Transcript:
Speaker: Well, good morning and welcome. Youâre a nice crowd, you certainly got quiet quickly. That surprised me. Can you hear me all right? There in the back? Well, for business school, you know it doesnât get much better than this. Having the worldâs greatest investor come to your campus is quite an honor.
Warren Buffett is Chairman of Berkshire Hathaway, a holding company whose investments range from GEICO Insurance, to American Express and Coca-Cola, to Borsheims jewelry store in his hometown of Omaha, Nebraska.
Mr. Buffett has been described as âthe god of value investorsâ and âthe Michael Jordon of the investing game.â He began his first investment partnership in the mid-1950s with $100 of his own money. A few years later he began investing in a struggling Massachusetts textile mill called Berkshire Hathaway. Through Berkshire he started putting capital into other businesses, chiefly insurance, which generated cash streams for more investments which have done very well indeed as we all know.
From a share price of about $18 in 1965, Berkshire today trades around $69,100 a share. Think Iâm going to go out and buy 500 shares. Over time the company has annualized performances more than double that of S&P 500, and Berkshire today is worth more than $100 billion. But Mr. Buffett is known as much for his unpretentious style as for his lofty success. He has become a champion of investors and is legendary for his aversion to corporate doublespeak. He is rare among CEOs in that he cheerfully admits his mistakes. Three years ago he wrote in his annual report that Berkshire would have done better if heâd simply had gone to the movies. There werenât very many years like that since 1965, believe me.
Berkshire was proudly, even defiantly absent from the dot-com hysteria of the last few years, and now that the bubble has burst as we all know, itâs Warren Buffett whoâs having the last laugh. In his most recent letter to shareholders he wrote, quote, âWeâve embraced the 21st century by entering such cutting-edge industries as brick, carpet, insulation, and paint.â Try to control your excitement. You know, and personally from reading his letters, I mean itâs just a joy. Itâs a business lesson in itself. I would encourage you, whenever you get an opportunity, to take one aside and read it carefully. Youâll learn a tremendous amount.
His wisdom and insights are so valued that some investors buy a share of Berkshire stock just so they can hear him at his legendary annual meeting, or as he calls it, âWoodstock for capitalists.â He doesnât make speaking appearances often, and we are extremely fortunate to have him with us today. Earl Leonard of Coca-Cola, and our distinguished executive in residence had a lot to with that, Earl, and weâre deeply indebted to you for helping to arrange this. Thank you very much.
Our format today will be primarily questions and answers. Mr. Buffett will make some brief remarks at the beginning and then weâll move into your phase. We will have a microphone set up over here. We would like to come aroundâ weâre videotaping, so weâd like you to use the microphone, please. So go ahead and begin to line up over there to ask your questions. So would you please give a very warm welcome to the oracle of Omaha, Warren Buffett.
Warren Buffett: Testing. 1 million. 2 million. Great, okay. I came in from Nebraska today, and youâre probably all familiar with us, mainly by our football team. We have those fellows with the big white helmets with those red âNâs on them. I asked one of our starters the other day, âWhatâs the âNâ stand for?â And he said, âKnowledge.â We make it tough on them though. I mean you donât coast through Nebraska just because youâre a football player. They major in agricultural economics, and thereâs a two question final for all of the players. And the first question is, âWhat did old MacDonald have?â And they were giving that to one of our potential Heisman Trophy winners the other day. He started to sweat. Finally he brightened up, he said, âFarm!â The professor, delighted of course, you donât want to flunk a Heisman candidate. So he said, âNow,â he said. âYouâre halfway home. Just one more question. How do you spell âfarmâ?â Now the guy really starts to sweat, and he looks at the ceiling and he looks around. Finally his face brightens up and he says, âEe-i-ee-i-oh!â So watch for that guy this year, heâll be dynamite.
I really want to talk about whatâs on your mind, so weâre going to do a Q and A in a minute. There are a couple questions I always get asked. You know, people always say, âWell who should I go to work for when I get out then?â Iâve got a very simple answer, we may elaborate more on this as we go along, but, you know the real thing to do is to get going for some institution or individual that you admire. I mean itâs crazy to take in-between jobs just because they look good on your resume, or because you get a little higher starting pay.
