QuestionerWhy do you want to strain and have more danger when you're already built your red? As Warren says, what difference does it make him if he has an extra zero on his tombstone? But Charlie, for return on investing capital, isn't that already taking into account leverage, though? Because return in equity is being advanced by leverage. Return of investment capital is not necessarily enhanced by level.
CharlieWell, no, of course everybody would rather have a business for a high return on capital. This is just like are you doing it.
QuestionerSo I said, well, I have to... Wall Street Journal, what's your habits?
WarrenI read three or four newspapers when I get up in the morning, and then I always have two or three books that I'm reading. I can. I go back and forth between. And that's what I do. That's what I've done all my life.
QuestionerWhat are your four papers?
WarrenWall Street Journal, New York Times, financial times, LA Times. No Washington Post. No.
QuestionerNo. Well, I heard you speak about it. Like going to medical school. That's a lot of work. You're not living very high or this or that. But later you're a doctor and have a better life. That's to her gratification. So, Charlie, you're the chairman of the Good Samaritan Hospital. Do you have any recommendations or any sufficient to lower prices, maybe even?
CharlieWell, it's been a very, I took that because it was basically a losing hand. And I placed so many winning hands. winning hands, I thought I should force myself to play a losing hand.
OtherA quick smile.
CharlieAnd I must say it's been very difficult.
OtherThank you. Thank you. Thank you.
QuestionerDo you believe in, like, a single health care, payer system?
CharlieI think a single-payer health system would work a lot better, yes. I think it will eventually come. I think the existing system is A ridiculous room goal. It's a ridiculous system.
WarrenRidiculous system.
QuestionerHow should we help our children to avoid envy and jealousy?
WarrenAvoid what?
QuestionerEnvy and jealousy.
WarrenWell, you can't. We don't have one way of doing it. We have certain things we avoid because we don't think we have the competency to deal with them. And we have certain things we kind of like because we're used to them. And so we don't have just one set of rules. We don't have any formulas that are exact or anything like that. And some of the stuff we do, we just know it's a little better than our alternatives. We're doing all kinds of stuff now that we would not have done. We're ample stock in the old days.
[2:56]
WarrenHe seemed like very straightforward. But you say I get them. million letters from people who want to go to work with Berkshire or want to come work. I sometimes get a check. They'll send me here's $50,000. I'll pay this to work for you. I said I send the $50,000 back. I will say that it's kind of a brash thing to do and I kind of admire it because it's kind of a smart ass done. Something was smart ass when I was young myself. But I'm looking for another starting helper or something. I'm playing out the end game. I'm playing out the end game. Anybody who's playing anything else with an end game when they're 93 is crazy. It's an end game. Charlie, can you...
CharlieTo recognize that he has some flaws. Okay. So you bet against the jockey, not against the horse necessarily?
WarrenNo, I... everything about because I don't... McKenzie. That's a killing game out of McKenzie. There are a lot of manipulative types of McKinsey. So is it just simply an observation of the people more so than the quantitative factors? You don't need to look at the balance sheet when you're... looking at the person. Well, I could see the chain letter aspects of the game. Okay. And the huge leverage and the huge...
CharlieHe was just, you're sort of building a chain letter. It's intrinsically a sort of dishonorable thing to do. Because your nature, then you're doing something that can't continue on its own motion, you're making it look like a will. So it's intrinsically sort of dishonorable. So I don't like chain letter operators. I don't like drunks. I don't like drunks. I don't like people that help them to buy. I don't like people who raise prices on drugs that people have to have by 500% overnight. Just as over. Just a lot of flags were flying.
WarrenCharlie?
QuestionerYeah. I'm working with Yahoo Finance. My name is Juliet. We've seen a lot of folks boycotting retailers because they sell Trump brand of merchandise and then vice versa because Starbucks wants to.
WarrenI wouldn't do that. Have you seen these boycotts? I don't like all that. I... Basically, I'm not in favor. of young people agitating them and trying to change the whole world. I think they know so much. I think young people should learn more and shout less. So I'm not sympathy for anybody. Young people are out in the streets agitating. And I say, that's not my system. I think if you've got Hitler or something, you can go out and agitate. But short of that, I think the young people ought to learn more and shout less.
[5:39]
QuestionerDid you personally know? They ought to act more like Chinese. Did you personally know? Richard Feynman?
CharlieYes, I know him slightly. Very slightly.
QuestionerWhat do you think of him?
CharlieWell, he was a genius. On the other hand, he was a screwball. He absolutely was nuts about screwing a lot of different women. I'm going after the wives of his own graduate students. That's disgusting. So he had this blind spot. In physics and teaching, he was one of the noblest people we've ever had. But in his personal life, he was a little nuts.
QuestionerCharlie, I have a question about real estate. Any investments in the tax? Way back. When I look at real estate or stocks, real estate is just easier to evaluate. You know, comps, cash flow, and replacement costs. It just seems an easier game than the equities market, provided that you don't use to make. Real estate?
CharlieYeah, real estate. The trouble of real estate is everybody else understands it. And the people who you're dealing with and competing with it, they've specialized on a little 12 blocks or a little. 12 blocks are a little industry. They know more about the industry than you do. And you've got a lot of bullshitters and liars and brokers. So it's not a bit easy. It's not a bit easy. The trouble is it's easy. All these people, a whole bunch of things that love real estate. You know, Asians, the city, Jews, India's of India, they all love real estate. They're smart people. And they know everybody and they know the tricks and getting this. You don't even see the good offerings in real estate. They show that the big investors are dealing. It's not an easy game to play from, from again and some point of view, real estate. Whereas stocks, you're equal with everybody, if you're smart. In real estate, you don't even see the opportunities when you're a young person starting out. They go to others. The stock market's always open. It's adventure capital. Sequoia sees the good stuff. You could open office, Joe Schmo, venture capitalists. Startups come to me. It's starved at it in. You got to figure out what your competitive position is and what you're choosing. Real estate has a lot of difficulties. And he said, those Patels from India that buy all the motels. They know more about motels than you do. They live in the goddamn motels with their family. They pay no income taxes. They don't pay much in workman's compensation. And every day, time they get, they fix up the thing and buy another motel.
[8:32]
QuestionerYou want to compete with the pet tells? Not I. To your left. Not I. Charlie, I guess throughout your business history, you were incredible in touching people, right? Whether it's Mrs. B. We were pretty good, yes. What, I mean, what was it that you and he looked for? You know, and what were mistakes that you were made that you learned from along with me? from along the way in judging who would be good business partners to work with?
CharlieWell, first there's some very good people with his family. One of whom I worked under was Fred Buffett. So we had people we knew well that were really noble people. So we had bases to compare people against. And we had bases to compare really against in terms of capacity and talent. So we had a lot of data in our heads that helped us. I think we had some genetic advantages. Not IQ points, just absolute quirks of nature that made us better. Like, what was it, Harry Bottle? What was his name?
QuestionerYes, Harry Bottle. Tell me about Harry Bottle and what you saw in him that was so...
CharlieWell, I'd worked with them in an electronics business that had gotten terrible difficulties. He'd help us work out of that business trouble by downsizing. He knew how to do it. And Warren had a business that needed it. business that needed downsizing and Ward did not know how to do it. So I put those two together. Of course, it worked well.
QuestionerCharlie, could you talk about the episode at Solomon Brothers and what you really learned about people from there as well?
CharlieWhat I learned is easy money and easy leverage and so forth in investment banking. It creates a culture that's all envy, jealousy, craziness, overreaching, over leveraging. It's a very hard business. very hard business to manage. It was out of control. The envy was these people won versus CERC. If one jerk got four million dollars some year, the other guy was curiously only got three million. And they just seethed and caused trouble. It was a very difficult business to manage. I think a lot of easy money that comes into finance just ruins practically everybody. No thing so.
QuestionerCharlie, any thoughts on Apple Corporation?
CharlieWell, it's a very odd thing. It's a very odd thing for us to do, and obviously we've got no special insights as to how sticky Apple's business is. Apple, whole supply chain is like one man with two million employees. That's very peculiar. And the man is not perfect. On the other hand, Apple has a very sticky bunch of customers.
[11:51]
QuestionerWill they be able to keep that going? And if so, how long?
WarrenI don't know. I think the chances are pretty good. It's going to be quite sticky. And that's why we bought it. But, as I say, we may have a slight edge in our favor there. But it's not a big edge. We're doing that because we don't find the stuff we used to find where we knew we couldn't lose. Apple, we've merely got, we think it's a little edge. We don't have a big insight that can't fail. But if you can't find, if you got the money, you have to put it somewhere. And you can't find what you used to like. You have to put it with what's best available. It's a nice problem to have, to have so much money. We shouldn't really be complaining about it. It got harder. The reason it got harder is we got so much money. When we bought that Coca-Cola, it was a million shares. It took us eight months to buy a million shares. We were buying like half of the whole trading every day. It's hard to get into all of these big blocks.
QuestionerAre you good friends with John Vogel or do you?
