Warren Buffett talks Berkshire Hathaway and investing [Supercut]

when Warren Buffett the Oracle of Omaha speaks investors from around the world listen after building Berkshire Hathaway into one of the world's largest companies Buffett amassed a fortune of more than 70 billion dollars placing him among the richest people on the planet promising to give away nearly all of his wealth to those in need now in these difficult times we turn to this stock market sage for his financial wisdom and calm in this episode of influencers I sit down with Warren Buffett as we discuss the markets and the pandemic that has brought the global economy to a near halt [Music] hello everyone I'm Andy serwer welcome to influencers and welcome to our very special guest Warren Buffett chairman and CEO of Berkshire Hathaway Warren nice to see you good to see you so it's March 10th and it's the day after the stock market crash the Dow is down over 2,000 points oil creature to $30 a barrel or so the 10-year bond went to below 0.5% what the heck is going on I told you many years ago if you if you stick around long enough you'll see everything in markets and and it may have taken me to 89 to years of age to throw this one and in the end of the experience but you know markets if yet if you have to be open second by second they react the news in a big time way I mean it's not like the market for real estate or farms or and you know things of that sort does this remind you of any other time well I've certainly been that a lot that's a fair number of times when panic has reigned in Wall Street and October 19 1987 in the period around it I mean it was there was panic on at the close of business on Monday October 19th most of the specialist firms which were important in those days of the New York Stock Exchange were broke and and the next morning there was a check to the Clearing House in Chicago that didn't get there and and sometimes late in the morning you know a decision I think if Palin had made the decision you know we're gonna stay open but but it was really close now that was and of course the financial panic there were you had 35 million people on September 1st that weren't worried about at all about their money market accounts on September 15th or 16th they were all how concerned are you about the coronavirus situation warren well you got to defer to the doctors on that but you know you can get in all these figures about I flew regularly kills you know 20 times as many people in this country is 40 times maybe as much as we've seen in the way of even more than that but you know it is a pandemic that it is really spread so we we've got something that we don't know how long it'll be with us we don't know how severe it will be but there will be uncertainty about that for a considerable period of time there has to be what precautions are you taking personally or well I'm drinking a little more Coca Cola seems to ward it off everything else in life I mean I've 18 I mean I just had had two different doctors tell me I'm in much better shape than I was a few years ago I'm not sure what I'm doing to get in better shape but by accident I mean I had an annual heart check where I wear something around my waist for a couple and the guy said money it's never good better so no I really I'm a probabilities guy and by nature so I you know I there's gonna be to 2.8 million deaths this year and at age 18 I'm a little more likely to be that I was in that group but two million eight you know and what we had so far I mean it it will grow but I've always felt a pandemic would happen at some time I made I've actually used that term I mean then describing things that can be in her that's gonna interrupt the progress of not only this country but the world it won't stop the progress of the country or the world I mean that this is this is a terrible event that's occurring we don't know how terrible and it may not turn out to be that make a deal when we get through but it may turn out to be a very big deal one we just don't know and I certainly don't know and nobody knows but there will be other things that happen in the world in the next 5 10 20 years that's the way the world works it doesn't it's it's not a totally even course the progress of mankind has been incredible and that won't stop I mean you flew out here you know yesterday or today ed and you flew over a country that 250 years ago through with anything here that's only three of my lifetimes and there wasn't anything here and now you've got all these bountiful farms and you've got two hundred and two hundred and sixty billion vehicles in the country and they've got it 80 million owner-occupied homes and and you've got one hundred and fifty-five million or whatever it is million people working and I mean it's it's incredible I went you don't want to add a medical check the other day I went to incredible medical facilities that are just two or three minutes from here and that wasn't here and even her a hundred years ago and so we keep making progress we haven't we haven't forgotten how to make progress in this country and we haven't lost interested making progress and that will benefit to varying degrees all kinds of people around the world but there will be interruptions and I don't know when they will occur and I don't know how deep they will occur I do know they will occur from time to time and I also know that will come out better on the other end and then what about the banks and you know boy they have been they got an awfully hard because of rates and the exposure to the energy sector right yeah and you don't know what other exposure there is I mean to the credit standards have been pretty darn good and the quality of what's on the books has been terrific in the liquidity and all of that the banks are in a whole different situation than they were during the ten or eleven years ago but there was you don't know you don't know the denominators the topple when airlines get bad and then that affects you know that affects energy demand you know it was just they're using less fuel than they were three weeks ago so there's there's ripple effects and and and there always will be in recessions that's the nature of recessions as you get ripple effects we get ripple effects on the railroad you know but there's just there's less intermodal traffic moving now because of the supply chain interruptions and all that sort of thing but that's you look at again I mean it you know in 1942 when I bought my first akhiya the Philippines were about to fall I mean it and the day I've wanted that I literally was down 2 percent and 2 percent then was only 2 points literally a broken hundred on the downside but no percent I felt it I mean I went to school in the morning and I about these three shares and when I came home and I already had lost them you know and glad you kept with it because about other people might yeah but I mean all the other kids in seventh grade had their money in something else right getting back to banks for just one second warrant a specific name which is Wells yeah are you getting frustrated with Wells Fargo well I think they've been to a lot of problems but I don't think that the the fundamental franchise and all of that I've had I did I'm fighting with that they I forget but it's an one out of every three households in the country and I mean a the mortgage mortgage service that you it's it's it went through something that various other companies Geico in the early seventies got that as troublesome American Express in 1964 when we got into it I had the salad oil scandal which everybody's forgotten about but it was a terrifying about that so we were sure they'll happen something will happen as am i again can't run a