Source: https://youtu.be/SdsRZsSZlho

well good morning and welcome
what a nice crowd you certainly got
quiet quickly
kind of surprised me can you hear me all
right
yeah thank you well for a business
school you know it doesn't get much
better than this having the world's
greatest investor come to your campus is
quite an honor
warren buffett is chairman of berkshire
hathaway a holding company whose
investments range from geico insurance
american express and coca-cola to
borsheim's jewelry store in his hometown
of
omaha nebraska mr buffett has been
described as the god of value investors
and the michael jordan of the investing
game
he began his first investment
partnership in the mid-1950s with 100
of his own money a few years later he
began investing in a struggling
massachusetts textile mill
called berkshire hathaway through
through berkshire he started putting
capital into other businesses
chiefly insurance which generated cash
streams for
more investments which have done very
well indeed as we all know
from share price of about 18 in 1965
berkshire today trades around
69 100
over time the company's annualized
performance is more than double that
of s p 500 and berkshire today is worth
more than 100 billion dollars but mr
buffett is known
as much for his unpretentious style
as for his lofty success he has become
a champion of investors and is legendary
for his aversion to corporate
doublespeak
he is rare among ceos in that he
cheerfully admits his mistakes
three years ago he wrote in his annual
report that berkshire would have done
better if he'd simply had gone to the
movies
there aren't very very many years like
that since 1965 believe me
berkshire was proudly even defiantly
absent
from the dot com hysteria of the last
few years and now that the bubble
has burst as we all know its warren
buffett is having the last laugh
in his most recent letter to
shareholders he wrote quote
we've embraced the 21st century by
entering such cutting-edge industries
as brick carpet insulation
and paint try to control your excitement
[Music]
you know and personally from reading his
letters i mean it's just a joy
it's it's it's a it's a business uh
lesson in itself i
would encourage you whenever you get an
opportunity to take one aside and
and read it carefully you'll earn a
tremendous amount
his wisdom and insights are so valued
that some investors buy a share of
berkshire stock
just so they can hear him at his
legendary annual meeting
or as he calls it woodstock for
capitalists
he doesn't make speaking appearances
often and we are extremely fortunate to
have him with us today
earl leonard of coca-cola and our
distinguished executive in residence had
a lot to do with that earl and we're
deeply indebted to you for helping to
arrange us thank you very much
our format today will be primarily
questions and answers mr buffett will
make some brief remarks at the beginning
and then we'll move into
your phase we will have a microphone set
up over here we would like you to come
around we're videotaping
so we'd like to use a microphone please
so
go ahead and begin to line up over there
to ask your questions
so would you please give a very warm
welcome
to the oracle of omaha warren buffett
testing one million two million great
okay
[Music]
i i came in from nebraska today and uh
you're probably all familiar with us
mainly by our
football team we have those fellows with
the uh
the big white helmets with those
red ends on them i asked one of our
starters the other day
what's the n stand for and he said
knowledge
we uh we make it tough on them though i
mean you don't coaster in nebraska
just because you're a football player
they major in agricultural economics
and there's a two question final uh
for all of the players and first
question is
uh what did old macdonald have and
[Music]
they were giving that to one of our
potential heisman uh
trophy winners the other day and he
started to sweat
finally he brightened up he said farm
professor
delighted of course you don't want to
flunk a heisman candidate uh
so he said now he said you're halfway
home he said just one more question
how do you spell farm now the guy really
starts to sweat
[Music]
he looks at the ceiling and he looks
around
find his face facebook so he says
e-i-e-i-o
so watch for that guy this year he'll be
dynamite uh
i'll uh i really want to talk about
what's on your mind so we're going to do
a q a
in a minute i uh there are a couple
questions i always get asked
uh you know i always uh people always
say well who should i go to work for
when i get out and
i've got a very simple answer we we may
elaborate more on this as we go along
but uh
you know the the real thing to do is to
get going in
for some institution or individual that
you
admire i mean it's crazy to take in
between jobs
just because they look good on your
resume or because you get a little
higher starting pay i was
up at harvard a while back and very nice
young guy picked me up at the airport
uh harvard business school attendee and
he said look
he said i went to undergrad here and
then i worked for
x and y and z and now i've come here
and he said i thought it would really
round up my resume perfectly if i went
to
work now for a big management consulting
firm and i
said well is that what you want to do
and he said no but he said
that's the perfect resume and i said
well when are you going to start doing
what you like and he said well i'll get
to that someday and i
i said well you know i said your plan
sounds to me a lot like saving up sex
for your old age
you know it just doesn't make a lot of
sense
but i told that same group i said you
know go to work for whomever you admire
the most and
i said you can't get a bad result you'll
jump out of bed in the morning and
you'll be having fun and
dean called me up a couple weeks later i
said what'd you tell those kids he said
they're all becoming self-employed
so you've gotta you've gotta temper that
advice a little bit uh
uh play one game a little bit with me
for just a minute and then we'll uh then
we'll get to your
questions um uh i'd like for the moment
to have you uh well i i
have you pretend i've made you a great
offer and i've
told you that you could pick any one of
your classmates and you
now know each other probably pretty well
after being here for a while
you can pick you have 24 hours to think
it over and you can pick any one of your
classmates
and you get 10 of their earnings for the
rest of
their lives and
i asked you what goes through your mind
in determining
which one of those you would pick
you can't pick the one with the richest
father that doesn't count i mean you've
got to
got to do this on merit but you probably
wouldn't pick
the person that gets the highest grades
in the class i mean that
nothing wrong with getting the highest
grades in the class but that that's not
that isn't going to be the quality that
that that sets apart
uh a big winner uh from the rest of the
pack
think about who you would pick and why
and i think you'll find when you get
through
you'll pick some individual you've all
got the ability you wouldn't be here
otherwise
you've all got the energy i mean you've
got you know
the the initiative is here the
intelligence is here
uh throughout the class but some of you
are gonna be bigger winners than others
and
uh it gets down to a bunch of qualities
that uh interestingly enough
are are are self-made i mean it's not
how tall you are it's not whether you
kick a football 60 yards it's not
whether you can run the 100 yard dash in
10 seconds it's not
whether you're the best looking person
in the room it's a whole bunch of
qualities
that really come out of ben franklin or
the boy scout coder so
whatever it may be i mean it's it's it's
integrity
it's honesty it's it's generosity it's
it's being willing to do more than your
share it's it's uh
it's just all those qualities that are
self-selected
and then if you look on the other side
of the ledger because there's always a
catch to these
you know free gifts and genie jokes so
you also have to
and this is the fun part you also have
to sell short one of the
your classmates and pay ten percent of
what they do
so who do you think is going to do the
worst in the class this is way more fun
and and think about it again and again
it isn't the
it isn't the person with the lowest
grades or anything anything of the sort
it's the person who just doesn't shape
up in the character department i mean we
look for
three things when we hire people we look
for intelligence we look for
for initiative or energy and we look for
integrity
and if they don't have the latter the
first two will kill you because if
you're going to get somebody without
integrity
you want them lazy and dumb i mean yeah
you don't want to you don't want to
smart and energetic so uh
it's that third quality but everything
about that quality is your choice
you know you you can't change the way
you are wired much but you can change
a lot of what you do with that wiring
and it's the habits that you
generate now on those qualities or those
negative qualities i mean the person
the person who always you know claims
credit for things they didn't do that
