Warren Buffett's Financial Advice to Students

Testing 1 million, 2 million, 3 million that's working okay. I'd like to, uh, talk to you about your financial future and I hope those figures become applicable to all of you as we go along.

At, uh, uh, and I'd like to start, uh, by posing a problem for you and in I'm just going to talk for a couple minutes and we'll do Q&A because what we want to do is talk about what's on your mind.

But I'd like you to think about this for just a second: if, as we walked out of here today, I said I would like to buy 10% of your financial future, I was going to write you a check today and from this day forth you were going to give me 10% of everything you earned, uh, how much would you want to charge me for that? I'm going to buy one-tenth of you and I may take the low bid and accidentally, so be careful what you write down.

Well, I think if you thought about that a little while as you you can contemplate that for a few minutes. You know you're going to get a check from me today and you can do anything you want with the money. But from this day forth you have to give me 10% of what you earn.

I think it would be very foolish of you, any of you, if you asked for less than say $50,000. Now, it's going to be a few years before you're out earning money and so I've got a few years of dead money there. But then I would start getting this royalty on you as you went along. So I really think that if you thought about it you most of you would want a fair amount more than that. I think you'd be right, uh.

Fortunately, I didn't make this deal with anybody when I started out so there's nobody's got a 10% royalty on me, but, uh, I think that $50,000 would sort of be the absolute minimum. And if you think about that, that means that right today you are worth $500,000 because if 10% of you is worth $50,000 in cash today, your potential is worth a minimum on 100% basis of $500,000.

That is the big financial asset you've got. It's way more important what you do with that $500,000 asset that you own today than whether you decide to buy stocks or bonds or whether you put your money in a mutual fund or pick your own stocks or anything of that sort. The biggest financial asset that you have going for you, by miles, is the value of your own earning power over the years.

So that's really what you should focus on if you're focusing on your financial future. That means you should focus on you because whether your 10% is worth $50,000 or $100,000 or $300,000, which would be $500,000 or a million or three million for all of you, whether it turns out to be one or the other is really dependent, uh, in a very large part on what you do in the next few years.

All of you in this room have the brains to do extremely well in life. You've all got the energy to do extremely well in life. And then the question is how do you apply it? If you've got a 200-horsepower motor, do you get 200 horsepower out of it? Do you get your full potential or do you get 100 horsepower or 50 horsepower?

Now, there's two things that can hold you back in getting the full horsepower out of your your engine, whatever it may be. All of you have big enough engines and one of those is a lack of education. But that probably isn't going to happen to very many people in this room. If you did have a lack of education, if you didn't have a chance to get a decent education in life, it wouldn't make any difference what that potential was because you'd never unlock it.

But the second most important thing, and equally as important, is in terms of the habits that you develop in terms of what you do with yourself. When we hire people, we look for three qualities: we look for integrity, we look for intelligence, and we look for energy. But if they don't have the first one, integrity, the other two will kill you because if you're hiring somebody without integrity, you really want them to be dumb and lazy, don't you?

I mean, the last thing in the world you want for is to be smart and energetic. So smart and energetic only goes with integrity, but the nice thing about it, you know, you make your own decision on that. You can't change your IQ or how far you can throw a football or how high you can jump or the color of your hair very easily, but you can elect to have integrity that matches anybody else's.

And if you match that with intelligence, which you have, and energy, which you have, uh, you will get extraordinary results. And you'd be very foolish to sell me 10% of yourself for $50,000. On the other hand, if you don't match it with that, your potential will, in a significant part, go unused.

And I'll give you a little simple test to apply in terms of thinking about the kind of habits you want to develop because you can have any habits you want to be. You can be, you can be lazy, you can be prompt, you can be late, you can be honest, you can cut corners. I mean, you have all these choices and those are choices for you to make. Nobody else is going to make them for you.

And I would suggest that you play this little game with me too. Uh, think about the person you would most like to be in life. Maybe it's one of your contemporaries, maybe it's somebody a little older, but pick out the person you admire the most, the person that you'd change places with if you could. And then write down why you admire them. Just put it on a piece of paper.

And then figure out the person that you would least like to change places with. Who really turns you off? Who do you find repulsive? And list the reasons why that person turns you off so much and put those down on the other side of the paper.

And then look at that list and you'll find that everything on the left side, what you admire in other people, the qualities they bring to life, um, cheerfulness, you know, generosity, all kinds of things, you'll find those are things you can do yourself. It's very simple. You got to apply yourself, but the habits you form in doing that early on will carry you through life.

And on the other hand, you'll find that the things that make people repulsive, selfishness, obnoxiousness, all these things, egotism, are things that no one has to have. If you find those in yourself, you can get rid of them, as long as you get rid of them early.

So all I suggest is that you write down a list of what you admire, what you find, uh, contemptible, and decide that, you know, the ones on the admired side are ones you're going to acquire for yourself. And if you do that when you're young, it'll carry you through the rest of your life.

This doesn't work if you do it when you're 50 or 60. By then, the habits are too well formed, uh, but if you do it early, behavior becomes a habit. So if you do that, two or three years from now, if you go through the same exercise, you'll find out the person you admire the most is yourself.

That can be a little dangerous under some circumstances, but it, uh, but it's not a bad thing. I mean, you want to be somebody you like, and you don't want to be somebody that you're, that you dislike, and form those habits early, you basically can't miss.

Now, I'll give you one other small piece of advice that’s just a corollary on this, and then we'll get to your questions. And that is, as a general matter, as a one piece of specific financial advice, I would say, you know, avoid credit cards, just forget about them.

