OtherFor the first time in India and exclusively in NDTV studios, the man who is better thanany other at making money and giving it away.Well, there are times in your life when you are really happy to get to work and tap danceto work, like the gentleman I have here and this is one of those moments when I'm reallythrilled to be a journalist because with me are a whole lot of students and the one andonly Warren Buffett and I must say that I'm equally very, very thrilled to have one ofthe most modest, humble and good human beings that I have met, Ajit Jain, where we're goingto get your questions ready and please be impressive, right? Short, sharp questions and be tough.This is your one chance. Anything goes. He says you can ask anything. But just I'd like to let whilethey're thinking, you gave an interview, a press conference three hours after landing in India andyou said it's only three hours and I really can't really comment much. But you're a man who looksmore than just the quantitative numbers, 8% growth rate, 10% growth rate. You have a qualitativefeel. You've been a little time here. What are your impressions of India?
WarrenWell, it is much as I expected. I mean, I expected to see a booming economy, which I've seen and ourparticular plant that I visited in Bangalore is just expanding very rapidly. But what I've I've had achance to get to meet a lot of people and I made some new friends and a few of them I've invitedover to our annual meeting in Omaha. I told him, be sure and vote for me if they come. But it'sbeen nothing. It's been nothing but fun so far. But it's been a hectic schedule. It's busy, but I getpaid by the hour. So, you know, these kids, they tend to embarrass me because they're much, muchmore competent. I think that you'll agree with me. This younger generation in India is much morecompetent than our generation. Is it the other way around in America that the younger generation alittle they've got everything they really need? They're not as hungry. So it's a reversal that you'vegot a great existing generation and a not so hungry new generation. We've got a dull old generationlike us, but a really hungry young generation. I meet with I'm going to meet with 48 schools thisyear, universities, a couple of them outside the country, but 45 of them are from America. And Ilove it. I mean, and but I'm seeing I'm seeing people that kind of remind me of myself when I
[3:21]
Warrenlook out there. No, they they're they got lots of energy. They're smarter than I was. But theythey're looking forward to doing the same thing I've done. And they look at me and they think, myGod, if he can do it, I can do it. It must be easy. When they look at Gates, they don't thinkthey can do what he did. But when they look at me, anybody can do that.
OtherOK, let's take our firstquestion. And you could ask either the two gentlemen here. The question is regarding the markets inIndia, the equity and the bond markets. So what financial innovations would you recommend fortheIndian markets to be more developed? Where are you from? Can you just tell us?
QuestionerOK, I'm from I am Bangalore. I am sounded like it.
WarrenI know I I really don't know your markets here 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 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. And in the end, I just want to buy a piece of a business that I feel has a good future, honest and and able management and buy it at the right price. And whether there's an option market or any of that sort of thing, it really has no impact on us. We're in the business of buying businesses. 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.
QuestionerWhen you say you don't even look at the stock market, how often do you look at the price of shares?
WarrenI would say that I probably look at the price of Berkshire once every two weeks. Yeah, no, it doesn't make any difference. I haven't bought or sold a share for 40 years. Somebody said, when's a good time to sell Berkshire? I said, I don't know. I never sold any. The only time I'm interested in the price of a stock is when I'm is when 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. I like our stocks to go down because I form my own
[5:46]
Questionerindependent judgment of what they're worth. And the cheaper they are, the better it is from ourstandpoint.
OtherAbsolutely.
QuestionerI am from I am Bangalore. And from all the students here, we like to thank youfor the knowledge that you have been sharing all across. I mean, Benjamin Graham would have taughtyou alone, but you have taught many students across the globe. And I think we are very privileged tohave you here in India. My question is regarding the moat that you talk about a lot of time, they saymoat of Coca-Cola, the C's candies that you have bought. How do you identify them? I mean, it's easyexposed. Now you sit here, you say that Coca-Cola's moat is expanding. But when you bought it, therewere a lot of suspicion whether the company will make it through or not. So how do you get theconviction to go out and buy a stock when the market is against you?