WarrenNo. You know, I just, maybe I've met him once or something. I think, I basically think he's right about his basic approach. The other people are not going to match the averages, and he is, and he's, and his idea has succeeded, and he's succeeded, and he was right. On the end, he's kind of a one-trick pony. I don't think he has another. He had one good idea in his lifetime. He wrote it very hard. That's all you need. That's an interesting example. He had one good idea. He pushed it hard, didn't work. You don't need all good ideas, but you do need one.
QuestionerCan you talk about BYD and What do you want to talk about?
WarrenThat again was something we never would have done in the early days. When I got into that through Lee, BYD had been pounded down so hard it was a gram-type stock. It was a gram-type stock. It was a gram-type stock. that wasn't a startup, but a small company.
QuestionerWould you see BYD doing the infrastructure here in the U.S.?
WarrenNo, no, no, no. I, B.W.D is now going to monorails. They'll do monorails in China. They wouldn't do that here in the U.S. Oh, they would, but I think they were pretty dumb. Monorails in the U.S. have been a peanut business forever. In China, they can get permits. China, they just go do it. do it.
QuestionerHow about energy storage?
WarrenWell, B.W.D is big in industry. Are already?
QuestionerYou see that happening here in the U.S.?
WarrenOf course. Everybody's going to do energy storage.
[14:51]
CharlieYou've got a time shift of the power if it comes from either the sun or the wind. Of course there are going to be a lot of storage. This might sound like Max Planck, chauffeur kind of knowledge, but when it comes to find the sellout price, the intrinsic value of the company, you want to compare that to the market. Of what? Just BYD, let's say. How would you... Oh, that's hard. And again, we've learned things there. When we bought in, we could see that a venture capitalist were paid three times as much for that kind of a deal. So it was cheap as a venture, and we could see it was a good venture capital thing because the guy had worked minor miracles already. So we, that was a cheap stock, but it was one that took some special insight. And I wouldn't have had it, Lee What? It's, it's Lee Liu who found that. And once we were in it, I got to know on John Fu. I know Juan Chon Fu, even though he can't speak a word of English. And Juan Chon Fu is a genius. And he's shrewd. And he's honest and he's fanatic and he loves his company and so on and so on and so on. And what he can do is just incredible. He learns whole new technologies. So it's mostly qualitative? It's partly what they have. And it's partly what it's quality. Partly I'm betting on the horsemen. betting on the horseman out there. I mean, because he's on the, and he's got a bunch of Chinese, young Chinese. You can't believe what those employees do. He's got 230,000 Chinese working for him. Berkshire only has 460,000 employees. Why? It's a lot of employees. And they can do things you can't believe you look at those young Chinese girls. Would you? Would you buy the whole company if you, if they'd allow that? If they'd allow that? I don't think so because one of the reasons he succeeds is the Chinese are proud of a eighth son of a peasant that creates a little company all himself and is doing so far. And a lot of the other stuff they're doing joint ventures and automobiles. They're joint ventures with the West that was already had. So in a sense they love and are proud of their own man, the son of the peasants that did it all himself and it's still Chinese. So I wouldn't want to destroy it. I wouldn't want to destroy that Chinese image by buying BYD. It works better the way it's going. But you're right, I'm betting to some extent on a person. I was in their battery separator plant. There are about five companies on Earth's owning battery separators.
[17:36]
CharlieThat goo comes bilaterally and hangs together through its own chemical something cohesion. It's the most complicated damn process you ever saw. It's very hard to do. If you don't do it exactly, right, the battery fails. He just learned that. Boom, what he needs to know, he just figures out. There aren't many people who can do that.
QuestionerDo you see similar qualities in an Elon Musk, or something be of that sort?
CharlieNo, I think that Aunt John Fu knows what he can do and what would be really difficult. I think Elon Musk thinks he can do anything. I'd rather bet on the man. Some limit to his self-appraisal.
QuestionerDo you think Mr. Bezos knows the limits of his skills?
CharlieWay better than you think. Bezos is utterly brilliant and utterly remorselessly ambitious. I would never bet against Jeff Bezos.
QuestionerDid you ever meet him?
WarrenYeah, I met Bezos.
QuestionerYou mentioned earlier about Coca-Cola becoming a little bit less efficient than they used to be?
WarrenFor the first hundred years, all that caffeinated, carbonated sugar water with the same flavor. same flavor just swept the earth. Every year more money came in. They were drowning in money, for the better part of 100 years. Of course, it was interesting. But of course, that kind of spoils you. And now, the basic stuff is going the other way.
QuestionerDo you think Coca-Cola and Pepsi still win the sparkling water battle?
WarrenI don't know. I think they're both very strong companies. And I think they both have a lot of momentum in place. And...
QuestionerDo you think if they were right, Do you think if they were run by 3G, they would do better or worse?
WarrenWell, I guarantee they'd do a lot better the second year. It's gone.
QuestionerIf Glott's came to you and asked you to make a new company today. Who? Glots. There's an article turning 2 million into 2 trillion. It's about creating a company that would be worth 2 trillion. I know. I gave the talk. talk. If you came to you today, you wanted to do another company, what would you tell me?
WarrenWell, I wouldn't do that because I did that only retrospectively. In other words, I knew the outcome when I created the story. Of course, that's a lot easier than starting now and projecting the future. So I can explain the past a lot better than I can predict the future. Surprise, surprise. And... And by the way, that talk, it was a total failure when I gave it. It's been a total failure ever since. I think it's absolutely right, and there's a lot of me learned in it.
[20:34]
CharlieAnd a few nuts like you make us get something out of it. But in terms of the greater world, I bored the people. Some of my fellows sleep. It was the most failed talk I ever gave. And so I published it when they did Poor Charlie's Almanac. Because I still think the basic lessons are right. It's just it's hard to understand. hard to understand. Most people don't understand basic psychology very well.
QuestionerCharlie, looks like you hit a home run with the Physics Institute in Santa Barbara.
CharlieWell, all I did was create a building. They already had the institute. But it looks fantastic, the whole idea and everything.
QuestionerYeah, it's wonderful. So maybe what you can do if you have a lot of intelligence and unlimited money. How about a Munger library somewhere? A Munger Library, like a Presidential Library, a Munger Library. How about that?
CharlieNo, I'm working on another student building in UCSC. UCSB.
QuestionerCharlie, what's scientific innovation going on right now that you're really excited about? What's one thing that you're really scared about?
CharlieI really am deeply aware of this agricultural revolution, and everything takes it for granted. It wasn't, you know, it isn't like agricultural productivity ever increased by 300% in a few decades. I mean, it was just amazing what happened. And of course, the world needed it terribly. terribly. And so I'm quite impressed. And more of that's coming. So all this stuff about gene splicing to make plants grow better, and gene splicing to make domestic animals produce better. All that's coming. Some are starting to work already. And they'll push this crossbreeding of seeds in the ordinary way. A few more. It's a hugely important thing that's happening, and the world needs it terribly. And it changed the whole world for everybody. We couldn't have this civilization without the food. And there's not that much arable land. We have to get more product out of our existing land. And our existing land, the way we're farming it intentionally, is degrading. And the reason we produce all this stuff is we pour chemicals and so forth into the land. Fungicides, herbicides, insecticides too. But it's just amazing what's happened. And we've made the miracle rice, the miracle grains. It's just, and so I'm quite impressed by the fact they keep doing that stuff. And to have 1% of the people produce all the food for America on their farms, when we used to have 80% of the people, it's a huge, huge change in the human condition.
[23:31]
CharlieAnd we'd all be doing stoop labor instead of running around on airplanes to hear people talk. If it weren't for all these revolutions that our predecessors created for us. So I have, I always, I'm, I just find that quite interesting. And we need it. I'm, Costco, you know, buys a lot of produce now. For vegetables growing in hot houses. Let me grab, let me grab me. And by and large, those are, those are Chinese. The Chinese who are good, they, you know, funny, six-acre hot house they really know where every damn blade is growing and it's not that different from rice growing. I mean, they're just very good at it. And that has a lot of potential that isn't, that is coming. So I like the agricultural stuff. Most people will just ignore it. We take it for granted. But I'm quite impressed by it.
QuestionerYeah. Is America sufficiently proving to be a ham sandwich business in the last? What? Is America sufficiently proving to be a ham sandwich enterprise in the last few months?
WarrenWell, there's a lot of good left in the American economy and American people. Partly because we're taking in so many talented people from these other nations think we've taken in from China, India, even Japan. It's a lot of human talent. And in the old days, we got the poor people, you know, and that was harder because, and now the Chinese have come here, they're not the poor Chinese. They're not the poor Chinese. They're the well-to-do Chinese. And the children of successful Chinese families that get high grades and so forth. The same from India. Every once in a while I meet Untouchable, who has just gotten out through the Maintainmental Institute of India and succeeded. But most of the Indians I made are all from the overcasts of India. We're sucking the brains out of India. And of course, that's good for us. Same with China. Same with China.
Questionertragedy for China and India though? What? Is that a tragedy for China and India?
