Warren Buffett shares his opinion on China, Costco, Elon Musk, College, and more

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 we're 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 me if we buy business we're gonna older forever so we're gonna have 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 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 a you read Samuelson you read any of it 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 it 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 difference happening but something difference happens all the time so and that's one reason economic predictions just don't enter into our decisions Charlie Munger my partner I in you know 54 years now we've never made a decision based on an economic prediction women 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 going to 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 well I pay none in the sense of as a guideline to doing anything it's entertainment I mean you know it's like going to a variety show or something like that but and I just don't know of any economist that that actually is what business is successfully as successfully or done well in stocks Paul Samuelson deadness me 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 it isn't 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 Donald's franchise or anything like that you wouldn't try and time the purchase you try and make the right purchase at the right price and you want to be sure you got a good business but you wouldn't settle it by it because growth this year's gonna be 3% instead of 2.8 percent or something the sword Berkshire does it depends on a personal situation if you're working in something where you're living off your your your paycheck from week to week you want to have a little cash or how long 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 of decent diversified businesses we need any cash yeah yeah I've got responsibilities you know we've got insurance claims we could have hurricanes that you know would happen 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 you know I wouldn't worry too much about having a lot of cash room you have a forty five billion dollar state 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 own it yeah no 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 the 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 it doesn't grow faster if I go and stare at it you know I can't cheer for it you know and I know there's gonna be some years when prices are gonna be good and some when the prices aren't gonna be good I know those years when yields will be better than others but about the farm and if it just and I don't care about economic predictions on or anything of the sort I would 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 whether it's cotton or whether it's corn or so it beans are all kinds of things and you and I benefited from that well it's 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 headed 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 it'll slow down our sales or they know you buy it knowing there's 365 days a year and you're gonna own it for 20 years so that's seventy three hundred days and you know they're gonna things are gonna be different from day to day and you're dear you shouldn't buy it up the day to day stuff that's important 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 well is going through your mind if I knew it that's not a big purchase for us actually and and now we will by Berkshire won't 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 the depreciation so we take care of the needs of the business then we have excess cash and if we find investment with to do is find other businesses to buy it but if our stock if I think the stock and my partner in Charlie Munger think the stock is selling below intrinsic business value we will buy in stock 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 don't want ever you know get so that that some some surprise could really take you out in some way but if we've got excess cash will buy as fast as we can yeah yeah exactly but it's you know if you and I own a McDonald's franchise together and it's worth a million dollars and you own 50% of it you come to me and you say I'll sell out four hundred thousand you know I'll buy out you say six hundred but you want six hundred thousand I'll just come back tomorrow Sanders 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 it 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 Mical did not I didn't follow the conclusion on it I mean you're distributing money to shareholders essentially you can do buy dividends and presumably American business 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 they'd be on the needs of the business and I think if their stock is underpriced that it makes nothing but sense 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 they should be a special oil depletion allowance you know fifty years ago one 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 of 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 it's it's hard to win with just a billionaire vote but I admire my normally I wish you had run I want to be very clear to questions is the business executive the right kind of person to be President and what characteristics do you look for well I think a business executive can be the right person but no I don't think that because they're a business executive 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 to 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 other 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 obviously in turning out more goods and services better ones year after year done it all through my life it does not it also has the as they said we have a system that the people who don't fit the market system in terms of their talents they may have been perfectly good to land on the beaches of Normandy and all of that sort of thing but they don't have them they just don't have that kind of talent just like I don't have any athletic talent you