Warren Buffett | HBO Documentary

so 70 years ago i was in high school almost a third as long as the country has been around and when i was in high school i really only had two things on my mind girls and cars and and i wasn't doing very well with girls so we'll talk about cars but let's just imagine that when we finish i'm going to let each one of you pick out the car of your choice sounds good doesn't it pick it out any color you name it it'll be tied up with a bow and it'll be at your house tomorrow and you say well what's the catch and the catch is that it's the only car you're going to get in your lifetime now what are you going to do knowing that that's the only car you're ever going to have and you love that car you're going to take care of it like you cannot believe now what i'd like to suggest you're not going to get only one car in your lifetime but you're going to get one body and one mind and that's all you're going to get and that body and mind feels terrific now but it has to last you a lifetime i'm on the way to the office it's a out of a five minute drive i've been doing it uh for 50 four years one of the good things about this five minute drive is that on the way there's a mcdonald's so i'll pick up something good morning thank you for choosing mcdonald's go ahead and order whenever you're ready i'll have a sausage mcmuffin with uh egg and cheese anything else that's it thank you and i tell my wife as i shave in the morning i say either 261 295 or 317 and she puts that amount a little help by me here and that determines which of three breakfasts i get acting okay 295. everybody hey great you're on candid camera i see hello everybody when i'm not feeling quite so prosperous i might go with the 261 which is two sausage patties and then i put them together and pour myself a coke hi how are you 317 is a bacon egg and cheese biscuit but the market's down this morning so i think i'll pass up the 317 and go with the 295. i like numbers started before i could remember it just felt good working with numbers i was always playing around with numbers in one way or another and it was fun to have a bunch of guys over and have them betting on which marvel would reach the drain first i had a lot of energy as you know i was inquisitive and i was the youngest one always in the class because i'd skip i've always been competitive [Music] i like to read more than most kids i really like to read a lot my aunt edie gave me a copy of the world almanac and that was heaven to me and i can still tell you that almost population was 214 0006 in 1930. some numbers just kind of stick with you and very early probably when i was seven or so i took this book out of the benson library called a thousand ways to make a thousand dollars and one of the ways in this book was having penny weighing machines and i sat and calculated how much it would cost to buy the first weighing machine and how long it would take for the profit for that one to buy another one i would sit there and create these compound interest tables to figure out how long it would take me to have a weighing machine for every person in the world i had everybody in the country weighing themselves ten times a day and he's just sitting there like john d rockefeller's weighing machines the allowance when i was a little boy was a nickel a week but i like the idea of having a little more than a nickel a week to work with and i went into business very early i started selling coca-cola door-to-door i sold gum door-to-door or sold saturday ink post liberty magazine ladies home journal you name it i think i enjoyed the game almost right from the start but i like being my own boss that's one thing i like about delivering papers i could arrange the route i wanted nobody was bothering me at five or six in the morning [Music] i was delivering 500 papers a day and i made a penny of paper but in terms of compounding that penny's turned into something else [Music] einstein has reputed have said that compound interest is the eighth wonder of the world or something like that and it goes back to that story you probably learned when you were in grade school where somebody did something for the king and the king said what can i do for you and he said well let's take a chess board and put one kernel of wheat on the first square and then double it on the second and double it on the third and the king readily agreed to it and by the time he figured out what two to the 64th amounted to he was giving away the entire kingdom so it's a pretty simple concept but over time it accomplishes extraordinary things berkshire is an amazing company his fourth largest company in the fortune 500 he is the only person who has ever from scratch built a company that is in the top ten of the fortune 500. well berkshire is a holding company of sorts it owns a large number of separate businesses that operate independently of each other and to a great extent from the parent company berkshire hathaway my favorite goal is so strong all right well we're gonna get more from you in a second we have maybe 70 maybe 80 businesses and we ask them to behave in a way that doesn't hurt our reputation at berkshire hathaway but they run their own lives other people do most of the decorating of the office so various things come in originally when i moved in in 1962 you can see this i went down to the south omaha library and i think for a dollar i got seven copies of old new york times from from big times like the panic of 1907. this is one 1929 obviously but i wanted to put on the walls days of extreme panic in wall street just as a reminder that anything can happen in this world i mean it uh it's instructive art you can call it [Music] i was born in 1930 here in omaha nebraska during the stock market crash well my dad lost his job in 1931 a year after i was born he was a stock salesman and he had what little savings he had in the bank and so he started his own company he worked right through the depression he had an investment company and as an adult when i looked back i said wow did that ever take a lot of nerve sometimes we'd go down there on sunday and we could play with the adding machine my brother and i tended to play the games together and i remember at one point he said to me i'm going to be a millionaire by the time i'm 30 or something like that it was totally outside of anything my family had experienced but it just was unusual that way [Music] well i was the oldest and then my brother and then my sister and my father would go to new york periodically to check on businesses and stops and things like that and come back he always had a costume for each of us and warren loved it he was very good-natured he was quiet it was hard to tell he was a genius at that point but um i mean who was looking the first books i read on investment were actually in my dad's office pretty soon i read all the books in the office and read some of them more than once my dad had various nicknames for me he'd call me fireball sometimes because i'd start little businesses he didn't care about money at all he believed very much