(bell rings) - [Announcer] Ladies and gentlemen, please welcome to the
stage Lindsay Bruinsma, an MBA candidate at the
McDonough School of Business, John J. DeGioia, President
of Georgetown University, Brian T. Moynihan, CEO of Bank of America, and Warren E. Buffett,
Chairman of the Board and CEO of Berkshire Hathaway. (applause) - Welcome. Good evening. Thank you all for being here. I must say I am beyond excited
to be here, and that I am in complete awe of the leaders
on this stage and before me. We have our own Dean Thomas
of the McDonough School of Business, Georgetown
President, Jack DeGioia, Chief Executive Officer
of Bank of America, Mr. Brian Moynihan, and though he really
needs no introduction, Mr. Warren Buffett. (applause) My name is Lindsay Bruinsma. I am a second year MBA candidate
at the Georgetown McDonough School of Business, with a focus
on global business strategy and COS marketing. Over a decade ago in 2003 I
was fortunate to attend the International Relations
Program here at Georgetown University for high school
students, and it had a significant impact on what I
wanted to achieve in my career. I've actually been trying
to get back here ever since. And so two years ago when
I decided to pursue my MBA, Georgetown's McDonough
School was unquestionably it. I believed then, even
more now I believe this, that Georgetown inspires
students to positively sculpt the way that business
and society interact. Programs such as the Global
Social Enterprise Initiative, founded by my new friend,
Professor Bill Novelli, have very much made this belief a reality. I am a product of GSEI
and our wonderful sponsor Bank of America, who partnered
with The One campaign last year to provide the
opportunity for five students to apply business skills towards
social and economic impact. Last summer I interned with
Red as a global strategy fellow, Red being a COS
marketing organization founded by Bono and Bobby Shriver under
The One campaign umbrella. Through this opportunity I
was able to implement business solutions in a non-profit setting. And with Red I was able to work
with global iconic brands to take on the HIV and AIDS
epidemic in sub-Saharan Africa through a COS marketing model. I would like to personally
thank Mr. Brian Moynihan for creating this opportunity
as well as Ms. Anne Finucane of Bank of America, and the
entire GSEI family including Executive Director Ladon Manteghi. I would also like to introduce
and thank our President, Jack DeGioia, for his unwavering
embrace of such programs as GSEI and for his continued
dedication to community and service. Since 2001 President DeGioia
has encouraged engagement at both a local and global level. Through this he has given
students not only the opportunity to follow in the footsteps of
some very impressive leaders, but he has given them the
opportunity to actively shape the new face of global leadership. And with that please
join me in introducing Georgetown University
President, Dr. Jack J. DeGioia. (applause) - Thank you very much, Lindsay, well done. Well thank you very much,
Lindsay, for that introduction and for the example that you
set through your commitment to social enterprise. We're very proud of you and
your fellow students who are engaged in this very important work. Well it's my pleasure to have
this opportunity to welcome you all to Georgetown this
evening for a very special conversation between Warren
Buffett and Brian Moynihan. We're deeply grateful to them
both for sharing their unique experiences and insights
with us this evening. I'll have the opportunity
to more formally introduce our guests in just a few
moments, but first I wish to express my gratitude to some
of the individuals who helped to make this evening possible. I'd like to begin with the
Dean of the McDonough School of Business, David Thomas, for
his exceptional leadership, and for fostering such
important initiatives as the Global Social Enterprise Initiative. I'd also like to thank Bill
Novelli, a distinguished professor of the practice at
the Business School and the founder of GSEI. His commitment to social
enterprise, corporate responsibility and social change
has enriched our community here at Georgetown, and
he will moderate our Q&A a little later this evening. The values at the core of
the work that we examine here tonight are defining characteristics
of the tradition that animates our University community,
a tradition rooted in our Catholic and Jesuit identity,
a tradition that compels us to create and share knowledge
and service to our world. As a university we have been
guided by this tradition since 1789, and now for over
224 years we've been building upon and reimagining it in
new and innovative ways. The GSEI, through it's work
to cultivate leaders who focus on both economic and social
value, is a concrete example of our commitment to living
this tradition in our contemporary world. As you know tonight's
conversation is made possible by Bank of America, and
I'd like to express my deep gratitude to two individuals. A proud Georgetown parent Anne
Finucane, Global Strategy and Marketing Officer at Bank
of America, for her work in bringing us together this evening. And again, Brian Moynihan,
Bank of America's CEO, for his leadership and support
of this extraordinary event. Under Mr. Moynihan's
leadership Bank of America has deepened it's commitment
to community development, philanthropy, and environmental
and sustainability initiatives. This includes a ten-year
$1.5 trillion community lending and investing
goal, the largest ever by a financial institution. Since 2007 Mr. Moynihan has
also led Bank of America's Global Diversity and Inclusion
Council, a group that is dedicated to creating an
inclusive work environment. And the company is consistently
recognized as having one of the best environments
in corporate America. Tonight he will be engaging
in a conversation with one of the world's great business
leaders and philanthropists, Warren Buffett. Mr. Buffett, it's an
honor to welcome you back to Washington D.C. Many people may not know this,
but this is a return home of sorts for Mr. Buffett. He attended high school
just a few miles away at Woodrow Wilson High
while his father was a member of Congress. Renowned and respected for
his business and investment acumen at the company that
he has led since 1965, Mr. Buffett is also well
known for his deep commitment to philanthropy and social enterprise. He co-founded, along with
Bill and Melinda Gates, the Giving Pledge, an effort
to encourage the wealthiest Americans to donate at
least 50% of their net worth to philanthropy. About five years ago he
pledged 99% of his Berkshire Hathaway shares to charity,
and last year the shares he donated went to
foundations that worked to fight poverty, elevate the
status of women and girls around the world, and support
early childhood education, among many other causes. This led to him being
ranked number one in 2012's Philanthropy 50, a list of the
nation's top philanthropists compiled by the Chronicle of Philanthropy. He has also given generously
over the years to help support the work of the Bill and
