Warren Buffett reveals his investment strategy for mastering the market

Warren Buffett needs little introduction. He's the godfather of modern-day investing. For nearly 50 years, Buffett has run Berkshire Hathaway, which owns over 60 companies like GEICO and Dairy Queen, plus minority stakes in Apple, Coca-Cola, and many others. His $82.5 billion fortune makes him the third richest person in the world, and he's vowed to give nearly all of it away. The Oracle of Omaha is here to talk about what shaped his investment strategy and how to master today's market. I'm Andy Serwer. Welcome to a special edition of Influencers from Omaha, Nebraska. It's my pleasure to welcome Berkshire Hathaway CEO Warren Buffett. Warren, welcome. Thanks for coming. So let's start off and talk about the economy a little bit, and obviously we've been on a good long run here. A very long run. And yet, does that surprise you? And what would be the signs that you would look for to see that things were winding down? Well, I look at a lot of figures just in connection with our businesses. I like to get numbers. So I'm getting reports in weekly in some businesses. But that doesn't tell me what the economy is going to do six months from now or three months from now. It tells me what's going on now with our businesses. And it really doesn't make any difference in what I do today in terms of buying stocks or buying businesses, what those numbers tell me. They're interesting, but they're not guidance to me. If we buy a business, we're going to hold it forever. So we're going to have good years, bad years, in-between years, maybe a disastrous year some year. And we care a lot about the price. We do not care about the next 12 months. But are you surprised at how long this economy has been expanding? I've been surprised by all kinds of things in the last 10 years about the economy. I mean, I don't think there was any economist I've ever read that talked about negative interest rates for long periods of time. I mean, if you go back and read Keynes or you read Samuelson, you read any of them, they do not get into a negative rate environment. I think now there's still $11 trillion of government debt around the world that's at a negative rate. So we've never seen it before. And we've never seen, at least the conventional wisdom on it, a sustained period of long and growing deficits while the economy is getting better, extremely low interest rates, and really very little inflation. So something different is happening, but something different happens all the time. And that's one reason economic predictions just don't enter into our decisions. Charlie Munger, my partner and I, in 54 years now, we've never made a decision based on an economic prediction. We make business predictions about what individual businesses will do over time. And we compare that to what we have to pay for. But we have never said yes to something because we thought the economy was going to do well in the next year or two years. And we've never said no to anything because we were right in the middle of a panic even if the price was right. All right. So you don't pay much attention to the dismal scientists then, I guess. Well, I pay none in the sense of as a guideline to doing anything. It's entertainment. I mean, it's like going to a variety show or something like that. And I just don't know of any economist that actually has bought businesses successfully or done well in stock. Paul Samuelson may know. He was a big shareholder of Berkshire. But it's, you know, they make guesses. And there's so many variables. I mean, in the hard sciences, you know, you know that, you know, if an apple falls from a tree, that it isn't going to change over the centuries because of anything or political developments or 400 other variables that go in. But when you get into economics, there's so many variables. And the truth is, you've got to expect good times and bad times in business. And if you were to buy an auto dealership and you're, you know, wherever you live locally or a McDonald's franchise or anything like that, you wouldn't try and time the purchase. You try and make the right purchase at the right price. And you want to be sure you've got a good business. But you wouldn't say I'm going to buy it because growth this year is going to be 3% instead of 2.8% or something of the sort. Fair enough. You have over $100 billion of cash. Maybe you do. Berkshire has over $100 billion in cash. And you say that you always want this company to be a fortress. So how much cash should an ordinary investor have on a percentage basis, do you think? It depends on their personal situation. If you're working in something where you're living off your paycheck from week to week, you want to have a little cash around. And you certainly don't want to have a credit card that's maxed out or anything like that. But if, you know, if your house is paid off, if you don't have big living expenses, you got a portfolio of decent, diversified businesses, we need any cash. So you can be more cash free than Berkshire is? Yeah, yeah, I've got responsible, you know, we've got insurance claims, we could have hurricanes that you know, would happen, all kinds of things where you might have to pay out billions of dollars. And I've got over a million people that own shares that are coming to run the place. So we get through periods like that. But if I were retired, I had a, say, a million dollar portfolio stocks that was paying me 30,000 a year in dividends or something of the sort. And my children had grown, the house was paid off and everything. I wouldn't worry too much about having a lot of cash around. Let's talk a little bit about Apple. Everyone always wants to talk about Apple, right? It's kind of the it stock, it company. You have a $45 billion stake, more or less. How closely do you follow the company? You know, people are concerned they haven't really introduced any new products. Well, if you have to closely follow a company, you shouldn't own it. Really? No, I mean, I mean, if you if you buy a business, if you buy a farm, you know, you go up and look, you know, every couple of weeks to see how far the corn is up. And, you know, you worry too much about whether somebody says this is going to be a year of low prices because exports are being affected or anything like that. You know, you buy a farm and you hold it for I've got one farm that I bought in the 1980s and my son runs it. But I've been there once, you know, I mean, it doesn't grow faster