I was up at Harvard a while back, and a very nice young guy, he picked me up at the airport, a Harvard Business School attendee. And he said, âLook. I went to undergrad here, and then I worked for X and Y and Z, and now Iâve come here.â And he said, âI thought it would really round out my resume perfectly if I went to work now for a big management consulting firm.â And I said, âWell, is that what you want to do?â And he said, âNo,â but he said, âThatâs the perfect resume.â And I said, âWell when are you going to start doing what you like?â And he said, âWell Iâll get to that someday.â And I said, âWell you know, your plan sounds to me a lot like saving up sex for your old age. It just doesnât make a lot of sense.â
I told that same group, I said, âGo to work for whomever you admire the most.â I said, âYou canât get a bad result. Youâll jump out of bed in the morning and youâll be having fun.â The Dean called me up a couple weeks later. He said, âWhat did you tell those kids? Theyâre all becoming self-employed.â So, youâve got to temper that advice a little bit. Play one game a little bit with me for just a minute and then weâll get to your questions.
Iâd like for the moment to have you pretend Iâve made you a great offer, and Iâve told you that you could pick any one of your classmatesâ and you now know each other probably pretty well after being here for a while. You have 24 hours to think it over and you can pick any one of your classmates, and you get 10 percent of their earnings for the rest of their lives. And I ask you, what goes through your mind in determining which one of those you would pick? You canât pick the one with the richest father, that doesnât count. I mean, youâve got to do this on merit. But, you probably wouldnât pick the person that gets the highest grades in the class.
I mean, thereâs nothing wrong with getting the highest grades in the class, but that isnât going to be the quality that sets apart a big winner from the rest of the pack. Think about who you would pick and why. And I think youâll find when you get through, youâll pick some individualâ youâve all got the ability, you wouldnât be here otherwise. And youâve all got the energy. I mean, the initiative is here, the intelligence is here throughout the class. But some of you are going to be bigger winners than others.
And it gets down to a bunch of qualities that, interestingly enough, are self-made. I mean itâs not how tall you are. Itâs not whether you can kick a football 60 yards. Itâs not whether you can run the 100 yard dash in 10 seconds. Itâs not whether youâre the best looking person in the room. Itâs a whole bunch of qualities that really come out of Ben Franklin, or the Boy Scout coders, or whatever it may be. I mean, itâs integrity, itâs honesty, itâs generosity, itâs being willing to do more than your share, itâs just all those qualities that are self-selected.
And then if you look on the other side of the ledger, because thereâs always a catch to these free gifts and genie jokes, so. You also have to âand this is the fun partâ you also have to sell short one of your classmates and pay 10 percent of what they do. So, who do you think is going to do the worst in the class? This is a way more. And think about it again. And again, it isnât the person with the lowest grades or anything of the sort. Itâs the person who just doesnât shape up in the character department.
We look for three things when we hire people. We look for intelligence, we look for initiative or energy, and we look for integrity. And if they donât have the latter, the first two will kill you, because if youâre going to get someone without integrity, you want them lazy and dumb. I mean, you donât want a spark of energy out of them. So itâs that third quality. But everything about that quality is your choice.
You know, you canât change the way you were wired much, but you can change a lot of what you do with that wiring. And itâs the habits that you generate now on those qualities, or those negatives qualities. I mean the person who always claims credit for things they didnât do, that always cuts corners, that you canât count on. In the end those are habit patterns, and the time to form the right habits is when youâre your age. I mean it doesnât do me much good to get golf lessons now. If Iâd gotten golf lessons when I was your age I might be a decent golfer.
But, someone once said âthe chains of habit are too light to be felt until theyâre too heavy to be broken.â And I see that all the time. I see people with habit patterns that are self-destructive when theyâre 50 or 60 and they really canât change then, theyâre imprisoned by them. But youâre not imprisoned by anything, so. When you write down the qualities of that person that youâd like to buy 10 percent of, look at that list and ask yourself, is there anything on that list I couldnât do?