Melinda Gates Foundation, which focuses much of its
efforts on global health and global development. So Mr. Buffett, on behalf
of our entire University community, it's an honor to
welcome you to Georgetown. We're so pleased you could
join us this evening. And it's now my privilege to
present to you all for our conversation this evening, Mr. Warren Buffett and Mr. Brian Moynihan. (applause) - So good evening, Georgetown. It's a pleasure to be here. For those of you that were here
last year, you know that we had Bono come talk to
you about what he did. And Anne Finucane helped us
arrange that through all the hard work she does for our company. And so this year I was
thinking about with Anne, who we should bring in, I
actually talked to Bono. And he said, "Well if you want
to bring a real rock star, "bring Warren Buffett in
because here's a guy who has "done more for philanthropy
than I can ever do", and etc. So last year we brought you a rock star. This year we brought you a real rock star. (applause) So what we're gonna do is
I'm gonna ask Warren a series of questions over 25-30 minutes,
and then we'll take your questions in the crowd and
let the students have a chance to ask Warren about his experiences. And I'm gonna start a little
bit where the President left off, which is this is your hometown. This is part of your hometown. So what are your best memories about being around Georgetown? - Well, I delivered papers
at Georgetown Hospital 66 years ago, and I like,
I developed this affinity because in the hospital people tipped. (laughing) My regular customers, the ones
that knew me, never tipped. But I would go to the hospital,
and one of the things that they would do, they would give
me cash tips, but they also would tell me if they were
a woman that had given birth to a baby that was, we'll
say eight pounds, 11 ounces, they would whisper that number to me. And the numbers racket was
very big in Washington at that time, and they thought
they were giving me this terribly valuable information,
the exact time in which the baby was born or something,
and I was supposed to bet on that number in the
numbers racket that day. So I have a lot of memories of Georgetown. I was here during World
War II, which was really a fascinating time to be in Washington. And my dad being in Congress,
it was really a window on an extraordinary time in America. And of course, at that time
we were probably more united than at any time in my
lifetime about a common goal. I mean, that was the time
when people like Bobby Feller and all the athletes, the day
the war broke out went down and enlisted, and people
really did voluntarily. And a very high percentage
played by the rules in terms of gasoline rationing and sugar
rationing and meat rationing and all that. We all bought savings
bonds at school to help out the troops, so it was quite a period. - [Brian] Well, somewhere along
there you started investing, - You bet.
- and changed the nature. And I've read stories that
you started investing at 13. Whether they're true or not,
but somewhere around that. - It was 11. (laughing) - What created a
fascination with investing? - It took me five years. I had to save $120. It took me five years to
get the $120 to buy a stock, three shares of City Service
Preferred when I was 11. I just, my dad originally was
in the investment business. He really wasn't very interested
in it, but I would go down on Saturday morning, and
he had these books there in the office. And I read all those, and I
went the Alma public library, and I read every book on
investments in the Alma public library by the time we
moved to Washington. And then when we got here I
had the Library of Congress. (laughing) - [Brian] Did you get through all those? - Oh, I read everything, and
I just found it fascinating. And incidentally I find
it fascinating today. I mean, it's an activity, you
know, if you're a baseball player or something, your
legs may go or something. But my legs have long gone,
but it doesn't make any difference in what I do so. I literally have as much, I
always have had fun working, but I has as much fun now
as I've ever had in my life. And I work with people I
love doing what I love, and it just doesn't get
any better than that. - So the quote is that you
tap dance to work every day. - I tap dance to work. - And so what makes you do that? - Don't ask me to demonstrate. (laughing) It was nice to get that round
of applause at the start, but I've learned that crowds
now applaud at the start because I'm 83, and they're
not sure I'll be around at the end of the talk. (applause) - I've shared enough dinners
with you to know that you have more energy than anybody I know. Let's switch to a little bit
on the philanthropy side. So President DeGioia talked
about the Giving Pledge. How did you come up
with the idea with Bill, and how are you doing on it? - Well, we're doing great. And it was three or four years
ago Bill and Melinda and I were out in California and talking. And I'm not exactly sure how
it came up, but we decided to call or write David Rockefeller
and ask if he would host a dinner in New York for
about 16 or 18 people, just to talk about philanthropy. And Oprah Winfrey came, and
Mayor Blumberg was there, and it was a private dinner. And I started having these
people talk around the table as to how they developed their
philosophy of philanthropy. It must have taken us two
and a half hours or so to get around. I mean, people were
really interested in it. So Bill and I were at that dinner. We decided that maybe there
would be a possibility of taking this passion which
these people had shown and going to other people that
had a great deal of money, and see if we could develop
something where people would pledge at least half their net worth. And we now have about 115 people. I've been dialing for dollars. I call these billionaires up,
and sometimes they tell me how they can't do it. And I decided it, I tell them
I'm gonna write a book on how to live on $500 million
dollars because apparently there's this great need. (laughing) They just can't seem to
figure out how to do it, and they need help. But it's been very rewarding. And I received a letter from one woman. She and her husband had
over $10 billion dollars. And she sent me a tie,
she sent me two ties, and she sent me this
handwritten note that said that they hadn't really faced it. It's a little like facing your
own mortality or something to start making that plan, and that's tough for people sometimes. And so she and her husband
had changed things, and over half of that
$10 billion was gonna go to philanthropy. They do tend to postpone the
decision, so I tell these people I call, you know, the
last will is what counts, but I tell them, you know are
you, if I'm talking to some 70-year-old I say do you really
think your decision-making ability is going to be better
when you're 95 with some blond on your lap, or now. (laughing) So let's get on board, fellas. - I assume that convinces
them maybe the 70-year-old decision is better at that point, right? - Well, Bill has gotten
people round the world because he travels more than I do, but
