CNBC Interviewer: Warren, first of all, thank you for sitting down and talking with us today. I appreciate it.
Warren Buffett: It’s always good to sit down.
CNBC Interviewer: The last time we sat down and spoke with you, I guess it was two times ago, in March, when we talked about what you were doing with your charitable giving, you said you were watching and waiting to see what came out about Bill Gates and the Epstein files and what had happened. You said you hadn’t determined what you were going to do. Today you put out a release saying you will be increasing the amount of money you give to the Susan Thompson Buffett Foundation and your three children’s foundations, but there will be nothing given right now to the Gates Foundation. Is that decision…
Warren Buffett: In interpreting that, I would point out that I read a great deal since January 1st in terms of what happened with Bill and Epstein. I read his remarks to Congress given under oath, and I read his cross-examination, and while it’s distasteful, and while he made mistakes, I’ve made mistakes too, hiring all kinds of people, or choosing friends, and then finding out later that they weren’t what I thought they were. So I found nothing in there that was beyond what I could picture myself doing. He ended it, and I’ve had situations where I made mistakes about people, or people felt I made mistakes about me, but life goes on, and no one bats a thousand in the business of choosing people.
CNBC Interviewer: You’re talking about hiring decisions, maybe who you’re associating yourself with. There were certainly some questionable decisions on that that came up in the release of these files, but there was also other personal information.
Warren Buffett: Yeah, and which he admitted to. I’ve known some pretty wonderful people, and I still know some wonderful people. I don’t think they’ve made every decision right.
CNBC Interviewer: So if that’s your opinion on it, why are you no longer giving money to the Gates Foundation?
Warren Buffett: I reevaluated my whole situation. It’s just like I’ve been doing since I was in my 20s. We got married, Susie and I, and we didn’t really have any money, but we did know that we intended to live fine and intended to have a family, though we did not have aspirations of having six houses or a 500 foot yacht or anything of the sort. Even then we talked about what we would do philanthropically. My idea and conviction was that I would compound money at a better rate than society generally, and that Susie would give it away better than 99.9% of the people who were giving it away, and she would get involved personally with the gifts, whereas I like to do things wholesale and she liked to do things retail. So we had a plan, but we didn’t have any money. Over time the money started to pile up, and she would say, “Are we rich yet?” And I would say, “No, but we’re getting closer.” But I was not in a hurry to do anything. We did some small things as we went along. I thought the most important threat to mankind was the nuclear bomb, and I had sort of grandiose plans in my mind about how I could change the probabilities of that happening, and I finally came to the conclusion after decades that I could not have a one hundredth or one thousandth of one percent chance of succeeding in that. It’s nice to bet on long shots, but betting on things that are…
CNBC Interviewer: So you’ve changed your plans. Why did you change your plans?
Warren Buffett: We changed plans because of what I said. The money began to pile up.
CNBC Interviewer: But you changed your plan now. In 2024 you said it was a lifetime pledge to the Gates Foundation. Now in 2026 you’re saying that’s not the case. What happened?
Warren Buffett: What happened was that I gave the Gates Foundation a great deal of money.
CNBC Interviewer: Maybe $47 billion in total.
Warren Buffett: And I thought that was a good decision. I think it was a decent decision. But I did not think my kids were in any way ready to give away vast sums of money. Susan and I started with them, I think we gave them, we may have given them $100,000 each.
CNBC Interviewer: This goes back 30 years at this point or longer?
Warren Buffett: That’s about right. But they were growing children. They had children of their own by that time, but still, I don’t think they were ready for it, and I certainly wanted to treat them all equally. That’s always a problem, if they have unequal talents or something. I can’t turn them all into musicians, and I can’t turn them all into baseball players, or anything. But I really hoped in the charitable field that they would have common goals and be able to work out among themselves a way where, with vast amounts of money, everybody felt there was plenty to do what they wanted to do.
CNBC Interviewer: And you think that’s the case today?
Warren Buffett: The probabilities of that are extraordinarily high. Could something happen to this plan? Of course. I’ve got three children who are 72, 71, and, well, look at my age. Things can happen in this world that cause you to change. But I have no expectation of change. As far as I’m concerned, we’ve reached the ideal point. We lost Susie in 2004, so it’s been more a matter of me stepping up the amounts they receive annually. Clearly they feel happy with the job too. There’s no sense sticking people in a job they aren’t fit for, or that differs totally from your own views. I had different views in life than my dad, who I admired more than anybody in the world, but that didn’t mean I joined his church, or did anything identically, and he encouraged that view. He would quote to me Emerson, who said something to the effect that the force in you is new in nature, meaning you’re one of a kind, find out what that one is. I think I found it very young, by luck, circumstance, and pretty purposeful pursuit myself. My kids did not, they behaved like most kids, they flirted with a lot of different ideas. But I feel one hundred percent now about what I have seen them do. My son Howard just published a hundred page or so report explaining what he’s doing, why he’s doing it, and what it’s costing.