WarrenWell, like, got a lot of people. They have a lot of brains left. You can't think about two countries. People's shortage is not. When you can sift the population that big, you'll get some smart people.
QuestionerDo you have any mental checklist that help you stick with that or prepare? or prepare before you get to your opportunity?
WarrenWell, if you haven't prepared, you won't have the courage to seize it. When I bought all that stock, the JJ, the journal has in like one day, you know, I knew something about the Bank of America.
[26:35]
WarrenI've lived in the culture. I've known the Bank of America bankers. I know a lot about what's right with it and what's wrong with it. I knew a lot. I knew a lot about Wells Fargo. I knew a lot about U.S. Bank, so.
QuestionerDid you pay cash or did you have to leverage up that day?
WarrenNo. I had cash.
QuestionerDo you have any thoughts on Chipotle and the food safety issues there? Chipotle and the activist involvement of that company and the food safety issues?
WarrenWell, I do know this. If you run a business where people have to trust your food, you just can't afford to have a scandal in food quality. Costco just sweats blood to avoid. Now everyone wants to know a few cases of some, you know, some fairly minor. Nobody gets away with it. But we just are financial. about preventing it and stepping out hard when it happens and so forth. And they got careless at that in, you know, the fried chicken company in China. Long, young, young brand. And of course, it hurt them terribly. You can't afford to have a scandal if you're selling food. And when the people adulterated the baby formula in China, China killed the people that did that. They're dead, and they didn't take a long time doing it. No, a lot of appeals or anything. anything. Kill our babies to make a little more money. You never will be missed. I have a little list off they went to the Great Beyond.
QuestionerCharlie, what about TransDime?
CharlieWhat? I don't know TransDime. What is TransDimes?
QuestionerSo there's supplier of auto, there's supplier of aircraft parts to Boeing and to Airbus and to Airbus and to aerospace and defense companies. And there have been comparisons recently between TransDime and Valiant. And was, you know, was curious if you had any. I was curious if you had any thoughts on whether those comparisons.
CharlieOh, I don't know anything about Transdine. But of course, it's generally a little easier to cheat the government that is to cheat anybody else. And so a lot of people try and cheat the government on defense contracts. And of course, there's suppliers also if the whole culture has some cheating. So I regard it as a little bit dangerous territory. But I don't know nothing about Transign.
QuestionerDid value clean itself out? or is it still a sewer?
CharlieWell, I'm sure it's way better. You'd stop stealing it. They'd already cut off your left hand. You wouldn't want to lose the other.
QuestionerCharlie, did you know Sumner Redstone in law school? And how do you think he could handle,
[29:15]
Charlieit could have handled its succession plans differently for his businesses? Well, I never knew of Summner Redstone, but I followed him because he was a little ahead of me in law school. But Sumner Redstone. was a very peculiar man. Almost nobody's ever liked him. He's a very hard-driven, tough tomato. And basically, almost nobody's ever liked him, including his wives and his children. And he's just gone through life. There's an old saying, screw them all except six and save those for pallbearers. And that is the way Sumner-Richton went through life. And I think he was into the point. And I think he was into the pallbearers because he lived so long. So one thing I've used someone or rest of all my life as an example of what not to do to do. He started with some money. And it was very shrewd and hard driven. You know, he saved his life by hanging while the fire was up in his hands. He's a very determined high IQ maniac. But nobody likes him. And nobody ever did. And when he paid for sex in his old age, cheated him. You know, he's had one this of one with another. Yeah. It's not a life you want to admire. I've used Sumner Redstone all my life as an example of what I don't want to be. But for share talent driving shrewdness, you would hardly find anybody stronger than Sumner. And he didn't care if people like him.
WarrenI don't care. 95% of the people don't like me, but I really need the other people. I really need the other five. Some are just... Many of them are here right now.
QuestionerYeah. Do you have any thoughts on some of the smaller networks with quality content, like Viacom, for example, with strong brands? Any thoughts on their future?
WarrenI have the general impression based on 60 years of experience in the neighborhood. The movie business is a tough business. Now, a lot of people have done well at it. But I don't know how to do it. to create a Star Wars. I don't know how to sell it for a price like that. I want to let somebody else make money in those difficult ways. It's, I regard the movie business as a tough business. Now, if it's your only way up and you're good at it, because you have to do it. But I don't even think about those things I'm not good at. I don't. Take Netflix. Who did House of Cards? Kevin Spitz. Oh, I'm a producer, though. Oh. The guy gave him the money. Reed Hastings. Netflix did. But HBO turned it down. And that was really stupid. It worked in England.
[32:30]
WarrenIt couldn't fail. But I'm just not attracted. I don't want to try and be ready.
QuestionerReed Hastings, sir.
WarrenWell, did you know Sol Price, the founder of... Very well. Very good guy. Cranky, but very, very good human being. be honorable, very honorable. What he liked about Costco, he thought it was such an honorable way to make money. Try to make the stuff you're selling very good and very cheap for the people who bought it. And he was right, it was honorable. And it was, he did it very well. So, I like he was very good.
QuestionerDo you think Walmart can turn into Sears?
WarrenWell, not for a long time.
QuestionerCharlie, do you think business modes are becoming more fragile with technology and transparency?
CharlieWell, that's. They all, they all, they, they, our ancestors were pretty good at creating fragile moats, too. I think it's natural with what's up in one era. Think of what I've lived through in terms of the people. DuPont looked impregnable. General Motors was the strongest corporation in the world. Kodak was one of the, boom, boom, boom, but they're gone, Xerox. I mean, it is hard to keep winning, and the world keeps changing. Look, the daily journal, it's hard. Imagine going into computer programming, dealing with a lot of agencies all over the world, including South Australia, bubble company like this. It's not a bit easy. And if we hadn't done it, we'd just be one more dying newspaper.
QuestionerCan you talk more about the airlines and what's changed from a couple of decades ago to now?
WarrenWell, I don't know that much about it, but I do know that it's more concentrated now, and there's no real substitute for it. It isn't like that. We have a substitute for air travel. And it's down to a relatively few players. In the old days, they can always start a new airline. They are nothing but young people. They pay the pilots less. They don't have a union. And they could just start hitting the prices. They just kept ruining the business over and over again. And even now, Southwest is just starting to go to Hawaii. So the vicious competition is continuing, including people doing it for government. own these airlines and do it to show off how strong they are. So I don't regard it as a perfect model, and I don't think it's the greatest idea we ever had. It's just something that, considering how pounded they were and how the world has changed a little. We thought, as I say, we had a little advantage by that particular gamble, but it is not that we,
[35:21]
Questionerit's not a cinch. Is there an outlook on oil prices advantage in the world?
WarrenI don't think oil prices will make that much difference over the the long term to the it's not that if the kerosene doubles in price I don't think over time I don't get matters that much to the airlines it's still it's it's it's you put hundred people in an airliner and fly somewhere it's pretty efficient and you can do a lot of flights per day and it's worth a lot of money you will take the trip and not going to be a new airport in Shanghai you know a lot of the airports are fixed and a lot of of them or how the capacity it is it's obviously better than it was in the past whether it's good enough so it will do well I don't know also if it starts working you get paid in advance for the tickets so there's no credit a lot of you'll lease the airliners so you make money you can pile up pretty rapidly in cash is there recent JetBlue wasn't in there I don't know anything about individual airlines neither is we bought a bunch I know it was it was a sector bed it's not about on an individual airline when industries like airlines or railroads rationalize and turn around how do you and Warren know I mean we don't know it was easy to say it in the railroad was all over and then we went in and the airlines it's not over but it's a it's a little bit the same story years of consolidation and bankruptcies three four five six big or so already in the airlines so for 50 years you've continually read about these industries even though you have disdain for them yes I talked about patients I I read Barron's for 50 years in 50 years I found one investment opportunity in Barron's other which I made about 80 million dollars with almost no risk I took the 80 million dollars and gave it to Lee Lou who turned it into four or five hundred million dollars so I have made four or five hundred million dollars out of reading Barins for 50 years and following me an idea now that doesn't help you very much does it I'm sorry but that's the way it really happened if you can't do it I I I didn't have a lot of ideas I didn't find them that easily but I didn't pounce on one which one was that which idea was that it was a little automotive supply company anyway it was a it was a cigar buck Is that K&W? No. No, no, this was, I forgot in the name of it. But it was a little, it was the Monroe shock absorber and all that stuff.
[38:28]
WarrenThe stock was a dollar and the junk bonds was paid 11.3% were 35. And when I bought the junk bonds, they paid me to 35%, they went right to 107 when they called. You know, it was, and then the stock went from 1 to 40, but of course I sold my stock at 15. But what did the article in Barron say? It said it was a cheap stock. But that's a very funny way to be to watch for 50 years and act once.
QuestionerHow long it took you to make the 15 bagger on that?
WarrenWhat?
QuestionerHow long did it take to make the 15x on that stock? It went from 1 to 15, right?
WarrenMaybe a couple of years.
QuestionerHow long did it take you to make the decision to buy it once you read the article?
