Carol Loomis Interview: From HBO's "Becoming Warren Buffett"

it's a phrase that warren had used i think in pred at some time in which he said that his whole life was focused on on on berkshire and he and he said i love my work so much i describe i describe myself as tap dancing to work and and so when we were searching for a title for the book and some very inappropriate ones were coming up i suddenly thought of this one and i thought that's it and fortunately uh warren agreed and and the publisher agreed to warren loved it from the minute uh he said that i'm in for that it is it just as appropriate as it has always been he truly loves to do what he does i i speak to warren a lot first of all there are a couple of things that we do during the year that i participate in so i'm always involved over november and december and january and february with the annual letter that's a lot of work between the two of us he he writes it i edit it i send it back to him he makes some suggestions some changes according to what i've suggested he sends it back to me i make some of the same we were plain bridge at k graham's apartment in in new york um over on the east side i think the other two players were probably my husband john loomis and a friend of ours george gillespie although the the constitution of the bridge game sometimes changed and they wanted a picture for fortune magazine where i worked and they said let's get one at the bridge table so i went went over and sat down and and pulled my cards back tried to look like exactly like we were playing and warren on the spur of the moment leaned over to look at my cards and i broke into laughter it was it was perfect it was a it was a great example of his sense of humor which is is very very extraordinary when people say things to him his instinctive wish is to say something funny back and he he manages to do that um a greater number of times than almost any person i know i first came to hear about warren buffett when my husband who was a has always worked in wall street jobs and was working for a small institutional firm at that time was assigned the midwest to cover and he read about warren never had heard of him here was his fellow in omaha who seemed to be making a move in investments and warren and john wrote him a letter and said i'm i'm going to be in omaha on monday could i possibly come over to see you and to me the amazing fact is that warren saw john because he never got his ideas from security salesmen and yet here he was willing to have john us stop by and they went out to lunch had a good time i'm sure that um john told him i worked for fortune i'm sure that warren was immediately interested because he has said that if he hadn't been an investor he might have been a journalist and that would have been a great loss for the investment world but a really great gain for the journalist world and so when that he and susie his late wife susie came to new york not very long after that they asked us to have lunch and first i john came back from this meeting with warren and said i think i may have met the smartest investor in the country and i'm sure i rolled my eyes like uh wives do when their husbands overstate things but i said oh yes okay and then when we went to lunch with susie and warren a couple of months later i said this guy is the smartest investor in the country if not the smartest guy i've never been sure that it's only limited to investments well about investments his father once said of him that boy can see around corners where investments are concerned and i do think that he can he does have a vision for investments that other people find it extremely hard to duplicate duplicate and and he has a philosophy to go with it and he sticks to the philosophy and he's incredibly patient which most investors are not that is a big failing of investors and then he knows business so well he he has a better grasp of business than anybody i know of all businesses and if it's one that he doesn't know he's willing to take the time to learn it he's willing to be patient about that and he brings this incisive mind to the job his iq is off the charts all the buffett children were tested for their iq when they were kids i'm not sure that warren was even the highest the girls i think were extremely high but his iq is way way up there and uh he has the ability to use it in ways that are beyond other people he's amazing warren's childhood was as you as indeed i did not know him at all at the time so i only know what i've heard he was not close to his mother he never would talk very much at least to me about the relationships between him and his mother he was extremely close to his father his father was his hero i think he was hero to his sisters also but warren grew up thinking of his father as the man he would most like to emulate and it was something has never left him to this day that he says that his father influenced him immeasurably and installed in him a code of ethics that he's never ever stopped following i did meet his mother at one time as a matter of fact i made a special effort to um to interview her i thought at one time i might write a book about warren as i've described it it was all hat and no cattle and we we never ended up doing that primarily because he didn't want to put the time in that it would have taken into just knowing how many hours he would have to be thinking about the book even though i was going to write it and but anyway for that i interviewed his mother probably it was probably the second time i had met her interviewed bertie his younger sister and so i i i did i did talk to his mother i came away with the feeling that she didn't influence him very much i think there was um a gap between them and he was he and his mother sort of got along well they didn't get along but uh but they sort of lived parallel lives and he was mainly influenced by his father very much so i think that one thing they would be most surprised to know about warren if they didn't know him and and hadn't read is that he loves prize fights boxing um he watches every friday night um he uh has even had floyd mayweather the the boxer uh on a buffett movie that just always struck me as one of those uh idiosyncratic things that you just quite can't quite imagine for warren buffett um i don't otherwise his his personality is start sort of out there what you see is what you get when he says that business is a game that he plays i think he means that he's not in it for the money but that it's the most uh ex astounding game that exists uh for anybody who has his talents and his interests and he enjoys playing it better than uh anybody else has and uh it's it's extraordinary what he's accomplished berkshire is an amazing company his fourth largest company in the fortune 500 he is the only man only person i should say in the in the history of the fortune 500 uh which is now more than 50 years old and um who has ever from scratch from a tiny little company built a company that is in the top 10 of the fortune 500. berkshire hathaway is is an amazing company and sometimes i think that people don't realize just exactly how amazing it is well warren buffett is probably the most rational person i've ever met charlie munger would be a close uh rival maybe maybe one would have the edge and um and most people are not as rational as warren and charlie are and so i think that when