YTread Logo
YTread Logo

Warren Buffett shares his opinion on China, Costco, Elon Musk, College, and more

Feb 27, 2020
So let's start and talk a little bit about the economy and obviously we've been in a good long term here for a long time and yet does that surprise you and what would be the signs that you would look for to see things that are declining well I look a lot of numbers just in relation to our businesses I like getting numbers not so much so I get weekly reports on some businesses uh that but that doesn't tell me what the economy is going to do six months from now or three months from now it tells me what's going on now with our businesses and it doesn't really make any difference to what I do today in terms of buying stocks they're buying businesses what those numbers tell me are interesting but they're not they're no guide to me if we buy businesses we're going to get old forever so we're going to have good years bad years between years it could be a disastrous year something here and we care a lot about price we don't care about the next 12 months I was surprised at the l kind of thing in the last ten years about economics, I mean, I don't think there's been any economist that I've read that talked about negative interest rates for long periods of time, I mean, if you go back and read Keynes or a read Samuelson read some of that they don't go into a negative rate environment I think now there's still 11 trillion government debt worldwide that's a negative rate so we've never seen it before and we've never seen it at least according to the conventional wisdom, Otto, this is the same period of long, rising deficits, while the economy is improving, extremely low interest rates, and very little inflation, so something different happens, but something different happens all the time, and That's one of the reasons why economic forecasts just don't.
warren buffett shares his opinion on china costco elon musk college and more
Don't participate in our decisions. Charlie Munger, my partner, I know that it's been 54 years since we've ever made a decision based on a forecast. Economics women, we make business predictions about individual businesses. I'll do overtime and we compare that to what we have to pay, but we never said yes to anything because we thought the economy was going to do well in the next year or two and we never said no to anything because we were right in the middle of a panic. , even if the price was right, well, I don't pay anything in the sense of a guideline to do anything, it's entertainment, I mean, you know it's like going on a variety show or something, but and I just don't know from no economist that it is actually what businesses are so successful or do well in stocks.
warren buffett shares his opinion on china costco elon musk college and more

More Interesting Facts About,

warren buffett shares his opinion on china costco elon musk college and more...

Paul Samuelson death I know he was a big shareholder but you know they make guesses and even though there are so many variables I talk about in the hard sciences you know you know if an apple falls from a tree it's not going to change over time centuries due to nothing or political developments or 400 other variables involved but when you get into economics there are so many variables and the truth is you have to expect good times and bad times in business and if you were to buy a car dealership and you know where you live locally or donald's franchise or something you wouldn't try to schedule the purchase try to make the right purchase at the right price and you want to be sure you got a good deal but you wouldn't figure it out because growth this year will be 3% instead of 2.8% or something like that the sword that Berkshire does depends on a personal situation if you work in something where you live on your salary week after week do you want to have a little cash or how much or time then and you certainly don't want to have a credit card that's maxed out or something like that, but if you know if your house is paid off, if you don't have huge living expenses, have a portfolio of decent diversified businesses, we need cash, Yes, yes, I have responsibilities. you know we have insurance claims we could have five hurricanes you know all kinds of things will happen we may have to pay billions of dollars and I have over a million people who own stocks that are going up they run the place to that we get through periods like that but if i was retired i had a million dollar stock portfolio that paid me 30,000 a year in dividends or something and my kids were growing up the house was paid for with everything you know i don't would worry too much about having a lot of cash room has a forty five billion dollar status how closely do you follow the company?
warren buffett shares his opinion on china costco elon musk college and more
You know people worry that they haven't really introduced any new products well, if you have to keep a close eye on our company you shouldn't own it, yeah no I did. I mean, if you buy a business, you bought a farm, you know you go and look every other week to see how high the corn is and you know you worry too much if someone says this is going to be a low price year because the exports are being affected or something like that you know you buy a farm and keep it because I have a farm that I bought in the 1980s and my son runs it but I've been there once you know I mean it it's not like that grow faster if i go and look at it you know i can't cheer it up you know and i know there will be some years where prices will be good and some years where prices won't be good. the yields will be better than others, but about the farm and if only and I don't care about economic predictions or anything like that, I would care that over the years it is well taken care of in terms of crop rotation and I hope the yields improve , which they usually have, in fact, that farm a hundred years ago, what about the lumber that was producing 30 bushels, maybe 35 bushels of corn per acre now in a good year, you know that would be 200?
warren buffett shares his opinion on china costco elon musk college and more
I mean, we've really made progress on this. country that's one of the reasons that commodity prices and going back a couple hundred years have moved so little is because we use, we've gotten better and better, whether it's cotton or corn or beans, they're all sorts of things and you and I benefit from that well it's a long term investment and if you own if you own the best car dealer in town the best brand and you spearheaded something that worked well it wouldn't happen every day and I would say you know how many people have come in today or I think interest rates are going up a bit maybe our sales are slowing down or they know you buy it knowing there are 365 days a year and you're going to have it for 20 years so it's seventy three hundred days and you know things are going to be different from day to day and you're darling you shouldn't buy the day to day things that are important you can see that between December 13th and 24th it looks like they bought about two hundred Thirty three million dollars in berkshire which was right near that particular stock market bottom how did you know it's good thinking if I knew it's not really a big buy for us and now Berkshire we won't have a lot of excess cash all business needs are taken care of we spent fourteen billion dollars on owned plant equipment last year much

more

than depreciation so we take care of business needs then we have excess cash and if we find an investment What to do is look for other businesses to buy it in, but if our

