Buffett’s TV Interviews Are an Underappreciated Resource

The best business education in the world can be found in the pages of Warren Buffett’s letters. His Buffett Partnership letters and his Berkshire Hathaway annual reports cover every topic under the sun with Buffett’s trademark wisdom and clarity.

And while most things pertaining to Buffett get plenty of exposure, I’ve always been surprised that the transcripts of his interviews on TV haven’t been compiled into summary form. His 3-hour gabfests on CNBC and his chats with Charlie Rose often add nuance and insight to what he’s already explained in his letters.

With that in mind, here are some useful thoughts from his February 27, 2017 interview with Becky Quick. I want to keep these ideas in a more usable form without having to slog through the actual video or the sometimes erratic transcript.

All bolded and bracketed comments are my own, and each topic/segment starts with a bolded lead. Buffett’s comments are indicated by quotation marks. The transcript was prepared by CNBC and lightly edited by me for clarity.[1]

America’s dynamism and economic power is the all-important factor in Buffett’s investing life. Progress isn’t a straight line and there are sure to be potholes but optimism prevails.

“[America’s economic dynamism is] the dominant theme that’s run through my life since I bought my first stock in the spring of 1942 when I was 11 years old. And it overwhelms everything else over time. I mean, we have hiccups in the economy and we even had a panic in 2008. And we had a war during that period that when they started we were losing the war, actually, in the spring of 1942. But this country always comes back and wins. And it’s astounding when you think about it, what’s happened in 240 years. That is less than three of my lifetimes. And let’s look at this place, I mean, there wasn’t anything here 240 years ago. And civilization [has] gone on, you know, for centuries, and centuries, and centuries with people making very little progress in their lives. And then America showed the way and it … and we have not lost the secret sauce.”

If you’re investing for more than a few years, it doesn’t make much sense to wait or try to get the timing perfect.

“[I]f there’s a game it’s very good to be in for the rest of your life, the idea to stay out of it because you think you know when to enter it — is a terrible mistake. I don’t know anybody that can time markets over the years. A lot of people thought they can. But, if you were buying a farm and you decided that farms were gonna be worth more money ten, or 20, or 30 years from now and that would be a productive asset, go out and buy it unless it was just … some absurd price. [You are] making a terrible mistake if you stay out of a game that you think is going to be very good over time because you think you can pick a better time to enter it.”

“[I]n the spring of 1942 I was 11 years old, and the Dow was at about 100. And we were losing the war in the Pacific at that point, that was early … was shortly after Pearl Harbor. And there was no doubt in this country we were going to win over time. I mean, and people said, ‘Well, this is let’s wait till things are clear, let’s wait till we start winning the war.’ There’s always a reason to wait and I’ve listened to that all my life. You know, when I got out of school the Dow had never been above 200. There’d never been a year when the Dow had not been below 200 during the year. Even in 1929, when it got to 381, the low was below 200. Never been a year. Well, so what, you know? But that was a big subject at that time. And then you know, we ran into price controls, we ran into the oil shocks, you name it, just all kinds of things. And those are diversions. So all my life I’ve been hearing, ‘You know, maybe there’s a better time to invest, you know?’”

Comparisons to prior market bubbles are misplaced, and interest rates really matter.

“[W]e are not in a bubble territory or anything of the sort. Now, if interest rates were 7 or 8 percent then these prices would look exceptionally high. But you have to measure, you know, you measure everything against interest rates, basically, and interest rates act like gravity on valuation. So when interest rates were 15 percent in 1982 they’d pull down the value of any asset. So, what’s the sense of buying a farm on a 4 percent yield basis if you can get 15 percent in governments? But measured against interest rates, stocks actually are on the cheap side compared to historic valuations. But the risk always is, is that — that interest rates go up a lot, and that brings stocks down. But I would say this, if the ten-year stays at 230, and they would stay there for ten years, you would regret very much not having bought stocks now.”

“Well, it’s not like during the internet boom or — and there have been various real peaks — I’ve written a couple of times when I thought things were getting out of hand on the high side. And that’s not now. Now, if interest rates dramatically upward, then these valuations would come down, in my view. But I don’t see the games being played on a big scale that you had in the late ’60s or that you had around the internet time, you know. I don’t see lots of just fallacies being promoted. Or games being built on accounting tricks and that sort of thing.”

