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When you say that after World War I there was a pandemic that killed more people than the war itself, most will say: "Wait, are you kidding? I know World War I, but there was no World War 1.5, was there?" But people were traveling around after the war, and that meant the force of infection was much higher. And the problem is that the rate of travel back then was dramatically less than what we have nowadays.
The challenge here is to design a system where market incentives, including profits and recognition, drive those principles to do more for the poor. I like to call this idea creative capitalism, an approach where governments, businesses, and nonprofits work together to stretch the reach of market forces so that more people can make a profit, or gain recognition, doing work that eases the world's inequities.
We may find the Divine to be 3,000 times what we think it is now. It's like asking the tulip there to explain you. The tulip is a beautiful creation, with millions of atoms cooperating with each other to produce great beauty, but ask that tulip to talk about you, and it can't do it. It doesn't have those perceptive abilities. Wouldn't it be conceited to suggest that I had the abilities to describe the deity?
Our best long-term and intermediate cycles suggest another slowdown and stock crash accelerating between very early 2014 and early 2015, and possibly lasting well into 2015 or even 2016. The worst economic trends due to demographics will hit between 2014 and 2019. The U.S. economy is likely to suffer a minor or major crash by early 2015 and another between late 2017 and late 2019 or early 2020 at the latest.
Investors should remember that their scorecard is not computed using Olympic-diving methods: Degree-of-difficulty doesn't count. If you are right about a business whose value is largely dependent on a single key factor that is both easy to understand and enduring, the payoff is the same as if you had correctly analyzed an investment alternative characterized by many constantly shifting and complex variables.
Unfortunately, in rich-world health, innovation is both your friend and your enemy. Innovation is inventing organ replacement, joint replacement. We're inventing ways of doing new things that cost $300,000 and take people in their 70s and, on average, give them an extra, say, two or three years of life. And then you have to say, given finite resources, should we fire two or three teachers to do this operation?
When I was trying to figure out why lives have improved so much in the last 300 years, where we've gone from a third of kids dying before 5 to - by 1990 it was down to 10% - now it's down to 5%. And saying why, over all history, there were smart people, but that number didn't change. Average life span didn't change. What's magical about what's been deemed the Industrial Revolution? It's really energy intensity.
Acknowledge the complexity of the world and resist the impression that you easily understand it. People are too quick to accept conventional wisdom, because it sounds basically true and it tends to be reinforced by both their peers and opinion leaders, many of whome have never looked at whether the facts support the received wisdom. It's a basic fact of life that many things "everybody knows" turn out to be wrong.
Intrinsic value can be defined simply: It is the discounted value of the cash that can be taken out of a business during its remaining life. The calculation of intrinsic value, though, is not so simple. As our definition suggests, intrinsic value is an estimate rather than a precise figure, and it is additionally an estimate that must be changed if interest rates move or forecasts of future cash flows are revised.
I mean, we'll be pounding on the guy's chest, you know, on the floor, and you know, he's not going to just jump up all of a sudden. So it makes it tough. I mean, it's tough to be in the legislature, you know, and vote for something and then people say, well, you voted all this money and you know, it's all getting spent. It isn't getting spent. It's getting invested. But it's all getting spent. Nothing's happening.
...one of the most inventive forms of creative capitalism involves someone we all know very well. A few years ago, I was sitting in a bar here in Davos with Bono. Late at night, after a few drinks, he was on fire, talking about how we could get a percentage of each purchase from civic-minded companies to help change the world. He kept calling people, waking them up, and handing me the phone to show me the interest.
We [US] are the biggest per person, by a substantial amount, greenhouse emitters, and we give the most foreign aid, not per person but in absolute. This is another issue where hopefully we will take a long-term approach which, even though we sometimes have a hard time doing that, it's easier for us, as a rich country with this kind of scientific depth, than it is for the poor countries who will suffer the problems.
It is obvious that the performance of a stock last year or last month is no reason, per se, to either own it or to not own it now. It is obvious that an inability to "get even" in a security that has declined is of no importance. It is obvious that the inner warm glow that results from having held a winner last year is of no importance in making a decision as to whether it belongs in an optimum portfolio this year.
