CNBC's Full Interview With Warren Buffett And Jamie Dimon

In an op-ed published this morning in the Wall Street Journal, Business Roundtable President Jamie Dimon announced the group's support for companies that fall short of quarterly earnings forecasts. Wow, this isn't a new idea from the CEO of Business Roundtable-backed JPMorgan. and big financial names like Warren Buffett bring a new spin to all this and much more weight. Oh, joining us right now is Berkshire Hathaway Chairman and CEO Warren Buffett and JP Morgan Chase Chairman and CEO Jamie Dimon, who is also the President of Business. Round table and gentlemen, welcome to both. I think this is the first time you two have done a television

interview

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That's right, Jamie. I think so. I'm delighted to be with you, Becky, you, Warren and us. We're not on stage a couple of times but we're not on TV either. Yes, this is great news and something you've both been very interested in for a long time, but I'm wondering. I mean, you all have very few things you can actually throw. your weight backs that up, you can really tell this is important to us, this is what we want to do, Jamie, why this issue is important, why it's such an important movement, yeah, just so you know, in America, the America's largest companies are owned by literally 100 people. millions of people, including veterans, retired teachers, we all feel a tremendous obligation to deliver over the long term to build great companies and that therefore corporate governance is important and an important step and, in fact, I learned this by listening to Warren that some of the Evils and problems of people doing short term forecasting, particularly quarterly earnings forecasting, earnings forecasting, no transparency, no openness, not having corley reports and often this can put a company in a position where the management, who you know from the CEO on down, feels obligated to make profits and therefore can do things they otherwise wouldn't have done, so if you have a good board, you know the board will say if you have a great investment opportunity and you say it's going to cost me another two hundred million dollars this quarter.

You know someone like Warren would do it. say absolutely, do it, that's good, future profits won't hurt your company because you're trying to deliver on something short-term, so we've been pushing and you know the morning has been, you know, part of that. of the person make it real, so we think it's good to give people an umbrella to walk away from and hope that a group of companies abandon it immediately. Warren, this is something you've been preaching about for a long time: what is it? An example of where you saw it go wrong, well, I've seen it where companies get where they live by what they call crunching the numbers and they do a lot of things that really go against the long-term interests of the industry. business and I have never seen a company whose performance has improved by having some forecasts from the CEO that we are going to win an X because that is not only sending the wrong message and delivering the wrong results to the country's company, it is also teaching the people who work under him that quarterly performance is the end all be all.

I tell our managers to pretend they don't know this is the only business you and your family got along for 50 years. years and you can't sell it and you will make the right decisions. Have you seen these kinds of things play out incorrectly, whether in boards you've served on or companies you've owned and other friends you've had? I have met Becky. I've been on twenty boards of publicly held companies, not counting the Berkshires, and I've seen managers who I personally really think are good. I would be happy for you to marry my daughter or be named executor of my will or move in next door, but you are tempted by this, the predictions you have made to me, your ego gets involved and when you discover that you cannot do the numbers, sometimes they make up numbers and I'm bad, it's very, very It's bad practice and once it gets going, it feeds on itself because if your investor relations department tells you that they know we publish, You'll make eight dollars and you'll get this reputation because you know you make your numbers or beat them.

I'm going to do some very stupid things at some point because business just doesn't work that way and for 53 years in Berkshire, you know, I consider Berkshire and the painting unfinished all the time and the horizon really is infinite as far as I'm concerned. Jamie, what does this mean from a real perspective? They are the companies in the Business Roundtable. I think there are 200 companies. Aren't they going to issue quarterly guidance on this? Someone who has something in common with Warren said, so first of all, remember this is going down. in a company, so this could be pressure on the divisional level, the sales level, that they should do something different, which they could always do and very often it is very easy for a CEO to change a profit figure to short term by not marking what they should do. by not opening the branches that they should be opening or by selling more products at a cheaper price, they can reach something like that revenue figure, so it just creates disincentives and, as Warren said, it feeds on itself if you start meeting compliance. that and you have to do it.