in having an inner score card and i never worry about what other people are thinking about you you know just just if you know why you're doing what you're doing that's good enough i admired everything about him to the extent that i was absorbing lessons from him without knowing it and the idea that all eyes have equal value is something that all three of these children felt since i can remember my dad at one point ran for congress when i was 12 or so it was a very republican household and i campaigned for my sister's campaign form the whole family did [Music] my mother was very very bright and she was very gregarious she was a good campaigner for my dad she had a lot of ambition and i think my brother warren got a lot of his extreme competitiveness from my mother actually she was brilliant at math you know i guess they still had these things where you cranked them and things added up and she could add it in her head faster than the machine could do it she was absolutely amazing in that she was very beautiful about taking care of the kids but you didn't get the same feeling of of love it was there but it just it didn't come out the same way as with my dad in the nation the only permanent way to prosperity is a violence budget unless that goal is achieved all post-war plans will collapse like hitler's conquest you have heard congressman howard l h buffett republican member of the house of representatives from nebraska when i was about 12 or 13 we moved to washington my family and i was mad i was having fun in omaha i lost all my friends and now i moved to a town where they were all strange and so i was very very unhappy at school i just lost interest i took pleasure in tormenting my teachers at that time for example at t was the stock that all teachers owned for their retirement and i decided that it would drive my teachers a little crazy if i went short the stock because when you go short of stock you're betting that it will go down so i shorted 10 shares of att and brought the confirmation to school and showed these teachers and i was shorting the stock they found me a big pain in the neck but they did think i knew a lot about stocks and then at home my mother would have terrific headaches and you didn't want to be around her when she was having the headaches and she would she would lash out more she would never do it in public well i think we were terrified of her when i'd wake up in the morning i'd listen to hear her voice i could tell by a voice was gonna be a terrible day or not when she got difficult the three children felt it when i was at the low point sort of i decided that i would run away so i talked two other guys into running away with me we went out and we started hitchhiking and then we got picked up by the highway patrol and that scared the hell out of us it's very interesting my dad never really gave me help about doing this but he finally said you know he says you can do better than this and just saying that i mean i i felt i was letting him down basically so in all ways he was teaching me he never taught by telling me things he just taught by example he had unlimited confidence in me even when i screwed up and that takes you a long long way the best gift i was ever given was to have a father that i had when i was born [Music] i didn't want to go to college i was 16 when i got out of high school and i was buying stocks i mean i actually was having a pretty good time and i didn't see that it really was much to be gained by going to college but my dad kind of jollied me into it [Music] he had a roommate who was a friend of mine and the roommate said it'd just drive him crazy because he studied all the time and more would come in like 15 minutes before the exam and just ace his way through it i finished in three years because i had enough credits then i was in a hurry i wanted to get out when i got out of the university of nebraska i applied to harvard business school they told me i was to get interviewed in a place near chicago i got there and he interviewed me for about 10 minutes and he said forget it you're not going to harvard and so now i'm thinking what do i tell my dad you know this is terrible and it turned out to be the best thing ever happened to me later that summer i was looking through a catalog and in the catalog it had these names of people that were teaching and one was graham and then another was done i had read this book by the two of them so i wrote them a letter in mid-august and i said dear professor god i said i thought you guys were dead but now that i found out that you're alive and teaching at columbia i would really like to come and he admitted me so you know that it just shows you never can tell a gentleman ben was this incredible teacher i mean he was a natural and he drew us all in are wall street professionals a more accurate in the shorter term than the long-term forecast well our studies indicate that you have your choice between tossing coins and taking the consensus of expert opinion and the results are just about the same in each case it was like learning baseball from a fellow who was batting 400. it really it shaped my professional life there are two rules of investing according to warren and he learned this from ben graham rule number one never lose money rule number two never forget rule number one ben graham basically coined the term value investing he believed in careful scrutiny of a company's financial statements and that if you bought value it would eventually prove out a few years ago i went to amazon and sure enough they had this manual there so or reliving my youth other guys were going to amazon probably and and buying old playboys or something but i bought old movies manuals instead and when i got out of school i started selling stocks i was 20 years old at the time and looked about 16 and acted about 12 so i was not the most impressive sales person anybody ever met but what i would do was i i went through a page by page looking for possibly undervalued stocks is this like going through an old family album better but she just stood there with a little uh watering can and just nourished me along and and changed me [Music] somebody once said that the chains of habit are too light to be felt until they're too heavy to be broken i had been terrified of public speaking i couldn't do it i'd throw up and i knew if i didn't cure it then i never cured and so i saw an ad in the paper for the dale carnegie course which worked on developing your ability to speak in public and i went down there a good smile has the same effect as a puppy's tail they made all these crazy things to get out of ourselves and so we stood on tables and did all kinds of things if i hadn't have done that my whole life would have been different so in my office you will not see the degree i got from the university of nebraska you'll not see the master's degree i got from columbia university but you'll see the little award certificate i got from the dale carnegie course as a matter of fact every week the instructor would give a pencil to whoever had done the most with