Warren Buffett & Bill Gates - University of Washington

You ought to be happy where you are working, and I always worry about people who say, "You know, I'm going to do this for 10 years. I really don't like it very well, and then I'll do 10 more years of this." I mean, that's a little like saving up sex for your old age. I mean, not a very good idea.

When I started Microsoft, I didn't think of it as all that risky. You've always got a job with me, Bill. The only thing that was scary to me wasn't quitting and starting the company; it was when I started hiring my friends, and they expected to be paid.

Buffett and Gates on success was made possible by the Floyd and Dolores Jones Foundation supporting efforts to enhance public education and a better understanding of business and investing in the American economy.

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Each spring in Omaha, Nebraska, thousands of investors gather from around the world. How long does it take to get over here from Paris, France? Ten hours for Sweden and roughly it's a day flight for a lot of people. It reminds me a lot of New York. A lot of people come for the annual shareholders meeting of an investment company, Berkshire Hathaway.

Many come just for a chance to meet Berkshire's legendary chairman, Warren Buffett. Obviously, when the stock goes up a lot, it creates interest. During the past four decades, Buffett's uncanny success in picking stocks has made big money for Berkshire shareholders, including Buffett himself. His net worth is estimated at more than $30 billion.

One highlight of the annual meeting is Berkshire Hathaway Day at an Omaha Royals baseball game. Buffett throws out the first pitch. Books analyzing Buffett's investment philosophy have acclaimed him the world's greatest investor, but he's made his fortune in companies well known to all—companies such as Coca-Cola, Gillette, and Dairy Queen. He avoids anything high-tech.

So how long have you been using a computer?

One of Buffett's good friends is Bill Gates. Microsoft's co-founder and CEO is 26 years his junior. His enormous success has come from a technological revolution that he has done much to pioneer and popularize.

Learning what did you learn about Gates? He started Microsoft with his high school friend, Paul Allen, when Gates was still in his teens. Their investment? $1,500. Ski jumping—that's pretty exciting, isn't it?

Today, Microsoft's annual sales exceed $14 billion. It is the world's leading developer of software for the personal computer, and Gates is the PC's globe-trotting evangelist, celebrating its many benefits.

Am I going to have time to get everybody?

Okay. Success has made Bill Gates the world's wealthiest and perhaps most famous entrepreneur. It also has made Microsoft a target of controversy. The popularity of its Windows software has brought legal challenges from government antitrust regulators. They've tried to limit Microsoft's expansion into new fields.

Bill Gates and Warren Buffett share a restless curiosity and fascination with the future. Together, in the spring of 1998, they came to the campus of the University of Washington in Seattle. They came to share their experience and their combined wisdom in conversation with students from the university's business school.

Young people overflowed the Student Union Auditorium for an extraordinary conversation with two of the most successful business leaders of our time. Proceedings, so please join me in giving a University of Washington Business School welcome to Bill Gates and to Warren Buffett.

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Well, I thought I ought to start this off by announcing that Bill and I have a small bet as to who would get the most applause. I suggested that I bet my house against his, but we settled on a small sum. But evidently, it isn't so small to Bill because just before we came out, he gave me this Nebraska Cornhusker shirt to wear, and he puts on this purple shirt.

We're going to answer your questions—whatever you want to talk about is fine. We don't want any softballs. I thought by wearing this Cornhusker shirt that I could guarantee hardballs.

Right in my head when we went to the game last year, about halfway through the first quarter, Bill said, "What's that big 'N' stand for on those guys of yours?" I said, "Bill, I said what the hell? I said it's knowledge!" We all agree on that: Nebraska.

Well, they've asked us to start out talking with the two of us on one question, but then it's going to be your questions. We're going to just have you line up behind the microphones and we'll go back and forth. They did ask that we might start off with talking about sort of what got us here.

It's pretty simple in my case. It's not IQ, I'm sure you'll all be glad to hear that. But everybody in this room has more IQ than they need to do my job. The big thing is rationality.