always cuts corners that
you can't count on i mean in the end
those
those are habit patterns and the time to
form the right habits is when you're
when you're your age i mean it uh uh
it doesn't do me much good to get golf
lessons now if i'd gotten golf lessons
when i was your age i might be a decent
golfer but
but it someone once said the chains of
habit or two
are too light to be felt until they're
too heavy to be broken and i see that
all the time i see people with
habit patterns that are self-destructive
uh when they're 50 or 60 and they they
really can't change them they're
imprisoned by that
but you're not imprisoned by anything so
when you write down the qualities of
that person
that you'd like to buy to 10 of look at
that list
and ask yourself is there anything on
that list i couldn't do
the answer is there aren't there won't
be and when you look at the person you
sell short
and you look at those qualities that you
don't like if you see any of those in
yourself
you know you get tested whatever it may
be
you can get rid of that i mean that is
not ordained
and uh if you follow that
and ben franklin did this and my old
boss ben graham did this at early ages
in their young teens they just
ben graham looked around and he said who
do i admire you know
and he wanted to be admired himself and
he said you know why do i admire these
other people
and he said if i admire them for these
reasons maybe other people will admire
me if i behave in a similar manner and
he
and he decided what kind of a person he
wanted to be and
if you follow that at the end you'll be
the person you want to buy 10
of i mean that's the goal in the end and
it's it's something that's achievable by
by everybody in this room so
that's the end of the sermon now let's
let's talk about what's on your mind and
the you can ask anything the only thing
i won't tell you
is what we're buying or selling or about
let's say yeah
i don't even tell myself that i mean i
write it down and then it's like the
coca-cola formula you know there's only
two people can get into the trust
department and find out what they are
and i don't know who the two are so
it's uh we don't talk about what we're
buying or selling but anything else is
fair game personal business
anything you'd like to talk about and
actually the tougher the questions are
the more interesting it is for me so
don't don't spare my feelings i mean
just
throw up my head and uh and with that
let's uh
i guess we've got a microphone is this
the only microphone or is there one
this is the only microphone okay
i have an old-fashioned belief that i
can
only should expect to make money and
things that i understand and when i say
understand
i don't mean to understand you know what
the product does or anything like that
i mean understand what the economics of
the business
are likely to look at look like 10 years
from now or 20 years
from now i know in general
what the economics of say wrigley
chewing gum will look like 10 years from
now
the internet isn't going to change the
way people chew gum
it isn't going to change which gum they
chew you know if you
own the chewing gum market in a big way
and you've got double mint and spearmint
and juicy fruit
those brands will be there ten years
from now so i can't pinpoint exactly
what the numbers are going to look like
on wrigley but i'm not going to be way
off if i try to look forward on
something like that
that evaluating that company is within
what i call my circle of competence i
understand
what they do i understand the economics
of it i understand the competitive
aspects
of the business
[Music]
there can be all kinds of companies that
have wonderful futures
but i don't know which ones they are i
given talks in the past where i carry
with me a 70 page
tightly printed list and it shows
two thousand auto companies now for the
start of
the 20th century you had seen what the
auto was going to do to this country the
impact it would have on the lives of
then your children and grandchildren and
so on that what
it just it transformed the american
landscape
but if those 2 000 companies you know
three basically survive and they haven't
done that well
uh many times so how do you pick
three winners out of 2000 i mean it's
not so easy to do it's easy when you
look back
but it's not so easy looking forward so
you could have been dead right
on on the fact that the auto industry in
fact
you probably couldn't have predicted how
big a impact it would have
but you wouldn't have if you'd want
companies across the board you wouldn't
have made any money because
the economic characteristics of that
business were not easy to define
um i said i i've always said the easier
thing to do is figure out who loses
and what you really should have done in
1905 or so when you saw what was going
to happen
with the auto is you should have gone
short horses there were 20 million
horses in 1900 and there's about four
million horses now
so it's easy to figure out the losers
you know the loser is the horse
but the winner was the auto overall
but 2 000 companies just about failed a
few merged out and so on
there were three companies auto
companies in the dow
industrials in the 1920s and 30s
studebaker nash kelvinator and hudson
motor now those names are all familiar
to me
and maybe some of them are familiar to
you but they're not making any cars
you know they didn't make money and yet
at one time
they were in the dow 30. they were the
aristocrats
of american business and they got
creamed
so figuring out the economic
characteristics
of the winners in a wonderful business
is not easy
in north carolina you know orville and
wilbur took off or i guess orville took
off and wilbur watched i'd have been
wilbur
uh but if you could have seen the future
of the airline business
from that point forward and how that
would transform things you know it would
have
blown your way and it's excited people
incidentally ever since but if there'd
been a capitalist at kitty hawk
he should have shot orville down i mean
it because
it's done nothing but cost investors
money there were over 400
airplane companies in the 1920s and 30s
alone there was an omaha there was in
nebraska we were the silicon valley
apparently of aircraft and they all
disappeared
been a terrible business at the end of
1991 if you'd added up the aggregate
earnings from all airline
companies with billions poured in since
wilbur and orville were down there they
came to less than zero
the number of passengers went up every
year now the importance of the industry
was dramatically increased decade by
decade
and nobody made any money so
figuring out the economic consequences
tv i think there's i don't know 20 25
million cents a year sold in the united
states
i don't think there's one of them made
in the united states anymore i mean
you'd say tv set manufacturer what a
wonderful business i tr
everybody and nobody had a tv in 1950
they're about 45 to 50. everybody has
multiple sets now
but nobody in the united states has made
any real money making the sense they're
all out of business you know the magna
boxes the rca's all of those companies
radio was the equivalent of the 20 over
500 companies making radios in the 1920s
again i don't think there's a
u.s radio manufacturer at the present
time but coca-cola
you know i was in 1884 jacob's pharmacy
or whatever
fellow comes up with something a lot of
copiers over the years
but now you've got a company that is
selling
roughly 1.1 billion eight ounce servings
of its product not all cokes bright and
some others
daily throughout the world 117 years
later so understanding
the economic characteristics of a
business is different
than predicting the fact that an
industry is going to do wonderfully
so when i look at the internet
businesses or i look at tech messages i
say this is a marvelous thing and i love
to play around on the computer and
it i order my books from amazon and all
kinds of things but i don't know who's
going to win
unless i know who's going to win i'm not
interested in investing i'll just play
around on the computer and
defining your circle of competence is
the most
important aspect of investing it's not
how
important how large your circle is you
don't have to be an expert on everything
but knowing where the perimeter of that
circle of what you know and what you
don't know is and staying inside of it
is all important tom watson senior who
started ibm
said in his book he said i'm no genius
he said but i'm smart in spots and i
stay around those spots
and you know that is the key uh so if i
understand a few things
and i stick in that arena i'll do okay
and if i don't understand something but
i get all excited about it because my
neighbors are talking about
stocks are going up and everything they
start fooling around someplace else
eventually i'll get cream and i should
so now let's go over here hello mr
buffett i got two short questions
one is how do you find intrinsic value
in a company well intrinsic value
is what is the number that if you were
all knowing about the future
and could predict all the cash that a
business would give you between now and
judgment day
