I began to take on the life of being an interviewer, even though i have a day job of running a private equity firm. [david reading onscreen text] appreciate it. Welcome to the Financial Capital of the world. All right, well. Man just to work, yeah. Right. All right. We are at your favorite restaurant in omaha, gorats. Why do you like it so much . Is it the food, or the price, or the combination of both . Warren its the food, and the price, and the heritage. I four generations of the gorat family were involved here. Pal gorat and i went to Grammar School together, and so ive known the people over the years. The steaks are great, you know, the prices are right, so. I had lunch here earlier today, it was very good, and it wasnt that expensive, and i quite enjoyed it. Lot cheaper than new york, washington. A lot. Thats why i buy people lunch here, then they can buy me the lunch in new york. Thats a good deal, a good arbitrage. You grew up in omaha, but then you moved to washington when your father became a congressman. Right. Did you really wanna move to washington . Or your father kind of forced you, you were too young to be able to resist . Yeah, no, i did not want to move. I was having a great time, i was in eighth grade, just entering eighth grade, and lots of friends, and. Everything was going wonderfully in the world, and now i had to move to a strange environment. So we moved first to fredericksburg, virginia, because my dad thought that washington was probably a den of inequity of some sort, and if he could keep us geographically separated it might not taint us. So we moved there. And i lived there for six weeks, and i got very unhappy, so i developed this strange malady where i told my parents, i cant breathe at night, but dont worry about it, ill just stand up all night. You get a good night sleep and dont worry about me. That message got back to my grandfather, and my grandfather says, come back. So i went back and lived for a while with him, and then when we moved to washington itself, okay. My family decided theyd heard enough of that. How did you start your Business Career in washington, with various pinball machines or golf businesses . Yeah, i was like that with a couple businesses going, and the best business we had was the pinball machine business, which was the wilson coinoperated machine company, and that was named after the high school my partner and i went to. But we had our machines in barbershops, and the barbers always wanted to put machines with flippers, which were just coming in. But those machines cost 350 bucks, whereas an old obsolete machine costs 25 bucks, so we always told them wed take it up with mr. Wilson. This mythical mr. Wilson, he was one tough guy, i gotta tell you. Heh. So when you graduated from high school you werent as interested in academics, i assume, at that time . I was not interested. Your High School Yearbook said, hes likely to be a stockbroker, hes very good in math. Why did you go to wharton, why did you only stay two years there . I didnt wanna go to college, and but my dad wanted me to go to college, and we didnt have sats then, but he practically would have done the sats for me, so he in the truth, i always wanted to please my dad. I mean, he was a hero to me and still is, but so he kept kind of cajoling me along, and said, well, why dont we just fill out an application for the hell of it . And so he suggested wharton, and i applied there and they let me in. And after the first year i wanted to quit and go into business, and my dad said, well, give it one more year. And so i went the second year, and i said, i still wanna quit. And he said, well, you know, youve got almost enough credits. If you go to nebraska which i was quite willing to do. For one year, you can get out in three years. So thats what i did. Has wharton ever called you up and said, youre a half graduate, you give us money . Or they never bothered you . Heh. So far they havent tried that line, but they may after they watch this. So after that, you wanted to go to Business School . Yeah. Id won some minor scholarship at nebraska to go to any graduate school i wanted to, that theyd give me 500 bucks. And so i applied my dad suggested harvard. So i applied. And you didnt get in . I didnt get in. I mean it took 10 minutes for the guy guy near chicago interviewed me, so i spent about 10 hours going to see him, and he looked at me and he said, forget it. And have you ever run into that guy again or you ever heard from him since . No, he needs protection now. Heh, heh. You went to columbia Business School why did you go to columbia . I was leafing through catalogs, and i just happened to see that columbia had graham and dodd as teachers, and id read their book, but i had no idea that they were teaching. So i wrote dean dodd, and i said, dear dean dodd, i said, i thought you guys were dead. I said, but now that i found out youre alive id like to come to columbia if you can get me in. So you did, i assume, pretty well at columbia Business School . I did okay there, yeah. You worked for mr. Graham and his partnership, and how did that work . Well, it was terrific in the sense i was working for my hero, but ben was going to retire in a couple of years, and so i was only back there about a year and a half. But every day i was excited about being able to work for him. So what you were good at was picking stocks, according to his formula, which was to look for companies that were undervalued, now we call it value investing. Did you realize that he had some principles that were very unique, and is that what you