Warren Buffett's Most Iconic Lecture EVER (MUST WATCH)

You would be better off if when you got out of school here, you got a punch card with 20 punches on it. Every big financial decision you made, you used up a punch. You'd get very rich because you'd think through very hard each one. If you went to a cocktail party and somebody talked about a company he didn't even understand what they did or 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 20 punches on that card.

There's a temptation to dabble, particularly during bull markets in stocks. It's so easy! You know, it's easier now than ever because you can do it online. Just, you click it in, and maybe it goes up a point, and you get excited about that, and you buy another one the next day, and so on. You can't make any money over time doing that. But if you had a punch card with only 20 punches, and you weren't going to get another one in the rest of your life, you would 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 20 punches in your lifetime, but you wouldn't need to.

Okay, I came in from Nebraska today, and you're probably all familiar with us mainly by our football team. We had those fellas with the big white helmets with those red ends on them. I asked one of our starters the other day what the "nend" stands for, and he said, "knowledge." We make it tough on them, though. I mean, they don't coast in Nebraska just because you're a football player. They major in agricultural economics, and there's a two-question final for all of the players. The first question is, "What did Old McDonald have?" They were giving that to one of our potential Heisman Trophy winners the other day, and he started to sweat. Finally, he brightened up and he said, "Farm!" Professor delighted. Of course, you don't want to flunk a Heisman candidate. So, he said, "Now you're halfway home. Just one more question: How do you spell 'Farm'?" Now the guy really starts to sweat. He looks at the ceiling, and he looks around. Finally, he brightens up and he says, "E, E, I, O."

So watch for that guy this year; he'll be dynamite. I really want to talk about what's on your mind, so we're going to do a Q&A in a minute. There are a couple of questions I always get asked. People always say, "Well, who should I go to work for when I get out?" And I've got a very simple answer. We may elaborate more on this as we go along, but the real thing to do is to get going for some institution or individual that you admire.

I mean, it's crazy to take a job just because they look 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, a Harvard Business School attendee. He said, “Look, I went to undergrad here, and then I worked for X and Y and Z, and now I've come here. I thought it would really round up my resume perfectly if I went to work now for a big management consulting firm.” I said, “Well, is that what you want to do?” And he said, “No, but that's the perfect resume.”

I said, “Well, when are you going to start doing what you like?” He said, “Well, I'll get to that someday.” I said, “Well, your plan sounds to me a lot like saving up sex for your old age. You know, it just doesn't make a lot of sense." I told that same group, I said, “You know, go to work for whomever you admire the most.” I said, “You can't get a bad result. You'll jump out of bed in the morning, and you'll be having fun.”

The dean called me up a couple weeks later and said, “What'd you tell those kids? 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 we'll get to your questions. I'd like for the moment to have you pretend I've made you a great offer. I've told you that you could pick any one of your classmates. You now know each other probably pretty well after being here for a while. You can pick any one of your classmates, and you get 10% of their earnings for the rest of their life.

Now, I ask you, what goes through your mind in determining which one of those you would pick? You can't pick the one with the richest father; that doesn't count. I mean, you've got to do this on merit. But you probably wouldn't pick the person that gets the highest grades in the class. I mean, there's nothing wrong with getting the highest 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, 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, 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, are self-made. I mean, it's not how tall you are. It's not whether you can kick a football 60 yards. It's not whether you can run the 100-yard dash in 10 seconds. It's not whether you're 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 and genie jokes, you also have to—and this is the fun part—you also have to short one of your classmates and pay 10% of what they do. So who do you think is going to do the worst in the class? This is way more fun. And think about it again and again; 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 that department.

I mean, we look for three things when we hire people: We look for intelligence, we look for initiative or energy, and we look for integrity. 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 them lazy and dumb. I mean, you don't want someone smart and energetic.

So it's that third quality. But everything about that quality is your choice. You can't change the way you were 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 claims credit for things they didn't do, that always cuts corners, that you can't count on.

I mean, in the end, those are habit patterns. And the time to form the right habits is when you're your age. I mean, it doesn't do me much good to get golf lessons now. If I'd gotten 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 50 or 60, and they really can't change them. 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 10% of, look at that list and ask yourself: Is there anything on that list I couldn't do? There aren't; 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, egotism, whatever it may be, selfishness, you can get rid of that. I mean, that is not ordained.

If you follow that—and Ben Franklin did this, and my old boss Ben Graham did this at early ages in their young teens—they just, Ben Graham looked around, and he said, “Who do I admire?” You know, and he wanted to be admired himself. 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.

And if you follow that, at the end you'll be the person you want to buy 10% 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. Now, let's talk about what's on your mind.

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Again, thanks for supporting the channel; it means the world to me, and this is my small way of repaying you. Now, let's get back to the video. You can ask anything. The only thing I won't tell you is what we're buying or selling or about, you know, I don't even tell myself that. I mean, I write it down, and then it's 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 we don't talk about what we're buying or selling. But anything else is fair game—personal, business, anything I’d like to talk about. And actually, the tougher the questions are, the more interesting it is for me.