know I mean I had to live in an athletic universe you could train me eight hours a day and I could read elegantly I'm not good I just gathered in fumble the ball or whatever what happens so so we have to take care of the people that the market system doesn't take care of while it's spewing out huge riches for the people who do fit well and and that can be done would you ever talk to 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 no 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 or something if I really want to get and then so that's why Bernie Sanders was so successful I made 90% of people voted for Bernie Sanders had probably not heard of him two years earlier but they felt that they knew exactly they probably 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 I'd rather learn from other people's mistakes actually was that a mistake but we'll find out over time but but we did pay too much in my view for for craft we didn't pay too much for Heinz so when we started out it was originally a non-public partnership between us and but we did paid too much in my view for craft and there's not much you can do about things if you pay too much and secondly there's always been a struggle between the retailer and brands I mean if if I've got a terribly weak brand and I want to get into Walmart I'm not gonna be able to do it you know I mean all for 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 non-essential ten 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's been royal crown Cola 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 Walmart Walmart yeah I mean but it's been accentuated I think we have a new retailing environment now I mean it it's like it goes from night today but it it moves someone and and brands that people who 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 begum and it built brands and people like obviously like the product too but people are more willing to change and it's harder yet 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 went women are better experimenting but you know if a kid when you were a kid to Gillette cavalcade of sports was your pal and brought you the Rose Bowl and on the World Series and all that sort of thing you didn't just shave would you let 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 a listing of the richest people in America came out he's number one I think your friend Bill Gates is number two you're number three so you can see what he's done in myriad ways now and of course the question is how come you have a body is there still time to buy what 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 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 earlier or something those just aren't my games I don't worry about the things that I miss that are outside my circle of 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 and 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 confidence something I should be able to understand I want to get back to that trend thing you were just talking about how do you recognize when a giant trend is over and you know you're right obviously that over time things don't change that much but sometimes they do like newspapers was a business that you admired for so long it's not a good business no news newspapers went if you're the only one in town in other words some competitive situations but it was survival of the fattest whichever whichever paper was the fattest one because it had the most ads in it and ads or news to people I mean they they want to know what what super mark is having the bargain on Coke or Pepsi this weekend and so on I mean if it upsets the people in the newsroom to talk that way but but the ads were the most important editorial content from the standpoint of the reader overall in any big day I mean if you were looking for a job you had one place but basically to look and that was the classified section if you were looking for a apartment to rent and in those those those pages were just dozens and dozens of pages that's that's disappeared I mean the essential things that are essentially you news is what you don't know that you want to know and you know what happened in national sports you know the moment it happens and you can go watch video of it and so on you can go to F channel ESPN and see what's going on you know what's happening in politics you know what it's happening in the stock market I used to look at the stock market pages the next morning you don't want to before I delivered the papers I checked them out the world has changed hugely and and it did it gradually went from monopoly to franchise the competitive to toast know they're disappearing they're going to disappear newer times won't the Washington Post won't the Wall Street Journal wall all right a little bit and corporate debt people are concerned about people are concerned about at 22 trillion dollars should we reduce let's just say the federal data and how would we do it 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 down nobody you don't get rich doing that if you look at invention that Forbes list if you get on the list the number of people have done that by economic analysis I think you're just about zilch on there 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 a made a good bit of the success of somebody like I've had the burger or something possible it would have happened without the America we have and if you go back go back 200 years and we're all working out 80% 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 now that as it gets more and more specialized and it's gonna 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 hope 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 low cost can provide a decent living for any 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 I mean yeah I find both Republicans and Democrats for I think it would be a better not to have one annual payment you know odd that they get it monthly and I think there's various things you could do but you want it you want them to feel part of the system and you want to get them have