CNBC Transcript: Warren Buffett and Bill Gates on Squawk Box
This is an unofficial transcript of Warren Buffett and Bill Gates appearing live on CNBC's Squawk Box on Monday, May 6, 2013 from 6 am ET to 9 am ET.
It is also available as a downloadable PDF document by clicking here.
ANNOUNCER: The Oracle of Omaha.
WARREN BUFFETT: Well, if you have any left over, yeah, mark 'em down, I'll buy one. (LAUGH)
ANNOUNCER: Warren Buffett gathering with his faithful.
BUFFETT: Let Charlie try and do this. (LAUGHTER)
ANNOUNCER: Now he sits down with Squawk Box for a three hour long conversation, the economy, the markets, the business of Berkshire Hathaway. A special presentation begins right now. (MUSIC)
BECKY QUICK: Good morning, everybody. Welcome to Squawk Box here on CNBC. I'm Becky Quick, reporting live from Omaha this morning. Joe Kernen and Andrew Ross Sorkin are back at headquarters on the East Coast. We have the man of the morning with us, Warren Buffett. Obviously we have a lot to talk about with him, including stock records runs, the Fed, bonds, the dollar and his deal for Heinz. But first, before we get to all of that, Joe and Andrew will have a short round up of the morning's top headlines. And guys, I'll send it over to you.
JOE KERNEN: Okay. Hello. Good morning. Hello, hello—
BECKY: Hello. Good morning.
JOE: How are you? Hi— Warren.
BUFFETT: Well, yeah I— you—
JOE: I keep hearing you talk about me, Warren. No one knows what the heck you said, so— I— I don't know. It's like who— (LAUGH) it's like one of the answers you get—
BECKY: No, I—
JOE: —to a lot of questions.
BECKY: —I was sitting— I was sitting right next to him and I heard him mention your name, too, and I'm not entirely sure what he said.
JOE: Nobody knows.
ANDREW ROSS SORKIN: Joe and I— Joe and I were having this conversation this morning. He said, "What did he say?" And I said, "I'm not sure." And I actually said the—
BECKY: He said something nice about him.
JOE: Was it, "Oh, it's—
ANDREW: It was nice.
BECKY: It was— it was something—
ANDREW: It as nice. I think.
BECKY: It was something about a question you (UNINTEL). It was nice, it was a question about something you're always bringing up and it wasn't NetJets.
BUFFETT: See my lawyer. (LAUGH)
JOE: That was a long time ago. All right. (LAUGHTER)
ANDREW: Anyway, we're going get back— we're going get back to— to Omaha. And let me just say, Warren, at— 'cause I— and I— I just got back now. You— Warren and— Warren and Charlie (Munger) were on fire this weekend, actually (RUSTLING) in a way that I don't think— we've been— we've been asking these questions for now I think five years, and I thought this was one of the most substantive meetings and just the most spirited of the discussions. Obviously Doug Kass— threw— threw a couple ones at them, too. But it— I thought it was fascinating.
JOE: Y— War— Warren, you— I— I've heard that people get to a certain age where they say whatever the hell they want to say. And I mean, has it got anything to do with that or—
BUFFETT: Well, we— we give 'em a little food or things like that, (CHUCKLE) it's amazing how far it goes.
BECKY: Yeah, it's true. I— I— I think though that— you and Charlie have been saying— kind of speaking your mind, Charlie in particularly— he may be almost 90, but I— I think he was talking that way 30 years ago and even 60 years ago.
BUFFETT: He was talking that way when I met him in 1959. One of the things that attracted me to him.
BECKY: Yeah, so he had a lot of things that he had to talk about. But Warren, before we jump into what happened this weekend, why don't we start off with the headline that the guys were just talking about, JP Morgan. You said before that you own shares in JP Morgan in your private account, not for Berkshire.
BECKY: So, you get to vote on this, too. ISS came out with this recommendation, in terms of what they're saying about the directors, three directors they're saying you shouldn't vote for. They actually have some pretty harsh language in some of the things that they were talking about. They said, "The board appears to have been largely reactive, making changes only when it was clear it could no longer maintain the status quo." What do you, as a shareholder in JP Morgan think?
