Bonus: Warren Buffett in Omaha 7/15/26

30:39But I also enjoy explaining why I take actions, just like I do in the annual report on Berkshire. I've got a didactic streak, which my partner Charlie Munger had,

31:00And to us, the money was important in terms of what it could actually do for other people. It wasn't important for what it could do for me. I have not denied myself anything in life.

31:19If something happens that you're not here to make these decisions, does it revert to what you talked about last year in your will, where there is a new foundation that is created? Yeah, there's a new foundation. And the three kids are in charge? It has to be, because it does have slight variations. One being unanimous consent among the three for anything they do. So does the STB Foundation or the kids' foundations, do they have to spend the money in this fiscal year as was required of the Gates Foundation? Or is this something where they can take their time and make their plans? They know my views on it, but they can do what they want.

31:55But if their wants get away from the basic principles far enough, you look at it again. But that isn't going to happen. Warren, you've spent most of your adult life thinking about philanthropy. How have your views changed over time? What would you like to see happen with this? I think about the giving pledge and what you all did. What's your perspective at this point? The perspective I have is out of 8 billion people, I may be one of the 10 luckiest in the world. So I've been lucky and healthy to get to 95. I've been lucky in that the field that intrigued me and where I had some natural ability happened to be one that paid off in a way that was nothing paid off like it.

32:43I've been a great violin player, you know, anything else. It requires more talent than I have, but a different form of talent. And fortunately, I got exposed, partly accidentally, to what I liked to do very early on and that was just an accident. If my father had been a plumber I would not have had the same advantage I had. So I was incredibly lucky and then as life has gone along I have seen how unbelievably unlucky some people have been. And it is luck. I mean, you know, we had accidents with the kids when they were young, and all kinds of things can happen. And it just didn't happen to us. All right, let's talk about a few other things while we have you here.

33:47Is there more you want to say? Let me add one more thing on that, though. I mean, the idea, the whole idea of kings and queens and everything, where you pass along for thousands of years the ability to live in any manner you wish, you know, while you say, let the mean cake to the rest, that is not the way the system would be if I had my way of designing a world. And I can't change the design of the world, but I can nipple at the edges. And those are the same values that your wife, Ostrid, and your kids all have, too? A hundred percent. And I'm glad you mentioned Auschwitz because she feels she's as extreme in this field as you can imagine.

34:32And she's actually experienced more hardship in life than either Susie or I did because she's Latvian and came over in a boat in Ellis Island and didn't know who she was being assigned to, lived in foster homes, all kinds of things. So the accidents of birth are just so extreme. And I've seen people that use those accidents to justify positions that are just ridiculous, in my view. And that's the reason for encouraging philanthropy. You can't mandate it. It isn't philanthropy if you mandate it. But people, most people are a combination, you know, lots of good instincts and lots of not so good instincts, including me.

35:33And if you do things that appeal to their better instincts, they respond sometimes. And by the way, your point with the Giving Pledge, when you founded that with Bill and Melinda Gates, was to encourage people to give to anything, but not to try and tell them what to do with their money. Exactly.

35:57And also decide when they would do it. I mean, a family that's got a family farm they've had for 100 years, and they're within the family, they've all worked out a number of things. they're going to have a different view toward capital. They're all going to work hard, but they're going to have a whole different view than some guy that is writing options on Wall Street. Yeah. Okay, let's talk about a few other things that have happened maybe since we got the chance to sit down last in May. The first that I can think of is the massive position that Berkshire has developed and grown in Alphabet and Google shares.

36:44That's something that a lot of people have looked at and said, OK, this is Greg's mark on how he's going to be changing the portfolio. How did the Alphabet position come along? I understand. I mean, I normally wouldn't give you an answer on something like that, but I will because... But we... I am not doing anything that he doesn't approve of. He's not doing anything I don't approve of. We talk all the time. He's... You know, he's... Well, every day. I mean, and... But he is the decider. And... Getting back to Alphabet or Google, So it's probably number five or six. Well, I thought it was number three, if you consider the$10 billion private placement that would go along with that, because that would put it north of$31 billion.