discounted at the proper discount rate
that number is what the intrinsic value
of businesses in other words
the only reason for making investment
and laying out money now is to get more
money later on right that's
that's what investing is all about now
when you look at a stop when you look at
a bond so means united states government
very easy to tell what you're going to
get back
it says it right on the bond it says
when you get the interest payments
says when you get the principal so it's
very easy to figure out the value of a
bond it can change tomorrow if interest
rates change but
you are the cash flows are printed on
the bond
the cash flows aren't printed on a stock
certificate that's the job of the
analyst
is to print out change that stock
certificate
which represents an interest in the
business and change that into a bond and
say
this is what i think it's going to pay
out in the future when we buy
you know some new machine for shaw to
make carpet
that's what we're thinking about
obviously and you all learn that in
business school but
it's the same thing for a big business
it if you buy coca-cola today
the company is selling for about 110 to
15 billion dollars in the market the
question is
if you had 110 or 15 billion you
wouldn't be listening to me but
uh i'd be listening to you incidentally
uh but
the question is would you lay it out
today
to get what the coca-cola company is
going to deliver to you
over the next two or three hundred years
the discount rate doesn't make much
difference after
as you get further out but and that is
the question how much cash they're going
to give you
this isn't a question of you know any
question about how many analysts are
going to recommend it or what the volume
in the stock is or what the
chart looks like or anything it's a
question how much cash it's going to
give you that's the only reason
it's a true if you're buying a farm it's
true if you're buying an apartment house
any financial asset oil in the ground
you're laying out cash now to get more
cash back later on and the question
is is how much you're going to get when
are you going to get it
and how sure are you and
when i calculate intrinsic value of a
business
when we buy businesses and whether we're
buying all of a business or a little
piece of a business i always think we're
buying the whole business because that's
my approach to it i look at it and say
what
what will come out of this business and
when
and what you really like of course is
them to be able to use the money they
earn and earn higher returns on it as
you go along i mean
berkshire has never distributed anything
to its shareholders but its ability to
distribute goes up
as the value of the businesses we own
increases
we can compound it internally but the
real question is
berkshire selling for we'll say 105 or
so billion now
uh what can we distribute
from that hundred if you're going to buy
the whole company for 105 billion now
can we distribute enough cash to you
soon enough to make it sensible at
present interest rates
to lay out that cash now and that's
that's what it gets down to it
if you can't answer that question you
can't buy the stock
you know you can gamble in the stock if
you want to or your neighbors can buy it
but if you don't answer that question
and i i can't answer that for
for internet companies for example
there's a lot of companies there's all
kinds of companies i can't answer it for
but i just stay away from those
number two so you got formulas involved
in finding intrinsic values on certain
companies i mean you've got a
mathematical
system discounted present value of
future cash
second short question is why haven't you
written down
your set of formulas or your
strategies in written form so you can
share with everyone else
well i think i actually have written
about that uh if you read the annual
reports over the
recent years in fact the most recent
annual report i
i use what i've just been talking about
i use the illustration of esau
because here esop was in 600 bc
smart man wasn't smart enough to know it
was 600 bc though i mean
would take a little foresight but
aesop you know in between tortoises and
hares and all these other things he
found time to write about
you know birds and he said a bird in the
hand is worth two in the bush
now that isn't quite complete because
the question is
how sure are you that there are two in
the bush and how long you have to wait
to get them out
now he probably knew that but he just
didn't have time because he had all
these other
problems to write and had to get on with
it so but
he was halfway there in 600 bc that's
all there is to investing is
how many birds are in the bush when are
you going to get them out
and how sure are you now if interest
rates are
15 roughly you've got to get two birds
out of the bush in five years to equal
the bird in the hand
but if interest rates are three percent
and you can get two birds out in 20
years
it still makes sense to give up the bird
in the hand because
it's all gets back to discounting
against an interest
an interest rate problem is often you
don't know
you know not only how many birds are in
the bush but in the case of the internet
companies there weren't any birds in the
bush but that
but they still take the bird that you
give them if in the hand but it's
but i i i actually have written about
this sort of thing and uh
stealing heavily from esop who wrote it
some 2 600 years ago but
i've been behind on my reading yeah good
morning
um i know you're famed for your success
but i was curious if
there were any particular moments in
your life that or
mistakes or failures that you've made
that were particularly memorable
what you may have learned from them and
if you had any particular advice for the
students here
and dealing with uh with uh
discouraging circumstances yeah well
i've made a lot of mistakes biggest
mistake
well not the biggest necessarily the
biggest but but buying berkshire
hathaway itself was a mistake
because berkshire was a lousy textile
business and i brought
it very cheap i've been taught by ben
graham
to buy things on a quantitative basis
look around for things that are cheap
and that i was taught that
say in 1949 or they made a big
impression on me so i went around
looking for what
i call use cigar butts of stocks
and the cigar butt approach to buying
stocks is that you walk down the street
and you're looking around for cigarette
butts and you find this obviously this
terrible looking soggy ugly
looking cigar one puff left in it
but you pick it up and you get your one
puff disgusting you throw it away
but it's free i mean it's cheap and then
you look around for another soggy
you know one puff cigarette well that's
what i did for years
it's a mistake uh although you make
money doing it but you can't make it
with big money it's so much easier just
to buy wonderful businesses so now i
would rather buy a wonderful business at
a fair price
than a fair business at a wonderful
price but in those days i was buying
cheap stocks and berkshire was selling
below its working capital per share you
got the plants for nothing you got the
machinery for nothing
you got the inventory and receivables at
the discount it was cheap
so i bought it and 20 years later i was
still running a
lousy business and that money did not
compound
you really want to be in a wonderful
business because the time is the friend
of the wonderful business you keep
compounding it keeps doing more
business and you keep making more money
time is the enemy
of the lousy business i could have sold
berkshire perhaps liquidated it
and made a quick little profit you know
one puff
but staying with those kind of
businesses is is a big mistake
so you might say i learned something out
of
that mistake and i would have been way
better off taking
what i did with berkshire is i kept
buying better businesses i started
insurance business
sees candy the buffalo all kinds of
things i would have been
way better doing that with a with a
brand new
little entity that i'd set up rather
than using berkshire as the platform now
i've had a lot of fun out of it
i mean everything in life seems to turn
out for the better so i i don't have any
complaints about that
but it was a dumb thing to do i went in
the u.s air
i bought a preferred stock in 1989
uh as soon as my check cleared
the company went into the red and never
got out i mean it was a really dumb
i mean it i've got an 800 number i call
now whenever i think about buying an
airline stock i call them up any hour
that fortunately i call them at three in
the morning and i just dial and i say my
name's warren i'm an aeroholic
you know and i'm thinking about buying
this thing and they talk me down i mean
it takes something
takes takes hours sometimes but it's
worth it believe me
uh if you ever think about that airline
buying an airline just don't call me and
i'll give you the 800 number because
you don't want to do it but
we got lucky in terms of how we
eventually came out on it
but it was a dumb dumb decision
all mine uh and i've done
biggest biggest uh in terms of
event in terms of opportunity cost and
measurable costs
i bought half interest in a sinclair