followed his guidance . Well, by the time i went to work for him i probably couldve recited the words in his book better than he couldve. Id read his books multiple times, and so it was more of a question of being inspired by him, than it was by learning something new from him. Why did you come back to omaha . I wanted to come back to omaha. I had made many friends in new york, i had a lot of friends in new york, but we had two kids by that time, and i lived in white plains, id take the train, and id take the train back. And it didnt strike me as much of a life compared to being here in omaha. And both sets of grandparents were alive at that time, and it just uncles and aunts and omaha was a more Pleasant Place to live. All right, so you buy a house here . I rent a house. You rented a house . I rent a house for 175 a month. Okay, and when did you buy your house that youre still in . In 1958. My third child was on the way. So you started partnership here, and how did you raise money . Well, david, actually when i came back i had about 175,000. And i thought that was all i would need to live the rest of my life. I could take care of everything. So i really planned to go to school i thought about going to law school. Think how successful you couldve been as a lawyer. Thats true. Ive regretted it ever since. Right, i know. So your first partnership, when you had people cobbled together some money, how much money did you actually cobble together . Well, we met one night in may, early in may, of 1956, and there were seven people there, aside from myself. And they put in 105,000, and i put in 100. So we started with 105,100, and i gave them a little piece of paper called the ground rules. But ultimately you ended that partnership well, what happened was that between may of 56 and january 1st of 62 i started 10 more partnerships. I made a mistake. I had no secretary, no accountant or anything. So every time id buy a stock id break it into 11 tickets. Id write 11 checks, i kept 11 sets of books, filed 11 tax returns. And and i did it all myself. And i took the liberty of those stocks. I was worried, it was other peoples money. Id go to the bank, have these things delivered, drafted. Finally i got wise, and on january 1st, 62, i put all 11 of the previous partnerships together in something called buffett partnership. I ran that till the end of 1969, at which time i dissolved it. You dissolve that then in 1969 you started a new partnership . No, in 1969, i i ma by that time we had about 105 million in the partnership, and about 70 million or so of that was in cash to be distributed, and the balance was in three stocks. Mostly Berkshire Hathaway, that i distributed pro rata to everybody. Okay. And then you started buying more stocks through the vehicle Berkshire Hathaway . Stocks and businesses, yeah. What would you say is the reason for your ability to do this . Is it that you study the companies more than anybody else . Youve stuck to your principles . Youre smarter than other people . People were just caught up with fads, you didnt get caught up with fads . What would you say is the reason for the success . Well, the first two to quite an extent. We bought businesses that we thought were decent businesses at sensible prices, and we had good people to run them. But we also bought marketable securities in berkshire. Over time, the emphasis shifted from marketable securities over to buying businesses. Over the years youve bought a number of companies and had stakes in companies. One of the ones that i know very well is Washington Post. How did that come about . Well, in 1973. The Washington Post company had gone public in 1971, right about the pentagon papers time, but in 73, the Nixon Administration was through bebe rebozo, who was a pal of nixons, they were challenging the licenses of two of the Florida Television stations the post owned, so the stock went from 37 down to 16. Now, at 16 there were about 5 million shares outstanding. So the whole Washington Post company was selling for 80 million, and that included the newspaper, four big tv stations, newsweek, and some other assets, and no debt to speak of. So the Washington Post company, which was intrinsically worth 400 or 500 million, was selling for about 80 million in the market. We bought most of our stock at about the equivalent of 100 million in the market, and it was ridiculous. I mean, you had a business that unquestionably was worth four or five times what it was selling for. And nixon wasnt going to put them out of business. You bought a stake in it, and was kay graham upset initially that you bought a stake . She was apprehensive. I wrote her a letter. She called it the dear mrs. Graham letter, and i said, i own or Berkshire Hathaway owns a little less than 10 percent of your stock, and we recognize that the company is graham owned, graham controlled, and we welcome that, and, you know, i have been a big admirer of the post over the years, and here i am. You admire the name graham, right . Absolutely. When youre doing these analyses, then and now, do you have computers that help you . Or how did you actually read all . Would you just get printed materials, or how did you, in those days, get the materials to read about the Washington Post . Or how do you do it today . Well, pretty much the same way, except theres fewer opportunities now. But i met bob woodward back, and hed just come out with all the president s men, and all of a sudden is that below 30 years of age he was getting quite wealthy, and we had breakfast, or lunch, over at the madison hotel, and he