Warren Buffett and Charlie Munger on picking winning stocks, businesses and more: Yahoo Finance

[Music] when warren buffett the oracle of omaha speaks investors from around the world listen after building berkshire hathaway into one of the world's largest companies buffett amassed a fortune of more than 70 billion dollars placing him among the richest people on the planet promising to give away nearly all of his wealth to those in need now in these difficult times we turn to this stock market sage for his financial wisdom and calm in this episode of influencers i sit down with warren buffett as we discuss the markets and the pandemic that has brought the global economy to a near halt [Music] hello everyone i'm andy surwer welcome to influencers and welcome to our very special guest warren buffett chairman and ceo of berkshire hathaway warren nice to see you good to see you so it's march 10th and it's the day after the stock market crashed the dow was down over 2000 points oil cratered to 30 a barrel or so the 10-year bond went to below 0.5 percent what the heck is going on and i told you many years ago if you if you stick around long enough you'll see everything in markets and and it may have taken me to 89 to years of age to throw this one in the in the into the experience but you know markets if you if you have to be open second by second they react to news in a big time way i mean it's not like the market for real estate or farms or you know things of that sort does this remind you of any other time well i've certainly been the fair number of times when panic has rained in wall street and october 19 1987 and the period around it i mean there was there was panic on on at the close of business on monday october 19th most of the specialist firms which were important in those days on the new york stock exchange were broke and uh and the next morning there was a check to the the clearinghouse in chicago that didn't get there and and sometime late in the morning you know a decision i think phelan had made the decision you know we're going to stay open but but it was really close that that was and of course the financial panic there were uh you had 35 million people on september 1st that weren't worried about at all about their money market accounts on september 15th or 16th they were all how concerned are you about the coronavirus situation warren well you got to defer to the doctors on that but uh you know you get in all these figures about how flu regularly kills you know 20 times as many people in this country as 40 times maybe as much as we've seen in the way of deaths even more than that uh but you know it it is a pandemic it has really spread so we we've got something that we don't know how long it'll be with us we don't know how severe it'll be but there will be uncertainty about that for a considerable period of time there has to be what precautions are you taking personally have you changed any of your habits well i'm drinking a little more coca-cola actually that seems to warded off everything else in life i mean i'm 89 i've been i just had had two different doctors tell me i'm in much better shape than i was a few years ago i'm not sure what i'm doing to get into better shape but but uh by accident i mean i had an annual heart uh check where i wear something around my waist for a couple of the guy said my it's never been better so uh i really i i i'm a probabilities guy in my nature so i you know i there's gonna be two 2.8 million deaths this year and at age 89 i'm a little more likely to be than i was in that group than ten but two million eight uh you know and what we had so far i mean it it it will grow but i've always felt a pandemic would happen sometime i mean i've i've actually used that term i mean in describing things that can be inter that can interrupt the progress of not only this country but the world it won't stop the progress of the country or the world i mean that this is this is a a terrible event that's occurring we don't know how terrible and it may not turn out to be that big a deal uh when we get through but it may turn out to be a very big deal and we just don't know and i certainly don't know and nobody knows uh but there will be other things that happen in the world in the next 5 10 20 years that's the way the world works it doesn't it's it's not a totally even course the progress of mankind has been incredible and that won't stop i mean you flew out here you know yesterday or today and and you flew over a country that 250 years ago there wasn't anything here that's only three of my lifetimes and there wasn't anything here and now you've got all these bountiful farms and you've got 200 and 260 million vehicles in the country and they got 80 million owner occupied homes and and you've got 155 million or whatever it is million people working and i mean it's it's incredible i went you know when i had a medical check the other day i went to incredible medical facilities that are just two or three minutes from here and that wasn't here i wasn't even here 100 years ago and so we we keep making progress we haven't we haven't forgotten how to make progress in this country and we haven't lost interest in making progress and that will benefit to varying degrees all kinds of people including around the world but there will be interruptions and i don't know when they will occur and i don't know how deep they will occur i do know they will occur from time to time and i also know that will come out better on the other end and then what about um the banks and you know boy they have been awfully hard because of rates and the exposure to the energy sector right yeah and you don't know what other exposure there is i mean credit standards have been pretty darn good and the quality of what's on the books has been terrific and the liquidity and all of that the banks are in a whole different situation than they were uh during the 10 or 11 years ago but uh there were you don't know you don't know the the nominals that topple when airlines get bad and and then that affects minimum uh that affects energy demand you know it's just uh they're using less fuel than they were uh three weeks ago so it there's there's ripple effects and and uh there always will be in recessions that's the nature of recessions as you get ripple effects we get ripple effects on the railroad you know but there's just there's less intermodal traffic moving now because of the supply chain interruptions and all that sort of thing but that's you look at again i mean it uh you know in 1942 when i bought my first stock the philippines were about to fall i mean and the day i bought it the the dow literally was down two percent and two percent then was only two points literally it broke a hundred on the downside but two percent uh i felt it i mean i went to school in the morning and i bought these three shares and when i came overnight i already had a loss to them you know i'm glad you kept with it because well other people might get yeah but i mean all the other kids in seventh grade had their money and something else right getting back to banks for just one second warning a specific name which is wells yeah and are you getting frustrated with wells fargo well i think they've been to a lot of problems but i don't think that the the fundamental franchise and all that i mean i'm fine with that but uh they have i forget whether it's in one out of every three households in the country and i mean they're the largest mortgage services hugh it's it's it went through something that various other companies geico in the early 70s got had his troubles american express in 1964 when we got into it it had the salad oil scandal which everybody's forgotten about but it was a terrifying event then uh so we berkshire they'll have something will happen to somebody you can't run can't run a place with 395 000 people that uh and not know that something is happening all the time and you just hope you catch it fast and then the moral of the wells fargo story is when you hear about something you've got to act fact and you can have incentives out there that are incentivizing the wrong thing and we've had them everybody's had them i mean you know anybody has a sales force makes mistakes sometimes in what they incentivize and and uh and and bad practices will spread if not jumped on uh and that's what you know you saw at wells they didn't i don't i don't see how in the world they made any money out of the phony accounts but uh you know the cost again there's a ripple effect i mean it's when something goes wrong at berkshire if it doesn't get corrected there'll be more problems subsequently and then when i was at solomon charlie and gave me the form he said you know get it right get it fast get it out get it over and anytime you see a problem and your responsible party in in corporate america i mean just get it right get it fast get it out get it over and and don't skip and just put that right in front of you and go to work on it yeah maybe i don't know about the get it over part with wells i mean it just well if you get her if you get it right and get it fast and get it out you will get it all right and if you don't the other things you've got you'll never get to get her over fair enough let's switch over to talk about oil um you are an investor in the sector through this occidental petroleum deal from last year you put in 10 billion dollars i think and and maybe some more after that i know you get preferred dividends but that investment has to be underwater at this point and what's your thinking well the the 10 the 10 billion is the preferred stock with warren said but and there is no market in it i mean it's a private deal but but we also have about two percent of the common stock and that's that's down significantly and and you know as i said when i did it i mean the biggest variable is the price of oil and i don't know the price of oil and every day it gets quoted you know if you have an opinion on oil you can buy or sell oil either one year out or two years out or three years out or something of sort and when oil was in the 30s there's a lot of agony in the oil patch and and the math just changes terrifically i mean it just doesn't pay to drill in in a lot of areas and the saudis can turn out a lot of it with with practically no operating costs or you know i mean they've been uh very very very cheap operations i mean between that war between the saudis and the russians and then also perhaps the secular decline of demand given concerns about climate change is this really a great place to invest well i don't think the secular demand will change that much but certainly the immediate demand has changed i mean the airlines need less and people drive less if they're working out of their homes and you can change you know when you're talking about something close to 100 million barrels a day if you change it by five percent you know that is huge i was reading in your annual letter on the other hand that you're so proud of berkshire hathaway energy which is so big in wind power and has this whole different business model so you think that alternatives actually have a have a real future oh alternatives have a future then they are the future over time but you can't change the world the base of the world i mean you've got 260 million vehicles on the road or whatever number it is in the united states and i don't know how many around the world and they're not changing what they use tomorrow and uh you know the average age of the american vehicle the auto i think is 11 to 12 years something like that and so the world can't change dramatically and and anybody thinks you can change energy sources ten percent of the year it just doesn't work that way and and uh uh but the world is going in the right direction in terms of of of working toward uh a minimization of carbon speaking of those cars i mean look at tesla and what elon musk is doing i mean that kind of is a revolution right well it's it's an important change but if you guessed on the penetration of electric cars let's say we say so 17 million or something a year and in 2030 when i'll be a hundred uh and i would say that i'd be surprised if more than a third of those would be electric well that's two-thirds of an art plus all the ones and so of the total car of the total vehicles on the road it still might be 10 to electric tops or something like that worldwide i mean you can't change this mass of of of transportation uh you can't change it in a year or two it is changing it should change but but in terms of just the math of of of replacing if we said we're going to junk all the cars we have you know the economy would stop i mean we can't produce we couldn't replace them what do you think of elon musk though if you met him and would you invest in tesla well i think you're trying to bait i don't know i'm just asking you to say no no no yes he's done some remarkable things okay he's done some remarkable things have you met him oh yeah he uh he joined the giving pledge uh some years ago that i've only met him once or twice but but uh yeah that's it i've talked with them but not for quite a while and would you invest in tesla no okay um let's switch over and talk about bond yields and interest rates because that's a crazy subject right now that is a crazy subject that is really crazy yeah so what is what is your thinking i don't know i've never been able to predict interest rates and i've never tried i don't charlie charlie and i uh we we believe in trying to function on what or to focus on what's knowable and important now interest rates are important but we don't think they're knowable and there's some things that are you know this gets back to you know something uh was it don rumsfeld or something yeah no unknowns and unknown unknown unknowns the question is is the box that says knowns and important knowable and important is there anything in that box and can you tell what's in that box and what isn't in that box and it's what i call knowing your circle of competence and my circle of competence doesn't include the ability to predict interest rates a day from now or a year from now or five years from now so i say can i function without knowing that same way as predicting what business is going to do what the stock market's going to do i can't do any of those things but that doesn't mean yet i can't do well investing over time i mean but things have changed they're different now because rates are so low you have negative rates and then you were talking about edgar lawrence smith yeah and his discovery about bonds versus retained earnings and then i think you are saying that it makes for as far as central banks it makes no sense to lend at 1.4 percent and then to have two percent inflation it doesn't make sense for you to buy bonds if somebody is telling you that they're going to try and destroy the unit in which the bond the promise is included they're going to try to destroy two percent of that a year right and for you to now pay and now receive maybe a half a percent and pay taxes on it right i mean so where where do you think these low super rates are going to go and negative rates i mean just what are the implications on well i would say that's the most important question in the world and i don't know the answer um no if we knew the answer wouldn't be the most important question ooh i like that yeah i mean i don't like that but no but it's true yeah yeah so let me let me ask this way then what has investing in equities changed given the interest rate environment it makes equities look super yeah no it reduces the hurdle rate right that's why that's why they like to decrease it is that it pushes asset values higher because obviously if you promised to pay me something at three percent a year that would have been a terrible instrument for me to own you know almost any time in history but today if you're good for it it's fabulous i mean did negative rates scare you warren they puzzle me but they don't scare me okay fair enough um i want to switch over to apple one of your biggest holdings does does the amount of shareholder interest in this company concern you or todd or ted in other words it's the market capitalization basically relative to the s p 500 is that something you look at well you look at everything and relate one to another i mean that's the nature of markets