jobs in wall street and they were going to employ only jews. >> on his name was ben graham but his real name was -- >> ben grossbalm. >> my son is name 56d ben and he is very glad he changed his name. >> so you moved back for a while to nebraska. then ultimately changed his mind and you went to work for ben graham. >> i kept pestering him. >> in those years what did you aspire to do? what did you aspire to become a wealthy person, did you want to buy stocks, companies? >> i loved just analyzing securities. i spent hours and hours. i kept turning the pages of moody's, instead, you had no internet or anything, you had two sources, moody's and standard & poor's. and we happened to have these sets of moody's, about 8,000

pages. about five manuals. and i went through those page by page. >> must have been exciting. >> yeah. it's a little strange. you know, i actually went to amazon a few years ago and found an old 1951 moody's. everybody else is going there for play boy but i'm ordering the old moody's. a strange guy here. >> working in new york you were attracted to one of the companies that ben graham was with, geico, i understand that you came down and knocked on the door. you started talking with them. >> yeah. it was really a lucky day. i was at the columbia university library and i looked up who is who in america and had a bunch of things but said chairman, government employees insurance company. so i asked the librarian how can i learn more. i had never taken courses in insurance. he said there is this manual. there was one page on government

employees insurance. that saturday i got on the first train, and i came down to washington and i went to the headquarters of what was then called government employees insurance. and to my total surprise the place was locked. them didn't work -- people in washington didn't seem to work on saturday. i kept pounding on the door. a janitor came and i said to the janitor, i said is there anybody i can talk to except you? he didn't seem to get offended to that introduction so he said there is a fellow on i think the sixth floor. he's the only one here. he was norbert davidson and he changed my life. he was a wonderful man. he talked with me for maybe four hours and gave me an education like i never got in school. >> so you liked it so much you bought the company. >> one of those -- yeah. it took a few years. >> when you were starting your investment partnership i think you started around 1956 with a partnership. >> correct.

>> and as i understand it, if somebody put $10,000 in, in 1956, and stayed with you and kept stock they could have gotten, that $10,000 would be worth $500 million. >> that's about right. >> wow. >> those people are grateful to you who did that. >> i was grateful to them. they were betting on a 25-year-old who looked about 20 and acted about 12. and actually, they were mostly relatives. my father-in-law and sister and her husband, my aunt. >> so your investment partnership, you started buying companies and stocks. one of the companies you bought was berkshire hathoway, though your sp kp is famous that was not one of your best investments. >> it was really dumb. it was what i call -- i used to call graham's approach on buying

cheap stocks that weren't good companies cigar butts. like walking down the street and finding a cigar butt there was one puff left in. it didn't cost anything. i thought berkshire hathoway was that kind of a company. it wasn't much of a puff either. >> so your company is named berkshire hathoway, you sold that many years ago. did you think of changing the name? >> no. i don't do much of that. >> so when you started, originally you were buying stocks, but then you started buying companies. was that a different skill set? how did you learn to buy and operate these? >> when i buy 100 shares of xyz i look at it as buying the whole company. so i've always looked at buying stocks as buying businesses so it wasn't a different situation. i couldn't resell it and i couldn't -- if i owned the stock i couldn't change management which i could if i owned the

company but it was basically the same approach. i'm a better investor because i'm a business person and i'm a better business person because i'm an investor. they cross over. >> berkshire hathoway has how many companies? >> about 75 but some of those own more companies. >> so 75 companies, you have about -- >> 270,000 employees. >> how do you manage? you have a small office. how many people do you have managing this? >> we're up to 24. we're on one floor. we're never going to leave one floor. i tell them hire all the people you want but we never leave one floor. if you want people on your lap go to it. >> you sit in your office looking at new ideas for companies? is that how you spend your time? >> i like to read a lot. i read newspapers and all kinds of financial information and basically i'm looking for one good idea a year. >> and do people send you letters over the transup.

