【中文字幕】沃伦·巴菲特 Warren E. Buffett 最经典视频推荐：1998 年在佛罗里达大学的演讲

uh i'd like to just say a few words uh pulmonarily and then uh uh the highlight for me will be getting your questions in in a few minutes because that's i want to talk about what's on your mind i urge you to throw hard balls it's it's more fun for me if you uh if you put a little uh put a little speed on the pitches as they come in you

can ask about anything except last week's texas a m game that's off limits uh we have a couple of men here from suntrust i was just up at the coke meeting uh and i sit next to jimmy williams there who ran sundress for many years and he wanted to be sure that i wore this suntrust shirt down here

i've tried to get sponsorship on the senior golf tour i haven't had much luck but now in the banker store i'm doing a little bit better and uh he said i got a percentage of the increase in deposits and gains though so i'll go out for sundress dear old sundress ah i would like to talk for just one minute up to the students about your

about your future when you leave here because there's you're going to learn a tremendous amount about investments and you'll learn you'll learn enough to do well you've all got the iq to do well you've all got the initiative and energy to do well or you wouldn't be you wouldn't be here uh and most of you will succeed

in in in in meeting your aspirations uh but in in determining whether you succeed there's more to it than intellect and energy and i'd like to talk for just a second about that in fact there was a fellow that pete keywood in omaha used to say that he looked for free things

in hiring people look for integrity intelligence and energy and he said if the person didn't have the first two that the latter two would kill him because if they don't have integrity you want him dumb and lazy you don't want him smart and energetic and i really like to talk about that first one because we we know you've got the second two and and i did play along with me in a little game for just a

second uh and in terms of thinking about that question you've all been here i guess almost all of your second year mbas and you've gotten to know your classmates and think for a moment that i granted you the right to buy 10 of one of your classmates for the rest of his or her lifetime

um now you can't pick one with a rich father that doesn't count i mean you've got to uh you've got to pick them pick somebody who's going to do it on their own merit and and i gave you an hour to think about it which one are you going to pick among all your classmates is for the one you want to own 10 percent of for the rest of their lifetime

and are you gonna give an iq test pick the one with the highest iq i doubt it are you gonna pick the one with the best grades uh i doubt it uh you're not even gonna pick the most energetic one necessarily you're the one that displays the most initiative but you're going to start looking for qualitative factors in addition because everybody's got enough right here and enough energy

and i would say that if you thought about it for an hour decided who you're going to place that bet on you'd probably pick the one who you responded the best to because the one that was going to have the leadership qualities the ones who are going to be able to get other people to carry out their interests and that would be the person who was

generous and honest and who gave credit to other people even for their own ideas all kinds of qualities like that and you could write down those qualities that you admire in this other person whoever you admire most in the class and then i would throw in a hooker i would say as part of owning 10 of this person you had to agree to go short ten

percent of somebody else in the class that's more fun is it and you think about who do i want to go short of and uh again you wouldn't pick the person with the lowest iq or the or you you you would start thinking about the person really who turned you off for one reason or another i mean they had very various

qualities quite apart from their academic achievement but they had various qualities in the indian shouldn't really want to be around them and other people didn't want to be around them and what were the qualities that lead to that well there'd be a whole bunch of things you know but it's the person who's egotistical the person who's greedy the person who

slightly dishonest cuts corners all of these qualities and you can write those down on the right-hand side of the page as you looked at those qualities on the left and right hand side there's one interesting thing about them it's not the ability to throw a football 60 yards uh it's not not the ability to run the 100 yard dash in 9-3 it's not being the best-looking person in the class they're

all qualities that if you really want to have the ones on the left-hand side you can have them i mean they are they're qualities of behavior temperament character that that are achievable they're not forbidden to anybody in this group and if you look at the qualities on the right-hand side the ones that you find turn you off in other people there's not there's not a quality there that you have to have if you have it you

can you can you can you can get rid of it and you get rid of a lot easier at your age than you can at my age because most behaviors is habitual and they say the chains of habit are too light to be felt until they're too heavy to be broken and there's no question about i see people with these self-destructed

behavior patterns at my age or even 10 or 20 years younger and they really are entrapped by them they they go around and they do things that turn off other people uh right and left and uh they don't need to be that way but by a certain point they get so they can hardly change it but at your age you can have any any any habits

any any patterns of behavior that you wish it's simply a question of which you decide and why not decide the ones that i mean if you like ben graham did this ben franklin did it beforehand but then ben graham in his low in his little teens looked around and he looked at the people he admired

and he said you know i want to be admired so why don't i just behave like them and they found there was nothing impossible about behaving like them and similarly he did the same thing on the reverse side in terms of getting rid of those qualities so i would suggest that if you write those qualities down and think about them a little while and make them habitual you

will be the one that you want to buy ten percent of when you get all through and the beauty of it is you already own a hundred percent you're stuck with it so you might as well you might as well be that person uh somebody else well that's that's a short little sermon so let's get on to what uh what you're interested in and uh like i say you can you can go all

over the lot so i don't know exactly how we're gonna handle this but uh but uh let's start with a hand here someplace or other where do we go with the first one yeah right here your thoughts about japan my thoughts about japan i'm i'm i'm not a macro guy now i say to

myself but berkshire hathaway can borrow money for ten years at one percent in japan now one percent and i say to myself gee i took graham's class 45 years ago and i've been working hard at this thing all my life maybe i could earn more than one percent you know i really worked hard at it one percent

answer it doesn't seem impossible does it so i wouldn't want to get involved in currency risk so i'd have to do it in something that was yen denominated so i have to get i have to be in japanese real estate or a japanese business or something of sort and be and all i have

to do is beat one percent that's all the money's going to cost me and i can get it for 10 years uh so far i haven't found anything that it's it's kind of interesting the the japanese companies earn very low returns on equity and and uh uh they have a bunch of businesses that earn four five six percent on equity and it's very hard to

earn a lot as an investor when the business you're in doesn't earn very much money now some people do it in fact i've got a friend walter schloss who worked with graham at the same time i did and and it was the first way i went at stocks to buy stock selling way below working capital very cheap quantitative

stocks i call it the cigar but approach to investing is that you walk down the street and you look around for a cigar but someplace and you finally you see one and it's soggy and kind of repulsive but there's one puff left in it so you pick it up and the puff is free i mean it's a cigar but stock i mean you get one free puff out

of it and then you throw it away and you walk down the street try another one i mean it's not elegant but it work you know if you're looking for a free puff uh it works those are low return businesses but time is the friend of the wonderful business it's the enemy of the lousy business if you're in a

lousy business for a long time you're going to get a lousy result even if you buy a cheap if you're in a wonderful business for a long time even if you pay a little too much going in you're going to get a wonderful result if you stay in a long time i find very few wonderful businesses in japan at present now that they may change the

culture in some way so that that that management's getting more stockholder responsive over there and returns are higher but at the present time you'll find a very lot of low return businesses and that was true even when the japanese economy was booming i mean it's it's amazing they had a incredible market without incredible companies uh they were

incredible in terms of doing a lot of business but they weren't incredible in terms of the return on equity and that they achieved and that finally caught up with them so we have so far done nothing there but as long as money is one percent i'll keep looking i mean yeah you were rumored to be one of the rescue buyers of long-term capital what what was the play there what did you see well

there's a story in the current fortune magazine one has rupert murdoch's picture on the cover that tells the whole story of our involvement it's kind of an interesting story because i i i it's a long story so i won't go into all the background of it but i got the really serious call about long-term capital uh about what four weeks ago this friday

whenever it was it was my granddaughter i got it in mid-afternoon and my granddaughter was having her birthday party that evening and then i was flying that night to seattle to go on a 12-day trip with gates on a to alaska and a private train all kinds of things where i was really out of communication but i got this call on a friday afternoon