Uh, we're in various businesses that issue credit cards. The American public loves credit cards, but if you start revolving debt on credit cards, you're going to be paying, uh, 18 or 20%, and you can't make progress in your financial life going around borrowing money at 18 or 20%.

You can make a lot of money by lending it out at 18 or 20% over time, you know, if you can find anybody that's good that will borrow from you. But you don't want to be on the side of the equation that's always behind in life.

Uh, you know, I was lucky. I saved about $110,000 by the time I got out of school. That $110,000 was really worth millions I might have earned later on because after you get a family and everything, the expenses roll in. But those were my tools to work with, but it was only because I was ahead of the game.

If you're behind the game by $110,000 at some point and paying 18 or 20% interest on it, you will never, you know, you'll never get out of it. So the trick, I’ve got a partner that says all I want to know is where I'm going to die so I'll never go there, you know, and, uh, and that's true in financial matters as well.

You want to figure out where you don’t want to be, uh, ahead of time and avoid that. And I get about a dozen letters a day from people who are having terrible problems, and there are two reasons why they have terrible problems.

One is a number of them have had health problems of some sort. I mean, they have really been hit by some, or somebody in their family has been hit by some kind of catastrophic illness, and that is a, you know, it's a terrible thing to happen to any family, and they get in, they run up bills they can't pay, and really only society can solve that one, uh, in terms of protecting people against that. That's just plain bad luck.

But the other one is from people who run up credit card debt and, uh, they're facing bankruptcy, or they've been through bankruptcy once before and they owe a whole bunch of money and they can't, they can't even pay the interest, let alone pay any principal. And half of my letters come from people like that, and that problem is avoidable. Catastrophic illness is not, but credit card debt is something you bring on yourself.

And it's way better, it's way easier to stay out of trouble than to get out of trouble financially. And, and, uh, I will guarantee if you run up big credit card debts, you will be in trouble, uh, probably the rest of your life in terms of your financial situation.

On the other hand, if you get ahead of the game, even it's on a very modest scale so that money is coming in from investing and you're a people owe you money or equities owe you ownership, uh, you'll be way ahead of the game compared to paying, uh, being always paying your creditors every month.

So my advice to you is, uh, if you can't pay for it, don't buy it and, uh, get yourself in a position where you can pay for anything. And, uh, then we'll be glad to see at Borsheim's or the Nebraska Furniture Mart.

Now let's, uh, let's have some questions. Do we have a mic out there that people can either go to or that travels around? And I can't necessarily see too well from. Um, we're gonna have one mic on each side, so just raise your hand and wait for us to come to you.

Okay, we have somebody up front that would like a mic. Anything that's on your mind, ask about. Don't, don't, don't be bashful.

Um, yeah. How would you advise people who aren't necessarily going into a career field in which you would make a large base salary, such as, like, medicine or something like that? Maybe, um, performing arts or music. How would you advise us to keep up financially with the rest of the world?

Well, there it is true that a market system, uh, does not pay as well in some activities as as might seem appropriate for the importance of those activities to society. Just take teaching, for example. I mean, teaching does not pay well, and what could be more important?

I mean, you know, you've got to be as interested in who your teachers of your children are as who your accountant is or, you know, uh, whatever, or who's winning the heavyweight title of the world or that sort of thing. But, but it doesn’t pay well, and it's a fundamental choice, uh, whether you're going to go into something for many people. It'd be a, it'd be a fundamental choice whether you're going to go into something you love or something to try and make a lot of money.

I think that generally it pays to go with what you love. Uh, I think that it's very hard to find people when they get to be my age who say they're on that they've loved what they've done all their life and feel was very worthwhile but they're terribly sad they made that choice because they didn't make a lot of money.

I don't think anybody's ever, ever said that to me, that they wish they'd gone into something else where they were uncomfortable doing it or didn't enjoy it, didn't feel very productive but made a lot of money. So I don't think you'll find that.

So I would, I would, I would go to work, I would go to work in whatever turns you on. It may turn out that it'll be more profitable than you can think, but almost everybody here will make enough money unless they get terrible habits along the way to do reasonably well.

And doing reasonably well in this country really is, is, uh, it's pretty darn good. I mean, it is not necessary to have, uh, huge amounts of money in order to enjoy yourself. I enjoyed myself when I was had my $10,000 and I live in the same house that I lived in when I was making when I had about that. I bought it 41 years ago.

I like the house then. I like the house now. I mean, if you think about it, if you have a reasonable job, you'll be eating at McDonald's and I'll be eating at McDonald's. So we're, we're to push on food.

I mean, you know, in fact, I hope it's Dairy Queen actually and may, um, uh, and if you come to Dairy Queen you'll see me and you can order anything on the menu I can order and we both can afford it. You know, you'll wear the same clothes I wear.

I, I'll pay more for my suits, but as soon as I put them on they look cheap on me, so we'll look about the same. And, uh, um, we'll both live in the same kind of houses. I live in that house from 41 years ago and it's warm in winter and it's cool in summer and it's comfortable and you'll live in a house that's similar.

And then, and what differences make if you have 50 more rooms or, you know, guest houses or all that it, you know, it'll probably just bring you problems. I mean you have to worry about the, about the greenskeeper or something when you get through.

So I, I, I have been in the houses of people where the houses are worth, um, oh, probably 200 times what my house is worth and I would not be any happier in houses at all. In fact, I'd be less happy. I'd just have one more thing to worry about and, you know, the dozens of people around the place and people quitting and people stealing from you and all kinds of things.