what we'd learned the week before and so in the fourth or fifth week i proposed to her mother and she said yes and so that week i won the pencil and i also got engaged it was an incredible week wedding date was kind of interesting because i couldn't see anything without my glasses and i was so nervous that i i just decided take off my glasses and i wouldn't be able to see all those people out there she was 19 when we got married and i was 21. [Music] but she was so much more mature than i was there's no comparison [Music] she was a better person than i was but when you get married it's not a question of saying i want to put a 14 factor in for humor and 17 for intellect and 22 percent looks it doesn't work that way i knew it was the right decision and uh and it was you could live anywhere in the world why do you choose omaha i love it i i you know i was born about a mile from here and you know i've never had a bad experience in elmo [Music] omaha and nebraska are home to me everything about it seems like home it's a pace it's relationships there's a lot of continuity there's a lot of community there's a lot of friendship it's a very solid place and friendly place in which to grow up and in which to conduct a business [Music] when i came back to omaha in early 1956 i had no idea what i was going to do but a few months after i came back some members of the family said what should we do with our money and i said well i'm not going back in the business of selling stocks but if you would like to join me in a partnership i said i'll be glad to do it so within a couple of months after coming back i set up the first partnership [Music] i wrote all the checks individually i filed 11 income tax returns i took delivery on stocks for all the different companies i i was a one-man band there for six years juan would sit upstairs in his little office there and uh i would bring up the name of a company and most of the time he knew much more than i did about the company he'd know how many shares were outstanding he'd know the capitalization you know the earnings it was absolutely incredible i mean when warren said something it meant a heck of a lot and i think all of us paid a lot of attention to warm when he took a definite stand on something when i first met warren back in 1959 i recognized immediately that he was a very intelligent person for the last four or five years the stock market has been booming along and presumably forecasting better business which is really not materialized so maybe the stock market is really uh correcting a previous incorrect forecast this time rather than making a new correct one he made a lot of money buying thinly traded securities that were incredibly cheap statistically warren was at that time dealing with small companies and his investments often were to buy a company that you could figure was a discarded cigar butt but it had one more smoke in it and he wanted to buy at the right time to be able to benefit from the one smoke the first partnership started with a hundred and five thousand one hundred dollars i put up the hundred and the other people put up 105 000. and then at the start of 1962 i moved to kiwi plaza and uh by the time i moved to keyword plaza we had seven million dollars invested and fair amount was profits i was then renting a house i never owned a house to that point and then two years later i bought the house i live in today in 1958. [Music] we have three children susie and i we had him young incidentally which was i think a very good thing [Music] my daughter says he was born here i named her susie just like that as soon as i looked at her she looked just like her mother [Music] and she was a cinch and then howie was you know this absolute bundle of energy which made things very difficult for for big sus for a while [Music] peter again reverted back to susie's personality and he was an easy child you know i would describe my childhood as normal but who knows what normal is people often think you know well warren buffett was this famous rich guy he was not famous and he wasn't rich when we were growing up what i saw first and foremost day in and day out was consistency every day we'd hear the garage door closed in the house and then like clockwork my dad would come in the door i'm home and we'd all eat dinner together which i think surprises a lot of people my dad used to rock me to sleep at night and sing over the rainbow so i have this insanely sentimental attachment to that song i've always had a really close relationship with him [Music] i've got three very different kids and they've got a common heart which they got from their mother she did most of the work by far of bringing up the children which is probably a good thing they have more of her qualities than mine which i would i would recommend well my mom was the biggest part of my life growing up even though i got disciplined on a regular basis and she was usually the one doing it she was still my best friend she was somebody who would help anybody i mean whether she knew or didn't know them or maybe even didn't agree with them she would still help them she was incredibly empathetic and she was interested in every person individually she never cared about money or business at all i mean he would go around saying i'm going to be the richest man in the world and i think well it's like somebody says i play music and i'm going to be mozart i don't know how does anyone know how does anyone know no so that was okay i don't really care about that i would say that susie led warren toward changing his political views he grew up as a young republican his father was a republican congressman but susie saw things in different ways she was the [Music] catalyst when the children were growing up i was very involved in civil rights i was immersed in it and i think that's what made warren a democrat he would go with me to hear speakers i remember that speech that martin luther king gave that was one of the most inspiring speeches i i've ever heard i come to say to you this took me right out of my seat my wife was with me and we both had the same experience it was interesting he in that speech he talked about truth forever on the scaffold long forever on the throne but that scaffold sways the future well he was going to be dead in six months but that scaffold did sway the future my wife was more active than i was but i was 100 with her mentally i was just working a little more on my own uh investments but it didn't make a difference what we were going to do with the money after we made it i thought i would pile it up over the years then she would unpile it in terms of running a one very large foundation and i was particularly good at compounding money and therefore society would benefit by waiting [Music] i was genetically blessed with a certain wiring that's very useful in a highly developed market system where there's lots of chips on the table and you know i happen to be good at that game [Music] ted williams wrote a book called the science of hitting and ended he had a picture of himself at bat and the strike zone