saying that things were really getting serious there i had some other calls before that the article gets into a few weeks earlier i know those people most of them pretty well a lot of them are solomon when i was there and uh the place was imploding and the fed was sending people up that weekend and so between that friday

and the following wednesday when the new york fed uh in effect orchestrated a a rescue effort but without any federal money involved i was quite active but i was having this terrible time because we were sailing up through these uh sort of these canyons which held no

interest for me whatsoever in alaska and and the captain would say you know if we just steer over here we might see some bears and whales and i said stairway you got a good satellite connection but we put in a bit on on wednesday morning i was by then i was in bozeman montana and i talked to uh bill mcdonough the head of the new york fed but uh

you know about 10 o'clock they were having me in the bankers at 10 o'clock that morning in new york and i caught him right we actually delivered a message when he called me out there in wyoming a little bit before 10 new york time and we made a bid it was a it was because it was being done at a long distance and everything it was really the outline of

a bid but uh in the end it was a bid for 250 million essentially for the net assets of uh but we would have put in three and three quarters billion on top of that and it would have been three billion from berkshire hathaway 700 million from aig and 300 million from goldman sachs and

we submitted that but we put a very short time fuse on it because when you're bidding on 100 billion dollars worth of securities that are moving around you don't want to leave a fixed price bid out there very long plus we were worried about it getting shocked uh in the end the bankers made the deal and uh but it was it was an interesting period

the whole long-term capital management i hope most of you are familiar with it but the whole story is really fascinating because if you take john merriweather and eric rosenfeld larry hillenbrand greg hawkins victor ghani the two nobel prize winners and merton

scholes if you take the 16 of them that they probably have as high an average iq as any 16 people working together in one business in the country including at microsoft or wherever you want to name so an incredible amount of intellect in that room now you combine that with the fact that those 16 had had extensive

experience in the field they were operating i mean this is these this one was not a bunch of guys who had made their money you know selling men's clothing and then all of a sudden went into the securities business or anything they'd had they'd they'd had in aggregate the 16 that probably had 350 or 400 years of experience doing exactly what they were doing

and then you throw in the third factor that most of them had virtually all of their very substantial net worths in the business so they had their own money up hundreds and hundreds of millions of dollars of their own money up super high intellect working in a field they knew and essentially they went broke

and that to me is absolutely fascinating i mean i i if i ever write a book it's going to be called why smart people do dumb things my partner says it should be autobiographical but but this might be an interesting illustration and these are perfectly decent guys i you know i i i respect them and they helped me out when i was i had problems with solomon and so that they're they're not bad people at all

but to make the money they didn't have and didn't need they risked what they did have and did need and that's foolish that is just plain foolish doesn't make any switcher iq is if you if you risk something that is important to you for something that is unimportant to you

it just does not make any sense i don't care whether the odds are a hundred to one that you succeed or a thousand one to succeed if you hand me a gun with a thousand chambers a million chambers in it and there's a bullet in one chamber and you said put it up your temple how much do you want to be paid

to pull it once i'm not going to pull it you know you can name any sum you want but it doesn't do anything for me on the upside and i think the downside's fairly clear so i'm not interested in that kind of a game and yet people do it financially then without thinking about it very much

there was a great book in the great book it was a great title it was a lousy book written once with a great title uh by walter guttmann the title was you only have to get rich once now that seems pretty fundamental doesn't it what is what difference if you've got 100 million dollars at the start of the year and you'll come you're going to make 10 percent if you're unleveraged and 20 if you're leveraged

99 times out of 100 what difference does it make the end of the year whether you've got 110 million 120 million makes no difference at all i mean if you if you die at the end of the year you know the guy that writes up the story may make a typo and he may say 110 even 120 so you've got nothing at all you know what it can't it makes absolutely no difference makes no

difference to your family makes no difference to anything and yet the downside particularly managing other people's money is not only losing all your money but it's it's disgrace and humiliation and and facing friends whose money you've lost everything i just i just can't imagine

an equation that that makes sense for and yet 16 guys with very high iqs who are very decent people entered into that game and you know i think it's madness and it's it's it's produced by an over reliance to some extent on things you know those guys would tell me back when i was at solomon you know that a six sigma event wouldn't you know wouldn't

wouldn't touch us or a seven segment event but they were wrong i mean that their history does not tell you the probabilities of future financial things happening and they had a great reliance on mathematics and they felt that that the bait of the stock told you

something about the risk of a stock it doesn't tell you a damn thing about the risk of the stock in my view and uh and and sigmas do not tell you about the risk of going broke in my view uh and maybe in their view now too uh but but i you know i i don't i don't like to even use them as an example because they are i mean the same

thing in a different way could happen to any of us probably where we where we really have a blind spot about something that's crucial because we know a whole lot about something else it's like henry kaufman said the other day that the people are going broke in this situation are just two of two types the ones who knew nothing and the ones that knew

everything and uh it's it's it's it's sad in a way i urge you in anything we never basically borrow money i mean we get flow through our insurance business and to do things but i never borrowed money i never borrowed money when i had 10 000 bucks basically because what difference did it make i was having fun as i went along

and it didn't make it was i had ten thousand dollars or a million dollars or ten million dollars uh you know except if i had a medical emergency or something had come along like that but i was gonna i was gonna do the same things when i had a lot of money is when i had very little money you know that if you think about the difference between me and you in terms

of how we live you know we wear that we wear the same clothes basically suntrust gives me mine but you what we so we wear the same clothes we we we eat you know we we all have a chance to drink the juice of the gods here yeah but we all go to mcdonald's or better yet dairy queen and uh

and we we live in a house that's that's that's warm in winter and cool in summer and and and we watch uh nebraska texas a m on a big screen you know you see it the same way i see it we do everything our lives aren't that different you know that you'll get decent medical care if something happens to you and i'll get

decent medical care the only thing we do is we travel differently you know i ride around this little plane and i love it and that takes money but if you leave if you leave that aside if you leave that we travel differently but other than travel you know i would i think about it think what what can i do that you can't do

now i get to work in a job that i love but i've always worked in a job i loved i loved it when i and i loved it just as much when i well you know when it was a big deal if i made a thousand bucks and i urge you to work in jobs you love i mean i think you're out of your mind

if you take keep taking jobs that you don't like because you think it'll look good on your resume i was with a fellow at harvard the other day who was taking me over to talk and he was 28 and he was telling me what he'd done in life and which was terrific and and then i said

what are you going to do next and he said well he said after i get out my my uh mba says i think maybe i'll work for a management consulting firm because it'll look good on my resume and i said wait a second you've been 28 you've been doing all these things i mean you've got a resume that's 10 times as good as anybody i've ever seen in already i said if you take another job

you don't like just for this isn't that a little like saving up sex for your old age you know i mean there comes a time when you ought to just start doing what you know yeah here we go so i i think i got the point across to him uh but i you ought to take it when you get out here take a job you love don't take

a job that you know you think is going to look good on your resume take a job you love it you may change it later on but you'll jump out of bed in the morning i mean when i got out when i got out of columbia the first thing i tried to go to work for graham immediately i offered to go to work for him for

nothing he said i was overpriced but but i had but i kept pestering him i went out to oman i sold securities for three years and i kept writing him and giving him ideas and doing all these things finally i went to work for a couple years and it was a great experience but i always really worked in a job i've worked in a job that that i would that i've you know loved doing and you

should really take a job that if you're independently wealthy you would take that's that's the job to take because that's the one that you're going to have great fun in you'll learn something you'll be excited about it and you can't miss you may go and do something else later on but but

you'll get way more out of it and i don't care what the starting salary is or anything short i don't know how i got off on that but i uh there i am uh so i i do think that that if you think you're going to be a lot happier if you've got 2x instead of x

you're probably making a mistake i mean it uh yeah you ought to you ought to find something you like that's that works with that and if and you'll get in trouble if if you think that making 10x or 20x is the answer to everything in life because then you will do things like borrow money when you shouldn't or or maybe cut corners on on

