Warren Buffett's speech that will leave you stunned

I'd like to uh talk to you about your financial future and I hope those figures become applicable to all of you as we go along at uh uh and I'd like to start uh by posing a problem for you and in I'm just going to talk for a couple minutes and we'll do Q&A because I what we want to do is talk about what's on your mind but I'd like you to think about this for just a second if as we walked out of here today I said I would like to buy 10% of your financial future I was going to write you a check today and from this day forth you were going to give me 10% of everything you earned uh how much would you want to charge me for that I'm going to buy one tenth of you and I may take the low bit incidentally so be careful what you write down well I think if you thought about that a little while is you you can contemplate that for a few minutes you know you're going to get a check for me today and you do anything you want with the money but from this day forth you have to give me 10% of what you earn I think it would be very foolish of you any of you if you asked for less than say $50,000 now it's G to be a few years before you're out earning money and so I've got a few years of dead money there but then I would start getting this royalty on you as you went along so I really think that if you thought about it you you most of you would want a fair amount more than that I think you'd be right uh fortunately I didn't make this deal with anybody when I started out so nobody's got a 10% royalty on me but uh I think that 50,000 would sort of be the absolute minimum and if you think about that that means the right today you are worth 500,000 because of 10% of you is worth 50,000 in cash today your potential is worth a minimum on a 100% basis of $500,000 that is the big financial asset you've got it's way more important what you do with that $500,000 asset that you own today then whether you decide to buy stocks or bonds or whether you put your money in a mutual fund or pick your own stocks or anything of that sort the biggest financial asset that you have going for you by miles is the value of your own earning power over the years so that's really what you should focus on if you're f focusing on your financial future that means you should fin focus on you because whether your 10% is worth 50,000 or 100,000 or 300,000 which would be 500,000 or a million or three million for all of you whether it turns out to be one or the other is really dependent uh in a very large part on what you do in the next few years all of you in this room have the brains to do extremely well in life you've all got the energy to do extremely well in life and then the question is how do you apply it if you've got a 200 horsepower motor you get 200 horsepower out of it you get your full potential or do you get 100 horsepower or 50 horsepower now there's two things that can hold you back in getting the full horsepower out of your your engine whatever it may be all of you have big enough engines and one of those is a lack of education but that probably isn't going to happen to very many people in this room if you did have a lack of Education if you if you didn't have a chance to get a decent education in life it wouldn't make any difference what that potential was because you'd never unlock it but the second most important thing and equally as important is in terms of the habits that you develop in terms of what you do with yourself when we hire people we look for three qualities we look for integrity we look for intelligence and we look for energy but if they don't have the first one Integrity the other to will kill you because if you're hiring somebody without Integrity you really want them to be dumb and lazy don't you I mean you last thing in the world you want for them is to be smart and energetic so smart and energetic only goes with Integrity you know you make your own decision on that you can't change your IQ or how far you can throw a football or how high you can jump or the color of your hair very easily but you can elect to have integrity that matches anybody else's and if you match that with intelligence which you have and and energy which you have uh you will get an extraordinary result and you'd be very foolish to sell me 10% of yourself for 50,000 on the other hand if you don't match it with that your potential will in a significant part go unused and I'll give you a little simple test to apply in terms of thinking about the kind of habits you want to develop because you can have any habits you want to be you can be you can be lazy you can be prompt you can be you can be late you can be honest you can cut Corners I mean you have all these choices and those are choices for you to make nobody else is going to make them for you and I would suggest that you play this little game with me too uh think about the person you would most like to be in life maybe it's one of your contemporaries maybe it's somebody a little older but pick out the person you admire the most the person that You' change places with if you could and then write down why you admire them just put it on a piece of paper and then figure out the person that you would least like to change places with you who really turns you off we you find repulsive and list the reasons why that person turns you off so much and put those down on the other side of the paper and then look at that list and you'll find that everything on the left-and side what you admire in other people the qualities they bring to life um cheerfulness you know generosity all kinds of things you'll find those are things you can do yourself it's very simple you got to apply yourself but the habits you form in doing that early on will carry you through life and on the other hand you'll find that the things that make people repulsive selfishness obnoxiousness all these things egotism are things that no one has to have if you find those in yourself you can get rid of them as long as you get rid of them early so all I suggest is that you write you write down a list of what what you admire what you find uh contemptible and decide that you know the ones on the on the admired side are are ones you're going to acquire for your if you do that when you're young it'll carry you through the rest of your life this doesn't work if you do it when you're 50 or 60 by then the habits are too well formed uh but if you do it early Behavior becomes becomes a habit so if you do that two or three years from now if you go through the same exercise you'll find out that the person you admire the most is yourself that can be a little dangerous under some circumstances but it uh uh but it's not a it's not a bad thing I mean you want to be somebody you like and you don't want to be somebody that you're that you dislike and and uh form