“Low interest rates push stocks up. You know, I mean the ten-year bond is selling at 40 times earnings. And it’s not going to grow. And if you can buy some business that earns high returns on equity and has even got mild growth prospects, you know, at much lower multiple earnings, you are going to do better than buying ten-year bonds at 2.30 or 30-year bonds at three, or something of the sort. But that’s been true for quite a while. And I’ve been talking about it the whole time. I said people were idiots in 2008 to put their money in cash. I mean, it was the one thing that wasn’t going to go anyplace. And interest rates are enormously important over time. And that’s — if bonds yield a whole lot more a year from now than they do now, stocks may well be lower.”

[Regarding the possibility that the Fed will rapidly increase rates]: “Well, I don’t really know. But what I do know that when you’ve got Europe and Japan with the rates they have, and particularly Europe, I mean, it’s — the spread gets — you’ve got to be thinking about the spread. You’re not going to have 8 percent rates in the United States and 1 percent rates in Europe or something of the sort. So Europe is a big factor. And you know, you widen it out, the dollar gets stronger, that hurts export. I mean, there’s a lot of consequences to everything. You never can do just one thing in economics, you always have to say, ‘And then what?’ And if I were the Fed, I’d probably be saying, ‘And then what?’ if I got too big a spread against Europe.”

“I would bet my life…well, it doesn’t mean much when I’m 86 to bet my life on a 30- year bet, but I would bet my life that stocks over 30 years will outperform the 30-year bond. I would come close to betting that over ten years they’ll do better than the 10-year bond. Versus the one-year bond or two-year bond I have no idea whatsoever. But if you look at the basic business of America, American equity earns a tremendous return on tangible net assets. That’s what the business is about. That’s what the farm is producing. Now, a bond is limited in what it can produce. But when you say reversion to the mean, I’m not sure what the mean is. I mean, the mean is going to be based upon returns on equity, the amount of equity reinvested and reemployed. And I would say there the prospects are so much better than in fixed dollar investments. Admittedly, I liked stocks a lot better a few years ago. And I’ve said that on this program. But the stocks versus bonds right now, it’s not close. Now, bond yields can change a lot. If bonds go to 15 percent, I may be recommending bonds.”

Over ~227 years the U.S. share of world population has risen from about 0.5% to almost 4.5%, going from ~4 million to ~325 million (>81x) while the world went from ~900 million to ~7.4 billion (>8x). Why?

“I think the market system was absolutely essential to it. It was not a planned economy and I would say that rule of law was important, never perfect but far more than many places. I would say that equality of opportunity was a factor. I would say that immigration did select for people that to some extent selected for people that were ambitious and really wanted a new life. But I would … if I had to pick one thing I would say the market system … was the overwhelming factor that contributed to it.”

If today’s environment seems unpredictable, that’s true — because the world has always been unpredictable.

o “All my life I’ve been hearing…’Things are more unpredictable now.’ They’re always unpredictable. I can’t predict what’s gonna happen tomorrow. I mean, you could have anything happen tomorrow. We’ve had October 19th, 1987, 22 percent down in one day. So I can predict what’ll happen ten or 20 years in a general way, but I have no idea what’ll happen tomorrow. And the important thing is if you got these wonderful assets out there, to own ’em, and which ones do you own? I mean, if you … if you save money you can buy bonds, you can buy a farm, you can buy an apartment, house, or even buy a part of American business. And if you buy a 10-year bond now you’re paying over 40 times earnings for something whose earnings can’t grow. And you know, you compare that to buying equities, good businesses, I don’t think there’s any comparison. But that doesn’t mean the stock market can’t go down 20 percent tomorrow. I mean, you never know what it’s going to do tomorrow, but you do know what it’s going to do over ten or 20 years. And people talk about 20,000 being high. Well, I remember when it hit 200 and that was supposedly high. The Dow, I mean, the Dow, in your lifetime. You know, you’re going to see a Dow that certainly approaches 100,000 and that doesn’t require any miracles, that just requires the American system continuing to function pretty much as it has.”

Mixing politics and investing is foolish and counterproductive. Buffett was a well-known and high-profile supporter of Hillary Clinton, and Donald Trump and Buffett even exchanged harsh words on several occasions. Buffett’s response to Trump’s election? Buying $20 billion of equities.