So don't spare my feelings. I mean, just throw at my head! And with that, let's—I guess we've got a microphone. Is this the only microphone, or is there one on this? The only microphone right here. Ask a question, you'll need to come down to this microphone; just stand in line and I'll be ready.

Yes, I have an old-fashioned belief that I can only expect to make money in things that I understand. And when I say understand, I don't mean understand what the product does or anything like that. I mean, I understand what the economics of the business are likely to look like 10 years from now or 20 years from now. I know, in general, what the economics of Wrigley chewing gum will look like 10 years from now. The Internet isn't going to change the way people chew gum. It isn't going to change which gum they chew.

You know, if you own the chewing gum market in a big way, and you've got Double Mint and Spearmint and Juicy Fruit, those brands will be there 10 years from now. So, I can't pinpoint exactly what the numbers are going to look like on Wrigley, 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, 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've given talks in the past where I carry with me a 70-page tightly printed list and it shows 2,000 auto companies. Now, if at the start of the 20th century, you had seen what the auto industry was going to do to this country, the impact it would have on the lives of you, then your children and grandchildren, and so on, that what it—just it transformed the American landscape. But of those 2,000 companies, you know, three basically survive, and they haven't done that well at many times.

So how do you pick three winners out of 2,000? 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, in fact, you probably couldn't have predicted how big the impact it would have. But if you bought companies across the board, you wouldn't have made any money because the economic characteristics of that business were not easy to.

I’ve always said the easier thing to do is figure out who loses. And what you really should have done in 1905 or so when you saw what was going to happen with the auto is you should have gone short horses. There were 20 million horses in 1900 and there's about 4 million horses now. So it's easy to figure out the losers; you know, the loser is the horse. But the winner was the auto overall. But 2,000 companies just about failed; a few merged and so on.

There were three auto companies in the Dow Industrials in the 1920s and 30s: Studebaker, Nash, Kelvinator, and Hudson Motor. Now, those names are all familiar to me and maybe some of them are familiar to you, but they're not making any cars; you know, they didn’t make money. And yet, 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 of the winners in a wonderful business is not easy. In North Carolina, you know, Orville and Wilbur took off, or I guess Orville took off and Wilbur watched. I'd have been Wilbur. But 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 have blown you away.

And it’s excited people coincidentally ever since. But if there had been a capitalist at Kitty Hawk, he should have shot Orville down, I mean, because it’s done nothing but cost investors money. There were over 400 airplane companies in the 1920s and 30s alone. There was an Omaha; there was in Nebraska. We were the Silicon Valley of apparently aircraft, and they all disappeared. It had been a terrible business.

At the end of 1991, if you’d added up the aggregate earnings from all airline companies, it was a billion poured in since Wilbur and Orville were down there, and they 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.

So figuring out the economic characteristics, I think there's, I don't know, 20, 25 million sets a year sold in the United States, and I don't think there's one of them made in the United States anymore. I mean, you'd say, "TV set manufacturer, what a wonderful business!" I mean, everybody now, nobody had a TV in 1950, there abouts 45 to 50; everybody has multiple sets now. But nobody in the United States has made any real money making the sets; they're all out of business.

You know, the Magnavoxes, the RCAs, all of those companies. Radio was the equivalent of the 20; there were over 500 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, what was it? 1884 for Jacob's Pharmacy or whatever; a fellow comes up with something; a lot of co-copers over the years. But now you've got a company that is selling roughly 1.1 billion 8-ounce servings of its product—not all C-bright and some others—daily throughout the world, 117 years later!

So understanding the economic characteristics of a business is different than predicting the fact that an industry is going to do wonderfully. So when I look at the Internet businesses or I look at tech businesses, I say this is a marvelous thing, and I love to play around on the computer and it, now I order my books from Amazon and all kinds of things, but I don't know who's going to win. And unless I know who's going to win, I'm not interested in investing. I'll just play around on the computer.

Defining your circle of competence is the most important aspect of investing. It's not how important, 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 and what you don't know is and staying inside of it is all important.

Tom Watson Senior, who 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 get all excited about it because my neighbors are talking about the stocks going up and everything, they start fooling around someplace else, eventually I’ll get creamed, and I should.

So now let’s go over here. Hello, Mr. Buffett. I got two short questions: one is, how do you find intrinsic value in a company? Well, 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 a business is. In other words, the only reason for making an investment and laying out money now is to get more money later on, right? That's what investing is all about.

Now when you look at a stock, when you look at a bond—say, a United States government bond— it's very easy to tell them what you're going to get back. It says it right on the bond; it says when you get the interest payments, it says when you get the principal. So it's very easy to figure out the value of a bond.

It can change tomorrow if interest rates change, but your cash flows are printed on the bond. The cash flows aren't printed on a stock certificate; that's the job of the analyst is to print out—change that stock certificate, which represents an interest in the business—and change that into a bond and say this is what I think it's going to pay out in the future. When we buy, you know, some new machine for Shaw to make carpet, that's what we're thinking about, obviously, and you all learn 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, oh, let's say, about $110 to $115 billion in the market. The question is, if you had $110 or $115 billion, you wouldn't be listening to me, but I'd be listening to you incidentally. 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 as you get further out. But the question is, how much cash are they going to give you? It isn't a question of how many analysts are going to recommend it or what the volume in the stock is or what the chart looks like or anything; it's a question of how much cash it's going to give you.