if I go and stare at it. You know, I can't cheer for it, you know, more effort, more effort or something like that. And I know there's going to be some years when prices are going to be good and some when the prices aren't going to be good. I know there's years when yields will be better than others. But I bought the farm and if it just doesn't I don't care about economic predictions on or anything of the sort. I do care that over over the years, it's well tended to in terms of rotating crops. And I hope yields get better, which they generally have. In fact, that farm 100 years ago would have probably produced 30 bushels, maybe 35 bushels of corn per acre. Now in a good year, you know, it'd be 200. I mean, we really made progress in this country. That's one reason commodity prices go back a couple hundred years, they've moved so little is because we've just gotten better and better at whether it's cotton or whether it's corn or soybeans or all kinds of things. And you and I have benefited from that. And so Apple is kind of like a farm. Well, it's a it's a long term investment. And if you own, if you own the best auto dealership in town, the best brand, and they had a good running it, you wouldn't drop by every day and say, you know, how many people have come in today, or, you know, I think interest rates are going up a little maybe slow down our sales or anything. You buy it knowing there's 365 days a year and you're going to own it for 20 years. So that's 7300 days. And you know, they're going to things are going to be different from day to day and year to year. You shouldn't buy it at the day to day stuff that's important. Let's switch over to talk about buybacks, which is another hot topic these days. And, and you did a fair amount. If you look in the annual report, you can see that between December 13th and 24th, it looks like you guys bought back about $233 million worth of Berkshire, which was right near that particular stock market bottom. How did you know that? What was going through your mind? If I knew it, I'd have bought a lot more than 200. No, that's not a big purchase for us, actually. And now we will buy Berkshire when we have lots of excess cash. All needs of the are taken care of. We spent $14 billion on property, plant and equipment last year, way more than depreciation. So we take care of the needs of the business. Then we have excess cash. And if we find investment, we'd love to do is find other businesses to buy. But if our stock, if I think the stock and my partner, Charlie Munger, think the stock is selling below intrinsic business value, we will buy in stock. So it obviously was at that point. Well, we thought so. Yeah, yeah. But but, you know, what's really intriguing is when it goes down a lot. I mean, when when you're buying dollar bills for for 60 or 70 cents, which periodically you get a chance to do in stocks, then, you know, assuming you've got the cash, you don't want to ever get so that that some some surprise could really take you out in some way. But if we've got excess cash, we'll buy as fast as we can. At that point, it'd be more like a 2009 rather than just December. Yeah, yeah, exactly. But it's, you know, if you and I own a McDonald's franchise together and it's worth a million dollars and you own 50 percent of it and you come to me and you say, I'll sell out for 400,000, you know, I'll buy you out. You want to buy mine. I'd be wary of that. But you want 600,000. I'll just come back tomorrow. So just continuing about buybacks, Senator Schumer's and Sanders want the government to weigh in to sort of legislate when companies can do buybacks. And then also there was a report recently about executives doing insider trading, it appears, around the times of buyback. So are buybacks a kind of a problem? Well, you'll have some people that misbehave and respect them any activity. I mean, so they wouldn't have much to do with buybacks. I think buybacks, the degree to which they've been part of nefarious activity, and I've observed them for a lot of years and are very close to zero. But that just may be that there aren't enough opportunities. But that article did not, I didn't follow the conclusion on it. I mean, you're distributing money to shareholders, essentially, you can do it by dividends, and presumably American business should distribute money to its owners occasionally. And we do it through buybacks. We've done some. And we don't do it through dividends. But most companies do it through having a dividend policy. And then if they have money beyond the needs of the business, then I think if their stock is underpriced, then it makes nothing but sense. Should the government tell companies when to do it, or at least mandate conditions where they can? Well, they do restrict you a little in terms of, if you're some general rule of the SEC, if you're having some kind of, this isn't quite the right word, but manipulative activity or anything like that in the stock. But no, I don't think the government should decide your dividend policy. I don't even think they should direct your capital investments. They can make it enticing to make certain kinds of capital investments, which they do with renewable energy, for example. I mean, the government has interest in fostering certain developments in this country over time. And there used to be a special oil depletion allowance 50 years ago and so on. That was more politics than it was governmental policy. But certainly renewables are a prime example of that. But the idea of directing whether you are entitled to return cash to shareholders and the manner in which you do it, I don't think really makes a lot of sense. The 2020 election is going to be upon us before we know it. And I know that you had some nice things to say about Mike Bloomberg, but it appears he is not going to be running now. Yeah, it's hard to win with just a billionaire vote. But I admire him enormously. I wish he had run. I want to be very clear on that. President Trump was a business executive. So two questions. Is a business executive the right kind of person to be president? And what characteristics do you look for for a president that you would support? Well, I think a business executive can be the right person. But I don't think that because they're a business executive that you give them extra points. And number one, I want a president that wakes up every morning and realizes that the greatest threat to a country, which has got all kinds of things going for it, are weapons of mass