37:45Yeah, but we've got the Burlington Northern Railroad, which is certainly worth far more money than that. OK, so you're counting fully owned companies as well. I mean, we are always making the choice between whether we'll buy marketable securities or the company. We look at it the same way. There are some minor exceptions to that. We can't set dividend policy, for example, if we don't own it. But the chances of those being material, the important thing is to buy a good business and to buy it on the right terms and to get the right person to run it. OK, but you've quickly grown a north of$30 billion investment in Alphabet.

38:26That puts it in terms of those companies that you own pieces of behind only Apple and American Express. So Coca-Cola would be smaller, Bank of America would be smaller. It's kind of close.

38:43But if you take Coca-Cola, which we've owned 45 years, whatever it may be, we don't have a thing to do with running that business. But it's a very good business. business. When I say a very good business, I mean something that you can expect to earn high returns on capital over a long period of time. Now the question is, when you get into Google or any of the AI companies, you're putting out huge amounts of money. I can put huge amounts of money into government bonds and get$20 or$30 or$40 billion a year in terms of payments from them. So a good business is one that earns a lot more and has prospects of continuing to earn a lot more than the returns on essentially riskless investments which you could define as treasuries.

39:53But if you take something like American Express, you know, there are most of the banks earn 13-14 % on capital. If I asked everybody to guess what American Express would do, they would come up with some figure similar. But it's so different that it earns 30 % plus on capital and does not incur more risk in doing so than the banks that earn 13 % or 14 % And the trick in life is to find, I mean, in investing is to find businesses that are going to earn high returns on capital for an extended period of time. And that's what happened with Berkshire for a long period of time. A long period of time gets to be very important because those doubles later on are very big numbers.

40:48But Charlie Munger, my partner for decades, he just pounded the idea that it wasn't a good business just because it was doing sexy things or whatever it might be. but if it wasn't earning real cash that it would be expected to do it in a very short period of time and just be able to distribute it if it wanted to better yet, if it could re-employ it as a business, it was even better than one that had the ability to earn high returns, but you couldn't deploy the excess capital of those returns. Okay, let me ask you though. So forever, people have thought of you as somebody who doesn't invest in technology.

41:38And by the way, you've described yourself as somebody who doesn't invest in technology. Obviously, the biggest position in the Berkshire portfolio is Apple, a position that you put on. But at the time, you called that a consumer company. Google, you just called an AI company. So what happened? The real question with Google and all of its competitors now, because they're all laying out hundreds of billions. They're big cap expenders. Yeah, and that's real money. I mean, if our railroad were to lay out$300 million or$200 billion, that kind of money wasn't even put in the railroad business in terms of developing.

42:21And that's the game they're playing now. They weren't playing that game with computer software. No, so when they were asset light, you didn't like them, and the markets loved them. Now that they are spending heavily on CapEx, a lot of shareholders don't like them as much. I think they're more likely to be a winner based on the record than probably 90 % or 95 % of what gets merchandised through Wall Street. Wall Street is interested to whether they can sell something and I can't recall a report on Wall Street that really gets into the internal rates of return that a business is actually earning.

43:08What's more important than what a business is earning? But they ask all these questions about what will happen next quarter or you know, it's just it's ridiculous, but you know investing is is coming up with, well, probably the most successful long-term investor was Roger Fuller. But look at what oil and gas has done over 150 for a couple of hundred years. So he kept compounding at a very good rate. Not as good a rate as Geico would have achieved in his early years because it's easier to do when you're small. Getting to do it when you're large is, you've got the whole world looking at you trying to, you know, how come those guys are doing it?

43:57We're not doing it. Why do you like Alphabet above all others? And what made you initiate this position? What was the eureka moment? I would say that I don't like it as well as at least four or five other businesses that we own. Other than Apple, the railroad? Well, you're not going to get the whole authority out of me. But you like it enough to make it a huge position. I like Berkshire that way. I mean, Berkshire earned high returns on capital. I'm not talking about using the tricks of leverage or that sort of thing. But I'm talking about why Afflebit versus the other Magnificent Seven or the other hyperscalers who are doing the same thing, spending a lot of money, Amazon, Microsoft, whoever it may be, to try and win in this position of AI.

