Warren Buffett Interview - India
For the first time in India and exclusively in NDTV Studios, the man who is better than any other at making money and giving it away, Business School shooters, please welcome Warren Buffett.
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Well, there are times in your life when you are really happy to get to work, a tap dance to work like the gentlemen I have here. None is one of those moments when I'm really thrilled to be a journalist because with me are a whole lot of students and the one and only Warren Buffett. And I must say that I'm equally very, very thrilled to have one of the most modest, humble, and good human beings that I've met, A.G.
We're going to all get your questions ready, and please be impressive—right short, sharp questions, and be tough. This is your one chance at all; anything goes. He says you can ask anything, but just I'd like to that while they're thinking, you gave an interview or press conference three hours after landing in India, and you said it's only three hours, and I really can't really comment much.
But you're a man who looks more than just the quantitative numbers: 8 percent growth rate, 10 percent growth review. You have a qualitative feel. We've been a little time here. What are your impressions of India?
Well, it is much as I expected. I mean, I expected to see a booming economy which I've seen, and our particular plant that I visited in Bangalore is just expanding very rapidly. But what I bet I've had a chance to meet a lot of people, and I've made some new friends, and a few old minds invited over to our annual meeting in Omaha. I told them, "Be sure and vote for me if they come," but it's been nothing but fun so far.
But it's been a hectic schedule, and I use it. It's busy, but I get paid by the hour, so it's like, well you know these kids, they tend to embarrass me because they're much, much more comfortable. I think that you'll agree with me this younger generation in India is much more competent than our generation. Is it the other way around in... I got that the younger generation are a little... they got everything they really need; they're not as hungry.
So it's a reversal that you've got a great existing generation and a not so hungry new generation. We got a whiny generation like us but a really hungry young generation. I'm going to meet with 48 schools this year, universities, a couple outside the country, but 45 of them were from America, and I love it! But I'm seeing... I'm seeing people that kind of remind me of myself when I look out there. There's, you know, they got lots of energy. They're smarter than I was, but they're looking forward to doing the same thing I've done. They look at me, and I think, "I got a peek into it; I can do it."
Yeah, it must be easy! When they look at Gates, they don't think he knew what he did, but when they look at me they're... "Anybody can do that!"
Okay, let's take our first question, and you could ask either of the two gentlemen here a question regarding the markets in India, the equity and bond markets. So what financial innovations would you recommend for the Indian markets to be more developed?
Where are you from? Can you just... okay, I'm from Iron Band Lord. I am sounding like it, I know.
I really don't know your market share that well. I mean, I look at individual companies, and if I find a business... what I like to do first is I like to value the business before I even look at its price because I look at the price of the stock; it will have some impact on my valuation if I like to go in without having the faintest idea what the stock is selling for.
And I look at a stock as a piece of a business. So it's what the business is selling for. So I look at the business first and value it, but I don't really care about a lot of innovations in a market. In the end, I just want to buy a piece of a business that I feel has a good future, honest and able management, and buy it at the right price.
And whether there's an options market attack or any of that sort of thing, it really has no impact on... we're in the business of buying businesses in truth, and we buy some of them in their entirety. We like to do that particularly, but some of them we buy part of. We own part of Coca-Cola, but we own all of 70-some businesses.
When you say you don't even look at the stock market, how often do you look at the price of...?
I would say that I probably look at the price of Berkshire once every two weeks. It doesn't make any difference. I am... Warren sold a chef before. Two years... and somebody said, "Wasn't it a good time to sell Berkshire?"
I said, "I don't know. I've never sold." Or maybe, you know, anytime I'm interested in the price of a stock is what I'm... is well, I'm either buying or selling it. And if we're buying one stock right now, I hope it goes down, obviously, because I've got billions of dollars worth of left to buy.
And most people like their stocks to go up; I like our stocks to go down because what I form my own independent judgment of what they're worth, and the cheaper they are, the better it is from our standpoint.
Absolutely. Clients from Iron Bangle and from all the students here, we like to thank you for the knowledge that you have been sharing all across. I mean, the engine around would have taught to you alone, but you have taught many students across the globe, and I think we are very privileged to have you here in India.
My question is regarding the moats that you talk about a lot of times. X, a moat of Coca-Cola, the See's Candies that you bought. How do you identify them? I mean, it's easy exposed now; you sit here, you say that Coca-Cola's moat is expanding, but when you bought it, there were a lot of suspicion where it becomes... we will make it through a lot.
So how do you get the conviction to go out and buy a stock when the market is against you as well?
If you can't recognize the moat, it doesn't mean there isn't one there. It may be just you can't recognize it, and then you go on to the next one. You don't have to buy any given stock; there's thousands and thousands and thousands of stocks trading it just on the... just in the United States or on the New York Stock Exchange, and you don't have to be right on everyone.
You only have to be right on the ones that you buy. And so there are times when I can see there's a moat around a product. Take Coca-Cola. I mean, that... you know, if you've been selling a product since 1886 and every year you saw more than the year before, and finally you're selling in terms of all Coca-Cola products, 1.6 billion 8-ounce servings a day, you've got a moat on that product.
Now, the moat is partly the taste of the product itself, but it's also the association that comes to your mind. If I say Coca-Cola, everybody in this room has something in their mind about it. What we hope with Coca-Cola is that it's something favored.
