OtherTonight, a special edition of Charlie Rose.
Charlie RoseWarren Buffett is the second richest man in the world, worth about $44 billion. He is chairman of the Berkshire Hathaway Corporation. He made headlines around the world on Monday, June 26, 2006, when he announced he was giving $31 billion of his wealth to the Bill and Melinda Gates Foundation. Together, they have created a foundation which will have more than $60 billion to give away. It was an act of extraordinary generosity, born out of friendship, shared values and mutual admiration. I admit it, I am prejudiced about Warren Buffett. He is a friend. He and his family have given me access and time to talk about his life, his business, his values, and his philosophy, his philosophy about everything. We have talked many times since our first interview in 2004 at the annual meeting of Berkshire Hathaway. His is a life worth talking about because of his candor about it and his remarkable intelligence, and yes, his stunning wealth. Warren Buffett owns 31 percent of Berkshire Hathaway, a company with a stock market value of $140 billion. His share is worth $44 billion. Berkshire Hathaway owns part of some of America's most famous brand names. Coca-Cola, the Washington Post Company, American Express, and Procter and Gamble, and all of Fruit of the Loom, See's Candy, and the Nebraska Furniture Mart. He is the subject of many, many newspaper and magazine stories, and more than 20 books have been written about him. For a man so famous and so rich, Warren Buffett has led a remarkably modest lifestyle in his hometown of Omaha.
WarrenOmaha is home. It's always been home, always will be home. A lot of friends are here, but I just feel good here. I mean, my kids are going to the, my grandchildren are now going to the same public high school that my kids went to, my wife went to, my dad went to, I mean, almost 100 years. And there's a lot of continuity here. It's a great life. You feel like you're part of a community. I live in a house I bought in 1958, you know, that's 46 years. I'm happy there.
Charlie RoseYou like the house?
WarrenWell, fame broke, don't fix it?
Charlie RoseYeah, this office I've been in for 42 years, and it's, it's, everything, everything falls into place.
WarrenI do two things. I call it asset allocation. In other words, we have somewhere between $100 million and $150 million a week coming in to Berkshire, and that's after all the needs of the operating businesses are taken care of. Because I let, you know, if they build plants or anything, that's up to them.
WarrenBut then the remainder comes into Omaha.My job is to allocate that among anything in the world that makes sense to me.I can put it in marketable securities, I can put it in bonds, equity, I can put it in,I can put it in whole businesses, I can sit temporarily with it in cash, but that's myjob.Nobody, I mean, that is my sole responsibility.We don't do that by committee.We don't do it by advisors.That's my job.The second job I have, and this is easier if you kind of get the ball rolling, and that'sto have talented, high-grade managers running our businesses who are happy running them.So when I buy a business, I'm usually buying the manager with it, because I don't knowhow to run the business.So when somebody comes along and says they want to sell their business, I have to lookthem in the eye, and I have to decide whether they love the money or they love the business.Now, it's okay to love the money to some, but they have to love the business.They have a passion for it.Why am I running down here every day, you know, and hardly wait to get to work?For the money, it's because I get to do my job the way I like to do it.I get to paint on my own canvas.I feel like I'm Michelangelo down here, and I'm doing the Sistine Chapel.Nobody else may think so, but they don't say use a little red paint instead of blue paintor something like that.I get to use whatever paint I want, paint whatever I want.I love it.Second thing is that they want applause.I want applause.I mean, I like it when people say, that's a good job, and our managers are just thesame way.They got a lot of money, most of them, and they want to be treated fairly.So they don't want to be taken advantage of.They want to paint their own painting.They love that.And they get it at Berkshire like no other place, and they want applause.And when they get applause from me, they're getting applause from a knowledgeable observer.I mean, it is not uninformed applause.So that keeps them, and, you know, we've had remarkable success in keeping managers overthe years.Let me just talk for a moment about your skills.We can do that in a moment.You think one moment's enough?Well, I'll stretch it out.Let's assume we talked about energy and intelligence, you know, and integrity.Let's give those values and skills to you.Yeah.All right?You have an extraordinary capacity to focus.Absolutely.Yep.You read a lot, and you focus.Yeah.A lot of people I know that have done well in their own areas focus.
WarrenIn fact, just about the first time I met Bill, we were at a place with 15 people eating dinner, and his dad went around the table and asked everybody what they thought the most important ingredient they brought to their game was, and I answered focus, and I saw Bill nodding his head across the room.
QuestionerSo you knew right there.
WarrenYeah, yeah. We were hit. Soulmates.
QuestionerYeah. No, it's focus. And what do we mean by focus?
WarrenI mean, just concentrating on what's important. I mean, you have to know your game. I was, listen, I was lucky. I was born wired a certain way, you know. I didn't have anything to do with it at all. I was born at the right time in the right place. Huge capital markets. America couldn't have been anything like it any place in the world. So here I am wired for it, and by focus, I mean using that wiring, basically, and trying to get it so that there's, you know, fewer flickers here and there and that sort of thing.
OtherHe was born on August 30th, 1930. His parents, Howard and Lela, lived on Barker Avenue in Omaha. This is Barker Avenue.
QuestionerBarker Avenue. Tell me about this photograph.
WarrenWell, that's my mom and dad at 4224 Barker, and that's where I spent the first five or six years of my life. My dad, until 1931, was working for a bank, and he was selling securities. And then the bank went broke in August of 1931, in fact, just about on my dad's birthday. And at that time, my dad was paying, as I remember, $55 a month on this house. He had no job. He had two little kids. I was about one year of age at that time. And my grandfather had a grocery store, so there was at least a little food around. But it was a tough time.
QuestionerIt was a tough time.
WarrenIt was the beginning of the Depression.
QuestionerIt was the beginning of the Depression, yeah, yeah. This one is...