place with 395 thousand people and and and not know that something is happening all the time and you just hope you catch it fast and do morale of the wells fargo story is what you're here about something yet you've got AK fact that you can have incentives out there that are incentivizing the wrong thing and we've had them everybody's having I mean you know anybody has a sales force makes a mistake sometimes in what they incentivize and and add and bad practices will spread if not jumped on and that's what you know you saw at Wells they didn't I don't I don't see how in the world I made any money out of the phony ago but you know the cost again there's a ripple effect I mean it's when something goes wrong sure if it doesn't get correct that so many more problems subsequently and then that when i'm solomon charlie and maybe the for me said you know get it right get it fast get it out get it over and anytime you see a problem and there's a responsible party and in corporate america that I mean just get it right get a fast get it out get it over on and don't skip man and just put that right in front of you and yeah go to work on it yeah maybe I don't know about to get it over part with Wells I mean it's just well if you if you get right then get it fast and get it out you will get it overhead and I don't the other things you guys it'll never get to get a home right there enough let's switch over to talk about oil you are an investor in the sector through this Occidental Petroleum ideal from last year you put in ten billion dollars I think and and maybe some more after that I know you get preferred dividends but that investment has to be underwater at this point and what's your thinking well but the ten the ten billion is a preferred stock with Warren said but and there is no market in it I mean no it's a private deal but but we also have about two percent of the common stock and that's that's down significantly and and there's I said one I did it I've been in the biggest variables the price of oil and I don't know the price of oil and every day it gets quoted you know if you have an opinion on oil you can buy or sell the oil either one year out or two years out or three years out or something the sort and when oil was in the 30s there's a lot of agony in the oil patch and and the math just changes terrifically I mean it just doesn't pay to drill and in a lot of areas and the Saudis can turn out a lot of it with practically no operating costs or you know I mean they've got very very very cheap operations I mean between that war between the Saudis and the Russians and then also perhaps the secular decline of demand given concerns about climate change is this really a great place to invest well I don't think the second or the the man will change that much but certainly the immediate the mad changed I mean the airlines need less and people drive less if they're working out of their homes and you can change you know when you're talking about something close to hundred million barrels a day did you change it by five percent with you know that is huge I was reading in your annual letter on the other hand that you're so proud of Berkshire Hathaway energy which is so big in wind power and has this whole different business model so you think that alternatives actually have a real future alternates have a future that and they are the future over time but you can't change the world the base of the world I mean you've got 260 million vehicles on the road or whatever number it is in the United States and I don't know how many around the world and they're not changing what they use tomorrow and you know the average age of the American be Auto I think it's 11 to 12 year or something like that and so the world can't change dramatically and and I think I think she can change energy sources ten percent in a year and it just doesn't work that way and and but the world is going in the right direction in terms of working toward minimization of carbon speaking of those cars I mean look at Tesla and what Elon Musk is doing I mean that kind of is a revolution right well it's it's an important change but if you guessed on the penetration of electric cars let's say we say so 17 million or something here and in 2030 when I'll be a hundred I would say that I'd be surprised if more than a third of those would be electric well that's two-thirds of the NARC plus all the ones and so of the total car of the total vehicles on the road it still might be ten percent electric tops or something like that world why I mean you can't change this mass of Transportation you can't change it in here it is changing it should change but but in terms of just the math of of replacing if we said we're gonna junk all the cars we have you know the kind of economy would stop I mean we can't produce that we couldn't replace them what do you think of Elon Musk though if you met him and would you invest in Tesla well I think you're trying to bait bill oh no no no yes yes remarkable things okay he's got some remarkable things have you met him oh yeah he's uh he joined The Giving Pledge some years ago that I've only met him once or twice but but uh yeah that's it I've talked with him but not for quite a while and when you invest in Tesla no okay um let's switch over and talk about bond yields and interest rates because that's a crazy subject right it is a crazy subject and it is really crazy yes so what is what is your thinking on I don't know I have never been able to predict interest rates and I've never tried I don't Charlie Charlie and I we we believe in trying to function on what to focus on what's knowable and important now interest rates are important but we don't think they're novel and there's some things that are you know this gets back to you know something who was it done Rumsfeld or something yeah the unknowns and unknown all that's an unknown unknowns the question is is the box that says knowns an important knowable and important is there anything in that box and can you tell what's in that box and what isn't in that box and that's what I call knowing your circle of competence and my circle of competence doesn't include the ability to predict interest rates a day from now or a year from now or five years from now so I say can I function without knowing that same way as predicting what business is going to do or the stock market's going to do I can't do any of those things but that doesn't mean yet I can't do well investing over time I mean if things have change are different now because rates are so low until negative rates and then you were talking about Edgar Lawrence Smith yeah and his discovery about bonds versus retained earnings and then I think you are saying that it makes for as far as central banks that makes no sense to lend at 1.4 percent and then to have 2 percent inflation those make sense for you to buy right Bob yeah if somebody is telling you that they're going to try and destroy the unit in which the bond promises included they're going to try to destroy 2 percent of that a year right and for you to now pay and now receive maybe a half a percent and pay taxes on us that's right I mean so where where do you think these low super rates are gonna go and negative rates I mean just what are the implications on I would say that's the most important question in the world I don't know the answer no if if we knew the answer wouldn't be the most important question oh yeah I mean I don't so let me let me ask this way then what has investing in equities changed given the interest rate environment it makes equities look super yeah you know it reduces a hurdle rate right that's why that's why they like to decrease it is that it pushes asset value is higher because