shares

do I think the

shares

and my partner at Charlie Munger believes that the shares are selling below intrinsic market value, we'll buy into the shares, well we think so, yes, but what's really intriguing is that this is when it goes down a lot, I mean, when you're buying our bills for 60 or 70 cents that periodically have it's the opportunity to do in stocks then you know you know it assuming you have the cash you don't ever want you know to get so some surprise might really get you somehow but if we have excess cash buy it quickest that we can, yes, exactly, but you know if you and I own a McDonald's franchise together and it's worth a million dollars and you own 50%, you come to me and say I'll sell four hundred thousand. you know I'll buy your share you say six hundred but you want six hundred thousand I'll be back tomorrow Sanders legislated when companies can do buybacks and then there was also a report recently about executives using inside information it seems in the days of buy back so our buybacks they are a problem well there will be some people who will misbehave and respect them in any activity i did so they really wouldn't have much to do rebuys i think you rebuy the degree to which they have been a part of nefarious activity and i have watched them for many years and they are very close to zero, but that only made me the throne of opportunity, but Mical did not.
I did not follow the conclusion. I mean you're distributing money to shareholders essentially they can buy dividends and presumably American companies distribute money to their owners from time to time and we do, we do it through buybacks or we've done some and we don't do it through of dividends but most companies do it through a dividend policy and then if they have but they would be in the business needs and I think if their stocks are low priced it just makes sense, well, they narrow it down a little bit in terms of is it a general rule of the SEC is it to have some kind of this is not the right word but manipulative activity or something like that in stocks but no I don't think I don't think the government should decide their dividend policy, I don't even think they should. target your equity investments can make it tempting to do certain types of equity investments that they do with renewable energy, for example, I mean the government has an interest in encouraging certain developments in this country over time and they do, they should being a specification oil depletion allowance ial fifty years ago one so that was

more

politics than government policy but certainly renewables are a prime example of that but the idea of ​​deciding whether you have the right to return cash to shareholders and the way you do it i don't think it really makes much sense 2020 is hard to win with just one billionaire vote but i admire my normality i wish you would have run i want to be very clear to the questions is the business executive the type of person right to be president and what characteristics are you looking for well i think a business executive might be the right person but no no I think because they are business executives you give them extra points and number one I want I want a president who wakes up every morning and realizes that the biggest threat to a country that has all sorts of things going for it is weapons of destruction massive and that we live in a world where people organize organizations and occasionally countries might have people who would like to take out a large percentage of the American people or maybe other countries as well and now have capabilities that I always thought recently that I could classify it as chemical and biological nuclear but I think you have to add cybernetic now you know you have an evil genius somewhere that madly reasons like it happened with anthrax back you know who knows what motivates someone who starts sending them anthrax letters and if you have someone who thinks it would be cool to send a false alarm to the Soviets, the Russians, and the US that the other side was spearing ndo or something like that you know it's a very very dangerous world it's a wonderful world but it has dangers now that it started in August 1945 and 1/9 Stein said this changes everything in the world except how men think and so I want a president who has the same filter that all these other things are important important, but protecting the country and reducing the possibility of successful use of weapons of mass destruction against us is job number one and I think I think that most of the presidents I've talked to are a couple over the years and I really think they realize that they can get lost in the events of each day as they go along and then beyond that I want a president who has two goals with the economy, one is to make sure there are wonderful mistakes that keep laying more golden eggs and then I want a president who also feels that if GDP is $60,000 per capita in the United States no one should be Stand back we have a market system that obviously works to produce more goods and better services year after year done everything throughout my life does not also have the as they said we have a system that people who do not fit into the market system in terms of their talents they may have been perfectly good at landing on the beaches of Normandy and all that sort of stuff, but they don't have them, they just don't have that kind of talent, just like I don't have any athletic talent, you know, I mean I had to live in an athletic universe you could train me eight hours a day and I could read fancy I'm no good I just got together on a fumble or whatever happens so we have to take care of the people the market system doesn't deal while spewing huge riches for people who are a good fit and that can be done would you ever put a nice word to it?
I somewhere don't, but I say what are you for, that most of your followers are against you, I know you really believeon that and that's reading the test but I'm not sure about that except under some kind of sodium pentathol or something if I really want to get and that's why Bernie Sanders was so successful I got 90% of the people to vote for Bernie Sanders they probably hadn't heard of him two years before but they felt like they knew exactly they probably knew exactly what he would do i mean they were probably authentic and if you ask him you know what he was for that most people might be against , I would tell you, you know, I prefer to learn from other people's mistakes, actually it was a mistake, but we'll find out over time, but, in my

opinion

, we paid too much for crafts.
We don't pay too much for Heinz so when we started it was originally a non-public partnership between us and in my

