>> good morning we have a special guest. >> yeah, who is that >> warren buffet >> see, you can do it. you can do that voice. >> good morning. >> i don't know what we pay you. >> good morning. thank you so much for being here >> thanks for having me.

it's something that we have been coming to you for years. what stood out to you? >> i think everybody had as much fun as ever. we had a crowd certainly equal our record they are all having a good time here so it's sort of a mardi gras >> we are fnot going to change the format very much >> there were a lot of controversial subjects and things that caught peoples attention. you and charlie say what you think especially charlie >> yeah. charlie says exactly what he

thinks he thinks in colorful language too. have you noticed that? >> i have noticed that >> is that more of the things. >> let's talk about some of the things where you began the annual meeting this year it was telling them a little bit about investing tips and lessons along the way. i can't remember when i did it i really thought thab we were giving the wrong lesson. so this time i went back to 1942 when i bought my first stock

we have had 14 presidents. we have had world wars, 9/11, cuban missile crisis we have had all kinds of things. the best thing l thing you could have done on march 11th, 1942 is buy an index fund and never look at aheadlinejust like you woul if you buy a farm. just do it and let the tenant farmer run it for you. if you put $10,000 in an index farm and i paused for a moment to let the audience guess how much it would amount to. it would come to $51 million now. you would have to know that american business would move forward. you didn't have to worry about

what stock to buy or what day to get in or out. you didn't know the federal reserve would exist. america works. >> you went back to the day in 1942 because it was the day you -- >> yes >> this is the new york times that day >> yeah. 1942 new york times sold for 3

cents. the dowjones, it was a 2% decline which would be 500 points today the night before on march 10th i sad i wa said i want to go in i had $125 it's still my personal is to shove it all in. >> which we have seen with apple. >> some what it was down from 55 in january it went up later on. >> these are lessons you point out you say they shouldn't be looking at things. you should stop paying attention and look away. you are somebody that does pay

attention to market evaluations wondering where you think the markets stand right now. at the end of february you said you thought things were not overly priced but you didn't find any businesses you yourself felt like you could purchase >> yeah. we haven't bought any in their entirety it wouldn't take me a second but it may be because bontds are going to fall a lot. the investor is between three and four things. they have short term governments

i mean they will get enticed that's when it will be nonexistent. >> so you're talking about the average investor >> yes but 99% of people are nonprofessional investors. dp they had to do that -- you can understand i'm sort of gambling on that the point is you don't have to buy exactly the right stock or why at the right time. most people get excited about the stock or market after it has gone up.

your spouse says is that guy smarter than you are or what they are enticed all they need to do is buy a cross section and it's best to buy it overtime. you made the point and basically said there's never ban good time to buy it going back to the war bonds back in the 40s. >> that's true the government was offering you 2.9% we were having to buy war bonds then we have $25 in ten years

so you could get three of four at the old ball game and the government happily pointed out to you that you were getting 2.9% compounded for that of course now you have a situation the federal reserve says they want inflation at 2% they say they will try to devalue that bond by 2% a year if you're going to put away money over time when you're younger you can buy stock and you'll not get the lows and you'll not buy at the highs.

>> going back to the idea this is a good place. if you're somebody like you you look at prices and you think what >> i find it hard to buy things. >> i don't find things easily. we were on in march of 2009. they are -- it was -- i continued and stocks were very very cheap i remember when bonds got to 15% like they were in 1982 that's a different equation than exists

now. >> you have had periods where you said stocks look expensive to you this is not one of those times i take it? >> it is not one of those imes >> interest rates are like gravity. obviously anything that yields you 2 or 3% will do way better i don't think they will be 1% for 100 years. >> just to get into the knew answers you're talking broadly about issues in terms of how you see the stock market as a great place for average investors i

have spoken to people who know a lot and say when they are looking at prices things look really rich. you're talking about prices that are 15 to 20% above what's a fair price does that match up to what you would agree with right now >> in addition they are being bought by people that are borrowing 60 or 70% of the money or maybe even more >> you talking about private equity >> but not exclusively it is not based on borrowing money at the purchase price.

we are not competitive and that general euphoria, they have to put the money out. it is kind of interesting what they do. it takes the money and they buy a company in the market from some of those same institutional investors. they sell it back for a while it is an interesting exercise. you said it's probably more like

rat poison squared charlie went onto then basically call bitcoin -- s >> he is an expressive one maybe when he gets older he'll mature >> you might expect people who are trading to be pretty loud about what they heard. what is it about bitcoin that gets you guys so firedup we are have something that can be produced. when you buy nonproductive

assets all you're counting on is if they will pay you more. one of the interesting thing is gold if you go back and you take it forward to now you'll find two tenths of one% and then you have to ensure it during that time it doesn't produce anything i bought a farm in the 1980s at the end of that period i have the farm and i have gotten significant impulse off ofit

we can keep running up the price. at the end there is one bit coin sitting there. now we have to find somebody else >> and that's a greater theory is that what you're saying >> yeah. it's buying something because you expect the pool of people who want to buy it because they want to sell it to somebody else will want to grow. people are like i have to get in on this. it is better if they don't understand it. if you i don't understand it you get much more excited.

>> you can have anything you want to imagine if you look at something and say that you can do it with seashells or anything they did it with tulips in 17th century and they will do it again. i mean people, they like to speculate. they like to gamble. if you look against something if you said if we lose the war we might have to run off to some other country so let's put our assets in gold you would get less than a penny. >> okay. andrew has a question. >> related to the issue of

bitcoin goldman sachs announced they would create a trading operation around crypocurrencies. what do you think of their decision to do that? >> they probably think lots of people are not going to get very excited about it and maybe already are. but they think there is must be to be made trading it. i would be very surprised if they are selling it and putting it in the bit coin charlie will come on at 8:00 no telling what he will say. >> i want to ask charlie about it when he was talking about the toureds turds and deciding you want to get a piece of that. >> you're not going to get me to

comment onthat it draws people in i can whisper something on this program there's no quantitative limits you say i'll buy it 15 times or it's gone up of. >> when i was tweeting i was repeating what you were saying.

you don't get defensive. you don't say you shouldn't buy a farm you say i'm making 4% or 8%. you get defensive when you look at this thing. it doesn't do anything you're hoping somebody comes along. you're dependent on more people growing basically.

those people do get angry. >> they sold it and brought something else with it it took a long time. it has quite a following among all of these people that think it's going to 25,000 or 100,000. you never embraced technology as much as a lot of other things. you're finally in apple. what did you buyapple? >> with bitcoin you know people that want to come on and sigh

buy bitcoin. they will lose money unless the crowd gathers. it is every reason in the world. when i buy apple i know that apple is going to repurchase a lot of shares. right now apple had whatever bit i know i don't have to do a thing. probably in a couple years we'll own 6% i love having 5% go to 6%. so there is no reason at all for me to encourage other people to buy apple

>> it started out as a utility company. then they baugt and started developing natural gas and found oil in connection with it. it morphed into a basic energy company, production company. but they issued when they were a utility and they issued a $6 preferred that and quit paying dif entds in 1932.

they eventually called it which was $100 plus all of the arrearages >> and what a history. there was pack man defense and then part of their -- >> yeah. >> it was bought by venezuela. the red sox. >> right it became a major oil company. they actually sold the preferred door to door way back in the '20s or manager lisomething lik. >> every time you say bought the -- i looked up -- that's a weird expression it is very morbid what it came

from i'm not going to go into it. it is where it came from when guys, they want to come back from war and want to buy a farm and unfortunately it is their family that ends up buying it from insurance proceeds. it's horrible. let's move onto itcoin >> everybody thought it was a total fraud. world war ii forced the country into this huge financing i mean we had the deficit finance in a way that was

incredible we took them out of the economy and we did it on borrowed money and it created the runway for the greatest economic progress the world has ever seen. >> so is that like an endorsement? >> it certainly works in world war ii i mean i do not think the 40s and 50s and 60s would have developed without the huge deficit spending and all of these events we were struggling to get out of and they turned the speck et loose

a lot would have an oppression post world war so that was a prevailing sort of thing. >> we need charlie on. >> be prepare today bleep him out though >> and we talked about city

services how did you come up with this? >> i must have heard somebody talk about it. here was this company that didn't have the money to pay it. it was going to earn a lot of money. the i was going to get $200 but the problem was buying it and having it go down to 27 and walking to school because i was

buying it. and having her point out this was going to happen. when i got back up to 40 and we each had a profit i thought -- >> probably very powerful ones we have a lot to talk about. back to you in the studio right now. >> okay. thank you. when we return we have two special guests joining becky and warren buffett we are getting the 3 second delay ready for charlie munger we have a lot more in just a moment on squawk mr. elliot, what's your wifi password?

wifi?

wifi's ordinary. basic. do i look basic? nope! which is why i have xfinity xfi. it's super fast and you can control every device in the house. [ child offscreen ] hey! let's basement. and thanks to these xfi pods, the signal reaches down here, too. so sophie, i have an xfi password, and it's "daditude". simple. easy. awesome. xfinity. the future of awesome. good morning s & p 500 looking to open up

about 50 points higher makes you wonder if the iran deal, is it in the price already because it's knot going down if the president decides to exit that deal. let's get back out to becky. >> thank you we are here with warren buffett. we'll be joined by charlie munger and bill gates later in the show you were questioned directly at the chair holders meeting wells

fargo has, is fines have continued. the developments we have found it but you have stuck with this and said you're not selling and that you have faith in time sloan. they said this is a company that has run into trouble and it doesn't jive how do you say yes this does fit with our investing philosophy? >> well, the league that made one mistake but maybe i made from time to time which they came up with improper incentives it happens from time to time >> let's talk about what

incentives were created. they rewarded people for the number of new accounts that were opened >> they say eight would be great and 6.2is better than 6.1 the real problem was when you find out about it you got to stop it immediately.