WarrenWell, if you can't recognize the moat, it doesn't mean there isn't one there. It may be just you can'trecognize it. And then you go on to the next one. You don't have to buy any given stock. There'sthousands and thousands and thousands of stocks trading and just on the just in the United Statesor on the New York Stock Exchange. And you don't have to be right on every one of them. You don't have to beright on the ones that you buy. And so there are times when I can see there's a moat around a product. TakeCoca-Cola. I mean, you know, if you've been selling a product since 1886, and every year you sell more thanthe year before, and finally you're selling in terms of all Coca-Cola products, 1.6 billion eight ounceservings a day, you've got a moat around that product. Now the moat is partly the taste of the product itself, butit's also the association that comes to your mind. If I say Coca-Cola, everybody in this room has something intheir mind about it. And what we hope with Coca-Cola is that it's something favorable. It's so we want to bearound you when you're experiencing moments of happiness. So we are going to be at the Olympics and the WorldCup, and we're going to be at Disneyland and all kinds of places where you're happy. And that over time will buildsomething in your mind about a product. I can name 100 other soft drinks, and there's nothing in your mind aboutthem. And that presence of mind with billions of people all over the world having something favorable in theirmind about their product, about that product, makes it huge over time. We do have this candy company. It's
[7:58]
WarrenSee'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 fallen for and presents it to her or her family before they go to the movies, and she kisses him, we own it. 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 at a customer after standing on their feet for eight hours, it widens the moat. If they if they snarl at them, it narrows the moat. So every single activity. And we look for businesses with very durable and wide moats. And 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.
QuestionerHow much do you actually get involved in advising them on on these aspects?
WarrenWell, I I send a letter to the managers and I talk to them about widening the moat. I say it isn't a question of the earnings per share this quarter or 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 if you have an economic castle in capitalism, they're going to be a bunch of people 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. And then I want this moat around. And I want that moat to get wider. It may be service. It may be better product design, all kinds of things. 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 piranha, octopus, 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 100 years. You can't sell it. And you've got to make this one work. And that means every day thinking about what's going to make it a great business over 100 years.
QuestionerSo, Ajit, similar lessons to you. Does he advise you much or just write a letter to you once in a while?
Ajit JainNo, no. He advises me a lot. I still think it's not enough. But, you know, 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
[10:34]
Warrenjob.But he doesn't need me. I love to talk to Ajit. So we do talk every day. I talked to Ajit more than any other manager we have by far. Hedoesn'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 talkabout personal things as well.And that's something about you, which everybody says you have a tremendous personal relationship with so many people in yourorganization, 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 metheir business and they cause my stomach to turn for some reason, I don't have to buy it. I mean, I can't be fired. I've got a friend wholikes to own 100 percent of his company because he likes to look in the mirror and say, all my shareholders love me. Well, I look in themirror and I say, enough of my shareholders love me. So I get to choose who I associate with. That's a terrific luxury in life. And so when Ifind a G back in 1985, and I mean, I feel like I've discovered a goldmine or something. And he's somebody that I'm attracted to personally. We'regood friends. That makes my life better. It makes Berkshire more valuable, but it makes my life better on a personal level. And we've gotdozens of managers. There's one right here with me on this trip that Kathy Barron-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 is better because she's part of Berkshirealso. But I get that. I have that option.
QuestionerI'm Shraddha Gupta from St. Stephen's. I'm studying economics there. A long time ago, I saw this talk where you'd given a talk at an MBA school andyou ran the students through an exercise where you asked them to choose a classmate in which they would invest 10 percent and anotherclassmate on whom they would go 10 percent short. And you mentioned that Ben Graham did the exercise himself. So I was wondering if you ever didthe exercise. And if yes, then which habits did you choose to develop and which ones did you choose to let go of?
WarrenWell, 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 likethem? You know, generally, you know, generally they have an upbeat attitude on life. Generally, they are generous people. They're humorous people.