>> occasionally but not often. i only need one a year. we're in june, incidentally, if you want to help me out. >> we have a couple of companies we'd like to sell to you. you don't pay high prices. so, in your office do you have a computer? >> not in my office but other people in the office have them. >> so i know you're not a famous technology person but do you have an ipad or you do -- >> no. >> internet things? >> i do internet things. i love the internet. the internet, it's fascinating to me because it's probably affected my life, you know, almost as much as, say, bill gates. we have -- when bill and i appear together sometimes we use a trick question of aside from e-mail which one of us is on the computer more. and the answer is me. >> because you play bridge. >> i play bridge on the internet. >> every night? >> yeah. a couple hours a night. >> after all of these years are

you a champion? >> no. not even close. i just have a good time. it's the most interesting game i found. >> people know that they are playing with you? >> i use the name t-bone. it's gotten around. i used to put my age as 103 so when i did something dumb so they would say for a guy 103 he's not bad. >> so you met over the years bill gates. >> right. >> how did you first meet bill? >> i met him on july 5, 1991. meg greenfield some of the people here probably knew had a house out on bainbridge island. she'd call me and said warren, i love seattle, do i have enough money to buy a second place. i said meg, anybody that calls me to ask. she bought this house and she wanted to show to the me in 1991. so actually, kay graham, i, rollie evans, maybe one or two

others went out there and visited meg and meg knew the senior gates so she called up bill senior and mary gates and said i've got this crew out here. could we drop down. mary said fine. mary called up bill and said warren buffett is coming down. would you like to come. he said hell no. what do i have in common with that guy. he doesn't understand technology. he's hopeless. mary was very determined and said you know, you're going to come, bill so. they negotiated a while. finally they got down to where he said he would come for an hour and 27 minutes or something. he came down and we hit it off. we're still talking 10 hours later and became friends. >> he never convinced you to buy microsoft stock. >> he tried to get me to use a computer. >> that work? >> eventually. when i learned to play bridge on it i got interested. i still don't understand what happens with it though. >> i thought he said i'll get

the most beautiful woman working at microsoft. >> that's what he did. he was engaged to her. pla malinda. >> did he influence your views on investments or philanthropy? >> i wouldn't say too much. we have a group of maybe 50 people started getting together in 1968, we immediate every other year. don graham was here. >> the buffett group. >> at those meetings we would talk about various subjects and philanthropy was important so i think it was maybe in 1993 or something like that we had a meeting. i think it was in ireland at that time. actually brought along the gospel of wealth for everybody to read. we discussed it then. our thinking sort of evolved together in a way. >> have you ever regretted not getting involved in giving away

money earlier in your life? >> my wife, she thought -- she liked the idea. we both agreed on giving away all the money. once we had everything we wanted, we've had everything we wanted. you know, the surplus wealth i have, has no utility to me. it has to the rest of the world if used properly. we agreed early. she would have liked the idea of giving away more of it earlier, and i felt that i was going to be a better compounding machine than most places, and that there would abwhole lot more to give away later on. i told her i'll pile it up and you unpile it. >> all right. now, your father was a conservative republican congressman. you were probably a liberal democrat. is that fair? >> yeah. but i was -- i was very conservative. >> you were conservative or when he was alive. then later moved further to the left and would you -- it's fair to say you are a liberal democrat now? >> yeah. i'm not a card carrying

democrat. i support some republicans. this year agave money to a republican congressman. >> you have become famous recently in washington for among other things the buffett rule, which says that people, i guess tax rates should be at least as high as their secretaries. >> in terms of the aggregate of pay roll and income taxes. i couldn't get a disease named after me so i had to settle for a tax. >> any of your friends suggested that you compensate your secretary in capital gains kind of thing so she could pay a lower rate? >> she has been suggesting that lately. she's always on the phone with some tax adviser now. the interesting thing is people speculated about how much money she made. but the tax rate actually above $106,000 for most people goes down if you take the aggregate. because the payroll tax is the most regressive and quits at that point so actually between