In other words, you know, I always look at IQ and talent as sort of representing the horsepower of the motor. But then in terms of the output, the efficiency at which the motor works depends on rationality. Because a lot of people start out with 400 horsepower motors and get 100 horsepower of output. It's way better to have a 200 horsepower motor and get it all into output.

So why do smart people do things that interfere with getting the output they're entitled to? It gets into the habits, into character and temperament. It really gets into behaving in a rational manner and not letting—not getting in your own way.

As I say, everybody here has the ability to absolutely do anything I do and much beyond, and some of you will and some of you won't. But it will be those that won't; it will be because you get in your own way. It won't be because the world doesn't allow you to. It will be because you don't allow yourself to.

So I have one little suggestion for you: pick out the person in the class that you admire the most and then write down why you admire them. Put down a list of qualities. You're not to name yourself in this.

Then put down the one that, frankly, you could stand the least in the whole group and write down the qualities that turn you off in that person. Look at that list, and you won't find it's a bunch of things like throwing a football 70 yards or anything of the sort. The qualities of the first one that you admire are qualities that you, with a little practice, can make your own and, with practice, will become habit-forming.

The chains of habit are too light to be felt until they're too heavy to be broken. I mean, my age, I can't change any of my habits. I mean, I'm stuck. But at your age, you know you will have the habits 20 years from now that you decide to put into practice today.

So I just suggest that you look at the habits you admire in others or the behavior you admire in others and make those your own habits. Look at what you really find somewhat reprehensible in others and just decide, you know, those are things you're not going to do.

Ben Franklin did that a few hundred years ago, and it still works today. If you do that, you'll find that you convert all your horsepower into output.

So with that sermon, I'll let Bill give you another one, and then we'll get into your questions.

Well, I think Warren's absolutely right about habit. I was lucky enough when I was quite young to have exposure to computers, which were very expensive and kind of limited in what they could do, but still fascinating. Some friends and I really talked about that and decided that they would change because of the miracle technology of chips into something that everybody could take advantage of.

We really thought writing software was a neat thing. We hired our friends who wrote software, thought about what the potentials were, and really didn't see any limit. So that vision of getting our friends together, getting them to work as a team, really seeing what kind of tool this could be—a tool of what we talked about as the information age, where the key thing is magnifying your brainpower instead of just your muscle power—by pursuing that with pretty incredible focus and being there at the very very beginning of the industry, we were able to build a company that has played a very central role in what's been a pretty big revolution.

Now fortunately, the revolution is still at the beginning. It was 23 years ago when we started the company. But there's no doubt that taking the habits we formed and sticking with those—which would be hard to change—the next 23 years are going to give us a lot more potential and maybe even get us pretty close to that original vision, which was a computer on every desk and in every home, and that's a fun, fun thing to be involved with.

Okay, fire away!

I was wondering how you define success personally.

Well, I can certainly define happiness because that's what I am. If that—I mean, if that, I get to do what I like to do every single day of the year, and I get to do it with people I like. I don't have to associate with anybody who causes my stomach to churn.

The only thing in my job I don't like, and this only happens about every three or four years, is occasionally I have to fire somebody. I don't like that. That's the only thing. Other than that, I tap dance to work, and I get down there and I think I'm supposed to lie on my back and paint the ceiling, you know, or something like Michelangelo. I mean, that's the way I feel. And it doesn't diminish; it's tremendous fun.

So, you know, they say that success is getting what you want, and happiness is wanting what you get. Well, I don't know which one applies in this case, but I do know that I wouldn't be doing anything else. I mean, I do advise you, you know, when you go out to work—go to work for an organization that you admire, people you admire, because it'll turn you on.

And you ought to be happy where you are working. I always worry about people who say, "You know, I'm going to do this for 10 years. I really don't like it very well. Then I'll do 10 more years of this." I mean, that's a little like saving up sex for your old age. I mean, not a very good idea.

So get right, recommend that, get right into what you enjoy, you know, and you'll be successful at it. You really will! I mean, you won't be able to miss. And, you know, that's—I don't regard what I do as the most important thing in the world at all, but it's right for me.