“I absolutely look at individual stocks. It has nothing to do what the Federal Reserve, it has nothing to do with the election. It would have something to do with interest rates if they did something extraordinary. It hasn’t [recently] because they haven’t changed that much. But there just were a couple of things I wanted to do and we had the money. And I like investing. And I would much rather have that $20 billion in these companies that I don’t look at it as being in stocks, I look at it as being in businesses. It’s just small pieces of businesses. And I would so much rather have that than have the money in treasury bills, which is my alternate, that I don’t have any problem with the decision at all.”

“Last year at our annual meeting, it was clear I was for Hillary, but I got asked a question about the market based on who got elected. And I said, America’s going to do fine under — in terms of economically under — under either candidate as president. People who mix their politics up with their investment activities I don’t think that makes sense. I’ve watched it all my life and obviously probably half the time, my adult life, I’ve had a president other than the one I voted for. But that has never taken me out of stocks. I mean, the American economy, you know, we’re up to number 45 or so and we’ve done awfully well. If you mix your politics with your investment decisions, you’re making a big mistake.”

“[I]n 1951, I proposed to my wife. And my father-in-law was the most conservative guy in Nebraska except maybe for my dad. My father-in-law said, ‘I want to have a talk with you.’ So I went over to his house to have a talk. And he sat there and he said, ‘Warren,’ he says, ‘I just want to absolve you from any worries. You’re going to fail. And the reason you’re going to fail — my daughter may starve to death and you’re going to fail, but I’m not going to blame you because it’s because the Democrats are in and they’re all Communists.’ And I listened to this thing for three hours. And I almost withdrew my proposal at the end. But I have seen people make economic decisions based on their political feelings and it is not the way to do it.”

“I grew up in a household where when Roosevelt got elected for the third term, my dad said, ‘There’ll never be another election.’ We couldn’t have dessert at our house, if you were a kid, unless you said something nasty about Roosevelt. And but I bought that stock in 1942 when Roosevelt was president. And it worked out pretty well.”

“I think the odds are good, as I said last year at the annual meeting, that we’ll have prosperity in any four-year period. It’s not a cinch. I mean, there are certain times when the economy has hiccups. But the odds are pretty good that any president has a reasonably good economy… I think, just on a probability basis, not specific to any given administration, I think the odds are very high that any administration ends up better four years — with the economy better four years later than at present. I would still say I think the economy will be better off four years from now, even though I disagree with some of the specific policies. But I disagree with the policies of most administrations — of some policies.”

Phil Fisher’s seminal book “Common Stocks and Uncommon Profits” — the first book on my “Mount Rushmore Reading” project for 2017 — was mentioned several times, particularly with regard to Buffett’s thoughts and research on Apple. And Apple, by the way, is now Berkshire’s second-largest common stock holding after Wells Fargo.

[Regarding Apple]: “Obviously it’s very, very, very tech-involved, but it’s a consumer product to a great extent too. And I mean, it has consumer aspects to it. And one of the great books on investing, which I’ve touted before, is one that Phil Fisher wrote back around 1960 or thereabouts, called ‘Common Stocks and Uncommon Profits.’ It had an effect on me. I went out to meet Phil Fisher after reading the book, I found him in this little office in San Francisco. And I recommend any investor read that book. And it’s still in print. And he talks about something called the scuttlebutt method, which made a big impression on me at the time. But I used it a lot, which is essentially going out and finding out as much as you can about how people feel about the products that they … it’s just asking questions, basically. And Apple strikes me as having quite a sticky product and enormously useful product that people would use, and not that I do. Tim Cook’s always kidding me about that. But it’s a decision-based … but again, it gets down to the future earning power of Apple when you get right down to it. And I think Tim has done a terrific job, I think he’s been very intelligent about capital deployment. And I don’t know what goes on inside their research labs or anything of the sort. I do know what goes on in their customers’ minds because I spend a lot of time talking to ‘em…[W]hen I take a dozen kids, as I do on Sundays out to Dairy Queen they’re all holding their Apple, they barely can talk to me except if I’m ordering ice cream or something like that. And then I ask ’em how they live their lives. And the stickiness really is something. I mean, they do build their lives around it, just like you were describing. And the interesting thing is, when they come into … when they come into get a new one, they’re gonna get they overwhelmingly get the same product. I mean, they got their photos on it and, I mean, yeah, I know you can … you can make some shifts and all that. But they love it.”

