WEBVTT 00:00:00.000 --> 00:00:01.760 Welcome back to the Deep Dives, where we sift 00:00:01.760 --> 00:00:03.960 through your source material and extract the 00:00:03.960 --> 00:00:06.320 most important nuggets of knowledge and insight. 00:00:06.740 --> 00:00:09.279 Today, we are undertaking a deep dive into a 00:00:09.279 --> 00:00:12.099 figure whose name is, well, it's pretty much 00:00:12.099 --> 00:00:14.560 synonymous with multi -generational wealth creation. 00:00:15.289 --> 00:00:17.469 Warren Edward Buffett. Yeah, absolutely. We're 00:00:17.469 --> 00:00:20.170 looking at the life and legacy of the Oracle 00:00:20.170 --> 00:00:23.390 of Omaha, an investor and philanthropist who, 00:00:23.469 --> 00:00:26.449 even as of January 2026, still ranked as the 00:00:26.449 --> 00:00:29.730 ninth richest person in the world, with a net 00:00:29.730 --> 00:00:34.149 worth getting close to $150 billion. And this 00:00:34.149 --> 00:00:36.270 deep dive is really for anyone who wants to go 00:00:36.270 --> 00:00:38.490 beyond the headlines. We want to understand how 00:00:38.490 --> 00:00:40.950 he did it, how his famous investment philosophy 00:00:40.950 --> 00:00:43.890 changed over time, and some of his really surprising 00:00:43.890 --> 00:00:46.210 and sometimes contradictory public policy views. 00:00:46.450 --> 00:00:48.689 Exactly. We're working from a pretty extensive 00:00:48.689 --> 00:00:51.689 biographical overview here. It tracks his career 00:00:51.689 --> 00:00:54.270 all the way from the 1950s right up to the recent 00:00:54.270 --> 00:00:56.429 news about his succession plan. And I think the 00:00:56.429 --> 00:00:57.909 first thing we have to talk about, the thing 00:00:57.909 --> 00:01:00.350 that frames this whole conversation, is the profound 00:01:00.350 --> 00:01:03.609 paradox of Warren Buffett. And that paradox is 00:01:03.609 --> 00:01:05.450 really the perfect place to start, isn't it? 00:01:05.609 --> 00:01:08.670 Here you have a person who has built, you know, 00:01:08.670 --> 00:01:11.290 arguably the greatest non -tech fortune in modern 00:01:11.290 --> 00:01:14.010 history. Yeah. He's been the chairman and CEO 00:01:14.010 --> 00:01:17.709 of Berkshire Hathaway since 1970. It's this sprawling, 00:01:17.750 --> 00:01:20.489 massive conglomerate. But at the same time, he 00:01:20.489 --> 00:01:23.069 lives this life of personal frugality that just 00:01:23.069 --> 00:01:25.989 seems impossible for someone of his standing. 00:01:26.189 --> 00:01:28.069 It really does. I mean, the sources make a huge 00:01:28.069 --> 00:01:30.269 point of this. He still lives in the same five 00:01:30.269 --> 00:01:32.769 -bedroom stucco house. in Omaha, Nebraska that 00:01:32.769 --> 00:01:36.049 he bought way back in 1958. For what, $31 ,000? 00:01:36.069 --> 00:01:39.510 For $31 ,500. So you have this incredible contrast. 00:01:39.849 --> 00:01:42.189 He is the ultimate capitalist success story, 00:01:42.349 --> 00:01:44.989 but he's also the ultimate counterexample to 00:01:44.989 --> 00:01:47.150 that sort of billionaire extravagance we see 00:01:47.150 --> 00:01:49.250 so often. And his whole professional life seems 00:01:49.250 --> 00:01:51.569 to be built on that tension. It is. He's operating 00:01:51.569 --> 00:01:54.329 at the absolute peak of global finance, moving 00:01:54.329 --> 00:01:57.450 billions with a single phone call. But he lives 00:01:57.450 --> 00:02:00.230 a lifestyle that's more like a successful, you 00:02:00.230 --> 00:02:02.840 know, small -town business owner. Okay, so let's 00:02:02.840 --> 00:02:04.659 unpack that. We have to start at the beginning 00:02:04.659 --> 00:02:07.319 with part one, the formative years in foundational 00:02:07.319 --> 00:02:11.009 education. Because the scale of his success is 00:02:11.009 --> 00:02:13.990 so huge, it's almost easy to forget how early 00:02:13.990 --> 00:02:16.270 and how meticulously he started. Oh, absolutely. 