Daily Journal · 2017

Causerie au coin du feu après l’assemblée 2017 du Daily Journal

15 fév. 2017 1 h 48 min vidéo

Source : Daily Journal · intégrée depuis l’original ; nous ne l’hébergeons pas.

Une fois l’assemblée officielle 2017 du Daily Journal terminée, Munger n’est pas parti. Il s’est assis avec ceux qui étaient restés et a répondu aux questions pendant presque deux heures de plus — la transcription a été établie à partir d’un enregistrement d’environ une heure quarante-huit. Les affaires de l’entreprise étant réglées, on est ici plus proche d’un Munger qui pense à voix haute que d’un Munger qui fait un exposé.

Pourquoi la regarder. Le format de la causerie élimine le remplissage des points trimestriels et ne laisse que l’essentiel de la sagesse pratique. Il décrit son habitude de lecture (« Je lis trois ou quatre journaux au réveil… et j’ai toujours deux ou trois livres en cours »), et fait valoir que c’est la préparation qui donne le cran d’agir quand une occasion rare se présente. On y trouve une variation typique sur la façon dont même les entreprises dominantes — DuPont, GM, Kodak, Xerox — finissent par se faire dépasser, parce que le monde ne cesse de changer et que les douves s’érodent.

Fils marquants : l’investissement concentré et la discipline de la carte perforée ; pourquoi il refuse de parier contre la maison (« Je n’aime pas jouer à contre-cote ») ; la famille, la philanthropie, et sa conception d’une vie bien remplie. À associer à l’assemblée principale de 2017 pour avoir la journée complète.

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Rich why do you want to strain and feel have more danger when you're already buil rich as Warren says what difference does it make to H has an extra zero on his Tombstone but Charlie for return on inv Capital isn't that already taking into account leverage though return equi be enhanced by leverage return inves Capital not necessarily enh by L no of course everybody would rather have a business High return on Capital Wall Street Journal what's your habits in I read 3 or newspapers when I get up in the morning and then I always have two or three books that I'm reading I kind of go back and forth between them and that's what I do that's what I've done all my life what are your four papers Wall Street Journal New York Times Financial Times LA Times no Washington Post be upset no watch well I heard you speak about like going to medical school that's a lot of work you're not living very high or this or that but later you're a doctor and have a better life that's the bir gratification so Charlie you're the chairman of the this American Hospital you have any recommendations or any sus to well it's been a very I took that because it was basically a losing hand and I play so many winning hands I thought I should force myself to play a losing hand quick I must say it's been very difficult thanks so much thank you do you believe in like a single Health Care payer system or I think a single fairer Health System would work a lot better yes I think it will eventually come I the existing system is a ridiculous Ro gold it's ridiculous system ridiculous how should we help our children to avoid what jealous well you can't we don't have one way of doing it we have certain things we avoid because we don't think we have the competency to deal with them and we have certain things we kind of like because we're used to them so we don't have we don't have just one set of rules we don't have any formulas that are exact or anything like that and some of the stuff we do we just know it's a little better than our Alternatives we're doing all kinds of stuff now that we would not have done Apple stock in the old days he seemed like very straightforward and but you say I get a million letters from people want to go to work for burshire want to come work I sometimes get a check they'll send me here's $50,000 I'll pay this to work for you I sent the 50,000 back I will say that it's a kind of a Brash thing to do when I kind of admire it cuz it's kind of a smart ass stunt something I smart ass when I was young myself but I'm not looking for another starting helper or something I'm playing out the end game anybody who's playing anything else but an end game when their 93 is crazy it's an end game Charlie can you uh to recognize that he has some flaws okay so you bet against the jockey not against the horse necessarily well no I everything about CU I don't McKenzie that's Skilling came out of McKenzie there a lot of manipulative types of M so is it just simply an observation of the people more so than the quantitative factors you don't need to look at the balance sheet when you're looking at the person well I can see the Chain Letter aspects of the game okay and the huge leverage and the huge he was just you're sort of building a chain letter it's intrinsically sort of dishonorable thing to do because you're nature thing you're you're doing something you can't continue on its own Mo motion you making it look like the will so it's intrinsically sort of dishonorable so I don't like chainlet operators I don't like drunks I don't like people that puff and lie I don't like people that raise prices on drugs that people have to have by 500% overnight just so just a lot of flags were flying Char yeah um I'm work with Yahoo finance my name is Julia um we've seen a lot of folks boycotting retailers because they sell Brandon merchandise and then vice versa because Starbucks want to have you seen these boyc I don't like all that I basically I'm not in favor of young people agitating them trying to change the whole world because I think they know so much I think young people should learn more and Shout less so I'm not sympathetic for anybody young people are out in the streets agitating I say they H you know that's not my system I think you can you got Hitler or something you can go out and agitate but short of that I think the young people ought to learn more and Shout less did you personally they ought to act more like Chinese did you personally know Richard fan I know him slightly very slightly what do you think of him well he was a genius on the other hand he was a screw ball he absolutely was nuts about screwing a lot of different women and going out after the wives of his own graduate students that's disgusting so he had this blind spot know and in physics and teaching he was one of the noblest people we've ever had but in his personal life he was a little nuts Charlie I have a question about real estate any investments in the cast way back when I look at real estate or stocks real estate is just easier to evaluate you know you comps cash flow and uh replacement cost it just seems an easier game than the equities Market provided that you don't use real estate yeah real estate the trouble with real estate is everybody else understands it then the people who are you're dealing with and competing with it they've specialized in a little 12 blocks or a little industry they know more about the industry than you do so and you got a lot of bullshitters and liars and Brokers so it's not a bit easy it's not a bit easy the trouble is if it's easy all these people a whole bunch of ethnics that love real estate you know Asians atic Jews Indians India they all love real estate they're smart people and they know everybody and they know the tricks and getting this you don't even see the good offerings in real estate they show that the big investors are deal it's it's not an easy game to play from A's point of view real estate whereas stocks you're equal with everybody if you're smart in real estate you don't even see the opportunities when you're you're a young person starting out they go to others the stock market's always open it's adventure Capital sequa sees the good stuff you could open an office joeo venture capitalist startups come to me it started death you know you got to figure out what your competitive position is and what you're choosing real estate has a lot of difficulties and these little those patels from India that buy all the motels they know more about motels than you do they live in the goddamn Motel their they pay no income taxes they don't pay much in work's compensation and every time they get they fix up the thing and buy another motel you want to compete with a pet tells not I to your left not I Charlie I guess disc questions I wanted to dig into this a little bit more you and Warren throughout your business history you were incredible at judging people right whether it's Mrs we were we were pretty good yes what I mean what was it that you and he looked for you know and what you what were mistakes that you made that you learned from along the way in judging you know who would be good business partners to work with well first there's some very good people in Warren's Family one of whom I worked under which was Fred Buffett so we had people we knew well that were really noble people so we had we had we had bases to compare people against and we had bases to compare against in terms of capacity and talent and so forth so we had a lot of data in our heads that helped us and I think we had some genetic advantages not IQ points just absolute quirks of nature that made us better like what was it Harry bottle what was his name yes Harry bottle one of my earliest tell me tell me about Harry bottle and what you saw on him that was so uh well I'd worked with him in a electronics business got in terrible difficulties and he'd help he'd help us work out of that business trouble by downsizing he knew how to do it and whon had a business that needed downsizing and Wen did not know how to do it so I put those two together of course it worked well Charlie could you talk about the episode at Solomon Brothers and what you really learned about people from there as well because I know what I learned is easy money and easy leverage and so forth in investment banking creates a culture that's Envy jealousy craziness overreaching overleveraging it's a very hard business to manage in do was out of control the mty was these people want for cir if one jerk got $4 million some year the other guy was Furious he only got 3 million and they just see and caused trouble it was a very difficult business to manage I think a lot of easy money that comes into Finance just ruins practically everybody uh no thanks okay any thoughts on Apple Corporation well it's a very odd thing for us to do and obviously we've got no