WarrenThat would be my... That would be... That was my sister Doris and me together, yeah, yeah.
QuestionerAnd this one?
WarrenThis has to be... Yeah, I was big on costumes when I was a kid. My dad would go to New York, and when he came back, he'd usually bring a costume, so I'd be a fireman or a cop or whatever.
QuestionerOr a cowboy.
WarrenOr a cowboy, yeah, right.
QuestionerDid you have an entrepreneurial spirit? Were you the kind of kid that wanted to paper out and wanted to sell lemonade and wanted to do all those things?
WarrenYeah, I did. I enjoyed it. And many years ago, I read about a study, and I don't know whether the study is any good or not, but somebody was trying to correlate business success with various factors, whether
Questionerit was your grades in business school or, you know, what your parents did or anything.
OtherAnd they said it correlated best with the age at which you first got into your own business.
QuestionerAnd when did you first get into your own business?
WarrenWell, I'm not sure exactly.It was probably when I was maybe six or something like that.
QuestionerDoing what?Do you remember?
WarrenWell, I would buy six packs of Coke from my grandfather's grocery store for a quarterand sell them for a nickel each.That's a five-cent profit right there.
QuestionerAbsolutely.Absolutely.And I had the whole Coca-Cola company behind me pushing it.
OtherHoward Buffett, his father, was elected to Congress in 1943, and the Buffett family movedto Washington.
QuestionerHe was your hero.
WarrenAbsolutely.Yeah.Because?
QuestionerYou know, just everything about it.I mean, growing up with him, we were pals, and I never saw him do anything in his wholelife that he couldn't put on the front page of a paper.
WarrenWhy did he get into politics?
QuestionerWell, he was a man of political ideas, but I don't think he ever had any ambition toget into politics.He was introverted.He basically didn't like to give speeches or anything of the sort, but he had strongideas about political systems and about the individual.
WarrenAnd about service?
QuestionerYeah.Yeah.And he had a strong political philosophy and a philosophy of life, and it was religious-basedto a significant degree, and he thought the government should play a very minor role inpeople's lives, to almost an extreme degree.And he may have gotten a little more extreme on it as he went on over the years.I didn't agree with him totally on political philosophy, even as I was growing up, andthen I grew further from that.But it didn't change my feelings about him.
WarrenWhat do you see in yourself that most reminds you of your father?
QuestionerWell...Listen, if I could be three-quarters of the man he was, I'd be very pleased with myself.
WarrenWhy do you say that?
QuestionerBecause...Well, I just think he was the best human being I've known.
WarrenBest human being you've known.
OtherWhen he came back to Omaha, he met Susie Thompson.The Buffett family knew the Thompson family.They were pious.They were like this.The parents.The parents.The children didn't know each other, because Warren and his sisters lived in Washingtonfrom the time he was 13.His father was a congressman.
QuestionerRight.So when you first met him...
OtherI first met him...I was going to be his youngest sister's roommate at Northwestern, so I walked into their houseand he was sitting in this chair in the living room, and he made some sarcastic quip.
OtherI hadn't even met him.
OtherSo I made one back.
OtherI thought, who is this jerk?
OtherAnd that's how we met, yes.
QuestionerHere is the story.
QuestionerHe chased you, and you were dating other people.
QuestionerHe would come over to the house...
OtherMm-hmm.
QuestionerRight.
QuestionerHere, my dad...
QuestionerHe sat with your father.
OtherYeah.
QuestionerAnd you were going off on a date.
OtherRight.
OtherMy dad fell in love with him.
QuestionerListen, Warren is smarter than you even know.
QuestionerMy dad had a mandolin up in the attic.
QuestionerWarren said, Doc, get out your mandolin and I'll play with you with my ukulele.
QuestionerSo they played together.
QuestionerAnd my father fell in love with Warren, and he kept saying to me, you don't understandthis boy.
QuestionerHe has a heart of gold, no pun intended.
QuestionerAnd that's what went on for quite a while.
QuestionerYou know?
QuestionerI mean, but doesn't Warren always get what he wants?
OtherSusie and Warren Buffett were married, and they soon moved to New York to study and workwith Ben Graham, a professor at Columbia University.
OtherNext to his father, Ben Graham remains an intellectual influence and a hero.
WarrenThere are half a dozen that had a tremendous influence, and certainly Ben Graham influencedme enormously in terms of giving me the investment framework to go forward.
WarrenI wouldn't be remotely where I am without Ben Graham.
QuestionerBut Graham gave you the principles.
WarrenHe gave me the foundation.
QuestionerAnd you read the book first.
WarrenI read the book.
QuestionerAnd said, I want to meet this guy?
WarrenYeah, well, that was the way it was.
WarrenAnd I didn't understand he was teaching, Charlie.
WarrenWhen I read the book, and even when I finished Nebraska, and then I was leafing through acatalog of Columbia, and his name popped out at me.
WarrenAnd that's when I wrote and said, will you take me?
WarrenBut I had no notion about that.
QuestionerWhy were you willing to leave Omaha and go to New York?
QuestionerWas it that this guy knows something?
WarrenOh, yeah.
WarrenI wanted to, you know, if I was going to be a disciple, I wanted to see the Messiah.
QuestionerAnd you sort of viewed it that way.
WarrenYeah, I did.
QuestionerIn terms of investing.
WarrenSure.
QuestionerWhen you read the book, you said to yourself?
WarrenI said, this makes sense.
QuestionerMakes sense.
WarrenIt makes sense.
WarrenNothing up until then had really made sense.
QuestionerBut the principles are still the same.
WarrenPrinciples are absolutely the same.
QuestionerHaving changed what, though, as you change circumstances?
WarrenWell, you just see more ways to apply them.
