Warren Buffett reveals his investment strategy and mastering the market

Warren Buffett needs little introduction he's the Godfather of modern-day investing for nearly 50 years Buffett his run Berkshire Hathaway which owned over 60 companies like Geico and Dairy Queen Plus minority stakes in Apple coca-cola and many others his eighty two point five billion dollar fortune makes him the third richest person in the world and he's vowed to give nearly all of it away the Oracle of Omaha is here to talk about what shaped his investment strategy and how to master today's market [Music] I'm Andy serwer welcome to a special edition of influencers from Omaha Nebraska it's my pleasure to welcome Berkshire Hathaway CEO Warren Buffett Warren welcome thanks for coming so let's start off and talk about the economy a little bit and obviously we've been on a good long run here a very long run and yet does that surprise you and what would be the signs that you would look for to see the things were winding down well I look at a lot of figures just in connection with our businesses I I like to get numbers not so so I'm getting reports in weekly in some businesses uh that but that doesn't tell me what the economy's gonna do six months from now or three months from now it tells me what's going on now with our businesses and it really doesn't make any difference in what I do today in terms of buying stocks are buying businesses what those numbers tell me they're interesting but they're not they're not guidance to make yeah if we buy business we're gonna older forever so we're gonna good your bad years in between years may be a disastrous year something here and and we care a lot about the price we do not care about the next 12 months but are you surprised at how long this economy has been expanding I've been surprised by all kinds of things in the last ten years about the economy I mean I I don't think there was any economists I've ever read that talked about negative interest rates for long periods of time I mean if you go back and read Keynes or you read Samuelson you read anything they do not get into a negative rate environment I think now there's still 11 trillion that's of government debt around the world that's at a negative rate so we've never seen it before and we've never seen at least the conventional wisdom Otto this is same period of long and growing deficits while the economy is getting better extremely low interest rates and really very little inflation so something different is happening but something different happens all the time so and that's one reason economic predictions just don't enter into our decisions Charlie Munger my partner in you know 54 years now we've never made a decision based on an economic prediction whim and we make business predictions about individual businesses will do overtime and we compare that to what we have to pay for but we have never said yes to something because we thought the economy was gonna do well in the next year or two years and we've never said no to anything because we were right in the middle of a panic even if the price was right all right so you don't pay much attention to the dismal scientists then I guess well I pay none in the sense of as a guideline to doing anything I've it's entertainment I mean you know it's like going to variety show or something like that but and I just don't know of any economist that that actually is what business is successively as successfully or done well in stock Paul Samuelson didn't know he was a big shareholder burger but it's you know they make guesses and though there's so many variables I mean in in the hard sciences you know you know that you know if an Apple falls from a tree that is gonna change over the centuries because of anything or political developments or 400 other variables that go in but when you get into economics there's so many variables and and the truth is you've got to expect good times and bad times in business and if you if you were to buy an auto dealership and you're you know wherever you live locally or a McDonald's franchise or anything like that you wouldn't try and time the purchase you try and make the right purchase at the right price and you wanna be sure you got a good business but you wouldn't say I'm gonna buy it because growth this year is gonna be 3% instead of a 2.8 percent or something the sword fair enough you have over a hundred billion dollars of cash you Berkshire has over 100 billion in cash and you say that you always want this company to be a fortress so how much cash should an ordinary investor have on a percentage basis it depends on a personal situation I've had it if you're working and something where you're living off your your your paycheck from week to week you want to have a little cash or around then and you certainly don't want to have a credit card that's maxed out or anything like that but if you know if your house is paid off if you don't have big living expenses you got a portfolio of decent diversified businesses we need any cash so you can be more cash free than Berkshire is yeah yeah I've got responsibilities you know we've got insurance claims we could have hurricanes that you know what happened all kinds of things we might have to pay up billions of dollars and I've got over a million people that own shares that are coming up run the place so we get through periods like that but if I were retired I had a say a million dollar portfolio stocks that was paying me 30,000 a year in dividends or something of the sort and my children were growing the house was paid off of everything but you know I wouldn't worry too much about having a lot of cash around let's talk a little bit about Apple everyone always wants to talk about animal right it's kind of the its stock it company you have a forty five billion dollar stake more or less how closely do you follow the company you know people are concerned they haven't really introduced any new products well if you have to closely follow our company you shouldn't don't really know I made it I mean if you if you buy a business did you buy a farm you know you go up and look you know every couple weeks to see how far the corn is up and you know you worry too much about whether somebody says this is gonna be a year of low prices because it's exports are being affected or anything like that you know you buy a farm and you hold it for I got one farm that I bought in the 1980s and my son runs it but I've been there once you know I mean it it doesn't grow faster if I go and stare at it you know I can't cheer for it you know forever and I know there's