CNBC Buffett Transcript Part 6: China and America's Diminishing Dominance

BECKY: Hey, Warren, before we go to a break, I do want to ask you about one more headline that came out yesterday and that does concern Berkshire in a very offhanded way. There's a gentleman named Rajat Gupta...

BUFFETT: Right.

BECKY: ...who was on the board at Goldman Sachs. Apparently he tipped off Raj Rajaratnam about your investment in Goldman Sachs, that it was coming, that big investment during the financial crisis. And Rajaratnam made about 900,000 to $1 million on that trade. The bigger question— I'm assuming you knew nothing about that...

BUFFETT: No, no.

BECKY: ...but the bigger question is, how frequently do you think things like this happened?

BUFFETT: Well, I think they've happened, you know, I've got no idea in the sense of any— but they happen. And one of the things I feel the best about is that, in all of the Berkshire acquisitions we've made, I mean, whether it was Dairy Queen or Flight Safety or Burlington Northern or you name it, or when Disney— when we acquired ABC and then when Disney acquired ABC, if you take the whole record of all the ones that Berkshire's directly involved in, the stocks of the acquired company have actually underperformed in the week before the announcement. Now, we make a point of trying to get deals done fast. I mean, and when we did Burlington, it was from a Friday when I made an offer that Matt Rose conveyed to his directors, and I told them that I wanted a contract by the following Sunday and I wanted to be able to announce it on Monday morning because I— if enough time goes by and enough people get exposed to it, somebody's going to talk. And so far at Berkshire we've been able to do that, but it always worries me because this— as— and when a deal starts out, the circle enlarges and who knows about. That Goldman deal, for example.

BECKY: Mm-hmm.

BUFFETT: The time between when I said I would do that deal and when it was announced was very, very, very short.

BECKY: How short?

BUFFETT: Oh, it was, you know, hours. I mean, and as opposed to a merger or something that might take a couple of weeks. But it's alleged, I think, that the fellow heard about it and then went right out and made a phone call. I mean, if they're going to do that, you know, you're going to have— you're going to have a problem. And I would say that, you know, it's all kind of— just what you hear from other people, but there's been a fair amount of trading on inside information, I think, in Wall Street. There's money in it, you know, and it's tempting to people.

BECKY: Hm.

BUFFETT: It could be a secretary in a law firm, it can be a— it can be somebody at a printer. I mean, it's— there's just— you can't make a deal without a certain number of people hearing about it. Now, at Berkshire, you know, I don't even tell the directors. I mean, I— Mark Hamburg, our CFO, knows about it if I'm working on something. Charlie may know about it. But I just— I'm paranoid about the idea that if we have 20 people that know about something, you know, one of them's going to tell somebody. And they may do it not even to make money or anything like that, they may do it just to show off that they, you know, that they got all this knowledge or something of the sort.

BECKY: Mm-hmm. OK. Well, again, Warren, thank you very much. And we're going to continue this conversation in just a moment. Carl:

CARL: All right, Beck. When we come back, a lot more form Warren and Becky in Omaha. By the way, if you still want to e-mail us, you can today. It's [e-mail]. We'll answer some of your questions right after the break

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