I mean, I happen to be wired in a certain way that what I do works in this. If I had to do what, you know, Bill does, I mean, I'd last about 10 minutes, and that's true of a lot of things. But I luckily kind of stumbled into the thing that I do best, and that, you know, it's worked out well.

Bill, I think that the key point there is you've got to enjoy what you do every day. For me, that's working with very smart people; it's working on new problems. You know, every time we think, "Hey, we've had a little bit of success," we're pretty careful not to dwell on it too much because the bar gets raised.

People's expectations of the products— we've always got customer feedback telling us the machines are too complicated. They're not natural enough. The competition, the breakthroughs, the research makes the field. I'm in—I think the most exciting field there is. There are some other good fields. Biotechnology is a good field because it's changing the world of medicine and health.

But the computer industry, in particular software, you know, I think is the most exciting, and I think I have the best job in that business.

Don't you think Dairy Queen is more important in the country?

You can manage Dairy Queen. I'll go and buy the Billy bars!

Yeah, I'm counting on it. We'll raise the price when you come.

Okay, yeah. You don't want it? I have turned down business deals that were otherwise decent deals because I didn't like the people that I would have to work with. I didn't see any sense pretending.

To take on to get involved with people that really cause your stomach to turn, you know, I say it's a lot like marrying for money—it's probably a bad idea under any circumstances, but it absolutely is crazy if you're already rich.

Right. Both of you are innovators in your given industry. I was wondering what your definition of innovation is.

Well, I don't do a lot of innovating in what I do. My job—I really have just two functions in my job. One is to allocate capital, which I enjoy doing. And the second one is to keep a group of managers enthused about what they do when they have no financial need to do it whatsoever.

Three, at least three or four of the managers we have are rich beyond any possible financial need, and therefore my job is to figure out how to cause them to want to jump out of bed at 6:00 in the morning and work with all the enthusiasm they did when they were poor and starting. If I do those two things, they do the creation. But Bill innovates. Now he can tell you about it.

The technology business has a lot of twists and turns, and that's why, partly, it's such a fun business. No company gets to rest on its laurels. You know, IBM was as dominant or more dominant than any company will ever be in technology. That's just not going to happen again.

They had the smartest people and all the customer feedback, yet they missed a few turns in the road. So that makes you wake up every day thinking, "Let's try to make sure today's not the day we miss the turn in the road." Let's go find out what's going on in speech recognition; let's go find out what's going on in artificial intelligence.

Let's make sure we're hiring the kind of people who can pull those things together and make sure we don't get surprised. Sometimes we do get taken by surprise. For example, the Internet came along, and we had it sort of as a fifth or sixth priority. It wasn't like somebody said "Internet" to me, and I said, "Oh, I don't know how to spell that!" I said, "Yeah, I got that on my list! I'm okay."

There came a point where we realized it was happening faster and it was a much deeper phenomenon than it had been recognized in our strategy. In that case, as an active leader, I had to create a sense of crisis.

We had a couple months where we all just threw ideas and sent electronic mail around, went on a bunch of retreats, and then eventually coalesced around a few ideas where we said, "Okay, here's how we're going; here's what we're going to do; here's how we're going to measure ourselves internally; and here's what the world should think; here's what we're going to tell them about what we're going to do."

That kind of crisis is likely to come up every three or four years or so.

Next time it comes up, remember Yogi Berra: "When you reach a fork in the road, take it!"

Growing up, who were your biggest role models and what kind of role did they play in your success?

You know, I had great parents, both of whom were involved in lots of interesting activities and would come home and talk to us about the world of business or law or politics or the charitable activities they were involved in. That made us—myself, my sisters—always think about what we were going to do out there.

They had us as avid readers, so we had pretty broad interests in reading. Scientists were a group that I gravitated to because this notion that just out of their heads they came up with neat ideas sort of fascinated me.

For quite a bit of the time, I thought I'd be a mathematician or a scientist. It was only when I got to Harvard that I started to think of this sort of all-absorbing hobby I'd had: computer stuff. I just thought, "Okay, I've got to get rid of this and decide to do something serious."