them get as as more and more of these golden eggs or late you want them to get get a little more of their share 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 to run it because that's the market system to do that but you make sure that on all seven of the family participated you can get more than abundant you might get 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 ever that you know too bad but that's just where the market system works you know go guy your have your spouse get a job and for housing someplace no no no I didn't worry about a name we could have gone on there's no name operation for ten years now that is we got a wonderful partnership in the sense that it's got long it's 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 that are so big that normally that they would get very bureaucratic on you know I mean if you try to do this with many big companies you have it up legal weighing and you know and and public relations weighing you know we don't have any of that stuff they may have them in certain areas but but I don't but Jamie isn't worried about doing that sort of thing and then at neither's 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 eighteen you know without without really making you less competitive among other things in the world so everybody thought the system needed some adjustment just not their part of the system and 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 would be even worse todd todd really does all the work at art but if this works you have the credit from the from the berkshires dad talked to him once or twice I'll tell you one interesting story about about him though and I think it was a 2010 you know I've got a partner Charlie Munger who's 95 now but we both read The New Yorker but we don't talk about it and and one day I I'm talking to Charlie and I say I read this terrific article my thought I'd never heard of before probably don't know how to pronounce his name that I said ah oh he says I sent him a check for $20,000 that article is best article I read a long time so I just thought you know get paid that much for being a writer he actually just said I'm off a check so two guys 1,500 miles apart both regarded that as one of the most interesting informative articles we read and similarly we follow them subsequently a man but it wasn't my well it is true that that if you read if you read three or four thousand words by somebody on an important subject and they really give you some insights or some factual background or something that you haven't seen in years and years of reading about it I mean they they should make an impression I mean other people have made an impression how major their writing time no no I I don't plan the plan is is to 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 the third receiving better care over time and and and stop the March upward of cost relative to the country's output but if you take 18 cents out of every dollar that you know of output in the United States and say it's going into health that leaves 82 cents and other countries are are doing it for 10 or 11 cents when if you go back to 1970 all of us were doing it for around 5 cents so we started from a fairly similar point compared to major industrial countries and it just keeps going up and and last year a corporate tax cut was put in for something that was 2% of GDP roughly and people said can't be competitive we have this 2% cost you know versus the rest of the world and there's something that basically corporations paying a very big way and it's it goes to 18 and I say it is a tapeworm of the US economy with the that's such a wonderful economy we can do some very expensive things I mean but and but that doesn't mean we should you have a rich family you still want to be as efficient as you can on things generally that's not the way all rich families feel but and that's it just makes sense we all know we've got this incredible economic machine but but we shouldn't we shouldn't be spending 18% when other countries are doing something pretty Compal in terms of doctors per capita hospital beds per capita all the very top stuff in medicine I think is very much concentrated in this country and that's great I want us to be the leader but I just don't I think we're paying a price if we're paying 7 extra points of GDP that's 1.4 trillion a year I mean they they're trying and and Congress generally I mean he took the average congressman they read they regard as a problem and 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 Kewanee heading it and we've got three three good-sized organizations backing him we're not trying to do it to make money I mean that is there's not a goal that we end up with some business that that we make money off of well 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 obviously we we selected him by by hearing and 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 and there's various ways to experiment learn a few things from your yeah but I want to ask you about you talked about the disparity in value between stakes and companies and wholesale takeovers so that you are looking maybe to buy positions and stocks rather than buying whole companies because of the price differential why do you why is that exist what can you explain that well generally speaking when companies are sold they sell it premiums now it's not a premiums because the the buyer thinks they can do all kinds of wonderful things with it that the president management isn't doing I've often said that you know on the fortune 500 maybe 250 company should buy the other 250 and they just totally shift every year because everybody thinks they can run it better than the next guy which is what you're saying when you when you buy it in its entirety I don't think we running running when we buy it so it's it's hard for me to get to a premium and the premiums have gotten more dramatic and the leverage available has gotten pretty generous and that causes people to buy people love to buy but they can't pay for it basically and some of the also put up the money