Warren Buffett – The World's Greatest Money Maker

warren buffett investment strategy

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He’s the world’s most successful money maker warren buffett has more money than the gross domestic products of more than half the world’s countries on the latest count he has 40 billion dollars i think you guys are earning your money and he made it all by simply investing in the right companies

Some people are better at certain things than others you know there’s a lot of people who sing a lot better than i can i’m better at making money than most people if you trusted him to look after ten thousand dollars for you when he started out you’d have a cool 50 million dollars

Now this was one hell of a wallop of money everyone who’s anyone wants to be seen with him but buffett himself remains charmingly down to earth the world super rich have often found themselves reviled of late and mr buffett has his doubts about them too the idea that the people that

Move money around are some favored class strikes me as getting pretty far away from where we should be buffett is different he’s built a huge business empire and has developed his own special way of running it he’s a unique leader i can’t think of anyone close what you see is what you get

Absolutely 100 warren buffett has given me a rare chance to explore his world i want to find out how he makes his money and whether he is the acceptable face of the filthy rich I’ve arrived in omaha in the midwestern state of nebraska a city 1200 miles from wall street that grew up as a center for the railroad and meat packing industries today it’s home to less than half a million people My destination is this non-descript block warren buffett has agreed to see me and i’ve already started picking up some clues about him well i’ve got a meeting with mr buffett in his own headquarters here up on the 14th floor of this building and if you want a measure of the kind of

Guy he is you should hear this email he sent us he can’t give us very long he explains because from an actuarial standpoint i only have about 4 000 days left on this earth and i’m trying to keep various activities in proper proportion it’s a perfectly rational calculation

But not one that most people would perform i think Mr buffett runs a company called berkshire hathaway it’s worth 150 billion dollars yet it rents just one floor of offices mr buffett isn’t one for extravagance so this is the recreation this is it this is it this is our wine cellar but uh feel free to have a call

Berkshire hathaway invests in other companies that employ thousands of people buffett personally owns a quarter of the enterprise so it really is literally this is the office is it i mean it doesn’t seem very big somehow well we have a full floor i’ve been here 47 years moved in on january 1st of

1962 and uh gradually we’ve built it up to where we now have 20 employees here we have about 240 000 around the world and and uh this is world headquarters uh despite the fact of doesn’t look like it this is buffett’s team yes the whole team running the 150 billion dollar empire

I’ve seen smaller companies who have more staff to look after the coffee He has a couple of secretaries and he has some accounting people and a bond trader and not much more than that i’ve never seen anything like it in my experience of looking at dozens of businesses he has almost no support or help buffett has a personal assistant who fends off endless inquiries

Mr buffett’s office and according to him he just sits in his office reading all day one moment please now there’s no there’s no computer on your desk i’ve never had a computer in there i’ve never had a calculator in there and uh and i’ve never had a stock trigger in there

From here buffered makes investments and buys companies working his financial magic Once a year omaha awakes There’s an invasion of berkshire hathaway shareholders 35 000 of them make the pilgrimage to buffett’s annual general meeting woodstock for capitalists it’s often called good morning everyone is being held in the arena anyone can buy berkshire shares and buy themselves a slice of buffered success Talk about popular capitalism It’s not your usual company meeting along with this massive gathering there are special events at local businesses owned by berkshire hathaway This ice cream parlor enjoys its busiest night of the year and here i find out these people are not just shareholders they’re disciples he has common sense how many people in this world have common sense right now i’m a college student and even i have this perspective is like can do no wrong

Type person he is as he appears he’s a regular guy Well he’s the greatest investor of all time along with ice cream you can buy books about the man they call the oracle of omaha and try to glean the secret of his success at the shareholder meeting buffett is surrounded by crowds and cameras The life you’d expect for a celebrity billionaire but away from the spotlight unlike many of the other super rich he lives in a very different world the real world take his house he bought it for 31 000 more than 50 years ago it sits on the corner of a pleasant

Enough residential neighborhood in omaha well i’m happy there i mean i’d move if i thought i’d be happier someplace else how would i improve my life by having 10 houses around the globe i mean if i’d wanted to become you know a superintendent of housing or something