BUFFETT: Well, I don't know the details, but if you're the director of a— a company like JP Morgan— you cannot know the details of what's going on with trading or anything of the sort. You really— your key decision is whether you believe that you have the right CEO If you have the right CEO the board has done its job, and— and if you prevent the CEO from overreaching in terms of (UNINTEL) or something. And— and I've written about that. And— and I think they've got the right CEO I— I— so I think they're— they're done their job.
BECKY: Y— you told us last week that— that you think he should maintain both his chairman and the CEO Titles as well.
BUFFETT: I think— I think it's fine if he does. Sure.
BECKY: Okay. So, you're on board— not just as— an outside observer, but also as a shareholder in JP Morgan?
BECKY: Let's talk a little bit about this weekend. It was a big weekend— if you had to pick your headline from what happened over the weekend, what would it be?
BUFFETT: I think it's just that everybody had a good time, including me and— the board members, the managers— and certainly the shareholders. I— I— I probably waved many thousands (UNINTEL) as I went around and— and— you know, they all call me Warren, which I like. And— and— certainly in terms of the sales at our various enterprises, they all broke records. So— people seemed happy.
BECKY: Some of the questions that jumped out at me— that jumped out to me as being some of the ones that were maybe some of the most persistently asked questions, had to do with your investigating style, because the Heinz deal is a different deal than we've seen in the past. It's one that links you up with private equity, which you haven't done before. It's one that takes on some leverage, and there have been some questions that people have asked. Just, does this signal that you're looking at things differently? Does it signal that— you'll be getting into deals you might not have in the past? And does it mean that you're not all that confident in where the market's headed overall?
BUFFETT: No. Well, we took— we took on leverage when we bought— BNSF, the railroad. And— and— and we, in no way consider— our— our partners in this as— as private equity. These are people that buy for keeps. They— they run businesses, I mean, they actively— and— and they will keep running them.
So, this is not a private equity firm. These fellows are not planning to make their money on some override on other people's money. They have big sums of their own money in this— deal. And— Jorge Paulo Lemann and my— my main partner in this— he'll— he'll keep the stock indefinitely, as will we. So, it's a partnership.
And our preferred stock introduced some leverage for our partners, but it's nonthreatening leverage. You know, it— it— it's held by their partners. So, we have— between the— between the two of us we have 16 billion— of equity in this deal and they have the more leveraged play, because we have this preferred stock.
BECKY: There was a question asked over the weekend about a column that had been written about this deal that suggested that, you know, the— the money that you had that wasn't in preferred shares, and the common was dead money.
BUFFETT: (CHUCKLE) If that 4 billion is dead money I'll be very surprised. And— and that's what our partners own. I mean, we each own 50 percent of the equity. And if it works out as we hope— the rate of return on that 4 billion, our 4 billion, their 4 billion of common, will be higher by a considerable margin than the rate of return on the preferred stock we got. But that— that's the way it should be.
BUFFETT: That's not dead money, by a long shot.
BECKY: Are— are people wrong when they assume that you're looking at deals like this because you look at the stock market and you think that it— it's not as cheap and you can't get as much value as you might have been able to get there in the past?
BUFFETT: Well, we always prefer to buy businesses, and that's what we consider Heinz to be. Well, we'll— we'll be in Heinz forever and— if a few of our partners decide to sell out at some point, I hope they sell to us. So, this— this— you know, we— we'd like to buy— we'd like to have bought 100 percent of Heinz, but we— we love the idea of Jorge Paulo Lemann being our partner. So— if it takes 50 percent of the equity to bring him in— that's fine with us.
BECKY: We— talked to you about the jobs report on Thursday of last week. And you said you wouldn't have put money on it, but if you had to bet you thought it would be a weaker number. It came in at up 165, which the market took as a huge roaring success. One sixty-five still isn't great growth, and it's certainly down from where we've been before we got into this new year. What do you think about that number? And again, your— your read on where you see the jobs market.
BUFFETT: Well, it's a good thing I didn't bet on it, isn't it? (LAUGH) I— I— I don't pay that much attention to the numbers from month to month. But in terms of our businesses, and we have 70 plus direct businesses and a lot more indirect— we're seeing the same thing we've been seeing for four years and that's gradual improvement in— in— in the economy. And we're— we cut across the whole economy, so I think it's a pretty good— a pretty good— view of what's going on.