special insights as to how sticky Apple's business is app whole supply chain is like one man with two million employees that's very peculiar and the man is not perfect and on the other hand apple has a very sticky bunch of customers will they be able to keep that going and if so how long I don't know but I think the chest are pretty good it's going to be quite sticky and that's why we bought it but as I say we may have a slight Edge in our favor there but it's not a big Edge it's we're doing that because we don't find the stuff we used to find where we knew we couldn't lose Apple we' merely got we think is a little Edge we don't have a big Insight that can't fail but if you can't find if you got the money you have to put it somewhere and you can't find what you used to like you have to put it with what's best available it's a nice problem to have to have so much money we shouldn't really be complaining about it got harder the reason it got harder is we got so much money we bought that Coca-Cola was a million shares it took us eight months to buy a million shares of coke we were we were buying like half the trading every day it's hard to get into all these big blocks are you good friends with j or you no I just maybe I've met him once or something I think I basically I basally think he's right about his basic approach other people are not going to match the averages and he is and he's he and his idea has succeeded and he succeeded and he was right on the he's kind of a one trick Pony I don't think he has another he had one good idea in his lifetime he wrote it very hard it's all you need that's he's an interesting example he had one good idea he pushed it hard and it worked you don't need a allot of good ideas but you do need one can you talk a little about byd and what do you want to talk about think what that again was something we never would have done in the early days when I got into that through Le byd had been pounding down so hard it was a it was a gram type stock that was a gram type stock in a wasn't exactly a startup but a small company would you see byd doing the infrastructure here in the US or no i b is now going into monals they'll do monals in China they wouldn't do that here in the US though oh they would but I they were pretty dumb monal in the US have been a peanut business forever hard in China they can get permits China they just go do it how about energy storage well the by is begging energy St already happening here in the US of course everybody's going to do energy storage you got to time shift the power if it comes from either the Sun or the wind of course they going to be a lot of storage this might sound like Max plank chauffeur kind of knowledge but when it comes to finding the sell price intrinsic value of the company you want to compare that to the market cap of what just byd let's say how would you oh that's hard and again we've learned things there when we bought in we could see that a venture capitalists would have paid three times as much for that kind of a deal so it was cheap as a venture C and we could see it was a good Venture Capital thing because the guy had worked minor Miracles already so we that was a cheap stock but it was one that took some special insight and I wouldn't have had it Lee what it's it's it's leelu who found that and once we were in it I got to know Wan Fu even though he can't speak a word of English and W Chan fu is a genius and he's shrewd and he's honest and he's fanatic and he loves his company and so on and so on and so on and what he can do is just incredible he learns whole new technologies and so it's mostly qualitative it's every it's it's partly what they have and it's partly what it's quality partly I'm betting on The Horseman out there I mean because he's on the and he's got a bunch of Chinese young Chinese you can't believe what those employees do he's got 230,000 Chinese working for him two Berkshire only has 460,000 employees what it's a lot of employees and they can do things you can't believe you look at those young Chinese girls would you and would you buy the whole company if you if they'd allow that I don't think so because one of the reasons he succeeds is the Chinese are proud of a eighth son of a peasant that creates a little company all himself and is doing so far and a lot of the other stuff they're doing joint ventures and Automobiles their joint ventures with the West was already ahead so in a sense they love and are proud of their own man the son of the peasants who did it all himself and it's still Chinese so I wouldn't want to destroy that Chinese image by buying byd it works better the way it going and but you're right I'm betting to some extent on a person I was in their battery separator plant there about five companies on Earth onic battery separators that goo comes bilaterally and hangs together through its own chemical something cohesion it's the most complicated damn process you ever saw it's very hard to do if you don't do it exactly right the battery fails he just learned that boom what he needs to know he just figures out there are many people that can do that do you see similar qualities in an Elon Musk with somebody of that sort no I think that the Onan Fu knows what he can do and what would be really difficult I think he on mus thinks he can do anything I'd Rather B on the man has some limit to his self appraisal do you think Mr Bezos knows the limits of his skills way better than you think Bezos is utterly brilliant and utterly remorselessly ambitious I would I would never bet against Jeff Bezos did you ever meet him yeah met B you mentioned earlier about cocaa becoming a little bit less efficient than they used to be for the first 100 years all that caffinated carbonated sugar water with the same flavor just swept the Earth every year more money came in they were drowning in money for the better part of 100 Years of course it was interesting but of course that kind of spoils you and now the basic stuff is going the other way do you think Coca-Cola and Pepsi still win the sparkling water battle I don't know I think they're both very strong companies and I think they both have a lot of momentum in place and do think do you think if they were run by 3G they would do better or worse well I guarantee they'd do a lot better the second year if uh GLS came to you not you to make a new company today who glot there's an article turning 2 million into 2 trillion it's about creating a company that would be worth two trillion I know I gave the talk today what if he came to you today you wanted to do another company what would you tell him well I wouldn't do that because I did that only retrospectively in other words I knew the outcome when I created the story of course that's a lot easier than starting now and projecting the future so I can explain the past a lot better than I can predict the future surprise and uh and by the way that talk it was a total failure when I gave it's been a total failure ever since I think it's abely right and there's a lot of me learned in it and a few nuts like you make us something out of it but in terms of the greater world I bored the people some of them I fell asleep it was the most fail talk I ever gave and so I published it when they did poor Charlie's Almanac CU I still think the basic lessons are right it's just it's hard to understand most people don't understand basic psychology very well Charlie looks like you hit a home run with the physic musics Institute in Santa Barbara well all I did was create a building they already had the Institute but it looks fantastic the whole idea and everything it's wonderful so might what you can do if you have a lot of intelligence and unlimited money how about how about a Munger Library somewhere AER Library like a Presidential Library AER Library how about that no I'm working on another student building in UCSC Charlie what's uh what scientific innovation going on right now that you're really excited about thing that you're really scared about I really am deeply aware of this Agricultural Revolution and every takes it for granted it wasn't you know it isn't like agricultural had ever productivity ever increased by 300% in a few decades I mean it was just amazing what happened and of course the world needed it terribly and so I'm quite impressed and more of that's coming all this stuff about genan splicing to make plants grow better and Jean splicing to make domestic animals produce better all that's coming someone starting to work already and they'll push this crossbreeding of seeds in the ordinary a few more it's it's a hugely important thing that's happening and the world needs it terribly and it changed the whole world for everybody we couldn't have this civilization without the food and there's not that much arable land we have to get more product out of our existing land and our existing land the way we're farming it intensively is degrading and the reason we produce all this stuff is we pour chemicals and so forth into the land fungicides herbicides and anyway it insecticides do but it's just amazing what's happened and how cre the miracle rice the miracal grains it's just and so I'm quite impressed by the fact they keep doing that stuff and to have 1% of the people produce all the food for America on their Farms when we used to have 80% of the people it's just a huge change in The Human Condition and we'd all be doing stupid labor instead of running around on airplanes to hear people talk if it weren't for all these revolutions that our predecessors created for us so I am I always I just found that quite interesting and we need it I'm Costco you know bu a lot of produce now from vegetables grown in hot houses and by and large those are ethnic those are Chinese the Chinese who are good they you know from the six acre hot house they really know where every damn blade is growing and it's not that different from rice growing I mean they're just very good at it and that has a lot of potential that isn't that is coming so I like the agricultur stuff most people just ignore it we take it for granted but I'm quite impressed by yeah is America sufficiently proving to be a hand business in the last is America sufficiently proving to be a ham sandwich Enterprise in the last few months well there's a lot of good left in the American economy and American people partly because we're taking in so many talented people from these other nations think we've taken