going to be some years when prices are gonna be good prices aren't gonna be good I know those years when yields will be better than others what about the form and if it just and I don't care about economic predictions on or anything the sort I do care that over over the years it's well tended to in terms of rotating crops and I hope yields get better which they generally have in fact that farm a hundred years ago what about wood produced 30 bushels maybe 35 bushels of corn per acre now on a good year you know it'd be 200 I mean we've really made progress in this country that's one reason commodity prices and go back a couple hundred years they've moved so little is because we've just gotten better and better at whether it's cotton or whether it's corn or soy beans are all kinds of things and you and I have benefited from that and so Apple is kind of like a farm well it's a it's a long term investment and if you owned if you own the best auto dealership in town the best brand and had something good running it wouldn't drop by every day and say you know how many people have come in today or you know I think interest rates are going up a little maybe that'll slow down our sales or anyway no you buy it knowing there's 365 days a year and you're gonna own it for 20 years so that's 70 300 days and you know they're gonna things are gonna be different from day to day and your dear you shouldn't buy it up the day to day stuff that's important let's switch over to talk about buybacks which is another hot topic these days and and you did a fair amount if you look in the annual report you can see that between December 13th and 24th it looks like you guys bought back about two hundred and thirty three million dollars worth of berkshire which was right near that particular stock market bottom how did you know that what was going through your mind if I knew it that's not a big purchase for us actually and and now we will by Berkshire only have lots of excess cash all the needs of the business are taken care of we spent fourteen billion dollars on property plant equipment last year way more than appreciation so we take care of the needs of the business then we have excess cash and if we find investment we'd love to do is find other businesses to buy it but if our stock if I think the stock and my partner Charlie Munger think the stock is selling below intrinsic business value we will buy in stock so it obviously was at that point well we thought so yeah yeah but you know what's really intriguing is this is when it goes down a lot I mean when you're buying down our bills for for 60 or 70 cents which periodically you get a chance to do in stocks then you know you know it assuming you've got the the cash you know whatever you know get so that that some some surprise could really take you out in some way but if we've got excess cash we'll buy it as fast as we can but at that point it would be more like a 2009 rather than just yes ember yeah but it's you know if you and I own a McDonald's franchise together and it's worth a million dollars and you own 50% of it you come to me and you say I'll sell out for four thousand you know I'll buy you out you say wary of that but tomorrow so just continuing about buybacks Senator Schumer's and Sanders want the government to weigh in to sort of legislate when companies can do buybacks and then also there's was a report recently about executives doing insider trading it appears around the times of buy back so our buybacks are kind of a problem well you'll have some people that misbehave and respect them any activity I made so the really wouldn't have much to do with buybacks I think buybacks the degree to which they've been part of nefarious activity and I've observed them for a lot of years and are very close to zero but that just made me the throne of opportunities but uh that article did not I didn't follow the conclusion on it I mean you're distributing the shareholders essentially in Dubai dividends and presumably American business should distribute money to its owners occasionally and we do it we do it through buybacks or we've done some and we don't do it through dividends and but most companies do it through having a dividend policy and then if they have but he'd be on the needs of the business and I think if their stock is underpriced that it makes nothing but sense should the government tell companies when to do it or at least mandate conditions where they can't well they do restrict you a little in terms of if you're some general rule of the SEC if you're having some kind of this isn't quite the right word but manipulative activity or anything like that in the stock but no I don't think that I don't think the government should decide your dividend policy I don't even think they should direct your capital investments they can make it enticing to make certain kinds of it does capital investments which they do with renewable energy for example I mean the government has interest in fostering certain developments in this country over time and they do there's be a special oil depletion allowance you know 50 years ago and so on that that was more politics than it was governmental policy but certainly renewables are a prime example of that but the idea of decided directing whether you are entitled to return cash to shareholders and the manner in which you do it I don't think really makes a lot of sense the 2020 election is going to be upon us before we know it and I know that you had some nice things to say about Mike Bloomberg but it appears he is not going to be running now yeah it's it's hard to win with just a billionaire vote but I admire menorahs me I wish he had run I want to be very clear on that president Trump was a business executive so two questions is a business executive the right kind of person to be President and what characteristics do you look for for a president that you would support well I think a business executive can be the right person but no I don't think that because they're a business that that you give them extra points and number one I want to I want a president that wakes up every morning and and realizes that the greatest threat to a country which has got all kinds of things going for it weapons of mass destruction and that we live in a world where people organizations and occasionally countries could have people that would like to wipe out a large percentage of the American people or maybe other countries as well and that you now have capabilities which I always thought recently I might classify it as a nuclear chemical and biological but I think you have