i have seen that before and then it just gets out of hand if you don't stop it immediately then everybody will come and say why candidn't you do something. >> it is not where wells fargo was not stopping it immediately. >> i don't know this firsthand but from what's been reported there have been many whistle blowers who said they were try to go report it and as a result they wound up losing their jobs. once you have not done it you're in the soup. he absolutely not profiting the

next minute he had to pick up the phone. on may 15th he did it all over again you knew this was out there so you have to act charlie had been very good with me on things like that he doesn't let me procrastinate. they under cover other wrong things i mean he had a ceo in the early 70s who refuse today accept the fact the results were developing

badly. you to hope that something good happens. that was a huge opportunity for us it was a mess. they needed to raise capital we bought half the company for less than 50 million bucks so the fundamental business. other banks ran into other kinds of trouble in 2008 and2009

period they made way less money doing that and the fines were even bigger going forward you can stop bad practices. tim sloan was an insider can you be an insider and still be the one that cleans it up >> will, derrick came in and i

put him in total charge. everything he did, you know, was perfect. he had all kinds of things to look at. >> he was an insider >> yeah. he was one of seven or eight people i had to have an insider. i arrived there on a friday. somebody had to run a business there was no way i could wait. i started interviewing at 9:00 in the morning i got in on a friday

there was the room that contributed that lead to this activity so i picked an insider who knew all of the people involved >> joe >> and they are on a complete reset now. >> i don't know if you saw it but they go back and show stagecoaches and then they go to a complete blank they say but this happened and now it's the new -- they paid someone to get an entire ad campaign there has been a complete reset. they are starting over

the spokesperson, it's all they talk about as well they are saying all of that history is in the past and we are starting all over right now. it is pretty amazing they had to come to that point did they talk to you about that advertising campaign >> no. no we did not run an advertising campaign i ran a double truck ad in the new york times and wall street journal when we reported our third quarter. i said what was wrong and said how we were going to change it.

i will guarantee they are doing something wrong. my job is to act when i hear about anything and to make sure we have some systems. we have got about 2,000 contacts i get anonymous letters and those are the two best sources some times they sign them but i think -- >> you received one last week about something happening at berkshire? >> sure. some times people don't like the person working next to them. they come in for a lot of reasons. you have to look into what it

is if you lack at 100 and the guy next to me has bad breath but that's the way you do find them is tips basically. >> how do you track down every one of those tips? >> we have an audit department that sorts out the ones that they think i ought to see. >> some of them come in, a letter comes in and it's usually not signed and that's okay obviously when they get very specific and say this is going on and that's going on, that's what happened at american express in 1964. they were getting calls from a guy at a bar he was saying tanks

are phony. you'll find it's not filled with oil. the guy didn't want to hear it he didn't want to tell his boss. it gets worse and worse and worse. >>. >> after you commented on wells fargo i got a couple of e-mails of folks who asked me if there could be a follow up question. the follow up question is this when you bought it you came in after the problems and some of the opportunity came because you weren't in the stock so there were two questions. why is wun do you wish you weren't in >> no. which i know you probably put your own money in before

the question is what point would you be wooutless at this point or does it have to be more outrageous >> i department i'llize that i wish i had the bank stocks i mean wells fargo is buying a lot of shares. you can argue they are improving the value because they had this bad news i think ten years from now i think if you look at the ten year record then you're very likely to see it outperformed most competitors >> would you be buying more if you could? >> yeah. i don't want to give recommendations on which stocks to buy >> i think you touched on it but the idea of being ruth legislation, if you lose for the

enyou're twishing betweened owned companies and investments. >> and you're a massive investor >> i'm not sure everyone understands it has become a bank holding company. there's a point at which your activities could make you. we had to dispose of it in 1980. we bought a bang we would have bought more banks and changes the old and we don't other banks if they hadn't

changed a lot in the period. >> okay. >> i don't feel responsible -- if you're having phone with your apple phone don't blame me okay we have much more from warren buffett still to come. warren buffett is going to be joined by charlie munger. just a moment. at&t provides edge-to-edge intelligence, covering virtually every part of your retail business. so that if your customer needs shoes, & he's got wide feet. & with edge-to-edge intelligence you've got near real time inventory updates. & he'll find the same shoes in your store that he found online he'll be one happy, very forgetful wide footed customer.

at&t provides edge to edge intelligence. it can do so much for your business, the list goes on and on. that's the power of &. & if your customer also forgets socks! & you could send him a coupon for that item. [fbi agent] you're a brave man, your testimony will save lives. mr. stevens? this is your new name. this is your new house. and a perfectly inconspicuous suv. you must become invisible. [hero] i'll take my chances. now you can, with shipsticks.com! no more lugging your clubs through the airport or risk having your clubs lost or damaged by the airlines. sending your own clubs ahead with shipsticks.com makes it fast & easy to get to your golf destination. with just a few clicks or a phone call we'll pick up and deliver your clubs on-time,

guaranteed, for as low as $39.99. shipsticks.com saves you time and money. make it simple. make it ship sticks. with dell small businessout your technology advisors you get the one-on-one partnership you need to grow your business. the dell vostro 15 laptop. contact a dell advisor today. no one thought much of itm at all.l people said it just made a mess until exxonmobil scientists put it to the test. they thought someday it could become fuel and power our cars wouldn't that be cool?

and that's why exxonmobil scientists think it's not small at all. energy lives here. you're gonna do great! thanks, dad! break a leg! aflac?! not that kind of break. oooh! that had to hurt. aflac?! not that kind of hurt. yeah, aflac paid us cash in just one day to help with our car payments and mortgage. aflac! perfect timing! see how aflac helps cover everyday expenses at aflac.com.

are you having fun >> i'm having fun. i love doing this. i do this every morning. ♪ all right. good morning again, everybody. welcome back to "squawk box" where we are live from omaha today we are introducing the warren buffett archive this is a website with the world's largest collection of buffett speaking about business, investing, money, and life it includes 25 full annual meetings from berkshire hathaway with buffett and munger taking questions from the audience. it goes back to 1994 with a highlight reel for each year by the way, folks, this is the only place that you can get this

complete archive it's also got 130 hours of searchable video it's synchronized to 2600 pages of transcripts that have been painstakingly checked by alex crippen who did a wonderful job of making sure everything was done this was done by hand i'm calling it instead of ai there are 500 video clips and a buffett timeline and a berkshire portfolio tracker. if you want to check it out, do it today it's buffett.cnbc.com. warren, you got a chance to look at this too. this comes from you giving our chairman at nbc universal access to 25 years of annual meetings this is stuff that only berkshire's been holding onto for this time. >> steve had suggested it to me a few times and suggested it a little stronger. it sounded like a good idea. i didn't think it could be done like this. so we just gave him all the, the

annual meeting material. we didn't give him the movie because that's got stuff we promised not to put out. >> you mean with celebrities. >> yeah. but in terms of the annual meetings, portal to portal, and everything we had. everything we had. even, you know, with university students anything we we gave steve. i told steve you can do with it exactly what you want. i thought it would be an impossible job i knew if it was done, it would be done well it blew my mind when i saw it. >> it's been really useful for me trying to figure things out years blend together with what you said when. and whether it was you or charlie who said it. the search function is better than i anticipated in terms of being able to look up things maybe i wanted to find out when you started buying shares of apple. type in apple shares and it comes up

i can link to the transcript and link to the video of you saying why you were buying it >> yeah. it'd be more fun for me to just recall what i'm saying but it's all there that's the way it should be. i just love the idea. >> great folks at home, if you are wanting to check it out, it's buffett.cnbc.com the website is live. we'd love to hear what you think about it too when we come back this morning, we have much more from warren buffett plus we'll be joined by charlie munger and microsoft cofounder bill gates nap is co that is coming up at 8:00 m.a. eastern time we will be right back from omaha, nebraska. okay, well let's see you get up from the couch. i'm sorry, what? grandpa come. at cognizant, we're uniting doctors, insurers and patients on a collaborative care platform, making it easier to do what's best for eveth, every step of the way. you may need more physical therapy. ugh... am i covered for that? yep. look.

grandpa catch! grandpa duck! woah! ha! there you go grandpa. keep doing that. get ready, because we're helping leading companies see it- and see it through-with digital. ♪ can i get some help. watch his head. ♪ i'm so happy. ♪

whatever they went through, they went through together. welcome guys. life well planned. see what a raymond james financial advisor can do for you. the kayak explore tool shows you the places you can fly on your budget. so you can be confident you're getting the most bang for your buck. alo-ha. kayak. search one and done.

good morning welcome to a special edition of "squawk box. we've got your ticket to omaha and the berkshire hathaway annual shareholder meeting our special guest, chairman and ceo warren buffett we'll cover berkshire's biggest holdings, buffett's latest bets, and his reads on the economy it's monday, may 7th, 2018 and "squawk box" begins right now. ♪ good morning welcome back to "squawk box" right here on cnbc i'm live -- we're live, i should say at the nasdaq market site in times square andrew ross sorkin and joe kernen i'm back from omaha. becky is in omaha this morning speaking with the one and only warren buffett we'll get back to them in just a couple of minutes.

first let's show you equity futures at this hour for a quick second we're going to show you now the dow is looking up about 90 points nasdaq up about 43 points and the s&p 500 up about 10 points also want to show you some headlines this morning nestle striking a $7.2 billion deal with starbucks to sell packaged goods globally. starbucks says it's going to use the proceeds to speed up share buybacks also tesla says it's evaluating capital expenditure needs. in a new s.e.c. filing this morning, it may raise additional capital to fund the growth of its business we're watching energy prices as well this morning because wti crude topping $70 a barrel for the first time since 2014. and the lundberg survey showing gasoline prices rising a tenth straight week. average price of regular grate gasoline to $2.90 a gallon meantime, we want to get back to becky in omaha speaking with mr. buffett. becky?