in from China India even Japan it's a lot of human talent and in the old days we got the poor people you know and that was harder because and now the Chinese that come here they're aren the poor Chinese they're the well to- do Chinese and the and the children of successful Chinese families that get high grades and so forth the same from India every once in a while I'm eat an Untouchable who has just gotten out through the main Technical Institute of India and succeeded but most of the Indians I made are all from the upper cast of India we're sucking the brains out of India and of course that's good for us same with China same with China is that a tragedy for China and India though what is that a tragedy for China and India though well I got a lot of people they have a lot of brains left yeah you can't think about two countries people shortage is not when you can shft a population that big you'll get some smart people about Comm do you have any like mental checklists that help you stick with that or prepare before you get to your opportunity well if you haven't prepared you won't have the courage to seize it when I bought all that's stuck that J the journal has in like one day you know I knew something about the Bank of America I've lived in the culture I've known the Bank of America Bankers I know the a lot about what's right with it what's wrong with it I knew a lot I knew a lot about wills Fargo I knew a lot about US Bank so did you pay cash or did you have to leverage up that day I no I had cash do you have any thoughts on Chipotle and the food safety issues there Chipotle and the activist involvement of that company and the food safety issues well I do know this that if you run a business where people have to trust your food you just can't afford to have a scandal in food quality Costco just sweats blood to avoid now everyone know how we get a few cases of some something you know some fairly mind nobody gets away but we just are fanatic about preventing it and stepping out hard when it happens and so forth and they got careless at that and in uh you know the Fried Chicken company in China long y l yum brand and of course it hurt him terribly you can't afford to have a scandal if you're selling food and when the people adulterated the baby formula in China killed the people that did that they're dead and they didn't take a long time doing it no lot of appeals or anything kill our babies to make a little more money you never will be missed I have a little list off they went to the great beyond Charlie what about trans what I don't know trans what is trans di so trans dimes um so their supplier of Auto of their supplier of aircraft parts to Boeing and Airbus and Aerospace and defense companies and there have been comparisons recently between trans dime and valian and was you was curious if you had any thoughts on whether those comparisons I don't know anything about trans but of course it's generally a little easier to cheat the government than is to cheat anybody else and so a lot of people try and cheat the government of Defense contracts and of course there are suppliers also if the whole culture has some cheating so I regard it as a little bit dangerous territory so but I know nothing about transplant did valant clean itself out or is it still a sewer well I'm sure it's way better you'd stop you'd stop stealing if it already cut off your left hand you wouldn't want to lose the other Charlie did you know suar Redstone in law school and how do you think he could handle could have handled his succession plans differently for his well I never knew some Su Redstone but I followed him because he was a little ahead of me in law school but Su regant was a very peculiar man almost nobody has ever liked him he's a very hard driven tough tomato and basically almost nobody's ever liked him including his wives and his children and he's just gone through life there's an old saying screw them all except six and save those for Paul bears and that is the way suar Redstone went through life and I think he was into the Paul Bears cuz he lived so long so I one thing I've used someone all my life as an example of what not to do to he started with some money and he was very shrewd and hard driven you know he saved his life by hanging while the fire was on his hands he's a very determined IQ Maniac but nobody likes him and nobody ever did and do when he paid for sex in his old age cheated him you know he's had one disappointment after another it's not a life you want to admire you I used summmer Redstone all my life as an example of what I don't want to be but for sheer Talent drive and shrewdness you would hardly find anybody stronger than Sumer he didn't care if people like him I don't care if 95% of the people don't like me but I really need the other five some are just many of them are here right now yeah do you have any thoughts on some of the smaller networks with quality content like vion for example with strong Brands any thoughts on their future I have the general impression based on 60 years experience in the neighborhood that the movie business and is a tough business now a lot of people have done well at it but I don't know how to create a Star Wars I don't know how to sell it for a price like that I want to let somebody else make money in those diffic difficult ways it's I regard the movie business as a tough business now if it's your only way up and you're good at it why because you have to do it but I don't I don't even think about those things I'm not good at I don't take Netflix who did the House of Cards Kevin the guy who gave him the money Netflix did but HBO turned it down and that was really stupid it had worked in England it couldn't fail and but I'm just not attracted I don't want to try and be Reed Hastings or did you know S price found very well good guy or very good guy cranky but very good human being honorable very honorable what he liked about Costco he thought such an honorable way to make money try to make the stuff here selling very good and very cheap for the people who bought it and he was right it was honorable and it was he did it very well so I like but he was very do you think Walmart can turn into seers well not for a long time Charlie do you think business modes are becoming more Fragile with technology and transparency well they always they our ancestors were pretty good at creating fragile modes too I think it's natural what's up in one era think of what I've lived through in terms of people Dupont looked impregnable General Motors was the strongest Corporation in the world Kodak was one of the boom WEA they gone Xerox I mean it is hard to keep winning and the world keeps changing look Daily Journal it's hard imagine going into computer Pro programming of dealing with a lot of agencies all over the world including South Australia little company like this it's not a bit easy and if we hadn't done it we'd just be one more dying newspaper and can you talk more about the Airlines and what's changed from a couple decades ago to now well I don't know that much about it but I do know that it's more concentrated now and there's no real substitute for it is like we have a substitute for hair travel and it's down to a relatively few players in the old days they could always start a new Airline they have nothing but young people they pay the pilots less they don't have a union and they could just start hitting the prices they just kept ruining the business over and over again and even now Southwest is just starting to go to Hawaii so the vicious competition is Continuum including people doing it for governments own these Airlines and do it to show off strong they are so I don't regard it as a perfect model and I don't think it's the greatest idea we ever had it's just something considering how pounded they were and how the world has changed a little we thought as I say we had a little Advantage by that particular gamble but is not that we it's not a Sange is there is there an Outlook on oil prices bettered I don't think oil prices will make that much difference over the long term to the it's not that if the kerosene doubles in price I don't think over time I don't think it matters that much to the airlines it's still it's it's you put 100 people in an airliner and fly somewhere it's pretty efficient and you can do a lot of flights per day and that's worth a lot of money people will take the trip and not going to be a new airport in Shanghai you know a lot of the airports are fixed and a lot of them are out of capacity it is it's obviously better than it was in the past whether it's good enough so it will do well I don't know also if it starts working you get paid in advance for the tickets so there's no credit and a lot of people lease the airliners so if you make money you can pile up pretty rapidly in cash is there a reason Jet Blue wasn't in there I don't know anything about individual Airlines NE do we bought a bunch it was it was a sector bed it's not a B on individual Airline when Industries like Airlines or railroads rationalize and turn around how do you and Warren know I mean have you been keep for 50 years it was easy to say the where we went it was all over and then we went in and the airlines it's not over but it's a it's a little bit the same story years of consolidation and bankruptcies three four five six big bankrupts already in the airlines So for 50 years you've continually read about these industries even though you have disdained for them yes I talked about patients I have read Barons for 50 years in 50 years I found one investment opportunity in Baron out of which I made about $80 million of almost no risk I took the $80 million and gave it to Lelo who turned it into $4500 million so I have made $4 or500 million out of reading Barons for 50 years and following my idea now that doesn't help you very much does it I'm sorry but that's the way it really happened you can't do it I didn't have a lot of ideas I didn't find them that easily but I did pounce on one which one was that which idea was that it was a little automotive supply company anyway it was it was a cigar book is that KW no this was I forgotten the name of it but it was a little it was the Monro shock absorber and all that stuff the stock was a dollar and the junk bombs was paid 11 38% were 35 and when I bought the junk bombs they paid me the 35% and they went right to 107 when they called you know it was and then they