That's the only reason. It's true if you're buying a farm; it's true if you're buying an apartment house; any financial asset, oil in the ground, you're laying out cash now to get more cash back later on, and the question is: how much are you going to get, when are you going to get it, and how sure are you?

When I calculate intrinsic value of a business—when we buy businesses and whether we're buying all of a business or a little piece of a 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?” And what you really like, of course, is for them to be able to use the money they earn and earn higher returns on it as you go along.

I mean, Berkshire has never distributed anything to its 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 is, Berkshire is selling for, we'll say, $105 billion now. What can we distribute from that? If you're going to buy the whole company for $105 billion now, can we distribute enough cash to you soon enough to make it sensible at present interest rates to lay out that cash now? And that’s what it gets down to.

If you can't answer that question, you can't buy the stock. You can gamble in the stock if you want to, or your neighbors can buy it, but if you don't answer that question—and I can't answer that for internet companies, for example. There are a lot of companies, all kinds of companies; I can't answer it for, but I just stay away from those.

Number two, so you've got formulas involved in finding intrinsic values on certain companies. You've got a mathematical system set up just kind of present value of future cash?

Yeah! The second short 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 recent years. In fact, the most recent annual report, I use what I've just been talking about.

I use the illustration of Aesop because Aesop was {in quotation marks} in 600 BC, a smart man. He wasn’t smart enough to know it was 600 BC though; I mean, it would take a little foresight. But Aesop, you know, in between tortoises and hares and all these other things, he found time to about birds. 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 he probably knew that, but he just didn't have time because he had all these other proverbs to write. And he had to get on with it.

But he was halfway there in 600 BC! That's all there is to investing is how many birds are in the bush? When are you going to get them out and how sure are you? Now if interest rates are 15%, roughly, you've got to get two birds out of the bush in five years to equal the bird in the hand, but if interest rates are 3% and you can get two birds out in 20 years, it still makes sense to give up the bird in the hand because it all gets back to discounting against an interest rate problem.

The thing is, often you don’t know; you know, not only how many birds are 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 in the hand. But, but I, I actually have written about this sort of thing, and stealing heavily from Aesop, who wrote it some 2600 years ago.

But I've been behind on my reading.

Good morning! I know you're famed for your success, but I was curious if there were any particular moments in your life that—or mistakes or failures that you've made— that were particularly memorable? What you may have learned from them? And if you had any particular advice for the students here in dealing with discouraging circumstances?

Well, I've made a lot of mistakes. The biggest mistake—well, not the biggest necessarily—but buying Berkshire Hathaway itself was a mistake because Berkshire was a lousy textile business. And I bought it very cheap. I’d been taught by Ben Graham to buy things on a quantitative basis—look around for things that are cheap. And that I was taught that, we'll say, in 1949 or 50, made a big impression on me. So I went around looking for what I call cigar butts of stocks, and 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, on this, ugh, this terrible-looking, soggy, ugly-looking cigar—one puff left in it—but you pick it up, and you get your one puff, disgusting, you throw it 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’s a mistake. Although you can make money doing it, you can't make it with big money. It's so much easier just to buy wonderful businesses.

So now, I'd rather buy a wonderful business at a fair price than a fair business at a wonderful price. But in those days, I was buying cheap stocks, and Berkshire was selling below its working capital per share. You got the plants for nothing; you got the machinery for nothing; you got the inventory and receivables at a discount. It was cheap! So I bought it, and 20 years later, I was still running a lousy business, and that money did not compound.

You really want to be in a wonderful business because time is a 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. And I would have been way better off taking what I did with Berkshire; I kept buying better businesses. I started with the insurance business, See's Candies, the Buffalo, 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 into US Air, I bought a preferred stock in 1989. As soon as my check cleared, the company went into the red and never got out. I mean, it was really dumb. I mean it, I've got an 800 number I call now whenever I think about buying an airline stock. I call them up at any hour; fortunately, I can call them at 3 o'clock in the morning, and I just dial, and I say, “My name's Warren; I'm an airline-holic, you know, and I'm thinking about buying this thing.”

And then they talk me down! I mean, it takes hours sometimes, but it's worth it; believe me. If you ever think about that, air buying an airline stock, call me, and I'll give you the 800 number because 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, all mine. And I've done the biggest, biggest—in terms of EV, in terms of opportunity cost—eventual costs. I bought a half-interest in a Sinclair filling station when I was about 20 with a guy I was in the National Guard with, and I had about $10,000 then, and I put $2,000 in, and I lost it all.

So that was 20% and that means that the opportunity cost is now $6 billion for that filling station, which is a big price to pay for, you know, getting to wipe a few windows and a few windshields and things like that. So actually, I like it when Berkshire goes down because it reduced the cost of that mistake on an opportunity.

But the biggest mistakes we've made—by far, I've made, not we've made—biggest mistakes I've made by far are mistakes of omission and not commission. I mean, it's the things I knew enough to do that were within my circle of competence, and I was sucking my thumb. That is really—that's the one that hurt. They don't show up any place. I probably cost Berkshire at least $5 billion, for example, by sucking my thumb 20 years ago when Fannie Mae was having some troubles, and we could have bought the whole company for practically nothing.

