CNBC's full interview with Berkshire Hathaway CEO Warren Buffett

[00:00:00] Speaker 1: We are here in Omaha Nebraska this morning with Warren Buffett the chairman and CEO of Berkshire Hathaway. He's just released his 55th annual shareholder letter to to the shareholders over this weekend. And this is actually the 13th year that we are now in Omaha talking to him after that letter. This is a show that we call ask Warren so that people can write in their own questions to Mr. Buffett after they've read that shareholders letter. But obviously this morning given the news there are a lot of other questions that people have concerning the stock market. Let's jump right into it. with Mr. Buffett who is here with us right now. And Warren thank you for being here today. It's good to see you. [00:00:34] Warren Buffett: Thanks for having me. [00:00:35] Speaker 1: I want to talk about the letter. Obviously one of the things that you touch on in the level on the letter is when people should be buying stocks. We're going to dig into a lot of it. But when you're looking at the futures down about 818 points this morning I think probably the first thing viewers want to hear from you are your thoughts on what's happening with the coronavirus. If this is a reason to panic and if you are worried about this. [00:00:53] Warren Buffett: Well I don't know I have any special thoughts beyond the news on the coronavirus. The very first day I bought stocks was March 12th 1941 40 42. And the stocks were down about 2% that day as it turned out. Unfortunately I bought in the morning. So when I came home in the evening and my dad told me the execution price it was down 2%. If you're buying a business. And that's what stocks are businesses. In fact people would be better off if they say I bought a business today not a stock today. Because that gives you a different perspective on it. Presumably you buy a farm. If you buy an apartment house. If you buy a business you're going to own it for 10 or 20 or 30 years. And the real question is has the 10 year or 20 year outlook for American businesses changed in the last 24 hours or 48 hours. And we're going to. You'll notice many of the businesses we own partially own American Express. We've owned it for 20 years Coca-Cola. We've owned it for 40 years. Those are businesses. And it will buy or sell your business based on on on today's headlines. And if it gives you a chance to buy something that you like and you can buy it even cheaper than it's your good luck basically. Although there are a lot of people who look at the market and they say look I want to buy but I don't want to buy when the market's sitting at new highs when it's been hitting new records every day. [00:02:18] Speaker 1: Maybe it's off 800 points this morning but maybe there's more of a decline to come because the effect of the coronavirus is going to be an impact on the global economy. IMF said that over the weekend. You are going to see weakness as not only China but other countries try and address this. You're right. It may not change things over the five or 10 year span of things. But if I think that I can buy something for potentially 10 percent cheaper maybe more than that if I wait a week or a month maybe that's what I'm sitting around. [00:02:46] Warren Buffett: Well if you think that then you've got a you're going to get fabulously rich if you're right. All you have to do is just keep buying at 10 day intervals and keep taking your 10 day prediction. If I knew what the market was going to do obviously but you don't I don't think anybody knows what the market is going to do. I think you do know whether you're making an intelligent purchase at a given price. Everybody when they buy a stock if you're going to buy say General Motors that has a billion 400 million shares out you should be able to take a yellow pad like you have there and on one page say let's say it's selling for 30. It isn't selling that low but that'd be 42 billion. You should say I am buying the General Motors company for 42 billion dollars because and you should get it on a piece of paper. And then if you want to have a shepherd piece of paper since I think I know what the stock market is going to do so I know whether it will be higher or lower. And but you don't you don't have that. [00:03:40] Speaker 1: You don't. But if I worry that the economy is going to slow down not just for the quarter but for the year that would impact how many cars I think they might be able to sell or even produce. [00:03:48] Warren Buffett: I'll guarantee you cars are going to slow down someday. They in 1932 General Motors had 19,000 dealers. That's more than all the auto dealers in the United States today. There are only 125 million people then but they had 19,000 dealers. They produced or sold and there was one month I think when they sold less than a tenth of a car right at a tenth of a car per dealer. That was a terrific time to buy General Motors. And forget about the market. If you can predict the market you don't need to read balance sheets. You don't need to read anything. You certainly can't predict the market by reading the daily newspaper. That is for sure. And you really can't. You certainly can't predict the market by listening to me. But you're buying businesses. And if you had planned to buy a local service station yesterday and it was closing today I don't think you'd tear your hair out or anything like that. You'd have already looked at where it was located and the contract that they had with the suppliers and made a decision on competition. People because they can make decisions every second in stocks whereas they can't with farms. They think an investment in stocks is different than an investment in a business or an investment in a farm or investment in an apartment house. But it isn't. If you get your money's worth in terms of future earning power over the next 10 or 20 or 30 years you're going to have made a good investment. And you can't pick them from day to day. If you can do that you can. Well I haven't met anybody yet that knows how to do it. [00:05:23] Speaker 1: You made a point of that in the letter this year where you highlighted a book that was written by Edgar Lawrence Smith back in 1924. And you said until he came along nobody really realized the compound interest effect of buying stocks. Not just buying businesses but buying stocks themselves. [00:05:41] Warren Buffett: Edgar Lawrence Smith changed the world with that book. And people have forgotten all about it now. Although in the 1920s it became more and more gospel as the boom went on. But Edgar Lawrence Smith set out to write a book on bonds versus stocks. And he said he went in with the idea that bonds would be a better investment in times of deflation. And stocks would be a better investment in times of inflation. And the first line of his book was to say that he'd been wrong. But he had enough sense to look at his evidence on it. I think Darwin said if you found evidence that was contrary to what you already believed write it down in 30 minutes or you're blind. Your mind will just block it out. I mean people have a great resistance to new evidence. And he said if a stock yields 4% and a bond yields 4% which was what he was talking about then. The stock was going to outperform the bonds because there were retained earnings that were building beyond that yield. And that's that has been true for a long long time but nobody paid any attention to it. We don't get rich on our dividends that we receive all the way happy to receive them. We get rich on the fact that the retained earnings are used to build new earning power repurchase shares which increases your ownership in the company. And Berkshire has retained earnings ever since we started. That's the only reason Berkshire is worth a lot more as we retain earnings. [00:07:06] Speaker 1: That led Keynes to actually say that this was an important book. People paid attention to it. But you're right. It added to the frenzy that built up to 1929. [00:07:16] Warren Buffett: Well that is true because you can get old boss Ben Graham told me very early on. You get more trouble with a good idea than a bad idea because the good idea works. I mean it's a good idea to buy a home for example and then people go crazy. The good idea works and it works and it works. Stocks work out better than bonds most of the time. And after a while people forget that there were some other limiting conditions. With Edgar Lawrence Smith's book it was that when bonds yield the same as stocks which was the case then that stocks are going to outperform because they have this retained earnings. So stocks started going up in the 20s and all of a sudden they were selling at five or six times the prices as when he bought the book. And the original correct perception on his part had experienced changing conditions but people just looked. They got their confirmation through stock prices and people that's what happens in bull markets. People people start out thinking stocks are cheap and then they start thinking stocks have gone up. And a stock can be a good buy or a bad buy. A bond can be a good buy or a bad buy. It depends on price. [00:08:25] Speaker 1: But that leads us to today. I mean if his premise was that stocks are always going to be a better a better investment than bonds. That's kind of what you hear today which we've been hearing for a while is Tina there is no alternative right. You have to buy stocks because bond yields are so low because interest rates are so low. [00:08:42] Warren Buffett: Well if you look at the present situation we've talked about this before that you get more for your money in stocks than bonds. That doesn't have to be the case. I mean but it's usually been the case in America very usually been the case. And if you buy a 30 year bond today with yield 2% you're paying 50 times earnings for an investment where the earnings can't go up for 30 years. Now if somebody said I want to sell you a stock that said 50 times earnings and the earnings can't go up for 30 years. You'd say that doesn't sound very good. Stocks are way better than 30 year bonds. I mean it's it's it's it's that's clear and that's one of the alternatives people people really have three basic alternatives short-term cash which is an option of doing something later on long-term bonds or long-term stocks and stocks are cheaper than bonds. [00:09:36] Speaker 1: Charlie said recently Charlie Munger the vice chairman at Berkshire Hathaway had his daily journal meeting just a couple of weeks ago and at that meeting he said that there's a lot of wretched excess out there and that there's a lot of trouble coming as a result. Do you agree with that. [00:09:50] Warren Buffett: There's always trouble coming. Yeah. There was trouble coming in 1942 when I bought that first stock all kinds of trouble Philippines were going to fall pretty soon. There's all kinds of trouble in 1949 there was trouble certainly trouble in 2008 when I wrote an article for the New York Times I said trouble is coming but I said buy stocks. [00:10:10] Speaker 1: Would you repeat that this time if troubles coming would you still say buy stocks right now. [00:10:14] Warren Buffett: I would say buy stocks if you get enough for your money. And you know we buy a few stocks but we don't look at we're not buying the stock market. We're saying I am buying say American Express. We own American Express and there's 815 million shares out and sells it this morning 126 or something like that. So it's selling for roughly 100 billion dollars. Now the real question is whether the company is worth more or less than 100 billion. It isn't what the stock is going to do tomorrow or next week or next month. [00:10:45] Speaker 1: You said just a few minutes ago when we asked you on worldwide exchange right now Berkshire Hathaway is a net buyer of stocks. You are in a net buying position. [00:10:53] Warren Buffett: We've been a net buyer of stocks or I've been actually been a personal net buyer of stocks ever since I was 11 every year. And there's been 15 American presidents in my lifetime more than a third. I've lived under a third of the life. I didn't buy stocks under Hoover. I was only about six months old then. But there have been seven Republicans after that and seven Democrats. I bought stocks under every one of them. Now I haven't bought stocks every day. There have been a few times I've thought stocks were really quite high. And I've even written an article once or twice. But that's very seldom. [00:11:28] Speaker 1: But you wrapped up your partnership at one point too. [00:11:30] Warren Buffett: I wrapped up my partnership once. Because you thought it was too expensive. Yeah. [00:11:33] Speaker ?: OK. [00:11:34] Speaker 1: But this is not a time like that. [00:11:36] Warren Buffett: We own $240 billion worth of stocks. Now we look at that as $240 billion worth of businesses that we own parts of. But I love owning those businesses. [00:11:47] Speaker 1: You've also got more than $125 billion in cash sitting around. [00:11:51] Warren Buffett: Yeah. Well, we'd like to buy more businesses. [00:11:53] Speaker 1: We are here, Warren, with you at Berkshire Hathaway's headquarters building. This is upstairs in the room that's called the Cloud Room. And this is a room where you often take students to kind of talk to them about questions they have when they come to visit you. You also do some other things up here too, other presentations. Yeah. [00:12:09] Warren Buffett: But I had students here for dozens of years. And for many years, 40 schools would come in. And they'd come in groups of eight at five days. I'd spend a year. And they come from all over the world. We had them from Peru. We had them from China. We had them from Israel. And we had a good time always. I've given it up now. But I started teaching when I was 21. And when I got to about 88, I thought, I'll take a rest. [00:12:40] Speaker 1: Well, there are a lot of questions that are coming in from viewers that have been hitting here today. They're waking up this morning looking at the stock market, indicated down by almost 800 points for the Dow. We're actually off our worst levels of the morning, which is something to say when you're still looking at the Dow, down by about 786 points. But people have a lot of questions about the economy. They're wondering what's happening right now, particularly with the coronavirus out there. You have a lot of economic data at your fingertips because not only are the many businesses that Berkshire owns, but the businesses you own pieces in. What are you seeing right now around the globe? [00:13:11] Warren Buffett: Well, it affects various businesses. I would say that I received commentary. I get some commentary monthly from almost all of the companies. And a good many of them had some comment about how it was affecting them. And however it was affecting them at that time, I'm sure it's accentuated. But they've been affected by, they were affected by tariffs. They're affected by taxes. They're affected by the most thing is they're affected by competitors and supply and demand over time. And I don't have the faintest idea what our businesses will be doing six months from now or 12 months from now. I do think that not only our businesses, but American business generally will be doing fabulously better 30 years from now or 20 years from now. And the long term is very, in my view, is very easy to predict in a general way, but an important way. I don't think there's any way to predict what the stock market will do 10 minutes from now, 10 days from