Of the sort you know i could have gone into that as a profession but i do not want to manage 10 houses and i really don’t even want somebody else doing it for me and i don’t know why the hell i’d be happier not even the biggest house in the street

I’m i’m warm in the winter i’m cool in the summer and it’s convenient for me i can’t imagine having a better house it’s the same story with his car now i think in about the year that he was declared the richest man in the

World and wanted you to go and buy a car for him is it true that you procured a car cheaply because it had hail damage yes yeah i’ve bought his last i think his last three or four cars and you have to understand he keeps cars until i tell him this is getting

Embarrassing time for a new car now they they don’t look hail damaged because they fix them but because they’ve been hell damaged they’re cheaper so you know what better deal can you get Buffett does have some super rich friends closest of all to him is bill gates this year gates is the richest person in the world last year it was buffett but they’ve both been at the top of the rich list for years it’s not a touchy subject apparently oh we definitely joke about it

You know i depending on his position i’ll usually try to send him something humorous uh it relates that i remember he was all the way down at eight one time i sent him a lucky eight ball gates was introduced to buffett a man 25 years older than him with no interest in computers

But their friendship quickly developed out of a shared passion for business and bridge sharon osberg often plays and travels with them it is like a father’s summer and i think bill will tell you that too like a father-son relationship bill is very interested in learning from warren and they’re clearly on the same

You know on the same intellectual plane so when they get going those brains get firing it’s really quite something they both have simple tastes and a love of junk food warren has never ramped up his ability to consume you know as long as a cheeseburger doesn’t get too expensive

And you know the price of coke is uh less than a couple bucks warren’s going to be fine now when you have some time with warren buffett what do you do well you try to work out how he does it buffett really is different while the

Guys on wall street like to make a quick buck buffett prefers to take it more slowly to invest and that’s the first lesson in the buffett primer invest don’t speculate well let’s talk about making money is there a meaningful distinction to be drawn between making money out of investment and

Making money out of speculation it’s always a bet isn’t it it’s always a gamble no it isn’t a gamble it there is a real distinction that basically it it’s subjective but an investment attitude you look to the asset itself to produce the return so if

I buy a farm and i expected to produce eighty dollars an acre for me in terms of its revenue from corn and soybeans and it cost me six hundred dollars i’m looking at the i’m looking at the return from the farm itself i’m not looking at

The price of the farm every day or every week or every year on the other hand if i buy a stock and i hope it goes up next week to me that’s pure speculation other investors look at prices every minute hoping they’ll go up but all that effort and not one is as

Rich as buffett To help him invest warren has a right-hand man he’s not like the wall street guys either he’s 85 years old for one thing charlie munger i asked him to give me some details important details as to what they like to invest in as it happens they have a checklist and

Charlie spelt it out for me item by item we have to deal with things that we’re capable of understanding and then once we’re over that filter we have to have a business with some intrinsic characteristics that give it a durable competitive advantage and then of course we would vastly prefer

A management place with a lot of integrity and talent and finally no matter how wonderful it is it’s not worth an infinite price so we have to have a price that makes sense that’s a very simple set of ideas simple indeed with this checklist manga and buffett have found some great

Investment opportunities hidden gems overlooked by the clever investors on wall street i’d like to buy the world a home and furnish it well hardly hidden take coca-cola great marketing over the decades had made it the world’s best-known brand A good product a good team in the 80s it ticked all buffett’s boxes What really counts is how the coca-cola company does and that really is not a bet it’s an analysis of the fundamental earning power of the asset and looking to the to that earning power to justify the price you pay on that basis coke shares seemed excellent value by a comfortable margin

So buffett and munger spent a billion dollars buying them for many many months we were buying as much coca-cola as we could buy roughly a third of the volume trading every day for months we were very aggressive in buying into coca-cola within four years their investment had

Quadrupled in value but they didn’t sell and today they still own coke shares worth 10 billion dollars [Applause] they invested in other big brands too like american express and walt disney And unlike most investors when they bought they really went for it they put a third of their assets into coca-cola it’s not recommended for ordinary savers but would-be warren buffett should remember you don’t have to diversify you break one of the cardinal rules of investment diversification i mean everybody’s told

