Warren Buffett | Charlie Rose | November 26, 2012 | Summary and Q&A

Transcript

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Summary

In this interview, Warren Buffett and Carol Loomis discuss topics such as tax reform, the state of the economy, Buffett's investment strategies, and their long-standing friendship. They also touch on Buffett's views on derivatives, the housing bubble, and the role of regulation in the financial industry.

Questions & Answers

Q: What is Buffett's opinion on tax reform for the wealthy?

Buffett believes that there should be a minimum tax for individuals earning over $1 million, with a rate of 30% for income between $1 million and $10 million, and 35% for income over $10 million. He argues that this is necessary because currently, high-income individuals often pay lower tax rates than middle-income earners.

Q: How does Buffett justify his stance on tax reform?

Buffett argues that the current tax system is not progressive enough, with some of the wealthiest individuals paying very low tax rates. He believes that those with high incomes should pay a rate comparable to their middle-income counterparts, rather than taking advantage of lower tax rates on capital gains and dividends.

Q: Do successful businessmen and women agree with Buffett's views on taxes?

While there are likely many successful individuals who agree with Buffett, it is not a unanimous opinion. Buffett acknowledges that not all wealthy individuals share his views on taxation.

Q: What impact does Buffett believe the fiscal cliff will have on the economy?

Buffett doesn't think the fiscal cliff will have a significant impact on the economy because he believes that lawmakers will find a solution before it becomes a serious problem. He compares it to the debt ceiling issue and argues that although the rest of the world may view the U.S. as "idiotic" at times, they do not believe the country will commit economic suicide.

Q: What is Buffett's outlook on the economy?

Buffett believes that the economy has been on the mend since 2009 and that it is gradually getting better. He points to the positive returns in the stock market over the past four years as evidence of the economic improvement.

Q: Why did Carol Loomis choose the title "Tap Dancing to Work" for her book?

Loomis explains that the title was chosen after several other options were considered, but her publisher thought it was a wonderful choice. Buffett has often referred to himself as "tap dancing to work" because he is always excited to start his day and looks forward to going to the office.

Q: What does Buffett mean when he says he "tap dances to work"?

Buffett means that he is always eager to go to work, and it is the most exciting part of his day. He has never had a day where he did not look forward to going to the office.

Q: How does Buffett assess the value of investments?

Buffett believes in investing in companies that he understands and whose value he can assess. He looks for enduring competitive advantages and companies with strong management teams. He also values the rationality and discipline he brings to investment decisions.

Q: Why does Buffett delegate the management of some investments to others?

Buffett delegates the management of some investments to others because he has full trust in their abilities and believes in giving them full authority. He does not want his own opinions or emotions to influence the decision-making process. He wants the responsible individuals to have complete control over the investments.

Q: How does Buffett assess potential acquisitions?

Buffett assesses potential acquisitions based on whether the companies approach Berkshire Hathaway with the intention of selling. He needs to gauge their willingness and desire to become part of Berkshire Hathaway before considering any further discussions.

Q: What are some of the mistakes Buffett has made in his career?

Buffett admits that he has made mistakes, including acts of omission where he failed to buy stocks that he knew he should have. He cites the example of Fannie Mae, which he did not buy and later regrets. However, he has also made successful investment decisions, such as selling Freddie Mac at the right time.

Q: How does Buffett evaluate the risks associated with derivatives?

Buffett acknowledges that he has had a checkered history with derivatives. While he has invested in some derivatives that were mispriced and turned out to be profitable, he has also experienced losses. He is cautious with derivatives and ensures he is fully aware of the risks involved in each transaction.

Q: What is Buffett's view on the housing bubble and the financial crisis?

Buffett believes that the housing bubble was a major factor in the financial crisis of 2008. He believes that the bubble burst had a domino effect on the economy as it rippled through various sectors. He also mentions that the executives in the industry did not fully understand the consequences of the bubble bursting and the extent of the risks involved.