now or 10 months from now. So I work on what I think I'm able to do. And as desirable as it might be to know what was going to happen 10 minutes from now, that's just not something I'll ever be able to master. So fortunately, I can come to a pretty firm conclusion that 20 or 30 years from now, America's business and probably over the world will be far better than it is now. [00:14:30] Speaker 1: What are the momentary implications that you've seen from coronavirus? What's an example of a business? [00:14:35] Warren Buffett: Well, an example, for example, we have maybe a thousand Dairy Queen franchises in China here. And they're just treat only, so they're the older type, not with food. But a great number of them were closed, but the ones that were open weren't doing any business to speak of. And Apple, I mean, our much bigger holding is Apple. We own 5.6 percent of Apple. And the company came out and said that it's affecting not only its stores, but all kinds of things, supply chain. And I find that certain of our companies have got supply chain arrangements that are being affected by this that I didn't even know had those. Like what? Well, I got one from John's Manville the other day, for example. You wouldn't normally think of them as having a big supply chain, but Shaw carpets or you name it. I'll guarantee you that a very significant percentage of our business is one layer affected by it. But they're being affected by a lot of other things, too. And the real question is, is where are those businesses going to be in five or ten years? They'll have ups and downs. Our candy business is a wonderful business, but it loses money seven months out of the year. But the nice thing is Christmas comes every year. [00:15:46] Speaker 1: When you look at the economy and how things were kind of chugging along, let's say, beginning of this year. Yeah. When things first picked up, how would you gauge the U.S. economy at that point? [00:15:55] Warren Buffett: Well, it's strong, but a little softer than it was six months ago. But that's over a broad range of business. You look at car loadings, rail car loadings, that's moving goods around. And there again, that was affected by the tariffs, too, because people front-ended purchases, all kinds of things, always a lot of variables. But business is down. But it's down from a very good level. So I would say that looking at our 70 businesses, and that actually -- they represent hundreds in addition. They're a little softer. On the other hand, I was out with the fellows from Nebraska Furniture Mart just Saturday night. And their business was up quite a bit in February, but that's because weather was good. So you have a lot of variables that hit. [00:16:43] Speaker 1: Why do you think business was down, let's say, the last six months? Is it a decline in confidence, or is it coming off of levels where there was unusual activity ahead of that? Well, it isn't really down. [00:16:54] Warren Buffett: It's just it leveled off and a little softer maybe now. But, well, tariffs -- the tariff situation was a big question mark for all kinds of companies, and still is to some degree. But that was front and center for a while. Now coronavirus is front and center. Something else will be front and center six months from now, and a year from now, and two years from now. The real question is, where are these businesses going to be five and 10 and 20 years from now? Some of them will do sensationally. Some of them will disappear. And overall, I think America will do very well. You know, it has since 1776. [00:17:30] Speaker 1: But you still watch things like rail car loadings very closely. [00:17:33] Warren Buffett: Oh, yeah. I watch everything. But I don't do it to make specific investment decisions. But I enjoy -- I mean, I want to know what's going on. But I also don't think that I can make money by predicting what's going to go on next week or next month. I do think I can make money by predicting what's going to happen in 10 years. [00:17:53] Speaker 1: All right. Well, tell us more about what's going on, just since you like knowing about those things. [00:17:57] Warren Buffett: Well, as I said, you know, the -- certain businesses depend on weather to quite an extent in retail, for example, in given months. But the big trends you see are going on. I mean, in terms of the movement to online commerce. And, I mean, the big stuff keeps moving. But we've got a big investment in the airline business. And I just heard, you know, even more flights are canceled and all that. But flights are canceled for weather. It so happens in this case, they're going to be canceled for longer because of coronavirus. But if you own airlines for 10 or 20 years, you're going to have some ups and downs in current business. And some will be weather-related. And they can be all kinds of things. The real question is, you know, how many passengers are they going to be carrying 10 years from now and 15 years from now? And what will margins be? And what will the competitive position be? And -- but I still look at the figures all the time. I'll admit that. [00:18:59] Speaker 1: You -- you mentioned the airlines. And you own stakes in all of the major airlines. All four. But not as much as Delta. I think you own north of 11 percent of Delta at this point? [00:19:08] Warren Buffett: Well, we -- our largest position is in Delta. Three of the four positions are mine. One of the positions is one of the other fellows of the four positions. But we own a very -- roughly 10 -- close to 10 percent of -- of the four largest airlines. There's been a lot of speculation. [00:19:28] Speaker 1: In fact, some of the questions that came in over this weekend were questions about those airlines. Wondering if you would buy any of them outright. Have you considered buying any of those companies outright? It would be very unlikely we would do that. [00:19:39] Warren Buffett: I'm not saying it's impossible, but it's complicated. Why? Well, for one thing, they're regulated. And there's an interplay. I'll just give you an example. Not that we'd be doing. But with Delta, we own 18 percent of American Express. And American Express is a bank holding company. And bank holding companies have limits as to what they can do. And we're a passive holder of a bank holding company with American Express. But if we owned an airline that was tied up with them, they'd have lots of arrangements. There's -- there's a lot of complications because it's a regulated industry. Any time you get in a regulated industry, you have more complications in transactions. [00:20:19] Speaker 1: So is it fair to say you like these stocks and you would own more if it wasn't complicated? [00:20:24] Warren Buffett: Well, we -- to go beyond 15 percent in any company, we would have to go in on Hart Scott Rodino. I mean, there's a lot of rules as you increase your ownership. Obviously, almost anything we own, we'd like to own more of. [00:20:39] Speaker 1: Are you buying more of any of those stakes right now? Apple shares? Well, right. [00:20:45] Warren Buffett: I get pretty close-mouthed when it comes to what we're buying. You thought about that for a second. [00:20:50] Speaker 1: All of a sudden, I feel my jaws lock up. [00:20:52] Warren Buffett: But it's fair to say -- But it's fair to say that anything that we own, we like. You know, and there's very few stocks that we own. And I look at them as part-ownerships in businesses. There's very few that are selling at some price where I would sell them a little higher. All right. [00:21:18] Speaker 1: Well, let me ask a question that came from Tony Dickinson. He said, "In the fourth quarter, Berkshire sold 55 million shares of Wells Fargo. Should shareholders view this as a lack of confidence in the new CEO turnaround planned? And what is Warren's future outlook for Wells Fargo?" [00:21:33] Warren Buffett: Well, I won't give them any advice specifically on Wells Fargo, but it's absolutely true that we've sold down our position. Some of it was sold down to avoid being over 10 percent, because then you do have some filings with the Fed and so on. They've sold well more than that. Yeah, we've sold well more than that. [00:21:54] Speaker 1: I think 8.4 percent was the last. [00:21:57] Warren Buffett: Yeah, that sounds right. And we've sold Wells Fargo in the fourth quarter and we've sold it earlier. [00:22:05] Speaker 1: Can I ask why? Only because I did get a number of questions. [00:22:08] Warren Buffett: Yeah, well, I can understand that. But we just don't -- we don't want to give any advice on what we're doing, because I could change what I'm doing tomorrow. We talk about everything except we don't give stock advice. Okay. [00:22:23] Speaker 1: I'll try one more from Tony Dickinson just because I think I got 15 or 20 different questions on this. Berkshire owns 32.58 billion of Bank of America and 17.39 billion of Wells Fargo. One position's been increasing while the other's been decreasing. Does Warren like Bank of America twice as much as Wells Fargo? And how should shareholders view the holdings? [00:22:42] Warren Buffett: Yeah, well, I think they've seen that we've bought -- we've bought Bank of America and we've sold some Wells Fargo. [00:22:48] Speaker 1: All right, let me ask you a broader question that comes in just on interest rates. Sure. And the impact that that might have as well. Varun Jain writes in on Facebook. Hi, I'm a huge fan and a student of Mr. Buffett. Please ask him, what impact does the zero interest rate environment across places like Japan and Europe have on their banks, whether the business is still good? And does the prolonged low interest rate regime in the United States hurt the prospects of American banks like JP Morgan, et cetera? And in such circumstances, do Indian banks, which have high return on equity, look attractive to Mr. Buffett? [00:23:23] Warren Buffett: Yeah, well, I can't comment on that. But generally speaking, with a lot of -- but there are a lot of other variables, too, but the banks are going to make more money if there's -- if there are higher rates with a steeper curve. The curve makes -- is more important, in other words, the 10-year versus short-term rates may make more difference than the absolute level. But American banks have made very good money with very low interest rates. Around the world, if you look in the UK or Europe or Japan, even lower rates have made it pretty tough for banks. The returns on equity are not as high. And they have to use more leverage to even get the same returns. And I don't like that as well. [00:24:13] Speaker 1: If you are talking about the curve that we're looking at this morning, the five-year, two-year is inverted. Two-year 10 is not right now, but the 10-year is below 1.4 percent this morning. [00:24:23] Warren Buffett: And think about that. The 10-year at 1.4 percent, that means you're paying 70 times earnings for something that can't increase its earnings for 10 years. Now, if somebody came to you with a stock and said, you know, this is a terrific stock. It sells at 70 times earnings. The earnings can't go up for 10 years. You'd say, well, explain that to me again. Right. But, no, the interest -- we've never seen a situation like this in the world, literally. I mean, you can go back and read Keynes and you can read Adam Smith and you can read, you know, all the great ones. And they don't talk about negative interest rates. It never cost their money. There was supply and demand and all these marginal costs. But brilliant economists never really anticipated that you would have negative. And you've got 13 trillion or something like that worldwide at negative interest rates. And we don't know what that means. And we've got a lot of people who can speculate what it means. But 10 years from now or 15 years from now, we'll look back and say, well, it's obvious what would happen under that. And we'll see it. But it is not a normal situation. And it's -- well, interest rates are the basis of all value. I mean, you know, if you knew interest rates were going to be zero for 100 years, you would think 1% was a great rate of return. But you also would know if you bought something that was yielding 1% or that was what it paid and rates went to 8%, you'd lose practically all your capital. So it's an enormous factor. And we don't know the answer. Central banks don't know the answer. All we know is that it's been useful in stimulating things, and particularly asset prices, now for 10 years. And what we thought was temporary in 2008 and 2009 in the way of monetary policy to stimulate, we've just put our foot on the gas even further. The whole world has. [00:26:20] Speaker 1: You made a point in the letter of saying that you don't know how long these interest rates will last. You and Charlie never try and figure these things out. But we did have St. Louis Fed President Jim Bullard on the program last week. And he said that he expects to see these low interest rates for a long time to come. That does raise a lot of questions, if that happens, about what this means for the stock market, what that means for banks, what that means for insurance companies, which you touched on in the letter, too. [00:26:45] Warren Buffett: It's bad for insurance companies, but it's good for stocks. [00:26:50] Speaker 1: It's bad for insurance companies. And what happens to the insurance companies as a result? Are they getting more -- are some insurance companies kind of pushing out risk? [00:26:56] Warren Buffett: Well, the ones that really get hurt on it are either life or annuity companies that are promised returns. The property casualty business doesn't promise returns. It still holds money, so it hurts them. But if you promise somebody an annuity that's going to pay them 3% or 4% and now you find that you're reinvesting your money at 1% or something, you're going to disappear. [00:27:19] Speaker 1: Are insurance companies being forced to make riskier and riskier bets? [00:27:23] Warren Buffett: Well, they shouldn't be. I mean, the answer -- if you need to get 3% and you're only getting 1%, the answer is to quit giving 3%. It's not to try and get the 1% up to 3% and do more dangerous things. You should always adapt your consumption to your income. You shouldn't try and adjust your income to your consumption. That's a basic principle for individuals, businesses, and everything else. And reaching for yield is really stupid, but it's very human. I mean, I understand it. And people say, well, I've saved all this money all my life and now I can only get 1% out. What do I do? The answer is you learn to live on 1%, unfortunately. And you don't go and listen to some salesman come along and tell you, I've got some magic way to get you 5%. [00:28:17] Speaker 1: Do you think, though -- that's what should be happening. Do you think that there is more risk taking place in the insurance market? [00:28:23] Warren Buffett: And you see that in what they call leverage loans and weaker covenants and all. No, people are reaching for yield. There's no question about that. And that's stupid. And it has consequences over time. But it's very human. [00:28:39] Speaker 1: Consequences that could have a big market impact? Depends how far it goes. [00:28:43] Warren Buffett: Yeah. Yeah. It's something that -- things that get built in slowly, people going crazy in tech companies. In the late 1990s. It can take a lot longer than you think. But eventually you get to midnight and everything turns to pumpkins and mice. [00:29:01] Speaker 1: You know, that's the downside of low interest rates. Yeah. Pensions, savers, anybody