Don’t put all your eggs in one basket spread them as widely as possible you actually do sometimes and put enormous numbers of eggs in one basket don’t you i stick with what i know if somebody owns 50 stocks can they really like the one they rank

As number 50 as well as the one they rank as number one can they know it as well i don’t think so however buffett does it it works he’s grown his investment fund by twenty percent a year twenty percent in one year is good but as an average over decades it’s unheard of

And it snowballs a thousand dollars put into berkshire shares in 1965 is now worth over five million dollars meet dick holland he’s living proof of the buffett formula he trusted buffett with his money in the early 60s and warren has made him rich very rich what i have today you know beyond my

Wildest dreams i i expected you know to be do decently and uh enjoy life and all that kind of thing but this was one hell of a wallop of money holland is so rich that he’s been able to give away tens of millions in recognition omaha’s huge new art

Center is named after him and his wife well i tried to thank warren once i said you know said really thank you for making me rich you know and he said oh i wouldn’t make you rich you didn’t sell we spoke to dick holland and he’s incredibly grateful i mean it’s it’s

Must be very nice to have people who are that great but he says you sort of don’t accept the uh the thanks that he would like to give you well i no i i know he’s grateful but i’m grateful to him i mean

He went with me when i was a 26 or 27 year old kid that looked about 20 and behaved like he was 15. i mean so he bet on me at a time when a lot of people wouldn’t have been on me so i’m grateful to him i

Mean it’s a it’s it’s mutual buffett’s down to earth approaches beguiling but can making so much money really be as simple as he makes it sound it’s simple but it is not easy he has spent nearly 80 years building up a mental file of everything that he knows about companies and businesses

He works at it all the time and he doesn’t really like to admit that so how did a middle-class boy from the midwest turn himself into the richest man in the world Buffett was born in omaha only a few miles from where he meets his shareholders today his father was a stockbroker which was tough in the depression years later howard buffett was elected to congress and the family moved to washington where young warren discovered money-making [Applause] he had several paper routes and he had a used golf ball business he had a chain of pinball machines for a while in a barber shop i mean i probably left things out but he was always doing these sorts of things buffett had a newspaper round in this rich apartment block

He built it up until with his other businesses he was earning more money than his teachers but the young warren had his adolescent troubles i had all these friends in omaha and everything was going wonderfully and then all of a sudden we ended up in washington dc so i behaved very badly

Buffett got into the wrong crowd and stole golf balls and even clubs from a department store on this site i didn’t need the things that that i was shoplifting when i was 12 or 13 but i was just doing it out of the show i was unhappy with the world for a while At heart buffered was a law abiding citizen from the age of 13 he completed his own tax return he was already thinking big i remember one time when he was about oh maybe 16 or 17 and he said to me i’m going to be a millionaire

By the time i’m 30. i think it was 30 but he told me this and i i thought yeah he probably will be but i didn’t think anything of it kind of you know because that’s just who he was when he left school buffett headed for new york

Not to wall street but to study his tutor was ben graham author of a best-selling book the intelligent investor he’s been buffered guru ever since not least for introducing him to someone called mr market well mr market is in chapter 8 of the intelligent investor probably the

Most important thing i’ve ever read in my life very simple concept that it says the market is there to serve you and not to instruct you imagine mr market is the man you do business with you can buy or sell from him any day of the year but he has unpredictable moods

Sometimes his prices are too high or too low and that gives you a chance to make money so in the stock market you get this wonderful opportunity to deal with this crazy psychotic uh partner called mr market and he does it with thousands of companies see and every day he gives you

That offer and when he’s wrong you take advantage of him but you don’t start paying attention to what he’s saying to tell you whether you’re right or wrong you pay attention to him because he is there to serve you and not to instruct you In his twenties buffett left new york and moved back to omaha he learned the ukulele to impress the father of the girl he wanted to marry it worked with the dad and then with his daughter the gregarious suzy thompson who became mrs buffett soon there were three children

They never became the spoiled children of the super rich when i was a teenager and i’d say gee could i have five dollars to go get my dinner at mcdonald’s he’d say yeah i would bring back the change and he’d laugh when he said it because he but he meant it too