“I had learned that [scuttlebutt approach] from Phil Fisher who wrote this great book called ‘Common Stocks and Uncommon Profits.’ And Phil was a remarkable guy. And I first used it back in 1963 when American Express had this great Salad Oil Scandal that people were worried about it bankrupting the company. So I went out to restaurants and saw what people were doing with the American Express card, and I went to banks to see what they were doing with travelers’ checks and everything. And clearly American Express had lost some money from this scandal, but it hadn’t affect their consumer franchise. So I ask people about products all the time. When I take my great-grandchildren to Dairy Queen they bring along friends sometimes. They’ve all got a iPhone and, you know, I ask ’em what they do with it and how … whether they could live without it, and when they trade it in what they’re gonna do with it. And of course, I see when they come to the furniture mart that people have this incredible stickiness with the product. I mean, if they bring in an iPhone, they buy a new iPhone. I mean, it just has that quality. It gets built into their lives. Now, that doesn’t mean something can’t come along that will disrupt it. But the continuity of the product is huge, and the degree to which their lives center around it is huge. And it’s a pretty nice, it’s a pretty nice franchise to have with a consumer product.”

Buffett and Munger are continuously learning and updating their thoughts. Rarely does a month or a year pass in which they don’t kill an idea they previously embraced. In a recent example, Buffett has reversed his skeptical stance on airlines into a multi-billion dollar investment.

[Regarding Buffett’s previous statement that if a capitalist had been present at Kitty Hawk he should’ve shot Orville down.] “That’s so true. He’d a saved him a lot of money. If you look at the last 30 years you can look it up on the internet, I think there have been almost 100 airline bankruptcies. I mean, that is a lot. So it’s true that the airlines had a bad first century. I mean, they’re kinda like the Chicago Cubs, you know, everybody had a bad century now and then. And they got that century out of the way, I hope. But it’s, it’s been a disaster for capital. I mean, it’s got glamour to it so you can always get guys to put some money up for an airline. And you can go to the internet and look at 100 of them that failed then, and all of them now that are operating, you know, with the exception, Southwest, I mean, the — they’ve been through bankruptcy. And I bought into one called U.S. Air, that was my previous investment in the late 1980s. Ed Colodny, who was the CEO, came out here. We had dinner at Gorat’s and I gave him $358 million, and it disappeared almost before we finished dinner. I mean, the airline … U.S. Air had some favored routes, but Southwest was coming at ’em over time. And I tried to sell that stock at $0.50 on the dollar … it was a preferred stock. Fortunately, I wasn’t able to do it, and then they had this blip so we actually made quite a bit of money. I mean, we’re one for one on airlines, actually, but not because we were smart. And then it went bankrupt twice afterwards, U.S. Air did. It’s part of American Air now.

“It’s a very tough business because it’s got the marginal cost of a seat … is practically nothing. You have these huge fixed costs, and yet if you take one more person on there’s virtually no cost to it. So you’re very tempted to sell that last seat too cheap, and if you sell the last seat too cheap it becomes the first seat for, in a way, so it has- it has this dynamic to it. And unless the airlines operate in the well over 80 percent capacity — what kills ya is when they really have too many airplanes around. I mean, they do what anybody else does. If they got too many airplanes around they just think it down to marginal cost, and marginal cost cause you to go broke over time in the airline business. I- the hope is that they will keep orders in reasonable relationship to potential demand. And — lately they’ve been operating in — in the 80s now for a while. But it’s a business you can always mess up.

“And — we’ll see how it turns out. I mean, it’s — the orders that they have now would not look excessive. I mean — they usually take options, and they can delay deliveries, and so on. But it can be brutal. And I mean, ever — you’ve got lower cost airlines, you’ve got startups that can come at ’em. And — historically — the pricing has been a very tough game. I do like the fact that they used lots a money to repurchase shares most of them have these huge tax carry-forwards, too. So they had a lot of cash coming in for a while. They’ve used up the carry-forwards in general. But they — the idea that you’re buying something that had a huge carry — tax loss carry-forward is not the best signal in the world. getting into a wonderful business. But — they bought in a lot of stock, I like that. And — we’ll see how they do. We bought ’em at lower prices and we’re not buying ’em now. And I don’t wanna — run out and buy airlines.”