00:02:16.490 --> 00:02:19.789 He was born in 1930. His father, Howard Buffett, 00:02:19.830 --> 00:02:23.009 was a U .S. congressman. But his drive wasn't 00:02:23.009 --> 00:02:25.650 political, not in the typical sense. It was purely 00:02:25.650 --> 00:02:29.169 commercial from day one. And it started so young. 00:02:29.530 --> 00:02:31.930 The sources say he was seven when he read a book 00:02:31.930 --> 00:02:34.909 called 1 ,000 Ways to Make $1 ,000. That's right. 00:02:35.069 --> 00:02:37.509 And that title just perfectly encapsulates his 00:02:37.509 --> 00:02:39.849 entire... early mindset. It was all about the 00:02:39.849 --> 00:02:42.069 numbers, about accumulation. And he put that 00:02:42.069 --> 00:02:44.509 into action pretty much right away. Immediately. 00:02:44.569 --> 00:02:46.389 He started doing all those classic childhood 00:02:46.389 --> 00:02:48.830 hustles, selling chewing gum, selling Coca -Cola, 00:02:49.009 --> 00:02:51.830 weekly magazines door to door. He even worked 00:02:51.830 --> 00:02:54.090 shifts at his grandfather's grocery store. It 00:02:54.090 --> 00:02:57.009 was just a constant multi -front effort to bring 00:02:57.009 --> 00:02:59.710 in cash. The pinball machine story is the one 00:02:59.710 --> 00:03:01.389 that really stands out for me, though. It shows 00:03:01.389 --> 00:03:03.379 he understood more than just earning. It really 00:03:03.379 --> 00:03:06.259 does. It's the perfect anecdote. So he's 15, 00:03:06.479 --> 00:03:08.860 a sophomore in high school, and he and a friend 00:03:08.860 --> 00:03:12.639 buy a used pinball machine for $25. And they 00:03:12.639 --> 00:03:14.520 didn't just put it anywhere. No, it was strategic. 00:03:14.639 --> 00:03:17.080 They placed it in a barbershop. Think about it. 00:03:17.120 --> 00:03:19.939 It's a place with constant foot traffic and people 00:03:19.939 --> 00:03:21.759 are just sitting around with nothing to do. It 00:03:21.759 --> 00:03:24.479 was the perfect location. And I assume the returns 00:03:24.479 --> 00:03:27.139 are pretty good. Spectacular. So good, in fact, 00:03:27.139 --> 00:03:29.599 that within just a few months, it wasn't just 00:03:29.599 --> 00:03:32.719 one machine. They had several spread across three 00:03:32.719 --> 00:03:35.979 different barbershops in Omaha. And in 1947, 00:03:36.319 --> 00:03:39.409 they sold the whole business. For how much? $1 00:03:39.409 --> 00:03:44.969 ,200 on a $25 initial investment. That is a massive, 00:03:45.050 --> 00:03:47.469 massive return. And his financial discipline 00:03:47.469 --> 00:03:50.460 was just. It was almost obsessive even back then. 00:03:50.520 --> 00:03:52.699 He was delivering the Washington Post, making 00:03:52.699 --> 00:03:55.960 $175 a month, which was a lot of money for a 00:03:55.960 --> 00:03:58.840 kid then. It was. But the detail that blows me 00:03:58.840 --> 00:04:01.360 away is his first income tax