WarrenOh, Bob. an hour and a half.
QuestionerWhat was it about that company, an auto supply company?
WarrenWell, I kind of knew, based on experience, how sticky some of that. Auto secondary market was, and how many old cars needed, Monroe, shocky absorbers. And I just knew it was too, it was too cheap. I didn't know it would work for sure, but I know that I knew that, I just, as I say, people were afraid it was going to go broke, obviously, if their bonds were selling at 35.
QuestionerHow do you define the edge of the circle of competency?
WarrenWhat?
QuestionerWhat's your definition of your circle of competency?
WarrenWell, each person's is its own, but it really helps to know what you can do and what you can't. I got whole things. I don't like to gamble against odds. I have not lost a thousand dollars in my life, betting against racetracks, casinos. The odds are against me. I just don't play. I don't even want to amuse myself playing against the odds. Now I have occasionally played bridge against better players where I'm really playing for the instruction which I can afford. But that's because I like the learning. But I don't do very much even though. I do not like playing against the odds.
QuestionerCan you maybe say one name that you invested in when you ran your partnership that performed beautifully for you and explain as a case study what it was about that company that attracted you? did you? Because there's not much about them under Wheeler Partnership.
WarrenWell, I did all kinds of things in those days. First place, in those days we had what were called Jewish Treasury bills. And that was event arbitrage. If a company sells out $100 a share in the stock selling at 95, for 60 years, people who just went in and bought the stock at 95 and made the 20% per annum with a little leverage. For 60 years, Graham Newman, Warren, I, and Goldman Sachs,
[41:29]
Warrenmade 20% per year on anything we did in the band arbitrage. What happened was when the stockbrokers were all on commission, the deals announced, every stockbroker can call his clients, oh, your stock is way up, maybe you should sell that, you know, they're getting any commission. So you had dumb selling. And so, of course we did well. Nowadays, the people do not do all that well in event arbitrage. It's too tough, the deals are, it's just too crowded, but it just worked for. but it just worked fine for all those years. We had all kinds of things in those days we can't do anymore. I was speaking with Rick Yurin, and he was saying that if he was to start a fund today, he wouldn't do it. And he says he doesn't think it's hard because the size of a fund like Berkshire limits you to large companies. He just doesn't think that there's the same opportunities anywhere. There aren't. That's why people come to this meeting. Speaking of opportunities, Charlie, could you talk a little bit about your thoughts on John Malone as an operating. as an operator and what you think about the cable industry's moat going forward?
CharlieI do not. I've always been troubled by the cable industry. For one thing, it was thinly disguised bribery when they got the franchises. I don't like to even think about a lot of scummy places that are getting their franchises by robbery. So I've just sort of ignored it. I didn't want to think about it. Malone is obviously something of a genius and he's a fanatic and doesn't like to pay taxes. And he's been very successful. very successful and I've just ignored it. I just don't want to think about it, so I haven't. I can afford the luxury and I don't have to think about everything. But the starting bribery that got the franchises, I just didn't like it. So I just haven't thought about it, and I'm still not thinking about it. And the movie business I don't like either because it's been a bad business. Career and labor unions, crazy agents, crazy screaming lawyers. screaming lawyers, idiosyncratic stars taking cocaine. It's just not my field. I just don't want to be in it. And these other stuff, I find out of the other stuff that I like. We've got so many places in Berkshire that just do their work pretty well. I like that. You'll be amazed. The Seas candy, they make the good candy they work out. We've got lots of places like that. Our utility business. We probably have the best run utilities in the United States.
[44:04]
CharlieWe care more about satisfying the regulators. We care more about safety records. We care more about everything we should care about. We bought Northern Natural Gas, which Enron owned. Of course, to show more earnings and more cash, they just don't know maintenance. The goddamn pipeline can blow up and kill people. And the minute the ink dried on that, we could, everybody took six months off and we spent all these pigs through the a big special name. We went through the pipelines, and we just caught up on all the deferred maintenance. We were not just killing people. That's the right way to behave. Enron is the wrong way to behave. Imagine deferring maintenance on a pipeline so you can show more cash. It's disgusting. It's like killing people on purpose so you can make more money. I mean, it's deeply immoral. And so, but they fix it fast. Of course, I'm glad to be associated with people who behave like that. Greg Abel is a terrific operator and a terrific guy. And he's actually in Iowa, Nebraska or side by Nebraska. Nebraska has public power. So they did not, they borrowed tax exempt, build a new plant, General Electric, they're paying 3% on the debt or something. And they could run a big public power agency. Our Iowa utility, the Greg A. well runs right across the river. His rates are miles below Nebraska public power entirely finances, you know, and the other utility in Iowa, our rates are half theirs. Of course I'd like being associated with a company that can deliver the power quite a lot. And more than 50% of all the power in Iowa comes from the wind. So we're, and the farmers are glad to have a few wind machines out among the corn. And so we've just quietly created a revolution there. The regulators, the customers, everybody likes it. Of course I like people who do that. And Berkscher's full of that stuff.
QuestionerDo you think that cheaper solar over time, as it continues to get cheaper and cheaper, does that pose any potential threat to the utility business? As people have kind of take along their own generation, there's one potential for a debt spiral there?
Greg AbelWell, Berkshire has something like $8 billion worth of solar, almost all of it in California. We've got take or pay contracts from the two big utilities. the two big utilities. And so we have, and the way we leverage to this, like financial land, we'll probably get 15 or 18% or some ridiculous return on our equity.
[46:47]
Greg AbelAnd just sitting on our ass, all these little mirrors sit out there in the field. You have to polish them once in a while. And they'll get better, but they won't get 50%. They'll get, there's a limit to how much better they can get. And the first one we had, they track. had, they track, not at all, they just lay there. The second one, they track east to west, but not from the celestial stuff that goes on, changing the seasons. The next ones will be pointed right of the sun through every kind of that. And they, oh, it makes, but there's a limit to how efficient that stuff can get. On the other hand, since it's free and coming in from the sun and doesn't pollute, and there's a lot of worthless desert in the United States, it's a pretty sensible. it's a pretty sensible way to get power eventually. So, of course, there's going to be more and more of it.
QuestionerBut you don't think the ability to generate so generate electricity at home or on a business's own property, is that going to be some sort of threat at some point to the revenue model or all the tax-
Greg AbelWell, people try and make money out of that crap. I am very skeptical about all this home stuff. That works if the utility will pay twice what the power is worth. Then you can reduce your electricity bill. Well, why should the utility pay for twice what the power is worth? twice what the power is worth, you know. And so we think it's more efficient to have some big place like us create the solar and just out of the utility.
QuestionerDo you talk to Ted and Todd, the new investment guys at Berkshire, much?
WarrenNot much, but I talk to them some. And they're different. It's like they're clones, but they're both good in their own way. And they're both, they both love Berkshire. They both made contributions.
QuestionerDo you think of the incentive where each one gets 20% of their compensation from the other one's performance? Who thought of that incentive? I thought that was brilliant.
WarrenIt's brilliant, but I don't think it's changed things at all. It's my own idea, and it looks good to you people and it look good to me when I did it. I don't think it's changed any behavior at all.
QuestionerCharlie, how do you feel about auto dealerships with their service component and the low capital requirements?
CharlieThat is very interesting. I don't want to be in the... the bottom 80% of the auto dealers. Sure. I think these people are well up in the top 20. And so if we've got 80 dealerships making 3 million a year after taxes, it's $240 million.
[49:38]
WarrenYou have all these dealer protection laws. It's entrenched. We take the real estate, it tends to be very good and stick it in our insurance companies where it's a decent insurance asset. It's what I call okay. So that's great then. great? No, it's not great. It's okay. If it's okay to you, it must be pretty great. No, it's not pretty good to me. It's not pretty good to me. It's okay. I would prefer doing it to not doing it, but nothing, it's nothing exciting about buying a bunch of auto dealers. Also, if you got $90 billion a float, you know, the idea of buying a bunch of auto dealerships that dominate. it's okay.
QuestionerAlso, do you know Norbert Liu of Punch Credit Capital and do you have any thoughts on Amazon?
WarrenI don't know. I'm right. Why should I know him?
QuestionerCharlie, going off of the auto question, I mean, what do you think about the advent of self-driving cars? How's that going to affect the ecosystem on insurance, scrap value, resale values?
CharlieWell, it could. You could change things so much that Geico would be a bad business. Everything can change. That's the nature of the game is that your great business is that you're a great business. are being eroded by something at all times. I think it's a long time in the future. I think it's a very complicated subject. After all, if you're in a self-driving car, it works better if all the things are being self-driven by the same people. We have that already. The monorails don't have operators. Nobody's driving the monorail.
QuestionerCharlie. But that's one guy owns the whole thing, including the roadway. The minute you're sharing the roadway with a lot of the roadway the roadway with a lot of other people, if I'm driving it on the road and some guy goes up and stands there with a machine gun, I will turn around it, I'll do something.
CharlieThe goddamn computer won't. He's not programmed to care about machine guns.