so you're always trying to think about a what's in my circle of confidence and then what makes the most sense that's within that circle but the important thing is know where the perimeter of the circle is i mean that's way more important than how big the circle is or a whole bunch of other factors so ah i think apple is a within my circle of confidence i think it's an incredible business run by a fellow that's one of the great managers of all time and he was underrated for a while but now he's being seen for what he really is and uh it's it's an astounding you could almost you know if we had a i got one if we had a card table here well yeah we could put all their products on one table can you imagine that i mean uh and i just think of uh basically the utility of those products to a ecosystem that is demographically terrific and and uh finds that instrument useful and dozens and dozens of times a day it's almost indispensable not only to individuals business i mean everything and you have one of these babies now right i've got i've got one of them i don't have an on name because i would be afraid it would ring and i wouldn't know what to do okay you could take a call during this and we wouldn't be having a problem with that and what what sort of apps do you have do you have any absolutely well they've got a lot of apps on it but but uh the other day actually yesterday i was someplace normally i don't carry it in town to carry it out but and and uh somehow i was having a little trouble just getting to the but this is only any two-year-old could do this but i was having a little trouble getting the part where i actually phone somebody i use it as a phone right so you're not but i got a lot of apps on it have you used any of the apps no no gaming apps or no people have shown them to me occasionally there's even some app with with uh me involved on this newspaper boy tossing thing that it's the app that that i uh revealed a year ago in the movie that i went i went out to california and and tim cook very patiently spent hours trying to trying to moving up to the level of the average two-year-old and didn't quite make it and but i i supposedly developed an app uh in this little movie we had and as i walked out i turned to tim and i said by the way what is an app we had a lot of fun he is a terrific guy right and that is a that is an unbelievable product just to one more about um those stocks you know the so-called fang stocks yeah and again you know does that approach a sort of bubble to you when you know this is the opposite i mean you're seeing in this kind of a market those companies don't need capital well netflix needs capital there but basically the big the big companies in market value don't need capital and uh that will separate them from even more from the rest of the pack i mean they they had an incredible business model if you look at the top 10 market value of companies go back 10 years 20 years 30 years i mean go back years it's you know it's att the old att and general motors and standard oil in new jersey as it was called that and you know the 500 you worked on it and uh but those companies needed money i mean when andrew carnegie was went in the steel business he built one steel mill you know made money on that saved three or four years later he built another one and it was it was capital retention and uh oil you know business the same way whatever it was and now the really incredible companies the ones that account for just the top five would have would be well well over ten percent of the market value of the company the country uh they really don't they don't take capital that might that uh they may their suppliers may in some cases and all that but but they are really overwhelmingly they're they're capital light and and that is really different then the question is why don't you own google and amazon those two in particular let's take this well that's a pretty damn good question but i don't have a good answer the i i i definitely should have owned google uh they the guys came to see me before they did when they were larry and sergey yeah yeah and they and uh uh and we were this is a long time ago i mean this was before they went public but they were talking about a little bit about it and and we were using search and geico in a significant way so i knew the power of search and i actually used search a lot myself starting with all of this or something going way back and uh search is incredibly valuable to me and and and it was valuable to to geico so i i was capable of understanding that on the other hand i had seen that google was taking out all of this to some degree and i thought you know maybe somebody else can take out google and maybe if they'd started earlier somebody else could have taken out google so i was always a step behind on that what do you do do you kick yourself what is wrong i made so many mistakes you know i'd if i tried to kick myself my legs would be exhausted and you don't you don't kick yourself in the investment but and incidentally you don't can kick yourself when you make a mistake i mean it is part of what you do and uh you know and you know i was there when ted williams batted 406 but he it was that means 594 that [Laughter] and what about amazon same kind of thing incredible but why why it's not too late to buy these stocks is it i don't know but you're not you're not buying them right now no but i don't buy much [Music] those those are the kind of businesses i think about a lot charlie thinks about them a lot you can't help but do it i mean those are incredible business stories right i mean so the door's not closed necessary no no right not at all okay um well actually you know one of the other fellows now has bought a little uh uh uh amazon i mean that's that showed up in our 13f uh ted or todd one of the two one of the two bought some amazon right yeah that that was in our 13f you know right there you go you took the plunge berkshire took the plunge the books are yeah they can do anything they want to do they can't short berkshire's a few socks and then speaking a little bit more about amazon and jeff bezos he owns the washington post yeah they offered it to you my understanding is when it was for sale or i mean you talked to don i talked to doc sure and why do you regret not buying it or not if i buy anything it's got to be for berkshire you know i i mean i'm i'm i'm just committed that way i'm mentally berkshire comes before me and and uh it would have been a mistake for the bird shirt on the washington post because of the political stuff yeah sure right right people would think i i will guarantee you that that that jeff bezos is not telling fred you know or anybody there that marty burke uh but but i'll bet 80 percent of the people that are some some huge number of people just generally think that that if you own a newspaper you tell them what to run every day i mean it's just you know it doesn't happen very often it used to happen with some papers obviously it probably does still happen with some papers but that is not the way it generally works and it certainly wouldn't be the way it would work at the washington post yeah i mean it sounds like president trump may think that yeah well a lot of i mean kay graham did not tell uh ben bradley what to write i can you know that i know i mean and they won't better know don graham but i mean it they just don't do it but i will guarantee you that you know particularly among uh political figures but really the man on the street that they they 90 of them probably would think that they that the graham family was telling telling editors what to do i know you're reluctant to wade into politics yeah but i want to ask you i may demonstrate that reluctance okay good you will in a second i'm sure but you know we've talked about this before warren that the country seems to be fairly divided up and you said it's eventually going to get back together you still feel that way oh sure sure what will how do we get back together well if you you could ask me the same question in the vietnam period and i will tell you it was it was even more intense i mean i watched i happened to be in new york at the time and i watched that crowd come up to wall street i mean it's coming up whichever street that is broad street oh no yeah i may have been wall and broad but whatever i mean i i've i have seen in our demonstrators yeah and during the vietnam period i mean people were just as inflamed i would say on both sides i mean they were it was it was and it went on a long time and uh you know it caused the president not to run again in the case of johnson so this country's been we had a civil war i mean you know it uh so we've we've had we've always had we're a democracy you know we've got we'll have strong opinions on both sides and sometimes they they rev up more than others but uh i do not regard this as some unique period in history although everybody i've been reading about unique periods in history ever ever since i was old enough to read so some of the things that my dad at least i grew up in a household uh that then it was the family's belief uh and it went beyond my dad and my mother but you know all my uncles and all i mean that basically that that the country had gone socialist you know in the 30s your father was a republican congressman yeah yeah very republican um we didn't get dessert at dinner until we said something nasty about roosevelt i mean my sister's highway just you know it was sort of ritualistic okay there are calls on the political left and the democrats to tax billionaires have a wealth tax would that stuff be productive and maybe close the wealth and income gap well i think that i think i wrote something seven or eight years ago about the fact that there was i was doing a little hyperbole but there was class warfare and my class was winning you know basically that there's no question that that that capitalism as it gets more advanced will widen the gap between the people that have market skills whatever that market demands and uh and others unless government does something in between which say the earned income tax credit or all kinds of things and and i think that's a proper function so i would i would i would say that if people it isn't some diabolical plot or anything but look at it this way if you go back to 1800 and 80 percent of the people were farmers and you were the best farmer in omaha and i was the worst the difference in our value might be two to one you might be worth twice as much if we are out there picking corn or whatever we might be doing or plan again uh but now there's we'll say 2 million times there's 30 million american males between 20 and 35 and if you're in the top one-tenth of one percent in basketball ability or football ability or baseball you aren't worth anything if you're in the top hundredth of one percent you're getting close so if that's if the payoff is huge because some guy discovered television many years ago and another guy discovered pay tv or cable and then pay tv so your talents where ted williams got 20 000 dollars a year for batting 406. your talents now if you if you make the majors still doesn't pay well on the miners but if you finally get to that one hundredth of one percent now you're you're worth millions and uh one tenth to one percent you can you can just play sandlot ball and so you get this pushing of extreme rewards to people who are very very good at something the market demands and people demand entertainment they demand people apparently that arbitrage securities you know i mean there's all there's certain specialties and uh that isn't because a bunch of people are sitting in a room deciding we're going to figure out how to take it away from the poor or anything like that it's because of the market system but we want the market system to keep functioning that way but we don't want people left behind in a society where you've got sixty thousand dollars plus of gdp per capita it uh and that the people on the on in the lower half have been getting falling behind the gains overall achieved by the country and we've they aren't worse off than they were 20 years ago they're somewhat better off and they're better off they're better off because of things like an iphone i mean you know that's that's something that's terribly useful and and everybody i get the benefits of search you know for nothing you know basically and but that's the ultimate tension is how do you keep a system that produces incredible benefits for everybody you know sports is an easy example because we all like to to watch them we don't want to watch a bunch of guys like you and me play basketball so that's where the money is but that didn't exist 200 but then how do we address that we address it through things like the earned income tax credit we address it so that anybody that worked 40 hours a week and has a couple of kids that they don't need a second job in the family they can have a decent life does that mean increasing the minimum wage it means increasing their earned income tax credit because i think that's a better system yeah what they need is more money in their pocket yeah now you can do more money in the pocket through a minimum wage but you don't work have as many people working you need something so they have money in their pocket right and we can do that and that does require a in my view it requires higher taxes on people that where they were born into this world with peculiar talents that marvelously now and in 200 years ago they would have been out there picking corn with me can you take the higher taxes on wealthy people and put it directly to the earned income tax credit well you could i mean because people complain oh my taxes are going well they're squandered yeah nobody likes taxes yeah but if you put had a program where it was earmarked well that's that's what people do when they're when they're on the debate stage you know currently it's the democrats and they they tell you all their new programs and how they'll pay for it but they don't tell you how they're gonna pay for the ones they're already there nobody's discussed the trillion dollar deficit we have so to talk about how you're going to introduce some new but basically you don't want to run deficits indefinitely that increase the relationship that the gdp there's there's there's some point at which that causes real problems although we haven't seen it a lot of places that you might expect to see it but this country has the productive capacity to let people like me live extraordinarily well or sports stars or entertainment stars all kinds of good managers whatever and still make sure that nobody is really left so that two people have to work and you have to hold two jobs and you wonder how you're gonna feed your kids if you're if you're working you know 7.50 an hour doesn't do it and 10 an hour doesn't do it but we can do it we have the resources to do it you said uh shifting gears for a little bit you said you might continue to underperform the s p 500 you might continue well i i will from time to time i'm for sure but what is the appeal then to own berkshire hathaway stock well i've got 99 of my money you know so i'm it appeals to me but uh and it appeals actually it appeals to a lot of people who feel very comfortable with the fact that we'll never blow it basically and i think that they could feel very certain uh relative to almost any company that uh you know we won't be at the bottom quartile or something of performance but they can feel very they also should feel we're not going to be in the top decile either we we run it we rent if you're a shareholder berkshire we we are running the business like you've got 100 of your money and and you're going to keep it in and it's up to us to take care of it you said that um my market value my value is not so high and it seems like you're trying to really create a berkshire hathaway that works well maybe not in perpetuity but for a very long time yeah and then you also said we're well prepared for succession it's almost going to be embarrassing how well yeah what is that what does that mean well it just means that the berkshire doesn't need me and we've got somebody that's extremely better than i am in many many many many respects uh to succeed me and that's and and and and you want that in the company and and i want it i mean