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tv   The David Rubenstein Show Peer to Peer Conversations  Bloomberg  November 2, 2016 8:00pm-8:31pm EDT

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>> he said, what do i do with this money? i said, investing it is about assigning the right use for the money. i did not want to go to college. -- i hadaha, i thought $175,000. i thought that was all i wouldn't need. >> when you had your first annual meeting, how many showed up at that? any advice to a young investor who would like to emulate you? >> would you fix your tie, please. >> most people would not
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recognize me if my tie was not fixed. ♪ david: i do not consider myself a journalist, nobody else would consider myself a journalist. i began to take on a life of being an interviewer even though i have the day job of running a private equity firm. how do you define leadership? what is it that makes somebody take? -- tick? >> i appreciate it. >> we are at your favorite restaurant in omaha, wide you like it so much? is it the food, the price, the combination? >> it is the food, the price, the heritage. of familytions
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involved, i have known him since grammar school. .he prices are right it was not that expensive, and i enjoyed it. a lot cheaper than new york and washington. david: a lot. you grew up in omaha and then moved to washington when your father became a congressman. how to do start your business career in washington with various pinball machines and gulf businesses? a couple of i had those businesses going in, the pinball was the best. the wilson coin-operated machine company. we had our machines and barbershops and the barbers wanted the machines with flippers, but those cost $350. whereas an obsolete machine only cost when he five dollars. we always a said we would take it up with mr. wilson. he was one tough guy. when you graduated from
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high school you are not interested in academics? your high school yearbook said you are likely to be a stockbroker even the you were not good at math. mr. buffett: we did not have sats than -- then. in the truth, i always wanted to please my dad, he was my hero. he kept a jogging me along and said, let's fill out an application. wharton, and i got in. after the first year i wanted to quit and going to business and my dad said, give it one more year. and went the second year said, i still want to quit. he said, you have almost enough credits. if you go to nebraska for one year, you can get out in three years. so that is what i did. said yous wharton ever
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are a half graduate, you should give us some money? mr. buffett: no, but they may after they watch this. minor scholarship in nebraska. i applied to harvard. i didn't get in. spent 100 minutes -- i hours going to chicago to see him, and he looked at me and said, forget it. david: did you ever run into that guy again? mr. buffett: no. harvard does not come after you because you turn them down. why did you go to columbia? i was in the omaha library in august, leaving through catalogs, and happen to see the teachers. i had read their book but had no idea they were teaching.
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i said, i thought you guys were dead. know you are alive, i would love to come to columbia if you can get me in. david: you went to columbia business school? mr. buffett: i did ok there. it was great in the sense that i was working for my hero. then he was going to retire for a couple years so i was only very year and a half. every day out was excited about being able to work for him. david: what you are good at was picking stocks, according to his companiesooking for undervalued, we call it value investing. did he have principles that were fairly unique and that is what you followed his guidance? kind of went to work for him, i could've recited his books, i read the multiple times. it was more a question of being inspired by him than learning something from him. david: why did you come back to
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omaha? to buffett: i wanted to go omaha. i had many friends in new york, but we had two kids by that time and i lived in white plains, i had to take the train. it did not strike me as much of a life compared to being here in omaha. both sets of grandparents were alive at that time. was a and aunts -- omaha more pleasant place to live. david: you buy a house here -- mr. buffett i rented a house. david: and when did you buy the house you are in? mr. buffett: when my third child was on the way. david: how did you raise money? i had 170 $5,000, i thought that was everything i needed. i planned on going to school, thought about law school. david: think about how successful you could have been as a lawyer. mr. buffett: i know, i have
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regretted it ever since. david: how much money did you cobble together? in may oft: we met 1956 and there were seven people there, aside from myself. $105,000 and i put in $100 and i gave them a piece of paper called the ground rules. david: but you ended up partnership? mr. buffett: between may of 1956 and 1962 i started 10 more partnerships. i made a mistake, i had no more -- no secretary or accounting. 11 checks of books, filed 11 tax returns. i was worried, it was other people's money. finally i got wise and on january 1, 1962 i put all 11 of the previous partnerships thether and ran that until
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end of 1969, at which time i dissolved it. david: then you started a new partnership? mr. buffett: no, by that time we $105 million in the partnership, $70 million was in cash to be distributed and the cash was in three spots. it pro rata to everybody. david: and you purchase stocks through berkshire hathaway? mr. buffett: yes. did you study the companies more than anybody you, are you smarter, didn't get caught up in fats, what is your reason for success? we boughtt: businesses that were decent at sensible prices and we had good alsoe to run them but we bought marginal securities. over time, the emphasis shifted to buying businesses. david: what was the theory
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behind buying a railroad, people thought they were fossils? mr. buffett: everybody has a bad century now and then. ♪ >> david rubenstein show, peer to peer conversations, is brought to you by state street global advisors.