[13:06]
WarrenThey're people that do more than their share. They're people that are thinking about something nice they can do for you. And all of those qualitiesattract you. And none of those are innate at birth. I mean, you can acquire those. And then there's other people that turn you off. And they havehabits. 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 ifyou'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 admirerather 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 likethem? And just write down those qualities and you will find there's no quality there that you can't have yourself. And similarly, with the fivepeople, you can't stand to be around. But those put those things down to turn you off about those people. And if they turn you off about them, whyshould you possess them? It's so simple. You know, it's not it's not it's not like some something complicated that you think you should belearning. It is investing in the stock market. But it's it's enormously important to have people work with you in life. They're going to workwith 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 youdon'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 todevelop 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. Sopick 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 canhave every one of the attractive qualities, get rid of the ones that are negative, and your life will be different.
QuestionerThat's really good and simple advice. But it's quite organized. Are you an organized person like you write a list?
WarrenWell, 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 youngman. And and I read about it. And then I talked to him about it subsequently. And the truth is, everybody liked Ben Graham. And it wasn't because hewas smart about investments. But it wasn't. It was because he was the kind of human being. But, you know, you choose what kind of human being
[15:35]
Warrenyou're going to be. And then other people choose whether to associate with you or not, or, or to be led by you. One of the great leaders inAmerican 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 forhim? Because he'd done so much for me. And hundreds of people, his employees felt that way, his directors felt that way, his friends felt thatway, and we still feel that way. Now, that is a wonderful way to go through life. People love the guy.
QuestionerSo is he very organized? Is he very disciplined? Or is he kind of as wild as some of us are?
WarrenHe is very disciplined. There is no question about it. He is the most rational, disciplined human being that you can come across without lettingthe emotions come in the way in terms of making a...
QuestionerHe sounds very emotional.
WarrenHe is emotional. He is sensitive at a very personal level. But by the same token, that doesn't come in the way of rationality.
QuestionerRight. That's a tough...
WarrenYou 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 oftrading 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.
QuestionerRight. Amazing, actually. This young man at the right in the front row here. Yes.
QuestionerMr. Buffett, my name is Norbert Surma, and I'm a media student. I'd like to ask you, you have been a symbol of, like, immense success, but what is your greatest regret in life so far?
WarrenYou know, I really never... I feel I've been so lucky. I mean, here I was in 1930. You know, I could have emerged from any womb in the world, right? But the womb I emerged from would happen to be in the United States, which offered enormous opportunity to me. 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. 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, over having been born a female with exactly otherwise the same qualities. So I won what I call 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, it may say white, it may say male, female, it may say smart, dumb, whatever it may be.
[17:57]
WarrenNothing 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've been, I've been lucky in marriage, I've been lucky in profession, I've been lucky in teachers, lucky in all kinds of ways.I just, I never look back and think about anything that could have been different.I mean, 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 some things, there'll be mistakes I make. I'm gonna make mistakes. Mistakes don't bother me.I don't wanna make any mistakes that jeopardize in a significant way anything that's important.But to try and live your life totally free of mistakes is a 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, 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, you know, I really, I can't think of any really particular regret I have.That means you don't look back and you're more, you're forward looking.Well, it'd be wonderful if my father lived longer or things like that.But those are beyond you.Regrets of things you did, actually.No, the things I did that were dumb worked out to be a plus in life.I mean, I got turned down by Harvard.I wouldn't have married the woman I did if I'd gotten accepted, probably.I mean, everything works out pretty well.
QuestionerYou know, I think there's a sort of a Hindu underlying trait in 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.
QuestionerI am Drakriti Batra 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?
WarrenYeah, 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 private equity sector.Oh, yeah, I don't think of our investment.We bought a $5 billion preferred and some warrants.But I don't look at that as a private equity investment.
[20:23]
WarrenThat was, in effect, a marketable security.We agreed to hold it for a while.But it was a direct investment with Goldman Sachs.But 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 firmand taking a firm private.We've never bought a business with the idea of reselling it.The private equity firms have an exit strategy.We have an entrance strategy.And our entrance strategy is to stay forever.So I think we're sort of 180 degrees away from private equity firms.I think her question on Goldman Sachs was you helped them out,and now they want to pay you back.Do you feel slightly upset about that?No, I mean, I'd be very disappointed with them if they didn't want to pay us back.They're paying us 10% a year.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 call our preferred on April 18th.And I'm hoping they have to find me personally,and I plan to go into a cave someplace and they'll never find me.It's very expensive money from their standpoint.They can get rid of us by paying us $5.5 billion for the preferred.We still have the warrants left over, which are worth a couple billion dollars.They can't get rid of the warrants.The warrants expire in about two and a half years,but they have no rights in respect to getting rid of the warrants.They do have the right, all of which was negotiated at the time we bought it.They have the right to get rid of the preferred by paying us $5.5 billion.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 dividend and stock repurchase policies to,and Goldman Sachs is one of them.So I've been hoping the Federal Reserve would go on vacation for a year or something.But unfortunately, they gave the green light to Goldman Sachs here a few days ago.But Ajit, do you think that was an emotional decision, the Goldman Sachs one, at that time?