obviously is you promised to pay me something of 3% a year that would have been a terrible instrument for me to own you know almost any time in history but today if you're good for it it's fabulous huh yeah I mean two negative rates scare you or they puzzle me but they don't scare me okay fair enough I want to switch over to Apple one of your biggest holdings does does the amount of shareholder interest in this company concern you or Todd or Ted in other words it's the market capitalization basically relative to the S&P 500 is that something you look at well you look at everything and relate one to another be nuts the nature markets so you're always trying to think about a what's in my circle of confidence and then what makes the most sense that's within that circle the important thing is know where the perimeter of the circle is I mean that's way more important than how big the circle is a whole bunch of other factors so I think Apple was it within my circle of confidence I think it's it an incredible business run by it of all this one of the great managers of all time and he was underrated for a while but now he's being seen for what he is it's an astounding you could almost go yeah I know if we had a card table here well yeah we could put all their products on one table can imagine that I mean and I just think of basically the utility of those products to a ecosystem that is demographically terrific and and finds that instrument useful in dozens and dozens of times a day if it's almost indispensable not only the individuals business I made everything and you have one of these babies now right I've got I've got one of them I don't have an odd name because I would not be afraid of a ring and I wouldn't know what to do with it okay you can take a call during this it wouldn't be a problem with it and what sort of apps do you have one do you have any absolutely well they've got a lot of apps on it but but the other day actually yesterday I was someplace normally don't carry it in town they carry it but and and somehow I was having a little trouble just getting to the but this is all I mean a two-year-old could do this but I don't trouble getting the part where I actually phone somebody I use it as a phone right so you're not but I got a lot of apps on it have you used any of the apps no no gaming apps serve no people have shown them to me there's even some app with with me involved on this newspaper boy tossing thing that's the absent that I revealed a year ago in the movie that I'm when I went out to California and and Tim Cook very patiently spent hours trying to trying to moving up to the level the average two-year-old and it didn't quite make it but and but I I supposedly developed an app in this the movie we had and as I walked out I turned to him and I said by the way what is it HAP we had a lot of fun he is a terrific guy and that is a that is an unbelievable product just of one more about those stocks you know the so called Fang stocks yeah and and again you know does that approach a sort of bubble to you we know is the opposite I mean you're seeing in this kind of a market those companies don't need capital well Netflix needs gap why they're new but basically the big the big companies in market value don't need capital and that will separate them even more from the rest of the pack I mean they they had a incredible business model if you look at the top ten market value of companies go back ten years 20 years 30 years I mean go back years it's you know it's AT&T the old AT&T and in General Motors and Standard Oil in New Jersey as it was called that I know you know the 500 you worked on it and but those companies needed money I mean when Andrew Carnegie was when the steel was he don't once steel mill know made money on that same if the fear for years later you build another one and it was it was capital retention and oil you know this is the same way whatever it was and now the really incredible companies the ones that account for just the top five with them would be well over ten percent of the market value of the company the country they really don't they don't take capital that might that they may get their suppliers may in some cases and all that but but they are really overwhelmingly their capital light and and that is really different then the question is why don't you own Google and Amazon those two in particular let's take those that's a pretty damn good question but I don't have a good answer they I definitely should have owned Google I think the guys came to see me before they did when they were Larry and Sergey yeah yeah and they and and we were this is a long time ago I mean this is before they went public but they were talk to me about a little bit about it and and we were using search and Geico in a significant way so I knew the power of search and I actually used search a lot myself that starting with all the vistors something going way back and search is incredibly valuable to me and and and it was valuable to the geico so I I was capable understanding of that on the other hand I had seen that Google was taking out all the Vista to some degree and I thought you know maybe somebody else can take out Google maybe if they started or me or somebody else could have think about Google so I was always a step behind on that what do you do do you kick yourself what does well I don't think it I I made so many mistakes that if I tried to kick myself my legs would be you don't you don't kick yourself in the investment but and is it you don't kick yourself when you make a mistake I mean it is part of what you do and you know and I was there when Ted Williams about at 4:06 but he means 594 that and what about Amazon same kind of thing incredible buzz but it why why it's not too late to buy these stocks is it I don't know but you're not you're not buying them right now no but I don't buy much mm-hmm then those those are the kind of businesses I think about a lot Charlie thinks about him a lot you can't help but I mean those are incredible business stories right I mean so the doors not closed nessuno no all right no not at all okay well actually you know one of the other fellows now it's water I mean that showed up in our 13f Ted or Todd one of the to one of the two bought some Amazon right yeah that that was in our 13f yeah right there you go you took the plunge person Berk certain spark sure to be out better sure they can do anything they want to do I think I sort berkshires a few socks and then speaking a little bit more about Amazon and Jeff Bezos he owns the Washington Post down they offered it to you my understanding is when it was for sale or I mean you talk to die I talked to Tom sure and and why do you regret not buying it or not if I buy anything it's got to be for Berkshire you know I I mean I'm I'm just committed that way I'm mentally Berkshire comes in before me and and it would have been a mistake for the Burchard on the Washington Post because of the political stage yeah sure right right people would think I will guarantee you that that that that Jeff Bezos is not telling Fred higher you know or anybody there that Marty burr but but about 80% of the people that are some huge number people just generally think that that if you own a newspaper you tell them what to run every day I mean it's just it doesn't happen very often it used to happen with some papers obviously a big bother he does still happen with some papers but it that is not the way it generally works and it certainly wouldn't be the way it would work at the Washington Post yeah I mean it sounds like President Trump may think that yeah well a lot of Kate Graham did not tell Ben Bradley what to write I can that I know I mean and there was no