he was dealing with people he was expecting rationality and they they were not behaving that way so i think that was uh what he and they they would say things also that they did not that were it would say things that were um not exactly honest knowing that they weren't ex going to quite live up to them whereas he always knew that what he was going to do he was going to live up to and i think those were things that he found it hard to accommodate in the way that other people reacted warren's values are to be very honest to do what you're going to say to say when berkshire hathaway makes a bid for a company there are people who are out there in the world who think that somehow this bid isn't going to go through and the fact is that bid is always going to be uh accomplished always going to be followed through on and uh so that's a big part of his values his his values are to uh never never equivocate although he can be he has a great deal of judgment about how to handle people and so he may be very tactful in what he says but basically he he wants to lead a life that he and his father if his father would still it was still living would say was a good one and his values extend through all of his life he um he does not have a person one personality that he brings to business and one personality that he takes home there that is absolutely not not the way he is he's he's got a set of values that he sticks to susie was one of the warmest and charming people that i've ever met she was extremely empathetic she had a great interest in other people she could have been a journalist in one way because warren used to talk about that if if susie sat by somebody at the uh end of the at at a dinner that a half an hour later they were had given her taken her into their complete confidence and they would know that she would go home uh thinking about it and very smart very interested in uh in in doing the right things uh and using the money that the buffet buffets came to have in ways that would be beneficial for people who weren't so lucky she was an extraordinary person i absolutely would say that susie led warren toward toward interacting socially and changing his political views he grew up as a young republican his father was a republican congressman warren had nothing in his early life that would suggest he could have been been a strong democrat but susie saw things in different ways and led him and led him toward changing his political views and he certainly has uh has stuck with them now for uh an enormously long time it's possible that he would have changed without susie but i i sort of doubt it she was the catalyst i didn't know warren or when all of this was occurring but uh the tales i've heard i think he was he was a strange kid in some ways he was beyond his years when he was young he could talk to adults and they loved him as a matter of fact here was some smart kid he was funny uh they really loved uh how he was but i i think he was um a little bizarre in some ways so when he went to interview uh for harvard business school i think he was 15 wait wait and he looked he has said he looked like he was 12. um and and he didn't get accepted which of course the harvard business school has never been able to live down and i think he takes a kind of a joy and that he couldn't get into harvard business school um but i think she made him into a much more normal kind of person she changed his political sensibilities uh she was always there for him when whenever he needed to turn to her uh and he was he was extremely dependent on susie and what she was like i think that part of warren's success comes from the fact that he does not have the same emotional currents affecting his investments decisions as other people do he tries to extract emotion from his investment decisions this is part of his rationality there certainly that's uh that's a key part of being a rational and um but i i but i think that sometimes he may overstate that too he hates to fire people uh emotions some certainly come into that he's very um caring about his employees so that i i don't think that he just uh erases emotion from what he does but in in his investment decisions it is um essential to the decisions he's making if he wished not to be emotional and which i think he he does i don't think he succeeds completely because he does have these things that infringe uh on his decisions warren's opinions of uh and the wall street investment bankers uh would not endear him to their mothers he feels that they're for the most part not out for their clients uh they're out for their own um uh business interests uh i don't think he thinks that his their uh honesty is uh always great so he uh he is not a general admirer of wall street bankers i think that certain investment bankers knew how smart warren was i remember bruce rosserstein a very famous wall streeter saying that you have to be very careful when negotiating with warren because he's so smart that he'll pick you if you're not uh not careful and um so and also he was warren was always more inflexible than an investment banker would uh want him to be he he'd name a price on a business and uh he thought that was the price that the business was worth and he wouldn't budge from that and and wall street bankers really like people who negotiate uh warren is not a negotiator i'm just thinking he and donald trump would not be exactly on the same wavelength about negotiating when warren made his investment in solomon um i was one of the people along with many many others who were quite amazed because he because he had taken a very critical tone in talking about investment bankers and about their greed and here he was investing in one solomon brothers that was known to be a member of the club it just didn't quite uh add up but there was a man then running uh solomon john's good friend that warren had had business dealings with and uh had found john always to be honest and uh forthcoming and uh uh to the to the client and that was very important for warren he is uh if somebody has treated him uh uh honestly and uh expertly he is likely to come back and respond when solomon's problems erupted my memory is that warren first learned about it while he was in las vegas except he really didn't quite understand what the problems were at the time and he had gone to las vegas with a family named blumkin who ran the nebraska furniture mart and it was a once a year expedition that they all looked forward to and he got a call and went out into a pay telephone he got a call about solomon went to a pay telephone to understand that there was something very important that john good friend wanted to talk to him about and he had no idea what it was and did not learn that evening really what it was the problem at solomon that warren eventually learned about was that a an important employee of solomon's had basically lied to the to the federal reserve about solomon's accumulation of a certain issue of government bonds and the line to the fed was just not something that was done it was it was an egregious uh crime and once it was discovered by management at solomon it had not it had been covered up they never thought of it that way but it it was covered up and the fed did not learn what had happened there was a letter from the federal reserve to to the management of solomon saying that the crime had been a grievous crime