Ajit Jain
[23:01]
OtherOr was it a...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.Warren made the comment it was very expensive 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 else in the world.Besides the fact they got the reputation factor working for them as well.Reputation helped a lot.Sure.But even money, 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.It's too late.Yeah.But I don't think...Is that kind of 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.
WarrenWell, we try to invest quietly.I am buying something right now in significant quantity.We're not going to talk about it.Now, we're legally required at certain points by the Securities Exchange Commissionand perhaps other regulatory authorities as well.But that's 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.We do not go around touting things we've done.
OtherGo ahead.I am Mohit from IIM Indore.Recently you 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?
WarrenI don't really...I don't know India remotely as well as everybody else in this room does.So it would be...It would really be presumptuous of me to give advice.I give advice sometimes in the United States and people think I'm way off base.But to talk about India or to talk about Korea, where we've been on this trip,I'm just not that well enough informed to offer you any good ideas.But do you feel that there is an entrepreneurial spirit here?Have you got that kind of...
QuestionerOh, there's an entrepreneurial spirit.You felt that?Absolutely.
WarrenWhen Ajit came in 1985, about 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.
QuestionerHello, sir.I'm Vineet Karhel from IIM Ahmedabad.So as we all know, you are an extremely intelligent person.
[25:36]
QuestionerAt the same time, you are very disciplined with your investing approach. So what makes Varun Buffet a great investor? Is it the intelligence or the discipline?
WarrenWell, I think at birth to some extent I was wired for capital allocation, but I think plenty of other people were too. I think the good news I can tell you is that to be a great investor, you don't have to have a terrific IQ. If you've got 160 IQ, sell 30 points to somebody else because you won't need it in investing. 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. And 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 in investments. They're all at 160 IQ. Well, they don't need it. I'm disappointed that they haven't sold off some already. And the 160s won't beat the 130s at all, necessarily. 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, not care what they read about in the newspaper, not care what they hear about in 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, you forget it. You go on to the next one. 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 temperament is important.
QuestionerThat's very good advice, that to be detached from all the noise that's come. So you don't just shouldn'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,
[28:23]
Questionerdon't let that fact push you into coming to a conclusion about something that you just don't know enough to come to a conclusion on.So we're actually going to launch a campaign searching for a hero of the stock market,but not the well-known ones 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?
WarrenWell, they just have to learn to value businesses.And if you can learn how to value a business and your value comes to X and it's selling for half X and you know what you're doing,you can make a lot of money.You 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 20 trillion dollars or something worth of stocks.You're looking at businesses that start with Abbott Laboratories and end up, you know,with some company that starts with a Z at the end.I mean, 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 12 months will be 150% 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 talk on television or whatever it may be,or read paper and and they take what is a fundamental advantage and turn it into a disadvantage.But there is no easier game than stocks.But you just have to be sure you don't play too often.
QuestionerAjit, Mr. Buffett makes it sound so simple as a game stacked in your favor.But to be the hero of the stock market, is it that simple?
Ajit JainYou know, it is that simple, as he 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 requirement.
[30:47]
QuestionerDiscipline 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. If you just cancel that as a rationale for doing any activity in life, you'll live a better life, whether it's at the stock market or anyplace else. I've seen more dumb things, and sometimes even illegal things, but justified on the basis of everybody else is doing it. You don't need to do what everybody else is doing. It's maddening during the internet craze, when the bubble was going on, and here's your neighbor who's got an IQ 50 points below you, and he's making all this easy money, and your wife is telling you, this jerk next door is making money, and you're smarter than he is, and why aren't you making money? You 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. Just go on and wait till you find something you understand.