106 and 200 in most cases the rate would go down. >> your financial accumin is pretty well known. we have 15.5 trillion debt and one trillion a year or so adding up. what would you do if you were able to wave a wand and fix our deficit problem? >> i think i would do what everybody in this room would do. i mean, if you ask everybody here, how much the federal government should be raising annually over the next 10 years, the answers would come in somewhere between 18 1/2 and 19 1/2% which is close to what has been the situation since world war ii. how much the government should be spending probably at 21%. and you can have a 2 percentage point deficit relative to gdp, and the debt to gdp will not grow.

it probably will shrink a touch so you skran a couple percent deficit. i would take the plan, the 90% of the people here would come up to get to the 19% of revenue or 21%. it can be simpson-bowles, a bunch of things. and no one's going to agree 100%. but i think we do agree on the fact that we probably should be raising 18 1/2 to 19% and spend twog 1 or thereabouts and that means getting more from taxes and cutting exspends turs. and the problem is that the democrats don't want to talk about what expenditures to cut and the republicans don't want to talk about increasing revenue. >> would be in favor of increasing the capital gains tax? >> yeah, i would be in favor of that. but we can come to -- we're raising we'll say you know, 2.4, 2.5 trillion now. we have to raise probably 3 or 400 billion more than that. that can be done.

we've done it straight through. i've operated under all kinds of tax rates including 39.5% on capital gains. our country works. but somebody has to step up and say -- it won't come from -- just talking about reform doesn't solve anything on the expenditure or the revenue side. you have to get specific. like i said, i would i'll bet if everybody in this room designed a plan i could sign on to 90% of them. >> today, the economy in the united states is thought to be growing about 2.5% a year. do you agree, you think there is a chance of a recession in the near term? >> i think it's very low unless -- unless events in europe develop in some way that spill over here big time. but incidentally, if the economy grows 2% a year and population grows 1% a year that means each generation is living 20% better than the generation before and means in a century people are living three times as well as

they lived at the start of the century. so i mean, our rates of gain in the way people live have been dramatic. i was born in 1930. there are six times the real gdp per capita as when i was born. six times in one person's lifetime. we have a system that works. i mean, and it will keep working. may not work six times for the next 80 years but it will be 2 1/2 times or three times. >> are you worried about the euro going away, you think europe would allow the euro to go away? >> that's the big question. lincoln said that a house divided cannot stand and half slave half free wouldn't work. they are half in and half out. in on the common currency and not on common culture or labor practices. and that house will fall. but that doesn't mean it has to. it means that they have to -- they have to reconcile some of these things. cannot be half slave half free.

>> now, you invest most of your money i guess in the united states. >> yeah. >> have you increasingly been investing outside the emerging markets or not as comfortable. >> i'm comfortable any place i understand the business and some extent the rules and where i have the right management. we'll buy a business in one of 40 countries tomorrow if it's the right kind of business. but most businesses i hear about are in the united states. they think of berkshire here, we're on the radar here. >> i understand that somebody from israel sent you a letter over the transom, 1 1/2 pages and you bought that company, that person was talking about for 4 plus billion. >> 80% for 4 billion. he wanted me to see it. he told me what a wonderful plant he had. i said i don't go to iowa you know as far as that's concerned. he said no, you never have seen a plant like this. i said i love your business, i love you, i'll give you $4

billion but i'm not going to go. i got to start crossing oceans or anything crazy like that. he said if you buy the business, will you come. and i said yes. so we bought the business, and then i went to israel. it was everything he said. i said yeah, i said if i had seen this i would have paid you more money. that's why i don't visit businesses. >> what about china? >> we have -- i was sitting in 2002 or 2003 reading a report of petro china and it was fortunate it was in english. i put about $500 million into petro china. the government of china owned about 90%. we owned 1.3%. between the two of us we controlled the company. and we made quite a bit of money. it was a very, very cheap company. a huge oil company and the company was selling for $35 billion in the market and that was ridiculous.

