CNBC's Full Interview With Warren Buffett And Jamie Dimon

in an op-ed out this morning in the Wall Street Journal Business Roundtable chairman Jamie Dimon announcing the group's support of companies moving away from guidance on quarterly earnings Wow this isn't a new idea from the JPMorgan chief executive the backing of the Business Roundtable and big financial names like Warren Buffett brings a new twist to all of this and a lot more heft ooh joining us right now is Berkshire Hathaway's chairman and CEO Warren Buffett and JP Morgan Chase chairman and CEO Jamie Dimon who is also the chairman of the Business Roundtable and gentlemen welcome to both of you I believe this is the first time that the two of you have ever done a television interview is that correct Jamie I think it is I'm thrilled to be on with you Becky with you Warren and we're not on stage a couple of times but not on TV yeah this is big news and it's something that both of you have been very interested in for a long time but I just wonder I mean you all have very few things that you can really throw your weight behind that you can really say that this is important to us this is what we want to be doing Jamie why this subject matter why why is this such an important move yeah so you know America the largest companies in America are owned by literally 100 million people including veterans retirees teachers you know we all feel a tremendous obligation to deliver in the long run to build great companies and that therefore corporate governance is important and one important step and I actually really learned this by listening to Warren is that some of the ills and problems of people making short-term forecasts particularly quarterly earnings forecast earnings forecast not transparency not openness not having corley reporting and it can often put a company in a position where management you know from the CEO down feels obligated to deliver earnings and therefore may do things that they wouldn't otherwise have done so if you have a good board you know the board will say if you have a great investment opportunity and you say it's gonna cost me another couple hundred million dollars this quarter you know someone like Warren would say absolutely do it that's that's good that's future earnings don't don't hurt your company because you're trying to meet a short-term thing so we've been pushing on it and you know morn's been you know part of the one of the person make it a real thing so we think it's a good thing to give people an umbrella to move away from and hoping a bunch of companies drop it right away Warren this is something you've been preaching about for a long time - what's an example of where you seen it gone wrong well I've seen when when companies get where they're sort of living by so-called making the numbers they do a lot of things that really are counter to the long-term interests of the business and and I've never seen a company whose performance has been improved by having some forecasts out there by the CEO that we're going to earn an X because that is sending not only sending the wrong message and delivering the wrong results to the to the company under the country it's also teaching the people that work under him or her that quarterly performance is the the end the endgame I tell our managers just pretend you don't know this is the only business you and your family got along for 50 years and you can't sell it and you'll make the right decisions have you seen this kind of play out the wrong way either in the boards that you've sat in or the companies that you've owned other friends that you've known Becky I've been on twenty boards of publicly owned companies not counting Berkshires and I have seen I have seen management's that I really think well personally I'd be glad if they married my daughter or were named as executor of my will or moved in next door but they get tempted by this the predictions I've been made their ego gets involved then and when they find they can't make the numbers sometimes they make up a numbers and I it's a it's a bad it's a very very bad practice and once it gets going it feeds on itself because if if your investor relations department tells you you know we put out you're gonna earn a dollar eight and you get this reputation for you know making your numbers or beating your numbers you're going to do some very stupid things at some point because business does it just doesn't work that way and for 53 years at Berkshire you know I consider Berkshire and unfinished painting all the time and and the horizon really is infinity as far as I'm concerned Jamie what does this mean from a real perspective are the companies in the Business Roundtable I think there are 200 companies are they going to not be issuing quarterly guidance at this somebody just common with Warren said so first of all remember this goes down in a company so this could be pressure the divisional level the sales level that they should go do something different they might always do and very often it's very easy for a CEO to change a short-term profit number by not doing marking they should do by not opening the branches they should open or by you know selling more product at a cheaper price they can hit a revenue number something like that so it just creates the disincentives and like Warren said it feeds in itself if you start meeting that and you have to meet it and you have to meet it you know yours later you find that it corrupted