to add cyber now you know you have some evil genius someplace that that crazy reasons just like it happened with anthrax back you know who knows what motivates somebody that starts sending to them anthrax letters and if you have somebody that thinks that'd be great send a false alarm to the Soviet to the Russians and to the US that the other side was launching or something of the sort you know it's it's it's a very very dangerous world it's a wonderful world but it has dangers now that started in August of 1945 and 1/9 Stein said you know this changes everything in the world except how men think and so I want a president that has that same filter that all of these other things are important but protecting the country and reducing the chance of successful use of weapons of mass destruction against us is the number-one job and I think I think most of the presidents I've talked to a couple kumano than over the years and I I really think that they do realize they may get lost in the events of every day as they go along and then beyond that I want a president that has two objectives with the economy one is to make sure that there's marvelous goofs we have keep laying more golden eggs and then I want a president that also feels that if GDP is $60,000 per capita in the United States that nobody should get left behind we've got a market system that works marvelously and turning out more goods and services better ones year after year done it all through my life would you ever talk to a candidate and say hey what do you think about these three things well don't tell me what I want to hear I want to hear what they tell people who disagree with him on the subject I I always like to ask a candidate they usually finessed me somewhere I know but I say what are you for that the majority of your followers are against you know I know you really believe in that and that's reading the test but I'm not sure that except under some kind of sodium pentathol got a great actress that's great but that's the question you ask the presidential candidates or presence that you would speak to it if if I really want to get and then said oh that's why Bernie Sanders was so successful I made 90 percent of people who voted for Bernie Sanders had probably not heard of him two years earlier but they felt that they knew exactly they felt they knew exactly what he would do I mean they probably was authentic and and if you asked him you know what he was for that most people might be against he would tell you you know a few questions about Kraft Heinz it was that a mistake but we'll find out overtime but but we did pay too much in my view for for Kraft we didn't pay too much for Heinz so when we started out it was originally a non public partnership between us and and but we did paid too much in my view for Kraft and there's not much you can do about things if you pay too much and secondly there's always been a struggle between the retailer and brands I mean if if I've got a terribly weak brand and I want to get into Walmart I'm not gonna be able to do it you know I mean I offer all kinds of crazy concessions you know that and I want to be in Walmart if I got I have some sort of super packaged goods the negotiation is way different if you have something essential versus not essentially 10 years ago Costco tried to get rid of coca-cola Costco's got terrific loyalty among customers and you know and and their own Kirkland brand is a thirty nine billion dollar brand now and it moved from category to category and they only started in 1992 so they they know brands and they and but in the end they put coca-cola back in if it'd been royal crown Cola had to put it back in so there's always that struggle between the brands I mean and there always will be but the retailer's net it has been moving in their direction particularly I think because of the Amazon revolution first Walmart and then Walmart Walmart yeah yeah but it's been accentuated I think we have a new retailing environment now I mean it it is like it goes from night today but it it moves someone and and brands that people spend billions of dollars developing and sponsoring TV shows or sponsoring radio shows in the old Campbell Soup was always on there with Jack Benny or something you know when I was a kid and it was big and it built brands and people like obviously like the product too but people are more willing to change and it's harder it's it's a somewhat different world than what it is night and day I mean you were very unlikely to keep changing brands every day but it really surprised me that that Gillette lost position I mean I men don't like men don't like to experiment much I move under better experimenting but you know if a kid when you were a kid Gillette cavalcade of sports was your pal and brought you the Rose Bowl and the World Series and all that sort of thing you didn't you just shape would you love the rest of your life and you still do to a great degree but it's not exactly the same as it was even five years ago or so when we bought crafts you mentioned Amazon as a game changer in I have to ask you you haven't bought the stock you're an admirer of Jeff Bezos the listing of the richest people in America came out he's number one I think your friend Bill Gates is number two you're number three so you can see what he's done in myriad ways and of course the question is how come you haven't bought Amazon is there still time to buy would you still buy oh I always admired Jeff I mean I met him 20 years ago or so and and I thought he was something special but I didn't realize you could go from books to it what's happened there no I I mean he had a vision and executed in an incredible way something that would not of you know that but there's a lot of games I miss I would have missed you know I would have missed Microsoft even if I got in to know Bill early or something those just aren't my games I don't worry about the things that I miss that are outside my circle of competence of evaluating I I do I have miss things who are within my circle and that's a terrible mistake those are my biggest mistakes you haven't seen them but I don't it's not a mistake because I miss Netscape or something like that at all there I would say that maybe 5% of the companies or 10% of the companies that most are within an area my circle of competence there's something I should be able to understand all right well let me let me switch gears then and ask you about leverage a little bit and corporate debt people are concerned about people are concerned about federal debt at 22 trillion dollars should we reduce let's