and and we don't we don't calculate leverage into any of our purchases in other words we don't say if we buy this thing for 10 billion we can borrow 7 billion against it because we're really using a berkshires general credit I mean I could apply 70% leverage to any one of our companies make it look better but the truth is it's the general credit of Berkshire that's doing that so it would be crazy to just because I want to buy something say well I'm buying this with 70 percent leverage so therefore I can pay this kind of silly price but when when when the CEO well you've got a huge bundle of money that's committed to buying something they're getting paid a fee tick-tick-tick every day to buy it now they do get paid whether they buy it or not things are not to some extent which is kind of an interesting business approach but they do but they also let's just say there's a trillion dollars out there and to do it I don't know the figure but beyond that they're probably they probably took two trillion of leverage they probably use two thirds leverage if they couldn't to purchase something close to that so you really got like three trillion of maybe purchasing power using these assumptions which I know aren't correct but they're in the general ballpark well three trillion there's only 30 trillion of US companies roughly and and you know you can take Amazon and Apple and Berkshire and they aren't for sales so you got trillions that aren't so the the demand supply is really really tilted and it works a hundred percent against us because that you know whenever whenever you've got somebody that gets paid for the upside and and locks up the money for ten years you know or so they've got every incentive to keep doing that twenty twenty years ago I had a fellow call me whose name you would know and he said morning I don't know anything about the reinsurance business and he said we've got this reinsurance they offered to us and big one and he said tell me what I should be looking at and I had I went through a little bit of it I said but you're not gonna learn that much about the reinsurance business by a phone call with me and that you know yeah and Wyatt Wyatt while you're looking at this and he he said well he said we got to get the money invested in the next three monster we have to give it back you know and and that's his equation you know and he's getting and once he buys that company he's got a feed built in for five years or whatever it may be and he's got some of the upside he'd like upside but if it doesn't work out he still makes a lot it's very very rich by anybody's standards so it's it's tough to compete with that but probably 50 years ago I looked at a few bargains causation but but I mean I read a lot and you know what happened yesterday but you remember the old stuff business you've got a lot of interesting quotations in your head I was looking at the New York Times stock boy it was I think three bucks in 2009 it's 30 bucks today and noticing I think very well it's it's been reported and it was in it's in this book that just just came out by the former editor there's just a little references yeah hills book and and and it's just touched on there but they were in trouble a lot of companies were in trouble then now they really they've hit on something online I mean they were late to the game on the online thing compared to the journal but but they're they're really moving in and I know and they should be I mean they they've got they've got the natural franchise for that and so their economic models worked out and I shouldn't go into any more detail history well it was ringing something but it yeah it was ringing enough I'll put it that way I mean I ran out of money before it quit ringing 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 I had more or less used up our powder well before the bottom was hit interesting how have you avoided not getting back in well actually I think Larry actually doing a good job I mean that's a only made the other day did a Danaher yeah Larry whole but to Danaher is a good sale and I think he's his priorities are straight and I think he's I just I just read the interview he did about two days you know a few days ago and he is he's a very able guy and he's on the right track and I'm a I'm a fan of g e--'s 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 got a lot of fun together I love the guy so I've got a great desire for GE to do well it hasn't it just hasn't looked that attractive to me you talked about the growth of trees down the letter shareholder one was the third Grove which was sort of the in-between stakes yeah the equity interests yeah we're not is it is it the case that those are sort of not the healthiest grove of trees no no the pilot flying case where you know they were there they're companies that under GAAP accounting we have to record under an equity method we own more than 20% but we don't control them and so it says 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 well it depends on circumstances I mean there's some times when the slope 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 capital we've tried 50 different ways to expand geographically 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 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 what 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 gone 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 other 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 stock you and I own a business together and we think we own all the stock but the truth is before the tax cut the government had a 35% share of the stock on income no I didn't have a share of the assets but had to share the income and if it wanted to change it to 40 it could have changed it but fortunately it changed it to 21 and if we had a private business if we had a McDonald franchise together or an auto dealership together you know the third shareholder that invisible shareholder the government just handed us back a bunch of the shares of stock and and and with and our shareholders benefited a lot of others