and so I think it's a good thing if you've really careful about how and when they use Ernie's guidance in particular and so the BRT you know I think of the BRT something like 60% of our members do annual earnings guidance and I would personally eliminate that to one day and something like going 20% plus and minus do quarterly but this is this is a first step to try to get people to focus in the long run I should also say buddy most these companies they're pretty good at focus in the long run too in terms of Rd and capital expenditures this is just one case that we think we should go another step to to improve the governance of corporate America well Jamie let me ask you you know you mentioned that it's up to a CEOs discretion to be able to do this if you wanted to how could you change the numbers at JPMorgan to try and do this if you were more focused on short-term well you can change it straight exposure by making a phone call and do some swaps and add 100 million dollars of revenue you can cut marketing a lot of people cut marketing because that's the one of the easiest things to cut you can reduce you can pay people less I said it's like airplane maintenance you can reduce the airplane mains but that's a really bad idea and so you know people tell me if you're doing that at a place like that's kind of what it is you're doing Yukie don't have to build a new data center well you should build the new systems you need you should do the R&D you need and explain it to your Cheryl's and your board and you of course you know some of the CEOs will say is the buy-side I mean the sell side that we put pressure but I'm trying to say to people be free to drop it you'll be ok companies have done it the of good smart shareholders don't mind you have the best whole world studying writing right on this TV telling you it's better he prefers it he does want to hear how you're doing but how you think about the future what you're investing in but you know he that he knows that quarterly earnings if they're their function of the weather commodity prices you know volumes competitor pricing and we don't you don't really control there's a CEO you're sometimes you just kind of like you're the cork in the ocean but do the right thing anyway you're gonna be fine in the long run where and what what do you want to hear from companies in terms of guidance and what they tell you in what they don't so that it doesn't put those artificial constraints on them well I want I want to talk hear from them of what I would hear if I were their sole partner to business and they were the operating partner and I was a person that did not spend day to day at the business but was at a significant part my net worth in it and they would tell me periodically the things that were important to me and then they would tell me the the upside possibilities the downside possibilities were they were investing ahead of time and and things that might pay off in a few years and and I would want them do I would want them to run it's like we were gonna be partners for 50 years and neither one of us could sell and then keep me informed and and and don't don't worry about what we earn today or in the next week I mean what's magic about a quarter I would we're in businesses for a very long period of time and we happen to be in the insurance business and believe me you can report any number you want in an insurance company for a while so if you tell me I'm gonna be shot unless I come up with earnings of X carried out to eight decimal places in the next quarter believe me I can come up with that and and the auditors will snap it is okay I know better than to ask either of you for any sort of quarterly earnings guidance from your companies but I will ask you to forecast this the economy because you both have a pretty good idea of what's been happening Jamie just this week you said that you think we're only in the sixth inning when it comes to the economy what does that mean what does that mean and what are you saying yeah so if you look at how the tables set the consumers are very good shape their balance sheet their incomes wages are going up their debt levels are low all the credit written since the Great Recession is pristine well it's mortgage credit other than student lending which is done by the government but it's mortgage credit small business credit large corporate credit business sentiment is that almost the highest level has ever been consumer centers the highest levels markets are wide open housings in short supply and my guess is mortgage credit will expand all of it not going back to subprime so it looks pretty good and the way I look at it there is nothing that's a real pothole there would have the leverage we had in 2007 so it may be well it's been a nine-year recovery it's been only 20 percent then an average recovery would have been like 40 percent growth over more like a seven or eight year period so the slack is being pulled up and it may very well be it's just a very long kind of delayed cycle you know it's sentiment grows recovery from the Great Recession that you may have you may very well have years of growth and I'm you know I I hate to forecast the future cause I don't know but it seems to me that's a that's a logical possibility and and and in fact I think the growth is getting stronger today not weaker if we are nine years into this recovery and we're only in the six inning I mean just doing the math on that you're talking about