Warren Buffett | India Interview | April 15, 2011 | Summary and Q&A

Transcript

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Summary

This video features an interview with Warren Buffett and Ajit Jain, where they discuss a range of topics including their impressions of India, the qualities of successful investors, the importance of having the right temperament, and the role of discipline in investing. Buffett also explains why he has not invested much in IT companies and discusses the potential impact of rising commodity prices.

Questions & Answers

Q: What are Warren Buffett's impressions of India?

Warren Buffet expected to see a booming economy in India, and his visit confirmed his expectations. He visited a plant in Bangalore that was expanding rapidly and had the chance to meet many people and make some new friends. He even invited a few of them to his annual meeting in Omaha, jokingly telling them to vote for him if they come. Overall, his visit has been nothing but fun so far.

Q: How does Warren Buffett value businesses before looking at their prices?

Warren Buffett cares more about valuing the business itself rather than the price of the stock. He likes to go in without knowing the stock's price and looks at it as a piece of a business. He values the business based on its future prospects, the quality of its management, and whether it is selling at the right price. He believes that the stock market innovations and options do not impact his approach as he focuses on buying businesses for the long term.

Q: How often does Warren Buffett look at the price of shares?

Warren Buffett looks at the price of Berkshire (his company's stock) once every two weeks. However, he emphasizes that the stock price doesn't matter much to him because he hasn't bought or sold any shares for 40 years. He actually prefers the stock prices to go down because it allows him to buy more at a cheaper price. He forms his own independent judgment of the value of the stocks he owns and believes that the cheaper they are, the better it is for his investment strategy.

Q: How does Warren Buffett identify businesses with a strong moat?

Warren Buffett looks for businesses with a durable and wide moat, which refers to the competitive advantages that protect a company from its competitors. He uses Coca-Cola as an example, explaining that a moat can be created not only by the taste of the product but also by the positive association consumers have with it. He also mentions See's Candies, a product that has a moat because it creates memorable moments for customers. Buffett believes that the moat of a business can widen or narrow based on various factors like service, product design, or consumer perception. He advises his managers to think about how to protect and widen the moat of their businesses.

Q: Does Warren Buffett advise his managers on protecting the moat of their businesses?

Yes, Warren Buffett sends letters to his managers and talks to them about the importance of widening the moat of their businesses. He believes that a great business is like an economic castle that attracts competitors. Therefore, he wants his managers to act as knights protecting the castle and making sure the moat keeps widening. He encourages them to focus on making their businesses great over the long term and to consider what actions will make them successful for the next hundred years.

Q: Does Warren Buffett think there is a contradiction in investing in private equity firms despite being critical of them?

Warren Buffett clarifies that he has not invested in private equity firms. Though Berkshire Hathaway did invest in Goldman Sachs, he does not consider it a private equity investment. He explains that private equity firms usually take companies private with a fair amount of leverage and then resell them to the public later. He emphasizes that Berkshire Hathaway's strategy is different as they focus on businesses they can buy and hold, not with the intention of reselling. Therefore, he believes there is no contradiction in being critical of traditional private equity firms while not investing in them.

Q: Why hasn't Warren Buffett invested much in IT companies despite being friends with Bill Gates?

Warren Buffett explains that he doesn't invest in IT companies because he doesn't have enough knowledge to predict which ones will be successful in the future. He mentions meeting Bill Gates in 1991 and acknowledging his success, but he didn't know how Microsoft or other IT companies would evolve. He admits that he made a mistake by not investigating companies outside the United States more thoroughly, but he focuses on investing in businesses he understands well. He believes in making big bets when he knows he's right, rather than investing in areas he has limited knowledge about.

Q: What qualities does Warren Buffett believe are important for successful investing?

According to Warren Buffett, successful investing requires the right temperament more than a high IQ. He believes that one must have the discipline to detach themselves from others' opinions and evaluate businesses based on their own understanding and the available facts. Being able to say no to opportunities that don't meet one's requirements is also crucial. He advises individuals to focus on businesses they understand and not follow the herd mentality. Buffett also emphasizes the importance of being a person that others want to work with, as it can lead to better opportunities and relationships in the long term.

Q: What is Warren Buffett's greatest regret in life?

Warren Buffett states that he doesn't have any particular regrets in life. He considers himself extremely lucky to have been born in the United States and have the opportunities he has had. He believes that his life has been a result of winning the "ovarian lottery" and being wired for capital allocation. Buffett is grateful for his life, marriage, and the people he has been able to associate with. He focuses on looking forward to the future and doesn't dwell on regrets or what could have been different.

Q: How does Warren Buffett view rising commodity prices and their potential impact?

Warren Buffett acknowledges that commodity prices, including oil, have been rising. He mentions that eventually there will be a peak in oil production as it is a finite resource. He believes that the world needs to recognize and prepare for this fact. Buffett also mentions that rising commodity prices, such as copper, cotton, and soybeans, may lead to significant inflationary pressures. He attributes this to the monetary and fiscal policies implemented post the 2008 financial crisis. He suggests that heavy doses of medicine can have consequences and believes that the aftereffects could still be felt.

Takeaways

Warren Buffett's interview highlights the importance of having the right temperament and discipline in investing. He emphasizes the need to detach oneself from the opinions and views of others and evaluate businesses based on available facts. Buffett advises individuals to focus on businesses they understand well and to be patient in finding attractive opportunities. He also stresses the significance of being a person that others want to work with and the value of long-term relationships and associations. Additionally, Buffett discusses his impressions of India, the importance of widening the moat for businesses, and the potential impact of rising commodity prices.