WarrenAnd I mean, the applications come up in different forms.
WarrenBut the principles remain the same.
QuestionerHelp me understand the operative idea about Ben Graham, of value investing.
WarrenWell, Ben just says, look at a stock, not as some thing that wiggles around or is quoted
Warrenin the paper every day, or is up there on a ticker.He says, look at it as a piece of a business.Figure out what the business is worth.If you can't figure out what the business is worth, you've got no business buying thestock.And I'd never thought of it that way.And so I started looking at businesses instead of stock charts and volume and all that kindof thing.And it was amazing what kind of an edge that gave me.And then secondly, he said, the stock market is there to serve you, not to instruct you.So you don't look at stock prices as telling you whether you're right or wrong.You're there to take advantage of stock prices when they get out of line with reality.And then thirdly, he said, always have a margin of safety that don't try and drivea ninety eight hundred pound truck across a bridge that says limit ten thousand pounds.Leave yourself some room for error because you don't know everything.So you always leave that margin of safety.
OtherBuffett works in this office building with a staff of 16 and a collection of memories.This is Gillette Safety Razor Company.
QuestionerRight.This goes back to the patent for the razor going back, I guess, well, this is this is70 years ago, roughly on that particular razor.And how did Gillette come about and why did you decide to get involved in Gillette?
WarrenWell, Gillette, you know, here's a company that after 100 years of being in the razorand blade business has 70 percent or so of the value of razors and blades throughoutthe world.Now, when you have that kind of permanent advantage, obviously, with the consumer, it'snot going to go away in a few years and it's not going to go away in decades.I mean, this is a company that really has something.This meets the Buffett.It meets the test.It's a durable, competitive advantage, durable, competitive advantage.And all night as you go to while you're sleeping, you know.Well, when I sleep at night, I know that hair is growing on the faces of billions of menaround the world and that hair is growing on twice as many legs of women around theworld.But I don't think too much about the women's legs.I wouldn't get to sleep.
OtherHere is the Omaha Royals.The Omaha Royals.
QuestionerYeah.
WarrenMaybe 10 or so years ago, maybe a little more even, the owner of the Omaha Royals was goingto sell and they probably moved the team out of town.So at the time it was the Union Pacific Railroad and Walter Scott and I bought the team primarilyto keep it in Omaha.
QuestionerAnd it's still in Omaha?
WarrenIt's still in Omaha.
QuestionerAnd you suit up ever?
WarrenOh, yeah.
QuestionerYeah, I know.
WarrenThey count on me.
QuestionerWell, I've seen pictures of you in a uniform.
WarrenI've started several games, but they seem to pull me after one pitch.
QuestionerBefore the first pitch.
WarrenYeah, right.
QuestionerWe have a change in the starting lineup. Buffett will not be pitching today.
WarrenNobody's gotten hit on me.
QuestionerThat was the first purchase.
WarrenYou can barely read it because the ink has gotten faded.
QuestionerOn the partnership?
WarrenThis first purchase of Berkshire stock by the partnership in 1962. And this is the trading record of a firm called, at that time, Tweedy Brown and Riley. And they were the brokers I used. A wonderful fellow named Howard Brown bought all my Berkshire for me at this small firm called Tweedy Brown. And then many years later, they pulled out the trading card relating to that first purchase and sent it to me.
QuestionerAnd this is what?
WarrenWell, let's see. Tom Osborne has signed this.
QuestionerYeah, and Frank Solich, too.
WarrenAnd that's the record of Nebraska during the Devaney, Osborne, Solich regime. 1962 to 2003. It was quite a record.
QuestionerThey won a lot of football games.
WarrenThey won a lot of football games.
QuestionerThat's a passion, University of Nebraska.
WarrenWell, I mean, you're not allowed to reside in Nebraska, unless you're a little bit of a fanatic on the subject.
QuestionerCan you take Gates to a game in which they're playing against Washington?
WarrenHe doesn't really respond very well.
QuestionerBut in Nebraska, I mean, when there's a divorce in Nebraska, they don't argue about the kids.
WarrenThey argue about the football team.
QuestionerWho gets the tickets?
WarrenYeah.
QuestionerRight. Here we have the New York Stock Exchange, and this is, let it be known, that Berkshire Hathaway Incorporated, Omaha, Nebraska, listed on the New York Stock Exchange. We had a problem doing that because of the price of our stock and everything. It took a little special action by the exchange, which I appreciated.
QuestionerExplain that to me.
WarrenWell, it's just that they had some round-lot requirements and all that that were designed for lower-priced stocks, and we didn't have the number of hundred-share owners that were required at the time. So they redefined it a little bit to allow Berkshire to be.
QuestionerThere are always people who want to know why you've never split the stock.
WarrenWell, we don't split the stock because we don't want to encourage the kind of buyer who is excited by stock splits. And this way, it keeps it more of a business atmosphere and less of a day-to-day stock
QuestionerAnd is there any sense that the people that you want to invest in Berkshire Hathaway, you want them to come in for a long time, and you want them to take seriously the decision to buy Berkshire Hathaway?
WarrenWe want them to join in the business with us with the intention of holding it forever. Now, all kinds of reasons why they might not, but that's the goal.
QuestionerDo you check the price of the stock every day?
WarrenI probably know about it sometime during the day, maybe, or it's a close, but no, I'm not checking the price.
QuestionerSo there's no movement, you're not interested in why there's movement, who might be selling it, who might be buying?
WarrenNo, it doesn't make any difference.
QuestionerIt doesn't make any difference?
WarrenNo.
QuestionerSo on this wall, here's Tom Murphy, and you were in a soap opera.
WarrenI was in about four soap operas, but that's because every time I got invited, they hadn't seen the earlier one. And Susan Lucey was terrific. I mean, she, Tom Murphy and I were there, and we couldn't remember our lines or anything, and she carried us through.
