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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 haul here, for a long time, but does that surprise you and what would be the signs that you would look for to see the things that we have? They're declining, well, I look at a lot of numbers just in connection with our businesses. I like getting numbers, not like that, so I get weekly reports in 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 tells me what's happening now with our businesses and it doesn't really make any difference in what I do today in terms of buying stocks, buying businesses, what those numbers tell me are interesting. but they are not, they are not a guide for me, if we buy businesses, we will be old forever, so we will have good, your bad years between years, it can be a disastrous year, something here and we worry a lot about price, we don't care the next 12 months.
warren buffett shares his opinion on china costco elon musk college and more
I've been surprised by all kinds of things in the last ten years about the economy. I mean, I don't think I've read any economists who talked about negative interest rates. over long periods of time, I mean, if you go back and read Keynes or read Samuelson, read anything, they don't get into a negative rate environment. I think there is still 11 trillion of public debt around the world now. negative rate, so we've never seen it before and we've never seen at least the conventional wisdom Otto, this is the same period of prolonged and growing deficits while the economy is improving, extremely low interest rates and really very little inflation, so something different is happening.
warren buffett shares his opinion on china costco elon musk college and more

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

But something different happens all the time, and that's one of the reasons economic predictions just don't factor into our decisions. Charlie Munger, my partner, you know, we've never made a decision based on a prediction in 54 years. economic, women make business predictions. about individual companies will do overtime and we compare it to what we have to pay, but we have never said yes to anything because we thought the economy was going to do well in the next year or two years and we have never said no to anything because we were in the middle of panic, even if the price was right, well, I don't pay anything in the sense that it's a guide to doing anything, it's entertainment, I mean, you know, it's like going to a variety show or something like that, but and I just don't know any economist that's actually what makes businesses so successful or stocks do well.
warren buffett shares his opinion on china costco elon musk college and more
Paul Samuelson, of course, I know he was a big shareholder, but you know they make assumptions and even though there are so many variables, I mean. In the hard sciences you know that if an apple falls from a tree it is not going to change over the centuries due to anything or political development or 400 other variables that go into it, but when you get into economics there are so many variables and the truth is that 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 like that, you don't try to time the purchase, you try to make the right purchase at the right price and you want to be sure that you have a good business, but you won't settle because growth this year will be 3% instead of 2.8 percent. or something that Sword Berkshire does, it depends on a personal situation, if you are working on something where you live off your salary week to week, do you want to have a little cash or for how long, and you certainly don't.
warren buffett shares his opinion on china costco elon musk college and more
I want to have a maxed out credit card or something, but if you know if your house is paid off, if you don't have big living expenses, if you have a portfolio of decent diversified businesses, we need cash, yeah, yeah. we have liabilities, you know, we have insurance claims, we could have hurricanes that, you know, happen, all kinds of things, we could have to pay billions of dollars and I have over a million people who own stocks that are coming. place to go through periods like that, but if I was retired I would have stocks in a million dollar portfolio that would pay me 30 grand a year in dividends or something and my kids were growing up, the house was paid for with everything you know.
I wouldn't worry too much about having a lot of cash space. You have a state of forty-five billion dollars. How closely do you follow the company? You know people are worried that they haven't really introduced any new products well if you have to keep an eye on them. our company you shouldn't own it, yeah, no, I made it. I mean, if you buy a business, you bought a farm, you know, you go and look, you know, every two weeks to see where the corn is and you know. You worry too much about someone saying this is going to be a year of low prices because exports are being affected or something.
You know, you buy a farm and you save it because I have a farm that I bought in the 1980s and my my son runs it, but I was there once, you know, I'm serious, it doesn't grow any faster if I go and look at it, you know , I can't encourage it, you know, and I know there will be some years when the prices will be good and some when the prices will not be good. I know those years when the yields will be better than others, but about the farm and if it is, 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 rotating crops and I hope that the yields improve, which they generally have, in fact, that farm a hundred years ago, what about the lumber that produced 30 bushels, such maybe 35 bushels of corn per acre now? a good year, you know, it would be 200. I mean, we've really made progress in this country, that's one of the reasons why commodity prices and, for a couple hundred years now, they've moved so little It's because we've gotten better and better. it's cotton or corn or something like that, beans are all kinds of things and you and I benefit from that, it's a long term investment and if you own the best car dealership in town, the best brand and you go something good working wouldn't come in every day and say: do you know how many people have come today or do you know I think interest rates are going up a little bit, maybe that will slow down our sales or do they know that you buy it knowing that there are 365 days a year and you will own it for 20 years, so it's seventy-three hundred days and you know things will be different day to day and, darling, you shouldn't buy it that day.
On the day-to-day important stuff, you can see that between December 13th and December 24th it appears that you guys bought about two hundred and thirty-three million dollars worth of Berkshire, which was right near that particular stock market bottom, How did you know something like this is happening? Remember, if you only knew, it's not really a big purchase for us and now, at Berkshire, we won't have much excess cash. All business needs are covered. Last year we spent fourteen billion dollars on real estate plant equipment. much