Corporate mergers often involve an elaborate “mating dance” that can result in mixed signals. Unilever was an example of that and another reason why Buffett prefers simple, straightforward deal-making with a minimum of negotiation.

“I don’t work on acquisitions that way myself. I just go in and say, ‘If you want me to make an offer, I’ll make one. If you don’t want me to make an offer, I won’t make one. And I’ll tell you a price if I do it.’ But there’s usually much more of a mating dance than that. And so you get this, ‘I’ll take it to the board,’ and all that. And you’re dealing with different kinds of people. Some people are different cultures, they’re more polite than others, and so on.”

“We don’t do hostile offers. I don’t think they’re morally wrong or anything. I think there are plenty of companies that could use some shaking up. And sometimes it takes a hostile offer to do it. I mean, there are companies that deserve hostility, believe me. But Berkshire doesn’t do it. And Unilever wasn’t one anyway. But we don’t do it.”

It is dangerous to let a swelling bankroll, an expensive market, boredom, or anything else become an excuse to lower your standards.

[Regarding the recent annual letter in which Buffett wrote about the $80+ billion in cash piling up at Berkshire] “I hate it. [But] you can’t afford to have an itchy trigger finger, but — well, in one sense you could say I always have an itchy one in the sense that I’m always looking for things to do. But it doesn’t change my standards in terms of having it, but I’m always looking.”

Natural disasters and insurance — like securities markets in general — fit into a certain pattern of risk-reward, unpredictability, and relative pricing. And the recent past doesn’t tell you anything about what’s about to happen.

[Regarding recent catastrophe trends] “Well, it’s not predictable, but the frequency of Florida hurricanes, for example, has been quite low for the last ten years or so, compared to history. That’s not been true in Asia. New Zealand had a quake a while back that would’ve been equivalent to, in relation to their population, probably three times or so what we’ve ever seen in the United States. But most of the cap covers do relate to the United States. [Hurricane] Matthew came close last year to being a big one. But it’s been remarkably benign in terms of Florida, Texas, the southeast for quite a while. But that doesn’t tell you anything about next year.”

“The prices went to where we don’t wanna write it. I mean, we did not feel like the house anymore, as you put it, when rates got to where they are now.”

“Last year, tornadoes were unusually frequent.[2] And if you wrote comprehensive auto, or you wrote homeowners in Texas you probably lost a lot of money on that line. We have, I don’t know, 25 auto dealerships or thereabouts in Texas. And we had losses that were I think seven or eight times the premium we paid, for example, on cars damaged at our auto dealerships through tornadoes. So Texas got hit hard — well, a lot of places got hit hard. So what you’ve seen in the last few years is there’s more tornadoes than you might expect and fewer hurricanes.[3] But who knows what’s gonna happen next year? I have not seen anything yet that would cause me to change the way we look at evaluating quakes, tornadoes, hurricanes…Now, that may happen someday…”

One of Berkshire’s own board members had misinterpreted his “Owner-Related Business Principles” to mean that Berkshire has made a commitment to own certain stocks “forever.” Buffett took a few sentences to clarify that the “Economic Principle” in question only applies to controlled businesses, not marketable securities.

“Well, there’s a section in the report which has been there for 30-some years saying that we won’t sell a business just because we get offered a fancy price for it or anything. But if it ever has one of two things happening, that it promises to lose cash forever, or we have major labor problems of some sort, we would consider selling. But I’ve gotten calls on businesses saying, ‘I’ll pay you way more than it’s worth,’ and I say, ‘I’m not interested.’ People have interpreted that — in fact, one of our directors had interpreted that as meaning it applied to the stocks as well. Well, the truth is, we keep selling stocks [but] our favorite holding period is forever. I mean, it’d be nice to find stocks. I’ve owned Berkshire forever, I mean, for 52 years. So I followed myself, and a lot of my family’s followed it. But we don’t commit to owning [any] stocks forever. We do commit — when a fellow sells me his business — I commit that we’re gonna keep it. We’re not gonna resell it to anybody. We’re not a private equity firm. And if it’s disappointing, we’ll keep it unless it gets in that those two categories. But that one section in what I call the — ground rules — that proved ambiguous is proved by the fact one of the directors actually mentioned it to me. So I just thought I’d better clear it up.”