And the answer is there wonât be. And when you look at the person you sell short, and you look at those qualities that you donât like, if you see any of those in yourself âegotism, whatever it may be, selfishnessâ you can get rid of that. That is not ordained. And if you follow that, and Ben Franklin did this and my old boss Ben Graham did this at early ages in their young teens, Ben Graham looked around and he said, âWho do I admire?â And he wanted to be admired himself and he said, âWhy do I admire these other people?â And he said, âIf I admire them for these reasons, maybe other people would admire me if I behave in a similar manner.â And he decided what kind of a person he wanted to be.
And if you follow that, at the end youâll be the person you want to buy 10 percent of. I mean thatâs the goal in the end, and itâs something thatâs achievable by everybody in this room. So thatâs the end of the sermon. Now letâs talk about whatâs on your mind, and you can ask anything. The only thing I wonât tell you is what weâre buying or selling. I donât even tell myself that. I mean I write it down and then itâs like the Coca-Cola formula. Thereâs only two people that can get into the trust department and find out what they are, and I donât know who the two are, so. We donât talk about what weâre buying or selling, but anything else is fair game. Personal, business, anything youâd like to talk about. And actually, the tougher the questions are, the more interesting it is for me. So donât spare my feelings, I mean just throw it at my head.
And with that, I guess weâve got a microphoneâ is this the only microphone or is there one on this side?
Speaker: Itâs the only microphone right here. To ask a question youâll need to come down to this microphone.
Warren Buffett: Just stand in line, and Iâll be Regis Philbin and you canâ I have an old-fashioned belief that I can only should expect to make money in things that I understand. And when I say âunderstand,â I donât mean understand what the product does or anything like that. I mean understand what the economics of the business are likely to look like 10 years from now or 20 years from now. I know in general what the economics of, say Wrigley chewing gum will look like 10 years from now. The internet isnât going to change the way people chew gum. It isnât going to change which gum they chew. If you own the chewing gum market in a big way, and youâve got Doublemint, and Spearmint, and Juicy Fruit, those brands will be there 10 years from now. So I can pinpoint exactly what the numbers are going to look like on Wrigley, but Iâm not going to be way off if I try to look forward on something like that.
Evaluating that company is within what I call âmy circle of competence.â I understand what they do, I understand the economics of it, I understand the competitive aspects of the business. There can be all kinds of companies that have wonderful futures but I donât know which ones they are. Iâve given talks in the past where I carry with me a 70-page tightly-printed list, and it shows 2000 auto companies. Now if at the start of the 20th century you had seen what the auto was going to do to this country, the impact it would have on the lives of then your children and grandchildren and so on. It just, it transformed the American landscape. But of those 2000 companies, three basically survive. And they havenât done that well, many times.
So how do you pick three winners out of 2000? I mean itâs not so easy to do. Itâs easy when you look back, but itâs not so easy looking forward. So you could have been dead right on the fact that the auto industryâ in fact, you probably couldnât have predicted how big of an impact it would have. But you wouldnât haveâ if youâd bought companies across the board you wouldnât have made any money, because the economic characteristics of that business were not easy to define.
Iâve always said the easier thing to do is figure out who loses. And what you really should have done in 1905 or so, when you saw what was going to happen with the auto is you should have gone short horses. There were 20 million horses in 1900 and thereâs about 4 million horses now. So itâs easy to figure out the losers, you know the loser is the horse. But the winner was the auto overall. But 2000 companies just about failed, a few merged out and so on.
There were three auto companies in the Dow Industrials in the 1920s and 30s: Studebaker, Nash-Kelvinator, and Hudson Motor. Now those names are all familiar to me, and maybe some of them are familiar to you, but theyâre not making any cars. They didnât make money. And yet at one time they were in the Dow 30, they were the aristocrats of American business. And they got creamed. So, figuring out the economic characteristics of the winners in a wonderful business is not easy.