CNBC Interviewer: For the Howard Buffett Foundation.
Warren Buffett: And it’s better than I could write. He has a sense of stewardship, and he also has enormous empathy for people he sees who don’t have it as lucky as he does.
On Trust, Timing, and Treating the Children Equally
CNBC Interviewer: So then is it fair to say 20 years ago, in 2006, when you made this decision, you trusted the Gates Foundation more than your children, and now you trust your children more than the Gates Foundation?
Warren Buffett: No, the amounts were different. It’s not to say that I trusted them differently, but I felt they were capable of handling it. I was certainly not going to turn something over to my kids and then pull it back from them. And the Gates Foundation, as it turned out, earned far more money than they expected to. They spend more money than anybody in the world I can think of.
CNBC Interviewer: Yeah, they have an endowment of north of $90 billion, I think, at this point.
Warren Buffett: Around that figure. And Bill has very substantial resources outside, which he intends to give, and I believe it one hundred percent, I believe that they will go there. I’ve really done the same thing as Bill in a certain sense. Except when I put it in, I tell the three children that it is theirs, and it’s their responsibility to get it done well. And you may find this hard to believe, but it’s true, I’ve never looked at their Form 990s, which they file. I’m not judging each action as it takes place, because you take actions where you think there’s only a 10% or 20% probability of success. It’s not like investments.
CNBC Interviewer: But what are your goals for the money? You kind of intimated that the kids have similar goals to what you have.
Warren Buffett: There are all kinds of ways in which the world is as unequal as you can possibly imagine. Just imagine the luck of birth, health, all those sorts of things. The ultimate goal is to make life better for the people who get short straws. There are a lot more people who get short straws than we’ll ever be able to take care of, and my kids will have more insight into certain areas than I would, and I have more insight than they do, just because of different interests and exposure. But the one thing I’m convinced of is that they will be attempting to do something, and they’ll be better at it. The probability is that they’ve got more years to live than I do. It really sneaks up on you when you get to be in your 70s. But I can’t think of a person in the world under 30, for example, that I would trust to do it. There are all kinds of brilliant people who are 30 or under, and they may turn out to be leaders of society and terribly important writers or whatever it may be, but I do think there’s something to seeing how people behave under different circumstances.
Philanthropic Goals: What the Money Is For
CNBC Interviewer: The kids are going to come under pressure, and probably already have, from a long list of people who think they should fund their ideas. I saw something today on X that Brad Gerstner put out suggesting that you give the money to Trump accounts, that there are other great things to do. What do you say to the lots and lots of people who will say this is where you should put that money, or what do you think they should say?
Warren Buffett: If you take 8 billion people in the world and feel that everybody should have an equal chance, you could spend a thousand dollars or ten thousand dollars trying to solve everybody’s problem. You’re never going to solve everybody’s problems. The idea of solving a societal problem is what I started out thinking with the nuclear weapon. Everybody who worked on a nuclear weapon regretted the fact that they had to put together something like that, the most brilliant people in the world, but they never figured out how to put the genie back in the bottle. And that is not something that society, in the first couple hundred million years, or a couple million years, of existence…
CNBC Interviewer: Do any of those plans, though, like the Trump accounts, appeal to you? Do you think they appeal to the kids? Or do you just leave it to the kids and say they can do what they want?
Warren Buffett: I leave it to the kids, but I do have this provision in my will, not in these gifts I’m giving now, but the bulk of my fortune is likely to be left upon my death, even though I’m stepping up the…
CNBC Interviewer: I will say right now it’s $140 billion that you have left, based on yesterday’s closing stock price, in terms of the Class A shares you have left. If the money you gave out this year is $6 billion…
Warren Buffett: Yeah, it’ll have to go up.
CNBC Interviewer: Right, it’s $17.5 billion at least annually, and that’s assuming Berkshire doesn’t go up from here, if you want this to be given out in eight years.
Warren Buffett: That’s an assumption. It’s an assumption. That is not a realistic assumption. An investment produces nothing beyond that… I get my 5% Treasury bills.
CNBC Interviewer: Right. How much did you have when you started making these donations in 2006? We were talking about less than $100 billion at that point, right? So you’ve given away $67 billion, and now you have $140 billion left to give as of today.
Warren Buffett: That’s one thing I understand. I don’t understand all these other things, but… $17.5 billion, even if it weren’t to go up, is more money than anybody is giving away right now. Did the Gates Foundation give away $8 billion last year?
CNBC Interviewer: Yeah, that’s about right.
Warren Buffett: And they did it employing a few thousand people, which almost any foundation would that had that kind of money. I’m impressed by the fact that my kids really want to give the money away rather than do other things with it as they go along.
CNBC Interviewer: You mean rather than spend it on themselves, buildings or anything of the sort.