said, what do i do with this money . And i said, investing is just about assigning yourself the right story. I said, imagine ben bradley this morning said to you, what is the Washington PostCompany Worth . what would you do . You have to write the story in a month. Youd go out and interview tv brokers, newspaper brokers, and owners, and you try to value each asset. I said, thats what i do. I assign myself the right story. And its nothing more than that. Now, theres some stories i cant write. If you asked me to write a story on, you know, what is some glamorous but nonprofitmaking business worth, i dont how to write that story. But if you asked me to write a story on what is Potomac Electric power worth or Something Like that, i can write the story. And thats what im doing every day. Im assigning myself a story, and i go out and do it. So you get the annual reports, and then you read them, just like other people might read novels, you read annual reports. Thats right. And then do you do the calculations of what things are worth in your head, or do you have computers that help you . No, no. If you need to carry something out to four decimal places, forget it. Heh. Today do you use a computer today even . I use it to play bridge. And i use it to go to search. To search . A lot. Yeah. Theres a computer in your office . You use i dont use i dont have one in the office, but i have one at home. And like for a smart phone, if somebody wants to, you know, get ahold of you, can they get ahold of you on a smart phone or a mobile telephone . No, a smart phone is too smart for me. And a computer you use rarely . Well, i use it quite a bit one of the trick questions that bill gates and i give when were talking to an audience is whos on the computer more . Excluding email. And the answer is i probably am. Because i probably play 12 hours a week of bridge on it, and then i use it a lot for search. But who do you play bridge with . Is it anonymous people in bridge or regular . No, i my name is tbone, and i play with a woman in San Francisco who goes by the name of sirloin, and shes a twotime world champ, and im twotime world chump. So were a good weve been playing together for decades. And are you at a worldclass level after all these years . No, no. I. I she you couldnt have a better teacher than she is, but the student has limitations. Heh. Now, you mentioned bill gates. How did you actually come to know bill gates . It came about because meg greenfield, who was the editor of the editorial page of the post, called me in the late 1980s, and she said, warren, ive always loved the pacific northwest. She had grown up there. And she said, i wanna know whether i have enough money to be able to afford to buy a house, kind of a vacation type house, on Bainbridge Island near seattle. And i said, meg, anybody that calls and asks me whether theyve got enough money does. The ones that dont call dont have it. She bought the house. So she invited me and kate graham and a few people out to the house, and she knew the elder gates. And so she called mary gates, and then mary went to work on bill to try and get him to come. And bill said, im not gonna go to meet some stockbroker or something. And mary was a very firm type and said, youre coming. And he said, im not coming. By the end they started negotiating hours. She said four hours, and he said one hour. And this went back and forth, and he came down, and when we met we talked for about 11 hours straight without being interrupted. Wow. Yeah. So that was the beginning of the relationship . Yeah, we hit it off. But you never bought any of his shares of you just i bought 100 shares, to keep track of what this kid was doing. Okay. And hes now on your board, is that right . Thats correct. So the relationship has become very close, and you get involved with him in many philanthropic things as well . Oh, yeah. Yeah, we have a lot of fun talking. So let me just ask about the philanthropic things youve done with bill and melinda. Bill became a philanthropist in very serious ways when he hit the age of 50. He retired, i think, at 52 or 53, from being ceo of microsoft, then he decided to devote himself fulltime to philanthropy. And he has the bill Melinda Gates foundation. You gave the largest gift anybody has ever given to another foundation, which is the gift that youve given to the bill Melinda Gates foundation. How did that idea of giving away your money to somebody elses Foundation Come to you . Well, i originally had planned that my first wife would handle the disposition of, well, everything that we had. And we came to that conclusion when we were in our 20s, and we started something called the Buffett Foundation over 50 years ago. But i didnt give away a lot of money during those intermediate years because i felt i was compounding at a rate that i could give away billions instead of millions, if i waited a little while. She died in 2004, so that plan disappeared, and then i was faced with the question of, how do i give away this money in a way that goes to the people i want, without me doing all the work . So the idea of giving away the bulk of your fortune to bill and Melinda Gates, that idea came to you when, in the middle of the night, or how did that happen . No, but it after my first wife died in 2004 i had to come up with another plan. And i literally had five foundations that i gave although because of the scale of things, and because obviously because bill and melinda had a similar goal, and had a feeling that every human life is of equal value, and. And they were young, they were using their