filling station was about 20 with a guy
who's in the national guard with
and i had about ten thousand dollars
then and i put two thousand dollars in
and i lost it all so that was 20
and that means that the opportunity cost
is now six billion dollars of that
of that uh filling station which is a
big price to pay for
you know getting to wipe a few windows
and a few
windshields and things like that so
actually i like it when berkshire goes
down because it reduced the cost of that
mistake
on an opportunity but
the biggest mistakes we've made by far
i've made not we've made biggest
mistakes i've made by far
are mistakes of omission and not
commission
i mean it's the things i knew enough to
do they were within my circle of
competence
and i was sucking my thumb and that is
really
those are the ones that hurt they don't
show up anyplace i
probably cost berkshire at least five
billion dollars for example by sucking
my thumb
20 years ago or close to when fannie mae
was was having some troubles and
we gotta bought the whole company for
practically nothing and
i don't worry about that if it's
microsoft because i don't know it was
microsoft isn't in my circle of
confidence that so i i
i don't have any reason to think i'm
entitled to make money out of microsoft
or out of cocoa beans or whatever
but i didn't know enough to understand
fannie mae and i blew it
and that never shows up under
conventional accounting
but the car i know the cost of it i know
i know you know i i passed it up
and those are the big big mistakes and
uh i've had plenty of them at uh and
you unless i tell you about them in the
annual report
and i resist the temptation sometimes uh
unless i tell you about them in the
annual report
you're not gonna know it because it
doesn't show up under conventional
accounting but
omission is way bigger than commission
there's
big opportunities in life have to be
seized
uh we don't do very many things but when
we get the chance to do something that's
right and big
we've got to do it and even to do it in
a small scale is just as big a mistake
almost is not doing it at all i mean
you've really got to you got to grab
them when they come and because they
you're not going to get 500 great
opportunities you would be better off if
when you got out of school here
you got a punch card with 20 punches on
it
and every big financial every financial
decision you made you used up a punch
you get very rich because you'd think
through very hard
each one you went to a cocktail party
and somebody talked about a company he
didn't even understand what they did or
couldn't pronounce the name
but they made some money last week and
another one like it you wouldn't buy it
if you only had 20 punches on that card
there's a temptation to dabble if
particularly during bull markets uh in
stocks is so easy you know
it's easier now than ever because you
can do it online you know just you
click it in and maybe it goes up the
point and get excited about that and you
buy another one the next day and so on
you can't make any money over time doing
that but if you had a punch card with
only
20 punches you weren't going to get
another one the rest of your life
you would think a long time before every
investment decision
and you would make good ones and you'd
make big ones and
you probably wouldn't even use all 20
punches in your lifetime but you
wouldn't need to
yep mr buffett good morning um in your
comments about making mistakes and
errors like that you talk a little bit
about your cell discipline
when you're in a position and you you
feel like it's no longer good
and what criteria to use to when you
just finally abandon it
yeah when i started out the self
situation has changed over the years
because when i started out
i had way more ideas than money i mean i
would go through
moody's manual i went through it page by
page and then i went through it again
page by page
and i found stocks in there that i could
understand that we're selling it like
two times earnings even one times
earnings
well when you only have ten thousand
bucks that can get a little frustrating
and
if you don't like to borrow money which
i'd never like to borrow money so
i was always coming up with more ideas
than i had money so i had to sell
whatever i liked least
to buy something new that just was
compelling to me and
for a long time i was in that mode and
now our problem is we have more money
than ideas uh
so we're we
if you look at our annual report which
is on the
internet under at our homepage berkshire
hathaway.com
you'll see something in the back called
the economic principles of berkshire
and you will see which i believe in
setting out for my
my partners they are my partners i don't
look at my shareholders like i'm as
partners they're going to be my partners
for life
so i want to tell them how i think and
if they don't disagree with the way i
think
that's fine but i don't want them to i
don't want to be disappointed in me
you know so uh i lay out there and i say
in terms of our wholly owned businesses
we're not going to sell no matter how
much anybody offers this for i mean if
somebody offers us three times what
something is worth
that sees candy the buffalo news
borsheims whatever it may be we're not
going to sell it
i may be wrong in having that approach i
know i'm not wrong if i owned 100 of
berkshire because
that's the way i want to live my life
i've got all the money i could possibly
need
it just amounts to which a change in the
newspaper
story on my obituary and the amount of
money the foundation has and the
break off relationships with people i
like and people that have joined me
because they think it's a permanent home
to do that simply because somebody waves
a big check at me it would be like
selling
one of my children because somebody
waved a big chick so i i won't do that
and i want to tell my partners i won't
do it so that
they're not disappointed me more and
more
with certain stocks we've got that
approach now
if we were chronically short of funds
and all kinds of opportunities coming we
might have a somewhat different approach
but
our inclination is not to sell things
unless
we get really discouraged perhaps with
the management
or we think the economic characteristics
of the business change in a big way
i mean and that happens so but we're not
going to sell simply because it looks
too high
in all likelihood i mean that you can't
make that 100
but it's it's uh that's that's that's
the
principle under which we're operating
we're generating right now
five billion of cash a year at least so
it's 100 million bucks every week
and you know just that we've been
talking here half an hour
and i've done a damn thing uh so
it's you know the real question is how
do you put it out intelligently and
and if we were selling things it'd be
just that much more so there may
there may come a time when that would
change but but we want to
and i have partners shareholders
partners
who would say if you can get three times
what sees candy's worth why don't you
sell it
and that's why i want to be sure before
they come in they know how i think on
that i mean they're
they're entitled to know that you really
want
think for a minute uh you know if you're
going to get married uh
and you'll want a marriage that's going
to last
not necessarily the happiest marriage
you know or one that that
martha stewart will talk about or
anything but you want a marriage is
going to last
what quality do you look for in a spouse
one quality
do it for brains do you look for humor
do you look for character to look for
beauty
no you look for low expectations
that is that is the marriage that's
going to last
both have low expectations i mean it uh
and i want my partners to be on the low
side on expectations coming in because i
want the marriage to last it's a
financial marriage when they join me
at berkshire and i don't want them to
think i'm going to do things that i'm
i'm not going to do so that's uh that's
our guiding principle
the advice is all free and your marital
advice everything else
next good morning mr buffett i have
questions regarding
evaluation of the sounds of investment
in recent years it appears that
the use of tax shelter incorporation is
increasing and such you know
reputable companies like ups and others
are involved in
cold battles over shelters with irs
and as we know most of these
transactions are fairly artificial
but yet there is a profit there from the
investor perspective do you think it's
beneficial for
investor the the company that they
invest
are involved in those uh shelters and if
so
do you think it'd be helpful is uh if
those transactions are disclosed in
uh statements meaning the uh notes to
statements
i'm not sure i got that 100 george could
you
i will repeat uh there are earls
if you think that uh involvement of
corporations that you invest or anybody
for that matter invest
in tax shelter which is by some
definition of
tax shelters right i've never used one
you know no
i'm not saying so i'm asking
if you know that corporation is involved
in
such activity that is beneficial in
short term
would you uh think that that's helpful
for investors
well there's i mean there there's