and the stock went from 1 to 40 but of course I sold my stock at 15 but what did the article in Baron say yeah what was it said it was a cheap stock only but that's a very funny way to be to watch for 50 years in act once how long it take you to make the 15 bager on that what how long did it take to make the 15 uh 15x on that stock it went from 1 to 15 right maybe a couple years how long did it take you to make the decision to buy it once you read the article oh about an hour and a half what was it about that company an auto supply company that was well I kind of knew based on experience how sticky some of that auto secondary Market was and how many old cars needed Monroe shock ex serers and I just knew it was too it was too cheap I didn't know it would work for sure but I know that I knew that I just as I say people were afraid it was going to go broke obviously if their Bonds were selling at 35 Charlie how do you define the uh Define the edge of Circ of Competency what's your definition of your circle of competent competency well each person says his own and but it really helps to know what you can do and what you can't I got whole things I don't like to gamble against odds I have not lost $1,000 in my life betting against racetracks casinos if the odds are against me I just don't play I don't even want to amuse myself playing against the odds now I have occasionally played Bridge against better players where I'm really playing for the instruction which I can afford but that's because I like I like the learning but I won't do very much even with that I do not like playing against the odds could you maybe say one name that you invested in when you ran your partnership that performed beautifully for you and explain as a case study what it was about that company that attracted you because there's not much about the M wheeler partnership I had all kinds of things in those days first place in those days we had what were called Jewish treasury bills and that was event Arbitrage if a company sells out $100 a share and the stock selling at 995 for 60 years people just went in and bought the stock at 95 and made the 20% per Anum with a little leverage for 60 years Graham Newman Warren I and Goldman Sachs made 20% per year on anything we did in the event Arbitrage what happened was when stock Brokers were all on commission the deals announced every stock broker can call his client say oh your stock is way up maybe you should sell that you know they're get any commission so you had dumb selling and so of course we did well nowadays the people do not do all that well in the EV Arbitrage it's too tough the deals are it's just too crowded and but it just worked fine for all those years we did all kinds of things in those days we can't do anymore yeah I was speaking with Rick garan and he was saying that if he was to start a fund today he wouldn't do it and he says he doesn't think it's hard because the size of a fund like Burkshire limits you to large companies he just doesn't think that there's the same opportunities anywhere there aren't that's why people come to this meeting speaking of opportunities Charlie could you talk a little bit about John you know your thoughts on John Malone as an operator and what you think about the cable industry's going for I do not I've always been troubled by the cable industry for one thing that was thinly disguised Barberry when they got the franchises I don't like to even think about a lot of scummy places that are getting their franchises by bar so I've just I've sort of ignored it not I just I didn't want to think about it Malone is obviously something of a genius and he's a fanatic and doesn't like to pay taxes and he's been very successful and I've just ignored it I just don't want to think about it so I haven't I have can afford the luxury and I don't have to think about everything but the starting bribery they got the franchises like I just didn't like it so I just haven't thought about it and I'm still not thinking about it and I the movie business I don't like either because it's been a bad business and crooked labor unions crazy agents CR crazy screaming lawyers idiosyncratic Stars taking cocaine this just not my this just not my feel and I just don't want to be in it and you these other stuff I find out with the other stuff that I like we've got so many places in birkshire that just do their work pretty well I like that you'll be amazed the SE candy they make the good candy they work on just we got lots of places like that our utility business we probably have the best run Utilities in the United States we care more about satisfying The Regulators we care more about safety records we care more about everything we should care about and we bought Northern Natural Gas which Enron owned of course to show more earnings and more cash they just done no maintenance goddamn pipeline can blow up and kill people and the minute the ink dried on that we everybody took six months off and we sent all these pigs through the pig name for we went through the pipes pipelines and we just caught up on all the Deferred maintenance we were not killing people that's the right way to behave en run is the wrong way to behave imagine deferring the maintenance on a pipeline so you can show more cash it's it's disgusting it's like killing people on purpose so you can make more money I mean it's it's deeply immoral and so but they fix it fast of course I'm glad to be associated with people who behave like that Greg Abel's a terrific operator and a terrific guy and he actually in Iowa Nebraska side Nebraska has Public Power so they did not they borrow tax exempt build a new plants General Electric they're paying 3% on the debt or something and any could run a big Public Power agency our Iowa utility the g runs right across the river his rates are miles below Nebraska Public Power entirely financed you know and the other utility in Iowa our rates are half theirs of course I like being associated with a company that can deliver the power quite and more than 50% of all the power in Iowa comes from the wind so we're and the farmers are glad to have a few wind machines Out Among the corn and so we just quietly created a revolution there The Regulators the customers everybody likes it of course I like people do that then B is full of that stuff do you think that cheaper solar over time as it gets continues to get cheaper and cheaper does that pose any potential threat to the utility business as people kind of take on their own generation is there potential for death spir well Berkshire has something like8 billion dollar worth of solar almost all of it in California we got taker pay contracts from the two big utilities and so we have and that the way we leveraged it is like Financial we'll probably get 15 or 18% or some ridiculous return on our e and just sitting on our ass all these little mirors sit out there in the field don't you have to polish them once in a while and they'll get better but they won't get 50% they'll get there's a limit to how much better they can get and the first one we had they track not at all they just lay there the second one they track east to west but not for the celestial stuff that goes on changing the seasons the next ones will be pointed right at the sun through every kind of and that all makes but there's a limit to how efficient that stuff can get on the other hand since it's free and coming in from the Sun and doesn't pollute and there's a lot of worthless desert in the United States it's it's a pretty sensible way to get power eventually and so of course there's going to be more and more of it and but you don't think the ability to generate so generate electricity at home or on a business's own property is that going to be some sort of threat at some point to the revenue model for all the well people try and make money out of that grap I am very skeptical about all this home stuff that works if the utility will pay twice what the power is worth then you can reduce your electricity bill well why should the utility pay for twice what the power is worth you know and so we think it's more efficient to have some big Place Like Us create the solar and just s of utility do you talk to Ted and Todd the new investment guys at Berkshire much not much but I talk to them some and they're they're different it's like they're clones but they're both good in their own way and they're both they both love ber and they both made contributions did you think of the incentive where each one gets 20% of their compensation from the other one's performance who thought of that incentive I thought that was that was brilliant it's brilliant but has change things at all it's my own idea and it looks good to you people look good to me when I did it I don't think I don't think it's changed any Behavior at all Charlie how do you feel about auto dealerships with their service component and the low Capital requirements that is very interesting I don't want to be in the bottom 80% of the auto dealer I think these people are well up in the top 20 and so if we got 80 dealerships making 3 million a year after taxes that's $240 million all these dealer protection laws it's entrenched we take the real estate which send to be very good and stick it in our insurance companies where it's a decent Insurance asset it's what I call okay so that's great then it's no it's not great it's okay if it's okay to you it must be pretty great no it is it's it's not pretty good to me it's okay I would prefer doing it to not doing it but nothing there's nothing exciting about buying a bunch of auto dealership also but if you got a 90 billion doll a float sure you know the idea of buying a bunch of auto dealerships that dominat it's okay also do you know Norbert Le punch card capital and do you have any thoughts on I don't know what why should I know him Charlie going off of the auto question I mean what do you think about the Advent of self-driving cars how's that going affect the ecosystem on insurance scrap value resell values well you could change things so much that Geico would be a bad business everything can change that's the nature of the game is that your great businesses are being eroded by something at all times I think it's a long time in the future I think it's very complicated subject after all if you're in a self-driving car it works better if all the things are being self-driven by the same people we have that already