you know whatever the number may be but it's many billions that will go for vaccines or whatever it may be uh education uh for decades to come that depends on that but more important it's it's really a couple it's at least a million people where a disproportionate number have got something close to their whole savings in and so with their partner i mean berkshire came out of a partnership charlie ran a partnership i ran a partnership we actually we do look at the people as partners and we look at a partner somebody who trusts us to make sure that we we don't they don't get killed in the process and they are not if they're if they're shooting for the top one percent of performance or fibers and they're important they're not going to find it they might have found it in our partnership back where we work with tiny sums of money but we can't do it and we don't want to think we can do it you said a person uh to succeed me i think just now and and so uh is that a person that we know or is it i mean there are various people at the top of berkshire that you've tapped and there's greg and and ajit are going to be on stage this year at the meeting it depends what happens to me and what happens to other people but but it's not justin bieber or someone out there no it isn't even elon musk but uh the interesting thing is uh if you take our top ten holdings at berkshire about we come back i got 150 billion in them i don't know who the successor is to the ceo in any one of those ten and i've watched a lot of successors come and go and in those whole things so uh to think that we wouldn't have somebody able it's just crazy i mean in our case that that uh you know it's just the ultimate responsibility of the board of directors is to have the right ceo and be prepared for if something happens to that person right you said that we possess skilled and devoted top managers for whom running berkshires far more than simply having a high paying or prestigious job how do you know that well you don't know for sure but but you've got to make judgments on that you make judgments on a marriage i mean you know and you've got more time to look them over in in and then selecting successor ceos but that's the most important decision though that you make it isn't what their iq is and it it isn't even necessarily the top maybe in a given type of managerial skill i mean if they figure the kind that'll leave you tomorrow i mean you really want somebody that is devoted to berkshire and instantly we look for the same thing in our subsidiaries in other words we've got a group of managers and dozens and dozens and dozens now everyone doesn't feel this way i mean but we've got a much higher percentage that feel that way than i think than virtually anybody has but right but you can't bat a thousand in that game uh another topic that people are very keen on right now is student debt and i know that you have really prided yourself on helping students is this something that really concerns you well it would be a tough consideration for me if i were going to school whether i wanted to not only invest i'm dumb at college but i wanted to invest the four years i didn't want to go to college that much when i got out of high school but not only the four years but if i had to incur uh you know hundreds of thousands of dollars in student debt i don't know which decision i would make uh no it's you know higher education is really expensive and we've helped out many thousands of students and the gates foundation has done the same thing and and other of the foundations that i support but but it's just expensive it's very is it still worth it it depends on the individual it depends on the individual more than the school i mean it there's a lot to learn in those four years i mean there's a lot you can learn in those four years and whether you do or not depends on more on the individual i don't think it i don't think it makes sense for everybody to go to college you know uh and i'm not so sure it made sense for me to go to college uh really come on no i'm not kidding i i i don't know i mean i i learned a lot by reading and and you know i spent three or four years well counting graduate school four years uh that i could have been doing other things and there were a lot of intelligent things to do then who knows i i don't think it was essential i mean i i had some wonderful people i met through it main thing when i went to columbia though with taking ben graham's course i already knew what he was going to say i mean i read it i understood you know i mean he was a very good writer but it was inspirational it was inspirational margin it was educational we have a few questions from our audience at yahoo finance from twitter one is what advice would you give to a young investor today well you've got to understand accounting you've got a that's got to be like a language to you and uh so yeah you have to know what you're reading i mean and unless you know that language and and and some people have more aptitude for that than others you know but uh and that's one thing i learned by myself now i took courses in it afterwards for example but i learned it myself in it largely so you have to do that and you have to have the attitude that you're buying part of a business and not that you're buying something that wiggles around on a charter that has resistance zones or 200-day moving averages or that you buy puts or calls on or anything like that you're buying part of a business and if you buy intelligently into a business you're going to make money and then you have to buy something that in my view which you do if you're buying a business that you're not going to get a quote on for five years that they're going to close the stock exchange tomorrow for five years and you'll be happy owning it as a business if you owned coca-cola it didn't really make any difference in 1920 when it went public the important thing was what i was doing with customers and you probably would have been better off if there wasn't any market in it for 30 or 40 years because then you wouldn't have gotten tempted to sell it and you just watch the business and you watch it grow and and you'd feel happy so that the proper attitude toward investing is is much more important than any technical skills another question from one of our audience members with all your success what keeps you and charlie going we have so much fun i just talked to him the other day for an hour and we have fun every time we talk and we are having we are doing what we love to do with people we love every day and you know i've been lucky on health god knows you know how charlie in 96 and me at 89 with our habits and everything it's a it's a i don't know what it's a testament to i think actually being happy in what you're doing makes a huge difference and you don't want to go around having grudges against people and i mean all these things that cost you to think negatively whether it's about the world or about individuals or about your own bad luck or anything of the sort just forget it you know basically i think i i think that helps how do you clear that stuff out of your mind i don't know whether you're born to some extent that way but certainly you certainly see that it works sandy you know i mean you just take the people you know and the ones that are sour in the world the world gets sour on you know basically and and so it's uh now it's got to be tough you know and certainly if you've got some major illness or something sorry i mean that's just you can have terrible luck in life and that and it can seem very unfair to you but but uh you're going to have you're going to have a better experience in life if if basically you you know you see the positive sides things people will see the positive things in you at that point and and if you can find if you can find some i'd say look for the job that you would take if you didn't need a job and if you can find that where you're actually i don't i don't think i've had a job i mean i've never i would define work as doing something when you'd rather be doing something else and and you know when i sold shirts at pennies and i was getting 75 cents an hour i would rather have been doing something else but since i've been certainly 24 i've always i've never there was anything else i wanted to do and i had everything i needed and life was wonderful and and i tell the students that comes you know you got to live so you may take a job at first for some organization that you don't admire or work for somebody you don't admire but but look for somebody admire look for somebody where you're looking forward to working with them that day and doing something that you're looking forward to that you do if you didn't need the money and charlie and i found that a long time ago and you're going to turn 90 what in a few months about five months five months yeah i'll send you a reminder i'll send you a present so looking back over these years what are you most proud of oh i would well i'm i'm certainly but i have to give all the credit to their mother i'm certainly proud of how my children work i mean that's not easy in a sense having a name that becomes famous or you know and thought of as having all kinds of money although they don't uh uh but all three of them are now in their 60s in fact you're looking at the guy whose youngest child is 61 i mean that's and and they've all they've all lived very productive lives and they and they all get along fine with each other and they can and i i've seen a lot of rich families it doesn't always work out that way and another question from the audience if you were going to start a business today what kind of company or what industry would you look to get into i i do the same thing i've done i mean i can everyone do what you do though i mean do you think that i'm cut out for for managing money and you know it doesn't mean it makes you know it's different people have different kinds of minds i i play bridges with people who can remain remember the hand they played 30 years ago you know and watch a basketball game at the same time but but so there's all kinds of different smarts that people have and and i've been fortunate enough that i might have been in something that pays off big and i could be you know very good something else that just as much utility to society but it doesn't it doesn't fit the market system as well and then just finally what um celebrities that you've talked to this year you how do people like katy perry or lebron james get in touch with you oh i'm easy to find i am so easy to find yeah i and i see all the mail that comes in and i'm not a hard guy to access all right so write them a letter all right we're going to leave it at that warren buffett chairman and ceo of berkshire hathaway thanks so much for your time it's been fun thanks i'm andy serwer you've been watching influencers we'll see you next time warren buffett needs little introduction he's the godfather of modern day investing for nearly 50 years buffett has run berkshire hathaway which owns over 60 companies like geico and dairy queen plus minority stakes in apple coca-cola and many others his 82.5 billion dollar fortune makes him the third richest person in the world and he's vowed to give nearly all of it away the oracle of omaha is here to talk about what shaped his investment strategy and how to master today's market [Music] i'm andy surwer welcome to a special edition of influencers from omaha nebraska it's my pleasure to welcome berkshire hathaway ceo warren buffett warren welcome thanks for coming so uh let's start off and talk about uh the economy a little bit and obviously we've been on a good long run here a very long run and yet does that surprise you and what would be the signs that you would look for to see that things were winding down well i look at a lot of figures just in connection with our businesses i i uh i like to get numbers so so i i'm getting reports in weekly in some businesses uh uh that but that doesn't tell me what the economy's gonna do six months from now or three months from now it tells me what's going on now with our businesses uh uh and it really doesn't make any difference in what i do today in terms of buying stocks or buying businesses what those numbers tell me they're interesting but they're not they're not guides to me if if we buy a business we're going to hold it forever so we're going to have good years bad years in between years maybe a disastrous year or something here and and uh we care a lot about the price we do not care about the next 12 months but are you surprised at how long this economy has been expanding i've been surprised by all kinds of things in the last 10 years about the economy i mean i uh i don't think there was any economist i've ever read that talked about negative interest rates for long periods of time i mean if you go back and read keynes or you read samuelson you read any of them they do not get into a negative rate environment i think now there's still 11 trillion that's uh of government debt around the world that's at a negative rate so we've never seen it before and we've never seen least the conventional wisdom on a sustained period of long and growing deficits while the economy is getting better extremely low interest rates and really very little inflation so something different is happening but something different happens all the time so and that's one reason economic predictions just don't enter into our decisions charlie munger my partner i in you know 54 years now we've never made a decision based on an economic prediction we make business predictions about what individual businesses will do over time and we compare that to what we have to pay for but we have never said yes to something because we thought the economy was going to do well in the next year or two years and we've never said no to anything because we're right in the middle of a panic even if the price was right all right so you don't pay much attention to the dismal scientists then i guess well i pay none in the sense of as a as a guideline to doing anything i it's entertainment i mean you know it's like going to a variety show or something like that but uh and i just don't know of any economist that that actually has bought businesses successfully uh successfully or done well in stocks paul samuelson may know he was a big shareholder berkshire but uh it's you know they they make guesses and there's so many variables i mean in in the hard sciences you know you know that you know if an apple falls from a tree that it is going to change over the centuries because of anything or political developments or 400 other variables that go in but when you get into economics there's so many variables and and the truth is you've got to expect good times and bad times in business and if you if you were to buy an auto dealership and you're you know wherever you live locally or a mcdonald's franchise or anything like that you wouldn't try and time the purchase you try and make the right purchase at the right price and you want to be sure you got a good business but you wouldn't say i'm going to buy it because growth this year is going to be three percent instead of 2.8 or something fair enough you have over a hundred billion dollars of cash um berkshire does that work maybe you do berkshire has over 100 billion in cash and you say that you always want this company to be a fortress so how much cash should an ordinary investor have on a percentage basis do you think it depends on their personal situation if you're working in something where you're you're living off your your your paycheck from week to week you want to have a little cash around and and you certainly don't want to have a credit card that's maxed out or anything like that uh but if you know if if your house is paid off if you don't have big living expenses you got a portfolio of of decent diversified businesses you don't really need any cash so you can be more cash free than berkshire is yeah yeah i've got responsible you know we've got insurance claims we could have hurricanes that you know would happen uh all kinds of things we might have to pay out billions of dollars and i've got over a million people that own shares that are counting on me to run the place so we get through periods like that but if i were retired i had a say a million dollar portfolio