Beyond the somewhat bizarre nature of this confusion — I always thought that issue was clearly explained, and either way Buffett has obviously been selling certain stocks in almost any given year of his entire career — this ties into his decision to sell Walmart. Buffett has cited his failure to buy Walmart in large size in the 1990s as a big mistake of omission, but after a meaningful investment from 2005 to 2016 Berkshire has now moved on. The reason? Retailing is hard and Amazon is a killer.

“Walmart’s a fabulous company. And what Sam Walton and his successors did, I mean, that’s one of the great stories of American business. I think retailing is too tough for me. We bought an department store in 1966 and I got my head handed to me. I’ve been in various things in retail. We bought Tesco over in the U.K. and I — it wasn’t we — I bought Tesco over in the U.K. and got my head handed to me. Retailing is very tough. And I think the online thing is very hard to figure out, you know? Now, we own we’re sitting in a retailer [Nebraska Furniture Mart] we own that does very well. I mean, I think this particular business is relatively immune from the online business, although we do a lot of online business here. But this does very well. I think it’ll continue to do well. But I think Amazon in particular is someone that’s going to have everybody in their sights. And they’ve got delighted customers. And it’s extraordinary what they’ve accomplished. And a lot of people like the delivery, and that is a tough, tough, tough, competitive force. Now, Walmart’s pushing forward online themselves and they’ve got all kinds of strengths. But I just decided that I’d look for a little easier game.”

[On whether Jeff Bezos is the best manager Buffett has ever seen]: “I think maybe he is, yeah. You know, I’ve said that. It’s remarkable. I mean, here is a guy who gets in a car with his wife [and] leaves [D.E.] leaves Shaw and starts driving across [America] and he thinks, ‘How am I gonna take over the world? Maybe I’ll sell books online.’ He is one terrific businessperson.”

[On why Buffett has never owned Amazon shares]: “Well, that’s a good question. But I don’t have a good answer. Obviously, I should’ve bought it long ago because I admired it long ago, but I didn’t understand the power of the model as I went along. And the price always seemed to more than reflect the power of the model at that time. So it’s one I missed big time. I just don’t know. Retailing is tough for me to figure out. If you go back to when I was a kid, in every town, the guy that owned the big department store was king, I mean, whether it was Marshall Field or, you know, or Dayton or Hudson in Detroit or Frederick and Nelson, Seattle, or you name it, , the department store was king. And people said, ‘What can happen to it?’ You know, it’s down there where the streetcar lines crossed and the women took the streetcar to shop there. And they could see 500 spools of thread and 500 wedding dresses. And they couldn’t see anything like that. It offered this incredible array of goods. And then somebody came along with a shopping center. And instead of making it vertical with all this display owned by one person, they spread it out, owned by many. And now comes the internet, and that’s the ultimate variety of things that you can get to very easily. So people love variety. They love low prices and a whole bunch of things. So it just keeps evolving. And the great department stores, many of ’em have disappeared and the rest are under pressure.”

In a 2005 response to a question about Sears, Buffett said, “Turning around a retailer that has been slipping for a long time would be very difficult. Can you think of an example of a retailer that was successfully turned around?”[4]

[Regarding newspapers as another once-dominant industry that has fallen from grace]: “There are only two papers in the United States that I think have an assured future because they have a successful internet model to go with their print model, and that’s The Journal and The New York Times. And I’m not saying it’ll even be easy for them. But they have developed an online presence that people will pay for. Now, the third that may do it, again going back to Bezos, is The Washington Post. And he’s improved dramatically their situation online. And so it’s conceivable that their math works. But there’s 1,300 daily papers left in the United States. We’ve got 31 of ’em. There were 1,700 or 1,800 not that many years ago. And it was an incredible business when you were first in everything. I mean, you could tell people how their stocks closed. I learned how my stocks closed by looking in the paper. I learned who won football games or what the box scores was in baseball. I learned all kinds of things from the paper first. And now, you’ve got an internet. And aside from the ones I’ve mentioned, 1,300 or 1,400 papers haven’t figured out a way to make the digital model compliment the print model in such a way as to guarantee the future. So circulation is going down significantly, advertising. I mean, [there] used to be dozens and dozens of pages of help wanted ads. It’s basically disappeared. And no one has found the answer to that yet.”