R&D generally has been a bipartisan thing, because in the IT space, in the medical space, the U.S., the benefits to ourselves and the world and our economy have been very, very clear. I'm hopeful we can make a very strong case there. Energy is actually harder; it takes more time to get a product, but if you do it's a very, very big market and the constraints of doing that in a clean way are more obvious all the time.
Who would think of buying or selling a private business because of someone's guess on the stock market? The availability of a quotation for your business interest (stock) should always be an asset to be utilized if desired. If it gets silly enough in either direction, you take advantage of it. Its availability should never be turned into a livability whereby its periodic aberrations in turn formulate your judgements.
As I see it, there are two great forces of human nature: self-interest, and caring for others. Capitalism harnesses self-interest in a helpful and sustainable way, but only on behalf of those who can pay. Government aid and philanthropy channel our caring for those who can't pay. But to provide rapid improvement for the poor we need a system that draws in innovators and businesses in a far better way than we do today.
You are present in your life on earth at this moment for the purposes of living, loving, learning, and growing. Be assured that life can reliably provide a wide variety of adventures, experiences, and situations that may require you to draw from the depths of your being. Your level of self-awareness and manner of expression can determine the quality of living you experience. Why? Because you get back what you give out.
When Berkshire Hathaway laid out three billion dollars for GE today, we didn't spend it, we invested it. When the Federal government buys the mortgages, they're not spending it, they're investing it. Now, they're investing it in distress type assets but they're buying them at distress prices if they buy them at market. It's the kind of stuff I love to do. I just don't have 700 million. Maybe we could go in it together.
Ben's Mr. Market allegory may seem out-of-date in today's investment world, in which most professionals and academicians talk of efficient markets, dynamic hedging and betas. Their interest in such matters is understandable, since techniques shrouded in mystery clearly have value to the purveyor of investment advice. After all, what witch doctor has ever achieved fame and fortune by simply advising 'Take two aspirins'?
I think Ebola is a great example of where the world really needs to come together. The three countries where this outbreak took place have had a lot of civil war, very weak health systems. And so, it did take a while for people to understand ....that eventually what we saw was a very unique Ebola epidemic. I think it is quite impressive what's being pulled together, and I think we will be able to get this under control.
[People] have seen the credit market seize up. They're worried about money market funds, although the latest proposition from government should take care of that. They've seen eight percent of the bank deposits in the United States get moved very skillfully, I might say, within the last couple of weeks from institutions that they thought were fine a few months ago to other institutions. They are not wrong to be worried.
I mean you know at midnight everything is going to turn to pumpkins and mice; right? But if the evening goes along, I mean, you know, the guys look better all the time, the music sounds better, it's more and more fun, you think why the hell should I leave at quarter of 12. I'll leave at two minutes to 12. But the trouble is, there are no clocks on the wall. And everybody thinks they're going to leave at two minutes to 12.
We will continue to ignore political and economic forecasts, which are an expensive distraction for many investors and businessmen. Thirty years ago, no one could have foreseen the huge expansion of the Vietnam War, wage and price controls, two oil shocks, the resignation of a president, the dissolution of the Soviet Union, a one-day drop in the Dow of 508 points, or treasury bill yields fluctuating between 2.8% and 17.4%.
Investors, of course, can, by their own behavior make stock ownership highly risky. And many do. Active trading, attempts to "time" market movements, inadequate diversification, the payment of high and unnecessary fees to managers and advisors, and the use of borrowed money can destroy the decent returns that a life-long owner of equities would otherwise enjoy. Indeed, borrowed money has no place in the investor's tool kit.
I wouldn't want to manufacture cigarettes. But if I owned - we do own Costco. Do they sell them? Yes. So I don't have a problem owning stock in that. But I just wouldn't want to - I wouldn't want to do it myself. I basically think, if anything is sufficiently antisocial, society should do something about it. But that's a separate question. But - and I don't think there's any company that I have seen that's 100 percent pure.