what we're hoping is people do pick up on norms. I mean when I was young
I read about Carnegie and Rockefeller and different people. Bill did too, and you do
pick up behavior from those who come before. And we've collected letters
from every one of these people that are up on our
website givingpledge.org, and I think they're worth reading. They're pretty remarkable. And of course, what we really
wanna do is get the younger people, like Mark Zuckerberg
has joined us, for example, and he obviously is going to
appeal to a much wider group than I would. So we are, we hope it
becomes this gospel of wealth that Andrew Carnegie came
up with 100 years or so ago. That's influenced all kinds of people. Well, we've got better
stories than than you know on these letters, so I just hope it moves. Now I don't think, I
wanna emphasize one thing. Nobody in our group has
given away a dollar that in any way affects how they live. I mean I have much greater
admiration frankly for the person who drops five dollars or one
dollar in a collection plate on Sunday where it makes a
difference in whether they go take their kids to a movie,
or whether they go to eat out or something of the sort. They are actually giving
up something that has utility to them. I am giving up nothing
that has utility to me. I have everything in the
world I want that can be bought by money. So I have a whole bunch
of stock certificates. They have no utility to me,
and they can possibly have enormous utility to other
people in vaccines or education or all kinds of things. So the people that give up
something that actually can have utility to their family and
give that to some other person so it has utility to them,
those are the people I really think deserve the kudos. But it's still nice to
go where the money is. It's the Willie Sutton approach. So if we can get, if we can
work on polio or something like that, and it takes big contributions, then we wanna go after it. - So the unique part of
what you've done is with Bill and Melinda and their
foundation, and on the one hand how you're doing it, and secondly
that you've gone and said whatever the number will be,
but almost all your wealth is going--
- All my Berkshire. - And so talk about the Gates
relationship and why you chose them as opposed to creating
your own foundation there. - Well, originally my wife
and I planned when we were in our 20's that when we
had everything we needed, we would use the rest for society. And I thought she would outlive me. She was younger, and women
live longer, and then she died in 2004, so I had to come
up with a different plan. And if you've read Adam
Smith and the specialization of labor, you know that if
you're good at one thing, you're not necessarily good
at another, you know to get the person, to use your talents
where they're most useful, and get other people
to give their talents. So you know, when my wife
had babies, I mean I went to an obstetrician. I didn't deliver them myself. When I get a toothache, I go to a dentist. So I wanted to go to people
who were very good at giving away money, and who
were younger, energetic, smart, and had the same objectives
in philanthropy that I did. And the basic principle of
the Gates Foundation is that every human life has equal value. And if you start with that
as your basic assumption, then a lot of things flow from that. And Bill and Melinda, as well
as my children because I have foundations for each one of
my three children that are of significant size, and you can
read the letters I wrote them up on the Berkshire Hathaway website. I do not direct them to do
anything, but I do tell them to swing for the fences. I tell them if they succeed
at everything they do in philanthropy, they're doing
the wrong things because the important things are the tough ones, and you're gonna fail in some of those. But I have got much younger
people, every energetic people, common objectives, and
they work for nothing so, (laughing)
that's not a bad deal, Brian. - That stretches the money a long way. - [Warren] Yeah, absolutely. - And the way I read it,
it said you require them to actually move the money
out the other side-- - They gotta spend it. And when I die all of the
money has to be spent within 10 years after the estate
is closed because I do not think that I can pick out
some little great great grandchild yet to be born,
you know, just because he has the right name of Buffett
or she has the right name, and they will be the best custodians. I mean, there will be plenty
of philanthropists 50 years after I die to take care of
the problems in 50 years, but I want the money
to get spent promptly. And I don't believe in
trying to control things from the grave. I mean, I like to think I
can think outside the box, but thinking outside
of that particular box. (audience laughs) - That may take a lot of
philanthropy to figure that one out. Recently I read an article
about East Lake and Tom Cousins. So this week as many people
know the PGA finishes up its tournament at East
Lake, which is a golf course in Atlanta. And the story I read about
the development is that you've now helped Tom Cousins
in the development work he does with communities. Talk a little about that because
that's a little different than this type of thing. - Yeah, well it's the same
theory of loving back people who are putting their own
time and energy and who are successful into a project that worthwhile. Tom Cousins is a remarkable
man that lives in Atlanta, just extraordinary. And he took this terrible,
terrible neighborhood called East Lake in Atlanta, and
against a lot of community opposition and everything. It was crime ridden and
nobody did well in school and everything else, and he
decided he had to apply a holistic approach to it. And you couldn't just attack
this thing or that thing. So he worked for probably 10
years to develop this entirely new community out of this total disaster. And then Tom and I talked
about it, and I said Tom, you know everybody is gonna
say that that can only be done because you're Tom
Cousins, and you're living in Atlanta, and you've done this. So he and I and a fella
named Julian Robertson, but primarily Tom, decided to
see if we could replicate this in other communities. And it seemed to me and
Tom that New Orleans was a great one to do it in. They've been wrapped by
Katrina and everything. So we've taken it to New
Orleans where we've got hundreds of people, and it's
mixed income type community. We do not want to have it with
everybody being subsidized. We wanna create a new kind
of community where people of different races, different
economic conditions work together and play together. And it's been successful in New Orleans. We went to Indianapolis,
it's been successful there, and we've got about 11 more
towns we're working on now. So Tom Cousins has really
come up with something. He had an op ed in the Wall
Street Journal about a week ago describing this, but he's
a fantastic human being. And when you get a chance
to join forces with somebody as high quality as that
and energetic and smart, and putting his own funds
in it, you just gotta jump at the chance.