opinion

we pay too much for craft and there's not much you can do if you pay too much. and secondly, there has always been a struggle between the retailer and the brands. I mean, if I have a terribly weak brand and I want to get into Walmart, I won't be able to do it. I mean everyone for all kinds of crazy concessions you know and I want to be at Walmart if I have got kind of super packaged goods the bargaining is very different if you have essentials vs nonessentials Ten years ago, Costco tried to get rid of Coca-Cola.
Costco has excellent customer loyalty and their own brand Kirkland is a thirty nine billion dollar brand now and they moved from one category to another and they only started in 1992 so they know the brands and but in the end they went back to put coca-cola if it's been royal crown cola so there's always that fight between the brands i mean and there always will be but the retail network has been moving in that direction particularly i think because of the coke revolution Amazon Walmart Walmart yeah I mean but it's been accentuated I think we have a new retail environment now I'm serious it's like it's night today but it touches someone and it marks people who spend billions of dollars developing and sponsoring TV shows or sponsoring radio shows in the old Campbell Soup was always there with Jack Benny or something like that when I was a kid starting to build brands and obviously people were too.
He liked the product, but people are more willing to switch and it's harder but it's a somewhat different world than it is night and day, I mean it was highly unlikely that you would keep switching brands every day, but I was really surprised that Gillette lost ground, I mean, men don't like men, they don't like to experiment a lot. experimenting but you know if a kid when you were a kid to the Gillette sports cavalcade was your friend and brought you the Rose Bowl and the World Series and all that kind of stuff you didn't just shave would you leave the rest of your life and you still do it to a large extent but it's not quite the same as five years ago a list of the richest people in america came out he's number one i think your friend bill gates is number two you're the number three so you can see what is done in innumerable ways now and of course the question is how come you have a body?
Is there still time to buy what you still buy? but I didn't realize that you could go from the books to what happened there, no, I mean, he had a vision and he executed in an incredible way something that, but there are a lot of games that I miss, I would have missed, you know, I would have lost Microsoft. Even if I got to know Bill before or something, those are not my games. I don't worry about the things I miss that are outside my circle of evaluation competence. I do. I miss things that are within my circle and that's a terrible mistake those are my biggest mistakes you haven't seen them and but I don't see them it's not a mistake because I miss Netscape or something like that at all there I would say maybe 5% of the companies or the 10% of companies that are most within an area my circle of trust is something that I should be able to understand I want to go back to that trend that you just talked about how do you know when a giant trend has ended and you know that you have reason obviously things don't change that much over time but sometimes they like newspapers it was a business you admired for so long it's not a good business there weren't news papers if you're the only one in town in other words some competitive situations but it was survival of the fattest whatever newspaper was the fattest because it had the most ads and ads or news for people i mean they want to know what super brand has l The sale of Coca-Cola or Pepsi this weekend and so on, I mean if it bothers people in the newsroom. to speak that way, but ads were the most important editorial content from the point of view of the general reader on any big day.
I mean if you were looking for a job you had a place but basically to search and that was the classifieds section if they were king toilets for an apartment to rent and on those those those pages it was just dozens and dozens of pages that disappeared I mean the essential things that are essentially you news is what you don't know you want to know and you know what happened in national sports you know the moment it happens and you can go watch a video and so on you can go to channel F ESPN and see what it's going on you know what's going on in politics you know what's going on on the stock market I used to look in the stock market pages the next morning you don't want to before you deliver the papers I checked them the world has changed enormously and and it did it gradually went from monopoly to franchise competition to toast you know they're going away the new times are going to go away, don't they, the washington post, the w all Street Journal, it's alright a little and corporate debt? and the federal data and how would we do it right if you have a deficit approaching 5% when things are going really good you know it's a new world I am and no one not even the Republicans are Democrats what you're especially worried about and we're not having much inflation that wasn't supposed to happen, but it's happening, which is why I say you know you don't really want to get hung up on trying to do economic analysis because nobody's any good. down nobody, you don't get rich doing that if you look at the invention that the Forbes list if you enter the list the number of people who have done that by economic analysis I think you are almost zero there well, it goes the other way around but I think I think that I believe the Earned Income Tax Credit is the best way to put money in the pockets of people who don't fit well into the market system but are perfectly decent citizens and made a fair share of the success. from someone like i've had the burger or something possible i would have happened without the america we have and if you go back, go back 200 years and we're all working. 80% of us are working on farms.
The person who is the best of that working on that farm. maybe double that's the worst you know that's the difference between super talent and no talent in farm economics picking cotton or whatever now if you're the best middleweight fighter in the world you know you can get twenty or thirty million dollars and and and if you're just a good citizen, raise nice kids that help out the neighborhood and everything else, but you don't have any marketing related skills, you'd be good on that stone farm and you'd be making something. comparable but most of the people around you but you don't have something now that as it becomes more and more specialized and will continue to become more specialized you want two things for that person you want them to have a decent life i mean live in a country with 60,000 of GDP per person you want them to have a decent living and can I hope I also think you want them to have a sense of accomplishment so you wanted to have a job assuming they are not disabled somewhere you wanted to have a job but the minimum wage would be one way and you'd say, well, we'll make sure they don't have it. cash don't need a higher salary need more cash in your pocket and government at relatively low cost can provide a decent living for anyone but it's the life that works forty hours a week and has a couple of kids and we've gone in that direction and it's kind of bipartisan, I mean, yeah, I find both Republicans and Democrats because I think it would be better not to have an annual payment, you know, it's weird that they get it monthly and I think there are a number of things that you could do but you want it, you want them to feel part of the system and you want them to get more and more of these golden eggs or later you want them to get a little more of you want you want more money in everyone's pockets and everyone is willing to work or can't work and we can do it a rich family would do that you know I had six or seven kids and I had some businesses I wanted to hand over you know you would pick the most capable person to keep leave it because that's the market system to do that but make sure that in all seven family members participate you can get more than plenty you could get more for the one who kept producing the golden eggs I would but no I would just tell the other one the one on the lower end that he might be the best guy ever and in most ways you know he's the one he shares with everyone you wouldn't tell him you taste too bad but that's where the market system is. work, you know, go boy, get your spouse to get a job and for housing. somewhere no no no I didn't care about a name we could have chosen there's no name operation for ten years now it's that we have a wonderful partnership in the sense that it's long and it's big and has reasonable market strength with them more than a million