To hell with it, you know. Uh, we drive, we'll drive the same kind of car. In fact, you'll probably drive a better car. I drive a car that's about eight years old. I don't know what it's worth now, but it gets me around fine.

I mean, I’m perfectly happy. We'll watch, we'll watch the same television. You know, we'll, we'll work on the same computer pretty much. The only difference will be how we travel long distances. You know, I will fly in a plane that's more comfortable than, than flying Southwest Airlines or something, which I've got nothing against. But that's the one real big difference.

And other than that, I do what I like every day. I hope you’ll do what you like every day, too. And, uh, I work with nice people. I hope you work with nice people. Uh, and that's, there's 24 hours in the day and those are where the hours go.

So great wealth is the tiniest bit different, uh, in a real sense than having just a decent income. And, uh, and to trade a decent income and something you love doing and something where you feel worthwhile doing it for huge wealth, where you trade off a lot of your principles, uh, would be a terrible mistake.

Would you acknowledge your success more on yourself or from the help and teachings of others?

Well, I had, I had the, I was very lucky in life. Uh, if you tell me who your heroes are I I will make a pretty good prediction about how what you're going to do. And I, I had the right heroes. I was very lucky in life and, uh, my heroes never let me down. It started with my dad and then I had others in business and so I have had great teachers, some formal teachers, some that were just, uh, informal teachers, teachers by instinct or example.

And, uh, if I hadn't had those, uh, you know, my, my life I'm sure would have been very different. If I had been born in any place else, when I was, I was born in 1930, uh, and at the time one out of 50 births in the world were in the United States. So I came in against 50 to 1 odds against being born in the United States.

I would've, I would have been a disaster, you know, if I'd been born in Afghanistan or Peru or someplace. I mean, I was extraord I won, I won the lottery the day I was born, you know, by being born in this country. So have you, I mean you, the odds were probably 40 to 1 against you being born in this country and that we're five times more likely to have been born in in China or six times, four or five times more likely you've been born in in, in India or some other place where it would not have been as easy to exploit the full potential of your talent.

So we've all won the lottery in that respect and, and that's just plain luck. I mean it, uh, and I was lucky to be born at this time. I mean capital allocation is something that pays off extremely well in the society now, but it doesn't pay off in other societies and it didn't pay off, you know, many years ago.

My friend Bill Gates says that if I had been born a few thousand years ago, I'd have been some animal's lunch. You know, I can't run very fast and I can't climb trees, and you know I just have those are talents. No, nobody asked me to climb trees now, but, uh, there was a time when it might have been important.

And incidentally, Bill would've been some animal's breakfast. I mean, he can't run so fast either. But, uh, in any event, uh, you know, we, we are lucky. I mean, just imagine being born a couple hundred years ago with exactly the same talents and how far they would have taken you then. You know, the average person today lives so much better than the richest person lived 100 or 150 years ago.

So, uh, I'm lucky in that respect to be born of terrific parents. I was lucky to be raised in Omaha in a great public school system. I got a start here in the first eight grades that gave me a foundation that later when I went off the track a few times, uh, carried me through because I had a terrific grade school education right here in Omaha at Rose Hill.

And one of the reasons I had it, incidentally, is kind of unfortunate, but I had that great education, uh, in part because women were being enormously discriminated against. And so a woman at that time could be a teacher, she could be a secretary, she could be a nurse, you know, and that was about it.

So you had half the talent pool in the United States limited to just a few jobs, so you had abundance of talent, uh, in those activities like nursing or teaching because that talent with males was spread across every act, every form of work activity there was. But with women, it was concentrated in a few areas, and that that benefited me. It's kind of sad because it didn't benefit those teachers, but, but I was very lucky.

And, uh, I've really been that way, uh, all my life, and what I do is, is what I do as important as, you know, what a good teacher does or a good nurse does or something of the sort? You know, I think that's quite questionable. It pays off enormously well in a market economy like the United States and, uh, but that's an accident.

Didn't have anything to do with any innate ability of mine. Um, my name is Marina Ted and I attend, uh, Omaha Central High School. Good for you, fine institution.

Now, Mr. Buffett, technology has been a great factor in stimulating the world economy. What are your predictions for the future of the technology industry and what is its future role in the world economy and the United States economy?

Yeah, well, it's there's no question it's turning the world upside down. It's, it's done it somewhat already but it will, you know, it's just beginning. But it's moving very fast. I met Gates on July 15, 1991. I was out there for a 4th of July, uh, celebration with a friend and, uh, who subsequently died, M. Greenfield of the Washington Post, and she took us down to visit the Gates family and he tried to educate me about high-tech and he'd had better luck with chimpanzees.

I mean, I was really a disaster, but, but he's a good teacher. But one thing he told me was that at the time he said, "You know, you've got this model in your head of the world and your model has time and distance as very limiting factors." And he said they aren't limiting factors anymore.

He said, "You know the cost of talking to somebody around the world or getting your message in front of somebody or publishing is it's going to be zero. They're so close to zero it doesn't make any difference." And, you know, that was revolutionary, but it's happened already in a very, very big way and it's just, uh, what, 8 years later and, and it's, it's exploding.

So high-tech, information technology, whatever you want to call it, is changing the world and it's going to change it in a very, very big way. It'll change, I mean, that's one of the things I think about in businesses we buy.

Uh, we announced the purchase yesterday of a furniture retailer in the Boston area and, you know, I think to myself what effect does this new world have in terms of the Internet on furniture retailing? I mean, you have to think about questions like that. The changes will be huge.