I started to realize, "You know, this is pretty serious and it's actually more interesting and more impactful than going in and trying to come up with a new theory in math or anything else." I had that dilemma for a couple of years but eventually decided that computer really was a great thing to be involved with.

Yeah, I think you're 100% on the money. Instead of calling them role models, I call them heroes, actually. If you tell me who your heroes are, I can tell you how you're going to turn out to quite an extent by this point in life.

I have been extraordinarily lucky in that none of my heroes ever let me down. The ones I came up with throughout their lives—I’ve never felt that I've been let down in any way. My number one hero was my dad, and he had a huge impression on me.

My wife, who is one of my heroes—is, you know, in terms of she's taught me a tremendous amount, and I've never seen anybody any better with human beings than she is. You can—Yogi Berra again said, "You can observe a lot just by watching."

I watched my dad; I’ve watched her; and I had a professor, Ben Graham, back at Columbia, who had a huge impact on me. I've been lucky in that I've had terrific heroes, and they have not let me down. That takes you a long, long way.

I've gone through one or two periods that were kind of tough in life, but every—everybody's had that. But having the right heroes will take you right through it.

The Internet exposes us to vast amounts of information, and in particular, children are being exposed to more and more complex issues at very young ages. Yourself being a father, Mr. Gates, I was wondering if you had any comments on the access now to information and how do we handle that?

Definitely the Internet has every kind of information you can imagine. All the worst things and best things that people are interested in are out there in great, great quantity. There's a decision a parent has in terms of do you let your kid go out onto the Internet.

One great thing about the Internet is if you set it up the right way, there's a log of exactly what the person's gone and looked at. You know, you have to decide, up to what age do you think it's legitimate that you have access to see where they're going and what they're interested in?

Personally, I'd rather see what my kid is interested in and talk to them about it than try and block altogether them ever learning anything about it. Because someday in their life, whether it's a magazine or a friend or a terminal that I don't control, if they're curious about something, they're going to find out about it.

My theory is not that my child should be okay as long as they don't hear about things. You want to have the full experience. But I think on the whole, the fact that a kid has this tool to be curious about all these topics—that's got to be a fantastic thing.

I can't improve on that. I just got to the age where Bill lets me watch the Internet alone, so I've been trying that!

That's a good story! You know, I've been trying to evangelize personal computers to Warren ever since we met, which is over about seven years ago now. It was amazing: I talked about stock quotes and spreadsheets and all these things, and in the end, it wasn't my talking at all that got him on—it was the ability to play bridge with his friends.

Now he's incredible; he's an addict!

Do you feel that technology has made businesses more efficient to the point where you can pay more for them?

Well, I'm sure technology has made more efficient, and if I thought otherwise, I would be afraid to say so with Bill sitting next to me.

But a lot of things in business, including maybe much of technology, really amounts—it has the same effect as if you went to a parade and the band started coming down the street, and all of a sudden, you stood up on tiptoe.

In another 30 seconds, everybody would be on tiptoe, you know? It'd be hell on your legs, and you wouldn't be seeing any better. There is that aspect to business—that there's a self-neutralizing aspect.

Now, Bill, tell them how much technology you'll make.

No, I think there's definitely a lift, a one-time lift where you go from not using technology well to using it well, particularly if U.S. companies are doing that better than their competitors outside the United States. So you get all this ability to communicate, and you get global scale in a lot of businesses that wouldn't have had it before.

If you look at the really big earners who are generating this 20% return on equity, a lot of them are companies like Koch or Microsoft or Boeing or GE, which are going to that worldwide marketplace. I know every one of those has been helped by technology, but that cannot explain why 10 years from now they'd be getting that type of return on equity.

There's something almost certainly ephemeral about current conditions. Capitalism tends to be self-neutralizing in terms of improvements, but that's marvelous because it means we've got better everything than we have otherwise.

But the real trick is to stand up on tiptoe and not have anyone notice it. If you can do that, then you do very well!