My dad bought a slot machine and he put it up on the third floor and everybody in the neighborhood thought this was the coolest thing ever so for a while what happened is we got our allowance and we’d stick it in the slot machine which my dad was not stupid um you know

He got all the money back all the time did he give it back to you did you did he unlock it and let you no i think there was a lesson there [Laughter] meanwhile buffett was making that first million but this was early in his career and he was still finding his way

So it wasn’t the coca-colas he was after he’d looked to invest in obscure companies using moody’s manual moody’s was a directory of financial data of thousands of companies the kind of thing you can get with a click of a mouse these days and the young mr buffett would scrutinize it on the

Search for bargains he was looking for undervalued companies the ones when you looked at the total value of the shares they were somehow worth less than the assets of the company these were called cigar butts why because you could pick them up for almost nothing but there was still a

Little bit of value left inside them Others were already making money this way buffett was happy too as well until one episode in the early 60s warren buffett was to get a lesson when he went 100 miles from home across the plains of nebraska to buy a company in the small town of beatrice

Buffett became the owner of one of the town’s biggest employers dempster mill The company made industrial machinery but it didn’t make money so buffered hired a tough manager harry bottle to try to turn it round dick tegmire worked there and saw how bottle set about his task he would walk around the plant and if he saw two people talking outside of either

One’s office you could rest assured one of those people would be gone by friday night because they’re slacking and they just put fear in a lot of people But buffett told his shareholders the bottle was unquestionably the man of the year A lot of people have made money doing what warren buffett did here you buy a cheap company that’s not performing very well you take the best bits out of it and sell them off for whatever price you can get asset stripping it has an economic purpose but it

Doesn’t make you popular with the locals if i’d come to beatrice in 1967 and ask people what they thought of warren buffett what would have been the response you think i think it would be quite negative um because this is a close-knit family town

And a lot of people got hurt a lot of people lost their job and so i think you’d be hard-pressed to see anything positive a couple of years later buffett sold dempster mill he made a decent profit but he realized he wasn’t one for unpopular decisions You know why why get involved with something with the decisions every day are terrible when you can get into a business where they’re very very easy it’s much more fun to sell coca-cola and everybody’s smiling as my partner charlie marker says we haven’t learned

How to make a silk purse out of a sow’s ear we have enough trouble making silk purse out of silk the conventional wisdom is that warren buffett sits in a room buying and selling stocks all day but the reality is that since the 1960s he’s been buying companies and creating a business that

Owns dozens of other companies he’s an executive he’s a manager as well as an investor exactly today the businesses berkshire hathaway owns are worth more than its other investments and they’re a strange mixture you’ve got children’s toys you’ve got metal working solutions you’ve got hard-wearing gloves clothes t-shirts candies

It appears to just be a rag bag collection of different companies So how does buffett run so many different businesses well his management secret is that he applies only the lightest hand to the solid tiller a tankless water heater take clayton holmes a family business buffett recently bought for a reported 1.7 billion dollars how does he interfere how does he know

What you’re getting people don’t believe this but you know he never came and looked at the company all we did was talk on the phone and he bought our company and then all we did he just said kevin just send me whatever financials you’re already producing internally so we just pass those along

Quarterly it is too good of a situation to to believe buffett wastes no time on state visits to his businesses as bill gates discovered one time only took warren to visit microsoft after we’d spent about a half day doing that he says now i’ve toured microsoft more than any business that i own

Because on-site tours are not you know part of how he does his analysis but if buffett isn’t micromanaging his many companies what is he doing well that’s the next piece of the buffett formula he says his job is to allocate capital efficiently it sounds dull but it’s key to his success It means taking the profits of one business and investing them in another you make some money he thinks he can invest it better than you can he takes it all off you how’s that manager not not a problem if he’s got a better use for it that’s fine

Warren buffett’s ability to convince the manager of one of his businesses that you know what i can use that capital more efficiently and effectively than you can by putting it in this business over here which by the way you don’t run that is an amazing power of persuasion persuasion that’s the next remarkable