another three years of recovery is that something that you say yeah that's not out of the realm of the possible it's it's definitely the realm of the possible and you know of course will climb wall climb the wall of worry if it gets long and long and of course one day we'll have a recession and I guess I don't like to predict that and I don't but the fact is things look pretty good and also we have a additional stimulus coming from you know tax reform and and other budget issues so I think yes you can have growth and it's people don't want to see it's been a long time so it's almost like we're too afraid to say it out loud how about you what's the economy look like from where you said well right now there's no question that it's feelings wrong I mean if we're in the sixth inning we we have our we have our sluggers coming to bat right now number three four and five and the lineup big business is good yeah I'm I'm no good at predicting out you know two or three or five years from now although I will say this that there's no question in my mind that America is going to be far ahead of where we are now ten twenty and thirty years from now but right now business is good there's no question about it and as a result you think the stock market looks affordable why well I did not as a result the decision on the stock market should be made independent of the current business outlook I mean you then when you should buy stocks is when you think you're getting a lot for your money not when you think business is Nezha and not necessarily when you think business is going to be good next year sound of I stock in America generally has been always with a few exceptions is because the long-term outlook is exceptionally good and I don't think you should buy stocks based on what you think the next six months or year is going to bring you had been buying stocks pretty actively in the first quarter a fair to say that you still are buying stocks i I like buying stocks yeah but I'm a net buyer and Jamie I've been that all my life you know I bought my first stock on March 11th of 1942 and we've had seven Republican presidents and seven Democratic presidents and I've bought stock under every one of them Jamie let me ask you the market wobbled a bit last week because of the issues with Italian politics real concerns about what people are calling quitte lis or Italy it'll leave how big of a problem do you think that that is and is it something that potentially we could face some contagion over here yeah so one thing I should point out to the viewers that you know Warren speaking about this thing about the long-term trends but obviously we've had problems but it's amazingly this ability a country there's the ability this country to continue to grow and even the worst 10 to 20 year period we've used them rather well and Bill Gates talks about a book called fact fulness out there Steven Pinker about the better angel nature how mankind's became better and better and stronger and stronger healthier and healthier living longer and that is reflected in you know markets and valuations and things like that and obviously there's always something go wrong I think the biggest threat to mankind is nuclear nothing other than your nuclear proliferation and things like that and and then you know you have things like Italy that just it's kind of one of those things to remind you that there is risk out there and you're always going to have that you can open up the newspapers any day and you'll be reminded of another risk that might be Argentina though I think that president is doing great things there and so this just remind us that it's not resolved the eurozone will have some issues and and you saw this wobble because people question again you know Italy stay in the eurozone which obvious I hope they do the monetary union is the most important thing they hope that they do and I do expect they will be very hard for them to leave it was because I do you expect that the Euro will still be here in five years and in ten years the I'm gonna say again I hate to predict the future I say yes exiting the Europe euro the monetary union will be catastrophic for anyone who exits and there is no way out of that and so I think that when people see that and they don't want to do it I think the might the EU is making progress with with Merkel and McCrone who are that you know the linchpins you know remembered Britain was never part of the monetary union and I if they continue to make proper reforms yes it can be a union the strengthened over time but it takes exactly what they're talking about it takes fiscal reform the ability for the banks to do pan-european banking you know some regulatory reform and certainty some common now they have to deal with certain issues of how they deal with the budget this is among the countries but he said everyone's interest that the European Union continued on that path because what other path is really not a good one all right what if you had to pick a side if you were forced to take a bet on this would you bet that the euro is here in ten years yeah I I would bet it but I that I don't consider myself an expert on it by any means but sure I'd bet on it and I would point out one thing and I was just doing a little mental calculation while you were talking in it I've been oh I've been investing over a period of probably over twenty five thousand days and I would say if you took the headlines from the paper of those twenty