>> andrew, thank you very much again, we are live in omaha, nebraska this was the site of the berkshire hathaway annual meeting this weekend the 53rd annual meeting. our special guest is berkshire's chairman and ceo warren buffett. thank you for being with us this morning. >> it's fun. >> it is fun i want to talk through the cash hoard. you told us last week that you had spent about $12 billion to $13 billion in the first quarter. so you were thinking the cash hoard was closer to $100 billion based on other things you bought as well. so you're spending billions of dollars. but you still have a hundred billion dollars. is that ideal? >> no. it's -- we earn very little on it but that is -- we will earn a little more this year. but it's just about the world's worst investment except doing

something dumb you're doing for a longer term. it decemboes give you the abili move something along but i would rather have that number be $100 billion and have the other $70 billion in businesses we own. but also in securities we own. and we did, for example, put t out -- how much was in the first quarter and in april we put out $15 billion or so net. and into stocks. i like that. i'd have been even happier in the first quarter or if we'd built a $50 billion business but you don't want money to burn a hole in your pocket either if we buy a business, we buy it

to keep. the business doesn't know. it doesn't adapt itself to what i make >> for the rest of us seeing you sit on $100 billion, we think that you think the market looks expensive and you can't find anything that makes it worth putting your money into. >> we own $170 billion worth of equities we go up every quarter and went up a fair amount in the first quarter. i would rather own the $170 billion we have than cash by a significant margin there are limits how much i can buy of some of these companies that i like. normally we quit at 10%. so if you told me i had a choice

and i couldn't make a change, if you told me i had a choice of owning treasury bills, long-term treasuries, or common equities, i'd buy common equities. i'd do it in a second. we'll get the money. something will happen. >> something will happen meaning a big deal >> it could, yeah. sure i could spend it all tomorrow. $100 billion deal came along that charlie and i really liked, we'd get it done >> you'd get it done by spending it all or by financing part of it >> we might borrow 25 or 30. we might sell some things. we'd get it done if we liked the deal >> there are questions that came from shareholders this weekend and i didn't get a chance to ask you all of the questions some of them said is $20 billion

the amount you still feel comfortable holding? the other is if you've got all this, why don't you put that $100 billion in the s&p index? >> it wouldn't be the dumbest thing in the world but that's a lot to move in and out. no index fund would take it, to start with knowing that we might want to yank it out. $50 billion of it out in a week. so we'd almost have to create our own index fund to do it. >> it wouldn't be hard >> well, it'd be a fair amount i mean, they're better off to do it than we are to buy stocks in proper proportions and that would have been smarter than what we've done i've thought about that some i think it's a little harder to act when you see something later on if you do have to unwind 500

positions. i like to move when i move but net, if you told me over the next 30 years that berkshire would keep its excess funds, we still have $20 billion at least in treasuries. or treasury bills. but if you told me we were going to follow for the excess money, a treasury policy, i would say the index fund policy would work assuming it would get executed reasonably well. >> let's talk about apple. the place where you were spending the bulk of that cash that you were in the first quarter. $12 billion that $13 billion you put in that's on top of the i think $28 billion you already owned in apple as of the end of the year. >> yeah. >> that's a big chunk of that $170 billion it's the biggest stock that you

own by far it already was before you bought these additional shares. 75 million shares. why? >> well, i should say in the past, plenty of times when a single stock was a bigger proportion of our total net worth. in terms of recent times well, it was a company i liked, a business i liked very much and we could buy a lot of it there are some others that are much smaller companies, we just can't buy that much. i might like them equally as well but i can't put as much money in it. but i clearly like apple and we buy up about 5% of the company i'd love to own 100% of it but that's the test. would you like to own 100% of a company? if you're going to buy 5%. we're not buying a stock when we buy apple. we're buying 5% of a business. we buy 100% of some businesses

when they're publicly held, we buy 5% we bring the same thinking to it and we like very much the economics of their activities and we like very much the management and the way they think and the way they act >> andrew? >> one of the other questions, warren, we didn't get a question to ask over the weekend was one about usg. this is a transaction you've been involved in you've historically avoided what are described as hostile takeovers. this one is a little tricky because this case of usg, you effectively backed a company that is trying to effectively take over usg. can you talk about that a little bit? >> yeah. we bought usg first 18 years ago. we made a substantial investment in 2006 the company went into

bankruptcy twice and the company faced huge asbestos claims. we backstopped single handedly a one for one stock offer. we backed with a billion six or a billion seven. this company comes out of bankruptcy having a one for one offering and then two years later in 2008 when the crisis hit, also hit housing. the company found itself needing money again. and we put up $300 million of the $400 million they needed at that time. and 18 years from the time we bought the first stock and 12 years from the time we bank rolled the company from coming out of bankruptcy, we never received a dividend of the stock

at $40 has been selling for less than that. and in general, the earnings estimates, the new products and that sort of thing, you know, have fallen short. that happens with companies we own too. business can be tough. but when they received an offer from another company that also had been an 18-year-old shareholder and perfectly responsible building materials company that actually competes with our company, they made an offer. the company did not -- we own 30% of usg the company did not call and say what do you think of this offer or anything of the sort. they just called afterwards and said that their board had unanimously decided that it wasn't in our interests to negotiate with them or anything. and like i said, we own 30% of the company. then the company made a second

offer. the german company kanaff. and again, they were turned down with no negotiation or anything of the sort. so we really felt the directors who were probably very fine people, i don't know them, but felt they did not represent our interest we saud we intended to vote against them at the annual meeting. we don't have a candidate of our own or anything like that, but we just think directors are there to represent shareholders. we did not feel they were certainly representing us with a 30% interest since then, the two proxy advising organizations have said that they think -- they recommend a vote against these directors as well. and now the company said it's going to negotiate with kanaff so that's -- that is the

situation. that's the first time i think in the 53 years i've been at berkshire that we voted against. withheld our vote at coca-cola a few years ago because of a compensation plan. we voted a time or two against individual issues maybe on stock on options or something of the sort but it's a question of whether the stockholders should determine what they think the value of the company is. all i know is that for 18 years, it's not worked out that well. management has been more optimistic than subsequent events we thought they should sit down and negotiate. >> warren, another question that came up from a lot of shareholders, we covered it some in the question and answers period on saturday but i thought maybe you could go into a little more detail on it. just the idea of consumer

packaged goods companies like coca-cola which hit a 52-week low last month even though the company came in with better than expected earnings on issues and a company like kraft heinz which is down about 35% over the last 12 months versus thes&p being up 11% it has a lot of people thinking consumer packaged goods don't have as bright of a future i think giorgio had said he felt like at a milking conference what do you think? >> if you've got a brand, if you look at the return on tangible assets, coca-cola or a kraft heinz or anything, you've got a very good business it doesn't look as good as it did five or ten years ago. there's two reasons, i think, for that one is people are -- seem to me to be a little more willing to experiment with different diets or foods than we were five years

ago. >> people would say healthy diets. where they won't eat things that are packaged it's a millennial attitude too they won't buy some of the old brands >> i think it may even extend i don't millennials to some degree they've gotten used to more change in their life in general. so i would say that there's still a huge loyalty factor. but it is not as strong as it was five or ten or twenty years ago. and secondly, there's always been a struggle between the retailer and the brand look that's billed into the american market system. and i would say that the retailers -- and they've always had private label brands the private label brands are priced below the big brands.

the retailer, every time a retailer meets up with a packaged goods salesperson arguing for lower prices and better deals i would say their hand becomes stronger as the costcos and the walmarts and in other countries, as they become stronger. the struggle can go one way or the other. i think a few years ago i think costco dropped coca-cola and that's a real test and of course sam's club at that time started pouring it on with more coke and everything coca-cola is a pretty strong brand. so costco could decide to do that if costco decided to drop a lot of other brands that you could name, they decided to drop them. the packaged good company might feel it more than the retailer

would feel it and they would come to terms faster it's an interesting dynamic. and it's gone somewhat against the package goods company. still very good businesses >> is that dynamic between the retailer and the packaged goods companies, that a pendulum swing that swings back >> i hope so not necessarily, no. you've got these german discounters coming over here now. each company's got some muscle if you've been selling -- whether it's coca-cola or whatever food you may have eaten as a kid or something like that, you want the consumer. you've got to win with the consumer in the end. you've got to have a product that's strong enough that the retailer has to carry it to some degree and where they're private labeled does not draw volume away and if you take heinz ketchup. it's hard to take share away

from heinz ketchup but i could name other products where it's easier to take share away and the consumer is going -- the consumer votes every day some things are affecting the consumer like feeling like other things are healthier or the sort price affects the consumer but just the prevalence of strength of retailer can affect the consumer too >> is that why there's so much pressure for some of these packaged goods companies to get bigger i'm going to take and wrap up with a lot of products then i have heft against the retailers if they try and jerk me around >> if coca-cola were to buy -- they've got the world's greatest distribution system. so they can push liquids through that i don't know whether they could push cream of wheat or something through their distribution obviously a great distribution system is worth an enormous amount like i said, coca-cola has a great one. and coca-cola incidentally,

they're selling 5% more liquids. they are selling a hundred ounces of liquids per capita in the whole world. 7 billion people are drinking coca-cola products and at the rate of a hundred ounces a year. that's substantial leaves a lot of ounces to go, but they are selling more ounces of liquid. they've got more brands now. but they are selling more than they've ever sold. and it grows by year and james quincy is doing a sensational job on that. first quarter showed it. but the -- if you've got a brand that's kind of lost out there or something of the sort, it's hard to get shelf space the retailer is going to stock what will move and sometimes that involves price. what you wand to have is a product the retailer has to have >> there are a lot of subjects that drew some controversy and

got a lot of headlines from this weekend. including some back and forth between you and charlie and then elon musk. we're going to talk about that in just a moment but i think we need to take a break. joe and andrew, we will send it back to you in the studio and we'll have more in a moment. >> all right, becky. you got a "wall street journal" out there, too, beck >> i have one right here what do you want me to look at >> you may have already seen this neil ferguson piece it echoes some of the stuff that warren was saying about this china skirmish >> oh, here it is. all right. i'm giving it to him right now so he can take a look at it. he'll read up on it and be prepared >> excellent like mr. buffett, i think they think that it's something that because of the changing relationship we have and things have changed since chimerica actually came about. china's done well. they need to come into the real

world and maybe we're not wrong to be doing it this way. that's the thurust of the piece. >> that's a good tease too we can talk more about that. >> i want warren's comments on that we'll have more from becky and warren buffett on the other side of the break in the meantime, let's get you caught up on the markets we had katy stockton on last thursday she was saying still thought the trend would reassert itself positively and suddenly on thursday we were down 400 points, well below 24,000 but it closed up five that day and another positive session suddenly we're about 700 points above the worst levels after she was on as it did reassert itself. the futures up about a hundred on the dow jones nasdaq up 45 and we're watching oil this morning. saudis reportedly want $80 they'd like $80. they seem to be getting their way this time around the 10-year note, still below

3% 2. 2.96% when i looked earlier this morning. we'll have more "squawk box" coming up in a minute with investing legend warren buffett when we return what do advisors look for in an etf? don't just track an index, help me meet a client's need. is the fund built to sell or built to last? etfs are only part of a portfolio. so make it easy to explain. give me a quality fund that helps me get clients closer to their goals. flexshares etfs are designed and managed around investor objectives.