Skill of mr buffett handling people My mom says when he was in his 20s he was reasonably socially inept i mean like in large crowds he’d much rather not be there and you know he just would rather be reading and working on his stuff so buffett learned how to deal with people from self-help guru dale carnegie I was terrified of public speaking when i was in high school in college i couldn’t do it i made throw up and everything so i took this dale carnegie course and as soon as i finished it i was 20 years old i went out to

University of omaha and i said i want to start teaching because i wanted to get up in front of people and make sure i didn’t lapse back carnegie promised anyone could win friends and influence people if they did things like giving people aspirations to live up to instead of nagging them

And using their first name all the time I actually had the diploma in the office and i don’t have my diploma from college i don’t have my diploma from graduate school but i’ve got my dale car negative over there because it changed my life Today buffett uses praise as a business tool he knows it’s not just fat bonuses that motivate people flattery works too he described kevin clayton as a joy to work with i think you’ve got an honorary mention in the shareholders letter is that right one we did thank you and i mean is that

A sort of a big thing for one of his managers to get it’s the ultimate an owner’s dream was how buffett described kathy baron tamaras to his shareholders he is a master psychologist i don’t know anyone better he makes us feel like we can do no wrong and that

Whatever we do is going to be the right decision so you’re so empowered and if you think i’m going to let him down after seeing that in the 07 report forget it and i think all of the managers we all feel exactly the same way berkshire hathaway is a massive company

Which feels like a family firm all the usual corporate vanities are absent and not a scent is wasted take a look at the berkshire hathaway website here to call it low-key would be to put it kindly it looks as though it’s from about 1994 no frills all the financial data’s here

But they haven’t even got around to uploading a photo and that’s all very much warren buffett’s style why waste money on a designer buffett insists his website does the job i think it’s what we are i mean it’s factual you could put a little picture of something on there perhaps or i want

People to get facts about berkshire and you know i don’t really think it makes any difference what i look like faith friends god bless america stand behind buffett’s idiosyncratic style is not just charming it’s a financial asset it saves time and money as it did when he bought the nebraska furniture mart

Started in omaha by a russian jewish emigre rose blumkin it’s run today by her grandson bob batt she was four foot ten she was very tenacious never went to school a day in her life and but she knew that she needed to make money and that she was a great salesman

This is a woman that came over from russia and after 16 years it saved 500 and started the business that became the largest home furnishing store in the united states and the punch line is she couldn’t read or write i’d always admired her and i went out

There on my birthday august 30th 1983. she was 89 then and i said mrs b i’d like to buy your business German buyers were also interested but warren is warren and blumpkin preferred to sell to him the family got together with mr buffett had a little talk decided on a figure the way warren did it saved on expensive lawyers and consultants i just typed up a little agreement and

She made a mark she you know and and uh we never conducted an audit i never checked the title of the properties or anything of the sort we just bought the business 50 million dollars changed hands in a flash and out of it all the affable mr buffett had secured a good deal

He got that business for less than it was worth he got it for perhaps a third less than it was worth and he’s done that a number of times in fact he has a history of sitting and smiling across the table from people who are talking themselves into selling him

Things that are worth a lot more than he is paying for it and he knows that and they figure it out later looking back on it did you pay a fair price yeah there are some people who say it was a bit low no

It wasn’t we paid we bought 80 of it but we bought it on the basis of paying 60 million for 100 and that was uh regards it’s perfectly fair price for a business like that it was soon after buying the furniture mart that buffett became a billionaire

But this business empire is built on more than his personality there’s a financial rocket fuel behind it insurance Insurance companies are at the heart of berkshire hathaway geico is one of buffett’s favorites he puts in an appearance in the company video [Applause] along with the chief executive tony nicely Nicely explains how his staff regard their owner he is the father figure the better yet he’s the grandfather figure and we all love our fathers but we have a special place in our heart for the grandfather warren is the grandfather of geico So what’s special about insurance will customers have to pay their premiums up front that creates a massive cash flow that buffett and his partner charlie munger can take away and invest for us who believed we had an edge in terms of investment expertise getting into a business that provided float