And what you are seeing now is certain areas, which didn't participate initially, like home building, coming back fairly strong. Our— our— we had record sales at Furniture Mart last year during this week— shareholder week, 36 million. It looks like— we know we'll have another record, it'll be about $40 million in one week. And the retailers out there know what that is. The— the biggest— our biggest gains, 30 percent same in flooring. And— and so people are buying carpeting and— and— that area is— is— is coming back. But overall the economy is— is moving forward but— at a slow pace.
BECKY: Why? What— there's been a lot of questions about why businesses aren't investing more, why they aren't hiring. What— what do you think the problem is?
BUFFETT: Well, they always hire— they— they invest— they hire in respect to demand. Now we had a record investment last year, and well over another record this year. I mean, we— we have lots of projects going on that we think make sense. But— businesses respond to demand and demand as come back, but slowly. Now I can see demand coming back faster in the residential area now than— than a year ago or 15 months ago and— and that makes a difference. And it kind of filters down through our brick business, carpet business and insulation business. But, it's not roaring back.
BECKY: Right. I know that— you're not somebody who looks at the market averages on— on a daily basis—
BECKY: —or cares about any of these things. But when you start seeing the trend that we've b— been seeing, which is— almost a straight march up, it seems like we're hitting new highs almost every day— and that's the type of thing that catches Main Street's attention.
We've got a lot of individual investors who are sitting around wondering if they've missed everything, if they should get back in, if they— if it's too late, if they've missed the train. I mean, w— what— what would you tell those people who are sitting at home wondering what the Oracle of Omaha thinks about when it comes to the market today?
BUFFETT: Well, they should pay— they should pay more attention when they're crossing those milestones on the downside, that's when stocks are getting cheaper. Right? That's when stocks are going on sale. But people do get more excited when they see new— well, I can remember when it was a big time when the Dow c— crossed 100. (LAUGHTER) And— and I certainly remember well when it was a thousand, I mean, that was a magic number.
So— probably in— in my lifetime and certainly in your lifetime, you know, you will see markets that are far higher than this. I mean, the— the retention of earnings by American industry and the growth of the country, — will cost stocks to go higher over time. You're not getting everything out of the stocks in terms of the divi— the dividends they pay, compared to the earnings, so that retention builds it up.
It's exactly like if you had a savings account and you only took out part of your interest. Your savings account would grow. So, I don't get too concerned about it, given level. You'll see— you'll see— you will see numbers a lot higher than this in your lifetime, Becky.
BECKY: You know, I— I know you watch the show and— and you probably have seen what Joe's been talking about. For— for quite a while now he's been talking about how this is something that reminds him of what he's seen in the past. And Joe, maybe you want to talk a little bit more about this, just what you've seen with the market, your theory about how things continue to climb and this feels really different than what we've seen in the past.
JOE: And I don't want—
BECKY: What do you think, Joe?
JOE: There— there's two things that— that scare people, that's when you're— and— and people do the same thing with human nature, they— they ride things all the way down and they think it's too late to sell. And then when things are going up, they— they— a lot of times they're not on board. And if they start out not on board, they never do get on board. And— and watching this happen— this time, every time we hit a new— a new high, people say, "Well, I can't buy now."
And— and that usually indicates that we're not near the end of— of something. And that— that's only been my— and my other point, Warren, I just get so irritated with— with sell side people that— they're— they're always saying, "I'm constructive long term, but in the— you know, there could be a pull back any time. I'm looking for, you know, five to ten percent any time."
And they— they say that as they miss thousands and thousands of points. And they're not committing new money. But they— they never— you— you can never pin 'em down on being wrong. And that's what— that's w— what I think they're most motivated. So, it's just sort of— just having seen it for so many years, it just gets— just a pet peeve of mine. And— and— you know, when it's just— when it's just utilities moving and just bond equivalents moving, it seems like— you're— you're not really at the end of— of a— of a run, of a bull run. I don't know.
BUFFETT: Yeah. Yeah.