diagram but I mean it they just don't do it but I will guarantee you that you know particularly among political figures but man on the street they they 90% of what they would think that they that the Graham family was telling telling editors what to do I know you're reluctant to wade into politics yeah but I want to ask I may demonstrate that reluctance right you will in a second I'm sure but you know we've talked about this before warned that the country seems to be fairly divided up and you said it's eventually gonna get back together you still feel that way well sure sure what will how do when we get back together well if you could've asked me the same question in the Vietnam period and I will tell you it was it was even more intense I mean I watched I happen to be in New York at the time and I watched that crowd come up to Wall Street I miss coming up whichever it street that is Broad Street who know would be yeah baby Ben Walton brought Ben whatever but I have seen in our demonstrators yeah and and during the Vietnam period I mean people were just as inflamed I would say on both sides I mean there were it was a it was and it went on a long time and you know caused the president not to run again in the case of Johnson so this country has been we had a civil war I mean you know uh so we've had we've always had if we're a democracy you know we've got we'll have strong opinions on both sides and sometimes say they rev up more than others but I do not regard this as some unique period in history although everybody I've been reading about unique periods in history ever ever since I was all love to read so I some of the things that my dad does I grew up in a household that then it was the family's belief and went beyond my dad and my mother but what the word you know all my uncles and all I mean that basically that that the country gone socialist you know and then the 30s your father was a Republican Congressmen yeah yeah very Republican we didn't get dessert a dinner until we said something nasty about Roosevelt I mean my sister's back yeah we're sort of ritualistic okay there are calls on the political left and the Democrats to tax billionaires have a wealth tax would that stuff be productive and maybe close the wealth and income gap well I think that I think I wrote something seven or eight years ago the but the fact that there was I was doing a little hyperbole but there was class warfare and my class was winning you know basically I that there's no question that that that capitalism as it gets more advanced will widen the gap between the people that have market skills whatever that market demands and and others unless government does something in between which say the Earned Income Tax Credit or all kinds of things and and I think that's a proper function so I would I would I would say that if people it isn't some diabolical plot or anything but look at it this way if you go back to eighteen hundred and eighty percent of the people were farmers and you were the best farmer in Omaha and I was the worst the difference in our value might be two to one you might be worth twice as much if we are out there picking horn or whatever we might be doing her planet good but now there's will say two million times but there's thirty million American males between twenty and thirty five and if you're in the top one-tenth of one percent in basketball ability or football ability or baseball aren't worth anything if you're in the top hundredth of one percent you're getting close so if that's if the payoff is huge because some guy discovered television many years ago and another guy discovered pay TV or cable and then pay TV so your talents or Ted Williams got $20,000 dollars a year for batting 406 your talents now if you if you make the majors still doesn't pay well in the minors but if you finally get to that one hundredth of one percent now you're worth millions and one tenth of one percent you can place a lot more and so you get this pushing of extreme rewards to people who are very very good at something the market demands and people demand entertainment they demand people apparently that arbitrage securities you know I mean there's all there's certain specialties and that isn't because how much of people are sitting in a room deciding we're gonna figure out how to take it away from the poor or anything like that it's because of the market system but we want the market system to keep functioning that way but we don't want people left behind in a society where you've got sixty thousand dollars plus of GDP per capita and that the people on the on the lower half have been getting falling behind the games overall achieved by the country and we've they aren't worse off than they were twenty years ago there there's somewhat better off and they're better off they're better off because of things like an iPhone I mean you know that's that's something's terribly useful and and everybody I get the benefits of search you know for nothing you know basically and but that's the ultimate tension is how do you keep a system that produces incredible benefits for everybody you know Sports is an easy example because we all like to watch him we don't want to watch bunch of guys like you and me so that's where the money is but that didn't exist 200 but what how do we address that we address it through things like the Earned Income Tax Credit and we address it so that anybody that worked 40 hours a week and has a couple of kids that they don't need a second job in the family I couldn't have a decent life does that mean increasing the minimum wage it means increasing the Earned Income Tax Credit because I think that's a better system yeah what they need is more money in their pocket now you can do more money in the pocket through minimum wage but you don't want work that was many people working yeah you need something so they have money in their pocket right and we can do that and that does require a in my view it requires higher taxes on people but where they were born into this world with peculiar talents that marvelously now and two hundred years ago it would have been out there picking corn with me can you take the higher taxes on wealthy people and put it directly to the Earned Income Tax Credit well you could I mean because people complain oh my taxes are going well they're squandered nobody likes taxes uh yeah but if you put had a program where it was earmarked well that's that's what people do in there when they're on the debate stage you know currently it's the Democrats and they they tell you all their new programs and all they'll pay for it but they don't tell you how they're already there nobody's discussed the trillion dollar deficit we have so to talk about how you're gonna introduce some new but basically you don't want to run deficits indefinitely that increase the relationship for debt to GDP there's there's there's some point at which that causes real problems although we haven't seen it a lot of places that you might expect to see it but this country has the productive capacity to let people like me love extraordinarily well or sports stars or entertainments are all kind of the good managers whatever and still make sure that nobody is really left so that do people have to work and you have to hold two jobs and you wonder how you're gonna feed your kids if you're if you're working you know seven fifty an hour doesn't do it ten dollars an hour doesn't do it but we can do it we have the resources to do it you said shifting gears for a little bit you said you might continue to underperform the sp500 you might continue well I I will from time to time for sure but what is the appeal then to own Berkshire Hathaway stock well I've got ninety nine