So we want to be around you when you're experiencing moments of happiness. So we are going to be at the Olympics, at the World Cup, and we're going to be at Disneyland, in all kinds of places where you're happy.
And that, over time, we'll build something in your mind about a product. I can name a hundred other soft drinks, and there's nothing in your mind about them. And that presence of mind with billions of people all over the world having something favorable in their mind about that product makes it huge over time.
We do have this candy company, See's Candy in California. If a 16-year-old in California buys a box of that candy and takes it to the girl that he's sweet on and presents it to her, her family, before they go to the movies, and she kisses him, we own him!
I mean, forever. He is not going to try another product. That's a moat. And every day, with every product the moat widens or narrows, and when our people that are selling See's Candy smile on the customer after standing on their feet for eight hours, it widens the moat. If they snarl at them, it narrows the moat.
So every single activity, and we look for businesses with very durable and wide moats. If you name a company out of the blue, I can't tell you whether it has a moat or not, but all I have to do is be right about the ones I look at.
How much you actually get involved in advising them on... B's a stick?
Well, I sent a letter to the managers, and I talked to them about widening the moat. I say it isn't the question of the earnings per share this quarter, anything like that. Any business that has a widening moat is going to make a lot of money over time, and they are guardians of the moat.
I say a great business is like an economic castle. And in it, if you have an economic castle in capitalism, there are going to be a bunch of people who are going to try and take it away from you. So I need a knight in that castle—the manager who worries about protecting that castle all the time.
I want this moat around, and I want that moat to get wider. It may be service; it may be better product design; it could be what's in their mind about the product, a consumer product. But I want that moat to be widening, and I want people to toss sharks and piranhas and octopus and everything into that moat to keep away those competitors because they're going to be coming, and our managers are charged with that.
I tell our managers... pretend that this is the only business that you and your family can own for the next hundred years. You can't sell it, and you've got to make this one work. That means every day thinking about what's going to make it a great business over a hundred years.
So Jesus similar in lessons to you, does the advising model just write a letter to you once in a while?
No, no, he advises me a lot. I still think it's not enough, but no, we have conversations typically every evening, and almost all what I do, I have a chance to run it by him and get the benefit of his advice and wisdom, and quite honestly, that is the biggest perk of my job.
But he doesn't need me. I love to talk to A.G., so we do talk every day. I talk to him more than any other manager we have by far. Yeah, he doesn't need me, but he is in an interesting business, and so I like to talk about his business, and I like him personally, so we talk about personal things as well.
And that's something about you, which everybody says you have a tremendous personal relationship with so many people in your organization—your friends.
Well, I've got the ultimate luxury. I get to associate with people I want to associate with. So if I meet somebody who wants to sell me their business, and they cause my stomach to churn for some reason, yeah, I don't have to buy it.
I mean, yeah, and I can't be fired. I've got a friend who likes owning a hundred percent of his company because he likes to look in the mirror and say, "All my shareholders love me." Well, I look in the mirror and I say, "Enough of my shareholders love me," so I get... I get to choose who I associate with. That's a terrific luxury in life.
And yeah, and so when I found A.G. back in 1985, and you know, I feel like I've discovered a gold mine or something. And he's somebody that I am attracted to personally; we're good friends. You know, that makes my life better, makes Berkshire more valuable, it makes my life better on a personal level.
And we've got dozens of managers; there's one right here with me on this trip, you know, that Kathy Baron-Tamraz who runs Business Wire has three offices in India, and it is a joy to work with Kathy. I mean, my life is better because she's part of Berkshire; Berkshire's better because she's part of Berkshire.
It also, but I get that—I have that option.
I'm Chicago, Stefan St. Stephens, and studying economics. Now, a long time ago, I saw the stock where you did— you'd give a talk at an MBA school, and you ran the students through an exercise when you asked them to choose a classmate in which they would invest ten percent and another classmate on whom they would go ten percent short. And you mentioned that Ben Graham did the exercise himself.
So I was wondering if you ever did the exercise, and if yes, then which habits would you choose to develop, and which ones would you choose to let go of?
Well, if you look around you at the people you admire, you know, they have certain qualities. I mean, you've got friends; why do you like them? You know, generally, you know that generally they have an upbeat attitude on life; generally, they're generous people; they're humorous people; they're people who do more than their share; they're people who are thinking about something nice they can do for you, and all those qualities attract you.
And none of those are our innate adverse. I mean, you can acquire those. And then there's other people to turn you off, you know, and they have habits; they take credit for things they didn't do; they don't show up on time—whatever it may be, they're a little dishonest about things.
And if you're looking at your life at a young age like you are, and you can choose what kind of a person you can be, why not be the person you admire rather than the person you can't stand? It's so simple!
So just write down the qualities you like; take your five best friends. Why do you like them? Just write down those qualities, and you will find there's no quality there that you can have yourself. And similarly, with the five people you can't stand to be around, put those things down to turn you off about those people.
And if they turn you off about them, why should you possess them? You go to... it's so simple! You know, it's not that... it's not like something complicated to give you.
I think you should be learning education is investing in the stuff.