employees one of the three of us have three CEOs who can get things done in organizations that are so big that normally it would get very bureaucratic you know I mean if you try to do this with a lot of big companies you have it in the legal weight and you know and the public relations weight you know we don't have any of that stuff that they might have in certain areas, but I don't, but Jamie's not worried about doing that kind of thing. and then in jeff neither so we have a commitment unit and the ability to execute the commitment the only problem is you have a three point four trillion dollar industry which is as much as the federal government collects each year that that basically feels pretty good d about the system, as we were talking to people to find a leader for the group, for example, you know, everyone says you know the system, you know it's really good medicine, but you can't get past five percent of GDP to eighteen you know, without really making you less competitive among other things in the world, so everyone thought the system needed some adjustment, but it wasn't their part of the system and that's very human, I do the same , I'm sure if I were in the same. place, so there is enormous resistance to change, while similar recognition of change will be needed, and of course if the private sector doesn't provide that for a period of time, people will say they know we gave up, we have to changing the top ones blew up which would be even worse todd todd really does all the artwork but if this works you got the credit for the one in the berkshires dad talked to him once or twice.
I'll tell you an interesting story about h I'm thinking and I think it was 2010, you know, I have a partner, Charlie Munger, who is 95 now, but we both read The New Yorker, but we don't talk about it and one day I'm talking to Charlie and me. Let's just say I read this great article my thought I've never heard of before I probably don't know how to pronounce his name I said ah oh he says I sent him a check for $20,000 that article is the best article I've read in a long time so I just thought that you know I get paid so much to be a writer that he actually just said I'm out of a paycheck, so two guys 1,500 miles away found it one of the most interesting informational articles we've ever read, and similarly the we continue later. a man but it wasn't my well it's true that if you read if you read three or four thousand words of someone on an important subject and they really give you some ideas or some factual background or something you haven't seen in years. and years of reading about it, I mean they should make an impression, I mean other people have left an impression of how important their writing time is.
In effect, finding some way that we can provide even better care and make people feel better about their care, too. I mean they have to perceive that the third party gets better care over time and stop the march of cost relative to country production, but if you take 18 cents out of every dollar you know of in US production and you say it goes to health that leaves 82 cents and other countries are doing it for 10 or 11 cents when you go back to 1970 all of us were doing it for around 5 cents so we started from a pretty similar point compared to the major countries industries and continues to rise and last yearintroduced a corporate tax cut for something that was about 2% of GDP and people say dcan't be competitive we have this 2% cost compared to the rest of the world and there's something basically corporations pay a lot and it's going to 18 and I say it's a tapeworm of the US economy with that such a wonderful economy we can do some very expensive things I mean but and that doesn't mean we should have a rich family you still want to be as efficient as possible possible in things in general that's not the way every rich family feels but and that's what makes sense we all know we have this amazing economic machine but we shouldn't we shouldn't spend 18% when other countries are doing something quite compal in terms of doctors per capita hospital beds per capita everything I think the best of medicine is very concentrated in this country and that's great.
I want us to be the leaders, but we just don't. I think we're paying a price if we pay an additional 7 points of GDP, that's 1.4 trillion a year, I mean, they're trying and and Congress in general, I mean, they took the average congressman they read, they considered it a problem and they did and they saw specific instances of, you know, drug pricing or something like that, but it's a big problem to change, I mean, the problem is that it intersects in so many ways and that's why we have Kewanee to the head and we have three three good sized organizations behind it.
We are not trying to do it to make money. with some businesses that we make money from, we'll talk to everyone, but it's just that his game plan is not something that we're trying to design because it's in his head to some degree, I mean, obviously we select it by listening and reading and so on. that he has done but he will learn if we always work well we will do certain experiments or he will know and try a community where one of us has many employees maybe and there are several ways to experiment learn some things from his yes but I want to ask him if he talked about the disparity in value between holdings and companies and wholesale acquisitions, so maybe you're looking to buy positions and shares instead of buying entire companies because of the price difference why why is it? that exists, what can you explain?, well, in general, when companies are sold, they sell it at premiums, now they are not premiums because the buyer thinks they can do all kinds of wonderful things with them that the president's management is not doing , often. said you know in the fortune 500 maybe company 250 should buy the other 250 and they just totally change every year because everyone thinks they can handle it better than the next one which is what you're saying when you buy it in its entirety , I don't think we're running when we buy it so it's hard for me to come up with a premium and the premiums have become more dramatic and the available leverage has become quite generous and that cause is people like to buy the People love to buy but basically they can't pay and some of them also put up the money and we don't calculate leverage on any of our purchases in other words we don't Let's say if we buy this for 10 billion we can borrow 7 billion because we're really using a general credit from Berkshires.
I mean I could put 70% leverage on any of our companies to make it look better but the truth is it's Berkshire's general credit doing that so I would be crazy just because I want to buy something to say good , I'm buying this with 70 percent leverage, therefore I can afford this kind of silly price, but when when the CEO right you? I have a large amount of money that is committed to buying something. They get paid a ticking fee every day to buy it. Now they get paid whether they buy it or not. Things aren't up to a certain point, which is kind of an interesting business approach, but they do, but let's also say there's a trillion dollars out there and to do it, I don't know the number, but beyond that, they probably took two trillion of leverage they probably used two thirds leverage if they couldn't buy something close to that so you really have like three trillion maybe buying power using these assumptions which I know aren't correct but they're in the general ballpark well three trillions there's only 30 trillion US companies or so and you know you can take Amazon and Apple and Berkshire and they're not for sales so you've got trillions that aren't so demand supply is really very skewed and It works against us one hundred percent because you know anytime you have someone who gets paid on the bright side and they get shut down. money for ten years, you know, they have every incentive to keep doing that.
Twenty twenty years ago a guy called me whose name you would know and he said tomorrow I don't know anything about the reinsurance business and he said we have this reinsurance they offered us and a big one and he said tell me what should I be looking at and I had to go through a I said little of that but you're not going to learn much about the reinsurance business from a phone call with me and you know you do and Wyatt Wyatt as you watch this and he said well he said we have to invest the money in the next three monsters we have to return it, you know? and that's his equation, you know, and he's getting and once he buys that company, he's got a built-in feed for five years or whatever and he's got some of the edge that he'd like, but if it doesn't work out he still makes a lot of it. very very rich by anyone's standards so its hard to compete with that but probably 50 years ago i looked at some causal bargains but i mean i did a lot of reading and you know what happened yesterday but remember the old stuff business you have a lot interesting quotes in your head i was looking at the stock boy from the new york times i think it was three bucks in 2009 it's 30 bucks today and i realize i think very well it's been reported and it was in this book that ex publisher just published there's just a little references yeah hills book and and and it was only mentioned there but they were in trouble a lot of companies were in trouble so now they've really found something online I mean they were late for thursday go online versus magazine but they're really moving and I know and they should I mean they have they have the natural franchise for that so their economic models worked and I shouldn't go into more story detail , well, it was ringing something, but yes, it was ringing enough.