stocks that was paying me 30 000 a year in dividends or something of the sort and my children were growing the house was paid off and everything but you know i wouldn't worry too much about having a lot of cash around let's talk a little bit about apple everyone always wants to talk about apple right it's kind of the it stock it company you have a 45 billion dollar stake more or less how closely do you follow the company you know people are concerned they haven't really introduced any new products well if you have to closely follow a company you shouldn't own it really no i made it i mean if you if you buy a business if you buy a farm you know do you go up and look you know every couple weeks to see how far the corn is up and you know you worry too much about whether somebody says this is going to be a year of low prices because exports are being affected or anything like that you know you buy a farm and you hold it for i've got one farm that i bought in the 1980s and my son runs it but i've been there once you know i mean it it doesn't grow faster if i go and stare at it you know i can't cheer for it you know more effort more effort or something like that and i know there's going to be some years when prices are going to be good and some when the prices aren't going to be good i know there's years when yields will be better than others but about the farm and and uh if it just doesn't i don't care about economic predictions or anything of the sort i do care that over over the years it's well tended to and in terms of rotating crops and i hope yields get better which they generally have in fact that farm 100 years ago would have probably produced 30 bushels maybe 35 bushels of corn per acre now in a good year you know it'd be 200 i mean we really made progress in this country that's one reason commodity prices go back a couple hundred years they've moved so little is because we've just gotten better and better at whether it's cotton or whether it's it's corn or soybeans or all kinds of things and you and i have benefited from that and so apple is kind of like a farm well it's a it's a long term investment and and if you owned if you own the the best auto dealership in town the best brand and had somebody good running you wouldn't drop by every day and say you know how many people have come in today or you know i think interest rates are going up a little maybe that'll slow down our sales or anything no you buy it knowing there's 365 days a year and you're going to own it for 20 years so that's 7 300 days and you know they're gonna things are going to be different from day to day and year to year you shouldn't buy it if the day-to-day stuff is important let's switch over to talk about buybacks which is another hot topic these days and and you did a fair amount if you look in the annual report you can see that between december 13th and 24th it looks like you guys bought back about 233 million dollars worth of berkshire which was right near that particular stock market bottom how did you know that well what was going through your mind if i knew it i bought a lot more than 200 no that that's not a big purchase for us actually and and uh no we will buy berkshire when we have lots of excess cash all the needs of the business are taken care of we spent 14 billion dollars on property plant and equipment last year way more than depreciation so we take care of the needs of the business then we have excess cash and if we find invest we'd love to do is find other businesses to buy but if our stock if i think the stock and my partner charlie munger think the stock is selling uh below intrinsic business value uh we will buy in stock so it obviously was at that point well we thought so yeah yeah but but uh you know what's really intriguing is when it goes down a lot i mean when when you're buying dollar bills for for 60 or 70 cents which periodically you get a chance to do in stocks then yeah you know assuming you've got the the cash you don't want to ever you know get so that that some some surprise could really take you out in some way but if we've got excess cash we'll buy it as fast as we can at that point it'd be more like a 2009 rather than just december yeah exactly but it's you know if you and i own a mcdonald's franchise together and it's worth a million dollars and you own 50 of it and you come to me and you say i'll sell out for four hundred thousand you know i'll buy you out if you say what's in my mind i'd be wary of that but yeah for just that reason you should be yeah but if you want six hundred thousand i'll just come back tomorrow so just continuing about buybacks senator schumer's and sanders um want the government to weigh in to sort of legislate when companies can do buybacks um and then also there's was a report recently about executives doing insider trading it appears around the times of buyback so are buybacks a kind of a problem well you'll have some people that misbehave and respect them any activity i mean so they wouldn't have much to do with buybacks i think buybacks the degree to which they've been part of nefarious activity and i've observed them for a lot of years are very close to zero but that just may be that there aren't enough opportunities but i i that that article did not uh uh i i didn't follow the conclusion on it i mean you're distributing money to shareholders essentially you can do it by dividends and presumably american business should distribute money to its owners occasionally and we do it we do it through buybacks or we've done some and we don't do it through dividends and but most companies do it through having a dividend policy and then if they have money beyond the needs of the business then i think if their stock is underpriced then it makes nothing but sense should the government tell companies when to do it or at least mandate conditions where they can't well they do restrict you a little in terms of uh if you're some general rule of the sec if you're having some kind of this isn't quite the right word but manipulative activity or anything like that in the stock but no i don't think that i don't think the government should decide your dividend policy i don't even think they should direct your capital investments they can make it enticing to make certain kinds of capital investments which they do with renewable energy for example i mean the government has interest in fostering certain developments in this country over time and they do there used to be a special oil depletion allowance you know 50 years ago and so on that that was more politics than it was governmental policy but certainly renewables are a prime example of that but the idea of deciding directing whether you are entitled to return cash to shareholders and the manner in which you do it i don't think really makes a lot of sense the 2020 election is going to be upon us before we know it and um i know that you had some nice things to say about mike bloomberg but it appears he is not going to be running now yeah it's it's hard to win with just the billionaire vote we have your vote and a few others that's funny but i admire him enormously i wish he had run i want to be very clear on that president trump was a business executive so two questions is a business executive the right kind of person to be president and what characteristics do you look for for a president that you would support well i think a business executive can be the right person but i don't think that because they're a business executive that that you give them extra points uh and number one i wanna i want a president that wakes up every morning and and realizes that the greatest threat to a country which has got all kinds of things going for it are weapons of mass destruction and that we live in a world where people organizations and occasionally countries could have people that would like to wipe out a large percentage of the american people or maybe other countries as well and that you now have capabilities which i always thought until recently i like classified as nuclear chemical and biological but i think you have to add cyber now you know if you have some evil genius someplace that that for crazy reasons just like uh you know happened with anthrax back you know who knows what motivates somebody that starts sending some anthrax out in the letters and if you have somebody that thinks that it'd be great to send a false alarm to the soviet uh to the russians and to the u.s that the other side was launching or something of the sort it's it's it's a very very dangerous world it's a wonderful world but it has dangers now that started in august of 1945 and when einstein said you know this changes everything in the world except how men think and and so i want a president that has that same filter that all these other things are important but protecting the country and reducing the chance of successful use of weapons of mass destruction against us is the number one job and i think i think most of the presidents i've talked to a couple of them and over the years and i i really think that they do realize that they may get lost in the events of every day as they go along and then beyond that i want a president that has two objectives with the economy one is to make sure that this marvelous goose we have keeps laying more golden eggs and then i want a president that also feels that if gdp is sixty thousand dollars per capita in the united states that nobody should get left behind we've got a market system that works marvelously in turning up more goods and services better ones year after year done it all through my life would you ever talk to a candidate and say hey what do you think about these three things well they'll tell me what i want to hear them so i want to hear what they tell people who disagree with them on the subject i i always like to ask a candidate uh they usually finesse me somewhere but i say what are you for that the majority of your followers are against you know i know you really believe in that you know and that's really the test but i'm not sure that except under some kind of sodium pedal or something you're going to get a great answer to that that's great but that's the question you asked the presidential candidates or presidents that you would speak to it if if i really want to get and then that's why bernie sanders was so successful i made 90 of the people who voted for bernie sanders had probably not heard of him two years earlier but they felt that they knew exactly they felt they knew exactly what he would do i mean they felt he was authentic and and if you asked him you know what he was for that most people might be against he would tell you you know um a few questions about craft heinz was that a mistake well we'll find out over time but but we did pay too much in my view for for uh for craft we didn't pay too much for heinz uh so when we started out it was originally a non-public partnership between us and uh but we did paid too much in my view for craft and there's not much you can do about things if you pay too much and secondly there's always been a struggle between the retailer and brands i mean if if i've got a terribly weak brand and i want to get into walmart i'm not going to be able to do it you know i mean i have to offer all kinds of crazy concessions you know that and i want to be in walmart if i got i have some sort of consumer packaged goods the negotiation is way different if you have something essential versus non-essential 10 years ago costco tried to get rid of coca-cola costco's got terrific loyalty among customers and you know and their own kirkland brand is a 39 billion dollar brand now and it moves from category to category and they only started in 1992. so they they know brands and they and but in the end they put coca-cola back in uh if it had been royal crown cola they wouldn't have had to put it back in so there's always that struggle between the brands i mean with that and and there always will be but the retailers net it has been moving in their direction uh particularly i think because of the amazon revolution uh first walmart and then oh yeah walmart right and walmart yeah but it's been accentuated i think we have a new retailing environment now i mean it is like it goes from night to day but it it moves somewhat and and brands that people have spent billions of dollars developing and sponsoring tv shows or sponsoring radio shows in the old days campbell soup was always on there with jack benny or something you know when i was a kid and it was big and it built brands and people like obviously like the product too but people are more willing to change and it's harder it's it's it's it's a somewhat different world than what it is night and day i mean you are very unlikely to keep changing brands every day but it really surprised me that that gillette lost position i mean men don't like men don't like to experiment much women are better experimenting but you know if a kid if when you were a kid the gillette cavalcade of sports was your pal and brought you the rose bowl and you know the world series and all that sort of thing you didn't you just shaved with your life the rest of your life and uh and and you still do to a great degree but it's not exactly the same as it was even five years ago or so when we bought crafts you mentioned amazon as a game changer and i have to ask you you haven't bought the stock you're an admirer of jeff bezos a listing of the richest people in america came out he's number one i think your friend bill gates is number two you're number three so you can see what he's done in myriad ways and of course the question is how come you haven't bought amazon is there still time to buy would you still buy it i always admired jeff i mean i met him 20 years ago or so and and and i thought he was something special but i didn't realize you could go from books to what what's happened there no i i mean he had a vision and executed in an incredible way something that it would not have you know that but there's a lot of games i miss i would have missed you know i would have missed microsoft even if i got into no bill earlier or something those just aren't my games i don't worry about the things that i miss that are outside my circle of confidence of evaluating i i do i have missed things that were within my circle and that's a terrible mistake those are my biggest mistakes you haven't seen them and but i don't it's not a mistake because i miss netscape or something like that at all i would say that maybe five percent of the companies or ten percent of the companies at most are within an area my circle of confidence there's something i should be able to understand all right well let me let me switch gears then and ask you about leverage a little bit and corporate debt people are concerned about people are concerned about federal debt at 22 trillion dollars should we reduce let's just say the federal debt and how would we do that well if you're running a deficit getting close to five percent when things are really good you know that that's a new world and nobody's neither the republicans or democrats you're particularly concerned about it and we're not having a lot of inflation that wasn't supposed to happen you know but it's happening that's why i say you don't really you don't want to get hung up on trying to make economic analysis because nobody's any good at nobody you don't get rich doing that if you look at you mentioned that forbes list if you get on the list the number of people who have done that by economic analysis i think you're just about zelda on there okay fair enough um income inequality wealth inequality you've talked about the earned income tax credit is there more to it than that should we adjust tax policy it seems to be going the other way right now well it's going the other way but i think i think i think the earned income tax credit is the best way to put money in the pockets of people that don't fit well into the market system but that are perfectly decent citizens and that have made a good bit of the success somebody like i've had with berkshire or something possible it wouldn't have happened without the america we have and if you go back go back 200 years and we're all working on 80 of us are working on farms the person that's the best at that working in that farm whatever it may be is worth maybe twice the ones