No, but it's enormously important to have people work with you in life. You're going to work with you in life if they like you, and they may occasionally... I mean, if you're in the army or something, you may work for somebody that you don't like, but by and large, you're going to get the best out of people if they feel good about you.
And it's just so easy, but you've got to develop the habits early because you can't say, "I'm going to suddenly become a terribly attractive person when I'm 60." It just doesn't work that way!
So pick up the right habits now, and I will guarantee you if you actually just write down those qualities and think about it, you will find you can have every one of the attractive qualities, get rid of the ones that are negative, and your life will be different.
That's really good and simple advice, but it's quite organized. Are you an organized person? Like, you write a list.
How are you?
Well, my boss, Ben Graham, I had this hero, one of my heroes in school, and Ben Graham literally did that when he was a very young man. And I read about it, and I talked to him about it subsequently, and the truth is, everybody liked Ben Graham.
And that it wasn't because he was smart about investments; it wasn't. It was because he was the kind of human being. But you know, you choose what kind of human being you're going to be, and then other people choose whether to associate with you or not or to be led by you.
One of the great leaders in American business is a fellow named Tom Murphy that for many years ran cap cities. Every time I saw Tom Murphy, I felt to myself, "What can I do for him?" because he had done so much for me, and hundreds of people, his employees felt that way, his directors felt that way, his friends felt that way, and we still feel that way.
Now that is a wonderful way to go through life—people love the guy, you know.
So is he very organized, very disciplined, or is he kind of as wild as some of us are?
He is very disciplined; there is no question about that. He is the most rational, disciplined human being that you can come across without letting the emotions come in the way in terms of making... sounds very emotional.
He is emotional; he is sensitive at a very personal level, but by the same token, that doesn't come in the way of rationality and understanding. You know, I don't think one needs to come at the expense of the other. You can be both emotional and rational.
Very often, people make the mistake of trading one off against the other, and I think Warren does a great job of balancing both of them and independently does a great job on each dimension. Amazing!
Actually, this young man at the right in the front row here.
Yes, it's published by my name is Norbert Sharma, and I'm a media student. I'd like to ask you—you have been a symbol of like email success, but what is your greatest regret in life so far?
You know, I really never... I feel I've been so lucky. I mean, here I was, 1930, you know—I could have emerged from any womb in the world, right?
But the womb I emerged from will have to be in the United States, which offered enormous opportunity. Today, my life would have been way different if I'd been born someplace else. I was wired in the right way for a capitalist market system; it had nothing to do with anything I did myself.
I was a male, which gave me an enormous advantage in the United States back in the 30s and 40s, and having been born a female would have been exactly otherwise. The same qualities. So I won what I called the ovarian lottery, you know, very early on.
Yeah, it was... that's what it is. It's an ovarian lottery. I mean just before you emerge, you get this ticket, you know, and it may say black or white; they say male or female; maybe it says smart, dumb—whatever it may be. Nothing to do with, you know, my qualities or you know, anything else.
And I got very, very, very lucky, and having been as lucky as I had been—lucky in marriage; I've been lucky in professor I've been looking at teachers, looking in all kinds of ways. I just... I never look back and think about anything that could have been different.
I'm looking forward to tomorrow. I mean, there's gonna be a lot of good things happen in the rest of my life, and there'll be something dubbing mistakes. I mean, I'm going to make mistakes that don't bother me. I don't wanna make any mistakes that jeopardize in a significant way anything that's important.
But I try and live your life totally free of mistakes; that's the life of inaction, and I like to believe in people, and occasionally you're going to be disappointed if you believe in people.
But I think you're way better off going through life trusting them. I mean, with some discretion, but still trusting people than having a big shell around you and not letting anybody inside. So I don't... I really... I can't think of any really particular regret I have.
No, that means you don't look back, and you're more forward-looking kind.
Well, it would be wonderful if my father lived longer—things like that. But those are the things you did know.
I even... the things I did that were dumb worked out not to be a pushover in life. I mean, I... I got turned down by Harvard; I wouldn't marry the woman I did about got accepted probably.
I mean that everything works out pretty well, you know? I think there's a sort of Hindu underlying train you because everybody here believes that everything eventually is preordained and works out for the best.
There's a young lady in the back row there.
I am Jacques Tati Betras from St. Stephen's College Delhi. I have a question: a certain portion of your investment is invested in the private equity sector; however, personally, you seem to be very critical of this particular sector, so there seems to be a contradiction. Can you explain?
Yeah, I'm not sure which investments are you thinking of in terms of private... we've never put any money with a private equity firm.
The Goldman Sachs investment, which was indirectly in private equity, and you have a very critical approach towards the private equity sector.
Yeah, I don't think of our investment... we bought a five-billion-dollar preferred and some warrants, but I don't look at that as a private equity investment either. That was an effect of marketable security. We agreed to hold the problem, but that was a... it was an investment with Goldman Sachs, but I would not... I would not consider that a private equity investment.
I think of private equity more in terms of taking firms private, usually with a fair amount of leverage, and then reselling them to the public later on, and I can't think of any instance where we've done that.
We've certainly never given any money to a private equity firm. We've never... that I can remember participated with a private equity firm in taking a firm private. We've never bought a business with the idea of reselling it.