>> one ever your famous investments is coca-cola. you bought it relatively cheaply. >> it's very good for you everybody. i don't care if you drink it. just pour it on your neighbor. open the can. >> when you were a boy you were addicted i was told to pepsi. how did you switch to coke? >> well, i would like to say of course that i just finally grew up. but i was a kid, pepsi was 12 ounces for a nickel. and coke was 6 1/2 ounces for a nickel. if you have any insight into my personality you know which i bought. >> so, of the investments you made over the years which one would you say was the single best investment. one that you really are most proud of? >> well, the one i'm probably the most emotionally attached to is geico because of -- a bunch of reasons but goes back to a day in january of 1951, a saturday, and that -- what

norman davidson did for me changed my life. i walked in there some 20-year-old kid on a saturday and he spent four hours educating me. then he became a friend for life. and then subsequent people, jack burn and tony eisley, it's just a wonderful association. whether we made money or not. we've done pretty well on the investment too. but beyond that, it has a special meaning to me. >> are there investments that you wish you had never done? what's your worst investment? >> i played a lot of terrible deals. the worst -- it's hard -- probably the worst is one i make in the future. the current, i bought a company, and i did it. we do not have power points around or people explaining this stuff to me. i go out and do them. we bought a company called extra shoe. george mitchell knows the come. we paid $400 million for it

which went to zero but we paid 400 million in stock. the stock we gave up is we gave up is probably worth $3 billion or $4 billion today. whenever berkshire goes down, i feel better about that deal. >> what about the deals you passed on? you famously passed on intel when it was getting started, i thought. >> yeah. i knew bob pretty well. we bought the converts when they were private, because of bob. we bought them at grinnell college and the endowment went from $8 million to a billion dollars in about 12 or 14 years, so and intel was in on that. in the end, i don't worry about things i don't understand. i mean, i think it was tom watson sr. said, i'm not genius but i'm smart in spots and i stay around those spots, and there's a lot to that. knowing your circle of competence is where that perimeter is, is enormously

important, and the fact that there is always kinds of things i can't do and plenty of companies i can't analyze, but i don't have to worry about that. >> with all the companies you bought, maybe the one that brought you the most trouble was salamon. when you bought it, at one point in bankruptcy and you had to go run the company. was that the most difficult experience in berkshire hathaway? >> i would say it was. there ceo five months, four days. it was 20 years ago and i think i remember every day of it. >> today when you have all these managers running 75 different companies, do they call you every day say i got this problem or that problem? how often do you talk to them? >> if they need to call me, they're in trouble. we buy businesses where the managers come with them, and there are some managers that i don't talk to want year and there's one i talk to almost every day, but -- after the one that i talk to almost every day, the next most, highest

frequency, maybe once a week. they always call me. i don't call them. >> now, when want to make an investment, you have a board of directors. do you ever ask them, i've heard that you will buy a railroad for 30-some billion and not tell your board of directors? >> i told a few of them. that was an exception. that i told them. no. part of -- part of why we're able to make deals is because we can act fast. they know we have the money. they know we'll do the deal. we closed on october 6, 2008, on a $6.5 million investment in wrigley in conjunction with mars, and they knew we would have the $6.5 million and close on it. people weren't closing on anything. so it's -- it's a real advantage to be able to pull the trigger, and one -- and we have to go through lots of presentations and everything. i mean, i've been on 19

corporate boards and, you know, every deal works on the power point. so -- it's a show-and-tell-type thing and i don't really participate in it. >> recently it wcame out in a course that an investment you made in goldman. it came out that you had set the deal and you told the investment banker, this is the deal, and they had to get back to you, but you said, don't call for a few hours, because you're going to darp dairy queen with your grandchildren and didn't want to be disturbed on a deal? >> i knew what i would do, and told them what i would do and if they wanted to do it, that's fine. if they didn't want to, that's fine. we don't negotiate at berkshire. i don't have enough time to spend the rest of my life negotiating. i'll tell them what i'll do. if it works, fine. if it doesn't work, fine. >> famously, people wonder who will be your successor and i wonder if tonight you wanted to give us any insights into that?

