Wareen Buffett | Nightline Interview | 1999

TL;DR

The best investing advice is to never buy on borrowed money, because a genuine investor can wait indefinitely for the right opportunity. Buffett buys only businesses he understands and plans to hold permanently, run by honest people he respects. He lives modestly not from thrift but because doing work he loves matters far more than possessions.

Transcript

mr buffett i presume i call you warren i mean you and me a little together a warren warren you are my destiny he's a man of simple tastes not always comfortable with the finer things in life he met a lobster for the first time in his life and he was attacking the back of the lobster which of course was totally resistant and i said warren if you tur... Read More

Key Insights

• The single most important rule for investors is to never buy stocks on borrowed money, because leverage forces impatience when the whole advantage of investing is the freedom to wait indefinitely for the right price.
• A real investor loses nothing when the stock exchange stays closed, because value comes from owning good businesses over time, not from constant trading or the urgency to act by sundown.
• Buffett refuses to invest in any business he cannot understand, avoiding high-tech companies entirely, because he sees no reason to expect profit from something whose economics he does not genuinely grasp.
• Buying a business is like a marriage you intend to keep, so Buffett will not partner with managers who make his stomach churn, no matter how much money the deal might add to his net worth.
• Wealth beyond a certain point buys mostly extra possessions to track rather than a better life, which is why owning several cars or a grander home holds no appeal for someone content with his daily routine.
• Refusing to split the stock deliberately filters the shareholder base, attracting long-term owners who share Buffett's expectations while screening out those who mistake a split for added value.
• A stock split changes nothing about a company's worth, just as cutting a pizza into more slices leaves the same amount to eat or collecting two hat checks yields no extra coat.
• The foundation of a happy working life is a job you love alongside people you like, admire, and trust, which Buffett says puts you most of the way toward everything worth having.

Questions & Answers

Q: What is Warren Buffett's top piece of advice for investors?

Buffett's single strongest piece of advice is to never invest on borrowed money. He observes that many people day trade and feel they must act on a good idea by sundown, but a real investor can wait for months or years for the right opportunity. Borrowed money destroys that patience by forcing you to act on someone else's timetable rather than your own judgment, turning a genuine advantage into a liability.

Q: Why does Warren Buffett live so simply despite his wealth?

Buffett lives in the same home he has occupied for decades and enjoys simple pleasures like Dairy Queen, bridge, and the books he reads. He explains that he lives now much as he did long ago because it is what he genuinely enjoys. He views the belief that money buys happiness through possessions as an illusion many people chase all their lives. Owning several cars, he notes, would only mean more things to keep track of, not a better time.

Q: What does Warren Buffett mean when he says his job is to allocate capital?

Buffett explains allocating capital as taking the money his businesses earn and doing the most intelligent thing possible with it for shareholders. His companies around the country earn money, cover their own operating needs, and then send the surplus to Omaha. His task is to reinvest that incoming cash wisely, typically by buying more good businesses. He frames it plainly enough for a child: the businesses send him money, and he decides how to deploy it.

Q: Why does Warren Buffett only invest in businesses he understands?

Buffett deliberately avoids businesses he cannot understand, including high-tech companies, because he sees no reason to expect to make money on something whose economics he does not grasp. He prefers plain, comprehensible businesses like Dairy Queen, where he understands the products and the way the company generates cash and grows steadily. Staying within his circle of competence lets him judge value confidently and avoid the risk that comes from investing in things he cannot properly evaluate.

Q: Why did Warren Buffett buy Dairy Queen?

Buffett bought the company that franchises Dairy Queen because it was a business he could understand, he liked the people running it, and the economics made sense. The company collects royalties from many franchisees paying for its name, grows a little each year, and generates cash that Buffett can redeploy into other businesses. He notes that other good chains like McDonald's or Burger King were not for sale, whereas Dairy Queen was available at a price that made sense.

Q: How does Warren Buffett choose the managers of the businesses he buys?

Buffett insists on partnering only with honest, talented people he respects and even likes, and he refuses to go into a deal to change management. He compares partnering with someone whose conduct makes your stomach churn to marrying for money, which he calls a bad idea under any circumstances and outright crazy if you are already rich. He says he will not associate with people who make him want to throw up, even if the deal would add to his wealth.

Q: Why has Warren Buffett never split Berkshire Hathaway's stock?

Buffett keeps the share price high to filter the shareholder base, attracting owners whose ideas, expectations, and measurements align with his own. He uses a theater analogy: mixing ballet and rock concert audiences leaves everyone disappointed, so he wants an enterprise that draws people who are in sync with it. Not splitting screens out those who think a split adds value, which he says it does not, comparing it to cutting a pizza into more slices or collecting two hat checks.

Q: What does Warren Buffett say is the key to a satisfying working life?

Buffett says the most important thing is to enjoy every day by having a job you love and working with people you like, admire, and trust. If you have that, he says, you are a long way home. He describes his own role as keeping talented managers, many of whom no longer need to work, excited about their businesses. He compares choosing partners to seeking one quality in a spouse, joking that low expectations make any relationship last.