perfectly
legal ways to shelter taxes i mean we
we did and still do but we were one of
the earliest ones
to go in for low income tax housing
credits in fact i met with
president first president bush about
about that one
and that benefits us to a mild degree it
it's not a big element uh of berkshire i
mean it's a peanuts
in terms of berkshire's overall value
but it it is a
congressionally ordained uh
tax benefit i wouldn't call it exactly a
shelter it's a tax benefit that
congress has decided they're willing to
offer businesses and they and because
they think it's the best way to
to generate uh low-income housing so
we participate in something but that
it's not a it's not a big
factor in in what we do and
uh but i don't there's no there's
nothing wrong with that then if you get
into tax evasion i mean that's a whole
different game at that point they ought
to go to jail you know
but certain businesses
some insurance companies reincorporated
in bermuda
and you can save a lot of taxes you have
to meet certain other tests which
we wouldn't want to meet but if we were
willing to meet those other tests
there's nothing illegal or immoral about
us
moving to bermuda we're not going to do
it and uh
but if if the restrictions weren't there
i mean the tax code is the rule book
and you follow the rule but i think some
of the things people do
in terms of bending that rule book get
very close
to fraud and sometimes cross the line
into fraud and when they do i think they
ought to be
be prosecuted but that's that's another
game
and incidentally there has been more
pushing on that i would say in the last
five years and certainly was my
experience earlier and
there are more there's
i think now it's diminished in the last
year or two but a couple years ago there
was very aggressive marketing
by some of the auditing firms and of of
these even with share
percentage shares of the gain to be paid
to the auditors i think that those
things got fairly dubious and
particularly when they shopped for legal
opinions
you know so that if you got caught doing
these things you can say well i was
relying on this legal opinion
and therefore i shouldn't go to jail but
just pay the back taxes so
i i i don't know of any anything we're
associated with that
has done that but obviously if they push
too far we don't want to be there
yep i was curious with the
large number of people you now have with
tremendous amounts of wealth what do you
think of the current state of
philanthropy
well i'll be out this week uh actually
i'm going to coca-cola mainland flying
out to seattle and
and talking to the united way group out
there they seattle united way raises
more per capita i believe than in the
united way in the country and
and bill gates will be there we're
talking jointly
his mother was very active in united way
but bill
uh is going to give away over a billion
dollars a year
a lot more later on but right now a
billion and it's very interesting i mean
he's
very rational about it and he's very
informed
in fact he got somebody i think his
primary advisor in the medical field as
a fellow was with the cdc and
atlanta and bill reads 15 books a
a month on this i mean he he can just
absorb it i
i wouldn't be able to get it that fast
but he just says with a billion dollars
he wants to save as many lives per year
as he can
so how did he that's his objective it's
just as much a metric
of his of his foundation as some other
metric return on capital might be for a
business and
he says i'm going to spend a billion
dollars a year how many how many lives
can be saved for that so he's gotten
very heavily into vaccines and
and aids in africa a number of things
it's very rational
uh i personally
uh think all of my
99 point something percent of my net
worth will go to a
foundation after the latter of my wife
and i
die i mean it's all going to go to a
foundation as far as i'm concerned i got
it from society it's going to go to
society
i've written a letter to my trustees and
i've got very few trustees if you've got
a whole bunch of trustees in my
view it they just homogenize themselves
down to sort of the lowest common
denominator because
you get 30 people in a room and uh
prestigious people but they'll they'll
all have their particular alma mater and
they'll have their particular hospital
and
it'll become a big trade-off game you
know it'll be a little like congress
so uh i have very few people
and i don't give them anything specific
because i tell them their judgment
above ground will be better than my
instructions from six feet underground
so
i don't like to think that but it's true
so
i tell them look
the society are the ones that don't have
a natural funding constituency
or are just damned intractable and very
difficult to solve
so i tell them i am not going to haunt
them at all
if they spend big money on some terribly
important problem and they fail because
they're taking on tough problems when i
buy businesses i'm buying easy
businesses
but the reason the big problems of
society are big problems
is that they're damn tough to solve so
they are they're swinging at bad pitches
i'm swinging at easy pictures in
business but they're swinging it they
have to swing at bad pitches
but i tell them i want them to try and
do it and if they fail it doesn't bother
me at all
i tell them if they give a million bucks
here and a million bucks there and a
million bucks there
they're not going to sleep because i'm
going to be haunting them i'm going to
come back every night you know
i do not want the eye dropper approach
used a philanthropy uh
but i want them to use their judgment to
look at
important problems that do not have a
natural funding constituency
you know the government's going to fund
it fine you know i mean they should be
funding important problems but
we won't need to do it the role of
private philanthropy in my
my opinion is to fund things that don't
have the natural constituency and that's
what bill's doing
there isn't there aren't a bunch of
people around
that you can make an emotional appeal to
to make vaccines available
to millions and millions of kids around
the world it just it doesn't target
anybody's heart strings you can't name
buildings after them
i mean it just isn't the sort of thing
that you can raise money for
on an emotional basis and there's
nothing wrong with raising money on an
emotional basis
but that is a problem that won't get
solved by a funding constituent
that's responding to that but bill is
responding to what in his mind is
is the important thing which is saving
lives and he doesn't care whether it
gets his
name on a building or whether anything
happens or whether anybody knows about
it i mean he gets
publicity just because of the scale he's
on but he doesn't care about that i can
promise you that so
that's my philosophy is that i got this
money
not because i'm a superior human being
not because
i've done more for society than other
people
i was wired the right way
to be dropped into the united states
at this particular time i mean it's a
huge capitalistic society and i'm wired
no credit to me but i get born that way
so that i'm better at asset allocation
than other people to some degree
just like other people are better at all
kinds of other things and i was with two
teachers out of
sun valley that are doing more for
society than i am
and they don't this market system does
nothing for them
market system does all kinds of things
for me gate says if i've been born 5 000
years ago
you know i'd have been some animals
lunch you know because i can't run very
fast
can't climb trees i mean you know what
those then i could i could tell that
animal was chasing me you know wait let
me see how i can allocate assets you
know
it wouldn't have made any difference so
here i am you know
i'm born now you know i just very very
lucky and
the odds when i was born in 1930 the
odds were 50 to 1 against me people in
the united states
that's a terrible set of odds to face
and then i was dropped down here you
know
and if i'd been dropped down in peru or
some place or or
china i mean i wouldn't have had a
chance so society is what does it for
you
and and it should go back it might be
what you go back to
society if you've been lucky enough to
be dropped into a society where your
particular wiring pays off big
you know it that uh that's just luck and
and you know there's nothing wrong with
being lucky i don't feel guilty about it
or anything else
but i also don't feel that i feel i have
a lot of fun doing what i do
but i feel the money should go back into
society and it should go back as
intelligently as it can
and the best way to do it intelligently
is to have high grade and intelligent
people
administering it uh at the time and you
don't know the problems that are going
to be out there 10 years from now or 20
years from now or 30 years from now but
i do know if i've got a small number of
high-grade smart
people and high grade is more important
i'll
if you gave me 20 extra points of iq but
but cheated a little on the high grade i
wouldn't take it because
they got to be they got to be there's so
many chances to
to do things in a petty way or you know