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than depreciation, so we take care of the needs of the business, then we have excess cash and if we find investments, what we need to do is find other companies to buy them, but if our stocks, I think the stocks and my partner at Charlie Munger I think stocks are selling below intrinsic market value, we'll buy stocks, well we think so, yeah, but you know, what's really intriguing is that this is when it goes down a lot, meaning when you're buying our bills for 60 or 70. cents that you periodically have the opportunity to make in stocks, so you know you know, assuming you have the cash that you never want, you know, so some surprise could really get you out somehow, but if we have excess cash we will buy as fast as we can yes, 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 the part, 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 doing insider trading. trading shows up at rebuy times so our rebuys are kind of a problem, well there will be some people who misbehave and respect whatever activity you do so they really wouldn't have much to do with rebuys I think than buybacks in grade. which have been part of a nefarious activity and I have observed them for many years and they are very close to zero, but that made me the throne of opportunity, but not Mical.
I didn't follow the conclusion on that. it means you're distributing money to shareholders, you can essentially buy dividends and presumably American companies distribute money to their owners occasionally and we do it, we do it through buybacks or we've done some and we don't do it through dividends, but most companies do it through a dividend policy and if they have one, it will depend on the needs of the business and I think that if their

shares

are undervalued, that only makes sense, well, they restrict you a little bit in terms of whether you're a general rule of the SEC if you 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 direct their capital investments. They can make it attractive to make certain types of capital 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, there should be a special oil depletion subsidy, you know, fifty years ago, that was

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politics than government policy, but certainly renewables are a great example of that, but the idea of ​​deciding to direct whether you have the right to return cash to shareholders and the way you do it I don't think makes much sense in 2020, it's hard to win just by voting of a billionaire, but I admire my normality, I wish you had applied.
I want to be very clear with the questions: Is the business executive the right type of person to be president and what characteristics is he looking for? Well, I think that a business executive may be the right person, but no, I don't think so because it is a business executive that gives them extra points and number one I want a president who wakes up every morning and realizes that the greatest threat to a country that has all kinds of things going for it, weapons of mass destruction and that We live in a world where organizations of people and occasionally countries can have people who they would like to eliminate a large percentage of the American people or maybe other countries as well, and now they have capabilities that I always thought recently that I could classify as a nuclear, chemical and biological, but I think you have to add the cyber, now you know that you have an evil genius somewhere that has crazy reasons like what happened with anthrax, 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 launching or something, you know, it's a very, very dangerous world, it's a wonderful world, but it has dangers now that they started in August 1945 and on January 9th Stein said this changes everything in the world except how men think and that's why I want a president who has the same filter that all these other things are important but they protect the country. and reducing the chances of successful use of weapons of mass destruction against us is job number one and I think most of the presidents that I've talked to over the years and I really think they realize that it can be lost in the events of each day as they move and then beyond that, I want a president who has two goals with the economy, one is to make sure that there are wonderful mistakes that we continue to lay more golden eggs and then I want a president that He also feels that if the GDP is $60,000 per capita in the United States no one should be left behind, we have a market system that obviously works to produce more goods and better services year after year.
I have done it throughout my life. No, you also have, like they said, we have a system where people who don't fit into the market system in terms of their talents might have been perfectly good at landing on the beaches of Normandy and all that kind of stuff, but they don't. They have, 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 eight hours a day and I could read gracefully. I'm no good, I just got together to fumble or whatever happens, so we have to take care of the people that the market system doesn't take care of while throwing enormous wealth at the people who do fit in well and and that can be done, would you ever talk to him?
Well, don't tell me what I want to hear. I want to hear what they say to thepeople who disagree with him on the issue. I always like to ask a candidate, they usually trick me somewhere, no, but. I mean, in favor of the majority of your followers being against it? I know you really believe in that and that's reading the proof, but I'm not sure about that, except under some kind of sodium pentathol or something, if I really want to get it. And that's why Bernie Sanders was so successful. I did it. 90% of the people who voted for Bernie Sanders 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 it, most people might be against it, he would tell you, you know, I prefer to learn from other people's mistakes, actually it was a mistake, but we will find out in time, but, in my