I will, I played Bridge yesterday, uh, with people all over the country, but I played it with people all over the world. I just sit down on my computer and I've got some popcorn there and I'm in khakis in a sweater and I can have a bridge game in 30 seconds with people all over the world and, uh, no cost to it basically.

You know, that's a lot different than trying to arrange a game with four people in Omaha, you know, on a day when one guy wants to play golf and another wants to watch baseball. And I mean it, it, it just, it changes things in a huge way.

Uh, we are very fortunate. I mean, it's in the degree to which the United States leads the world in this area. I mean, we have a lead. It's hard to think of who's in second place. And 15 or so years ago this country had an inferiority complex.

It'd be hard for you to remember because you, you weren't old enough to be around then, but in the early '80s we were wondering whether the Germans and the Japanese were going to own everything and that they were going to make all the steel and they were going to make all the cars and everything else. And the television sets and we were going to flip hamburgers. That was the standard line.

And just imagine in a short period like 15 years how that's changed around in an important way. That's changed because of this information revolution, uh, where we, like I said, I don't know who, I don't know who you would name as being in second place in the world.

But here's the most important industry in the world and the United States has this incredible position and we're moving all the time with that position. So I think that argues for a very, I think it argues for a terrific future for the world over time. And I think it argues even more for a terrific future for this country.

What are the best ways for youth to get started now in securing their financial future?

For, for what?

To secure their financial future for you.

For you?

Youth.

Oh, well, it, it's not, it's not very complicated. Uh, it goes back to getting full use out of your own talents first. I mean, the difference between whether you're going to be earning X or 2X or 3X a year, uh, 20 years from now, uh, is going to be a function of how well, not how much talent you have, but how well you use the talent you already have.

And, uh, so that is the best financial future is your own ability and your, uh, capacity to use those abilities to their potential, and they can't take that can't be taken away from you. They can't even tax it. I mean, uh, you know most things, if, if, if you want a, if you want a piece of real estate, if they double the taxes, they double the taxes and that changes your ownership in the property because now in effect the taxing authorities own more of it because they've got a greater command on the revenue.

Uh, the same thing about, uh, almost any asset you have, uh, but they they don't tax what's in your head and they don't tax your ability to start performing when you, when you get to work in the morning and finish in the evening, uh, to, to your potential. One of the things that amazes me is how people who really do perform well just sort of jump out at you once you're running a business.

When I got out of school I thought, you know, everybody would behave that way, but they don't. Most people sort of go through life in a sleepwalk, and if you don't, you will stand out. So the big, the biggest thing for your financial future is yourself.

Now beyond that, it is always being ahead of the game rather than getting behind the game. It's saving a little no matter how you do it. I mean I delivered papers, I worked at pennies, I sold golf balls, I had a pinball machine round. I did a lot of things that enabled me to accumulate about $10,000 by the time I got out of school.

Uh, $10,000 doesn't go as far now as it did then, but it having anything so that you're ahead of the game and not getting behind the game is enormously important. I mean just, you know, if you're going to run a 100 yard dash against a bunch of people in life, if you can figure it out so that when the gun goes off you're 10 or 15 yards ahead instead of 10 or 15 yards behind, it's going to make an enormous difference in how that race comes out.

So, uh, having some net resources doesn't make much difference whether they're in stocks or bonds in my view, but, uh, and not having debt when that gun goes off when you get out of school, uh, is a huge plus over being behind the game.

And, uh, you know, it may come from delivering a paper out in the morning. It may come from part-time work someplace. But, but put aside a few dollars for yourself. It, uh, uh, so that when the time comes and you enter the ENT of the workforce, uh, you're ahead of the game and not behind, and then once you get there don't get behind but by buying a whole lot of things that you figure you're going to pay for someday while you're paying 20% interest in between.

If you could please say your name and school when you ask a question, hard for me to see even where the microphone is, but I can. My name is Patrick Dhy and I'm from Billian Lista High School.

I was wondering with the increasing costs of education today, what can students do to deal with their debts once they're out of college?

Well, that's a tough one. I mean I guess I'd pay it off as fast as I could and I would incur as little debt as possible in, in, uh, uh, before that time came. And I would say this: in my experience in business, um, there is very little difference, if any, between a very high-priced business education and what's available a lot for a lot less money.

So I, I, I went to the University of Nebraska at Lincoln. My last year in college I went to Wharton for a couple years before that. I learned just as much at University of Nebraska as I did at Wharton.

At, uh, and that's nothing against Wharton. I mean it's just we had a very good school here. I had some terrific professors at, at Lincoln and so I, I would not assume that if I was paying a few thousand dollars for an education, uh, here in the state, for example, versus paying huge amounts elsewhere that it was going to make a lot of difference.

Uh, most of a lot of the education, uh, you need to be prodded in the right direction, but an awful lot of it is, is, is self-taught. Um, uh, I mean Andrew Carnegie did a wonderful thing in this country in terms of libraries and I used to spend a lot of time at libraries. I even got locked in at the University of Omaha one, what was then the University of Omaha, and they had, I couldn't get out for hours and one night I got so trans with what I was reading.

But there's, there's all kinds of information available now with the Internet. It's so much, you know, easier than it was then. So, uh, it's out there to be taken and it isn't necessary to pay $30 or $35,000 a year to go to some, uh, big-name school to get the education at all.

I mean, if you're going to learn accounting, if you're going which is probably the most important course you'd take in business, if you're going to learn accounting, you can learn accounting absolutely as well in my view going to UNO as going to Harvard.