to
try to i mean people get subverted in
their own minds to their own interests
rather than the interests of the
institution so
i really want super high grade people
doing it and i've got them
and i think the money might do a lot of
good it may do no good
but it'll be operating in fields where
if it does some good
that good probably wouldn't have been
done otherwise
yep i'm just wondering
um there's a lot of differences between
the recent
boom and bust in the stock market and
one in the 1920s
but there's also a lot of similarities
and those similarities are allowing
people to draw the conclusion that
stock prices will be depressed for uh
some time to come
what where do you disagree and agree
with that conclusion well
the the the whole century is quite
interesting if you take
the 20th century it was an unbelievable
century for the united states
the gdp per capita and that's the way to
think of this per capita sometimes they
talk about our gdp versus europe's
but if their population's the same every
year and ours goes up one percent you've
got a
you know in the end that you you gotta
you gotta have a divisor as well as a
numerator
and so gdp per capita in the 20th
century in the united states
went up 610 percent
actually qualitatively it went up far
more than that because you can't really
measure
you know certain things in medicine or
whatever it may be and
improvements but just on a quantitative
basis it went up every single decade
including the decade of the thirties
so you hear you had a hundred years when
basically the u.s
citizenry was getting was improving
their lot
decade by decade by decade the 30s it
was up 13
uh best decade was world war ii the
1940s
it's up 36 percent the worst decade was
the first world war so you get
sometimes the analogy you know you can
get in trouble on analogies but in any
event it was
it was a huge period interestingly
enough
there were six big periods in there for
the stock market
in both directions there were three big
bull markets from 1900 to 1921
the dow went from 66 to 71
less than a 10 move in 20 years
less than half a percent a year you got
dividends too but a half
so it didn't move from 21 to 29 as you
point out it went
it went from 71 to a high of 381 in
september of
1929. went up 500 well obviously
the well-being of the country didn't go
up 500 during that period and the
well-being of the company country went
up a whole lot more than
10 during that first 21 years so he had
this very uneven development from 19
from september
until the end of 1948 the dow went from
381
to about 180 it was cut in half
and that was 18 long years and yet
the per capita gdp was moving right up
during his whole period so the economy
was doing fine from 48
to 65 the dow went again from about 180
up to close to a thousand again five for
one which was far outstripping
from 65 to 81 the dow went down
literally well again per capita gp and
then we've had this last period where
it's gone up terrifically if you take
the whole hundred years
it went up 180 for one every thousand
dollars became 180 000.
but 43 and a quarter year 43 and
three-quarters years
were those three big huge bull markets
and 56 and a quarter years
were periods of stagnation all in an
economy that was doing fine
you know year after year after year 56
and a quarter years
net the dow was down a couple hundred
points during that period
and the other 43 and three quarters
years made up the rest of this
move from 66 to 11 000 some on the dow
so you say to yourself how could it be
that you could have a country that was
doing better and better and better and
better
citizens were living every every
generation was living better than
the one that preceded it but you had
these huge
changes big gains a few times
long periods of stagnation 20 years i
mean that's a long time to do nothing
the answer is that investors behave in
very human ways which is they get very
excited
during bull markets and they look in the
rear view mirror and they say i made
money last year
i'm going to make more money this year
so this time i'll borrow you know or
or the neighbor says you know i wasn't
in last year when that neighbor was
dumber than i
made a lot of money so i'm going to go
in this year so they're always looking
in the rearview mirror
and when they look in the rearview
mirror and they see a lot of money
having been made in the last few years
they plow in and they just push and push
and push on prices
and when they look in the rearview
mirror and they see no money having been
made
they just say this is a lousy place to
be so they don't care what's going on
in the underlying business and it's it's
astounding but that's that makes for a
huge
opportunity just huge opportunity i mean
i've lived through roughly half
in an investing sense about half that
period and
i've had that long period of stagnation
from 48
i mean from 65 to 80 to 17 years
i wrote an article for forbes in 1979 i
just said how can this be
pension funds in the in 1970 put a
hundred and some percent of their new
money in stock because they were
wild about stocks then they got a lot
cheaper and they put a record low in
nine percent of their net new money and
in 1978 when socks were way cheaper
people behave very peculiarly in in in
terms of their reactions because they
they're human beings and they they get
excited when others get excited they get
greedy when others get greedy they get
fearful when others get fearful
and they'll continue to do so and you
will
you know you will see things you won't
believe in your lifetime
and securities markets and the country
will do very well over time but you will
see these huge waves
and and uh if you can
stay objective throughout that if you
can detach yourself
temperamentally from the crowd you get
very rich
and you won't have to be very bright i
mean it i'm sure you are but but
uh you want you know it just it doesn't
take brains it takes temperament
it takes the ability to sit there and
look at something
when i started out in 1950 i would go
through and find things at two times
earnings and they were perfectly decent
businesses and people wanted jobs at
those companies
and everybody knew they were going to be
around and they wouldn't buy them at two
times earnings and that's when interest
rates were two and a half percent
you know i went to the i started selling
securities when i was 21
and a kansas city life insurance company
happened to be a
fairly prominent company in omaha and
the policies they sold you
if you were buying life insurance from
them had a built-in assumption of two
percent interest
the stock of kansas city life was
selling at
less than three times ernie you're
getting 35 percent
if you bought the stock no question
about the soundness of the company
i went to the local agent i thought i
figured hell i'll be able to sell him a
few shares of stock i mean the guy i
understand he's got his whole life
invested in this company i went to local
agent
we've been with him for 20 years and his
name was moose i said mr moose i said
you know you're selling these policies
with two percent you may even have a few
members of your own family and you can
buy into this company whose paycheck you
depend on every month and you
and whose future you your your
beneficiaries of these life policies
depend on
and who you're selling them you know two
percent investment on and you get 35
on your money yeah sudden you know
stocks aren't any good
and and i couldn't i couldn't tell you
you know i was a lousy salesman i mean
well you have to start with that but
but uh it just blew me away it blew me
away i thought
sometimes i used to wonder if i was nuts
you know but
those things the same thing happened i
mean in 1964 the dow closed at
864. at the end of 1981
17 years later it closed at 8.65 it
moved one point
in 17 years now it's not a big move and
that you can't believe the
how discouraged people were by that
during that period
but you know people were living better
so things can go on a long time
that don't make sense and
but they do come to an end i mean the
internet thing i mean you had these
companies selling for many billions of
dollars that
had no really frankly no prospects of
making any money that's a that's a
bubble
but herb stein one time said anything
that can't go on forever will end
that seems pretty but think about that
and uh
particularly think about it next time
you're trying to do something just
because
the stock's gone up a whole lot you know
and your neighbors made money or
something it
you've got to be you just have to sit
and think objectively and
think about would i buy this whole
business
it's an internet company's got 100
million shares out and selling 100
that's 10 billion dollars
is it worth 10 billion dollars if it's
worth 10 billion dollars it's got to be
able to give you
you know 700 or 800 million next year
and if it doesn't give you 700 million
next year it has to give you
maybe 10 more than that the year after
and continued
there aren't a lot of businesses that
can do that and people just go crazy
and of course it's fun i mean it's you
know it's like that
sign they put in brokerage offices it
says