percent of my money that's uh i'm appeals to me but i an appeals actually it appeals to a lot of people who feel very comfortable with the fact that we'll never blow it basically and i think that they could feel very certain relative to almost any company that you know we won't be in the bottom quartile or something of performance but they can feel very they also should feelers we're not gonna be in the top ten we we run it we run it if you're a shareholder Berkshire we we're running the business like you've got a hundred percent of your money and and you're gonna keep it in and it's up to us to take care of it you said that my market value my value is not so high and it seems like you're trying to really create a Berkshire Hathaway that works well maybe not in perpetuity but for a very long time yeah and then you also said we're well prepared for succession it's almost going to be embarrassing how well yeah what does that what does that mean well it just means that the Berkshire doesn't need me and we've got somebody that is extremely Oh better than I am in many many many respects to succeed me and that's and and and you want that any company and and I want it I mean I you know whatever the number may be but it's many billions that will go for vaccines or whatever it may be education for decades to come that depends on that but more important it's it's really a couple it's at least a million people or a disproportionate number have got something close to their whole savings in and so we're there partner I mean Berkshire came out of a partnership Charlie ran a partnership I ran a partnership we actually we do look at the people as partners and we look at a partner or somebody who trusts us to make sure that we we don't they don't get killed in the process and they are not if there's if they're shooting for the top one percent of performance or fibers I'm never that important they're not gonna find it they might have found it in our partnership back where I work with tiny sums of money but we can't do it and we don't want to think we can do it you said a person to succeed me I think just now and and so it's that a person that we know or is it I mean there are various people at the top of Berkshire that you've tapped and there's Greg and and Ajit are going to be on stage this year at the meeting I it depends what happens to me and what happens to other people button but it's not Justin Bieber or someone out there no it doesn't even need mosque but the interesting thing is if you take our 10 top 10 holdings at Berkshire I thought we'd come by going out 150 billion in them I don't know who the successor is into the CEO and any one of those 10 and I've watched a lot of successors come and go and in those holdings so to think that we wouldn't have somebody able it's just crazy I mean in our case that that should be a little bit responsibility of the board of directors is to have the right CEO and be preferred for and something happens to that person right you said that we possess skilled and devoted top managers for whom running Berkshires far more than simply having a high paying or prestigious job how do you know that well you don't know for sure but but you've gotta make judgments on that you make judgments on a marriage at me and you've got more time to look em over and then selecting successor CEOs but that's the most important decision though that you make it isn't what their IQ is and it it isn't even necessarily the top maybe in a given type of managerial skill I mean that if they're thinking they kind of leave it tomorrow I mean you really want somebody that is devoted to Berkshire and suddenly we look for the same thing in our subsidiaries in other words we've got a group of managers and dozens and dozens and dozens now everyone doesn't feel this way I mean but we've got a much higher percentage that feel that way then I think that virtually anybody has but but you can't pout a thousand in that game another topic that people are very keen on right now a student debt and I know that you have really prided yourself on helping students is this something that really concerns you well it would be a tough consideration for me if I were going to school or whether I wanted to not only invest I'm done a college but I want to invest the four years I didn't want to go to Congress that much one got a high school but not only the four years but if I had to incur you know hundreds of thousands of dollars in a student that I which decision I would make no it's it you know higher education is really expensive and we've helped out many thousands of students and the Gates Foundation is on the same thing and another of the foundations and I support them but it's just expensive it's berries it's still worth it it depends on the individual it depends on the original more than the school I mean it there's a lot to learn in those four years I mean there's a lot you can learn in those four years and whether you do or not depends on more on the individual I don't think it I don't think it makes sense for everybody to go to college you know and I'm not so sure it made sense for me to go to college really come on no I'm not getting III I don't know I mean III learned a lot by reading and and you know I spent three or four you and Counting graduate school four years that I could've been doing other things I there were a lot of said intelligent things to do that who knows III don't think it was essential I mean I I had some wonderful people I met through it main thing when I went to Columbia though would with taking pentagrams course I already knew what he was gonna say I mean I read it I understood you know I mean he was a very good writer but it was inspirational it was inspirational margin it was educational we have a few questions from our audience at Yahoo Finance from Twitter one is what advice would you give to a young investor today well you've got to understand accounting you've got a that's got to be like a language to you and so yeah you have to know what you're reading I mean and then and unless you know that language and and and some people have more aptitude for that than others and that's one thing I've learned by myself now I took courses in turn afterwards for example open up and I learned of myself in it importantly so you have to do that and you have to have the attitude that you're buying part of a business and not that you're buying The Wiggles around on a charter that has resistance zones or 200-day moving averages or that you buy puts or calls on or anything like that you're buying part of a business and if you buy intelligently into a business you're gonna make money and then you have to buy something that in my view which you do if you're buying a business that you're not going to get a quote on for five years that they're gonna close the stock exchange tomorrow for five years and that you'll be happy owning it as a business if you owned coca-cola it didn't even make any difference in 1920 if that what am i public the important thing was but I was doing with customers and you probably would have been better off if there wasn't any market in it for 30 or 40 years because then you wouldn't have gotten tempted to solve that and you just watched the business and you'd watch it grow and and you'd feel happy so you that the proper attitude toward investing is is much more important than any technical skills another question from one of our audience members with all your success what keeps you and Charlie going we have so much fun ah I just talked to him the other day for an hour and that we have fun every time we talk and we are having we are doing what we love to do with people we love every day and you know I've been lucky