BUFFETT: When— when people talk about— you can see a pull back, of course you do. It— they pull back any day for the next thousand, ten thousand days. Nobody knows what the market's going to do the next day. But you shouldn't pay any attention to that. I— I bought a farm in 1985, I haven't— haven't had a quote on it since.
I bought a piece of real estate in New York in 1992, I have not had a quote on it since. I look to the performance of the assets. Maybe those— m— maybe my farm and my— my— my piece of real estate have had pull backs, but I don't even know about 'em. People pay way too— way too much attention to the short term. If you're getting your money's worth in a stock, buy it and forget it.
BECKY: I mean, is that— is that an— oh, go ahead, Joe.
JOE: Oh, no, I— I was just— I— I've just got this sort of exciting feeling— with me 'cause I'm saying, I— I'm not sure whether Warren is— whether this is going happen or not, but, you know, he's given me a brick, and he's given me— you know, some ketchup (LAUGHTER) and— and—
ANDREW: And a Marquis jet card but that— that came up—
JOE: That didn't work. But there is a jet right behind him. Is this a surprise today for me, Warren? Is that— that one behind you? Are you going— is— is that going be mine?
ANDREW: You're going wait all three hours of the show.
JOE: Yeah— is— are you going— that's going be the—
BUFFETT: Hey, you got to stick around, Joe. Be sure to stick around, Joe.
ANDREW: There's a big unveil going around at the end of this program.
BUFFETT: There— there's—
JOE: I mean, it— is—
JOE: Uncle Warren, it's beautiful. It's beau— it's beautiful.
BUFFETT: There's— there's— there's a name on that plane, Joe, and we'll look at it later.
BECKY: I can see it from here (LAUGHTER). I'm not going give it away, though.
JOE: Can you see the ribbon on the side?
BECKY: But yeah, that is the Global 6000. We're going be talking more about this, too. So, it's a new— it's a brand new delivery. We're going talk more about this a little bit later, too, because—
BUFFETT: But we can put you behind the wheel, Joe. Don't worry. (LAUGHTER)
BECKY: I'm not riding if Joe's behind the wheel. Can I just say that? Warren, let's— let— and let's talk (CLEARS THROAT) about the Fed. The reason so many people think that equities have done so well, at least in part, is it's not just the economy improving, it's also what the Fed is doing to make every other asset class look not nearly as— as strong as equities.
BECKY: You— how much do you think the Fed has done— how much— how much of this boom, I should say, in stocks do you think is coming from what the Fed's done?
BUFFETT: Well, it— it— when interest rates are low, and people expect them to stay low for a while— it pushes up the value of all other assets. I mean, and— interest rates act like gravity to other asset prices. Everything is based off them. So, when there are high interest rates there is a lot of gravitational pull down on the value of assets, as we found back in 1981 and 2 when— when— when the rates got to extraordinary levels.
If you guaranteed people that the long term rate would be 1.7 percent, or ten-year rate, or— you know, and short term rates would be practically nothing— you know, stocks should be, you know, selling at least double where they are now. The question in people's mind is how long it lasts. You don't— you have the strong feeling it doesn't last forever, but interest rates have a powerful effect on all asset— all assets. Real estate, farms, oil, everything else— it— they're— they're the cost of carrying other assets. They're the alternative. They're the yardstick.
BECKY: But if— if you had to look at it, would you say that 50 percent of the market's rise— it's come 50 percent from the improving economy and 50 percent from the Fed? Or does one side have a heavier weighting?
BUFFETT: I don't know the answer to that. Both— both are— are very important. If the economy had gone no place— and interest rates had come down like they have— stocks would be cheaper than they are now. And if the interest rates had been somewhat higher during this period, and— and business had come back, stocks would be somewhat higher. I don't know how to break up the two.
BECKY: Is— if you were Ben Bernanke, you know, we just heard from them last week, or when we got the FOMC minutes. We heard that they've said, "Look, if this isn't enough, we're prepared to do even more than $85 billion a month."