broken into i think 77 squares and he said if he waited for the pitch that was really in a sweet spot he would bat 400 and if he had to swing at something on the lower corner he would probably bat 235 and in investing i'm in a no called strike business which is the best business you can be in i can look at a thousand different companies and i don't have to be right on every one of them or even 50 of them so i can pick the ball i want to hit and the trick in investing is just to sit there and watch pitch after pitch go by and wait for the one right in your sweet spot and if people are yelling swing you bum ignore them there's a temptation for people to act far too frequently in stock simply because they're so liquid over the years you develop a lot of filters and i do know what i call my circle of confidence so i i stay within that circle and i don't worry about things that are outside that circle defining what your game is where you're going to have an edge is enormously important i bought the first shares of berkshire in 1962 and it was a northern textile business destined to become extinct eventually and uh it was a statistically cheap stock in a terrible business berkshire hathaway was closing mills and as they closed mills it would free up some capital and then they would repurchase shares so i bought some stock with the idea that there would be another tender offer at some point and we would sell the stock at a modest profit and at one point the management asked me what price we would tender our stock and i said 11 and 50 cents and the tender offer came out a few months later and uh it was at 11.3 eighths was an eighth of a point cheaper and that made me very mad so i just started buying more stock i just felt that i had been double-crossed by the management and in may of 1965 but bought enough so we controlled the company and we changed the management that was a pretty silly way to behave as warren has recounted in retrospect one of the reasons warren's successful is he's brutal and appraising his own past he wants to identify miss thinkings and avoid them in the future but it was an accident that he chose berkshire hathaway if the chairman hadn't tried to cheat him out of an eighth there wouldn't have been any buffet dash berkshire hathaway history if you're emotional about investment you're not going to do well you may have all these feelings about the stock the stock has no feelings about you looking back it's interesting that tender offer i didn't realize it but it happened about five days after my dad had died and whether that had affected me or not i don't know do you remember your last conversation with your father yeah but i don't want to talk about it i think it just sobered him and hurt him but born soldiers on both warren and i could look at our fathers and see what they did right and what they did wrong warren's father was a real old-fashioned right-wing ideologue and his father was so intense about it that warren just decided that it was a mistake that cabbage up your head to be that much of ideologue so he loved his father but didn't want to become that much of a true believer in in anything [Music] my politics became more overt after my dad died [Music] civil rights changed my abuse you know in 1776 thomas jefferson wrote all men are created equal and then when they wrote the constitution they all of a sudden decided that no it was just three-fifths of a person if you were black i mean that struck me as kind of crazy i was talking to him one day about some racial issue and he said to me wait tell women discover they're the slaves of the world now how many men were cognizant of that and even women then the initial example is really my mother she came from a generation where the main function of the wife was to help her husband in the job and my sisters are fully as smart as i am they got better personalities than i have but they got the message a million different ways that their future was limited and i got the message that the sky is the limit and it wasn't due to a lack of love or anything of the sort it's just it was the culture on the other hand you can look at the flip side and say it's quite encouraging because if you look at what this country accomplished only using half of its talent you know just think of the potential for the future i'm enormously bullish on america over the future and part of the reason is that we by some rather stupid decisions essentially put half our talent on the sidelines warren is probably the most rational person i've ever met charlie munger would be a close rival and charlie became a man that warren depended on heavily and i think his first experiences in the discarded cigar but era convinced them that it was not exactly where he wanted to be he'd made so much money for so long doing what he'd been taught by ben graham which should buy these very cheap stocks if they were cheap enough he didn't care it was a lousy company and lousy management he knew he was going to make money anyway just because of the cheapness charlie munger has had a big impact on me in moving me toward looking for wonderful companies at fair prices rather than fair companies at wonderful prices and that was enormously important because it enabled berkshire to scale up in a way that would have been impossible to do otherwise yep what are the key indicators you look for within companies before making an investment well i look for something that does give them a motor rod we have a company called sea's candy out on the west coast sea's candies box chocolates if you give a box of sea chocolates to your girlfriend on the first date and she kisses you we own you you know we we can raise the price tomorrow and you'll buy the same box you're not going to fool around with success so the key there is the response you do not want to go home on valentine's day and say to your wife or your sweetheart preferably they're the same person you don't say here honey i took the low bid it doesn't work price is to a degree is immaterial if you've got a economic castle people are going to come and want to take that castle away from you and you better have a strong boat you better have a nightmare castle that knows what he's doing you're not buying an asset you're buying a name you're buying a brand you're buying a real franchise here and charlie was more responsible for that than anybody we were metal partners right from the moment we met i want to know going back 50 years what it was like when you first met warren well i thought he was a prodigy and i got a lot of criticism my wife said why are you paying such enormous respect to that young man with a crew cut who won't eat vegetables he's ungodly mark he's got a much broader intellect than i do and he's magnificent at being able to condense important ideas into just a very few words if you're not interested in the economic scene right now you're mentally dead charlie has no tact all right let's talk a little bit about bankers charlie on friday compared them to heroin addicts yeah well that's colorful charlie but i would not have chosen