I mean, I, I see, uh, I, I, I would, I’d bet on that. And, uh, so I wouldn't run up huge bills in terms of getting a business education. Now, you know, if you're going to get a medical education, I mean there are certain professions where there, there may not be any way around spending a fair amount of money and getting in debt to some degree. You got to make that decision yourself, but I'd certainly try to minimize it and, uh, and I would sort of, I would have it figured out how I would handle that debt in say a five-year period after I got out of school or I would think twice about incurring it.

There's a question up here if we can bring a microphone. Uh, my name is Kyle Clark. I'm here representing the Omaha Youth Advisory Council. Um, what advice would you have for forming a nonprofit organization?

Well, I've always tried to avoid forming nonprofit organizations, but, uh, well, that would depend entirely on what I wanted to accomplish. I mean, it, you know, it'd be one thing it was a hospital. It could be another thing, uh, you know, if there are, there's, there's so many types of it. So I, you know, you've got to get people that are that are experienced and involved in an entity like that.

And, uh, uh, but it, it depends so much on the, on the objective, uh, you're working at. Uh, yeah, I promised this young lady here a microphone for a long time. Hi, my name is Cara Harvard, and I attend Millard West High School. And I understand that you're very civically involved, and I was wondering how important of a quality you think that is for an individual in life and why?

Yeah, well, I wouldn't say that I am that. I mean I do certain civic things. I think I think your, your model as a citizen, for example, in all, would be Walter Scott. I mean he is far more civically involved than I am.

And, uh, incidentally, his predecessor Peter Kiewit was too, but Walter’s carried it to new heights. So I, uh, don't want to take, uh, an amenable for that myself. I do some things. Uh, one of the problems I have is I love what I do so much that, uh, that it sort of takes over.

I mean, I'm like a, uh, a guy that likes to play a lot of golf or something except I like, I like the business I'm in. But, uh, I've got a family that participates very actively. Uh, some of my children work, work on almost anything that comes along in the civic area.

And, you know, it's you do, in the end, people do what they want to do to quite a degree, and, uh, uh, I think I've never talked to anybody that that enjoyed working in civic activities that that didn't feel where it was very worthwhile after they've done it. I mean, they've built something, and participating in building something is always a lot of fun.

And, and, actually, you can have a good time. We have this golf tournament, for example, in September, and we raise some money for S, but everybody has a good time, so nobody's paying any price by doing it. I'm having a good time. The people who come are having a good time and, uh, we get to show all off to people.

But you should be enjoying things you go along, and you will if you work in civic activities that that, uh, that interest you and you can do the same thing in politics. I mean it, uh, you know if you, if you get, if you find political ideas or, or politicians who particularly, uh, you identify when turning on, you can get a lot of self-satisfaction out of out of working and, and you're doing something worthwhile.

So I just, just follow your instincts on that. That'd be my recommendation. Hi, my name is Jeremy Gray. I'm from Millard South High School. Um, we're probably the, I guess the elite of today and I question what do you see as the problem, the biggest economic problem facing, um, the youth of today going into the future?

Yeah, I, I don't think that, uh, you're going to have enormous economic problems. I think you will live in a society where the average person, uh, lives better by a significant margin than the average one of a generation earlier or two generations earlier. That's been the history of this country.

It's a marvel country that way. I mean it when you think of it, we have 4 and a half percent of the world's population, you know, and, and what's been accomplished here is incredible. 53% of the value of corporations that are publicly traded in the world exists in the United States with 4 and a half percent of the population.

This country always has done well. Uh, they say in stocks that you should buy stock in a business that's so good that even an idiot can run it because sooner or later one will. And that's not terrible advice. Well, that seems to have been sort of the history of this country from time to time.

I mean we’ve, we’ve had all these problems that have come along. If you look back on the last 100 years and list all the problems this country has run into, you know, you can make a very long list. And a lot of people who focused on those problems at the time have missed the bigger picture, and the bigger picture is that every generation lives better than the one before.

And that's because of, uh, that's because of savings, because savings enables people to create new tools to do better things as they go along, and it's also due to an environment that lets people realize their potential to a greater degree than most other environments in the world.

It's far from perfect. I mean it's, it's sad how far it is from perfect, but it is better than anything else around. I mean in, in this country, uh, you’ve got you don't have some commissar or something running a, you know, a big business in this country, you've got a guy like Jack Welch.

And a fellow like Jack Welch makes a difference of night and day in terms of the productivity of that business over a period of decades, and productivity is what a is what causes the standard of living to rise.

So anything that a system that throws up the Jack Welches of the world to run businesses is going to have an enormous advantage over a society that does it by heredity or that does it by government edict. And we've got, we're closer to that society that I've described than anything, than any other country and it's led to great things and it will continue to lead to great things.

So I think, I think you've got the best future. Uh, you know you don't face, you don't face a war and you've got a, you’ve got a great, uh, you've got a better future in terms of, uh, achieving material rewards than any generation in history. So I wish I could trade you places. I might get taken up on that by a few of you, though.

[Music] Hi, I'm Ryan Wilkins from Millard West High School and, um, I was wondering if you or if you could, uh, speak for Mr. Gates were afraid of the impact on Y2K on the economy or specifically the stock market.

Yeah, well I'm, I'm glad you gave me a chance to bring in other people because I, I'm the last guy in the world understanding about Y2K. You know, I don't know why this microphone’s working, I don't know, you know why lights go on or I flip on the switch of my television set and pray.

