Warren Buffett, Chairman, Berkshire Hathaway Investment Group | Terry Leadership Speaker Series

Good morning. It certainly got quiet quickly. That surprised me. Can you hear me? Are you there? Back well for business school, you know, it doesn't get much better than this. Having the world's greatest investor come to our campus is quite a bore. Office German Berkshire Hathaway Holding Company's investments range from backup insurance, American Express, Coca-Cola, portions jewelry stories, whole town Nebraska. Mr. Buffet has been described as God, value investors, Michael Jordan of the investing game.

He began his first investment partnership mid-nineteen fifties with 100 hours of his own money. A few years later, he began investing in a struggling Massachusetts textile mill called Berkshire Hathaway. Through Berkshire, he started putting capital into other businesses seeking insurance which generated cash streams for more investments, which have done very well indeed. Share prices were about eighteen dollars in 1965. Berkshire today trades around sixty-nine thousand one hundred dollars a share.

Over time, the company's annualized performance has more than doubled that of the S&P 500, and Berkshire today is worth more than 100 billion dollars. But Mr. Buffett is known as much for his unpretentious style as for his lofty success. He has become a champion of investors, is legendary for his aversion to corporate double-speak. It is rare among CEOs in that he cheerfully admits his mistakes. Three years ago, he wrote in his annual report that Butler would have done better if he'd simply gone to the movies.

I’m not great at work. Very many years like that since nineteen sixty-five, believe me. Berkshire was proudly even the finally absent from the dot-com era the last few years, and now that the bubble has burst, as we all know, it’s Warren Buffett who is having the last laugh. In his most recent letter to shareholders, he wrote, quote, "We have embraced the 21st century by entering such cutting-edge industries as brick carpet installation and paint." Try to control your excitement, my buddy!

You know, I am personally, from reading his letters, it's just a joy. It’s a business lesson in itself. I encourage it. Whenever you get an opportunity to take one side and read it carefully, you'll learn a tremendous amount. His wisdom and insights are so valued that some investors buy a share, purchase stock just so they can hear him at his legendary annual meeting, or as he calls it, Woodstock for capitalists.

He doesn’t make speaking appearances as often, and we are extremely fortunate to have him with us today. Earl, head of Coca-Cola and our distinguished executive-in-residence, had a lot to do with this, and we're deeply indebted to you for helping to raise us. Thank you very much.

Our format today will be primarily questions and answers. Mr. Buffett will make some brief remarks at the beginning, and then we'll move into your questions. We will have a microphone set up over here. We would like you to come around. We are videotaping, we'd like to ask you to use a microphone, please. So, go ahead and begin to line up over there to ask your questions.

So, would you please give a very warm welcome to the Oracle of Omaha, Warren Buffett?

Yeah, good night. Testing one million, two million, three okay, I came from Nebraska today. You're probably all familiar with us, mainly by our football team. We have those fellows with the bingo white helmets with those red hands on. I asked one of our starters the other day, "What does the end stand for?" He said, "Knowledge." Okay, we can make a ton of that! I mean, that you know, a coaster, Nebraska, just because you're a football player with that, they made your in agricultural economics.

And there's a two-part question final for all of the fires. First question is, what do all McDonald's have? They were giving that to one of our potential Heisman trophy winners, the other day, and he started to sweat finally right now. Is a farm pressure in the light? Of course, you don't want to find a Heisman candidate. So I said, "Now," he said, "You're halfway home." He said, "Just one more question: how do you spell farm?" I think he really started to sweat, and he looks at the ceiling, and he looks around. By his face by itself, he says, "He." I, all so much for that guy!

Surely it will be done right now! I look, I really want to talk about what’s on your mind, so we’re going to do a Q&A. I – there’s a couple questions I always get asked. You know, I always did. I always say, "Well, who should I go to work for when I get out?" Then I've got a very simple answer. We may elaborate more on this as we go along, but another real thing to do is to get going in first with some institution or individual that you admire.

I mean, it's crazy to take a job just because it looks good on your resume or because you get a little higher starting pay. I was up at Harvard a while back, and a very nice young guy picked me up at the airport. Harvard Business School attending. He said, "Look," he said, "I went to undergrad here, and then I worked for X and Y and Z, and now I've come here." And he said, "I thought it would really round up my resume perfectly if I went to work now for a big management consulting firm." And I said, "What is that what you want to do?" He said, "Nobody said that’s the perfect resume." And I said, "Well, what are you going to start doing what you like?"

And he said, "Well, I'll get to that someday." And I said, "Well, you know, I said your plan sounds to me a lot like saving up sex for your old age. It just doesn't make a lot of sense." I told that same girl, I said, "You’re not going to work for everyone you admire the most." And I said, "You can't get a bad result out of jumping out of bed in the morning, and you'll be having fun."

He called me up a couple of weeks later, said, "What you tell us gets," he said, "They're all becoming self-employed." So you've got to temper that advice a little bit. Play one game a little bit with me for just a minute. And then I’ll roll up and we’ll get to your questions. And I’d like for the moment to have you a lot that heavy pretend I made you a great offer. I’ve told you that you could pick any one of your classmates, and you now know each other pretty well after being here for a while.

You can thank you have 24 hours to think it over and you can pick any one of your classmates. You get ten percent of their earnings for the rest of their lives. And I ask you what goes through your mind in determining which one of those who would pick. You can pick the one with the richest father. That doesn't count on me. You got to do this on merit. But you probably wouldn't pick the person against the highest grades in the class. I mean, at all, we're getting is grades in the class but that isn't going to be the quality that sets apart a big winner from the rest of the pack.

Think about who you would pick and why, and I think you’ll find when you get through doggone, you'll pick some individual. You've all got the ability, you wouldn't be here otherwise. You've all got the energy. I mean, you've got it out here. The initiative is here. The intelligence is here throughout the class but some of you are going to be bigger winners than others. And it gets down to a bunch of qualities that interestingly enough you are self-made.

I mean, it’s not how tall you are, not whether you can kick a football sixty yards, it's not whether you could run the hundred-yard dash in ten seconds, it’s not whether the best-looking person in the room. It’s a whole bunch of qualities that really come out of Ben Franklin or the Boy Scout code or whatever it may be. I mean, it’s integrity, it's honesty, it’s generosity, it’s being willing to do more than your share. It’s just all those qualities that are self-selected.

And then, if you look on the other side of the ledger, because there's always a catch to these free gifts, you know, a joke. So you’ll also have to – this is the fun part – you also have to short one of your classmates and pay ten percent of what they do. So what do you think is going to do the worst in the class? It’s a great more fun. Think about it again and again. It wasn't the plan, but it isn't the person with the lowest grades or anything of the sort. It’s the person who just doesn't shape up in the character department.

When we look for three things when we hire people, we look for intelligence, we look for initiative or energy, and we look for integrity. And if they don't have the latter, the first two will kill you because if you're going to get somebody without integrity you want to be lazy and done. I mean, you don't want to get a lot of smart and energetic self without that third quality. And everything about that quality is your choice.