own money, they were bright, they were hardworking. It made a lot of sense to have them be the number one beneficiary, their foundation. So you called bill, or melinda one day and said, im gonna give you the bulk of my fortune, what was their reaction . It wasnt quite as elegant as that, actually. Hahaha. I you know, ive been asked that i dont remember that, clearly, but i just at some point i did call them up. It was done over the phone i think. And i and you didnt ask them to say, well call it the bill and Melinda Gates and warren Buffett Foundation . No, i did not think that would do any good. So you are on the board of the bill Melinda Gates foundation now . That is true, but they run it. Im gonna give him a stock tip now. [woman laughs] david what would you say are the highlights . The deals that youre most proud of. Lets take one that you did recently. The biggest deal youve ever done was precision castparts. About 37 billion in Purchase Price . Yeah, it was between 32 and 33 billion of cash, and then we assumed about 4 billion in debt. Okay. So how much . You to spend 37 billion, you spent a year studying the company . No. Heh. How much time did you spend with the ceo . I met the ceo, i think, on july 1st, last year, and he happened to be calling on certain shareholders, and one of the fellows in our office had had a position in the stock for some time. So it was an accident i met him. If id been out playing golf or something, it never wouldve happened. But i went in, and i liked him, i heard him talk for 30 minutes, and i then said to the fellow in our office, i said, call him tomorrow, and say if he would like to receive a cash bid from Berkshire Hathaway, we would supply one, and if he wouldnt like to receive one, you know, forget we ever called. That was it. Did you hire Investment Bankers to help with the analysis . No. No. Do you hire Investment Bankers to help you analyze a company . Not to help analyze a company. Sometimes they are involved in the deal when were perfectly willing to pay a fat commission. Normally you make a price, and you dont right. And do you ever do unfriendly deals . No. No. No. Why is that . Although you can say Berkshire Hathaway originally was an unfriendly deal. But no, were just not interested. Not that unfriendly deals are necessarily bad. I mean, there are managements that should be replaced. But right. Now, people must call you every day and say, i have a deal for you, its perfect, and how often do any of these deals ever pan out . They dont call every day, and weve made our criteria fairly clear, so theres relatively few that call. And when somebody calls i can usually tell within two or three minutes whether a deal is likely to happen or not. So theres just a half a dozen fillers. It either makes it through the fillers or it doesnt. One time i was told that you got a letter from somebody from israel, correct. Saying, id like you to look at my company. Whats the likelihood that somebody from israel sends a company a prospectus to you over the transom, and you say youre gonna buy it . And you did buy it. Yeah, we did buy it. We gave bought 80 percent of it at that time for 4 billion. We later bought the remaining 20 percent. But before you bought it, did you go to israel to look at the company . No, i did not go to israel. I hope its there. Heh. You were happy with what you bought . Absolutely. And you also bought one of the biggest railroads in the world. Correct. Thats worked out okay . Thats worked out okay. What was the theory behind buying a railroad . People thought they were kind of fossils as businesses. Railroad business had a bad century. Kind of like the chicago cubs, everybody has a bad century now and then. But finally the Railroad Industry got rationalized to quite an extent, and modernized, and the Railroad Business is a good business. Its not a great business, but its a good business. And in the fall of 2009 we already owned a fair amount of bnsf, Burlington Northern santa fe, and the price it look liked we could do it at a sensible price. So that was a thursday, and on friday i said we would pay 100 per share if the directors were interested. Then he checked with the directors, and the following sunday we had a contract signed. And your view is the best place to invest is the United States . Well, it certainly. It has to be the best its the best i know of. Its it its been wonderful. I mean, nobody has sold america short since 1776, and and enjoyed what happened subsequently. But we were having roughly two percent or less Slower Growth the last couple years. Do you think that its possible to grow three and four and five percent again in this economy . There will be some years, but two percent growth, if you have a little less than one percent population growth, means in one generation, 25 years, call it, that we will add maybe 18 or 19,000 of gdp per capita. Family of four, 75,000. Right. So were just beginning. One percent. You know, my life has been a product of compound interest, and it may be better to do it at higher rates, but if you have an already prosperous economy, and weve got the most prosperous economy the worlds ever seen, and you keep compounding it, over time, people will be living far better 20 years from now than they are now. You have said your secretary pays a higher tax rate than you do, and as a result counting payroll taxes, yes. Still does. And so youre in favor of changing that . Some years ago, somebody from the white house, not the president , called and said that theyd read my views on taxation, and they said, would you mind