that i once wrote of him that when they handed out humility he didn't get his fair share the ideal way to run a headquarters is to have one man preferably over 80 sitting in an office by himself anything else is pure flippery he's always honest than what he tells me so i i listen to him [Music] we never had an argument we just we just kind of roll with it easily suppose warren doesn't want to do something that i would have done and suppose that happens four times over 40 years or something what the hell difference does it make to me net the record is working out fine both of us know that we've done better by having ethics warren's not interested in making money by cheating people warren's opinions of wall street investment bankers would not endear him to their mothers he feels that they're for the most part not out for their clients they're out for their own business interests in the late 1960s there were just a flood of accounting shenanigans and mergers built upon false accounting and misleading people it was a time when a lot of charlatans were prevailing in wall street and were being applauded by wall street and i understood what the game was about but i didn't want to play in it so i closed down the partnership at the end of 1969 and i took on the title of chairman for the berkshire hathaway well i think the modern berkshire is pretty much all a reflection of warren i have constructed a business that fits me it's kind of crazy to spend your life painting if you're painting a subject you don't want to look at i've gotten to paint my own painting in business on an unlimited canvas in a way it's a different sort of place i work with great group of people that make my life very easy and take good care of me we have 25 people in the office and if you go back it's the exact same 25 the exact same ones we don't have any committees at berkshire we don't have a public relations department we don't investor relations we don't have a general counsel we don't have a human relations department we just don't go for anything that people do just as a matter of form it's exactly the life i like and it's not work to me it's just a form of play basically well i like things quiet i shut the door actually at the office because i i don't want to hear anybody talking outside and i still probably spend five or six hours a day reading look at what's trending today what's amazing is the stuff he remembers it's like a little computer you know i keep thinking the hard drive will run out of space but it doesn't he's one of the smartest people we know so i was at a couple of the family dinners at the gates house where mary bill's mom was trying to convince him to come out to the family place at hood canal to meet warren buffett and he was resisting because he was really busy with microsoft and uh finally he said mom okay i'll come for lunch so the two of us flew out there somewhat reluctantly because you know buying and selling stocks which is how i thought of warren uh wasn't a particular interest to me it didn't seem like value added it turned out that was completely wrong we knew that day that we'd be very close friends in fact we just couldn't get enough of each other shortly after i met bill gates bill's dad asked each of us to write down on a piece of paper one word that would best describe what had helped us the most bill and i without any collaboration at all he wrote the word focus well focus has always been a strong part of my personality if i get interested in something i get really interested if i get interested in new subject i want to read about it i want to talk about it and i want to meet people that are involved in it we both love to work hard you know neither of us like frivolous things you know he doesn't know much about cooking or art or a huge range of things i can't tell you the color of the walls in my bedroom or my living room i don't have a mind that relates to the physical universe well but uh the business universe i think i understand reasonably well warren's ability to size up people and businesses it's a pretty magical thing he is the best out of anybody we know we should all try to be 20 percent as as good at that i like to sit and think and i spent a lot of time doing that and sometimes it's pretty unproductive but but i i find it enjoyable to to think about thinking about about business or investment problems they're easy it's it's the human problems that are the tough ones sometimes there aren't any good answers with human problems there's almost always a good answer with money [Music] he was served a genius i think sometimes geniuses are by default lonely and isolated [Music] he was not really well adjusted he was just just funny i mean humorous guy who maybe had a moat around him because he was afraid and he didn't know anyone that he wanted to let in [Music] and to this day i mean i don't know well nobody knows it like i do and probably any wife would say that but uh he's a loner in a sense and it's difficult to connect on an emotional level because i think that that's not his basic mode of operation he was there uh physically but he was upstairs reading all the time i always told my mother we have to talk in sound bites i learned that early on that if you start you know going into some long thing unless you've explained to him ahead of time that it's going to be a long thing and you need him to hang in there you lose him you lose him to whatever giant thought he has in his head at the time that he was probably thinking about before you came in and really wants to get back to [Music] he's not like the rest of us i don't think my dad ever took anybody for granted but you are a little bit blind i think sometimes to what other people might be doing behind the scenes and my dad's gotten a little bit of a pass [Music] lauren can't find the light switch and it's probably my fault one time years ago when the kids were little i was feeling really sick i had the flu so i lay down on the bed and i said to lauren will you get me a pan or something from the kitchen i may not get to the bathroom i feel so sick he said okay so he travels down to the kitchen and i hear this bang boom bang and he comes up and he brings me a calendar and i looked at it and i said look honey this has holes in it oh oh okay so he ran down all this banging he comes up and he puts the colander on a cookie sheet [Music] physical proximity to warren doesn't always mean that he's there with you he's so cerebral you see and that's why i learned to have my own life we were two parallel lines and but very connected when he was open to connecting [Music] i did make a joke at one point i said you know we could make a tape of mom yelling you know bye warren i'll be back later and then have the door slam and you would just think she was here i don't think he knew what she was doing most of the time [Music] once howie and i were both gone as we've gotten older she started to see the writing on the wall here and you know just started trying to figure out how she could at least have some more she called it you know a room of her