You know, you can’t change the way you are wired much, but you can change a lot of what you do with that wiring, and it’s the habits that you generate now on those qualities or those negative qualities. I mean, the person who always you know claimed credit for things they didn’t do, that always cuts corners, that you can’t count on, getting it in the end, those are habit patterns.

And the time to form the right habits is one year when you're your age. I mean, it doesn’t do me much good to get golf lessons now. If I'd gotten the golf lessons when I was your age, I might be a decent golfer. But someone once said the chains of habit are too light to be felt until they're too heavy to be broken. And I see that all the time. I see people with habit patterns that are self-destructive when they're fifty or sixty and they think they really can’t change, they’re imprisoned by that. But you’re not imprisoned by anything.

So when you write down the qualities of that person that you'd like to buy ten percent of, look at that list and ask yourself, is there anything on that list I couldn’t do? The answer is there won’t be. And when you look at the person you sell short and you look at those qualities that you don’t like, if you see any of those in yourself you could change, whatever it may be, selfishness, you can get rid of that. I mean, that’s not ordained.

If you follow that, you and Ben Franklin did this in their young teens, they just — Ben Graham did this at early ages. He just looked around and he said, "Who do I admire?” You know, and he wanted to be admired himself. And he said, “You know why do I admire these other people?” And he said, “If I admire them for these reasons, maybe other people will admire me if I behave in a similar manner.”

And he decided what kind of a person he wanted to be. If you follow that, at the end you’ll be the person you’d love to buy ten percent of. I mean, that’s the goal in the end. And it’s something that’s achievable by everybody in this room. So that’s the end of the sermon. Knowledge! Let’s talk about what’s on your mind, and you’re going to ask anything. The only thing I won’t tell you is what we’re buying or selling.

I don’t even tell myself that. I mean, I write it down that I like the Coca-Cola formula. You know, there’s only two people can get into the trust department and find out what they are, and I don’t know who the two are, so it is — we don’t talk about what we’re buying or selling, but anything else is fair game: personal, business, anything you’d like to talk about, and actually the tougher the questions are, the more interesting those are for me, so don’t spare my feelings.

I may just throw it at my head! And with that let’s — I guess we got a microphone. Is this the only microphone? Is there one on? I’m feeling like, "Okay, here is my ceiling." I’m going to do the microphone, so stand in line. I’ll be Regis Philbin and you can ask away!

Yes, I have an old-fashioned belief that I should only expect to make money in things that I understand. When I say understand, I understand — I know what the product does or anything like that. I didn’t understand what the economics of the business are likely to look like ten years or twenty years from now. I know in general what the economics of Wrigley chewing gum will look like ten years from now.

The internet is going to change the way people chew gum. It isn’t going to change which gum they chew. Now, if you own the chewing gum market in a big way, and you've got Doublemint, Spearmint, and Juicy Fruit, those brands will be there ten years from now.

Now, I can’t pinpoint exactly what the numbers are going to look like, I’m really, but I'm not going to be way off if I try to look forward on something like that. Evaluating that company is within what I call my circle of competence. I understand what they do. I understand the economics of it, and I understand the competitive aspects of the business.

There can be all kinds of companies that have wonderful futures, but I don’t know which ones they are. I have given talks in the past where I carry with me a seventy-page tightly printed list, and it shows two thousand auto companies. Now, for the start of the 20th Century, if you'd seen what the auto was going to do to this country, the impact it would have on the lives of your children and grandchildren and so on, it transformed the American landscape.

But of those two thousand companies, you know, three basically survive. And they haven't done that well. I have had many times when someone asked, how do you pick three winners out of two thousand? I mean, it’s not so easy to do. It's easy when you look back, but it's not so easy looking forward. So, you could have been dead right on the fact that the auto industry—fact is, you probably could have predicted the huge impact it would have, but you wouldn't have made money if you want companies across the board because the economic characteristics of that business were not easy to define.

I had always said the easier thing to do is figure out who loses. It’s what you really should have done in 1905 or so when you saw what was going to happen with the auto. You should have gone short horses. There were twenty million horses in 1900, there’s about four million horses now. So, it’s easy to figure out the losers. Get the losers, the horses, but the winner was the auto overall—two thousand companies just about failed.

You merged out, and there were three companies, auto companies, in the Dow Industrials in the 1920s and 1930s: Studebaker, Nash, and Hudson Motor. Those names are all familiar to me, and maybe some are more familiar to you, but they’re not making any cars, you know? They didn’t make money. At one time, they were in the Dow 30. They were the aristocrats of American business, and they got creamed.

So, figuring out the economic characteristics about the winners in a wonderful business is not easy. In North Carolina, I guess we’ll talk often; I have been Wilbur, if you could have seen the future of the airline business from that point forward and how that would transform things—you know, it would blow you away it’s excited people incidentally.

Ever since, but if they’re competitors—capitalists—the Kitty Hawk, he should have shopped Horace down because it’s nothing but cost investors money. There were four hundred airplane companies in the 1920s and 1930s. Along with all the hall, there was a Nebraska. We were the Silicon Valley of America, apparently. Very graft, and they all disappeared into a terrible business. At the end of 1991, if you added up the aggregate earnings from all airline companies, it came to less than zero.

The number of passengers went up every year, the importance of the industry was dramatically increased decade by decade, and nobody made any money. Figuring out the economic consequences—TV, I think there’s, I don’t know, twenty, twenty-five million since the years old in the United States. I don’t think there’s one made in the United States anymore. I mean, it's a TV set manufacturer. What a wonderful business!

Everybody had a TV in 1950; there were about forty-five to fifty who had multiple sets. Now nobody is in the United States and made any real money making the sets. They're all out of business. And the Maginot boxes, the RCA's, all of those companies—radio was the equivalent of twenty over five hundred companies making radios in the 1920s. Again, I don’t think there’s a U.S. radio manufacturer at the present time.

But Coca-Cola, you know, was founded in 1884, Jacob’s Pharmacy or whatever, and a fellow comes up with something with a lot of copiers over the years. But now you’ve got a company that is selling roughly 1.1 billion servings of its product—not all cola, writing some other daily—throughout the world. A hundred seventeen years later.

So, understanding the economic characteristics of a business is different than predicting the fact that a business is going to do wonderfully. I look at the internet businesses or looking at tech, Mrs. I say this is a marvelous thing. I love to play around on the computer, and now I order my books from Amazon and all kinds of things, but I don’t know who’s going to win.

Unless I know who's going to win, I'm not interested in the best thing. I’ll just play around on the computer. Defining your circle of competence is the most important aspect of investing. It’s not how large your circle is; you don’t have to be an expert on everything, but knowing where the perimeter of that circle of what you know, what you don’t know, is and staying inside of it is all important.

Tom Watson Sr. started IBM, said in his book, he said, "I'm no genius," said, "but I'm smart in spots, and I stay around those spots." And you know that is the key. So, if I understand a few things and I stick in that arena, I’ll do okay, and if I don’t understand something, but I got all excited about it because my neighbors are talking about stocks are going up and everything, I start fooling around someplace else—eventually, I’ll get creamed. And I should.