those habits early you basically can't miss now I'll give you one other small piece of advice that's just a coraly on this and then we'll get to your questions and and that is as a general matter as a one piece of specific Finance uh Financial advice I would say you know avoid credit cards just forget about them uh we're in various businesses that issue credit cards the American public loves credit credit cards but if you start revolving debt on credit cards you're going to be paying uh 18 or 20% and you can't make progress in your financial life going around borrowing money at 18 or 20 per. you can make a lot of money by lending it out at 8 18 or 20% over time you know if you can find anybody that's good that will borrow from you but you don't want to be on the side of the equation that's always behind in life uh you know I was lucky I'd saved about $10,000 by the time I got out of school that $10,000 was really worth millions I might have earned later on because after you get a family and everything the the expenses roll in but but those were my tools to work with but it was only because I was ahead of the game if you're behind the game by $10,000 at some point and paying 18 or 20% interest on it you will never you know you'll never get out of it so the trick I've got a partner that says all I want to know is where I'm going to die so I'll never go there you know and uh and that's true in financial matters as well you want to figure out where you don't want to be uh ahead of time and avoid that and I get about a dozen letters a day from people who are having terrible problems and there are two reasons why they have terrible problems one is a number of them have had health problems of some sort I mean they have really been hit by some or somebody in their family has been hit by some kind of catastrophic illness and that is a you know it's a terrible thing to happen to any family and they get in they run up bills they can't pay pay and and really only Society can solve that one uh uh in terms of protecting people against that that's just plain bad luck but the other one is from people who run up credit card debt and uh they're facing bankruptcy or they've been through bankruptcy once before and they owe a whole bunch of money and they can't they can't even pay the interest let alone pay any principal and half of my letters come from people like that and that that that problem is avoidable catastrophic illness is not but but uh credit card debt is something you bring out on yourself and it's way better it's way easier to stay out of trouble than to get out of trouble financially and and uh I will guarantee if you run a big credit card Debs you will be in trouble uh probably the rest of your life in terms of uh your financial situation on the other hand if you get ahead of the game uh even it's on a very modest scale so that money is coming in from investing and you're you're a you people owe you money or equities owe ownership uh you'll be way ahead of the game compared to paying it uh being always being paying uh your creditors every month so my advice to you is uh if you can't pay for it don't buy it and uh get yourself in a position where you can pay for anything and uh then we'll be glad to see at borines at Nebraska Furniture Mark now let's uh let's have some questions do we have a mic out there that people can either go to or that travels around anything that's on your mind ask about don't don't don't be bashful yeah how would you advise people who aren't necessarily going into a a career field in which you would make a a large base salary such as like medicine or something like that maybe um performing arts or music how would you advise us to keep up financially with the rest of the world well it there it is true that a market system does not pay as well in some in in some activities as as might seem appropriate for the importance of those activities to society just take teaching for example I mean teaching does not pay well and what could be more important I mean you know you've got to be as as interested in who you're the teachers of your children are as who your accountant is or you know whatever or who's winning the heavyweight title of the world or that sort of thing but it doesn't pay well and and it's a fundamental Choice uh whether you're going to go into something it for many people it'd be a it'd be a fundamental Choice whether you're going to go into something you love or something to to try and make a lot of money I think that generally it pays to go with what you love uh uh I think that it's very hard to find people when they get to be my age who say they're that they've loved what they've done all their life and feel it was very worthwhile but they're terribly sad they made that choice because they didn't make a lot of money I I don't think anybody's ever ever said that to me that they wish they'd gone into something else where they were uncomfortable doing it or didn't enjoy it didn't feel very productive but made a lot of money so I don't I don't think you'll find that so I would I would I would go to work in whatever turns you on it may turn out that it'll it'll be more profitable than than you can think but almost everybody here will make enough money unless they get some terrible habits along the way to do reasonably well and and doing reasonably well in this country really is is uh is pretty darn good I mean it is it's not necessary to have huge amounts of money in order to enjoy yourself I enjoyed myself when I was had my $10,000 and I live in the same house that I lived in when I was making when I had about that I bought it 41 years ago I like the house then I like the house now I mean if you think about it if you have a reasonable job you'll be eating at McDonald's and I'll be eating at McDonald's so we're we're to push on on on food I mean you know in fact I hope it's Dairy Queen actually and may uh and if you come to Dairy Queen you'll see me and you can order anything on the menu I can order and we both can afford it uh you know you'll you'll wear the same clothes I wear I I'll pay more for my suits but as soon as I put them on they look cheap on me so we'll we'll look about the same and uh we'll both live in the same kind of houses I live in that house from 41 years ago and it's it's it's it's warm and winter and it's cool and summer and it's comfortable and you'll live in a house that's that's similar and then and what difference is it make if you have 50 more rooms or you know guest houses or all that you know it'll probably just bring you problems I mean you have to worry about the about the Greenskeeper or something when you get through so I I I I have been in the houses of people uh where the houses are worth um oh probably 200 times what my house is worth and I would not be any happier in those houses at all