so you can advise with confidence. before investing, consider the fund's investment objectives, risks, charges and expenses. go to flexshares.com for a prospectus containing this information. read it carefully. yourbut as you get older,thing. it naturally begins to change, causing a lack of sharpness, or even trouble with recall. thankfully, the breakthrough in prevagen helps your brain and actually improves memory. the secret is an ingredient originally discovered... in jellyfish. in clinical trials, prevagen has been shown to improve short-term memory. prevagen. the name to remember. no one thought much of itm at all.l people said it just made a mess until exxonmobil scientists put it to the test. they thought someday it could become fuel and power our cars wouldn't that be cool?

and that's why exxonmobil scientists think it's not small at all. energy lives here. us. it's what this country is made of. but right now, our bond is fraying. how do we get back to "us"? the y fills the gaps. and bridges our divides. donate to your local y today. because where there's a y, there's an us. ♪

good morning, everybody. welcome back to omaha, nebraska, where we are live with berkshire hathaway's ceo warren buffett coming off the 53rd annual shareholders meeting thank you for being here >> glad to be here >> one thing i've been holding off to get your comments on is elon musk. elon musk was brought into the conversation this weekend at the shareholders meeting by a question i forgot who asked it. one of the shareholders, maybe bringing up this idea -- maybe it was andrew. somebody brought up the competitive advantage in modes

elon musk recently said he thinks they're stupid. >> i wish he'd give me his >> and that became a subject where charlie weighed in and said, yes, he's right that actual motes around castles are stupid he responded this weekend with some tweets saying i'm starting a candy company and it's going to be amazing. it occurred to me the plot of willy wonka is messed up okay, okay, just for the sake of argument what do you wish for in candy? cryptocandy. then i'm going to build a mote and fill it with candy berkshire hathaway kryptonite. i'm killing me lol. what do you think about all of this >> if you look at the leading candy bars, for example, for the last 50 years, i think you'll find snickers on top then you've got m&m's. you've got two types

but i think they're number two and four hersheys in there at number three. i can't take them on i don't think elon can take them on you know, they have motes. when you go into a drugstore, a 7-eleven or something and say i would like a snickers bar and the owner says i've got something. the mush bar at 10 cents off the snickers you say give me the snickers if he doesn't give it to you, you go across the street and buy the snickers brands are motes, obviously. and if you try to -- this product is sell iing to hundred of millions of people. richard branson tried virgin

cola in the united states 15 or 20 years ago millions of others have been tried. so i don't really have the same urge to produce automobiles that he apparently has to produce candy. but i don't suggest that he takes on snickers. >> you're taking me literally and stepping away from the real story here which is the war of words between you and charlie and elon do you even know elon musk >> i've never said anything negative about elon. you're baiting me to do it >> i am. >> people like his car and everything, but somebody mentioned now he's financing i thought i heard that >> andrew just read some headlines where it looked like tesla may be going back to market and to pick up some additional financing i'm not sure all i heard was the headline >> that's what i call a counterrevelation. i think it was just a few days

ago they said they wouldn't need financing. but, you know, he's trying something to improve a product and i salute him for that. and the american public will decide whether it's to assess. it's not easy. it's probably easier to develop a new car than to compete with snickers but some products have terrific moats. there's just certain things you are not much inclined to be dissatisfied with and seek -- and i would say incidentally that the iphone, you know, has a terrific moat. people that have an iphone or maybe have some other phone. they want to continue with the product that they've got -- they want the new version it's just easier for them. they learned how to do everything and their life's built around it and all of that. moats are very useful. costco has a moat in people's mind amazon can raise the price of

prime 20% and you can't do that unless you've built something within that image of the amazon prime. then you can raise prices $20. but if you're selling some commodity product, you can't do that you need a moat. >> you mentioned amazon so let's talk about that. you said over the weekend amazon is one of the shares that you haven't bought that you wished you had. are you ever going to buy shars of amazon? >> it'll probably be tough i've probably got so many psychological problems i didn't do it that it's hard to do it. i -- when i first met jeff, i knew he was an incredible person and he still encloses his 1997 annual report which i read at the time with his current annual report he's an extraordinarily clear thinker as well as being a

brilliant thinker. and then he can execute. it's far surpassed anything i would have dreamt could have been done. because if i really felt it could have been done, i should have bought it i knew he would do the most with whatever idea he had i had no idea that it had the potential. i blew it. >> another stock that you mentioned over the weekend saying you should have known it early on was google. alphabet, the parent company of google because you knew how much they could charge you when it came to geico and -- >> i remember paying them ten bucks or something for every click. ten bucks. and it produced results for us that's why we paid them the money. so i have seen the product work. and i knew the kind of margins this doesn't cost anything and it's very useful i mean, if you're looking up

auto insurance on geico, you've got an interest in auto insurance. very directed way of talking to people so the real question in my mind, i'd seen all of this to before i used to play bridge on all of this and what i didn't know was whether there'd be more entrance i didn't know enough to know about technology to know whether this was the one that would stop the competitive race and all of that but i should have done google too. >> you say that silicon valley and a lot of the things that happen there, it's not your field of expertise but you've been around and seen how a lot of things happen particularly with how washington can have an impact the reason shares of apple were down earlier this year was in part because of the iphone but probably also in part because the fang stocks were under pressure what do you think broadly about some of these regulatory issues, some of these privacy issues or do you even consider it

>> i think about that. but basically, i like good news that -- bad news that isn't going to last. and i'm saying that as one of them but bad headlines don't bother me i had bad headlines when i bought that stock two or three months after pearl harbor. but i am not worried about -- we made the most money when there's been temporary bad news over time got to be sure it isn't permanent or something of the sort but if people get excessively worse about, you know, people changing their tastes and what they drink, they're going to drink 64 ounces of something or other. and carbonated soft drinks have lost share -- they gained share just steadily for i don't know how many years practically forever. but bad news does not scare me >> just to put a finer point on that, though, the regulatory issues concerning the fang

stocks, you think that's a temporary headline where maybe there's much adieu about nothing here or you're not sure >> regulatory issues on which? >> on facebook -- >> that's important. that's important i mean, "60 minutes" had two different ones back on october 8th and a couple weeks ago that illustrated -- been appointed the head of their committee for 2020 and it's a very interesting episode. they really knew how to target everybody in the country basically. with things that would appeal directly to them it could suppress moats. i mean, they -- facebook

embedded that there. so it's a very, very important issue. i think congress has just begun to scratch the surface of it. >> what's different with what the trump campaign did than what the obama campaign did four years earlier when they were using facebook and were seen as technology wizards for figuring it out >> they took a first step. i don't blame anybody for doing it but the -- my guess is they thought they were doing it as well in the democratic campaign in 2016 as the republicans were. but the republicans were technologically -- >> advanced. >> and obama was advanced for 2012 the trick is to convince people but also to get your vote out and then the trick which is really tricky is very counterdemocratic is to suppress the other guy's vote >> and that's what you think will make congress pay more attention? >> a lot of things in privacy

will people impersonate me. >> joe does it very well >> well, he's doing it to a sophisticated audience in your case but if somebody impersonates me on some website and says something i say, it may be all over the world it isn't me. this has brought a lot of important issues out we're just in the early stages >> okay. we're going to talk more about this and many other things we'll send it right now, though, back to joe and andrew in the studio >> okay, becky we'll come back to you in just a little bit we have that question from alex ohanian we have to ask at some point in just a little bit but we will get back to them in omaha, get their thoughts on china and whether or not a trade war is on the horizon. and don't forget today we are introducing the warren buffett archive. the largest collection of buffett speaking about business, investing, money, and life

includes 25 full annual meetings going all the way back to 1994 highlight reel for each. plus cnbc interviews, buffett timeline, and berkshire portfolio tracker. be sure to check it out. buffett.cnbc.com it is very cool. meur iju ax" retnsn st mont ve man, mr. stevens. your testimony will save lives. mr. stevens? this is your new name. this is your new house. and a perfectly inconspicuous suv. you must become invisible. [hero] i'll take my chances. people don't invest in stocks and bonds. they don't invest in alternatives or municipal strategies. what people really invest in is what they hope to get out of life. but helping them get there means you can't approach investing from just one point of view.

because it's only when you collaborate and cross-pollinate many points of view that something wonderful can happen. those people might just get what they want out of life. or they could get even more. what they want out of life. don't juggle your home life and work life without it. ♪ ♪ don't skip that office meeting for a board meeting without it. don't keep it real... keep it going... or simply keep it in the family without it. and don't turn that business trip, into an overdue family trip without it. ♪ ♪ the more you live between life and business, the more you need someone at your back. the powerful backing of american express. don't live life without it. it starthen a decisionussion, and now you're working toward something together. can you afford it? is it the right time? yes. and you feel good about it.

because you're doing this for him in return for everything he's always done for you. at pnc, we're here to help you take steps today to make a plan to borrow and stick with it. bienvenido a casa, papá. pnc. make today the day. kevin, meet yourkeviner. kevin kevin kevin kevin kevin kevin kevin kevin kevin trusted advice for life. kevin, how's your mom? life well planned. see what a raymond james financial advisor can do for you.