- That's true. Let's switch to the economy
now, what's going on, and move from philanthropy to the economy, that you create your wealth
off of, that you can do these wonderful great things with. So what do you see in the
economy and what you're seeing in your companies or
operating companies from an investor's point of view? - Well business has come back
very well from five years ago when the panic hit in. It was a panic like nobody's ever seen. Whatever you think about it, it was worse. I'm dead serious about that. We were right on the edge of the cliff. And fortunately I give
enormous credit to both Ben Bernanke and Hank
Paulson and Tim Geithner, and frankly even though
I didn't vote for him, never voted for him, President Bush. You know, I don't know how
many of you have studied economics, but in Adam Smith
they talk about comparative advantage, and Gains
talked about animal spirits and all those people. But President Bush really
came out with a great economic insight of all times,
and he did it in 10 words in September of 2008. He went out of there from
the White House and he said, "If money doesn't loosen up,
this sucker could go down." (audience laughs) And I mean that goes right up there. Tear down those plaques of Adam Smith. And he backed up those fellas, and so it, we've come back from it. But business has come back. You know, a lot of companies
are having record profits, including many of ours,
and the American populace as a whole has not come back. Inequality is getting wider. The Forbes 400 which just
came out showed aggregate wealth of the Forbes 400
is two trillion dollars. You go back 20 years and
that was $300 billion, so it's up six or seven for one. It's different people to some
extent, but this is the top. Three hundred billion to two
trillion, and if you read the paper today you'd have
seen that the median income is the same place it was in
terms of real purchasing power from 1989, it hasn't changed. So the inequality is getting wider. The rich are doing extremely
well, extraordinarily well, and business is doing well. Business profit margins are
terrific compared to the record historically. Business returns on tangible
equity are terrific. But most, a great many
people in our country, if you take the bottom 20% of households, that's 24 million households
or something like that, housing close to about 60 million people, you know the top level is
$22,000, and I don't wanna try to live on $22,000 with a couple of kids. So we've got an economy that
is delivering $50,000 of GDP per capita, and we've
got an awful lot of people that aren't living well. So we have learned how
to turn out lots of goods and services, but we haven't
learned as well how to have everybody share in
the bounty that we have. - So how do you think, is
that that we just gotta grow out of it to provide-- - No, we're growing, we're growing. I mean if you take even two
percent a year, if you think about it, people feel very
unhappy with two percent a year, but the population grows
one percent a year, so that means one percent
per capita real growth. That means in 20 years, a
generation, there's a 20% gain in GDP per capita. That's not bad in a generation, but the question is how
it gets distributed. This country will, this
system works, you know. In my lifetime, I was born in 1930. I was conceived in 1929
because my dad was a stock salesman, and after the crash
he didn't have anything to do. (audience laughs) So I look back with great
fondness on the 1929 crash. But since 1930, since I
was born in 1930 real GDP per capita has increased six for one. Just think of that, six for one. I mean you went centuries when
nothing happened for people. And this country works. I mean, I consider the luckiest
person on a probabilistic basis that ever lived is
the baby that's born today in the United States. It is a fabulous country,
and the market system works, all kinds of things, but we do have to, in my view we have to make sure
that everybody participates to a reasonable degree. We don't want equality
results, but we also want a base level that's
satisfactory for our people. - So you talked about the,
George Bush's economic statement about it could go down. What do you think the lessons
are over the last couple of cycles that you've seen
from an investor standpoint? We've got a lot of young kids out there. You've lived through multiple
cycles in the 50, 60 years plus you've been investing,
70 years investing. What are the lessons, and
what, these are young people. What should they take away? - The lessons are that
people will continue to make the same mistakes they've made. I mean humans, and it doesn't
correlate to IQ particularly. When they get greedy, and
we had this huge bubble with the most important asset
the American public has, housing. So you had a huge bubble,
and something that you could borrow heavily against. So you could run a margin
account in effect on a house instead of stocks, and the
conditions got very lax. And so when that bubble
popped, but people came into that gradually. When they get fearful,
it happens all at once. I mean when everybody wants,
when people get scared, they all wanna leave at one time. And we had them all
wanna leave at one time, and that'll happen again. It'll happen with a different
set of circumstances, but the human animal will
keep behaving pretty much the way it has in the past. So we will have periodic recessions. We'll have an occasional
panic, which all recessions don't come from panics. But the good news is if you
look at the 20th century, in the 20th century we had two world wars, we had the Great Depression,
we had the flu epidemic, we had the cold war, we had
the atom bomb, you name it. The Dow Jones average
went from 66 to 11,497. With all these terrible
things happening supposedly at various times. America works, and when I
bought my first stock when I was 11, that was in the spring of 1942. And that was a couple
months after Pearl Harbor, and we were getting
clobbered in the Pacific at Corregidor and Bataan, I
mean the death march of Bataan. In the European theater the
blitz of England was on, and the Dow was at about
100, but just look at where we are now. I mean, the country really works. The trick is, it seems to me
the obligation of a society as prosperous as ours is to
figure out how nobody gets left too far behind. - That was interesting because
last year Bono's speech was a lot about America
is a society of dreams, and you can accomplish more here. And it was actually one
of the best speeches about the optimism America could
have by a person who's not American by birth. And I know you carry that
optimism, so after all this what makes you most
optimistic for the next decade about America, next couple of decades? - Well just imagine, you know, 1789. Just go back just a few hundred years. There wasn't anything here,
I mean in this country. And Sir Christopher Wren I
think that designed St. Paul's Cathedral is buried there. And there's a little
plaque there, and it says, "If you seek my monument, look about you." Well I say in America, if
you seek America's monument, look about you. This country has all come
about in a few hundred years. We had less than four
million people when we became a country. China had 300 million people at that time. Europe had about 75 million. They were just as smart as we were. They worked just as hard as we did. They had natural resources
that were similar to our. And yet we ended up with