Warren Buffett: Right. No. When they don’t need more help as they go along. I think the foundations employ something between, there’s three of them now.
CNBC Interviewer: Four of them, with the STB Foundation.
Warren Buffett: STB. Let’s take the kids first, though, because they make the total decision as to what they’re doing, and they have between 11 and 25 employees.
CNBC Interviewer: Total, between the three foundations? Each, okay.
Warren Buffett: Yeah. And they have expense ratios far below that of institutions that are much better known.
CNBC Interviewer: Expense ratios closer to 1% or less.
Warren Buffett: They’ve shown that they’re not regarding it as play money.
CNBC Interviewer: Meaning that almost everything they get goes back out the door.
Warren Buffett: Well, it really all goes out the door eventually. They’re not going to build huge home office buildings, or hold conferences at esoteric places, and all kinds of things. There’s nothing wrong with doing that, but the important thing is whether people who have a hundred times what they need pass it along to somebody else for the next generation. In many parts of the world they’ve been doing that for thousands of years.
CNBC Interviewer: You’re not a big fan of bureaucracy. Berkshire Hathaway was run here in this office with 25 people or something.
Warren Buffett: 25 people, and we probably grew in size ten for one before we added the last two or three.
The Friendship with Bill Gates
CNBC Interviewer: Before we move on, does Bill Gates know about this? When we spoke with you in March, you said you had not spoken with him since any of these allegations started coming out. He said the same thing last month, in June, when he sat down for his congressional testimony, that he had not spoken with you since January. Have you spoken with him since, and does this come as a surprise to him?
Warren Buffett: No, it does not come as a surprise. He gave a talk at my alma mater, I don’t know, three weeks ago, or I kind of lose track of time, but certainly not three months, three weeks since we talked. We spent three hours talking together, and he intends to call me. He’s the one who initiates calls, generally, and as you can see, I’m available anytime, but he’s much more organized than I am, and he’s already proposed another one.
CNBC Interviewer: Another meeting?
Warren Buffett: Yeah, and we have had an enormous number of good times together since we met, whatever it was, 1991, and he’s always done more than his share, always more than his share. You don’t see me doing the planning.
CNBC Interviewer: In the friendship, you mean?
Warren Buffett: Yeah, it’s been a wonderful friendship. Bill and I are interested in enough things that overlap that we find plenty to talk about, and each of us has got his own specialty to some extent.
CNBC Interviewer: But you told him three weeks ago or so, when you met him, that you would not be making any more donations to the Gates Foundation?
Warren Buffett: Yeah, I may have even meant it. I can’t tell you exactly what I told him, but at some point I had read what Congress came up with, I’d read everything, and all I can say is, I don’t know whether I’ve done dumb things, but I’ve done many dumb things in life. All I have to do is look at our portfolio. At least four out of five of the decisions I’ve made have not been anything out of the ordinary.
CNBC Interviewer: But he was okay when you told him this. So he’s on board, none of this is new to him?
Warren Buffett: Yeah. Bill, unlike me, more or less, I think wants it to end when he dies. And of course he doesn’t know…
CNBC Interviewer: His foundation.
Warren Buffett: The Gates Foundation. Whereas I hope that my kids live a lot longer than I do, and I hope all three participate, and I think all three will be better off for doing that. But that’s not a decision that was made, well, when Susie and I started giving to them I think we moved it up to maybe 30 million a year.
CNBC Interviewer: To the kids’ foundations?
Warren Buffett: No, actually to their father, she, I don’t remember the exact figures at all, but we gave it to them when we were 99% sure that they would, well, they were willing, and in some cases eager, to do things for other people. They’ve had a good life. They haven’t, well, they’ve followed a rule that somebody told me a long time ago, which I give credit for, which is that if you’re the child of a very rich family, you should be given enough to do something, but not enough to do nothing.
CNBC Interviewer: And that’s exactly what’s been going on, at an increased scale.
Warren Buffett: Just to step it up now, because at my age the probabilities really get against me. The last will I wrote is very likely to be my final will, whereas the wills I was writing when I was 30 or 40 or 50, I knew they would change.
Increasing the Family Foundations, Led by the Susan Thompson Buffett Foundation
CNBC Interviewer: Let’s talk about that. The other thing you’re announcing is that you would like to see the money, and the shares, go out at an expedited rate. To this point it’s been ten years after your death that the shares would all be dispersed to charity. Now you’re saying you would like all of those shares dispersed eight years from now, by the end of 2034. What changed your mind on that, and what does it mean?
Warren Buffett: It certainly means that I had two purposes in all of Berkshire, particularly with essentially 100% of my money in Berkshire. That’s my painting, and I like the painting. I like the people associated with it, and it’s been refined over time. I’ve added an apple over here or something. I don’t know of ten people in the United States that I would trust to hand that over to. I don’t know of five people. And I know a lot of people, and I have a very high standard in terms of what I’m looking for in that person. Clearly we’ve found him, with Greg Abel, and that becomes more evident by the day.