In North Carolina, you know Orville and Wilbur took offâ or I guess Orville took off and Wilbur watched. Iâd have been Wilbur. But, if you could have seen the future of the airline business from that point forward and how that would transform things, it would have blown you away. And itâs excited people incidentally ever since. But if there had been a capitalist in Kitty Hawk, he should have shot Orville down, because itâs done nothing but cost investors money. There were over 400 airplane companies in the 1920s and 30s alone. There was in Omaha, there was in Nebraska, we were the Silicon Valley of apparently of aircraft, and they all disappeared. Itâs been a terrible business.
At the end of 1991 if youâd added up the aggregate earnings from all airline companies, with billions poured in since Wilbur and Orville were down there, they came to less than zero. The number of passengers went up every year. The importance of the industry was dramatically increased decade by decade, and nobody made any money. So, figuring out the economic consequencesâ T.V. I think thereâs, I donât know, 20-25 million sets a year sold in the United States. I donât think thereâs one of them made in the United States anymore. Youâd say, T.V. set manufacturer, what a wonderful business. Nobody had a T.V. in 1950, thereabouts, â45-â50. Everybody has multiple sets now. Nobody in the United States has made any real money making the sets; theyâre all out of business. You know the Magnavoxs, the RCAs, all of those companies.
Radio was the equivalent in the 20s. Over 500 companies making radios in the 1920s. Again, I donât think thereâs a U.S. radio manufacturer at the present time. But Coca-Cola, you know. What was it, 1884 at Jacobs Pharmacy or whatever, a fellow comes up with something. A lot of copiers over the years, but now youâve got a company thatâs selling roughly 1.1 billion 8 ounce servings of its product, not all Coke âSprite and some othersâ daily throughout the world 117 years later.
So understanding the economic characteristics of a business is different than predicting the fact that an industry is going to do wonderfully. So when I look at the internet businesses or I look at tech businesses, I say this is a marvelous thing and I love to play around on the computer, and I order my books from Amazon and all kinds of things. But I donât know whoâs going to win. Unless I know whoâs going to win, Iâm not interested in investing; Iâll just play around on the computer.
Defining your circle of competence is the most important aspect of investing. Itâs not how large your circle is, you donât have to be an expert on everything, but knowing where the perimeter of that circle of what you know and what you donât know is, and staying inside of it is all important. Tom Watson Senior who started IBM said in his book, he said, âIâm no genius. But Iâm smart in spots, and I stay around those spots.â And, you know that is the key. So if I understand a few things and stick in that arena, Iâll do okay. And if I donât understand something but I get all excited about it because my neighbors are talking about, the stocks are going up, everything; I start fooling around someplace else, eventually Iâll get creamed. And I should. So now letâs go over here.
Audience: Hello, Mr. Buffett. I've got two short questions. One, is how do you find intrinsic value in a company?
Warren Buffett: Well intrinsic value is the number that if you were all-knowing about the future and could predict all the cash that a business would give you between now and judgement day, discounted at the proper discount rate that number is what the intrinsic value of a business is. In other words, the only reason for making an investment and laying out money now is to get more money later on, right? Thatâs what investing is all about.
Now, when you look at a bond, so when you see a United States government bond itâs very easy to tell what youâre going to get back. It says it right on the bond. It says when you get the interest payments. It says when you get the principal. So, itâs very easy to figure out the value of a bond. It can change tomorrow if interest rates change, but the cash flows are printed on the bond. The cash flows arenât printed on a stock certificate. Thatâs the job of the analyst is to print out, change that stock certificate which represents an interest in the business, and change that into a bond and say this is what I think itâs going to pay out in the future. When we buy some new machine for Shaw to make carpet, thatâs what weâre thinking about obviously, and youâll learn that in business school.
But itâs the same thing for a big business. If you buy Coca-Cola today, the company is selling for about $110-15 billion in the market. The question is, if you had 110 or 15 billionâ you wouldnât be listening to me, but Iâd be listening to you incidentally. But the question is would you lay it out today to get what the Coca-Cola Company is going to deliver to you over the next 2 or 300 years? The discount rate doesnât make much difference as you get further out. And that is a question of how much cash theyâre going to give you. It isnât a question of how many analysts are going to recommend it, or what the volume of the stock is, or what the chart looks like or anything, itâs a question of how much cash itâs going to give you.
