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One of the principal impediments to job creation is uncertainty on the part of American companies, large and small. We've all watched as companies have sat on a lot of capital. They're uncertain about what tax policy is going to be. They're clearly uncertain about how health care costs. They're uncertain about all the regulations on capital markets.
There are a lot of complaints by the older generation about the lack of action in this generation. My retort: give these people something to be engaged in. Cutting a check is not engaging. Some charities treat donors like cash machines. Until now there hasn't been any effective way for them to provide a more personal or interactive giving experience.
Some years ago one oil company bought a fertilizer company, and every other major oil company practically ran out and bought a fertilizer company. And there was no more damned reason for all these oil companies to buy fertilizer companies, but they didn't know exactly what to do, and if Exxon was doing it, it was good enough for Mobil and vice versa.
I think the reason why we got into such idiocy in investment management is best illustrated by a story that I tell about the guy who sold fishing tackle. I asked him, "My God, they're purple and green. Do fish really take these lures?" And he said, "Mister, I don't sell to fish." Investment managers are in the position of that fishing tackle salesman.
The things a man believes most profoundly are rarely on the surface of his mind or tongue. Newly acquired notions, decisions based on expediency, the fashionable ideas of the moment are right on top of the pile, ready to be displayed in bright after dinner conversation. But the ideas that make up a man's philosophy of life are somewhere way down below.
The status quo is a product of our culture or our culture is a product of the status quo - I'm sure which is the effect and which is the product - there is probably a feedback loop there that is mutually reinforcing. But we have a culture that says "Hey, look around. This place called Earth was created for you and you can do anything you want with it."
[In picking stocks] You really have to know a lot about business. You have to know a lot about competitive advantage. You have to know a lot about the maintainability of competitive advantage. You have to have a mind that quantifies things in terms of value. And you have to be able to compare those values with other values available in the stock market.
If a working class Englishman saw a bloke drive past in a Rolls-Royce, he'd say to himself "Come the social revolution and we'll take that away from you, mate". Whereas if his American counterpart saw a bloke drive past in a Cadillac he'd say "One day I'm going to own one of those". To my way of thinking the first attitude is wrong. The latter is right.
Suffering will always be there. You'll always have the poor. You have to own your own progress. It is true that because of the economy and the fear factor the president [Barack Obama] is able to execute a lot of promises that it would be difficult to deliver it not for the fear factor. It's funny. He's delivering on what he promised and we call it fear.
As a matter of fact 25% of our U.S. investment banking business comes out of our commercial bank. So it's a competitive advantage for both the investment bank - which gets a huge volume of business - and the commercial bank because the commercial bank can walk into a company and say, "Oh, if you need X, Y and Z in Japan or China, we can do that for you."
If you're worried about messaging, people will just move to something else. You know if you legislate against Facebook and Apple and Google and whatever else in the US, they'll just use something else. So are we really safer then? I would say no. I would say we're less safe, because now we've opened up all of the infrastructure for people to go wacko at.
I don’t consider myself an activist, but I realize how much I’ve benefited from the sacrifice of others. So if hearing that the CEO of Apple is gay can help someone struggling to come to terms with who he or she is, or bring comfort to anyone who feels alone, or inspire people to insist on their equality, then it’s worth the trade-off with my own privacy.
The Trump administration's economic agenda is the right agenda. Corporate taxes have been driving capital and brains and companies overseas for a decade. It has caused huge damage in investment and jobs and productivity. It was a mistake. We have to fix it. Counterintuitively, that usually helps middle-class wages, and lower-class wages, and job formation.
Obviously, consideration of costs is key, including opportunity costs. Of course capital isn't free. It's easy to figure out your cost of borrowing, but theorists went bonkers on the cost of equity capital. They say that if you're generating a 100% return on capital, then you shouldn't invest in something that generates an 80% return on capital. It's crazy.
I think democracies are prone to inflation because politicians will naturally spend [excessively] - they have the power to print money and will use money to get votes. If you look at inflation under the Roman Empire, with absolute rulers, they had much greater inflation, so we don't set the record. It happens over the long-term under any form of government.
God gave me my money. I believe the power to make money is a gift from God . to be developed and used to the best of our ability for the good of mankind. Having been endowed with the gift I possess, I believe it is my duty to make money and still more money and to use the money I make for the good of my fellow man according to the dictates of my conscience.
A lot of people think if you just had more process and more compliance -- checks and doublechecks and so forth -- you could create a better result in the world. Well, Berkshire has had practically no process. We had hardly any internal auditing until they forced it on us. We just try to operate in a seamless web of deserved trust and be careful whom we trust.