CNBC Interviewer: So you don’t think you need to hold on to the shares, or have your family have voting power over those shares, for as long, because you think Greg Abel is…
Warren Buffett: He is the choice. The only question is, is he not immortal either. You always have this mortality question, and nobody gets away from it. People can be in marvelous health, or seem like it, and, who died the other day, Lindsey Graham, 71 or something. So there’s an enormous variety and variation from being lucky, to then not being lucky. That’s the bet I make with Greg. I do not have a list of ten. I mean, I don’t have ten kids either, but I don’t have a list of three.
CNBC Interviewer: In terms of who you would trust the company to at this point.
Warren Buffett: Yeah. No, I’ve got directors that I trust to be imbued with, they like the concept of Berkshire Hathaway, they would like to keep it going. So I’ve got the right group, that’s the intermediary in making that choice. But things don’t always work out perfectly in the world.
CNBC Interviewer: So your hope is that the shares will be dispersed by the end of 2034, just over eight and a half years from now. But I take it, if you’re not here and the kids are the ones making the choices, you would leave it to their decision making at that point?
Warren Buffett: Yeah, and eight years from now my daughter will be 80, very close to 81, another one will be 70, and it’s not just a question of mortality, it’s a question of keeping your marbles too.
CNBC Interviewer: Have they heard you say it like this?
Warren Buffett: Well, I mean, I’m losing marbles at this point. I accumulated marbles for a longer time than I deserved, and that’s just a matter of luck. I’ve seen so many managers of our companies, I think I’ve mentioned it in a few annual reports, annual meetings, we had guys cutting out paper dolls, and their assistants covering for them.
CNBC Interviewer: Okay, just to clarify, you are of your right mind while you’re making these decisions, right?
Warren Buffett: I hope so. But actually I wrote the will a couple of years ago, and I will not knowingly change that will except for extremely important decisions, because there’s no question that I had my marbles when I wrote it.
CNBC Interviewer: Okay, so let’s talk about what happens now, because you’ve talked about how this is really your children making the decisions, but in the announcement you’re putting out now, you increased each of your children’s foundations by about 50%.
Warren Buffett: Yeah, but for what we gave them last year, the Susan Thompson Foundation…
CNBC Interviewer: But it’s the Susan Thompson Buffett Foundation that really is seeing the outsized gains in what they’re going to be giving away. The amount of shares they received this year is tenfold what it was last year. Basically they’re getting all the money that would have gone to the Gates Foundation.
Warren Buffett: Well, they’re getting all the money that would have gone to the Susan Thompson Buffett Foundation for…
CNBC Interviewer: And then some.
Warren Buffett: Would have survived.
CNBC Interviewer: Right, and then some. But basically the payout they’re going to be getting this year, in terms of what they can disburse, is $4.5 billion. That’s how much the Gates Foundation got last year. Why so much more to the STB Foundation than the other three foundations, relatively speaking? Everybody gets more, but why that outsized amount?
Warren Buffett: The foundation is what I would say totally my first wife would have created, and I would have approved of it. We were on the same page in all kinds of questions that aren’t even questions anymore, in terms of women’s rights and civil rights. We were in sync on that. She took an interest in listening to everybody’s story, that would be the last thing in the world I would want to do. She saw every individual as an individual, but she also saw them as a group. I saw them as a group, and I had other things that fascinated me more.
CNBC Interviewer: This money that goes through, is this what you will anticipate seeing from this point on? In years past, at Thanksgiving, you’ve given additional disbursements to the three kids’ foundations. Do you plan to do that again this year?
Warren Buffett: Yeah, I’m almost sure I will, but regardless, the other goes on. I’m more probable to die before Thanksgiving than any of my three children, or, probably, the probability of all three combined. But I also enjoy explaining why I take actions, just like I do in the annual report on Berkshire. I’ve got a didactic streak, which my partner Charlie Munger had. To us, the money was, well, the money was important in terms of what it could actually do for other people. It wasn’t important for what it could do for me. I have not denied myself anything in life.
CNBC Interviewer: If something happens that you’re not here to make these decisions, does it revert to what you talked about last year in your will, where there is a new foundation that is created?
Warren Buffett: A new foundation, and the three kids are in charge. It has to be, it does have slight variations, one being unanimous consent among the three for anything they do.
CNBC Interviewer: Does the STB Foundation, or the kids’ foundations, do they have to spend the money in this fiscal year, as was required of the Gates Foundation, or is this something where they can take their time and make their plans?
Warren Buffett: They know my views on it, but they can do what they want. If their wants get away from the basic principles far enough, you look at it again, but that isn’t going to happen.