that's the worst you know i mean that's the difference between super talent and no talent in the farm economy picking cotton or whatever it may be now if you're the best middleweight fighter in the world you know you may get 20 or 30 million dollars and and and if you are just a good citizen raise nice kids help in the neighborhood and everything else but you don't have market related skills you'd be you'd be good on that farm still and you would be earning something comparable to most of the people around you but you don't have something now that as it gets more and more specialized and it's going to continue to get more specialized you want two things for that person you want to have a decent life i mean they live in a country with 60 000 of gdp per person you want them to you want them to have a decent life and they can i i also think you want them to have a feeling of accomplishment so you want them to have a job assuming that they're not handicapped in some way you want them to have a job but the minimum wage would be one way say well we'll make sure that they have enough money in their pocket but that's got a lot of effects in disturbing the market system they just need more cash they don't need a higher wage they need more cash in their pocket and and the government at a relatively low cost can provide a decent living for anybody that's living that's working 40 hours a week and has a couple of children and we've gone in that direction and it's sort of bipartisan i mean i find both republicans and democrats for i think it would be better not to have one annual payment you know that they get it monthly and i think there's various things you could do but you want it you want them to feel part of the system and you want to get them have them get as as more and more of these golden eggs are laid you want them to get get get a little more of their share i mean if we don't do that and the democrats win it's possible we get you know big taxes on wealthy people free college for all and and those are bigger plans you want you want more money in the pockets of every everybody's willing to work or is unable to work and and we can do it a rich family would do that you know if i had six or seven kids and i had some business i wanted to pass on you know you'd pick the most able person to run it because that's the market system to do that but you make sure that all seven of the family participated you'd give more to the one that you might give more to the one that that that kept producing the golden eggs you would but uh you wouldn't just say to the other you know the one at the lowest end who might be the best kid of all in most respects you know he's the one that shares with everybody and there's all kinds of things you know and you wouldn't it wouldn't say to that emperor that you know too bad but that's just the way the market system works you know but go get your have your spouse get a job and look for housing someplace right why don't we do uh update about the health care initiative which now the company has a name yeah haven was that your idea no no sometimes no i didn't worry about a name we could have gone on as a no-name operation for 10 years as far as i'm concerned no that is we've got a wonderful partnership in the sense that that it's got raw it's large and has reasonable market muscle with them more than a million employees among the three of us we've got three ceos that can make things get done in organizations that so are so big that normally they they wouldn't get very bureaucratic you know i mean you know if you tried to do this with many big companies you know get up legal weighing in and you know and and public relations weighing you know we don't have any of that stuff they may have them in certain areas but but i don't have to but jamie isn't going to worry about doing that sort of thing and neither is jeff so so we've got a unity of commitment and an ability to execute on the commitment the only problem is you've got a 3.4 trillion dollar industry which is as much as the federal government raises every year that that basically is feels pretty good about the system they as we went around talking to people to find a leader for the group for example you know everybody says you know the system you know it turns out very good medicine but you can't go from five percent of gdp to 18 you know without without really making you less competitive among other things in the world so everybody thought the system needed some adjustment just not their part of the system and that's very human i do the same thing i'm sure if i was in the same place so it's there's an enormous resistance to change while a similar acknowledgement the change is will be needed and of course if the private sector doesn't supply that over a period of time you know people will say then you know we give up we got to turn this over to government which will probably be even worse how often do you talk to jamie and jeff about it i know todd combs i think is your point todd really does all the work at our but if this works give todd a hundred percent of the credit from the from the berkshire standpoint does haven have to buy companies to gain expertise and what do you no the plan is is to support uh a very very very good thinker on this subject who's once is a practicing uh physician and who commands the respect of the medical community to in effect figure out some way so that we can deliver even better care and have people feel better about their care too i mean they have to perceive that they're receiving better care over time and and and stop the march upward uh of cost relatives to the country's output we've got this incredible economic machine but but we shouldn't we shouldn't be spending 18 percent when other countries are doing something pretty complex in terms of doctors per capita hospital beds per capita the very top stuff in medicine i think is very much concentrated in this country and that's great i want us to be the leader but i just don't i think we're paying a price if we're paying seven extra points of gdp that's 1.4 trillion a year you know is the administration focusing by focusing on drug prices is that sort of a rabbit hole is that missing the bigger i mean they they're trying and and and congress generally i mean you talk to the average congressman that they re they regard as a problem uh and and they may and they see specific instances you know of drug prices or something like that but it it it's a big problem to change i mean the trouble is it intersects in so many ways and that and that's why uh we've got quantity heading it and we've got three biggest eyes organizations backing him we're not trying to do it to make money i mean that is not a goal that we end up with some business that that we make money off of and will he be talking to health insurers for instance well he'll be talking to everybody but it's it is his game plan is not something we're going to try and lay out because it it's in his head to some degree i mean obviously we selected them by by hearing and and reading and so on but uh uh what he's done but he'll learn as we go where can we we will conduct certain experiments or he will you know and and try out a community where one of us has a lot of employees maybe in there's various ways to experiment shifting gears where do you find things like that abe lincoln tail and leg quotes i mean you read bartlett's book of quotations probably 50 years ago i looked at a few bartlett's quotations but but i read i read a lot and you just remember these things and applause well if you're 88 years old i mean i'll remember something oh you don't remember what happened yesterday but you remember the old stuff you know you've got a lot of interesting quotations in your head you know nothing like you do it that's that's great okay so one company you invested in um was ge yeah and you did well with that investment and yeah yeah i was too early actually if you look back uh i was very active in the last half of september and early october and then i wrote that article in later october and i knew it was going to get bad i wrote the article was going to get bad but i didn't think the stock market would react as much as it did between then and march so i had more or less used up our powder well before the bottom was hit it's interesting how have you avoided not getting back into ge more recently i mean i'm sure that they've reached out to you everyone says why doesn't warren buffett invest in ge and save it and take it to the promised lands this great american company well actually i think larry actually is doing a good job today harry coleman said dana hurt yeah larry hope but to dana uh is a good sale and i think he's his priorities are straight and i think he's a very able guy and he's on the right track and i'm i'm a fan of ges in the sense that that uh we're a big buyer from them we're a big seller to them i've known the managers you know i mean jack welch is a very good friend of mine and we don't agree on politics 100 but we have a lot of fun together and i love the guy so i've got a great desire for ge to do well it hasn't it just hasn't looked that attractive to me right you talked about the groves of trees in the letters shareholder one was the third grove which was sort of the in-between stakes yeah the equity interests yeah is it is it the case that those are sort of not the healthiest grove of trees why would that be no those are the pilot flying jigs very you know they they're companies that under gap accounting we have to record under an equity method we own more than 20 but we don't control them and so it's it's treated under gap accounting as a special category and and and it it didn't fit well in the other growth so i had to make it a separate grove by itself it's not it's not it's not that significant a grove you say that the the sum of berkshire is has a greater valuation than the party that is true did you ever try to calculate that how much is that well it depends on circumstances i mean there's sometimes when the float from insurance can be very valuable there's sometimes when the ability uh to use production tax credits we'll say in the utility business but have them on our as part of our consolidated return helps but that varies a lot it it but it is a plus and uh we can move capital we'll take a business like see's candy which we bought 40 odd years ago it's a wonderful little business it throws up capital we've tried 50 different ways to expand geographically and do all kinds of things it doesn't work and we'll try it again and it won't work but uh we can move that capital to help buy the nsf railroad or do all kinds of other things so we've got a seamless and and and tax efficient way of moving capital uh where it's needed and we've got some companies that really chew up capital and we've got others that kick it off and and and we can move it from one pi if you try to do that with your investments you incur some taxes as you go along doing it and it's less efficient than what we've got you talked a lot about um the tax cuts and the benefits to berkshire you didn't really get into the costs of the tax cut which surprised me a little bit what what are the are there costs i mean is it just free money well it makes a difference the tax cut we get for example our utilities as i mentioned in the report that goes to the customers that's just the nature of utility regulation but but net we were a significant beneficiary from the tax i mean basically let's just say we had one class of stock we've got two but stock you and i own a business together and we think we own all the stock but the truth is before the tax cut the government had a 35 percent share of the stock on income now i didn't have a share of the assets but had to share the income and if it wanted to change it to 40 it could have changed it but fortunately it changed it to 21. and if we had a private business if we had a mcdonald's franchise together or an auto dealership together you know the third shareholder that invisible shareholder the governor just handed us back a bunch of the shares of stock and and uh and and our shareholders benefited and a lot of other shareholders benefited right you talked about uh ajit jane and greg abel saying that berkshire blood flows through their veins have they made a difference since they become vice chairs and then are they like warren and charlie no they don't they don't have the interaction they each run a separate business in a second ajit does not think about the other businesses he thinks about the insurance business and greg does not think about the insurance business at all and and i think about the money and the capital and so on but they uh they're running two very big businesses i mean the jeet's business you know has uh you know all told at least a couple hundred billion of assets you know and and and greg's business has 150 billion of revenues i mean these are they both would fit up there toward the top 10 you know or so in the country uh in terms of value so uh maybe the top 15 uh but they're they're very big businesses but they're not exactly like you two guys it's not no no no charlie and i have a partnership thinking about the whole place and we've done it forever you know and uh and we still do and todd and ted i didn't see them mentioned well they they they they have 13 billion dollars each including pension funds that uh our pension funds that they they run and and uh so the 173 billion we had at year end in equities they had well we had 173 bucks we had another 8 billion in pension funds so 180 or so they had 26 between them that they're managing they got total discretion on that they don't ask me at the month end i look and see what they did they they don't do much they don't do a lot of trading or anything but i i look to see what changes they made and todd for example i mean he made a couple of small investments in in private placement type operations and i know what the businesses do but i can't tell you their names that's his baby was one of those uh you made this investment in oracle and then you sold it was that something they did no that was not something they did that was something i did yeah and you said you didn't understand it that's why you sold both then why'd you get it in the first place yeah well that's that's a good question to which i do not have a good answer i know i i see develop i know enough about the cloud to know i don't know enough about the cloud right okay um so barclays put out a note they said they were lowering the estimates for berkshire for the eps do you read that stuff no well i mean i may read it accidentally but i don't seek it out to read i'll put it that way but it just doesn't make any difference at all i mean if i spent time reading that i wouldn't have time to read 10ks and we're not going to do anything different i don't know what we're going to earn as i put in the annual report and i really think this is unique i mean we do not prepare financial statements monthly for berkshire and there's just no other company would do it but there's no sense doing it i know i know where the money is i know what i know how the companies are doing generally but what difference does it make because i'm not going to try and hit any number for the quarter by you know having a sale on insurance or doing something even worse so it it and charlie i mean he knows he knows where we stand and we know what businesses are doing well which aren't and we certainly know where the money is another one ubs survey of berkshire investors says the five most important things to them are succession investment performance m a opportunity share repurchase insurance margins do you read that or no but i don't disagree i mean i'm glad somebody understands us your own investors yeah um well that's important you know 54 well to go back to when i started my partnership in 1956 that berkshire came out of there were seven people sitting there at a table uh having dinner uh relatives primarily and i i said here's the partnership agreement it's done under nebraska law it's four or five pages you don't need to read it but i said here's a little half page what i call the ground rules and i want you to read these and if you feel okay about that about the interaction what the expectations are and all of that sort of thing then we'll join forces