QuestionerCharlie, what you make of the legacy that you and Warren have left, I mean, do you have any idea of the sort of impact you had worldwide? worldwide? Or does it always...
CharlieOn what? On investing, on just basically thinking, not just investing, but just... Well, I think we've had some effect. But they're still teaching the efficient market theory in the business. And the old ideas died hard. And by the way, it's roughly right. It's just the very hard form, which everybody believed. They believed it was impossible. It was rare. They thought efficiency was absolutely inevitable.
[52:28]
CharlieIt was like physics. I call it physics envy. That's what they had in the finance field. They wanted to make their subject like physics. Now, what kind of a nut would want to make stock markets like physics? It ain't like physics. It's more like a mob at a football game.
OtherDo you have a hand? Can you open that way? That's how you open the candy. That's how you open the candy. the candy.
QuestionerWell, and quite a few too. Charlie, would you like to know why I think you should know who in Robert Lewis? Yeah. Because he follows the munger system. His hedge fund is called punch card capital based on the philosophy of punch card investing. And since 08, he's killed the markets and done well for his investors by being invested in just three stocks. Wells Fargo, Berkshire, Hathaway, and Bydo. I just thought you'd be interested.
Charlieinterested? Well, I think I am interested, and I'm not surprised. I'm not surprised. It's worked. It's just what I recommended. And he picks on the same stocks. Right.
QuestionerWell, he admires you very much.
CharlieWell, I think what a simple way that was to get rich.
OtherI'm going to share this with you, gentlemen, because otherwise I'll eat it all. Since you can open the box, we expect to see you here for another kind of a time. I'll say what the hell is. You open one box and you got another. My friend.
QuestionerCharlie, were you surprised on election day?
CharlieOf course. Of course I was surprised on election day.
QuestionerDo you lose sleep for a few days? What? Do you lose sleep for a few days?
CharlieWell, no, because I expect to be disappointed with politics.
QuestionerSo, Charles, you were able to change Warren from Ben Graham to high-quality companies. Was there any change that he brought in your life? Any of your systems?
CharlieWell, I didn't change him that much. You know, Warren would have gotten there anyway. Maybe I accelerated it in six months. But Warren would have figured out that what he was doing wouldn't scale.
QuestionerAbout your granddad, but I hardly hear you talk about your dad, Alfred Munger. I'm wondering if you had any thoughts about some lessons he taught you. since he taught you.
CharlieSo I was very fond of my dad. My grandmother, Munger, was more disciplined than my father. My father made a good income as a lawyer, which he carefully spent, except for his life insurance in his house, and so on. My grandfather always saved his money. And the Great Depression came, he could save the whole rest of the family.
[55:25]
CharlieAnd so, actually, I remember more when I talk about the investors. And the Alfred Munger Foundation? I mean that for my father. That's not my grandfather. Right.
QuestionerAnd what does that do?
CharlieWell, I'm going to give away all that money with where I'm dead if I'd last a little longer. It's not that much money.
QuestionerWhat do you want to give it to?
CharlieWhatever appeals to me at the time. I don't ask anybody.
QuestionerHow do you think about creating impact through philanthropy?
CharlieWhat?
QuestionerHow do you think about creating impact through your philanthropy?
CharlieDoing what? So we're giving away money. money?
QuestionerHow do you think about recruiting?
CharlieI do it. If I give anything off again, please. I regard this is a tax exempt, a bunch of munger money. I've got no staff. I just do it.
QuestionerDo you have any criteria that you follow, or what kind of change are you trying to be?
CharlieI do it when I want to do it and I give where I want to give it.
QuestionerWhat are your hope for your grandchildren?
CharlieWell, naturally, we hope the grandchildren do well. In any grandchild, I've got one who's running a little tiny partnership. But my grandchildren are all doing different things. I've got one at Google. He's a computer software engineer.
QuestionerAre there any other periodicals besides Barron's that you've read for 50 years? And do you have any more inspiring anecdotes from the, Forbes, Fortune, Wall Street Journal?
CharlieI've never bought, I've read Fortune for 60. or 60. Fortune for 60.
QuestionerI was not kidding about that deferred gratification. I was not kidding about that deferred gratification. Isn't it true that you got a new car when you were like in your 50s or 60s? That was the first new car?
CharlieI bought them for my wives. But I always bought a Cadillac that was about 3,000 miles on a way cheaper. Pull around and coach airplanes. He has to go to the Berkser-Hathaway meetings and coach. They were all the coach, too. They'd stand up and clap.
QuestionerHey, Charlie, I wanted to read you a quote and get your opinion on it. My religion consists of a humble admiration of the illimitable superior spirit who reveals himself and the slight details we're able to perceive with our frail and people mind. Sounds like that's not from Zionist. It's Einstein.
CharlieYeah, well. That's the way he felt.
QuestionerWhat's your opinion on that?
CharlieWell, I don't have his idea that he was good at puzzles, because this was a big puzzle to him. So he actually loved that great puzzle on the puzzle maker in the sky.
[58:37]
OtherIt made it difficult, but you could figure it out. I'm different from Einstein. Of course, I couldn't figure out the puzzles what he did. Can you rephrase that? I don't understand the answer. Well, Einstein has his own slant on. land religion. There's already no conventional theology in Einstein. He's not talking about being nice to other people or anything like that. He just, it must be some God out there that created these wonderful puzzles for me to solve. That's a peculiar kind of a religion. But that was Einstein.
WarrenCharlie, you mentioned that one of your greatest treatise was family, having a family. Can you tell us a little more about how what you would do differently with the family or things that? with the family or things that you did really well with the family?
CharlieWell, I have a lot of children. I educated them all. And I take the results as they fall. Well, it's going to do with a family. I have a lot of very admirable children, some of whom are out there today. And that's a huge blessing. One of things I like about them is that they're decent, generous people. One of my daughters who was there. He had a friend who was married to a total church. go to the church, straightened circumstances, bitter divorce. My daughter just bought her a house. I think she owns the house, but his other family lives in it. What's your opinion? That's a nice, generous thing to do if you're rich. Wow. I'm glad my children like that and not like some arrest them. What's your opinion of the giving flag? I told Gates that I wouldn't do it. Because I've already found. Because I've already flouted it. When Nancy died, community property stay, I, she left it up to me to decide where it went. But I knew she would want to go to the children. Every wife, always afraid the old man will have his money taken away by some nurse or something. He's dotage. I knew Nancy would want to go right to the children. So I shunted more than half the monger portion, quite a bit more than a half to the children. I said, I've already totally violated. I've already totally violated the spirit of his plague. And I said, Bill, I'm not going to publicly be a spokesman for something. I've already totally flouted. And I flouted it because I knew my wife who had helped me all these years would have wanted it that way. I'm not a good example for his pledge. So I won't do it. I don't pretend to be doing something I really didn't do.
[1:01:52]
QuestionerIt may be a little too personal, but it may be a little too personal, but is there anything that you do? like to share about your wife? Mrs. Munger.
OtherYeah, we'd like that.
QuestionerPardon me says?
CharlieA long life has many disappointments and agonies in it. I watched the sister die of horrible death of Parkinson's disease, dying young, 64. I lost my first son to leukemia, miserable, slow death. And at the end, he kind of knew it was coming. I've been lying to him all along. It was just so awkward. And it was just pure agony. You have some of those agonies that are going to happen. There's not so much agony when somebody's really old dies. You know, they deteriorate so much, you almost don't miss them. Which I'm doing a good job of. But, no, I think you just take the hardships as they come. You take the blessings as they come. You have fun out of figuring out the puzzles as best you can. It's really, we're very blessed to have the... We're in the United States. We're not in India. We're not in India. under some crazy dictator like Russia, live where everybody's like bribe India. We got a lot to be thankful for here. And we have a lot of options. We can change jobs. We can move around. We can do this to that. We get a huge admixture here with all the cultures of the world without having to travel. So we're not restricted to one narrow group of Bulgarian farmers making olive oil or something. We got this great mixture of people. great mixture of people who are quite interesting and quite different, and they're all cross-marrying, which makes it even more interesting. It's amazing to me there was a lot of anti-Jewish prejudice when I was young. And now every family I know, they got a thorough cross-married. I don't have a friend, hardly, but the big family doesn't have a Jewish in-law. It's all, and the old ideas have sort of died. How did you meet your wife? wife and how did she accept you? My wife, 52 years and died seven years ago. That was mutual friends who introduced us. We were both divorced, both the same age, both had two children. And I only say that I owe a gratitude to the people that introduced us.
QuestionerCharlie, I've heard you and Monish both talk a lot about the power of cloning, great ideas. And I was wondering what you think about the flaws or limitations or dangers of cloning. For example, when you're not true to you, yourself, like when does one get in trouble with cloning and it doesn't work?
[1:04:44]
WarrenWell, cloning is, of course, a very, it's not an ambiguous word, word, when you use it biologically. But when you take it into some other field, cloning is a very interesting idea. You do remove ideas from one place and bring them into another. If that's cloning, I do it all the time. Charlie, can you take us... I like cloning. Can you take us back when you bought the Buffalo News paper?