So now let’s go over here a little bit. I got two short questions. One is, how do you find intrinsic value in a company?

While intrinsic value is what is the number that if you were all-knowing about the future and could predict all the cash that a business would give you between now and judgment day discounted at the proper discount rate, that number is what the intrinsic value of businesses is. In other words, the only reason for making investment, laying out money now, is to get more money later on, right? That’s what investing is all about.

Now, when you look at the stock, when you look at the bond, so Miss United States government is very easy. Tom, what you’re going to get back, it says right on the bond: it says when you get the interest payments, so when you get the principal. So it's very easy to figure out the value of a bond.

It could change tomorrow if interest rates change, but your cash flows are printed on the bond. The cash flows are printed on a stock certificate; that's the job of the analyst to print out that stock certificate, which represents an interest in that business, and change that into a bond, and say, "This is what I think it’s going to play out in the future."

When we buy some machine for Shaw, it’s to make carpet. That’s what we’re thinking about obviously, and you know you all learned that in business school, but it's the same thing for a big business. If you buy Coca-Cola today, the company is selling for about 110 to 115 billion dollars in the market.

The question is, if you had one hundred ten or fifteen billion, you would be listening to me, but I didn't listen to you. It’s nothing but the question is would you lay it out today to get what the Coca-Cola company is going to deliver to you over the next two or three hundred years?

The discount rate doesn’t make much difference after you get further out, but the real question: how much cash are they going to give you? It isn’t a question of, you know, that is the question of how much you gonna get, when you get it and how sure are you?

And when I calculate intrinsic value of a business, when we buy businesses, whether we’re buying all of a business or a little piece of the business, I always think we’re buying the whole business because that’s my approach to it. I look at it and say, "What will come out of this business, and when?"

What you really like, of course, is to be able to use the money they earn and are higher returns on it as you go along. I mean, Berkshire’s never distributed anything to shareholders, but its ability to distribute goes up as the value of the businesses we own increases. We can compound it internally.

But the real question, Berkshire, selling for, let’s say, a hundred and five or so billion now, what can we distribute from that hundred? And if you’re going to buy the whole company, can we distribute enough cash to you soon enough to make a sensible present interest rate to lay out that cash now?

And that’s what he gets at doing at the end. If you can’t answer that question, you can’t buy the stock. You know, you can gamble in the stock if you want to. Your neighbors can buy it, but if you don’t answer that question, I can’t answer that for internet companies, for example, there's a lot of companies that all kinds of me, so I can ask for, but I just stay away from those.

Number two, so you get formulas involved in finding intrinsic value and circumference. You’ve got a mathematical description of that—present value, future cash flow segments. The question is, why haven’t you written down your set of formulas or your strategies in written form so you can share with everyone else?

Well, I think I actually have written about that. If you read the annual reports over the years back, the most recent annual report, I use what I’ve just been talking to use the illustration of Esau because here he stopped.

He was in 600 BC. Smart man was smart enough to know it was 600 BC. Though, I mean, it will take a little foresight. But he stopped, you know, it between tortoises and hares always, other things he found time to write about, you know Bert, and he said, "A bird in the hand is worth two in the bush."

Now, that isn’t quite complete because the question is how sure are you that there are two in the bush? And how long do you have to wait to get them out? Now, they probably knew that, but he just didn’t have time because he had all these other problems to write and had to get on with it. But he was halfway there in 600 BC.

That’s all there is to investing. It’s how many birds in the bush and what are you going to get them out and how sure are you now? If interest rates are fifteen percent, roughly, you’ve got to get two birds out of the bush in five years equal to the bird in the hand.

But if interest rates are three percent and you can get two birds out in twenty years, it still makes sense to give up the bird in the hand because it’s all gets back to discounting against an interest on interest rate. That Hamish often, you don’t know, you know, not only how many birds in the bush, but in the case of the Internet companies, there weren’t any birds in the bush, but they still take the bird that you give them from the hand.

I actually have written about this sort of thing and still have away from the top of the rotor some 2,600 years ago, but I’ve been behind on my reading!

Yeah, good morning, huh? I know you’re vain for your success, but I was curious if there are any particular moments in your life that are mistakes or failures that you’ve made, that were particularly memorable?

What you may have learned from them, and if you have any particular advice for the students here in dealing with the discouraging circle.

Yeah, well, I may have made a lot of mistakes. The biggest mistake I... well, not the biggest, not necessarily the biggest, but buying Berkshire Hathaway itself was a mistake because it’s virtually a lousy textile business, and I bought it very cheaply. I’ve been taught by Ben Graham to buy things on a quantitative basis, look around for things that are cheap.

I was taught that in 1949-50. It made a big impression on me, so I went around looking for what I call cigar butt stocks. The cigar butt approach to buying stocks is that you walk down the street and you’re looking around for cigar butts, and you find this honestly that’s terrible-looking, soggy, ugly-looking cigar with one puff left in it. But you pick it up, and you get your one puff. Disgusting, this right away, but it’s free! I mean, it’s cheap.

And then you look around for another soggy, you know, one-puff cigarette. Well, that’s what I did for years. It was a mistake. Although we made money doing it, you can’t make it with big money. It’s so much easier just to buy wonderful businesses.

So now I would rather buy a wonderful business at a fair price than a fair business with a wonderful price. But in those days, I was buying cheap stocks, and Berkshire was selling below its working capital for sure. You have plans for nothing at the machinery for nothing.

You’d get the inventory and receivables at a discount. It’s cheap. So, I bought it, and twenty years later I was still running a lousy business, and that money did not compound. You really want to be a wonderful business because, at that time, the friend of the wonderful business, you keep compounding it, keeps doing more business, and you keep making more money.

Time is the enemy of the lousy business. I could have sold Berkshire, perhaps liquidated it, and made a quick little profit, you know, one puff, but staying with those kinds of businesses is a big mistake.

So, you might say I learned something out of that mistake. I would have been way better off taking what I did with Berkshire, I kept buying better businesses. I started the insurance business, See's Candy, Buffalo, and all kinds of things. I would have been way better doing that with a brand-new little entity that I'd set up rather than using Berkshire as the platform.

Now, I've had a lot of fun out of it. I mean, everything in life seems to turn out for the better, so I don’t have any complaints about that. But it was a dumb thing to do.

I went in US Air; I bought a preferred stock in 1989. As soon as my check cleared, the company went into the red; never got out. I mean, it was really dumb. I mean, a dead. I’ve got an 800 number I call now whenever I think about buying an airline stock. I call them up, and fortunately, I call it three in the morning, and I just dial it myself.

My name is Warren; I’m an airline-holic, and I'm thinking about buying this thing. And they talked me down many things happened. Thanks Takes hours sometimes, but it’s worth it. Flipping if you ever think about that era of buying an airline stock, call me and I’ll give you the 800 number because I don’t know; you don’t want to do it. But we got lucky in terms of how we eventually came out on it.