QuestionerYou played yourself?
WarrenYeah.
QuestionerSo you went and Murphy showed up on the set of All My Children?
WarrenRight.
OtherMay I introduce my friend Warren Buffett?
OtherOh, my, I am so thrilled to meet you. I have been such a fan of yours for such a long time, but I must tell you that your photographs just do not do you justice at all, Mr. Buffett.
WarrenPlease call me Warren.
OtherWell, thank you, if you'll call me Erica.
QuestionerSusan Lucey, the longtime star of that show. Now, they paid you for this?
WarrenThey paid me for this. I tried to negotiate for more, but I didn't have much luck, and you'll notice there's a wardrobe allowance, which they gave me for $10. And that was in 1991. I haven't spent it yet. Someday, something will come along.
QuestionerThis suit is not new?
WarrenNo, no, no.
QuestionerThis is funny. This is a story about Gorbachev. When he was ousted, hardliners declared emergency tanks rolled into Moscow streets. And the man that they are assuming to be Gennady Yanayev is not, in fact, it is Warren Buffett.
WarrenHe may be my long-lost twin. I don't know. But this was the day after I took over at Solomon, and I thought some of the comment— A, they got my picture mixed up, and then there's hardliners declare emergency, vows to overcome crisis. They had the right captions. It would have fit for Solomon.
QuestionerIt kind of fit, yeah. This is you batting against Bob Gibson?
WarrenBob Gibson, right. Yeah. I only play against —
QuestionerYou take your life in your own hands, don't you?
OtherI only play against the best.One of the best throwers there's ever been in the history of baseball.We're friends, but I wasn't sure how far that would carry me.And so Brokaw sends you a note saying, a copy, but Gibson —Gibson may object or something.May object to something, yeah.Is baseball —I've always liked baseball.I mean, and I don't follow it the way I used to when I was a kid, but baseball is — youknow, I love sports, generally.Everywhere I look, there's you in a uniform.There's a hockey thing over there.Here is a man that you refer to because of his approach to hitting.Right.Represents what to you as a metaphor?Pat Williams was all about discipline in hitting.He said the most important thing was waiting for the right pitch.And he illustrated — in his book, The Science of Hitting, he illustrated that.And you know, he looked at hitting as something that he thought about morning, noon, and night,you know, and always was looking for how to do it better.But discipline, he said, swing — waiting for the right pitch is the most importantthing in batting.
WarrenWhen you think about morning, noon, and night, Berkshire Hathaway in what way?Well, we keep waiting for the right pitch.And we're not going to swing at some pitch that some other fellow might like.I mean, if our favorite pitch is two inches above the navel, you know, and some otherguy likes it, you know, around the letters or a little lower or something, that's fine.But in business, unlike baseball, there are no called strikes.So you can sit there and the pitcher can throw you IBM at 62 or General Motors at 28, allkinds of things, and nobody's going to call a strike.If you swing at one of those pitches, when it comes across, Berkshire Hathaway is 7-3-8,and you miss, it's a strike.But it's a terrific game that way, because you can sit there and wait and wait and waitfor the right pitch.And there are not many things in life where you get that option.And that's exactly what you're doing now.That's what I do now.And I've done it before.In anticipation of this annual meeting, you have to say to the stockholders, I've beenwaiting for the right pitch, and I haven't seen it.That's right.That's right.And some pitch somebody else can hit out of the park, you know, but I don't think I can.You know, that's my problem, but I'm not going to think I can hit a pitch I can't.
QuestionerDoes it kill you to know that you've got $40 billion there, not earning huge interest rates
Questionerin today's market?
WarrenYeah.Well, I don't like it, but I like it better than swinging and missing.The problem for most managers is that they've got all these people up in the stands yellingswing your bum, you know, but we've got a group of shareholders who not very often yellout swing your bum.In fact, they're yelling out swing when you when you're ready.
QuestionerYeah.I mean, that's the confidence as you develop.
WarrenThat's right.Why did they come to this annual meeting?I think they have fun.I mean, it's you know, they they they see people they like.I think they they they they learn more about Berkshire.It's kind of a reunion for many of them.And there's all kinds of little clubs develop and friendships develop out of it.
QuestionerShopping on the side?
WarrenYeah, shopping on the side.And I get to see a free movie.In the end.
QuestionerYeah, that's about it.
WarrenNo, we don't.We don't give them goodies or anything like that.I mean, they come because they want to come.And here is Babe Ruth.
QuestionerYeah, that's that's the Hall of Fame after the second year, minus Ty Cobb, who was late.
WarrenThis is up here simply because you love baseball.
QuestionerWell, I just think those are, you know, those are the champs.They were the first people put in the Hall of Fame.And Ty Cobb, he was late for the picture, whoever took it wouldn't wait.But he actually knew your great friend Carol Loomis.He dated her.
WarrenHe dated her.He dated her.Right, right.Now, bear in mind.A little bit of her history we didn't know.To be honest about it, I mean, he was 40 or some years older than she was at the time.But his nephew called her and said, my uncle Ty has been watching you on television.She was on a quiz show and he would very much like to take you out.She went a couple of times.He said, it's worth getting to know Ty Cobb.
QuestionerYeah, right, right, right.So here's when Tiger Woods is what to Warren, he says, I thoroughly enjoyed our day togetherand look forward to doing it again, send your friend Tiger.Was he caddying for you?
WarrenNo, no.I was caddying for him.And if I had my back here, on the back of it, it says Woods.I mean, that was a very.
QuestionerOh, I see.And then on the 18th hole, he said, now, Warren, he said, I understand you play this game.And I said, not the game you're talking about.He said, we're going to play the 18th hole and we're going to play it for serious money.And I said, Tiger, all money is serious.He said, no, we're going to play for five dollars.I said, well, that's serious money.