♪ good morning, again, everybody. we are live from omaha, nebraska, the site of the berkshire hathaway annual meeting. our special guest is warren buffett. so many things we've talked about this morning and over the weekend, one issue is just the economy. i know you said last week it's picked up steam. what numbers do you see, what are the things that run there u your head in determining the berkshire economic index >> yeah. i see a lot of numbers

and i get them pretty fast i mean, in general it's pretty strong you could look at railroad cart loadings, for example, every week they come out on wednesday and you could see them by category 22 different categories. i think matt rose may have mentioned that the other day and they're carrying stuff because people are buying stuff. and you see it -- and you're seeing some inflation connect with some of this. but you see it in some building material we've seen it particularly in electronic components. we have an operation most people probably don't even know anything about called tti. and it carries close to a million different types or any one of a million items from us

they're very small people buy them because they're using them we have a hard time filling orders in that business. that kept getting strong er we're seeing pretty good business most places >> the jobs number on friday had some people speculating they can't get much lower in terms of an unemployment rate that it's hard to find bodies to fill the jobs that are opening do you experience that >> that's absolutely true. we have a lot of jobs. if you would want to be a carpet installer, you could make very good money because there's a shortage of people that know how to do carpet we could teach you to do it, takes awhile but it's a good job. and our home builders, of the housing operation. we have a site bill operation as

they call them we're in denver and austin, texas, various places. we have a hard time getting people for certain of the construction trades. and again, we're actually funding a school in denver we probably have other participants doing it just to teach people jobs that can pay them $50,000 or $60,000 a year employment is tight in some areas. there's no question about it >> what do you do? do you end up having to pay more than $60,000 a year? >> well, the market system in the end if a resource is scarce whether it's human or otherwise, resource is scarce, and we are see i seeing prices moving in some areas and

resistance to those prices in recent months. this is not -- this isn't an explosion of world war 12 scaiie scarcity. >> you wonder when the fed would see the potential act against. there are so many people who are trying to figure that out. >> and i see all these figures i don't change one thing i ever do in terms of buying -- i've never changed an activity based on a headline in my life that i can remember or an editorial opinion or even the facts we get i'm aware of them. we're going to own the company a year from now or five years from now. and i've got a responsibility in terms of these figures i'm trying to steer them to some degree >> but i may not have affected or impacted the decision on

whether or not you were going to buy a business, but it does impact your evaluation expectations in terms of looking at stocks versus bonds or stocks versus something else. you've told us on this program that inflation acts as a weight on stock valuations. when interest rates are so low -- >> it should push up interest rates over time. it's very easy talking about having a 2% goal but it's another thing to keep it from going once it starts in either direction, it's -- we don't know how well that'll work >> let's talk about something that joe alluded to earlier. and that's china and trade not just with china, with mexico, nafta, other things happening. but our delegation just returned from china over this weekend this is steven mnuchin, the treasury secretary, wilbur ross, lighthizer, all of them coming

back now we have to wait and see. we have to figure out if trump's tough talk will start paying dividends and improve trade relrel relations or if it leads us potentially into a trade war what do you think happens? by the way, here's a tweet from the president. i believe this was friday night. our high level delegation is on its way back from china where they had long meetings with chinese leaders and business representatives. we will be meeting tomorrow to determine the results but it's hard for china in they have become very spoiled with u.s. trade wins >> yeah, well, the answer is i don't think we will have trade wars of significance we will have trade movements but in terms of the old fashioned thought of a trade war where you just keep piling it on, i don't think that happens it's counter to the interest of us, it's counter to the interest of china, it's counter to the interest of every country in the world. we would not have the economy

nor would china or the rest of the world have the economic well being without a lot of trade and incidentally in 1970, we exported and imported exactly the same amount. it was about 5% of gdp so our exports have grown to 11% and a fraction of gdp. which is a huge number now but the imports -- there's about a three-point gap or thereabouts. there will always be people trying to get edges of all of that but in the end, china and the united states have a common interest in something very big and we have a less than common interest in some things. we will -- the world will not do something stupid over time in trade. >> joe, did you want to jump in here i know this is an issue you've been following very closely. i would. just a little. i mean, i think warren probably read this piece, but it is amazing when this alliance or

whatever you want to call it between china and the united states started back in 2001, it was a different world. and china really was supplying cheap labor and cheap goods. and we were benefitting from that with low inflation. kept our interest rates low. the ferguson article points out china is looking more and more like us in terms of their economy and consumers and everything else. and at this point, it only makes sense that the trade deficit has to come down and that's something that's not -- you know, it's not unrealistic for the united states to be asking for that at this point and china shouldn't be shocked that -- and should probably make some concessions warren, last week we went back and forth. we said china has more to lose, china said we have more to lose. we went back and forth with that rhetoric but the simple fact remains i think right now 4% of china's exports go to united states.

less than 1% of our exports go to china so, i mean, we can affect them much more significantly than they can affect us it's not too much to ask for them to -- for the trade deficit to go down even though most economists say you shouldn't look at it that way. it's only fair and bilateral trade. >> i think it was in 2003, joe, i wrote a article for fortune about the trade deficit. i was worried about it getting too large then because again, it was getting to be 3% or so of gdp it wasn't specificto china at all, but it was a question of how wise it is to let the trade deficit grow larger and larger because when you -- when you are in effect buying more from other countries than they're buying from you, you are handing them investment funds i mean, it's the nature. you give them little pieces of paper and they canconvert that into buying government bonds, buildings here japanese bought pebble beach in

the 1980s when they were running a big surplus. so you are giving up claim checks on our country, essentially, in exchange for having more consumption now than you're producing in this country. so i do think there's levels of trade deficit that bother me i had some that did not make it country specific but i think the world has gotten better and better and there's no question that countries may try and take advantage in this or that and we've actually been guilty of that sometimes in the past too. i don't think leaders in other countries whether china or a hundred other countries are not smart enough to realize that it's in the interest to keep promoting trade. the more we trade over time. and we don't want it to be a question of where we import 20% of our gdp and we export

nothing. now, we could all quit working and we could hand little pieces of paper to the rest of the world and they could keep sending us food and autos and all kinds of things. but eventually they have claims on all our wealth. so we do want to have policies where the overall trade deficit is not getting out of hand in relation to gdp. and i've been arguing that for a long, long time. >> guys, i'm going to take a break right now. we were going to keep going. we have both bill gates and charlie munger who are going to join us at the top of the hour and charlie munger is here early. so we're going to take a break so we can bring him right over and we'll have more coming up with these two in just a few moments. guys are ready to kill me because i'm called an audible. but i want him on set if he's here so right now we'll take a quick break. when we come back, we'll be joined by charlie munger, the vice chairman of berkshire hathaway

stick around we'll be right back.

there's nothing small about your business. with dell small business technology advisors you get the one-on-one partnership you need to grow your business. the dell vostro 15 laptop. contact a dell advisor today.

good morning, again, everybody. welcome back to omaha, nebraska, where we have been live the last two hours with warren buffett. the chairman and ceo of berkshire hathaway we are joined now by berkshire's vice chairman charlie munger who's sitting down and joining us thank you so much for being with us today i really appreciate you being here >> well, i'm delighted to be here >> let's talk about this between the two of you -- >> i'm delighted to be anywhere. >> between the two of you, you have 181 years of experience and you've been doing this annual meeting for 53 years. i thought we could take a minute or two for both of you to reflect on these meetings, how

they've evolved over time and what it is that you enjoy so much about setting with each other. charlie, what do you think >> it's my hometown where i was raised and of course i like the company and i like the shareholders and this like the festival everybody's having a good time and we're celebrating values as well as ourselves. and so of course i like it >> what's it like sitting next to charlie on the stage? >> i always learn something. and i certainly get surprised. and charlie and i, we worked in the same grocery store less than four miles from here we didn't work at the same time so we didn't know each other until 20 years later but we -- we've got an extremely good partnership and business is more fun, just as life is more fun with a good personal partner and to have a great business

partner. you know, it's just -- we've accomplished more, but we've also had way more fun. and charlie and i -- and this is true we disagree on a lot of things not that many, but some. we've never had an argument in the entire time we've known each other. which is almost 60 years now >> what's one thing that charlie's done for you a decision, an arena, something about your life that you listened to charlie and you're better off for it? >> charlie has given me the ultimate gift that a person can give to somebody else. he's made me a better person than i otherwise would have been that's the most you can do for somebody else. i've listened to him not too many people i listen to, but charlie, you know, he's given me a lot of good advice over time. and i may hate to take it to a certain degree sometimes, but my decisions have been better

i've lived a better life because of charlie >> charlie, has warren done anything for you >> he talked me out of leaving law practice which turned out to be a good idea everybody's done a lot for everybody else at berkshire. that's why everybody likes it. i don't think all these people would come just to celebrate making a lot of money. they're here to celebrate, i'd say a set of values. it's like the catholic -- >> how so? >> it never changes, for one thing. >> and usually has old guys in charge. >> has old white males in charge, absolutely >> we're seeing a wisdom of that more and more as we go along charlie was practicing law i said it's okay as a hobby, but forget it.

>> he was right. took him awhile to convince me but i'm a slow learner sometimes. >> people wonder how long you guys can keep doing this charlie, you're 94 warren, you're 87. but you made it look pretty easy up there on stage. >> it is easy, actually, at this point. some day it won't be it's as easy now as ever you didn't see me enter the race that took place over the weekend or anything of the sort. but this job doesn't really require hand/eye coordination or stamina or anything. just sit at a desk and you apply things that you learned 70 or 60 years ago. but it's the perfect guy, the perfect job for somebody that wants to be working at 80 or 90. >> you mentioned that you have had disagreements in ways of

thinking over the years. what's the biggest thing that either of you can remember disagreeing on even though it wasn't a fight or didn't get into anything where's an area one of you thought you should do something and the other didn't want to or vice versa >> i wanted berkshire to buy the french stake in costco when the french left. >> what year was that? >> that was a long time ago. >> i was playing at a bridge tournament they called me out of this thing which is very bad at bridge tournaments. and charlie is saying basically saying the french in a retailing firm there had a 15% block or something like that. charlie says shut your eyes and buy it >> he said i'm going to shut my eyes and say no. >> i should have bought it >> you should have bought it >> absolutely. in fact, i can't really -- i can hardly think of anything charlie has recommended that i do that shouldn't have been done i would do more things than charlie would. but that's partly because i'm there, you know, eight hours a

day or something i've got a little more inkri nation toward action and charlie wants to really wait for the fat pitch. i mean, he wants -- he would be very happy hitting ten home runs in the final game of the world series in life and have that be it and that's the right way to proceed. but i like a little more action. >> all right the billionaires keep showing up bill gates is here we're going to have more from this berkshire summit in just a moment billionaire summit fresh from berkshire hathaway's annual meeting, warren buffett, his long-time investment partner charlie munger, and microsoft founder bill gates join us live in omaha nearly $200 billion of wealth together for one hour. a special presentation of "squawk box" begins right now. ♪

welcome back to "squawk box" here on cnbc live from the nasdaq market site in times square i'm joe kernen along with andrew ross sorkin. becky is in omaha. big hour coming up of billionaire summit in omaha. charlie munger and bill gates will join becky alongside warren buffett live that's coming up in just a moment first, though, a quick check on the markets. we've been right around triple digits on the dow either just above or just below. up now about 92 on the dow up about 10 on the s&p 500 and the nasdaq indicating up 41 points the 10-year has been under 3% for a few sessions now