CharlieYeah. the stress that you had to go through because it looks like it was going to go under right at one point for a while, right? Well, take us the story about the buffoons. We were never the weakest in the town. So we were betting that we'd be the survivor. And we were. So it was unpleasant because we showed no return for a long time. But when the other guy finally turned up his toes, we suddenly started making a lot of money. So it just was delayed gratification. seven years of like no profits. Wow. And it disappears and the sky rings gold. On the note of... The earnings went from nothing to 70 million years pre-tax. Boom, boom.
QuestionerOn the topic of cloning, do you really believe, as Manisha said, that if investors look at 15 apps of super investors, that they can beat the market by picking their spots, and will add spinoffs?
WarrenIt's a very plausible idea. I have encouraged one young man to look at it. So I can hardly say that. I can hardly say that it has no merit. Of course, it's useful if I were you people, to look at what other people you regard as great investors are doing for ideas. The trouble with it is that if you pick people as late in the game as Berkshire Hathaway, buying our limitations caused by size. You really need to do it from some guy that's operating in smaller places and finding places with more advantage. And of course, it's hard to do it. identify the people in the small game. But it's not an idea that won't work. If I were you people, of course, I would do that.
QuestionerWhat do you mean? I would want to know exactly what the true people were doing, and I would look at every one of them, of course. That would be a no-brainer for me. What do you mean about you encourage one young man to pursue it? What do you mean?
WarrenWell, my young man's my grandson, who has a fair amount of money, fascinated by securities. So I advised him, but once you start there. Let's you start there.
QuestionerDo you think the equity positions within Berkshire... So it's Monash's idea. Do you think the equity positions in Berkshire will do better for Berkshire going forward or the
[1:07:43]
WarrenWell, I think the wholly owned businesses will because we won't do any taxes on selling. And I think they will continue to grow and I think they'll do better. I think the Berkshire, the wholly owned businesses of Berkshire are the 80% of ownership. percent of them, or what have you, on average, better than the businesses, say, the S&P. So I think we'll do better in that part than the S&P. And I don't think our stocks located in a corporation subject to taxation will do enough better than the A&P to even pay the taxes. But if we're buying the stocks with the float and some insurance company, of course, the change, there were changes. But, no, I would say that, of course, the... Of course, if you buy Berkser, you should not be buying the strength of its little insuring its portfolio. Look, we get $8 billion, it's the biggest market cap in the country. It's a considerable period, get $8 billion into it. And it's not that big a deal with a $400 billion market cap. And it's not that... It was easier to get into it out than other things. No, I... People who buy Burkshire. When you went Berkshire back 30 or 40 years ago, you were getting a bunch of marketable securities in the discount and all the businesses were free. And of course those people made a lot of money. We outperform the market by miles in those days, and the businesses did well. And now we've got businesses that are averaging out doing well, and our marketable securities are a small percentage of our... There were years when we had more marketable securities per share than our book value for share. Now it's quite different. And of course, the marketable. that's Crescent Mobile, it's a different world. The one thing about Berkshire that's interesting is we do get some opportunities people, other people don't get. If you're 3G and want a partner for your next deal, who are you going to come to? We know we're, they know we're a good partner. So we see stuff other people don't see. That helps. Sorry.
QuestionerCharlie, moving on to one of the smaller positions in Berkshire portfolio. There was a recent position. position made in Sirius XM. In what? Serious XN. Can you talk at all about radio assets and your outlook on radio assets with...
CharlieI don't know anything about radio assets, yeah, but it's a very mature market. And Godham radio is basically an auto market. I'm choosing the radio.
[1:10:42]
QuestionerPeople driving. Very peculiar. And totally concentrated. I don't know what even bought. I never think about it. How much? of your success can be attributed to Occam's Reza and Kelly's formula.
WarrenWell, Occam's Razor is, of course, a good idea. It's a basic idea. Occam's Razor is like telling a fisherman to fish where the fish are. Of course, she'll do better. And fishing where the fish are.
QuestionerYeah. In those businesses that are not wholly owned but maybe 85% owned, the 15% ownership, when there's massive investment with, within that business, how does that affect the ownership of the 15%.
WarrenTake the Nebraska Furniture Market, owned by the parts of the Blumkin, and we didn't want to sell them. They love the business, they're very rich, they have an enormous portfolio, marketable securities within their, you know, came out of money left in their 20%, because a lot of surplus money they've accumulated it's outside the furniture business, and it's very One says to those people, who he treats kind of like sons, you know, I live in the same community. And he lets them control the dividend policy of the company. It doesn't make much difference to us. The dividends are mostly tax-free. He said, whatever dividend policy, we own 80% of it. So he says to the minority owners, just to choose the dividend policy with the whole company. Whatever you want, it's always doing things like that with the right people. So is Lidu. I tell you a story about Lidu that you will want. General Motors. General Electric was famous for always negotiating out of the wire. And just before they're at close, they'd have one final twist. And of course, it always worked. The other guy was all invested. So everybody feels robbed and cheated and mad. But they get their way. That last final twist, people have him. So, Lee-Lum had a couple of venture capitalists investments with the field. He made this one with this guy. They had made us a lot of money in a previous deal, and we're now going in with them again on another very high Very high-grade guy and very... Now we come to the General Electric moment. He says, I have to make one change in this investment. It sounds just like General Electric, just about to close. I didn't tell you, he did it himself. He said, you know, this is a small amount of money to us. You got your whole net worth in it. I cannot sign this thing if you want, let me put in a clause,
[1:13:48]
Charliesaying if it all goes to hell, we'll give you your money back. That was the change you wanted. Now, you can imagine. how likely we were to see the next venture capital investment. And nobody has to tell Leloo to do that stuff. Some of these people, it's in the gene power. It's just such a smart thing to do. It looks generous. And it is generous. But it's also a huge self-enders down. Is there a little reciprocity opportunity there? Well, it's the right way to behave anyway. And the second way, it helps you. And Berkshire has helped you. And Berkshire has helped by its past behavior to see things that other people don't see. But how many people, would Sumner Redstone have ever done that? Would General Electric have ever done that? That whole culture of behaving otherwise. Ben Franklin talked about morality being the best policy. But then you see the Sumner Redstones and the icons and the Trump's doing really well by acting kind of the opposite. Yes. How do you reconcile that and still? and still come out with the, what no doubt is the correct answer, that it's wiser to be moral? Well, of course, Sautner Redstone, I graduated from Harvard Law School a lot a year or so apart. And he ended up with more money than I did. So you can say he's the success. But that's not the way I look at it. And so I don't think it's just a financial game. And I think it's better to do it the other way. other way and you sometimes you think you're getting by with this General Motors is a letter they file out when they take something over a letter says dear Joe Schmo major supplier to this business they've just bought we're going to accomplish wonderful things together we have to but we have to harmonize the systems of General Electric with the and you're going to evaded 90 days instead of 30 days, which is just horrible imposition on the supplier. But they got a whole department that's just organized and brutalize the suppliers and the furnishing all the money. They did that with one supplier that I know. And of course, the sales manager said, but I don't tell them to go fuck himself. And the guy said, no, I won't do that. He says, just bring me all the stuff where General Electric is my customer, where they've got no alternative. And he just raised the prices by about four times. I think it's a mistake to be quite that brutal. Now they do. They compete in GE based on who can get the suppliers to burnage more and more of the capital.
[1:16:50]
WarrenThey're very tough. Now, it's a great company that was great products and they've got some very good people. I think Jeff M.L. was a good guy, but I would be very uncomfortable doing that. My theory of life is win-win. I want suppliers that trust me and I trust them. And I trust them. don't want to screw the suppliers as hard as I can.
QuestionerHow did you feel when Berkshire bought the GE's fight? What? How did you feel when Berkshire put money into GE in the crisis?
WarrenIt was fine. It was sure to work. It was a high coupon. And it did work. When we buy up something like that, we're not making any moral judgment about the company. I don't think that's that immoral. Average top. Geez, one of our better companies. In terms of fanaticism about defect absence, and they're very good on that stuff.
QuestionerCharlie, in your book, you said one of your... I want to get ahead, making a final twist on every deal, just before the closing. I'm brutalizing all my suppliers to the last NECO on when I paid them. That's not my system. So, Charlie, you said in your almond, this is one of the best years you ever encounter, the one that didn't close, a wood manufacturer. Yeah. Can you grow a little more in detail?
Charliethat was Conwood. It's an addictive product. People are totally hooked. They're a number two person in the market. They all believe in their product. Every damn one of mature tobacco. And the figures were just unbelievable. That was virtually no financialist. You're going to know nothing but money. And the cancer caused by that mouth tobacco is maybe 5% of the cancer. percent of the cancer you get from cigarettes. But it's not still. You definitely are going to kill people with that product. They have no reason to die. It's the best deal we ever saw. We couldn't lose money to it. We passed. They didn't pay it out. Jay Pritzker, who was then head of the trustees or something at the University of Medical School. Fiskers were big in Chicago. He just snapped it up so fast. The visitors made two or three billion dollars out of that. Do we miss the two or three billion we would easily have had? Not an Iota. We had a moment's regret? Not an Iota. We are way better off not making a killing out of a product. We knew going in was a killing product. Why should we do that? On the other hand, it was just a marketable security. We wouldn't feel that the morality owe it was ours. But it's going to be our subsidiary.