things that your employer wants you to cut corners on or it just doesn't make any sense you won't like it when you look back on it yeah would you talk to the students about companies that you like i don't mean names i mean what makes the company something that you like i like i like businesses i can understand we'll start with that that narrows it down about ninety percent and i mean

see there's all kinds of things i don't understand but fortunately there's enough i do understand and you have this big wide world out there almost every company is publicly owned so you got you got all american business practically available to you now to start with doesn't make sense to go with things that you think you can understand but you can understand some things i can understand this i mean you

can understand this anybody can understand this i mean this is a product that basically hasn't been changed much like out of the cherry uh but you know since 1886 or whatever it was and it's a simple business it's it's not an easy business i don't want a business it's easy for competitors so i want a business with a moat around it i want a very valuable castle in the

middle and then i want to i want to i i want the duke who's in charge of that castle to be honest and hard-working and able and then i want a big moat around the castle and that moat can be various things the moat in a business like our auto insurance business at geico is low cost i mean people have to buy auto insurance so everybody's going to have one auto

insurance policy per per car basically uh per driver and and i can't sell them 20 you know but but they have to buy one what are they going to buy on they're going to buy on based on service and cost most people will assume the service is fairly uh identical among companies or close

enough so they're going to do it on costs so i got to be the low-cost producer that's my most the extent my costs get further lower than the other guy i've thrown a couple of sharks into the moat now but all the time if you've got a wonderful castle there are people

out there going to try and attack it and take it away from you and i want a castle that i can understand but i want to castle with a moat around it 30 years ago eastman kodak's moat was was just as wide as coca-cola smoke i mean if you

were going to take a picture of your six month old baby and you're going to want to look at that picture 20 years from now and you're going to look at it 50 years from now and you're never going to get a chance i mean you're not a professional photographer so that you can evaluate what's going to look good 20 or 50 years

ago what is in your mind about that about that photography company is what counts because they are promising you that the picture you take today is going to be terrific to look at 20 or 30 or 50 years from now about something that's very important to you maybe your own child or whatever it may be well kodak had that in spades 30 years

ago they owned that they had what i call share of mine forget about share market share mind they had something in everybody's mind around the country around the world with a little yellow box and everything that said kodak is the best that's priceless they've lost some of that they've been lost at all and and not due to george fisher who runs georgia's doing a great job but they let that moat narrow they let fuji

come and start narrowing them out in various ways they let them get into the olympics and take away that special aspect that only only kodak was fit to photograph the olympics so fuji gets there and immediately in people's minds fuji becomes more on a parody with with kodak you haven't seen that with coax mode is wider now than it was 30 years ago you can't see them out day by day but every

time you know the infrastructure gets built in some country that isn't yet profitable for coke but will be 20 years from now the moat is widening a little bit things are all the time changing that mode in one direction other 10 years from now you can see the difference our managers are the businesses we run i've got one message to them you know which is to widen them up and we want to we

want to throw crocodiles and sharks and everything else gators i guess into the moat to keep away competitors and that that's comes about through service it comes about for quality of product it comes about through cost it comes about sometimes through patents it comes about through real estate location so that's the business i'm looking for now

what kind of businesses am i going to find like that well i'm going to find them i'm going to find them in simple products because i'm not going to be able to figure out what the most going to look like for oracle or lotus or microsoft 10 years from now i mean i gates is the best business man i've ever run into and you know they've got a hell of a

position but i really don't know what that business is going to look like 10 years from now and i certainly don't know what his competitors businesses are going to look like 10 years from now now i'll name one i don't own i know what the chewing gum business is going to look like from 10 years from now i mean the internet is not going to change how we chew them

and and nothing much else is going to change how we chew them and then are there going to be lots of new products is it really you know our spearmint juicy fruit and all those going to evaporate some isn't going to happen you give me a billion dollars and tell me to go in the chewing gum business and try

and make it real dent in wrigley's i can't do it and that's the way i think about business i say to myself give me a billion dollars and how much can i hurt the guy give me 10 billion dollars give me 10 billion dollars and how much can i hurt coca-cola around the world i can't do it well those are good businesses now give me some money and tell me to hurt somebody

in in some other fields and i can figure out how to do it so i want a simple business easy to understand great economics now honest enable management and and uh then i can see about in a general way where they're going to be 10 years from now and if i can't see whether to be 10 years from now i don't want to buy it

basically i don't want to buy any stock where if they close the new york stock exchange tomorrow for five years i won't be happy owning it i buy a farm and i don't get a quote on it for five years and i'm happy if the farm does okay you know i buy an apartment house don't get a quote on it for five years i'm happy if the apartment house produces the returns that i expect but

people buy a stock and they look at the price the next morning and they decide whether they're doing well or not doing well it's crazy because they're buying a piece of a business that's what graham the most fundamental part of what he taught me you know you're not buying a

stock you're buying you're buying a part ownership in a business you will do well if the business does well and if you didn't pay a totally silly price and that's what it's all about and you ought to buy businesses you understand just like if you're buying farms you ought to buy farms you understand it it's it's not complicated uh and so in calling us graham buffett i mean it's

just pure gram i i was very fortunate because i i picked up a book when i was 19 i got interested in stocks when i was about six or seven and i bought my first stock when i was 11 but i was playing around with all this stuff and i had charts and volume and i'm making all kinds of technical

calculations everything and then i picked up a little book and it just said that you're not buying some little ticker symbol that bounces around every day you're buying a part of a business and as soon as i started thinking about it that way everything else followed very simple so we buy businesses we think we can understand there's no one here that can't understand the coca-cola company i would say there's no one here that can understand

some new internet company and since i said at the annual meeting this year that if i were teaching a class in business school on the final exam i would pass out the information on the internet company and ask each student to value it and anybody that gave me an answer i'd flunk i don't know how to do it but people do it every day i mean it's

more exciting i mean if if you look at it like going to the races or something that's that's a different thing but if you're investing i mean investing is putting out money to be sure of getting more money back later you know at an appropriate rate and to do that you have to understand what you're doing it in i mean you have to understand the business and you can understand some businesses but not all businesses yep

warren said you covered half of it which is trying to understand the business and buying a business but you also alluded to getting a return on the amount of capital you invest in the business as an investor and you know that comes back to what are you paying for the business how do you determine you know what you think is a fair price to pay for the business it's a tough thing to decide but

i don't want to buy in any vision i'm not terribly sure of so if i'm terribly sure of it it probably doesn't it probably isn't going to offer incredible returns i mean why should something that is essentially a cinch to do well offer you 40 a year something like that so we we don't have huge returns in mind but we do have in mind never losing anything and i mean we bought seized candy in 1972.

see's candy was then selling 16 million pounds of candy at a dollar ninety-five a pound and it was making two bits a pound or four million pre-tax we paid 25 million dollars for it took no capital to speak of when we looked at that business basically my partner charlie and i really decided there was a little untapped pricing power there in other words whether that dollar 95 box of

candy could just easily sell for two or two and a quarter if you could sell for two and a quarter another 30 cents a pound was was four million eight on 16 million pounds which on a 25 million purchase price was fine we didn't do any mo you know we've never hired a consultant in our lives well i mean our idea of consulting has gone by a box of candy you know

but what we did know was there was that they had share a mind in california i mean there was something special every person in california had something in their mind about seized candy and overwhelmingly was favorable they had taken a box you know valentine's day and giving it some girl she kissed him if she slapped them you know we'd have no business but but if as long as she kisses him you know that's that's that's

what we want in their mind sees candy getting kissed and if we can get that in the minds of people we can raise prices and and i bought that and i bought in 1972 we raised every year i raise the price on december 26th i raise it the day after christmas so that everybody because we sell a lot at christmas fact we'll make 60 million dollars this year we'll sell 30 million

pounds make two dollars a pound same business same formulas same everything 60 million bucks still doesn't take any capital and we'll make more money 10 years from now but of that 60 million we make about 55 million in the three weeks before christmas and our company song is what a friend we have in jesus i mean