in fact I'd be less happy i' just have one more thing to to worry about and you know the dozens of people around the place and people quitting and people stealing from you and all kinds of things to hell with it you uh we drive we'll drive the same kind of car in fact you'll probably drive a better car I drive a car is about eight years old I don't know what it's worth now but it gets me around fine I mean I'm perfectly happy we'll watch we'll watch the same television you know we'll we'll work on the same computer pretty much the only difference will be how we travel long distances you know I will fly on a plane that's more comfortable than than flying Sou West Airlines or something which I've got nothing against but that's the one real big difference and other than that I do what I like every day I hope you you'll do what you like every day to do and uh I work with nice people I hope you work with nice people uh and that's there's 24 hours in the day and those are where the hours go so great wealth is the tiniest bit different uh in a real sense than having just a decent a decent income and uh and to trade a decent income and something you love doing and something where you feel worthwhile doing it for huge wealth where you trade off a lot of your principles uh would be a terrible mistake would you not acknowledge your success more on yourself or from the help and teachings of others well I had I had the I was very lucky in life uh if you tell me who your heroes are I I will make a pretty good prediction of about how what you're going to do and I I I had the right Heroes I was very lucky in life and uh my heroes never let me down and started with my dad and then I had others in business and so I have had great teachers some formal teachers some that were just uh informal teachers teachers by instinct or example and uh if I hadn't had those uh you know my my life I'm sure would have been very different if I had been born in any place else when I was I was born in 1930 uh and at the time one out of 50 births in the world were in the United States so I came in against 50 to one odds against being born in the United States I would have I would have been a disaster you know if I'd been born in Afghanistan or or Peru or someplace I mean I was extraord I won I won the lottery the day I was born you know by being born in this country so have you uh I mean you you the odds were probably 40 to1 against you being being born in this country and were five times more likely to have been born in in China or six times four or five times more likely you've been born in in in India or some other place where it would not have been as easy to exploit the full potential of your talents so we've all won the lottery in that respect and and that's just plain luck I mean it uh and I was lucky to be born at this time I mean Capital allocation is something that pays off extremely well in the society now but it doesn't pay in other societies and it didn't pay off you know many years ago my my friend Bill Gates says that if I was been born a few thousand years ago I'd have been some animals lunch you know I I can't run very fast I can't climb trees and you know I just have those are talents nobody asked me to climb trees now but uh there was a time when it might have been important and incidentally bill would have been some animals breakfast I mean he can't run so fast either but uh in any event uh you know we we are lucky I mean just imagine being born a couple hundred years ago with exactly the same talents and how far they would have taken you then you know the average person today lives so much better than the richest person lived 100 or 150 years ago so uh I'm lucky in that respect lucky to be born of terrific parents I was lucky to be raised in Omaha in a in a in a in a great public school system I got a start here in the first eight grades that gave me a foundation that later when I went off the track a few times uh carried me through because I had a terrific grade school education in at right here in Omaha at Rose Hill and one of the reasons I had it incidentally is kind of unfortunate but I had that great education uh in part because women were being enormously discriminated against and so a woman at that time could be a teacher she could be a secretary she could be a nurse you know and that was about it so he had half the talent pool in the United States limited to just a few job so you had a abundance of talent uh in those activities like nursing or or or teaching because uh that Talent with males was spread across every act every form of work activity there was but with women it was concentrated in a few areas and that that benefited me it's kind of sad because it didn't benefit those teachers but but I was very lucky and uh I've really been that way uh all my life and what I do is what I do as important as you know what a good teacher does or nurse does or something of the sort you know I I think that's quite questionable it pays off enormously well in a market economy like the United States and but that's an accident didn't have anything to do with any inade ability of mine Mr Buffett technology has been a great factor in um stimulating the world economy what are your predictions for the future of um the technology industry and was what is its future role in world economy and the United States economy yeah well it's there's no question it's turning the world upside down it's it's it's done done it somewhat already but it will you know it's just beginning but it's moving very fast I met Gates on July 15 1991 I was out there for Fourth of July uh celebration with a friend and uh who subsequently died M Greenfield with the Washington Post and she took us down to visit the gates family and he tried to educate me about high-tech and he'd had better luck with chimp fies I mean I was I was really a disaster but but he's a good teacher but one thing he he told me was that at the time he said you know you've got this model in your head of the world and your model has time and distance as very limiting factors and he said they aren't limiting factors anymore he said you know the cost of talking to somebody around the world or getting your message in front of somebody or publishing is said it's going to be zero they're so close to zero doesn't make any difference and you know that was revolutionary but it's happening already in a in a very very big way and it's just uh what eight years later and and it's it's exploding so high-tech Information Technology whatever you want to call it is changing the world and it's going to change it in a very very big way and change I mean that's one of the things I think about in businesses we buy uh we announced the purchase yesterday of a uh Furniture retailer in in in in Boston in the Boston area and you know I think to myself what