Itâs true whether if youâre buying a farm, itâs true if youâre buying an apartment house, any financial asset. Oil in the ground, youâre laying out cash now to get more cash back later on. And the question is is how much are you going to get, when are you going get it, and how sure are you? And when I calculate intrinsic value of a business when we buy businesses, and whether weâre buying all of a business or a little piece of a business, I always think weâre buying the whole business because thatâs my approach to it. I look at it and I say, what will come out of this business and when?
And, what youâd really like of course is then to be able to use the money that you earned, and earn higher returns on it as you go along. I mean, Berkshire has never distributed anything to its shareholders, but its ability to distribute goes up as the value of the businesses we own increases. We can compound it internally, but the real question is, Berkshireâs selling for, weâll say 105 or so billion now. What can we distribute from thatâ if youâre going to buy the whole company for 105 billion now, can we distribute enough cash to you soon enough to make it sensible at present interest rates to lay out that cash now.
And thatâs what it gets down to. And if you canât answer that question, you canât buy the stock. You can gamble in the stock if you want to, or your neighbors can buy it. But if you donât answer that question, and I canât answer that for internet companies for example, and a lot of companies, there are all kinds of companies I canât answer it for. But I just stay away from those. Number two.
Audience: So you've got formulas involved in finding intrinsic values on certain companies? I mean, you got a mathematical system?
Warren Buffett: Just kind of present value, future cash, yeah.
Audience: Second short question is why havenât you written down your set of formulas or your strategies in written form so you can share it with everyone else?
Warren Buffett: Well I think I actually have written about that. If you read the annual reports over the recent years, in fact the most recent annual report I used what Iâve just been talking about, I used the illustration of Aesop. Because here Aesop was in 600 BCâ smart man, wasnât smart enough to know it was 600 BC though. Would have taken a little foresight. But Aesop, in between tortoises and hares, and all these other things he found time to write about birds. And he said, âA bird in the hand is worth two in the bush.â Now that isnât quite complete because the question is, how sure are you that there are two in the bush, and how long do you have to wait to get them out? Now, he probably knew that but he just didnât have time because he had all these other parables to write and had to get on with it. But he was halfway there in 600 BC. Thatâs all there is to investing is, how many birds are in the bush, when are you going to get them out, and how sure are you?
Now if interest rates are 15 percent, roughly, youâve got to get two birds out of the bush in five years to equal the bird in the hand. But if interest rates are 3 percent, and you can get two birds out in 20 years, it still makes sense to give up the bird in the hand, because it all gets back to discounting against an interest rate. The problem is often you donât know not only how many birds are in the bush, but in the case of the internet companies there werenât any birds in the bush. But they still take the bird that you give them if theyâre in the hand.
But I actually have written about this sort of thing, and stealing heavily from Aesop who wrote it some 2600 years ago, but Iâve been behind on my reading. Yeah?
Audience: Good morning. I know youâre famed for your success, but I was curious if there were any particular moments in your life, or mistakes or failures that youâve made that were particularly memorable, what you may have learned from them, and if you had any particular advice for the students here in dealing with discouraging circumstances.
Warren Buffett: Yeah. Well Iâve made a lot of mistakes. The biggest mistakeâ well not necessarily the biggest, but buying Berkshire Hathaway itself was a mistake, because Berkshire was a lousy textile business. And I bought it very cheap. Iâd been taught by Ben Graham to buy things on a quantitative basis, look around for things that are cheap. And I was taught that say in 1940 or 1950; it made a big impression on me.
So I went around looking for what I call used cigar butts of stocks. And the cigar butt approach to buying stocks is that you walk down the street and youâre looking around for cigar butts, and you find on the street this terrible-looking, soggy, ugly-looking cigarâ one puff left in it. But you pick it up and you get your one puff. Disgusting, you throw it away, but itâs free. I mean itâs cheap. And then you look around for another soggy one-puff cigarette.