On Luck, Astrid, and the Purpose of Philanthropy
CNBC Interviewer: Warren, you’ve spent most of your adult life thinking about philanthropy. How have your views changed over time? What would you like to see happen with this? I think about the Giving Pledge and what you all did. What’s your perspective at this point?
Warren Buffett: I have, out of 8 billion people, I may be one of the ten luckiest in the world. I’ve been lucky and healthy to get to 95. I’ve been lucky in that the field that intrigued me, and where I had some natural ability, happened to be one that paid off in a way that nothing else paid off like it. I would have been a worse violin player than, you know, anything else, it requires more talent than I have, but a different form of talent, and fortunately I got exposed, partly accidentally, to what I liked to do very early on, and that was just an accident. If my father had been a plumber, I would not have had the same advantage I had. So I was incredibly lucky. And as life has gone along, I have seen how unbelievably unlucky some people have been. We had accidents with the kids when they were young, all kinds of things can happen, and they just didn’t happen to us.
CNBC Interviewer: All right, let’s talk about a few other things while we have you. Is there more you want to say?
Warren Buffett: The whole idea of kings and queens, and everything, where you pass along for thousands of years the ability to live in any manner you wish, while you say let them eat cake to the rest, that is not the way the system would be if I had my way of designing a world. And I can’t change the design of the world, but I can nibble at the edges.
CNBC Interviewer: And those are the same values that your wife Astrid and your kids all have too?
Warren Buffett: One hundred percent, and I’m glad you mentioned Astrid, because she feels, she’s extreme in this view, as you can imagine, and she’s actually experienced more hardship in life than either Susie or I did, because she’s Latvian, and came over in a boat, and through Ellis Island, and didn’t know who she was being assigned to, lived in foster homes, all kinds of things. So the accidents of birth are just so extreme, and I’ve seen people use those accidents to justify positions that are just ridiculous in my view, and that’s the reason for encouraging philanthropy. You can’t mandate it, it isn’t plausible if you mandate it, but people, most people, are a combination of lots of good instincts and lots of not so good instincts, including me. If you do things that appeal to their better instincts, they respond, sometimes.
CNBC Interviewer: And by the way, your point with the Giving Pledge, when you founded that with Bill and Melinda Gates, was to encourage people to give to anything, but not to try and tell them what to do with their money.
Warren Buffett: Exactly. And also to decide when they would do it. A family that’s had a family farm for a hundred years, and within the family they’ve all worked out and everything, they’re going to have a different view toward capital. They’re all going to work hard, but they’re going to have a whole different view than some guy who is writing options on Wall Street.
The Berkshire Stake in Alphabet
CNBC Interviewer: Okay, let’s talk about a few other things that have happened maybe since we got the chance to sit down last, in May. The first that I can think of is the massive position that Berkshire has developed and grown in Alphabet and Google shares. That’s something a lot of people have looked at and said, this is Greg’s mark on how he’s going to be changing the portfolio. How did the Alphabet position come along?
Warren Buffett: I initiated it, but I normally wouldn’t give you that answer on something like that, but I will, because I am not doing anything that he doesn’t approve of, and he’s not doing anything I don’t approve of. We talk all the time, every day. But he is the decider. Getting back to Alphabet, or Google, it’s probably number five or six.
CNBC Interviewer: Well, I thought it was number three, if you consider the $10 billion private placement, which would put it north of $31 billion.
Warren Buffett: Yeah, but we’ve got the Burlington Northern Railroad, which is certainly worth far more money than that.
CNBC Interviewer: Okay, so you’re counting fully owned companies as well.
Warren Buffett: We are always making the choice between whether we’ll buy marketable securities or the company. We look at it the same way. There are some minor exceptions, we can’t set dividend policy, for example, if we don’t own it, but the chances of those being material, the important thing is to buy a good business, and to buy it on the right terms, and then get the right person to run it.
CNBC Interviewer: Okay, but you’ve quickly grown a north of $30 billion investment in Alphabet. That puts it, in terms of companies you own pieces of, behind only Apple and American Express. Coca-Cola would be smaller, Bank of America would be smaller.
Warren Buffett: But if you take Coca-Cola, which we’ve owned 45 years, whatever it may be, we don’t have a thing to do with running that business. But it’s a very good business. When I say a very good business, I mean something you can expect to earn high returns on capital over a long period of time. Now the question is, when you get into Google, or any of the AI companies, you’re putting out huge amounts of money, and I can put huge amounts of money in government bonds and get 20 or 30 or 40 billion dollars a year in terms of payments from them. So a good business is one that earns a lot more than the returns on essentially riskless investments, which you could define as Treasuries. But if you take something like American Express, most of the banks earn 13% or 14% on capital. If I asked everybody to guess what American Express would get, they would come up with some figure similar, but it’s so different, it earns 30% plus on capital, and does not incur more risk in doing so than the banks that earn 13% or 14%. The trick in investing is to find businesses that are going to earn high returns on capital for an extended period of time, and that’s what happened with Berkshire for a long period of time. A long period of time gets to be very important, because those doubles later on are the payoff of very good numbers. Charlie Munger, my partner for many decades, he pounded the idea that it wasn’t a good business just because it was doing sexy things, or whatever it might be. If it wasn’t earning real cash that it would, or could be expected to, distribute in a very short period of time, and be able to distribute it if it wanted to, that mattered. Better yet if it could re-employ it in the business, that was even better, the ones that had the ability to earn high returns but you couldn’t deploy the excess capital of those returns.