just say the federal debt and how would we do that well if you're running a deficit getting close to 5% when things are really good you know that's a new world I'm and nobody neither the Republicans are Democrats you're particularly concerned about it and we're not having a lot of inflation that wasn't supposed to happen you know but it's happening that's why I say you know really you don't want to get hung up on trying to make economic analysis because nobody's any good go that nobody you don't get rich doing that if you look at invention in that Forbes list if you get on the list the number of people of I've done that by economic analysis I think you're just about as old Shawn there okay fair enough um income inequality wealth inequality you've talked about the Earned Income Tax Credit is there more to it than that should we adjust tax policy it seems to be going the other way right now well it's going the other way but I think I think I think the Earned Income Tax Credit is the best way to put money in the pockets of people that don't fit well into the market system but that are perfectly decent citizens and that have made a good bit of the success of somebody like I've had with Berkshire or something possible it wouldn't have happened without the America we have and if you go back go back 200 years and we're all working out 80 percent of us are working on farms the person that's the best of that working in that farm whatever it may be is worth maybe twice the ones that's the worst you know I mean that's the difference between super talent and no talent in the farm economy picking cotton or whatever it may be now if you're the best middleweight fighter in the world you know you may get twenty or thirty million dollars and and and if you are just a good citizen raise nice kids helping the neighborhood and everything else but you don't have market related skills you'd be you'd be good on that farm stone and you would be earning something comparable but most of the people around you but you don't have something out of it as it gets more and more specialized and it's going to continue to get more specialized you want two things for that person you want them have a decent life I mean they live in a country with 60,000 of GDP per person you want them to you want them to have a decent life and they can I also think you want them to have a feeling of accomplishment so you wanted to have a job assuming that they're not handicapped in some way you wanted to have a job but the minimum wage would be one way and say well we'll make sure that they haven't I'm wearing their pocket but that's got a lot of effects in disturbing the market system they just need more cash they don't need a higher wage they need more cash in their pocket and and the government at a relatively local come provide a decent living friendly but it's living that's working forty hours a week and has a couple of children and we've gone in that direction and it's sort of bipartisan and you find both Republicans and Democrats for it I think it would be better not to have one annual payment you know how'd that they get it monthly and I think there are various things you could do but you want it you want them to feel part of the system and you want to get them have them get as as more and more of these golden eggs or like you want them to get get get a little more of their share I mean if we don't do that and the Democrats win it's possible we get you know big taxes on wealthy people free college for all and and those are bigger plans you want you want more money in the pockets of every and everybody's willing to work or is unable to work and and we can do it a rich family would do that you know I had six or seven kids and I had some business I wanted to pass on you know you'd pick the most able person or mother because that's the market system to do that but you make sure that on all seven of the family participated you didn't get more than the one that you might give more to the one that that that kept producing the golden eggs you would but you wouldn't just say to the other the one at the lowest end who might be the best kid of all and in most respects you know he's the one that shares with everybody you wouldn't it would say to that Emperor that you know too bad that's just the way the market system works you know go guy your have your spouse get a job for housing someplace right why don't we do update about the health care initiative which now the company has a name yeah we're Haven was that your idea no no I didn't worry about a name we could have gone on there's no name operation for ten years now that that is we got a wonderful partnership in the sense that it's got law its large and has reasonable market muscle with them more than a million employees one of the three of us we've got three CEOs that can make things get done in organizations so are so big that normally that they would get very bureaucratic on a I mean if you try to do this with many big companies you have it up legal weighing and then you know and and and public relations where you know we don't have any of that stuff they may have them in certain areas but but I don't but Jamie isn't worried about doing that sort of thing and then neither is Jeff so so we've got a unity of commitment and an ability to execute on the commitment the only problem is you've got a three point four trillion dollar industry which is as much as the federal government raises every year that that basically is feels pretty good about the system they as we went around talking to people to find a leader for the group for example you know everybody says you know the system you know it turns out very good medicine but you can't go from five percent of GDP to 18 you know without without really making it less competitive of among other things in the world so everybody thought the system needed some adjustment just not their portable system had and that's very human I do the same thing I'm sure if I was in the same place so it's there's an enormous resistance to change while a similar acknowledgement the change is will be needed and of course if the private sector doesn't supply that over a period of time you know people will say them you know we give up we gotta turn those over they got ruined which will probably be even worse how often do you talk to Jamie and Jeff about it I know Todd combs I think that Roger God really does all the work at our but if this works you have the credit from the from the berkshires dad boys does Haven have to buy companies to gain expertise and what do you know it no I I noticed the