QuestionerAnd then he got down on his knees.He played me on his knees.So every stroke he hit was on his knees.I mean, he was all the way down on his knees.And how did he do?Well, he hit his drive about 260.On his knees?On his knees.I mean, it's unbelievable.Straight down.It's out like this.I mean, he didn't even adjust himself after he was down.And so I went over and I handed him five dollars and then I said, Tiger, I think you're forgettingsomething.He said, what's that?I said, the caddy gets 10 percent of your winnings.I'm still waiting for the 50 cents.One day of caddying for him.He's a terrific guy.He is one terrific guy, I can tell you that.It was part of a charity deal.And I mean, he went all out to deliver value to the people that bought the right to playwith him.And as Jack Nichols says, he plays a game I'm not familiar with.If you go to Omaha, Nebraska, to see Warren Buffett, one of the things you might end updoing is going to Garage Restaurant, one of his favorites.We did that.And we talked with him about a typical day.Walkthrough day for me is you wouldn't believe the day.
WarrenI mean, I come down and I I had one time.Well, I do some read.I usually read a lot of the papers at home.So I get up around six or six forty five paper on online, mostly on regular paper.But I but I also click on some things.
QuestionerYeah.You have a favorite list, too.
WarrenYeah.Right.I've even got the Charlie Rose show up there.Yeah.I want to see who's out here.I really do.But so I get up about six forty five usually.
QuestionerYeah.But I may get to the office at nine o'clock.Now, I may get there at eight, depending on what's going on.But I have no schedule to speak up.
WarrenI mean, you know, here's here's my date book.You know, just just take a look, you know, and I do this is not a jam packed appointment.Eight o'clock, nine o'clock.I just don't do it.So I don't want to live that way.
QuestionerYou decided that a long time.
WarrenA long, long, long time.I decided that when I was delivering papers, you know, when I was a kid, I mean, I, I knewwhat I enjoyed and what I didn't enjoy.I like delivering papers.I'd still be glad to deliver a paper, but I don't want to be ahead of IBM or GeneralMotors or why not?Because your life is too taken up by things that you don't really have choice about.
QuestionerYeah.I just don't want to do it.You would take nine forty five.You get in at whatever time.
WarrenI do more reading.I read five newspapers a day.I read all kinds of annual reports and magazines and 10 K's and 10 Q's.
WarrenAnd so I would say I spend seventy five percent of the day, at least maybe eighty five percentreading and I spend the rest on the phone and I make an I buy or sell any of the stocksor bonds or foreign currencies.I mean, but but that doesn't take much time because we're not doing that on a broad scale.And then I go home and I play bridge or read some more.
QuestionerGo home at what?Five, six o'clock.
WarrenYeah.Yeah.There is no I don't I don't like that.No schedule.I don't like to be structured.You want to go home at three.You go home at seven.You go home at seven.Exactly.And still read more.Yeah.Usually I'll play bridge now more online, online.I would pay and I don't mind saying this to the people that own it because they don'tknow how to get it from me.I would pay five million dollars a year for the ability to play online bridge 12 hoursa week.It's worth it to me.You know, if I compare it to the cost of a second home, which wouldn't mean a thing tome to speak of or a boat or whatever it might be.I mean, what you need to do is to be able to deliver 12 hours of enjoyment playing withmy sister and Carmel or whoever may be, you know, doing it in a few seconds, clickingon great, you know, interface on it.I'd pay it.But they get they can't figure out.So I'm paying about ninety five dollars a year.Principle to get is that and bridge and friends, those and the bridge and the friends intersect,of course.And I mean, well, this Saturday I'll play with Bill and at 10 o'clock.My time.The eight o'clock is time.We'll play for a couple of hours.
QuestionerAnd you always win.
WarrenNo, no, I tell you so.But you check with him.But that's exactly what I would do.
QuestionerThe notion of investing for you.What are you looking at for when you read you're looking for an interesting companyyou're looking for?
WarrenI'm looking for a business I can understand.I'm like a basketball coach.And if I walk down the street, the first thing I look for is seven footers, you know.And now once I find a seven footer, I still got to figure out, you know, whether he'scoordinated and whether I can keep him in school and all those things.But if some guy comes up and he says, you know, he's five, six and he says, you know,when you see me handle the ball and all that, I'm not looking for those.So I leave.You want to look up at your players.Yeah.And when I first started, I used to find a lot of seven footers harder to find sevenfooters now because my universe isn't as big.
WarrenBut I look for things I can understand.I think I know what the economics of the business will look like five or 10 or 20 yearsfrom now.And it doesn't mean that, you know, I understand what a computer does, but I don't know whois going to be making lots of money off computers 10 years from now, any more than I knew whowas going to be making a lot of money off of television sets back in 1960.Turned out nobody was.
QuestionerYou've always, always taken the position that really you don't want to make speeches exceptto business students and to kids.Just the students.What's the idea?
WarrenThe idea is that they listen and you may change some lives.I mean, the things I heard when I was 20 from somebody I wanted to listen to changed mybehavior in ways and the people I listened to at age 74, you know, I want to be entertainedand all that, you know, but I'm not going to change anything.So if I talk to a bunch of 50 or 60 year olds, basically they want to be entertained andthey want predictions.But if I talk to 20 year olds, or 25 year olds, they ask me the questions, it's what'son their mind and they really get to what's on their mind and they listen and you cansee it in their faces and then they write me afterwards and it changes some lives.The biggest thing we talk about, and I know it resonates with them, because a lot of themare thinking they ought to go into this line or that line because they'll look good ontheir resume or they'll get a little more experience.I tell them if you wait until you're 80 to do something you like, I say that's like savingup sex for your old age, you know, you want to have a passion for what you're doing.Why go through life, you know, waiting for the big moment when you're 80 and you're preparingfor something else.