Well thatâs what I did for years. Itâs a mistake. Although, you can make money doing it, but you canât make it with big money, itâs so much easier just to buy wonderful businesses. So now Iâd rather buy a wonderful business at a fair price than a fair business at a wonderful price. But in those days I was buying cheap stocks, and Berkshire was selling below its working capital per share. You got the plants for nothing, you got the machinery for nothing, you got the inventory and receivables at a discount. It was cheap, so I bought it. And 20 years later I was still running a lousy business and that money did not compound.
You really want to be in a wonderful business because the time is the friend of the wonderful business. You keep compounding, it keeps doing more business, and you keep making more money. Time is the enemy of the lousy business. I could have sold Berkshire, perhaps liquidated it and made a quick little profit, you know one puff. But staying with those kind of businesses is a big mistake.
So you might say I learned something out of that mistake. And I would have been way better off takingâ what I did with Berkshire is I kept buying better businesses. I started an insurance business, Seeâs Candy, the Buffaloâ all kinds of things. I would have been way better doing that with a brand new little entity that Iâd set up rather than using Berkshire as the platform. Now Iâve had a lot of fun out of it. I mean everything in life seems to turn out for the better, so I donât have any complaints about that, but it was a dumb thing to do.
I went into US Air; I bought a preferred stock in 1989. As soon as my check cleared, the company went into the red and never got out. I mean it was really dumb. Iâve got an 800 number I call now whenever I think about buying an airline stock. I call them up any hour, fortunately I can call them at three in the morning, and I just dial and I say, âMy nameâs Warren and Iâm an aero-holic. And Iâm thinking about buying this thing.â Then they talk me down. It takes hours sometimes but itâs worth it, believe me. If you ever think about buying an airline stock, call me and Iâll give you the 800 number because you donât want to do it.
But, we got lucky in terms of how we eventually came out on it. But it was a dumb, dumb decisionâ all mine. And Iâve doneâ biggest in terms of opportunity costs, eventual costs, I bought half interest on a Sinclair filling station when I was about 20 with a guy who I was in the National Guard with. And I had about $10,000 then and I put $2,000 in, and I lost it all. So, that was 20%, and that means that the opportunity cost is now $6 billion of that filling station which is a big price to pay for getting to wipe a few windows and a few windshields and things like that. So, actually I like it when Berkshire goes down because it reduces the cost of that mistake on an opportunity cost.
But, the biggest mistakes weâve made by farâ Iâve made, not weâve made. The biggest mistakes Iâve made by far are mistakes of omission and not commission. I mean itâs the things I knew enough to do, they were within my circle of competence, and I was sucking my thumb. And that is really, those are the ones that hurt. They donât show up any place. I probably cost
Berkshire at least $5 billion, for example, by sucking my thumb 20 years ago, or close to it when Fannie Mae was having some troubles. We could have bought the whole company for practically nothing.
And I donât worry about that if itâs Microsoft because I donât know. Microsoft isnât in my circle of competence. So I donât have any reason to think Iâm entitled to make money out of Microsoft or out of cocoa beans or whatever. But I did know enough to understand Fannie Mae and I blew it. And that never shows up under conventional accounting. But I know the cost of it. I passed it up. And those are the big, big mistakes, and Iâve got plenty of them. And unless I tell you about them in the annual report âand I resist the temptation sometimesâ unless I tell you about them in the annual report youâre not going to know it because it doesnât show up under conventional accounting.
But omission is way bigger than commission. Big opportunities in life have to be seized. We donât do very many things, but when we get the chance to do something thatâs right and big, weâve got to do it. And even to do it in a small scale is just as big a mistake almost as not doing it at all. Youâve really got to grab them when they come, because youâre not going to get 500 great opportunities. You would be off if when you got out of school here you got a punch card with 20 punches on it, and every financial decision you made you used up a punch. Youâd get very rich because youâd think through very hard each one.