I mean that's it's all, it's all beyond me. But I would say this: the smartest people I know in that area, uh, in large part think it's going to be a non-event at, uh, in this country. I don’t, I can't speak for the rest of the world, but, uh, uh, so I think, uh, I think you'll wake up on January 1st and find the world hasn't changed from December 31st.

Now I would say this, you might, you might get a whole bunch of friends to write your checks for a billion dollars on December 31st and then deposit them and, you know, who knows what'll happen? Can't lose anything. I mean all I can do is bounce. And if the system gets fouled up, you know, you might find a lot of money in your account.

But I wouldn't count on it. Wait, we have, we have, we own a company called Executive Jet. We have about 14 or 1500 customers who own pieces of airplanes with us. And we, so we've got a, well we got 160 of their planes and some of our own flying around.

It'll be very interesting to see what the Advan people let us know ahead of time when they want to use it. It'll be very interesting to see how many sign up for January 1st at 12:01, but it'll, I, it wouldn't bother me to fly him in the least on January 1 or do anything else on January 1st. Ideally I hope they getting prepared to watch the Huskers play in the big game.

I'm Jamie Solace from Twin Valley and I was wondering how do you decide what you invest your time and money in?

Yeah, well, I, I like to find businesses that have good economics. Now, what are good economics? Well, good economics are a business that has some kind of a moat around it that makes its product or its service or its location or something a little more desirable than to the customer than any other sort of a comparable product.

Uh, you know the number one candy bar in the last 30 or 40 years has been Snickers. People don't fool around with different candy bars. They fool around with different length dresses, they fool around, you know, with all kinds of things, but they don't fool around with candy bars because they figure, you know they’re going to go in and lay out 50 cents or whatever it is and put it in their mouth and they're not going to for 50 cents in putting it in your mouth. I mean you're not going to say, I'll, I'll put in I'll lay out 45 cents and put something else in my mouth.

So you find that very stable and we like businesses that we think we can figure out where they're going to be in 10 or 15 years. I don't know where the information technology businesses are going to be in 10 or 15 years. I know where Snickers bars are going to be in 10 or 15 years. They're going to be selling just about this, you know the way they do now.

I know where Wrigley's gum is going to be in 10 or 15 years. There's not going to be a lot of innovation in chewing gum. And people, the internet's not going to cause people to quit chewing gum either. I mean at least, I mean Gates may think so, but I don't think so. But, uh, uh, it's, it's predictability regarding the sustainability of a competitive advantage, something, something special about a product.

So we look for those kind of products and then we look for people that are running the business that are honest and able. And, um, you know, that's it's easier to find people that are honest and able than it is to find businesses that are going to stay wonderful for a long period of time.

There are a lot of businesses that looked like they were going to stay wonderful but really evaporated over time. But that's what we're looking for. And the nice thing about it is we don't have to find very many. If we find one a year, that's terrific because you don't, you don't need a hundred or a thousand great investment ideas to do well. You need a couple, and, uh, if we, the discipline is the most important thing.

We don't need brain power; we need discipline, that, uh, you don't need 150 IQ to do what I do. Thank God, you know you don't need 140. You know, 135, you may need 115 or something like that and, and but you do need discipline. You have to wait until you see the fat pitch to swing at.

Because investing is a no-called strike game. You know if I were a baseball player and I only like pitches two inches above my navel, you know some guy could learn that and he could pitch me, you know, three or four inches below that and I get called out on strikes because I never find a pitch I like.

You can get CAU out on strikes in baseball. You have to, you have to swing. Get pictures that you, you don't even necessarily like, particularly after the count gets the two strikes. In business you don't have to swing at anything. You can sit there and the paper says General Motors at 68 or it says General Electric at 115 or says General Dynamics at 63 and if you don't like those prices you don't have to swing. You can wait there day after day after day after day and there are no called strikes.

Now when you swing, when you decide to buy something then, you know, if you swing and miss it's a strike. But it's a marvelous game to be in because there are no called strikes and you can simply wait for that one time in a month or six months or a year or two or three years when you really know what you're doing, where you like the price, where you like the people running the business, and then you swing.

And you only need a few swings in your lifetime, uh, so that's the way we try to pick businesses. We try to stay with things we understand. I mean, there can be all kinds of wonderful investment opportunities out there that I don't understand.

I don't know what cocoa beans are going to do next year. You know maybe you know, but I don't know. I don't know what, I don't know what crude oil is going to sell for, but I don't have to know. I just have to know the things I have to know. I have to know where the limits of my understanding are, what I call what my circle of competence is.

And if I'm only able to evaluate 5% of the businesses in the world, no problem. I just stay within that 5% and try and find something. And that's most people get in trouble because in investment because they, well, they get itchy. You know they can't discipline themselves and they hear about other people making money.

Nothing upsets people so much as to hear about their friends making money. I mean that’s very destructive to discipline because they think, you know, I'm smarter than that guy next door and he just, just bought that new car with the money made trading stocks on the internet.

So why can't I? Well, the answer is you can't. Over time you will lose money if you trade stocks actively and, uh, it's, it's hard to exercise the discipline. But anytime you buy something you should should be able to take out a one-page sheet of paper and say, I'm buying General Motors at 65, I'm buying General Electric at 150 because, and you should write down the reasons.

If you can't, if you can't fill out the sheet, if it's because somebody told me about it at a cocktail party last night, that's not good enough. If it's because my broker told me about it, that's not good enough. You know, it's you've got to have a reason for thinking that it makes an intelligent investment.