Yeah, Bill, Warren, the world is becoming a much smaller place, both in technology and in finance. How do you see yourselves as businessmen taking your businesses globally, and how do you view that individually as a person?

Well, I've got an easier answer, so I'll let Bill think while I get the easy answer. We don’t do it directly. I mean, our two largest commitments are Coke and Gillette. Coke has 80% of their earnings coming from abroad, and it'll be larger in the future. Gillette has two-thirds of their earnings coming from abroad, and that'll be larger in the future.

So they are participating in a worldwide improvement in living, and they'll continue to participate. So we do it by piggybacking them. I can sit in Omaha, you know, and let Doug Ivester at Coke fly all over the world and do a tremendous job doing it.

Bill has to get out there and do it for Microsoft, and I'll let him tell you how.

One great thing about our business is it is global. What do you need in a spreadsheet about the same thing in Korea and Egypt as you need in the United States? The PC standard is a global standard. We have to do some adaptation for the local languages, and that's a fun part of our business—understanding bidirectional languages and the large alphabets that you have in Chinese, Japanese, and Korean.

Over the years, we've gotten very, very good at that. In fact, our market share is much higher outside the United States than it is inside the United States because it's relatively hard to set up subsidiaries, understand local conditions, local distribution, and relationships.

Most of our competitors are in the U.S. and aren't as good at doing international business. We thrive even better in these other countries. Most of our growth will come from outside the United States. The United States will get to the point where it's largely a replacement market. Most homes and business desktops will have PCs now.

That doesn't mean they won't replace them; that they won't want better software that can see, listen, and learn, but outside the U.S., we still have that early slope phenomenon.

So it's very much a global, global business.

When you think about it, many of you are probably too young to remember with clarity anyway—15 years ago, this country almost had an inferiority complex about its ability to compete in the world. With software and the whole development of the computer, now the rest of the world is looking to us, you know?

And, you know, Bill has played a big part in that. He has contributed in a major way to a change in our attitude about this country and the world's attitude about this country.

So what impelled you to make a trip together to China in 1995 and what's your perception before and after the trip?

And most next question is, what has that trip affected your global business decisions in that region since?

Well, we went to China for a lot of reasons—partly to relax and have fun. We found a few McDonald's there just so we didn't feel too away from home. It was also exciting to go and see all the changes taking place. I mean, it's so amazing what's going on there.

We saw different parts of the country, got to see some of the leaders. It's a market that, you know, Microsoft had already been investing a lot in. We've upped that quite a bit since then, although about three million computers get sold every year in China. People don't pay for the software.

They will, though. As long as they're going to steal that, we want them to steal ours. They sort of get addicted, and then we somehow figure out how to collect sometime in the next decade.

So, you know, it's a great place to be involved in, and it was a lot of fun, which was, I guess, the key goal. My family was amazed. I went—I never traveled more than maybe, you know, the outer reaches of the county in Nebraska, and I just went and had a terrific time.

And also confirmed my feeling that there were going to be a lot of Coca-Cola sold there in the future. I told everybody over there that acted as an aphrodisiac!

I don't know, as two of the most successful business people in the country, what role do you see for yourselves in giving back to your respective communities, and how do you use your influence to get others to give back as well?

Well, I think we both have quite a similar philosophy on that. I know in my own case that 99% plus will go back to society, and that'll actually count everything that my family and I have lived on during our entire lifetimes.

Just because we've been treated extraordinarily well by society, you know, I'm lucky. Bill said if I'd been born a long time ago, I'd have been some animal's lunch. You know, I mean, I don't run very fast!

I'm wired in a particular way that in a market economy, big capitalist economy—lots of action—I’m well adapted for that. I'm not adapted for pro football; I’m not adapted for bowling there. I just happen to be in something that pays off huge in society.

Basically, I get the fun of playing around with that while I live, but it will all go back to society. I think it'd be wrong to be otherwise, frankly. If I'd been dropped down in, you know, in some remote country or almost any other place in the world, I wouldn't have been worth a damn.

