Notes from Charlie Rose moderating a conversation with Bill Gates and Warren Buffett
There is a new documentary Becoming Warren Buffett premiering January 30th 2017 on HBO.
On learning and books - Bill says it is an incredible time to be a learner. There are things that you read and wished you could get more in depth knowledge. Today the courses and the videos online are phenomenal. You have access to information more so now than ever before. Bill's biggest problem is he stays up late because of reading.
Warren had at one time read every book in the Columbia school library on investing. He would pull out a book and what he read in there would lead him to look up another book. He claims this led him to buy GEICO. One of things he enjoys reading are biographies such as Personal History - Katherine Graham because you are able to live the lives of these people, learn from their lessons, and the excursions they face. If you are an investor than the obvious book is Benjamin Graham's Intelligent Investor.
On what they enjoy about each other - Bill and Warren found so many things they could connect on. They just had the same curiosity in the world. When Microsoft was small, Warren would ask Bill why Microsoft would do better than IBM. They would talk about the economics and these would be questions nobody would ask Bill at the time. Warren led Bill to think outside the box. Bill admires Warren's overall sense of humor, and the fact that he enjoys what he does and shares it with other people. Warren has an ability to explain things that may be obvious to him, but not to others with great humility.
On the future of America - This country has a lot of hardworking folks. When Warren bought his first stock the Dow was a 100 something and now its 20,000 something. Warren believes even though there may be uncertainty, this prosperity will continue. The question is how the prosperity gets allocated between everyone. Every year that goes by there will be energy and health breakthrough. It has been easier to finance ideas now with more capital and better ways to connect than in the 1950s.
On why they got into their respective fields - Charlie asks why Warren thinks he got interested in investing at 11? To which Warren replies, "Because I was too dumb to get interested at 4." Warren says it just seemed to make sense and was a fascinating subject. He also believes he has the temperament and ability to think for himself.
On overcoming fear of risk - Bill has never viewed computer as risky, but rather a fun hobby. The start of his interest in computers coincided right at the beginning of what he saw would be a big change. He didn't have kids at the time and felt that he could always go back to school to finish his degree and find a job. However, he was risk adverse when he was running the company and made sure that they had enough money to pay everyone at least a year if nobody paid them. The thought of hiring a bunch of people with families put a lot of responsibility on him. What he does advise is that young people be risk takers.
Warren is having just as much fun then as he is now. He was petrified at speaking. So, he signed up for a course and gave up his $100 dollars. Don't fear failure. Warren got turned down by Harvard and it turned out fine. Just keep going. Go forward.
If you were to do it again, what industry and where would you start your business?
They'd be doing the same thing. Look for the job you would take if you didn't need a job. You really want to be doing what you love doing. You can't necessarily find it on your first job, but don't give up until you find it. Doing what you don't want for X amount of years is like saving sex for old age.
How might Bill and Warren convince investors to think long-term?
Warren says that if he knew how to double my money tomorrow, he'd prob invest short term. For him it is easier to invest in the long-term. He hasn't the faintest idea of what will happen tomorrow or next week. Politicians face election every 2 years or 6 years. Congressional districts primaries are more important than before. It is very hard to think what is good 20 years from now when they are worried about getting elected tomorrow.
What does Warren look for when investing or buying in a company? Durable competitive advantage, a moat for a considerable period of time, honest and able management, fair purchase price. But he says it is better pay a bit too much of a good business then a bargain company with no future. He can't predict what most companies will do, but he only has to be right about a couple. It is the opposite of the baseball, where there are no strikes called.
On choosing wives and partners - Charlie Munger changed Buffett's views on looking for the quality companies and to make an investment for 5 to 10 years versus focusing on cigar butt investing. Whereby you find a cigar (company) with out puff left in it and then you'd have to go find another. That works on a small scale, but you really want to find a business you want to own forever. Similar to how you want to get associated with a person forever.
Bill says, Melinda thinks about the people issues better and can be more realistic about the science. Life is more fun with a partner than without.
How do you figure out what causes to donate to?
Warren had originally discussed with his wife that he would pile up the money and then she would unpile it. But when she passed, he had to think of another solution. He decided to wholesale it to someone who had similar values, objectives and could pour intelligence. That was Bill and Melinda. Warren believes every life has equal value.
Bill has studied how the Rockafeller foundation set themselves up and used that as a guide for philanthropy. Funding the vaccine projects isn't the government's forte, but once you come up with the formula the new vaccines marginal costs come out to less than a dollar.
How do you reconcile what is believed by the public and your thoughts?
Bill begins by saying that you should understand where people disagree. There are all sorts of causes that his foundation looks at. There are a lot of diseases and aspects of education to consider. Part of the strength is diversity in the fund. His voice shouldn't be that much louder than other people.
On relationships - Warren says, you will move in the direction with the people you associate with. Associate with those people that are better than yourself. You want to associate with the kind of people you'd want to be. The friends you have will form you as you go through life. Have people you admire as well as you like. Bill says it is good to invest in those friendships and some friends challenge you about things you are doing.