QuestionerSolid advice, but saying no to somebody who comes to you and says, my life, this is a dream, my life depends on it, isn't it tough to say no sometimes?
Ajit JainWell, I'm not sure whether they're life depending on... On your investment. On investment, no, I'm not, I would tell them they're in the wrong, they got themselves in the wrong position. My life depends on not doing dumb things.
QuestionerIsn't it just tough to say no sometimes?
Ajit JainYou 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, 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, you know, the real tailwind is I work for a company, work for a boss,
[33:12]
Warrenwork for a board who understand the business, and, you know,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 Ajit and he hasn't done anything for a monthand everybody else is writing a lot of business, I say, you know, funny thing.I haven't found anything to do for a month either.That is the absolute true story.
OtherGirl, yes, in the second row there on the left.
QuestionerI'm Fern Sharma from St. Stephen's College,and my question to you, sir, is that despite being good friends with Bill Gates,we don't see you investing much in IT companies.Why is that so, sir?
WarrenBecause I don't have the faintest idea which ones will be the winners.I know there will be winners,but I don't know.I met Bill in 1991, and he'd been pretty successful up to that point,and he kept being successful,but I didn't know what his company would 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 was going to.I didn't know anything about what the industry was going to look like.I knew the chewing gum business would look the same 10 years later,or the Coca-Cola would look, how it would look 10 years later.It wasn't a negative view.It was simply an acknowledgment on my partthat I did not know enough about the businesses in the futureto foresee who the winner would be,and it would be exactly like if you went back to 1910,when there were probably, by that time,a thousand auto companies in the United States.Ford was going to be enormously successful.General Motors was going to be enormously successful,and 900 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 it, I back it up big time.We also believe in making big bets when we know we're right.I mean, the idea of doing a little of this,a little of that, a little of that.I call that the Noah's Ark approach.I mean, we do not want a zoo 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.
QuestionerYou're also very good at kind of looking at long-term trends globally,and we are now seeing commodity prices rising, oil prices rising.Where do you think all this is?
[35:37]
QuestionerDo you believe in this peak oil theory?
Greg AbelWell, eventually there will be peak oil.
In the United States...
That means oil will start...
That will be peak oil.
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 thoughtback when we discovered oil in the 1850s or whenever it was.
Colonel Drake came up with it.
But it's finite.
In the United States, we literally have, hard to believe, 500,000 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 every place in the globe,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 or cotton or soybeans,they're all advancing, and we may be sowing the seeds of significant inflationin the United States with the extreme, but required, in my view, at the time.
But 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 heavy dosages of medicine can have consequences too.
The after effects could still be felt.
We have given the patient a lot of medicine post the fall of 2008,and the medicine can have consequences.
QuestionerThe young gentleman in the third row there with the white and striped shirt.
Hello, sir. I'm Shreya from IAM Calcutta.
I think this is a question which all of us want to ask.
Although everybody's 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 atwhich have made you take such a position?
WarrenWell, 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 thaton the businesses around the world, and I would have been a lot better offif I spent more time investigating some companies outside the United States.
But, you know, that's one of the mistakes I've made, and I'll make a lot more.
CharlieThe only thing I want to add to that, you used the phrase,we have stayed away from India, or he has stayed away from India.
I think India has stayed away from him more than he stayed away from India,because our investment, his investment style,is not so much as to identify a product market segment
[38:30]
Warrenand 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 him. Unfortunately, we haven't had too many opportunities that have been served up to him that would be a win-win for both the person looking for capital and for him as a provider of capital.
QuestionerIs that what Ajit said?
WarrenActually, I've never had a call from India in terms of that. That's amazing.
QuestionerThat's amazing that you've never had a call from India.
WarrenNow, 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 screening them adequately.
QuestionerIs this a mistake that's going to be rectified soon? When is the first big investment in India? Is it going to come?
WarrenYou'll be the first to know.
QuestionerIs it going to come?
WarrenIt 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.
QuestionerBut generally, do you feel a little more confident after this trip that this could be a good place to invest?
WarrenWell, I keep leaving my phone number all over.