You do the same thing if you're buying a farm or an apartment house. If you're buying a farm, you'd say I'm buying this farm at $1,000 an acre because I think I can earn $60 an acre on it if corn sells at such and such and soybean sells at such and such and yield is such and such, and you'd figure it out.

That's the same reason you buy businesses and when you buy stocks you're buying a little piece of a business. And that's probably the most important thing to remember in, in investing is that when you are buying a stock you're buying a little piece of the business and if you are buying it at an attractive price for the business, for the whole business, you're going to make money and if you aren't, you know over time you won't make money.

Hi, my name is CLI Maoy from Elor Mount Michael. Um, Reverend Jackson, Jesse Jackson talked to us earlier. He seemed to believe that the moral standards of today's society will eventually affect us in business. How do you feel this will affect us as youth growing up in the United States?

He, he said the moral standards will affect us how? Like moral decay in society today will affect us in business by how we feel and how we interact with other people.

Well, I think very difficult to quantify moral standards over time. I mean that, that you know, you could pick out huge weaknesses at any given time in terms of how people or the country is behaving and, and in huge strength.

So I think it's enormously difficult to quantify. Uh, I think by and large we have made progress in what I would call institutionalized moral standards in this country. I mean the, the, uh, um, you know, in terms of slavery in terms of the, uh, in terms of, I mean the women, women couldn't vote. You know, a century ago it, uh, uh, were half the country were second class citizens in that respect in a very, and they had much lesser rights in terms of inheritance and all kinds of things.

Uh, the income tax, uh, didn't exist 100 years ago. So the idea of taxing people according to to how much that they benefited from society and their income, uh, didn't exist. So I think in terms of institutionalized moral standards, the country has made really quite significant progress in the last 100 years.

I think, you know, there's an enormous distance to go. I think we're going in the right direction maybe by fits and starts, but I think we're going in the right direction and I think that, uh, you know, will be a, it will be a significant plus to everybody in this room if they live in a more moral society 40 years from now than a less moral.

But I think the odds are that they will. I think the country moves in that direction. Very difficult to do it all kinds of interests that work against it, but, uh, in the end I think the American people wanted, and um, you saw it in civil rights.

I mean it took television to dramatize what was going on and people that weren't near it preferred not to think about it, but it got through to the conscience of, uh, the American people and, uh, uh, a lot of progress has been made there and there's a lot left to be made, but there it's better than it was.

And the pace may seem very slow to those people involved, and I can understand that, uh, the pace, you know, for women's suffrage. I mean that went for decades and decades and decades.

Woman could be on a jury. I was reading the trial of Clarence Darrow which took place in California in about 19, I don't know, 10 or 11. You know, were no women on the jury. The woman wasn't allowed to be on a jury. They weren't citizens, in that sense.

So it's the moral behavior of the country has in my view improved, but it, uh, you know, and it'll continue to improve and I hope you all in this room do your part to help it improve.

Hi, I'm Nick Jores from, uh, Central High and, uh, I was I was wondering how, uh, since the stock market's so high right now, if it'd be smart for us to get to get involved now or to wait till it goes down a little or what?

Yeah, I can't tell you whether or not to buy stocks now. Generally I think it's important that you save money, you know, and whether you put it in the stock market or not, uh, uh, I don't think is terribly important.

I think if you're interested in the stocks you should, you should buy, you know, and you've got a little capital you should buy a few. I mean I don't think there's any way of learning about them better than experiencing. Doing it on paper isn't the same.

I can guarantee you if you lose money on paper or lose real money it's a different experience. And, and so I, I think there, I think you'll learn more about yourself if you do it that way. I bought my first stock when I was 11. I was actually, I was at Rose Hill at the time and I bought three shares of City Service preferred at, uh, 38 and it went down to 27, which is something I still remember, even though it was 11 at the time.

Uh, and then it went up to 40 and I sold it. I made five bucks on my three shares after commissions, and then it went to 200 and something.

So, you know, I, I probably remember that a little better than if I'd been doing it on paper and I fooled around doing a lot of things between about age 11 and 19 in the stock market. I did charts, I did all kinds of technical analysis. I read every book I could get on the subject and I didn't do that well.

I didn't do terrible, but, but I, I didn't I was really just floundering around. But by that time, by the age of 19, when I read Ben Graham's book, I was at the University of Nebraska in Lincoln. I went and bought this book called The Intelligent Investor that had just come out and it had an enormous impact on me.

Now, if I hadn't done in the previous eight years, if I hadn't been all over the lot, I’m not so sure that that book would have had the same impact on me. I mean, I was by that time I was prepared to read Ben Graham's book, which changed my life financially in an incredible way.

I mean it, uh, I wouldn't be up here today if I had read that book. But, yeah, part of life is getting prepared so that when something does happen that's significant you can grasp the significance of it and know what to do with it.

And I would say that first eight years of fooling around, even though it produced nothing financially to speak of, uh, produced a lot in terms of getting my mind prepared for when I really did read something that made sense.

So I would encourage you if you're interested in the field to do a few things. I still try to make them as intelligent as possible. I would try to stick with things, businesses I thought I understood.

I'd still get out that sheet of paper and I'd write I'm doing this because and just test my reasoning. And then I go back and read it a year later and and see whether what you thought would be true turned out to be true.

So I would always check myself. I believe in grading myself on everything. You know doctors have post-mortems and they they do it because they learn from post-mortems.

Uh, in business people don’t like to do postmortems. When I'm, I can be on the board of a company and they can be building plants or buying companies and they never wanted two years later to run a check on how that decision turned out because it can be unpleasant.