the monor rails don't have operators nobody's driving the monor rail it's but that's one guy owns the whole thing including the roadway the minute you're sharing the roadway with a lot of other people if I'm driving it on the road and some guy goes up and stands there with a machine gun I will turn around I'll do something the goddamn computer won't he's not programmed to care about machine guns Charlie what do you make of the Legacy that you and Warren have left I mean do you have any idea of the sort of impact you've had worldwide or does it always surprise on investing on just basically thinking not just investing but just well I think we've had some effect um but they're still teaching the efficient market theory in the business and the old ideas die hard and by the way it's roughly right it's just the very hard form which everybody believed really they believed it was impossible they think it was rare they thought efficiency was absolutely inevitable was like physics I call it physics anding that's what they had in the finance field they wanted to make their subject like physics now I what kind of a nut would want to make stock markets like physics it ain't like physics it's more like a mob at a football game do you need a hand with that's how you open the candy I have quite a few too Charlie would you like to know why I think you should know who Nobert Lewis yeah because he's he follows the Monger system his hedge fund is called punch card Capital based on the philosophy of punch card investing and since 08 he's killed the markets and done well for his investors by being invested in just three stocks Wells Fargo Burkshire ha theway and BYU I just thought you'd be interested well I think I am interested and I'm not surprised and not surprised it's work it's just what I recommended and he pick some of the same stocks right well he admires you very much well think of what a simple way that was to get rich right I'm going to share this with you gentlemen because otherwise I'll eat it on since you can open the box we expect to see you here for another 10 or 15 minutes say what the hell is you open one box and you got another charie were you surprised on Election Day of course of course I was surprised on Election Day you lose sleep for a few days what did you lose sleep for a few days well no because I expect to be disappointed with politics so Charlie you are able to change War warrant from RR to high quality companies was there any change that he brought in your like any of your systems well I didn't change him that much you know War would have gotten there anyway maybe I accelerated in 6 months but War would have figured out that what he was doing wouldn't scale hey Charlie um you talk a lot about your grandad but I hardly hear you talk about your dad Alfred merer I was wondering if you had any thoughts about some lessons he taught you so that was right found to my dad my grandpa Monger was more disciplined than my father my father made a good income as a lawyer which he carefully spent except for his life insurance and his houses and so on my grandfather always saved his money and when the Great Depression came he could save the whole rest of the family and so actually I remember more when I talk about the investors in the Alfred Munger Foundation that I for my father and what does that's not my grandfather right and what does that do that well I'm going to give away all that money before I'm dead if I last a little longer it's not that much money what do you want to give it to whatever appeals to me at the time I don't ask anybody how do you think about creating impact through philanthropy what how do you think about creating impact through your pH anthropy doing what they're giving away money how do you I do I give anything out please I regardless just a tax exempt Bunch ofer money I've got no staff I just do it do you have any criteria that you follow or what kind of train change are you training I do it when I want to do it and I give where I want to give it what are your hopes for your grandchildren well naturally we hope the grandchildren do well and any grandchild I've got one who's running a little tiny partnership but my grand are all doing different things and got one to Google a comp software engineer are there any other PA itical besides Barons that you've read for 50 years and do you have any more inspiring anecdotes from uh from the out Forbes Fortune Wall Street Journal Bloom business week I've never bought I BR Fortune for 60 Fortune for 60 I've never bought a thought I was not kidding about that diver gratification isn't it true that you got a new car when you were like in your 50s or 60s that was the first new car I bought them for my wife but I always bought a Cadillac that was about 3,000 miles on it way cheaper P around and Coach airplanes has to go to the berer halfway meeting and coach and ber show stand they were all coach too they'd stand up and clap hey Charlie I wanted to read you a quote and get your opinion on it My Religion consists of a humble admiration of the illimitable superior Spirit who reveals himself in the slight details we're able to perceive with our frail and feeble mind sounds like some scientist it's Einstein yeah well he that's the way he felt what's your opinion on that well I don't have his idea that he was good at puzzles physics was a big puzzle him so he naturally loved that great puzzle in the puzzle maker in the sky that it made it difficult but you could figure it out I'm different from my of course I couldn't figure out the puzzles what he did can you rephrase can you rephrase that I don't understand the answer well Einstein has his own sland on religion there certainly no conventional theology in Ein he's not talking about being nice to other people or anything like that he just uh there must be some God out there that created these wonderful puzzles for me to solve that's a peculiar kind of a religion but that was Einstein Charlie you mentioned that uh one of your greatest treatments was family having a family can you tell us a little bit more about how what you would do differently with the family or things that you did really well with the family in terms of investing with investing into the family well I had a lot of children I educated them all and I take the results as they fall what else can you do with a family and I have a lot of very admirable children some of whom are out there today um and that's I huge blessing um one the things I like about them is that they're decent generous people one of my daughters who was there she had a friend who was married to a total Church straighten circumstances bitter divorce my daughter just bought her a house I she I think she owns the house with his other family lives in what's your opinion that's a nice generous thing to do if you're a rich wow I'm glad I having children like that not like s riched what's your opinion of the giving fled well I told Gates I wouldn't do it because I've already flouted it when Nancy died community property State I she left it up to me to decide where it went but I knew she would wanted to go to the children every wife always afraid the old man will have his money taken away by some nurse or something in his dotage I knew Nancy would want to go right to the children so I shunted more than half the Monger forun quite a bit more than half to the children so I've already totally violated the spirit of G plug I said bill I'm not going to publicly be a spokesman for something I've already totally flouted and I flouted it because I knew my wife who had helped me all these years would have wanted it that way I'm not a good example for his pledge so I won't do it I won't pretend to be doing something I really didn't do Charlie it may be a little too personal but what it may be a little too personal but is there anything that you'd like to share about your wife Mrs yeah would like that I'm say a long life has many disappointments and agonies in there I watched the sister die a horrible death of Parkinson's disease dying young 64 I lost my first son to leukemia miserable slow death at the end he kind of knew it was coming and I've been lying to him all along it was just so awkward and it was just your Agony now you just have some of those agonies that are going to happen there's not so much Agony when somebody's really old dies you know they deteriorate so much you almost don't miss them which I'm doing a good job of but no I think you just take the hardships as they come you take the blessings as they come you have fun out of figuring out the puzzles as best you can it's really we're very blessed to have the and we're in the United States we're not in India we're not under some crazy dictator like Russia live where everybody out bribe India we got a lot to be thankful for here and a lot of options we can change jobs we can move around we can do this that we get a huge ad mixture here with all the cultures of the world without having to travel so we not restricted to one their little group of Bulgarian and Farmers making olive oil or something we got this great mixture of people who are quite interesting and quite different and they're all cross Maring which makes it even more interesting now it's amazing to me there was a lot of anti-jewish prejudice when I was young and now every family I know you know they got a they're all cross married I don't I don't have a friend with a big family doesn't have a Jewish in it's all and the old ideas have sort of died how' you meet your wife and how did she accept you wife oh 52 years died seven years ago that was mutual friends who introduced us we were both divorced both the same age both had two children and all I can say I owe got of gratitude to the people that introduced us char you and Mish both talk a lot about the power of cloning great ideas and I was wondering what you think about the flaws or limitations or dangers of cloning what for example when you're not true to yourself like when does one get in trouble with cloning when it doesn't work well cloning is of course a very it's not an ambiguous world word when you use it biologically but when you take it into some other field cloning is a very interesting idea you do remove ideas from one place and bring them into another if that's cloning I do it all the time and Charlie can you take us I like cloning can you take us back when you bought the Buffalo News yeah paper and just the stress