avoid hangovers stay drunk you know i
mean
it's it's just so much fun to keep
playing but uh
you gotta you gotta do sensible things
to get to get good results
yeah yeah next well we got three people
standing there so
let's do the three that are standing
there okay good morning sir hi
hi i was wondering um what your opinion
is of the federal reserve
and their actions taken recently do you
feel they've done enough to boost the
economy
yeah well i'm a fan of alan greenspan's
over time i've known him for a long long
time we were on a board together at cap
cities and
allen is a very very smart guy he is
motivated in my opinion entirely by what
is good for
the united states people the united
states and so you've got to you've got
you couldn't have a better person in
there and the problem
he may have is that that because his
tenure in office has been associated
with this incredible
bull market that that even though he
wouldn't have claimed credit for it that
people
might associate it because of the
importance of the fed generally they
might associate with him so they may
if things don't work out so well they
may blame him as well but i think his
policy has generally been very good
you have to understand one thing about
the fed
is that it's not as powerful as the
mystique would make it
its break is better than its gas pedal
when the
fed wants to put on the brakes we go
through the windshield
i mean you know the economy just room
yeah
they can put on the brakes paul volcker
did it he broke inflation by doing it
but i mean when he put on the brakes
and that period around 1980 i mean
people hated he was crucified for it but
it was the right thing to do
and he could do it he did it all by
himself and he's
he and and it was the only way because
of the momentum that inflation was
generating it was the only thing that
it was what was needed then enormously
unpopular
it's much harder for
a greenspan to put on the brakes because
nobody wants to put on the brakes but
he's so visible
but he's put him on sort of gradually
but stepping on the gas pedal he does
not necessarily get the same result
it may help but there are a thousand
other variables operating
and as you see in japan you know you can
get down to zero interest rates
and you can't stimulate anything so it
isn't like the japanese haven't read the
same books we've read about
economics i mean they've read canes and
they've read the whole thing so
we're not smarter than they are we don't
have any secrets they don't have
but they don't know how to get their
economy going
and uh you know their gdp there has been
gone no place you know in the last five
years and there's still problems around
so
easy money doesn't solve everything but
greenspan could very well get
blamed for the fact that that he hasn't
solved everything and it's just not in
his power
to solve it uh he can help in various
ways and i but i i don't think he could
have anybody
buddy better and i think he's done the
right thing to this point but the right
thing may not be quite as
as effective as as people may hope that
it would be
in economics it's always you always want
to ask and then what
you'll read in the paper well what
happens if the japanese start selling
government our government bonds or what
happens if they dump the dollar
they can't dump the dollar there's no
way to dump dollars you could
you can at least dollar assets because
if the japanese want to sell government
our government bonds they sell them to
us you know they get a time deposit or a
demand deposited city or they still own
a dollar asset
if they sell them to the french they get
they may get some assets from the french
but now the french have it i mean
the only way you can reduce
foreign investment in the united states
is to change it around so they're
consuming
more than from us more than we're
consuming from them i mean when
when when we buy a television set from
japan
if we buy more television sets from them
then they buy equivalent
consumables from us the exchange what
balances things is we give them
some investment type asset whether it's
cash or us government bond or our stocks
or our
movie studios or our real estate or
different things
and the only way that reverses is when
we start
running a trade surplus which we're
miles away from so
logically you know if you read classic
economics
that you would believe that our currency
would have been weak along or weaker
uh over the recent years and that it
would be
weak now but there are other things
operating and that's one of the problems
about economics is there's never just
one variable
there's usually hundreds of variables
and
they operate with different impact
at different times i mean it's a it's
it's not like a physics formula i mean
i guess it would be if you got in the
heisenberg principle or something like
that but
but the formula
has a lot of the same variables year
after year
but the relative importance of those
variables and how they interact with
each other
is never exactly the same and that's
what we find out the japanese find out
everybody finds out and
and foreign currency or the current uh
the value of our dollar and currency
rates
are defying what you would expect based
on history
but if somebody said if history were a
perfect guide you know the forbes 400
would all be librarians you know
go look it up in the books and they'd
always know all the answers but uh
it history doesn't repeat itself as mark
twain said
history doesn't repeat itself but it
rhymes i mean things come back but they
don't quite come back in the same form
we'll understand all this perfectly a
few more years why the dollars behave
the way it has but i
i think it would be useful net for the
u.s
if the dollar were less strong
yes mr buffett thanks for taking my
question um my question pertains to
small business and my family's been in
uh the truckload sector of
transportation for about 50 years
and as you talked about the airline
industry and all the mergers next
acquisitions and things going on and a
lot of the smaller players being
tossed out of the market what do you see
for people that
like in this room for students that want
to start a small business
and maybe they want to start in a
business that is somewhat of a commodity
type business but as businesses the
large corporations get larger and their
efficiencies
increase how can a small business
compete
with these people yeah they
in many areas small businesses have an
advantage you know and other businesses
scale has a huge advantage and
i mean you don't want to be a a tiny
carbon steel producer on the other hand
when minnie mills came along and learned
how to use scrap more effectively than
than the the older methods of making
steel they actually had advantage so
scale
is a huge advantage in some businesses
it's
you know the largest airlines haven't
won southwest airlines is one
starting with you know just a few planes
flying down there between houston and
dallas and
and they have become bigger but their
ambition hasn't been to be the biggest
and
you know they they probably buy their
fuel is just as cheap as united and
they've already bought it you know when
they're a lot smaller walmart is a
classic example i mean
who would have thought 25 years ago
30 years ago i mean here was sears with
a 100 story plus building in chicago
had access to money far cheaper than sam
walton i mean sam walton's credit was
not as good as sears
every supplier wanted to do business
with sears nobody ever heard of sam
every real estate developer was
developing a new shopping center went
first to sears
you know and sam got the short end so
here's the guy starting in bentonville
arkansas
and he kills him over time just plain
kills him and disadvantage and buying
disadvantage and borrowing disadvantage
and real estate
advantage sam walton and his ability to
inspire
in the end hundreds of thousands of
people to be enthusiastic about going to
work and doing all the doing the right
things over time so
i would be just as optimistic about
small business
generally now there's certain areas uh
where scale just is is just plain
important
but but i see no disadvantage we
intentionally at berkshire
we have a hundred and twelve thousand
employees
more in georgia than any other state in
the union incidentally uh
we employ a lot up near dalton and we
boy a lot of people are making it geico
and we intentionally with our 112 000
boy we probably have i don't know how
many business units but lots
and we only have 13.8 people at
headquarters
i'm not the point eight incidentally i
represented what people think that i'm a
full
but we have one woman that works four
days a week and that's all we have at
headquarters 112 000 people
105 billion a market cap but we
intentionally keep our units small
we think we want them to have the
nimbleness
the responsiveness to the customer
particularly that
will turn them you know that essentially
will more than offset anything that the
scale of having
maybe a little more purchasing power or
something will develop
we own a home furnishing we have
furniture home furnishings business in
utah
run by a fellow named bill child he was