India just went 3 years with no cases [of polio]. Pakistan is our toughest location right now because some parts of the Taliban have not allowed vaccinators to come in and have even attacked vaccinators. We are hopeful this will get resolved since no one wants their kid to be paralyzed. I spend a lot of time making sure the polio campaign is doing the best it can. We have great computer models that help guide our activities.
Virtually every company will be going out and empowering their workers with a certain set of tools, and the big difference in how much value is received from that will be how much the company steps back and really thinks through their business processes, thinking through how their business can change, how their project management, their customer feedback, their planning cycles can be quite different than they ever were before.
I won't close down a business of subnormal profitability merely to add a fraction of a point to our corporate returns. I also feel it inappropriate for even an exceptionally profitable company to fund an operation once it appears to have unending losses in prospect. Adam Smith would disagree with my first proposition and Karl Marx would disagree with my second; the middle ground is the only position that leaves me comfortable.
There's a true schizophrenia where if you say to voters, you know, do you think the federal government spends too much money and they should spend less, they say yeah, absolutely. Then you name specific things, like Pell grants for students and they say, no, not that. How 'bout NIH, medical research funding? Nah, you really shouldn't cut that. And pretty soon you've proved that what the American public is against is arithmetic.
From the standpoint of our spiritual development, it might be important for us to realize that we came from an unknown somewhere; we brought with us an attained state of consciousness; and while we are here, we are expanding that consciousness. From some perspectives, it may seem that we are making giant strides, but from the greater overview, our quantity of spiritual knowledge is smaller than Ptolemy's knowledge of astronomy!
I think philanthropy is also growing and catching on. Figuring out how the philanthropy sector, which is quite small compared to the private sector, which is the biggest by far, and then the governments, you know, even in these poor countries over time has to take on these key responsibilities. How does philanthropy accelerate that? Drive the kind of innovations, make sure they get used well. So it plays this kind of special role.
You have to turn over a lot of rocks to find those little anomalies. You have to find the companies that are off the map - way off the map. You may find local companies that have nothing wrong with them at all. A company that I found, Western Insurance Securities, was trading for $3/share when it was earning $20/share!! I tried to buy up as much of it as possible. No one will tell you about these businesses. You have to find them.
Just look at that Forbes 400. Takes a billion three to get on the Forbes 400 this year. And the aggregate wealth is just staggering. And those people are paying less percentage of their total income to the federal government than their receptionists are. [...] I'll bet a million dollars against any member of the Forbes 400 who challenges - me that the average for the Forbes 400 will be less than the average of their receptionists.
There is no question that an important service is provided to investors by investment companies, investment advisors, trust departments, etc. This service revolves around the attainment of adequate diversification, the preservation of a long-term outlook, the ease of handling investment decisions and mechanics, and most importantly, the avoidance of the patently inferior investment techniques which seem to entice some individuals.
The value of market esoterica to the consumer of investment advice is a different story. In my opinion, investment success will not be produced by arcane formulae, computer programs or signals flashed by the price behavior of stocks and markets. Rather an investor will succeed by coupling good business judgment with an ability to insulate his thoughts and behavior from the super-contagious emotions that swirl about the marketplace.
I served for 42 years on the board of trustees of the largest Presbyterian seminary, Princeton Theological Seminary, and we had brilliant people - teachers and students both-but they did not come up with many new concepts. They weren't invited to come up with new concepts. Anybody who had come up with a new concept would have been under suspicion for being out of step with the tradition or out of step with the teachings of the church.
I mean, they were getting the mortgage of some guy in Omaha, you know, securitized a couple of times. I mean he had all these - they had all these types from Wall Street, you know, and they had advanced degrees, and they look very alert, and they came with these - they came with these things that said gamma and alpha and sigma and all that. And all I can say is beware of geeks, you know, bearing formulas. They've heard that in Europe.
Well depending on the government, you either work through the government, which is ideal, because then you're strengthening their capabilities, or you work through the non-governmental organizations. It's never easy, and you know, it's just about the very basics of health. This is not hospitals. This is just primary health care [in Africa], the most simple things, and even so, getting the supplies out, getting the trained workers there.