a quarter of the world GDP a few hundred years later. We've got something that
works, and we don't wanna mess than up. We wanna figure out what do
we do with this abundance better as we go along, but
you don't have to worry about the system working. But you will have periodic
recessions, and you will have an occasional panic brought
on by something that who knows where it comes from. And the thing to remember at
that time, I wrote an op ed piece in the New York
Times in the fall of 2008, and I said that the
country will come back. It'll go through a big
recession and everything, but it'll come back, and it's coming back. Don't ever worry about America. Tell ya, you're in the right place. - So you've been famous for
your investment strategy basically that follows the
opposite side of principles, invest when the chips
are down and ride it up. That's served you well. So what's your favorite
time that you were able to accomplish that? When you got somebody down and moved-- - Well, I always think my
favorite time's gonna be tomorrow. But it's always been fun. And there's a company here
in Washington called Geico, you know, and I first got
exposed to that in 1950. I was 20 years, I was 19,
or it was '51, I'm sorry. I was 20 years old, and I came down here, and I came down on a Saturday
because I'd learned that my professor who I worshiped
at Columbia named Ben Graham was the Chairman. I got down there, and the
door was locked when I went to the building because it was Saturday. And I pounded on the door,
and some janitor let me in, and a marvelous fellow
named Lorimer Davidson spent four hours with me teaching
me all about insurance. And he helped me so much
in my, you're gonna get, you're gonna help by some
wonderful people in life. It's a great thing to
remember later on when you get to be my age that all the
help you've received from different people because
nobody does it alone. Obama got in trouble when he
said that in the campaign, that nobody does it by themselves. Nobody does do it by themselves. We all sit in the shade
of trees that were planted by others, so it's obligatory
I think to plant a few trees ourselves if we've had good luck. It's been a great ride, but it's not over. - When did you actually buy Geico? When did you invest in
Geico the first time? - Well, Geico I bought, I met
Lorimer Davidson when I was finishing up at Columbia,
and then I started selling securities when I got out. And I went out to my Aunt
Alice, and my Aunt Alice would have bought anything from me. And so she bought 100 shares
of Government Employees Insurance. I was the first stock I ever sold. And then a lot of years passed,
and Mr. Davidson was very kind to me in a variety of
ways, but I went in different directions. And then in 1976 the
company got in big trouble because they miscalculated their reserves, and they were going broke. And so I came back here, and I
bought a third of the company in the market in a very
short period of time. And then in 1995, by now
my third had become a half because they'd repurchased their shares. And I went out to see Mr.
Davidson who was out in Bethesda. He was 96 or 97, and he had
a bunch of stock in Geico with no cost basis because
he had held it forever. And I said Davey, if I make
an offer for this company for cash, you're gonna pay a big tax. And of course, if you die with the stock, you don't have that tax and
you get a stepped up basis. So I'm not gonna make
this offer unless it's alright with you. And he said to me, he said,
"Warren, I've hoped for this "all my life", and so we
bought the rest of the company. He was a great man. - That was terrific. Well, let's turn it over
to some student questions. So they're gonna put
a microphone out here, and we'll have you queue
up and let you have questions for Warren. All right, why don't you,
let's take the first question. Tell us who you are, and ask away. Go ahead, sir. - Hi, I'm Cassin
Tavalali, a senior in SFS. I was wondering if you
have any stock tips for any of the students today? (audience laughs)
I mean, we're all trying to make a little living. - I didn't think they
taught that at Georgetown. (laughing) The best investment I
ever, well I bought a book in 1949 by a fellow
named Ben Graham called The Intelligent Investor. I don't remember what I paid,
but aside from what I paid for my two marriage licenses,
that was the best investment I ever made. And it's very important to
have the right framework. You need to have an approach
to investing that's sound. And Graham's approach is
simple, but some people adopt to it, which I did
immediately, and most people don't. But if you have the right
philosophy, you will find opportunities as you go
through the next 20, 30, 40, 50 years. And frankly you're most likely
to find them in periods like five years ago when we
were having the panic. I mean, stocks sell at silly
prices from time to time. Most stocks will at one
time or another sell at very silly prices. And it doesn't take a
high IQ to figure out that they're cheap, but it does
take a temperament that's willing to step up and actually act. I tell people if they're going
in the investment business, if you got 160 IQ, sell
30 points to somebody else because you won't need it. (audience laughs) I mean, I figured out very
early you don't have to be that smart in this business,
which is fortunate, but you do have to have
the right temperament. And you have to be able to
ignore what other people are saying and simply look
at the facts and decide is this stock, which is
selling at X, worth two X? And occasionally you'll
find things like that. And when you don't find
them, you don't do anything. So that's my generalized stock tip. No names. - I'll make it simpler. Just buy Bank of America,
and you'll be set. (laughing) It worked all right for him. - Yeah, that's right, that's right. (applause) - Next question. - Good afternoon. My name is Nicholas Walker. I'm a sophomore in the SFS as well. So Mr. Buffett, in the
past you invested in China, South Korea and Israel, and
recently your partnered with 3G Capital and Jorge Paolo
Lemann from Brazil over for the Heinz deal. Does this mean are you
tempted to venture into the Brazil market next? - I didn't get the question. - The question, you did the Heinz deal. The question is are you
gonna invest in Brazil next? - Oh, I don't know where
I'm gonna invest next. That's what makes my job interesting. I mean, I'm not kidding. I mean, if you went out and played golf, and every drive went in
the hole, you'd give up. The game wouldn't be interesting. What's interesting is
when you get in the rough, and you have to come out,
and a few things like that. So I love the fact that
I don't know what I'm going to do next. You mentioned the Israel investment. In 2006 in the fall I got
a letter from a fellow, and I never heard of him, and
I never heard of the company he was talking about. But he said my name is Eitan
Wertheimer, and I wanna tell you a little about my company ISCAR. The letter was a page and a
half long, and he said if he sold the company, the
family sold the company, the only company they
wanted to sell it other was Berkshire Hathaway. And if I was interested
they'd be glad to come over from Israel and explain it to me. And it was, it just jumped
off the page that this was an interesting idea. So I emailed them, and they
came over very shortly, and we bought the business. We handed them four billion