I'll say it that way. I mean, I ran out of money before it stopped ringing. last half of September and early October and then I wrote that article at the end of October and I knew it was going to get worse. I wrote the articles that it was going to get worse, but I didn't think the stock market would react as much as it did between then and March, so I had more or less used our powder well. before you hit rock bottom interesting, how did you avoid not going back in? In fact, I think Larry is really doing a good job.
I mean, that just did it the other day. his priorities are clear and I think he's just I just read the interview that he did about two days ago, you know, a few days ago and he's a very capable guy and he's on the right track and I'm a fan of g--' s in the sense that we're a big buyer for him we're a big seller for him knowing the managers you know I mean Jack Welch is a really good friend of mine we disagree I never said politics but we had a lot of fun together.
I love the guy, so I really want GE to do well, don't you? I didn't find it that appealing, you talked about growing trees in the shareholder letter, one was the third Grove, which was kind of in between bets, yes, the equity interests, yes, we're not, it's the case those aren't the healthiest grove no no pilot flight case where you know they were there are companies that under GAAP accounting we have to record under an equity method we own more than 20% but we do not control them. and then it says that it's treated under GAAP accounting is a special category and it didn't fit well when the other one grew so I had to make it a separate growth by itself, it's not that significant growth.
It depends on the circumstances, I mean, there are times when the insurance pendency can be very valuable, sometimes, when the ability to use production tax credits will say in the utility business, but have them as part of our consolidated return It helps but that varies a little bit a lot but that's a plus and we can move capital well take a business like See candy we bought 40 years ago it's a wonderful little business throw in capital we've tried 50 different ways to expand geographically do all kinds of things that it doesn't work and we'll try again and it won't work, but we can move that capital to help through the BNSF railroad or do all kinds of other things so that we have a transparent and efficient way of taxation. necessary and we have some companies that really consume capital and we have others that start it up and we can move you out of a pie if you try to do that with your investments you incur some taxes as you go about doing it and it's less efficient than we've been tax cuts and benefits for Berkshire.
You didn't really realize the costs of the tax cut, which surprised me a bit. What are the other costs? I mean, is it just free money? well it makes a difference what tax cut we get for example our utilities as I mentioned in the report going to customers that's just the nature of utility regulation but really we were a significant beneficiary of the tax, I mean, basically, let's say we had one class of shares, we have two, but shares, you and I own a business together and we think we own all of the shares, but the truth is that before the tax cut, the government had a 35% share of revenue shares.
No, I did not have a share in the assets, but I had to share the income and if I wanted to. changing it to 40 could have changed it but luckily he changed it to 21 and if we had a private business if we had a McDonald's franchise together or a car dealership together you know the third shareholder that invisible shareholder the government just gave us back a bunch of shares and and and with and our shareholders benefited many others have made a difference since they became vice presidents and charlie no they don't have the interaction they each run a separate business i inside and she doesn't think about the other businesses he thinks about the business of the insurance and Gregg doesn't think about the insurance business at all and I think about money and capital and so on but they run two very big businesses I mean a The Jeets business you know has told you at least a couple hundred of billions of assets that you know of and and Greg's business has a hundred and fifty billion in revenue. the country had in terms of value so maybe top 15 but they're very big companies oh no no no Charlie and I have a partnership that thinks all over the place and we've done it forever you know ? they are doing well they they they they have thirteen billion dollars each, including the pension funds which are pension funds that they manage and they saw one hundred and seventy three billion that we had at the end of the year in shares they had well gone up in 73 Buffy had another eight t billion in pension funds over a hundred and eighty years old they had 26 among them Thera's manager had total discretion in that they don't ask me at the end of the month I look and see what they did they don't do much they don't I do a lot of trading or anything but I look to see what trades they made and Todd for example I mean he made a couple of small investments in private placement type trades and I know what companies do but I can't tell you their names, you know, baby, no, that wasn't something they did, that was something I did, yeah, well, that's a good question that I don't have a good answer to.
I don't know enough about cloud, okay, so Barclays put out a note saying they were lowering estimates for Berkshire for EPS. to read it, put it that way, but there it just doesn't make any difference at all. I mean, if I spend time reading that, I wouldn't have time to read ten cases and we're not going to do anything different. I don't know what we're going to learn as I put in the annual report and I really think this is unique I mean we don't prepare monthly financial statements Berkshire and there's no other company that would but there's no point in doing it I know I know where the money is I know what I know how companies are doing in general, but what difference does it make because I'm not going to try to hit any numbers for the quarter if you already know have an insurance sale or do something even worse?
So him and Charlie I want to say that he knows where we stand and we know what business. they are doing well where their art is and we certainly know where the money is another UBS survey of Berkshire investors says thefive most important things to them are return on investment successionM&A opportunities share buyback insurance margins. do you read? That's nice, no, but I don't disagree. I mean, I'm glad someone understands us. Yeah, well, that's important. there were seven people sitting at a table having dinner with mostly relatives and I said, here is the partnership agreement that was made under Nebraska law, it's four or five pages, you don't need to read it, but I said, here's a little half page what I call the ground rules and I want you to read this and if you feel good about the interaction what the expectations are and all that kind of stuff we'll join forces and if you don't then it's okay for other people to I know, but we don't, we shouldn't be partners, I mean, you know if I'm going to have a partnership with somebody, I want to be a match, you know, and when you have a public company you can't control who gets in there.
I can't control a guy who comes in and thinks we were going to pay big dividends that they're supposed to store or something so I say goodbye to my stocks and my communications and everything I want to attract the public market people that I want and want to keep others left Costco built Saul Price who started the price club that thing sat down and figured out the customer he didn't want and set up a system that would keep out the customer he didn't want didn't need didn't want. I don't want someone buying a quart of milk with someone behind them with a basket of $200 worth of goods expecting that so we put in a membership fee and putting on the membership page killed all the drop in business where it b