2.96% at this point. i don't know if it's okay to add up three guys how much they're worth. that's not what it's about, right? >> it's not about money. >> when you get up in the morning, do you put on -- i still put on pants one pant leg at a time. >> one pant leg at a time. these guys do too. >> find out. i don't know maybe they don't maybe they're able to get on a ladder and jump in or something. >> i assure you they do. >> they do >> we want to get back to becky who is in omaha this morning and she has three now very special guests >> six pant legs six legs >> my guess is they put their pants on the same way you do, j joe. let's get to our billionaire summit joining us now is bill gates charlie munger is the vice chair of berkshire hathaway. and still with us today, warren buffett. gentlemen, welcome

thank you all for being here this morning >> thanks for having us. >> i was trying to figure out how to get into these conversations with the three of you. it's always difficult. the three of you are brilliant thinkers it can be intimidating but i was thinking over the years the times we sat down. you are all very similar in a lot of ways. you're analytical thinkers, voracious readers, and you're all people who think knowledge is the ultimate quest. you want to figure out how the world works. but it occurs to me part of the reasons you're friends is not just what you share in common. but sometimes you have differing opinions on these things and you probably like to challenge each other on these issues i thought maybe we could tease out some of those issues this morning where you may not see eye to eye exactly on things i'm going to throw up some areas this morning and see where you agree and where you differ i'll start with the idea of the markets. this is where we started with

warren at 6:00 a.m. eastern. just the idea where the markets are right now. are they fairly valued are they expensive is it hard to find things that you like bill, why don't we start with you? since you're just sitting down with us. warren pointed out it looks expensive to him on private deals that come along. you're a big investor too. what do you think when you look at the market today? >> in terms of absolutely returns, you've got the 10-year around 3%. so that's your risk-free rate in dollars. so expecting to make a lot more than 3% on things either you're being smarter than everybody else or you're -- so our returns are predicted to be lower over these next ten years than they've been in most ten-year periods. >> absolute returns on stocks >> on all asset classes.

the t-bill sets the rules, the strength of gravity. so if you ask investors, they agree just as state pension plans have 7.5% to 8%. that's an unrealistic expectation which makes those deficits a little worse. actually, quite a bit worse than they appear on paper >> charlie, what do you think? >> i agree with bill >> you have nothing further to add? >> i have nothing further to add. except one thing i think berkshire is going to do a little better. >> bill, you agree with that too? >> oh, absolutely. >> so what does berkshire do that gives it that advantage >> we're less crazy. we just -- there are certain bad habits we don't have >> such as

>> there are a million ways to be irrational. while we're irrational pretty often, we're less often irrational than most people. that really helps. >> our bad habits are not financial. >> i don't suppose you want to go into any detail all right. let's talk a bit about the dabbling you all may do. you each have your own money aside from berkshire money that you look and invest. charlie, i know you've looked to china a lot of times when you start looking at places that you like >> the munger family has invested in china substantially. >> since when and why? >> since about 14 years ago. and i did it because i respected the man who was going to do the investing. it all looked inexpensive to me and the companies looked very

strong to me and of course it's worked out. i've done way better than i had any right to expect. >> does it still look that way when you look to the chinese markets? >> the best companies in china are cheaper than the best companies in the united states >> the concern other investors might have before they follow in that way is they don't know that much about chinese companies -- >> they're just generally afraid of china. >> is there a reason that they may have -- i mean, you have people who are guiding you that understand china well. if someone was trying to do this on their own, would it be a little more dangerous? >> sure. it really helps to understand the country you're operating in. of course. >> all right that's a stupid question moment. you would not necessarily advise others to do this, is my point, for investors sitting at home watching >> i don't think itwould be al that hard for any smart person to find four or five great companies in china to invest in. >> bill, how about you when you look around, what areas are catching your fancy?

i know of things you've done in the past, areas where you've gotten into currency markets or other things but what captures your attention now? >> well, my tech investing is almost entirely the microsoft stock. i think in terms of things that will have super high returns, there are tech stocks that are undervalued. you're just going to get very high variants out of tech stocks because you have some markets where the winner ends up getting a substantial profit pool. because i don't have to have a conflict with microsoft, i don't invest in other tech stocks. but i create a fantasy portfolio to see if my predictive power is good or not. you know, outside of that, i have a team of people who invest and are quite diversified. they have a fair amount in

china. china looks quite attractive >> who's on your fantasy technology league? >> i probably shouldn't talk about that i mean, there's some that are still private like airbnb which, you know, at a fair valuation that's a strong one. >> why >> they serve businesses globally so the reputation they have, you can't just go into one city like you might for ride sharing and just compete in that one city. here you have to have global reputation and inventory so it makes challenging that leader position far more difficult. >> i mean, i've always kind of thought of airbnb and the ride services as having some of the similar risks in terms of local regulations that could get in the way with things.

does that not concern you with an airbnb? >> absolutely. but they're city by city they get to deal with that the competitive dynamics for the ride services versus the airbnb is different in airbnb's favor >> i won't ask you for your entire list of fantasy technology companies because you already told me you wouldn't tell me, but is apple on that list with berkshire plowing so much money into it >> well, apple's an amazing company and the multiple's not gigantic you know, it's not like a tech speculative money where it's still losing money or anything so, you know, i think warren's applied great thinking there the top tech companies do have a very strong --

>> i guess when you described this company, the reason you like apple is not reasons that are technology-based reasons you think of it as a consumer goods company. >> it's the consumer behavior with the product what they do with it, how it becomes part of their lives and all that sort of thing that i observe and primarily reason from bill would know it before i would. but it has a position in consumers' minds that is -- and the utility to them that's very, very, very useful. it's an incredible ecosystem that they have found ways to profit more from as they've gone along. i should mention that both of these fellows have done way better with their non-berkshire

holdings than i have >> warren, you.n you don't even have an iphone >> a fellow sent me a x the other day, but i haven't -- i'm not using it yet very nice fellow i think he pretended he was writing to his 3-year-old child. he wrote me this nice letter on what to do with it it wouldn't bite me or anything like that. i'm getting up my courage here one of these days i'll move. >> charlie, do you have an iphone zblo >> of course not >> what do you think of apple? >> i'vey e my adding machine. >> what do you think of apple? >> i wished we owned more of it. >> why >> i think we've been a little too restrained >> $43 billion is not enough >> no. >> what do you like about the company? >> well, i like the fact that

it's reasonably priced and strong that's a very desirable combination. and the management, yes. very intelligent management. >> let me sask you, charlie, about some comments you made over the weekend that people paid attention to. my twitter feed lit up when i tweeted about some of them specifically when you started talking about bitcoin as turds >> i'm surprised that attracted any attention. >> why did you equate the two? >> well, bitcoin is worthless artificial gold which if it succeeded facilitated a lot of illicit activity now, that is not something i think the world needs. and the fact it's clever computer science doesn't mean that it should be widely used

and that respectable people should encourage other people to speculate in it. bitcoin reminds me of oscar wilde's definition of the pursuit of the uneatable by the unspeakable. >> well, it sounds better than what he used before. >> we asked earlier, charlie, andrew brought it up with warren -- >> i think it's a scum ball. does that serve you better >> thank you we asked earlier about goldman sachs getting into the business of having a trading desk for bitcoin. berkshire hathaway owns about $200 million of goldman sachs. does it bother you or not surprise you >> well, i don't expect every investment bank to agree with everything i think they have a lot of animal spirits in investment banking. >> bill, charlie and warren have weighed in on bitcoin. do you own any >> somebody gave me some for my

birthday and then a few years later i thought, hey, i'm going to sell that so no. there's some really good technology in terms of sharing data bases and verifying transactions that is talked about as blockchain. that is a good thing bitcoin and icos, i agree completely it's one of the crazier speculative things where it's not as an asset class you're not producing anything 37 and so you shouldn't expect it to go up it's kind of a pure greater fool theory type investment so, you know, i agree i would chart it if there was an easy way to do it >> one interesting thing, if people react when you criticize

their investment, if they get mad, they're gambling. if somebody criticizes apple or berkshire, we like it. i mean, if the stock goes down, we'll buy more of it because it's -- we don't care whether -- it's just, we don't feel it has anything to do with it but if we criticize something they own because they only want it to go up tomorrow, they feel we are hurting them then they get upset about it if they really like what they own, what difference could it make you know if i criticize their wife or something, they don't get all upset about it >> wait a minute that's a bad habit >> yeah. probably not the perfect example to use >> in terms of privacy issues, we spoke with warren about this earlier. what's happened in silicon valley, privacy issues surrounding facebook and twitter and google and apple and how

that has kind of weighed on those fang stocks has a lot of people looking toward washington wondering if there would be regulation that comes down and looking towards the european union where regulation is coming this month bill, you've dealt with regulatory close scrutiny in the past is this something you think is likely to have an impact on silicon valley will the regulators come will it make it tougher for these companies to follow their business models? >> well, privacy's a super important issue. but i do think that the big companies, they'll be able to handle it. people don't mind having a little demographic information about them used to target ads. that's value added to the user there are issues about medical records or the content of your communications that are very private. one challenge of the privacy

laws is making sure small companies can still get involved in the ad market these rules could block lots of new companies. so i think the challenge of privacy can be met the challenge of what gets published on a platform, hate speech, free speech, fake news, and what you allow people to get outraged about and what you should do, every government has a view so making sure the government takes responsibility for those rules, i think that's one of the toughest things for any platform where people are expressing opinions that's a separate issue and i think the harder of the two. >> you mean acting as a publisher rather than a bulletin board. going back to compuserve >> right and they'll always view that in

retrospect it's a realtime system with millions of people writing things those judgment calls, you need some standards of the government not a private corporation to make those calls >> charlie, what do you think? >> well, i think we always use television ads to flog the idiots of each party to the polls and to sell them in a misleading way and we're just shifting the misleading ads to a different medium i do think it works other. in other words, i think the facebook thing it's really good at flogging angry idiots to the polls. i think that changes the equation >> changes the equation meaning you think it -- >> it has an effect on politics. >> it has an effect on politics and will bring in regulation >> i don't -- i think there

won't be regulation. it's hard to control people that want to be silly about politics >> andrew has a question too andrew >> i was just going to ask bill, but everybody can weigh in on this, given the ownership of geico maybe you have some insight into it as well warren and charlie. autonomous vehicles. you were talking about technology and even elon musk with tesla when you look at the cars that are in the car market that's out there, do you see in terms of technology any of them doing better than the other? and what do you think of tesla as an investment itself? >> bill? >> i don't want to weigh in on tesla. >> yeah, tesla's making a great product. they have a very high valuation and they will experience all the automakers coming in and competing with them. so it's not like some tech markets that the leader gets all

that market share. it's going to be a tougher thing. the move to autonomous and electric are proceeding in parallel if you take a 15-year time frame, it's going to be a very, very dramatic change you know, i tend to be optimistic about technology adoption and i think worldwide there's a lot of cities that want to be the thirst to get in with these cheap autonomous services so it's exciting and the other car companies now have been forced to have strategies for electric cars and autonomous some have very impressive plans. >> warren, what does -- go ahead, andrew. >> i was just going to say are there lower insurance rates, talking about geicgeico, for a a or the new cadillac that has some sort of semiautonomous driving? some of these new features that allow the computer to drive a little bit more than the human

>> yeah. presumably any cars that catch on big are going to be safer and a safer car is going to bring lower insurance rates. there's a modest offset to that in terms of collision activity, the damage is done to a car in terms of a bumper or a side rearview mirror or something costs far more it's a much more complex product. so the damage per accident not human damage but physical damage to the car, that will probably go up substantially. but the number of accidents won't -- you won't see widespread adoption unless they're safer. and we want a safer car. so net it will be bad for the auto insurance industry over time if autonomous cars become a big part of the fleet.