Had a special attraction so we thought we were playing to our strengths using insurance float allows buffett to be different from wall street he can invest in a big way without borrowing money you see unlike the clever hedge fund for example buffett doesn’t like borrowing or leverage as it’s called

In fact it’s another tenet of the world according to warren don’t get into debt more smart people have gone broke through leverage than through any other uh activity a smart person can’t go broke unless they use leverage i mean as one of my friends says if you’re smart

You don’t need it and if you’re dumb you’ve got no business using it so it just doesn’t make sense buffett is financially conservative far from the mad crowd that have got our banks into trouble and he’s like that with his children too when his daughter was pregnant she

Wanted money to build a kitchen extension what i wanted to do was get a loan it was a loan from my dad i think it was thirty thousand dollars um and you know the answer was no so we didn’t do it but there are no hard feelings today

Susie says her father has been generous like her two brothers she runs a charity that he funds her brother peter is a musician buffett has always told his children not to expect to inherit his wealth he doesn’t think that would be fair and they agree why in the world just because my dad’s

Really good at something has made a lot of money should i get that it just does you know i mean it fundamentally doesn’t make sense I could see where other people would think what a nasty guy and what a crazy kid for not thinking that somehow that should be passed along but i just i don’t get it the children did get some shares in berkshire hathaway threw an inheritance from their grandfather

If they’d kept them they would have been wealthy but peter sold his to fund his music yeah i often say it’s like your money or your life you know i had this choice and i would much rather have the career and and the life i’ve built than 60 million dollars there’s just no

Question Now you’re getting a picture of mr buffett but you want to see some of his glamorous lifestyle how he flies to the world’s best restaurants well he doesn’t actually his favorite is goratz of omaha the local steakhouse are you ready to order yes i’m gonna have what warren buffett

Has okay what is that by the way a t-bone double order hash browns three cherry cokes and a chocolate sundae for dessert that’s what i’ll have thank you very much all right well thank you buffett dines here for nights on end forget the fancy foods of the super rich he keeps it basic

He does not really eat vegetables he will eat a few he’ll eat tomatoes but he’s uncomfortable with most vegetables we have the orange bars here breakfast we would have peanuts and coca-cola and that was breakfast i don’t think i’ve ever and i’m not making this up in 56 years

Seen him drink a glass of water and i’m pretty sure i was going to say no fruit but that’s not true he eats banana cream pie sometimes and strawberry shortcake juan’s very good at understanding what works for him and then he stays with it i mean whether he’s talking about stocks

Or talking about food or anything else he knows what what agrees with hmm i suppose the thing about warren buffett is this he doesn’t go out of his way to be different he just has a supreme self-confidence he doesn’t judge what he does by the standards of other people

It’s true in business and in his personal life and it means that he’s sometimes exceptionally ordinary but he’s also quite happy to be deeply unconventional most unconventional have been his relationships after being apparently happily married for more than 20 years buffett’s wife susie left omaha to start a new life in san francisco

But they didn’t get divorced and this wasn’t exactly a marriage breakdown i said i’m not leaving you because i’ll be wherever you want me when you want me but most of the time when you’re in the same house he is or whatever he’s up reading and you’re that’s why i

Learned to have my own life we were two parallel lines what was unconventional was what happened next suzie introduced her husband to astrid menks a friend of hers had been working as a maitre d in a restaurant in omaha when i moved to san francisco i called

Officers i said i said will you take one make him some soup go over there and look after him five months after delivering soup astrid menks moved in with buffett with his wife’s blessing she takes great care of him and he appreciates it and i appreciate it she’s a wonderful person Did every people raise their eyebrows at you or the fact that you had a wife in california you had a person you were living with in nebraska with i’m sure there were people that raised their eyebrows they didn’t do it in front of me but it didn’t make any

Difference to me i mean as long as the three people that were involved were all doing very well and happy with the situation you know that was fine with me but i’m sure that that the if you’ve taken a poll of all the people in normal i’m sure there was some with raised

Eyebrows but let’s find it it keeps them entertained and i’m doing fine for 25 years the triangular relationship continued Susie buffett died of cancer five years ago and buffett married astrid concluding a tale of the most important rule of his life in marriage food or investing think independently You have to think for yourself when i look in the mirror in the morning i say how do you feel about this and if the mirror says yes that’s good enough based well away from wall street he and charlie munger have been able to ignore the kind of hype that persuades ordinary