elon

gs . the 7-eleven we want Bircher to not leave out people who have expectations of us that are different from ours, I mean, good for them and I hope they find someone, they said, but if you're going to lead a church you want, you want their seats to be filled by people who are generals I want to hear your form of religion and you don't want it to change every week and say geez I need a new group and I'll go out and talk to a group of industrialists and have them come to my church it's sunny because only so many seats in the church there are one million six hundred and forty five thousand or more equivalent shares and those are the seats and I want them to be filled by people who are on the same page as I am there is business I understand and I like the price at which they are selling relative to their future prospects I think 10 years from now they will be worth more money and I feel there is a very high probability I am right and I don't think they These little ones turn out to be the best investments.
You know the whole panoply of things you could do, but I'm pretty sure they won't let me down. You said you're surprised interest rates aren't. due to central bank policy accommodation around the world and how technology area deflation bac tell him the reasons but in the end you know no one was telling me you know if someone told me ten years ago what was going to happen next next ten years we could have been a lot of money deep down we're together you know but but there's always the reason why later tomorrow's paper will say stocks went down today because you know but they didn't they didn't write it in this morning's paper that football i can get down to this you have to know what you don't know you know and you have to make sure that what you don't know is not at all important i mean if there are four boxes in there you want to get to what is knowable and and and and and and what that it's favorable and there are things you'll miss because they b

elon

g in three other boxes, one of which will be favorable, one of which will be favorable and the fact that you're missing ninety percent of the stuff doesn't really h It doesn't make any difference if ten percent right now doesn't change the insurance business I've changed no, it would change our insurance business writing 20-year policies.
I mean, if there was something that would change life mortality adversely to the interests of the living insurance company, you're stuck with a policy for twenty years if you write the life insurance policy and that's you know you're going to pay your premiums if it's adverse to me that's what happened in long term care insurance for example but when you write a free policy one year at a time you see what the developments are and if you know cars for example they are much safer to drive than they used to be there used to be 15 deaths per 100 million miles driven now there is a little over 1 on the other hand they have become much more expensive to repair I mean on that small side just like I'm getting married now, which used to cost 10 bucks.
Now you know, a thousand dollars or something, so you have things that are changing in the ending. hat windshield the bumper all sorts of things are the side view mirror and all that in their own way your aim but if you're writing your responsibility in writing you know people aren't going to die that often there so the weather changes like a climate car has been changing but the truth is you can buy really big cat caps now cheaper than you could in 2005. Is there anything that allows for changes in the dollar and population concentration? So so far the rates have come down. the reason we've largely gotten out of the cat business we were the we were a big writer on the cat business 10 or 12 years ago we're not out of the cat business because of climate change we're out of the cat business because of prices they are not doing well and the world will change and it will have very serious consequences but it will not change so much from one year to the next that they know we have done very well during a period of climate change and I wonder if social media and Facebook and Google and the Russian trolls that they enter is that maybe an example of that, are you still worried about that problem?
Well, I think cyber poses real risks. Humanity forgets about problems, even misinformation. I'm just thinking about you. track and some of them carry ammonia and some of them come back, you know, chlorine and things that we have to transport it, we have no choice about the number required by law to transport it and you know I would rather, I would rather do it in a in the world cybernetic in a cybernetic world, I wish there were all sorts of things. The problem with something like cyber is that it's moving and it's just unpredictable if you're going to get some crazy guy like nailed with anthrax in there you know what they can do it's magnified I mean when you saw what you know 19 guys didn't you know ?
I mean the tools in the hands are potentially in the hands of crazy individuals, crazy groups, or even some crazy governments. s you know they are really something and and and and and we don't necessarily know what are all the tools that I have that move around all the time I mean you know again Einstein said said I don't know with what what what what weapons world war 3 will feel thought but the World War 4 will be fought with sticks and stones you know I mean it's a dangerous world well I think it has room for improvement yeah and he would say the same thing just some people have a talent for interesting. others have a little more of a blocker up there saying in an issue and friends he's a remarkable guy but I don't see I just don't see the need to reach out you know I never have I think I have.
Seven tweets because a friend of mine signed me up and called me a hundred times. Tell me, can I tweet this or that? and I said yes, two or seven times I guess, or something like that. I never actually wrote one. I don't even know how to do it I joined The Giving Pledge so once or twice but that was many years ago seven or eight years ago no I mean he hasn't come to our annual meeting so no I've seen it in seven or eight years, we're here with Warren Buffett of Berkshire Hathaway. And perfect yang, great accent, by the way, we'll do the rest of this in Chinese if you prefer, so let's talk this through with China and I guess I'd like to ask if you think Donald Trump was right to draw attention to himself.
Chinese government and basically put them on notice. I will not have any comment on that in terms of political activity. Say about any president you know who, to some degree, hails from Berkshire and they and they don't hail from Berkshire. I'm just an individual, so I, you know. I'm not talking about that part, well, I think China and the United States are absolute. Ultimately they are meant to be the superpowers that you know beyond the lifetime of my great grandchildren and we will always be competitors and we will be competitors and in business working with creditors and ideas in all kinds of ways and there is no other way to make it be and we just have to make sure that that competition still doesn't get us to a point where we don't realize that the best world is one where both the United States and China prosper, I mean we don't want to have an island of prosperity elsewhere of the world envious of us in a nuclear age and

