 as of 4/16/'19 12:31 EDT. Stating the obvious, or I would think is the obvious of who other than institutional investors & the very rich can afford to buy even a single share of B-H stock–let alone multiple shares–doesn't this ultimately have a negative effect on the stock price? There's not as much volume as there would be at let's say $100-300 a share–or I would think there wouldn't be.
    Yeah, probably dumb question on my part–being that if anyone could figure out a reason for not splitting it into many multiples (or however that is done) it would be the Wizard of Omaha.

  • Reply Fast Eddy Love April 16, 2019 at 5:53 pm

    @ 37:12 "Mr. Babbit"–had to listen to it again. Is this gentlemen nervous? Not paying attention?

  • Reply bartakin April 23, 2019 at 6:17 pm

    )))

  • Reply Robbie Rox May 17, 2019 at 9:27 am

    I can’t thank enough this guy for keeping me inspired and on track with my modest investment. Next step, do what I had always wanted to do.

  • Reply Gijoe215062056 Ham May 17, 2019 at 6:47 pm

    Tell your Brother sorry the godfathers looking for

  • Reply borderlord May 22, 2019 at 10:09 pm

    E I e I O

  • Reply bobbylockes June 28, 2019 at 10:17 am

    ability to earn money does not mean someone has a character worth investing in.

  • Reply bobbylockes June 28, 2019 at 10:41 am

    buffets secret to a long marriage is "low expectations"… v witty guy.

  • Reply kshitij agarwal July 26, 2019 at 4:38 am

    1 million 2 million…..most epic line ever

  • Reply Jeng Lot July 26, 2019 at 6:54 am

    11:01 chain of habit

  • Reply Kurt Knispel August 1, 2019 at 6:08 pm

    Stocks are any good …

  • Reply Ryan Hammond August 11, 2019 at 1:48 pm

    Same stories for over half a century lol. I lost everything then forced myself to read snowball and best thing that could of ever happen. I grew up trading futures and stuff with a passion for selling fixed income but everything came together when I understood how he built his complex web of things that now generate over 246 billion a year in revenue lol.

  • Reply Tao Of Millennials September 11, 2019 at 10:17 pm

    Excellent video, second time I’ve watched it, there is immense depth of knowledge here

  • Reply Vỹ Ngô September 25, 2019 at 8:17 am

    What a lazy and greedy guy with that yellow shirt. The only thing he cares about is an easy Warren's formula. It takes Warren Buffett alot of effort to get to this point and end up having a formula along the way. Then a fellow appears from nowhere and knows to have Warren's wisdom in a minute.

  • Reply John Teague September 27, 2019 at 1:11 pm

    Hes now buying up airlines

  • Reply Master Of Odd September 27, 2019 at 7:42 pm

    He provides value in the form of capital in exchange for a higher return. Who are his customers? Entire companies. That is why he is rich. His customers have the most customers.

  • Reply TheMightyHarihar October 8, 2019 at 4:51 pm

    The trick to his wealth is compounding, and compounding across a long runway. The long runway means the money pulls in more and more money as the years go on. If you save all your money, invest it and reinvest earnings, you too will compound like buffett. It is pretty easy to become a millionaire just from this if you start young, 40 years of compounding will take a normal wage and turn it into million. Billionaire is harder and needs even more time 60 years plus and an above average rate of return on the S&P 500.

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