who gets left in a raw position of that. On the alternate side of things, if rates were to rise rapidly or maybe not even so rapidly, what does that mean for the federal debt? [00:29:17] Warren Buffett: Well, it depends on the average maturity of the debt. But our maturities are fairly short. They've gotten lengthened a little. But if you take $20 trillion and you're borrowing at 2%, you've got 400 -- what have you got at? $2 trillion, $200 billion? You've got $40 billion of expense. But if it goes to 5%, you've got $100 billion of expense. I'm sorry. It's -- we are benefiting enormously in our national budget by the fact that interest rates are very low. And so interest cost has not gone up as you would have anticipated if you were looking at the scene 20 or 30 years ago with the increase in national debt. You know, Austria issued 100-year bonds, you know, at 2% or thereabouts, and then they've gone way, way up. And I think maybe they yield 1.1 or something like that. I don't know where they are now. But it's great if you're a borrower to have cheap money. I mean, everybody should refinance their mortgage. [00:30:31] Speaker 1: Is that an argument for the Federal Reserve -- I'm sorry, for the Treasury Department here issuing longer notes? [00:30:38] Warren Buffett: Well, yeah, but I would have said the same thing five or six years ago and been wrong. But if we -- under the President's slope, it still would cost more to lengthen it out. But you're lengthening it out at very, very low rates. And it would be what I would be inclined to do if I were Secretary of Treasury. But I'd have missed a lot of bets in the last 10 years, too. [00:31:03] Speaker 1: Warren, again, for people who are just waking up -- Sure. And they want to know what you think about this sell-off this morning, to see the Dow down 700, 800 points in the morning. Yeah. What's your reaction when you see something like that? [00:31:14] Warren Buffett: Well, my reaction is that I like to buy stocks, so I don't wish ill on anybody else. But I like to -- if they want to sell them to be cheaper, I prefer it. So if that's a -- you know, roughly a 3% decline or thereabouts -- I don't know how many 3% declines I've had in my lifetime, but there have been a lot of them. And I can't think of one that you shouldn't have bought on, you know, basically. That doesn't mean stocks are going to go up or down next week or next month or next year. But if there's something -- if you like to own American businesses, you're getting a chance to buy at 3% cheaper. I don't consider that a lot cheaper. I mean, but how can it be bad news unless you have to sell stocks? Now, if you have to sell them for some reason, you're worse off. If you don't have to sell them -- I mean, somebody can come around and offer you a quote on your house today, and it could be 2% less than they offered you yesterday. But if you like the house, it really doesn't make any difference to you. [00:32:13] Speaker 1: Does that mean Berkshire will be buying stocks today? [00:32:16] Warren Buffett: Well, we certainly won't be selling. And, yeah, we may -- we could easily be buying something, sure. [00:32:22] Speaker 1: Okay. Let's talk a little bit about a Barron's cover story that was just out last week. The good news on the cover story is they think that Berkshire is worth more than it's selling for right now. The bad news is they said they think that's in part because there's -- it's got a big conglomerate discount, and they think if you weren't running it, that it might get broken up. What's your response to that line of logic? [00:32:43] Warren Buffett: Well, conglomerates have had a bad name, and for good reason, over the years. I mean, I closed my partnership up at the end of the 1960s, and there was a run -- a very abusive run in conglomerates where they played with numbers, and they had dirty pooling, as they called it, of accounting. They wanted to have their stocks up and put out stories to do it so they could issue more stock. They were kind of chain letter arrangements. There have been a lot of -- there have been a lot of bad conglomerates, and probably disproportionately so compared to sort of honest-to-God single industry businesses over time. We don't think we're that kind of a conglomerate. We've certainly never wanted issue shares. We've never touted shares. And it's done for business reasons, in our case. The interesting thing is, of course, is the American public has been going wild in their enthusiasm for conglomerates in the last few years, if you think about it. I mean, it's been an incredibly popular area. But they call them index funds. You buy 500 businesses. [00:33:46] Speaker 1: Trying to figure out what you were talking about. [00:33:48] Warren Buffett: Yeah, well, 500 businesses all put together. I mean, that's the ultimate conglomerate, isn't it? I mean, I've recommended index funds to lots of people, and when they do it, they're buying into 500 businesses. And they're going to have 500 businesses a year from now and five years from now, and they think that group of businesses will do very well. And I think our group of businesses will do okay. [00:34:08] Speaker 1: The difference with an S&P 500 index is it's 500 different companies run by 500 different management teams who are all focused on their business, maybe not having a centralized operation that is loosely running all of those businesses. [00:34:22] Warren Buffett: We've got -- our businesses are run by separate people. I mean, I -- we just finished Valentine's Day, and I did not -- I did not select what pieces went in the boxes. And it's been -- probably been 10 years at least since I've been to a C's canary factory. Now, you know, I get the figures every month. But I don't have -- I don't know how to make chocolate, anything of the sort. I don't pick out the new locations. We have managers for our businesses that are very much like the managers we have for the businesses that we own pieces of, like American Express or Coca-Cola. And there's a couple things we can do. We can determine the dividend policy of our subsidiaries. We can control their capital allocation to some extent. But on most capital allocation, whether to buy new equipment or anything like that, they make the decision. The BNSF railroad is going to spend $3.5 billion on -- I don't approve a single dollar of that in terms of capital expenditures. They know what they need to do, where they need to lay track, how many locomotives they need, whatever it may be. So our managers are -- I would say, in a sense, they're almost more independent than the managers of the S&P 500, who go around and report to Wall Street week after week. They have an investor relations meeting, and they're always explaining what they're doing and trying to get the approval of the analysts and all that sort of thing. And we just tell our managers to do what makes sense. [00:35:48] Speaker 1: OK. Outside of the idea of them not having to report to individual shareholders or the investment community, what's the advantage of having you there? The capital allocation part of it? [00:35:58] Warren Buffett: Well, we can -- yeah, we can move capital within -- if you move capital from one stock to another, and you've got a game, particularly -- I mean, you pay a tax. And you may pay a dividend tax or if you sell -- but there's a lot of taxes incurred in moving from one business to another, either at the corporate level in some cases, but certainly at the individual level. And we can move capital -- well, just take C's candy again. We bought that in 1972. We've moved several billion dollars from the candy business to other types of businesses. And we'd love it if we could use it all in the candy business, but it just isn't that sort of business. In addition to that, we free up our managers from all dealing with Wall Street, dealing with baggers, dealing with all kinds of things that are what I regard as less productive use of their time. [00:36:55] Speaker 1: However, you also have a situation where you have gotten some activists who have been interested in the stock, including Bill Ackman. He's built up a stake, hasn't said too much about it, but I think he has made some comments about how maybe Burlington/Northern Santa Fe's margins could be improved. You can look back at Bill Ackman's experience with the Canadian Pacific Railway and kind of wonder if he is building up a position because he would like to see you take a more active role there. [00:37:20] Warren Buffett: Well, we notice what other railroads earn and when their margins are better. I mean, and we certainly put way less pressure on than Wall Street might, who would want it next week. But our managers are well aware of what's going on in other industries. And we've made changes where we don't think some businesses are performing as well as they should. But overwhelmingly, we've got managers there that are very, very good. They've got capital available to them for anything that makes sense. And we decide how much they distribute, where the capital moves, and sometimes it moves from one industry to another. And in certain industries, a consolidated tax position really is very helpful to us. [00:38:09] Speaker 1: There's a viewer question that came in from Ben Comston, and he asks, it was recently pointed out by Bill Ackman that some subsidiaries like Geico, BNSF, lag their peers in some areas. Would you agree with that? And how can your successor push improvement in subsidiaries while maintaining a decentralized management structure? [00:38:28] Warren Buffett: Well, at Geico, we bought Control in 1995. We had about 2.5% of the market for auto insurance, and we're at about 13.7% of the market. So we've gone from 2.5 billion of premium volume, or thereabouts, to 35 billion of premium volume. We're number two now at State Farm. We were number six or seven at that time. So I would say that not due to Berkshire at all, but due to Tony Nicely during almost all those years, Geico has been the envy of every other company in the auto insurance business, except for Progressive. But they've done a good job, too. But Geico is worth tens and tens and tens of billions more than when we bought it, in addition to all the earnings we've given, just the goodwill value. So that's been extraordinarily well run. And with Burlington, I think we paid a dividend of $5 billion last year, and we paid $35 billion for it. So it's gained in market share in its business. Its operating margins have improved, but they haven't improved as much as some other railroads. [00:39:49] Speaker 1: Do you believe in precision scheduling railroading? Well, we'll see. I mean, we've watched it plenty, and -- And for those who don't know what that is, it's something that kind of irritates customers, because it makes things a little more rigid, but it does improve margins. [00:40:03] Warren Buffett: Yeah, it makes the customers adapt to the railroad more than the railroad adapting to the customers. And practically, everybody's done it. And a fellow named Hunter Harrison was enormously successful. [00:40:12] Speaker 1: Who worked with Bill Ackman at the Canadian Pacific. [00:40:14] Warren Buffett: Yeah, he worked with the BNSF, if you go back far enough. He -- and there's a book about it. It's very interesting. But he did it at the Illinois Central, the Canadian National, the Canadian Pacific, and then he was going over to the CSX. He -- he -- he developed a method of railroading where the customer does adapt more to the -- to the railroad. And it improved margins dramatically. Our margins are close to what -- the better railroads -- well, there's only a few -- to get from precision railroading. On the other hand, we've gained share. Because the customers don't like it. Because the railroads -- apparently -- or the railroad customers like us better. And over the -- over the long term, we'll see. But it isn't like it's something we can't do. [00:40:58] Speaker 3: And here's the latest on the coronavirus. China reported an additional 150 deaths and 409 new cases overnight. South Korea raised its coronavirus alert to the highest level after the number of cases there ballooned from 31 to more than 750 in less than a week. Stocks in Asia falling overnight. Hong Kong's Hang Seng fell 1.8 percent. South Korea's Kospi fell nearly 3.9 percent. Shares of South Korea's two largest airlines down as they canceled flights to the city of Daegu, where many of the new cases were detected. Meantime, Italy's government is scrambling to deal with the biggest outbreak of the coronavirus outside of Asia. Stocks there were lower overnight. The government placed at least 10 towns in northern Italy under quarantine and canceled the last few days of the Venice Carnival. People elsewhere in Italy -- schools, museums, universities, and cinemas were closed. And major soccer matches were canceled. At this point -- I mean, Boris Johnson out earlier today, Andrew, saying that the risk to U.K. citizens just over there remains low. I would say that -- our officials would say that here, too. Yes. The risk to U.S. citizens remains low. But there's a significant difference between supply chain disruption slowing dozens and dozens and actually hundreds of companies. Absolutely. And that's dampening global growth. What worries me is that we don't know -- three months, six months, nine months -- if it ever gets to the point where we start to see, in a lot of countries around the world, these breakouts where they don't even know the origin of some of these. And if they multiply like that, that's when I think it could really get -- at this point, it's still a global growth slowdown. Nobody in most of the world is worried that they're going to catch coronavirus and they can't go out and they can't, you know, go to the movies or the health club or to a restaurant. But that -- I just wonder -- we don't know. [00:42:59] Speaker 4: Look, there are major travel that's being changed right now. Conferences are being canceled. There was an article in "Time" magazine speculating whether the Olympics in Japan over the summer will be canceled. So there's real implications here that could reverberate. Having said that, the farther we get to the spring, the better it gets in terms of weather. There's a whole sort of view about how the flu, you know -- [00:43:23] Speaker 3: You know, I was looking at some of Jim's tweets earlier. If you go too far with the fear and the panic, you're accused of one thing. If you don't go far enough, you're accused of the other thing. So we really just need to sit here and each day report on the facts and try to remain attached. But there's something about a pandemic that just is different than other black swans. It's a frightening prospect. Anyway, let's get right back to our guest of the morning. Warren Buffett joins Becky in Omaha following the release of his annual letter to shareholders over the weekend. Becky, you took a plane. I mean, it's in the back of our minds, is it not? It did. It's just in the back -- there's no way -- It is. And the risks are low. [00:44:07] Speaker 1: It goes back to 1918. It goes back to 1918. If you look at the numbers of what happened in that pandemic when it came around the globe, up to 50 million people were killed in that. It was a third of the planet's population that was infected. It was 500 million people that were infected at that point. 