You know, the private equity firms have an exit strategy; we have an entrance strategy, and our exit strategy is to say forever.
So it... I think we're sort of 180 degrees away from private equity.
I think her question on Goldman Sachs was you helped them out, and now they want to pay you back; do you feel like you upset about that though?
No, that... I mean, they... I'd be... I'd be very disappointed with them if they did every day.
If they didn't want to pay us back, they're paying us 10 percent a year. Yeah, that's $15 a second—tick, tick, tick—$15 just as we go along.
So I'm hiding from them now; they're going to... they're going to call our preferred on April 18th, and I'm hoping to have to find me personally, and I plan to go into a cave someplace and never find me, ah, the day... it's very expensive money from their standpoint.
They can get rid of us by paying us five and a half billion dollars for the preferred. We still have the warrants left over, what you're worth a couple of billion dollars.
They can't get rid of the warrants. The warrants expire in about two and a half years of the date. They have no rights in respect to getting rid of the warrants. They do have the right, but all of which was negotiated at the time we bought it.
They have the right to get rid of the preferred by paying us five and a half billion dollars, and they're smart people, and they're doing it just as fast as they could. The Federal Reserve kept them from doing it. They could have paid us off a long time ago.
They have not needed our money for a long time, but the Federal Reserve there were 19, I think, companies that they really have dictated both dividends and purchase policies to. Goldman Sachs was one of them, so I've been hoping the Federal Reserve would go on vacation for a year or something. Unfortunately, they gave the green light to Goldman Sachs a few days ago.
But the deed was... do you think that was a notional decision, the Goldman Sachs one, at that time, or was it not at all?
It was a very rational decision calculated to the last decimal position, and like a lot of what we do, it was a win-win for both sides.
I mean, what made the comments was the expense of money for them, but at the time when the investment was made, I would submit it was a very cheap investment for them. They couldn't have gotten any place in the world, besides the fact they got the reputation factor working for them as well.
Appreciation helps a lot, sure, sure, but even that kind of money, in the amount that was given to them at that point in time, I'm sure they could have never got on the same terms that Warren offered them.
And once Warren offered them, everyone wanted to jump on the bandwagon.
Yeah, but I don't think that a responsibility when you invest, and everybody says, "My God, this must be a great stock."
So you're not only investing for yourself; you're kind of sending a signal around the world.
Well, we try to invest quietly. I am buying something right now in significant quantity, so we're not going to talk about it now. We're legally required at certain points by the Securities Exchange Commission and perhaps other regulatory authorities as well, but that's the primary... the primary one.
And we have to disclose certain things at certain times, and that is usually the point at which people find out what we've been doing.
Well, we do not go around touting things we do... we've done good.
I move it from... I am in dot recently talked about capitalism and the advantage of us in terms of that. So what steps should India take to reduce that gap between India and us?
I don't really... I don't know India remotely as well as everybody else in this room does. I... it would be... it really would be presumptuous to me to give advice.
I give advice sometimes in the United States, and people think I'm way off base. So, but to talk about India or to talk about Korea where we've been on this trip... I... I'm just not that well as what I've informed to offer you any good ideas.
But do you feel that there is a strong entrepreneurial spirit because... that absolutely.
When A.G. came of it in 1985, about two... two years later, I wrote his parents right here in Delhi; I wrote his parents and said, "If you have one more like him, send him over, because then I'll own the world."
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I'm Vinita Hell from I'm Ahmedabad. So, as you all know, you are an extremely intelligent person. At the same time, you are very disciplined with your investing approach.
So what makes Warren Buffet a great investor? Is it the intelligence or the discipline?
Well, I think it’s both to some extent. I was wired for capital allocation, but I didn't tell me about it. People were born to... I think one day the good news I can tell you is that to be a great investor, you don't have to have a terrific IQ.
You know, if you've got 160 IQ, sell 30 points to somebody else because you won't need it in investments. What you do need is the right temperament. You need to be able to detach yourself from the views of others or the opinions of others.
You need to be able to look at the facts about a business, about an industry, and evaluate a business unaffected by what other people think. That is very difficult for most people.
I mean, most people have... sometimes a herd mentality which can under certain circumstances develop into delusionary behavior. I mean, you saw that in the internet craze and so on. So I would say that I'm sure everybody in this room has the intelligence to do extremely well within investments.
They're only 160 IQ. Well, they don't need it. I'm disappointed that they haven't. So long, so long. Yeah, and the 160s won't beat the 130s at all necessarily; they may, they may, but I mean they do not have a big edge.
But the ones that have the edge are the ones who really have the temperament to sit, look at a business, look at an industry, and not care what the person next to them thinks about it and not care what they read about in the newspaper, not care what they hear about on television, not listen to people who say, "You know, this is going to happen or that's going to happen."
You have to come to your own conclusions, and you have to do it based on facts that are available. If you don't have enough facts to reach a conclusion, forget it!
You want another... excellent that; so you have to also have the willingness to walk away from things that other people think are very simple. And that's a lot of people don't have that.
I mean, I don't know why it is, and I've been asked a lot of times whether that was something that you're born with or something you learn, and I'm not sure I know the answer, but that temperament is important.
That's very good advice; to be detached from all the noise—that's completely... you don't just... couldn't just go with the herd.