it is a good business but the important thing about that business is think about a little people don't buy most people don't buy boxed chocolates to consume themselves they buy them as gifts you know somebody somebody's birthday more likely it's a holiday it's a valentine's day single biggest day of the year christmas is the biggest season by far but women buy for christmas and they

plan ahead and buy over two or three week period men buy on valentine's day they're driving home we run ads on the radio you know guilt guilt guilt guilt you know the guys are veering off the freeway right left and they won't dare go home without a box of candy when we get through with them on our radio ads so that valentine's day is the biggest day but can you imagine going home on

valentine's day and our seas candy is now 11 bucks a pound thanks to my brilliance and and let's say there's there's candy available at six dollars a pound but you really want to walk in on valentine's day and hand i mean this your wife's got all these favorable images of the seas candy over the years

and she sees you and that's the way she thinks of you during the rest of the year when you really behave kind of badly and you walk in and say honey this year i took the low bid and then hand her a box of candy i mean it just isn't our work so in a sense it is it's a it's it there's

untapped prices price it's it's not price dependent basically think of disney i mean disney is selling we'll say home videos for i don't know what 16 95 1895 or whatever all over the world people and we'll say particularly mothers in this case have something in their mind about disney i mean every person this

room when you say disney has something in their mind about it if i say universal pictures you don't have anything in your mind you know if i say 20th century fox you don't have anything special in your mind if i say disney you've got something in your mind and that's true around the world now picture yourself with a couple of

young kids you know who you want to put away for a couple of hours every day and you get a little peace of mind and you and you know if you get them one video they'll watch it 20 times so you go to the video store or wherever you buy the video are you going to sit

there and premiere you know 10 different videos and watch them each for an hour and a half to decide which one your kids should watch no i mean let's say there's one there for 16.95 and the disney's there for 17.95 you know if you take the disney video you can be okay so you buy it and you don't have to make a quality decision on something that you don't want to spend the time to do and

so you can get a little bit more money if you're if you're disney and you'll sell a lot more videos makes it a wonderful business makes it very tough for the other guy how would you try to create a brand dreamworks is trying but how would you try to create a brand that competes with disney around the world and to replace the concept that people have in their minds about disney with

something that says universal pictures you know so that the mother's gonna walk in and pick out a universal picture uh video and preference to it isn't he it's not gonna happen no coca-cola is associated with people being happy around the world we're every place they're happy where disney world or disneyland with the world cup will be at the olympics where every place where people are happy happiness and coco together now you give me

i don't care how much money and tell me that i'm going to do that with rc coal around the world and have five billion people that have a favorable image in their mind about rc coal it can't get done you know and you can floor around with the f you can do anything you want to do

you have price discounts on weekends and everything but you're not going to touch it and that's what you want to have in the business that's the moat and you want that moat to widen and if you're seized candy you want to do everything in the world to make sure that the experience basically of giving that gift

leads to a favorable reaction that means it means what's in the box it means the person that sells it to you because all our business is done when we're terribly busy i mean people come in in those weeks before christmas are on valentine's day they're long lines so at five o'clock in the afternoon some woman is selling the last person the last box of candy and that person's been

waiting in line for maybe 20 or 30 customers and if the sales person smiles at that last customer our moat is widened and if she snarls at them our moat is narrowed we can't see it it's going on every day but that's the key to it i mean it's the total part of the product delivery is having everything associated with with it say see's candy and

something pleasant happening and that's what business is all about do you do yep product paper and have you ever bought a company where the numbers told me not to those are the best buys the questions whether have i ever bought a company where the numbers told me not to and how much is qualitative and how much is

quantitative the best buys have been when the numbers almost tell you not to i mean because then you then you feel so strongly about the product and not just the fact that you're getting a used cigar but sheep that it it's compelling i mean i i owned a windmill company at one time and so i've i you know windmills are cigar butts believe me

i bought it very cheap i wanted a third of working capital and then we made money out of it but there's no repetitive money to be earned i mean there's a one-time profit in something like that and and it's just not it's not the thing to be doing i went through that phase i mean i bought streetcar companies and all kinds of things but uh

in terms of the qualitative i probably understand the qualitative the moment i get the phone call i mean almost every business we bought has taken five or ten minutes i mean in terms of analysis uh and we bought two businesses this year uh general ree is you know 18 billion or

some deal i've never been to their home office yeah i hope it's there there could be just a few guys and say well what number should we send buffett this month you know i can see you know coming in once once a month and well we'll just tell them we've got 20 billion in the bank this month instead of 18 billion or something

but i've never been there i've never and before i bought executive jet which is fractional ownership of of of jets and before i bought it i'd never been there i i bought my family a quarter interest in the program three years earlier and i'd seen the service and seen it develop well and i got the numbers but

if you don't know enough to know about the business instantly you won't know enough in a month or two months i mean you have to have sort of the background of of understanding and and knowing what you do understand and don't understand and that that is the key it's defining what i call your circle of confidence and everybody's got a different circle

of confidence the important thing is not how big the circle is the important thing is staying inside the circle and if that circle has only got 30 companies in it out of thousands on the big board as long as you know which 30 they are you're okay and you should know those businesses well enough so that you don't need to read do lots of work now i did a lot of work

in the earlier years just getting familiar with businesses and and the way i would do that is i would go out and use what phil fisher called the scuttlebutt approach i'd go out i talked to customers i talked to i talked to to maybe ex-employees in some cases i talked to suppliers everybody every time

i'd see somebody in an industry let's say i was interested in the coal industry i go around see every coal company and then ask every every ceo if you could only buy stock in one coal company that wasn't your own which one would it be and why and you piece those things together and you learn a lot about the business after a while and finally as you get very similar answers

as long as you ask about competitors that you know i would i'd say if you got a silver bullet you know you put it through the head of one competitor which competitor and why you know you'll find out who the best guy in the industry is that in that case or the one that's coming up and there's a so there's a lot of things you can learn about a business i've done

that in the past uh on the businesses that i feel i could understand so i don't have to do much of that anymore the nice thing about investing is you don't have to learn anything very new i mean you can do it if you want to but if you learned about wrigley's chewing gum 40 years ago you still understand regular chewing gum it's not that

not a lot of great insights together in the disorder as you go along so you do get a database in your head i had a guy frank rooney who ran melville for many years his father-in-law died on a company called h.h brown a shoe company and he put it up with goldman sachs but he's playing golf with a friend of mine here in florida and mentioned to this friend the guy said

why don't you call warren he called me at the end of the golf match and in five minutes i basically had a deal and but i i knew frank and i knew the kind of business i sort of knew the basic economics of a shoe business and so i could buy it and quantitatively i got to decide what the price is

uh but uh you know that's either yes or no i mean i don't fool around a lot with negotiations so if they they name a price that makes sense to me i buy it and if they don't i you know i was happy the day before so i'll be happy the day after without owning it future earnings yeah coronaries and like the fact that coke has a lot of their profits coming in from outside the

united states how do you think that the asian crisis so to speak is going to affect coke question is about the asian crisis and how it affects a company like coke that recently announced that the earnings actually they just announced a third quarter earnings but a few weeks ago they tipped people off that they were going to be lower in the fourth quarter

well basically i love it but but because the market for coca-cola products is going to grow far faster over the next 20 years internationally than it will in the united states it'll grow in the united states on a per capita basis but it's going to go faster elsewhere so the fact that it it's going to be a

tough period for who knows three months or three years but it will be tough for 20 years i mean people are still going to they're you know they're going to work productively around the world and they're going to find that this is a a bargain product in terms of uh the portion of their working day that they have to give up in order to have

one of these or or better yet five of them a day like i do uh it's a uh you know this is a product in 1936 when i first bought six of those for a quarter and sold them for a nickel each and it was in a six and a half ounce bottle and you paid the two per two cent deposit on the bottle that was a six and a half ounce bottle