675,000 Americans died at that point. So, inevitably, your mind kind of goes back to what's happened in the past. Because as humans, we always look back to history to try and predict the future. It doesn't always work. It's not always prophetic. But it does give you something of what to kind of play out if this were to get worse and worse. Now, Andrew brought up the idea that it's warm weather. We're approaching spring in a lot of parts of the country -- or a lot of parts of the planet. That may be good news. We just don't know if this time around if this is one of those viruses that does die off in warmer weather. We'll wait and see and kind of hope. [00:44:55] Warren Buffett: Yeah, I actually -- I think this -- from what I've heard from people that know a lot more about viruses than I do, that unfortunately, this will make it through the summer. And in terms of having a vaccine, it's a long ways off. So you've got -- you know, it is scary stuff. I don't think it should affect what you do in stocks. But in terms of the human race, it's scary stuff when you have a pandemic. Yeah. [00:45:27] Speaker 1: I guess this one's particularly frightening because it's new. So there's no natural immunity that's built up in any of the populations. And you wonder what happens, particularly in areas where there's not the same health care structure that we have in America or in some of the developed nations. I guess that's a big part of the question, too. Yeah. [00:45:45] Warren Buffett: And it's -- it's -- well, I think about it in terms of our annual meeting. I mean, which is May 2nd. I mean, it -- it could very well affect by that time. It could affect -- [00:45:57] Speaker 1: We've got questions from viewers asking just that. Will the annual meeting be any different this year, particularly because you have a large Chinese contingency of shareholders who are here for that? Yeah. [00:46:07] Warren Buffett: I don't think -- yeah. And that certainly will be affected. And -- and incidentally, I mean, flu is particularly tough on old people. Yeah. You're going to have two guys on the stage whose combined age is 185. So, well, we'll -- we won't be looking for people that are showing any signs of contagion. But that's one of the problems with this, is it does have a long gestation period. Right. And it's highly transmissible. [00:46:33] Speaker 1: And again, you did talk about it earlier. It's something that you see in the results of the businesses. It's true. Even some of your own fully owned businesses that you didn't anticipate. [00:46:42] Warren Buffett: Well, and we own airlines, for example. No, it -- it affects businesses. Now, actually, my dad used to tell me a story. He was 14 in 1918. And he -- he told me what went on in Omaha, you know, during the big Spanish flu epidemic. I mean, it was -- it was something in those days. And -- and pandemics will occur in the -- in the future. Now, what they hope to get is -- is a universal flu vaccine. But that's a long way off. It isn't impossible. I mean, I asked my -- my own science advisor is Bill Gates. So, I talked to him. I call him. I've talked to him the last few days about -- about it. And he's bullish on the long-term outlook for a -- a universal -- prevention of it. But -- but he says it's not going to come, you know, for -- it's not going to be here in 10 years. [00:47:34] Speaker 1: What are -- what are Bill's concerns as somebody who spends a lot of time traveling around the globe, as somebody who is trying to help medicine in some of the less developed parts of the world? [00:47:43] Warren Buffett: Yeah, the Gates Foundation is -- is very active in trying to be helpful on this. And Bill says the CDC is the best in the world. And I mean, we've got terrific resources in this country. But a pandemic is a pandemic. And -- and -- there's just no evaluating. But I have heard that the summer is not likely to cause the end of this. Do you know why? But I don't know. And, you know, you shouldn't be asking. I -- I shouldn't be offering my opinion on that. Because I -- I -- I pass along things I hear from people I think are smart. But -- but -- [00:48:20] Speaker 1: I'm actually asking for Bill's opinion, not yours. Yeah. [00:48:23] Warren Buffett: Well, I shouldn't -- and I shouldn't really quote him. But I do -- he's the guy I ask. And I did talk to him just a few days ago. And he loves to talk science. And he -- he can make it so I can understand it, which is quite a trick. You know, at the Gates Foundation, they're taking it very seriously. I'll put it that way. [00:48:43] Speaker 1: Is money going from the Gates Foundation to try and find a vaccine? [00:48:46] Warren Buffett: I'm sure we're expanding human and financial resources. [00:48:51] Speaker 1: Have -- I mean, maybe this is more than you know. But do you know if they have put human resources out, either into China or other places where there's -- [00:49:00] Warren Buffett: I don't know that -- I don't want to comment on that. But I know that they're -- that that is something they've always spent -- they've been very involved in is human health. And -- and -- and even particularly this. Bill knows a lot about vaccines. [00:49:14] Speaker 1: Let's talk a little bit about Berkshire Hathaway. We were in the middle of a conversation when we had to go to a break before. But there has been this question raised, not only by Barron's in the cover story there, but by other places, too, about whether Berkshire Hathaway would be worth more if it were split up. That's -- it's a good question. [00:49:32] Warren Buffett: And I will tell you that -- that if you were to say -- and let's say the stock market didn't change for two years and interest rates didn't change. So you had a two-year period and you said, we'll sell off all the businesses. Mm-hmm. I don't think -- I mean, you have the expenses of selling them. Now, if you sold them all to people who leveraged them up to their maximum, you might get a little more than the stock is selling for. It would be very tax inefficient, very tax inefficient. Interestingly enough, up 'til 1986, it wouldn't have been. I mean, there was a general utilities doctrine that governed corporate breakups. And so you could dispose of businesses or securities, if you did it right, you could dispose of securities or businesses that are depreciated without a tax at the corporate level. That was done regularly in various ways up 'til 1986. They revised the tax code big time. They killed general utilities. You can't do that now. Now, you can go -- you can have spin-offs, this business or that business. You probably have to lie a little in terms of your purpose in order to get the best tax ruling. And it takes time, but you cannot break up -- you cannot dispose of the entire business, business by business, without having very substantial tax liability. It would not produce a gain. On the other hand, having them together produces -- there's some very valuable synergies in there. Now, we don't use leverage as much as the people who would buy them piece by piece would do. So we could leverage Berkshire up to the sky. I've promised people we won't because we have insurance promises to people out 50 or 100 years, and we've got shareholders who are going to own the stock for 50 years, and they do not want us to leverage to the sky. But there would not be a profit if we were simply to announce that over the next 24 months that you could come in and buy any business we had, and we'd sell them to the highest bidder. [00:51:33] Speaker 1: You made a point of talking about this in the annual letter. You said, "Key to my only Berkshire -- key to my Berkshire-only institutions is my faith in the future judgment and fidelity of Berkshire directors. They will regularly be tested by Wall Streeters bearing fees. At many companies, these super salesmen might win. I do not, however, expect this to happen." [00:51:53] Warren Buffett: That's exactly true. And I think by writing it, it helps a little, too. No, there's no question that Wall Street would love to come along and sell anything that we've got. I mean, there's a fee every time that there's a transaction. And there are big fees, and there's fees for financing. I mean, so we've had all kinds of people snoop around. They know they're not getting it done with me, but it won't get done later on either. I am leaving -- every share of Berkshire I have goes to charity, and it's 99% of my net worth. So I got -- nobody cares more than I do about getting the most money to those philanthropies over the years following my deaths. And that's going to take place over 15 years, and I say keep it all in Berkshire. But if I thought that it was going to be run in a way responsive to Wall Street, I would instead do something else and have the money distributed to these philanthropies and not have it all tied to Berkshire. But Berkshire has a very unusual shareholder base. I mean, we have individuals that own Berkshire, and a lot of them have owned it 50 years just like that. People buy it to own for a lifetime, and we're going to run it in a way that they won't be disappointed. [00:53:14] Speaker 1: Do you think the people who are newer, relatively newer shareholders buying the B shares have the same mentality as the people who have been in it for 50 years in the A shares? [00:53:23] Warren Buffett: Well, we try to because that's who we encourage. I mean, in effect, we don't want everybody to buy our stock. I mean, there's only so many seats. There's about a million six hundred and some thousand A shares out. All the seats are filled. I love the shareholders we have. I don't want to go to Wall Street and try and get some new shareholders. They're going to replace the people we have. So what we want to have is people in those seats that are in sync with us. You can run a French restaurant or you can run a hamburger stand. And if you serve good hamburgers, you'll do good business at the hamburger stand. At the French restaurant, you can do the same thing there. But you can't run the French restaurant and then serve hamburgers inside, and you can't run the hamburger stand and serve French food inside. So we advertise in our deeds, in our words, in every way we can, what we're about. And we're looking to have the seats filled at our church by people who are in sync with us. And we do have them there. We get the same people every Sunday. And I see no advantage in going out and telling everybody on Wall Street we're going to do wonderful things and having those seats replaced. Because the only way you can get a seat is to throw somebody else out of that seat. There's only so many seats and they're all full. And you want them filled with people who are in sync with the policies of the company. And therefore, you have to explain those policies and you have to live up to those policies. And for 55 years, we've tried to. [00:54:44] Speaker 1: So you get the shareholders you deserve. Exactly. All right, not to mix metaphors, but can you have a decentralized central office running both the French restaurant and the hamburger place? [00:54:53] Warren Buffett: Well, we're not trying to have the railroad management run the utility or anything else. [00:55:00] Speaker 1: A decentralized, that's what I mean. A decentralized headquarters that's in charge, a conglomerate in charge of all those different businesses. [00:55:06] Warren Buffett: Well, we could run. Well, we have decentralized management as it is. We could have somebody in charge of all the little companies. Another one of the big companies. We could divisionalize it in all kinds of ways. I think we'd have more overhead. I think we'd have a different sort of manager. Our managers like running their own businesses and they like -- they never have to finance their businesses. I mean, they never have to go to Wall Street. They never -- they probably save 25 percent of their time. And I want them to feel they own their businesses. And that's all they're responsible for. If we mess up some other way, you know, they still -- they get paid based on how they do. And there, again, we attract managers who like to operate on that basis. We don't attract managers, particularly, who think they're going to keep moving step-by-step through various divisions and eventually run the whole place. [00:56:05] Speaker 1: One of the things that people wrote in -- a lot of people had questions about the banks, about what's happening with the banks, what you've changed with some of your investments over time. Jason Goldberg writes in. He says, "Please ask Warren about his views on the bank stocks in general and on Wells Fargo in particular. Over the last two quarters, he's sold almost a quarter of his longstanding Wells Fargo stake. Also, in the fourth quarter, he dumped a third of his Goldman stock -- Goldman Sachs shares, although he still owns over $75 billion in bank equities. So what do you think about banks -- not necessarily the sell-off today because you don't look at it day by day? [00:56:38] Warren Buffett: Well, banking is a good business if you don't do dumb things on the asset side. I mean, basically. It's a business that the banks we own earn between -- the commercial banks earn between 12% and 16% or so on net tangible assets. That's a good business. It's a fantastic business against the long-term bond, you know, at 2%. If you have a choice between a 2% instrument and a 12% instrument, which one's going to win over time? So if you ask me whether I think banks are going to go down where they only earn 3% or 4% on tangible assets, I don't think that will happen. The question is really whether they do something massively dumb, I mean, which periodically a number of banks have done. And I feel very good about the banks we own. They're very attractive compared to most other securities I see. And most of them are buying -- Bank of America is buying in a lot of stock every year. So our ownership of the Bank of America this year probably will go up 7% or 8% without us spending a dime. I'd like to own any business, any good business, where my ownership is up 7% or 8% every year without me spending any money and on top of it I get a dividend and so on. They're very attractive both against interest rates and against bonds and against other stocks in my view. [00:58:12] Speaker 1: You say occasionally they do dumb things. Maybe you're talking about Wells Fargo with the scandal that it had. It just settled on Friday with a number of the regulatory institutions that were kind of looking into it, the investigations that were taking place for $3 billion. Does this mean that they have kind of finally gotten through that and can move forward? [00:58:30] Warren Buffett: I don't know the answer to that. I know that they paid $3 billion because it was an ounce. I don't know what else is outstanding. But Wells Fargo's classic in terms of one lesson. My partner Charlie Margaret, you know, he says whenever we have a problem you attack it immediately. He says an ounce of prevention is not worth a pound of cure. An ounce of prevention is worth a ton of cure. And we've seen that time after time. And the interesting thing, and I don't know the details at all, but the original thing was a whole bunch of phony accounts. Now, I don't know how, if you open up a couple million phony accounts, you make any money on it at all. I mean, I don't, the shareholders didn't make money. People say that, well, if people-- [00:59:13] Speaker 1: Well, the incentive structure was set up so that some of the employees didn't make less money. [00:59:16] Warren Buffett: It was the dumbest incentive system you can think. And as soon as you learn, you can devise dumb incentive systems. We've done them ourselves. I mean, you can cause people to do the wrong thing because they will do what