44:53Well, I don't want to sit around knocking the others. They don't have any choice. To spend like this, you mean? Yeah. They're now playing a game, in many cases, or some cases, where they're playing a game they don't want to play. IBM would have loved it if they just kept playing the game that IBM was playing in the 30s or the 40s or the 50s or the 60s. And then somebody came along and said, we'll get a better result for you. Achieving the objective of all the customers you have, because that's all you're going to have. You don't have happy customers, you don't have customers over time. And the customer's not dumb.

45:37Wall Street can be very dumb. And in terms of, they can dream. But a guy with a grocery store can't dream. I mean, I went to my grandfather's grocery store and we saw, well, we had one store in 1869 and we had one store in 1969. And other people were earning high returns on capital, some on a national scale. A and P, which people don't associate with anymore, in the 1930s, I mean, they were number one, enemy number one of Trussbusters in Washington. And they had a very, very, very good hand and that hand disappeared. So it's a different game. And you like this game, you understand this game more than you understood the game they were playing before, is that fair to say?

46:33Yeah, well there's all kinds of games I don't understand, sure. Yeah. But this game. Why should I expect to make money in all kinds of things I don't understand? And. . . But that's what I'm getting at. What do you understand about this game at this point? Because most people would say he's never going to buy any technology stocks. And I think you've said the same thing yourself in the past. Yeah, but I've done it. And actually, one of the most successful companies I was associated with, going back to 1958. Right. We started a company called Data Documents. We started Data Documents because a couple of pals of mine read in the paper that IBM had settled a antitrust suit by divesting.

47:17They had to divest 50 % of the capacity of what was their best business. And everybody knew it was their best business. Now, it so happens it ran out after 10 or 15 years, and I knew some of the people that caused it to run out. But if you have a wonderful business, you are going to be subject to a tax. So it's not a question of whether it was wonderful yesterday. The question is how long is it going to be wonderful? But that's what I think I love. People can try and pigeonhole you and say they know who you are and what you do. To me, it looks like you're 95 turning 96 next month, and you are still changing and following the game.

47:59Yeah, but it's easier for me. if somebody came along

48:07well I'm just trying to think of what about you better candy that would have more predictive value to me than if they came along and had a better way of doing something that a hundred of their competitors would sneak in the plant at night to see exactly how they got it all done.

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49:20We're back. This is a special bonus edition of Squawk Pod with Warren Buffett. Let's talk about your largest position, Apple. You told us that you were thrilled with everything that Tim Cook had done. I don't know how well you know John Ternus at this point or what you think of the company's doing. You still have a lot of faith in Apple? Well, there was no move they could make that would replace Tim that I would have liked. I mean, if you've got somebody, Stradivarius playing the violin for you, don't spend the next 300 years looking for another one. I mean, you've got one already. And of course, Wall Street thrives on the idea that convincing you that if you just listen to them, they've got something that nobody else has, which can't be true.

50:19I mean, it's ridiculous. But it works because, well, in general it works because America has been a wonderful place to invest money. And the Dow Industrials, when I bought my first stock, just crossed 100, 100. And now it's 52 ,000 or something. And you've got dividends in between and all kinds. Well, I mean, the village idiot could have made it from that point forward. And so I've been in the right game. If I'd been in wheat speculation, I mean, wheat's gone from, you know, I don't know whether it's gone from$3 to$5 or something over 200 years. And it's a very simple business. as long as you keep remembering that it's simple and that making it complicated can, well, it's just crazy.

