Warren Buffet’s Event – The Q and A Session

Question:  “What should one read to learn to invest wisely?”

Warren Buffet: The Intelligent Investor by Benjamin Graham (especially chapters 8 and11) The biggest thing to learn is attitude toward investing.

Charlie Munger:I have nothing to add.

Question: Tell us about Cologne Re.

Warren Buffet: It is one of the oldest insurance companies in the world. We one 90% and we are under contract to buy the rest.

Charlie Munger:  I have nothing to add.

Question: Where is the market going?

Warren Buffet: I have no idea. I choose companies that will increase in time, even if the market shut down for 10 years.

Charlie Munger: I have nothing to add.

Question:  How to you choose good managers?

Warren Buffet:  I buy businesses with good managers who don’t care how much they make; enthusiastic managers who make things happen. I choose the ones who bat 400 and who love to work. An example is Rose Blumkin, matriarch to the Nebraska Furniture Mart. An immigrant from Russia, she came alone to join her husband in the United States. She was short – 4 foot 10 inches – but a giant amongst businessmen (women). If she ran a popcorn stand I’d want to be in business with her.

Charlie Muunger: She worked until she was 102. Then she died the year later. A lesson to all managers.

Question: Should you buy stock options?

Warren Buffet: My experience is if you want to buy, buy the stock.

Charlie Munger: I dislike trading in stock options and other "fancy" investments. Such investing turns the market into a gambling operation. The croupiers can make more money" at investors' expense.

Question: What should you learn in business school?

Warren Buffet: Much of the complex financial matters taught in business schools are unnecessary, but professors feel they must impart that knowledge to their students. "It really has nothing to do with investment success."

Buffett said an investor needs to know only two things: how to value a business, and how to think about stock market fluctuations. “It's like teaching theology,” he said. The book has many examples, but it all comes down to the 10 Commandments.

Charlie Munger: I have nothing to add.

Question: What are the pitfalls of investing?

Warren Buffet: My pledge to give 85 percent of my wealth to the Bill & Melinda Gates Foundation is not on a par with a person who donates to his church instead of taking the family out to dinner. I've never given up anything that's made a difference in my life. I’m giving away excess.

Charlie Munger: If you belong to the extreme left or extreme right, you probably give too much.

Question: A 12-year-old from Philadelphia asked what he should be reading.

Warren Buffet: "There are a lot of things they don't teach you in school that you should know," he said.

Buffett recommended reading a daily newspaper and getting a World Book encyclopedia. "You should just soak it up," he said. "You just can't learn enough in life."

Question: How do you balance things such as an ethical dilemma? The questioner stated Berkshire runs sweat shops.

Warren Buffet: You are mistaken. We do not run sweat shops. There are differences in cultures and what cultures allow. Ours is better than average. We never want to trade our reputation for money.

Question: What will be the result of high commodity prices?

Warren Buffet: They ultimately will be passed on to the user. We don’t like inflation, but over time will make money because of it.

Question: What are the ramifications of the derivative crisis?

Charlie Munger: “We are having convulsions that make Enron look like a tea party. We will have changes in regulation but they won't work perfectly." Later Munger described the convulsion as "a huge dislocation that was very extreme but very brief. It's interesting how brief these opportunities are."

Question: Several members of the Klamath band, named after a river in Oregon that has dams on it owned by Pacificorp, a unit of MidAmerican,of Berkshire Hathaway made claims that dams have exacerbated pollution and damaged salmon. Members of Klamath tribes protested and asked questions at Berkshire's annual meeting in 2007 and some did the same this year.