QuestionerYeah, right.It doesn't make any sense.It doesn't make any sense.I tell them, you know, basically unless Shirley MacLaine's right you only live once, you know.And we go from there.There's no evidence yet that she's right.I hope she's right.
QuestionerI do too.
OtherTalking to students about life and business is one of Warren's passions.He does it more and more these days.From all over the world, they make a pilgrimage to Omaha.One such appearance, it was filmed for public television, was at the University of Nebraskain Lincoln where he appeared with his friend Bill Gates.
QuestionerHi, my name is Nicole Brockhoft and I am a senior business administration major hereat the university.
QuestionerAnd I was just wondering, what is the best piece of advice you've ever been given and how has it impacted your personal or professional lives?
WarrenI think that, you know, I got an awful lot of good advice from my dad and he didn't lay it on me. I mean, he just, you know, you picked it up from him. But there was never any of this, you know, do this, do that type of thing at all. But I think he really taught me that it's more important in terms of what's on your inner scorecard than your outer scorecard. I mean, some people get in a position where they're thinking all of the time of what the world's going to think of this or that instead of what they themselves think about it. If your inner scorecard, if you're comfortable with that, I think you're going to have a pretty happy life. And I think the people that strive too much for the outer scorecard sometimes find that it's a little hollow when they get all through.
QuestionerHello, my name is Kim Martin. I'm a senior finance major here at the university. My question is, how do you instill ethical leadership throughout your organization? And to begin with, how do you know that the management one level below you is making decisions that would parallel your own?
WarrenWe have all the money we need. You know, we'd like to have more, but we can afford to lose money. But we can't afford to lose reputation, not a shred of reputation. And therefore, I asked the managers, I asked them to judge every action they take, not just by legal standards, although obviously that's the first test, but also by the tests, what I call the newspaper test. How would they feel about any given action if they knew it was to be written up the next day in their local paper, to be read by their family, by their friends, by their neighbors, written by a smart but kind of unfriendly reporter. And if it passes that test, it's okay. And I tell them if anything is close to the lines, it's out. And they can always call me if they wanted to check something. But if they call me, there's something wrong with it probably anyway. And that's about it.
OtherIn Microsoft's case, our top management team, the majority of them joined us as right after whatever degree they got, if any. I should mention that I am the only college grad up here.
QuestionerYou've made a point to see almost any group of students who will come to Omaha. What is it about that? What do you get out of it? And what do you think they get out of it?
WarrenWell, I like teaching.
WarrenI mean, I taught my first class when I was 21, and I just enjoy it. I enjoy the interaction. I mean, it's fun to sit there and have them throw questions at me. And so I've always enjoyed doing it, and I do as much of it as I can.
QuestionerWhere is their curiosity? Where is it? Yeah. What is it they...What questions do they ask?
WarrenThey ask a lot of...Well, they...They're business students, a lot of them. And so they're interested in markets and business and all that. But they're also interested in their own lives, and that's when it gets the most interesting. I mean, they ask me a lot of personal questions, and I answer them. And it's interesting to know what's on their mind, because they're...They're groping. I mean, they're looking for the road they're going to take in life. And a big part of that is the business and making some money and all of that. But that isn't the only part of the road. And we have good discussions about that, and I enjoy it. And about values, about the notion of friendship and the notion of...And how you're going to feel about yourself when you're 70 years old, and what, you know, looking back, what you'll feel good about and how you get there. I mean, I want them to reverse-engineer their life, you know, basically. To look at what you would like for it to be at the end and ask yourself...
QuestionerYeah, sure.
WarrenAnd work backwards. How do I work...Sure.
OtherBuffett also tells students about the inherent advantages of where you were born.
WarrenLet's imagine that it's 24 hours before you're born, and a genie comes, and he says, Charlie, you really look like you've got good judgment, you know, and so I'm going to give you an enormously important task. I'm going to let you design the world into which you're going to be born in 24 hours. And you say to the genie, appreciate the responsibility, you picked the right guy, but what's the catch? I mean, I've been a lot of little...The genie says, there's just one catch. Before you go out into that world, after you've designed the rules, you're going to go over to that big barrel over there, and there's six billion tickets in it, and you're going to pull a ticket out. And that ticket may say male, female, it may say rich, poor. What kind of a world do you want to have, not knowing what tickets you're going to get? Now, I call that participating in the ovarian lottery. I got a ticket that said United States. You did, too. You know, I got a ticket that said smart about certain things, and all of that helped me.
WarrenBut I say you should design a political system that will deliver lots of goods and services to people, but then will search for fairness in how those are distributed. So I come into this, and abundance has just showered on me, because I have the, you know, a talent. Gates says if I'd been born at some other time or some other place, a long time ago, I'd have been some animal's lunch, because, you know, I don't run very fast, and I can't climb trees. You know, so I'd be talking about, I'd be talking about allocating capital, you know, and that damn dinosaur would be coming right at me. And he offers a profound definition of success. Let me tell you a story that gets there. I have a friend here in Omaha. She's my wife's best friend. Sixty-odd years ago, she was an Auschwitz. She's a Polish Jew. The whole family did not come out. If you talk to her today, and you ask her about friendship, she would say she would define it as who would hide me. She says that's the bottom line. Now, I would say that if you get to be my age, or much younger for that matter, and you have a lot of people who will hide you, the people who you want to have hide you would do so, you're going to feel very good about your life. It's the real test. I mean, it's a referendum on how you've lived your life, and you can't fake the ballot box on it. I mean, it's all important, and you certainly want to feel that way with your kids, but it's wonderful when you feel that way with your business associates and those who work around you.