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

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we paid too much for craftsmanship and there's not much you can do about it 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, you know, I mean everything for all kinds of crazy concessions, you know, and I want to be in Walmart if I have some kind of super-packaged product, the negotiation is very different if you have something essential or non-essential Ten years ago Costco tried to get rid of Coca-Cola Costco got tremendous customer loyalty and you know, and its own Kirkland brand is a thirty-nine billion dollar brand now and it went from category to category and they only started in 1992, so they know the brands and in the end they put coca. -cola again if it has been royal crown Cola put it back, so there is always that fight between the brands, I mean, and there always will be, but the retailer's network has been moving in its direction, particularly I think because to the revolution of Amazon Walmart Walmart Yes, I mean, but it has become more pronounced.
I think we have a new retail environment now. I mean, it's like it's nighttime today, but it moves someone and the brands, the people who spend billions of dollars developing and sponsoring television shows or radio shows. in the old Campbell's Soup it was always there with Jack Benny or something, you know, when I was a kid and a begum and it built brands and people obviously like the product too, but people are more willing to change and it's even harder , it is a little different world than the one that is day and night. I mean, it was highly unlikely that you would keep changing brands every day, but I was really surprised that Gillette lost position.
I mean, men don't like men, they don't like to experiment a lot, I was women. It's better to experiment, but you know, if a kid, when you were a kid, in the Gillette sports cavalcade was your friend and brought you the Rose Bowl and the World Series and all that kind of stuff, and you didn't shave, would you let him? the rest? of your life and you still do it to a large extent, but it's not exactly the same as five years ago, a list of the richest people in America came out. He is the number one.
I think your friend Bill Gates is number two. We're number three so you can see what he's done in countless ways now and of course the question is how do you have a body? Is there still time to buy what you still buy? Oh, I always admired Jeff, I mean, I met him 20 years ago or so I thought he was something special, but I didn't realize that he could go from the books to what happened there. No, I mean, he had a vision and he executed something incredibly well, but there are a lot of games that I miss.
He would do it. I've missed, you know, I would have missed Microsoft even if I had met Bill before or something, those just aren't my games. I don't worry about things I miss that are outside my circle of evaluation competence. I have missed things that are within my circle and that is a terrible mistake, those are my biggest mistakes, you have not seen them and but no, it is not a mistake because I miss Netscape or something like that, there I would say maybe. The 5% of companies or 10% of companies that are most within an area of ​​my circle of trust, something I should be able to understand.
I want to go back to that trend you were talking about, how do you recognize when there is a giant trend? It's over and you know you're right, obviously over time things don't change much, but sometimes they do like that newspapers were a business that you admired for so long, it's not a good business, newspapers weren't going if you're the one. only. one in the city, in other words, some competitive situations, but it was survival of the fattest, whichever newspaper was the fattest because it had the most ads and announcements or news for the people, I mean, they want to know what's having the super brand. the bargain on Coke or Pepsi this weekend and so on, I mean, if people in the newsroom mind talking that way, but the ads were the most important editorial content from the reader's point of view in general on any big day, I mean, if you were looking for a job you had one place but basically to search and that was the classifieds section if you were looking for an apartment to rent and on those those those pages were just dozens and dozens of pages that disappeared , I mean the essential things that are essentially news, it's what you don't know, what you want to know and you know what happened in national sports, you know the moment when it happens and you can go watch the video, etc., you can go to channel F ESPN and watch. what's going on you know what's going on in politics you know what's going on in the stock market I used to look at the stock market pages the next morning you don't want to do it before you deliver the papers I looked through them the world has changed enormously and did it, it gradually went from monopoly to franchise, the competitive ones, to toast, you know they are disappearing, they are going to disappear, in the new times, won't the Washington Post, the Wall Street Journal, be a wall, okay a little And corporate debt?
People are worried about people are worried about the $22 trillion that we should cut, let's just say the federal data and how we would do well if we have a deficit close to 5% when things are really good. You know it's a new situation. In the world it's me and no one, not even the Republicans, are Democrats. You're particularly worried about that and we're not having a lot of inflation that wasn't supposed to happen, but it's happening, which is why I say you don't really know. I don't want to get obsessed with trying to do economic analysis because no one is any good, no one gets down, you don't get rich doing that if you look at the inventions that are on the Forbes list, if you get on the list, the number of people who have done it.
For economical reasons. analysis I think you're missing the point, well, it goes in the other direction, but I think I think 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 they are perfectly decent citizens and they contributed greatly to the success of someone like me I have eaten the hamburger or something like that possible, it would have happened without the United States that we have and if you go back, you go back 200 years and We are all working, the 80 % of us work on farms, the person who is the best at working on that farm, whatever it is, is worth maybe twice as much as the ones who are the worst, you know, I mean, that's the difference between super talent and no talent. the agricultural economy picking cotton or whatever now, if you're the best middleweight fighter in the world, you know you can make twenty or thirty million dollars, and if you're just a good citizen, raise good kids, help the neighborhood and everything. .
Otherwise, but you have no market-related skills, you would be good at that farm stone and earn something comparable, but most of the people around you, but you don't have something now, as it becomes more and more specialized and it will continue to become more specialized you want two things for that person you want them to have a decent life I mean they live in a country with 60,000 GDP per person you want them to have a decent life and I hope they can, I also think you want them to have a feeling of achievement, so you wanted to have a job, assuming they're not disabled in some way, 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.
I am using your pocketbook, but that has many effects in disturbing the market system. They just need more cash. They don't need a higher salary. They need more cash in their pocket. and the government, at a relatively low cost, can provide a decent living for anyone, but it's about living by working forty hours a week and having a couple of kids, and we've gone in that direction and it's kind of bipartisan. I mean, yes, I find that they are both Republicans. and to the Democrats because I think it would be better not to have an annual payment, you know, it's strange that they receive it monthly and I think there are several things you could do, but you want it, you want them to feel part of the system and you want to get them, make them get as there's more and more of these golden eggs or late, you want them to get a little bit more of their share, you want, you want more money in everyone's pockets and everyone's willing to work or they can't work and and we can do it, a rich family would do that.
You know, I had six or seven children and I had a business that I wanted to pass on. You know, you would choose the most capable person to run it because that's the market system to do it. but you make sure that in the seven family members who participated you can get more than abundant, you could get more for the one who kept producing the golden eggs, but you wouldn't just tell the other one who is at the lowest level. In the end, who could be the best kid of all and in most ways you know that he is the one who