(Talking about his first computer) Like all kids we not only fooled around with our toys, we changed them. If you've ever watched a child with a cardboard carton and a box of crayons create a spaceship with cool control panels, or listened to their improvised rules, such as "Red cars can jump all others," then you know that this impulse to make a toy do more is at the heart of innovative childhood play. It is also the essence of creativity.
I grew up playing football and hunting; and went to military school and then into the Marine Corps. Kindness is not a valued trait. That`s why I had to learn kindness. As I grow older I'm finding it's something I definitely need to put focus on, thought and practice. Kindness actually comes from the heart, so it's really stretching inside of me. It's been quite a magical journey for me to learn to be kinder in my dealing[s] with other people.
I have no views as to where it will be, but the one thing I can tell you is it won't do anything between now and then except look at you. Whereas, you know, Coca-Cola (KO) will be making money, and I think Wells Fargo (WFC) will be making a lot of money and there will be a lot - and it's a lot - it's a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that.
In the same way that when the car got going, people thought it would be an electric car, people thought it would be a steam car. Actually, the dark horse in that race was internal combustion, but because of the energy density of gasoline and discovery of oil in large amounts at that point in first Pennsylvania and then Texas, it won out over those other two, to the point that those other two are actually viewed as obscure footnotes in history.
The interview process tests not what the applicant knows, but how well they can process tricky questions: If you wanted to figure out how many times on average you would have to flip the pages of the Manhattan phone book to find a specific name, how would you approach the problem? If a spider fell to the bottom of a 50-foot well, and each day climbed up 3 feet and slipped back 2, how many days would it take the spider to get out of the well? .
[Melinda Gates] is a lot of fun to work with. There's some of the people skills that she's better at and cares about more. It'd be a mistake not to think of her as very numerical and interested in the science. I enjoy, if I get ahead of her, say, understanding the immune system, then we can spend a few hours, where I'm going through how amazing it is and interesting, and how that affects our creating new products, so I've always had a partner.
The parable of the talents is a good analogy of what happens when we give. When we merely try to hold on to what is given or entrusted to us, life may seem to take away even that. But when we choose to use what life has given us, the return of abundance can include friendship, companionship, financial blessings, homes, transportation, and security in wonderful ways. The universe holds nothing back from the one who lovingly and sincerely gives.
I am concerned that too many people are focused too much on money and not on their greatest wealth, which is their education. If people are prepared to be flexible, keep an open mind and learn, they will grow richer and richer through the changes. If they think money will solve the problems, I am afraid those people will have a rough ride. Intelligence solves problems and produces money. Money without financial intelligence is money soon gone.
Charlie and I decided long ago that in an investment lifetime, it's too hard to make hundreds of smart decisions. That judgment became ever more compelling as Berkshire's capital mushroomed and the universe of investments that could significantly affect our results shrank dramatically. Therefore, we adopted a strategy that required our being smart and not too smart at that, only a very few times. Indeed, we now settle for one good idea a year.
It has been said that "to enthuse" means "to fill with spirit," and that spirit of enthusiasm is awaiting release or manifestation. Enthusiasm can be harnessed and activated. It can be transferred from one person to another. The energy of enthusiasm is similar to a radio signal that carries around the world. It can be transmitted and received; and when enthusiasm is shared by a group of people, it can be potentiated to a higher degree of power.
Many media commercials encourage us to believe that if we buy a certain product, we can be physically appealing, or popular, or successful. According to the commercial message, it may be easy to make friends and influence people if we simply do what we're told to do. It would be wonderful if that were true, but unfortunately life does not seem to work that way. What is inside of us can be much more important and influential than what is outside.
...how little our side of the industry did to move its business to the more ethical firms and to make a fuss about conflicted or unethical behavior. Had a number of us moved our business, we might have slowed or even stopped the 30-year slide in conflicted, unethical behavior that we have experienced. I, for one, regret the modest nature of our moves. We all could have done more. We have tolerated a pretty nasty decline in standards. Shame on us.