plan I mean Eddie the plan is support a very very very good thinker on this subject who's once is a practicing physician and who commands the respect of the medical community to in effect figure out some way so that we can deliver even better care and have people feel better about their care too I mean they have to perceive that they're receiving better care over time and and and stop the march upward of cost relative to the country's output we've got this incredible economic machine but but we shouldn't we shouldn't be spending eighteen percent when other countries are doing something pretty competent terms of doctors per capita hospital beds per capita not the very top stuff in medicine I think is very much concentrated in this country and and that's great I want us to be the leader but I just don't I think we're paying a price if we're paying seven extra points of GDP that's 1.4 trillion a year yeah is the administration focusing by focusing on drug prices is that sort of a rabbit hole as I'm missing the big I mean they they're trying and and and and Congress generally I mean talk the average congressman they read they regard as a problem and they made and they see specific instances you know of drug prices or something like that but it's a big problem to change I mean the trouble is it intersects in so many ways and that and that's why we've got quantity heading it and we've got three bigger sized organizations backing him we're not trying to do it to make money I mean that is not a goal that we end up with some business that that we make money off of and will he be talking to health insurers for instance well he'll be talking to everybody but it's it is his game plan is not something we're trying to try and lay out because it it's in his head to some degree I mean I we selected him by by hearing and reading and so on what he's done but he'll learn is we always work well we will conduct certain experiments or he will you know and and try out a community where one of us has a lot of employees maybe in their various ways to experiment shifting gears where do you find things like that Abe Lincoln tail and leg quotes I mean you read Bartlett's book of quotations probably fifty years ago I looked at a few Bartlett's quotations but but I mean I read a lot and if you just remember these things and apply for 88 years you don't know what happened yesterday but you remember the old stuff business you've got a lot of interesting quotations in your head that's great okay so one company who invested in was GE yeah and you did well with that investment and yeah I was too early actually if you look back I was very active in the last half of September and early October and then I wrote that article in later October and I knew it was gonna get bad I wrote the articles gonna get bad but I didn't think the stock market would react as much as it did between then and March so I had more or less used up our powder well before the bottom was hit that's interesting how have you avoided not getting back into GE more recently I mean I'm sure that they've reached out to you everyone says so what does it Warren Buffett invest in GE and save it and take it to the promised land this great American company well actually I think Larry actually doing a good job there Colton's the Danaher yeah there we go but to Danaher is a good sale and I think he's his priorities are straight and I think he's very able guy and he's on the right track and I'm a I'm a fan of G ease in the sense that that we're a big buyer from him we're a big seller to him knowing the managers you know I mean Jack Welch is a very good friend of mine we don't agree on politics I never said but we have a lot of fun together I love it so I've got a great desire for GE to do well it hasn't it just hasn't looked that attractive to me right you talked about the growth of trees and letters shareholder one was the third Grove which was sort of the in between stakes the equity interests yeah is it is it the case that those are sort of not the healthiest grove of trees and all I would that be no the pilot Flying J where you know they're they're companies that under GAAP accounting we have to record under an equity method we own more than twenty percent but we don't control them and so it's it it's treated under GAAP accounting is a special category and and and it it didn't fit well when the other grow so I had to make it a separate grow by itself it's not it's not it's not that significant a growth you say that the the some of Berkshire is has a greater valuation than the part is true did you ever try to calculate that how much is that well it depends on circumstances I mean there's some times when the flow from insurance can be very valuable there sometimes when the ability to use production tax credits will say in the utility business but have them on our as part of our consolidated return helps but that varies a lot but it is a plus and we can move capital well take a business like See's candy which we bought 40 odd years ago it's a wonderful little business it throws off of capital we've tried 50 different ways to expand you graphically do all kinds of things it doesn't work and we'll try it again and it won't work but we can move that capital to buy help by BNSF railroad or do all kinds of other things so we've got a seamless and and and and tax efficient way a moving capital words needed and we've got some companies that really chew up capital and we got others that kick it off and and we can move it from one one pie if you try to do that with your investments that you incur some taxes as you go along doing it and it's less efficient than what we've done you talked a lot about the tax cuts and the benefits to Berkshire you didn't really get into the costs of the tax cut which surprised me a little bit what are the are their costs I mean is it just free money well it makes a difference the tax cut we get for example our utilities as I mentioned in the report that goes to the customers that's just the nature of utility regulation but but net we were a significant beneficiary from the tax I mean basically let's just say we had one class of stock we got two but it's not you and I own a business together and we think we own all the stock but the truth is before the tax cut the government had a 35% share of the stock on income no I didn't have a share of the assets but had a share the income and if it want to change it to fort it could have changed it but fortunately it changed it to 21 and if we had a private business if we had a mcdonald franchise together or an auto dealership