and if you don't it's fine other people have you know but we don't we shouldn't be partners i mean you know if i'm gonna have a partnership with somebody i want to be compatible it is you know and when you have a public company you can't control who comes in i can't control some guy that comes in and thinks we're gonna pay big dividends or split the stock or something like that so by my actions and my communications and everything i want to attract the people that from the public market that i want and i want to keep the others away costco was built saul price who started the price club that thing he sat down and figured out the customer he didn't want and he set up a system that would keep away the customer he didn't want who did not want he didn't want somebody buying a quart of milk with somebody behind them with a with a basket of 200 worth of goods waiting for that so we put in a membership fee and by putting in a membership page he killed all the drop in business the business that belonged to the 7-eleven we want berkshire to to keep out people who have expectations about us that are different than ours i mean good for them and i hope they find somebody they said but if you're going to run a church you want you want your seats to be filled by people that are generally want to listen to your form of religion then and you don't want it to change every week and say gee i need a new group and i'll go out and talk to a bunch of investors and get them to come to my church this sunday because there's only so many seats in the church there's a million 645 000 or so a equivalent shares and those are the seats and i want them occupied by people that are on the same page i am the church of berkshire um your seems like you've got a big weighting in financials and of course you finally invested in jamie dimon's company why banks right now their businesses i understand and i like the price at which they're selling relative to their future prospects i think 10 years from now that they'll be worth more money and i feel it's a there's a very high probability i'm right and i don't think they will turn out to be the best investments at all of you know the whole the whole panoply of things you could do but i'm pretty sure that they won't disappoint me is climate change changing your insurance businesses no it doesn't change the insurance business does it change modeling or something in the business it would change our insurance business if you're writing 20-year policies i mean if there was something that changed life mortality adversely to the interests of a live insurance company you're stuck with a policy for 20 years if you write the life insurance policy and you know you you'll keep paying your premiums if it's adverse to me that's what's happened in long-term care insurance for example but when you write a policy for one year at a time you see what the developments are and if you know it cars for example are much safer to drive than they used to be there used to be 15 deaths per 100 million miles driven now there's a little over one on the other hand they become much more expensive to fix i mean that little little side right inside view mirror which used to cost 10 bucks you know now a thousand bucks or something like that so so you have things that are changing in terms of if you're writing collision experience insurance you got to allow for the fact that that that that windshield the bumper all kinds of things are the uh the side view mirror and all that are way more expensive but if you're writing if you're writing liability you know that that people aren't going to die as often so climate change is like climate climate's been changing but the truth is that you now can buy uh really big catastrophe limits cheaper than you could buy them in 2005 or thereabouts uh allowing for changes in the dollar and and concentration of population so so so far rates have come down that's the reason we've gotten out of the cat business to a great degree we were the we were a very big writer of cat business 10 or 12 years ago we aren't out of the cat business because of climate change we're out because the prices aren't right and the world will change and that's got very serious consequences but it won't change that much from year to year that you know we've done very well during a period of some climate change you've talked about technology advancing faster than our ability to understand it and i'm wondering if social media and facebook and google and russian trolls coming in and is that maybe an example of that are you still worried about that problem well i think cyber poses real risks to humanity forgetting about the problem of even misinformation i'm just thinking of you know we have railroads running over 22 000 miles of track and some of them are carrying ammonia and some of them are carrying you know chlorine and things we have to carry them we have no choice about that i'm required by lawn to carry them and uh you know i would rather i would rather do that in a non-cyber world than a cyber world and i would there are all kinds of things i the problem about something like cyber is that it's it's moving and it's it's just unpredictable whether you'll get some crazy guy like stuck the anthrax in there you know what they can do becomes magnified i mean when when uh when you saw what you know 19 guys did you know 9 11 i mean it tools in the hands are potentially in the hands of either crazy individuals uh crazy groups or even a few crazy governments you know are really something and and and and we don't necessarily know what all the tools they have are and that is moving all the time i mean you know again einstein said he said i know not with what what what what weapons world war three will be felt fought but world war iv will be fought with sticks and stones you know i mean it's it's a dangerous world i don't know if you've been following this uh warren but um what do you think of elon musk's behavior as a ceo well i think it has room for improvement now he he and he would say the same thing you know i mean it's just some people have a talent for interesting quotes and others others have a little bit more of a blocker up there that says this can be in the problem and but he's he's a remarkable guy but uh i don't see i just don't see the necessity to communicate you know i've never i i think i've got seven tweets because a friend of mine signed me up for it and she's called me about a hundred times say can i tweet this or that and i said yes to her seven times i guess or something like that i i've never actually written one myself i i don't even know how to do it have you talked to elon ever uh he joined the giving pledge so once or twice but that's a lot of years ago uh you know seven or eight years ago i'm not i'm he hasn't come to our annual gathering so i haven't seen him for seven or eight years so uh let's talk about this uh this trade war that's been going on a little bit with uh china and i guess i'd like to ask you do you think that donald trump was right in calling out the chinese government and basically putting them on notice i won't have any comment on on on on that in terms of political uh uh activity i don't put my citizenship in a bind blind trust so when the election comes around i'll i'll do something on the other hand people will interpret things i say about any any president you know as to some extent coming from berkshire and they'd and they don't come from berkshire i'm just an individual so i i i you know i think uh i'm glad to talk about china but i can't talk to you about that part of it fair enough i mean do you think there was room for improvement then in terms of the trade relationship between china and the united states well i think that china and the united states absolutely are destined to be the superpowers you know beyond my great-grandchildren lives and and and will always have the competitors and we'll be competitors in in business we'll give competitors and ideas all kinds of ways and there's no other way it would be and we just have to make sure that that competition doesn't get get us to a point where we don't realize that the best world is one in which both the united states and china prosper i mean that we do not want to have an island of prosperity in the rest of the world uh envious of us in a nuclear age and and china doesn't russia doesn't i mean we already recognize the dangers of letting competition get out of control and and become you can you can be competitors without being enemies and and that's that's what all powerful nations have to realize over time i mean it's different than 200 years ago when you could have some dominant uh country and then they may have done some things that you didn't like but it didn't threaten the existence of the world you really threaten the existence of the world as we know it if important countries do not constantly recognize that they can compete they can fight over certain things but they can't regard it as essentially the equivalent of war here's a question from kevin chen who is a berkshire shareholder and an nyu professor and he says and this is sort of along the lines of what you were just saying warren but do you think the u.s and china will be able to resolve their differences or are conflicts unavoidable well i don't think conflict should run the boy level but i think i think it has to be active thinking on the part of every hugely powerful country and russia is hugely powerful i mean ninety percent of the nuclear arms in the world are between u.s and russia so they they have to recognize that the best world for them is one where they don't try and grab all the apples basically and we have to recognize that and and we can't in the united states we can't think that either our ideas run the world you know or uh uh we start getting aggressive about things and china can't think that russia can't think that and and that's obvious you just have to make things you gotta be sure things don't escalate and uh you know world war one you know with an archduke you know i mean you get you get these you can get chance incidents and and you really want to uh i asked one of the presidents one time you know in terms of what he would do if awakened in the middle of the night with somebody coming to him and saying absolutely and somebody else has launched you know and would you launch on that and you've got 10 minutes to decide and i wouldn't want to have that responsibility but but you want to make sure you don't get to that point right right would you ever make a big acquisition in china and if not aren't you missing a huge portion of the answer is we would yeah we would have you looked uh we've been made aware of some things yeah are you concerned um on the flip side of the coin are you concerned that the the rule of law is different that uh the accounting might be opaque well i'd i'd want to be sure i understood the accounting obviously some businesses that'd be easier to do than others but but i know the laws the customs the accounting the people better in the united states than anyplace else so there's some small hurdle in in many countries to get over which i can get over i mean but but i just don't it's just not as easy as looking at something where i already know the answer you know from previous transactions or something of the sort so so it it's easier uh to make a big acquisition in the united states i have to do more work uh if i'm looking beyond the borders but i love the idea of doing it when we made the acquisition in israel a dozen years ago you know i didn't know what the tax rates were there i didn't i didn't know what corporate law you know i was i i suspected that it would all be answered satisfactorily which it was but i didn't just automatically know it it seems like you're more open about doing a deal in china than in previous conversations i don't think so no i uh no it no i i i i'm open yeah i i we we made you know we made two decent-sized stock acquisitions there and that worked out fine those are well petrol china and dyd uid yeah byd was charlie's but charlie's very well versed on china right um the the trade the u.s trade deficit has been widening and of course a lot of that has to do with our trade with china is that something that worries you well i wrote an article about it for fortune in the the trade situation many years ago and when our deficit got to be large in relation to gdp i don't think it's i don't think it's essential to have a trade balance but i i think that if a trade deficit gets large and and it looks like you have no way out from it that that can be a real problem over time i mean you know you're you're shipping little pieces of paper to the rest of the world and they're shipping you goods i mean people are working making underwear or shoes someplace and they get little pieces of paper from us and it gets very tempting if you've done that enough to make sure that those little pieces of paper aren't worth very much over time when they want to cash them for something so and you don't want to have we don't have any problem running trade deficits but but if we ran really large ones and we sort of worked ourselves into a box where they were we didn't really have a solution to get the numbers down it could be a problem and i wrote about it one time but it's it's kind of a nice thing actually just i mean wouldn't you like to have something where you should just send out little pieces of paper and somebody keep supplying you with their food or your you know what i'm living it you're all right exactly we call them credit cards yeah yeah exactly yes yes okay uh and last question china is facing its slowest growth in nearly three decades the leadership there lowered the targets i think to around 6.5 6 are you concerned about this slowing growth and the impact on global markets well i don't worry about in terms of global markets i mean china's going to grow a lot over time i mean they when you think of what's happened well this is 1949 or where you know but there's been nothing really like it i mean he had 20 percent of the world's population at that time perhaps really hadn't remotely achieve their potential i mean the intellectual capacity they had decent soil all kinds of things i mean and and and what's happened there almost is beyond belief and and that game's not over but we've had incredible developments in the united states i mean you know real gdp per capita is six times what it was the day i was born in the united states six times and we thought we were pretty confident and everything no my parents wouldn't have believed it i mean they would have thought you know that this kid has really got it made you know i think more in the united states that it was true i mean we had this tailwind and and china's had a hurricane behind it you know in in the in recent decades in a good way absolutely because you're comparing to the tailwind of the hurricane on your back yeah at their back and and and they've they have found a way of life that is dramatically different than existed for the billion there was a billion then maybe maybe a billion two or three whatever it is now and and they have changed uh a country really of size that's i don't think there's ever been anything like it we've done it too but it took a took somewhat longer i mean it was more stretched out it was a remarkable period but but uh you know when you go to i first went there in 1995 and then they regarded as a miracle then i went back 10 years later it was a whole different country beyond that warren buffett thanks so much for joining us i'm andy serwer you've been watching influencers we'll see you next time a business empire needs decisive leadership but also a steady hand for over 40 years charlie munger has been the latter for berkshire hathaway as berkshire's vice chairman the 95 year old monger is warren buffett's right-hand man he's also an investing legend in his own right monger ran a firm in the 1960s and 70s that scored returns of over 24 per year he's here to talk about how to make investment decisions and life choices that help secure prosperity and longevity [Music] [Music] i'm andy serwer welcome to influencers and welcome to our guest vice chairman of berkshire hathaway charlie mugger charlie nice to see you della to be here so you just had the annual meeting and i have to ask you what