51:28At that point, you're gambling. But do you still like Apple? People's enthusiasm for gambling is enormous. You've talked about that over the last many years, probably since COVID. But you still like Apple, back to the point? Yeah. Yeah. And I know more about Apple than I knew. many years ago. But on the other hand, if you're Apple, you've got very, very smart people all over the world shooting and trying to figure out how to make sure that Apple's future, the future, isn't as bright as it is in the past. And look at the car companies. I mean, Henry Ford owned the car business for 20 or 25 years.

52:10And he did the virtually integrated, like you cannot believe it. He got the drove costs down. He got the cost of Model T down, I think, to$285. And he always was decreasing prices while increasing wages. So he was, but he also was a little nuts in some ways. And that did him in. Finally, when he converted over to the Model A, and General Motors just came racing by. And my friend Charlie Munger thought that General Motors was the, was going to be the dominant company. Who could imagine attacking their dealer fleet and everything they had going for them?

52:53You've always got somebody shooting at you. To that point, Apple brought a lawsuit against OpenAI just last Friday night, just last week, and basically accused OpenAI of trying to steal trade secrets. I would say most companies would love to steal trade secrets. They wouldn't love getting caught. But if you really could dig deep into the hearts of managers, they'd like to steal secrets.

53:28Wouldn't you? I mean, if you had a business and you were struggling along and the guy next door was making money, I had a half interest in a Sinclair filling station at 30th and Redick in Omaha when I was in my early 20s. And I'd been to business school and knew all these things. And the guy next door had the Phillips station, and he was pumping 30 ,000 gallons a month, and we were pumping 15 ,000 gallons a month. So I said, we're going to wipe this guy off the face of the earth. And a couple of years later, we were selling$15 ,000 and he was selling$30 ,000 and we gave up and we closed up. And I think he's still operating.

54:15People are playing for keeps in business. We talked about Coca-Cola briefly, the longtime position you've held for more than 45 years. There is a major lawsuit with the government that could look at action, I believe, going all the way back to 1996 with Coca-Cola. The government, the IRS has said that they owe them$20 billion, roughly. Yeah,$20 billion, of which they paid. I think they put$10 billion or something. They made a deposit of quote to$10 billion. Right. But we're going to hear about whether the activities in this has to do with overseas, their overseas business, just some of the accounting that goes back and forth.

54:57Coca-Cola says that they thought they had an agreement in 1996 that stood with how they should behave. The government's now looking for more money and saying that's not the case. It's not just Coca-Cola that's riding on this. So there's a lot of other American businesses who are doing the same thing. A huge number, which is why the derivative effects of the suit could be the biggest in American history. What do you think of this? And with the understanding that you are a Coca-Cola shareholder, a large Coca-Cola shareholder, was this an overzealous government looking for ways to raise more money?

55:30Was this a company that performed badly or that behaved badly? I've got a dog in that fight. So that's why we have courts. Yeah. So you'll wait and see what happens with it. I take it you're watching this closely. Yeah. Paying the extra money won't break Coca-Cola any more than anything I can think of would break Berkshire. I mean, all I do is think about the downside. The upside will take care of itself. Right. We also have a new FOMC chairman, Kevin Warsh, who is taking a look at the economy. This week he's going to be, or he is speaking in front of Congress. A lot of questions about what he'll do with the markets, what he'll do with interest rates and what that in turn means for the markets.

56:20You in the past have spoken about how interest rates are gravity and it determines where stock market prices are headed. So what do you think happens? What are you betting? I don't know what he'll do, but I would say that that job is so complicated. I think the other day he was quoted as saying that they have 950 economists when they could use 110.

56:47I admire him for taking on the job. I think he will do the best he can at achieving the job he was assigned to do, which is 2 % inflation and well maintaining maximum employment. And my guess is that just like some of the others that have preceded him, not all of them, but he would read that every morning. The dual mandate of the Fed. The dual mandate. And he knows he can't be perfect at it. And just like I know I couldn't be perfect at taking people's money and earning super returns on it. But my guess is that people were right in realizing that I cared about what happened to their money and I would say that the warship he cares about the country.