What Makes a “Good Business”
CNBC Interviewer: Okay, let me ask you though. Forever people have thought of you as somebody who doesn’t invest in technology, and by the way, you’ve described yourself as somebody who doesn’t invest in technology. Obviously the biggest position in the Berkshire portfolio is Apple, a position you put on, but at the time you called that a consumer company. Google you just called an AI company. So what happened?
Warren Buffett: The real question with Google, and all of its competitors now, is they’re all laying out hundreds of billions.
CNBC Interviewer: They’re big cap-ex spenders, the biggest.
Warren Buffett: Yeah, and that’s real money. If our railroad were to lay out 300 million, or a billion, or 200 billion, that kind of money wasn’t even put into the railroad business, in terms of developing it. That’s the game they’re playing now. They won’t play that game with computer software.
CNBC Interviewer: So when they were asset light you didn’t like them, and the markets loved them. Now that they are spending heavily on cap-ex, a lot of shareholders don’t like them as much because they don’t…
Warren Buffett: They’re more likely to be a winner, based on their record, than probably 90% or 95% of what will get merchandised through Wall Street, because Wall Street is only selling something. I can’t recall a report on Wall Street that really gets into the internal rates of return that the business is actually earning. What’s more important is what a business is earning, but they ask all these questions about what will happen next quarter, and it’s ridiculous. Investing is, well, probably the most successful long term investor was Rockefeller, but look at what oil and gas has done over 150, a couple of hundred years. He kept compounding at a very good rate, not as good a rate as Geico would have achieved in its early years, because it’s easier to do when you’re small. You’ve got to do it when you’re large, you’ve got the whole world looking at you trying to figure out how come those guys are doing it and we’re not.
CNBC Interviewer: Why do you like Alphabet above all others, and what made you initiate this position? What was the eureka moment?
Warren Buffett: I would say that I don’t like it as well as at least four or five other businesses that we own.
CNBC Interviewer: Other than Apple, the railroad, American Express.
Warren Buffett: Yeah, I’m not going to get into the whole priority.
CNBC Interviewer: And of course you like it enough to make it a huge position.
Warren Buffett: That way, yeah. Berkshire earned high returns on capital without, I’m not talking about using the tricks of leverage or that sort of thing.
CNBC Interviewer: But I’m talking about why Alphabet versus the other Magnificent Seven, or the other hyperscalers who are doing the same thing, spending a lot of money, Amazon, Microsoft, whoever it may be, to try and win in this position of AI.
Warren Buffett: Well, I don’t want to sit around knocking the others. They don’t have any choice. They’re now playing a game, in many cases, that they don’t want to play. IBM would have loved it if they just kept playing the game IBM was playing in the ’30s, the ’40s, the ’50s, and the ’60s, and then somebody came along and said, we’ll get a better result for you, achieving the objective of all the customers you have, because that’s all you’re going to have, either happy customers or you don’t have customers, over time. The customer’s not dumb. Wall Street can be very dumb, in terms of they can dream, but a guy with a grocery store can’t dream. I worked in my grandfather’s grocery store, and we had one store in 1869, and we had one store in 1969, and other people were earning high returns on capital, some on a national scale. A&P, which people don’t associate with anymore, in the 1930s they were number one, and one of the number one targets of trust busters in Washington. They had a very, very good hand, and that hand disappeared.
CNBC Interviewer: So it’s a different game, and you like this game, you understand this game more than you understood the game they were playing before. Is that fair to say?
Warren Buffett: There are all kinds of games I don’t understand, sure. Why should I expect to make money in all kinds of things I don’t understand?
CNBC Interviewer: But this game, what do you understand about this game at this point? Because most people would say he’s never going to buy any technology stocks, and I think you’ve said the same thing yourself in the past.
Warren Buffett: Yeah, but I have done it. Actually, one of my most successful companies I was associated with, going back to 1958, we started a company called Data Documents. We started Data Documents because a couple of fellows of mine read in the paper that IBM had been subject to an antitrust suit, and had to divest 50% of the capacity of what was their best business, and everybody knew it was their best business. It so happens it ran out after ten or fifteen years, and I knew some of the people that caused it to run out. But if you have a wonderful business, you are going to be subject to attack. So it’s not a question of whether it was wonderful yesterday, it’s the question of how long it is going to be wonderful.
