CNBC TRANSCRIPT: Warren Buffett & Bill Gates - Keeping America Great
BUFFETT'S $100,000 OFFER
BECKY: Welcome back, everybody. We have more questions for Bill Gates and Warren Buffett. And we are running through them, but let's keep them going. Got a question right over here.
QUESTION: My name is Erica Braley and I am a second-year student. My question is for Mr. Gates. What is the most important thing you do every day?
GATES: Hmmm. [LAUGHTER] [APPLAUSE] Well, I do a lot of variety. I think reading a lot, you know, and continuing to learn. I'm in a lot of new areas in the Foundation, education, health. And I love reading a lot. So I think, you know, arming myself with that knowledge and sitting down with people who live the topic and brainstorming with them, that's what helps me back the right people and make sure I know what's going on. So I guess I'd say learning is what is the key thing. [LAUGHTER] [APPLAUSE]
BECKY: What was that? Let's get to another question.
QUESTION: Mr. Buffett, Mr. Gates, thank you for being here today. My name is Justin Heyman, I'm a second-year MBA, as I get ready to graduate, I was wondering, what's the one thing that your MBA didn't prepare you for when you got out into the real world?
BUFFETT: Well, I was -- it prepared me very well, not the whole degree, but specific professors prepared me very well for what I wanted to go into. I knew I was interested in investing, like I say, from the time I was six or seven years of age. So I was lucky that I found what turned me on early on. And I had these two marvelous professors here at Columbia that just being around -- I had read all the stuff they had written. So it wasn't I was acquiring lots of incremental knowledge but I was getting inspired. They were terrific for me. They treated me like a son. They would take me out to dinner. Ben Graham did the same thing for me. So it gave me confidence in myself. It just propelled me into a field I already love with a terrific tailwind from these professors that believed in me. [APPLAUSE] But let me add one point because -- to the MBA situation. Right now, I would pay $100,000 for 10% of the future earnings of any of you. So anybody that wants to see me after this is over -- [LAUGHTER] [APPLAUSE] If that's true, you are a million-dollar asset right now, right, if 10% of you is worth 100,000? You could improve -- many of you, and I certainly could have when I got out, just in terms of learning communication skills. You know, it's not something that is taught. I actually went to a Dale Carnegie course later on in terms of public speaking. But if you improve your value 50% by having better communication skills, that's another $500,000 in terms of capital value. See me after the class and I'll pay you 150-thousand. [APPLAUSE]
BECKY: Warren, you bring up your time here. I don't know if you can see the monitors back here, but we did take a look at your yearbook and steal your picture from 1951 year.
QUICK: I think we have a picture in the back. There you are. [APPLAUSE]
BUFFETT: I don't think I'd pay $100,000 for 10% of that guy. [LAUGHTER]
BECKY: Another question right here.
BUFFETT: Hi. My name is Oleg Cheesh. I'm a second-year MBA student here. My question is for Mr. Gates. You obviously worked very hard to get to where you are. Could you reflect on what role pure luck played in your success?
GATES: Well, I was lucky in many ways. I was lucky to be born with certain skills. I was lucky to have parents that created an environment where they shared what they were working on and let me buy as many books as I wanted to. And I was lucky in terms of the timing. The invention of the microprocessor was something profound. And it turned out only if you were kind of young and looking at that could you appreciate what it meant. And then I had been obsessed with writing software. It turned out that was the key missing thing that would allow the microprocessor to have this incredible impact. So in timing and skill set, in some of the people I was lucky enough to meet, you know, meeting Warren and talking to him, learning from him, it is unusual to have so much luck in one life, I think. But it's been a major factor in what I have been able to do.
BECKY: All right. Another question right here.
QUESTION: Hello, my name is Ugin Quinn, I'm from Deerfield, Illinois. And I'm a first-year student at Columbia Business School. I'd like to direct my question to both Mr. Buffett and Mr. Gates. In the context of both your professional relationship and unique friendship, what do you admire most about each other?
BECKY: OK. Who wants to take that one first? [LAUGHTER]
BUFFETT: My athletic ability. Say that. [APPLAUSE] Well, I would say what I really most admire about Bill is the view he has about what he should do with the wealth he's accumulated. I mean, as he said, he was very lucky. He was born in the right country, at the right time, with the right wiring and all of that sort of thing. In the end, he knows he's a beneficiary of a terrific society, and not everybody gets the long straws like he and I did. So he is -- and he has this view that every human life worldwide is the equivalent of every other human life, and he's backing it up not only with money, but backing it up with his time. And his wife, Melinda, is backing it up with her time. And they are really going to spend, you know, the last half of their lives or so using both money, talent, energy, imagination, all improving the lives of 6.5 billion people around the world. That's what I admire the most. [APPLAUSE]
GATES: With Warren, there are a lot of things you could pick, you know, his integrity as an example for the world. His sense of humor. But I think I'd pick his desire to teach, his desire to teach things that are complex and put them in a simple form so that people can understand and get the benefit of all his experience, all his models of how the world works. He loves to teach. And he does it meeting with students. He does it in his annual newsletter. He does it when he's talking to me on the phone. It's a real gift that I admire incredibly. [APPLAUSE]
BECKY: Let's take another question right here.
