Live-blogging cnbc’s airing of Buffett and Greed responding to questions from Columbia Business school
Q: Was Greed at the root of the financial crisis?
Buffett: We’ve got the engine that was ever devised. Greed will continue. But what drives the system is the equality of the opportunity.
Gates: The best systems are ones with good short term metrics and a willingness to do things long term (investing in research, eg) and a willingness to invest in youth. Other countries have seen it (China, India) and are trying to emulate it. But nobody wants to borrow from the extreme leverage US got into. But that’s not the heart of our system.
Q: Mr. Gates, can you tell us what you were feeling when you first heard Lehman’s was filing for bankruptcy?
Gates: The fact that there are ups and downs – he had no sentimentality. The domino effect caused him anxiety – he called up Warren 🙂
Q: Was it a mistake to let Lehman go under?
Buffett: Gives Bernanke high marks on the whole for how he’s handled this.
Q: To what extent to you think that business schools like Columbia were responsible for the crisis?
Gates: Business schools teach wonderful things. The case studies of this crisis will be taught here for decades to come. Leverage is a very dangerous thing. The notion of risk on this was not well understood.
Q: Can you teach ethics in a business school?
Buffett: The best place to teach ethics is in the home. The wonderful thing about it is you can succeed wonderfully in this country with ethics. Practicing ethically is not a hindrance at all. This country doesn’t avoid problem; it solves them. Youth have a wonderful future. This is currently fertile soil and there’s no reason to cut corners.
Q: What industry do you think will produce the next Bill Gates?
Gates: Industries have different paces of innovation. The math of the chip, fibre optics… there are few other industries which will compete for being exciting. Energy industry? Medicine? Those are the three that have the strongest momentum.
Buffett: Don’t let anybody else tell you what to do. Do what turns you on.
Q: Can you explain your key motivation to investing so heavily in the Burlington Railway industry at this time?
Buffett: Well, when I was a kid, I asked for a model railway and didn’t get one! (laughter) Railroads are still key, and will be, to transporting goods back and forth. You have the most environmentally friendly and efficient method in Railway – far more efficient than highways. They use 1/3 less fuel, they put far less pollutants into air. (money coach: YEAYYYY! I own CN Rail shares 🙂 )
Q: What keeps you up at night?
Buffett: I try to live my life so that nothing does! I don’t like to sound like a mortician, but last fall was quite exciting to me – there were opportunities that didn’t exist a year or two earlier. I don’t want to be leveraged so that I cannot participate or so that it keeps me up at night. The corn fields had not gone away. Our innovativeness had not gone away. I knew we just had to straighten a few things out, and we are.
Gate: A pandemic – outliers like that, you have to keep an eye on. Our K-12 system is not improving as it should be. That’s a bit scary and needs more attention. But our system generally has a lot of good self-corrections in it.
Q: May people question the current rally in the market. Is it sustainable?
Buffett: I first invested at 11 yrs old. Guess which year has been the best? The answer is 1954. The DOW went up 50%. (Moneycoach – I think I got that quote right, need to double check). It’s a terrible mistake to look at the economy then look at whether to buy stocks. You should look at any given company and evaluate its longterm prospects. If you find a good company, a bad economy is your friend. It gives you a chance to do things. If you wait to see the Robin, spring will be over.
Q: Can you comment on the work Steve Jobs has done on Apple?
Gates: They’re in a bit of a different business because they sell both hardware and software. They’re an incredible force. Of all the leaders in the industry, he’s showed more inspiration and he saved the company.
Q: What’s the one thing that your MBA didn’t prepare you for?
Buffett: It prepared me very well – specific profs, not the whole degree – I was lucky in that I found what turned me on, early on. A couple profs really inspired me. It gave me confidence in myself, propelled me, gave me tailwind. I later went to a Dale Carnegy course which gave me public speaking skills.
Q: Mr. Gates, what role did pure luck play in your success?
Gates: I was lucky to be born with certain skills. I was lucky to have parents who let me buy as many books as I wanted. And I was lucky in my timing- to be young and looking at the microprocessor just as it was emerging. So timing, skill set, meeting Warren … it’s unusual to have so much luck in one life.
Q: In the context of your unique friendship, what do you admire most about each other?
Buffett: It’s my athletic ability (laughter). What I most admire about Bill is his view about what he should do with the wealth he accumulated – he knows he benefited from society and he knows every life is of equal value to every other human life. They’re going to use the last half of their lives to improving lives of 6.5 Billion people around the world.
Gates: His integrity as an example. His sense of humour. But his desire to teach – to put things in simple terms so others can understand – it’s a real gift I admire incredibly.
Q: Dean of Columbia Business School asks: How do we develop business leaders who understand context and connect the dots?
Buffett: I think that what I learned from _____ (Graham?)_____ – having sound principles takes you though everything.
Q: Do you think we’re through the roughest times?
Buffett: The financial panic is behind us. The spillout is still with us. It will end – it won’t go on forever. To try to pick the bottom – don’t pass up something attractive today in the hopes of finding something even more attractive tomorrow.
Q: Will clean energy investments help pick up the economy?
A: We don’t yet know which of the energy industries will pan out long-term. You’ll have to be careful to find one with its cost-structure in line, not one being pushed along by subsidy.