together you know the third shareholder that invisible shareholder the governor just handed us back a bunch of the shares of stock and and and went and our shareholders benefited a lot of other shareholders benefit right you talked about Ajit Jain and Gregg Abel saying that Berkshire blood flows through their veins have they made a difference since they become vice chairs and then are they like Warren and Charlie no they don't they don't have the interaction and they each run a separate business inside and she does not think about the other businesses he thinks about the insurance business and Gregg does not think about the insurance business at all and and I think about the money and the capital and so on but they running two very big businesses I mean a Jeets business you know as you go all told at least a couple hundred billion of assets you know and and and Greg's business has a hundred and fifty billion of revenues I mean these are they both would fit up there toward the top ten you know or so in the country in terms of value so maybe the top 15 but they're they're very big businesses but they're not exactly like you to guys it's oh no no no Charlie and I have a partnership think about the whole place and we've done it forever you know and and we still do and Todd and Ted I didn't see them mentioned well they they they they they have 13 billion dollars each including pension funds that are pension funds that they they run and and saw 173 billion we had at year-end in equities they had well we got on in 73 Buffy had another 8 billion in pension funds over 180 years old they had 26 between them that their manager they got total discretion on that they don't ask me at the month end I look and see what they did they they don't do much they don't do a lot of trading or anything but I I look to see what changes they made and and Todd for example I mean he made a couple of small investments in in private placement type operations and I know what the businesses do but I can't tell you their names you know maybe was one of those you made this investment in Oracle and then you sold it was that something they did and no that was not something they did that was something I did yeah and you said you didn't understand it that's why you saw both and why'd you get it in the first yeah well that's that's a good question which I do not ever go to answer I know I I seat about I know enough about the club to know I don't know enough about the cloud right okay um so Barclays put out a note they said they were lowering the estimates for Berkshire for the EPS do you read that stuff no well I mean I may read it actually that money but I don't see it out to read out put it that way but there it just doesn't make any difference at all I mean if I spent time reading that I wouldn't have a time to read ten case and we're not going to do anything different I don't know what we're gonna learn as I put in the annual report and I really think this is unique I mean we do not prepare financial statements monthly for Berkshire and there's no other company would do it there but there's no sense doing it I know I know where the money is and I know what I know how the companies are doing generally but what difference does it make because I'm not gonna try and hit any number for the quarter by you know having a sale on insurance or doing something even worse so it and Charlie I mean he he knows he knows where we stand and we know what businesses are doing well Wishart and we certainly know where the money is another one UBS survey of Berkshire investors says the five most important things to them are succession investment performance ma opportunity share repurchase insurance margins do you read that all but I don't disagree I mean I'm glad somebody understands us your own investors yeah well that's important 54 well to go back to when I started my partnership in 1956 that Berkshire came out of there were seven people sitting there at a table having dinner relatives primarily and I said here's the partnership agreement it's done under Nebraska law that's four or five pages you don't need to read it but I said here's a little half page what I call the ground rules and I want you to read these and if you feel okay about that about the interaction what the expectations are and all of that sort of thing then we'll join forces and if you don't it's fine that other people you know but we don't we shouldn't be partners I mean you know if I'm gonna have a partnership with somebody I want to be compatible it is you know it and when you have a public company you can't control who comes in I can't control some guy that comes in and thinks we were gonna pay big dividends they're supposed to stock or something like that so by by actions and my communications and everything I want to attract the people that from the public market that I want and I want to keep the others away Costco was built Saul Price who started the price Club that thing he sat down and figured out the customer he didn't want and he set up a system that would keep away the customer didn't want who did not want he didn't want somebody buying a quart of milk with somebody behind him with a with a basket $200 worth of goods waiting for that so we put it in a membership fee and by putting in a membership fee he killed all the drop in business-to-business to belong to the 7-eleven we want Bircher don't to keep out people who have expectations about us that are different than ours I mean good for them and I hope they find somebody they fit but if you're gonna run a church you want you want your seats to be filled by people that are generally want to listen to hear form of religion that and you don't want it to change every week and say gee I need a new group and I'll go out and talk to a bunch of investors and get them to come to my church this sunny because there's only so many seats in the church there's a million six hundred forty five thousand or so a equivalent shares and those are the seats and I want them occupied by people that are on the same page I am the Church of Berkshire your seems like you've got a big waiting in financials and of course you've finally invested in Jamie diamonds company why banks right now they're businesses I understand and I like the price at which they're selling relative of their future prospects I think 10 years from now that they'll be worth more money and I feel it's a there's a very high probability I'm right and I don't think there will turn out to be the best investments at all you know the whole the whole panoply of things you could do but I'm pretty sure