for a nickel at that time it's now a 12-ounce can which if you buy it on on weekends or if you're buying bigger quantities so so much money doesn't go to the packaging you essentially can buy the 12 ounces for not much more than 20 cents so you're paying not much more than twice the per ounce

price of 1936 and it is a product that's gotten cheaper and cheaper and cheaper and relative to people's earning power over the years and which people love in in in 200 countries you have the per capita use going up every year for products of over 100 years old and that dominates the market i mean that is it's unbelievable one thing that

people don't understand is one thing that makes this product this is worth tens and tens of billions of dollars there's one simple fact about about really all colas but we'll call it coca-cola for the moment happen to be a name i like uh cola has no taste memory

you can drink one of these at nine o'clock eleven o'clock three o'clock in the afternoon five o'clock the one at five o'clock will taste just as good to you as the one you drank early in the morning you can't do that with cream soda root beer orange grape you name it all of those things accumulate on you most foods and and and beverages accumulate on you you

get sick of them after a while and if you if you eat i mean we get these people go to workforce and seize candy and we tell them they need all the candy they want the first day they go crazy but after a week they're eating about the same amount they need if they're buying it because chocolate accumulates everything accumulates on there is no

taste memory to cola and that means that you get people around the world that are heavy users that will drink five a day or diet coke maybe you know seven or eight a day or something of the sort they'll never do that with other products so you get this incredible per capita consumption the average person in in this part of the world

uh well maybe a little north of here drinks about 64 ounces of liquid a day and you can have all 64 ounces of that be coke and you will not get fed up with coke if you like it to start with in the least but if you do that with almost anything else if you eat just one product all day you you'll tend you'll get a little sick of it after a while and and and

it's it's a huge factor so that today over one billion eight ounce servings of coca-cola products will be sold in the world and that will grow year by year it'll grow in every country virtually and it'll grow on a per capita basis and 20 years from now it'll grow in a lot

faster internationally than in the us so i really like that market market better because there is more growth there over time but it will hurt him in the in in it is hurting him in the short term right now and but that that doesn't mean anything i mean that uh coca-cola went public in i think it's 1919. stock sold for 40 a share it

1919. stock sold for 40 a share it went back before that as a candler family and they they went back they bought it for two thousand bucks the whole business uh a's the canada back in the late 1880s in a couple of purchases so now he goes public in 1919 48 a share one year later selling for 19 going down 50 in one year now you might think that's some kind of

disaster and you might think that sugar prices increased and the bottlers were rebellious and a whole bunch of things you could always find a few reasons why that wasn't the ideal moment to buy years later you'd have seen the great depression then you'd have seen world war ii and you've seen sugar rationing and you've seen thermonuclear weapons and the whole thing there's always a

reason but in the end if you bought one share for 40 bucks and reinvest the dividends it'd be worth about 5 million now and that factor so overrides anything else i mean if you're right about the business you'll make a lot of money and and the timing part of it is very is a very tricky thing so i don't worry about any given event if i've got a wonderful

business uh you know whether what it does to next year or something of the sort um you know their price controls have been in this country at various times and that's that's followed up even the rest of businesses i mean i wouldn't be able to raise the price on december 26th of these candy if we had price controls

and we've had them in this country but that doesn't make it a lousy business if that happens happen because you're not going to have price controls forever we had them in the early in the early 70s so it the wonderful business you know you can figure out what will happen you can't figure out when it will happen you don't want to focus too much on wayne you want to focus on what

if you're right about what you don't have to worry about one very much what investment mistakes the question is about my business mistakes how much time do you have well the interesting thing about the mistakes is that in investments at least for me and for my partner charlie munger the biggest mistakes have not been mistakes of of co-mission they've been mistakes of omission they're where

we knew enough about the business to do something and for one reason or another we sat there sucking our thumbs instead of doing something and so we we've passed up things where we could have made billions and billions of dollars from things we understood forget about things we don't understand we don't in fact i could make billions out of microsoft doesn't mean anything

because i never understand microsoft but if i can make billions out of health care stocks then i shouldn't make it and i didn't you know when when when the clinton health care program was proposed and they all went in the tank uh we should have made a ton of money

out of that uh because i could understand it i didn't make it i should have made a ton of money out of fannie mae back in the mid 80s i understood it and i didn't do it those are billion dollar mistakes or multi-billion dollar mistakes that the generally accepted accounting principles don't pick up the mistakes you see the mistakes you see we made a

and we i made a mistake uh buying uh usair preferred some years ago i mean that i had a lot of money around i make mistakes when i get cash charlie tells me to go to a bar instead don't hang around the office but i i hang around the office and i got money in my pocket i do something dumb and it happens every

time and and uh so i i bought this thing nobody made me buy i now have a 800 number i call every time i think about buying stock in an airline and they talk me down they say you know i say i'm worn i'm an aeroholic and then the guy says you know keep

talking don't hang up you know and don't do anything rash and finally i get over it uh but i but i i bought it you know and uh it looked like we were gonna lose all our money in that and we came very close to losing all our money and and you can say we deserve to lose all our money and we bought it because it was an attractive security but it wasn't not an

attractive business i did the same thing with solomon that i bought an attractive security in a business that i wouldn't have bought the equity in so you can say that that's one form of mistake buying something because you like the terms when you don't like the business that well and i i've done that in the past i'll probably do it again uh the the bigger mistakes though are the ones of

of old mission uh i did back back when i was when i had the ten thousand bucks i put two thousand dollars of it into a sinclair service station which i lost so my opportunity cost that's about six billion right now fairly big mistake yeah it makes me feel good my berkshire goes down then because the cost of my singular station goes

down too my 20 opportunity cost but i will say this you talk about learning from mistakes i really believe it's better to learn from other people's mistakes as much as possible but uh but we don't spend any time looking back at berkshire uh i've got a partner charlie munger we've been pals for 40 years

never had an argument i would disagree on things a lot but but we but we don't we don't have arguments about it and we never look back we just you know we just figured there's so much to look forward to that there's just no sense thinking about what we might it it just doesn't make any difference i mean you can only live life forward and you can

learn something perhaps from the mistakes but the the big thing to do is stick with the businesses you understand and uh so if there's a generic mistake of of getting outside of your circle of competence and you know buying something because somebody tips you on it or something of the sort in an area you know anything about

i mean that you should learn something from that which is that you stay with what you can figure out yourself i mean you really want your decision making to be by looking in the mirror and uh saying yourself i'm buying 100 shares of general motors at 55 because and i mean it's your responsibility if you're buying it and there's got to be a reason

and if you can't state the reason you shouldn't buy it if it's because somebody told you about it a cocktail party not good enough you know i mean there's just it's got to be something you know can't be because the volume you know the chart looks good on it or anything like that it's got to be a reason you'd buy the business and

we that we stick to pretty pretty carefully that's one of the things ben graham taught me economic situation in the world our economy seems to be still tagging along quite well where are we going what's going to happen the question about what's going to happen in infrastructure where we go in the world i don't think about the macro stuff you know i i just important what you really want to do in

investments is figure out what's important and knowable if it's unimportant or unknowable you you forget about it what you talk about is important but in my view it's not knowable understanding coca-cola isn't knowable or wrigley or eastman code act or anything i mean you can understand those business that's knowable and whether it turns out to be important

depends on where your valuation leads you in the current price and all of that but we have never either bought a business or not bought a business because of any macro feeling of any kind we don't read things about predictions about interest rates or business or anything like that because it doesn't make any difference i mean let's say in 1972 when we bought

c's candy i think maybe nixon put on the price controls a little bit later let's say we'd seen it but so what we missed a chance to buy something for 25 million it's earning 16 million pre-tax now i mean we we don't want to pass up the chance to do something intelligent because of some prediction about something that we're no good on anyway