Investors to jump on bandwagons we’ve learned to tune that stuff out we make our own appraisals and then when the market has a different appraisal we back our own instead of the markets appraisal i think omaha is helping me understand buffett’s extraordinary success here it’s easy to avoid the latest fashion

And it’s the unfashionable stocks that are the best deals and like omaha buffett is unhurried a tortoise to the wall street hare accumulates steady returns for decades while many professional investors earn quick profits they also make quick losses in short buffett is everything wall street isn’t but in the early 90s buffett’s values

Were pitted against wall street well wall street has been unsettled by a growing crisis at solomon brothers surrounding its illegal trading in u.s treasury bonds solomon brothers one of the biggest investment banks on wall street was in trouble with the financial authorities buffett was one of its biggest

Shareholders he was persuaded to step in as temporary chairman the solomon episode he would say is the darkest of his career and he was dragged into it and no matter what happened he was likely to lose part of his reputation and money the bank had failed to report some

Illegal trading by its staff the case was taken on by jerry corrigan needless to say i was not a very happy camper why wasn’t i told about this much earlier much much earlier and the more i thought about it frankly the more angry i became the u.s treasury was preparing to take

Action that would finish solomon brothers off but on a dramatic sunday morning buffett put his reputation on the line and begged the top treasury official i told him that you know this is the most important day of my life and uh and i meant it and i think he felt

I was over dramatizing it but he also felt that i believed it and and and then he changed an order of the us treasury on a sunday which is not easy to get done and and it kept us alive they were going to shut solomon down and

In effect as a personal favor to warren buffett because they considered him honest and trustworthy they did not do that i must say that even in a high tense environment such as this and believe me this was high tension he was always totally level-headed never lose his composure a gentleman at all times

After the crisis buffett started to clean the bank up in a very public way mr buffet buffett whose very name stands for integrity made it clear there had been changes at the top lose money for the firm and i will be understanding lose a shredder reputation for the firm

And i will be ruthless and having saved solomon he tried to cut back the excessive salaries and bonuses of its staff wall street meets warren i can still remember a phone call i got from warren one day after a compensation committee meeting where he had been unsuccessful

In persuading the other members of the committee that our compensation package was too high warren made a point when he reached me on the phone of telling me that he’d been thinking about this all the way uptown on the subway at the time the solomon brothers management all had cars and drivers to

Take them uptown they didn’t ride the subway like warren buffett never got much gratitude for saving the jobs of the bankers especially when he tried to cut their bonuses some of the senior solomon personnel grumbled a bit about his presence and if i remember correctly the people on the

Risk arbitrage desk even tried to get the firm to buy them out in order to get rid of them today it seems the whole world is worried about bankers bonuses buffett shares the concerns with the deeply held view that the super rich aren’t as smart as they think

Basically most of the rich people in the united states and probably the uk too i mean they they would not have done quite as well if they’d been in bangladesh or some place like that i mean they may think they did it all by themselves but the

Society has done an awful lot for them and and if you get the chance to live very rich in the society you really ought to in my view you ought to have a taxation system but you also have a personal value system where you believe that that

A lot of that ought to go back to the people that got the short straws in life buffett’s experience at solomon brothers has never put him off wall street completely and last year he invested five billion dollars in the wall street giant goldman sachs He negotiated hugely favorable terms in the darkest days of the financial crisis everybody was scared there were some of the largest companies in the united states that if the federal reserve hadn’t stepped in they wouldn’t have met their payroll i did not feel that we would be dumb

Enough really in a really basically prosperous country to let sort of the the misfunction of the financial engine bring down the country but there was a time there where you wondered about that true to his philosophy buffett ignored the markets and put money in when everyone else was getting theirs out But investing in wall street is that part of the buffett philosophy He’s also been making some big bets using derivatives complicated investment instruments that he once famously condemned as financial weapons of mass destruction there’s clearly more to buff it than meets the eye you look at berkshire and you think of things like the furniture company or dairy queen