the own mistakes involve not understanding other people as well as you might well she left omaha in 1977 and there really isn't much to say about that it was devastating for him and i came home because i i i can't say i was mad at her exactly but i kept thinking how can you leave him he's so he can't function by himself so my mother she'd asked a bunch of her friends to sort of look in on him and ostrich was one of them so i called officers i said i said will you take one make him some soup go over there and look after him because he's not going to make it and it took him a while to figure it out but he figured it out i said i'm not leaving you because i'll be wherever you want me when you want me my mom moved to san francisco and i think one of the reasons it was important for her to leave omaha was because she just felt like she was kind of trapped in this environment that everybody knew who she was that she you know couldn't have her own identity he knew that there's something she needed to do and that she really recognized that the money gave us all and her a choice in a lot of ways that a lot of people didn't have there was a time juan was getting criticized that here was this very very rich man who was getting richer every year and really wasn't giving a lot of money away and there was terrific criticism by some people which one never said anything about the biggest thing in making money is time you don't have to be particularly smart you just have to be patient susie didn't want to wait as much as i did but she never quite appreciated compounding like i did that is a disagreement we have i bring the foundation now i think we should be giving more money away but i understand why we don't because it's business to me the crux of it is that it wasn't the money itself you can see that the way he lives i mean he doesn't buy huge paintings or build big houses or anything like that it's all mental with him and the money is his scorecard and he used to say to me everybody can read what i read it's a level playing field and he loves that because he's competitive and he's sitting there all by himself in his office reading these things that everybody else can read because that's the idea that he's going to win i'll tell you how you do it have you ever seen a juggler juggle 25 milk bottles how did he ever get to do that the answer he started with one bottle and two then three and just kept doing it and pretty soon he was a and that's the way we did it so basically we started out with cash and ended up buying a bunch of businesses including insurance companies insurance is in itself a profitable business but it has the additional advantage of creating something that's called float and float is the money that hangs around berkshire while a claim is waiting to be paid and warren turned out to have a extraordinary ability to use the money thrown off by the float to buy companies that fed the growth of berkshire in 1983 mrs b cashed in on her business by selling control for 55 million dollars to a company owned by investor warren buffett warren was quite an expert about newspapers he got interested in the post because he recognized it as a greatly undervalued company he had to write me a letter dear mrs graham i've just bought five percent of your company and i mean you no harm and i think it's a great company i know it's graham owned and ray i'm ron and that's fine with me and i thought whoa this guy's really terrific he used to come to board meetings with about 20 annual reports and he would take me through these annual reports i mean it was like going to business school with warren buffet k graham did introduce warren to the world of washington entirely different group than he had ever dealt with before it was clear that working with kate gave him a different kind of confidence and he was the star everyone wants to hear what warren buffett has to say the oracle of omaha building his image and having some fun berkshire shares have increased more than 2 000 in value one of the largest market capitalizations in the world and it could grow a lot larger since warren buffett shows no sign of slowing down so how did he do it by investing in what he knows and understand good old-fashioned american brands like coca-cola fruit of the loom and dairy queen what inspired you this inspired me yeah absolutely [Music] today the coca-cola company will sell almost two billion eight ounce servings of one form or another coca-cola products now if you get an extra penny a day a penny a serving that's 20 million dollars a day that's 7.3 billion dollars a year from one penny more when you own coca-cola you own a little piece of the minds of billions and billions of people that is really good who's got the most hundred dollar bills these days well his name is warren buffett in this country and he has just displaced his friend bill gates as the richest businessman in the world and the purpose of wednesday's meeting was to discuss buffett's company berkshire hathaway's plan to purchase railroad giant burlington northern valued at 26 billion dollars this would be buffett's largest acquisition ever he's created berkshire from virtually nothing into hundreds of billions of dollars of market cap nobody else has a record like that he wanted to have an outstanding reputation that he never really upset the apple cart when he bought a business but he kept the management in place he was establishing a reputation that paid off later in life it's been building and building ever since i've known him [Music] it takes 20 years to build a reputation and it takes five minutes to lose it when warren made his investment in solomon i was one of the people along with many many others who were quite amazed because he had taken a very critical tone in talking about investment bankers and about their greed and here he was investing in one solomon brothers that was known to be a member of the club warren and charlie went on the board and charlie couldn't stand what was going on there and didn't like the culture at all and shortly after they got involved the thing exploded in 1991 on a terrible day in august i got a call and the two top officers of solomon were on the other end and they said that that you know we had to problem [Music] this is nbc nightly news good evening it is the kind of scandal that rocks wall street and raises questions questions about the integrity of our financial institutions the giant securities firm of solomon brothers under investigation for improper trading of treasury bonds solomon admitted it exceeded the limit of trading in government bonds once by buying bonds in the name of a customer who didn't even know about the deal solomon brothers is under investigation by the treasury department the federal reserve the sec and the justice department but more important than the fate of the firm itself is the impact their actions could have on the public trust and on the credibility of the american market worldwide [Music] the company owed 150 billion dollars built more money than any other private company in the united states at