have they made a difference since they become vice chairs and Charlie no they don't they don't have the interaction 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 has you 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 had in terms of value so maybe the top 15 but they're they're very big businesses oh no no no Charlie and I have a partnership thinking about the whole place and we've done it forever you know and and we still do well they they they they they have thirteen billion dollars each including pension funds that are pension funds that they they run and and saw a hundred and seventy three billion we had at year-end in equities they had well we got on in 73 Buffy had another eight billion in pension funds over one hundred eighty years old they had 26 between them the Thera 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 baby no that was not something they did that was something I did yeah [Music] well that's that's a good question to which I do not have a good answer I know I I seat about I know enough about the club to know I don't know enough about the cloud okay 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 definitely 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 gonna 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 Berkshire and there's no other company would do it but there's no sense doing it I know I know where the money is I know what I know how the companies are doing generally but what difference does it make because I'm not 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 knows he knows where we stand and we know what businesses are doing well where's your art and we certainly know where the money is another one UBS survey of Berkshire investors says the five most important things to them are succession investment performance M&A opportunities share repurchase insurance margins do you read that's pretty no but that I don't disagree I mean I'm glad somebody understands us yeah well that's important you know 54 well to go back to when I started my partnership in 1956 that Berkshire came out of there were seven people sitting there at a table 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 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 I got so bye-bye 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 needed not want he didn't want somebody buying a quart of milk with somebody behind them with a with a basket $200 worth of goods waiting for that so we put in a membership fee and by putting in the membership page he killed all the drop in business the 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 said 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 your 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 in dusters and get them to come to my church this sunny cuz 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 there are businesses I understand and I like the price at which they're selling relative to their future prospects I think 10 years from now that they'll be worth more money and I feel it's a there's a very high probability I'm right and I don't think they're little 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 you said you're surprised that interest rates isn't that because of accommodating central bank's policies around the world and how deflation area technology back him up the reasons but in the end you know does that nobody was telling me you know if somebody told me ten years ago what was gonna happen the next ten years we could have been a lot of money in the bottom are together you know but but it's there's always the reason afterwards tomorrow's paper will say stocks went down today because of you know but they didn't they didn't write it this morning's paper that soccer can I go down to this you have to know what you don't know and you have to make sure that what you don't know isn't all important I mean you're if there's four boxes there you want to get to what is knowable and and and and and and which is favorable and there's things that you'll miss out on because they belong in other three boxes one of which will be favorable another one the favorable and the fact that you're missing out on ninety percent of the stuff doesn't really make any difference if the ten percent you do is right now it doesn't change the insurance business I've changed 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 company you're stuck with a policy for twenty years if you write the life insurance policy and that's you know you you'll be paying your premiums of it's 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 mean that little little side right as I do marry now which I used to cost 10 bucks you know now a thousand bucks or something like that so so you have things that are changing in termina if you're writing collision experient insurance you got a lot for the fact that that that that windshield the bumper all kinds of things are the side view mirror and all that their way their marksmanship but if you're writing your writing liability you know that the that people aren't gonna die as often there 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 are 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 10 or 12 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 and I'm wondering if social media and Facebook and Google and Russian trolls coming in is that maybe an example of that are you still worried about that problem well I think cyber poses real risks humanity forgetting about the problems even misinformation I'm just thinking of you know we have railroads running over 22,000 miles of track and some of them are carrying ammonia and some of them returning 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 an on cyber world in a cyber world 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 stuck 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 I mean it tools in the hands are 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 what 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 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 others have a little bit