that uh you had to go through because it looked like it was going to go under right at one point for a while right take us the story about the buffal we're never the weakest in the town so we were betting that we'd be the Survivor and we were so it was unpleasant because we showed no return for a long time but the other guy finally turned up his toes he suddenly started making a lot of money so it just was delayed gratification seven years of like no profits wow and it disappears Sky rains cold on the on the note of earnings went from nothing to 70 million years pre-ex boom on the topic of cloning do you really believe as Manisha said that if investors look at 13 FS of super investors that they can beat the market by picking their spots and will add spin-offs it's a very plausible idea and I've encouraged one young man to look at it so I can hardly say that it has no merit of course it's useful if I were you people to look at what other people you regard as great investors are doing for ideas the trouble with it is that if you pick people as late in the game as bercher haway right you're buying our limitations caused by size sure you really need to do it from some guy that's operating in smaller places and finding places with more advantage and of course it's hard to identify the people in the small game but it's not an idea that won't work if I were you people of course I would do that what do you mean I would I would want to know exactly what the true people were doing and I would look at every one of them of course that would be a no- Brandon for me what do you mean by you encourage one young man to pursue it and what do you mean well the young man is my grandson who has a fair amount of money fascinated by Securities so I advise to once you start there do you think the uh Equity uh positions within berkshire's idea do you think the equity positions in Berkshire will do better for Berkshire going forward or the holy owned businesses operating businesses well I give holy own businesses will because we won't be paying any taxes on selling them and I think they will continue to grow and I think they'll do better I think the berer the wholly owned businesses of Berkshire or the 80% owned or what have you are on average better than the businesses that say the S&P so I think we'll do better in that part than the SNP and I don't think our stocks located in a corporation subject to taxation will do enough better than the a even pay the taxes but if we're buying the stocks with the float in some insurance company of course the change CH the world changes but no I would say that of course if you buy Berkshire you should not be buying it on the on the strength of its local insur portfolio look we get 8 billion the biggest market cap in the country considerable took a considerable period get $8 billion into it and it's not that big a deal with a 400 Bon billion market yet and it's not that it's was easier to get into it than other things no I people who buy Berkshire when you bought Burkshire back 30 or 40 years ago you were getting a bunch of marketable Securities in the discount and all the businesses were free and of course those people made a lot of money we outperform the market by miles in those days and the businesses did well and now we've got businesses that are averaging out doing well and our marketable security or a small percentage of our there were years when we had more marketable Securities per share than our book value per share now it's quite different and of course the market that's presentent mobile it's a different world no but the one thing about biry is we do get some opportunities people other people don't get if you're 3G and want a partner for your next deal who hell are going to come to we know we they know we're a good partner we see stuff other people don't don't see that helps Sorry Charlie moving on to one of the smaller positions in bir portfolio there was a recent uh position made in Sirius XM could you talk it what Sirius XM could you talk it all about radio assets and your outlook on radio assets with I don't know anything about radio assets sh it's a very mature market and godam radio is basically an auto market not to the radio people driving very peculiar and it's totally concentrated I don't know even what I never think about it how much of your success can be uh attributed to aram's razor and Kelly's formul well aam's razor is of course a good idea it's a basic idea it's aam razor is like telling a fisherman to fish where the fish are of course you'll do bettering with the fish are you know in those businesses that are not wholly owned but maybe 85% owned the 15% own ownership when there's massive investment within that business how does that affect the ownership of the 15% take Nebraska Furniture Mark owned by the parts of the blumin and we didn't want to sell up they love the business they're very rich they have an enormous portfolio marketable securities within their you know that came out of money left in there 20% because a lot of surplus money they've accumulated it's outside the furniture business and it's very interesting Warren says to those people who he treat kind of like Sons you know they live in the same community and he lets them control the dividend policy of the company doesn't make much difference to us the Dividends are mostly taag free he say whatever div policy we own 80% of it so he says to the minority owners just choose the dividend policy with the whole company whatever you want fine with me B's always doing things like that with the right people so is lelu I tell a story about lelu that you will like you know General Motors General Electric was famous for always negotiating down to the wire and just before they closed they had one final twist and of course it always worked the other guy was all invested so everybody feels robbed and cheated and mad but they get their way that last final twist him so L made a couple of Adventure capitalist Investments with the field and he made this one with this guy they had made us a lot of money in a previous deal and now going in with him again on another very highgrade guy and very smart and so forth now we come to the General Electric moment Le says I have to make one change in this investment it sounds just like General Electric just about to close I didn't tell he did it himself he said you know this is a small amount of money to US you got your whole net worth in it I cannot sign this thing if you w't let me put in a clause saying if it all goes to hell we'll give you your money back that was the change you wanted now you can imagine How likely we were to see the next venture capital investment and nobody has to tell lelu to do that stuff wow some of these people it's in the gene power it's just such a smart thing to do it looks generous and it is generous there little reci also there huge self-interest on there little reciprocity opportunity there for that for that well it's the right way to behave anyway and the second way it helps you and burshire is helped by its past Behavior to get see things that other people don't see but how many people would Su a redstone have ever done that would General Electric have ever done that a whole culture are behaving otherwise Ben Franklin talked about morality being the best policy but then you see the some the redstones and the icons and the trumps doing really well by acting kind of the opposite how do you reconcile that and still come out with the what no doubt is the correct coner that it's wiser to be moral well of course Sumer Redstone and I graduated from Harvard Law School about a year or so apart and he ended up with more money than I did so you can say he's the success but that's not the way I look at it and so I don't think it's just a financial game and it's I think it's better to do the other way and you sometimes you think you're getting by with this but General Motors has a letter they file out when they take something over the letter says Dear joeo major supplier to this business they've just spoken we're going to accomplish wonderful things together we but we have to harmonize the systems of General Electric with hor and you're going to be paid in 90 days instead of 30 days which is just horrible imposition on the supplier but they got a whole department that's just organized to brutalizer the suppliers into Furnishing all the money they did that with one supplier that I know and of course the sales manager said when I don't tell them to go himself the GU no I won't do that he says just bring me all the stuff we're General electric is my customer where they've got no alternative and he just raised the prices about four times with how do you feel about I think it's a mistake to be quite that brutal now they do they compete in GE based on who can get the suppliers to furnish more and more of the capital they're very tough now it's a great company that with great products and they've got some very good people I think Jeff em is a good guy but I would be very uncomfortable doing that my theory of life is win-win I want suppliers that trust me and I trust them and I don't want to screw the suppliers as hard as I can so how did you feel when Berkshire bought the GE pight what how did you feel when Berkshire put money into GE in the crisis was fine it was to work it was a high coupon and it did work when we buy something like that we're not making a big moral judgment about the company I don't think G is that immoral average style G is one of our better companies in terms of fanaticism about defect absence and they're very good on that stuff Charlie in your book you said one of your but I want to get ahead making a final Twist on every deal just before the closing I'm brutalizing all my suppliers to the last Nick on when I paid them that's not my system so Charlie you said in your almond this is one of the best you ever one that with manufacturer yeah you that was Conwood it's an addictive product people are totally hooked they're the number two person in the market they all belied in their product every damn one them sh tobacco and the Figures were just unbelievable that was virtually an open anist you're going to know nothing but money and the cancer caused by that mouth tobacco is maybe 5% of the cancer you get from cigarettes but it's not still you defin are going to get kill people with that probably have no reason to die why I it's the best deal we ever saw we