ROSE:  Where does this populist instinct in you come from? 

BUFFETT:  I was born lucky.  I was born the United States of America.  The odds were at least 30 to 1 against that.  I didn’t have anything to do with that.  I was born wired for capitalization.  I didn’t have anything to do that.  So here I am.  I won the ovarian lottery the day I was born, you know.  A lot of people don’t.

They go off to Afghanistan or fight for us to preserve things for me.  When some of my friends complain about their taxes I feel like saying let’s continue this conversation on the shore’s enormity.  Let’s just go over there and we’ll just talk about this and how terrible your situation is.

I really think this country works wonderfully on a market system.  We don’t want to give it up.  Indeed, we have to control that market system in many ways.  But it works.  It works with the kind of incentives we have.  It works with equality of opportunities.  It’s not perfect.  We’ve tried for it all the time.

But the lucky ones still prosper incredibly disproportionately.  I’m not for having some kind of a czar in Washington besides what’s proper but I do think something that thinks about the 60 million people that are living at $21,000 a year or less in their household.  I think a rich, rich, rich society should think about them a little bit every day. 

ROSE:  That’s the America you believe in. 

BUFFETT:  Yes, it is.  I think it’s the America most people believe in. 

ROSE:  Are you ok by Dodd-Frank that, in fact, that was their appropriate reform? 

BUFFETT:  I haven’t read it, Charlie.  I think there’s two things that are needed to keep the financial system from going crazy.  One is keeping some limits on leverage and we didn’t do a very job of that last time.  And incidentally --

ROSE:  Dodd-Frank is devoted to that a little bit, isn’t it? 

BUFFETT:  Yes, but Congress, I mean they encouraged huge leverage in Fannie and Freddie.  I mean that’s where the money was.

The second thing is having the proper incentives for people at the top of important financial institutions.  We saw institution after institution go to the government and say we’re too important to this society that you can’t let us fail.  So pour in the money, do whatever’s necessary and I’m going go off and be rich.  I’m the guy that screwed it up.

I think you’ve got to have down side, really drastic down side for the people that run financial institutions, big ones that get into trouble.  And we need those incentives and I don’t think they’ve attacked that yet.  That can be done through the board of directors. 

ROSE:  Too big to fail continues to exist. 

BUFFETT:  Too big to fail will always exist.  There will always be institutions that are too big to fail.  They’re deciding over in Europe that Greece is too big to fail. 

ROSE:  Ok.  But could they be broken up.  I know that.  Should those institutions be broken up? 

BUFFETT:  No, no, no. 

ROSE:  As one Federal -- former Federal Reserve --

BUFFETT:  No, we decided the whole banking system was too big to fail when we put in the FDIC in effect.  We can’t exist without them.  So we have to do something to change the behavior of people that are at the top of those institutions so they have huge downsides.  They didn’t have down side.

I’m not going to name names but those people did not have down side.  They had down side to their reputation but they walked away with tens of millions of dollars so you can’t that have that situation exist and expect great behavior.  And then you have to have some restrictions on leverage.

ROSE:  But has that changed? 

BUFFETT:  The incentives have not changed very much.  They say they’ve changed by paying them more stock and all that.  But that isn’t draconian enough for me. 

ROSE:  I want to come back to Omaha. 

BUFFETT:  Great.

ROSE:  And look at what the lessons of Berkshire Hathaway are, for you.  I mean most of your businesses have grown.

BUFFETT:  Yes.

ROSE:  The railroad’s grown.

BUFFETT:  Everything’s growing.

ROSE:  Everything’s growing.

BUFFETT:  Pretty much. 

ROSE:  You are finding that you need to hire new people. 

BUFFETT:  Sure.  We’re investing a record $7 billion this year in capital investment, almost all of which is in the United States.  That’s at least a billion more than we’ve ever invested in the past.  There’s plenty of things to do here. 

ROSE:  You have often said that in a time like this in which there are difficult times, that’s the best time for you because you can have more opportunities to buy things that you think are of quality at better prices. 

BUFFETT:  There’s no question about that.  It’s like buying on sale.  Last Monday we spent more money in the stock market buying than any day this year.  But it was --

ROSE:  Buying stock. 

BUFFETT:  Right.  Not business.  But buying business is very infrequent.  There’s a lot of happenstance in that but you have to be ready to do it. 

ROSE:  There’s much discussion in the paper about buying another acquisition of Transatlantic, I think it is -- an insurance company. 

BUFFETT:  Yes.  We made an offer about a week ago.  That offer is expired now.  We don’t leave things out. 