effect does this new world have in terms of the internet on furniture retailing I mean you have to think about questions like that the the changes will be huge I will I played Bridge yesterday uh with people uh all over the country but I played it with people all over the world I just sit down on my computer and I've got some popcorn there and I'm in khakis and a sweater and I I can have a bridge game in 30 seconds with people all over the world and uh no cost to it basically you know that's a lot different than trying to arrange a game with four people in Omaha you know on on a day when one guy wants to play golf and another wants to watch baseball and I mean it's it it it just it changes things in a huge way uh we are very fortunate I mean it's in the degree to which the United States leads the world in this area I mean we have a lead it's hard to think of who's in second place and 15 or so years ago this country had an inferiority complex it'd be hard for to remember because you you weren't old enough to be around then but in the in the early 80s we were wondering whether the Germans and the Japanese were going to own everything and that they were going to make all the steel and they were going to make all the cars and everything else and the television sets and we were going to flip hamburgers that was the standard line and just imagine in a short period like 15 years how that's changed around in an important way that's changed because of this information uh Revolution uh where we like I said I don't know who I don't know who you would name as being in second place in the world but here's the most important industry in the world and the United States has this incredible position and we're moving all the time with that position so I think that argues for a very I think it argues for a terrific future for the world over time and I think it argues even more for a terrific future for this company country what are the best ways for youth to get started now and securing their financial future for for what to secure their financial future you for youth youth oh well it's not it's not very complicated uh it goes back to getting full use out of your own talents first I mean the difference between whether you're going to be earning X or 2x or 3x a year uh 20 years from now uh is going to be a function of how well not how much talent you have but how how well you use the talents you already have and uh so that is the your best financial future is your own ability and and and your uh a capacity to to use those abilities to their potential and they can't take that can't be taken away from you they can't even tax it I mean uh you know most things if if if you and if you want a piece of real estate if they double the taxes they double the taxes and that changes your ownership in the property because now in effect the taxing authorities own more of it because they've got a greater command on the revenue stream uh the same thing about uh almost any asset you have uh uh but they they uh they don't tax what's in your head and they don't tax your ability to start performing when you when you get to work in the morning and finish in the evening uh to to your potential one of the things that amazes me is how people who really do perform well just sort of jump out at you once you're running a business when I got out of school I thought you know everybody would behave that way but they don't most people sort of go go through life in a sleep walk and and if you don't you will stand out so the big the biggest thing for your financial future is yourself now beyond that it is always being ahead of the game rather than getting behind the game it's saving a little no matter how you do it I mean I delivered papers I worked at pennies I sold golf balls I had a pinball machine R I did a lot of things that enabled me to accumulate about $10,000 by the time I got out of school uh 10,000 doesn't go as far now as it did then but it having anything so that you're ahead of the game and not getting behind the game is enormously important I mean just you know if you're going to run a 100 100 yard dash against a bunch of people in life if you can figure it out so that when the gun goes off you're 10 or 15 yards ahead instead of 10 or 15 yards behind it's going to make an enormous difference in how that race comes out so uh having having some net resources doesn't make much difference whether they're in stocks or Bonds in my view but uh uh and not having debt when that gun goes off when you get out of school uh is a huge plus over being behind the game and uh uh you know it may come from delivering a paper out in the morning it may come from part-time work someplace but but put aside a few dollar for yourself it uh uh so that when the time comes and you enter you the workforce uh you're ahead of the game and not behind and then once you get there don't get behind by buying a whole lot of things that you figure you're going to pay for someday while you're paying 20% interest in between I was wondering with the increasing costs of Education today what can students do to deal with their debts once they're out of college well that's that's a tough one I mean i' guess I'd pay it off as fast as I could and I would incur as little debt as as possible in before that time came and I would say this in my experience in business there is very little difference if any between a very high price business education and what's available a lot for a lot less money so I I'm I uh I went to the University of Nebraska at Lincoln my last year in college I went to Wharton for a couple years before that uh I learned just as much at University of Nebraska as I did at Wharton at uh uh and there nothing against Wharton I mean it's just we had a very good school here I some terrific professors at Lincoln and so I I would not assume that if I was paying a few thousand do for an education uh here in the state for example versus paying uh huge amounts elsewhere that it was going to make a lot of difference uh uh most of a lot of the education uh you you need to be prodded in the right direction but an awful lot of it is is is is self is selftaught um uh I mean Andrew Carnegie did a wonderful thing in this country in terms of libraries and I used to spend a lot of time at libraries I even got locked in at the University of Omaha one what was then the University of Omaha and they had I couldn't get out for hours and one night I got so entranced with what I was reading but it there's there's all kinds of information available now with the Internet it's so much you know easier than it was then so uh it's out there to be taken and it isn't necessary to pay 30 or $35,000 a year to go to some uh bigname School to get the education at all I mean if you're going to learn accounting if you're which is probably the most important