your favorite moments of that were what i like is that both the shareholders and the employees of berkshire are so extremely enthusiastic and it's not just that they've made a lot of money and have nice careers they think they're on the right side and you know they come there to hear you guys talk all day and yes like a cult it's like a cult yeah in a good way though yeah a good cult yes a good cult okay i mean in the the stuff that they hear some of it's new some of it's old and a lot of it is common sense and you were talking about it's common sense right but of course when people use the word common sense what they mean is uncommon sense because the standard human condition is ignorance and stupidity and so they say old joe has common sense what they mean is he has uncommon sense i guess it's a bit of a misnomer then but it really is so yeah why is it that people can't think clearly about investing or decisions in their lives well they don't think very well about sex or gambling either you know the standard human condition is a lot of miscognition and there are ways to make hay of that or yes you take advantage of other people you can improve your own life by eliminating your miscognitions let me shift gears a little bit charlie and ask you about uh the u.s economy and what is your take on where things are right now well obviously they're booming but you know the economy sometimes booms and sometimes it doesn't and you have to live your life through both episodes and our attitude is we just keep swimming and sometimes the tide is with us and sometimes against and but we keep swimming either way are you surprised by how long this expansion has lasted of course it's lasted a long time but what was really remarkable is that we never printed money so much and spent it so fast and bought back so much debt public and private so this is total terror incognita in economics and nobody knew for sure how it was going to work so was it risky then of course it was risky but it worked and i i don't think they had much else they it would work they weren't set up to do stimulus too much controversy democratic inertias the very so they had to do something and all they had left was just to print money and start buying things and that's what they did and it turned out to be a very wise response and what's even more remarkable is that both congress and the presidency and under both parties made the same decision they all cooperated it was the last time but where is that going to leave us ultimately well it left us licking the great recession so maybe we want to try cooperation again since it worked so well once how much is president trump responsible for this current economic situation well i think he deserves some credit but a lot of it just happened economic cycle yeah and the decisions of his predators predecessors um what do you think about the president's um campaign to lobby the fed to lower rates or keep rates low well i think presidents have always done this if you're a politician in a democracy of course you want people to burn money and spend it and of course it's not a good idea the best example probably in the whole world is singapore which has zero debt and never prints money and spends it and is one of the most successful places on earth i wish we were like that but but there's only one singapore well some people now say that federal debt is not a problem at all well if you believe that you believe the tooth fairy because then we don't have to have any more taxes ever we'll just spread money and live happily ever after it obviously won't work so there comes a point when printing money is counterproductive are we at that point or you can no i don't think we are at that point but nobody knew where the point was going to come and we don't know now none of these people who are so pompously sure of things because we all want reassurance and so so they provide it but nobody really knows how much of this is too much and do you have any thoughts on jay powell and the job that he's done well i think a lot of him i think he's as good a choice as we could have made one consequence of this expansion or actually precedes that it's just something that's occurred in our economy over the past 50 years really has been wealth and income inequality yeah one do you see it as a problem two if so how do we address it well it's a problem if enough politicians are screaming about it that makes it a problem if it weren't for that this one will go away by itself it happened by accident we were in desperate trouble we were on the eve of a great recession that could have been a great depression and then followed by the rise of people like adolf hitler and so on and so on so we faced a real catastrophe the only weapon they had with this huge was to print money and spend it and they did it well of course and they drove interest rates down to zero or real interest rates well of course that lifted asset values for the people who were already rich nobody was trying to make the rich richer it just was an accidental byproduct of a correct governmental decision made on a bipartisan basis and since it was a weird byproduct that occurred in a weird time it would go away by itself a new course it would go away by itself sure so there's no reason for people that are screaming about it are idiots it's going to go away by itself now that's not to say that we can't raise the minimum wage a little and enlarge the social safety net a level we should be doing that as we prosper both parties agree on that what do you think about the proposals put forth by alexandria ocasio-cortez and elizabeth warren that would sort of greatly address this problem well i don't consider those two necessarily the best prescribers in the world they're kind of likable i particularly kind of like elizabeth warren she's got a manner that appeals to me really but i don't agree with her her attitude i don't think she's studied adam smith enough and what about aoc do you have any take on her i don't think she knows who adam smith was i want to ask you just a few more questions about politics and we can talk about the markets in berkshire a little bit more what about the situation that we find ourselves in with the mueller report and the way congress the democrats are fixating on that and the president's on the defensive what is your thought thinking on that i tend to avoid the whole subject just as i ignore tied with me tied against and just keeps swimming both parties are so partisan now that they're blinded by their anger and i don't want to be blinded by my anger so i control it and i would recommend it to both parties i think they should all cool with why are we so divided up charlie right now in this country well anger when you pound on one another feeds on itself that's one of the great difficulties with it it's irrational and it feeds on itself so i liked the world when it was dwight eisenhower against adlai stevenson and more civility and ronald reagan and tip o'neill got along and a lot of was done my war was a bipartisan war and in the aftermath foreign policy of the united states was a bipartisan policy i like that world better i hate this extreme hatred on both sides will we ever get back to those days or get to new days where we don't have the hatred probably if you live long enough a lot of good things happen a lot of bad things happen fair enough it's my understanding charlie that you were instrumental in helping warren get away from focusing on the cigar but form of investing and looked more towards companies that i guess you could call them branded companies better businesses better businesses right yes um how did you help him make that uh decision well it was perfectly obvious and he made so much money in the other technique that it was hard for him to leave something that had worked so well but it was not going to scale so when he started looking for investment values and great businesses that were temporarily under pressure it changed everything for the better now we could scale up to the big time are apple and amazon technology companies are they brand companies both um someone told me they asked warren if he could buy one brand this was about 40 years ago what that company what that brand would be and he said gillette which makes sense what would that company be today coca-cola still if you take the amount of coca-cola drunk in the world in the main flavor it's one hell of a brand now it's such a different product from this stuff on the internet i don't have the same my judgment would not be as good on the internet as it is on coca-cola um i want to get back to apple tim cook was at the meeting yesterday did you get a chance to speak with him i did can you tell us what you guys talked about nothing we exchanged pleasantries but he's a wonderful guy and of course it's a huge record that he's building um let me ask you a little bit about craft heinz and that situation during the meeting yesterday we found out that the chief marketing officer was leaving the company did you know that and what does that mean for the company i knew nothing about it in advance what happened there was very easy the truth of the matter is that heinz ketchup was a stronger brand than craft cheese and they paid more for it so one acquisition worked brilliantly and the other worked poorly well welcome to adult life it happens to everybody you mentioned that you think that uh tim sloan could still be or should still be the ceo wells fargo yeah if i were running the world tim sloane would still be the ceo of wells fargo well why did he leave that well he made this decision but he was being pushed hard he did it for the benefit of the company it was just so much of this partisan hatred was washing off against wells fargo it's understandable he was there for a long time the company had defrauded its own customers nobody was seemingly being punished for it in some people's minds listen to ceos left under pressure i regard that as a lot of punishment so i don't think these people were failing with their anger they removed two ceos and so and but now they went out they it's like tim sloane was not responsible for the crazy incentive system that created the trouble so they threw him out the way you'd take out the char woman when you read a gambling establishment getting back to coca-cola you mentioned that it would be a bad idea if it got into cannabis i mean why not doesn't it make sense because it's such a wholesome brand associated with happiness why do we want to associate it with a recreational drug that would be a terrible idea um what about um boeing and the 737 max i mean they're going to fix that would you would you go on the plane after they said it was fixed yes of course and they will fix it well but i don't think it was really all that excusable that they made the mistake i want to ask you charlie a little bit about that was a serious mistake you know saying they're still working on it yeah they'll fix it boeing probably has the best safety record in the world if you take 60 years and this was a very unusual lapse there may not be another one for 60 years is that lapse symptomatic though or indicative of us developing software that's too powerful and we don't understand the consequences of it no i don't think the problem was that i think it was just an absolute lapse of being a big bureaucracy you also mentioned at the meeting yesterday doing billion dollar deals overnight with very short contracts yeah we've always done that has that ever blown up on you i can't think of a single example in my whole life where keeping it simple has worked against us we've made mistakes but they weren't because we kept it simple and that's simple it i would say that the chief advantage that berkshire has had in accumulating a good record is that we have avoided the pompous bureaucratic systems we've tried to give power to very talented people and let them make very quick decisions um i want to ask you about something that's talked about all the time with you guys which is succession and you talk about again you talk about that all the time and this has been countless barrels of ink spilled but if you're getting older how do you make the decision to step back if you may not have the mental acuity to make that decision well i think you'll be surprised at how well both warren and i are capable of stepping back when when we feel our powers are too far deteriorated have you talked about that sure and warren has told people to speak up when the time comes if we've been rational all this way do you think we're not going to try and be rational right to the better end is the process i mean we're sort of in the middle of the process you've been giving more and more control or authority to jeet and greg and todd and ted so it's sort of a continuum a process like that of course and by the way it's working fine it's amazing how good this next generation is they're steeped in our non-bureaucratic ways there's these big bureaucracies they think the work is done if you get it out of your inbox and into somebody else's inbox that is not getting it done getting it done is when it's done not when it's in somebody else's inbox and if everybody's in a big committee meeting all the time you're worn out at the end of the day and you haven't done anything are ted and todd making all the stock choices at this point no of course not warren steps in and does big things where do you think charlie the biggest opportunities are globally right now well i don't think we have a master plan of knowing where the opportunities are we're trying to find intelligent things to do with a torrent of surplus cash and we've always had a torrent of surplus cash and we're always looking for intelligent things to do with it and if we find things that are intelligent to do we do it and if we don't find anything we let the cash build up what the hell is wrong with that not much yeah not much is right so i know that you guys have talked about england or it seems that you have because uh warren talked about doing this article in the ft is basically a way of signaling potential interests given that brexit may create some opportunities is that the case what the hell do i know about brexit i don't even know how i voted on it if i were in england yeah i just don't i don't know much about it will react opportunities wherever they are and we regard the vicissitudes of politics as it's just what they are vicious dudes but this is a little bit more than a vicissitude to drop out of the european union i mean you're not guessing it isn't a good deal this country was enormously helped when we put all the colonies together we had the internal tariffs against each little colony the united states would not be as big as it is so it's understandable what europe wanted to get together in addition to the advantages they got from the free trade they'd had a long history of having wars and we all are sort of one big place trading with one another it'll be safer those were very good ideas i'm not quarreling with the basic ideas on the other hand if you have unlimited immigration from one country to another that caused us lots of strains look at germany merkel brought in more immigration than her people she wanted she was leading a parade and she looked back and know what he was following so these very few people want unlimited immigration of a different culture it doesn't we made it work in america but we had a vacant continent to work on it was easy bacon and rich oil minerals wonderful soil should we still be letting immigrants into this country i think we should have way more control of our borders than we do isn't that donald trump is right on that and i think the democrats are committing suicide by being so they hate him so much that they're against him even when he's right it seems like the borders is conflated with immigration policy sometimes though right i mean of course they are yeah and and but i think we ought to have some control over immigration some effective control i think the bulk of the people want to be very nice to the people who are already here including all the people from latin america but they want more control over the inflows are you concerned about this rise of somewhat nationalistic leadership around the world like in turkey in uh brazil in china in the united states arguably well take