destruction, and that we live in a world where people, organizations, and occasionally countries could have people that would like to wipe out a large percentage of the American people or maybe other countries as well. And that you now have capabilities, which I always thought until recently I classified as nuclear, chemical and biological, but I think you have to add cyber now. If you have some evil genius someplace that for crazy reasons, just like what happened with anthrax back, who knows what motivates somebody that starts sending anthrax out in their letters. And if you have somebody that thinks it'd be great to send a false alarm to the Russians and to the U.S. that the other side was launching or something of the sort, it's a very, very dangerous world. It's a wonderful world, but it has dangers now that started in August of 1945 and when Einstein said, this changes everything in the world except how men think. And so I want a president that has that same filter that all of these other things are important, but protecting the country and reducing the chance of successful use of weapons of mass destruction against us is the number one job. And I think most of the presidents, I've talked to a couple of them over the years and I really think that they do realize that they may get lost in the events of every day as they go along. And then beyond that, I want a president that has two objectives with the economy. One is to make sure that this marvelous goose we have keeps laying more golden eggs. And then I want a president that also feels that if GDP is $60,000 per capita in the United States, that nobody should get left behind. We've got a market system that works marvelously in turning out more goods and services, better ones year after year, done it all through my life. Would you ever talk to a candidate and say, hey, what do you think about these three things? Well, they'll tell me what I want to hear. So I want to hear what they tell people who disagree with them on the subject. I always like to ask a candidate, they usually finesse me some way or another, but I say, what are you for that the majority of your followers are against? You know, I know you really believe in that, you know, and that's really the test. But I'm not sure that except under some kind of sodium pethyl or something, you're going to get a great answer. That's great. But that's the question you asked the presidential candidates or presidents that you would speak to. If I really want to get, and that's why Bernie Sanders was so successful. I mean, 90% of the people who voted for Bernie Sanders had probably not heard of him two years earlier, but they felt they knew exactly, they felt they knew exactly what he would do. I mean, if you asked him what he was for that most people might be against, he would tell you. A few questions about Kraft Heinz. Was that a mistake? Well, we'll find out over time, but we did pay too much, in my view, for Kraft. We didn't pay too much for Heinz. So when we started out, it was originally a non-public partnership between us. But we did pay too much, in my view, for Kraft. And there's not much you can do about things if you pay too much. And secondly, there's always been a struggle between the retailer and brands. I mean, if I've got a terribly weak brand and I want to get into Walmart, I'm not going to be able to do it. I mean, that's all for all kinds of crazy concessions. And I want to be in Walmart if I have some sort of super packaged goods. The negotiation is way different if you have something essential versus non-essential. Ten years ago, Costco tried to get rid of Coca-Cola. Costco's got terrific loyalty among customers. And their own Kirkland brand is a $39 billion brand now. And it moved from category to category. And they only started in 1992. So they know brands. But in the end, they put Coca-Cola back in. If it had been Royal Crown Cola, they wouldn't have had to put it back in. So there's always that struggle between the brands. And there always will be. But the retailer's net, it has been moving in their direction, particularly, I think, because of the Amazon revolution. First Walmart and then... Walmart, Walmart, yeah. But it's been accentuated, I think. We have a new retailing environment now. I mean, it is like it goes from night to day, but it moves somewhat. And brands that people have spent billions of dollars developing and sponsoring TV shows or sponsoring radio shows in the old days... Campbell's Soup was always on there with Jack Benny or something, you know, when I was a kid. And it was big. And it built brands. And people obviously like the product, too. But people are more willing to change. And it's harder. It's a somewhat different world. It is night and day. I mean, you are very unlikely to keep changing brands every day. But it really surprised me that Gillette lost position. Men don't like to experiment much. Women are better at experimenting. But when you were a kid, Gillette Cavalcade of Sports was your pal and brought you the Rose Bowl and the World Series and all that sort of thing. You just shaved with Gillette the rest of your life. And you still do to a great degree. But it's not exactly the same as it was even five years ago or so when we bought Kraft. You mentioned Amazon as a game changer. And I have to ask you, you haven't bought the stock. You're an admirer of Jeff Bezos. A listing of the richest people in America came out. He's number one. I think your friend Bill Gates is number two. You're number three. So you can see what he's done in myriad ways. And of course, the question is, how come you haven't bought Amazon? Is there still time to buy? Would you still buy? Oh, I always admired Jeff. I mean, I met him 20 years ago or so. And I thought he was something special. But I didn't realize you could go from books to what's happened there. No, I mean, he had a vision and executed it in an incredible way, something that it would not have. But there's a lot of games I miss. I would have missed Microsoft even if I'd gotten to know Bill earlier. Those just aren't my games. I don't worry about the things that I miss that are outside my circle of competence of evaluating. I do. I have missed things who are within my circle. And that's a terrible mistake. Those are my biggest mistakes. You haven't seen them. But I don't. It's not a mistake because I miss Netscape or something like that at all. I would say that maybe 5 percent of the companies or 10 percent of the companies at most are within