If you're going to be an investor, you're going to make some investments where you don't have all the experience you need. But if you keep trying to get a little better over time, you'll start to make investments that are virtually certain to have a good outcome. The keys are discipline, hard work, and practice. It's like playing golf - you have to work on it.
If you talk to anyone involved in business - forget banks and big business - talk to small businesses - do it yourself, don't ask me - they'll tell you it's crippling. Small-business formation is the lowest it has ever been in a recovery, and it's really for two reasons. One is regulations and the second is access to capital for people starting new businesses.
Creativity and innovation are something you can’t flowchart out. Some things you can, and we do, and we’re very disciplined in those areas. But creativity isn’t one of those. A lot of companies have innovation departments, and this is always a sign that something is wrong when you have a VP of innovation or something. You know, put a for-sale sign on the door.
A few major opportunities, clearly recognizable as such, will usually come to one who continuously searches and waits, with a curious mind, loving diagnosis involving multiple variables. And then all that is required is a willingness to bet heavily when the odds are extremely favorable, using resources available as a result of prudence and patience in the past.
I've been seeing the change. It's been steady. It's been more controlled than people think. And my own belief is that China knows it also needs to be part of the world, and that it needs to be able to have trade with Europe and the United States in order to house and feed a billion people. That's really kind of single-mindedly what they see their role as being.
I agree with Peter Drucker that the culture and legal systems of the United Statesare especially favorable to shareholder interests, compared to other interests and compared to most other countries. Indeed, there are many other countries where any good going to public shareholders has a very low priority and almost every other constituency stands higher in line.
So you can get very remarkable investment results if you think more like a winning pari-mutuel player. Just think of it as a heavy odds against game full of craziness with an occasional mispriced something or other. And you're probably not going to be smart enough to find thousands in a lifetime. And when you get a few, you really load up. It's just that simple.
Economic systems work better when there's an extreme reliability ethos. And the traditional way to get a reliability ethos, at least in past generations in America, was through religion. The religions instilled guilt. ... And this guilt, derived from religion, has been a huge driver of a reliability ethos, which has been very helpful to economic outcomes for man.
We've made a huge effort globally and in the US, in getting kids jobs. This is one piece. The South Bronx and inner-city schools need it more than most. It's our hometown; JPMorgan Chase banks a lot of people here. If you see the school, it works. Kids all getting jobs, they're smiling, they're proud of themselves. That's what we need to do in inner-city schools.
Of course I'm troubled by huge consumer debt levels - we've pushed consumer credit very hard in the US. Eventually, if it keeps growing, it will stop growing. As Herb Stein said, "If something cannot go on forever, it will stop." When it stops, it may be unpleasant. Other than Herb Stein's quote, I have no comment. But the things that trouble you are troubling me.
The economic union - creating a big common market, like the United States, so that you can compete across borders. There are common rules, regulations, and simplification, and that is still a good reason, too. When they put their monetary union together, that created a rigidity that made it hard for currency fluctuations. They don't really have a solution to that.
I'm speaking to you from Silicon Valley, where some of the most prominent and successful companies have built their businesses by lulling their customers into complacency about their personal information. They're gobbling up everything they can learn about you and trying to monetize it. We think that's wrong. And it's not the kind of company that Apple wants to be.
I think we have lost our way when people like the [board of] governors and the CEO of the NYSE fail to realize they have a duty to the rest of us to act as exemplars... You do not want your first-grade school teacher to be fornicating on the floor or drinking booze in the classroom; similarly you do not want your stock exchange to be setting the wrong moral example.
It takes 10 years to get all the permits to build a bridge today. Ten years? What happened to the good old can-do America? Where is "We get it done, we work together"? We've become this bureaucratic, stifling environment. I'm not talking about violating environmental things - I'm talking about building a bridge, getting things going, getting people to work together.
Ninety-nine percent of everyday things are things we don't need - that goes for regular visits to the hairdresser just as it does for clothing. What would it mean if we all consumed 20 percent less? It would be catastrophic. It would mean 20 percent less jobs, 20 percent less taxes, 20 percent less money for schools, doctors, roads. The global economy would collapse.
Doing business is all about providing a good product or service to your customers. A good businessman is he who knows that what is successful today may not be so tomorrow. Technology changes so fast, and so do people's needs and wants. That's why it would do well for a businessman to know how to adapt to change. He must constantly reinvent the business, or it won't last.
We regard using [a stock's] volatility as a measure of risk is nuts. Risk to us is 1) the risk of permanent loss of capital, or 2) the risk of inadequate return. Some great businesses have very volatile returns - for example, See's [a candy company owned by Berkshire] usually loses money in two quarters of each year - and some terrible businesses can have steady results.