on hell God knows I you know how Charlie in 96 at me at 89 with our habits and everything it's it's a it's a I know what it's a testament to I think actually being happy and what you're doing makes a huge difference and you don't want to go around I think grudges against people and I mean all these things of course you think negative leave whether it's about the world or about individuals or about your own bad luck or anything of the sort just forget it I don't basically I think I think that helps how do you clear that stuff out of your mind I don't know whether you're born to some extent that way but it certainly you certainly see that it works and you know I mean it you just take the people you know and the ones that are solvent the world the world gets sour on you know basically and and so it's no it's got to be tough you know and certainly if you've got some major illness or something I'm sorry I mean that's just a terrible locket - and it can seem very unfair to you but but you're going to have you have a better experience in life if basically you you know you see the positive signs things people will see the positive things in you at that point and if you can find if you can find some I say look for the job that you would take if you didn't need a job and if you can find that where you're actually I don't I don't think I've had a job I mean I have never I would define work as doing something when you'd rather be doing something else and and you know when I sold shirts at pennies and I was getting 75 cents an hour I would rather have been doing something else but since I've been certainly 24 I've always never there wasn't anything else I wanted to do and I had everything I needed and life was wonderful and and I tell the students that I'm you know you got a live so you you may take a job at first for some organizations that you don't admire work for somebody you don't admire but but look for somebody admire look look for somebody where you're looking forward to working with them that day and doing something that you're looking forward to this you do if he didn't need the money and Charlie I found out a long time ago and you're going to turn 90 what in a few months about five months five months I'll sign your reminder I'll send your press so looking back over these years what are you most proud of oh I would well I'm certainly but I have to get all the good Carter's our mother but I'm certainly proud of my children of working I mean that's not easy in a sense having a name that becomes famous or thought of as having all kinds of money although they don't but all three of them are now in their 60s in fact you're looking at the guy who's youngest child was 61 I mean that's a and and they've all they've all had very productive lives and they and they all get along fine with each other and they and I've seen a lot of rich families and doesn't always work on that way and another question from the audience if you were going to start a business today what kind of company or what industry would you look to get into I do the same thing I've done I mean I I'm can everyone do what you do though I mean do you think that I'm cut out for for managing money you know it doesn't mean you know different people have different kinds of minds I play bridge with people are gonna remember the hand they played 30 years ago you know and watch a basketball game at the same time but but so there's all kinds of different smarts that people have and and I've been fortunate enough that I might have been in something a pays off big and I could be you know very good something else that just as much utility to society but it doesn't that it doesn't fit the market system as well and then just finally what celebrities that you talked to this year are they how do people like Katy Perry or LeBron James get in touch with you oh I'm easy to find I'm so easy to find yeah I see all the mail that comes in there I'm not a hard guy to access all right so right I'm a letter all right we're gonna leave it at that Warren Buffett chairman and CEO of Berkshire Hathaway's thank thanks so much for your time it's been fun thanks I'm Andy serwer you've been watching influencers we'll see you next time Warren Buffett needs little introduction he's the Godfather of modern-day investing for nearly 50 years Buffett his run Berkshire Hathaway which owns over 60 companies like Geico and Dairy Queen Plus minority stakes in Apple kolja 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 we're winding down well I look at a lot of figures just in connection with our businesses I I like to get numbers now so so I'm getting reports in weekly in some businesses uh 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 and 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 old with rubber so we're gonna have good your bad years in between years may be disastrous you're something here 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 10 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 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 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 differents happening but something different happens all the time so and that's one reason economic predictions just don't enter into our decisions Charlie Munger my partner I in you know 54 years now we've never made a decision based on an economic prediction we make business predictions about what individual businesses will do over time and we compare that to what we have to pay for him but we have never said yes to something because we thought the economy was going to do well in the next year or 2 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 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 stock Paul Samuelson didn't mean oh he was a big shareholder Berkshire 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 going to change over the centuries because of anything here political developments or 400 other variables it's going 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 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 their personal situation I've had it 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 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 so you can be more cash free than bursaries yeah yeah I've got responsibility 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 counting on me 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 thirty thousand 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 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 own it really 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 it's exports are being affected or anything like that you know you buy a farm and you hold it for I've got one farm that I bought in the 1980s and my son runs it but I've been there once you know I mean it it doesn't grow faster if I go and stare at it you know I can't cheer for it you know more effort more effort and I know there's gonna be some years when prices are gonna be good and some prices aren't gonna be good I know those years when yields will be better than others what about the farm and if it just doesn't I don't care about economic predictions on or anything of 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 whether it's cotton or whether it's corn or soybeans around 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 you're dear you shouldn't buy it at 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 in your 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 not we will by Berkshire only have lots of excess cash all the needs of the business are taken care of we spent 14 billion dollars on property plant equipment last year way more than a depreciation 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 