an area of my circle of competence. There's something I should be able to understand. All right. Well, let me switch gears then and ask you about leverage a little bit. And corporate debt, people are concerned about. People are concerned about federal debt at $22 trillion. Should we reduce, let's just say, the federal debt? And how would we do that? Well, if you're running a deficit getting close to 5 percent when things are really good, that's a new world. And neither the Republicans or Democrats are particularly concerned about it. And we're not having a lot of inflation. That wasn't supposed to happen. But it's happening. That's why I say you don't want to get hung up on trying to make an economic analysis because nobody's any good at it. You don't get rich doing that. If you look at, you mentioned that Forbes list. If you get on the list, the number of people have done that by economic analysis. I think you're just about as old, Sean, there. Okay. Fair enough. Income inequality, wealth inequality. You've talked about the earned income tax credit. Is there more to it than that? Should we adjust tax policy? It seems to be going the other way right now. Well, it is going the other way. But I think the earned income tax credit is the best way to put money in the pockets of people that don't fit well into the market system, but that are perfectly decent citizens and that have made a good bit of the success of somebody like I've had with Berkshire or something possible. It wouldn't have happened without the America we have. And if you go back 200 years and we're all working on, 80% of us are working on farms. The person that's the best at that, working on that farm, whatever it may be, is worth maybe twice the ones that's the worst. I mean, that's the difference between super talent and no talent in the farm economy, picking cotton or whatever it may be. Now, if you're the best middleweight fighter in the world, you may get $20 or $30 million. And if you are just a good citizen, raise nice kids, help in the neighborhood and everything else, but you don't have market related skills, you'd be good on that farm still. And you would be earning something comparable to most of the people around you. But you don't have something now that as it gets more and more specialized, and it's going to continue to get 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 of GDP per person. You want them to have a decent life, and they can. I also think you want them to have a feeling of accomplishment. So you want them to have a job, assuming that they're not handicapped in some way. You want them to have a job. But the minimum wage would be one way to say, well, we'll make sure that they have enough money in their pocket. But that's got a lot of effects in disturbing the market system. They just need more cash. They don't need a higher wage. They need more cash in their pocket. And the government, at a relatively low cost, can provide a decent living for anybody that's working 40 hours a week and has a couple of children. And we've gone in that direction, and it's sort of bipartisan. I find both Republicans and Democrats for it. I think it would be better not to have one annual payment, you know, that they get it monthly. And I think there's various things you could do. But you want them to feel part of the system, and you want to have them get, as more and more of these golden eggs are laid, you want them to get a little more of their share. I mean, if we don't do that and the Democrats win, it's possible we get big taxes on wealthy people, free college for all, and those are bigger plans. You want more money in the pockets of everybody that's willing to work or is unable to work. And we can do it. A rich family would do that. If I had six or seven kids and I had some business I wanted to pass on, you'd pick the most able person to run it, because that's the market system to do that. But you'd make sure that all seven of the family participated. You'd give more to the one that kept producing the golden eggs. You wouldn't just say to the one at the lowest end, who might be the best kid of all in most respects, you know, he's the one that shares with everybody and does all kinds of things. You wouldn't say to him or her that, you know, too bad, but that's just the way the market system works, you know. Have your spouse get a job, look for housing someplace. Right. Why don't we do an update about the health care initiative, which now the company has a name, Haven. Was that your idea? No, no. I didn't worry about a name. We could have gone on as a no-name operation for 10 years as far as I'm concerned. No, that is, we got a wonderful partnership in the sense that it's large and has reasonable market muscle with more than a million employees among the three of us. We've got three CEOs that can make things get done in organizations that are so big that normally they wouldn't get very bureaucratic. I mean, if you try to do this with many big companies, you'd have legal weighing in and public relations weighing in. We don't have any of that stuff. They may have them in certain areas, but Jamie isn't going to worry about doing that sort of thing and neither is Jeff. So we've got a unity of commitment and an ability to execute on the commitment. The only problem is you've got a $3.4 trillion industry, which is as much as the federal government raises every year, that basically feels pretty good about the system. As we went around talking to people to find a leader for the group, for example, everybody says, the system, it turns out very good medicine, but you can't go from 5% of GDP to 18 without really making you less competitive among other things in the world. So everybody thought the system needed some adjustment, just not their part of the system. And that's very human. I'd do the same thing, I'm sure, if I was in the same place. So there's an enormous resistance to change, while a similar acknowledgement that change will be needed. And of course, if the private sector doesn't supply that over a period of time, people will say then, we give up, we've got to turn this over to government, which will probably be even worse. How often do you talk to Jamie and Jeff about it? I know Todd Combs, I think is your point. Todd really does all the work at Harvard. If this works, give Todd 100% of the credit from the Berkshire standpoint. Does Haven have to buy companies to gain expertise? No. What is the plan? The plan is to support a very, very, very good thinker