that they won't disappoint me its climate change changing your insurance businesses now it doesn't change the insurance business does it change modeling or something in the business no it would change our insurance business writing 20-year policies I mean if there was something that changed life mortality adversely to the interests of live insurance coming here stuck with a policy for 20 years if you write the life insurance policy and that's you know you you'll be paying your premiums of its adverse to me that's what's happened in long-term care insurance for example but when you write a policy free one year at a time you see what the developments are and if you know it cars for example are much safer to drive than they used to be there used to be 15 deaths per 100 million miles driven now there's a little over 1 on the other hand they've become much more expensive to fix I'm in that little little side right side do marry which I used to cost ten bucks you know now thousand bucks or something like that so so you have things that are changing in terms of if you're writing collision experient insurance you got a allow for the fact that that that that windshield the bumper all kinds of things are the the side view mirror and all that their way their marksmanship but if you're writing if your writing liability you know that the that people aren't gonna die as often they're so climate changes like a climate car has been changing but that the truth is that you now can buy really big catastrophe limits cheaper than you could buy them in 2005 or there abouts allowing for changes in the dollar and and and concentration of population so so so far rates have come down that's the reason we've gotten out of the cat business to a great degree we were the we were a very big writer of cat business ten or twelve years ago we aren't out of the cat business because the climate change we're because the prices aren't right and the world will change and it's got very serious consequences but but it won't change that much from year to year that you know we've done very well during a period of some climate change you've talked about technology advancing faster than our ability to understand it and I'm wondering if social media and Facebook and Google and Russian trolls coming in and is that maybe an example of that are you still worried about that problem well I think cyber poses real risks do you matter II forgetting about the problems even misinformation I'm just thinking of you know we have railroads running over 22 thousand miles of track and some of them are carrying ammonia and some of them return you know chlorine and things we have to carry him we have no choice about that number required by law to carry him and you know I would rather I would rather do that in a non cyber world in a cyber world and I would there are all kinds of things I the problem by something like cyber is that it's it's moving and it's it's just unpredictable whether you'll get some crazy guy like suck the anthrax in there you know what they can do becomes magnified I mean when when when you saw what you know 19 guys didn't you know 9/11 I mean it had tools in the hands or potentially in the hands of either crazy individuals crazy groups or even a few crazy governments you know are really something and and and and we don't necessarily know what all the tools I have are and that is moving all the time I mean you know again Einstein said he said I know not with what what but what weapons World War 3 will be felt thought but World War 4 will be fought with sticks and stones you know I mean it's it's a dangerous world I don't know if you've been following this warn but what do you think of Elon Musk's behavior as a CEO well I think it has room for improvement he yeah and he would say the same thing just some people have a talent for interesting quotes and others others have a little bit more of a blocker up there that says this key and a problem and but he's he's a remarkable guy but I don't see I just don't see the necessity to communicate you know I've never I I think I've got seven tweets because a friend of mine signed me up for it and she's called me about a hundred times say can i tweet this or that and I said yes two or seven times I guess or something like that i I've never actually written one myself I I don't even know how to do it have you talked to Elon ever I joined The Giving Pledge so I have once or twice that that's a lot of years ago uh seven or eight years ago I'm not I mean he hasn't come to our annual gathering so I haven't seen him for seven or eight years so let's talk about this this trade war that's been going on a little bit with China and I guess I'd like to ask you do you think that Donald Trump was right in calling out the Chinese government and basically putting them on notice I won't have any comment on that in terms of political activity I don't put my citizenship in a bind a blind trust so when the election comes around now other hand people will interpret things I say about any any president you know as to some extent coming from Berkshire and they'd and they don't come from Berkshire I'm just an individual so I I you know I think I'm glad to talk about China but like I can't talk to you about that part of it fair enough I mean do you think there was room for improvement then in terms of the trade relationship between China and the United that China and the United States absolutely destined to be the superpowers you know beyond my great-grandchildren lives and and will always have be competitors and will be competitors and in business working with letters and ideas all kinds of ways and there's no other way it would be and we just have to make sure that that competition doesn't yet get us to a point where we don't realize that the best world is one in which both the United States and China prosper I mean we do not want to have an island of prosperity in the rest of the world envious of us in a nuclear age and and China doesn't Russia doesn't I mean we all recognize the dangers of letting competition get out of control and and and become you can you can be competitors without being enemies and and that's that's what all powerful nations have to realize over time I mean it's different than 200 years ago when you could have some dominant country and then they may have done some things didn't like but it didn't threaten the existence of the world you really threaten the existence to the world as we know it if important countries do not constantly recognize that they can compete and they can fight over certain things but they can't