featured in fortune about one issue ago
the cover story was god in business it
was and it was bill was
the number one illustration bill took
that business
from his father-in-law when it was doing
250 000 a year
and then i was over half the business in
utah in this field but
close to 400 million he built it by
thinking about the customer
and the truth he was competing with
sears he was competing
uh with levitz was a huge furniture
retailer in the past he was competing
with everybody
but all he thought about from the moment
he got up in the morning
was how do i take care of my customer
and that wins
we have a business in omaha some of you
may have heard of
it's the largest home furnishing store
in the world
in omaha which only has a smsa of 650
000 people
it's on 72 acres it's
does 325 million dollars in one location
which happens to be five hundred dollars
for every man woman and child in the
smsa but it draws from beyond that
that business comes about
or has resulted from an investment of
five 500
in 1937 by a woman
who walked out of russia in 1921
she landed she walked out got on a
peanut boat
landed in seattle with a tag around her
neck she couldn't speak one word of
english
the american red cross looked at the tag
it said fort dodge iowa they got her to
fort dodge iowa
she couldn't pick up the language she
was there two years she said she felt
like a dummy
so she came to alma because there were
other russian jews there and she'd at
least have somebody to talk to
her little girl started school francis
francis would come home at night and
teach her mother the words she learned
in school that day that's how
this woman rose blump can learn the
english language but from her
from her daughter from kindergarten on
teaching her the words
she brought seven siblings over from
russia one at a time 50 bucks every time
she saved 50 bucks she sold used
clothing and other works
she got her seven siblings over her
mother and father and by 1937 16 years
after she got here she saved 500
she got on a train went to chicago to
the american furniture mart
which was this huge impressive thing she
had this
she was smart as hell but she thought
like a peasant in a way and she saw this
building and she decided to name her
company
the nebraska furniture market she went
in and bought 500 worth of
she bought about 2 000 worth of
merchandise
all the way back to omaha she worried
because she thought i owe 1500
and she only had a 500 equity so she got
to omaha
she took the bed the sofa
the refrigerator out of her own home to
sell
fast so she could get the money so she
could pay on time
she took that business and built it from
that start
no one would sell to her she went into
court four times because they tried to
the carpet manufacturers tried to keep
her from selling at a discount and she
went into court
and told the judge because she figured
out ways to buy this stuff in
various nefarious ways from other had
other people buy it for and she said
look at
i pay three dollars a yard for this
carpet brandeis sells it for 6.98 says i
sell it for 3.98
just tell me judge how much you want me
to rob people she defended herself
papers wrote it up the judge bought
carpet from her the next day i mean it
was it was marvelous
brandeis isn't selling anymore they were
the huge department store in omaha
she put everybody out of business and
the punchline she worked till she was
103.
she sold me the business when she was 89
and
she didn't have she didn't have an audit
i went out to see her
one afternoon i took a check out with me
and because i knew she wanted to do
something and i said mrs b
here's the money i said i don't need an
audit just tell me whether you want any
money she said i've never owned any
money since i owe those guys
back in 1937 and she said it's all free
and clear
she'd never seen a balance sheet she
didn't know what accounting terms meant
but she
understood the nature of the business
and i told her i said i'd rather have
i'd rather have your word you know than
an audit from
every one of the big six or big eight or
whatever they were the number
at the time of the top auditing firms
then and she worked till she was 103.
she died at 104. she had three siblings
at her funeral i mean those are some
jeans her son works there now he's 82 or
three and
the three sisters are all alive but the
punchline is
she couldn't read or write this woman
could not read or write if you told her
this room was 68
feet by 43 she would tell you how many
square yards it was like that
she never went to school today in her
life she would tell you how how much
that was at five ninety eighty yards
she'd had the tax
she'd knock off something because she
liked your looks and that would be it
and that was that's you know that is the
that you can't beat that you know and
and you can't replicate that
at general motors you can't
institutionalize that the the person who
brings that kind of drive
to a business and does it day after day
and thinks about their customer uh
and that's all she did can't and what
she raised four kids in the process too
but
you can't it can't miss and no you don't
have to worry
if you're an entrepreneur in most fields
there's some fields where
you can't do it because there are scale
aspects to it but in most fields
you know you'll you'll kill people bob
shaw did that which was shock
nobody ever heard of shaw and carpet 30
years ago and he's got 40
of the carpet business in the country so
don't i
it's a great field of opportunity out
there and i had uh
i don't know about trucking specifically
but i wish you the best on it then
you won't be at a disadvantage in many
fields if you're small and you'll
actually have an advantage george
thank you
mr buffett thank you very much for
sharing your wisdom and your ideas and
wonderful stories with us today
we are truly honored and pleased we've
had this opportunity to get to know you
a little bit better
i'd like to thank a couple people before
we conclude
for helping with the logistics associate
dean bob gatewood
our director of alumni relations and
marie garrison
thank both of you david dodson our
director of communications there's a lot
of work and effort went into this and i
thank all of you for all you've done
and earl again thank you for helping
make this possible
mr bubba we have a parting gift for you
but it needs to be placed into context
before we show you what it is in your
most recent uh
letter newsletter to uranu report to the
shareholders
you discuss some of the things that you
look for in making making acquisitions
and one of the things you talked about
was owners
you look for owners who care who they
sell to and that was important to you
i'd like to quote from your your report
when a business masterpiece has been
created by a lifetime or several
lifetimes
of unstinting care and exceptional
talent it should be important to the
owner
what corporation is entrusted to carry
on its history
a little bit further down you say how
much better it is for the painter
of a business rembrandt to personally
select its permanent home
than to have a trust officer or
uninterested heirs
auction it off well we believe that many
of these words
apply to you as well you too have
created a business masterpiece
you two have created a rembrandt what we
have today
is a lighthearted portrait a
lighthearted
characterization that we hope captures
some of the business milestones in your
career and we hope also captures
some of that quick-witted humor that you
demonstrated today
it was painted by a good friend of ours
and a well-known
artist lives here locally alan campbell
alan is with us and he will help unveil
it today alan please come down
now when he when he unveils us please
understand that you're not going to be
able to see the detail of this
where you're sitting but we would invite
you to come down and walk past it
as you as you leave today alan if you're
going to speak come over to the
microphone please
uh thank you and and and mr buffett i
hope you'll
maintain your sense of humor which
appealed to me greatly when
reading your corporate report and this
is going to be a test of that famous
humor
but it is a it tended to be a portrait
both of you and of your company and
of your values and um when i
when marie garrison my girlfriend the
alumni director here told me you were
coming
and i read the comments about the
rembrandts and lying on your back you
feel like you could lie on your back and
paint the ceiling every day at berkshire
you basically open the door with your
own words so
um and and just on the side my brother
is one of your pilots for executive jet
come on the one thing that's not
included is a reference to the jewelry
company so you've been spared
there
this is based on a very famous rembrandt
self-portrait for anybody's
information
mr buffett will sign autographs if
you've got books with you'd like him to
sign we'll set up a table down front
here as for the next
15 or 20 minutes if you'd like to uh
take a picture if you've got a camera
with you please come on up don't
hesitate and
thank you all for coming and
participating today it was a wonderful
event thank you very much
[Music]
[Applause]
you