But it was a dumb, dumb decision—mine and I’ve done. I’ve biggest, biggest step in terms of events that, in terms of opportunity costs, eventually cost. I bought half interest in a Sinclair filling station, was about twenty with a guy who was in the National Guard, with out of my ten thousand dollars, then I put two thousand dollars into it, and I lost it all!

So that was twenty percent, and that means that the opportunity cost is now six billion dollars of that filling station, which is a big price to pay for, you know, getting the white with your windows in the fields, and Hannah windshields and things like that.

So actually, I like it when Berkshire goes down; does it reduce the cost of that mistake of an opportunity to us? But the biggest mistakes we made by far, I've made—well, we’ve made—the biggest mistakes I made by far are mistakes of omission—not commission.

It’s the things I knew enough to do. They were within my circle of competence, and I was sucking my thumb. And those are really the ones that hurt; they don’t show up anywhere. I probably cost Berkshire at least five billion dollars, for example, by sucking my thumb twenty years ago.

I closed the door on Fannie Mae. It was having some troubles, and forget about the whole company for practically nothing, and I don’t worry about that if it’s Microsoft because I don’t know what was Microsoft. It isn’t in my circle of competence, that’s why I don’t have any reason to think I’m entitled to make money out of Microsoft, or out of cocoa beans or whatever.

But I didn’t know enough to understand Fannie Mae, and I blew it. And that never shows up under conventional count, but I know the cost of it. I know I passed it up, and those are the big, big mistakes. I’ve had plenty of them, and unless I tell you about them in the annual report, and I resist the temptation sometimes, as I tell you about them in the annual report you're not going to know about them because it doesn’t show up under conventional accounting.

But omission is way bigger than commission. There are big opportunities in life that have to be seized. We don’t do very many things, but when we get the chance to do something that’s right, big, we’ve got to do it.

And even to do it on a small scale is just as big a mistake almost as not doing it at all. I mean, you really got to grab them when they come, and that because they are not going to get five hundred great opportunities. You would be better off if when you got out of school here you got a punch card with twenty punches on it, and every big financial decision you made, you used up a punch. You’d get very rich.

Because you think through very hard each one of you want to a cocktail party, and somebody talked about a company you didn’t even understand what they did, and you couldn’t pronounce the name, but they made some money last week, and another one like it, you wouldn’t buy it if you only had twenty-four inches on that card!

There’s a temptation to dabble, particularly during all markets in stocks. It’s so easy. You know, it’s easier now than ever because you can do it online. You know, just click it. Then maybe it goes up to five percent. Get excited about that, you buy another one the next day and so on. You can't make any money over time doing that.

But if you have a punch card with only twenty punches, when you got another one in your life, you’d think a long time before every investment decision, and you would make good ones, and you’d make big ones. You probably wouldn’t even use all twenty punches at the end of your lifetime, but you would need to.

Yeah, Mr. Buffett, good morning. In your comments about making mistakes and errors like that, you talk a little about your self-discipline when you’re in a position, and you feel like it’s no longer good. What criteria do you use to finally abandon it?

Yeah, when I started out, the situation has changed over the years because when I started out, and I had the ideas, the money, and I would go through Moody’s Manual. I went through it page by page, and then I went through it again page by page, and I found stocks in there that I could understand that were selling at below two times earnings, even one times earnings.

Well, when you don’t have ten thousand bucks, that can get a little frustrating. And if you don’t like to borrow money, which I never liked to borrow money, so I was always coming up with more ideas than I had money, so I had to sell whatever I liked least to buy something new that just was compelling to me.

For a long time, I was in that mode. Now our problem is we have more money than ideas. So, when you look at our annual report, which is on the internet under in our home base furniture out of the way, you’ll see something in the back called the economic principles of Berkshire.

And you will see, which I believe in, I’m setting out for my partners. They are my partners; I don’t look at my share of my partners. I got my partners for life. So, I want to tell them how I think, and if they don’t agree with the way I think, that's fine. But I don’t want them to be disappointed in me.

So, I lay it out there. I say, “In terms of our wholly owned businesses, we’re not going to sell no matter how much anybody offers this for me.” I mean, if somebody offers three times what something is worth, that See's Candy, the Buffalo News, or whatever maybe, we’re not going to sell it.

I may be wrong in having that approach; I know I’m not wrong with my own daughter’s percentage of aperture because that’s the way I want to live my life. I’ve got all the money I could possibly need; you know, just so much amounts to which a change in the newspaper story on my obituary and the amount of money the foundation has and then break off relationships with people I like and people that have joined me because they think it’s a permanent home to do that simply because somebody waits a big check at me would be like something for my children.

Because I want to be a big shot, I won’t do that, and I want to tell my partners I won't do it so that they’re not disappointed in me. More and more with certain stocks we’ve got that approach.

Now, if we were chronically short of funds and all kinds of opportunities were coming, we might have a somewhat different approach, but our inclination is not to sell things unless we get really discouraged, perhaps with the management, or we think the economic characteristics of the business change in a big way. I mean, and that happens.

So, what I’m going to sell simply because it looks too high, yep, in all likelihood, that means I can't make that a hundred percent, but that’s about it. That’s the principle under which we operate. We're generating right now five billion in cash, or at least, so it's a hundred million bucks every week.

And you know, since you know, I think the real question is how do you put it out to intelligent buy the edge? If we were selling things, would be just that much more money? There may come a time when that would change, but what we want to do—and I have partners, Cheryl, we’re partners who’d say, “If you can get three times what See's Candy is worth, why don’t you sell it?”

And that’s why I want to be sure before they come in they know how I think on that. I mean, they’re entitled to know that. You really want to thank for meta; you know if you're going to get married and you want to marry someone that’s going to last, initially, the happiest marriage—or one that Martha Stewart will talk about.

Anything that you want a marriage that's going to last? What quality do you look for in a spouse? One quality? Good for brains. You look for humor. You look for character. You look for beauty. Now you look for low expectations. That is the marriage that’s going to last.

Both have low expectations; I made it. And I want my partners to be on the low side on expectations coming in because I want the marriage classes—the financial marriage—when I join me at virtual, and I don’t want them to think I'm going to do things that I'm not going to do. So that's our guiding principle; the advice is all free in your medical advice.

Everything next time, good morning. Mr. Buffett, I have a question regarding evaluation of the sounds of investment in recent years. It appears that the use of tax sheltering in preparation is increasing, and such, you know, reputable companies like UPS and others involved in a cold part of silver shoulders with the IRS.

And as we know, most of these transactions are very artificial, but yet there is profit there from the investor perspective. Do you think it’s beneficial for investors that the companies that they invest in are involved in tax shelters? And if so, do you think it would be helpful if that’s built in such that is disclosed in statements and immediately?

Not sure I got that a hundred percent, George. Do you think that the involvement of a corporation that you invest in, or anybody for that matter, invest in tax shelter, which is by some definition of that, tax shelters?

Right, I’ve never used one. Yeah! I know I want to go out to it saying that so I'm asking, if you know that the corporation is involved in such activity, is it beneficial in charting? Would you think that that’s helpful for investments?