and that uh it was likely that the fed would have to take uh action about this and the fed assumed that the letter had gone to the board of directors warren was not a part of management at this time the company was run by john goodfriend and um but the the board never saw this letter so there were conversations that warren engaged in after that where mysterious references were made to a letter that he had no idea what they were talking about it was like two people were talking right by each other and it was only much later that he learned about the letter when when solomon's problems erupted warren was in omaha doing his usual thing of running berkshire hathaway making one this big decision a year as he has uh sometimes said um and he was on the phone with um uh with john good friend and tom strauss uh the number two guy at uh at solomon and it claimed became clear to warren during that conversation as i remember it on a friday morning um that he that somebody needed to step in to run solomon there was a need and he was the logical guy to do it to this day i think that warren thinks he suggested that he come to come to new york to start running solomon i think john's good friend who who just recently died might say that it was his idea for warren to do this but at any rate the upshot was that warren if this happened on a friday by saturday he was in new york and by sunday he was appearing before the press as the new acting ceo of solomon there was an important moment in this whole solomon affair in which uh warren called nick brady who was the secretary of the treasury nick brady was at the horse races in saratoga and um i guess he was pulled out of the stands uh to take this call and warren told him that if if the fed went through with its threat that it was going to uh um solomon's status and not allowed it to uh just to not allow it to uh sell and trade in in government bonds that it would destroy solomon and warren thought and he still thinks to this day he does think that if that it if solomon went down it would take other important parts of the of wall street with it and he said all of this uh to nick brady and and nick kept saying now warren it's just you know you're overstating this problem it's gonna be all right they were old friends and warren kept saying to him no you don't understand the matter is as serious as i'm saying it is to you and you need to take some action and when nick brady got off of the phone he still hadn't been convinced but the events then became begin to change and and in time he did take some action the threat from treasury that made warren think uh that it was so dire that he could solomon could not take it was that solomon would no longer be able to be a a government trader the fed had that ability to say who could trade government bonds and the fed was in fact saying you are you're a terribly you're you're an evil force and we don't want you trading our bonds warren said that it was the most important day in his life i've always i've always thought about that just because i think the most important day of his life was when he married susie and i always wondered what susie thought about that [Laughter] warren had always said that um you can go through life building your reputation and in five minutes it can be destroyed and he believed that at that particular point his reputation was on the line he had not he had not come in to take over solomon brothers to save it from bankruptcy he had come in to keep it on its feet get it uh uh as a uh as a traitor of government bonds and the thought that it was going to end up with as bankruptcy was uh just unimaginable to him and i don't and he's he said he told nick brady that he was not going to stay around to run it if it became bankrupt and nick brady did not believe him but uh i believe it would have happened he would have said i was not i did not come to rescue solomon with the thoughts that it was going to become bankrupt and i will i'm not going to stay around you can find somebody else for that well in the end the fed uh did not um in in the end the fed did not come forth with the uh most terrible thing it could do which was to remove solomon as a government trader it um it relented to some point at some point to some it relented to some degree and and solomon proceeded to although its stock was wrecked at that point it had to come back from that proceeded to behave pretty much as it had been but the whole incident had been so uh extreme and so carried out in the public that the government uh called hearings and warren had to go down and testify certainly for the first time that he'd ever had to do anything like that he'd hardly been involved with anything that hadn't gone well up to that time and here he was the man on the spot being called to testify at government hearings and to this day he uses that episode the televised episode as he began it goes in every berkshire movie because he wants the people who work for him the managers of his business to hear that every year extraneous i always argue that it's time to take it out i don't get any advice he has said that if um uh if it's a mistake if if an employee solomon employee makes a mistake he will be um he will understand um if he if he is if he does something that could land up on the front page of the new york times he will be unforgiving he will be ruthless and um uh it was it was a big word it was i argued at the time it was too big a word [Laughter] i was having conversations with warren during this period first of all he was he was in new york [Music] and i saw him maybe once or twice in new york there was a shareholder meeting while all of this was going on i went to that and during his famous uh press conference on sunday right after he had become acting ceo of solomon i was at that press conference so i was very tuned in to what was going on i was nervous for him on the other hand i think he is so capable of handling almost any situation that i i thought i thought he would i thought he would do it this one was putting strains on him that he had never had before but when a question came up at the press conference about how he was going to handle the fact that he had a big company in omaha and he was going to be in new york handling solomon he said well my mother has sewn my name on my underwear so it's going to be okay warren did decided from the or said from the very beginning that if he took over at solomon first of all he hoped it would be temporary um and he would be taking no money from solomon he was a dollar a year man and i guess in the sense that that word is often used um he he never he never took any money for it and people said well of course he's doing this because of his large stake in solomon brothers and i never believed that was true i i believed of course he wouldn't have been in the position if he hadn't had that large stake because there wouldn't have been any a dialogue between him and and john's good friend but i i never believed that i it was it was a potential blot on his life and he did not want this to happen he wanted to save the firm and i i think the money that berkshire had in it was a very much of a secondary matter well when warren took the job at solomon um he had once said that he was if he made one good business decision at berkshire a year he was doing his job solomon required him to make one decision after another