china

not russia i don't want to say we all recognize the dangers of flooding competition gets out of hand and becomes you can you can be competitors without being enemies and that's what all the Powerful nations have to realize over time, I mean it's different than 200 years ago when you could have a dominant country and then they may have done some things that you didn't like.
They liked it but they didn't. threaten existence o If the world really does threaten the existing world as we know it, if major countries don't constantly recognize that they can compete, they can fight over certain things, but they can't essentially regard this as the equivalent of war. The New York University professor and he says: but do you think the US and China will be able to resolve their differences or our conflicts inevitably? Well I don't think conflicts are inevitable but I think it has to be active thinking on the part of every hugely powerful country and Russia is hugely powerful I mean 90% of the nuclear weapons in the world between the US and Russia, so they have to recognize that the best world for them is one where they basically don't try to grab all the apples and we have to recognize that and we can't in the United States, we can't think that our ideas rule the world or we start to get aggressive with things and China can't think that Russia can't think that and that's obvious, you just have to do things you have to make sure that things don't escalate and we have World War I with an archduke, you know, I mean you understand these can have random incidents and you really want I asked one of the presidents once you know in terms of what I would do is wake up in the middle of the night with someone coming or to him and saying absolutely and I'm something they pitched as well could you pitch in on that and you've got ten minutes on the side and I wouldn't like to have that responsibility but you want to make sure you don't get to that point and if not aren't you missing out a large part of the answer? aware of some things, some things that concern you, accounting can be opaque, well, I'd like to be sure I understand accounting, obviously, so some businesses are easier to do than others, but I know the laws, the customs better , accounting, people. in the US and elsewhere so there's some little I rush in a lot of countries to get over what I can get over I mean but I just don't it's not as easy as looking at something where I already know the answer you know of previous transactions or something like that regular it's easier to do a big acquisition in the United States I have to do more work if I look across the borders but I love the idea of ​​doing it when we did this acquisition Israel a dozen years ago you know that I didn't know what the tax rates were there I didn't know I didn't know what corporate law you know it was I Suspected everything would be answered satisfactorily which it was but I didn't automatically know I don't think so I know no I'm open yes we let you know that we did two decent sized stock acquisitions there and it worked out well, PetroChina and BYD, yes, byd was Charlie's, but Charlie is very well versed in China trading, US trading.
U.S. a lot of it has to do with our trade with China is something you're concerned about well I wrote an article about that for fortune and the trade situation many years ago and when our deficit got large relative to GDP we didn't I think it's, I don't think it's essential level trade balance, but I think a trade deficit gets big and it looks like you have no way out that that can be a real problem over time I mean you know you're shipping little pieces of paper to the rest of the world and they send you products I mean people are working making underwear shoes somewhere and they get little bits of paper from us and it becomes very tempting if you've done that enough to make sure those small pieces of paper are not worth much. overtime when they want to charge for something and you don't want to have we don't have a problem with trade deficits but if we ran really big and got into a box where they were we didn't really have a solution to get the numbers down it could be a problem and I wrote about it once, but it's a good thing really just I mean, wouldn't you like tohave lower goals?
I think about six point five percent six percent. Are you concerned about this slowdown in growth in global markets? Well, I don't worry in terms of global markets. I mean China is going to grow a lot over time I mean when you think about what happened it was in 1949 or you know but there hasn't really been anything like it I mean it had 20 percent of the world's population at that time , maybe you know it really hadn't even remotely reached its potential I mean the brainpower had decent ground all sorts of things I mean and and what happened there is almost unbelievable and that game isn't over but we've had amazing developments in the States United I mean you know real GDP per capita is six times what it was the day I was born in the United States six times and we thought we were a nice country and everything, no my parents wouldn't have believed it, I mean they would have thought that you know this kid really has it. made it true I mean we had this tailwind and China has had a hurricane mine you know and in the last few decades in a good way absolutely yes at their back and they have found a way of life that is dramatically different from what exists for the billion there was a billion so maybe maybe a billion two or three whatever now and they've really changed a country in sizes I don't think it was something like that we have done it too but it took a little longer I want say, or it lasted, but it was a remarkable period, but you know, when you go, I went there for the first time in 1995 and then they considered it a miracle and I came back, it was a completely different country beyond that well I have already said many times that if you get to be 65 or 70 and over and the people you want to have really love you love you you are a success i have never seen anyone reach that age i mean i am not talking about someone who is a extreme poverty or painters .