they're incented to do. And they had, obviously, a very dumb incentive system. People started playing it various ways. And the big thing is they ignored it when they found out about it. I mean, you're going to do dumb things in business. And we do them every day, you know. But you absolutely have to attack a problem as soon as it occurs and you know about it. And if that had happened, Wells Fargo shareholders would be a lot better off. But Wells Fargo shareholders did not profit from opening up accounts that were phony accounts that had nothing in them. I mean, somebody was getting paid so much per account. And the practice spread because bad practices do spread if they're allowed to spread. And they were ignored, which is a total disaster. And look at the consequences. So two or three years later, who's paying? The shareholders are paying for something that didn't do them any good whatsoever. [01:00:23] Speaker 1: Is that why you've sold off some of the shares? [01:00:26] Warren Buffett: No, not specifically. [01:00:29] Speaker 1: I know you don't want to get specific on why. [01:00:33] Warren Buffett: I'm not recommending it. What stocks? People have to make up their own minds on that. Okay. [01:00:39] Speaker 1: I want to ask you a question about Todd Combs and his new role at GEICO. I've got several questions that came in from that. And let's just use this one from Peter Lampras. During last year's interview on CNBC after the 2018 letter was released, you were asked about succession at GEICO. And you mentioned that at a recent meeting at GEICO, you met about 40 of their top executives. And after each introduced themselves, they stated their length of time with the company. The shortest was 19 years. Please explain why none of these 40 top executives were qualified to take over as CEO after the retirement of Bill Roberts. Again, that's Pete Lampras from Chicago. [01:01:12] Warren Buffett: Bill Roberts took over not even two years ago. And he's done a terrific job in connection with Tony Nicely. I mean, GEICO is my first love. Absolutely. I tell the other companies that. You can compete for my second love, but you can't compete for my first love, which is GEICO. Because it goes back 69 years and it did wonders for me. Anyway, GEICO, Bill Roberts took over a little less than two years ago. And then in either October or November last year, he said he'd like to retire in a year. He would adjust it in any way that made it the easiest for us. And we did not have the person, in my view, to replace him at that point. And Todd Combs, who's worked with Berkshire now for 10 years, he actually was a product manager at Progressive in the past. And he knows a lot about insurance. Insurance is probably the only business I know something about that we're in. All the rest of them are total confusion. But I understand the insurance business to some degree. Todd understands it very well at the operating level. And so Todd is there, and I hope very much that he's not there very long, because I'd like to get him back to Omaha. But our intention always is to promote from within. And we would hope to pick out the right person at GEICO. It isn't that there isn't somebody there. It's just you want to have the right one. Because when you put somebody in, you're going to keep them there for a long time. Or her. [01:02:57] Speaker 1: Does that suggest Todd is not going to be there for a long time? [01:03:00] Warren Buffett: I don't think he's going to. No, no. The plan is not for him to be. I mean, he has not made a permanent career shift. And I don't know how long he'll be there. We have one important problem, which all insurance companies have. But Progressive has done a better job of managing, of correlating risk with rate. And that is what we're focused on now. Correlating risk with rate. In other words, having the proper rate. [01:03:39] Speaker 1: Right. Charging the right amount. [01:03:41] Warren Buffett: Charging the right amount. If you were in the life insurance business, and you thought that 80-year-olds had the same life expectancy as 20-year-olds, you'd have a big problem. And what would happen is you'd write all the 80-year-olds, and somebody would write all the 20-year-olds. So in auto insurance, the same thing. [01:03:55] Speaker 1: There's a vast difference. In auto insurance, I'm not sure. I might prefer the 80-year-olds over the 20-year-olds. [01:03:59] Warren Buffett: Well, you might. And you certainly would prefer the 80-year-olds to the 16-year-olds. I mean, yeah. And you'd prefer the 16-year-old female to the 16-year-old male. There's a whole bunch of things. So you've got to, you've really got to segment risks. And that's enormously important. And every company's trying to do it better all the time. We do it far better than we did 50 years ago. But we have room for improvement on that. We're focused on that. And in the meantime, we're growing faster. We're gaining market share. Geico is a fantastic asset. Todd's job is to focus on that. But it's also to work himself out of a job very quickly. And definitely to work himself out of a job with somebody from Geico. [01:04:51] Speaker 1: Eric Lafont writes a follow-up question. He says, Warren, why did you and Ajit decide to appoint Todd Combs as the CEO of Geico? That part you've answered. But how will he be able to run Geico, manage a $13 billion investment portfolio, oversee Haven, and be on the board of JP Morgan? [01:05:06] Warren Buffett: Yeah, well, it'll keep him busy. And we've told him he's unlimited use of a NetJets. Really? Oh, sure. No, I mean, we want him to be efficient. That's what NetJets is for. And, you know, he'll be working 70-hour weeks. The question about the portfolio is interesting. Most months, neither Ted nor Todd makes a single change in their portfolio. I mean, portfolio management is something that you learn over decades. And when I ran Solomon, you know, I was running Berkshire's portfolio. It is not something that you have to sit there day by day and do. People do it that way. But if -- there are many years where if I just left the portfolio entirely the same and didn't make any changes, we'd be better off. So that's not about -- but you're right in terms of JP Mortgage Board. He's going to be a very busy guy. Geico's the top priority, but it isn't going to stay the top priority for a long, long time. [01:06:06] Speaker 1: Let me run to another question that Max0205 wrote in. Have Todd Combs and Ted Weschler outperformed the S&P 500 since they began working at Berkshire? Why don't you disclose their record? Why don't I? Why don't you disclose their record, they said. [01:06:23] Warren Buffett: Well, we're not disclosing -- I think it would be very unusual for a firm to disclose everybody's sales last year among their salespeople or anything like that. They're entitled to work in relative anonymity. Our directors know how they do. I know how they do. We made a lot of money with them. I feel very good -- I mean, I feel very good about them in all ways. But we're not going to -- we're not going to tell you how much each candy store sells. It wasn't -- sees candy or who was the top -- the top person that -- at any place brought in in sales or whatever it may be. [01:07:04] Speaker 1: All right. Let's jump to Berkshire's overall record versus the S&P. Yeah. The S&P 500 has now underperformed the S&P 500 on one-year, three-year, five-year, and 10-year marks. Yep. Is that because it's too big? And will it ever be able to outperform the S&P 500? [01:07:15] Warren Buffett: Well, certainly being too big is part of it. And -- but I would say this: during that same time, I mean, last year, we achieved -- now, I don't like it -- gap earnings very well. But we achieved the highest gap earnings of any company in the world has ever achieved that's investor-owned. And we have the highest net worth of any company in the world investor-owned -- any company in the world. So it -- I would say, related to safety of principle over time, I feel good about it. And I feel good about the fact that 99% of my money is in it and that it will be the source of all the philanthropic contributions that are made for 15 or dozen years after I die. So -- but I don't think -- I do not think it will be in the top 10% of stocks performing over the next 10 years. I don't think it will be in the top 15% of stocks performing in the next 10 or 15 years. I also don't think it will be in the bottom 10% or 20% or 30%. So -- but our ability to have a huge edge over the market generally with a $550 billion market value -- it's just -- it'll be minor, but it'll be done in a very, very safe manner. [01:08:33] Speaker 1: Is an investment in the S&P 500 a better investment than in the broker? It could be. [01:08:37] Warren Buffett: It could be. You know, on balance, I think we'll do a little better. But it'll be -- it'll be minor. It depends on the kind of market we're in. If we're in a down market, we're going to beat it. I mean, it's that simple. And sometimes we will be. The last 10 years, we haven't been. But over 55 years, it's worked. And it will continue working. But it will not work at all like it did when we were working with $100 million or a billion dollars. There's no question about that. But we've got good businesses. And we're -- we won't be in the bottom quartile, I promise you, over any long period of time. [01:09:16] Speaker 1: There are people like there were back in 1999 who have said maybe you've lost your edge. It was a similar thing in 1999 where you saw the technology stocks that were the big high-flyers, that people were pouring their money into the dot-com companies and a lot of others associated with that. If you look at the markets again, it's the technology companies that have the big runs. This time, you're participating in Apple, which is one of those front runners. But is this a cyclical thing to you? Do you think there'll be another market downturn and then -- Oh, there'll be a downturn sometime. And then Berkshire outperforms at that point? [01:09:49] Warren Buffett: Oh, we'll outperform in the down market. But that may not be particularly satisfactory to people. But, no, we will because we have these businesses that are making money. And, I mean, we are not -- we're geared somewhat away from a full-market participation in either direction. But that's fine. We own -- if you think about it, we're 80-some percent in equities. We may show 230 or 40 billion in equities and that looks like we're against our market cap. We're 40 percent. But we own 100 percent of these other businesses. Those are equities, too. I mean, we own a -- and we own insurance companies. And those are -- those are equities. So we're about 80 percent in -- roughly in equities and about 20 percent in cash. And I'd rather -- I'd rather have that 20 percent in other good businesses. But -- but -- that is, to some extent, a curse of size. And it's, to some extent, the fact that -- that it's very hard. If interest rates stay at this level, we'll wish we'd -- for the next 10 or 20 years, we'll wish we'd been 125 percent in equities. I mean, you know, equities are so much cheaper than bonds, long bonds, that, you know, something will change in a major way. I just don't know what. And I want to be prepared for anything, obviously. [01:11:13] Speaker 1: So that's why you keep so much cash around. You want to be able to be prepared for a downturn? You want to be prepared for a crisis? [01:11:19] Warren Buffett: We want to be prepared for anything, Becky. We want to be prepared for pandemics. We want to be prepared for -- anything comes along. Now, that is the chief job I have. I have people's money that gave it to me 50 or 60 years ago. And some of them still have 100 percent of their money, essentially. And the one thing -- and I've got the responsibility for five foundations that presently are going to get 80 billion and I think we'll get a lot more over time, probably. We don't want to permanently lose money. And you don't want to get that so that you go into a shell and don't do anything. But we have obligations to people on workers' compensation claims and auto accidents they've had that go out 50 years. And, you know, we have to run the place so that every check clears under any circumstances. And that's why, incidentally, we own Treasury bills. We don't own commercial paper. We don't rely on bank lines or anything. When people get terrified -- and they will occasionally -- everything freezes. And you're going to have to stand on your own feet at a time like that. It won't happen very often, but it'll happen occasionally. [01:12:32] Speaker 1: I know you've developed a thick skin over the years. But does it tick you off when people start questioning whether you've lost it, whether you can still -- Well, I'm sure I've lost some of it. [01:12:41] Warren Buffett: I can tell you all kinds of things I've lost. No, that happens. But we haven't lost Geico or the railroads we own. Berkshire without me is worth essentially the same as Berkshire with me. I mean, my value added is not high. But I don't think I'm subtracting value. But the big thing is how our businesses do and what we get to add in the way of businesses over time. And we can add them through marketable securities. I mean, we own five and a half or a little over a percent of Apple. It's probably the best business I know in the world. And we own five and a half percent of it. And that is a bigger commitment that we have in anything except insurance and the railroad. So it's our third largest business. [01:13:32] Speaker 1: Yeah. It made the point that it was bigger than your biggest acquisition of precision. Oh, sure. [01:13:36] Warren Buffett: It's our third largest business. [01:13:38] Speaker 1: All right. Let me test you on your thick skin. Okay. Wow. Here was the kicker of that Barron's cover story. He said, "There's reasons to think that the company will be a market beater when he's gone. In the meantime, happy 90th." [01:13:51] Warren Buffett: Yeah. Well, I hope it is a market beater when I'm gone. I'm counting on it. I'm telling my estate and then the trustees that succeed my executors in the estate. I'm telling them to keep every share of Berkshire they have until they have this pattern of giving it away. I mean, I want them to look back and say, "Gee, we should have made this change earlier." Because it's going to determine how much we buy in the way of vaccines and all kinds of things, education and all these things. And I feel terrific about Berkshire after I leave. [01:14:26] Speaker 1: I want to talk about another issue that we have not touched on yet, and that's politics here in the United States. We just watched the Nevada caucus. Bernie Sanders walked away with the most delegates after that. He looks to be as the clear frontrunner for the nomination for the Democrats this time around. You have long been a supporter of the Democratic Party. What do you think? [01:14:46] Warren Buffett: Well, I think I'm going to wait and see who gets the nomination. But I'm a Democrat, but I'm not a card-carrying Democrat. And I've voted for Republicans. I've contributed to Republicans. In fact, I've only run for two offices in my life. One was head of the Young Republicans at the University of Pennsylvania, and the other time I was actually on the ballot running for a delegate to the Republican National Convention in 1960. But normally I vote for Democrats, and we will see what happens. Wow. [01:15:21] Speaker 1: That's the first time I've ever heard you say something like that. [01:15:24] Warren Buffett: Well, I've kept it