And I don't worry about that if it's Microsoft because I don't know it; Microsoft isn't in my circle of competence. And so 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 did know enough to understand Fannie Mae, and I blew it. And that never shows up under conventional accounting, but I know the cost of it. I know, you know, I passed it up.

And those are the big, big mistakes. And I've had plenty of them. And, you know, unless I tell you about them in the annual report—and I resist the temptation sometimes unless I tell you about them in the annual report, you're not going to know it because it doesn't show up under conventional accounting. But omission is way bigger than commission. There's 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 and 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 if really you've got to grab them when they come because you're not going to get 500 great opportunities.

You would be better off if when you got out of school here, you got a punch card with 20 punches on it, and every big financial decision you made, you used up a punch. You'd get very rich because you'd think through very hard each one of them. If you went to a cocktail party and somebody talked about a company you didn't even understand what they did or 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 20 punches on that card.

There's a temptation to dabble, particularly during bull markets in stocks; it's so easy! You know, it's easier now than ever because you can do it online. Just, you click it in, and maybe it goes up a point, and you get excited about that, and you buy another one the next day, and so on. You can't make any money over time doing that. But if you had a punch card with only 20 punches, and you weren't going to get another one in the rest of your life, you would 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 20 punches in your lifetime, but you wouldn't need to. Yep. Mr. Buffett, good morning! In your comments about making mistakes and errors like that, you talk a little bit about your sell discipline when you're in a position, and you feel like it's no longer good. You know what criteria do you use to when you just finally abandon it?

Yeah, when I started out, the sell situation has changed over the years because when I started out, I had way more ideas than money. I mean, I would go through Moody's manual. I went through it page by page. And then I went through it again, again, page by page, and I found stocks in there that I could understand that were selling at like two times earnings, even one times earnings.

Well, when you only have $10,000 bucks, that can get a little frustrating. And if you don't like to borrow money—which I never like 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.

And for a long time, I was in that mode. And now our problem is we have more money than ideas. So if you look at our annual report, which is on the internet under our homepage, BerkshireHathaway.com, you'll see something in the back called the economic principles of Berkshire, and you will see which I believe in setting out for my partners.

They are my partners; I don't look at them as shareholders; I look at them as partners. They're going to be 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. I don't want to disappoint them.

So I lay out there, and I say in terms of our wholly owned businesses, we’re not going to sell no matter how much anybody offers us for them. I mean if somebody offers us three times what something is worth—See's Candy, the Buffalo News, Borsheim’s, whatever it may be—we're not going to sell it. I may be wrong in having that approach. I know I'm not wrong if I owned 100% of Berkshire because that's the way I want to live my life. I've got all the money I could possibly need, so it just amounts to a change in the newspaper story on my obituary and the amount of money that the foundation has.

To 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 waves a big check at me would be like selling one of my children because somebody waved a big check. So 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 had all kinds of opportunities 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, but we’re not going to sell simply because it looks too high in all likelihood. I mean, you can't make that 100%, but that's the principle under which we're operating. We're generating right now five billion in cash a year at least, so it's a hundred million bucks every week.

And, you know, just that we've been talking here half an hour, and I haven't done a damn thing. So, you know, the real question is how do you put it out intelligently? And if we were selling things, it would be just that much more.

So there may come a time when that would change, but we want to—and I have partners, shareholders, partners who would 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 think for a minute, you know, if you’re going to get married and you want a marriage that’s going to last—not necessarily the happiest marriage, you know, or one that Martha Stewart will talk about or anything—but you want a marriage that’s going to last. What quality do you look for on a spouse?

One quality do you look for? Brains? Do you look for humor? Do you look for character? Do you look for beauty? No! You look for low expectations! That is the marriage that’s going to last. Both have low expectations.

I mean it does! And I want my partners to be on the low side on expectations coming in because I want the marriage to last. It's a financial marriage when they join me at Berkshire, 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, and your marital advice, everything else.

Next! Good morning, Mr. Buffett. I have a question regarding the evaluation of the business in recent years. It appears that the use of tax sheltering incorporation is increasing, and such companies like UPS and others are involved in cold battles over shelters with the IRS.

And as we know, most of these transactions are fairly artificial, but yet there is a profit there from the investor perspective. Do you think it's beneficial for investors that the company that they invest in or anybody for that matter invest in tax shelter—which is by some definitions tax shelters?

Right! I've never used one—you're not, no! I'm not saying so—so I'm asking if you know that that corporation is involved in such activity that is beneficial in the short term, would you think that that’s helpful for investors?

Well, there’s—I mean, there’s there perfectly legal ways to shelter taxes. I mean, we—we did and still do, but we were one of the earliest ones to go in for low-income tax housing credits. In fact, I met with President—the first President Bush about that one, and that benefits us to a mild degree. It’s not a big element of Berkshire; I mean, it's a peanuts in terms of Berkshire's 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 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 in what we do.

And, uh, but I don’t—there’s nothing wrong with that, then if you get into tax evasion—I mean, that’s a whole different game. At that point, they ought to go to jail, you know; but certain businesses—all of them—some insurance companies reincorporated in Bermuda, and 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 us moving to Bermuda. We’re not going to do it.