>> bill just mentioned that over the next 15 years you are going to see some significant changes. is that the time frame that geico is looking at too? >> we don't know what it'll be you've got 260 million cars on the road let's just say that 10% of the people putting up autonomous cars in a year now you're talking about 1.8 million out of the 10 million. there's a whole luf cycle and all that but what does better for the consumer will prevail over time. and that's good for the american public it's very hard to tell who the winner will be there won't -- it was hard under the conventional car to pick out which would be the company that was doing the best early that's why charlie and i have talked about the auto industry forever. so it's very hard to pick winners. and it'll be hard to pick winners five years from now. nobody's going to own the market >> i am amazed at how good

almost all the cars are. with all those mechanisms and electricity scattered through. you can buy a car and drive it ten years with practically no trouble. it's an amazing achievement. >> i mean, you were big on the electric vehicles, too, with byd. >> you got to remember in china you couldn't breathe the air in the cities so i thought they might end up with more electric cars wasn't a very difficult idea >> let's talk a little bit about berkshire overall. and some of the changes that we've seen this year ajit jain and greg named >> it was easier to start with but 5% i didn't like, i just said, oh, those are your responsibilities that's the way i selected what the responsibilities would be. charlie can tell you, it's

changed our lives very little but all for the better it's been very, very good for berkshire and even better for me >> charlie, you were a proponent of this. >> it was hardly -- you can hardly find two people who have done better in their jobs. very outstanding people. the truth is we were too late. >> bill, i know succession is a common hor constant topic with the rest of the board members. what does the board think about this these positionings and now they're both board members, too, what does that mean from board perspective? >> it's exciting to have two highly energetic super capable people helping out warren. and now as board members i've gotten to know both of them for over ten years

i'm amazed at what they bring. they understand the berkshire culture because they've been inside it and have benefitted from it. so it's great news >> there are people who are wondering if this was creating a horse race for a successor i heard ron olson's knocking down that idea over the weekend. how would you respond to that? >> no, it's not a horse race for being the successor. that's not a good way to characterize it. >> what is the good way to characterize it? >> that the number of businesses that report to warren, it's a pretty unbelievable number to have gone from one person with all those businesses reporting to him to three people so the company's not adding, you know, a lot of staff, you know, under greg and under ajit. you just have three great business minds managing over 50

business entities. so it's still one of the leanest management structures you've ever seen. if you draw it out as a chart, you have to have one of the widest pieces of paper ever even with the three now berkshire's still very, very unique >> all right folks, we are going to have more of this conversation with warren buffett, charlie munger, and ll gbiates we will be back with more from omaha, nebraska, right after this because, when you really, really want to be there, but you can't. at cognizant, we're helping today's leading media companies create more immersive ways to experience entertainment with new digital systems and technologies.

get ready, because we're helping leading companies see it- and see it through-with digital.

♪ welcome back to a special edition of "squawk box." we are live in omaha, nebraska and we are joined by bill gates, cofounder of microsoft and berkshire hathaway shareholder, charlie munger the vice chairman of berkshire hathaway and warren buffett. i thought we might take this next half hour and go broader. all three of you have big ideas about the world and how to fix it you have spend a considerable amount of money and time on projects to try to find ways to move beyond.

and you all happen to know a lot about so many different things one of the issues that's been so much in the headlines over the last six months or so has been berkshire's move to go along with jpmorgan and amazon to try to come up with a way to rein in health care costs and inflation in the united states warren, we've talked to you about this but haven't got the chance to talk with bill and charlie about this for those who don't know it, charlie for the last 31 years has been the chairman of the board at good samaritan hospital in los angeles so he knows an awful lot about health care. bill gates has worked tirelessly when it comes to health care issues around the globe. the gates foundation has invested $12 billion in global health initiatives jest over the last five years. for anybody wondering about your credentials on this, there they are. why don't we start with you, bill what do you think about the idea of trying to tackle health care cost inflation and how that might be tackled in the united states

is this something that could get traction >> i think other than improving the education system, making sure the health care costs don't continue to go up so rapidly is the biggest issue. if you look at state governments, over time they've had to shift money away from education and infrastructure into the various health care expenses and so it's a problem for the government it's a problem for business. so any effort to take a look at this system and how we use the latest technology to make it more efficient, to reward the low cost providers so they gain market share, i think that's fantastic. i've studied it a lot. i don't think it's an easy thing to fix but it's fantastic that the three companies are going to

work together. to the degree they succeed, there are hundreds of companies that would love to join in but first they've got to hire some people and it's got to come into focus >> charlie, let's just talk about how fixable you think this problem is do you see a lot of rampant waste when it comes to these issues at least from your perspective at the hospital? >> rampant waste is a good phrase, of course. our system is shot through with rampant waste. and a lot of the medical care we do deliver is wrong. and so expensive and wrong is ridiculous a lot of our medical providers artificially prolong death so they can make more money i regard that as deeply immoral. and there's a lot of it. and so i think the first time the democrats control all three branches of government, we will get single payer medicine.

i think it's so bad people will reach out for a complete change forced by the government to have a young person have a $5,000 deductible when he has a baby, that's not insurance anymore. it's some strategy to make it better for an insurance company. but it's not really medical insurance. the whole system is shot through with defects and of course i welcome the fact that berkshire is trying to make it a little be rt in some ways >> if you could fix it, how would you go about doing it? are there obvious ways of trying to -- >> it's very hard to get to a system like singapore's which costs about 20% of what our system does and works better from where we are now. we will never get there, in my opinion. in a big, rich nation like ours. but we can have a better system than we have now >> would universal health care be the answer?

you think that's what -- >> well, there are many defects in universal health care, but universal health care with an opt out which they have in all of the other nations, it's a perfectly reasonable system and it exists everywhere else so i'm not frightened of it >> universal health care with an opt out. being universal health care rich people pay for and get a different level of care? >> sure. even in singapore if you want a better hospital room, you don't get a better snunurse or doctoru you'll get a better room there's nothing wrong with this. >> andrew has a question >> it's for warren warren, historically you've allowed the managers at berkshire to run their groups autonomously and impose different programs from headquarters i'm curious when you do implement the health care program with amazon and jpmorgan, whether it will be voluntary for the managers to effectively choose to be part of

it or whether it'll be something that they're going to have to do >> well, "a," it'll -- i may not be around when that takes place. this is an extraordinarily difficult project. i think it might be reasonable to make something here and there. but we're really hoping that something that has gone from 5% of gdp to 18% of gdp and keeps moving, we can do something about it you know, it's -- we have not picked an easy task. you have $3.3 trillion or something like that spent on the health care system every dollar just like in government, every dollar has -- h has a defender i think it's important it be tried. what i would tell our managers and i've told our managers, that

we will never -- we will not be coming up with something that hurts them in terms of the care they receive if we come up with any kind of an improved product, i can guarantee no one will have the stuff it down their throat and we will have people join us. but it is really an uphill climb. and -- but we should be doing it >> you said over the weekend that you hope to have a ceo named for this new initiative between the three companies in the next couple of months. >> yes. >> has it been narrowed down significantly? >> yeah. it's down to a very few. it's by far the most important decision we'll make. there's no way -- it's -- we've got plenty of people that want the job, but it is an extraordinarily difficult job. you have to be plenty knowledgeable about the system

but you have to be able to get your mind beyond it and you have to understand who your opponents will be. you have to understand public opinion. and you have to -- you know, you could bargain down costs in some areas 1% or 2% but we really hope we can find the perfect person in terms of being able to make a real decision there's some history in terms of what happened. >> when rockefeller totally revolutionized american health care for the better, he went after the low hanging fruit. he went after the quacks and so forth. and my guess is that berkshire will find some low hanging fruit. >> if you had to guess where that low hanging fruit would be -- >> i don't want to say >> okay. >> we'll whisper it to our new ceo though. >> speaking of the new ceo, i

know this is something todd combs is heading up, but charlie and bill have you had any input into what should happen with this who the new ceo should be? >> well, todd's a great learner and he and i have brainstormed about what health care looks like, but not specifically on who gets hired berkshire finds a way to optimize its health care costs versus the entire u.s. health care system. and access versus cost are duh two different things if you add access, unless you're very careful, like a universal coverage, it will actually drive up costs pretty dramatically >> and potentially lower standards or lower what access people get >> right so when vermont costed out what universal care would cost, even

the proponents were stunned at the cost so we have to perform two miracles we have to get better access in america and get the cost down. >> probably couple of others we don't know about the goal is not to reduce berkshire's costs. and we will have a ceo and i hope i would expect within a couple of months we will need a remarkable individual that person will have to also have a number of remarkable people who wish to join the person that's one of the things, you have to have somebody that does attract other talent and so on so nothing's going to happen fast except we do want to get the ceo placed it's not going to turn the whole

system upside down but you want somebody that thinks about where you want to be in five years and figures out a path >> the person has to be an expert in health care but from which arena? whatever arena they're coming from becomes -- >> yeah. talk to somebody that works in a hospital for 20 years, they think everything is a problem but the hospital it's just the way it is. >> right let's talk a little bit more broadly about some of the issues that we're seeing today. earlier we spoke with warren about trade issues particularly with china with our delegation just coming back from china. but trade has been a big issue when it comes to nafta, when it comes to our trade agreements around the world and the strategy from the trump administration has been a little different than what we've seen from previous administrations. maybe now we're going to find out if it works or not we're at that point. charlie, what do you think about whether or not we're going to wind up in trade wars or whether you think we get better trade agreements as a result >> i'm pretty optimistic about

china and the united states working together it would be insane for them not to work together and not to develop a trusting, constructive relationship and i have no reason to think that that won't happen >> bill? >> i agree, although i would say the u.s. is making that a bit challenging right at the moment. in terms of predictability and stability and finding the right approach we're all big believers and the large benefits of trade and so the fact that the sentiments have turned against it, do you need to do more to help those who aren't hurt by trade politically, it's impressive that free trade was not supported by either candidate. >> you mean in the u.s.