BUFFETT: He's a gutsy guy. I mean, he— he— he said, back in September of 2008, he would do what it takes, and he's been doing what it takes ever since. He is the man and he can do what it takes. He— he— he is— he is the man that's dealt a heavy response— a huge responsibility— to get the economy going and to keep it going. And he has used monetary policy— in a way I've never seen before.
But, we faced a situation I hadn't seen before. So, I— I'm a huge admirer of his. I don't envy the job of playing the hand out from here. But I— I think he— he— he's done very, very well in— in— in terms of what he's done for— for— for the United States.
BECKY: And you've been very outspoken about how much you admire him and— what a job you think he's done. But you've also said, over probably the last year or so, that you thought maybe if it were you in that seat, you would have taken your foot off the gas a little sooner.
BUFFETT: Probably. Well, I— I might not know how to take my foot off the gas. (LAUGHTER) If— if he— if he call— when he decides to sell or quit buying, but— with— with single selling at some point, if he calls me and asks me how to do it, you know, I will— I will tell him to call Charlie. (LAUGHTER)
BECKY: Put that in the too hard file, right?
BUFFETT: Way too hard.
BECKY: All right. If— if you'll bear with us, Warren, we're going slip in a quick commercial break right now. (MUSIC) When we come back, we will talk more with Warren Buffett. He is spending the entire morning with us, so stay tuned. We'll get his thoughts on Europe and whether it is safe for investors, when we come back. And then a little later this morning, we will also be joined, live, by Berkshire Board Member, Microsoft Chairman Bill Gates. Buffett and Gates together, live, starting at 8:15 Eastern time. Squawk will be right back.
CHARLIE MUNGER (on tape): Cyprus demonstrates it's an old truth. You can't trust bankers to govern themselves. A banker is allowed to borrow money at X and loan it out as X plus Y. We'll just go crazy and do too much of it, if the civilization— doesn't— doesn't have rules to prevent it.
What happened in Cyprus is very similar to what happened in Iceland. It was stark raving mad in both cases. And the bankers, they'd be doing even more if they hadn't blown up. I do not think you can trust bankers to control themselves. They're like heroin addicts.
BECKY: That was Charlie Munger who sat down with us on Friday. We are live in Omaha this morning with Berkshire Hathaway Chairman and CEO, Warren Buffett. And— Warren, you've heard Charlie's comments. What he was talking about there ended up with bankers, but it started on what he thought about Cyprus, some of the things that are happening in Europe.
Over the weekend, when the two of you were on stage, it seemed like you— you disagreed a little bit about the state of Europe, just in terms of— how great of an investment it may or may not be right now, how safe of an investment it is. You talked about how you see— things— you'd potentially be interested in a deal coming out of Europe right now.
BUFFETT: We've bought— in the last 12 months we've bought a couple smaller businesses in Europe. We've bought some European stocks. And— the fact that there are troubles in Europe, and there are plenty of troubles, and they're not going go away fast, does not mean you don't buy stocks. We bought stocks when the United States was in trouble, in 2008 and— and it was in huge trouble and we spent 15 1/2 billion in three weeks in— between September 15th and October 10th.
It wasn't because the news was good, it was because the prices were good. And if you believe that Europe is going to be around, which it certainly is, and it's going have huge amounts of purchasing power with its citizens and all of that— then you— you look at— you actually look at troubles as possibly being— offering you an opportunity to buy.
I bought my first stock, you know, when— when the United States was losing the war, right after Pearl Harbor. I didn't buy it because I thought losing the war was a great idea, I bought it because I thought stocks were cheap and that eventually we'd win the war. And the same way in Europe.
BECKY: So, you've been buying European stocks. Has that been disclosed already?
BUFFETT: Well, we've bought some in our— in— in our re-insurance company we have over there. We spent a couple billion euros— a year or so again. And— and— and— and we would look at more. I mean— if we find a good business, if— if Coca Cola were based in Amsterdam, instead of Atlanta, you know, we'd love to buy it. And— and— if the— if— if we get it cheap enough, that— that— that's— we— we like good companies at— at cheap prices.
BECKY: Would you buy in some of the Southern European countries, too? And specifically in Greek, Italy and Spain? And I ask that, because Wilber Ross joined us recently and said that he'd be interested in making some deals in Greece.