Learning to control anger in interpersonal conflict can be a huge advantage, and sending hasty or rash emails and tweets can lead to a lot of problems. Sure, he’s a little bit of a technophobe, but there is a lot of wisdom in intentionally delaying his ability to respond to provocations. It is “Thinking, Fast and Slow” applied to communication with other people.

“There’s two things I was told in life many, many years ago that turned out to be terrific advice. One is to praise by name and criticize by category. Somebody told me that 40 years ago. And Tom Murphy 40 years ago said, ‘Warren, you can always tell somebody to go to hell tomorrow. You haven’t lost the option.’ Both of those pieces of advice have been very good. And I would say that both email and Twitter really can cause you to stray from that very easily ’cause if you can just whack out something it’s very easy to tell somebody to go to hell in ten seconds if you get mad at ’em. And the very act of having that available instead of writing a letter or doing something of the sort, I think has made a lot more things come out that people shouldn’t have said. I think they’d do better following my philosophy, but I think it’s harder to do that. [And] it’s reinforcing in that you see that it works. A lot of people have said things in emails or whatever I wish they hadn’t said. I think was it Kierkegaard that said life can life can only be understood backwards, but it must be lived forwards, basically. And you do learn about a lot of dumb things, including writing letters in the past, but now including tweeting and emails. Your first impulse is not necessarily your best course of action. It’s really is a mistake to give an instant reaction, you know, to everything that comes along.”

Wells Fargo’s big mistake was the response to the problem, not necessarily the problem itself.

“They made a huge mistake. The huge mistake was not necessarily the dumb incentive system. Everybody comes up — incentives systems are fine sometimes [but sometimes] they incent the wrong things; they certainly incented the wrong things. The problem is they didn’t do anything about it when they learned about it. Same with Salomon in that sense. I keep preaching to our guys, ‘If you see a problem, attack it immediately.’ A huge mistake was made at Wells not in cooking up the incentive; the big mistake is when they found out and didn’t do anything about it. Their fine was something like $180 million or $185 million. I think they saw that wrongly as in the light of $5 billion fines put on for mortgage practices at some other banks. They saw the problem as sized by the size of the fine and it wasn’t at all. Any time you have people making up accounts and doing all the thing they were doing, it isn’t the size of the fine that measures the customer impact, it’s how your reputation will suffer. It’s what you were doing and it was wrong. Clearly they knew what was going on to some extent and they didn’t do anything about it. I will say this, if the top guy doesn’t do anything, the people below won’t. John Stumpf is a perfectly good guy. I wouldn’t worry for a second. But somehow when he saw the evidence, he didn’t do something about it. Now, maybe he thought somebody else was going to do something that part is similar to what happened at Salomon, John Gutfreund thought that he postponed calling Jerry Corrigan. Late April, May 15th another government bond offering came along and the guy behaving badly behaved badly again and now it was too late. To some extent when you get behind the eight ball and don’t do it immediately you think it will go away. If I come in now, why don’t I come in six weeks ago or six months ago. Whatever it was, it’s a terrible mistake when you see a problem not to attack it immediately. It can be unpleasant. Get it right, get it fast, get it out, get it over. I keep telling our managers that. I’m sure something is being done now with 367,000 employees the Berkshire and I hope I find something about it and do something about it.”

[Regarding new CEO Time Sloan]: “I had lunch with him and I’m going to have lunch in a week or two. I think he’s doing fine. They made a big mistake and they are correcting it. I don’t think in terms of the earning power of the company in five years from now it’s material.”

Buffett said he’s known about 10 people in his life that were close to a lock to outperform the markets over time: Phil Fisher, Charlie Munger, Bill Ruane, Herb Wolf, Walter Schloss.

“The amount of money people wasted getting investment advice is just ridiculous in this country.”

“I’ve known 10 or so people [who], with modest amounts of money, I would bet a lot of money that they would do better than average. And I say that there are hundreds, maybe even thousands. But there’s thousands, and thousands, and thousands and thousands of hedge fund managers charging two and twenty — [that] is just ridiculous. And you don’t get better because you charge a lot. I mean, that does not make you a better judge of securities or anything like that. And so the good salespeople, overwhelmingly, are the ones that attract the money, rather than the very few who are extraordinary at managing money. Phil Fisher, who wrote that book Common Stocks and he was going to do better than average. Charlie was going to do better than average in life in investments. Bill Ruane, a friend of mine, was going to do better. There have been a few. But there are very, very few. And then only if they work with fairly modest sum of money.”