dollars for 80% of a company where I'd never seen it or anything. Eitan kept saying you
gotta come over to Israel and see the plants and everything. You won't believe how wonderful they are. And I said Eitan, I don't
go to Council Bluffs, Iowa. (laughing) I am doing find in Omaha. And he said no, no, you gotta see. I said no no, I don't. I said we can make a
deal without seeing it. And he said if you buy the company, will you come and see it? I said if we buy the company, I'll come. So we bought the company,
and I went over there, and it's true. I've never seen plants like this. It was the greatest
operation I've ever seen. And Eitan said to me, he said
you know, that's why I wanted you to come over to see these things. I said listen Eitan, if
I'd come and seen them, I'd have paid more money. (laughing) So we have a wonderful
partnership with the people in Israel, but I don't know tomorrow. Our partnership with the people in Brazil, with Jorge Paolo Lemann
and his associates, they are sensational people. I got to know Jorge Paolo
when I was on the board of Gillette with him, and
the opportunity to buy into a wonderful business like
Heinz, and to be partners, and they'll do all the heavy
lifting, they run the place with Jorge Paolo and his
associates, I mean it's just a great opportunity for us. And I don't know what the
opportunity will be tomorrow. But Jorge Paolo, last
December I was going out to Boulder, Colorado where
he had a group that met. And he said I think I've
got an idea that might interest you when I get out there. And so I went out there, and
as we came back on the plane he explained what he was
thinking about in terms of Heinz, and I said count me in. And I'll tell you one
other thing which was quite impressive about him. After I said that and went a
little further on the thing, he sent me one-page governance
description of how it would work between the two of us,
and he sent me a very brief description of what he
thought would be a fair deal for both of us. I didn't have to change a word. I mean, those are the
kind of people you like to associate with. - [Brian] Next question. - Hi. You mentioned that people
will make the same mistakes in terms of the boom-bust cycle, but there have been several
recent financial developments such as the creation of
derivatives, which has since exploded recently, and you
once called derivatives weapons of mass destruction. Now that derivatives are a
$700 trillion dollar industry, do you see this as setting
the stage for the next financial crisis? - It's very hard to tell. You know, we've enacted Dodd-Frank. And if you look at what happened
in September and October of 2008, there were some
extraordinary things done. The Federal Reserve poured
$85 billion dollars into AIG, and if they hadn't, our world
would be very different. Hank Paulson guaranteed
money market funds at a time when 30 million Americans
with money market funds were panicking, and when $300
billion in three days had gone out of the non-government
money market funds, 125 of it had gone back
into the government, $300 billion. That was almost equal to
the deposits of Wells Fargo or Wachovia at the time,
which were then two separate institutions. Both of those authorities
have essentially been, I don't think they can
do that under Dodd-Frank. I don't think that Bernanke
could do what he did, and I don't think that
Paulson could do what he did. When there's a panic, the
only thing that will stop it basically is when somebody who
has the ability and the will says I'm gonna do whatever it takes. And basically that's what
Bernanke and Paulson and finally Congress in
kind of a reluctant way, but said to the American public,
and you could believe it. If Bernanke said I'm gonna
do whatever it takes, nobody knows what section 13.3
of the Federal Reserve Act, and it wasn't probably meant
to do what he did with it, but he did it. And the same way with the,
they call it the exchange stabilization fund of the Treasury. Nobody, it was enacted back in 1934. Nobody dreamt it would
be used to take care of money market funds. But you had these strong
characters who had the ability to print money in the case
of Bernanke, and they said we're going to do whatever
it takes, and the President was behind them. That is the way you end a real panic. And I worry actually that,
you know Congress doesn't like to give anybody that much
authority, and it bothers them that the Fed has all this
authority, or that Paulson acted as he did in Tarp. And I tip my hat to
them, and I'm not sure, there will be another panic. Where it comes from, who knows,
but when that times comes the question will be are the
people who have panicked, who have frozen, who have
caused the economic engine to stop, will they believe
and come right back and be doing something? And I'm not sure whether
the, what's been enacted is a plus or a minus in that regard. Regardless the country
will come through, but we, it's very hard to write
regulations that will keep people from acting foolishly,
particularly when acting foolishly has been proven
very profitable over the preceding few years. It's just the way it works. Humans, they all think they're
Cinderella at the ball. And they think as the night
goes along, the music gets better and the drinks flow
and everything, and they think they all think they're gonna
leave a two minutes to 12. And of course, there's
no clocks on the wall, and they're still dancing,
so it'll happen again. But buy when it happens. (laughing) - [Brian] Next question. - [Warren] I'll be buying. - Hi, my name's John Ruff. I'm from Georgia, so I'm
familiar with the work over at East Lake. - [Warren] Oh, that's great. - But you talked a little
bit about income inequality, but if you look at class mobility
rates, and if you look at average household income
for middle class families measured with inflation, a
lot of these rates have been trending down since the 1970s. And some may argue that it's
harder today for the middle class than it's been in 30 years. And I was wondering if you
had any more thoughts on how a rising tide can life all
boats, and not just the yachts. - Yeah, well that's what's happened. It's like John Kennedy
talked about, a rising tide lifting all yachts. And the yachts have been
lifted like I say for the top 400 from $300 billion
to two trillion just in the last 20 years. There is a very I think
structural problem as a market system gets more and more specialized. If you go back to an
egrarian society like we had a couple hundred years ago
with most people working on a farm, most people
fit most job requirements. That, as the world has become
more and more specialized I think we keep moving away from that. So a market system will not
pay well for a significant percentage of society. They aren't needed to
keep GDP itself going up, and people at the top. And I think government
has to address that. I think it's, ... I sometimes toss out to
students this proposition. Imagine that it's 24
hours before you're born. And you're sitting
there, Johnny or Joanie, we don't know yet, and you're in the womb, and a genie comes. And the genie says, John or
Joanie, you strike me as a remarkable potential human
being, and I'm going to give you an enormous responsibility. I'm going to let you decided
the world, how the world is going to work into which
you're going to emerge. You can decide on the economic
system, the social system, the political system, you design it. And whatever you design,