having a tax named after you . And i said, well, if all the diseases have been taken, why shouldnt i . Ill take a tax. And so theyve referred to this. But i really do feel that anybody thats making millions of dollars a year should have a combined payroll and income tax that is at least 30 percent. And in my office, everybody in the office does have that except me. Wow. So your father was a conservative republican congressman. Very conservative. And youre a id say, a liberal democrat . Maybe . I dont know that im im probably liberal on social issues more than no, im im i would not be on the liberal side of the democrats, but i would not be some conservative. How do you think you became a democrat when your father was a big republican, you live in a conservative state . How do you think that evolved . Civil rights more than anything else. I mean, i i didnt think about it when i was, you know, 12 years old or 14 years old, and i went to alice steele, and there was a school for blacks just a few hundred yards away, and it just never dawned on me how different life was for other people. And then as i got to see more of the world, i just decided that there were a lot of things that were unfair, and the democrats seemed to be doing a little more about it. David in Berkshire Hathaway today, you have an annual meeting that attracts roughly 40,000 people. Correct. Your first annual meeting, how may people showed up at that . Well, we had 12, but you had to count my aunt katie and my uncle fred, and a couple of the managers. We usually had about two outsiders. And when you started Berkshire Hathaway, did you ever, in your wildest imagination, think that you could build a company that became one of the biggest . Was that ever in your plans . No. No. I just ive always just kind of put one foot in front of the other. What is it that you would like to have as your legacy . As you think id like to be the oldest man that ever lived, actually. Heh. But no, i i like teaching. And so if if ive been a decent teacher and i have a lot of University Students come out every year. And today, is there anything on your bucket list you would like to do that you havent done . Id have done it. You know, if theres anything i want to do, i do it. Money has no utility to me. Time has utility to me. But money, in terms of making trips or doing, owning more houses, or having a boat or something, it has no utility to me whatsoever. It has a lot of utility to other people, the reason for the giving pledge. What motivates you to still run a company when most people your age are playing shuffleboard or theyre relaxing or doing something . Yeah, they spend all week planning their haircut usually. I get to do every day what i love with people that i love. It doesnt get any better than that. And so the greatest pleasure in your life, other than doing interviews like this, is what . Looking at new companies, making investments . Giving away the money . What gives you the most pleasure . Your grandchildren . All. Its all of the above. I mean, but the truth is that that i regard Berkshire Hathaway sort of like somebody that a painter regards a painting. The difference being that the canvas is unlimited. So theres no finish line at berkshire, and its a game that you can continue to play. If i was a pro golfer, which nobodys ever suggested or a Football Player or something, you know theres physical limitations, and thats really not the case with what i do. And ive got over time ive assembled this Wonderful Group of people, that many of whom are personal friends, and they make my life easy. Any word of advice you to give to somebody whos a young investor, who would like to emulate you . What you would recommend that they do to kind of build something close to what youve done . I think you should look for the job that you would want to hold if you didnt need a job. I mean, youre probably only going to live once. Shirley maclaine may differ with that or a few people. And you dont wanna go sleepwalking through life. And you really whether you make x or 120 percent of x, really isnt remotely as important as to whether, in most cases, you marry the right person, and you also find something that you would do if you didnt need the money. And ive had that job for, you know, 50 or more years. And i was lucky in that i sort of found early on what turned me on that way. But dont settle for something if you can possibly dont worry about making the most money this week or next month. When i went to offer to work for ben graham, i said ill work for nothing, and i meant it. I mean, just the idea of being turned on. So look for the job that turns you on. Find a passion. [ ] be more pbs [jim] coming up, brandon baballengees artistic pctice and Scientific Research share a single purpose, to generate understanding and awareness of endangered species. How do we wrap our head around extinction . Im not sure were hardwired to. [jim] performance anxiety is common, even among the most accomplished professionals. This fight or flight impulse can be paralyzing but it can also be conquered. If theres no special vibration thats going on inside of you before you perform, then you probably should reexamine why youre doing it. [jim] and moe brooker is rightly regarded as one of the greats of american abstract painting. Hes stared down adversity, but admits that hes also had some luck. I just happened to be at the right place at the right time and had the right parents, that allowed me, to in fact go on. I was not the best, but i worked hard at it. [jim] thats all ahead, on articulate. light music