a secret for all these years, but now it comes out. [01:15:28] Speaker 1: You just said that you're not a card-carrying Democrat. [01:15:31] Warren Buffett: That's true. [01:15:32] Speaker 1: You are a card-carrying capitalist. Absolutely. You actually have one of those in your wallet. Yeah. I've seen it. [01:15:37] Warren Buffett: I don't know whether -- I'm a card-carrying capitalist, right? I don't think that's consistent with -- inconsistent with what I've said on politics. Yeah, here it is. I don't know whether that shows up. [01:15:46] Speaker 1: For those who can't see, I'll show you on this camera right here. [01:15:48] Warren Buffett: A card-carrying capitalist. And -- This is what you carry in your wallet. Yeah, and I think we will have some of those available at the annual meeting, too, for our shareholders. [01:15:56] Speaker 1: I think Andrew's got a question that he wanted to jump in with here. Andrew? [01:16:00] Speaker 4: I was going to follow up on that question, Warren, which was about a year ago, we had asked you about Michael Bloomberg. And you had said that if he ever entered the race, he was somebody you would support. Would you support him? Is he your candidate? [01:16:12] Warren Buffett: Well, I would -- I would certainly -- I would certainly vote for him. I don't think -- I don't think another billionaire supporting him would be the best thing to announce. But, sure, I would -- I would have no trouble voting for Mike Bloomberg. And what do you think his chances are? And incidentally -- well, I don't think I want to get into handicapping the race. But I would say this in terms of Sanders. I actually agree with him in terms of certain things he would like to accomplish. I don't agree with him in many ways. But in terms of the fact that we ought to do better by the people that get left behind by our capitalist system. I don't think we should have killed the capitalist system in the process. I think we should make sure that the Golden Goose keeps laying more eggs. And it's worked wonderfully since 1776. But it doesn't work as well for people whose talents aren't really geared to a market economy. And I don't think anybody should be left behind by an economy that has over $60,000 of GDP per capita. And so I'm a big fan of increasing the earned income tax credit. And I'm -- you know, I think there should be some changes made. But if given a choice, I would certainly vote for Mike Bloomberg as opposed to Sanders. [01:17:40] Speaker 1: There is a plan -- let's talk about some of Sanders' plans. You said you agree with some of what his intentions are. But let's talk about some of those actual plans. One of those plans would be to give 20 percent of companies' stock to employees and put workers on the board. What do you think about that? That would be for any company, public company, that has more than $100 million in annual revenue or a $100 million balance sheet. [01:18:00] Warren Buffett: Well, I don't want to get involved in evaluating this whole plan, but I think that would be a particularly bad idea. Because? Well, I just -- I don't think that -- I don't think putting 20 percent of the capitalists on a labor union is a good idea either. And I -- I think the market system works very, very well in terms of developing more goods and services. I mean, when you flew out here to Omaha, if you'd flown out here and you wouldn't have been able to fly in 1776, you wouldn't have seen anything. Everything you see is the product of a system that's worked like nothing's ever worked in the history of the world. So I -- I do not believe in messing up our system of developing output. I do believe that -- that anybody's willing to work 40 hours a week and has a couple kids should not have to have an extra -- a second job. And I believe in having a higher income for people, not necessarily a higher minimum wage, but I -- I do not think it's at all unreasonable that the income tax credit produces at least $15 an hour, maybe higher in certain areas. So I -- I am very much in sympathy with the fact that Senator Sanders believes that a lot of people are getting left behind and through no fault of their own. And there's all kinds of aspects of capitalism that can need in some ways to be regulated. But I don't believe in giving up the capitalistic system. All right. [01:19:27] Speaker 1: Let me slip in some questions that viewers have written in on this front. Michael Blank writes in, "Please ask Warren if he thinks the market will sell off if it becomes clear that Bernie Sanders will win the Democratic nomination." [01:19:39] Warren Buffett: I think -- I normally would never make a comment on something like that. But I would say that if you had Sanders and a Democratic House and Senate, or if you had Trump with a Republican House and Senate, there would be a significant difference. But I don't think I would necessarily vote on what -- in fact, I know I wouldn't vote -- on what I thought necessarily would affect the market the better. I think it's a very poor yardstick. I would not want to cast my vote in a presidential election based on which would be better for the market in the next 30 or 60 or 90 days after the election. [01:20:22] Speaker 1: But your reservations with Bernie Sanders, I assume, come with your concerns about what it means for the economy, not over 30, 60, 90 days, over a much broader period of time. Certain aspects of the economy. [01:20:32] Warren Buffett: Certain things I'd like to see done. I would like to see the earned income tax credit change dramatically upward. [01:20:40] Speaker 1: Alan Buckey writes in a letter. He says, "If Michael Bloomberg becomes the Democratic candidate, would you consider buying his company?" [01:20:47] Warren Buffett: No. No. I can give you a category. I'll answer that. [01:20:51] Speaker 1: Because of the price? Because of the -- [01:20:55] Warren Buffett: That'd be something to pay more. [01:20:56] Speaker 1: Warren, we've talked this morning about the coronavirus. But there are people who are waking up across the country now, kind of tuning in at this hour. So maybe we should address this again, with the markets indicated down 750 points. With concerns about coronavirus spreading and now worries about what that will mean for the global economy this year. I know this is not something you look at a day-by-day basis. But how do you kind of wake up and read this and think through it? [01:21:21] Warren Buffett: I don't think it -- it makes no difference in our investments. I mean, there's always going to be some news, good or bad, every day. In fact, if you go back and read all the papers for the last 50 years, probably most of the headlines tend to be bad. But if you look at what happens to the economy, most of the things happen -- are extremely good. I mean, it's incredible what will happen over time. So if somebody came and told me that the global growth rate was going to be down 1% instead of a tenth of a percent, I'd still buy stocks if I like the business and I like the price at which -- And I like the prices better today than I liked them last Friday. [01:21:59] Speaker 1: Do you like prices better today? Will Berkshire be buying stock today? [01:22:03] Warren Buffett: Sure. Well, we'll certainly be more inclined to buy stock today than on Friday. Yeah. Anything we were buying Friday, we will be buying today and feeling better about buying it. [01:22:16] Speaker 1: You know, one of the things you talked about in the annual letter was stock buybacks of Berkshire Hathaway. Right. And for the first time, you told people to call Mark Millard in your office outright if they have $20 million worth of Berkshire shares and they're ready to sell. Right. That's a really unusual move. Why did you do that? [01:22:34] Warren Buffett: Well, we did it because it's very hard to buy blocks in the market at Berkshire. We practically never see blocks, except we do see them from estates or occasionally. But if somebody's going to sell $100 million worth of Berkshire and we want to buy it, we'd like them to call us. And if we're buying at that price level, we'll buy it. [01:22:59] Speaker 1: Dan Mahoney actually wrote in with a very similar question. He just said, is it hard to buy back the shares? [01:23:03] Warren Buffett: It's harder to buy back Berkshire shares than, say, Bank of America is buying back their shares. Bank of America bought back 8% or 9% of their stock last year and they can really do it without moving the market. I mean, Apple's been buying back a ton of stock. They were buying stock at the same time we were buying stock. But it was easier for us to buy Apple stock, even though Apple itself was buying a lot of stock, than it is to buy Berkshire. Berkshire is, well, it's held by people that really plan to keep it. I think the amount of speculation in Berkshire stock is relatively low compared to most stocks. And so it's, well, we bought $5 billion worth last year, but that's only 1% of the market cap. And I would say with a great many companies, you can buy 4% or 5% of the company fairly easily a year without disturbing the market. American Express has been buying it every year. [01:23:57] Speaker 1: So with you putting out an ad in the letter to shareholders, does that basically mean you are eager to buy more shares back? [01:24:04] Warren Buffett: Depends on the price, but we'll let anybody know if they -- we told them to call us before the opening or after the close. But -- and only if -- only with blocks and only if they're ready to do business. Now, there'll be a few people probably that'll probably try and call just to see whether we're buying or not. And we will -- we will not show a lot of patience with those people. [01:24:23] Speaker 1: Let's talk about shares of Apple, both from -- you just mentioning it with the share buybacks, with it being such a huge holding of yours. You've got more than 5.3% of the company right now? I think it's 5.6%. [01:24:36] Warren Buffett: 5.6%. And it goes up every day. [01:24:39] Speaker 1: Let's talk about what we've seen with the slowdown with the coronavirus. Because Apple is one of the companies that has said it's going to have an impact, not only with the stores that they've closed there, with the behavior of Chinese customers, but also what happens with the supply chain. Sure. How do you read through any of that? What are you hearing? Do you know more than we do on that front? [01:24:57] Warren Buffett: No, no. I don't know one thing more. I see -- I may see Tim Cook at the annual meeting. I see him in Sun Valley once a year. I don't think -- I don't think I've placed a phone call to Tim Cook in two or three years. I mean, no. All kinds of things are going to happen to Apple over the next ten years. The real question is, you know, what is the degree of pervasiveness and strength of that product five or ten years from now? And I don't think of Apple as a stock. I think it's our third largest business. [01:25:30] Speaker 1: It's also a high-flying technology company. It's one that's been at the forefront. But you've said in the past you didn't buy it because it's a technology company. [01:25:38] Warren Buffett: I think it's a consumer product. In fact, I think I said this on the program a couple years ago. I mean, obviously, it's a consumer product company that uses technology. But we've got a lot of products that use technology at Berkshire. But it's an incredible company. And I should have appreciated it earlier. [01:25:57] Speaker 1: There's a question that came in from, I guess the handle is GPG. This is a question that came in on Twitter. And the writer asks, you've said that you can do fair value estimates of companies you follow at any time in your head. So please do one now for Apple. What went wrong with your estimate for IBM and how is that miscalculation different than for Apple? [01:26:18] Warren Buffett: IBM is an entirely different business than Apple. I mean, Apple doesn't resemble IBM anymore. It resembles seized candy way more. I mean, it is an incredibly useful product to people that grows more useful as the number of people are involved. I mean, it's really interesting, you know, we call them smartphones. If you go back and look at the old telephone, that was an incredible useful product. It changed my mother's life and my dad's life. It changed lives in every way. And they took a long time to become pervasive. And it was very expensive initially. But it changed the world. And the smartphone is part of hundreds and hundreds of millions of people's lives in all aspects of their lives. It's used for all kinds of utility. It's a consumer product. [01:27:22] Speaker 1: Are you a consumer of its products at this point? You've had to flip them for forever. Ah, I'm glad you brought that up. [01:27:28] Warren Buffett: I am now using, not very often, but I'm using the latest model. And I'll give you a little preview of our movie for the annual meeting. We haven't done it yet, but it will probably show me crushing with my foot, my old flip phone while closing up to the new smartphone. When did you get the smartphone? I've been given several of them, but including by Tim Cook. One finally stuck? What, pardon me? One finally stuck? Yeah, absolutely. No, my flip phone is permanently gone. The number's been changed to my new phone. Yeah. [01:28:11] Speaker 1: That's impressive. [01:28:12] Warren Buffett: I mean, you're looking at an 89-year-old guy that's barely beginning to be with it. [01:28:17] Speaker 1: What do you like best about the phone? And what do you like least? [01:28:23] Warren Buffett: Well, I don't use all its facilities like most people. I mean, most people are living their lives around it. And I use it as a phone. As a phone and nobody else? Yeah, I use it as a phone. [01:28:33] Speaker 5: I don't like when investment bankers talk about EBITDA, which I translate as **** earnings. [01:28:40] Speaker 1: That was Berkshire Hathaway Vice Chairman Charlie Munger about a week and a half ago when he was speaking at the annual shareholders meeting for his other company, The Daily Journal, answering questions, giving his usual straight answers when things come up as questions. Warren, that was Charlie talking about EBITDA earnings, calling them BS earnings, although he said it a little more explicitly. You, in your shareholder letter for Berkshire Hathaway, also wrote about how you don't believe in gap earnings. How do you guys come about this? What do you think? You still have to report these numbers, but you're basically telling shareholders don't listen to them. [01:29:20] Warren Buffett: Well, yeah, it's two different principles. I mean, the gap numbers would show us earning 80 billion, which is more than any company's ever earned in history. And we explained why that really isn't the relevant statistic, because a lot of that was just the stock market going up, which now gets counted in our earnings. And Charlie was expressing an opinion we both have. Charlie's the shy, reticent one of the pair, but Charlie is the best partner anybody could possibly have. We've been partners now for 60 years, and you could not have a better partner. He, at 96, a woman, since that meeting, actually, in the last couple of weeks, a woman said to him, "Is it too, Mr. Munger, that you have eight children?" And Charlie's reply was, "So far." So, Charlie is very much an active partner, we'll put it that way. Next time I see him, I'll get an update on that to see what so far is still going. [01:30:27] Speaker 1: Yeah, okay, let us know what happens with it. Yeah, I will. You know, we watch pretty closely