If you don't know the answer yourself, don't expect somebody else to tell you, and if you don't know the answer yourself, and somebody else says they know the answer, don't let that fact push you into coming to a conclusion about something that you still don't have to come from.
So we're actually going to launch a campaign searching for the hero of the stock market, but not the well-known one. It could be anybody here around the country asking people to kind of assess things. What advice would you give anybody who wants to be India's hero of the stock market?
Well, they just have to learn to value businesses, and if you can... we're not a value business, and your value comes to X and that's selling for half X, and you know what you're doing, you're gonna make a lot of money.
It won't make it tomorrow or next week necessarily, but you'll make it at some point. And when you think about it, I'll talk in terms of the United States market, but you're looking at twenty trillion dollars or something worth of stocks; you're looking at businesses that start with Abbott Laboratories that end up doing it with some company that starts with a CDN.
But there's thousands and thousands and thousands of businesses. You don't have to be right on anything except one, and their prices change every day. If you look at the typical stock on the New York Stock Exchange, its high will be perhaps, for the last twelve months, will be a hundred and fifty percent of its low.
So they're bobbing all over the place, and all you have to do is sit there and wait until something is really attractive, that you understand, and you can forget about everything else. That is a wonderful game to play in.
I mean, there's almost nothing where the game is stacked in your favor like the stock market, and then what happens is people start listening to everybody; I talk on television or whatever it may be, you're reading papers, and they take what is a fundamental advantage and turn it into a disadvantage.
But there's no easier game than stocks, but you just have to be sure you don't play too often.
A.G. Buffett's son sneaks it, it sounds so simple with this game stacked in your favor. But to be the hero of the stock market, is it that simple?
You know, it is that simple as we just outlined. The only thing... and he talked about it earlier that I would superimpose on what he said is the discipline and the ability to say no.
I see it in my own business, in the insurance business; I'm not smart enough to dabble in the stock market, but in the insurance business as well, more than finding the right deals, if you have the discipline to say no to the deals that you don't feel are properly priced or meet your requirements and to say no—the discipline to say no.
I think if you have that, and you're not willing to let people steamroll you into saying yes, if you have that discipline, that's more than 50 percent of the battle.
Don't do anything in life where if somebody asks you the reason why you're doing it, the answer is, "Everybody else is doing it."
I mean, if you just cancel that as a rationale for doing any activity in life, you'll live a better life, whether to the stock market or any place else.
I've seen more dumb things and sometimes even, you know, illegal things but justified on the basis of "Everybody else is doing it," and you don't need to do what everybody else is doing.
It's maddening! During the internet craze for Skype trades, you know when the bubble was going on, and here's your neighbor who's got an IQ 50 points below you, you know, and he's making all this easy money, and your wife is telling you, "You know, this jerk next door is making money."
You know, and you're smarter, and he isn't. Why aren't you making money?
You just have to forget about all that sort of thing. You just have to do what works, what you understand, and if you don't understand it and somebody else is doing it, don't get envious or anything of the sort.
You know, just go on and wait till you find something you understand.
That's solid advice, but seeing no to somebody who comes to you and says, "My life depends on it"—tough to say no sometimes?
Well, I'm not sure whether their life depends on your investment... so I'm not... I would say they're in the wrong position; my life depends on not doing dumb things!
It's tough to say no sometimes, you know? A lot depends on the corporate structure that you're a part of. If you're a part of a corporate structure where the boss is comparing you to the rest of the market and saying, "Forget your wife," you know, so if your boss is comparing you with the rest of the market and saying, "You know, these guys are going up and they're writing more premiums than you are, what the hell are you doing?"
You know, that makes it very difficult for you to maintain that rationality and to maintain that discipline. But if you work for a setup like ours, where the boss understands the business, you know, and it becomes a lot easier to be very rational and to be very disciplined.
I mean, a lot of people give me credit for being very rational and being disciplined, but I think the real tailwind is we... I work for a company, work for a boss, work for a board who understand the business, and they're not comparing me with the short-term performance of some of my competitors.
They're looking at me on an absolute basis, which makes it easier for me to be disciplined and rational.
If I call up A.G. and he hasn't done anything for a month and everybody else is writing a lot of business, I say, "You know, funny thing: I don't find anything to do for a month."
Ever—that is the actual true story.
Girl, yes, in the second row there on the left here.
I'm sure you’ve known this.
Muffin fancy since college and my question to you, sir, is despite being good friends with Bill Gates, we don't see you investing much in IT companies. Why is that?
It's awesome because I don't have the faintest idea which ones will be the winners. I know there will be winners, but I didn't know... I met Bill in 1991, and he'd been pretty successful up to that point, and he kept me... he was successful.
But I didn't know what his company would do, look like in 10 years. I didn't know... I didn't even know Google was going to exist; I didn't know what Oracle is going to... I didn't know anything about what the industries would look like.
I knew that you... I know the chewing gum business would look the same ten years later. The Coca-Cola would look like how it would look ten years later.
It wasn't a negative view; it was simply an acknowledgment on my part that I did not know enough about the businesses in the future to foresee who the winner would be.
And it would be exactly like if you went back to 1910 when there were probably at that time a thousand auto companies in the United States. Ford was going to be an arm swing successful; General Motors was going to be a normally successful, and nine hundred plus of them were going to disappear, and I wouldn't have known which one was going to be the winner.