I'm an optimist. I've always believed the future is going to be better than the past. And I also believe I have a role in that. The great thing about human beings, myself in particular, is that I can change. I can do better. If you can get up every day, stay optimistic, and believe the future is better than the past, those few things get you through a lot of tough times.
I think that if you have a single payer system and an opt-out for people who want to pay more [for better service, etc.], I think it would be better - and I think we'll eventually get there. It wouldn't be better at the top - [our current system] is the best in the world at the top. But the waste in the present system is awesome and we do get some very perverse incentives.
With Congress and the S.E.C. so heavily peopled by lawyers, and with lawyers having been so heavily involved in drafting financial disclosure documents now seen as bogus, there was a new "lawyer" joke every week. One such was: "The butcher says 'the reputation of lawyers has fallen dramatically', and the check-out clerk replies: "How do you fall dramatically off a pancake?
I think there's a need for somewhat of a mindset change. We need to have a consistent external focus. We've always had the research labs. We've always had the resources to be innovative, and we've been innovative in a number of businesses. But, in any big company, you have to constantly push people to look at markets and customers, rather than look internally at themselves.
Our business is not based on having information about you. You’re not our product. Our product are these, and this watch, and Macs and so forth. And so we run a very different company. I think everyone has to ask, how do companies make their money? Follow the money. And if they’re making money mainly by collecting gobs of personal data, I think you have a right to be worried.
The investment in our mining industry has been very positive for Australia but we need to be doing more if we want, as I do, more revenue for our defence - which I think is under-resourced - our police, our elderly, our hospitals, roads, infrastructure and communication, to be able to repay our debts and enable sustainable job opportunities for existing and future generations.
Let's look at lending, where they're using big data for the credit side. And it's just credit data enhanced, by the way, which we do, too. It's nothing mystical. But they're very good at reducing the pain points. They can underwrite it quicker using - I'm just going to call it big data, for lack of a better term: "Why does it take two weeks? Why can't you do it in 15 minutes?"
If you turn on the television, you'll find the mothers of the most obvious criminals that man could ever diagnose, and they all think their sons are innocent. That's simple psychological denial. The reality is too painful to bear, so you just distort it until it's bearable. We all do that to some extent, and it's a common psychological misjudgment that causes terrible problems.
And maybe the cereal makers by and large have learned to be less crazy about fighting for market share-because if you get even one person who's hell-bent on gaining market share.... For example, if I were Kellogg and I decided that I had to have 60% of the market, I think I could take most of the profit out of cereals. I'd ruin Kellogg in the process. But I think I could do it.
The toughest are people mistakes, when you put the wrong person in a job. Sometimes you're too slow to move them out. Or not getting the right people involved to solve a problem, or doing something out of anger; you learn, just don't do that. But I'd have to say the Whale was one of them, and I would also have to put Bear Stearns and Washington Mutual on the list at this point.
I mean people are really crazy about minor decrements down. And then, if you act on them, then you get into reciprocation tendency, because you don't just reciprocate affection, you reciprocate animosity, and the whole thing can escalate. And so huge insanities can come from just subconsciously over-weighing the importance of what you're losing or almost getting and not getting.
I get very excited when I wake up in the morning and I am just full of oxygen. I say that purposefully. I try not to take for granted how lucky we are to have life and breath and opportunity. Once we've got that, we can conquer anything. Truly, I get high on oxygen, and once I graduate from that, what really fulfills me is doing what I love. That, to me, is absolutely priceless.
Mutual funds charge 2% per year and then brokers switch people between funds, costing another 3-4 percentage points. The poor guy in the general public is getting a terrible product from the professionals. I think it's disgusting. It's much better to be part of a system that delivers value to the people who buy the product. But if it makes money, we tend to do it in this country.
If you take sales presentations and brokers of commercial real estate and businesses... I'm 70 years old, I've never seen one I thought was even within hailing distance of objective truth.... 'incentive-caused bias,' causes this terrible abuse. And many of the people who are doing it you would be glad to have married into your family compared to what you're otherwise going to get.
The general culture of investment banking has deteriorated over the years. We did a $6 million deal years ago for Diversified Retailing and we were rigorously and intelligently screened. They bankers cared and wanted to protect their clients. The culture now is that anything that can be sold for a profit will be. 'Can you sell it?' is the moral test, and that's not an adequate test.
The word mantra comes from two Sanskrit words man, ("to think") and tra ("tool'). So the literal translation is "a tool of thought." And that's how mantras are used in Buddhist and Hindu practices, as tools that clear your mind of distractions. Because when you focus on repeating that mantra over and over again, soon the noise will die down and all you will hear is your inner voice.