QuestionerNow you'll be getting calls. OK, we'll 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 a bit, but we'll try and pin him down. There are a lot of students who will do that. That's in a moment from now. Welcome back to Warren Buffett, the man who's 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. We'll come to that first here in the front row. Do you have a mic? OK, go ahead. Why don't you ask a question?
QuestionerSir, yesterday you mentioned that Indians are not hardworking as they were earlier, but they're smart working. In regard to this, like recently you mentioned, if you, Charlie, and Ajit Jain are traveling in the same boat, if one has to be saved, it will be the Ajit Jain. So is it because of the smartness or any specific quality which made you to make that type of statement?
WarrenI just think that Ajit is far more valuable to Berkshire Hathaway
[41:18]
Warrenthan those other two members of the boat.My partner, Charlie, wondered myself.Ajit has contributed many, many, many billions of dollarsto the value of Berkshire.What's equally impressive is that he never, in that process,has raised that in any way by the slightest inference anythingin terms of suggesting anything about his compensation.He has gotten paid way less money by Berkshire Hathawaythan he could have earned elsewhere.And he feels about it, I think, quite the same way I feel about it.I mean, 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 thatthat as long as we're living well, and we do live well,what else can we want in life?
QuestionerTell us a bit about the fun you have.
WarrenOh, is that not... It's a family channel, so...Sorry, is there any...Tell us a bit about the fun that you have.Well, 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 yourself working for a day in your life.
Ajit JainTwenty-five, twenty-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, to be...That's great, that's great.The fun is the work.Yeah.I've been very fortunate in terms of 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, you know.But what we find fun, incidentally,is we get unusual insurance propositions given to us,and sometimes Ajit 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're right.You can't judge by outcome, you have to judge by probabilities going in.But it's a very, very interesting game.Intellectual fun, and it's challenging.And there's real money involved.
QuestionerYeah.Young lady here in the blue.Hi, I'm Malika Dabur from St. Stephen's College again.Sir, I happened 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?
[44:14]
WarrenI 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 a middle-class neighborhood where I still live.I've lived in the same house now for 52 years.I paid $31,500 for it.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 a very normal way growing up.And I think they would say, and certainly my feeling, that 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 a car, they had to figure out how to do it,just like I had to figure out how to do it, probably just like you'd have to figure out 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've 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 a school where the students were perhaps 25% 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.It's certainly 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 good.They could have had everything handed to them.But how would they feel about themselves?How would they feel about whether they're friends or really they're friends?Whether, you know, why their spouse married them?Who knows what?And if I were 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 going to 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 in their lives.They had important interests in education and one son and helping people farm around the world and all of that.
[47:04]
WarrenSo one Christmas, I, my wife and I, set up a foundation for each of the three of them,gave them to them as a Christmas present, not money for themselves, but money they could 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 BerkshireHathaway.com and you can see the letter,letters that I wrote 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 boardand they start ganging up on each other.They get, it brings out the worst in them.This way, if one of the children has a good idea,other ones can pick it up if they like it or if they don't, they don't have to.So they really, 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, there are a lot of businesses in India which are family run.Is that a negative or are you neutral?When it works, it works wonderfully.And when it doesn't work, it's 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've told my three children exactly the same thing.If they had wanted to come into the Berkshire Hathaway business, they'd been 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 as fully as important in terms of their humanness 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 other people.
Ajit JainAjit, 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 investment?
[49:23]
OtherYou know, I think it goes back to what Warren said.
OtherIf they work, they work brilliantly.
OtherAnd if they're a disaster, it's very dysfunctional.
OtherThere are a lot of family businesses that have stood the test of time in India.
OtherSo it's not a negative?
OtherNo, no.
OtherOn the contrary, each one.
OtherOh, no, it can be wonderful.
OtherOne of the best businesses we have is run by the third generation.
OtherAnd there's two boys involved.
OtherNow they brought in the fourth generation.
OtherIt works wonderfully.
OtherThey pull together and they have a unity that you can't get unless you're really part of a family.
OtherOn 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.
OtherThe other one thought the other one should be.
OtherAnd they sold it to me.
OtherAnd they said, we don't want to break up the family, so you decide.