I know who's going to be the winner in certain businesses, and when I know what I back it up big time.
I mean, we also believe in making big bets when we know we're right. I mean, it... the idea of doing a little of this, a little that, a little that, I call that the Noah's Ark approach.
I mean that we do not want to do... when we get through with two of every animal, we want to concentrate on things that we really understand. When we find something good, we take a big swing at it.
You're also very good at kind of looking at long-term trends globally; we're now seeing commodity prices rising, oil prices rising. Where do you think—also, you believe in this peak oil theory?
Well, we're... sure, there will be peak oil. We in the United States, and weasely lose done... probably don't know why some—it is finite.
And we're taking 86 million barrels of it out of the ground every day, and there was a lot there, and there was a lot more than we thought back when we discovered oil in the 1850s or whatever it was.
Curled right came up with it, but it's finite. In the United States, we literally have, hard to believe, five hundred thousand producing oil wells now. That’s a lot of straws to stick into the ground!
We've found the easy oil in the United States. We haven't found the easy oil necessarily everywhere else in the world.
But there will be a point at which oil production starts falling, and the world would better recognize that in terms of commodity prices generally—whether it's copper, cotton, or soybeans, they're all advancing.
And you know, we may be sowing the seeds of significant inflation in the United States with the extreme... but required, in my view, but at the time we have pushed monetary policy as far as you can push it.
We've pushed fiscal policy to an extreme degree, and I think that was warranted. But every dosages of medicine can have consequences, and the after-effects could still be felt.
We have... we've given the patient a lot of medicine post the fall of 2008, and the medicine could have consequences.
The young gentleman in the third row there with the light insight shot here.
Hello, sir. I'm sorry, Tom; I am from Calcutta. I think this is a question which all of us want to ask. Although everybody is talking about India shining and India booming, you have taken a position and have stayed away from India.
As students, we would like to know what are the things that you are looking at which have made you take such a position?
Well, I made a mistake, but again I didn't understand the companies that well over here. I do not have encyclopedic knowledge or anything remotely approaching that on the businesses around the world.
And I would have been a lot better off if I spent more time investigating some companies outside the United States, but you know, that's one of the mistakes I made, and I'll make a lot more.
Well, the only thing I want to add to that: you use the phrase "he has stayed away from India," or "he has stayed away from India." I think India has stayed away from him more than he's stayed away from India.
Because his investment style is not so much as to identify a product or market segment and then go in and zero in on that. It's more people serve him up with opportunities, and he evaluates those opportunities and then says yes or no to them.
Unfortunately, we haven't had too many opportunities that have been served up to him that would be a win-win for the Button looking for capital and for him as the provider of capital.
A Jesus... I've actually never had a call from India, ah, in terms of that.
That's amazing!
Yeah, that's amazing. I've never had a call from India. Now, I must confess I have got a lot of calls from India, and I've not done as good a job as I should have in terms of sort of treating them adequately.
Is this a mistake that can be rectified soon? When is the first big investment in India? Is it going to come?
Probably the first at all is it going to come, but it could come tomorrow; it could come a year from now. I don't know; that's what makes my job so interesting. If I knew what was going to happen every day, I wouldn't show up at the office.
It's every day when I go to the office something really big and surprising could happen. It doesn't happen most days, but it could happen, and it will happen from time to time, and that makes it a lot of fun.
But generally, do you feel a little more confident after this trip that this could be a good place?
No, I keep leaving my phone number all over now. You'll be getting cold.
Okay, we take a short break. When we come back, we'll try to find out a little bit more about Warren Buffett's views on India, and is he going to invest?
He's skirting around that topic, and we'll try and pin him down, so a lot of students will do that at the moment.
[Music]
[Music]
Welcome back to Warren Buffett, the man who made more money than anybody else and given away more money than anybody else. And a lot of people here who want to ask questions about your philanthropic nature as well as will come to that. First here is in the front row.
Do you have a mic? Okay, go ahead. Why don't you ask a question?
Actually, you mentioned that Indians are not as hard-working as they were earlier, but there's an issue regarding this.
You recently mentioned, if you, Charlie and A.G. Jane are traveling in the same boat, if one has to be saved, it will be that Jane.
So is it because of the smartness, any specific qualities we should have which made you to make that type of statement?
I just think that A.G. is far more valuable to Berkshire Hathaway than those other two members of the boat.
My friend, my partner Charlie, Berger and myself, A.G. has contributed many, many, many billions of dollars to the value of Berkshire.
And what's equally impressive is that he never, in that process, has raised that in any way by the slightest inference anything in terms of suggesting anything about his compensation.
He has gotten paid way less money by Berkshire Hathaway than he could have earned elsewhere, and he feels about it, I think, quite accept the same way I feel about it—that we want to do, first of all, the best job for the company.
And we want to have a lot of fun while we do it, and if we get that, we get enough satisfaction out of that.
As long as we're living well—and we do live well—you know, what else can we want in life?
Tell us a bit about the fun you have.
Oh, is that not... it's a family channel, so tell us a bit about the fun that you have.