so we just don't we don't read or listen to or do anything in relation to to macro factors at all zero and the typical investment counseling organization goes out and they give you they bring out their economist they trot him out and he gives you this big macro picture and then they start working from there on down in our view that's nonsense but uh and if you know if alvin greenspan

was on one side of me and bob rubin on the other side they're both whispering in my ear exactly what they're going to do the next 12 months wouldn't make any difference to me and what i pay for executive jet or general reinsurance or anything else i do well what's the benefit of being an out-of-towner uh as opposed to being in wall street i worked in wall street for

a couple of years and uh and i like i've got i've got my best friends actually and i'm on both coasts and i like seeing them and i get ideas when i go there but the best way to get to think about investments is to be in a room with no one else and just think and if that doesn't work nothing else is going to work and the disadvantage of being

in any kind of a market type environment on wall street would be the extreme is that you get overstimulated you think you have to do something every day i mean the camber family paid two thousand bucks for this company and that you don't have to do much else if you pick one of those and the trick then is not to do anything else even not to sell it in 1919 which they the family did

later on did it so what you're looking for is some way to get one good idea a year you know and then and then write it to its full potential and that's very hard to do in an environment where people are shouting prices back and forth every five minutes and shoving reports under your nose and all that because wall street makes its money on activity

you make your money on inactivity you know i mean if everybody in this room trades their portfolio around every day with every other person you know you're all going to end up broke and then and and the intermediary is going to end up with all the money on the other hand if you all own stock in a in a group of average businesses and just sit here for the next 50 years

you'll end up with a fair amount of money and your broker will be broke so his act his activity is is he's like a doctor who gets paid on how often he gets you to change pills i mean basically i mean he gives you one pill and it cures you the rest of your life and he's got one sale one transaction and and that's it but if he

can convince you that changing pills every day is the way the great health uh it'll be great for him and the prescriptionists and and you'll be out a lot of money and you won't be any healthier be a lot worse off financially so you want to stay away from any environment that stimulates

activity and wall street would have the effect of doing that i would i i used when i had one i wanted to almost go back about once every six months and i'd go back with a whole list of things i wanted to check out one way or another companies i wanted to see and i would i would get my money's worth out of those trips but then i'd go back

to home and think about it yeah how should an investor evaluate owning shares of virtual pathway or microsoft if they don't pay dividends yeah well the question with berkshire hathaway because it was about evaluating berkshire when it doesn't pay any difference and and it won't pay any dividends either it's a promise i can keep uh the

all you get with berkshire you stick it in your safe deposit box and then every year you go down and fondle it you know you take it out then you put it back and i mean there's an enormous psychic reward in that you don't underestimate it but the the real question is whether we can keep retaining dollar bills and turning them

into more than a dollar at a decent rate and and that's what we try to do and and charlie munger and i have our money in it to do that that's all we'll get paid for doing we won't take any options we won't take any salaries to speak up or anything we'll ride around in the plane uh but the that's what we're trying to do it gets

harder all the time the more money we manage the harder it is to do that and we would do way better percentage-wise with berkshire if it was 1 100 the present size but it is it is run for its owners but it isn't run to give them dividends because so far every dollar that we've earned and could have paid out we've turned into more than a dollar it's worth more than a dollar to keep it

and therefore would be silly to pay it out even if everybody was tax free that owned it it would have been a mistake to pay dividends at berkshire because so far the dollar bills retained have turned into more than a dollar but there's no guarantee that that happens in the future and at some point the game runs out on that uh but it is the goal i mean that is what the business is about

we're not nothing else about the business do we judge ourselves by we don't judge it by the size of its home office building or you know anything of the number of people working around it we've got 12 people at headquarters we've got 45 000 employees at berkshire and 12 people at headquarters 3 500 square feet and we won't change it so it we will judge ourselves by the performance of the company

uh and that's the only way we'll get paid but believe me it's a lot harder than than it used to be investment one of your investments has reached its full potential as you said earlier that you uh i missed the last part oh richard's full potential well

ideally you buy in business is where you feel that will never happen in terms of i mean i i don't think i don't buy coke with the idea that it's going to be out of gas in 10 years you know or 15 years it i mean it could be something happen but i i would think

that chances are almost nil so what we really want to do is buy businesses that we would be happy to own forever it's the same way i feel about people by berkshire i want people to buy berkshire that plan to hold it forever they may not for one reason or another but i want

them at the time they buy it to think they are buying a business that they're going to own forever and i don't say that's the only way to buy things it's just that that's the group i want to have join me because i don't want to have a changing group all the time i measure berkshire by how

little activity there is in it if i if i had a church and i was the preacher and half the congregation left every sunday i wouldn't say oh this is marvelous because i have all this liquidity among my members you know just terrific turnover you know uh i would i would i would rather get a church where all the seats are filled you know every sunday by the same people

well that's the way we look at the businesses we buy we want to buy something that we're really happy to own virtually forever and we can't find a lot of those and back when i started i had way more ideas than money so i was just constantly having to sell what i thought was the least attractive stock

in order to buy something that i just discovered that looked even cheaper but that's not our problem really now and so we hope we're buying businesses that we're just as happy with five years from now as as now and if we ever found some huge acquisition you know then we'd have to sell something uh maybe to make that acquisition but that would be a very pleasant pleasant problem to have we never buy something with a price

target in mind i mean we never buy something at 30 saying if it goes to 40 we'll sell it or 50 or 60 or 100. we

just don't do it that way any more than when we buy a private business like sees candy for 25 million we don't say ourselves if ever if we ever get an offer of 50 million for this business we'd sell it that that's just not the way to look at the business we look at

the businesses is this going to keep producing more and more and more money over time and if the answer to that is yes you don't need to ask any more questions well solomon like i said i was i i went into that because it was a nine percent security in 1987 september 1987 we the dow was up 35 that year we sold a lot of stuff and i had a

lot of money around i i it looked to me like they were never getting a chance to do anything so i took an attractive security form in a business i would never buy the common stock of and i went in because of that and i think that's generally a mistake it worked out okay finally on that but uh but it it it's not what i should have been doing i should have

i either should have waited in which case i could have bought more coca-cola a year later thereabouts or i should have even bought coke at the prices it was selling at then even though it was selling at a pretty good price at the time so that was a mistake on long-term uh capital that's we have learned other businesses that are associated with securities over the years and i mean one of them is arbitrage i i i've

done arbitrage for 45 years and grammed it for probably uh 30 years before that and that's a business unfortunately i have to be near a phone for and i have to i have to really run out of the office myself because it it requires being more sort of market a tune and i don't want to do that anymore so i

really unless a really big arbitrary situation came along that i understood i won't be doing much of that but we've i've probably been in 300 arbitrage situations at least in my life maybe more and it's been it was a good business perfectly good business long-term capital has a bunch of positions they got tons of positions but the top