What does that mean? There’s but there’re perfectly legal ways to show their taxes. I mean, we did and still do; we were the earliest ones to go in for low-income tax housing credits. That got met with first President Bush about that one, and that benefit are still mild degree.

It’s not a big element of virtue; it’s a penis in terms of picture overall value, but it is a congressionally ordained tax benefit. I wouldn’t call it exactly a shelter; it’s a tax benefit that Congress has decided they’re willing to offer businesses those, and they do that because they think it’s the best way to generate low-income housing.

So, we participate in something, but it’s not a big factor. And what I want—there’s no wrongdoing with that. Then if you get into tax evasion, I mean, that’s a whole different game. At that point, they’ll go to jail.

No, but certain businesses, some insurance companies are incorporated in Bermuda. You can save a lot of taxes. You have to meet certain other tests, which we wouldn’t want to meet, but if we were willing to meet those other tests, there's nothing illegal or immoral about moving to Bermuda. We’re not going to do it.

And if the restrictions were done, it—that the tax code is the rulebook, and you follow the rule. But I think some of the things people do in terms of bending that rulebook get very close to fraud and sometimes cross the line into fraud. And when they do, I think that would be prosecuted, but that’s another game.

And inside there has been more pushing on that, I would say, in the last five years and certainly was my experience earlier. There are more, there’s up—I think now has diminished in the last year, too—but a couple years ago, there was very aggressive marketing by some of the auditing firms and these even with sure percentage shares of the gain to be paid to the others.

I think that those things got fairly dubious and pretty when they shopped for legal opinions; and also if you got caught doing these things, you could say, “Well, I was relying on this legal opinion, and therefore I shouldn’t go to jail, but just pay the back taxes.”

So, I don’t know how many anything where associated with it—what’s done that, but I’ve obviously, if they pushed too far, we don’t want to be there. Yep, I was curious with the large number of people you have now with the tremendous amounts of wealth.

What do you think of the current state of philanthropy? Well, I'll be out this week, and then actually ten: out flying on to Seattle, talking to the United Way group out there. They see how well United Way raises more per capita I believe in every other way in the country, and Bill Gates will be there.

We're talking jointly. His mother was very active in the United Way, but Bill is going to give away over a billion dollars a year and a lot more later on, but right now a billion. It’s very interesting, and he’s very rational about it, and he’s very informed.

In fact, he got somebody, I think, is primary advisor in the medical field is a fellow with the CDC in Vienna, and Bill reads fifteen books a month on this. I mean, he is thinking just absorbing.

I wouldn’t be able to get it that fast, but he just says with a billion dollars, he wants to save as many lives for years you can. So how did he get that? His objective is just as much a metric of his foundation as some other metrics for return on capital might be for a business.

And he says, "I'm going to spend a billion dollars on how many lives can be saved for that?" So he’s gotten very heavily in the vaccines and AIDS in Africa with a number of things that are very rational.

I personally think I've all my 99. something percent of my net worth will go to a foundation after the ladder of my wife and I. It’s all going to go to the foundation as far as I'm concerned. I’ve written a letter to my trustees.

I’ve got very few trustees. I’ve got a whole bunch of trustees, in my view; they just homogenized themselves down to the lowest common denominator because you have thirty people in a room, and they’re prestigious people, but they also all have their particular hospitals.

And it will become a big trade-off game, you know, that they like Congress, so I have very few people. I don’t give them anything specific because I tell them their judgment above ground will be better than my instructions from six feet underground.

Son, I don’t like to think that, but it’s true. So, I tell him I look at society are the ones that don’t have an actual funding constituency. See, you love or are just damned intractable and very difficult to solve.

So, I am NOT going to haunt them at all if they spend big money on some terribly important problem and they fail because they’re taking on tough problems. When I buy businesses, I’m buying easy businesses.

The reason that big problems of society are big problems is that they’re damn tough to solve. So, they’re swinging at bad pitches. I’m swinging at easy pitches in business, but they’re swinging at— they have to swing at bad pitches, but I tell them I wanted to try and do it, and if they fail, it doesn’t bother me at all.

And I tell them if they give a million bucks here and a million bucks there and a million bucks there, they’re not going to sleep because I'm going to be haunting them. I'm going to come back every night; you know, I did not want the eyedropper approach used to fly through pee, but I want them to use their judgment to look at important problems that do not have a natural funding constituency.

You know if the government is going to find it, fine. I mean, they should be funding important problems, but we don’t need to do it. The ball applied to be in my opinion is the fun things that don’t have the natural constituents, and that’s what Bill is doing.

There isn't a neck there are a bunch of people around that you can make an emotional appeal to make vaccines available to millions and millions of kids around the world. It just doesn’t target anybody’s heartstrings.

You can make a building after mean it just isn’t the sort of thing that you can raise money for on an emotional basis. And there's nothing wrong with raising money on an emotional basis, but that is a problem that will get solved by a funding constituency that is responding to that.

But Bill is responding to what is mine. And that is the important thing, which is saving lives. And he doesn’t care whether it gets his name on a building or whether anything happens or what everybody knows about it, and he gets published.

It’s just because of the scale he’s on, but he doesn’t care about that; I can promise you that. So, that’s my philosophy— that I got this money not because I’m a superior human being, not because I've done more for society and other people.

I was wired the right way to be dropped into the United States at this particular time. I mean, it’s a huge capitalistic society, and I’m wired—no credit to me, but I was born that way.

So that I’m better at asset allocation than other people to some degree, just like other people are better at all kinds of other things. I was with two teachers out of the sun valley. They’re doing more for society than I am, and they don’t—this market system does nothing for them.

The market system does all kinds of things for me. Kate says if I had been born five thousand years ago, you know, I would have been some animal's lunch, you know, because I can’t run very fast and climb trees.

I mean, you know, just stay. And I could tell that animal was chasing me in a way that we see how I can allocate assets. You know, it wouldn’t make any difference.

So here I am! I’m bored out again. I just very, very lucky. At the odds, when I was born in nineteen thirty, the odds were fifty to one against a baby born in the United States.

That’s a terrible set onto the face. And then I was rock down here, you know, and if I had dropped down and/or someplace ER or China, I mean, I wouldn’t have a chance.

So society is what does it for you, and it should go back. And it might be with you; go back to society if you've been lucky enough to be dropped into a society where your particular wiring pays off big. Now, that’s just luck, and you know, there’s nothing wrong with being lucky. I don’t feel guilty about that.

But also don’t feel that I feel like I have a lot of fun doing what I do, but I feel that money should go back into society. And it should go back as intelligently as it can, and the best way to do it intelligently is to have high-grade and intelligent people administering it at the time.

And you don’t know the problems that are going to be out there ten years from now, or twenty years from now, or thirty years from now, but I do know if I've got a small number of high-grade smart people, and high-grade is more applied out. Oh, if you gave me twenty extra points of IQ, but cheaped a little on the high-grade, I wouldn’t take it because they got to be—there’s somebody’s chances that do things in a petty way or, you know, do try to make people get supported in their own minds to their own interests rather than the interest of the institution.