every day a hundred maybe not 100 a day but certainly 10 big ones a day and it was a world that he wasn't totally familiar with um but he he did it because he he knew that somebody had to do it and as he said i was the right person um in this world where he had to make all these decisions we had to deal with people who were very very greedy where he could not even make any headway against a compensation system that was pretty egregious and is still today being um uh fought over um he knew that that he he was the right place omaha all of his life had been a the place he wanted to be and he knew that the work that he was doing at uh at berkshire which he never considered work it was part of his tap dancing to to work routine he knew that how lucky he'd been that he was not in this uh in this environment and that he was going to return to the environment that was perfect for him we'll never know what would have happened if solomon had gone down but warren believed and still believes to this day that it was an integral part of a wall street where promises are taken for granted and people people trade every day on the uh theory that they will get paid he felt that the um the infrastructure there was not set up for a severe shock like solomon going down and on that sunday when all of this was being debated is what would happen the key point was that the japanese market was going to open that night and if if it was if the solomon uh situation was still as severe as the fed wanted it to be warren believed that trading in japan would be really affected and then it would just roll around the world and he believed that there was a uh too big to fail scenario the term was not used then like it later came to be in 2008 but he believed that solomon was too big to fail and that it would fail if the fed stuck to its dictum that it was to be removed from trading unfortunately my total exposure to ben graham was hearing a speech of his at one day but he he believed that he basically coined the term value investing he believed in a careful scrutiny of a company's financial statements decisions based on the probability that this was a success a company that could survive under any circumstances and the belief that if you bought value it would eventually prove out and one of his dictums that warren has said is the two rules of investing according to warren and i think he got this from ben grammer the first rule is um never lose money and the second rule is never forget the first rule when warren was first into investments and he learned this from ben graham he was in his investments often were to uh to buy a company that you could figure was a discarded cigar bud but it had one more smoke in it and he wanted to buy at the right time to uh be able to pull out the one smoke to be able to benefit from the one smoke and uh so the uh the cigar the discarded cigar but theory was one that he used at the beginning of his investment life warren if he bought a discarded cigar but uh company would certainly make himself known to the management of that company would would state his opinions as to what might be good for it um and would um hang around looking around wait uh looking for the last puff from the cigar cigar but the cigar but theory only was important if you were dealing with small companies you just couldn't expand that into and multiply that into large acquisitions and it was warren would have continued to be a small operator if he had if he had stuck to the cigar but theory and he he is an opportunist um he's always looking for the right opportunities he's willing to have anybody bring a strange strange thought to him as to what he might do and to uh to move on it and uh it it just wasn't going to um to work to stick to discarded cigar butts if if berkshire was to be built into any kind of important company what made the turn was that warren got to know charlie munger um a california lawyer who had also grown up in omaha but the two young men had not known each other because charlie was eight years older than warren and they just didn't happen to but they had but they both worked for um warren's grandfather's grocery store but at separate times so they didn't know each other and charlie became uh warren's uh sort of alter ego and became a man that uh warren depended on heavily uh just to discuss things with uh charlie's opinion was important and charlie felt and managed to convince warren and this was a real turning point in warren's business life that buying important companies buying good companies at fair prices was the way to proceed and leave the cigar cigar butts in the in the gutter if you pardon the expression charlie's uh influence on warren and pushing him in the direction of good businesses at fair prices was a huge turning point for warren and berkshire there's no telling what berkshire would be today if uh if that if that turn in events uh hadn't occurred uh we'd uh we'd all be poorer that's for sure and um so um warren has said that after he left the discarded cigar but era he was still drawn to them occasionally but but charlie was keeping him um and and warren was learning increasingly that buying good companies at fair prices was the way to go warren's initial initial plan when he made the investment to buy berkshire hathaway was to end up selling his stock back to the company at a at a profit and um and it it and this could have happened the company was at that time selling off a mill here and there and getting a little cash paying a big dividend and warren was expecting to to end up benefiting from this then the ceo of berkshire hathaway uh and engaged in a little bit of chicanery promising them one price uh for a tender offer that they were making uh that was their way of of buying in stock and the the ceo of berkshire promised him one price and then went back on it and that was just something that warren couldn't live with and so he changed his strategy seavery stanton's change made warren very very angry i imagine he was just about livid with anger warren took great offense at what seabury's stanton did warren did not like two-timing of any kind he probably did not in this case probably did not put quite enough study into what he was actually buying but he made a an effort he changed his strategy and became to think that he would take over control of berkshire hathaway because the ceo seaberry stanton had cheated him and are gone back on his promise and so he ended up buying this uh textile company which was not uh in great shape and which warren has said was the biggest mistake he ever made was buying this uh textile company or getting control of it not buying it as as warren got into berkshire hathaway i think he he realized its frailties um he he worked hard to to make the company do the right uh go down the right road but to the extent that it was pulling off throwing off cash he wasn't going to put it back into textiles and um in the first of um of berkshire's uh ability to take cash and use it in a uh in a an important and constructive way in other in other businesses uh he took cash from um from berkshire hathaway and moved it into insurance and insurance turned out to be uh just ideal for warren it itself accumulated cash or threw off cash and and so that was the beginning of warren's ability to to build a large company from this this company that he really claims was a mistake to