Summary

Warren Buffett, the second richest man in America, is known for his down-to-earth lifestyle and his success in the stock market. In this interview, he discusses his simple tastes, his investment strategy, and his philanthropic goals.

Questions & Answers

Q: What is Warren Buffett's lifestyle like?

Warren Buffett leads a modest lifestyle, living in the same home he has lived in for 40 years. He enjoys simple pleasures, such as eating at his favorite restaurant, the Dairy Queen. Although he has amassed great wealth, he does not let it change his way of life. He believes that material possessions do not bring happiness.

Q: What is Warren Buffett's investment strategy?

Warren Buffett takes a long-term approach to investing. He looks at each share of stock as a part of a business and considers the value of the entire business when deciding whether to invest. He focuses on businesses with good economics and honest, talented management. He does not engage in day trading or follow short-term market trends. He advises against investing on borrowed money and encourages individuals to invest in businesses they understand.

Q: Why does Warren Buffett prefer not to split his company's stock?

Warren Buffett believes that splitting a stock only attracts a certain type of investor who sees a lower stock price as more affordable. He wants his shareholders to understand the value of the underlying business rather than focusing on the stock price. By not splitting the stock, he filters out investors who are primarily interested in stock splits and ensures that his shareholders have similar ideas and expectations.

Q: How does Warren Buffett view the current state of the stock market?

Warren Buffett acknowledges that the stock market has been on a long and strong upward trend in recent years. However, he also believes that valuations are high compared to historic standards and that speculation is prevalent. He advises against investing in stocks solely based on their price action or short-term expectations. He cautions against using borrowed money for investing and recommends approaching investing with a long-term perspective.

Q: What are Warren Buffett's philanthropic goals?

Warren Buffett plans to donate a large portion of his wealth to society through his foundation. He believes in a meritocracy and wants the resources of society to be handled by those who have accomplished things that deserve those resources. He aims to address big and intractable problems that are not being tackled by other philanthropic efforts. Some areas he is particularly interested in are the spread of nuclear knowledge and finding solutions to problems that lack a funding constituency.

Q: What does Warren Buffett think about leaving money to his children?

Warren Buffett does not believe in leaving vast sums of money to his children. He believes in a meritocracy and does not think that someone should be entitled to wealth simply by being born into the right family. While his children will receive a better education and environment, he believes that the people handling society's resources should be those who have earned it through their own accomplishments.

Q: Is Warren Buffett involved in any charitable endeavors currently?

Warren Buffett is actively involved in philanthropy. He has chosen six highly capable individuals to manage his foundation and has given them the freedom to tackle big problems that do not have a funding constituency. One area he is specifically focused on is the spread of nuclear knowledge. He wants to make a significant impact and is willing to take on high failure rates to address important issues.

Q: Does Warren Buffett enjoy performing and being in the public eye?

Warren Buffett has a bit of a ham side to him and enjoys performing in certain situations. In the interview, a clip is shown of him participating in a charity event where he played the role of Daddy Warbucks from the musical "Annie." While he is generally a quiet guy, he appreciates opportunities to have fun and make a positive impact.

Q: Did Warren Buffett invest in Microsoft?

Warren Buffett did not invest a large amount in Microsoft. Although he spent nine hours with Bill Gates, who explained the company to him, he only bought 100 shares. This shows that even someone like Warren Buffett can make mistakes when it comes to investing.

Q: What is Warren Buffett's future plan regarding interviews?

Warren Buffett promises to do interviews again in the future, although there is no specific timeline. He has kept his word before and will likely honor his commitment at some point.

Takeaways

Warren Buffett's down-to-earth lifestyle, long-term investment strategy, and philanthropic goals make him a unique and admired figure in the business world. He emphasizes the importance of understanding the businesses one invests in, being patient, and avoiding speculative behavior. His approach to wealth and inheritance challenges the idea of entitlement and promotes a meritocracy. Through his philanthropic efforts, he seeks to address major societal issues and make a lasting impact. Overall, Warren Buffett serves as a role model for those looking to achieve financial success while also prioritizing ethics and social responsibility.

Summary & Key Takeaways

• Warren Buffett, described as America's second richest man, almost never grants interviews but agreed to speak with Ted Koppel in Omaha, hosting lunch at his favorite restaurant, Dairy Queen, a company he liked so much that he bought it. He still lives in the same home he has occupied for decades.

• Buffett describes his job as allocating capital: the businesses he owns send their surplus earnings to Omaha, and he reinvests that cash intelligently for shareholders. Berkshire Hathaway owns varied businesses, from candy and insurance to a newspaper, plus stakes in companies like Coca-Cola, Gillette, and the Washington Post.

• He buys only businesses he understands, run by honest, talented people he genuinely likes, and he intends to hold them permanently. His core advice for investors is patience and avoiding borrowed money, since a true investor can wait as long as it takes for the right opportunity to appear.