You find it and you have to comply with it, you know yours, then you find out it's corrupt, so I think it's good if you're very careful about how and when they use Ernie's guide in particular and therefore the BRT, you know, I think in the BRT, something like 60% of our members do an annual earnings guide and I personally would eliminate that for someday and something like 20% more and less do it quarterly, but this is a first step to trying to get people to focus on the long term, I should also say dude, most of these companies are also pretty good at the long term focus in terms of Rd and capex.

This is just one case where we believe we should take another step to improve the governance of American companies. Well, Jamie, let me ask you, you know, you mentioned that it's up to the CEO's discretion to be able to do this if you wanted to, how could you change the numbers at JPMorgan to try to do this if you were more focused on the short term? You can change the exposure directly by making a phone call and making some trades and adding 100 million dollars of income. You can reduce marketing. A lot of people eliminate marketing because that's one of the easiest things to eliminate.

You can reduce. You can pay people less. I said it's like maintenance on an airplane, you can reduce the power grid on the airplane, but it's a very bad idea, so you know, people tell me that if you're doing that in a place like that, that's what you're doing. . Yukie doesn't have To build a new data center you would have to build the new systems you need, you would have to do the R&D you need and explain it to Cheryl's and your board of directors and of course you know some of the CEOs will say it's The buying side, I mean.

On the sales side, we push, but I'm trying to tell people, be free to quit, it'll be fine, companies have done it, good smart shareholders, they don't care, they've got the best in the whole world studying writing. about this. The television tells you that it is better, he prefers it, he wants to know how you are doing, but how you think about the future, what you are investing in, but you know that he knows that quarterly profits are a function of the weather. raw material prices you know volumes competitor prices and we don't you don't really control there is a CEO sometimes you are like you are the cork in the ocean but do the right thing anyway you will be fine in the long run where and what you want to hear from companies in terms of guidance and what they tell you and what they don't so that you don't impose those artificial limitations on them.

Well, I want, I want to talk, listen. from them about what I would hear if I was their only business partner and they were the operating partner and I was a person who did not spend day to day in the business but represented a significant part of my net worth in it and they told me periodically the things that were important to me and then told me the positive and negative possibilities if they were investing ahead of time and the things that could pay off in a few years and I would want them to. I want them to work, it's like we were partners for 50 years and neither of us can sell and then keep me informed and don't worry about what we make today or next week, I mean what's magic? about a quarter.

I would be in business for a very long period of time and we are in the insurance business and believe me you can report any number you want on an insurance company for a while so if you tell me I will be shot unless get profits of sort of a guide to your companies' quarterly earnings, but I'm going to ask you to forecast the economy because you both have a pretty good idea of ​​what's been going on. Jamie, just this week you said that you think we're only in the sixth inning when it comes to for the economy, what does that mean, what does that mean and what are you saying, yeah, if you look at how the tables are laid out, consumers are very well on their balance sheet, their income, salaries are increasing, their debt levels are low, all credit issued. since the Great Recession is pristine, well, it is mortgage credit different from student loans, which is provided by the government, but it is mortgage credit, small business credit, large corporation credit, the business sentiment is that almost the highest level has never been that of the consumption centers, the highest levels, the markets are completely open. there's a housing shortage and I assume that mortgage credit will

full

y expand, it won't be subprime again, so it's looking pretty good and there's nothing that's a real blip from my point of view.

It would have the leverage that we had in 2007, so it may be good, it's been a nine-year recovery, it's only been 20 percent, so an average recovery would have been like 40 percent growth over a period or so seven or eight years, so the slack is picking up and it's very possible that it's just a very long kind of lagging cycle, you know, sentiment is growing, the recovery from the Great Recession that you may have, it's very possible that You have years of growth and, you know, I hate to predict the future because I don't know, but it seems.