But, but if the restrictions weren’t there—I mean, like, the tax code is the rule book, and you follow the rule book. I think some of the things people do in terms of bending that rule book get very close to fraud and sometimes cross the line into fraud. And when they do, I think they ought to be prosecuted.

But that's another game. And there has been more pushing on that, I would say, in the last five years than certainly was my experience earlier. And there are more—I think now it's diminishing in the last year or two—but a couple years ago, there was some very aggressive marketing by some of the auditing firms of these even with share percentage shares of the gain to be paid to them.

I think that those things got fairly dubious and particularly when they shopped for legal opinions, you know, so that if you got caught doing these things, you can 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 of anything worse associated with that has done that. But I obviously—if they push too far, we don't want to be there.

I was curious about the large number of people you now have with tremendous amounts of wealth. What do you think of the current state of philanthropy?

Well, I’ll be out this week! Actually, I'm going to Coca-Cola meeting, and I'm flying out to Seattle and talking to the United Way group out there. The Seattle United Way raises more per capita, I believe, than any in the United Way in the country, and Bill Gates will be there. We're talking jointly. His mother was very active in United Way, but Bill was going to give away over a billion dollars a year—a lot more later on—but right now, a billion.

And it’s very interesting! I mean, he is very rational about it, and he's very informed—in fact, he got somebody, I think his primary adviser in the medical field is a fellow who was with the CDC in Atlanta. And Bill reads 15 books a month on this. I mean, he can just absorb it. I wouldn't be able to get it that fast, but he just says with a billion, he wants to save as many lives per year as he can. So how do you do—he's focused on that!

That's his objective! It’s just as much a metric of his foundation as some other metrics return on capital might be for a business. And he says, “I'm going to spend a billion dollars a year; how many lives can be saved for that?” So he's gotten very heavily into vaccines and AIDS in Africa—a number of things—it’s very rational.

I personally think all of my 99 point something percent of my net worth will go to a foundation after the later of my wife and I die. I mean, it's all going to go to a foundation. As far as I'm concerned, I got it from society; it's going to go to society. I've written a letter to my trustees, and I've got very few trustees. If you've got a whole bunch of trustees, in my view, they just homogenize themselves down to sort of the lowest common denominator because you get 30 people in a room, and prestigious people, but they'll all have their particular alma mater, and they'll all have their particular hospital, and it'll become a big trade golf game, you know; it'll be a little like Congress.

So, I have very few people, and I don't give them anything specific because I tell them their judgment is above ground and will be better than my instructions from six feet underground. So I don't like to think that, but it's true.

So I tell them, “Look, society is where the ones that don't have an actual funding constituency and are just damned intractable and very difficult to solve.” So I tell them, “I'm 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.

But the reason the big problems of society are big problems is that they’re damn tough to solve. So they are 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 want them to try and do it, and if they fail, it doesn’t bother me at all.

I tell them if they give a million bucks a year and a million bucks here 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 do not want the eye-dropper approach used to philanthropy.

But I want them to use their judgment to look at important problems that do not have a natural funding constituency. If the government’s going to fund it, fine! I mean, there should be funding for important problems, but we won't need to do it. The role of private philanthropy, in my opinion, is to fund things that don’t have the natural constituency.

And that’s what Bill’s doing. There aren’t a bunch of people around that you can make an emotional appeal to—to make vaccines available to millions and millions of kids around the world. It just doesn’t tug at anybody's heartstrings; you can't name buildings after them. I 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 won’t get solved by a funding constituency that’s responding to that. But Bill is responding to what, in his mind, is the important thing, which is saving lives. And he doesn’t care whether he gets his name on a building or whether anything happens or whether anybody knows about it.

I mean, he gets publicity 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 is that I got this money not because I'm a superior human being, not because I’ve done more for society than 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 just 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. And I was with two teachers out at Sun Valley that are doing more for society than I am and they don't—the market system does nothing for them. The market system does all kinds of things for me.

Gates says, “If I’d been born 5,000 years ago, you know, I’d have been some animal’s lunch. You know, because I can't run very fast and can't climb trees.” I mean, you know what those— and I could tell that animal was chasing me, you know, wait till I see how I can allocate assets; you know, it wouldn’t have made any difference.

So here I am, you know, I'm born now; you know, I'm just very, very lucky. And the odds when I was born in 1930, the odds were 50 to 1 against me being born in the United States. That’s a terrible set of odds to face, and yet I was dropped down here, you know. And if I’d been dropped down in Peru or someplace, or China, I mean, I wouldn’t have had a chance. So society is what does it for you, and it should go back, in my view, it should go back to society if you’ve been lucky enough to be dropped into a society where your particular wiring pays off big, you know. That’s just luck!

And you know, there’s nothing wrong with being lucky. I don’t feel guilty about it or anything else, but I also don't feel that— I feel I have a lot of fun doing what I do, but I feel the 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 10 years from now or 20 years from now or 30 years from now.