I'm never going to see anyone who has a lot of people who love them not be happy and I've seen some very wealthy people give testimonial dinners doing named schools. Lord and all there is. no one no one loves him you know his own kids would say he's in the attic he's in the attic okay yo by far the best investment you can make is in yourself. I mean, for example, communication skills. I tell the students that come in that they're going to graduate school and business and they're learning all these complicated formulas, all of that if they just learn to communicate better and both in writing and in person increase their value by at least 50% no I want say if you can't communicate with someone, it says You know that I It's like winking at a girl, the dark is okay, basically you know you have to be able to get both ideas and that's relatively easy.
I did it myself with a Dale Carnegie of course some people wish I would take it with shorter course not speaking later but it's very important and you if you invest in yourself no one can take it away I mean you and the second thing that I will receive some criticism for not living it, but I do. Tell those students that you know that if I give you a car and it will be the only car that you will give them the rest of your life, he will take care of it like you can't believe and he scratches himself, you would fix that moment. you read the owner's manual you keep it in the garage with all this stuff and you get exactly one mind of a body in this world and you can't start taking care of it when you're 50 by that time you rust it a bit find out if you haven't done anything to let me know that you really have to make sure to remember that and you just had a mind and body to spend your life with towards wellness, life advises you to know that the most important thing, aside from the things that I've already talked about , it's really who you associate with you want to associate with people who are better than I mean basically you're going to go in the direction of the people you associate with and you want the right heroes you want people if you want to emulate someone you better choose by far be careful who you want to emulate and when you obviously don't get to choose your parents they will have a huge influence on you but you don't get to choose that but you have choices as you go down the line and you who to look up to as who you want to copy and the most important thing for most people in terms of that decision is your spouse is also important in terms of a partner in business but the partner in life is the most important thing you want to choose a spouse who is little who is better than you and then he or she a and you hope they don't find out too quickly well they try but they just don't realize all you have to do is shop in the stern United United and never listen to people like me or read the newspapers. or do anything subsequently they think they think because you can trade you should trade they could buy a farm buy an apartment building you can't resell it tomorrow and I don't know the cost of moving or now you get something given to the quiddity of allah which you know is instant and sell and the cost to do it or the pennies you know compared to other types of investing activities so because they can move so easily they move and move is not smarter than investing What is that?
Well, that way and I actually sent someone now to get me something, since I sent the publicity I received earlier describing my habits at McDonald's. Now, someone happened. someone went to the office, but that was it. it was a plus for entertainment value me i actually eat exactly what i like to eat yes i liked it on my 6th birthday and my 6th birthday party when we had hot dogs and hamburgers and coke and fudge sundae i still like it and no no I worry about nothing after I found out everything when I was six and if someone offered me a deal when I was twenty I said you're going to live another year and instead of living to 88 you live 89 or whatever. if nothing but broccoli and brussels sprouts and onions and all this stuff and i didn't take last year off it's probably not that good anyway you know tame i eat what i like ain't adventurous in that area ?
I just don't have onions I don't put them in the same category it depends on the person and much more than it depends on the school I mean I wouldn't worry that some people are going to get a lot out of advanced education and other people are going to get very little and I don't even think it's important. It's not like everyone goes to

college

, I mean, we have all kinds of jobs at 70 or more thousand a year, eighty thousand a year,

college

education is not abusive and actually, I wasn't interested in going to college, yes, my father. kind of a jolly guy if he can make me do anything but what if they had a SAT in those days he would have taken the test for me but because i was just i knew i could have a good time and i liked investing and not really I felt like I could read the books so I don't know it's a big commitment to take four years and the cost involved then maybe the loans involved that's all and I think depending on what your interests are aligned I don't think I don't think it's for everyone I think it's for a lot of people but there must be a reason why you go and I really didn't see many reasons why some drink only water under russian which is you it's definitely my way well I like the bridge over the river kwai because E of the lot there were a lot of lessons in that nice was a huge lee fascinating yeah yeah barry but the end of that was kind of a life story you know he created the railroad the enemy to cross it i know it well the favorite book of the best book that had the biggest impact on my life was the smart investor my bedroom will probably be nebraskan some huge bowl gave it the win well i probably carry maybe $400 oh yeah actually my what to my wife she likes to use cash so i just take home a little cash once in a while she doles it out she looks at my wallet and sees if all the hundreds are gone its pretty simple i have an american express card i keep in 1964 but I pay cash 98% of the time if I'm interested I always pay cash it's easier hello investors I'm Zac Guzman thank you very much for visiting Yahoo Finance YouTube don't forget to click here to subscribe and don't forget to watch our live market coverage all 9:00 am to 5:00 pm ET right here on the Yahoo Finance YouTube channel

If you have any copyright issue, please Contact