To me, that's a logical possibility and, in fact, I think growth is getting stronger today, not weaker, if we're nine years into this recovery and we're only in the sixth inning, I mean, just doing the math. . When we're talking about another three years of recovery it's something that you say, yeah, it's not outside the realm of the possible, it's definitely the realm of the possible and you know, of course, you're going to climb the wall of worry if it drags on. and long and of course one day we will have a recession and I guess I don't like to predict that and I don't, but the fact is things are looking pretty good and we also have additional stimulus coming from tax reform and and other issues so I think yes, you can have growth and people don't want to see it, it's been a long time so it's almost like we're too afraid to say it out loud, what about you, what does the economy look like?

From where? You said well at this time, there is no doubt that it feels bad. I mean, if we're in the sixth inning, we've got our hitters coming up to bat right now, number three, four and five, and the big lineup business is good, yeah. m I'm not good at predicting, you know, two, three, five years from now, although I will say this: I have no doubt that the United States will be far ahead of where we are now in ten, twenty, thirty years. now, but right now business is doing well, there's no doubt about it and as a result, you think the stock market looks affordable, why well, I don't.

As a result, the stock market decision must be made regardless of the current business prospects. When you should buy stocks is when you think you're getting a lot for your money, not when you think the business is Nezha and not necessarily when you think the business is going to be good next year. The sound of my actions in the United States in general has always been like this. Some exceptions are because the long-term outlook is exceptionally good and I don't think you should buy stocks based on what you think the next six months or years will bring.

You had been buying shares quite actively in the first quarter. It's fair to say you're still buying shares. I like buying stocks, yes, but I'm a net buyer and Jamie, I have been my whole life. Know?I bought my first shares on March 11, 1942 and we have had seven. Republican presidents and seven Democratic presidents and I have bought shares of each of them. Jamie, let me ask you, the market wobbled a little bit last week because of the issues with Italian politics, real concerns about what people call quitte lis or Italy. How big do you think the problem is?

Is it something that we could potentially face some contagion here? Yeah, one thing I should point out to viewers is that you know Warren talking about this long-term trends thing. but obviously we have had problems, but it is surprising that this country has the capacity to continue growing and even in the worst period of 10 to 20 years we have used them quite well and Bill Gates talks about a book called factfulness out There, Steven Pinker, about the best angelic nature, how humanity became better and stronger, healthier and healthier, living longer and that reflects. You know, markets, valuations and things like that, and obviously something always goes wrong.

I think the biggest threat to humanity is nuclear energy, nothing more than nuclear proliferation and things like that, and then you know you have things like Italy, which is just nice. one of those things to remind you that there is a risk out there and that you will always have to open the newspapers any day and you will remember another risk that could be Argentina, although I think that president is doing great things there and this just reminds us that he is not resolved, the eurozone will have some problems and you saw this wobble because people are again questioning, you know, Italy will remain in the eurozone, which is obvious, I hope they do, monetary union is the most important thing.

What they hope to do and I hope they find it very difficult to leave is because I hope the euro will still be here in five years and in ten years, I'll say it again: I hate doing it. predict the future I say yes, leaving Europe, the euro, the monetary union will be catastrophic for anyone who leaves and there is no way out of that, so I think when people see that and don't want to do it, I think they could The EU is moving forward with Merkel and McCrone, who know the axes, remember that Britain was never part of the monetary union and I, if they continue to make the right reforms, yes, it can be a union that gets stronger over time, but it will needs. exactly what they are talking about, tax reform is needed, the ability of banks to do pan-European banking, you know, some regulatory reform and certainty, something common, now they have to deal with certain questions about how they manage the budget, this is one of the countries, but he said that it is in everyone's interest that the European Union continues on that path because what other path is really not good?