QUESTION: Mr. Buffett, Mr. Gates, thank you for being here tonight. I am Ibrahim Dolly, first year here at Columbia. I came from Portugal. I have a question for both of you. You both knew early in your careers what you wanted to do in your life. What advice do you have for those of us who are a little bit unclear?
GATES: Well, finding the thing that you are passionate about and that you are good at can sometimes take a period of years. I think Warren and I were lucky we kind of ran into it. I wasn't even sure it was software. I was kind of obsessed with it but then it wasn't clear it could be a career. When that happened, it was great. I think most other people get into their 20s and have to try out some different experiences. And some things will expose you to a lot of different businesses, a lot of different work opportunities. And I think you can make your first few jobs optimized for getting that exposure. And then when you want it, see the thing that you want to be fanatical about and just jump on to that.
BECKY: All right.
BUFFETT: First of all, I'd say marry the right person. [LAUGHTER] And I'm serious about that. [APPLAUSE] It will make more difference in your life. It will change your aspiration, all kind of things. It's enormously important who you marry. Beyond that, I would say that do what you would do if you were in my position, where the money means nothing to you. At 79, ... I work every day. And it's what I want to do more than anything else in the world. The closer you can come to that early on in your life, you know the more fun you're going to have in life and really the better you're going to do. So don't be driven where you think the last dollar is presently or anything of that sort. And then also go to work, if possible, for an organization or an individual that you admire. I mean I offered to go to work for Ben Graham because there was nobody I admired more in the business than him. I didn't care what he paid me. When he finally did hire me in 1954, I moved from Omaha to New York and I didn't know what I was getting paid until I got my first paycheck. But I knew I wanted to work for Ben Graham. And I knew I would jump out of bed every morning and be excited about what I would do and I would go home at night smarter than I was in the morning. Go to work at a job that turns you on and a person that turns you on and institution. [APPLAUSE]
BECKY: Stay right here. We will be right back.
WHY CASH ISN'T 'KING'
BECKY: All right. Class continues, everybody. We are back with the two greatest capitalists out there with Investing 101, back to more students’ questions. Why don't we start right here?
QUESTION: My name is Adam Van Dam and I'm a first-year student here. This question is for Mr. Buffett. If the Burlington Northern acquisition is any indication of your long-term buy and hold forever investment philosophy, I am wondering if the financial crisis has impacted that philosophy or your investment process in any way?
BUFFETT: No. It hasn't changed at all. We like products like this. How is this for shameless products? [APPLAUSE] This started in 1886. It's gone through all of these events. And the end will be 1.6 billion eight-ounce servings of Coca-Cola products come today and there will be more next year. We want to be in business with a durable competitive advantage with managements we like and trust and do them at a price we like. It hasn't changed a 1/10 of a degree. Incidentally, we own Fruit of the Loom, too, but I'm not going to do a product. [APPLAUSE]
BECKY: OK. Our next question right here.
QUESTION: Hi, I'm Brian Seedabalker. I'm a second-year student. Mr. Buffett, it's great to see you again. I was on the trip to Omaha last month. Thank you for hosting us. My question is, how would you recommend an individual investor who follows the Graham and Dodd philosophy to allocate their capital today?
BUFFETT: Well, it depends whether they are going to be an active investor. Graham distinguished between the defensive and the enterprising and that. So if you are going to spend a lot of time on investment, you know I just advise looking at as many things as possible and you will find some bargains. And when you find them, you have to act. It doesn't -- it hasn't changed at all since I was here in 1950, 1951. And it won't change the rest of my life. You start turning pages. When I got out of school, I turned every page in Moody's 10,000-some pages twice, looking for companies. And you have to find them yourself. The world isn't going to tell you about great deals. You have to find them yourself. And that takes a fair amount of time. So if you are not going to do that, if you are just going to be a passive investor, then I just advise an index fund more consistently over a long period of time. The one thing I will tell you is the worst investment you can have is cash. Everybody is talking about cash being king and all that sort of thing. Most of you don't look like you are overburdened with cash anyway. [LAUGHTER] Cash is going to become worth less over time. But good businesses are going to become worth more over time. And you don't want to pay too much for them so you have to have some discipline about what you pay. But the thing to do is find a good business and stick with it.
BECKY: Does that mean you think we are through the roughest times? You had always kept the cash word around, too.
BUFFETT: We always keep enough cash around so I feel very comfortable and don't worry about sleeping at night. But it's not because I like cash as an investment. Cash is a bad investment over time. But you always want to have enough so that nobody else can determine your future essentially. The worst -- the financial panic is behind us. The economic spillout which came to some extent from that financial panic is still with us. It will end. I don't know if it will end tomorrow or next week or next month. Or maybe a year. But it won't go on forever. And to sit around and try and pick the bottom, people were trying to do that last March and the bottom hadn't come in unemployment and the bottom hadn't come in business but the bottom had come in stocks. Don't pass up something that's attractive today because you think you will find something way more attractive tomorrow.
BECKY: Another question right here.
QUESTION: Mr. Buffett and Mr. Gates, my name is Antionette Genevieve. I am a first-year executive MBA student. And I actually work at Goldman Sachs, so thank you for your investment. [APPLAUSE]