[1:20:02]
WarrenWe're going to be paying the people that are advertising. people that are advertising, you know, bagel. It's just too much for us. We're not going to do it. Charlie, is there any one question you've anticipated being asked in your whole life that you've not been asked yet?
QuestionerThat's a good question. Why didn't they ask that? What question should I ask you? It will help me. Anyway. Do you have a favorite Mrs. B story you can share with us?
CharlieWell, she was very very very very very. and bossy. She was illiterate in English, although she was fluent in Yiddish. And she could make arithmetic complications in her head that you can't make. She knew exactly how many yards there were in 26 and a half by 104 and a quarter in her head. And she was there, but she was a very bossy, domineering, hardworking woman. And it was a very bossy, was she worked herself a hundred hours a week. She had sons-in-law who were the nicest people, and they weren't maybe 50 hours a week after they were filthy rich. She called them those bums. It said, you know, a lot of characters. The other one is, is we bought a business from, it was half owned by a daughter of Moses, Salmon. She was a very rich woman, and she don't have this business, which was her husband's business. And she was driving cattle. Her husband died, but she had a company car and had a company car. And she wanted the catalog. So she told her lawyer to ask Mr. Bobbitt, give me the catalog. And she told the lawyer what to say. Tell warrant, she said, that a lot of people give money to poor people. money to poor people. But that's easy. They get the reward and fulfillment of knowing the poor and observing the tenets of religion. It's the real charity that's unusual, is giving money to the rich. And so she made that pitch to war and the lawyer was very embarrassed to do it. Tell her also to her a wholesale bluebook, which she finally did. But she said, but she first made the pitch that we should give her. the car because it was so much more generous to give to the rich. It was so more unusual. That woman had an adopted child who was a genius. And so she would rent Carnegie home and let the child conduct an orchestra. Rich can get quite except for you.
QuestionerCharlie, can you go back to the Nixon years when you bought the Washington Post and how that whole situation happened out?
CharlieThe market. cap of the Washington Post was 75 million we bought in.
[1:23:34]
WarrenIt would, you could have sold it an afternoon every single asset for four or 500 million. So it was a good business, not just a gram stop, but it was also a gram stock because it was so cheap. And they also had a business that was likely to destroy its competitor, making it a monopoly. Now it was only a tiny little money when they could go in. That's what makes it hard for you people. It's a great investment, but it was a great investment. investment, but maybe it would absorb four or five million dollars. Have you seen an opportunity like that since? Which we did. And by the way, that four or five, I mean, it was ten million. We got ten million into it. At the top it was a billion. And, but we only did that once. So it's a great story, but now that helped us way back to have that extra billion in our dollars. But that wasn't an opportunity that would take billions of dollars. That's why what happens in the past in Berkser can't happen again. that little opportunity for $10 million investment. It was wonderful. But we don't have a lot. If you look at Berkshire, you'd think we'd have 10 investments that are each of them, say 10 times. We put in a billion, and now it's 10 billion, and then we have 100 billion and 10 companies. But we don't. We had three or something. And it's not that damned easy to find these damn things that you can identify. It's not that damn easy. Thank you again. all your continuous sharing. Well, I appreciate it. I'm glad you guys are still having fun doing it then. I'm glad you're not discouraged. You shouldn't be, but you know, everybody who did the value investing in my generation and plugged the way out. You didn't have to be that smart. They all did well. And yours is going to be more difficult. Is there a good... But, you know, you want something to do anyway. That's kind of interesting to do, so the fact that's difficult shouldn't. it's difficult shouldn't discourage you that much. Is there a good systematic approach to learning from one's mistakes, like so you don't repeat them? Is there something that's worked for you in terms of post-mortems? We were active enough so we had some mistakes to remember. It's hard to learn. We learned a lot vicariously, because it's so much cheaper. We also learned a lot from unpleasant experience. And so just doing it. Doing it, you'll, you'll, I mean, they get those mistakes. Nobody can avoid them.
[1:26:15]
WarrenAnd of course you'll learn from everyone. Monash is good at post-Morteming, post-mortem, his mistakes. And... What did you say when Dexter's shoes came up? Were you for or against it at the time? Well, I had to look it very hard. The company was loved by all the retailers, was the number one supplier to J.C. Penny. It had surpassed everything. It was a solid earner, a dominated Maine. They were nice people. And of course, the Chinese hadn't come up by that time. They just came up so fast. And they just took no prisoners in the shoe business. And they weren't just cheaper by a little. They were half-priced. And of course, the shoe business is not that easy of business. Of course people bought the half-price shoes. And the business just went to hell very fast. But that business, because it created such a business, because it created such a huge lesson, and it looks awful in terms of what the Berkshire stock is worth. I mean, we're the main charity in Maine, if you call us. But at the time, it was 2% of one year's performance. That's what we lost by having to go to zero. So our return from one year went down by two percentage points. Now to be sure if we bought our own stock instead of this thing, you know, or not giving away our stock. stock it's a huge error. But the, but we learn from us. I just think if you just keep going, you'll make some mistakes and of course you'll learn from. How could you not learn from that one? We've learned how awful it is to have somebody who's really way lower. Price come in, hard, and how no amount of managerial skill could protect us. Now we have other show businesses and little niches that make 20 million a year or something after taxes. taxes. Maybe a little bit of that is left over, Dempster even. But we just, we make do. And, but don't you all have mistakes? Yes. Yeah. That are painful. And haven't you learned from them? Yeah. And isn't that good? Yes. And so, but I don't know what I would do now with it. I know. I live surrounded by capital guardian people. I have over a trillion dollars. And they are all these guys. that gets a business school and they treat them well and they divide them up and they get expertise in various places. It doesn't work to beat the indexes. I knew that company when it was smaller, you know, five or six hundred million, and they beat the indexes by a point a year, you know, which was fine because they were drawing the fees off the top
[1:29:27]
Charlieand the clams. Now they've lagged by a point a year or whatever you know, it is. They handle that the way, by denial. They just don't face it. I was there the other day, and this very nice portfolio manager was very smart, a polished, generous, nice man. It's just a very nice, polished, intelligent woman. He said, well, you know, we outperform in my fund, which has $100 million by two percentage points a year. I'm going to raise my eyebrows. I was looking at it for a while. He said, well, I mean that we outperforming our competitors. outperform our competitors by 2% plus. And I said, yes, and in that overperformance, a lot of it was a long time ago, and he had way less money. And that was another horrified pause, and finally the woman says, he's on to us. We're not on to discuss something else. We're not on to discuss something else. Anyway. It's awkward. You know, you want to keep getting paid. You like your money to work. You're flying around interviewing management and so forth. And what all said and done. And they did it for a long time before. It just got harder. And then I see people leave. They say, I can't manage $30 billion. I'll manage $3 billion. And now I'll outperform. And they've had that happen two or three times. And the new guys don't outperform either. either because the new client still wants 10 stocks or something. Oh, and there's another experiment. They've done about five, not five, three times at Capital Guardian. Follow what the great investors are doing. That's one way. They said, we get the best idea from our best people and we'll make a portfolio just of our best ideas from our best people. Nothing can be more plausible. I've done it three times and failed every time. Now, how would you predict that? Well, I can predict it. because I know psychology. When you pound out an idea as a good idea, you're pounding it in. So by asking people for their best ideas, they were getting the stuff that people had most pounded in, so they believed. So of course it didn't work. And they stopped doing it because it didn't work. They didn't know why it didn't work, because they haven't read the psychology books, but they knew it didn't work, so they stopped. And it's so plausible. I don't think that's true at Berkshire. I think that's true at Berkshire. at Berkshire, if you asked me and Warren for our best ideas, that would have worked. But it didn't work in a place like that, the more conventional manager.