>> well, i have left the directors a ouija board and plan to keep in contact with them. [ laughter ] i don't want to disappoint you, but you're not on the short list, david. [ applause ] >> can i be on the long list? >> we're in perfect shape for it, though. i will say that. we've got successors that in most ways are better than i am. >> but you expect berkshire will be around 20, 30, 40 years? >> it's built on being forever. it has a special culture. it has directors committed as managers. we have an organization that would reject anybody that tried to tamper with that culture. is special and it can stay special. >> so today having achieved all that you've achieved you've got the admiration of virtually everybody in the world for what you've done what kind of

motivates you to keep going? what are your aspirations over the next five years or so? >> i'm having the time of my life. i get to do every day exactly what i like to do with people who i love and who seem to like me pretty well, and it doesn't get any better than that. i tell the students that come to see me, and i have 48 universities come out every year. i tell the students, take the job you would take if you didn't need a job. and i've got the job that i -- i don't need a job, and the i've got that job. >> you're giving away 99% of your wealth. you have three children. seven grandchildren and nine great-grandchildren, and do any of them ever say maybe you could leave some of that to me? or -- >> well, i will leave some of it to them, and one of the things i do is that i don't write a will very often, but wlthen i write will, i give it to my children

first before i sign it. they're the executors, i want two things. i want them to understand exactly what's in it and secondly i want them to agree with it, and if they don't, we talk it out now and figure out what makes sense, and so -- i don't know, every five or six or seven years, whenever i do this, they read it, and sometime there's is something that they don't understand in terms of exactly what their duty it's might be or something of the sort and then in terms of equating, one son that like as farm. a farm he'll get. another daughter that likes particular house, and various ways of equating that in percentages and all of that, and in the end, i think they feel very lucky in life. >> so the average person who doesn't have your investment skills, and they want to not lose their money. would you recommend that they play the stock market jl they buy mutual funds? what do you recommend to the average investors? >> well, playing is -- not a word i would choose. i would recommend that they put

a similar sum than maybe they'den earning as they went along, save something every month and basically put it in an index fund. they are not in a position to make judgment it's on stocks themselves. they're not in the game anymore that i can -- i can prescribe medicine or something of the sort. they dwill get a good result. take the 20th century. dow started at 66 and ended at 11,400. think of that. how can anybody get a bad result starting at 66 and 1 11,400. a lot of people do because they jump in at the wrong time. the average person consistently buying equities to me by far the most investment choice around and put it in, and do that 20, 30 years they'll do very well. >> you don't subscribe to the efficient market here to they says basically you can't beat the stock market? you s

subscribe to the theory that you can? >> well, i still would be delivering papers. i think -- no. i -- i don't think there's any question that certain people who evaluate stocks as businesses can make intelligence decisions about businesses which will enable them to do very well in the securities market, but i don't think somebody that is listening, you know, to a tv channel telling them what to do or somebody jumping around with astronices or even a sales person getting paid for something and getting them to change tomorrow is the key to it. >> now, you gave away, or committed to give away, the bulk of your money to a foundation set up by other people. why did you choose not to just have the money go to a foundation named after you that presumably you would control, and how did that idea come about? >> well, originally, i'd actually planned -- i thought my first wife would outlive me and would give away the money.

so it would have gone a foundation she ran. the idea was to get the money spent pup say, run by other people. but, you know, if you set up a foreign foundation or you set up the carnegie foundation, they're run by other people. just the carnegie didn't know who they would be, henry ford didn't know. they are going to be run by other people if they extend beyond your lifetime and i picked people that i have enormous confidence in the fact they a similar judgment where money should go, and where i thought they would do a first-class job of administering it and in the case of the gates foundation, i get people that are putting up their own money big time, very able people, who are working full-time out of themselves who aren't charging me anything and i have these foundations run by my children that have been wonderful for them. they each have a separate foundation so they can follow their own interests and not have to sort of roll logs as to who votes for this one or that one. e