buy in the first place and he stuck with the company he wanted it to be to succeed he really did he didn't want those um those those people those those uh employees who were going to be thrown out of work he did not want that to happen so he stuck with it longer than he probably should have but finally he had to at concede that it berkshire the mills must be shut down the mill must be shut down and the textile business disappeared when warren started investing um he he sometimes and i would say pretty often had the intention of of liquidating the company he felt that the cost of gaining control of the company was not as much as the assets of the company and that there was a profit to be made there and and his intention was to to move forward with uh with liquidating companies this wouldn't always have been the case but but but often but i think his first experiences in that business so to speak uh convinced him that it was not exactly where he wanted to be i mean there was a small company called dempster in in nebraska it was a small town whose whose population depended heavily on this company existing and closing it down um liquidating it was a lot of pain for and he was not a man who enjoyed causing pain and susie was probably at home saying oh i'm so sorry about all those people there i know it was that that his father's death was a huge uh sadness for warren he'd been so close to his father uh they had they worked together um he did he'd been um as a young boy he had worked sometimes at his uh father's brokerage office um and uh he admired his father and his standards so greatly that to have this um this person leave his life was amazing was was was so hard for him um he actually i as has not been happy to talk about it because uh it was uh it was a huge uh a huge calamity for him to to deal with but warren has the ability to pick himself up from things and move forward uh he's amazing that way warren definitely has a uh a tendency to look forward and to think optimistically i don't think we could ever have gotten where he's gotten if he hadn't been an optimist and he believes that there are pessimists around who don't understand facts as well as he does and he is in the business of being a teacher trying to straighten out the landscape for these people warren decided to close down his partnership in 69 because the late 60s were a period of enormous speculation and stock prices had gotten in to levels that warren just could not understand in many cases that people were were buying he and he said i just don't understand this market and i'm better getting out of it and so he just chose to close down the hedge fund which is what it was and and berkshire meanwhile was there he'd been he'd taken control of that in 1965. people used to write how he had left the investment business and i used to laugh at that because he hadn't left the investment business he just changed the uh the uh party that through which he was uh doing it and so he he just said there's idiocy out here in the stock market and i don't really want to have a part of it becoming warren buffett is a that's a long period of years in which he was becoming warren buffett and he was not the statesman that he now is uh when he started out of course he was so young that no one would have accepted him as a statesman anyway but he has developed over the years so much he's broadened that that is the best word for him he is has broadened in ways that have made him a different man i think my expression was that fortune for which i worked was lucky to have been standing alongside warren buffett while he was becoming warren buffett he he changed not only that he kept creating a journalist loved this kept creating new stories um and uh he was never dull you you know you knew that um uh just when you thought you understood the kind of thing that warren buffett was going to do he would come up with something new and for a journalistic organization to be standing alongside him while he did that and to have some some pretty good access because i had known him for so long was was a wonderful thing warren was quite an expert about newspapers he bought the um buffalo evening news and um and he he he got interested in the post because he recognized it as a great greatly undervalued company and he he got to know kay graham told her he had no evil intentions at all and uh he was going to let um uh he wasn't going to try to tell her what she to do in her newspaper and um it um it just it was it was a great investment opportunity for him and if there was something else i don't know what it was that nixon's the political uh strife that the washington post entered into hurt its value and made made most people run from the stock and the stock went way way down to levels that were almost unconscionable uh and warren realized how how uh very very low it uh it was and uh so he has always wanted to move into undervalued situations and this was one that was right up there on the rise and for you to see kay graham uh was warren did think she was undervalued she'd been thrown into this job for which in some senses people would have said she had no background for a very very important journalistic job she was not she was not she didn't have a lot of self-confidence and so she needed constantly to have her self-confidence build up she was not familiar with financial figures finance was not a big part of her life and warren was a teacher and he has said that he oh that his ambition in life is to be a teacher uh he kate kay graham was a uh one of his primary uh students um she said that that he uh that she was going to the buffett school of business which is kind of uh ludicrous considering that he couldn't get into harvard business school and he had a great opportunity to influence the way that the post is going to uh go even though i don't mean that journalistically because he was hands off entirely in in what the post was running kay graham did introduce warren to the world of washington and it was a little bit rocky at times i think he turned up for one of his first dinners with her without a tuxedo and they had to find a tuxedo on very short notice in in washington um and but he enjoyed it um i think at first he probably felt like he was in a totally unfamiliar environment and he was but he could talk with the best of them and and and he enjoyed it and uh kay kay had wonderful dinner parties and um so uh he got he got so he liked it i think the whole period after which he became involved with the washington post was important to his growth he he thought more broadly um his uh democratic uh inclinations uh his political democratic inclinations were were strengthening um and he he was able to to test them out talking to people like the editorial editor of the washington post meg greenfield he he was introduced to new people entirely different group than he had ever dealt with before and still he wanted to go back to omaha but he didn't mind getting into washington politics a little bit i i think of 1970 as being sort of the key year in in which the conditions for women changed in the business world and and kaye was getting involved at that time in the in the management of the post um i was at fortune i never did think of myself as um on any kind of battlefield there i just i knew i'd been put into a job that most women didn't do and i was enjoying that and and trying