57:42I think that's been true of a good many. It doesn't mean their decisions are always great but because sometimes the decisions are so tough I I mean, imagine Paul Volcker getting death threats all the time. And others just think they know more than they do. But you think Kevin knows a lot and is a... I think he's a very... Yeah, I think he was a good choice. Okay. Which probably means the president will be mad. Future presidents will be mad at him because future presidents are looking at the next election and he's not supposed to be looking at the next election. Right. Right. You obviously don't come out and make calls on where the market's headed at any point in time, but you do make calls on market behavior and what makes sense to you and what doesn't.

58:30Do you think the markets make sense to you when there's so much riding on AI? Earnings have been very strong. The consumer looks like it's held into this point, but how do you view it? Well, I think there are times when opportunities are just thrown at you so fast you can't, you know, it's unbelievable. And then there's other times when you're very, very lucky if you find one thing in a couple of years. And it should always be that the latter is what prevails. But since humans love to gamble so much, there's more money in actually cultivating gamblers than there are cultivating investors. If somebody bought Berkshire 40 years, 50 years ago, a guy would have made one commission.

59:23And he should spend the rest of his time telling the client, don't do anything with it. And that's just not the way, we can't expect that to humans. but every now and then you do find people I mean you find people behave far better than other people Fair to say though it's tougher to find values or find cheap opportunities It's tough to find values when everybody is preferring gambling and from the standpoint of the state we may have discussed this but from the standpoint of the state it's sort of disgusting because the state needs money for all kinds of things, roads, schools, you name it and And they have found that they can clip people who are buying nothing but hope, selling something with a payout ratio of 60 % or something like that.

1:00:13And if they weren't doing that, they'd have to have the income tax higher. It's a cynical sort of activity. And I think the less you get cynicism between the governing body and the people of government, But you don't want people to be cynical about their system. But there's times when the system says, you know, just be as cynical as you want because this is what I'm going to do, baby. Let's go back very quickly. You touched on this. Part of the reason that you want the shares given out over the next eight years is because you want your kids making these decisions. But the other part is that you don't feel like you necessarily have to hold on to these voting shares of Berkshire for as long because you have faith in Greg.

1:01:02Exactly. And if we didn't have faith, well, part of the reason I'm around is because we didn't have sufficient faith in anybody. and we know all kinds of people but I mean if you were talking about Tom Murphy I mean if I could have hired Tom Murphy but the trouble was they were all older and all my friends were pretty much older so I didn't it wasn't like I was in college and I could see really had it you know who was writing crib sheets on their answers on their shoulder, on their shoulder. But you feel that way with Greg. I feel 100 % that way. I've seen him in a lot of situations. A lot of situations.

1:02:00I felt that way with Charlie. I felt that way with Tom Murphy.

1:02:06But, you know, nobody expects you to pick out 25 husbands and have them all work out. I mean, just fighting one is pretty tough. I mean, that's the right sort. And then you make mistakes. Warren, how are you feeling today? Well, I broke a leg. What happened? A few weeks ago, so, which is really, I've been very lucky on that sort of thing. I haven't broken a leg in my life until now.

1:02:45But I'm glad I was born. And I'm glad I wasn't born in some other country. And I was glad initially that I wasn't born female. And I mean, all kinds of things. I mean, I really won the lottery when I came out. And other people think they won the lottery. If they've got a trust fund set up, one that takes care of them for their whole life and, you know, five generations thereafter. But I just wasn't raised that way. And I think it's a good thing I wasn't. And I haven't raised the kids that way. Or more important, Susie didn't raise them that way. Well, I want to thank you for your time today. Thank you.

1:03:26I appreciate it. And we're an interesting business. Yeah.

1:03:34Thanks for listening to Squawk Pod. Make sure you follow us wherever you listen to podcasts. You'll get conversations like this one with Warren Buffett, plus so much more. I'm Becky Quick. Have a great day.

1:04:04Oh, that sounds easier than I thought. You got this. Yeah, I do. Now, where did I put my keys? You will find them where you left them. Investing involves risk, including risk of loss. Fidelity Brokerage Services, LLC. Member NYSE SIPC.