that's going to be the system in which you live, your children
live, grandchildren live. And you being wise beyond your
minus 24 hours of age say, I know all about you genies. What's the catch? And the genie says, there's one catch. Just before you emerge,
having designed the system, put it in cement, you're going
to go over to that barrel over there that has seven
billion slips in it, one for every human being in
the world, and you're going to pull out a slip. It may say male, it may say female. It may say white, it may say black. It may say infirm, it may say strong. It may say bright, it
may say below average. It may say United States,
it may say Bangladesh. Now not knowing which ticket
you're going to pull out, what kind of a world do you wanna design? Well, you certainly wanna design
a world that produces lots of goods and services and
keeps producing more and more. You want a lot of stuff around. It could be the world's fairest
society, but if it's on a barren desert island, it
isn't gonna do anybody good. So you really want something
that works in terms of output. But once you have something
that works in kind of in terms of output, you
certainly want something that eliminates fear from everybody's life. Now that doesn't just mean a lot of cops. It means fear of old age, fear of health, all of those problems. And you certainly want a
system, not knowing what ticket you're gonna get, that takes
care of the people that don't survive so well in that
market system which maximizes the amount of output, your first goal. And I think we've done a
wonderful job at the first stage. We have churned out lots of stuff. We have not thought as much,
although we've thought a fair amount. I mean when social security
came in and all that, this country have developed
in terms of thinking about how a rich family should
behave, but we have not, I think we are in a stage
where we need to focus more on making sure that the
people who get the bad tickets do better than they are. And you know, we said that
Blacks, that were slaves were three-fifths of a person
back when we started. We said all men were
created equal in 1776. Then in 1789 we said Blacks
were three-fifths of a person. We not only said all
men are created equal, but the Gettysburg Address
you know, Lincoln repeated it. It was 1920 before we passed
the 19th Amendment for women, so we treated women as a
essentially different class for all those years. So I think we've got, I think
we've gone significantly in the right direction in
terms of behaving better as a society, and I think
we've gone terrifically in the right direction in terms of
turning out lots of stuff. But I think we have to address
the question of how do you treat the people that are
left behind in a system that maximizes the output
of goods and services. And that can only come through government. - [Brian] Next question. - Good evening. My name is James Fishback. I'm in the School of
Foreign Service, first year. It's no doubt that you're an
outspoken fan of Ben Benanke, but knowing he's gonna be
stepping down in January of next year, whomever
takes over the position, do you think that they
should continue the Fed's controversial buyback program? And if so, for how long? - Well, I think they should
take, Bernanke's approach was he says he's gonna keep
doing it until he sees more improvement in the economy. And I think he's been mildly disappointed, not hugely disappointed, but
mildly disappointed in the rate of improvement in the
economy in the last few years. And therefore just the
other day he said he's gonna extend it further until he sees it. So he's not prejudging exactly
when it's going to happen. He's telling you the conditions
under which he'll change. And the economy is getting better. We are in an experiment
which hasn't really been tried before. I mean, the Fed has a three
and a half trillion dollar balance sheet, and buying
securities is usually easier than selling securities as
sometimes people find out. So we don't know how this game plays out. And just the announcement
whenever it was a few months ago that tapering was gonna occur,
that had some significant market reactions, probably
100 basis points of so on the tenure. And what'll happen when they
actually, if they actually try to deleverage the Fed. I mean what has happened is the
American public deleveraged, and the government leveraged
up through the Fed. When the Fed, if the Fed
deleverages in any big way, that will be a new experiment. - But Warren, as we were
talking earlier, the question is when they do that, the economy
has to be growing faster. And the piece people don't
take into account is they're clear that they're gonna
stay there until the economy grows faster, so it's a different-- - And he has no pressure on him. In fact, you know, the
Fed is the greatest hedge fund in history. You've go a trillion
one financed by currency in circulation, which
doesn't cost anything, and you got about a trillion
eight or nine for the banks at 25 basis points. And I mean, the Fed is
gonna make $80 billion or something like that. The Fed is the fourth
largest contributor to the United States government's
revenues that there is now. That wasn't the case a few
years back, but it's $80 or $90 billion a year probably. And it is under no
pressure, none whatsoever, to have to deleverage. So it can pick its time, and
if you have somebody wise there, and I think Bernanke's
wise, and I certainly expect his successor to be, it could be handled. But it is something that's
never quite been done on this scale. It'll be interesting to watch. - No, it will be, and we've
seen a lesson in the market moving ahead and back just
based on the last 30 days. So I think we're gonna
take one more question, and then the next student. - Hi, my name is Shali,
and I'm from China, and currently a graduate
student in Georgetown. My friend Danny Strell and
I, we are both a very big fan of you and your friend Charlie. And we read his book,
which is very interesting. He had this whole system
of criteria on how to evaluate a company. It's all very confusing, but
he said that Warren and I are always staying away from
the industries we don't know. So you have Candies
Railways and Coca-Cola. But now the world is
changing, and we are living in a new era. The business models are changing. The B2C platforms, everybody
is shopping online. Maybe in a few years
everyone is gonna pay with their iPhones, and Bank of
America no longer issues credit cards. So non-profit is a new model. - [Warren] So what's a dinosaur
like me gonna do, yeah? - Yeah, there's so many
things you don't know about. - [Brian] He'll take out
his flip phone and show you, so he's not gonna be one of them. - This is my new one. I just turned in the one
Alexander Graham Bell gave me. (laughing and applause) Okay, so the question is the
business models are changing, the world are changing. There are the new technology
that are changing everything. There's no way you can
just stay out of it and stay with your traditional. Now for the (mumbling)
especially in the venture capital industry, what would you
think is the most important thing, the key in evaluating a company? I'm not asking about doing mediocre. I'm not asking about being
average, but about excellent, remarkable. Just name one thing. (laughing) - The most important thing is
to decide, is to be able to define which one's you
can come to an intelligent decision on and which ones