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with everyone, you wouldn't say you know that very badly, but that's where the market system works, you know, go boy , you make your spouse get a job and a home somewhere no, no, I didn't worry about a name that we could have followed, there is no name operation for ten years, I mean, we have a wonderful partnership in the sense that it is long, it is big. and they have a reasonable market force with them, over a million employees, one of the three of us, we have three CEOs who can get things done in organizations that are so large that normally they would become very bureaucratic, you know, I mean if you try to do this with a lot of big companies, you have it on the legal scale and you know, and in public relations, you know we don't have any of that, they may have it in certain areas, but I don't, but Jamie Yeah.
I'm not worried about doing that kind of thing and then neither is Jeff, so we have a drive of commitment and an ability to execute the commitment. The only problem is that you have a three point four trillion dollar industry that is so As much as the federal government raises every year that it basically feels pretty good about the system, while 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 very good. medicine, but you can't go from five percent of GDP to eighteen, you know, without making it really 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 is very human.
I do the same. I am sure that if I were in the same place, there would be enormous resistance to change, while similar recognition of change will be needed and of course if the private sector does not provide it over a period of time. You know people will tell them, you know we gave up, we have to turn them around, they went broke, which would be even worse. Todd Todd really does all the art work, but if this works, you have credit to the Berkshires dad who talked to him. Once or twice I'll tell you an interesting story about him and I think it was in 2010.
You know, I have a partner, Charlie Munger, who is now 95 years old, but we both read The New Yorker but we don't talk about it. and one day I was talking to Charlie and I told him I read this fantastic article, I thought I'd never heard of it before, I probably don't know how to pronounce his name, that's what I said, ah oh, it says I sent him a check. for $20,000, that article is the best article I've read in a long time, so I thought, you know, I get paid that much to be a writer. Actually, he just said I won't get a check, so two guys 1,500 miles apart considered him one of the most We read interesting informative articles and similarly followed them subsequently, but it wasn't my good, it's true that if you read three or four thousand words from someone on an important topic and they really give you some ideas or some factual background or something that you haven't seen in years and years of reading about it.
I mean, they should make an impression. I mean, other people have given an impression of how important your writing time is. No, no, I don't plan the plan. is to supportto a very, very good thinker on this topic, who was once a practicing doctor and who commands the respect of the medical community to actually find some way that we can provide even better care and make people feel better. feel better about her. I also want to say that they have to perceive that the third party receives better care over time and stop the increase in costs in relation to the production of the country, but if you take 18 cents of every dollar that you know of the production in the United States and You say that dedicating yourself to health costs 82 cents and other countries do it for 10 or 11 cents, when if we go back to 1970 all of us did it for around 5 cents, so we start from a fairly similar point compared to the major industrial countries and it just keeps going up and last year a corporate tax cut was introduced for something that was about 2% of GDP and people said we can't be competitive, we have this 2% cost, you know, versus the rest of the world and there is something that basically corporations pay a lot and that is that it reaches 18 and I say that it is a tapeworm of the US economy with that In such a wonderful economy, we can do some very expensive things, I mean, but that doesn't mean that if you have a rich family you still want to be as efficient as possible at things in general, that's not the way all rich families feel, but and that makes sense, we all know we have this incredible 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, everyone.
I think the best in medicine is very concentrated in this country and that's great. I want us to be leaders, but I don't think we are paying a price if we pay 7 extra points of GDP. 1.4 billion a year, I mean, they're trying and Congress in general, I mean, they took the average congressman who read and consider a problem and looked at specific cases, you know, about drug prices or something like that, but it's a The big problem is change, I mean the problem is that it intersects in many ways and that's why we have Kewanee at the helm and we have three good sized organizations behind it, we're not trying to do it for money , I mean there's no goal that we end up with some business that we can make money with, we'll be talking to everyone, but your game plan is not something we're trying to design because it's in your head to some extent, I mean Obviously we select him by listening and reading etc. what he has done, but he will learn if we always work well, we will perform certain experiments or he will know and try a community where one of us has many employees maybe and there are various ways to experiment, learn some things from you, yes, but I want to ask you if you talked about the value disparity between holdings and companies and wholesale acquisitions, so you are looking to maybe buy positions and shares instead of buying entire companies because of the spread of prices, why does that exist?
What can it explain? Well, generally speaking, when companies are sold, they are sold at premiums, now they are not premiums because the buyer thinks they can do all kinds of wonderful things with it that the president's administration is not doing. I've often said that in the Fortune 500, maybe 250 companies should buy the other 250 and they just totally change every year because everyone thinks they can run. It's better than the next one, which is what you say when you buy it in its entirety. I don't think we ran the show when we bought it, so it's hard for me to come up with a premium and the premiums have gone up.
It's more dramatic and the leverage available has become quite generous and that makes people buy, people love to buy but basically they can't afford it and some of them also put up the money and we don't calculate the leverage. in any of our purchases, in other words, we don't say that if we buy this for 10 billion we can borrow 7 billion because we are actually using a Berkshires general credit. I mean, I could apply 70% leverage to any of our purchases. our companies make it look better, but the truth is, it's Berkshire's overall credit that's doing that, so it would be crazy to say, just because I want to buy something, well, I'm buying this with 70 percent leverage. cent, so I can pay this guy. stupid price but when when when the CEO well, you have a huge wad of money that is committed to buying something, they pay them a tick-tic-tic fee every day to buy it now they pay them whether they buy it or not, things don't They are to a certain extent, which is an interesting business approach, but they do it, but let's also say there's a trillion dollars out there and to do that I don't know the figure, but beyond that they're probably 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 got like three trillion of maybe purchasing power using these assumptions that I know aren't correct, but they're in the overall, well, three trillion, There are only 30 billion American companies or so and you know you can take Amazon, Apple and Berkshire and they are not for sales so you have trillions that are not so the demand supply is really skewed and it works one hundred percent against us because you know whenever you have someone who gets paid for perks and locks up the money for ten years, you know, they have every incentive to keep doing that for twenty twenty years.
A while 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 that they offered us and a big one and he said tell me what I owe I'll be looking and I went through a little bit of that. I said, but you're not going to learn much about the reinsurance business from a phone call with me and you know that, yeah, 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 pay it back, you know, and that's his equation, you know, and he's getting and once he buys that company, he has a feed incorporated for five years or whatever and has some of the perks you'd like, but if it doesn't work out, you still make a lot, you're very, very rich by anyone's standards, so it's hard to compete with that, but probably 50 Years ago I looked at some bargains on causality, but I mean, I read a lot and you know what happened yesterday, but you remember the old business, you have a lot of interesting quotes in your head.