10 are probably 90 percent of the money that's at risk and i know something about those 10 positions but there's a few other positions we have that aren't that big because they can't get that big but they involve they could involve yield curve relationships or or on the run off the run governments or things like that that are just things you learn over time if you're around securities markets they're not the base of our business

probably on average they've accounted for a half a percentage point of our return a year you know our three-quarters of a percentage point a year of our return they're little pluses that you get for for actually having just been around a long time and learning a little bit about first arbitrage not the first arbitrage i did but one of the first arbitrages they did

involved the company where you they were offering cocoa beans in exchange for their stock that was in 1955 and i bought the stock turned in the stock got warehouse certificates for cocoa beans and and they happened to be a different type they were trading their coke exchange but there was a basis differential my favorite and i sold them i mean that's

just something that i was around at the time so i learned about hasn't been a cocoa bean deal since yeah 40 odd years i've been waiting for another cocoa bean deal i haven't seen it but but it's it's there in my memory if it ever comes along and that long-term capital is that on a big scale yep

the question is about diversification and i've got a dual answer to that if you are not a professional investor if your if your goal is not to manage money in such a way is to get a significantly better return than the world uh then i believe in extreme diversification i mean if it so i believe 98 or 99 maybe more than 99 of people who invest should extensively diversify and not

trade so it that leads them to an index fund type of decision with very low cost because all they're going to do is own a part of america and they made a decision that only part of america is worthwhile i don't quarrel with that at all that is the way they should approach it unless they want to bring an intensity to the game to make a decision and start

evaluating businesses but once you're in the business of evaluating businesses and and you decide that you're going to bring the effort and intensity and uh and time involved to get that job done then i think the diversification is a terrible mistake and at any degree and uh i got asked that question was at suntrust the other day and uh if you really know businesses you probably shouldn't own more than six of

them i mean if you can identify six wonderful businesses that is all the diversification you need and you're gonna make a lot of money and i will guarantee you that going into a seventh one is going to rather than putting more money in your first one it's got to be a terrible mistake very few people have

gotten rich on their seventh best idea you know but a lot of people getting rich on their best idea yeah so i i would uh i would say that for anybody working with normal capital who really knows the businesses they've gone into a six is plenty and uh and i probably have half of it in what i liked best

i don't diversify personally i mean and uh all the people i know that have done well with the reception we mentioned walter slash earlier waller diversifies a lot he owns a little of everything i call him noah you know he's got two of everything well procter gamble is a good very very good there's a strong distribution capability lots of brand names and everything

but if you ask me are going to go away for 20 years to put all my family's net worth in one business but i'd rather have procter and gamble or coke actually procrastinating was a little more it'd be more diversified at monk product line but i would feel sure

of coke and procter and gamble i wouldn't be unhappy if somebody told me i had to own procter and gamble during that 20-year period i mean that would be in my top five percent because they they are not going to get killed uh you know but i would feel better about the unit growth and the pricing power of a coke over 20 or 30 years

than i would about a procter gamble right now the pricing power might be tough but you think a billion billion servings a day you know an extra penny 10 million dollars a day you know we own eight percent of it that's that's eight hundred thousand dollars a day for berkshire hathaway you get another penny of the stuff doesn't seem impossible does it i mean

it's worth another penny but uh it doesn't right now it'd be a mistake to try and get in most markets but over time coke will make more per serving than it does now 20 years from now guarantee it'll make more preserving i'll be selling a whole lot more servings i don't know how many i don't know how much more but i know that uh png's main products

i don't think they have the kind of dominance and they don't have the kind of unit growth but but they're good businesses you know i would not be unhappy uh if you told me that i had to put my family's net worth in png and that was the only stock i could own i would you know i might prefer some other name but there aren't 100 other names i would prefer

mcdonald's the questions about mcdonald's and going away for 20 years mcdonald's has got a lot of things going for it and particularly abroad again i mean their position in abroad in many countries is stronger relatively than here it's a tougher business over time people do not want to eat an exception to the kids when

they're giving away beanie babies or something people do not want to eat at mcdonald's every day i mean if people are drinking coke today they drink five of them today i'll probably drink five tomorrow uh the the fast food business is tougher than that but if you had to pick one hand to have in the fast food business which is going to be a huge business worldwide you'd pick mcdonald's i mean it has the the

strongest position uh it doesn't win taste tests you know with adults and then he does very well with children and it does fine with adults but it does i mean it's not it's not like it's a clear winner and and it's gotten into the game in recent years

of being more price promotional and and you know you remember the experiment a year ago or so and so it's gotten more dependent on that rather than just selling the product by itself i like a product by itself so i feel better about gillette if people buy the mach 3 because they like the mach 3 then if they get a

beanie baby with it you know i mean and so i just think it's fundamentally a stronger product if that's the case and and you know it probably is we own we own a lot of gillette and and you can sleep pretty well at night if you think of a couple billion men with their hair

growing on their faces you go to you know it's going all night while you sleep you know and women have two legs it's even better so it's uh it beats county sheep and those are the kind of business but if you think you know what promotion am i going to put out there against burger king next month you know and what if they sign up disney and i don't get disney

and i mean that is i i like the st i like the products that stand alone uh absent promotional or price appeals although you can build a very good business based on that and mcdonald's is a terrific business it's not as good a business as as coke but that you know there really are hardly any uh

it's a very good business and if you bet on one company in that field aside from dairy queen of course you might have a mcdonald's we bought dairy queen here a while back that's why plugging it shamelessly here yeah way back there what do i think of what the electric utility industry well i've i've thought about that a lot because you can put big money in it and

and i've even thought of buying entire businesses there's a fellow in omaha actually that's that's done a little of that uh through cal energy but i don't quite understand the game in terms of how it's going to develop uh with deregulation i mean it's it it's got it i can see how it destroys a lot of value uh for the high cost producer you know once they're not protected by a monopoly

territory and i don't for sure see how who benefits and how much i mean obviously the guy with very low cost power some guys got hydropower you know at two cents a kilowatt or something like that has got a huge advantage but how much of that he's going to get to keep and everything or how extensively he can he can send that outside his natural

territory i haven't been able to figure that out with it so that i really think i know what the industry is going to look like in 10 years but it is something i think about and if i ever develop any insights you know that call for action i'll develop you know i will act on them but it because i think i can understand the attractiveness of the product and

it's it's all that all the aspects of certainty of of user need and and and the fact that it's a bargain and all of that i understand i just don't understand who's going to make the money in it uh ten years from now and that keeps me away yeah how do you think that the market has

favored the large cap chip stocks over the small cap stock the question is large caps versus small caps and why large caps over perform i i don't know the answer that we don't think uh we don't we don't care whether companies large cap giant camp middle cap small cap micro cap doesn't make any

difference i mean the only question is can we understand the business do we like the people running it and does it sell for a price that is attractive from our my personal standpoint running berkshire now because we've got pro forma for gen ray i don't know what we have maybe 75 or 80 billion dollars to invest and i only want to invest in about five things so i'm really limited to very big

companies but if i were investing a hundred thousand dollars i wouldn't care whether something was large cap or small cap or anything i would just look for businesses i understood now i i think that on on balance large cap companies as businesses have done

extraordinarily well the last 10 years and way better than people anticipated they would do i mean you really have american business earning close to 20 on equity and that's something nobody dreamed of and that's being produced by very large companies in aggregate so you've had this huge revaluation upward of inc because of lower interest rates and then much higher returns on capital and

you know if if american business is really a bond disguise bond that earns 20 percent has a 20 coupon it's a much better deficit bond with a 13 coupon and that's that's happened with big companies in recent years whether it's permanent or not it's another question i'm i'm skeptical of that but uh but i don't i i i i wouldn't even

think about except for questions of how much money we run i wouldn't even think about the size of the the business a good small c's candy was a 25 million dollar business when we bought it i mean if i could find one just like it now even as big as we are you know i'd love to buy it and just it's the certainty of it that

that counts yeah way over there you mentioned earlier one thing until the last five years real estate has been primarily private and pronouncing a great securitization of real estate and what is your insights into the interest yeah you know i might just say they've been

securitization enormous securitization of of of the debt too of real estate and that is one of the items right now that is really clogging up uh the the capital markets i mean the the mortgage-backed securities are they're just not moving uh in in commercial mortgage back now residential

mortgage backed and so that's but i think you're you're directing your question at equities probably and and the equities if you leave out the corporate form has been a lousy way to own equities i mean you've interjected a corporate income tax into something that people individually have been able to own was with a single tax and by

having the normal corporate form you get a double taxation in there you really don't need with real estate and it takes away too much of the return reits have in effect created a conduit so that you don't get the double taxation but they also generally have fairly high operating expenses and if you get real estate let's just say you can buy fairly simple types of real estate on an

eight percent yield or thereabouts and you take away maybe close to one or one and maybe even one and a half percent by the time you count stock options and everything it's not a terribly attractive way to own it maybe the only way a guy with a thousand bucks or five thousand bucks can own it but if you have a million dollar if you're 10 million dollars