Uh, but you learn from post-mortems and, uh, you don't want to learn. It's way better to learn from other people's mistakes than your own, but you got to learn from a few of your own too, and the time to do it is when you're young.

We can do maybe one more and then I we wrap this up at one, do we? Or maybe, maybe two more?

Um, my name is Pete Walsh from Katon Prep, and my question is to what extent do you feel that the government with the current policies of welfare and Social Security is it financially competent and fiscally prepared for the future?

Well, I I think that the country as a whole is quite, quite well prepared for the future. That doesn't mean that I adopt would adopt every policy they have, but, but, uh, I think we have an enormously rich society, enormously rich society, and it'll get richer.

Uh, everyone isn't going to participate in that. Some won't participate because of physical disabilities, others because of mental disabilities, others because of shortcomings in the education they received when they were growing up.

All kinds of reasons as rich enough society to be able to take care of those people, and we should take care of them and how we do it so that they feel most useful in life and how we do it so that we continue to encourage people to be more productive themselves and all that.

I mean those are not easy questions, but, but that shouldn't take our eye off the ball of feeling we should do something about it that, uh, um, I often I pose this problem sometimes to people.

I say let's assume that it's 24 hours before you're born and all of you can take this test 24 hours before you're born and a genie comes to you and the genie says, "What was your name again out there?" Whatever, we'll call you Joe.

And the genie says, "Joe, says you look pretty promising to me. I think you've got kind of a sense of fair play and and a good mind, and so I'm going to let you have an extraordinary opportunity. I'm going to let you design the world into which you're going to be born in 24 hours."

It's yours. You pick out the political rules you pick out the economic rules you pick out the social rules, you design the world. And when you're born in 24 hours, you're going to emerge in this world you designed.

And that's the world that's going to exist for you for your lifetime, for your children's lifetime, for your grandchildren's lifetime. And you, having heard of some of these genie jokes in the past, would say, "What's the catch?"

The genie says, "Well, it's a very slight catch." I said, "When you're born in 24 hours, you're going to emerge in this world you designed, but what you don't know is whether you're going to be born black or white, male or female, rich or poor, bright or Ed, able-bodied or infirm, in the United States or Afghanistan.

All you know is that you're going to reach into this barrel which now has six billion balls as we know representing one person, every person in the world, and you're going to participate in what I call the ovarian lottery. You're going to take one ball out of that barrel and you're never going to get another ball. That's you, you're going to get one ball.

And now what kind of rules do you want to have for that society not knowing which ball you're going to get? Now that I put to you is the way I think people should think about social policy. And if you're born, if you're lucky enough to be born in this country, you've won the lottery already, but we should have a system in my view that encourages the Jack Welches and the Bill Gates and all of that to work far beyond the time when it has any economic significance to them.

We want people commanding those resources who are extremely able at commanding them. That's how that's how the standard of living moves forward. So we should want, you know, we should want Tom Osborne coaching in Nebraska.

We should want Bill Gates designing software, and we don't want to mix up those two. I mean we don't we don't want to get Bill coaching at Nebraska, uh. So you want, you want people, you want a system that directs gets people to their potential and puts them in the position where they can do the most good for society.

But you also want a system for the people who get the wrong ball. I mean, somebody's going to get the ball that says this disease or that disease early in life that cripples him. And we've got a rich enough society that we can take care of those people.

And I think that to get back to your question, I think that this society will move more and more in that direction. It has the capability of moving more and more in that direction as our resources and our output increases, and I think that it has the will to do that in a general way, although, like I say, there have always been lots of fits and starts.

So there is no shortage in the United States of resources, there's no shortage of output. You have to have a system that encourages people to behave to the limit of their abilities and puts them in the right place, but then you have to make sure that everybody gets taken care of, too.

Now we can do one more and then we’ll break. Then I'll let the fellow with the microphone or woman here make the decision. Hi, my name is Ben Gold, I go to B.R. Talbert, and I wanted to know how do you think the media affects the world economically today?

Well it's a small question, uh. Well what it obviously does simply because it's, it's moved so far technologically as it's brought it together in a big way.

I mean I was over in China a few years ago and I was right after the time of the Women's Conference in, in Beijing and I was reading the Chinese coverage of that conference and of course it had nothing to do with what was taking place.

But the internet was coming in and, and you know you can, you can access the Washington Post or the New York Times or anything. I get the Washington Post at 9:30 here at night in effect. I never could get it the next day on through physical delivery, but I buy electronic delivery.

I can read it, um, you know probably earlier than most of the people in Washington are reading it. So the ability to communicate and the degree to which the world can have awareness of what's going on every place in the world, it's just, you know, it's been a quantum leap.

And you know that will have there, there are a lot of things that come out of that, and, uh, uh, net, they're a plus over time. But the, they, I mean they, the ability of information to be available to everyone worldwide, almost instantaneously.

It's, it's, it's a could be huge advances in things like medicine for example, just to, to pick one. Uh, so it, it’s, it's a net plus; it has a, it has a big effect.

And, uh, the definition of media has now been expanded enormously. I mean there were three television networks in the early 1960s, and that was it. There were three highways information traveled electronically and if the three pieces of information were I Love Lucy, you know and something else and something else, those were the three choices of information or entertainment that you had for tens and tens of millions of people sitting there looking at a tube.

Now it's unlimited and that's only what, three or so decades. So it's just exploded and it'll continue to explode and net. I think it's a plus. And I think I it's one o'clock. I want to thank you all. I, I wish you well. You're going to do terrific.

Thanks.