return. Yeah, tell 00:04:01.360 --> 00:04:03.819 us about that. So in 1944, he files his first 00:04:03.819 --> 00:04:07.340 return, and he claims a $35 deduction for the 00:04:07.340 --> 00:04:09.900 business use of his bicycle and his watch on 00:04:09.900 --> 00:04:12.710 his paper route. I mean, think about that. He 00:04:12.710 --> 00:04:14.810 had a working understanding of business expenses 00:04:14.810 --> 00:04:17.709 and depreciation before he could even legally 00:04:17.709 --> 00:04:20.329 drive a car. So all this hustling and discipline, 00:04:20.550 --> 00:04:23.009 it actually added up to some serious money. It 00:04:23.009 --> 00:04:25.769 really did. By the time he graduated from college, 00:04:25.889 --> 00:04:29.709 he'd saved up $9 ,800. Wow, what is that today? 00:04:29.810 --> 00:04:33.389 Over $100 ,000. Well, over $100 ,000, yeah. And 00:04:33.389 --> 00:04:35.569 it's not really about the sum itself. It's about 00:04:35.569 --> 00:04:38.089 the discipline it took to get there so early. 00:04:38.410 --> 00:04:40.769 And yet, he didn't even want to go to college, 00:04:40.930 --> 00:04:43.269 did he? No, he thought he already knew everything 00:04:43.269 --> 00:04:46.389 he needed to know about business. But his father 00:04:46.389 --> 00:04:48.470 overruled him. So he went to Wharton for a bit, 00:04:48.550 --> 00:04:50.050 then finished up at the University of Nebraska 00:04:50.050 --> 00:04:55.230 in 51. But the real turning point for him educationally 00:04:55.230 --> 00:04:57.589 came from a big rejection. Getting rejected from 00:04:57.589 --> 00:04:59.750 Harvard Business School. That was it. That rejection 00:04:59.750 --> 00:05:02.370 was the catalyst. It pushed him to look at Columbia 00:05:02.370 --> 00:05:04.949 Business School, but only for one reason. Benjamin 00:05:04.949 --> 00:05:07.490 Graham taught there. The author of The Intelligent 00:05:07.490 --> 00:05:10.709 Investor. The father of value investing. The 00:05:10.709 --> 00:05:13.170 one and only. Buffett earned his master's in 00:05:13.170 --> 00:05:16.730 economics from Columbia in 1951. And that one 00:05:16.730 --> 00:05:19.629 experience studying under Graham gave him the 00:05:19.629 --> 00:05:21.949 entire intellectual framework for everything 00:05:21.949 --> 00:05:24.170 that came next. OK, so that's the cornerstone. 00:05:24.230 --> 00:05:25.870 For anyone listening who really wants to grasp 00:05:25.870 --> 00:05:29.230 the core of this, what were the big lasting lessons 00:05:29.230 --> 00:05:32.540 Graham gave him? While Buffett himself says Graham's 00:05:32.540 --> 00:05:34.480 teachings are the cornerstones of investing, 00:05:34.759 --> 00:05:38.019 even 100 years later, it really boils down to 00:05:38.019 --> 00:05:40.199 three big ideas. First, and this is the most 00:05:40.199 --> 00:05:43.540 important one, view stocks as fractional ownership 00:05:43.540 --> 00:05:45.899 in an actual business, not just as a piece of 00:05:45.899 --> 00:05:48.480 paper or a blip on a screen. This forces you 00:05:48.480 --> 00:05:50.920 to think about the business's fundamental value, 00:05:51.079 --> 00:05:54.000 its earnings, not just the market's mood. So 00:05:54.000 --> 00:05:55.800 it's about the business, not the stock price. 