OtherTurned out neither one of them were any good.
OtherBut that's not the point.
QuestionerYoung man in the front here, middle, front row.
QuestionerSir, I am Naveen from IIM Lucknow.
QuestionerI have two questions for you, sir.
QuestionerThe question number one is, sir, what is your philosophy of wealth creation?
QuestionerBecause I have read a lot about you.
QuestionerAnd my understanding about you is you have lived a very simple and modest life.
QuestionerSo what drives you towards that?
QuestionerAnd the second question is, what's your philosophy towards wealth creation?
WarrenOne second, I'll answer that.
WarrenI'm all for it.
WarrenI do what I love doing.
WarrenI'm painting the painting I like to paint.
WarrenIt happens to pay off like crazy in a capitalist system.
WarrenSo the money gets showered on me eventually.
WarrenSome of it is of utility to me and my family.
WarrenBut we can only eat three meals a day and we can only sleep in one bed.
WarrenBut we have whatever bed we want, we have whatever meals we want.
WarrenBut I see that uses up maybe 1% of my wealth over my whole lifetime for my family and myself.
WarrenSo then I've got a lot of wealth left that has no utility to me and has enormous utilityto other people.
WarrenAnd so that's where it belongs.
QuestionerHas wealth creation got a little difficult these days?
QuestionerWas it easier, let's say, two, three decades back?
WarrenNo, no, I think it's very easy.
WarrenI don't mean it's easy in a day or a week or a month.
WarrenBut if you keep doing things that make sense, you know, it is like a snowball going downhill.
WarrenI mean, it does accumulate bigger and bigger as time goes by, and particularly if you'reusing wet snow.
WarrenSo you can't help almost if you spend a lifetime working at something productively, assuming
[51:55]
Questionerthat you've got above average intelligence and lots of energy and all of that.But wealth will build up and it will do it now just like it did 20 years ago, 50.I think it's easier now, actually, in many ways.You often said that wealth creation is the main focus.In fact, dividend payouts by companies should be, in fact, reinvested.You shouldn't have dividends.There is a view that philanthropy, giving it to charities, affects poverty less thanwealth creation in the company.If they build bigger assets, have more employment, that would help the society get rid of povertymore than just giving it to charity.
WarrenWell, the money I'm giving to charity doesn't affect at all Berkshire Hathaway's investmentin more products and more companies and everything.So I'm not taking the money from Berkshire Hathaway to give away.I'm just giving away these little stock certificates that represent the ownership in it.So there is no diminution in the capital investment of Berkshire Hathaway because I'm giving awayall my money.
QuestionerBut you could have put that also into companies.Would that have helped the economy more?
WarrenWell, but I'd have had to sell the Berkshire to have money.I've just got the stock certificates.And the stock certificate says who gets the bounty from this investment that's constantlytaking place.I've taken all the bounty I want, takes care of me, my family, you know, there's nothingI want.And on top of that, there's a lot available for somebody that doesn't need it.And so through philanthropy, you attempt to use that intelligently.
QuestionerYou had some questions for these young 160 IQ kind of people.We already told them that you've got 30 IQ too much, right?Give it away.Sell it.Trade it.
WarrenWhen I look at a group like this, I feel very good about the future.You know, I mean, these people are going to do things that I couldn't dream of doing.I mean, you know, for one thing, they've got more tools than I had.I mean, you've got you've got the Internet.You've got all kinds of communication tools.You can you can get good ideas faster than I could get in the past.And you're going to go out and do wonderful things.And I'll be cheering for you.How many of you are going to go into the stock market and become want to be a WarrenBuffett?That's about I'll take a 10 percent royalty from that's about 50 percent or a little more,maybe 60, 65 percent of you.Any questions?
QuestionerYeah.Young gentleman here.Hello, sir.
[54:30]
QuestionerI'm Naman Mittal from IIM Ahmedabad.My question is regarding a starting investor and aspiring investors just starting out willalways face cash crunch problems.So what should be 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 liquid cashflow to invest?