ROSE:  You don’t like bidding wars, either. 

BUFFETT:  No, no. 

ROSE:  But if you look at Berkshire today it’s different the sense that more of it is owning businesses 100 percent than it is owning stock. 

BUFFETT:  Yes.  And we’ve been in that direction for 20 years but people are seeing more and more evidence of it but we employ 260,000 people or more and we have added to employment this year. 

ROSE:  With the exception of homes and construction and carpet and

all those --

BUFFETT:  Everything is --

(CROSSTALK)

ROSE:  The second largest real estate agent and all that. 

BUFFETT:  Yes. 

ROSE:  And that’s the one thing -- So Berkshire in a sense offers an opportunity to look at where U.S. economic growth is. 

BUFFETT:  I can tell you how many people had Dilley Bars yesterday.  Everything from Dilley Bars to corporate aircraft.

ROSE:  Robert Zoellick, the President of the World Bank said this is a very, very, internationally is a difficult time and because what’s happening in the United States and in Europe could very well be a warning sign.  You seem to say, look, my success of my companies is different except for construction. 

BUFFETT:  The United States has been improving.  I mean, it went through -- we talked about it, it was economic Pearl Harbor.

ROSE:  Right.

BUFFETT:  I mean, I use that term.  And we had a shock to our system that was really colossal and if a few people hadn’t acted right, even more so.  But we have been coming back steadily.  The mood has gone up and down more like this as we’ve gone but everything I see in business, we’ve been coming back steadily since the summer of 2009 and continuing up through last month.

Now can something happen that will interrupt that?  Perhaps, but I haven’t seen it.  Europe is a different story. 

ROSE:  Ok.  Put Europe in the context of this, though.  How could the sovereign debt crisis in Europe affect the rest of us? 

BUFFETT:  Well, the problem is I don’t know.  I -- I don’t know -- I don’t know what’s going to happen over there.  I know 17 countries that joined the European monetary union gave up the right to print their own money.  That was a huge, huge decision.  I hope the United States never does it.

I mean it changes the game --

ROSE:  To be in control of your own finances, in fact. 

BUFFETT:  Yes.  And they linked themselves.  They gave each other their credit cards and said let’s all go out.  And some behaved better than others or worse than others. 

ROSE:  Should they dismantle the Euro Zone then? 

BUFFETT:  I don’t know.  I mean it’s very complicated.  You have to decide one or two things.  You’ve either got to decide that these members are actually going to get their act together, the ones that have troubles in a very major way because they need lots of money.  They have to refund their old obligations all the time.  So nobody has to lend money to country a, b, or c.  Nobody has to lend money to them.

The United States, nobody lends money to the United States, we print it.  But not over there.  If Greece owed their money in drachma they’d have a lot of inflation and, you know, devalue and all of that.  But they wouldn’t have a problem paying their bonds.  They gave up that right.

Now, either the weaker countries get their act together in some major way -- and I think that’s very, very difficult -- or basically the very strong companies, and we’re talking countries -- we’re talking Germany, have to say I’m willing to take care of my brother-in-law that’s been using my credit card. 

ROSE:  That’s what they’ve said so far. 

BUFFETT:  Well, they sort of half said it.  I mean that’s their problem.  If you’re having a run at a bank and you’ve got 10 people in front of it and no FDIC insurance that line isn’t going to stay at 10.  You’re either going to get rid of those 10 or you’re going to have a hundred.

And so far, in Europe they’ve sort of kept talking to the 10 and a few more straggled up and so they didn’t get rid of the line and when then there’s a run the line only gets longer unless it gets taken care of very quickly. 

ROSE:  But what are the consequences for the United States and for Asia?

BUFFETT:  I don’t -- I don’t know the answer to that.  I don’t think they’re necessarily extremely dire.  There have got to be consequences but I don’t -- Europe won’t go away.  We’re selling a lot of goods in Europe. 

ROSE:  It is a huge market. 

BUFFETT:  Yes.  It’s a huge market.  And they’re not going to go away and the plants aren’t going to go away and the farmland isn’t going to go away.  It’s just going to be kind of an economic mess for a while. 

ROSE:  You have said before to me and to others that Berkshire is your canvass that you paint on.  It’s your masterpiece. 

BUFFETT:  Well, I don’t know about masterpiece, but canvass. 

ROSE:  So what is it if you look at it today, Berkshire, you find fault with? 

BUFFETT:  Find fault with? 

ROSE:  Yes. 