regard to this essentially the equivalent of war here's a question from Kevin Chen who is a Berkshire shareholder and an NYU professor and he says and this is sort of a long in lies what you were just saying Warren but do you think that US and China will be able to resolve their differences or our conflicts unavoidable well I don't think conflicts are unavoidable but I think I think it has to be active thinking on the part of every hugely powerful country and Russia is hugely powerful I mean 90% of the nuclear arms in the world between US and Russia so they they have to recognize that the best world for them is one where they don't try and grab all the apples basically and we have to recognize that and we can't in the United States we can't think that either our ideas run the world you know or we start getting aggressive about things and China can't think that and Russia can't think that and and that's obvious you just have to make things you gotta be sure things don't escalate world war one you know with an Archduke you know I mean you get you get these can get chance incidents and and you really want to I asked one of the presidents one time but you know in terms of what he would do if awakened in the middle of the night was somebody coming to him and saying absolutely and on something they also launched on would you launch on that and you've got 10 minutes at the side and I wouldn't want to have that responsibility but but you'll want to make sure you don't get to that point right right would you ever make a big acquisition in China and if not aren't you missing a huge portion of the answer is we would no we would have you looked Oh we've been made aware of things some things yeah are you concerned on the flip side of the coin are you concerned that they're the rule of law is different that the accounting might be opaque well I'd want to be sure I understood the accounting obviously some businesses that'd be easier to do than others but but I know the laws the customs the accounting the people better in the United States that I place else so there's some small hurdle in in many countries to get over which I can get over I mean but but I just don't it's just not as easy as looking at something where I already know the answer you know from previous transactions or something of the sort so so it's easier to make a big acquisition in the United States not to do more work if I'm looking beyond the borders but I love the idea of doing it when we made the acquisition Israel a dozen years ago and I didn't know what the tax rates were there I didn't I didn't know what corporate law you know I was I I suspected that it would all be answered satisfactorily which it was but I didn't just automatically know it it seems like you're more open about doing a deal in China than in previous conversations I don't think so no I know I I'm open yeah we made you know we made two decent-sized stock acquisitions there and that worked out fine those are well PetroChina Andy why do you idea yes yeah me whitey was Charlie's but Charlie's yeah very well-versed on China um the the trade the US trade deficit has been widening and of course a lot of that has to do with our trade with China is that something that worries you well I wrote an article about it for fortune and the the trade situation many years ago and wondering what our deficit got to be large in relation P I don't think it's I don't think it's a essential level trade balance but I I think that a trade deficit gets large and and it looks like you have no way out from it that that can be a real problem over time I mean you know you're you're shipping little pieces of paper to the rest of the world and they're shipping you goods I mean people are working making underwear or shoes someplace and they get little pieces of paper from us and it gets very tempting if you've done that enough to make sure that those little pieces of paper aren't worth very much overtime when they want to cash up for something so and you don't want to have we don't have any problem running trade deficits but but if we ran really large ones and we sort of worked ourselves into a box where they were we didn't really have a solution to get the numbers down it could be a problem and I wrote about it one time but it's it's kind of a nice thing actually just I mean wouldn't you like to have something where you should just have little pieces of paper and somebody keeping supplying it was there food or yes okay and last question China is facing its slowest growth in nearly three decades the leadership they're lower the targets I think to around six point five percent six percent are you concerned about this slowing growth and the impact on global markets well I don't worry about in terms of global markets I mean I China's gonna grow a lot over time I mean they when you think of what's happened was in 1949 or where you know but there's been nothing really like it I mean he had 20% of the world's population at that time perhaps and although really hadn't remotely achieve their potential I mean that the intellectual capacity they had decent soil all kinds of things I mean and and and what's happened there almost is beyond belief and and that game's not over but we've had incredible developments in the United States I mean you know real GDP per capita is six times what it was the day I was born in the United States six times and we thought we were pretty I'm country that everything no my parents wouldn't believed it I mean they they wear the thought you know this kid has really got it made it was true I mean we had this tailwind and and China's had a hurricane mine that you know and in the in recent decades in a good way absolutely because you were comparing to the tailwind yeah hurricane over back yeah at their back and at and and they've they have found a way of life that is dramatically different then existed for the billion there was a billion then maybe maybe a billion two or whatever it is now and and they have changed a country really of sizes I don't think it's ever been anything like it we've done it too but it took a somewhat longer I mean it more stretched out but it was a remarkable period but but you know when you go to my first went there in 1995 and then they regarded as a miracle then I went back it was a whole different country beyond that Oh Warren Buffett thanks so much for joining us I'm Andy serwer you've been watching influencers we'll see you next time [Music]

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Id: SEZwkbliJr8

Length: 59min 30sec (3570 seconds)

Published: Thu May 02 2019