the time and that night i met with the man that ran the federal reserve of new york who was the sheriff in effect and i said you know i've never really owed very much money before i said i got a little mortgage on a house but 150 billion is a little staggering and i was hoping he would say well don't worry warren will give you a few weeks to breathe and he he said to me prepare for any eventuality [Music] earlier today the u.s treasury department announced that it had suspended solomon brothers from participating in the auction of new issues it was one more jolt for a scandal scarred wall street the fed was in fact saying you're an evil force and we don't want you trading our bonds it was a huge turning point for warren and he believed that at that particular point his reputation was on the line warren had 24 hours to make up his mind is whether he was going to go forward or just bow out and i think at that point solomon brothers could have gone into bankruptcy and warren stepped up and took responsibility okay i'm warren buffett i was uh elected uh interim chairman of solomon inc a few hours ago at a board of directors meeting why was it necessary for you to step in and what is your mandate of leadership i think that it was necessary to step in because i would do whatever was needed dig out any bit of information about what's happened in the past and i would do everything i could to make sure that things exactly right in the future i had to convince the treasury that what was done in the past was awful and stupid and they had every right to be furious at us but this firm employed 8 000 people and it was going to go out of business unless they let us continue basically warren believed that there was a too big to fail scenario the term was not used then but he believed that solomon was too big to fail and if solomon went down it would take other important parts of wall street with it we had this death knell from the treasury so i called the treasury nick brady was the secretary you know i'm pleading for my life and i'm sure my voice was cracking and everything else i said nick this is the most important day of my life and that i really did feel that it was going to be a colossal disaster he wasn't sure i was right at all in fact he probably thought i was wrong but he knew that i felt what i was saying so the treasury modified its order and in effect of course it was quite an endorsement it was huge [Music] it saved solomon nick brady went with warren because he trusted him it shows how having a good reputation is really helpful in life i thank you for the opportunity to appear before this subcommittee i would like to start by apologizing for the acts that have brought us here the nation has a right to expect its rules and laws to be obeyed but i also have asked every solomon employee to be his or her own compliance officer after they first obey all rules i then want employees to ask themselves whether they are willing to have any contemplated act appear the next day on the front page of their local paper to be read by their spouses children and friends if they follow this test they need not fear my other message to them lose money for the firm and i will be understanding lose a shredder reputation for the firm and i will be ruthless i welcome your questions it's been 50 years since i formally took control of berkshire hathaway and step by step we've created something that is kind of what i dreamt we might create over time but it took a lot of time to do it never seemed like we were making that much progress on any one day but compound interest works when you think back 50 years ago when you founded this company did you ever imagine it would be the fifth largest company in the world uh no i didn't but if i was thinking about it i wouldn't have thought in terms of being the fifth or the fourth or the third he would have wanted number one well i mean if you're gonna dream you might as well breathe well a berkshire hathaway shareholders meeting is partly a fun festival it's sort of a mardi gras for people to come every year it's a chance for us to have a lot of fun and meet people that have entrusted us with their money well we used to have just uh 30 people in the cafeteria and now we have this huge public spectacle celebration is part of making a group of people work well together it's a celebration we are glad you're here at our meeting be sure to check out our wares we'll sell uc's candy and dilly bars and insurance for all of your cars for it's bye bye bye all you see [Music] he truly loves to do what he does i think investors who own berkshire hathaway they see themselves as a part of a community there are more long-term holders of berkshire than any company people consider it a religion [Music] they don't buy it with the idea they're going to sell it next week i think most of them buy it with the intent of holding it for their lifetime just like they'd buy a farm or buy an apartment house at berkshire everybody gets the same information from the comprehensive annual report we don't meet with the analysts i'm not interested in what an analyst thinks about berkshire i'm interested in what the owners of berkshire think about berkshire [Music] he came out of a private partnership where people he knew were trusting him [Music] and he had his relatives in the partnership and they were not rich and as it got bigger started treating everybody else the way he treated his relatives in terms of our feeling toward the people who are shareholders we regard them as our partners they're not some faceless group of people and that's why at the annual meeting you know i love seeing 40 000 them it gives real meaning to what we're doing every day let's try if [Music] we just have a lot of love and respect for each other and that's never changed i don't go to most things in omaha because i think austin lives there with him and that's for her to do and then we do all kinds of things strange as it may seem to people i always think you know who cares if it's working between the people who are directly involved who cares what anyone thinks and my mother and us were very close you know they really really loved each other and i think that my mother was glad that she was there cause she you know she loved my dad she wanted him taken care of and happy and there's no one better than ostrich i mean she loves my dad she wouldn't care if he had one scent well austrian has lived with me for a long time she's done wonders for me it worked well but i don't think it'll work for lots of other people necessarily susie and i loved each other and we admired each other and we were totally in sync with what the other was doing but we were two different individuals the first time lauren came out to san francisco we took a walk and he looked around and he doesn't he's not very visual he was looking around and he said this really is this is your city i am so drawn to color and light and form and nature that he thought it was a good place for me over the years i've developed a better understanding of human nature i can learn a lot about