five thousand days I'll bet a majority of those headlines they certainly wouldn't be good news or optimistic I mean there's you know I can start with 1942 when we were losing the war when I was made the first investment so the the news is usually well it's more often I think the headlines are bad than good but but the Dow was a hundred one at that time and the Dow is you know whatever it is now 25,000 so America works but the headlines are Jena frequently going to be a kind of alarm the headlines lately here in the United States have been pretty good I'm thinking about last Friday when we got that unemployment rate of 3.8 percent and the new headlines this week that show that the number of job postings outnumber the number of people who are looking for jobs the number of workers out there Jamie I wonder have you had any trouble trying to find workers at this point what's it like in terms of trying to find employees yeah we're not but this number is the lowest it's been in like 40 or 50 years yeah and I think sometime later this year it will be lowest ever an amazing other number we take global unemployment it will also probably this year at the lowest ever and that's a good thing we all want wages to go up so at the BRT where I just was you are having a lot of conversations they've seen wages going up the seen pressure to get people but I look I look at that as a good thing that's sharing the wealth is being created we want wages to go up you know we'll probably be sitting here in a year worried about what inflation and wages going to high but right now god bless it it's bringing more people back into the system back to work work as dignity work is great you know once people start in that ladder of work they tend to move up a little bit they tend to have household formation so you know we should do everything is a nation you know both war and I support this thing called the Earned Income Tax Credit which help it's kind of a little bit of a negative income tax which helps pay you know people basic minimum wages more money and and I just think it's so much better for society to have people working and having household formation and it's better for social outcomes and so this is a wonderful thing we should be celebrating it and of course when I start worrying about the downside of it soon but so far so good we always worry even with the positive headlines Warren yeah Becky and when you raise the question about whether we have trouble finding people we have six or so home building operations in various places Kansas City in Denver and Austin Texas and and there is a shortage of the labor required in home building throughout the country and and we have home furnishing stores and and carpet installers are there certainly and and and and and truck drivers there's there's a plenty of places where there are a lot of jobs that are unfilled right now can you solve that problem just by paying more well the people that are thinking about going into those jobs but want to get it solved probably by higher wages but the market system works towards solving problems like that but but but it is absolutely true now that there there are there are shortages of people and some fairly important type jobs let me ask you both about trade because that's been an issue that both of you had said could create a little bit of a problem could weigh on sentiment Jamie I know you've heard from the Business Roundtable optimism levels kind of off the charts when you're talking to all of those CEOs but it did pull back a little bit you think it's because of trade why probably it's hard it's hard to tell but we did ask about trade we did another special survey and I was like 80 to 90 percent are worried about if trade goes south prices will go up they'll have they'll invest less and things like that so we're trying to be very clear about this we think the president has raised some very critical issues about trade particular China around state-owned enterprises fair competition market access value the ability to own 100% of a company and these things should be negotiated out and the Business Roundtable supports the fact those issues the business roundtables been very quite clear that we don't think tariffs are the way to do it tariff has unpredictable outcomes you hurt your allies making for you for anyone else people tend to retaliate you can incite nationalism in countries because it's not the same thing if you and I negotiate and being tough on each other then you know if you put a country in a very tough position how they might have to react so it just has it can create these potential negative outcomes and you know so we're just very cautious about doing it that way but and but want to support trade we want to get NAFTA done we think that you can make great progress of China and the China would be very responsive to some of those issues that's what we're pushing on for trade very quickly the latest coming from the White House is that they are looking for bilateral talks instead of a NAFTA between Canada Mexico and the United States bilateral talks with us in Mexico and with us in Canada what do you think about that Jamie well I've disagreed you know there were stuck here on two issues okay the son before NAFTA the sunset provision which basically the president has today you can rip it up when everyone's so what why wouldn't it go Shane for it I don't know you know it just creates more uncertainty for everybody else you could