course you'd take in business if you're going to learn account you can learn accounting absolutely as well in my view going to Uno is going to to Harvard I mean I see I bet on that and uh I wouldn't run up huge bills in terms of getting a business education now you know if you're going to get a medical education I mean there's certain professions where there there may not be any way around spending a fair amount of money and getting in debt to some degree you got to make that decision yourself but i' certainly try to minimize it and uh uh and I would sort of I would have it figured out how I would handle that debt in say a fiveyear period after I got out of school or I would think twice about incurring it what advice would you have for a forming nonprofit organization for forming a nonprofit organization well I've always tried to avoid forming nonprofit organizations uh well that would that would depend entirely on what I want wanted to accomplish I mean you know it be one thing it was a hospital it could be another thing uh you know there's there's a there's so many types of it so I you know you've got to get people that are that are experienced and involved uh in an entity like that and uh uh but it it depends so much on the on the objective uh you're working at uh I understand that you're very civically involved and I was wondering how important quality you think that is for an individual in life and why yeah well I wouldn't say that I am that I mean I I do certain Civic things I think I think your your model as a citizen for example in alaho would be Walter Scott I mean he is far more civically involved than I am and uh incidentally his predecessor Peter kwit was too but walers carried it to new heights so I uh I don't want to take uh on any Manel for that myself I do some things uh one of the problems I have is I love what I do so much that uh that it it sort of takes over I mean I'm like a a guy that likes to play a lot of golf or something except I like I like the business I'm in but uh I've got a family that participates very actively uh uh some of my children work work on almost anything that comes along in the Civic area and you know it's you do in the end people do what they want to do to quite a degree and and uh uh I think I've never talked to anybody that that en enjoyed working in Civic activities that that didn't feel where was very worthwhile after they've done it I mean they've built something and participating in building something is always a lot of fun and and actually you have a good time we have this golf tournament for example in September and we raised some money for S but everybody has a good time so nobody's paying any price by doing it I'm having a good time the people who come are having a good time and uh we get to show all off to people but you should be enjoying things you go along and and you will if you work in Civic activities that that uh that interest you and you can do the same thing in politics I mean that if you find political ideas or or politicians who particularly uh you identify when turn on you can get a lot of self-satisfaction out of out of working and and you're doing something worthwhile so I just just follow your instincts on that that that'd be my recommendation I have question what do you see as the problem the biggest economic problem facing um the Youth of today going into the future yeah I I don't think that uh you're going to have enormous economic problems I think you will live in a society where the average person uh lives better by a significant margin than the average one of a generation earlier or two generations earlier that's been the history of this country it's a marvelous country that way I mean it when you think of it we have four and a half percent of the world's population you know and and what's been accomplished here is incredible 53% of the of the value of corporations that are publicly traded in the world exists in the United States with four and a half perc of the population this country always has done well uh they say in stocks that you should buy stock in a business that's so good that even an idiot can run it because sooner or later one will and and that's not terrible advice well that seems to have been sort of the history of this country from time to time I mean we've we've had all these problems that have come along if you look back on the last hundred years and list all the problems this country has run into you know you can make a very long list and a lot of people who focused on those problems at the time have missed the bigger picture and the bigger picture is that every generation lives better than the one before and that's because of uh that's because of savings because savings enable people to create new tools to do better things as they go along and it's also due to an environment that lets people realize their potential potential to a greater degree than most other environments in the world it's far from perfect I mean it's it's it's sad how far it is from perfect but it is better than anything else around I mean in this country uh you've got you don't have some commissar or something running a you know the a big business in this country you've got a guy like Jack Welch and and a fellow like Jack Welch makes a difference of Night and Day in terms of the productivity of that business over a period of decades and productivity is what a is what causes the standard of living to rise so anything that A system that throws up the Jack Welches of the world to run businesses is going to have an enormous advantage over a society that does it by heredity or that does it by government edict and we've got we're closer to that society that I've described than than than anything than any other country and it's it's led to to great things and it will continue to lead to great things so I think I think you've got the best future uh you know you don't face you don't face a war and you've got a you you've got a a great uh you've got a better future in terms of achieving material rewards than any generation in history so I wish I could trade you places I was wondering if you or if you could speak for Mr Gates were afraid of the impact on Y2K on the economy or specifically the stock market yeah well I'm I'm I'm glad you gave me a chance to bring in other people because I I'm the last guy in the world understanding about why 2 Ki you know I don't know why this microphone's working I don't know you know why lights go on or I I flip on the switch of my television set and pray I mean that's it's all it's all Beyond me but I would say this the smartest people I know in that area uh in large part I think it's going to be a non-event at U uh in this country I don't I I can't speak for the rest of the world but uh uh so I think uh I think you'll wake up on January first and find the