CNBC Interviewer: But that’s what I think I love. People can try and pigeonhole you and say they know who you are and what you do. To me it looks like you’re 95, turning 96 next month, and you are still changing and following the game.
Warren Buffett: Well, it’s easier for me. If somebody came along with a better candy, that would have more predictive value to me than if they came along and had a better way of doing something that a hundred of their competitors would sneak in the plant at night to see exactly how they got it all done.
Apple, the AI Capex Race, and the OpenAI Lawsuit
CNBC Interviewer: Let’s talk about your largest position, Apple. You told us you were thrilled with everything Tim Cook had done. I don’t know how well you know John Ternus at this point, or what you think of what the company is doing. Do you still have a lot of faith in Apple?
Warren Buffett: Well, there was no move they could make that would replace Tim that I would have liked. If you’ve got somebody like a Stradivarius playing the violin for you, don’t spend the next 300 years looking for another one, you’ve got one already. And of course Wall Street thrives on the idea of convincing you that if you just listen to them, they’ve got something nobody else has, which can’t be true, it’s ridiculous. But it works, because, in general, it works, because America’s been a wonderful place to invest money. The Dow Industrials went high, when I bought my first stock it had just crossed 100, and now it’s 52,000 or something, and you’ve got dividends in between and all kinds of, well, the village idiot could have made it from that point forward.
CNBC Interviewer: But do you still like Apple?
Warren Buffett: People’s enthusiasm for gambling is enormous.
CNBC Interviewer: You’ve talked about that over the last many years, probably since Covid, but you still like Apple, back to the point.
Warren Buffett: Yeah. And I know more about Apple than I knew many years ago, but if you’re Apple, you’ve got very smart people all over the world trying to figure out how to make sure that Apple’s future is as bright as its past. Look at the car companies. Henry Ford owned the car business for 20 or 25 years, and he did the vertically integrated model like you cannot believe. He drove costs down, he got the cost of the Model T down, I think, to $285, and he was always decreasing prices while increasing wages. But he was also a little nuts in some ways, and that did him in, finally, when he turned over the Model A, and General Motors just came racing by, and my friend Charlie Munger thought General Motors was going to be the dominant company. Who could imagine attacking their dealer fleet and everything they had going for them, but you’ve always got somebody shooting at you.
CNBC Interviewer: To that point, Apple brought a lawsuit against OpenAI just last Friday, just last week, and basically accused OpenAI of trying to steal trade secrets.
Warren Buffett: Most companies would love to try to steal trade secrets. They wouldn’t love getting caught, but if you really could dig deep in the hearts of managers, they’d like to steal secrets. Wouldn’t you? If you had a business and you were struggling along, and the guy next door was making money… I had a half interest in a Sinclair filling station in Omaha when I was in my early 20s, and I’d been to business school and knew all these things. The guy next door had the filling station, and he was pumping 30,000 gallons a month, and we were pumping 15,000 gallons a month. So I said, we’re going to wipe this guy off the face of the earth. A couple of years later we were selling 15,000, and he was selling 30,000, and we gave up and closed up, and I think he’s still operating. People are playing for keeps in business.
Coca-Cola’s IRS Dispute
CNBC Interviewer: We talked about Coca-Cola briefly, the long time position you’ve held for more than 45 years. There is a major lawsuit with the government that could look at action, I believe, going all the way back to 1996 with Coca-Cola. The IRS has said that they owe them roughly $20 billion, of which they’ve paid…
Warren Buffett: About $10 billion or so.
CNBC Interviewer: But we’re going to hear about whether the activities, and this has to do with their overseas business, some of the accounting that goes back and forth, Coca-Cola says they thought they had an agreement in 1996 that stood for how they should behave. The government’s now looking for more money and saying that’s not the case. It’s not just Coca-Cola that’s riding on this, so there’s a lot of other American businesses doing the same thing.
Warren Buffett: A huge number, which is why the derivative effects of the suit could be the biggest in American history.
CNBC Interviewer: What do you think of this, with the understanding that you are a large Coca-Cola shareholder? Was this an overzealous government looking for ways to raise more money, or a company that behaved badly?
Warren Buffett: I’m the one, you know, I’ve got an organ that applies to it, so that’s why we have courts.
CNBC Interviewer: Yeah, so you’ll wait and see what happens with it, I take it you’re watching this closely.
Warren Buffett: Paying the extra money won’t break Coca-Cola any more than anything I can think of would break Berkshire. I look at, all I think to do is think about the downside, the upside will take care of itself.
The Federal Reserve, Kevin Warsh, and Market Speculation
CNBC Interviewer: We also have a new FOMC chairman, Kevin Warsh, who is taking a look at the economy. This week he’s going to be speaking in front of Congress. A lot of questions about what he’ll do with the markets, what he’ll do with interest rates, and what that in turn means for the markets. In the past you’ve spoken about how interest rates are gravity, and determine where stock market prices are headed. So what do you think happens? What are you betting?