investments out of a book but i don't think you can learn as much about human beings you really need some experiences and i'm wiser in that respect than i was 40 or 50 years ago even though i can't rattle off numbers the same way i used to be able to [Applause] [Music] well i think that what we do reflects who we are that's true for everybody in this room and if you do the work i do you meet the best human beings in the world people who've made a choice not to make money but to serve other human beings i think it's the best kind of life anyone could have i was with her in arizona at this fortune most powerful women's conference and she told me that she'd had a biopsy the day before and i didn't really think much of it then we got home and the biopsy results were not good it was stage four oral cancer i was on my way to a board meeting in india and i remember saying to her you know i'll see you when i get back and she rarely cried and she just started crying said no you need to stay here and you need to come out for the operation so we were all there and the day she was going into the surgery that morning my dad it's funny he there's some of it he just can't you know he just can't the thought of something happening to her was just for him you know it's just the worst thing that could happen [Music] she knew it was going to be really difficult she knew that recovery was going to be brutal so i think that she had that surgery for others [Music] it was quite a big surgery she couldn't talk she couldn't swallow she couldn't eat but she came out and i really was with her for the next four months or so and my dad came out every week she and my dad had gone to cody wyoming which they did every year with a bunch of friends and my dad called this was i don't know eight o'clock at night or something and he said something happened to mom i'm in an ambulance you need to come i actually thought something happened to my dad i don't know why i thought that but i guess i thought you know my mom had had this recovery it was successful and why would anything happen to her that was horrible and a total shock you know she'd been fine she'd been fine they went off to cody and she was fine and they were having dinner and you know she didn't feel well after dinner and she had the stroke [Music] we went into the hospital room and my dad was sitting there he'd been sitting there all night holding her hand [Music] i was so proud of him because when it came down to it he knew what he was supposed to do and he did it which was nothing so my dad went to sleep and i sat with her and i just kept putting my hand on her heart to see if she was breathing and um at one point you know i didn't feel anything so i went and got the nurse and i said um can you come in here and she said no she's gone so i have to say one of the worst moments of my life was waking my dad up to tell him that it's a very strange thing love you can't get rid of it if you try to give it out you get more back if you try to hang on to it you lose it susie really put me together she believed in me she she she she put me together and i would not only turn out to be the person i'd turned up but i i would not have i actually wouldn't have been as successful in business without that he made me more of a whole person he went dark essentially quiet and inward for a certain amount of time you know my dad is a solitary guy and he had lived essentially a solitary life in a lot of ways i think it came down to him figuring out how he was going to get through this tunnel and get out the other side welcome i'm patty stonesider the ceo of the bill and melinda gates foundation and we appreciate you coming today especially since i sent a very vague and very late notice to ask you to come to a conversation with bill and melinda on the future of philanthropy so let's get on with it i have the pleasure of introducing a good man whose great decision is going to change the world warren buffett a remarkable decision tonight from one of the richest men in the world mega billionaire warren buffett says he is giving away most of his fortune to charity buffett has pledged to give away in the bulk of his fortune to the bill and melinda gates foundation and giving more than 15 percent of his money to foundations started by his three children and his late wife susan one global health activist called what buffett did today one of the most remarkably selfless acts that history will ever record that's a better hand than i get at a berkshire hathaway meeting i'd like to thank you for coming it it's a great day for me it's a great day for my family my wife susie and i had planned that whatever i made would go back to society and originally i thought she would outlive me and she'd make the big decision on it but since her death i had to rethink the best way to get the money into society and have it used in the most effective way and i had a solution staring me in the face it was completely out of the blue i mean amazing the largest single gift ever given was what he gave away that day i'd like to ask the people representing those various foundations to come out first three letters are easy to sign i just signed dad when he wrote the letter to us he put something in that letter that was incredibly important to me which was exactly how our foundation behaves which is if you're gonna try to bat a thousand you won't do very many things that are important but if you're willing to basically strike out a few times you can really change something big iccn [Laughter] well i feel perfect about the fact that my three children each run a separate foundation that combines their special interests whether it's early education or whether it's farming in areas where people's techniques for using small plots of land could use a lot of improvement all kinds of ways vaccines you name it more powerful than buffett's gift is the message he's sending to other wealthy americans that those who have the least in this world should benefit from those who have the most in my entire lifetime everything that i've spent will be quite a bit less than one percent of everything i make the other 99 plus will go to others because it has no utility to me so it's silly for me to not transfer that utility to people who can use it it's doing me no good i am so proud of what we do i almost cry at every board meeting because i just think she would be so proud and that is my biggest job in my opinion is to make sure that every penny gets spent the way she would want us meant whoever you are in this life you don't want to think you've wasted a lot of your energy and love and time on something useless i always thought i'd marry a minister a doctor or somebody out doing some valuable service to human beings and the fact that i married somebody who makes just piles up money is really the antithesis of what i ever thought but i know what he is and he is there's no finer human being in who he is you

Channel: Investor Archive

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Length: 84min 25sec (5065 seconds)

Published: Tue Nov 10 2020