on this subject who is a practicing physician and who commands the respect of the medical community to, in effect, figure out some way so that we can deliver even better care and have people feel better about their care too. I mean, they have to perceive that they're receiving better care over time and stop the march upward of cost relative to the country's output. We've got this incredible economic machine, but we shouldn't be spending 18% when other countries are doing something pretty comparable in terms of doctors per capita, hospital beds per capita. The very top stuff in medicine, I think, is very much concentrated in this country, and that's great. I want us to be the leader, but I just don't. I think we're paying a price. If we're paying seven extra points of GDP, that's 1.4 trillion a year. Is the administration focusing by focusing on drug prices, is that sort of a rabbit hole? Is that missing the bigger picture? I mean, they're trying, and Congress generally, I mean, you talk to the average congressman. They regard it as a problem, and they see specific instances, you know, of drug prices or something like that, but it's a big problem to change. I mean, the trouble is it intersects in so many ways, and that's why we've got Gawande heading it, and we've got three bigger size organizations backing him. We're not trying to do it to make money. I mean, that is not a goal that we end up with some business that we make money off of. And will he be talking to health insurers, for instance? Well, he'll be talking to everybody, but his game plan is not something we're going to try and lay out because it's in his head to some degree. I mean, obviously, we selected him by hearing and reading and so on what he's done, but he'll learn as we go. We will conduct certain experiments, or he will, you know, and try out a community where one of us has a lot of employees maybe, and there are various ways to experiment. Shifting gears, where do you find things like that Abe Lincoln tail and leg quotes? I mean, do you read Bartlett's book of quotations? Probably 50 years ago, I looked at a few Bartlett's quotations, but I read a lot. You just remember these things and apply them? Well, if you're 88 years old, I mean, you ought to remember something. Well, you don't remember what happened yesterday, but you remember the old stuff. You've got a lot of interesting quotations in your head. Not like you do. That's great. Okay. So one company you invested in was GE, and you did well with that investment. Yeah. I was too early, actually. If you look back, I was very active in the last half of September and early October, and then I wrote that article in later October, and I knew it was going to get bad. I wrote the article was going to get 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 used up our powder well before the bottom was hit. It's interesting. How have you avoided not getting back into GE more recently? I mean, I'm sure that they've reached out to you. Everyone says, oh, why doesn't Warren Buffett invest in GE and save it and take it to the promised land? It's this great American company. Well, actually, I think Larry actually is doing a good job. Larry Kolb. Yeah, Larry Kolb at Danaher is a good sale, and I think his priorities are straight, and I think he's a very able guy, and he's on the right track. And I'm a fan of GE's in the sense that we're a big buyer from them. We're a big seller to them. I've known the managers. I mean, Jack Welch is a very good friend of mine, and we don't agree on politics 100%, but we have a lot of fun together. I love the guy. So I've got a great desire for GE to do well. It just hasn't looked that attractive to me. Right. You talked about the groves of trees in the letters, shareholder. One was the third grove, which was sort of the in-between stakes. Yeah, the equity interests. Is it the case that those are sort of not the healthiest grove of trees? No. Why would that be? No, those are the pilot flying Jaysbury. No, they're 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's treated under GAAP accounting as a special category, and it didn't fit well in the other grove, so I had to make it a separate grove by itself. It's not that significant a grove. You say that the sum of Berkshire has a greater valuation than the parts. That is true. Did you ever try to calculate that? How much is that? Well, it depends on circumstances. I mean, there's sometimes when the float from insurance can be very valuable. There's sometimes when the ability to use production tax credits, we'll say, in the utility business, but have them as part of our consolidated return helps. But that varies a lot. But it is a plus. And we can move capital. We'll take a business like See's Candy, which we bought 40-odd years ago. It's a wonderful little business. It throws up capital. We've tried 50 different ways to expand geographically, do all kinds of things. It doesn't work. And we'll try it again, and it won't work. But we can move that capital to help buy the NSF Railroad or do all kinds of other things. So we've got a seamless and tax-efficient way of moving capital where it's needed. And we've got some companies that really chew up capital, and we've got others that kick it off. And we can move it from one pie. If you try to do that with your investments, you incur some taxes as you go along doing it. And it's less efficient than what we've got. You talked a lot about the tax cuts and the benefits to Berkshire. You didn't really get into the costs of the tax cut, which surprised me a little bit. Are there costs? I mean, is it just free money? Well, it makes a difference. The tax cut we get, for example, our utilities, as I mentioned in the report, that goes to the customers. That's just the nature of utility regulation. But net, we were a significant beneficiary from the tax cut. I mean, basically, let's just say we had one class of stock. We've got two. But you and I own a business together, and we think we own all the stock. But the truth is, before the tax cut, the government had a 35% share of the stock on income. Now, it didn't have a share of the assets, but it had a share of the income. And if it wanted to change it to 40, it could have changed it, but fortunately, it changed it to 21. And if we had a private business, if we had a franchise together, an auto dealership together, you know, the third shareholder, that invisible shareholder, the governor, just handed us back a bunch of the shares of stock. And our