election. >> exactly >> right it may be the blowback after what happened in 2008 and 2009 people who felt they got left behind and haven't caught up with others. i'm not sure how else to handle that what the right way about going to do that would have been but bill, you're somebody who has to go from nation to nation, country to country and through the foundation and your work there. kind of hope everyone can work together has it gotten tougher to do that or is it the same as it was before >> well, the most important relationship in the world is between the united states and china. and you can imagine lots of win/win things with trade, with innovation, with helping to drive stability for the world. we're countries with very different histories, very different governments. so you watch even in these last

few months the sparks fly. but i think logic will prevail our foundation has worked a lot with the chinese government. you know, we're excited they're becoming a bigger aid donor. so even for the work we do to help poor countries, having this relationship be strong would be very, very helpful >> bill and melinda, as well, have actually done very big and important things in terms of getting countries to work together in the health field they have brought the world closer together in terms of attack i attacking particularly vaccines but a number of things to do with health. and over time, that sort of thing will prevail in the world. i mean, when people see something working and their lives getting better and you mentioned the problem of the prosperi prosperity if countries get far more

prosper, they should figure out a way all of the citizenry participate in some ways you want to keep the market system, does wonders and all of that but you have seen you can look at what bull and ill and melinde done it's a tremendous achievement. >> you all have been incredibly philanthropic. you've given billions and billions of dollars away if you had to look and find one arena, one topic, one place that you think it's underserved, aside from what you're doing with your own money, the foundation money, is there an area you would look and say hey here's another thing that needs additional funding it's overlooked and it's deserving. bill, what do you think? >> well, there's so many important causes out there we picked global health and education. by sort of specializing in those, you can do a good job

but the needs are really vast. some philanthropists are working in the u.s. justice system to deal with the inequities there we do some work on poverty but there are many others who have different cuts on that. you know, the beauty of philanthropy is you're taking on, you know, these social goals that are very, very difficult tto achieve in showing how toot do better job but there's so many causes i encourage other people to do so philanthropy. we hope they'll pick one of these unmet areas and get a passion for it and bring their same skills they had in business because that's huge value added even beyond the money. >> you're talking about through

the giving pledge. >> ideally through the giving pledge we set and talk to people about philanthropy and most of those people do end up joining the pledge. >> charlie, how about you? what areas -- >> better drugs and devices have the advantage. they work almost automatically the one i see that will change the world is the new iud is a huge thing to human civilization it's just sweeping and it's going to change life. and the beauty of that, didn't require any government, didn't require any pompous bureaucracy. it spreads automatically i love that kind of thing. and of course i like the vaccinations think of the good that it does to do the vaccinations and of course if you vaccinate and i don't, it doesn't work as well naturally the nations cooperate.

but bill's going to get more cooperation than warren is >> because >> because people agree with bill they're not going to like it at all. >> very quickly before we go to warren on this, can you give us an update on where polio stands right now speaking of the vaccinations >> we have two countries that we haven't gotten rid of polio. it's pakistan and afghanistan. we're making sure it doesn't travel to other parts of the world. so we have to keep the vaccination rates up and we're doing a better job getting out to all the children in those two countries so with luck, this could be the last year with cases, but it's very tough you know, it's every morning i get up and say what does the case count look like and we sample the sewage to see if there's any polio being

transmitted. so we're very close, but zero is the magic number if you miss it, you have to go another year so we've got our fingers crossed. >> the reason you sample sewer sample is because -- >> amazingly if a kid has polio and they're in that city, if you look in the sewage, there's so many viruses out of even a single kid, that we can detect it and we can see which virus it's like so we can understand where it came from so that's actually our best tool is that we politely say environmental sampling >> you can see why i delegate philanthropy my urge to sample sewage is -- i have no urge to sample sewage. bill gets excited about it >> bill gates has a huge advantage. nobody's in favor of paralysis and a lot of people are in favor

of medical practice as counterproductive. >> it's not a slam dunk for the vaccinations you've had trouble with some cultures who don't like you coming in there and some vaccination workers who have goo big trouble, too >> you have rumors about vaccinations, even in the u.s., like is this good for the people you have to constantly remind people how beneficial it is. and every once in a while when the cover traits go down, you will get lots of measles or pertussis coming in. so people who really understand want this and progress has been phenomenal, but we have to create demand as well as supply to meet our goals. >> warren, i want to come back to you in terms of finding a cause that you think is important that you hope somebody else will spend some time on

>> well, i think the number one problem of mankind is weapons of mass destruction since 1945, how somebody with bad intent or some organization with bad intent, the knowledge is there of how to kill millions of people. and in some cases, the intent might be there, the materials have been hard in the case of nuclear to some extent, and now you have added cyber to the equation so i consider that the number one problem of mankind i don't know how to use money to fight it, particularly, but then i believe in women having the right to decide what to do with their bodies and that's been advanced very

considerably, but there's still a lot of work to be done there i believe the number one problem beyond weapons of mass destruction, i would say it is to figure out how to maintain all the benefits of a market system, which works wondrously in creating more output all the time and, at the same time, make sure that people that are really not very consistent very well, still live decent lives. and we've got to resources to do it and we've made a lot of progress on it, social security was progress, i made, we take better care of our young than old but we don't, we haven't figured out the way to take very good care of somebody that just doesn't fit into the market system that is a perfectly accident system. and the rich society should solve that one >> andrea has a question as well andrew >> i don't have a serious question i hopefully have a fun question

for the bunch. this came in over the weekend from the guy who was in the audience he was the ceo of rerkddit the husband of serena william ls it's a famous question on reddit in the ask me anything sessions they do. a bit of a logic training question so the question is this, and i don't know if you have heard it, would you want to battle a one horse-sized duck or a hundred duck-sized horses? and there's huge debate on the internet about what the right answer is to this question >> well, you have gone to the wrong place to find the answer i'll go out and buy a bunch of ducks that meet the test and horses that meet the test and have a real life illustration.

but bill probably knows the answer already >> i think warren knows more about it than i do >> you all are voracious readers. and the general asemily asked you about what you have been reading. what makes it this year? >> the top would be a book called "factphomous. when we talk about the news and where we are going -- >> charlie >> i read a book by a chinese

economist who had worked in the world bank and his general idea was that we had learned better how to help a poor nation develop. there was a lot of stupidity in the early days when we give some very poor and backward nation -- i think this economist was right. there's a lot right in the world. >> warren, have you been reading anything to catch your attention? >> i'm always recommending chapter 8 "the intelligence investor" that stays up there among the top sellers for years. but in that same spirit, i would recommend reading chapter 4 there are reasons to be optimistic about the world in that chapter.

>> what does it focus in on? >> yeah, tell them the name of the book. >> it is called "progressive phobias. and the book is called "enlightenment now." it's another book that talks about the progress we have made. and how we can learn from the places we have made faster progress it came out of the work he did in his previous book where he saw that violence was going down now he has looked to a lot of other things like workplace safety and happiness and it's a more serious read than a lot of books, but really fantastic. >> we have spoken a little bit with charlie and warren about what they have learned from each other. i'll ask each of you as we're wrapping up this hour, what you have learned from berkshire broadly as board members, as people who have traveled together, who work together, who have fun together and spend time

together just what it has meant over the years. i'll go to your bill, because you have not weighed in on this yet. something you have learned from charlie or bar rehn warren or t at large. >> well, the whole approach to thinking logically, thinking long-term, it's been an incredible education and totally shaped how i think about things. the fact that then there's this incredible set of people, including charlie and the managers that i've gotten exposed to, we have in our second board meeting a bunch of managers come in and talk about the businesses and it's one of the most fun times of the year because you're about very different businesses in the competitive dynamics and how technology affects them and how a system where you have these great long-term thinkers with very high integrity or dealing with the challenges.

so in my whole business education, it started the day i met warren and the berkshire team has helped to keep it going at full speed. >> warren? >> well, it's very important in life to associate with people that are better than you are and it is the most important decision you will go in the direction of the people that you associate with and you'll get ideas from them and you'll see how their behavior works and all that sort of thing and then most important, usually in that respect, is your spouse. but it's enormously important among your friends to have people that you admire and have a lot of fun with. and you will move in the direction of better behavior and with both bill and charlie, i have learned a lot and had an enormous lot of fun. but i would pick up on their

ideas. and that has been a very good thing. >> charlie, i would like to have you have the last word today on that topic >> well, i said to the berkshire managers this year as i looked out over the crowd, the nice thing about this room is that we would all feel pretty safe just delivering or children to almost anybody at random selected from the group. you couldn't say that at most places there's a horse race for something or other we have an admirable bunch of people and we have less bureaucracy than anybody so that is not a small achievement. i don't think think of a single company of our size that has less bureaucracy than we do. >> did you set out to do that at the beginning? >> well, we always hated bureaucracy. so i would say, in a sense, yes. wouldn't you say, warren >> yeah, absolutely.

we both -- >> we both hated it. >> and we had the ability, we were fortunate, we could create the company to some extent that we wanted to have. and i've always said, it's crazy to be a painter painting something at the end that is not the painting you wanted to have. and berkshire is a sort of painting we have not walked into some huge organization to have to crawl through the progressions and the politics and we have created what we wanted to create. >> i don't think we can fix a big bureaucracy. we can create something that didn't become a big bureaucracy, but we couldn't fix one already bureaucratic. >> charlie, warren, bill, i want to thank all three of you for your time. folks, that does it for us today. make sure to join us tomorrow. right now it's time for "squawk on the street. ♪