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>> over the years you bought many companies, like washington post. how did that come about? they had gone public in 1971, about the times -- time of the pentagon papers. they were challenging the licenses of two of the four television stations. to stock went from 37 down
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16. -- it there were about $80,000, no debt to speak of. the washington post company, intrinsically worth $400 million or 50 -- $500 million, sold for $80 million. it was ridiculous. it was ridiculous. it was unquestionably worth five times what it was selling for, and mr. nixon was not going to put them out of business. david: when you do analogies, do you have computers that help you? in those days, how did you read about those or know about that today? mr. buffett: same way, but fewer opportunities now. and he cameodward up with all the presidents men. at 30 years of age he was getting quite wealthy.
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at the madison hotel and he said, what do i do with the money? i said, investing is about assigning yourself the right story. imagine if ben bradley said to you, what is the washington post company worth? brokersd interview tv and assign value to each asset. that is what i do, isi myself the right story. it is nothing more than that. there are some stories i cannot write. nonprofitrous, business, i do not know how to write the story. what potomack me electric power is worth, i can do that. i assign a story. david: you get annual reports and read them the way some people might read annual reports and you do the calculations for how things are worth in your head. you need to --
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do you use a computer today? i use it to search, a lot. i do not have one in the office, but it home. david: for a smart phone, can someone get a hold of you on a smart phone or mobile telephone? no, a smart phone is too smart for me. david: and a computer, you use barely. mr. buffett: bill gates and i say, who was on the computer more, and it is probably me. i use it for playing bridge. david: who'd you play bridge with? mr. buffett: i play with a woman in san francisco. she is a two time world champ and i am eight two time world chump. david: are you at a world-class
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level? mr. buffett: no. you could not have a better teacher than she is, but the student has limitations. david: you mentioned bill gates, how did you come to know him? mr. buffett: the editor of the editorial page of the post called me in the late 1980's and warren, i have always loved the pacific northwest, but would like to know if i would have enough money to purchase a vacation house near seattle. i said, anyone who asks me if they have enough money, does. so she bought the house and invited me and others to the house. she knew the elder gates. get bill to come, he did not want to come to meet a stockbroker. negotiating started
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hours and she said for hours, and he said one hour. when we met, we talked for about 11 hours straight. so that was the beginning of the relationship. mr. buffett: we hit it off. david: i bought 100 shares just to keep track of what this young kid was doing. board?is now on your yes.uffett: we have a lot of fun talking. ask about the philanthropic things you have done with bill and melinda. haddad the idea of giving your money to somebody else's foundation come to you? mr. buffett: i originally planned that my first wife would handle the disposition of everything. we came to that conclusion in our 20's, we started the buffett foundation over 50 years ago. but i did not give away a lot of money during those intermediate
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years because i thought it was compounding at a rate i could give away billions instead of millions of i waited a while. so that plan004, disappeared. then i was faced with the question of, how do i give away this money in a way that goes to the people i want without me doing all the work? david: so you called bill dorman linda one day, to say i will give you the bulk of my fortune? mr. buffett: not as elegant as that. it was done over the phone. david: you did not want your name on it? mr. buffett: that would not do any good. david: you were on the board? mr. buffett: true, but they run it. david: what are the highlights you are most proud of? the biggest deal you ever did
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was $37 billion. mr. buffett: between $32 billion and $33 billion of cash, and we assumed $4 billion of debt. david: did you spend a year studying the company? how much time did you spend with the coo? mr. buffett: i met them july 1 of last year. he happened to be calling on certain shareholders. one of the fellows in our office at a position in the stock for some time. it was an accident i met him. if i had been out playing golf it never would have happened. i like tim, i heard him talk for 30 minutes. tomorrow.ill call in if you would like to receive a cash bid from burke or hathaway -- berkshire hathaway, we would. higherdo you ever investment bankers to analyze the company? mr. buffett: no.