OtherFriends, real friends, are important to Warren Buffett, and here are three of the closest. William Murphy, former CEO of ABC Capital Cities, Charlie Munger, vice chairman of Berkshire Hathaway, and Don Keogh, chairman of Allen & Company. Warren would never take advantage of anybody. He's never looking to make a bad deal for the other guy, and he's completely honest and fair with everybody.
CharlieIt's the nature of life that, as the old Germans say, you're too soon old and too late smart. Anybody that helps you get smarter a little earlier enormously improves your life. And all we do is prove these simple old adages like that German saying. Warren got me smarter in some ways a little earlier, and that helped me.
QuestionerHow close did you live to the Buckets?
CharlieWell, I lived across the street.
QuestionerAcross the street?
CharlieAcross the street. I bought a house there in around 1959, a three-story house, brick house, tile roof, paid $27,500
Otherfor it, and there was a young fellow living across the street in another house, a bighouse.He paid $30,000, I think, for his.His name was Warren Buffett.Nobody knew who he was.He was a nice guy.He had, I think, he and Susie had three kids.He had four working on five, and, you know, I got to know him.He wasn't easy to know because you didn't see much of him, but my kids did.You know, of course, the real story is that he came across the street one day and he said,Don, I love your kids.I said, I know.And he said, you know, I was thinking about college, you know, getting kids through collegeisn't easy.I said, Warren, I'm working on grade school right now.I'll get around to college a little later.He said, I've started a little fund, people putting a little money into it, and if yougave me, say, $10,000, I think I could build that up into something.Well, Charlie, I didn't give it to him for two reasons.One, I didn't have it.I could have borrowed it from my father.But I went into Mickey and said, Can you imagine giving $10,000 to a guy who doesn'tget up and go to work in the morning?That was one of my great decisions of my life.If you had given him that $10,000.Don't ask.Yeah.Probably over $400 million.$400 million.We're still friends, incidentally.
OtherSusie Buffett, Warren's beloved wife, unexpectedly died in 2004, one month after she sat downwith me for her only television interview and talked about their unique relationship.According to him, to me, he would not have made it without you.You gave him something.
OtherWell, I feel really good about that, Charlie, because whoever you are in this life, youdon't want to think you've wasted a lot of your energy and love and time on somethinguseless.Warren is phenomenal.And I felt that the best thing I could give him was unconditional love, and I have.And he said, You're like a little watering can, you know, and I'm a flower.How can you not feel good about that?
OtherHe made you feel needed.
OtherMm-hmm.Very much so.And you knew he loved you.
OtherOh.I don't know that anyone's ever been more loved.It fits me to be needed and to know that what I have to give is the right thing.And if you have two people, we just have a lot of love and respect for each other, andthat's never changed.And again, I can't help but relate it to art, because any great novelist, painter, musicianis going to need the room to allow that to grow.And something's going to grow if it's in the right soil.
OtherAnd my mother gave him the soil.
OtherThat's really what it is.
OtherDid you get more mothering than fathering because he was so into reading and...Yeah.
OtherYeah.
OtherI mean, my mother was there, and she was there and more present, in the sense thatmy dad was, you know, sitting in his office or room doing a lot of reading.
OtherWhy did you move away from Omaha?
OtherI'll tell you. I am a person who likes a private life, and I thought, you know, I would like to havea place where I could have a room of my own. It would be nice. Because, you see, physical proximity to Warren doesn't always mean that he's there with you. I mean, you can...There hasn't been any change in anything, which he had to... It took him a while to figure it out, but he figured it out. I said, I'm not leaving you, because I'll be wherever you want me when you want me. But most of the time, when you're in the same house he is or whatever, he's up reading. That's why I learned to have my own life. We were two parallel lines, but very connected when he was open to connecting.
OtherYou just got this sense that there were two people that were very much in love, but weresort of becoming disconnected in a certain way.
OtherBecause my mom loved life, and my dad loved what he's always loved, you know, his work. He loved his work.
OtherAbsolutely.
OtherSo I think what my mom was starting to see coming was this idea of, you know, I don'twant to be Mrs. Warren Buffett in Omaha, because she doesn't... She just can't think of herself that way. She's an independent, strong-willed, giving human being that needs to be connected toa lot more things than what Omaha, I think, would have to offer after her kids were gone. I mean, she really gave us and my dad everything.
OtherAre you responsible for Astrid?
OtherWell, yeah. I mean, well, I'll tell you. I call her Aya. That's a term of endearment.
OtherYou call her what?
OtherAya. Aya. It's a term of endearment. When I was singing at the French Cafe in Omaha, Aya was the maid of the year, the woman thatmet you at the door, and she is a very helping, giving person. And between sets, she would always bring me tea, and we'd sit and talk, and we becamevery good friends. Then when I moved to San Francisco, I mean, it would have been all right for some otherperson, but Warren can't find the light switch, and it's probably my fault, but I don't takeall the fault for that. So then I called Astrid. I said, Astrid, will you take Warren, make him some soup, go over there and look after
Otherhim, because he's not going to make it.I mean, he's different than a lot of guys, because we see each other all the time, andwe do things, but he just can't, no, he can't function, yeah.
OtherSo she went over and stayed.
OtherYeah, and stayed.
OtherAnd that was, she's done me a great favor, let me tell you.
OtherShe took care of your man for you.
OtherShe did.
OtherAnd she takes great care of him, and he appreciates it, and I appreciate it.
OtherShe's a wonderful person.
OtherAnd they go out to dinner and everything.
OtherYeah, they just do.
OtherHe's a companion.
OtherThey do what they do, you know?
OtherThis is real parmesan.
OtherOh, good.
OtherOh, this is the reason he comes.
OtherOh, the potatoes.
OtherThe hashbrowns.