shareholders benefited, and a lot of other shareholders benefited. Right. You talked about Ajit Jain and Greg Abel saying that Berkshire blood flows through their veins. Have they made a difference since they become vice chairs? And then are they like Warren and Charlie? No, they don't. They don't have the interaction. They each run a separate business. And Ajit does not think about the other businesses. He thinks about the insurance business. And Greg does not think about the insurance business at all. And I think about the money and the capital and so on. But they're running two very big businesses. I mean, Ajit's business, you know, has, you get all told, at least a couple hundred billion of assets, you know, and Greg's business has 150 billion of revenues. I mean, these are, they both would fit up there toward the top 10 or so in the country in terms of value. So maybe the top 15. But they're very big businesses. But they're not exactly like you two guys. Oh, no, no, no. Charlie and I have a partnership thinking about the whole place, and we've done it forever, you know, and we still do. And Todd and Ted, I didn't see them mentioned. Well, they have 13 billion dollars each, including pension funds, our pension funds, that they run. And so of the 173 billion we had at year end in equities, they had, well, we had 173 bucks, we had another 8 billion in pension funds. So of the 180 or so, they had 26 between them that they're managing. And they got total discretion on that. They don't ask me. At the month end, I look and see what they did. They don't do much. They don't do a lot of 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 operations. And I know what the businesses do, but I can't tell you their names. That's his baby. Was one of those, you made this investment in Oracle, and then you sold it. Was that something they did? No, that was not something they did. That was something I did. Yeah. And you said you didn't understand it. That's why you sold it. Then why'd you get it in the first place? Yeah, well, that's a good question to which I do not have a good answer. I know, I see development. I know enough about the cloud to know I don't know enough about the cloud. Right. Okay. So Barclays put out a note, they said they were lowering the estimates for Berkshire, for EPS. Do you read that stuff? No. Well, I mean, I may read it accidentally, but I don't seek it out to read. I'll put it that way. But it just doesn't make any difference at all. I mean, if I spent time reading that, I wouldn't have a time to read 10Ks. And we're not going to do anything different. I don't know what we're going to earn. As I put in the annual report, and I really think this is unique. I mean, we do not prepare financial statements monthly for Berkshire. And there's just no other company would do it. But there's no sense doing it. I know where the money is. I know how the companies are doing generally. But what difference does it make? Because I'm not going to try and hit any number for the quarter by having a sale on insurance or doing something even worse. And Charlie, I mean, he knows where we stand. And we know what businesses are doing well, which aren't. And we certainly know where the money is. Another one, UBS survey of Berkshire investors says the five most important things to them are succession, investment performance, M&A opportunity, share repurchase, insurance margins. Do you read that? No, but I don't disagree. I mean, I'm glad that somebody understands this. Your own investors. Yeah. Well, that's important. You know, 54. Well, to go back to when I started my partnership in 1956 that Berkshire came out of, there were seven people sitting there at a table having dinner, relatives primarily. And I said, here's the partnership agreement. It's done under Nebraska law. It's four or five pages. You don't need to read it. But I said, here's a little half page, what I call the ground rules. And I want you to read these. And if you feel OK about that, about the interaction, what the expectations are and all of that sort of thing, then we'll join forces. And if you don't, it's fine. Other people have, you know, but we don't we shouldn't be partners. I mean, you know, if I'm going to have a partnership with somebody, I want to be compatible. It is. And when you have a public company, you can't control who comes in. I can't control some guy that comes in and thinks we were going to pay big dividends or split the stock or something like that. So by my actions and my communications and everything, I want to attract the people that from the public market that I want and I want to keep the others away. Costco was built. Sol Price, who started the price club, he sat down and figured out the customer he didn't want. And he set up a system that would keep away the customer he didn't want. Who did not want? He didn't want somebody buying a quart of milk with somebody behind him with a with a basket of two hundred dollars worth of goods waiting for that. So we put in a membership fee and by putting in a membership fee, he killed all the drop in business, the business that belonged to the 7-Eleven. We want Berkshire to keep out people who have expectations about us that are different than ours. I mean, good for them, and I hope they find somebody they fit. But if you're going to run a church, you want you want your seats to be filled by people that are generally want to listen to your form of religion. And you don't want it to change every week and say, gee, I need a new group and I'll go out and talk to a bunch of investors and get them to come to my church this Sunday because there's only so many seats in the church. There's a million six hundred and forty five thousand or so A equivalent shares. And those are the seats. And I want them occupied by people that are on the same page. I am the church of Berkshire. Your seems like you've got a big weighting in financials. And of course, you finally invested in Jamie Diamond's company. Why banks right now? There are businesses I understand, and I like the price at which they're selling relative to their future prospects. I think 10 years from now that they'll be worth more money. And I feel there's a very high probability I'm right. And I don't think that will turn out to be the best investments at all of the whole panoply of things you could do. But I'm pretty sure that they won't disappoint me. Is climate change changing your insurance businesses? No, it doesn't change the insurance business. Does