I mean I went to a cocktail party and somebody talked about a company he didnât even understand what they did or couldnât pronounce the name. But theyâd made some money last week and another one like it. You wouldnât buy it if you only had 20 punches on that card. Thereâs a temptation to dabble, particularly during bull markets, and stocks are so easy. Itâs easier now than ever because you can do it online. You know just you click it in and maybe it goes up a point and you get excited about that and you buy another one the next day and so on. You canât much money over time doing that. But if you had a punch card with only 20 punches, you werenât going to get another one for the rest of your life, you would think a long time before every investment decision. And you would make good ones and youâd make big ones, and you probably wouldnât even use all 20 punches in your lifetime. But you wouldnât need to. Yep?
Audience: Mr. Buffett, good morning. In your comments about making mistakes and errors like that, could you talk a little bit about your sell discipline? When youâre in a position and you feel like itâs no longer good. What criteria do you use when you just finally abandon it?
Warren Buffett: Yeah when I started outâ the sell situation has changed over the years because when I started out I had way more ideas than money. I mean I would go through Moodyâs Manual, I went through it page by page, and then I went through it again page by page. And I found stocks in there that I could understand that were selling at like two times earnings, even one times earnings. Well, when you only have 10,000 bucks that can get a little frustrating, and if you donât like to borrow money, which I never liked to borrow money.
So, I was always coming up with more ideas than I had money, so I had to sell whatever I liked least to buy something new that just was compelling to me. And for a long time I was in that mode. And now our problem is we have more money than ideas. So, if you look at our annual report which is on the internet at our homepage berkshirehathaway.com. Youâll see something in the back called the economic principles of Berkshire, which I believe in setting out for my partners. They are my partners; I donât look at them as shareholders I look at them as partners. Theyâre going to be my partners for life. So I want to tell them how I think. And if they disagree with the way I think thatâs fine, but I donât want them to be disappointed in me.
So I lay out there and I say, in terms of our wholly-owned businesses, weâre not going to sell no matter how much anybody offers us for them. I mean if somebody offers us three times what something is worthâ Seeâs Candy, The Buffalo News, Borsheims, whatever it may be, weâre not going to sell it. I may be wrong in having that approach. I know Iâm not wrong if I owned 100 percent of Berkshire because thatâs the way I want to live my life. Iâve got all the money I could possibly need, it just amounts to a change in the newspaper story on my obituary and the amount of money the foundation has. And to break-off relationships with people I like and people that have joined me because they think itâs a permanent home, to do that simply because somebody waves a big check at me would be like selling one of my children because somebody waved a big check. So I wonât do that, and I want to tell my partners I wonât do it so that theyâre not disappointed in me.
More and more with certain stocks weâve got that approach. Now, if we were chronically short of funds and had all kinds of opportunities coming, we might have a somewhat different approach.
But our inclination is not to sell things unless we get really discouraged, perhaps with the management, or we think the economic characteristics of the business change in a big way, and that happens. But weâre not going to sell simply because it looks too high. In all likelihood, you canât make that 100 percent but thatâs the principle under which weâre operating.
Weâre generating right now 5 billion of cash a year at least, so thatâs 100 million bucks every week. Weâve been talking here half an hour and I havenât done a damn thing. So, the real question is how do you put it out intelligently, and if we were selling things itâd be just that much more, so. There may come a time when that would change. But we want toâ and I have partners, shareholders, partners, who would say, âIf you can get three times what Seeâs Candyâs worth, why donât you sell it?â And thatâs why I want to be sure before they come in, they know how I think on that. I mean theyâre entitled to know that.
But you really wantâ think for minute if youâre going to get married and you want a marriage thatâs going to last, not necessarily the happiest marriage or one that Martha Stewart will talk about or anything, but you want a marriage thatâs going to last. What quality do you look for in a spouse? One qualityâ do you look for brains? Do you look for humor? Do you look for character? Do you look for beauty? No. You look for low expectations. That is the marriage thatâs going to last, if you both have low expectations. And I want my partners to be on the low side on expectations coming in because I want the marriage to last. Itâs a financial marriage when they join me at Berkshire and I donât want them to think Iâm going to do things that Iâm not going to do. So thatâs our guiding principle.
The advice is all free in here, the marital advice, everything else. Next?