more of a blocker up there that says in a problem and buddies 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 never actually written one myself I I don't even know how to do it I joined The Giving Pledge so I have once or twice but 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 we're here with Berkshire Hathaway's Warren Buffett Y yang perfect great accent by the way well conduct the rest of this in Chinese if you'd prefer [Laughter] so let's talk about this 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 out of their 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 again I can't talk to you about that part of it well I think that China and the United States absolutely are destined to be the superpowers you know beyond my great-grandchildren lives and and we'll always have be competitors and we'll be competitors and in business working with the creditors 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 that 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 flooding 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 that you didn't like but it didn't threaten the existence of the world you really threaten the existing the world as we know it if important countries do not constantly recognize that they can compete they can fight over certain things but they can't regard to this essentially the equivalent of war NYU professor and he says 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 Russia can't think that and and that's obvious you just have to make things you gotta be sure things don't escalate and have 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 you know in terms of what he would do it's an awakened in the middle of night with somebody coming to him and saying absolutely and I'm something they also launched would you launch on that and you've got ten minutes at the side and I wouldn't want to have that responsibility but but you want to make sure you don't get to that point and if not aren't you missing a huge portion of the answer is we would don't we would have you looked oh we've been made aware of things some things you are you concerned the accounting might be opaque well I'd want to be sure I understood the accounting obviously then some businesses that be easier to do than others but but I know the laws the customs the accounting the people better in the United States and 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 have to do more work if I'm looking beyond the borders but I love the idea of doing it when we made these acquisition Israel a dozen years ago you know I didn't know what the tax rates were there I didn't I didn't know what corporate law you know I was I I suspected that it would all be answered satisfactorily which it was but I didn't just automatically know it I don't think so no I know no I I'm open yeah I we made you know we made two decent-sized stock acquisitions there and that worked out fine well PetroChina and BYD yeah byd was Charlie's but Charlie's very well-versed on China the the trade the US trade 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 when when our deficit got to be large in relation to GDP 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 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 lower the targets I think to around six point five percent six percent are you concerned about this slowing growth in the on global markets well I don't worry about in terms of global markets I mean China's gonna grow a lot over time I mean they when you think of what's happened was in 1949 or you know but there's been nothing really like it I mean he had 20 percent of the world's population at that time perhaps you know 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 country and everything nope my parents wouldn't have believed it I mean they would have 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 yeah at their back and and and they've they have found a way of life that is dramatically different then existent for the billion there was a billion then maybe maybe a billion two or three 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 took somewhat longer I mean or stretched out but it was a remarkable period but but you know when you go to I first went there in 1995 and then they regarded as a miracle and I went back it was a whole different country beyond that well I've said many times that if you get to be 65 or 70 and later and and the people that you want to have love you actually do love you you're a success I've never seen anybody that reaches that age I mean I'm not talking about somebody that's an extreme poverty or painters I'm gonna never seen anybody that if they have a lot of people that love them that there's other than happy and I've seen some very very wealthy people that give testimonial dinners doing named schools have sir and everything there is nobody nobody loves him you know their own kids would say he's in the Attic he's in the Attic okay well I by far the best investment you can make is in yourself I mean that for example communication skills I tell the students that come that they're going to graduate schools and business and they're learning all these complicated formulas all that if they just learn to communicate better and both in writing and person they increase their value at least 50% no I mean if you can't communicate somebody he says you know it's like winking at a girl the dark nothing happens you know basically and you have to be able to get get both your ideas and and that's that's relatively easy I did it myself with a Dale Carnegie of course some people wish I'd take it a shorter course not by talking later on but it it's just hugely important and you if you invest in yourself nobody can take it away from you I mean you and the second thing which I'll get a certain criticism for not living it but but I do tell the those students you know that if I gave you a car and it'll be the only car you're getting them rest of your life he take care of it like you can't believe and he scratch you'd fix that moment you read the owner's manual you keep it garage