What if you had to choose a side? If you were forced to place a bet, would you bet on the euro? it's here in ten years, yeah, I would bet, but I don't consider myself an expert on that by any means, but I sure would bet and point out one thing and I was just doing a little mental math. As you were talking, I've been, oh, I've been investing over a period of probably over twenty-five thousand days and I would say that if you took the newspaper headlines from those twenty-five thousand days, I would bet a majority of those headlines certainly wouldn't be good news or optimistic.

I mean, you know, I can start with 1942, when we were losing the war, when I made the first investment, so the news is usually good, I think it's more often than the headlines. They are bad rather than good, but the Dow Jones was a hundred and one at that time and the Dow is, you know, now it is 25,000, so the United States works, but the headlines are Jena are often going to be some kind of alarm, the headlines lately here in the United States. have been pretty good, I'm thinking about last Friday when we got that 3.8 percent unemployment rate and the new headlines this week showing that the number of job openings exceeds the number of people who are looking for work, the How many workers there are Jamie, I'm wondering if you've had any problems trying to find workers at the moment.

What is it like trying to find employees? Yes, no, but this number is the lowest in 40 or 50 years, yes, and I think sometime after that. this year will be the lowest ever recorded, another surprising number, we take global unemployment, this year will probably also be the lowest ever recorded and that's good, we all want wages to go up, so on the BRT where I just was, They're having a lot of the conversations they've seen wages go up, the pressure seen to attract people, but I see something good being created which is sharing the wealth, we want wages to go up, you know, we'll probably be sitting here in a year worried about inflation and rising wages, but right now, God bless it, it's bringing more people back into the system to work, work as decent work, it's great, you know, once people start in that job ladder, they tend to move up a bit.

But they tend to have household formation, so you know we have to do everything we can. It's a nation you know, both at war and I support this thing called the Earned Income Tax Credit, which helps, it's a kind of negative income tax that helps pay. people earn basic minimum wages, more money and I think it is much better for society to have people working and making households and it is better for social outcomes, so this is a wonderful thing, we should celebrate it and of course when I start worry about the downsides of this soon but so far so good we always worry even with the positive headlines Warren yes Becky and when you ask the question about whether we have trouble finding people we have about six house building operations in various Kansas City locations in Denver. and Austin, Texas, and there is a shortage of labor needed in home construction all over the country and we have home furnishing stores and carpet installers, there are certainly truck drivers, there are many places where there are There are many jobs. jobs that are vacant at the moment.

Can that problem be solved by simply paying better to the people who are thinking about filling those jobs but who want to solve it, probably with higher salaries, but the market system works to solve problems like that, but but? but it is absolutely true now that there is a shortage of people and some quite important type jobs. Let me ask you both about trade because that has been an issue that you both said could create a bit of an issue that could affect. sentiment Jamie I know you've heard at the Business Roundtable a little bit off-the-charts levels of optimism when you talk to all those CEOs, but it backed off a little bit, do you think it's because of the trade, why is it probably difficult?

I say that, but we asked about trade, we did another special survey and I thought that 80 to 90 percent are worried that if trade goes south, prices will go up, they will have to invest less and things like that, so we are Trying to be very clear about this, we think the president has raised some very critical issues about trade, particularly with China, around state-owned enterprises, fair competition, market access, the value of the ability to own 100% of a company and these things must be negotiated and the Business Roundtable supports. The fact that those issues in the business roundtables have been very clear is that we don't think tariffs are the way to do it.

Tariffs have unpredictable results that hurt your allies and do for you anyone else people tend to retaliate. You can incite nationalism in countries because it's not the same if you and I negotiate and are tough on each other, then you know that if you put a country in a very difficult position, how might you have to react so that it can create these possible negative outcomes, and you know it. We're very cautious about doing it that way, but we want to support trade, we want NAFTA to be enforced, we think there's a lot of progress that can be made with China and China would be very receptive to some of those issues, that's what we're doing. pushing for trade very quickly the latest coming from the White House is that they are looking for bilateral talks instead of a NAFTA between Canada, Mexico and the United States, bilateral talks with us in Mexico and with us in Canada, what do you think of that ?