But I do know if I’ve got a small number of high-grade smart people—and high-grade is more important! I'll, I'll, if you gave me 20 extra points of IQ but but cheated a little on the high-grade, I wouldn’t take it because they got to be—there are so many chances to do things in a petty way or, you know, to try to—I mean, people get subverted in their own minds to their own interests rather than the interests of the institution.

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

Yep. I was just wondering, there’s a lot of differences between the recent boom and bust in stock market and one in the 1920s. But there’s also a lot of similarities, and those similarities are allowing people to draw the conclusion that stock prices will be depressed for some time to come. What where do you disagree and agree with that conclusion?

Well, the whole century is quite interesting. If you take the 20th century, it was an unbelievable century for the United States. The GDP per capita, and that’s the way to think of it as per capita—sometimes they talk about our GDP versus Europe’s, but if their population’s the same every year and ours goes up 1%, you've got to, you know, in the end you got to have a divisor as well as a numerator.

And so GDP per capita in the 20th century in the United States went up 610%. Actually, qualitatively it went up far more than that because you can't really measure certain things in medicine or whatever it may be, and improvements. But just on a quantitative basis, it went up every single decade, including the decade of the '30s.

So here, you had a hundred years when basically the US citizenry was getting was improving their lot decade by decade by decade. The '30s, it was up 13%; best decade was World War II, the '40s, was up 36%; the worst decade was the First World War.

So you get sometimes the analogy—you know, you can get in trouble with analogies. But in any event, it was a huge period. Interestingly enough, there were six big periods in there for the stock market in both directions. There were three big bull markets. From 1900 to 1921, the Dow went from 66 to 71; less than a 10% move in 20 years!

Less than half a percent a year—you got dividends too—but a half a percent! So it didn't move. From 1921 to 1929, as you point out, it went from 71 to a high of 381 in September of 1929. It went up 500%! Well, obviously, the well-being of the country didn't go up 500% during that period.

And the well-being of the country went up a whole lot more than 10% during that first 21 years. So you got this very uneven development. Then from 1929 until the end of 1948, the Dow went from 381 to about 180. It was cut in half! And that was 18 long years!

And yet the per capita GDP was moving right up during this whole period. So the economy was doing fine. From '48 to '65, the Dow went again from about 180 up to close to 1000 again—5 for 1—which was far outstripping it. From '65 to '81, the Dow went down literally—well, again, the per capita GDP.

And then we've had this last period where it's gone up terrifically. If you take the whole hundred years, it went up 10 for 1; every $1,000 became $180,000. But 43 and a quarter years—43 and 3/4 years—were those three big, huge bull markets, and 56 and a quarter years were periods of stagnation—all in an economy that was doing fine! You know, year after year after year.

For 56 and a quarter years, net, the Dow was down a couple hundred points during that period. And the other 43 and 3/4 years made up the rest of this move from 66 to 11,000—somewhat on the Dow. So you say to yourself, how could it be that you could have a country that was doing better and better, and better?

And the better citizens were living every—every generation was living better than the one that preceded it, but you had these huge changes, big gains, a few times long periods of stagnation—20 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.” Or, their neighbor says, “I wasn’t in last year when that neighbor was dumber than I, made a lot of money, so I’m going to go in this year.”

So 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 in 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. And it’s astounding, but that makes for huge opportunity—just huge opportunity. I mean, I lived through, roughly, half—in an investing sense, about half that period, and I've had that long period of stagnation from '48. I mean, from '65 to '82, 17 years!

I wrote an article for Forbes in 1979, and I just said, “How can this be?” Pension funds in the '70s put 10 and some percent of their new money in stock, because they were wild about stocks. Then they got a lot cheaper, and they put a record low in 9% of their net new money in 1978 when stocks were way cheaper.

People behave very peculiarly 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'll continue to do so.

And you will—you know, you will see things you won't believe in your lifetime in 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—if you can detach yourself temporarily from the crowd, you get very rich.

And you won't have to be very bright! I mean it—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 jobs at those companies.

And everybody knew they were going to be around, and they wouldn’t buy them at two times earnings, and that’s when interest rates were 2.5%. You know, I started selling securities when I was 21 at a Kansas City Life Insurance Company; it happened to be a fairly prominent company in Omaha, and the policies they sold you if you were buying life insurance from them had a built-in assumption of 2% interest.

The stock of Kansas City Life was selling at less than three times earnings; you were getting 35% if you bought the stock. No question about the soundness of the company! I went to the local agent; I figured I ought to be able to sell him a few shares of stock. I mean, the guy understands! He’s got his whole life invested in this company; I went to the local agent who'd been with them for 20 years. His name was Moose.

I said, “Mr. Moose, I said, you know, you’re selling these policies with 2%. You may even have a few on members of your own family, and you can buy into this company whose paycheck you depend on every month and you—and whose future your beneficiaries of these Life policies depend on and who you're selling them, you know, a 2% investment on, and you can get 35% on your money!

You know stocks aren't any good!” And I couldn't—I couldn’t sell the—you know, I was a lousy salesman! I mean, well you have to start with that! But, 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. At the end of 1981—17 years later— it closed at 865. It moved one point in 17 years! Now that’s not a big move, and that—you can't believe how discouraged people were by that during that period. But, you know, people were living better!