to get better all the time and and kaye was kay was a learner um and warren um one thing i will say about warren among many is that um i have never ever met a business leader who is as unprejudiced as warren is about gender or nationality ethnic anything warren has only one prejudice and that is about intelligence and he doesn't care where that turns up it and so i think of him as being um more uh supportive of women over the years than any business executive i know because many many a big business executives that i respect for other reasons are just a little bit insensitive on the women front and warren has none of that he has always been a supporter of women for berkshire um insurance is in itself a profitable business particularly if it's well run and warren has had a real knack for getting good people uh to run his insurance companies but it has the additional uh advantage of creating something that's called float and float is a uh is the money that hangs around berkshire while a claim is waiting to be paid eventually somebody's going to get that claim payment but in the meantime the money is there that in effect has been reserved for payment and can be used by berkshire to invest in other things and warren turned out to have a extraordinary ability to both run the insurance companies accumulate float and use the money thrown off both by the running and the float to buy companies that fed the the growth of berkshire i think c's for warren represented his departure from the cigar but days to the time of buying good companies at fair prices seas is a company that has thrown off uh money i mean it does it does it does not need a lot of capital investments historically warren has tried to stay did try for many many years to stay away from companies that required large amounts of capital investments eventually to build berkshire he had to move into companies like the railroad and the utility that do require large capital expenditures if berkshire's growth would have have stopped if if he hadn't done that but seas was a company that threw off all this money that could be used for other things and meanwhile was a wonderful company uh people love it i have some in the kitchen um and um uh so it was it was a great uh a great acquisition for warren and one that i think he still feels very proud of today i think that warren could think of some of his investments as a comfort zone he understands them like coca-cola [Music] he doesn't think they're going to go away because he himself could probably not exist if he didn't have uh frequent infusions of cocoa and um so i i think he he does feel that knowing a business and knowing the kind that's not going to go away can't be in in change by technology i those are important [Music] important pegs for him to use when he's considering investment absolutely warren's divisions of his life the business life has always been the one that he focused on and he he was not i think he probably would say this himself he was not the most dedicated father who ever existed although his uh his kids all grew up to be wonderful people and uh wonderful admirers and very devoted to their to their father um but warren's personal life did not include a lot of time spent away from the reading and the thinking about berkshire that made it grow he just wasn't built that way susie's leaving for california was um was kind of unprecedented as as a a a way for a married couple to live because they uh continued to travel together after she was in california um i think it was a great blow for warren because he had depended on her so much she had sort of uh she had she had filled in every emotional facet of his life and it it was um it extraordinarily hard for him on the other hand he still had the business and he could he could turn to that uh and draw from it uh the strength that that it had always given him um it was um it was it most of his friends didn't quite understand what was going on um but it was something they managed to work out for a lot of years in in omaha she was always going to be mrs buffett mrs warren buffett she she had staked out her own area of of philanthropy but uh she needed uh she needed time to uh she needed a different uh venue for uh uh for her own interests and and i never had thought of it really but i guess it it it could be because women were kind of reaching out in in every direction warren was able to avoid the tech bubble because he um he recognized something about the tech tech companies many people did not recognize and still don't that technology changes and that a company that is highly prosperous in 1985 or 1990 can be kind of thrown out let's talk about aol think about aol where it stood um in in the late 80s and uh the fact that it was soon to to assume a much less important role still around today but warren does not like to buy business as a change he likes businesses like without coca-cola you can argue with change because everybody's worrying about their weight but he likes um uh businesses that are going to uh continue to to be there uh to operate pretty much in the same way that they always have and to turn out uh the good profits that they always have so technology was too much change for him he never knew where they were going to be 10 years from there they might be great in year one but year 10 they could have been even almost put out of business by change in technology it wasn't for him in the late 80s he was pretty much said to be a has-been people said it was all over for warren buffett and he just because he was not involved in technology the technology bubble was forming uh it was going to explode in the early 90s and they just said though warren buffett doesn't know what he's doing he's uh he's not with it uh he's not cool um he is somebody that uh just um has had his day and it's gone warren doesn't enjoy criticism published criticism any more than anybody else i don't think um but i think that uh down deep he he knew that his methods were the right thing for him uh he was not to be swerved and to a different direction and i i i don't see any sign that he changed his way of operating so i i don't think it got to him very much it had to be a pretty long period in his life because it went on for a number of years i remember that charlie and he talked about that they both wanted to be around when the bubble burst because they just couldn't quite imagine how things had gotten as much out of kilter as they had he hates to be misquoted and um and and berkshire is a complicated company so when berkshire hathaway when somebody at berkshire hathaway buys in a stock they always the headline writers intuitively turn to headlines that say buffett buys buffett buys apple as we're hearing these days where there are now three buyers they've always been at least two or for many decades there's been at least two but now there are three buyers so it could easily be and then the apple investment for example was not warren's investment at all it was one of the two guys who worked for him uh ted wessler and todd combs and um so it's easy for the press to get things wrong about berkshire because it's a complicated company and i i do think that um he would like to always be quoted uh accurately in the press um and have berkshire described in the way that it actually is happening but uh he uh he manages to uh and i think that one of the reasons he's gone