I mean, I am here because of a tremendous society that surrounds me and the fact that I happen to be well adapted to a certain part of it. All of it's going to go back to society, and I know Bill feels very similar.

No, I think that's a great philosophy, not to mention the fact that passing along lots of money can be a bad thing for the people who receive it. They might not think so at times, but I've never put it to a vote.

I really don't think it's— I don't think it's right that the quarterback of the Nebraska football team next year should be the eldest son of the quarterback of 22 years ago, nor do I think that our Olympic team in 2000 should be chosen as to be from the same family that was on the Olympic team in all the respective sports in 1976.

I mean, we believe in the meritocracy when it comes to athletics and all kinds of things. Now, why not have a meritocracy in terms of what you go out into the world with in terms of productive goods?

Let the resources flow to those who use them best, but then I think they ought to give them back to society primarily when they get through. I do not believe in a divine right of the womb. I do not think that, you know, if you select the right womb, that you're entitled to do nothing the rest of your life.

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Hi. There's been a lot of discussion about how the information age is revolutionizing society, and I would like to get your opinion about which countries, industries, and companies are best prepared to take advantage of these changes and what factors would account best for their success.

Maybe I'll start with that. If you look at what's happened in personal computers or what's happened in business in general in terms of how we allocate capital and let labor move around, the United States has emerged in a very strong position.

So the first beneficiary of all this information technology will be the United States. There are a few other areas, like Singapore, Hong Kong, and the Scandinavian countries, where they're adopting the technology at basically the same rate that we are.

There are a few countries that, even relative to their level of income, are going after the technology because they believe so much in education—in Korea and many parts of China. We see incredible penetration of personal computers, even at very low income levels, because they basically decided it's a tool to help their kids have access to information and get ahead.

The whole world is going to benefit in a big way. There'll be this shift where instead of your income level mainly being derived by what country you're in, it'll be derived by what your education level is.

So today, a PhD in India doesn't make nearly as much as a PhD in the United States. Well, as you get the Internet allowing services and advice to be transported as efficiently as goods are being transported through shipping and all those things, then you'll get essentially an open market bidding for that engineer in India versus the engineer here in the United States.

That benefits everyone because you're taking better advantage of those resources, and people are better off. So the developed countries will get the early benefit from these things.

In the long run, the people who are lucky enough to get a good education in developing countries will actually get an absolutely the biggest boost from all these things that go on. I didn't get it at first, but it’s huge and it will change the world.

The technological revolution in dramatic ways and, quickly, ironically, our approach to that is just the opposite of Bill's. His is the right one for the world; it's the right one for me.

I look for businesses where I think I can see what they're going to look like in 10, 15, or 20 years. We don’t own any, but if you take Wrigley’s chewing gum, I don't think the Internet's going to affect how people chew gum.

You know, and Bill probably does, but I don't think it's going to affect the fact that Coke will be the drink of preference and will gain in per capita consumption around the world. I don't think it'll change that.

Whether people shave or how they shave or the fact that they like a better shaving system, as the Mach 3 is going to be very shortly on my dad. We are looking for the very predictable.

And you won't find the very predictable in what Bill does. You'll find more exciting things—things that are going to change society more.

And so I have a little different opinion. I, as a member of society, applaud what he's doing, and as an investor, I keep a wary eye on it. That's a different approach to investing. Most people think of that all as opportunity, and it has been opportunity. Every Internet stock has gone crazy here in recent months, but I don't know how to look at one or the other and tell the winners.

I think this is an area I agree strongly with Warren on. I think the multiples of technology stocks should be quite a bit lower than the multiples of stocks like Coke and Gillette because we are subject to complete change in the rules.

You know, I know very well that in the next 10 years, if Microsoft is still a leader, there will have been at least three crises that we will have had to really prove our excellence in.

I accidentally, once, when we were on a panel with the CEO of Coke, said something like, "I couldn't run my business when I get to be 60 because it's such a hard business, not like Coke!" And I offended him without meaning to.