Well, you know, that sort of reminds me of a line that somebody used. Somebody made the comment saying, "Find a job that you love, and you'll never find yourselves working for a day in your life."
Twenty-five, thirty-six years ago when I joined Berkshire, I found the job, and I found myself not working for a single day in my life since then.
I've been very fortunate to be working for Berkshire and working for Warren. Warren uses the phrase that he won the ovarian lottery, but I won a lottery when I joined Berkshire.
He has no idea what winning a lottery is all about. What we find fun, incidentally, is we get unusual insurance propositions given to us, and sometimes A.G. will think of what his answer would be to that particular problem.
And I'll think of what my answer would be, and it's a game of sorts, and we get a lot of fun out of sort of pitting our views against the rest of the world.
And sometimes we're wrong; sometimes we right... you can't judge my outcome; you have to judge my probabilities going in, but it's a very, very interesting game.
It makes you fun, and it's challenging, and there's real money involved.
Yeah, a young lady here in the blue.
I'm Monica Novice from St. Stephen's College again. So, I'm happy to read somewhere that your son took a loan from you regarding a business investment.
How do you think these values have transformed the lives of your children?
I mean, interestingly, yeah, I probably took a loan to start a business myself. I don't think there's anything unusual about that.
My children grew up in the middle-class neighborhood, where I still have... I lived in the same house for now 52 years, I paid thirty-one thousand five hundred dollars for that.
All of my children went to public school; they went to the same grade school their mother went to; they went to the same high school that my father went to.
And they lived very normal ways growing up, and I think that I think they would say and certainly my feeling that they are better... they've had a better life because of that.
They have not lived in some rarefied atmosphere at all. They were not some rich person's child, and if they wanted to start a business or buy something, they had to figure out how to do it just like I had to figure out how to do it.
Probably just like you have to figure how to do it. And I don't think they've missed anything by not being treated as the children of an extremely rich man over the years.
I think they gained a lot. I think they know who their friends are. I think they have seen and made friends with people in all kinds of economic situations and social situations.
They went to school where the students were perhaps 25 percent black. They know America as it is, and they know who they are.
I think they have a feeling of security about the fact that they have achieved what they have largely on their own.
They certainly have been helped by the position I'm in, but not disproportionately at all.
So I feel wonderful... my children are in their 50s now. I feel wonderful about how their lives have turned out, and I think they feel that they could have had everything handed to them, but how would they feel about themselves?
I was, you know, how would they feel about whether their friends are really their friends, whether... you know, why their spouse married them? Who knows what?
And if I were to do to do it all over again, I would do it exactly the same way in terms of raising the children.
When you gave away these tens of billions of dollars, what did they say to you?
Oh, shucks!
Well, my wife and I, 15 years ago originally, we thought we were gonna set up one large foundation. And then about 15 years ago, still, with the idea there'd be one very large foundation, but I really wanted each one of the children to have their own foundation.
And people thought they had a lot of money by this point; they had important interests in education and one sun and helping people... farmers around the world and all of that.
Right? So one Christmas, my wife and I set up a foundation for each of the three of them. We gave them to them as a Christmas present—not money for themselves, but money they can give to others.
And I told them at the time a couple of things: I'm not going on the board of the foundation; I'm not judging one of you versus the other. If I add money later on, I'll add the same amount with each child because who knows which activity in philanthropy is going to have the greatest long-term payoff?
Well, we've added to that as we went along, and now you can go to Berkshire Hathaway dot-com, and you can see the letters that I wrote to my three children about this.
They're about a page and a half or two pages, and in effect, they have a billion-dollar foundation each.
The interesting thing about that is I've seen foundations where all the children were on one foundation board, and they start ganging up on each other; it brings out the worst in them.
This way, if one of the children has a good idea, the other ones can pick it up if they like it, or if they don't, they don't have to.
Easily, it's brought them closer together, and it has not acted as a divisive force, as I've seen with some other family foundations.
When you talk about families, a lot of businesses in India, which are family-run, is that a negative or a union?
But it works! It works wonderfully; and what it doesn't work is a disaster.
And I bought a lot of businesses from families, and sometimes I bought them because the family couldn't get along.
But I have given the gift to my children that my father gave to me. My father said to me: "He said anything you do, I support. He says you're going to be good at anything you do. I want you to do what you want to do; you don't have to do what I do. You're your own person."
I have told my three children exactly the same thing.
If they had wanted to come into the Berkshire business, that's fine, but I do not regard... because I make a lot more money than they do, that does not make me a superior human being at all.
I regard what they each do is fully as important in terms of their humaneness as what I do, and they know it, and they do what they're best at, and I've given them some resources to do it on behalf of others.
A G, Indian family businesses, is different from American families; it's a much closer relationship here.
Do you look at that as a negative or a positive for Indian investments?
You know, I think it goes back to what Warren said. If they work, they work brilliantly, and if they are a disaster, it's very dysfunctional.
A lot of family businesses that have stood the testing time, in India, that's not a negative.
No, no, and finicky - I don't know. It can be wonderful. One of the best businesses we have is run by the third generation, and there's two boys about now.
They brought in the four sherry; it works wonderfully! They pull together; they have a unity that you can't get unless you're really part of a family.
On the other hand, I had a couple that sold me their business because the husband thought that one of the descendants should be running it. The other one thought the other one should be, and they sold the mean; they said, "We don't want to break up the family."