on television more is because he wanted to be able to explain himself he didn't want to have the press standing interpreting what he was doing he wanted to be the guy who was the explainer and his speeches which can be very complicated are always done extemporaneously and so they do not lend themselves to being put down in in perfect order i i know this uh personally because i have had to take some of them and edit them into into articles but that's the way with extemporaneous speeches but he's uh he has been on stage a public stage a lot and has grown to enjoy it i would say and now charlie is going to enjoy it also uh warren called me it was um i i think i was not aware at the time she came to that fortune conference of what she had just learned she left very quickly after the conference she told me that a friend of hers was ill that was during the aids period and she she had some friends who were were ill with aids but now even as we talk about it i i think probably it it was because she herself was was the one who was she knew her she herself was the one who was ill and was going off to deal with it and the war and i learned i learned that susie was ill when warren called to tell me that she had throat cancer and uh he was taking it pretty hard he went to san francisco uh every weekend for i don't know how long but it was a long period and um it was not the normal kind of thing for him to do but um the circumstances susie being that ill the brightening that i that i think it would have brought to her weekends when he was out there i i think he knew it was important it was important for him too um i was playing golf at so i heard the news uh about susie dyne at wingfoot golf club where i was playing golf i walked off after a match it was the women's tournament a competition has once a year and i walked off after playing a match and my daughter was standing there and i looked at her you know why she why was she there and she said to me susie buffett has died and i said oh my gosh he'll never be able to stand this that's what i said remember this perfectly he he got up and and went back to work and recovered not recovered because he was still distraught by it but he but he went back to work in a way that i i could not have imagined that he could do and i've heard his daughter susie say i thought he might disappear into his bedroom and never come out and and the fact is he picked himself up and resumed his life after susie's death uh warren definitely did throw himself back in to his work uh in a way that uh let him keep going in a forward sort of way i don't recall that i talked to him anymore it was always when i did talk to him it was with a feeling of enormous sympathy because i i knew what a a void it would have been in his life well i think that warren's place in the pantheon of american businessmen is totally established um i laugh a little bit at um at lists of leaders in business that need to change every year journalistically because you can't run the same list every year and that leave warren buffett off because i i just i think that he is without doubt the um the leading businessman of the of the country um i i think he is quite possibly quite probably uh going to be the only one that ended up in the history books uh although i recall saying this to a friend uh recently and the friend said when you're talking about a hundred years from now which is what you're saying there aren't going to be any books and i said uh but i i i think he's going to end up in the history books a hundred years from now i'm not sure though what role he's going to be assigned will he be famous for what he did as an investor as a businessman because there is a difference or as a philanthropist and i'm i'm just not sure which of those roles you know andrew carnegie was carnegie more accurately was a businessman before he was a philanthropist but we remember him today as a philanthropist and i'm just not sure how it's going to turn out the shareholders well they they range from people with not much money to uh hedge fund guys who are uh the richest and uh often considered uh the most the greediest uh of all kinds of businessmen um i would say that uh an awful lot of the people that i've met out there are been people you'd like to spend your time around and i've seen many letters that have come in to warren after the meeting from people talking about how much they enjoyed the people they met how much they like the whole atmosphere how friendly they think it is of course that's a midwestern trade anyway and i think it's a congenial crowd that is drawn back just because it's not only warren and charlie up there but this the whole atmosphere of all these people who have had very good fortune in many cases because they've bought the stock but who sort of see them as cells as part of something a little bit bigger than the stock there is definitely a a sense of of a buffett community with a uh with a a charlie munger geography on the side um these these people they don't sell their stock if there were statistics about this there probably would we would probably find that there are more long-term holders of berkshire than than any company people consider it a religion they don't they don't want to they don't it's always been a mistake to sell berkshire hathaway and so they don't want to be making the mistake now and um so they do see themselves as part of community and warren does everything he can to encourage that feeling because he regards shareholders as uh owners of the business and he regards the smallest of them as equal in size to the biggest many questions that are asked that the question are either asked for a response from both warren and charlie or warren turns to charlie or charlie intercedes to answer and warren's answers uh are always given with great tact he's very careful how he answers questions charlie has no tact um i once wrote of him that he said he that when they handed out humility uh that he didn't get his fair share but he is uh he says what's on his mind and he doesn't care whether he insults the questioner or not so you'll certainly get this yen and yang where where warren is being very tactful and and charlie is almost saying to warren you know you don't mean that well the really truth is this it's a very interesting uh conversation whatever what happened in 2008 is as close as uh as ever happened leaving aside the depression of the 30s to the country's financial structure sort of falling apart this country depends on prompt payments there's a system out there in which everybody is expected to pay what they owe and and for the most part they do and wall street is a probably the epitome of this and we were very close um in the in 2008 in september 2008 specifically to that whole structure breaking down and heroic efforts by a lot of people managed to prevent this from happening but i don't think most people realize how really uh terrible it was i was talking to him some on the phone he was getting calls from various people seeking help he he knew it was very very bad i don't don't recall that he ever said we've got two days or otherwise we're going to have a disaster but he knew it was bad and he was uh he was on he was talking to everybody and he was getting calls from people like tim geithner in um in washington the secretary of the treasury uh was calling him about very very important