Jamie Well I disagree you know we were deadlocked here on two issues okay the son before NAFTA the sunset provision that the president basically has today you can break it when everyone is so why wouldn't I go Shane for that? Don't know. you know it just creates more uncertainty for everyone else, you could argue those certainties there anyway, but the fact is you want more consistency, this other so-called orbit, various forms of arbitration that you can go to an effective arbitrator instead of the courts in Mexico, Canada. o America creates a little more certainty, everyone wants that and you know you can argue.

It could be better if America is good to have it is better for our friendship with our neighbors it is better for business it is better for certainty and I personally think we should give it up and end NAFTA. There are many things that have already been negotiated. Modernize NAFTA. So I'm pretty much in favor of doing it, so it's important that we do these things in person. I would have done the TPP. and in trade it gets very complicated when you start doing bilateral things, it could also be used against you, so what we are doing in some of these places now has opened the door to much more complicated exchanges. negotiate with our allies that we know and I think we should be working and we allies have a common interest and not against China, but to establish global standards that may not be exactly one, but those global standards that you know that eventually China will have to meet. a-even around reciprocity investment treaties, etc., and you know, but look, the president is doing his way.

I hope it works out, we're going to try to support as much as we can, but you know I personally do some of these things differently. Let me ask you. both about a big issue they've been trying to address here at home, which is the rising cost of health care. You two, along with Jeff Bezos, have announced an initiative where you're going to work together with this joint venture to really try to keep track of all of those issues to help your employees and maybe even the rest of the country to warn them. When we spoke to you last month in Omaha, he said that maybe within the next two months he hoped to name a new CEO, has he made progress on that front?

Yes, we have, and the three of us and the new CEO, we basically came to an agreement, so we're just fixing a couple of things, but we should have done it, we should have had an announcement about it. The matter may take two weeks at most, but the work is done and we have the right CEO and I am very excited about it. I know Jamie and Jeff are... Jamie, you've already met this new CEO. Yes, I have the The heavy lifting was done by Todd Combs. I want to get all the credit and he went through an exhaustive process, but I think my quorum that we have we have an excellent capacity for culture of individual character, my heart, the whole thing and you know this is a long process. term thing we are not looking for immediate success but-but-but-but there are many ideas out there that many things would be done better we know about fraud the administrative costs we know the overuse and underuse of various medications and specialized procedures, we know that the End of life often costs a lot more than it should and it's a lot more painful, so there's so many and with big data there's so many things to do, but the goal is greater employee satisfaction and you know.

We will eventually be able to learn a lot of things and maybe help inform America how we can improve some of these things. Jamie, have you heard from your employees about this? Warren. Know? I'm going to start with Jamie, yeah, a little bit, you know there was. a little bit, what does it mean to us, but it means the same thing, I mean, effective, we do this every year for employees, every year, we look at myself, we use a lot of very good companies to help us get things done in terms of claims and structure. and payments and options and wellness and we just want to do better and I told them we're just trying to get better and you should expect us to do it the right way.

The same kind of heart that we've had before, but to improve your lives, improve your well-being, improve results, give you more options, I believe in you, other things that will effectively be cheaper and you will have healthier, much healthier employees, Lauren , you've heard? of your employees, yes, I spoke to a group of approximately 130 of the different financial directors of all our subsidiaries just a couple of days ago and they are very interested in the topic and the interesting thing is that we were

interview

ing a large number of the possibleWe didn't come across any CEOs who didn't think the improvement was both a significant improvement, possible and important, so it's not like there's anyone out there who's connected to the system of things we've already done. .

We come to Nirvana and they know how hard the work will be to make major changes, but everyone is rooting for us to succeed. The number might have wanted to be the one to help us succeed. We said a lot, but no one disagreed with him. mission, importance or feasibility, but it's also a very, very difficult nut to crack and will take a long time. We have the right person, so you guys are working on everything from the issues facing American businesses to the long term. the short-termism of this enormous problem for the country itself and that is health care and it has all kinds of people starting to wonder Jamie if you are going to run for president.