I was looking at the New York Times. stock guy, I think it was three dollars in 2009, today it's 30 dollars and I realize that I think very well that it has been reported and it was in this book that the former editor just published, there are just some small references, yeah, the Hills book and and it was just mentioned there, but they were in trouble, a lot of companies were in trouble and now they've really hit on something online, I mean, they were late to the online game compared to the magazine, but but they. They are really moving and I know it and they should.
I mean, they have the natural franchise for that and their economic models worked and I shouldn't go into more detail about the story. It was playing something but yeah, it was playing enough. I'll put it that way. I mean, I ran out of money before it stopped ringing. Yes. I came too soon. In fact, if you look back, I was very active in the last half of September and the beginning. October and then I wrote that article at the end of October and I knew things were going to get bad. I wrote the articles that were going to go bad, 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 use of our gunpowder long before we hit bottom.
Interesting, how have you avoided not getting back in properly? Actually, I think Larry really did a good job. I mean, that was just done the other day, I did a Danaher, yeah, full Larry, but for Danaher he's a good sell and I think his priorities are clear and I think I just read the interview 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 path and I'm a I'm a fan of g e--'s in the sense that we're a great buyer for him, we're a great seller for him knowing the managers, you know, I mean, Jack Welch is a very good friend of mine.
We don't agree on politics, I never said that, but we have a lot of fun together. I love the guy, so I really want GE to do well. No? He just didn't seem that attractive to me. I talked about the growth of the trees in the letter, shareholder, one was the third forest, which was a kind of middle game, yes, the capital interests, yes, we are not, it is the case that those are not the trees healthier. No, no, the flight pilot case where you know they were there. These are companies that, under GAAP accounting, we have to record under an equity method.
We own more than 20%, but we don't control them, so it says they are treated according to GAAP. accounting is a special category and it didn't fit well when the other one was growing so I had to make it grow separately, it's not that significant growth, well it depends on the circumstances, I mean there are sometimes. when the insurance slope can be very valuable, sometimes when the ability to use production tax credits is said in the utility business, but having them on our consolidated return helps, but that varies a lot, but it is an advantage and we can moving capital, well, let's take a business like See's Candy, which we bought about 40 years ago, it's a wonderful little business, it wastes capital, we've tried 50 different ways to expand geographically, we do all kinds of things, it doesn't work and we'll try. do it 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 smooth and tax efficient way, moving capital words are needed and we have some companies that really consume capital and we have others that start it and we can move it in a single pie if you try to do that with your investments, you incur some taxes as you go and it is less efficient than What have we been doing with tax cuts and benefits for Berkshire, you didn't really go into the costs of the tax cut, which surprised me a little, what are the other costs?
I mean, it's just free money, well, it makes a difference. The tax cuts that we get, for example, for our utilities, as I mentioned in the report that goes to customers, that's just the nature of utility regulation, but we were actually a significant beneficiary of the tax, I mean basically let's say we had a class of shares I have two but shares you and I own a business together and we think we own all the shares but the truth is before the tax cut the government had a participation of 35% of the shares on the income. No, I did not have a share of the assets. but I had to share the income and if I wanted to change it to 40 I could have changed it but fortunately I 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 party shareholder that invisible shareholder the government just gave us back a bunch of shares and with our shareholders benefiting many others have made a difference since they became vice president and Charlie didn't, no, no, no.
They have the interaction, they each run a separate business inside and she doesn't think about the other businesses, he thinks about the insurance business and Gregg doesn't think about the insurance business at all and I think about money and capital, etc. ., but they run two very large businesses, I mean a Jeets business, you know, they've been told at least a couple hundred billion in assets, you know, and Greg's business has a hundred and fifty billion from income. I mean, they would both fit in there. towards the top ten that you know in the country in terms of value, so maybe top 15, but they are very big businesses, oh no, no, no.
Charlie and I have a partnership thinking all over the place and we've done it forever, you know, and we're still doing well. They have thirteen billion dollars each, including the pension funds that they manage and we saw one hundred and seventy-three billion that we had at the end of the year in stocks. Well, we got along fine in '73. Buffy had another eight billion in pension funds from over a hundred and eighty years. They had 26 between them. Thera's manager. They had complete discretion about 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 do much trading or anything, but I look to see what changes they made and Todd, for example, I mean he made a couple of small investments in private placement type transactions and I know what companies do, but I can't tell you their names, you know, honey, no, that wasn't something they did, it was something I did, yeah, well, that's a good question that I don't have a good answer for.
I know. Feel. about I know enoughabout the club to know I don't know enough about cloud, so Barclays put out a note saying they were lowering Berkshire's estimates for EPS, did you read that? No, I mean, I can read it. actually, definitely, but I don't see it to read it, put it that way, but it doesn't make any difference. I mean, if I spent time reading that, I wouldn't have time to read ten cases and us. We're not going to do anything different. I don't know what we're going to learn as I put it in the annual report and I really think this is unique.
I mean, we don't prepare financial statements monthly at Berkshire and there's no other company that would. but there is no point in doing it. I know where the money is. I know what I know about 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 by having to sell insurance or do anything even worse, so, and Charlie, I mean, he knows where we stand and we know what businesses are doing well, where his art is and We certainly know where the money is.
Another UBS survey of Berkshire investors says that the five Most important to them is investment performance in succession. M&A opportunities share buyback insurance margins, did you read? That's quite a lot, no, but I don't disagree. I mean, I'm glad someone understands us, yeah, well, that's important, you know, 54, to go back to when I started my partnership in 1956, when Berkshire came along. From there there were seven people sitting at a table having dinner mainly with relatives and I said here is the partnership agreement that is made according to Nebraska law, which is four or five pages long, you don't need to read it, but I said here is a small half page of What I call the ground rules and I want you to read them and if you feel good about that interaction, what the expectations are and all that kind of stuff, then we will join forces and if you don't, it's okay to have other people with you.
I know, but no, we shouldn't be partners. I mean, you know if I'm going to have a partnership with someone that I want to be compatible with, you know, and when you have a public company you can't control who comes in. I can't control a guy coming in and thinking we were going to pay big dividends that they're supposed to store or something, so goodbye to stocks and my communications and everything I want to attract the public market people I want and I want to keep others away. Costco was built. Saul Price, who started the Price Club, sat down and figured out the customer he didn't want and set up a system that would keep the customer he didn't want out. wanted who didn't need to want, didn't want someone buying a liter of milk with someone behind with a basket of $200 worth of products waiting for that, so we put up a membership fee and by putting up the membership page it killed all the leave the business the business to b