in 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 yeah 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 we'll buy as fast as we can at that point 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 out you say well I mind I'd be wary of that so just continuing about buybacks and rumors 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 mean either 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 may be the thoroughness of opportunities but that article did not I didn't follow the I mean you're distributing money to shareholders essentially you can do buy 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 they'd be on the needs of the business and I think if their stock is underpriced that it makes nothing but sense so 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 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 the site 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 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 my normally I wish you had run I want to be very clear about 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 there are businesses negative 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 tonight anthrax in my 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 one night 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 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 keeps 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 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 like I always like to ask a candidate they usually finessed me somewhere but I say what are you for that the majority of your followers are against you know I know you really believe in that you know and that's reading the test but I'm not sure that except under some kind of sodium pedal or something got a great that's great but that's the question you ask the presidential candidates or presence that you would speak to it if I really want to get and then said oh that's why Bernie Sanders was so successful I made 90 percent of people 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 was that a mistake but we'll find out over time 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 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 it 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 gotta 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'd been royal crown Cola they would've had to put it back in so there's always that struggle between the brands I mean we had 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 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 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 was 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 men don't like men don't like to experiment much or 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 the World Series and all that sort of thing you didn't just shave 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 Kraft 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 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 was out of that but there's a lot of games I miss I would have missed you know I would have missed Microsoft even if I gotten 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 and but I don't it's not a mistake because I miss Netscape or something like that at all there's 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 are particularly concerned about it and we're not having a lot of inflation that wasn't supposed to happen you know what it's happening that's why I say you know really you don't want to get hung up on kind of make economic analysis because nobody's any good go that 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 of I've done that by economic analysis I think you're just about zilch on there okay fair enough um income inequality wealth inequality you've talked about the Earned Income Tax Credit is there more to it than that should we adjust tax policy it seems to be going the other way right now well it's going the other way but I think I think I think the Earned Income Tax Credit is the best way to put money in the pockets of people that don't fit well into the market system but that are perfectly decent citizens and that have made a good bit of the success 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% of us are working on farms the person that's the best of that working in that form 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 still 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 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 had 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 yet find both Republicans and Democrats for it I think it would be better not to have one annual payment you know how did 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 late you want them to 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 all seven of the family participated you can get more of them funded 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 you know 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 but 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've 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 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 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 yeah 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 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 I know Todd combs I think that God really does all the work at our but if this works you have the credit from the from the burgers dad boy does Haven have to buy companies to gain expertise and what do you know it no III know it's the plan I mean Eddie the plan is support a very very very good thinker on this subject who's once was 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 Compal in 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 that's great I want us to be the leader but I just don't I think we're paying a price if we're paying seven extra points of GDP that's 1.4 trillion a year you know is the administration focusing by focusing on drug prices is that sort of a rabbit hole is that missing the big I mean they they're trying and and 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 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 obvi 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 try out a community where one of us has a lot of employees maybe and there's various ways to experiment shifting gears where do you find things like that Abe Lincoln tail and leg quotes I mean you read Bartlett's book of quotations probably fifty years ago I looked at a few Bartlett's quotations but but I mean I read a lot and you just remember these things and apply your 88 years you know what happened yesterday but you remember the old stuff 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 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 it's interesting how have you avoided not getting back into GE more recently I mean I'm sure that they've reached out to you everyone says oh 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 did Larry Colton's do Danaher yeah Larry called 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 e--'s in the sense that that we're a big buyer from them were a big seller to them 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 I love the guy so I've got a great desire for GE to do well it hasn't it just hasn't looked that attractive to me right you talked about the growth of trees and the 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 why would that be no the pilot Flying J where you know they're there 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 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 of 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 