So I really want super high-grade people doing it, and I’ve got them. I think the money might do a lot of good. It may do no good, but it will be operating in fields, or if it doesn’t do good, that good probably would have been done otherwise.

Yep, I’m just wondering! There's a lot of differences between the recent boom and bust in the stock market and the one in the nineteen twenties, but there are also a lot of similarities.

And the simulators are allowing people to draw the conclusion that stock prices will be trapped depressed for some time to come. Where do you disagree or agree with that?

We bought in the whole century quite interesting. If you take the twentieth century, it was an unbelievable century for the United States. The GDP per capita, and that’s the way to think of this per capita, sometimes they talk about our GDP vs. Europe’s, but if their population is the same, every year an artist goes up one percent, you’ve got to have a divisor as well as the numerator.

And so, GDP per capita in the twentieth century in the United States went up six hundred and ten percent. Actually, qualitatively, it went up more than that because you can’t measure, you know, certain things in medicine or whatever it may be.

And the improvements, but just out of a quantitative basis, it went up every single decade, including the decade of the thirties. So, here you have a hundred years when basically the U.S. citizen really was getting—and was improving their lot decade by decade by decade.

The thirties, it was a thirteen percent gain; that decade was World War II. The forty-six percent—the worst decade was the First World War. So, you get sometimes the analogy—I can get in trouble with analogies—but any of that, it was a huge, interestingly enough.

There were six big periods in there for the stock market in both directions. There were three big bull markets from 1910 to 1920. One, the Dow went from sixty-six to seventy; one, less than a ten percent move in twenty years, less than half a percent here.

You got evidence of a half. It didn’t move from 1921 to 1929, as you pointed out; it went from 71 to a high of 381 in September of 1929, while five hundred percent growth was obviously the country—that was well-being of the country, think, about five hundred percent during that period.

And the well-being of the country as a whole was a whole lot more than ten percent during that first twenty-one years. So, he had this very uneven development, from September 1929 until the end of 1948.

The Dow went from 381 to about a hundred and eighty—it was cut in half—and that was eighteen long years! And yet the per capita GDP was moving right up during this whole period. The economy was doing fine from 38 to 265.

The Dow went again from about a hundred and eighty up to close to a thousand again—541, which was far outstripping from 1965 to 1981; one, the Dow went down literally. Well, again, per capita, the GDP went down a couple of points during that period.

And in the other forty-three and three-quarters years, it netted the Dow was down a couple of other points during that period, and the other forty-three and three-quarters years made up the rest of this move from 66 to 11,000.

So, one self-excited yourself: how could it be that you can have a country that was doing better and better and better and better? The citizens were living every generation was living better than the one that preceded it, but you have these huge changes: big gains and a few times long periods of stagnation.

Twenty years, I mean, that’s a long time to do nothing. The answer is that investors behave in very human ways, which is they get very excited during bull markets, and they look in the rearview mirror and they say, "I made money last year; I'm going to make more money this year."

So, this time I’ll borrow in hour, or the neighbor says, “You know, I wasn’t it last year when that neighbor was dumber than I am? I made a lot of money, so I’m going to go in this year.” They’re always looking in the rearview mirror.

And when they look in the rearview mirror, and they see a lot of money having been made in the last few years, they plow and they just push and push and push on prices. And when they look in the rearview mirror, and they see no money having been made, they just say, "This is a lousy place to be!"

So, they don’t care what’s going on in the underlying business. It’s astounding, but that makes for a huge opportunity—just huge opportunities. I mean, I have lived through roughly half—in investing sense, about half that.

And I’ve had that long period of stagnation from 48—I mean, from 65 to 80. It’s a seventeen-year period. I wrote an article for Forbes in 1979, and I just, how can this be pension funds in the nineteen-seventies put a hundred and some percent of their new money in stocks because they were wild about stocks.

Then they got a lot cheaper, and they put a record low in nine percent of that nobody in the 1970s when stocks were way cheaper. People behave very peculiarly, and in terms of the reactions because they're human beings and they get excited when others get excited.

They get greedy when others get greedy; they get fearful when others get fearful, and they will continue to do so. And you will see, you know, if you—you will see things you won't believe in your lifetime, and securities markets and the country will do very well over time.

But you will see these huge waves, and if you can stay objective throughout that, you can detach yourself temperamentally from the crowd, you get very rich. And you won’t have to be very bright. I mean, I’m sure you are, but it doesn't take brains; it takes temperament.

It takes the ability to sit there and look at something when I started out in 1950, I would go through and find things at two times earnings and they were perfectly decent businesses. And people wanted two jobs at those companies, and everybody knew they were going to be around, but I’m behind with two times earnings and that interest rates were two and a half percent.

You know, I went to the start installing security lights at the Kansas City Life Insurance Company, I had to be a fairly prominent company in Omaha, and the policies they sold would allow you if you were buying life insurance from them. Had a building and an assumption of two percent interest. The stock of Kansas City Life was selling for less than three times earnings.

You were getting thirty-five percent if you bought the stock, with no question about the sound of the company. Now, I went to the local agent because I would figure it out, I'll give myself a few shares of stock. I mean think; I understand he's got his whole life invested in this company with the local agent; we've been with them for twenty years, and his name is Moe Size.

Mr. Moose, and you know, you’re selling these policies with two percent even have a few members of your own family, and you can buy into this company whose paycheck you pay you on every month, and you know, and whose future your beneficiaries of his life policy depend on.

And who you’re selling them, you know, a two percent investment on, and you get thirty-five percent of your money, you know? And I’m stuck trying to be good. And then I couldn’t. I consulted, and I went to check myself.

When I mean the world, you have to start with that. But it just blew me away; it blew me away!

I thought sometimes I used to wonder if I was nuts, you know? But those things—the same thing happened. I mean, in 1964, the Dow closed at 864 and then in 1981, 17 years later, it closed at age 65 and moved one point.

In 17 years, now it’s not a big move, and you can’t believe how discouraged people were. But during that period, you know, people were looking better. So, things can go on a long time that don’t make sense, and they don’t come to an end.

I mean, the Internet thing, I mean, you had these companies selling for many billions of dollars that had, really frankly, no prospects of ever making any money. That’s a bubble, but I once said, “Anything that can't go on forever will end.”

Now, that’s a pretty good saying! Think about that, and particularly think about it next time you’re trying to do something just because the stock’s gone up a lot, you know, many of your neighbors making money or something that you’ve got to do, you’ve had to sit and think objectively.

And think about what I buy this whole business. It’s an Internet company that’s got a hundred million shares outstanding, a hundred—that’s ten billion dollars—is it worth ten billion dollars? It’s worth ten billion dollars; it’s got to be able to give you, you know, seven or eight hundred million next year.

And if it doesn’t give you seven or eight hundred million next year, you should get a good move, maybe ten percent more than that the year after and continue to him. There are a lot of businesses that can do that, and people just go crazy.

And of course, it’s fun! I mean, it’s like that sign they put in doctors’ offices and says, “Avoid hangover, stay away,” etc. It’s just so much fun to keep like that, but yeah, you got to do sensible things to get that result.