Warren Buffett: I don’t know what he’ll do, but I would say that job is so complicated, I think the other day he was quoted as saying they have 950 economists when they could do with 110. I admire him for taking on the job. I think he will do the best he can at achieving the job he was assigned to do, which is 2% inflation and maintaining maximum employment. My guess is that, just like some of the others who preceded him, not all of them, he would read that every morning.
CNBC Interviewer: The dual mandate of the Fed.
Warren Buffett: The dual mandate. And he knows he can’t be perfect at it, just like I know I couldn’t be perfect taking people’s money and earning super returns on it. But my guess is that people were right in realizing that I cared about what happened to their money, and I would say the White House he cares about the country.
CNBC Interviewer: Okay.
Warren Buffett: And I think that’s been true of a good many. It doesn’t mean their decisions are always great, because sometimes the decisions are so tough. Imagine Paul Volcker getting death threats all the time. Others just think they know more than they do.
CNBC Interviewer: But you think Kevin knows a lot and is a…
Warren Buffett: A very, yeah, I think he was a good choice.
CNBC Interviewer: Okay, which probably means the president will be mad.
Warren Buffett: Future presidents will be mad at him too, because future presidents are looking at the next election, and he’s not supposed to be looking at the next election.
CNBC Interviewer: Right. You obviously don’t come out and make calls on where the market’s headed at any point in time, but you do make calls on market behavior, and what makes sense to you and what doesn’t. Do you think the markets make sense to you, when there’s so much riding on AI? Earnings have been very strong, the consumer looks like it’s held in to this point, but how do you view it?
Warren Buffett: I think there are times when opportunities are just thrown at you so fast you can’t believe it, and then there are other times when you’re very, very lucky if you find one thing in a couple of years. It should always be that the latter is what prevails, but since humans love to gamble so much, there’s more money in actually cultivating gamblers than there is in cultivating investors. If somebody bought Berkshire 40 or 50 years ago, a broker would have made one commission, and he should have spent the rest of his time telling the client don’t do anything with it. That’s just not the way we can expect of humans. But every now and then you do find people who behave far better than other people.
CNBC Interviewer: Fair to say, though, it’s tougher to find values, or find…
Warren Buffett: It’s tougher to find values when everybody is preferring gambling. And from the standpoint of the state, it’s sort of disgusting, because the state needs money for all kinds of things, roads, schools, you name it, and they have found that they can clip people who are buying nothing but hope, selling them a payout with a payout ratio of 60% or something like that. If they weren’t doing that, they’d have to have the income tax higher. It’s a cynical sort of activity, and I think the less cynicism there is between the governing body and the people they govern, the better. You don’t want people to be cynical about their system, but there are times when the system says, just be as cynical as you want, because this is what I’m going to do, baby.
Closing Reflections
CNBC Interviewer: Let’s go back very quickly. You touched on this. Part of the reason you want the shares given out over the next eight years is because you want your kids making these decisions. But the other part is that you don’t feel like you necessarily have to hold on to these voting shares of Berkshire for as long, because you have faith in Greg.
Warren Buffett: Yeah, exactly. And if we didn’t have faith, well, part of the reason I’m around is because we didn’t have sufficient faith in anybody before. We know all kinds of people, but if you were talking about Tom Murphy, if I could have hired Tom Murphy, but the trouble was they were all older, and all my friends were pretty much older, so it wasn’t like I was in college and could see who was writing crib sheets on their shoulder or their shirt cuffs.
CNBC Interviewer: But you feel that way with Greg.
Warren Buffett: I feel one hundred percent that way. I’ve seen him in a lot of situations, a lot of situations. I felt that way with Charlie, I felt that way with Tom Murphy. But nobody expects you to pick up 25 partners and have them all work out. Just finding one is pretty tough, there’s the right sort, and then you make mistakes.
CNBC Interviewer: Warren, how are you feeling today?
Warren Buffett: Well, I broke a leg.
CNBC Interviewer: What happened?
Warren Buffett: A few weeks ago. Which is really, I’ve been very lucky on that sort of thing, I haven’t broken a leg in my life until now, but I feel good. I’m glad I was born, and I’m glad I wasn’t born in some other country, and I was glad that I wasn’t born female. I mean, all kinds of things, I really won the lottery. A lot of people think they won the lottery if they got a trust fund set up that takes care of them for their whole life, and five generations thereafter, but I just wasn’t raised that way, and I think it’s a good thing I wasn’t, and I haven’t raised the kids that way, or, more important, Susan didn’t raise them that way.
CNBC Interviewer: Well, I want to thank you for your time today.
Warren Buffett: Oh, thank you.
CNBC Interviewer: I appreciate it.
Warren Buffett: And we’re listening to business.