“It’s tougher than it was, obviously, 50 years ago. I mean, my best year actually was 1954. But I was working with tiny amounts of money and in a market that was not combed over the same way as presently. So there are way more people looking to compete with. And I think still think, because of temperamental differences, I think there are a fair number of people that, with small amounts of money, can do well. But the chances that the average person is going to pick them out or that the person sitting across from you, trying to sell you, is that person, is betting against the odds. Significantly against the odds.”

“And what really gets me is sometimes they hire consultants. They say, ‘Well, I don’t know enough to pick good managers, but I know enough to pick a good consultant.’ I have never quite figured out why they can’t figure out who a good manager is, then some guy comes in, says, ‘Well, I’m a good consultant.’ So it’s really sad, but they’re really outclassed, in many cases, by the salespeople. I mean, that’s true in a lot of fields. But in investments, you’re talking big, big, big money. And somebody’s got $1 billion, they want to have a family office, or they want to feel special. And the truth is, you don’t need to be special.”

“I always felt I would [outperform the market], yeah. It’s kind of disgusting, but I really did. I mean, I retired when I left Graham Newman with $175,000 and I thought that would be enough to provide me a good living you know, the rest of my life. And I had a couple kids then. And no, I thought I was right for this business. Now, I thought Charlie was right for this business. I thought Bill Ruane — I mean, I knew ten or so people, Walter Schloss — and I didn’t think they were the smartest guys necessarily in the world, although maybe Charlie is. But I thought they were well adapted to the business. People have different talents. I mean, you look at chess champions or bridge champions. Sometimes they’re not so good in other areas and I’m wired for this business to some degree. So and I felt that, yeah. And I learned from the greatest teacher you could have.”

3–4 percent economic growth would be great, but even 2 percent will work wonders.

“The economy [in] everything I see has been the same since 2009, the fall of 2009. It keeps moving ahead at a couple percent a year, which is terrific, incidentally. Not as terrific as 3 percent or 4 percent would be, but if it just stays at 2 percent, you’ll add in one generation $19,000 of GDP per capita to our present economy. We’ll have so much more stuff then than we have now, it’ll be fabulous, one generation away. So your kids are going to live better than you do. But people would rather have 3 percent or 4 percent, and maybe we’ll get it. But 2, we’re moving forward. I just don’t know [if we’ll get to 3 percent growth]. I mean I wouldn’t bet on it, but 2 percent will be — will do perfectly. 3 percent would be better.”

“Productivity is the only thing that gives you growth. I mean, if we hadn’t changed productivity since 1776, we’d be living like we were in 1776. If 80 percent of the people had to be on the farms to feed us, we wouldn’t be producing much of anything else. So it’s all productivity over time that counts.”

[1] http://www.cnbc.com/2017/02/27/full-transcript-billionaire-investor-warren-buffett-speaks-with-cnbcs-becky-quick-on-squawk-box-today.html

[2] That isn’t true for the United States. Presumably Buffett was referring to localized storm-related cat damage in Texas and parts of the Southeast. He could have also been referring to 2015, which was in fact a record-setting year for tornadoes in Texas. Source: http://www.spc.noaa.gov/wcm/2016/torgraph-big.png ; http://www.spc.noaa.gov/wcm/adj.html ; http://www.spc.noaa.gov/climo/online/monthly/2015_annual_summary.html ; http://www.spc.noaa.gov/climo/torn/STAMTS16.txt; http://www.lloyds.com/~/media/Lloyds/Reports/Emerging%20Risk%20Reports/Tornadoes%20final%20report.pdf

[3] Again, the Atlantic Basin has clearly experienced a hurricane drought stretching more than a decade, but it is not clear that tornado frequency has increased. Using an average annual total of 1,100 to 1,200 tornadoes, there has not been a truly “bad” year for tornadoes since 2011. 2015 was average while 2012, 2013, 2014, and 2016 were significantly below average. The same applies to tornado deaths. Property damage, including incurred P&C losses, may vary considerably, and there have been significant localized damages due to severe thunderstorms, hail and flooding that did not pertain to tornadoes: https://www1.ncdc.noaa.gov/pub/data/cmb/images/tornado/clim/EF1-EF5.png

[4] http://fortune.com/2017/02/15/walmart-warren-buffett/

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