elon

g to 7-eleven we want Bircher to not exclude people who have different expectations of us than we do, I mean, good for them and I hope they find someone, they said, but if you're going to run a church , you want your seats to be filled by people who generally want to hear your form of religion and you don't want it to change every week and say, wow, I need a new group and I'll do it.
Go out and talk to a group of businessmen and have them come to my church on this sunny day because there are a limited number of seats in the church, there are one million six hundred and forty-five thousand or so equivalent shares and those are the seats and I want them. occupied by people who are on the same page. There are businesses that I understand and like the price at which they are sold relative to their future prospects. I think in 10 years they will be worth more money and I think there is a very high probability that I am right and I don't think they will be small and turn out to be the best investments.
You already know the whole panoply of things you could do, but I'm pretty sure they won. You don't disappoint me, you said that you are surprised that interest rates are not due to the accommodative policies of central banks around the world and how the technology of the deflation area supports it, but in the end you know that no one told me that. If someone had told me ten years ago what was going to happen in the next ten years, we could have had a lot of money in the fund, we're together, you know, but there's always reason after tomorrow's paper says that stocks They went down today because you know. but they didn't, they didn't write it in this morning's paper that football can come down to this you have to know what you don't 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 there, you want to get to what is knowable and and and and and that is favorable and there are things that you will miss because they b