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one time you told me about a story how an investment banker was there -- american energy , theyan investment banker sent a big bill at the end and said you have to increase your price. i said, i am not worried about whether you look good. i hung around for a week in the nicole back to plead, can't you increase your price somewhat so we can send the bill and get paid appropriately for our non-services? ok we will pay $35 and five cents. david: do you ever do unfriendly deals? mr. buffett: berkshire hathaway
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was originally an unfriendly deal. not that they are necessarily bad. youd: people must call every day and say, i have a deal for you. how often do they pan out? mr. buffett: they do not call every day. we have made our criteria fairly clear. somebody calls, i can usually tell within two or three minutes whether the deal is likely to happen. it either makes it through the filters or it does not. david: one time i was told you got a letter from israel, someone asking to look at your company. what are the odds that they would send you the perspectives and you would say you will buy it? you did buy it. mr. buffett: we bought 80% of it. david: before you bought it, did you go to israel to look at the company? mr. buffett: no, i hope it is there. david: and you are happy with
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what you bought. mr. buffett: yes. david: and you bought a railroad, what was the theory behind that? mr. buffett: the railroad business had a bad century. railroadly, the industry got modernized and it is a good business. it is not a great business, but a good business. in the fall of 2009, we already owned a fair amount in northern santa fe. the price looked like we could do it at a sensible price. that was a thursday. $100y i said we would pay per share of the directors were interested. he checked over the weekend and the following sunday we had a contract signed. david: somebody from the white house calls and says, would you mind having a tax named after you. of all the:
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diseases, i will take attacks. ♪
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mr. buffett: it is the best i know of, and it has been wonderful. america shortd
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since 1776. a joy what happened subsequently. we had roughly 2% or slower growth. david: is it possible to ever grow 5% in this economy? growth, if you have less than 1% population growth, means in one generation, $18,000, we will add gdp per capita, so we are just beginning. 1%, my life has had a lot of compound interest. if you haven't already prosperous economy, and we have the most prosperous economy the world has ever seen, and you keep compounding it, over time, people will be living far better 20 years from now than they are now. secretary pays a higher tax rate than you do.
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ago,uffett: some years summary from the white house that they had read my views on taxation, and said, would you mind having it -- a tax named after you? if all the diseases have been taken, i will take a tax. dollarsith millions of per year should have a combined and tax of at least 30%. everyone in the office has that but me. david: how did you become a democrat? mr. buffett: civil rights more than anything else. when it think about it was 12 or 14 years old. there was a school for blacks a few hundred yards away, it never dawned on me it was different.
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then i noticed there were a lot of things unfair and democrats to be doing more about it. david: in berkshire hathaway today, you have an annual meeting that attracts roughly 40,000 people. when you had your first annual meeting, how many people showed up to that? had 12, but you have to account family and managers. ever think you could build a company that would become one of the biggest in the world? mr. buffett: no. i have always just put one foot in front of the other. david: what would you like to have is your legacy? mr. buffett: i would like to be the oldest man that ever lived. i like teaching. , have been a decent teacher and i have a lot of university students come out every year. david: anything on your bucket
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list you would like to do that you have not done? mr. buffett: if there is anything i want to do, i do it. -- money has no utility, time has utility. in terms of more trips or houses, has no utility to me whatsoever. david: what motivates you to run a company when most people your age are relaxing? mr. buffett: they spend all week planning their haircut. i get to spend all week with love, that is the best. david: so the greatest pleasure in your life is looking at new companies, giving away love, th. money, your grandchildren? mr. buffett: all of the above. i regard berkshire hathaway the way a painter regard to painting. there is no finish line.
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it is a game you can continue to play. david: any words of advice to young investor that would like to emulate you? how would they build something close to what you have done? mr. buffett: look for the job you would want to hold if you did not need a job. you're probably only going to live once. -- do not want to go through sleepwalking through life. what you make is not remotely as marrying the right person, or finding something you would do if you did not need the money. i have had that job for 50 or more years. i was lucky in that i found it early on. something, dofor not worry about making the most money. offering to work for
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ben graham, i said i would work for nothing. look for the job that turns you on, find a passion. ♪
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mark: i am mark halperin. john: and i am john heilemann. with all respect to king trump, it looks like the democrats have this one in the bag. ♪ on a day when the new york times delivers thrilling details from a new tribe called west album we strike a musical theme , on the show tonight. including donald trump's change of student -- change of tune. but first, the polls pick up tempo. can barely keep up with the onslaught of surveys from key state polls that flooded our inboxes today.


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