OtherHashbrowns, yeah.
OtherThat's the biggest piece of meat I've ever seen on a single plate.
OtherThey were really good friends.
OtherI mean, I think it's true.
OtherThey loved each other.
OtherI think, I know Astrid loved my mother, and my mother adored her, yeah.
OtherSo your mother's death was tough for her, too.
OtherIt was very hard for her, yes.
OtherBut even more important for her to be strong, because it's one of those things that's sostrange it works.
OtherThat's exactly right.
OtherI mean, I always think this is one of those things that unless you're in it, you may notget it.
OtherBut it works, and it's great.
OtherShe knew that my dad would need somebody, certainly.
OtherAnd I don't know, or I don't remember the exact details, but I do know that there wasessentially a, you mind making them chicken soup, and one thing led to another, you know,basically.
OtherWhich is phenomenal.
OtherI mean, it is a, it's extraordinary how that worked out, I think, for everybody.
OtherHe was devastated by Susie's death.
OtherOh, that's an understatement, yeah.
OtherCouldn't even get out of bed.
OtherWell, he did get out of bed.
OtherI was proud of him.
OtherI didn't know if he'd be able to get out of bed for a few months, but he did.
OtherI mean, he was just, because it was so sudden.
OtherOh, it was a huge shock.
OtherI mean, my mother, you know, she got sick in October of 2004, went through this reallyawful operation, and very difficult radiation and recovery, and was doing really well.
OtherIt was slow, but she was doing really well.
OtherAnd she'd had an MRI, I think, just a few days before she died.
OtherAnd she was very excited.
OtherShe was doing great.
OtherAnd didn't die from cancer.
OtherDied from a stroke.
OtherNo, she didn't die from the cancer.
OtherYou know, I think that, for any of us, it was hard to imagine her ever being gone.
OtherAnd I'm sure that's probably natural.
OtherHe said to me, he thought he would go first.
OtherI think we all thought that.
QuestionerI mean, I would have said the same thing if you'd asked me that question. And I don't know why that is, but, you know, she was the true matriarch of the family. And so I think we just, for some reason, we felt that way. And for not any logical reason, but we, you know, that was just, I've never asked Susie or Peter how they felt, but I mean, that would have been my answer to the question, is that I just thought that she would have been around towards the end. And I think that, you know, he's still adjusting to it. I mean, it probably takes years to adjust to it.
WarrenFive years, he said, I'll be the same. He told me, five years from now, I'll feel the same way.
QuestionerYeah, and that's probably true. Can't talk about it, though.
WarrenWell, that doesn't surprise me. I mean, you know, she was something very special. Has he changed? I think he has a little bit. He's never too busy or uninterested, which is fantastic. And that has only increased. I think that's the biggest thing over time and specifically since my mom's death. That he's more available? Great. Well, just greater interest in being in touch. You know, my show was on the mall in Washington when the Smithsonian opened their National Museum of the American Indian. And I called him up and I said, you know, normally I call my mom and I tell her how excited I was. And then she'd call you and tell her how excited I was. So I'm calling you and telling you, you know, because she's not here anymore. He has said that there's nothing more important in life than to have someone you love who you know loves you back.
QuestionerWell, I mean, he would know that with her. There's no question about it. This is a remarkable woman.
WarrenYeah. You know, and the pictures of her, every picture I would see of Susie, she's smiling. It's going to be hard to talk about.
QuestionerI know, but you've got to talk to me about it because she talked about you. Charlie, I'd like to talk about it, but I can't. There's no finer human being than who he is. So I overlooked the money.
OtherTwo years later, Warren Buffett decided to give $31 billion to the Bill and Melinda Gates Foundation, and six more billion dollars to family foundations.
QuestionerWhat surprised you about the reaction?
WarrenThen I'll tell you what surprises me. Well, it just surprised me that there was so much reaction, to tell you the truth. The whole thing. But when you think about it, I mean, it has so much drama that the second richest person wants to give his money to the first richest person.
QuestionerWell, I can see that angle.Yeah.I mean, that makes it fear.Yeah.If it was the 20th or something like that, it wouldn't have had the same impact.Yeah.I mean, and it's so far ahead of everybody else that it's just, you know, that makesit.The other thing that surprises me.We haven't heard from the Sultan of Brunei yet, by the way.
QuestionerYes, exactly.
QuestionerLet me see.The other thing is, everybody asks about the kids as if somehow the kids are going to bepissed off.It is the most surprising thing to me that somehow, and to know your kids and how muchthey love you and what a great family it is, it's like a thought never occurred, yet everybodywonders, what about the kids?They think it's the best thing that's ever happened.Two of the three kids have told me in the past, I'd set up these small foundations sevenor eight years ago for them, and they have told me they would rather have me give moremoney to the foundation than to give that same money to them.They'd say they don't need money, you know, and they consider themselves ungodly blessedand they love working with the foundation.But literally, two of the three have said, come up to me, you know, at a Christmas timewhen they thought I might have been adding to the foundation.They said, don't give money to me.Give the money to the foundation.
QuestionerYou also had a wonderful marriage.Right.Has the things that have happened since 2004 given you a sense to put all that in context?
WarrenNo, it's always tough, Charlie.But this, in a sense, it seems to me, and I've said this on a previous conversationwe had here at this table, is so in touch with the spirit.Yeah, it's the right thing to do, and Susie would have thought it was the right thingto do.
QuestionerWhen you think about the future, is it just continuing to paint the picture?
WarrenAbsolutely.It doesn't get any better than this.I mean, I don't know how long you can do it, but, you know, you're just plain lucky inlife if you get to do something that you love doing with people that you love being around.
OtherTomorrow, how Warren Buffett turned a $9 per share investment into a company worth $90,000a share.
QuestionerYeah.