into all these things and you get exactly one mind of one and one body in this world and and you can't start taking care of it when you're 50 by that time you little rust it out if you haven't done anything so you know you should really make sure that you just remember that you just got one mind and body to get through life with into the well life advises you know the most important thing aside from the things I've talked about already is it's really who you associate with you want to associate with people that are better than you are I mean basically you'll go in the direction of the people that you associate with and and you want to the right heroes you want people if you want to emulate somebody you better pick very carefully who you want to emulate and and when obviously you can't pick your parents they're gonna have an enormous influence on you but you don't get a choice on that but you get choices as you go down the line and you who you who you admire who you who you want to copy and the most important for most people in terms of that decision is their spouse it's also important in terms of a partner in business but the partner in life is is the most important you you want to pick a spouse that's little that's better than you are and then he or she and you hope they don't figure it out too fast well they try to but they they just don't realize that all you have to do is just buy across the stern of America and they never listen to people like me or read the papers or do anything subsequently they think they think that because you can trade you should trade they might you buy a farm you buy an apartment house you can't resell it tomorrow and I don't know the cost of moving around or you now you get something handed to the allah quiddity you know which is instant and sell and the cost of doing it or pennies you know compared to other kinds of investment activity so because they can so easily move around they do move around and moving around is not smarter than investing what is that well that way and and I was actually send somebody over to them now to get me something since since I sent the publicity I got from earlier describing my habits at McDonald's I I now somebody happened had somebody go in the office but that was that was a more for entertainment value I I actually I eat exactly what I like to eat if I liked it on my sixth birthday and my sixth birthday party when we had hot dogs and hamburgers and coke and ice cream with chocolate I still like it and I don't care about anything subsequently that I discovered it all by the time I was six and if somebody offered me a deal when I was twenty I said you're gonna live one year longer and instead of living to 88 you live 89 or whatever it may be if nothing but broccoli and Brussels sprouts and onions and all these things and I I didn't take the last year off it probably won't be that good anyway you know I Manso I eat what I like did I I am NOT venturesome in that area I just don't have like onions I don't put them in the same category depends on the person and much more than it depends on the school I mean I wouldn't worry some people are gonna get a lot out of advanced education and some people are going to get very little and I don't even think it's important that every person go to college at all I mean we have all kinds of jobs at 70 or so thousand a year eighty thousand a year that college training is is not abuse and and I actually was not keen on going to college myself yeah my dad kind of jolly man whether he can get me to do anything but and if they'd had an SAT test those days he would have taken the test for me but but because I I just I was III knew I could have a good time and I liked investing and I didn't really feel like I could read the books so I don't you know it's it's a big commitment to take four years and the cost involved then maybe the loans involved that everything and I think depending on what your interests are aligned I don't think I don't think it's for everybody I think it's for a lot of people but there ought to be a reason you're going and I didn't really see much reason a few do you ever drink water only under Russian what is your it's undoubtedly it's my way well I like the bridge on the river kwai because of the lot there were a lot of lessons in that pleasant was a you know enormous Lee fascinating yeah yeah Barry but that the ending of that was sort of the story of life you know he created the railroad the enemy to come in across it you know it well the favorite book from the best book that had the most impact on my life was the Intelligent Investor my bedroom it's probably going to be would be Nebraskan some huge bowl gave him winning well I probably carry maybe $400 oh yeah I actually my what my wife likes using cash so I just take home a chunk of cash every now and then she doles it out she looks at my billfold and see whether all the hundreds are gone it's pretty simple I've got an American Express card which I got in 1964 but I I pay cash 98% of the time if I'm interested always pay cash it's just easier hello investors I'm Zac Guzman thank you so much for checking out the Yahoo Finance YouTube don't forget to click right here to subscribe and don't forget to check out our live market coverage every day from 9:00 a.m. to 5:00 p.m. Eastern Time right here on the Yahoo Finance you tube channel

Channel: Yahoo Finance

Views: 862,125

Rating: 4.7631783 out of 5

Keywords: Yahoo Finance, Personal Finance, Money, Investing, Business, Savings, Investment, Stocks, Bonds, FX, Currencies, NYSE, Equities, News, Politics, Market, Markets, Market Movers, Midday Movers, The Final Round, Warren Buffett Interview, Warren Buffett 2019, best warren buffett interview, how did warren buffet get rich, full warren buffett inteview, new warren buffett interview, warren buffett documentary, warren buffett investment strategy

Id: uddpWu5-1Uk

Length: 80min 22sec (4822 seconds)

Published: Tue Aug 27 2019

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Kraft Heinz and Costco (and brands generally) at timestamp 17m32s