brazil who in the hell would like brazil it's a great climate and a great country but they're screwing it up to a fairly well you mean the new leader or just what's happened what's happened generally yeah okay so does that require a strong man to take over though well i don't think i've got deep knowledge on exactly what works well in the internal politics of every other country who would have guessed that the chinese communists would improve their big country as much as they have in the last 30 years that surprised you well they didn't the first 20 years they had the cultural revolution it was crazy and now they have one of the greatest success records in the history of mankind i don't know about you but i did not predict it i didn't but but what so what is the secret to china's success then they copied singapore which i remember the communist leader said i don't care if the cat is black or white i care whether it catches mice and they copied a very wonderful famous chinese man in singapore and lo and behold they they found the right they found the right chinese leadership outside of china which amuses me now he was chinese but look at the way it worked in the whole history of the world no nation that big has ever advanced that fast and they did it by having a bunch of poor people save half their income they did not use the wealth of the rich world to get ahead they they use the savings of poor people i am a huge admirer of what the chinese have accomplished and i give if you ask me who is the one man who did the most for china it was len kuan yew lee kuan yew of singapore they copied him are you still sanguine about the future for china right now there's a lot of concerns about slowing growth and leverage in the system i'm quite optimistic they've been succeeding for a long time sure they have ups and downs and they make mistakes as well as good decisions but if you average them out the chinese are getting ahead they're not moving backward what do you think the economic relationship between china and the united states looks like say two years from now well if both sides have any sense they will be better and better friends and adjust all differences it is start craving madness on either side not to make a friend of the other really powerful nation on earth i want to ask you a little bit about some silicon valley stuff i mean you said yesterday you were ashamed of missing on google yeah i am we could see if we looked carefully at our own companies that their advertising is working way better than other advertising just we weren't paying enough attention so is it too late i don't know i don't know everything you know well we'll leave that aside but you know you look at these uh tech investments so they're apple now amazon did you know about the amazon purchase were you involved in that decision no of course not um i've never owned a sheriff amazon i am a huge admirer of bezos i think he's been sort of like lee kuan yew he's a leader that's all by himself he's been just a perfectly amazing human leader but it's always been too complicated and uncertain for my particular temperament it's interesting and i find other things to do that'll work fine someone was telling me the other day that they thought that you could actually sort of think of apple and amazon not as technology companies so much but as big branded growth businesses which would be something that would be appealing to you oh i think they're both right brands and technologies and it's hard to separate the effect of one from the other okay um and as far as what's going on in silicon valley right now with ipos unicorns going public and not having any profitability or any prospect of profitability in the near term what do you think of that situation well there are a whole lot of things i don't think about and one of those companies that are losing two or three billion dollars a year and going bubbly it's it's not my scene have you looked so you're not interested in uber or companies like that necessarily well i have to be interested when they're that important and sweep the world and change practice but i don't have to invest in everything i'm interested in i'm looking for things where i think i can predict what's going to happen with a high degree of accuracy and i have no feeling that i have the ability to do that with uber right i want to ask you um about architecture which is something you've been interested in for a while how did you get interested in that and what is your current um well i had a situation as an architect and it's i've always thought it was the queen of the arts in other words i think architecture does more good than painting her sculpture so i think architecture is hugely important very interesting and does such enormous good when it's done right so i'm a big admirer of of the birth of the potentiality of the profession but i think that i think a lot of people go into architecture because they're sort of frustrated sculptors and they don't think with enough common sense or uncommon sense about what the hell they're doing what are some projects that you've been involved with them oh i've i've built houses i've built office buildings i've built apartment houses i've done i've helped charities and educational institutions build things i built science centers i i do a lot of it i like it is this a creative outlet for you yes absolutely do you have some projects that you're working on right now some of our culture projects what are they about well i'm working on products at ucsb university of california at santa barbara and and uh and it's basically housing but of several kinds i want to shift gears and ask you a little bit about um repurchasing shares you said in the shareholder meeting i predict we'll get a little more liberal in repurchasing shares how much more aggressive will you get and do you think that's going to be a problem potentially with the democrats well a politician that's in the business of howling about something trying to create a sense of outrage they're always complaining about something but and it is true that a lot of people it got so popular to purchase shares that some people purchased them repurchased them even when they were too high priced we will never do that we're only going to buy them back if they're too cheap and but of course that ought to be done if you had a partnership with three of your crippled relatives and one of them needed some money wouldn't you buy out the crippled relative with the company's money it's just simple morality so but i do think it's being overdone by some people and it undoubtedly is being done to prop up values which i regard as an improper use of the share repurchasing technique should there be laws about that no there are laws and and but we shouldn't be telling people what the right price is right um so i want to ask you a little bit about um the social safety net we were talking about and medicare and do you support medicare for all would that be something you'd be interested in well i'm one of the few republicans you'll ever talk to that thinks we should have a single-payer system but not one of the type that we're going to get if you look at the single-payer system of singapore it costs 20 of what ours cost and that's an advanced civilized high-income nation and of course the people are a lot healthier well of course i'd rather spend eighty percent less and have the people healthier and of course i'd like to have american manufacturers not have this terrible burden of unnecessary health costs affects their competitiveness in the world so we have an insane medical system that grew like topsy by accident with the help of a lot of dumb governmental intervention not all of it was done but some of it was and and the system is ridiculous if a young family has to pay a five thousand dollar deductible to have a baby they don't really have medical insurance it isn't just the medicare that's wrong the whole damn system is going wrong and the amount of unnecessary tests and unnecessary prolongation of inevitable death that's going on is a national disgrace of course i don't like it have you ever thought about moving to singapore charlie well no but i'd like to move some of singapore's results into the united states they have practically no deaths from opioids they have a low crime rate they have no debt of the whole country and no no they're doing a lot right i wish to hell our politicians and both parties would spend a lot more time studying singapore but some people say many people say it's an authoritarian government there's no there's a lack of freedom there it's a democracy it just does such a good job the people keep reelecting it that's that i like that result what the hell's wrong with that i was with some people um just a few minutes ago actually and they were kind of recounting some of your zingers do you spend time before the meeting say oh i've got like these six zingers i'm going to get out during the annual meeting think of all the people you know that have tried to take one extra step of falling off a cliff well on that happy note we will conclude the meeting that's just come to you yes i think the meetings work better if they're spontaneous if we were scripting things i don't think people would like it so you and warren don't say anything at all before you sit down zero you have no idea what's going to happen that is correct that's fantastic um so i want to ask you just a question or two about growing up and you were at the university of michigan and you dropped out and joined the army right i certainly did and we all did in those days yeah so how did that did the army influence you well everything influences you and your past life and yes of course it influenced me i never wanted to be in a big bureaucracy i was well toward the bottom i finally got to be a second lieutenant in the army i was way down in the ranks and nobody gave a damn what i thought about any subject they just gave me a little job to do when i was supposed to do it and of course i didn't like that as well as having a freer rain to control my own destiny and so on so i am much better adapted to being a capitalist operator than i am to being a cog in a bureaucracy did you ever get in trouble in the army of course tell us about that well my senior officers could tell i thought they were wrong and i tried to hide it and they could still tell and so of course it i i never got anything serious trouble but they they who in the hell likes a junior officer you look over there and he's plainly indicating he thinks you're an idiot so that didn't work out too well well it worked out all right i did my work well enough so they didn't bother me but it was it was not a medium where i was going to succeed right so how did you figure out a lot of people look at your life and you know would want to emulate what you've done is that something that people can do look at someone like yourself and see your path i mean you're in real estate law been investing what do you even consider yourself a businessman how would you describe what you do well i don't consider myself i think my way of thinking will work for anybody of trying to be very rational and disciplined so i think that much but to flit around to various careers and go into the other fellows professional territory and try and outdo him and do all kinds of things like that i think will not work for most people and so i always tell i'm always being visited by young men who say i'm practicing law and i don't like it i'd rather be a billionaire how can i do it and i tell them well i'll tell you a story a young man goes to see mozart and he says mozart i want to start composing symphonies and mozart said how old are you and the guy says 22 and he says you're too young to do symphonies and the guy says yes but you were 10 years old when you were composing somebody's and mozart says yes but i wasn't running around asking other people how to do it right so i think this floating around business is something not everybody should try yeah i think i think if i tried it again it might not have worked as well you said just figure out i may have been somebody why were you you were lucky yeah yeah i think i had some luck yes well but i i think there's more to it than that i mean where were you yes the combination of luck and skill that's what all good records are right um so let me just ask you a few more questions and do you you eat all that peanut brittle up there right yeah is that your one peanut brittle day or do you yeah really yeah it is so the other 364 days you don't need much of it they put it there i think they it's warren is so business-like he likes promoting peanut butter at the annual meeting well don't the other berkshire brands get jealous and say once you put like a railroad train up there or something like that we got a whole exhibit hall full of other brands promoting one another at the berkshire meeting you cannot claim that we're under promoting i would never claim that but you you know that the koch people and the seized people get special placement up there yes they do but those are two where seas was our first great brand and coke is one of the great it's a great drink soft drink brand of the world so they're entitled to have a a special place do other companies ask to get put up there though well they all push themselves forward as much as we'll let them is that a yes yes they of course they want to be pushed up okay um and and finally charlie i want to ask you a little bit about um philanthropy and you know it seems like warren's been sort of a little bit more upfront about that about that with bill gates and the giving pledge and i know you're philanthropic as well um what is your thinking on that how well i wouldn't sign the given pledge because i've already transferred so much to my children that i've already violated it so i think i'm asking i'm seeking false credit if i join them and say i'm a big philanthropist that's going to give more than half of my wealth to charity i've already given more than half of it to my children so i can't join them it's like coming back from the dead i can't do it but doesn't that make warren mad i mean mad when is warren mad about somebody else's warren thinks that each bird sure otherwise entitled to do with his own money what he damn pleases so let me just follow up on that what you did then what was your thinking in terms of giving them giving away money like that though well it's simple itself i had a wonderful wife most wives worry that the husband if he survives will get involved with some nurse or something in his dotage and the money will go away from the children and i knew that my dead wife would have preferred to have the money go to the children so i arranged that she got her wish right so any thoughts on how uh the meeting is going to be different next year i mean when do you start talking about that or do you even talk about the annual meeting we never talk about it we just do what works as long as it works and when it stops working or it indicates it's going to stop working we'll stop did apple say they want to have some exhibit in the convention center this year i had no discussion with them i don't have any idea what they're doing and do you see a time when ajit and greg and ted and todd will come up there with you at some point i don't know how it will morph i don't think that what worked in one era has to be duplicated in another i don't think what we're doing would work for many people i think it was an historical accident who we didn't do it on purpose we just sort of drifted into it when it worked we fanned the flames but we didn't create it with any forethought and i think some later generation will have some different system i think there's more wiseassery in our meeting than would be appropriate forever and i'm the principal wiseass yeah you are charlie munger vice chairman of berkshire highways wise ass all right thanks very much for joining us i'm andy surwer you've been watching influencers we'll see you next time

Channel: Yahoo Finance

Views: 74,551

Keywords: Yahoo Finance, Personal Finance, Money, Investing, Business, Savings, Investment, Stocks, Bonds, FX, Currencies, NYSE, Equities, News, Politics, Market, Markets, Yahoo FInance Premium, Stock market

Id: Cvef-efSBB8

Length: 150min 3sec (9003 seconds)

Published: Sat Apr 30 2022