But when you look at where the massive profits and the cash generation is coming from it’s really from the insurance business it’s really from derivatives it’s really from the investments that he’s making on wall street and so there is a disconnect there’s a divide between what you see on

One side which looks very simple and what’s actually happening behind the curtain buffett now deals in such large sums that cozy family businesses are too small for his billions he has to be resourceful and it means there’s another element in the buffett formula even if it’s one he wouldn’t admit to

Always be ready to break your own rules why are you dealing in derivatives because this is quite counter to the image we have of what you invest in if we think some financial instrument is mispriced significantly and that i know enough to make that evaluation uh we’ll buy it

Uh so you do speculate you see this comes back to where we started you will speculate i i no i i would regard it’s not like your other businesses is it no no but it’s it’s an analytical process of of looking at the very various economic factors that are going to

Affect a given instrument is that benjamin graham ah no people understand that you’ve cheated there are just times when you see an opportunity and you can’t resist you can’t resist punting well but the opportunity is based on an analysis of of fundamentals there’s one final and undisputed element

To be added to any guide to buffett’s approach to money what you do when you’ve made it is give it away Three years ago buffett announced he was giving the bulk of his fortune to charity 31 billion dollars would go to the foundation run by bill and melinda gates where gates’s own fortune is being used to improve health and agriculture in the developing world that was a complete surprise to me and you know i said wow uh the first time he

Said it i thought well that’s at least been nice you know he’s saying that it would be rational to do that uh he’s not really saying he’s gonna do it but the second time i he brought it up i knew he was considering it seriously buffett had thought carefully about the decision

Some people are better at certain things than others you know there’s a lot of people who sing a lot better than i i’ll be able to draw a lot better i can and there are people who give away money better than i can i’m better at making

Money than most people and somebody else can be better at giving it away so i’ll have them do it almost nobody’s crying it’s amazing and unlike other great philanthropists buffett’s generosity won’t be remembered in the names of the organizations he’s funding are you never tempted to have the name

Buffett more prominently displayed i mean you don’t even find streets or buildings or charities can get money by naming things for people so why not why waste the building on me they’re going to get my money anyway for gates buffett is not just another big donor he’s a role model

There’s a philosophy of life of you know embracing people having fun at what you do doing it with some humor that you know i’ll always strive uh to do those things nearly as well as warren does Buffett will be 80 next year and is still firing on all cylinders but one day berkshire hathaway will continue without him it will be a memorial but what else what about how you’d like him to be remembered i don’t know because i think of him as a father

You know i do it’s really weird when you’ve got a famous parent who’s you know out there and everybody sees the person i remember pulling out my credit cards in a store once and buying something and someone saw my name and they said oh are you related to warren and i said yes

And they said oh you’re so lucky and i thought what a funny thing to say they don’t know him now yes i am but not for the reasons they think i’m not lucky because i’ve got a rich famous dad you know i’m lucky because i’ve got him Buffett says he enjoys himself so much that he tap dances to work every day with the two of us okay we have had a lot of fun together warren and i and if we’ve been a little more successful than other people is because we always realized that the school of

Life was always open and if you weren’t learning more you were falling behind and it just happened that the way we like spending our days coincided with something that worked in the investment process so weren’t we lucky If we’d like chorus girls we wouldn’t have such a good investment record Warren buffett has accumulated more wealth than almost anyone ever unfortunately for us that was never as simple a task as he makes it seem you can’t easily copy it at home but buffett is still worth emulating because of all the billionaires in the world he’s uniquely clever funny and generous

Warren buffett really is different to the other super wealthy the kind of people that you read about and perhaps even envy i’m sorry that mr buffett can’t tell you how to make money like they do but i suppose at least you can pick up some tips

On how to lead a rich life like he does thanks [Applause] he’s good inspiration for the apprentice usa that’s over on bbc one and eleven twenty have i got news for use next on bbc two and then later who backs player for president of the eu that is we’ll be exploring the divide at the heart of europe and should you have

To prove your faith before you can enroll in a faith school the case has gone all the way to the new uk supreme court and why swapping at westminster join us at 10 30.

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