things and the dialogue between the two of them was going to determine a lot of what happened in the country well i don't think he um does anything without some sort of uh purpose or the belief that it will be uh to the to the good um and um he knew that his was a voice um that uh would would be important in the dialogue and then i i also believe that he he thought that the right actions would be taken in washington because to contemplate that they wouldn't be taken was to lead to disaster and so he he himself was optimistic that the right strategies were going to be formed and carried out well derivatives are securities whose value is derived some other benchmark like the value of a stock so a stock option for example is a derivative it is a means by which one financial party transfers risk to another financial party but an important thing about it is that the risk doesn't go away it's changed hands guy a has gotten it out of his hands and transferred it to guy b but the risk is still there and still still something that kind of hangs over the economy and as derivatives have exploded um uh they and they are uh they are a huge force in the financial world and um warren uh does not uh think think well of them he um has uh called him uh he's called them uh weapons of mass destruction well i learned it i learned that warren was going to give away well it was always apparent after susie's death that warren suddenly had a problem on his hand that he had hadn't anticipated he was going to have to be the the person who determined where his fortune how how it would be allocated uh he had expected this but there wasn't anybody else to do it so he was going to have to deal with it i heard him talk about it a little in conversations we had after susie died but i then think i just got a call from him said well i i've made i've made the decision i'm going to give i'm going to give most of my money to the to the gates foundation and i said we'd like to write about that and so we fortune did do the story that broke that news well i definitely think that each each one of those uh four foundations is carrying out uh purposes uh missions that susie would have approved of and absolutely i know quite a lot about the three um the three the foundations of the three children they've all risen the children have risen to the occasion uh the work they're doing is uh is wonderful and i know very personally the work of the susan t buffett foundation and i can say that it's its mission is being carried out well susie would have loved it all um the susan thompson buffett foundation does not go around seeking out the press and uh it probably um it probably is not known to a lot of people but but i would say it's known to quite a few too and heaven knows the information is publicly available there's no no problem about finding out what any foundation is doing i i feel very privileged to have known uh to have known warren and to um to have played a an important a role in any way may be important and and working with him on his uh annual letter um because he regards that uh as a part of his legacy um and uh it's uh it's not only i've been a privilege to work with him on that and to maybe help just a little bit make it better but not much because of the content of it is entirely his and uh i i feel that even if he didn't everybody needs an editor but even if he hadn't had an editor this and this letter would have been famous um and also just to have had the chance to play bridge and to be at social occasions because every i was in a group that every um two years met which i always called the buffett group although it had a very uh it had a very uh it had a wide range of names but it was the essentially the only way you could describe this group was friends of warren buffett so i always thought the buffett group and to to been a part of a life as big as warren's is is a wonder for anybody who ever managed to enjoy that i've been very lucky in that well i don't see how anybody could uh perform uh with the excellence that warren has and charlie has had in a slightly less uh important position [Music] they have been such great leaders of that company that i don't know how anybody can uh follow that that's a tough act to follow if ever there was one however berkshire is a a bunch of assets is a collection of assets that is really wonderful and i know that charlie i've heard charlie say again and again i've told my kids not to sell because this company is going to thrive on and on and i i think that is probably right the assets are so wonderful well my very favorite uh buffett rule is uh don't in investing uh but rule number one is don't lose don't lose money and rule number two is don't forget the first rule so i love that no i don't think i've experienced his tough side but i i do know that uh that he has that reputation as being tough with some of his managers and i've heard about that uh and i i know of one who um i know almost complained or certainly commented about uh the fact that how how tough and maybe even harsh strict he was in dealing with but i i have not seen it personally well i'm not certain that um there has ever been more brain power employed in a more creative way then warren has expended on berkshire he has never allowed himself to be trapped in any kind of formulaic way he has been opportunistic and there have been lots of opportunities that have come along and he has created some and some he has seized and um it and he all through this he has had a devotion of one idea he wants to make berkshire better and it is uh is something that for 50 years now that's been his every thought when he gets up in the morning what can i do what if there's a business happening what can i what can we how will this affect us what can we glean from this and uh if you're spending uh 50 years with pretty much 100 of your very high intelligence and energy focused on one ambition it's probably not surprising that the company has grown into the fourth largest uh in the country the the companies that form berkshire are a collection of good businesses as identified by a man who undoubtedly has one of the great minds for business that ever existed the companies in the standard poor's uh 500 are just everybody who's in the standard poor's 500 and some of these are not good businesses and some of these are companies that warren would not even have gotten close to uh considering belonged to be cons could would not have come close to realizing should be to thinking should be in a um in this group of carefully chosen companies that berkshire has become i i think investors who own berkshire hathaway in general feel good about themselves because they uh they they bought a company that uh has has grown uh has grown in a in a way that has distinguished it uh in the business enterprise in the business environment and um they're they're they can't think of anything bad about being a berkshire shareholder it's they they see themselves as a part of a community they see warren and charlie as the the leaders uh they see a great reputation they know that to say i'm i've been a berkshire shareholder for a number of years is um is is a credit to themselves and i think they're just people who who who relish being in this community

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Id: 3F7SN3ID420

Length: 88min 7sec (5287 seconds)

Published: Tue Jul 20 2021