world hasn't changed from December 31st now I would say this you might you might get a whole bunch of friends to write your checks for a billion dollars on December 31st then deposit them and you know who knows what'll happen can't lose anything I mean all we can do is Bounce and if the system gets followed up you know you might find a lot of money in your account but I wouldn't count on it wait we have a we have we own a company called executive jet we have about 14 or 1500 uh customers who own pieces of airplanes with us and we so we've got aund well we got 160 of their planes and some of our own flying around it' be very interesting to me to see what the advanced people let us know ahead of time when they want to use it it'll be very interesting to see how many sign up for January 1st at 1201 but it'll I it wouldn't bother me to fly him in the least on January 1 or do anything else on January 1 ideally I hope they getting prepared to watch the Huskers play in the big game and I was wondering how do you decide what you invest your time and money in yeah well I I I like to find businesses that have good economics now what what are good economics well good economics are a business that has some kind of a moor around it that makes its product or its service or its location or something a little more desirable than to the customer than any other sort of comparable product you know the number one candy bar in the last 30 or 40 years has been Snickers people don't fool around with different candy bars they fool around with different length dresses they fool around you know with all kinds of things but they don't fool around with candy bars because they figure you know they're going to go in and lay out 50 cents or whatever it is and put it in their mouth and they're not gonna for 50 cents and putting it in your mouth I mean you're not going to say I I'll put in I'll lay out 45 cents and put something else in my mouth so you find that very stable and we like businesses that we think we can figure out where they're going to be in 10 or 15 years I don't know where the information technology business businesses are going to be in 10 or 15 years I know where Snickers bars are going to be in 10 or 15 years they're going to be selling just about you know the way they do now I know where Wrigley's gum is going to be in 10 or 15 years there's not going to be a lot of innovation in in in chewing G and people the internet's not going to cause people to quit chewing gum either I mean at least I mean Gates may think so but I don't think so but uh it's predictability regarding the sustainability of a competitive Advantage some something special about a product so we look for those kind of products and then we look for people that are running the business that are honest and able it's easier to find people that are honest and able than it is to find businesses that are going to stay wonderful for a long period of time there are a lot of businesses that looked like they were going to stay wonderful but really evaporated over time but that's what we're looking for and the nice thing about is we don't have to find very many if we find one a year that's terrific because you don't you don't need a hundred or a thousand great investment ideas to do well you need a couple and uh if we the discipline is the most important thing we don't need brain power we we need discipline it uh you don't need 150 IQ to do what I do thank God you know you don't need 140 you don't need 135 you may need 115 or something like that and and but you do need discipline you have to wait until you see the fat pitch to swing at because investing is a no called strike game you know if I were a baseball player and I only like pitches two inches above my navl you know some guy could learn that and he could pitch me you know three or four inches below that and I get called out on strikes because I never find a pitch out like you can get called out on strikes in baseball you have to swing at pitches that you you don't even necessarily like particularly after the count gets the two strikes in business you don't have to swing at anything you can sit there and the paper says General Motors at 68 or says General Electric at 115 or says General Dynamics at 63 and if you don't like those prices you don't have to swing you can wait there day after day after day after day and there are no called strikes now when you swing when you decide to buy something then you know if you swing and Miss it's a strike but it's a marvelous game to be in because there are no called strikes and you can simply wait for that one time in a month or six months or a year or two or three years when you really know what you're doing where you like the price where you like the people running the business and then you swing and you only need a few swings in your lifetime uh so that's the way we try to pick businesses we try to stay with things we understand I mean there can be all kinds of wonderful investment opportunities out there that I don't understand I don't know what cocoa beans are going to do next year you know maybe you know but I don't know I I don't know what I don't know what crude oil is going to sell for it but I don't have to know I just have to know the things I have to know what I know I have to know where the limits of my understanding are what I call my circle of competence is and if I'm only able to evaluate 5% of the businesses in the world no problem I just stay within that 5% and try and find something uh and that's most people get in trouble because in Investments because they well they get itchy you know they can't discipline themselves and they hear about other people making money nothing upsets people so much as to hear about their friends making money I mean it that that's very destructive to discipline because they think you know I'm smarter than that guy next door and he just just bought that new car with the money made trade trading stocks on the internet so why can't I well the answer is you can't over time you will lose money to trade stocks actively and uh uh it's it's hard to exercise the discipline but anytime you buy something you should be able to take out a onepage sheet of paper and say I'm buying General Motors at 65 I'm buying General Electric at 150 because and you should write down the reasons if you can't if you can't fill out the sheet if it's because somebody told me about it at a party last night that's not good enough if it's because my broker told me about it that's not good enough you know it's uh you've got to have a reason for thinking that it makes an intelligent investment you do the same thing if you're buying a farm or an apartment house if you're buying a farm you'd say I'm buying this farm at $1,000 an acre because I think I can earn $60 an acre on it if corn sells at such and