it change modeling or something in the business? It would change our insurance business if you're writing 20 year policies. I mean, if there was something that changed life mortality adversely to the interests of live insurance company, you're stuck with a policy for 20 years if you write the life insurance policy and you'll keep paying your premiums if it's adverse to me. That's what's happened in long term care insurance, for example. But when you write a policy for one year at a time, see what the developments are. And cars, for example, are much safer to drive than they used to be. There used to be 15 deaths per 100 million miles driven. Now there's a little over one. On the other hand, they've become much more expensive to fix. I mean, that little side right in the side view mirror, which used to cost 10 bucks, you know, now a thousand bucks or something like that. So you have things that are changing in terms of if you're writing collision insurance, you've got to allow for the fact that that windshield, the bumper, all kinds of things, or the side view mirror and all that are way more expensive. But if you're writing liability, you know, that people aren't going to die as often. So climate change is like climate has been changing. But the truth is that you now can buy really big catastrophe limits cheaper than you could buy them in 2005 or thereabouts, allowing for changes in the dollar and concentration of population. So far, rates have come down. That's the reason we've gotten out of the cat business to a great degree. We were a very big writer of cat business 10 or 12 years ago. We aren't out of the cat business because of climate change. We're out because the prices aren't right. And the world will change. And that's got very serious consequences. But it won't change that much from year to year that, you know, we've done very well during a period of some climate change. You've talked about technology advancing faster than our ability to understand it. And I'm wondering if social media and Facebook and Google and Russian trolls coming in and is that maybe an example of that? Are you still worried about that problem? Well, I think cyber poses real risks to humanity forgetting about the problem of even misinformation. I'm just thinking of, you know, we have railroads running over 22,000 miles of track and some of them are carrying ammonia and some of them are carrying, you know, chlorine and things. We have to carry them. We have no choice about that. We're required by law to carry them. And, you know, I would rather do that in a non-cyber world than a cyber world. There are all kinds of things. The problem about something like cyber is that it's moving and it's just unpredictable whether you'll get some crazy guy like stuck the anthrax in there, you know, what they can do becomes magnified. I mean, when you saw what, you know, 19 guys did, you know, to non-911, I mean, tools in the hands or potentially in the hands of either crazy individuals, crazy groups, or even a few crazy governments, you know, are really something. And we don't necessarily know what all the tools they have are. And that is moving all the time. I mean, you know, again, Einstein said, he said, I know not with what weapons World War III will be fought, but World War IV will be fought with sticks and stones. You know, I mean, it's a dangerous world. I don't know if you've been following this, Warren, but what do you think of Elon Musk's behavior as a CEO? Well, I think it has room for improvement. Now, he, he, and he would say the same thing. You know, I mean, it's just some people have a talent for interesting quotes and others, others have a little bit more of a blocker up there that says this can get me in a problem. But he's, he's a remarkable guy. But I don't see, I just don't see the necessity to communicate. You know, I've never, I think I've got seven tweets because a friend of mine signed me up for it. And she's called me about a hundred times, say, can I tweet this or that? And I've said yes to her seven times, I guess, or something like that. I've never actually written one myself. I don't even know how to do it. Have you talked to Elon ever? He joined the giving pledge. So once or twice, but that's a lot of years ago, seven or eight years ago. I'm not, he hasn't come to our annual gathering. So I haven't seen him for seven or eight years. So let's talk about this, this trade war that's been going on a little bit with China. And I guess I'd like to ask you, do you think that Donald Trump was right in calling out the Chinese government and basically putting them on notice? I won't have any comment on that. In terms of political activity, I don't put my citizenship in a blind trust. So when the election comes around, I'll do something. On the other hand, people will interpret things I say about any president, you know, as to some extent coming from Berkshire. And they don't come from Berkshire. I'm just an individual. So I think, I'm glad to talk about China, but I can't talk to you about that part of it. Fair enough. I mean, do you think there was room for improvement then in terms of the trade relationship between China and the United States? Well, I think that China and the United States absolutely are destined to be the superpowers, beyond my great-grandchildren lives. And we'll always be competitors. And we'll be competitors in business, we'll be competitors in ideas, all kinds of ways. And there's no other way it would be. And we just have to make sure that that competition doesn't get us to a point where we don't realize that the best world is one in which both the United States and China prosper. I mean, we do not want to have an island of prosperity in the rest of the world, envious of us, in a nuclear age. And China doesn't, Russia doesn't. I mean, we all recognize the dangers of letting competition get out of control and become, you can be competitors without being enemies. And that's what all powerful nations have to realize over time. I mean, it's different than 200 years ago when you could have some dominant country. And they may have done some things that you didn't like, but it didn't threaten the existence of the world. You really threaten the existence of the world as we know it. If important countries do not constantly recognize that they can compete, they can fight over certain things, but they can't regard it as essentially the equivalent of war. Here's a question from Kevin Chen, who is a Berkshire shareholder and an NYU