[1:32:26]
CharlieBy the way, I don't think it would have worked that perfectly at Berkshire. I think it would work better than did at Capitol Guardian. Isn't that interesting that that would not work? Does it still occur you talk to Warren once a week now? No, no. It'd be like talking to yourself. We don't have any new ideas. 87 and 93 ago. I mean, what the hell? Anyway, the, but the young man makes some contributions. They caused us to think about things we wouldn't have thought about before. We would not have bought the airlines or the, or the Apple, if the young man hadn't come up with the idea. But once they did, Warren ran with it. And Warren's pretty great. It was hard to buy that much airline stock. Doesn't sound like much airline stock. You know. by Berkshire standards, but we had to be a hell of a percentage of the market in those years for a pretty long time. It's very hard to manage a lot of money. It must be an awkward conversation with Bill Gates after he bought the apples. What? I said it must be an awkward conversation with Bill Gates after that Apple has gone by. I don't, Bill Gates does not have any illusions on that subject. Bill Gates bought that $150 million with Apple, I think they sold it. Right. That was a good buy. Yeah, but it was not a good sale. Oh, I got another story where you would like. I guess another story. I have a firm investment. That thing around all of you. Al Gore. Al Gore has come into you fellow's business. And Al Gore is in your fellow's business. And Al Gore is in your business. He has made three or four hundred million dollars in your business. And he's not very smart. He drank a lot. He smoked a lot of pot as he coaxed through Harvard with a gentleman's seat. But he had one obsessive idea that global warming was a terrible thing, and he understood that he'd protect the world for. So his idea when he went into investment counseling is he was not going to put any CO2 in the air. So he found some partner. partner to go into investment counseling with. And he says, we're not going to have any CO2. And, but this partner is a value investor and a good one. So what they did is, is Gore hired staff to find people who didn't use, put CO2 in the air. And of course, that put him into services. Microsoft. And all these service companies were just ideally located. And this value investor picked the best service companies. So all of a sudden the clients are making,
[1:35:29]
Warrenhundreds of millions of dollars and they're paying part of it to Gallagore. Now I go, Al Gore has hundreds of million dollars in your profession. And he's an idiot. And it's an interesting story. And Krillwood. Charlie, earlier you were talking about how. So if you were idiots about global warming, President would push your theory. By the way, it's not the only one. There's an investment. There's a leveraged buyout operator in Los Angeles. Los Angeles that I know cash away. He's made 35% per annum for 30 years. All he buys the service companies. Instead of buying five per, you know, 100% in the management, they have 10. He always tries to buy 60 and let the old manager who created the company own the other 40. And he buys nothing but service companies. And he knows a lot about it. And with that formula, which like, you know, inventories, receivables, are all kinds of horrible things in business. that just by service companies you can avoid. And it's amazing how it's worked for, it worked for this guy with does the LBOs just the way it worked for Algo, or 35% for Rana. And he's smart because he's causing people to have more of their own skin in the game. They know more about it. They're more like partners, you know. The new manager's not an employee. They really, some other guy who was reporting you old, 60, that's a different role. relationship and he's the founder. But what a clever way to do it, and it works better. And of course, he knows more about it when he does nothing to serve his companies. I know another guy does nothing but mail order and internet companies. Also, he's made 20% percent for him for a long, long time. And, but he knows more about getting customers and this racial, and he knows more about these damn mail over and internet companies. He really knows a lot. knows a lot. It's two specialists. Each one of the different specials. Both working. Interesting. And that's why I made it all talk about, the specialization frequently works. I haven't had more fun to go on and do everything, but these specialists do better, average down. They know a lot. So how is our little mail order business Oriental trading doing? And did they give you a... That's one of this guys. This guy sold that. Not to us. but one previous to us. Well, it's a very humdrum, damn business. But it's right there in Omaha. It's a non-event. It may be better than something else we put insurance float into.
[1:38:33]
WarrenBut it's not, it's going nowhere. But, you know, if your phone costs you nothing, and you suddenly make 10 to 1% on it, it's a big galling. We've got a float now. Speaking of that, Ahji, there only been two transactions like that in the history of that. like that in the history of the world, 10 billion each. How she does both of them? If you want them to do a lot with the AIG? What? Do you reinsurance of AIG? That's the second one. But where else is AIG going to go for, who would you trust to pay a lot of other stuff 30 years from now, except Berkshire? Nobody. It was nice to be in that position. And we get along with them. Do you still do, in the past, do you do you do a lot of work still for on? of work still with Ron Berkel in the supermarket finance? I have not seen Ron Berkel in 35 years. He always tells people what a great friend he gets to mine. I like Ron Berkel's father. It was our last customer for trading stamps. And I like Ron when he was eager, but Ron, when he's made a lot of money, is a bit insufferable. Yeah, I mean, no, he's my good friend if you listen to him. Because you show up in pretty much every biography of him that's ever written. The one he really knows is Bill Clinton because he furnished him with girls. He's talking about the wrong, his wrong, he's had other friendships that are closer. When you look at what's made you and Warren, and Warren have relatively happy lives. Is there some aspect of that that's imitable for the rest of us?
CharlieWell, it's all emitable. If your marriage reasonably works, and if your family life reasonably works, that doesn't mean perfectly, because nobody's family lives perfectly, particularly with the children. And if your partnerships work well, we have had marvelous partners. Warren's been a marvelous partner for me. I've been a good partner for him. All of our other. subsidiary partnerships, which don't overlap totally a bit marvelous. I did not have a big failed partnership with any kind. But that's because I am a good partner, and Warren is a good partner. And so it's like, you want a good spouse, deserve one. If you want to be a good partner, be a good partner. It's a very simple system, and it's worked very well. Of course, it wouldn't work without it. And also get rid of the bureaucracy. You deal with good people you trust. people you trust expense trouble lawyers checking we're always closing something with no audit we basically are very old-fashioned we bought the
[1:42:04]
WarrenNorthern Natural Pipelines they needed money Monday and it was like Saturday it was lots of money we came up with the lawyers were having a fit we gave them the money and took the pipeline worked out the details letter and other people can't do that their whole culture is all kinds of bureaucrats that want to something to do. They can't make an exception.
QuestionerGoing back to Enron, do you have any insight into whether Kinder Morgan would be a successor or a rejecter of Enron culture?
CharlieWell, I don't think Kendra Morgan is anything like Enron in the sense of it. Enron is total fraud and bullshit and craziness and regulation. They went for CERC and Kendra Morgan made puff a little and pretend that cash flow is really cash and there isn't. really an obligation to replace a debris. He may, but it's not Enron. Enron was just pure, disgusting, awful. And I think most of those limited partnerships have a slight touch of the old mining companies on the San Francisco Exchange. They've all paid monthly dividends as they got into the ore. And of course, once they'd done that, they had two divisions. They had a shuck the suckers division. on the mining exchange in San Francisco. And a bunch of miners that went in the mine. It was like a two-handled pump. They'd flood the mine. Stock would go down and they'd buy it. They'd pump the water out of the mine, pay a big monthly dividend. A shocking suckers over here by kind of fraudulent, illegal, by modern standards. And the mine, they were, it was disgusting. But to some extent, the master limited partnerships, they pretend that the cash is really free. When a lot it really isn't, it's sort of, it's, it's, they're taking out money, they really, the business is going to need to replace what it's doing. In that sense, it's sort of a mildly, a moral way of doing things and they're doing it, because they can get by with them.
QuestionerYou have a different view about the master limited partnership. Now it's crazy how they raised so much equity, they were, like, the issue of equity, like, raising two in people.
CharlieYeah, well, it was kind of dishonorable. You know, I, yeah. Well, I, the old con dominole. I had the old condomerate business with he issued the stock and then the stock sell 30 times our needs to keep buying a bunch of ordinary business. That was like a chain letter, yeah. It was dishonorable. There's a lot that goes on in finance. It's dishonorable.
[1:44:54]
QuestionerSo what do you think about the last couple of books that have been written about you? And if there was an author here, what would you tell him? He was writing a book about you?
WarrenI haven't read. What are you talking about?
QuestionerLike the Tao of Charlie Munger?
WarrenOh, I never finished it. Yeah. Dammit, what, any kind of your thoughts on the books that have been written about you? Well, I don't finish them. I'm not like, Of course people are going to tend to look about stuff that's written about them and it's distributed. But when they just copy old quotes and so forth, why should I read it?
QuestionerHey, Charlie, I believe you've said that if you could have lunch with anybody, it would be, Benjamin Franklin. And if you did, what would you ask him or what would you talk about?
CharlieWell, it's hard for all that. Benjamin Franklin has already taught me what I want to know because he left such a record, and his biographers have been so good, and he was so famous in his own lifetime, and for so long. So I already have had my conversations with the Franklin. He actually gave us the autobiography. And then the various biographies I've read, and the rest of the story. It was interesting, in the end, he failed in his relationship with his only surviving son, who was loyal to the crown. That rupture never healed. And it was just too much. Ben thought his son had a duty, not to publicly have a big fight with his father who had raised him and gotten his fancy position with the crown for him and everything else. And the son felt that, you know, protected position. in the protected position he had. You could understand that I'd feel that way. Most people wouldn't do that. They would reconcile somehow or pretend to reconcile. But that really erupts. He didn't even talk to that son at the end. Which is interesting. Franklin was capable of having more resentment than I have. I have conquered resentment better than Franklin did. I'm not that mad about the people that disapproval. That's why I kissed off that Trump stuff by making up. off stuff by making a compliment today. I don't want to... I don't think much of Trump, as you can imagine. Imagine me voting for Hillary Clinton. It was very hard to push the pen. But I did.
QuestionerAre you angry?
CharlieNo, I'm fine. I'm getting riddle. I'm going to leave with a minute. Is Oscar out there?
OtherNo, if Jerry would like to meet with you for a little bit. Okay. I think I should.
QuestionerYeah, sure. Thank you. Thank you.