WarrenYeah, when I started, I had way more ideas than money.I had ninety eight hundred dollars when I got out of school and I was soon to get marriedand have children reasonably soon.So I had I had very little money and and but I had lots of ideas.I just went through and looked at thousands of companies and there were all kinds of thingsthat 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 60 years ago as I'm having now.But I'm having a good time now as I had then.It's the adventure is is where the fun is.And I did not think to myself, if I have a million dollars, I'm going to be way betteroff than I had when I had ten thousand or five, ten million, I'll be better off thanone 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 bed 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.
QuestionerThere's a question from the back row, the red.Yes.I'm with you 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?
WarrenVolatility is the friend of the.I love volatility.If no stock ever moved around very much, it'd be impossible to make any 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 or you feel like you oughtto rush in and buy things because they've gone up, volatility is your enemy.But if volatility means that a very good company on some day will sell at X and sometimelater 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 can just keep figuring out what X is.And volatility is what will enable you to make a lot of money.So any time people get upset about volatility, they don't really understand the nature ofmarkets and how they should be thinking about them.The more volatile the market, the more money we'll make at Berkshire.
[56:58]
QuestionerI have two internet questions.One which says people have written in, we asked them to ask you questions.There were thousands.But what exactly goes through your mind when you're actually making that investment?
WarrenWell, if I drive by a McDonald's stand or a Kentucky Fried Chicken stand, I will automaticallythink to myself, what is this business worth?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 givenbusiness.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 business is.It's what Aesop 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 now what's called discounted cash flow andall that sort of thing.But Aesop had it figured out, you know, 2,600 years ago.And all I'm trying to figure out is if I take that dollar in my hand, when do I get thetwo dollars out of the bush?How sure am I of 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.A lot of times you look at it and you say, I don't know how many birds will be in thebush.So you go on to the next one till you find the answer.
QuestionerDo you get butterflies in your stomach?
WarrenPardon me?
QuestionerDo you get butterflies?Do you get nervous?
WarrenNo, no, never.Never?Never.Sleepless nights?No.No.I'm not going to do something that causes me to stay awake.Not sleep at night.No.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.No.No, I sleep like a baby.
QuestionerAjit, sleepless nights?
Ajit JainNo.Worries before you go to sleep?Well, worries, but they don't translate into sleepless nights.I sleep like a baby too.That means we wake up and cry every hour.
OtherI think we'll take one last question on the left there, smart young gentleman in the tie.
QuestionerHello, sir.My name is Siddharth.I am from IIM Lucknow.So my question to you, sir, is as a person and as an investor, how has the Warren Buffetof 25 years changed your life?How has the Warren Buffet changed your life?
WarrenWell, I think it's a very good question.
[58:59]
QuestionerI think it's a very good question.I think it's a very good question.I think it's a very good question.I think it's a very good question.I think it's a very good question.
Warrenhave the same kind of fun.I'm working with even more people than I like and really enjoy working with.So in a sense, that part has gotten better.But there's really – I wouldn't have been doing it 25 years ago if I didn't enjoy it.I wouldn't be doing it now if I didn't enjoy it.I can do anything in life I want that doesn't require any physical ability or anything ofthe sort.But I elect to do what I'm doing because it really is the most exciting thing, interesting,I can be doing in life and that was true 25 years ago and I hope it's true 25 years fromnow.By the way, something which probably many of you may not know is extremely fit worksout a lot.Wouldn't you agree?As fit physically as mentally.
QuestionerWho are we talking about?
WarrenAbout you.
QuestionerSo Mr. Buffett, this is not an insensitive question, but 50 years from now, we all gotto go sometime.What would you like on your tombstone?
WarrenHere lies the oldest man that ever lived.
QuestionerWell, that shows that you just love life and that probably is the secret to your success.
WarrenIt helps.
QuestionerWell, thank you very, very much.Hasn't that been wonderful?Thank you.One thing to tell them before they go, you said that business schools teach them allthe wrong things.What should business schools teach them?
WarrenIt doesn't teach them all the wrong things, but it's important if you're going to be investing,there should be a course in business school.This is how to value a business, right?
QuestionerThat's great.Well, thank you all very much for your questions and take care of those 160 IQs.
OtherThank you, Ajit.
OtherThank you, Mr. Buffett.
OtherThank you.