So you decide; you're not... neither one of them are any good!
Young man in the front, middle country.
I'm Nomi from Ahmedabad. I have a question for you, sir. The questionable one is, so what is your philosophy of wealth creation?
Because I have read a lot about you, and my understanding about you is you lived a very simple and modest life, so why?
What bribe suit was that? And the second question is, what will be restoration?
What's the philosophy towards wealth creation?
Once I got back on the roster of all four, I... What I do, what I love doing, I'm painting the painting I like to paint. It happens to pay off like crazy, and in a capitalist system, I get the money get showered on me.
Eventually, some of it is of utility to me and my family, but we can only eat three meals a day, and we can only sleep in one bed.
And we have whatever bed we want; we have whatever meals we want, but I see that uses up maybe one percent of my wealth over my whole lifetime for my family and myself.
So then I've got a lot of wealth left that has no utility to me and has enormous utility to other people.
And so through philanthropy, you attempt to use that intelligently! You had some questions for these young 160 IQ kind of people.
We already told them that you've got 30 IQ too much, right?
So give it away!
I hate it when I look at a group like this—I feel very good about the future! No, I mean it!
If these people are going to do things that i couldn’t dream of doing, I mean, they're... you know, for one thing, they got more tools than I out of me!
You’ve got the internet; you’ve got all kinds of communication tools; you can get good ideas faster than I could get in the past, and you're going to go and do wonderful things.
Then how many is ready for you?
How many of you are going to go into the stock market and become... want to be a Warren Buffett?
That's about... let's take a 10 percent royalty from all that!
That's a bundle!
50 percent or a little more, maybe 60, 65 percent of you.
Any questions?
Yeah, young gentleman here!
I'm No Man Metal from Ahmedabad. My question is regarding a starting investor and aspiring investors, just starting out.
Will always face cash crunch problems. So what should the strategy be for a starting investor to counter that?
And is it any different from a successful investor with a lot of money and cash flow?
Sure, when I started, I had way more ideas than money. I had $9,800 when I got out of school, and I was soon to get married and have children reasonably soon, so I had very little money.
But I had lots of ideas; I just went through and looked at thousands of companies, and there were all kinds of things that stimulated me.
Now we've got more money than ideas, so it shifts over at a point. But the young investor, I was having as good a time sixty years ago as I'm having now.
But I'm having a look at the time now as I had to end it.
The adventure is where the fun is, and I did not think to myself, "If I have a million dollars, I'll be way better off than I am."
It was had when I had ten thousand, five... ten million, I'll be better off than one million.
The truth is, I've lived well all my life. I've never had to worry about where a meal was coming or what that... I would sleep in.
And I've been having fun every day doing what I do, and that was true when I was 21, and it's true today.
The question from the back, will read, yes, some video stops from St. Stephen's College.
So the Indian markets have been very volatile in the past. You're a long-term investor, so given the present scenario, do you suggest foreign investments in the Indian economy?
Well, volatility is the friend of the... I love volatile! If no stock ever moved around very much, there'd be impossible... my getting real money.
Volatility is your friend; you can turn it into your enemy. I mean, if you get worried when your stocks go down or you feel like you ought to rush in and buy things because they've gone up, volatility is your enemy.
But if volatility means that a very good company someday will sell at X and some time later it’ll sell at two-thirds of X, and another time it'll sell at one and a half times X, you will get very rich if you could just keep figuring out what X is.
And volatility is what will enable you to make a lot of money.
So anytime people get upset about volatility, they don't really understand the nature of markets and how they should be thinking about them.
The more bobble in the market, the more money we'll make it at Berkshire.
I have two internet questions—one which says... people have written in the Austen's a few questions they're worth thousands, but what exactly goes through your mind when you're actually making that investment?
Well, if I drive by a McDonald's or a Kentucky Fried Chicken tent, I will automatically think to myself, "What is this business worth?"
You know, and how many customers can walk in the door? What kind of gross margins can they have? How many people do they need?
How likely is it that another chicken stand opens across the street? I mean, all of those things, and that's true of the chicken stand and it's true of Google or you name the business.
I mean, it’s all about evaluating the economic potential, the economic future of a given business. And most of them, you don't know the answer on, but every now and then you run into one where you know the answer.
But that's all businesses; it's what ESOP said a long time ago: "A bird in the hand is worth two in the bush."
You know, that was said in 600 BC, and that's not what's called discounted cash flow and all that sort of thing, but he saw had it figured out, you know, 2600 years ago at all.
I'm trying to figure out if I take that dollar in my hand, when do I get the two dollars out of the bush?
Oh, sure! I'm getting it out of the bush. Is there some other bush where I can get three dollars out of it instead?
I mean, it's very basic stuff, and a lot of times you look at it and you say, "I don't know how many birds will be in the bush."
So you want an excellent, until you find one, you get all the edge butterflies in your stomach!
Mommy, you get butterflies?
These are Elvis out.
I'll never, never, never sleepless night!
No, no! If I'm not good, I'm not going to do something because it causes me to sick—not sleep!
But I know if you're going to have sleepless nights, you shouldn't be investing.
I mean, you don't know what you're doing on that stock.