argue those certainties there anyway but the fact is you want more consistency this other one called orbit various forms of arbitration that you can go to an effective arbitrator as opposed to courts in Mexico Canada or the United States creates a little more certainty everyone wants that and you know you can make an argument I might be better if United States nice to have it it's better for our friendship with our neighbors is better for the companies it's better for certainty and I think personally that we should give it up and finish NAFTA there are a lot of things in they have already negotiated modernize NAFTA so I'm quite in favor of doing that and so it's just import we get these things done personally I would have done TPP and and in trade it gets very complicated when you start to do a bilateral things it also is very much could be used against you so what we're doing in some of these places you know it has now opened the door for much more complicated trades negotiate with our allies who we you know and I just think we should be working and allies do we have a common interest and not against China but to set global standards that may not be exactly one but those global standards you know eventually China have to adhere to - including around reciprocity investment treaties etc and so you know but look the president's doing his way I hope it works we're gonna try to support as much as we can but you know I personally doing some of these things differently let me ask you both about a big problem that you've been trying to tackle here at home that's the rising cost for health care the two of you along with Jeff Bezos have announced an initiative where you're going to be working together with this joint venture to really try and track all some of those issues to help your employees and maybe even the rest of the country to warn when we spoke with you last month in Omaha you said that maybe within the next two months you had hoped that you'd be naming a new CEO have you made progress on that front yeah we have and and the three of us and and the new CEO are we basically reached agreement so we're just tidying up a couple of things but we should have we should have an announcement on that matter within maybe two weeks at the outside but the work has been done and we have the right CEO and and word I'm very enthused about it I know Jamie and Jeff are - Jamie you've met this new CEO - yes I have the heavy lifting was done by Todd combs I want to came from full credit and he went through a thorough process but I think my quorum we have we have an outstanding individual character culture capability heart mine the whole thing and and you know this is a long-term thing we're not looking for immediate success but-but-but-but there are a lot of ideas out there that a lot of things would be done better we know the fraud the administrative costs we know overuse and under use of various drugs and specialized procedures we know the end of life is often cost far more than it should and it's far more painful it should be so there's so many and with big data there's so many things to do but the goal is better satisfaction for employees and you know eventually we can learn a lot of things and maybe help inform America how we can improve some of these things Jamie have you heard back from from your employees about this Warren have you I'm gonna start with Jamie yeah a little bit you know there was a little bit what does it mean for us but it means the same thing I mean effective we do this every year for employees every year we look at me we use a lot of very good companies to help us do things in terms of claims and structure and payments and and choice and wellness and we just want to do that better and so we're I told them is we're just kind of trying to a better and you should expect that we're gonna do it the right way of the same kind of heart we've had before but to improve your lives improve your wellness improve the outcomes give you more choice which I believe in you other things that it will effectively be cheaper and you'll have healthier much healthier employees Lauren have you heard from their employees yeah I addressed a group of about 130 or so of the various CFO's from all our subs just a couple of days ago and and they're very interested in the subject and the interesting thing is as we went around interviewing a large number of prospective CEOs we didn't run into one that didn't think that the improvement was both a significant improvement was both possible and important so it isn't like there's anybody out there that's connected with the system of the things we've already arrived at Nirvana and they know how difficult the job will be to make major changes but they're all cheering for us to succeed the number might have wanted to be the one to help us succeed we said a lot one but no nobody disagreed with the the mission the importance of it or the feasibility but it's also a very very tough nut to crack and it's gonna take significant time we've got the right person so you guys are working on everything from problems facing American businesses with the long term is inverses the short termism to this huge problem for the country itself and that's that's healthcare and it has all kinds of people starting to wonder Jamie if you're going to run for president I have no intention of running for president why are you going I'm not running for vice-president either let me ask you this week we spoke