couldn't lose money doing it we passed they didn't play out J priter who was then head of the trustees or something at the UN of Chicago Medical School pits are big in Chicago he just snapped it up so fast richers made2 or three billion dollars out of that but do we miss the 2 or 3 billion we would easily have had not an Iota if we had a moment's regret not an Iota we are way better off not making a killing out of a product we knew going in was a killing product why should we do that on the other hand if it was just a marketable security we wouldn't feel that the moral it was ours but it's going to be our subsidiary and we're going to be paying the people that are advertising on Tobacco that's that's just too much for us we're not going to do it Charlie is there any one question you've anticipated being asked in your whole life that you've not been asked yet good question why didn't they that some people ask me what question should I ask you that will help me anyway do you have a favorite Mrs B story you can share with us well she was very peremptory and bossy she was she was illiterate in English although she was fluent in Yiddish and she could make arithmetic complications in her head that you can't make yeah you know exactly how many yards there were in 26 and A2 by 14 quarter in her head and she was there but she was a very bossy domineering hardworking woman and it was she worked herself 100 hours a week and she had sons-in-law who were the nicest people and they worked maybe 50 hours a week after they were Filthy Rich she called them those bums it's a we know a lot of characters person the other one is we bought a business from it was half owned by a daughter of Moses anenberg she was a very wi woman and she don't have this business which was her husband's business and she was driving Cadillac her husband had died but she had a company car new Cadillac and she wanted the Cadillac to go with her onion and so she told her lawyer to ask Mr Bubba give me the Cadillac and she told the lawyer what to say said tell warrant she said okay that a lot of people give money to poor people but that's easy they get the reward and fulfillment of helping the poor and observing the tents of religion it's the real charity that's unusual is giving money to the rich so she made that pitch to War and the lawyer was very embarrassed to do it tell her tell her also to her the wholesale Blue Book which she finally did but she said but she first made the pitch that we should give her the car because of was so much more generous to give to the rich it was so more unusual that woman had an adopted child who show was a genius and so she would rent Carnegie homeall and let the child conduct an archestra Rich can get quite except Charlie can you go back to the Nicks and yours when you uh bought U The Washington Post and how that whole uh situation kind of the market cap of the Washington Post was 75 million we bought in it would you could have sold it an afternoon every single asset for 4 or 500 million so it was a it was a good business not just a gram stock but it was also a gram stock because it was so cheap and they also had a business that was likely to destroy its competitor making it a monopoly now there was only a tiny little amount of money could go in wi that's what makes it hard for you people it's a great investment but maybe it would absorb four or5 million have you seen an opportunity like that s which we did and by the way that four I it was 10 million we got 10 million into it at the top it was a billion and but we only did that once so it's a great story but now that helped us way back to have that extra billion bance she but there was an opportunity that would take B millions of dollars that's why what happens in the past in berer can't happen again that little opportunity for $10 million investment was wonderful but we don't have a lot if you look at burer you'd think we'd have 10 Investments that are AG up say 10 times we put in a billion and now it's 10 billion then we have 100 billion and 10 companies but we don't we have three or something and it's not that damned easy to find these damn things that you can identify it's not that damn easy thank you again Charlie for all your continuous sharing really appreciate it oh I'm glad you guys are still having fun doing it and I'm glad you're not discouraged you shouldn't be but you know everybody who did the value investing in my generation and plugged away you didn't have to be that smart even they all did well and yours is going to be more difficult is there a good but you know you want something to do anyway so it's kind of interesting to do so the fact it's difficult shouldn't discourage you that much is there a good systematic approach to learning from one's mistakes like so you don't repeat them is there something that's worked for you in terms of post-mortems we were active enough so we had some mistakes to remember it's hard to learn we learned a lot vicariously cuz it's so much cheaper we also learned a lot from unpleasant experience and so just doing it you'll automatically get those mistakes nobody can avoid them of course you'll learn from everyone monish is good at post moring post morm and his mistakes and what did you say when Dexter shoes came up were you for it or against it at the time well I didn't look it very hard the company it was loved by all the retailers was number one supplier to JC Penny it had it surpassed everything it was a solid earner it dominated main they were nice people and of course the Chinese hadn't come up by that time they just came up so fast and they just took no prisoners in the shoe business and they weren't just Cheaper by a little they were half priced and of course the shoe business is not that easy a business of course people bought the half pric shoes and the business just went to hell very fast but that business because it created such a huge lesson and it looks awful in terms of what the burshire stock is worth I mean we're the main charity in Maine if you call us at the time it was 2% of one year's performance that's what we lost by having that go to zero so our return from one year went down by 2 percentage points now to be sure if we bought our own stock instead of this thing you know we're not giving away our stock it's a huge error but the but we learn from it we I just think if you just keep going you'll make some mistakes and of course you'll learn from them how could you not learn from that one we've learned how awful it is to have somebody who's really way lower prices come in hard and how no amount of managerial skill could protect us now we have other shoe businesses and little niches that make 20 million a year or something after taxes maybe a little bit of that is leftover Dempster even but we just we make do okay and but don't you all have mistakes yes that are painful that you learn from them isn't that good and so but I don't know what I would do now if I'm a I live surrounded by Capital Guardian people I have over a trillion dollars and they hire all these guys that get a in business school and they treat them well and they and they divide them up and they get expertise in various places and it doesn't work to beat the indexes I knew that company when it was smaller you know 5 or 600 million and they beat the indexes by a point a year you know which was fine because they were drawing the fees off the top and the Clans now they've lag by a point of year or whatever now it is and they handle that the way every by denial they just don't face it I was there the other day and this very nice portfolio manager was very smart polished generous nice man assistant very nice polished intelligent woman and he said well you know he say we outperform in my fund which is1 billion dollar by two percentage points a year I going to raise my eyebrow I just look at it for a while he said well I mean that we outperform our competitors by 2 percentage points and I said yes and in that over performance a lot of it was a long time ago and you had way less money and that was another horrified pause and finally the woman says he's on to us we not to discuss something else anyway it is awkward you know you want to keep getting paid you like your going to work you're flying around to interviewing management and so forth and what all said and done and they did it for a long time before it just got harder and then I see people leave they say I'm not going can't manage $30 billion I'll manage three billion and now I'll all perform and they've had that happen two or three times and the new guys don't outperform either cu the new client still wants 10 stocks or something oh and there's another experiment they've done about five not five three times at Capital Guardian you follow what the great investors are doing that's going way they said we'll get the best idea from our best people and we'll make a portfol folio just of our best ideas from our best people nothing can be more plausible done it three times since failed every time now how would you predict that well I can predict it because I know psychology when you pound out an idea as a good idea you're pounding it in so by asking people for their best ideas they were getting the stuff that people had most pounded in so they believed so of course it didn't work and they stopped doing it because it didn't work they didn't know why it didn't work because I haven't read the psychology books but they knew it didn't work so they stopped and so plausible now I don't that's true at Berkshire I think at Berkshire if you asked me and Warren for our best ideas that would have worked but it didn't work in a place like that a more conventional manager by the way I don't think it'll work that perfectly a berer I think it would work better than it did at Capital guarding but isn't that interesting that would not work do it still true you talk to Warren once a week now no it'd be like talking to yourself we don't have any new ideas 87 and 93 I mean what the hell anyway the but the young men make some contribution they cause us to think about things we wouldn't have thought about before we would not have bought the airlines or the or the Apple if the young man hadn't come up with the idea and but once they did Warren ran with it and Warren is pretty great it was hard to buy that much airline stock doesn't sound like much airline stock you know by berer standards but we had to be a hell of a percentage