such and soybean sells at such and such and yield is such and such and you figure it out that's the same reason you buy businesses and when you buy stocks you're buying a little piece of the business and that's probably the most important thing to remember in in investing is that when you are buying a stock you're buying a little piece of the business and if you are buying it at an attractive price for the business for the whole business you're gonna make money and if you aren't you know overtime you won't make money um Reverend Jackson Jesse Jackson talked to us earlier he seemed to believe that the moral standards of today's society will eventually affect us in business how do you feel this will affect us as youth growing up in the United States well I think very difficult to quantify moral standards over time I mean it that you know you could you can pick out huge weaknesses at any given time in terms of how people or the country is behaving and and and and and huge strength so I think it's enormously difficult to quantify uh I think by and large we have made progress in what I would call institutionalized moral standards in this country I mean the the the uh U you know in terms of slavery in terms of the uh in terms of I mean the women women couldn't vote you know a century ago at half the country were second class citizens in that respect in a very and they had much lesser rights in terms of inheritance and all kinds of things the income tax didn't exist a 100 years ago so the idea of taxing people according to to how much that they benefited from society and their income uh didn't exist so I think in terms of institutionalized moral standards the country has made really quite significant progress uh in the in the last 100 years I think you know there's an enormous distance to go I think we're going in the right direction Maybe by fits and starts but I think we're going in the right direction and I think that uh it will be a significant plus to everybody in this room if they live in a more moral Society 40 years from now than than a less moral but I think the odds are that they will I think the country moves in that direction very difficult to do it and all kinds of interests that work against it but uh in the end I think the American people want it and um you saw it in civil rights I mean it took television to dramatize what was going on and people that weren't near it preferred not to think about it but it got through to the conscience of uh the American people and uh a lot of progress has been made there and there's a lot left to be made but there it's better than it was and the pace may seem very slow to those people involved and I can understand that uh the pace you know for woman's suffrage I mean that went for decades and decades and decades woman could be on a jury I was reading the trial of Clarence Darrow which took place in California about 19 I don't know 10 or 11 you know there were no women on the jury the woman wasn't allowed to be on a jury they weren't citizens in that sense so it's the moral behavior of the country has in my view improved D but it uh and it'll continue to improve and I hope you all in this room do your part to help it improve I was wondering how uh since the stock market's so high right now it'd be smart for us to get to get involved now or to wait till till it goes down a little or what yeah I can't tell you whether or not to buy stocks now generally I think it's important that you save money you know and whether whether you put it in the stock market or not uh I don't think is terribly important I think if you're interested at the stocks you should you should buy you know and you've got a little Capital you should buy a few I mean I don't think there's any way of learning about them better than experiencing you doing it on paper isn't the same I can guarantee you if you lose money on paper or lose real money it's a different experience and uh uh I think you'll learn more about yourself if you do it that way I bought my first stock when I was 11 I was actually I was at Rose Hill at the time and I bought three shares of City service preferred at uh 38 and it went down down to 27 which is something I still remember even though it was 11 at the time uh and then it went up to 40 and I sold it I made five bucks on my three shares after commissions and then it went to 200 and something so uh you know I I I probably remember that a little better than if I'd been doing it on paper and I fooled around doing a lot of things between about age 11 and 19 in the stock market I did charts I did all kinds of technical analysis I read every book I could get on the subject and I didn't do that well I didn't do terrible but but I I didn't I was really just floundering around but by that meant by the age of 19 when I read Ben Graham's book I was at the University of Nebraska in Lincoln I went and bought this book called The intelligent investor just come out and it had an enormous impact on me now if I hadn't done in the previous eight years if I hadn't been all over the lot I'm not so sure that that book would have had the same impact on me I mean I was by that time I was prepared to read Ben Graham's book which changed my life financially and an incredible way I mean I wouldn't be up here today if I had read that book but yeah part of life is getting prepared so that when something does happen that's significant you can grasp the significance of it and know what to do with it and I would say that first eight years of fooling around even though it produced nothing financially to speak of uh produced a lot in terms of getting my mind prepared for when I really did read something that made sense so I was ready to accept it and I actually went back and went to Columbia to study under the under Graham and because of of reading that book and all kinds of things float out of it so I would encourage you if you're interested in the field to do a few things I still try to make them as intelligent as possible I would try to stick with things businesses I thought I understood I'd still get out that sheet of paper and I'd write I'm doing this because and just test my reasoning then I go back and read it a year later and and see whether what you thought would be true turned out to be true so I would always check myself I believe in grading myself on everything you know doctors have post-mortems and they they do it because they learn from postmortem uh in business people don't like to do postmortem building plants or buying companies and they never wanted two years later to run a check on how that decision turned out because it it can be unpleasant uh but you learn from postmortem and uh you don't want to learn it's way better to learn from other people's mistakes than your own but you got to learn from a few of your own too and the time