Yeah, yeah, next! Well, we got three people standing there, so let’s do the three that are standing.

Okay, good morning, sir! I was wondering what your opinion is on the Federal Reserve and their actions taken recently. Do you feel like they’ve done enough to fix the economy?

Yeah, well, I’m a big fan of Alan Greenspan’s over time. I’ve known him for a long, long time. We were on a board together—caption reason Alan is a very, very smart guy! He’s motivated, in my opinion, entirely by whatever is for the United States.

You could have a better person in there. The problem he may have is that because his tenure in office has been associated with this incredible bull market, that even though he wouldn’t have claimed credit for that, people apply it associated because of the importance of the Fed generally; they might associate it with him.

So, they made, if things don’t work out so well, they may blame him as well. But I think his policy has generally been very good. You have to understand one thing about the Fed; it’s not as powerful as the mystique would make it.

It’s a brake; it’s better than its gas pedal! When the Fed wants to put on the brakes, we go for the windshield. I mean, how do you know the economy just wrong?

Yeah, and they can put on the brakes! Paul Volcker did it. He broke inflation by doing it, but I mean when he put on the brakes and that, around nineteen eighty, I mean people hated it. He was crucified for what is the right thing to do.

And he could do it; he did it all by himself, and he, and it was the only way because of the momentum the inflation was generating. It was the only thing that was needed, then normally unpopular.

It’s much harder for a Greenspan to put on the brakes, because nobody wants him to put on the brakes. Busty! So visible. But he's put them on sort of gradually, but stepping on the gas pedal, he does not necessarily get the same result.

It may help, but there are a thousand other variables operating. And as you see in Japan, you know, you can get down to zero interest rates, and you can stimulate anything. So, it isn’t like the Japanese haven’t read the same books we read about economics.

I mean, they’ve read Keynes and the whole thing, so we’re not smarter than they are; we don’t have any secrets they don’t have. But they don’t know how to get their economy going, and you know, there are two GDPs going no place in the last five years.

Still, problems arise. So easy money doesn’t solve everything. But Greenspan could very well get blamed for the fact that he hasn’t solved everything, and it’s just not in his power to solve it.

He can help in various ways, and I don’t think you could have anybody better, and I think he’s done the right thing to this point. But the right thing may not be quite as effective as people may hope.

You read in the paper, "Well, what happens if the Japanese start selling government or government bonds, or what happened? They dump the dollar. They can’t dump the dollar; there’s only one way to dump dollars.

You could at least dollar assets because if the Japanese want to sell government, our government bonds, they sell up to us, and they get a time deposit or a demand deposit. They still own a dollar asset if they sell them to the French, they get it, and they may get some answers from the French, but now the French haven’t.

I mean, the only way you can reduce foreign investment in the United States is to change it around, so they’re consuming more than we’re consuming from them. That might be one— at one point, we buy a television set from Japan, if we buy more television sets from them than they buy equivalent consumables from us.

The exchange of what balances things is we give them some investment-type asset, whether it’s cash or U.S. government bonds or stocks or movie studios or real estate or different things, and the only way that reverses is when we start running a trade surplus, which we’re miles away from.

So, logically, you know, if you read classic economics, you would believe that our currency would have been weak along, or weaker over the recent years and that it would be weak now. But there are other things operating, and that’s one of the problems about economics is there’s never just one variable; there’s usually hundreds of variables.

And they operate with different impact at different times. I mean, it’s not like a physics formula, if I mean. It is, I guess it would be if you get into the Heisenberg principle or something like that.

But the formula has a lot of the same variables year after year. But the relative importance of those variables and how they interact with each other is never exactly the same, and that’s what we find out.

The Japanese find out, and everybody finds out, and foreign currency or the currents of the value of a dollar and currency rates are defined by what you would expect based on history.

But somebody said of history were a perfect guide— you know, the Forbes 400 would all be librarians. You know, she’s going to look it up in the books and all the answers, but history doesn’t repeat itself as Mark Twain said.

“It’s going to repeat itself, but it rhymes.” I mean, things come back, but they don’t quite come back in the same format. We’ll understand all this perfectly for years; why the dollar is behaving the way it has. But I think it would be useful, net from the US, if the dollar was strong.

Yes, Mr. Buffett, thanks for taking my question. My question pertains to small business. My family has been spending in the truckload sector of transportation for about fifty years, and as you talked about the airline industry and other merchants next week, acquisitions, and things going on, and a lot of the smaller players being tossed out of the market.

What do you see for people— for students that want to start a small business? Maybe they want to start in a business that is somewhat of a commodity-type business. But as business, as large corporations get larger and their efficiencies increase, how can small businesses compete?

It has these people—the idea. In many areas, small businesses have an advantage. You know, in other businesses, scale has a huge advantage. I mean, you don’t want to be a tiny carbon steel producer. On the other hand, when many miles came along and learned how to use scrap more effectively, then the older methods of making steel, they actually had managed to scale; it’s a huge advantage.

In some businesses, it’s, you know, the largest airlines—haven’t won. Southwest Airlines as one, starting with, you know, just a few planes flying down there between Houston and Dallas, and they have become bigger, but their ambition hasn’t been to be the biggest.

And, you know, they probably buy the fuel just as cheap as United that we bought it, you know, when there’s lots more. Walmart is a classic example; I mean, who would have thought twenty-five years ago, thirty years ago, I’m here with serious, with a hundred story plus building in Chicago, had access to money far cheaper than Sam.

I’m Sam was credit—not as good as serious. Every supplier wanted to do business with Sears. Nobody ever heard of Sam. Every real estate developer was developing a new shopping center. Went first to Sears. So, Sam got the short end.

So here’s the guy starting in Bentonville, Arkansas. Now he kills them over time, just playing; kills him! Disadvantaged and buying disadvantage and borrowing disadvantage and real estate disadvantage.

Sam Walton and his ability to inspire the end—even millions and millions of people to be enthusiastic about going to work and doing the right things over time, so I would be just as optimistic about small business generally.

Now, there are certain areas where scale just as well; I was playing important, but I see no disadvantage. We intentionally at Berkshire; we have a hundred and twelve thousand employees. More in Georgia than any other state in the Union. Incidentally, we employ a lot of them.

Then we put a lot of people are making a guy go ad. We intentionally with our hundred and twelve thousand, but we probably have about hum—I don’t know how many business units, but lots. We have thirteen point eight people at headquarters.

I’m not the point agent said that my—I resent it when people like that. So I have a full, but we have one that works four days a week. That's all we have at headquarters, hundred and twelve thousand people with a hundred and five billion market cap, but we intentionally keep our units small.

We think we want them to have the nimbleness and responsiveness to the customer, particularly that will turn them—you know, that essentially will more than offset anything that the scale of having maybe a little more purchasing power, something when the will develop.

We own a home furnishing with furniture home furnishings business in Utah run by the phone Bill Child. He was featured in Fortune about one issue ago that it did. The cover story was God in business; it was, and Bill was the number one illustration built up that business from his father-in-law.