Charlie's shareholder meeting for The Daily Journal. Sure. We send cameras out, we watch it. I've been out myself. Do you watch that meeting, too, to see what he has to do? [01:30:39] Warren Buffett: I watched it all on YouTube afterwards. But my sister and one of my good friends and my niece were all there. And, no, I end up watching it, and I actually end up reading it, usually, too. And I wouldn't miss it. But I don't go out for it. [01:30:56] Speaker 1: Was there anything he said that surprised you this time around? I'm just looking through some of his... Actually, nothing Charlie says can surprise me. Was there anything that enlightened you or changed your opinion on something? Maybe something that... [01:31:07] Warren Buffett: No, but I learn from Charlie every time I talk to him. Charlie has the best 30-second mind in the world. So I can go to him with a new question, a new problem of any kind, and it goes through about eight filters in his mind in 10 seconds, and he gets to the essence of any problem. There is nobody better to talk to than Charlie at age 96. [01:31:33] Speaker 1: Is there anything you've talked to him about recently that you might be able to share? I don't know if you want to share the conversations you guys have privately, but anything where you bounce something off of him and he... [01:31:41] Warren Buffett: Well, I bounce... We talk about a lot of things, and we talk a lot of... We talk particularly about things we don't know the answer to. And, you know, we find the whole scene so interesting, whether it's politically or economically or the world. I mean, it's incredibly interesting to us, and we're particularly interested in each other's view, although I think I'm more interested in his view than he is in mine. And that would be a correct decision to make for somebody overhearing us. [01:32:09] Speaker 1: What's something you guys don't understand right now? [01:32:12] Warren Buffett: Oh, we do not understand at all what the outcome will be in a world where 13 trillion is being borrowed at less than zero, and even Greece went on short-term... Yeah, I think Greece, the 10-year bond, is 1%, for example. And at the same time, in this country, we're having, under very good business and market conditions, we're having a 4.5% federal deficit and nobody is concerned in the least. And we're talking about massive new programs and so on. Everybody talks about how they'll pay for them, but they really, you know, the deficit's going to widen. So we don't know what world comes out of something where you start with extremely low interest rates and high rates of growth and then what you do for stimulus later on. But the whole game, I mean, the game always unfolds differently than you expect, and that's what makes it so interesting. [01:33:17] Speaker 1: You know, the 10-year, speaking of these low rates, just a little bit ago hit its lowest yield since July of 2016 this morning. It was 1.377%, we're back at 1.396%, but 10-year rates below 1.4%. Yeah. Would you have anticipated this? [01:33:31] Warren Buffett: It makes no sense to lend money at 1.4% to the U.S. government when it's government policy to change to have 2% a year inflation. I mean, you've got -- the government is telling you we're going to give you 1.4% and tax you on it. And on the other hand, we're going to presumably devalue that money at 2% a year. So these are very unusual conditions. And classical economics, it doesn't appear that, you know, what do people do under such circumstances? Does everybody buy a mattress and stick their money under the mattress or what? And it particularly seems unusual when the world is generally prosperous. But that's -- the game is always changing, but it always looks logical in retrospect and it always looks puzzling prospectively. But there's always things to do that make sense, too. [01:34:27] Speaker 1: Like what? [01:34:28] Warren Buffett: Well, I hope that's what we're doing. It's buying good businesses at decent prices, whether all of the businesses or parts of the businesses through the stock market. [01:34:38] Speaker 1: You know, you told me a year and a half ago, maybe longer, that when you went out to try and buy whole businesses right now, it just looks too expensive, which is why you started buying pieces of companies, more stocks, putting money into places like Apple. Is that still the case? Is it still a huge premium to try and buy a company outright? [01:34:54] Warren Buffett: There's quite a premium and part of the premium is because you can borrow so much money so cheap -- so cheaply in buying those businesses. Obviously, you can pay more for a business if you can borrow a very high percentage of the purchase price and of the future cash flow committed to it. And you can borrow low rates with very little in the way of restrictions, restrictive covenants or anything of the sort. I mean, that's going to bring higher prices and the demand for that is huge. And people look at those rates on the 30-year or the 10-year and they say to themselves, "Gee, I can't live on that." And so they stretch and buy poorer credits. But that's just part of the human cycle over time. And that leads to something else and that leads to something else. In the end, if you own good businesses at the right price, you're going to do fine. [01:35:43] Speaker 1: You're often quoted as saying that you don't know who's skinny dipping until the tide goes out and who's swimming naked until the tide goes out. Yeah, exactly. Do you get the sense with the high tide right now that there's a lot of skinny dipping? [01:35:56] Warren Buffett: Well, we're certainly doing -- we're allowing people to borrow money on much weaker terms than we were five or 10 years ago. You couldn't borrow money at all there for a period of 10 years ago. I mean, literally, you could -- Berkshire couldn't borrow money. I mean, everything stopped and now we've -- the pendulum has swung dramatically and yet we still have -- you know, we have very, very, very low rates. It's hard to believe that 10 years or 20 years from now we will have a substantial continuation of negative interest rates. But I've already seen things I didn't think could happen. Who knows what could happen? That's what makes it interesting. [01:36:40] Speaker 3: Let's get back out to Omaha where Becky Quick is with Warren Buffett. And there's a lot of important things happening. But don't forget that March Madness is right around the corner, Becky. And I -- [01:36:54] Speaker 1: You should see what he's doing right now, Joe. He was rubbing his hands as you said that. Now you're talking his language. [01:37:00] Speaker 3: Now -- well, Creighton -- it was 70 to 35 at one point. And I had Creighton yesterday. I don't know if you were paying attention to that. Were you watching that at all, Warren? Nebraska plays tonight. We pay attention -- [01:37:12] Warren Buffett: We pay attention to Creighton out here. They're good. [01:37:16] Speaker 3: We talked about it earlier this morning off camera. [01:37:18] Speaker 1: They're peaking. [01:37:19] Speaker 3: I think they're peaking. I mean, they're getting better and better and better. The three-point shooting was -- I think that one guy was seven for seven at one point yesterday. Which is -- I'd be like seven for 10,000 for three-pointers, I think. Anyway, get back to business. I just -- I'm looking forward to it, Warren. And I know we always have our own personal bet. If I get them all right, you give me Berkshire Hathaway, which would be cool for me. [01:37:45] Warren Buffett: I'll tell you, if you get -- if you get it all the way -- I'll give you my Berkshire Hathaway shares. All the way to the 64. [01:37:54] Speaker 4: Wow. Wow. The giving pledge. That's the ultimate giving pledge. Yeah. [01:37:59] Speaker 1: That's how sure he is that you won't be able to do it. I'm pretty sure. Andrew, I hear you have a question, too, Andrew. [01:38:08] Speaker 4: I actually have a couple, and I thought that I read the letter like everybody else over the weekend. It was fascinated by so many of your comments, Warren. Specifically, I wanted to ask you -- you talk about diversity on boards in this letter. And one of the things I wanted you to weigh in on, if you could, is -- I don't know if you saw, but David Solomon, the CEO of Goldman Sachs, on our air, actually, announced a couple weeks ago that he won't be taking any companies public -- Goldman won't -- unless they have at least one diverse board member and are likely going to push that to two. You know, in the state of California, they put a law into place saying that you needed to have a female board member. And I'm curious what you think of not just the push towards more diversity on boards, but the requirement. Because I also note in your letter that you have very specific thoughts about what it means to be a board member, what it means to be an independent board member, how wealth is involved in all of that. What are your thoughts? [01:39:06] Warren Buffett: Well, at Berkshire, for decades, we've given the three factors in addition to integrity, but -- for board membership. And we want people who are business savvy. We want them to have a -- a strong personal interest in -- in -- in -- in Berkshire itself. And we've -- we -- we've got directors who really represent shareholders, basically, at Berkshire. And I think they do a great job. Now, that doesn't mean that they don't think that we should delight our customers, that we should treat associates well, that we should be -- behave well in our community, both local and national. But -- but our -- our directors represent the shareholders. [01:39:58] Speaker 4: So, Warren, just to -- just to follow up on it, though, what -- what's your thought about both the requirement that -- that maybe banks and others, investors, are going to force companies to have diverse candidates on their board, laws, as I mentioned, in California? [01:40:15] Warren Buffett: Yeah. I -- actually, there -- there may be -- there's been sent to us a proposal, which, unless it's withdrawn, will be on our proxy. I can't tell you precisely what it says. But that relates to this issue, and we will get our shareholders' view on it. I -- I personally -- and I -- I -- I want shareholders that -- I want directors that represent the shareholders. And, you know, in terms of my estate, you know, with -- with maybe currently $80 billion worth of shares to give to philanthropy, I -- I hope that we have -- and I -- we do have a group of directors that I think will be very conscious of doing the right thing. [01:40:58] Speaker 4: The -- the reason I ask the question is because the other point you made, which I think is a very smart one, and is often misconstrued in the corporate governance land, is that an independent director these days isn't always independent, in large part. And you make the point that those that don't come to the table with some form of wealth often need the job. They need the money. They want the money. And, therefore, that makes them less independent. And the reason I ask this is, one of the things, as we've been trying to get more diverse candidates on boards, more women on boards, as you know, there are -- there are -- there are fewer CEOs, fewer people who have made enormous amounts of money, and people, therefore, then can question their independence. It becomes a very tricky issue. And -- and that's what I was hoping you might weigh in on. [01:41:42] Warren Buffett: Yeah, Andrew, I've been on 21 publicly owned -- boards of publicly owned companies, and I've seen them in operation. And I would say that -- that people that I have often seen -- and that's perfectly understandable -- I have often seen people who are classified as independent directors, and they are getting $300,000 a year for a job that takes them a couple of days, maybe six times a year, maybe four times a year, and the company flies them to their office. And it's very enjoyable, and the company's good, and -- and who wouldn't want a job like that? I mean, it's an incredible job. And people -- I get calls from -- I get calls from headhunters, I get calls from CEOs, and they ask, you know, who I think would make a "good" director, and what they are asking is, you know, who is not going to cause too much trouble, and who is going to reflect -- their name is going to reflect credit on the institution. And they are not looking for somebody that -- that -- that I would regard as really independent. And I don't blame them. I mean, if -- if -- if I had spent my life being, you know, a teacher or whatever it might be, I mean, my IQ is just as high as the average or higher than the people on the boards and all that. But on the other hand, I want to get on a board. I mean, $300,000 a year would look terrific, and you don't even have to retire probably. In most cases, it's $65,000 or anything of the sort. So to call them independent is ridiculous. And if you're -- if you're on one board like that, you want to really go on another one and make $600,000 a year, and you are not going to do things that irritate your present CEO. So when he or she gets a call and says, would this guy make a good director, that the answer is no. I mean, it's -- it's -- it's just ridiculous to ignore the factor of compensation with board members. Okay. [01:43:50] Speaker 1: All right, let me -- let me ask a follow-up question that is similarly related. [01:43:55] Speaker ?: Yeah. [01:43:55] Speaker 1: Warren, and that's just having to do with sustainability, all these issues that are out there. Guys in the control room, sorry, this is not where I told you I was going, but Abhishek Bwadra wrote in a question. He said, "Larry Fink recently said that our investment conviction is that sustainability and climate-integrated portfolios can provide better risk-adjusted returns to investors." What's your view on sustainable investing? [01:44:18] Warren Buffett: Well, I don't happen to make that decision when I'm buying stocks in our portfolio. I'm -- I -- what their individual policies are, I think they're all pro-social, I mean, obviously. You've got to be in tune with your society, but if you -- if you think that I look down at a bunch of stocks and decide whether to buy Apple or whether to buy JP Morgan or -- I am not -- I'm not using the factors and the delays out. [01:44:53] Speaker 1: Okay. I want to run through a series of questions that have been in. These are kind of all over the map, so forgive me. We'll bounce around, but these are questions that came in from viewers that I thought were good ones. Lucas writes in. He said, "Did Justin Sun change your mind on cryptocurrencies?" For anybody who doesn't know, Justin Sun bought the dinner or the lunch that you just had from the last Glide Foundation fundraiser. He is actively involved in Bitcoin. After that meeting, his PR people put out some notes saying that, you know, you kind of listened to cryptocurrency and maybe you're a little more in tune with the idea of Bitcoin now. [01:45:27] Warren Buffett: Well, I would say this. When Justin and four friends came, they behaved perfectly, and we had a good three-and-a-half-hour dinner, and the whole thing was a very friendly exchange of ideas. But cryptocurrencies basically have no value, and they don't produce anything. So you can look at your little ledger item for the next 20 years, and it says you've got X of this cryptocurrency or that. It doesn't reproduce. It doesn't deliver. It can't mail you a check. It can't do anything. And what you hope is that somebody else comes along and pays you more money for it later