to do it is when you're young my question is to what extent do you feel that the government with the the current policies of welfare and Social Security is it financially competent and fiscally prepared for the future well I I I think that the country as a whole is quite quite well prepared for the future that doesn't mean that adopt would adopt every policy they have but I think a we have an enormously Rich Society enormously Rich society and it'll get richer uh everyone isn't going to participate in that someone won't participate because of physical disabilities other because of mental disabilities other because of shortcomings in the education they received when they were growing up all kinds of reasons we have a prosperous enough Society to be able to take care of of those people and we should take care of them and how we do it so that they feel most useful in life and how we do it so that we continue to encourage people to be more productive themselves I mean those are not easy questions but but that shouldn't take our eye off the ball of feeling we should do something about it it uh um I often I I I pose this problem sometimes to people I say let's assume that it's 24 hours before you're born and all of you can take this test 24 hours before you're born and a genie comes to you and the genie says what was your name again out there oh whatever we'll call you Joe uh and and the genie says Joe says you look pretty promising to me I think you've got kind of a sense of fair play and and a good mind and so I'm going to let you have an extraordinary opportunity I'm going to let you design the world into which you're going to be born in 24 hours it's yours you pick out the political rules you pick out the economic rules you pick out the social rules you design the world and when you're born in 24 hours you're going to be born into that world and that's the world that's going to exist for your lifetime for your children's lifetime for your grandchildren's lifetime and you having heard of some of these Genie jokes in the past would say what's the catch the genie says well it's very slight catch I said when when you're born in 24 hours you're going to emerge in this world you designed but what you don't know is whether you're going to be born black or white male or female male rich or poor brigh or able-bodied or infirm in the United States or Afghanistan all you know is that you're going to reach into this Barrel which now has six billion balls as we know representing one person every person in the world and you're going to participate in what I call the ovarian Lottery you're going to take one ball out of that barrel and you're never going to get another ball that's you you're going to get one ball and now you're going to emerge now what kind of rules you want to have for that Society not knowing which ball you're going to get now that I put you is the way I think people should think about social policy and if you're born if you're lucky enough to be born in this country you've won the lottery already but we should have a system in my view that encourages the Jack Welches and the Bill Gates and all of that to work far beyond the time when it has any economic significance to them we want people commanding those resources who extremely able at commanding them that's how that's how the the standard of living moves forward so we should want you know we should want Tom osbor coaching in Nebraska we should want we should want Bill Gates designing software and we don't want to mix up those two we don't want to we know we don't want to get Bill coaching in Nebraska uh so you want you want people you want a system that directs gets people to their potential and and puts them in the position where they can do the most good for society but you also want a system for the people get the wrong ball I mean somebody's going to get the ball you know that says adiq somebody's going to get the ball that says this disease or that disease early in life that cripples them and we've got a rich enough society that we can we can take care of those people and I think that to get back to your question I think that this Society will move more and more in that direction it has the capability of moving more and more in that direction as our resources uh and our output increases and I think that it has the will to do that in a general way although like I say there have always been lots of fits and starts so there is no shortage in the United States of resources there's no shortage of output you have to have a system that encourages people to behave to the limit of their abilities and puts them in the right place but then you have to make sure that everybody gets taken care of too and I wanted to know how you think the media affects the world economically today well it's small question uh [Music] well what it obviously does simply because it's it's moved so far technologically is it's brought it together in a big way I mean I was over in China a few years ago and I was right after the time of the Women's Conference in in uh in Beijing and I was reading the Chinese coverage uh of that conference and of course it it had nothing to do with what was taking place but the internet was coming in and and you know you can you can access the Washington Post or the New York Times or I get the Washington Post at 9:30 here at night in effect I never could get it the next day on on through through uh physical delivery but I buy electronic delivery I can read it uh you know probably earlier than most of the people in Washington are reading it so the ability to communicate and the degree to which the world can have awareness of what's going on every place in the world it's just you know it's been a Quantum Leap and you know that will have there are a lot of things that come out of that and uh uh net they're a plus over time but the they I mean they the the ability of information to be available to everyone worldwide almost instant instantaneously it's it's it's a can be huge advances in things like medicine for example just to pick one uh so it it's it's a net plus it has a it has a big effect and uh the definition of media has now been expanded enormously I mean there were three television networks in in the 19 and you know in the early 1960s and that was it there were three highways information traveled electronically and if the three pieces of information where I Love Lucy and I want something else and something else those were the three choices of information or entertainment that you had for tens and tens of millions of people sitting there looking at a tube now it's unlimited and that's only what three or so decades so it's just exploded and it'll continue to explode and net I think it's a plus and I think it's 1:00 I want to thank you all I I wish you well you're going to do terrific thanks