I have no intention of running for president, why are you going? He's not running for vice president either, let me ask you this week, we talked to Howard Schultz, he announced that he's leaving his position as president of Starbucks, he talked to us on squawk box and he said yeah, he may be considering public office, he doesn't know exactly. what that would be right now, but we also talked to Ken Langone, who was our guest while we were talking to Howard Schultz, he said, look at the idea that Donald Trump won the presidency and people say this expands the meaning that a business leader He could come in and run the country and that expands the city group as far as he's concerned, he thinks that's a good thing Jamie, what do you think about that?

Well, you know, I think businesses should collaborate with the government and get involved and businesses need to learn what the problems are in government, you can't just go up to government officials and tell them this is what I need for my business. and my earnings etc, you know, governments have huge problems to deal with in terms of poverty and incarceration and education, we should help them do that and that's why I came together to help me do this work on the BRT and all of our team members are deeply involved in that, so to get involved in politics, I think is a great thing for anyone. so if you want to do it, I applaud it.

I think it is dificult. I'm not sure being a CEO naturally translates to that. You know, I watched Howard and I think Howard's world and he would make a great CEO or governor or senator or mayor whatever he wants to do, but it's hard, you know, and you have to be in it, you have to want it, this is you. you, this is not, you're not going to be ordained president on stage, you have to go out and fight for it, so you know, CEOs are not used to doing that and I don't think all CEOs translate to that, so We'll say it, but I think Ken is absolutely right about hiring people. involved in government collaboration, government is a good thing, even having people that I can focus on having war and help focus on health care is a good thing for America and we know that the government can't do all of these things anymore alone, in particular, that's changing rapidly, I mean, the technology isn't. technological world, so I completely applaud it.

I wish you to know the best, Warren, what you think. I completely agree: most of us business owners would have trouble starting the year early and in Iowa, and going from motel to motel and repeating the same thing six or seven times a day. I say the same thing and I listen with great interest to every potential voter about what their suggestions might be, so I don't recommend it to any of my friends, but I think it's very important for companies to be servants of the government and companies have done that Wonderful. things for America and America has done wonderful things for business.

Both have said some pretty nasty things about Bitcoin recently. Which of you hates Bitcoin the most? I said high standard. I don't know if Jamie can teach me or not. I don't want to be the spokesperson for Bitcoin, you know, just be careful anywhere and we'll warn you very quickly before we let you go. We have talked a lot about the super agreement. We spoke with Derek Oshkosh for Scott. We had said that. The report was correct, I just wanted her, if there's anything you could add to that, that the conversations went back and forth. Zarah said that she would love to have you involved in something in the future.

Any chance of that, well, I think it's highly unlikely, but. I'm not saying zero to anything that came in, it's true that we had a conversation a few months ago and certainly, as I said before, I'm impressed with them and Ryan and we just didn't come to an agreement, but that's not a unique experience in Berkshire Yes, Warren Jamie. I just want to thank you both so much for your time. We appreciate the efforts of what you are doing both with health care and the long-term approach that you would like people to have. Taking with the companies we really appreciate your time talking about this today Becky thank you enjoyed it well great think of you thank you that was great and even though you are in different states and very far away it was amazing they play together very well yeah.

It's really good Warren, thank you guys so much for the inspiration and for joining in on this and I hope you help make things a little better. I'm with you, you're 100% on this and even though you crossed a few branches of the desert into the night, I would do it. Let's say Jamie is involved in a meaningful way Becky, he is her heart and mind, well I'm excited, I can't wait to find out who the CEO is, thanks for bothering us, yeah, okay, thanks guys, thanks. thanks Mike, hello, thanks for watching CNBC on YouTube. Be sure to subscribe to stay up to date on all the biggest stories of the day.

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