on. But then that person's got the problem. But in terms of value, you know, zero. [01:46:05] Speaker 1: So it sounds like he did not change your position. No, but I didn't change his either. [01:46:09] Warren Buffett: And I had a very pleasant dinner, and those people were -- they behaved more than well. And they gave four points -- or Justin gave 4.6 million to Glide, and that will buy a lot of meals and provide a lot of beds for people in San Francisco. So I thank him. [01:46:24] Speaker 1: He gave you some Bitcoin. What's it feel like to be a Bitcoin? [01:46:27] Warren Buffett: I don't have any Bitcoin. [01:46:31] Speaker 1: You don't? No. Okay. No. [01:46:36] Warren Buffett: You don't own Bitcoin. No, I do not own one. I don't own any cryptocurrency. I never will. And, you know, in the end, I may start a war on currency. You know, maybe I can create one, and I'll say there's only going to be 21 million of them, and you can have a little ledger sheet from me and everything that says you have it. And you can have it after I die. But you can't do anything with it except sell it to somebody else. And the interesting thing, of course, is that Bitcoin's been out there a long time, and people talked about how it would be used in various kinds of exchange. But none of our companies are doing business in Bitcoin or anything. Bitcoin has been used, I think, to move around a fair amount of money illegally. Or maybe in countries where you have a hard time. Yeah. So the logical move from the introduction of Bitcoin is to go short suitcases. Because the money that was taken in suitcases from one country to another, suitcases will probably fall off in demand. I mean, so you can look at that as the economic contribution of Bitcoin to the society. [01:47:46] Speaker 1: All right, let's talk about a question that comes in from Rusty Thomas. And he's got a question on baseball. He said, "Given Warren's love of baseball and the contrast between his deft management of the Solomon Brothers scandal and Major League Baseball's inexplicable mismanagement of the Astros' sign-stealing debacle, what advice would Warren provide MLB Commissioner Manfred to restore confidence and integrity in the game?" [01:48:09] Warren Buffett: Yeah, well, it survived the Black Sox scandal back around 1920. And people will continue to love baseball. But, you know, it was one thing to steal signs if you were on second base, but it's bad. Baseball will get past this. [01:48:28] Speaker 1: You're a huge baseball fan. Were you -- Pardon me? You're a huge baseball fan. Were you surprised to hear about it? [01:48:33] Warren Buffett: Yeah, I was surprised to hear about it, yeah. But then I find out that Bobby Thompson's home run, you know? Somebody just stole the sign, I think, off Ralph Breitger or somebody, you know? Just -- So, people are going to -- in any games, including the stock market game, you know, a certain number of people cheat. And generally, we have people that administer things to try and minimize the cheating. And I'm sure that Major League Baseball will address the problem. [01:49:02] Speaker 1: Should the Astros' players get off scot-free? [01:49:04] Warren Buffett: Oh, I'm not going to make a judgment on that. But Joe Jackson certainly didn't. Yeah. Yeah. [01:49:13] Speaker 1: Let me ask you about a question that came in from several viewers, actually. And that's about ETFs. DeMoseley Management wrote this version of the question. And news agencies have reported that Berkshire Hathaway purchased two ETFs. So, can you talk about if this purchase happened? And if the purchase happened, who purchased the ETF for Berkshire Hathaway? And how was the decision made to purchase it? Yeah. [01:49:36] Warren Buffett: Small numbers. It wasn't me or it wasn't Todd or it wasn't Ted. And it happened in some pension fund. And we have a few pension funds that aren't actually managed by us. But all I can tell you is that nobody that manages money at Berkshire is buying ETFs. Nor do I see any possibility that they will. [01:49:54] Speaker 1: Okay. Another purchase that came up recently, Kroger. And Jason Escamilla writes in. Was that one of yours or a lieutenant's pick? [01:50:04] Warren Buffett: It was one of the others. And, you know, I know Kroger. Kroger's done a good job, but it's in a very tough business. I mean, when you have Amazon and Walmart slugging it out and Costco taking a special part of it and everything. It's a tough business, but they've done a good job. And one of our managers decided to buy that. [01:50:29] Speaker 1: Okay. And then Kraft Heinz. This comes in from David Hall. He says, Mr. Buffett, while Kraft Heinz continues to whittle down their total debt, do you feel that the current dividend payout is appropriate? Or should it be reduced further to free up more cash flow to reduce debt more rapidly? [01:50:43] Warren Buffett: I think Kraft Heinz should pay down its debt. And it should -- but I think, under present circumstances, it appears that it can pay the dividend and pay down debt at a reasonable rate. And that it has too much debt. But it doesn't have some -- it doesn't have debt it can't pay down. And the debt holders are going to get the interest, and the debt should come down year by year. And I think it will, and I think it can with the present dividend. But who knows for sure in the future. [01:51:12] Speaker 1: Theofilos writes in a similar question and says, do you still believe in the company and management at Kraft Heinz? [01:51:17] Warren Buffett: It's still a great business in the sense that it earns, we'll say, $5 billion after depreciation pre-tax on $7 billion of tangible assets. It uses about $7 billion of fixed assets. It's a very valuable business, but we paid too much for Kraft, and we took on more debt in that, but we paid too much. [01:51:43] Speaker 1: Another question comes in from Beal, again, on Kraft Heinz. And this person writes in, private labels have performed very well against brands like Kraft Heinz, but they haven't made a dent against other brands like Coca-Cola or Seas. Why do you think that is, and how do you think about brands' modes, given your experience with Kraft? [01:52:00] Warren Buffett: Well, brands are always going to be in a fight with the retailer, and it varies by country enormously. It varies by product category. If people -- I worked in a grocery store in 1941. Charlie worked in St. One in 1940. People would call, and they'd ask for a can of peas, and I'd write down a can of peas. They'd call in, and they'd ask for Heinz ketchup, and I'd better give them Heinz ketchup. They didn't care which brand the peas were. They didn't care that much whether the two quarts of milk we sent them were this brand or that brand, but they cared whether it was Heinz ketchup. That was, you know, 1941. Some brands are terribly strong. You can't bring out a private label call and do very well with it, and people have tried for a long, long time. On the other hand, you can bring out private labels and lots of products, and they sell very well. And, you know, you take Costco with their own Kirkland label. I mean, that label grows dramatically. It cuts across categories. You know, it's done since 1992 or whenever it was introduced. Other people spent 100 years, you know, with huge amounts of advertising and special display, all kinds of things. So the battle goes on. I would say that the retailer has gained ground against brands to some degree, but brands are still terribly important. I mean, try and give me a $10 billion budget and ask me to bring out another Coca-Cola that makes a dent in Coca-Cola, and I can't do it. [01:53:44] Speaker 1: Warren, one of the questions that did come in -- it was something that you wrote about in the annual letter -- was the role that Greg and Ajit play. Greg Abel, Ajit Jain, the two vice-chairmen who were recently added as vice-chairmen, the role that they're going to be playing in the annual meeting with shareholders. You said that they will play a larger role in the shareholder meeting. How will that work? [01:54:03] Warren Buffett: Well, it will mean that any shareholder or any of the journalists there who are presenting questions from shareholders that have been sent to them can direct those questions to either Ajit or to Greg. So if they were insurance questions, they might want to direct them to Ajit, not insurance questions to Greg. But they will be there, and we'll have 60 or so questions. We don't know what they're going to be. And if anybody says, "I would like Greg to answer this," or "I would like Ajit to answer this," then they're right there adjacent to us. [01:54:33] Speaker 1: They'll be sitting on stage with you and Charlie? [01:54:35] Warren Buffett: Well, there's -- yeah, there's -- well, he's sitting in front of the crowd. There's two different levels of tears there. [01:54:41] Speaker 1: Yeah. Again, you said you did this because you'd gotten a lot of questions from directors, shareholders, other people who had kind of advised you that they thought it was good for them to be playing a bigger role. [01:54:51] Warren Buffett: Yeah. Everybody -- I heard from quite a few people. Now, we directed questions out to them where they were sitting with the directors out in front, and then the spotlight went down. So this may encourage more questions directly of them, and that will be terrific. [01:55:05] Speaker 1: Okay. Jim Bean writes in a question. He says, "In the past, both you and Bill Gates have stated that half of the board meetings are spent discussing succession. How has this changed since Ajit and Greg are on the board? Do they leave the room?" They leave the room. [01:55:17] Warren Buffett: But if I die tonight, the board tomorrow morning knows exactly what they're going to do. I hope they're polite about it, let the body cool off. But basically, they know what they're going to do. And the interesting thing about it is we own a -- you know, the Apple and J.P. Morgan, all those things. I don't know who's going to succeed the CEOs of any of the companies, I think, that we own stock in. But we're well prepared for succession. It's almost going to be embarrassing how else. [01:55:53] Speaker ?: All right. [01:55:54] Speaker 1: Let's get to a few more shareholder questions. Chip Crook writes in a note and says it was reported that Boeing was looking for a large cash loan. Were you ever approached about Berkshire loaning the money, kind of like the Goldman Sachs deal from years ago? [01:56:06] Warren Buffett: I think Boeing's raised about $13 billion. But that's bank-type money. In other words, my memory is it's maybe 1 percent, you know, plus -- they're looking for -- they're looking for traditional bank loans. And we don't make traditional bank loans. [01:56:22] Speaker 1: You also talked in the letter about how Berkshire Hathaway has -- Berkshire Hathaway Energy, I should say, has the ability and the talent to manage big investments. $100 billion and more. I think you wrote, "We stand ready and willing and able on such opportunities." California Governor Gavin Newsom asked you at one point to bid on PG&E. Is that such an opportunity? [01:56:43] Warren Buffett: PG&E -- we've obviously -- I mean, we've worked with them for decades and been familiar with them. But that doesn't fit Berkshire. But if there were $100 billion of transmission lines or whatever it might be, Berkshire could do it. I mean, we would love it. That happens to be a very tough thing to do because you cross all these states and everybody says, "Not in my backyard," and all that. But there can be huge, intelligent investment made in the utility energy area. And no one is better equipped to do it than Berkshire in both talent and resources. [01:57:19] Speaker 1: Why does PG&E not fit that bill? It's too tough. [01:57:23] Warren Buffett: I don't know the answer to it. I mean, rearranging that utility -- I know Governor Newsom. I think he's a very, very, very smart guy. And in terms of solving this problem, it's just not easy. You've got so many constituencies, and they're at each other's throats, and there's lots of money involved. And I don't want to be the guy -- I don't know how to solve all that. [01:57:50] Speaker 1: Let's go on to a question that is posed by Ken Ducey. He says, "You sold 31 newspapers after buying them over 40 years as a self-described newspaper addict. You said recently that most newspapers were toast." I know that's not exactly what you said. Yeah, that's not true, actually. But this is in his question. You can answer that, too. Yeah. "Do you believe the problem with local newspapers is a lack of demand or a lack of innovation and a new business model?" [01:58:13] Warren Buffett: Well, the problem is that -- well, getting back to the toast comment, Andy Sherware actually is the fellow that said toast. He was interviewing me, and I repeated it. But the problem is, even every day, the circulation of the papers in every -- print circulation goes down. And the interesting thing about it, of course, is that the three survivors so far that look promising online are the New York Times and the Wall Street Journal and the Washington Post. All three of those papers sold their smaller papers. The New York Times sold, I think, 11 papers about seven or eight years ago. The Dow Jones, which owned the Wall Street Journal and now is owned by News Corp. They sold the Ottawa newspapers, eight papers. The Washington Post sold the Everett Herald. So they all saw the handwriting on the wall before I did. And they all sold their papers. That was their reaction. They did not -- they did not try and figure out the online solutions. They got out of them. And, unfortunately, I bought some. And we're still -- I mean, we are financing Lee. And we think Lee has, by far, the best opportunity to continue print as long as anybody and to find an online solution for these papers. So we put new money into the newspaper industry here, or we've committed to do it. It will close in a month or two. [01:59:31] Speaker 1: And then, finally, very quickly, we are in the Berkshire Hathaway's headquarters building here in Omaha. Strahm writes in a question and says, "Why did you decide to rent your offices for all these years instead of buying the building or building your own office building?" [01:59:43] Warren Buffett: Well, we only use one floor of the 15 floors here. But we have signed a lease for the next 20 years on one more floor. So it shows just how flexible our thinking is about the future here. How much growth you're anticipating? [01:59:54] Speaker 1: Yeah. [01:59:55] Warren Buffett: We don't want a big headquarters office. If we had a big headquarters office, we'd fill it, believe me. I mean, if we had 15 floors of our own, we'd have 15 floors' worth of people. [02:00:04] Speaker 1: Warren, before we let you go, let's just go back to the futures again this morning. Because right now the Dow is indicated to open down about 830 points. Weakness, again, on concerns about coronavirus and what that means. What's your mentality today as you kind of go out and look at the stock market and decide what you're going to do? [02:00:21] Warren Buffett: We're buying businesses to own for 20 or 30 years. We buy them in whole. We buy them in part. They're called stocks when we buy them in part. And we think the 20- and 30-year outlook is not changed by coronavirus. [02:00:32] Speaker 1: Warren, I want to thank you for your time today. We really appreciate it. Your generosity with your time. And we hope to see you again soon. [02:00:40] Warren Buffett: Come every year. [02:00:41] Speaker 1: Thank you.