BUFFETT: Well, I don't see it as impossible. I think— I think there's a higher hurdle— to clear in looking at business in those areas. But many of those businesses are international businesses, too. But I— you know, the— the answer is, if I understand the business well and I trust and admire the management and the price is right— we'll buy there.
BECKY: Hmm. Charlie did a crack on the stage on Saturday that if— if it was in Greece he'd hoped you'd give him a call before you went ahead and buy it.
BUFFETT: Yeah. (LAUGHTER) I'll— I'll— I'll do that. But he says no to everything I come with, so it really won't make much difference.
BECKY: Andrew, I know you have a question, too.
ANDREW: Hey Warren— I— this is really actually more of a follow up from— from our— from the meeting on— on Saturday and it came after you had commented— during— during the meeting we got a number of emails asking for the follow up. So, here's the follow up.
It was a philosophical question— really related to the division of— of having a chairman and a CEO— and whether they should be the same person. You had commented about the reasons for having (Warren's son) Howard— be— be the eventual successor, non-executive chairman to sort of oversee things and be a check on the CEO.
After you said that, during the meeting, invariably I think I got maybe half a dozen emails from people and the audience said, "Well, then follow up and— and— and ask should that be applicable across the board?" And— and I guess given the news this morning related to JP Morgan, you— you could put it in that context. But— but more broadly philosophically, do you think there should be a separation between the chairman and CEO, now that you're thinking about— the future of Berkshire in— at least in that way a little bit?
BUFFETT: Yeah. I— I think e— I— I think either system is okay. But the one advantage of having the chairman separate from the CEO is that it becomes easier to change the CEO if you have the wrong— person in the job. And the biggest problems with CEOs is not— the occasional one that is crooked or— or— or just absolutely terrible, the problem is, is if you get somebody that's reasonably good, but— but— you can come up with somebody w— better.
I mean, we have all kinds of second string— quarterbacks or third string, you know, in— in pro football or something, and they're— they're very good, but you still want the top guy in there. And— top person playing in— in the position. And— and it's very difficult— when the— you have the chairman and CEO and they're likeable, and they have appointed you to the board, they're doing their best, they're doing a reasonable job, but you could get— you could get somebody better and perhaps you should.
And— and that is not an easy thing. When people come into board meetings, you know, six times a year, four times a year and they have a lot of committee meetings and they want to get planes back out of town— it's— it's— it's not easy to change when you've got somebody that's good but not great. And— so I— that is a reason to separate the two.
On the other hand, I don't think that it's— it's key to do that at— I do think it's important at Berkshire, because— my son Howard, with the non-executive chairman, he would have no function— you know— in terms of capital allocation or anything else, it would just be if there was one chance in a hundred that we came up with the wrong CEO it would be easier to make a change.
BECKY: Is that almost a lead director position?
BUFFETT: It's— it's— it's almost similar to the lead director. And one of the— one of the beneficial things that have come out of securities regulation in the last ten years or so is the idea of having a meeting once a year of the board, without the CEO there. I— I've been a participant— as a director, in those situations, and directors say a lot of things and subjects come up— when the CEO isn't there— that don't happen with the CEO— in person. And— and some impor— (CLEARS THROAT) some important things.
BECKY: Why isn't that preferable all the time, instead of just some of the time?
BUFFETT: Well, I think if you do it once a year, it's often enough.
BECKY: No, I— I I'm sorry, I mean that set up in that situation? What— why is it a situation that you think is only good in some cases and not in others?
BUFFETT: Well, I—
BECKY: For— for example, why is it not a good idea for Berkshire right now?
BUFFETT: Well, Berkshire does it now.
BECKY: Oh, you do it right now?
BUFFETT: That— that— yeah, we will have a director's meeting later and then—
BECKY: And you won't—
BUFFETT: —they'll ask me to leave. And— and— and I— and you get a little nervous, as— as— if you're gone an hour or two (LAUGHTER) and they're still meeting. But— no, that— that— that's required, I believe, at— at— at public companies.
BUFFETT: And it— it it's been good at Berkshire.
BECKY: How long were you out of the room the last time this happened at Berkshire?