elon

g to three other boxes, one of which will be favorable. another is favorable and the fact that you're missing out on ninety percent of the things doesn't really make any difference if the ten percent that you do right now doesn't change the insurance business.
I have changed, no, I would. change our insurance business by writing 20-year policies. I mean, if there was something that changed the mortality of the life in a way adverse to the interests of the life insurance company, you're stuck with a policy for twenty years if you write the life insurance policy and you know, I'll pay my bills. premiums because it's adverse for me, that's what's 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, the cars , for example, are much more expensive.
It's safer to drive than before. There used to be 15 deaths per 100 million miles driven. Now there are a little more than 1. On the other hand, they have become much more expensive to fix. I mean that little side. Now I'm getting married. which used to cost 10 dollars, now you know a thousand dollars or something, so you have things that are changing in the terminal, if you are writing insurance with collision experience, you have a lot of the fact that that one, that one, that one, that one, that one, that one, that one, the windshield, the bumper, everything.
These kinds of things are the rearview mirror and all that, their aim, but if you're writing your writing responsibility, you know those people aren't going to die that often there, so the weather changes like a car has been doing. climate, but the truth is that you can now buy really large catastrophe limits cheaper than you could in 2005. Are there measures that allow for changes in the dollar and population concentration? So so far the rates have gone down, that's the reason we've gotten We were largely out of the cat business, we were a great writer on the cat business 10 or 12 years ago, we're not out of the business. of cats because of climate change, we are because the prices are not right and the world will change and it will have very serious consequences, but it will not change that much from year to year, you know, we have done very well during a period of some climate change and I wonder if social media and Facebook and The Coming of Google and Russian Trolls is 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. runway and some of them carry ammonia and some of them come back, you know, chlorine and things that we have to transport, we have no choice about the number required by law to transport it, and you know, I would prefer, I would prefer to do it in a cyber world in a Cyber ​​world. I wish there were all kinds of things. The problem with something like cyber is that it's moving and it's just unpredictable if some crazy guy puts the anthrax in there, you know what they can do.
It's magnified, I mean, when when you saw what you know 19 guys, you didn't know? I mean, the tools in the hands are potentially in the hands of crazy individuals, crazy groups or even some crazy governments that you know are really something and and and and we don't necessarily know what all the tools that I have are and that's moving around all the time. I mean, you know it again. Einstein said, he said, I don't know what what what what weapons. It will feel like World War III, but global. 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, it's just that some people have a talent for being interesting, others have a little more of a blocker up there saying in a problem and friends, he's an extraordinary guy, but I don't see, I just don't see the need to communicate, you know, I never have.
I think I have seven tweets because a friend of mine signed up and she called me like a hundred times and she was like, 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 I did it 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 I haven't seen him in seven or eight. years we're here with Warren Buffett from Berkshire Hathaway And yang perfect great accent by the way, we'll conduct the rest of this in Chinese if you prefer, so let's talk about this with China and I guess I'd like to ask you if you do.
I think Donald Trump was right to call the Chinese government and basically warn them. I will not comment on it in terms of political activity. I do not put my citizens in a bind, a blind trust, so when the elections come. Out of reach, people will interpret the things I say about any president you meet as if he comes to some extent from Berkshire and they and they don't come from Berkshire. I'm just an individual, so you know, I think I'm happy to talk about China, but again, I can't talk to you about that part. I believe China and the United States are absolutely destined to be the superpowers you know beyond the lifetime of my great-grandchildren and we always will.
We have been competitors and we will be competitors and in business we will work with creditors and ideas in many ways and there is no other way to be and we just have to make sure that that competition does not take us to a point yet where we do not realize that the best world is the one in which both the United States and China prosper. I mean we don't want to have an island of prosperity in the rest of the world that envies us in a nuclear age and China doesn't "It's not Russia, I mean we all recognize the dangers of a flood, competition getting out of control and "You can be a competitor without being an enemy and that's what all powerful nations have to realize over time.
I mean, it's different." Over 200 years ago, when you could have some dominant country and then they might have done some things that you didn't like, but they didn't threaten the existence of the world, you really threaten the existence of the world as we know it if they are major countries. They don't constantly recognize that they can compete, they can fight over certain things, but they can't see this as essentially the equivalent of war. The New York University professor says, but do you think the United States and China will be able to resolve their differences or our conflicts? inevitable well, I don't think conflicts are inevitable, but I think there has to be active thinking on the part of every enormously powerful country and Russia is enormously powerful, I mean 90% of the nuclear weapons in the world between the United States 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 work. the world you know or we start to be aggressive about 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 you have World War I, You know? with an archduke, you know, I mean, you understand, you can have chance incidents and you really want to.
I asked one of the presidents once, you know, in terms of what he would do, it's a wake up in the middle of the night with someone coming. to him and say absolutely and I'm something that they also threw, would you jump on that and you have ten minutes aside and I wouldn't like to have that responsibility, but you want to make sure you don't have? up to that point and if not, aren't you missing a big part of the answer? Wouldn't we? We would have looked at you. Oh, we have been informed of some things.
Some things worry you. Accounting could be opaque. Well, me. I would like to be sure I understand accounting, obviously, so some businesses are easier to do than others, but I know the laws, customs and accounting of people in the United States better and place other places, so there are some small obstacles in many countries to overcome which ones I can overcome I mean but I just don't it's not as easy as looking at something where I already know the answer you know from previous transactions or something so it's easier to make a Big acquisition in the United States has to do more work if I look beyond the borders, but I love the idea of ​​doing it when we made these acquisitions in Israel a dozen years ago.
You know, I didn't know which oneswere the tax rates there. I didn't know what corporate law you know I was I suspected everything would be answered satisfactorily what it was but I didn't automatically know I don't think so no I don't know no I I'm open yes we let them know we made two size stock acquisitions decent there and that worked well, PetroChina and BYD, yes, byd was Charlie's, but Charlie is very well versed in China and trade with the US, a lot of that has to do with What it has to do with our trade with China is something that worries them.
I wrote an article about this for Fortune and the trade situation many years ago and when our deficit became large relative to GDP, I don't think that's the case. I don't think it's an essential level of trade balance, but I think a trade deficit gets big and there seems to be no way around it and 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 pieces of paper from us and it becomes very tempting if you've done it long enough to be sure. that those little pieces of paper aren't worth a lot of extra time when they want to charge for something and you don't want to have it, we have no problem having trade deficits, but if we ran really big and got into a box where they were, we didn't really have a solution for lowering the numbers, it could be a problem and I wrote about it once, but it's actually a good thing.
I mean, wouldn't you like to reduce the goals? I think about six point five percent six percent Are you worried 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 really hasn't been anything like that. I mean, they had 20 percent of the world's population at that time, maybe you know they really hadn't reached even remotely their potential, I mean the intellectual capacity that they had, decent soil, all kinds of things, I mean, and what happened there is almost unbelievable and that game is not over, but we have had incredible developments in the United States, I mean, you know, real GDP. per capita is six times greater than 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, you know, this kid really has made it right, I mean, we had this tailwind and China had a hurricane mine, you know, and in the last few decades, in a good way, absolutely yes, behind their backs and they have found a way of life that is dramatically different than what exists for the billion there was a billion then maybe a billion two or three whatever it is now and they have changed a country really in sizes, I don't think it has ever been anything like that, we have done it too, but it took a little longer of time, I mean, or it was extended, but it was an extraordinary 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've said many times that if you get to be 65 or 70 or older and the people you want to have love you, really love you, you're a success. I've never seen anyone reach that age. I mean, I'm not talking about someone who is extremely poor or painters. I have never seen anyone who, if he has a lot of people who love him, is more than happy and I have seen very, very rich people who give testimonial dinners, making schools named after them, they have a Lord and everything, there is no one, no one loves him, you know, his own children would say he is in the attic is in the attic ok well I by far the best investment you can make is in yourself I mean for example communication skills I tell the students that come that they go to graduate and business schools and they are learning all These complicated formulas, all if they learn to communicate better and both in writing and in person increase their value by at least 50%, no.
I mean, if you can't communicate with someone, he says, you know, it's like winking at a girl, in the dark, nothing happens, you know, basically, and 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 took it in a shorter course, not to talk about later, but it's very important and if you invest in yourself, no one can take it away from you, I mean you and the second thing that I. You'll get some criticism for not living it, but I tell those students that you know if I give you a car and it's the only car you'll give them for the rest of your life, he'll take care of it just like you.
I can't believe it and it scratches you, you would fix it the moment you read the owner's manual, put it in the garage for all this stuff and you get exactly one mind and one body in this world and you can't begin to take care of When you're 50, at that point you have little rust if you haven't done anything, so you know you really have to make sure you remember that you only have one mind and one body to get through life with towards a good life. advises you to know that the most important thing, aside from the things I've already talked about, is who you associate with, you want to associate with people who are better than you.
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 very carefully who you want to emulate and when you obviously can't choose your parents they they will have a huge influence on you, but you don't have a choice about it, but you do have choices as you go down the line and you, who you admire, who you want to copy and most importantly for most people in terms of that decision It's your spouse.
It is also important in terms of partner in business, but partner in life is the most important thing: you want to choose a spouse who is small, who is better than you and then he or she and you hope they don't notice too . quick, well, they try, but they just don't realize that all you have to do is shop in the stern of America and they never listen to people like me or read the papers or do anything afterwards. They think they think that 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 they will give you something to Allah quiddity, you know, which is instantaneous. and sell and the cost of doing it or pennies, you know, compared to other types of investment activities, so because they can move so easily, they move and moving is not smarter than investing which is so good about that way and I was actually Send Someone Now to get me something, since since I sent the publicity I received earlier describing my habits at McDonald's, now someone stopped by and someone went to the office, but that was more for entertainment.
Actually, like exactly. What do I like to eat? Yes, I liked it on my sixth birthday and at my sixth birthday party when we ate hot dogs and hamburgers and Coca Cola and chocolate ice cream. I still like it and I don't care at all after I discovered it all when I was six years old. And if Someone offered me a deal when I was twenty, saying: you would live one more year and instead of living to be 88, you would live to be 89 or whatever, if nothing more than broccoli, Brussels sprouts and onions. and all these things and I didn't take the last year off it probably won't be that good anyway you know I Meek like what I like I'm not adventurous in that area I just don't have onions?
Not putting them in the same category depends on the person and much more than it depends on the school. I mean, I wouldn't worry that some people will get a lot out of advanced education and others will get very little and I don't even think it's important for all people to go to

