Warren Buffett | Jamie Dimon | The End Of Short-Termism | June 6, 2018 | Summary and Q&A

Summary

In an interview on CNBC, Business Roundtable Chairman Jamie Dimon and Berkshire Hathaway CEO Warren Buffett discuss their support for companies moving away from quarterly earnings guidance. They emphasize the importance of long-term corporate governance and the negative impact of short-term forecasts on decision-making. They also address topics such as the current state of the economy, trade, and their joint healthcare initiative.

Questions & Answers

Q: Why did Jamie Dimon and Warren Buffett express their support for companies moving away from quarterly earnings guidance?

Jamie Dimon explains that America's largest companies have an obligation to deliver in the long run and that short-term forecasts can often lead to counterproductive actions. He states that by eliminating the pressure to meet quarterly earnings, companies can focus on long-term strategies that benefit the business and its stakeholders.

Q: What example of negative impact from short-term forecasts does Warren Buffett provide?

Warren Buffett highlights that companies can become fixated on meeting short-term earnings predictions, which leads to making decisions that are not in the best interest of long-term growth. He argues that quarterly earnings forecasts are not only faulty in sending the wrong message, but they also encourage employees to prioritize short-term performance rather than making decisions that benefit the business in the long run.

Q: Have Jamie Dimon and Warren Buffett seen instances where short-term forecasts have gone wrong?

Both Dimon and Buffett recount instances where companies have allowed short-term forecasts to drive decision-making. They explain that this practice can lead to unethical behavior, such as inflating numbers or making poor decisions that may harm the company's long-term goals. They emphasize the importance of a strong board and sound corporate governance to prevent these issues from arising.

Q: What does Jamie Dimon believe this move away from quarterly guidance means for companies in the Business Roundtable?

Dimon suggests that companies in the Business Roundtable, which represents around 200 companies, should consider moving away from issuing quarterly guidance altogether. He believes that focusing on the long-term outlook and being transparent about investment opportunities, rather than meeting short-term forecasts, will lead to stronger corporate governance and better decision-making.

Q: According to Warren Buffett, what kind of information does he want to hear from companies?

Warren Buffett shares that he wants to hear from companies as if he were a sole partner in the business. He values updates on what is important to him as an investor and wants companies to openly discuss investment opportunities, risks, and strategies. He encourages companies to prioritize long-term thinking and make decisions that would be beneficial if they were to partner for 50 years.

Q: How does Jamie Dimon explain the concept of being free to drop quarterly guidance to CEOs?

Jamie Dimon states that being free to drop quarterly guidance means CEOs can focus on making the right long-term decisions for their company's growth, even if it affects short-term earnings. He highlights that good CEOs should communicate with their board and shareholders about investment opportunities and other factors that influence the business, without feeling obligated to meet quarterly earnings expectations.

Q: How do Jamie Dimon and Warren Buffett view the current state of the economy?

Jamie Dimon believes the current state of the economy in the U.S. is strong, with consumers in good financial shape, low debt levels, and overall positive business sentiment. He predicts possible years of growth and highlights additional stimulus from tax reform and other budgetary measures. Warren Buffett agrees that the economy is currently strong and states that America will be far ahead in the long run, but refrains from making specific predictions about short-term growth.

Q: Do Jamie Dimon and Warren Buffett believe the stock market is affordable?

Jamie Dimon believes that the time to buy stocks is when an investor believes they are getting a lot for their money. He emphasizes the importance of the long-term outlook for stocks and encourages investors not to focus solely on short-term projections. Warren Buffett agrees with Dimon's perspective and mentions that he continues to buy stocks because he believes in the long-term prospects of the American market.

Q: How does Jamie Dimon view the potential risks of trade, specifically in relation to tariffs?

Jamie Dimon points out that the Business Roundtable conducted a survey that revealed 80-90% of CEOs are concerned about the negative implications of trade tensions. He explains that while there are valid issues regarding trade, tariffs are not the best solution. He believes negotiations with countries like China should focus on fair competition, market access, and resolving other trade-related issues instead of resorting to tariffs.

Q: What is Jamie Dimon's view on the long-term outlook for the euro?

Jamie Dimon states that he believes the euro will still exist in 10 years. He emphasizes the importance of preventing any country from exiting the euro, as it currently represents catastrophic consequences for those who do. He expresses support for the European Union and the negotiated reforms being made, such as fiscal reform and regulatory adjustments, which can strengthen the union over time.

Q: Do Jamie Dimon and Warren Buffett believe that business leaders should get involved in politics?

Both Dimon and Buffett believe that business leaders should collaborate with and be involved in government affairs. They argue that business has an important role to play in addressing societal issues and supporting government activities. While they acknowledge the challenges of political leadership, they encourage business leaders to engage in politics and contribute to positive change.

Q: Are Jamie Dimon and Warren Buffett considering running for public office?

Jamie Dimon states that he has no intention of running for president, but supports business leaders getting involved in politics. Similarly, Warren Buffett insists that he is not running for any political office but acknowledges the value of business leaders participating in government activities to promote collaboration and positive outcomes.

Q: What progress has been made on the joint healthcare initiative involving Jamie Dimon, Warren Buffett, and Jeff Bezos?

Warren Buffett confirms that they have made significant progress on the joint healthcare initiative and expect to announce a new CEO for the venture within the next two weeks. Jamie Dimon credits the progress to Todd Combs and expresses confidence in the chosen CEO. They both emphasize the importance of improving healthcare outcomes and reducing costs for employees, ultimately aiming to benefit all Americans.

Q: How have Jamie Dimon and Warren Buffett addressed employee concerns about their healthcare initiative?

Jamie Dimon reassures employees that the joint healthcare initiative aims to make improvements and provide better healthcare options. He emphasizes that employees' satisfaction and wellness are essential, and the initiative intends to reduce costs while enhancing the quality of care. Warren Buffett adds that employees are interested in the topic and acknowledges the challenges of making significant changes but claims that potential CEOs recognized the opportunity for improvement and feasibility of the initiative.

Q: What is Warren Buffett's perspective on the idea of business leaders entering politics?

Warren Buffett agrees with Jamie Dimon's stance on collaboration between businesses and governments. He supports business leaders engaging in politics to address critical issues and contribute to societal progress. While Buffett acknowledges the difficulty of the political path, he believes it is essential for business and government to work together for the betterment of the nation.

Q: Do Jamie Dimon and Warren Buffett dislike Bitcoin?

Both Jamie Dimon and Warren Buffett express skepticism about Bitcoin. Warren Buffett does not consider himself an expert on the subject, but warns individuals to be cautious and points out the absence of intrinsic value in Bitcoin. Dimon indicates that he sets a high standard for disliking Bitcoin but does not explicitly state who dislikes it more.

Q: Does Warren Buffett plan to be involved with Uber following talks with Dara Khosrowshahi?

Warren Buffett reveals that while talks with Dara Khosrowshahi were held and he has great admiration for Khosrowshahi, they did not come to an agreement. Buffett does not rule out the possibility of future involvement with Uber, but deems it unlikely. He mentions that negotiations where an agreement cannot be reached are not uncommon for Berkshire Hathaway.