BUFFETT:  Well, I’ve made plenty of mistakes along the way so I have a lot of brush strokes just give me a little whatever things to remove that I would do it.  So I’ve made mistake, but I expect to make mistakes and I’ll keep making mistakes. 

ROSE:  Because unless you take chances you won’t make mistakes. 

BUFFETT:  Oh sure and mistakes are part of the game.  I mean you’re swinging at pitches and -- I don’t want to sound -- I feel good about Berkshire.  I mean, the people I’m associated with at businesses, we have a -- we lay out our economic principles and I laid them out many, many years ago.  And we don’t change them.  I mean we try to operate that way.

Doesn’t mean we’re perfection.  You’ve got a company of 260,000 people, I’ll guarantee you right now somebody’s doing something I wish they weren’t.  You can’t have a city of 260,000 people and have no jails.

But overall I feel there’s a culture that I don’t think any other large -- any large public company has and I think it’s enduring because it’s so inculcated and the manager, the shareholders, the directors, everybody.  So I feel that about Berkshire. 

ROSE:  Would I be wrong to suggest the thing you worry most about is whether after you are gone that that culture remains as it is?  That you have in a sense made Berkshire strong enough to exist without you? 

BUFFETT:  Yes, I don’t worry about that.  I worried about it over the years, which is why I did a bunch of things that I think ensure that future.  But that’s always the question.  You’ve seen all kinds of great companies topple from --

(CROSSTALK)

ROSE:  You once said to me and to others you have to make your company idiot proof because at some point some idiot will run it. 

BUFFETT:  Yes.  Well, that may be even the case now.

ROSE:  Someone has said I think that the thing you worry most about is whether Berkshire will be intact 20 years after you’re gone. 

BUFFETT:  I don’t worry about it, but I care about it.  And since care about it I put things in place which I think almost ensure that Berkshire will be a lot better 20 years after I gone than it is now. 

ROSE:  Where is succession today? 

BUFFETT:  Where is succession?

ROSE:  yes. 

BUFFETT:  If I die tonight tomorrow morning it won’t take the board an hour to announce my --

ROSE:  Who the CEO is? 

BUFFETT:  Absolutely.  They know exactly who it is and they agree.

ROSE:  But it may change six months from now. 

BUFFETT:  It’s unlikely to change six months from now.  But it could.  I mean that person could die. 

ROSE:  Is there a list of people or one person? 

BUFFETT:  No.  There’s several people but there’s one person they’ve all agreed on.

ROSE:  Takes over as CEO.

BUFFETT:  Yes.  And there should be.  I mean, there’s no reason to have the board of directors start thinking about who the CEO should be the day after the present CEO leave.  I mean they’ve neglected their job if they do that. 

ROSE:  Was the Sokol affair the thing that caused you most angst because it had to do with judgment of --

BUFFETT:  Well, it caused angst.  I don’t know whether it’s the most in my business life but it was up there. 

ROSE:  When you think about whatever legacy there is, your legacy is Berkshire Hathaway beyond family and philanthropy. 

BUFFETT:  Yes, well it’s -- I’ll settle for those. 

ROSE:  You quoted Sir Christopher Wren who I think, created St. Paul’s Cathedral --

BUFFETT:  That’s right.  He’s buried there too.

ROSE:  And if you go there the epitaph he has written for himself is?

BUFFETT:  I’ll paraphrase it there a little bit.  "If you seek my monument, look about you."  And I say that should be the -- That’s the way we should think about this country.  I mean this country a monument to what was done a few years ago and the people that have followed.  It’s incredible.

Just think if you would.  Back in 1790 you said I want to create a monument to this new country I’m giving you and you’d envision the country of 2011.  I don’t think anybody would have dreamt big enough.  I mean this is something that -- so I just -- When I fly across the country that thought occurs to me that if you really seek this country’s monument, if you seek our founding fathers monument, just look around you. 

ROSE:  And you worry today that there’s some threat to that.  Not because the system is not right, not because the system is not strong enough but you worry that there are things happening that will make it less great if they are not addressed. 

BUFFETT:  Right.  I think we’re being tested, Charlie, yes.  But we were tested in the Civil War.  We were tested in the Depression.  We were tested December 7 of ‘41.  We were tested on September 11th of 2001.  We will get tests.  And this is one of them.

We will surmount them but I would just as soon get on with the job of surmounting them now. 

Content and Programming Copyright 2011 Charlie Rose Inc. ALL RIGHTS RESERVED. Copyright 2011 CQ-Roll Call, Inc.  All materials herein are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of CQ-Roll Call. You may not alter or remove any trademark, copyright or other notice from copies of the content.

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