You won't offend me!

I want to be in a business I can run when I'm 100 because I plan to do it!

I'm going to retire about five years after I die.

Maybe starting a new company is very risky. How do you determine when is the best opportunity to start a new company, and how can you get people to support you?

When I started Microsoft, I didn't think of it as all that risky. I mean, I was so excited about what we were doing. It's true I could have gone bankrupt, but you know, I had a set of skills that were highly employable, and in fact, my parents were still willing to let me go back to Harvard and finish my education if I wanted to.

You've always got a job with me, Bill. The only thing that was scary to me wasn't quitting and starting the company; it was when I started hiring my friends, and they expected to be paid.

And then we had customers who went bankrupt—customers that I'd counted on to come through. And so then I got this incredibly conservative approach that I wanted to have enough money in the bank to pay a year's worth of payroll, even if we didn't get any payments coming in.

And I'm almost true to that the whole time! We have about $10 billion now, which is pretty much enough for the next year.

Anyway, you know, if you're going to start a company, it takes so much energy that it better overcome your feeling of risk. I don't think that if you're going to start a company, you should do it at the start of your career.

I think there's a lot to be said for working for a company, learning how they do things. You know, if you're young, it's hard to go lease premises. They made that hard for me. You couldn't rent a car when you were under 25 at the time, so I was always taking taxis to go see customers.

The people would—you know, people say, "Well, we're going to go have a discussion in the bar." Well, I couldn't go to the bar. But you know, that's fun because I'll tell you when people are first skeptical and they think, "Oh, this kid doesn't know anything!"

Then when you show them you've really got a good product, and you know something, they actually tend to go overboard and think, "Whoa! They know a lot! Let's really do an inedible amount with these people."

Our youth, at least in this country, was a huge asset for us once we reached a certain threshold.

It is hard to hire older people because they'll be a little conservative about whether they should come and take the risk. It took three or four years before we could go out into the normal sort of employment pool. But those PRs that come starting the firm, you better think of those as part of the pleasure part of the challenge that is part of the excitement.

I was curious what each of you felt was the best business decision you made throughout your career.

The best what? Business decision?

I think just getting in—jumping in the pool, basically. I mean, I've always enjoyed what I've done, and a few things have worked out very well. The nice thing about the investment business is that you don't need very many. You'll see plenty of times when you get chances to do things that just shout at you.

The thing you have to do is, when that happens, you have to take a big swing. I mean, there is no time to be reading a book on the theory of diversification! I mean, that is a time to put very significant—when you find something where you know the business, that's within your circle of competence, you understand it, the price is right, the people are right, then you know you take your—put it out of your mouth, and you barrel in.

We were talking at breakfast this morning about, of all Warren's investment decisions, which was the worst decision, which it's amazing. I mean, they're tough to find because he—he's—you know, the track record is unbelievable.

But I think we decided that by some metric, the buying the company that his company is named after was probably the worst investment decision.

That's true. I mean, we went into a terrible business because it was cheap, and what I referred to as the used cigar butt approach to investing: you see this cigar butt down there—it's soggy, you know, it's terrible—but there is one puff in it, and it's free.

And that's what Berkshire was when we bought it. I mean, it was selling below working capital. Actually, buying Berkshire Hathaway—buying control of it was probably the biggest single bad decision that I've made.

And then I made all kinds of decisions that have cost us billions of dollars, but they've been mistakes of omission rather than commission. I mean, there were businesses that we knew enough to buy a lot of—I don't worry about not buying Microsoft because I didn't understand that business.

I don't understand Intel. But there were businesses that I did understand. Fannie Mae was one. I mean, I made a decision to buy it, and I just—I didn't execute, and we would have made many billions of dollars on something that was within my circle of competence, and I didn't do it.

You don't see that in conventional accounting; it doesn't record that, but believe me, it happened.

In my case, I'd say my best business decisions really have to do with picking people. You know, deciding to go into partnership with Paul Allen is probably at the top of the list.

And then subsequently hiring a friend, Steve Ballmer, and