college

. I mean, we have all kinds of jobs at about 70 thousand a year, eighty thousand a year, that university training is not an abuse and, in reality, I didn't really want to go. I went to

college

myself, yes, my father is a cheerful man if he can get me to do something else and if they had had an SAT exam those days, he would have taken the test for me, but, like me, I only had III, I knew I could have done it.
It was a good time and I liked investing and I didn't really feel 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 everything and I think. Depending on what your interests are, I don't think, I don't think it's for everyone, I think it's for a lot of people, but there should be a reason why you go and I didn't really see much of a reason for some. Do you ever drink water only in Russian language? What is your? There is no doubt that it is my way.
Well, I like the bridge over the River Kwai because of everything, there were a lot of lessons in that nice, you know, huge Lee, fascinating, yes, yes, Barry, but that. the ending was kind of a life story, you know, he created the railroad, the enemy to cross it, you know that well, the favorite book of the best book that had the biggest impact on my life was The Intelligent Investor, my bedroom is probably would be Nebraska, some huge bowl gave her the win, well I probably carried maybe $400, oh yeah, actually what my wife likes to do is use cash, so I take home a chunk of cash every once in a while, She distributes it, look. my wallet and see if all the hundreds are gone.
It's pretty simple. I have an American Express card that I got in 1964, but I pay cash 98% of the time, if I'm interested I always pay cash, it's easier. Hello investors. m Zac Guzmán, thank you very much for visiting Yahoo Finance YouTube. Don't forget to click here to subscribe and don't forget to check out our live market coverage every day from 9:00 a.m. to 4:00 p.m. m. to 5:00 p.m. m. ET here on the Yahoo Finance YouTube channel

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