you're better off owning the real estate properties yourself and sticking some intermediary in between that will get a sizable piece of the return for himself so but generally speaking we've seen very very little in that field that gets us excited uh

there's people sometimes get very very confused about they'll look at uh some huge land company uh take i'll take one that's that won't evoke any emotional reactions on the part of anybody like texas pacific land trust which has been around over 100 years and got a couple million acres in

texas and they'll take the you know they'll sell one percent of their land every year and they'll take that as applying to everything and come up with some huge value compared to the market value but that's nonsense if you really own the property i mean you know you can't move you can't move 50 of the properties or 20 of the properties it's it's way worse

than an illiquid stock so you get these i think you get some very silly valuations placed on a lot of real estate companies by people that don't really understand what it's like to own one and try to move large quantities of property it reeks and behave terribly in the market this year as you know and it's not at all inconceivable they would become a class that would get so unpopular that they

would sell at significant discounts uh from what you could sell the properties for and they could they could get interesting as the class then and then the question is whether the management would fight you in that process because they would be giving up their income stream uh for managing things and their interest might run counter to the shareholders on that i've always

wondered about the reits that say you know our assets are so wonderful and they're so cheap and then they go out and sell stock i mean there's a there's a contradiction in that if they say our stock at 28 is very cheap and then they sell a lot of stock at 28 less than underwriting commission it doesn't you know they're either they're just there's a disconnect there and so but it's a

field we look at i mean charlie and i can understand real estate and and we would be open for very big transactions periodically and if there was a long-term capital management situation and translated to real estate you know we would be open to that trouble to so

many other people would be too that would be unlikely to go at a price that would that would really get us excited way back there sort of a down market is good for net savers can you sort of give us where the market's going it's downward trend and long term

well yeah i've got no idea where the market's going to go i prefer it going down but i but i haven't you know my preferences have nothing to do with it the market knows nothing about my feelings that's one of the first things you have to learn with a stock you know you buy a hundred shares of general motors now all of a sudden you have this feeling

about general motors i mean if it goes down you may be mad at it you may say well if you just go up to what i paid for you know my life will be wonderful again or if it goes up you may say how smart you were and how you and general motors have this love affair and i mean you've got all these feelings stock

doesn't know you own it stock just sits there it doesn't care what you paid it doesn't care that you owned it or anything so any feeling i have about the market is not reciprocated i mean it is the ultimate it is it is very cold shoulder we're talking about here and

anybody that is going to be in that safe practically everybody in this room is more likely to be a net buyer of stocks over the next 10 years and they are in a seller so every one of you should prefer lower prices i mean if you're going to be a net eater of hamburger in the next 10 years you want hamburger to go down

unless you're a cattle producer and if you're going to be a buyer of coca-cola and you don't own coke stock you hope coke the price of coke goes down i mean you're looking for it to be on sale this weekend at your supermarket you want it to be down on the weekends not up on the weekends when you're gonna attend the supermarket your stock exchange is a big supermarket of companies and you're gonna be buying

stocks what do you want to have happen you want those stocks to go down way down and you know you will make better buys then and later on 20 years from now 30 years from now when you're in a period when you're just saving or when your air is disabled for you uh after you're gone i mean that

then you may care about higher prices but i i find people that was one of the there's a chapter eight in ben graham's intelligent investor about the attitude towards stock market fluctuations and that and the chapter 20 on the margin of safety are the two most important essays ever ever written on investing as far as i'm concerned because when i read

chapter eight when i was 19 i i figured you know i mean what i just figured out what i just said but it was it's obvious i didn't figure it out myself though it was it was explained to me i've probably gone another 100 years if i had still thought it was good when my stocks were going up now we want we want things to go down but i have no

idea what the stock market's going to do i never do never will it it's not something that that i think about it all when it goes down i feel i look harder at what i might buy that day because i know there's more likely to be some merchandise there that i can use my money effectively in

okay we'll take one more question from the audience okay i'll let you pick who gets it you can be the guy yeah what's the question right thank you okay uh if you uh uh leave it again uh studying your life again then what would you like to do

to have a happier life yeah i would say that and this is gonna sound disgusting question is what would i do if i can live over again and have a happier life uh well i i the only thing i might do is select a gene pool where people live to be 120 or something i came from but i've i've been i've been extraordinarily

lucky i mean it uh i use this example i'll take a minute or two because i think it's worth thinking about a little bit let's just assume that it was 24 hours before you were born and a genie came to you and he said he said herb uh

you look very promising and i've got a big problem i've got to design the world in which you're going to live and he says i've decided hell whether it's too tough you design it so you've got 24 hours you figure out what the social rules should be the economic rules uh the governmental rules and you're going to live under those your kids are

going to live under them their kids are going to live under and you say i can design anything and jeanne says yeah you can do it and you say well there must be a catch he says well there's a catch you don't know whether you're going to be born black or white rich or poor male or female infirm or able-bodied brighter all you know is you're going to take one

ball out of a barrel that's got 5.8 billion you're going to participate in what i call the ovarian lottery you're going to get one ball out of there and that's and that is the most important things that are going to happen in your life because that is going to control whether you're born here or in afghanistan or whether you're born with an iq 130 or an iq of 70.

uh it's going to determine a whole lot and you're going to go out of the world and you're going to have that ball now what kind of a world you wanted to design well i think that's a good way to look at social questions because not knowing which ball you're going to get you're going to want a ball that you're going to want a system design a

system that's going to produce lots of goods and services because you're going to want people on balance to live well and you're going to want it that produces more and more so your kids live better than you do and your your grandchildren look better than the kids but you're also going to want a system

that if it does produce lots of goods and services does not leave behind the person that accidentally got the wrong ball and is not well wired for this particular system see i'm ideally wired for the system i fell into here i mean i came out and i got into something that enables me to allocate capital you know nothing so wonderful about that if all

of us were stranded on a desert island you know we all landed there we're never going to get off of it the most valuable person would be the one that could raise the most rice you know uh over time and and you know i could say well i'm going to allocate capital how about paying meals and you wouldn't get very excited about that so i am in the right place i mean gate says

if i'd been born you know a few million years ago i did some animals lunch you know he says you can't run very fast you can't climb trees you can't do anything you just me you know i just been chewed up in the first day so he says you're lucky you were born today and i and i am but the question getting back one question you can ask yourself incidentally

is here is this barrel with 5.8 billion balls everybody in the world if you could put your ball back and they gave you and then they took out at random 100 other balls and you had to pick one of those would you put your ball back in now those hundred balls that you're going to get out

roughly uh five of them will be american so there's 95 versus five so you're only gonna have five ball if you want to be in this country you're only gonna have five balls now left you know half of them are gonna be one half i'm gonna be

men i'll let you all decide how you vote on that one uh half of them are gonna be below average intelligence half are going to be above yeah i mean do you want to put your ball back most of you i think will not want to put that ball back to get a hundred and so what you're saying is i'm in the

luckiest one percent of the world right now right now sitting in this room top one percent of the world well that's the way i feel i mean i've been lucky to be born where i was because it was 50 to 1 against me in the united states when i was born lucky with parents lucky with all kinds of things and lucky to be wired in a way that in a

market economy pays off like crazy for me doesn't pay off for somebody who's absolutely as good as citizens i am you know leading boy scout troops teaching sunday school whatever raising fine families but it just doesn't happen to be wired in the same way i am so i've been extremely lucky so i would like to be lucky again and and if i'm lucky

then the way to do it is to play out that game and and and do something you enjoy you know all your life and be associated with people you like i only work with people i like you know i i don't i don't if i could make it a hundred million dollars by buying a business with some guy that caused my stomach to churn i'd say no

because i say that's just like marrying for money which probably isn't a very good idea in any circumstances but if you're already rich it's crazy right i am not going to marry for money so i would do it i would i would really do almost exactly uh what i've done except i'd only got to bought the usair thanks

you