buy helped 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 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 thanks 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 to share the income and if I want 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 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 went and our shareholders benefited and a lot of others are already better 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 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 got all told at least a couple hundred billion of assets you know and and and Gregg's business has a hundred and fifty billion of revenues I mean these are they both would fit up there towards 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 but they're not exactly like you two guys it's no 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 and 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 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 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're so bold and why'd you get it in the first week yeah well that's that's a good question to which I do not have a good answer I know I I see the Bell 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 way 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 believe think this is unique I mean we do not prepare financial statements monthly Berkshire and there's no other company would do it 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 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 M&A opportunities 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 we 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 it's four or five pages you don't need to read it but I said here's a little half page what I call the ground rules and I want you to read these and if you feel okay about that about the interaction what the expectations are and all of that sort of thing then we'll join forces and if you don't it's fine that other people that 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 like that 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 one 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 it in a membership fee and by putting in the membership to he killed all the drop in business the business to belong to the 7-eleven we want Bircher to to keep out people who have expectations about us that are different than ours I mean good for them and I hope they find some way 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 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 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 chairs and those are the seats and I want um occupied by people that are on the same page I am the Church of Berkshire your seems like you've got a big weighting 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 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 no it doesn't change the insurance business does it change modeling or something into this no it would change our insurance business writing 20-year policies I mean there was something that changed life mortality adversely to the interests of life insurance coming here stuck with a policy for 20 years if you write the life insurance policy and it'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 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 the lower one on the other hand they've become much more expensive to fix I mean that little little side and right side do marry 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 experian insurance you got a allow for the fact that that that that windshield the bumper all kinds of things are the side view mirror and all that they're way they're more expensive but if you're writing your writing liability you know that the that people aren't gonna die as often they're so climate change is 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 out because the prices aren't right and the world will change and that'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 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 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 with 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 9/11 I mean it 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 what what weapons World War 3 will be felt thought but World War four 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 warned 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 others others have a little bit more of a blocker up there that says this key in 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 once or twice but that's a lot of years ago uh seven or eight years ago I'm not 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 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 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 are destined to be the superpowers you know beyond my great-grandchildren lives and and we'll 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 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 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 that he 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 it as essentially the equivalent of war here's a question from Kevin Chen who is a Berkshire shareholder and an NYU professor and he says and this is sort of a long in lines of 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 Russia can't think that and and that's obvious you just have to make things you gotta be sure things don't escalate 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 but you know in terms of what he would do if awakened in the middle of the night with somebody coming to him and saying absolutely and on something they also launched on 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 right right would you ever make a big acquisition in China and not aren't you missing a huge portion of the answers what yeah we would have you looked oh we've been made aware of things some things you 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 be easier to do than others but but I know the laws the customs the accounting the people better in the United States than a place else so there's some small hurdle in in many countries to get over which I can get over I mean 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 the 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 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 said 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 not 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 what when our deficit got to be large in relation P I don't think it's I don't think it's a potential ever 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 catch 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 came in supplying it was there food or yes okay and last question China is facing its slowest growth in nearly three decades the leadership there 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 China's going to 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 percent of the world's population at that time perhaps a little 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 that games 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 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 mind that you know and in the in recent decades in a good way absolutely because you were comparing to the tailwind of yeah hurricane or back yeah at their back and 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 three 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 took somewhat longer I mean it more stretched out 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 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Id: I-z5lGPSNk8

Length: 108min 28sec (6508 seconds)

Published: Wed Jul 15 2020