So things can go on a long time that don’t make sense, and but they do come to an end. I mean, the internet thing. I mean, you had these companies selling for many billions of dollars that had no really practically no prospects of making any money—that's a bubble.

But Herbert Stein one time said, “Anything that can't go on forever will end!” Now that seems pretty—it seems pretty basic, but think about that, and particularly think about it next time you're inclined to do something just because the stock’s gone up a whole lot, you know, and your neighbors made money, or something.

You've got to be—you just have to sit and think objectively and think about: Would I buy this whole business?

If it’s an internet company, it’s got 100 million shares out, and it's selling 100, that’s 10 billion. Do you think it’s worth 1 billion? If it’s worth 10 billion, it’s got to be able to give you, you know, 7 or 800 million next year. And if it doesn't give you 7 or 800 million next year, it has to give you maybe 10% more than that the year after and continue to be—there aren't a lot of businesses that can do that.

And people just go crazy. And, of course, it's fun! I mean, it's, you know, it's like that sign they put in brokerage offices. It says, “Avoid hangovers; stay drunk.” I mean, it’s just so much fun to keep playing, but you've got to—you’ve got to do sensible things to get good results.

Yeah! Next! Well, we’ve got three people standing there, so let's do the three that are standing there. Okay, good morning, sir!

Hi! Hi! I was wondering what your opinion is of the Federal Reserve and their actions taken recently? Do you feel they've done enough to boost the economy?

Yeah, well, I'm a fan of Alan Greenspan's over time. I've known him for a long, long time. We were on a board together at Cap Cities, and Alan is a very, very smart guy. He is motivated, in my opinion, entirely by what is good for the United States people of the United States. And so you've got a—you've got you couldn't have a better person in there.

And 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 it, that people might associate it because of the importance of the Fed generally—they might associate with him. So they may—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, is that it's not as powerful as the Mystique would make it; it's brake is better than its gas pedal. When the Fed wants to put on the brakes, we go through the windshield! I mean, you know, the economy just—it can put on the brakes! Paul Volcker did; he broke inflation by doing it.

But I mean, when he put on the brakes in that period around 1980, I mean, people hated him! He's crucified for it. But it was 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 that inflation was generating—it was the only thing that was needed then—not enormously unpopular!

It's much harder for a Greenspan to put on the brakes because nobody wants him to put on the brakes, plus he's 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 thousand other variables operating.

And as you see in Japan, you know, you can get down to zero interest rates and you can't stimulate anything. So it isn't like the Japanese haven't read the same books we've read about economics. I mean, they've read Keynes and they've read 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, their GDP has gone nowhere, you know, in the last five years, and there's still problems around. 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—but I think you couldn’t 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 that it would be.

And economics is always—you always want to ask, “And then what?” You'll read in the paper, “Well, what happens if the Japanese start selling government bonds?” or “What happens if they dump the dollar?” They can't dump the dollar! There’s no way to dump dollars! You can at least dump dollar assets! Because if the Japanese want to sell government bonds, they sell them to us. You know, they get a time deposit or a demand deposit at Citi, or they still own a dollar asset.

If they sell them to the French, they may get some assets from the French, but now the French have it! But 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 from us, more than we're consuming from them.

I mean, when we buy a television set from Japan, if we buy more television sets from them than they buy equivalent consumables from us, the exchange is what balances things. We give them some investment type asset whether it's cash or U.S. government bonds or our stocks or our movie studios or our 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, that 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—it’s not like a physics formula! I mean, well, I guess it would be if you got in 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; everybody finds out! Foreign currency or the current—the value of our dollar and currency rates are defying what you would expect based on history. But as somebody said, if history were a perfect guide, you know, the Forbes 400 would all be librarians; you know, they’d just go look it up in the books and they’d always know all the answers.

But history doesn’t repeat itself, as Mark Twain said, “History doesn’t repeat itself, but it rhymes!” I mean, things come back—but they don’t quite come back in the same form, and we’ll understand all this perfectly in a few more years why the dollar’s behaved the way it has.

But I think it would be useful net for the US if the dollar were less strong. Yes, Mr. Buffett, thanks for taking my question! My question pertains to small business.

My family's been in the truckload sector of transportation for about 50 years, and as you talked about the airline industry and all the mergers and acquisitions and things going on, a lot of the smaller players being tossed out of the market—what do you see for people that, like in this room, for students that want to start a small business and maybe they want to start in a business that is somewhat of a commodity-type business?

But as businesses, the large corporations get larger and their efficiencies increase, how can a small business compete against those people?

Yeah, 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 mini-mills came along and learned how to use scrap more effectively than the older methods of making steel, they actually had an advantage.

So scale is a huge advantage in some businesses. You know, the largest airlines haven’t won; Southwest Airlines has won, 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 their fuel just as cheap as United, and they probably bought it, you know, when they're a lot smaller. Walmart is a classic example. I mean, who would have thought 25 years ago, 30 years ago? I mean, here was Sears with a 100-story-plus building in Chicago, had access to money far cheaper than Sam Walton.

I mean, Sam Walton's credit was not as good as Sears; every supplier wanted to do business with Sears. Nobody had ever heard of Sam, every real estate developer who was developing a new shopping center went first to Sears, you know, and Sam got the short end.