BUFFETT: Well, I go— I go back to the office and they're meeting in another room. And I— I kind of hope that they're having a little post-meeting chatter or something. But it's— Ron Olsen will be the guy that usually comes around and— and he's come— around as late as an hour later. The— for example, I mean, I— you know, I— I don't like a lot of security or anything and— and the board— I don't know, two years ago or three years ago said, "You're going to have more." You know, and— and— and—
BUFFETT: —I mean, things like they— they— they— they don't want to talk to me directly like that when I'm in the room. It's a little embarrassing to be the one that brings it up. But, I— I can say I've been on one board where a lot of change happened because the CEO let the room.
BECKY: Is the additional security the biggest thing the board has ever imposed on you?
BUFFETT: They've made suggestions on a few other things, but— but— that's the most recent ones that I remember. Yeah.
BECKY: Okay. Guys I think we're going to send it back to you, to slip in another quick break. But we do have a lot more to come— from— Warren Buffett right here in Omaha.
BECKY: Good morning, everybody, and welcome back to Squawk Box. We are live in Omaha with Warren Buffett, the chairman and CEO of Berkshire Hathaway this morning. And right now we are sitting on a Global 6000. Warren, this is part of a signature series for NetJets. You just started taking delivery of these planes, I believe, in December of last year.
BECKY: But this is a series of planes that you specifically designed with Bombardier— because you wanted— certain things that you wanted in these planes.
BUFFETT: Yeah, people of NetJets did. But I actually made a suggestion or two myself. (LAUGHTER)
BECKY: What was your suggestion?
BUFFETT: I— I— I like a wide bed. (LAUGHTER)
BECKY: So that bed back there?
BUFFETT: That back there.
BECKY: All the way back. These planes can hold up to 13 people. They also have special— crew quarters where you can actually sleep in them, and I guess that's so you can take longer flights so people—
BUFFETT: That's right. That's right. When you need a crew change— in route.
BECKY: Okay, so you've got these planes that are out here, and we're going be sitting down with (NetJets chairman and CEO) Jordan Hansell in just a moment to talk more about that. But one interesting thing is that this weekend happens to be a huge weekend for NetJets, because so many people are coming not only here to the Berkshire Hathaway annual meeting, but also to the Derby.
When— when I saw Bill Gates earlier this weekend, he said he thought just basically— looking at the runway, he thought there were about 25% more jets than there were last year at this time— private jets. I talked to Lou Simpson over the weekend, and he suggested that he thinks it's part of the wealth effect— people really starting to buy into what they're seeing in the stock market. What do you think?
BUFFETT: Yeah, well, we're— we are seeing in— in flying the people that own the planes, or fractions of the planes, are flying more hours than they were. It— it was interesting to me. Whe— when the— when 2008 came along, in the fall, people already owned the planes. They were paying a monthly management fee. They had their homes— vacation homes wherever they might be in Florida or Colorado. But the flying fell off dramatically. I mean, very, very, very rich people cut back in a significant way. It— it was like somebody blew a whistle. And— and it's been coming back from that.
BECKY: Well, was that— was that in part, you think, just because of— the appearance of austerity? Or do you think that that was really that they just feel like this is a luxury that they can let go before everything else?
BUFFETT: I— I— they— they just felt poor, but they were still very rich, you know. No, I don't think it was— they were embarrassed getting out of a plane. But I think— that— they and their families in some way— they had to hold. They had the plane. They were paying. (LAUGH) But, they just— changed their behavior very, very significantly. We saw it in a lot of places, but it surprised me the extent to which we saw it with the planes. Now— now like I said, it's come back— dramatically since then.
BECKY: Okay. Again— what do you about this particular plane? Have you spent time on the Global 6000?
BUFFETT: I— I've flown it once and I— and— w— once— (LAUGH) and it's a very powerful sales tool. (LAUGHTER) Jordan— Jordan will be working on me here in the next— few months, I'm sure, and— I'm— I think it'll be— he probably has a patsy. (LAUGHTER)
BECKY: Okay, again— this is the Global 6000. We're going to go back outside and we're going sit down with Jordan Hansell, who's the chairman and CEO of NetJets, along with Warren Buffett when Squawk Box comes right back.