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Part - II

Q: In the world of great investors, who do you compare yourself to, if anybody at all? And who do you think will take on your mantle?

A: There are plenty of people around. I consider myself much more of a businessman now than an investor. But I've learnt a lot from others. I've learnt from Ben Graham, I've learnt from Phil Fischer, I've learnt from my partner Charlie Munger. I've learnt from Phil Curray who used to come to our meetings right up until he was 99-100 years of age. Walter Schloss who worked with me at Graham-Newman Corp. He just wound up his partnership recently. He's 85 and over the past 47 years, he's had a terrific record. Way, way better than the S&P with no risk at all. There are people around; there will continue to be people around. It's easier doing this thing with small amounts of capital than large amounts. With a huge bulk of capital, chances are you won't outperform the market by any significant amount.

The Strategy

Q: Your style has been described as 'Buy and Hold'. Wall Street sometimes perverts that notion to get people to invest and forget about what they own. I think what you do is 'Buy and Watch'. You do sell, if something's no longer working?

A: That's true. We do sell. We don't sell the businesses we buy. But we have sold a lot of stock over the years. My portfolio in 1950 had six stocks. I don't have any of them today. But yes, when I buy, I buy with the idea that I'll hold on to it indefinitely. That is, if I'm taking a big equity position. Today, we have arbitrage, we have high yield bonds, and we do a lot of other things. Those do not have that kind of permanence attached to them. But if you're talking about just pure bread and butter equities, I like to buy things I feel very good about, in terms of their business and management. And ones where I feel so good about the price I pay for them, that I say to myself 'I just want to own this forever.' That's way the I want people to feel about Berkshire. Personally, I'm going to hold Berkshire forever. I've never sold a share. And I think you'll find such everlasting commitment more among Berkshire shareholders than you'll find among shareholders of any other company. That's the kind of partners I want.

Q: What about your original investors, the people who gave you $10,000 in 1960?

A: We had a case in New York a few years ago where the husband and wife left about $750 million to six charities. Another one not so long ago, had over a billion dollars being passed on. A lot of people have stuck with me. There are at least 25 families here in Omaha that have more than $100 million in Berkshire. They probably didn't put in more than $50,000 when they bought it the first time.

Q: Coca Cola, Dairy Queen...What does that tell us about you?

A: That I like to buy things I can understand. I do a lot of research on things like Dairy Queen. And if you look at our businesses, the truth is that you'll understand every one of them. There might be some you're more familiar with than others. But there is nothing in there that's black box material. Nothing's hidden. You'll understand what those companies are doing with the customer, what they do to keep the customer happy, why the customer is likely to keep coming back 5-10 years from now, why the company is likely to have an edge - things like that. I look for things I can understand. And Dairy Queen is a great example.

Q: Nothing to do with a sweet tooth?

A: I like the product. I have an aunt who going to be 96 very shortly. And we go to Dairy Queen every Sunday. That's her only big indulgence. So I get a lot of the family's opinion on these things too.

Q: Do you ever go overseas and look for opportunities?

A: We want to. We are not on the radar screen to the same extent outside the United States as we are in the United States. I get way more calls now than 20 years ago, from within the US. I don't get them from outside the US. So, I am hoping that people, particularly the privately owned businesses of size, where they really want the right home for, I am hoping that they think of me in the future. We are perfectly willing to buy businesses outside the country.

Q: What do you make of what's going on in housing? People are kind of surprised that through this recession, housing did what it's done in no other recession in previous periods, which is to continue strong.

A: I have been baffled by it. If you'd asked me a couple of years ago, I'd have been dead wrong as to what would happen under these circumstances in housing. But we are in housing through brick, through insulation, through carpet, through paint and all of those business stayed very strong. Because new housing construction has roared along. And incidentally, we are the second largest residential real estate brokerage firm in the country. And we'll probably close somewhere between 30-35 billion of residential house sales this year. So you'll have to explain that. I'll watch CNBC to find out why all this is happening.

Q: Two years ago, a lot of people were writing your professional obituary. Saying you'd kind of missed the hot action, that you'd kind of lost your touch. And now, a lot of those same people are either unemployed, out of business or on their way to jail. What do you make of this turn relative to two years ago?

A: We had a bubble. It didn't prevail every place in the market but we had one of the great bubbles of all time. And people get very happy when they are in a bubble. It's very tempting when your neighbor, who you're sure has an IQ 30 points below yours is making a lot of money, to say why can't I make money too. It looks so easy when it's happening. But its usually analogy that its like Cinderella at the ball. You think you're gonna leave before midnight and then you look around and the clock has no hands and all of a sudden it all turns to pumpkins and mice.

Q: How did you know to stay out though? Most people say that the most difficult thing in the world is to recognize a bubble is happening as it happens. And yet you were always of that mind as far as I could tell. And you knew to stay away? What told you not to get involved?

A: I've always known reasonably well what I don't know. There have been all kinds of things that I haven't participated in. Whether it's semi conductor 20 years ago, or whatever it may be. I don't envy other people because they are making money in some manner that I don't understand. There are people who are speculating that Coke is making a lot of money. It doesn't bother me. And just because I think I know something about a few stocks doesn't mean that I know something about all stocks. Because I don't. If there are 3000 stocks on the stock exchange, all I have to do are understand a few of them well. And if I don't understand something it doesn't make any difference to me. So it wasn't that I made a conscious decision to stay away from this or that. It's just that I stay away from things that I think I don't understand.

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