professor. And he says, and this is sort of along the lines of what you were just saying, Warren, but do you think that US and China will be able to resolve their differences, or are conflicts unavoidable? Well, I don't think conflicts are unavoidable, but I think it has to be active thinking on the part of every hugely powerful country. And Russia is hugely powerful. I mean, 90% of the nuclear arms in the world are between US and Russia. So they have to recognize that the best world for them is one where they don't try and grab all the apples, basically. And we have to recognize that. And we can't, in the United States, we can't think that either our ideas run the world, or we start getting aggressive about things, and China can't think that, and Russia can't think that. And that's obvious. You just have to make things, you've got to be sure things don't escalate at World War I, you know, with an Archduke, you know, I mean, you can get chance incidents, and you really want to, I asked one of the presidents one time, you know, in terms of what he would do if awakened in the middle of the night with somebody coming to him and saying, absolutely, you know, somebody else has launched, you know, and would you launch on that? And you've got 10 minutes to decide. And I wouldn't want to have that responsibility, but you want to make sure you don't get to that point. Right, right. Would you ever make a big acquisition in China? And if not, aren't you missing a huge portion of the world? Yeah, the answer is we would. Yeah, we would. Have you looked? Oh, we've been made aware of some things, yeah. Are you concerned, on the flip side of the corner, are you concerned that the rule of law is different, that the accounting might be opaque? Well, I'd want to be sure I understood the accounting. Obviously, some businesses, that'd be easier to do than others. But I know the laws, the customs, the accounting, the people better in the United States than any place else. So there's some small hurdle in many countries to get over, which I can get over. I mean, but I just don't, it's just not as easy as looking at something where I already know the answer, you know, from previous transactions or something of the sort. So it's easier to make a big acquisition in the United States. I have to do more work if I'm looking beyond the borders. But I love the idea of doing it. When we made the acquisition in Israel a dozen years ago, you know, I didn't know what the tax rates were there. I didn't know what corporate law, you know, I was, I suspected that it would all be answered satisfactorily, which it was. But I didn't just automatically know it. It seems like you're more open about doing a deal in China than previous conversations. I don't think so. No, I, no, I'm open. Yeah. We made, you know, we made two decent sized stock acquisitions there and that worked out fine. Those are? Well, PetroChina and BYD. BYD, yes. Yeah. BYD was Charlie's, but Charlie's very well-versed on China. Right. The trade, the U.S. trade deficit has been widening. And of course, a lot of that has to do with our trade with China. Is that something that worries you? Well, I wrote an article about it for Fortune and the trade situation many years ago. And when, when our deficit got to be large in relation to GDP, I don't think it's, I don't think it's essential to have a trade balance, but I, I, I think that a trade deficit gets large and, and it looks like you have no way out from it, that that can be a real problem over time. I mean, you're, you know, you're, you're shipping little pieces of paper to the rest of the world and they're shipping you goods. I mean, people are working, making underwear or shoes someplace, and they get little pieces of paper from us. And it gets very tempting if you've done that enough to make sure that those little pieces of paper aren't worth very much over time when they want to cash them for something. So you don't want to have, we don't have any problem running trade deficits, but, but if we ran really large ones and we sort of worked ourselves into a box where they were, we didn't really have a solution to get the numbers down. It could be a problem. And I wrote about it one time, but it's, it's kind of a nice thing, actually, just, I mean, wouldn't you like to have something where you just send out little pieces of paper and somebody keep supplying you with their food or your, you know, whatever. I'm living it. You're right. Exactly. And we call them credit cards in the United States. Exactly. Yes. Yes. Okay. And last question, China's facing its slowest growth in nearly three decades. The leadership there lowered the targets, I think, to around 6.5%, 6%. Are you concerned about this slowing growth and the impact on global markets? Well, I don't worry about in terms of global markets. I mean, China's going to grow a lot over time. I mean, they, when you think of what's happened, well, this is 1949 or whatever, you know, but there's been nothing really like it. I mean, you had 20% of the world's population at that time, perhaps, really hadn't remotely achieved their potential. I mean, the intellectual capacity, they had a decent soil, all kinds of things. I mean, and what's happened there almost is beyond belief. And that game's not over, but we've had incredible developments in the United States. I mean, you know, real GDP per capita is six times what it was the day I was born in the United States, six times. And we thought we were pretty confident and everything. No, my parents wouldn't have believed it. I mean, they would have thought, you know, that this kid has really got it made, you know, I was born in the United States and it was true. I mean, we had this tailwind and China's had a hurricane behind it, you know, in recent decades. In a good way. Absolutely. Because you're comparing to the tailwind of the hurricane on your back. Yeah, at their back. And they've found a way of life that is dramatically different than existed 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 of size. I don't think there's ever been anything like it. We've done it too, but it took somewhat longer. I mean, it was more stretched out. It was a remarkable period. But, you know, when you go to, I first went there in 1995 and then they regarded it as a miracle. And then I went back 10 years later and it was a whole different country beyond that. Warren Buffett, thanks so much for joining us. I'm Andy Serwer. You've been watching Influencers. We'll see you next time.