It was doing two hundred fifty thousand dollars a year, and then I was over half the business in Utah in this field. But you're close to four hundred million. He built by thinking about the customer.

And the truth is, he was competing with Sears; he was competing with rabbits; he was a huge furniture retailer, the retailer in the past. He was competing with everybody, but all he thought about from the moment he got up in the morning was, "How do I take care of my customer?" And that wins.

We have a business in Omaha; some of you may have heard of it. It's the largest home furnishing store in the world in Omaha, which only has a census of 650,000 people. It’s on seventy-two acres and does three hundred twenty-five million dollars in one location, which happens to be five hundred dollars for every man, woman, and child in the census.

But it draws from beyond that. That business comes about her as resulted from an investment of five hundred dollars in 1937 by a woman who walked out of Russia in 1921.

She walked out on a peanut boat, landed in Seattle with a tag around her neck. She could speak one word of English. The American Red Cross looked at the tag; she said Fort Dodge, Iowa. They got her to Fort Dodge; Iowa, what she couldn’t pick up the language.

But from her from her daughter from kindergarten on, teaching of the words she learned in school that day—that's how this woman rose, bumped, can learn the English language—but from her daughter from kindergarten on teaching.

But she brought seven siblings over from Russia one at a time. Fifty bucks. Every time she say fifty bucks, sold used clothing and the works. She had her seven siblings over her mother and father. And by 1937, sixteen years after she got here, she saved five hundred dollars, got out of the train, went to Chicago to the American Furniture Mart, which was a huge impressive thing.

She had this—I’m smart as hell. But she fought like a peasant. She saw this building. She decided to name her company: “Then browse current.”

You want to buy five hundred dollars worth of got about two thousand dollars' worth of merchandise all the way back to Omaha. She worried because she thought I owe twelve hundred fifty and she only had a five-hundred-dollar equity.

So, she got to Omaha; she took the bed, the sofa, the refrigerator out of her own home to sell fast so she could get the money so she could pay on time. She took that business and built it from that start! No one would sell to her.

She went to court four times because they tried to keep her from selling the discount. And she went into court and told the judge, because she figured out ways to buy this stuff in various nefarious ways from other hand of people by foreign.

She said, “Look at—I paid three dollars a yard for this carpet. Brandeis sells it for $6.98. If I sell it for $3.98, just tell me, Judge, how much you want me to rob people?” She defended herself—papers wrote it up—the judge bought carpet from her the next day!

I mean it was no marvelous Brandeis. It’s selling anymore; they were the huge department store. She put everybody out of business and the punchline: she worked till she was a hundred and three! She sold me the business when she was eighty-nine.

And she didn’t have—she didn’t have an audit. I went out this year, I wanted to take a check out with Nana because I knew she wanted to do something. And I said, “Mrs. B, here’s the money.”

I said, “I don’t even know what—just tell me where the only money has never opened.” Any money since I told her guys back in nineteen thirty-seven, and she said it’s all free and clear.

She never seen a balance sheet; she didn’t know what accounting terms meant, but she understood the nature of the business. And I told her, “I’d rather have—I don’t have your word and other than an order from everyone of the big six or bigger or whatever their word number the time is at the top of turning from sin.”

And she worked till she was a hundred and three, and she died a hundred and four. She had three siblings at her funeral. I mean those are some genes. Her son works there now; he’s eighty-two or three, and the three sisters are all alive.

But the punchline is she couldn’t read or write. This woman could not read or write. If you told her this room was sixty-eight feet by forty-three, she would tell you how many square yards it was like that.

She had never gone to school to be in her life, but she would tell you how much that wasn’t 598 yards. She had the tax; she just nodded at something that she liked or her looks, and that would be it, and that was that.

You can’t beat that, you know? You can't replicate that at General Motors. You can’t institutionalize that, that the person who brings that kind of drive to a business and does it day after day and thinks about the customer.

Yeah, and that’s all she did. I can't—and once you've raised four kids in the process too—but you can’t hit it, you can’t miss! And not you don't have to worry if you're an entrepreneur in most fields.

Some fields where you can’t do it because there are some scale aspects to it, but in most fields, you know, you will kill people by showing that—which was shocked nobody ever heard of Sean Carpet thirty years ago and got forty percent of the business in the country—so don’t!

I did! It’s a great field of opportunity out there, and I had and I know about trucking specifically, but I wish you the best on it!

Then your—you won’t be at a disadvantage in many fields, and you’ll actually have an advantage for it. Thank you, Mr. Buffett! Thank you very much for sharing your wisdom and your ideas, your wonderful stories with us today.

We are truly honored and pleased we’ve had this opportunity to get to know you a little bit better. I’d like to thank a couple of people before we conclude for helping with the logistics, associate dean Bob Gatewood, our director of alumni relations, and Marie Garrison.

Thank both of you, David. Director of communications for a lot of work and everyone into this. I thank all of you for all you've done to help make this possible, Mr. Buffett.

We have a parting gift for you, but it needs to be placed into context before we show you what it is. In your most recent letter, in your report to the shareholders, you discuss some of the things you look for in making with making acquisitions, and one of the things you talked about was owners.

Look for owners who care who they sell to, and that was important to you. I like to quote from your report: "When a business masterpiece has been created by a lifetime or several lifetimes of understanding, care, and exceptional talent, it should be important to the owner what corporation is entrusted to carry on its history."

A little bit further down, you say how much better it is for the painter of a business, Rembrandt, to personally select its permanent home than to have a trust officer or uninterested heirs knock it off.

Well, we believe that many of these words apply to you as well. You, too, have created a business masterpiece. You, too, have created a Rembrandt!

What we have today is a light-hearted portrait, a light-hearted characterization that we hope to capture some of the business milestones in your career, and we hope it also captures some of that quick wit and humor that you demonstrated today.

It was painted by a good friend of ours and a well-known artist who lives here locally, Alan Campbell. Alan is with us, and he will help unveil today. Alan, please come down!

Now when he unveils this, please understand that you’re not going to be able to see the detail of this mural you're sitting, but we invite you to come down and walk past it as you leave today. Alan, if you're going to speak over the microphone place.

Well, thank you, and Mr. Buffett, hope you told Maintain your sense of humor, which appealed to me greatly when reading your corporate report.

And this is going to be a test of that famous humor, but it is intended to be a portrait of both you and your company and of your values. When I was—when Marie Garrison, my girlfriend, the alumni director here, told me you were coming, and I read the comments about the Rembrandts and lying on your back, feeling like you can allow your back to paint the ceiling every day. Brooks here, you basically opened the door with your own words.

And just on the side, my brother is one of your pilots for Executive Jet. I think this is not a reference to the jewelry. So you can say this is based on one very famous Rembrandt self-portrait.

And for anybody's information, Mr. Buffett will sign autographs. If you've got books with you, like in the side, we’ll set up a table down front here for the next 15 or 20 minutes.

If you’d like to take a picture of you, got a camera with you, please come on up. Don’t hesitate! And thank you all for coming and participating today. It was a wonderful event. Thank you!