with Howard Schultz he announced that he's stepping down as chairman of Starbucks he spoke with us on squawk box and said yeah he may be considering public office he doesn't know exactly what that would be at this point but we also spoke with Ken Langone who was our guest dose while we were speaking with Howard Schultz he said look the idea that Donald Trump won the presidency and people are saying this expands the this means a business leader could come in and run the country and that expands the town pool as far as he's concerned he thinks that's a good thing Jamie what do you think about that okay you know I think business should collaborate with government and be involved and the business people need to learn what the issues are in government you can't just walk into govern officials and say here's what I need for my company and my profits etc you know governments have huge issues to dealing with in terms of you know of the poverty and an incarceration and education we should help them do that and that's why I met to help me do this job at the BRT and all the be our team members are deeply involved in that so therefore getting involved in politics I think it's a great thing for anybody so if you want to do it I applaud it I think it's hard I'm not sure being a CEO naturally translates to that you know I saw Howard and I think the world of Howard and he'd be a great chief executive or governor or senator or mayor whatever he wants to do but it's hard you know and and you've got to be in you you gotta want it this is you this is not you're not gonna be ordained to be the president on stage you've got to get out there and fight for it and so you know CEOs aren't used to doing that and I don't think Oh all CEO is translate to that so we'll say but I think it's I think ken is absolutely right getting people involved in government thing collaboration the government's a good thing even having people I can focus having war and help focus on healthcare is a good thing for America and we you know government can't do all these things itself particularly anymore that's rapidly changing ie tech not technological world so I completely applaud it I wish our you know the best Warren your thoughts well I totally agree we most business people would have trouble starting out the year early and Iowan and going from motel to motel and repeating themselves six or seven times a day saying the same thing and listening with great interest every possible voter as to what their suggestions might be so I I'm not recommending it any my friends but I do think it's very important that business be a a handmaiden of of government and business has done wonderful things for America and America's done wonderful things for business you both have said some pretty nasty things about Bitcoin recently which one of you hates Bitcoin more well that would I said a high standard I don't know whether Jamie can taught me or not I don't want to be the Bitcoin spokesman you know just beware anywhere and and warned very quickly before we let you go we've made a lot about we'd heard about the uber deal we talked with Derek Oshkosh for Scott we had said that that report was correct out there just wanted her if there's anything you could add to that that the talks came and went Zarah said he'd love to have you involved with something down the road any chance of that well I think it's it's very unlikely but but I I don't say zero to anything it entered it's true that we did have a conversation a few months back and certainly as I said earlier I'm impressed with their and and da Ryan and the we just didn't quite come to terms but that's not a unique experience at Berkshire yeah Warren Jamie I just want to thank you both very much for your time we appreciate the efforts of what you're doing both with healthcare and with the long-term approach that you'd like people to be taking with companies we really appreciate your time talking about this today Becky thank you enjoyed it okay great think about you guys thank you that was excellent and even though you're in different states and far away that was amazing you play together so well yeah it really does it's okay Warren thank you very much folks for the inspiration and for joining this and hopefully will help make things little bit better I'm with you have 100% on this and and and even though you through some desert bouquets towards night I would say that the Jamie is participated in a significant way Becky he is his heart is in it as well as his mind well I'm excited I can't wait to hear who the CEO is thank you for teasing us okay yeah okay thanks guys thank you thank you Mike hey there thanks for checking out CNBC on YouTube be sure to subscribe to stay up-to-date on all of the day's biggest stories you can also click on any of the videos around me to watch the latest from CNBC thanks for watching

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Keywords: CNBC, business news, finance stock, stock market, news channel, news station, breaking news, us news, world news, cable news, cable, finance news, money, money tips, warren buffett, warren buffett cnbc, buffett dimon, warren buffett jamie dimon, berkshire hathaway, buffett uber, jp morgan buffett, buffett amazon, amazon healthcare, berkshire amazon healthcare, warren buffett 2018, warren buffett advice, warren buffett debt, warren buffett explains, J.P. Morgan

Id: MLyCdxc-wfA

Length: 29min 41sec (1781 seconds)

Published: Thu Jun 07 2018