of the market and those are for a pretty long time it's very hard to manage a lot of money must be an awkward conversation with Bill Gates after he bought the Apple St what I said it must be an awkward conversation with Bill Gates after that Apple St by I don't Bill Gates does not have any illusions on that subject Bill Gates bought that $150 million with app I think they sold it right yeah that was a good buy yeah but it was not a good sale oh I got another story for you really like just another story that thing around all Al Gore Al Gore has come into you fellow's business and elor and your business in he has made three or 400 million in your business and he's not very smart he drank a lot he smoked a lot of Pop as he cooks through Harvard with a gentleman sea he but he had one obsessive idea that global warming was a terrible thing and he understand he'd protect the world for so his idea when he went and investment counseling is he was not going to put any Co CO2 in the air so he found some partner to go into investment counseling with and he says we're not going to have any CO2 and but the partners a value investor and a good one so what they did is Gore H staff to find people who didn't use put CO2 in the air and of course that put him into Services Microsoft and all these service companies were just ideally located and this value investor picked the best service company so all of a sudden the clients are making hundreds of millions of dollars and they're paying part of it to gore and now Gore has hundreds of million dollars in your profis he's an idiot and it's an interesting story and creu one Charlie earlier you were talking about how so if you were idiots about global warming and presid Bush your theory by the way it's not the only one there's an invest is a leverage buyout operator in Los Angeles that I know casually he's made 35% perom for 30 years all he buys the service companies instead of buying five you know 100% letting the management have 10 he always tries to buy 60 and let the old manager who created the company own the other 40 and he buys nothing for service companies and he knows a lot about it and with that formula which like you know inventories receivables are all kinds of horrible things in business that you just by service companies you can avoid yeah and it's amazing how it's worked for it worked for this guy with does the LV was just the way it worked for alore 35% pan and he's smart because he's causing people to have more of their own skin in the game they know more about it they're more like Partners you know instead of the new maner is not an employee they really some other guy was 40 you own 60 that's a different relationship he's the founder but what a clever way to do it and it work better and of course he knows more about it when he does nothing but service companies I know another guy who does nothing but mail order and internet companies also no be operator he's made 207% per hand for a long time and but he knows more about getting customers and the this racial and that he knows more about these damn male companies he really knows a lot so two Specialists you know each one of a different specialty both working interesting and that's why I made it oh talk about the specialization frequently works I find it more fun to go around and do everything but these Specialists do better average down they know a lot so how is our little mail order business Oriental Trading doing and did they give you that's one of this guys this guy sold that oh okay not to us but to one previous to us well it's a very hum drown damn business but it's right there in Omaha it's a event it's yeah it may be better than something else we put insurance float into but it's not it's going nowhere but you know if your phone cost you nothing you suddenly make 10 12% on it's a big ging we got FL now speaking of that AI there only been two transactions like that in the history of the world 10 billion each how she does both of them if you wanted to do a you what do reinsurance with AIG yeah that's the second one but where else is AIG going to go for who would you trust to pay off a lot of this stuff 30 years from now except burer nobody it's nice to be in that position and get along with them Charlie do you still do uh do in the past do you do a lot of work still with Ron Burl in the supermarket finan I have not seen Ron Burkle in 35 years he always tells people what a good friend he is to mine I like Ron burle's father was our last customer for trading stamps but and right like Ron when he was eager but Ron when he's made a lot of money is a bit insufferable yeah I mean no I it's he's my good friend if you listen to him CU you show up in pretty much every biography of him that's ever written the one he really knows is Bill Clinton because he furnish him with girls he's talking about the wrong his wrong he's had other friendships that are closer when you look at what's made you and Warren have relatively happy lives is there some aspect of that's imitable for the rest of us well it's all imitable uh if your marriage reasonably works and if your family life reasonably works that doesn't mean perfectly cuz nobody's Family Life works perfectly particularly with the children and if your Partnerships work well we have had marvelous Partners Warren's been a marvelous partner for me I've been a good partner for him all of our other subsidiary Partnerships which don't overlap totally have been marvelous I do not have a big fail partnership of any kind but that's cuz I am a good partner and Warren is a good partner and so it's like you want a good spouse deserve one if you want to be a have a good partner be a good partner it's a very simple system and it's worked very well of course it wouldn't work without it and also get rid of the bureaucracy you deal with good people you trust expense trouble lawyers check we're always closing something with no audit we basically are very oldfashioned we bought the Northern Natural pipelines they needed money mon Monday and it was like Saturday and it was lots of money we came up with the lawyers having a fit we gave him the money and took the pipeline worked out the details letter and other people can't do that their whole culture is all kinds of Bureau want something to do they can't make an exception going back to Enron do you have any insight into whether Kinder Morgan would be a successor or rejector of andron culture well I don't think Kender Morgan is anything like Enron in the sense en is total fraud and craziness and manipulation they went verir and Kender Morgan made puff a little pretend that cash flow is really cash and there isn't really an obligation to replace it to pre he may but it's not Enron was just pure disgusting awful and I think most of those limited Partnerships have a slight touch of the old mining companies on the San Francisco Exchange and they all paid monthly dividends as they got into the ore and of course once they done that they had two divisions they had a shuck the suckers division on the Mining Exchange in San Francisco and a bunch of miners who went the mine it was like a two-handle pump they flood the Mine stock would go down they buy it they pump the water out of the mine pay big monthly dividend up shucking suckers over here by kind of fraudulent illegal by modern standards and the mine they were it was disgusting but to some extent the master limited Partnerships they pretend that the cash is really free well it really isn't it's sort of it's they're taking out money they really the business is going to need to replace what it's doing in that sense is sort of a m imoral way of doing things and they're do doing it cuz they can get by with it you have a different view about the master limited partnership no it's crazy how they raed so much Equity they were like they is crazy yeah well was kind of dishonorable yeah well I had the old conglomerate business where they issued the stock and then had the stock sell 30 times ear you keep buying a bunch of ordinary business that was like a chain letter it was dis honorable there's a lot that goes on from that it's dishonorable so what do you think about the last couple of books that have been written about you and if there was an author here what would you tell him he was writing a book about you I haven't read what reason books you're talking about like the to tow of Charlie M I never finished it damn it what any thoughts on the books that have been written about you well I just I don't finish them I'm not of course people are going to tend to look about stuff that written about them and it's distributed but when they just copy old quotes and so forth it's not why should I read it hey Charlie um I believe you said that if you could have lunch with anybody it would be um Benjamin Franklin and if you did what would you ask him or what would you talk about well it's hard offer all that Benjamin braglin has already taught me what I want to know because he left such a record and his biographers have been so good and he was so in his own Lifetime and for so long so I already have had my conversations with Franklin he actually gave us the autobiography then the various biographies I've read p PE and the rest of the story it was interesting that in the end he failed in his relationship with his only surviving son who was loyal to the crown and that rupture never healed and it was just too much ben thought his son had a duty not to publicly have a big fight with his father who had raised him and gotten his fancy position with the crown for him and everything else and the son felt that going to protect the position he had you can understand that they feel that way most people wouldn't do that they would reconcile something or pretend to reconcile but that really rups he didn't to us on the end interesting and Franklin was capable of having more resentment than I have I have conquered resentment better than Franklin did I'm not that mad about the people I disapprove of that's why I kissed off that Trump stuff by making a compliment today I don't want to I don't think much of trump is you can imagine me voting for Hillary Clinton it was very hard to push the pen but I did are you hungry no I'm fine I've e eting brittle I'm going to leave a minut is Oscar out there uh no if Jerry would like to meet with you for a little bit okay I think I yeah okay thank you

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