So here’s the guy starting in Bentonville, Arkansas, and he kills them over time—just playing, kills them! And at a disadvantage in buying, at a disadvantage in borrowing, disadvantage in real estate. Advantage Sam Walton and his ability to inspire in the end hundreds of thousands of people to be enthusiastic about going to work and doing all the right things over time.

So I would be just as optimistic about small business generally. Now, there are certain areas where scale is just plain important. But I see no disadvantage—we intentionally at Berkshire, we have 112,000 employees—more in Georgia than in any other state of the union, incidentally.

We employ a lot up near Dalton, and we employ a lot of people in making it Geico, and we intentionally—with our 112,000—we probably have, I don't know how many business units, but lots. And we only have 13.8 people at headquarters. I’m not—the point 8; in fact, I resent it when people think that I’m a fool!

But we have one woman that works four days a week, and that’s all we have at headquarters for 112,000 people; we probably have 105 billion in market cap. But we intentionally keep our units small.

We think we want them to have the nimbleness, the 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 or something will develop.

We own a home furnishing—we have a furniture home furnishing business in Utah run by a fellow named Bill Child. He was featured in Fortune about one issue ago; the cover story was “God and Business.” It was—and Bill was the number one illustration.

Bill took that business from his father-in-law when it was doing $250,000 a year, and then now it’s over half the business in Utah in his field—about close to 400 million. He built it by thinking about the customer. And the truth is, he was competing with Sears; he was competing with Levitz, who was a huge furniture 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’s the largest home furnishing store in the world in Omaha, which only has an SMSA of 650,000 people; it’s on 72 acres.

It's $325 million in one location, which happens to be $500 for every man, woman, and child in the SMSA, but it draws from beyond that. That business comes about, or has resulted from an investment of $500 in 1937 by a woman who walked out of Russia in 1921. She landed—she walked out, got on a peanut boat, landed in Seattle with a tag around her neck.

She couldn't speak one word of English; the American Red Cross looked at the tag, it said Fort Dodge, Iowa. They got her to Fort Dodge, Iowa; she couldn't pick up the language. She was there two years; she said she felt like a dummy. So she came to Omaha because there were other Russian Jews there, and she'd at least have somebody to talk to. Her little girl started school, and Frances would come home at night and teach her mother the words she learned in school that day.

That’s how this woman, Rose Blumkin, learned the English language—but from her daughter, from kindergarten on teaching her the words. She brought seven siblings over from Russia one at a time. Fifty bucks every time she saved 50 bucks; she sold used clothing and other works. She got her seven siblings over—her mother and father—and by 1937, 16 years after she got here, she saved $500.

She got on a train, went to Chicago to the American Furniture Mart, which was this huge impressive thing. She had this; she was smart as hell but she thought like a peasant in a way, and she saw this building. And she decided to name her company the Nebraska Furniture Mart.

She went and bought $500 worth of she bought about $22,000 worth of merchandise all the way back to Omaha. She worried because she thought, “I owe $1,500.” And she only had a $500 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 into court four times because the carpet manufacturers tried to keep her from selling at a discount, and she went into court and told the judge because she figured out ways to buy this stuff in various nefarious ways.

She had other people buy it for her and she said, “Lookit, I pay $3 a yard for this carpet brand. I sell it for $6.98. She says, 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 marvelous. Brandes isn’t selling anymore; they were the huge department store in. She put everybody out of business, and the punchline—she worked till she was 103. She sold me the business when she was 89, and she didn’t have—she didn’t have an audit. I went out this year one afternoon; I took a check out with me, and because I knew she wanted to do something, and I said, “Mrs. B, here’s the money.”

I said, “I don’t need an audit. Just tell me whether you owe any money.” She said, “I’ve never owed any money since I owed those guys back in 1937, and she said it’s all free and clear.” She’d 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 your word, you know, than an audit from every one of the big six or big eight or whatever they were, the top auditing firms.”

And she worked till she was 103. She died at 104; she had three siblings at her funeral. I mean, those are some genes! Her son works there now; he's 82 or 83, 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 68 feet by 43, she would tell you how many square yards it was—like that!

She never went to school a day in her life. She would tell you how much that was at 5.98 a yard. She’d add the tax; she’d knock off something because she liked your looks, and that would be it!

And that’s—you know, that is—the you can't beat that, you know! And you can't replicate that at General Motors. You can't institutionalize that. The person who brings that kind of drive to a business and does it day after day and thinks about their customer, and that’s all she did!

Can't—and, well, she raised four kids in the process too; but you can't miss! And no, you don’t have to worry if you’re an entrepreneur—in most fields, there’s some fields where you can't do it because there are scale aspects to it.

But in most fields, you’ll kill people. Bob Shaw, that was with Shaw—nobody ever heard of Shaw in carpet 30 years ago, and he's got 40% of the carpet business in the country. So don’t, don’t—I—it’s a great field of opportunity out there, and I—I don't know about trucking specifically, but I wish you the best on it.

And you won’t be at a disadvantage in many fields. If you're small, you will actually have an advantage. Thank you.

Okay, oh!