are beyond your capacity to evaluate. You don't have to be right
about thousands and thousands and thousands of companies. You only have to be right about a couple. I met Bill Gates on July 5th, 1991. We were out in Seattle,
and Bill said you've gotta have a computer. And I said, why? And he said, well you can
do your income tax on it. I said I don't have any income. Berkshire doesn't pay a dividend. He said, well you can keep
track of your portfolio. And I said I only have one stock. (laughing) And he says it's gonna change everything. And I said, well will it
change whether people chew gum? And he said, well probably not. And I said, will it change
what kind of gum they chew? And not. I said well then, I'll
stick to chewing gum, and you stick to computers, you know? (laughing) I don't have to understand
all kinds of business. There's all kinds of
business I don't understand. But there's thousands
of opportunities there. I did understand the Bank of America. And I'm able to do that. I'm able to understand
some given percentage. But Ted Williams wrote a book
called The Science of Hitting. And in The Science of
Hitting he's got a diagram, shows him at the plate, and
he's got the strike zone divided into 77 squares,
each the size of a baseball. And he says, if I only swing
at pitches in my sweet zone, which he shows there, and
he has what his batting average would be, which is 400. If he had to swing at low
outside pitches, but still in the strike zone, his average would be 230. He said the most important
thing in hitting is waiting for the right pitch. Now he was at a disadvantage
because if the count was zero and two or one and two
or so on, even if that ball was down where he was only gonna bat 230, he had to swing at it. In investing there's not called strikes. People can throw Microsoft
at me, and you name it, any stock, General Motors,
and I don't have to swing. Nobody's gonna call me
out on called strikes. I only get a strike called if
I swing at a pitch and miss. So I can wait there and look
at thousands of companies day after day, and only when
I see something I understand and when I like the price
at which it's selling, then if I swing, if I hit it, fine. If I miss it, it's a strike,
but it's an enormously advantageous game. And it's a terrible mistake
to think you have to have an opinion on everything. You only have to have an
opinion on a few things. In fact, I've told students
if when they got out of school they got a punch
card with 20 punches on it, and that's all the investment
decisions they got to make in their entire life, they
would get very rich because they would think very hard about each one. And you don't need 20 right
decisions to get very rich. Four or five will
probably do it over time. So I don't worry too much about the things I don't understand. If you understand some of
these businesses that are coming along and can spot
things, if you can spot an Amazon for example, I mean it's a
tremendous accomplishment what Jeff Basils has done. And I tip my hat to him. He's a wonderful businessman,
and he's a good guy, too. But could I have anticipated
that he would be the success and 10 others wouldn't be? I'm not good enough to
do that, but fortunately I don't have to. I don't have to form an opinion on Amazon. And I did form an opinion
on the Bank of America, and I formed an opinion on Coca-Cola. I mean Coca-Cola has
been around since 1886. There's 1.8 billion, 1.8 billion eight-ounce
servings of Coca-Cola products sold every day. Now if you take one penny
and get one penny extra, that's $18 million dollars a day. And $18 million times 365
is $7 billion three less 730 billion or six billion,
570 million dollars. So annually $6,570,000,000 from one penny. Do you think Coca-Cola is
worth a penny more than Joe's Cola? I think so. (laughing) And I've got about 127
years of history that would indicate it. So those are the kind of
decisions I like to make. And you may have an entirely
different field of expertise than I would have, and
probably much more up to date in terms of the kind of businesses
that we're seeing evolve. And you can get very rich
if you just understand a few of them and understand the future. But fortunately I don't have to. I mean, if we go into Heinz,
you know, and I look at people pouring ketchup on
hamburgers and potatoes, I don't think it's gonna change. And the nice thing about
some products travel. Some products don't travel. Candy bars don't travel well. If you look at the
Cadbury bars in England, they don't sell well here,
and the Hershey's bars here, they don't sell as well someplace else. Soft drinks travel, and ketchup travels. I like products that travel. - [Brian] Well, thank you. Thank you, Warren. (applause) Warren, I wanna thank you
for taking the time to work with the students today. And I think for all
the students out there, just think about this is the
person who, the passion he still has at 83 to make that
right investment decision. Importantly what we talked
a lot earlier about is the ability to try to do
something with all that wealth that will help a pretty near
term set of goals in society. And I think you will find
very few people in the world that have been able to
do both things so well as Warren Buffett has, and
there's a lesson to learn for all of us in that. So thank you for spending the time. - [Warren] Thank you. (applause) - So wow. That's probably the first
time in my life I ever heard a positive outcome for the
great economic crash of 1929. (laughing) So Brian, thank you for
bringing us our rock star. (applause) We just heard a terrific
conversation, a terrific discussion about economic
impact and social impact, and how the two fit together. And before this conversation
Brian Moynihan had a session with some of our business
students in which he talked about community lending, philanthropy. He talked about environment
initiatives, and he talked about how they are good business
as well as good for society. And this is the right place. Georgetown is the right place for that. Our President Jack DeGioia,
he talks about global human development. And the Dean of our Business
School, David Thomas, he talks about being in service
to business and society. And that's why our Global
Social Enterprise Initiative is flourishing, and why
it's in the right place. Our organization, the Global
Social Enterprise Initiative, is driven by students. In fact, it was started by students. There's a student here, I
should say an alumnus here, I don't know where he is,
Raul Pasarnacar, who flew in. He's a McKenzie executive. He flew in just for this conversation. He helped to conceptualize
this initiative, and Raul, wherever you are, keep
the good work going. Ladan Manteghi and I,
we think that students power what we do. And we have many projects
going, and students are involved in every one of them, and
we're very thankful for that. And I can tell you that I love Georgetown. I love Georgetown because
I come in here every day, and I rub elbows with
these students who are tomorrow's leaders. And every night I go home
thinking the future is really in good hands. So look for future GSEI events. Look at our website. Thank you again for this
wonderful conversation. We've got to applaud these two gentlemen. (applause) I'm sorry that not every
student got to ask a question, but there's always email. And would you please let the
first two rows leave because there are some security issues involved. Thank you very much. (applause)