00:05:55.939 --> 00:05:57.860 What's the second idea? The second is the concept 00:05:57.860 --> 00:06:00.899 of Mr. Market. Graham personified the stock market 00:06:00.899 --> 00:06:03.060 as this, you know, manic depressive business 00:06:03.060 --> 00:06:06.639 partner. Every day, Mr. Market shows up and either 00:06:06.639 --> 00:06:09.680 offers to buy your shares at a ridiculously high 00:06:09.680 --> 00:06:13.000 price or sell you his at a ridiculously low price. 00:06:13.639 --> 00:06:17.519 Your job as an investor is to use his emotional 00:06:17.519 --> 00:06:20.660 swings. You buy when he's panicked and depressed 00:06:20.660 --> 00:06:23.019 and you think about selling when he's euphoric. 00:06:23.199 --> 00:06:25.579 So volatility isn't a risk, it's an opportunity. 00:06:26.120 --> 00:06:29.019 That's a huge mental shift. A huge shift. And 00:06:29.019 --> 00:06:31.720 the third and maybe the most famous lesson is 00:06:31.720 --> 00:06:33.660 the margin of safety. The protective buffer. 00:06:33.879 --> 00:06:36.839 Exactly. Graham taught that you have to buy a 00:06:36.839 --> 00:06:39.300 business for significantly less than its intrinsic 00:06:39.300 --> 00:06:41.699 value. So if a business is worth a dollar, you 00:06:41.699 --> 00:06:44.300 should aim to buy it for, say, 60 cents. That 00:06:44.300 --> 00:06:46.420 40 cent difference is your margin of safety. 00:06:46.660 --> 00:06:49.180 It protects you if you're wrong, if the economy 00:06:49.180 --> 00:06:52.480 turns, if anything unexpected happens. It's your 00:06:52.480 --> 00:06:54.819 single best defense against losing money permanently. 00:06:55.439 --> 00:06:57.339 That sounds so simple in theory, but I imagine 00:06:57.339 --> 00:06:59.500 it's incredibly hard to practice. And Buffett 00:06:59.500 --> 00:07:01.100 didn't immediately go to work for Graham, did 00:07:01.100 --> 00:07:03.579 he? No, he struggled to land a job with his mentor. 00:07:03.899 --> 00:07:06.120 He even offered to work for Graham for free. 00:07:06.259 --> 00:07:09.410 And Graham said no. Graham refused. At the time, 00:07:09.410 --> 00:07:11.550 Graham had a practice of hiring Jewish analysts 00:07:11.550 --> 00:07:13.529 because they were often discriminated against 00:07:13.529 --> 00:07:16.730 on Wall Street. So he passed on Buffett. Buffett 00:07:16.730 --> 00:07:18.529 had to go back home to Omaha. And that's when 00:07:18.529 --> 00:07:20.430 he started working as a stockbroker and teaching 00:07:20.430 --> 00:07:22.470 night classes. Yeah, which is kind of ironic, 00:07:22.649 --> 00:07:25.149 isn't it? He's a 21 -year -old kid teaching these 00:07:25.149 --> 00:07:27.170 investing principles he just learned from Graham 00:07:27.170 --> 00:07:29.750 to students who are often twice his age. But 00:07:29.750 --> 00:07:31.810 the opportunity to work with Graham finally came 00:07:31.810 --> 00:07:36.420 through. It did, in 1954. He got a job as a securities 00:07:36.420 --> 00:07:39.800 analyst at Graham Newman Corp for $12 ,000 a 00:07:39.800 --> 00:07:42.500 year. He worked there for two really crucial 00:07:42.500 --> 00:07:45.199 years, side by side with Walter Schloss, another 00:07:45.199 --> 00:07:47.779 one of Graham's famous disciples. So when Graham 00:07:47.779 --> 00:07:51.759 retired in 1956, Buffett was ready. He was perfectly 00:07:51.759 --> 00:07:55.000 positioned. Graham closed his partnership. Buffett 00:07:55.000 --> 00:07:57.639 took his own savings, which by then was up to 00:07:57.639 --> 00:08:01.839 $174 ,000, and armed with this perfect intellectual 00:08:01.839 --> 00:08:05.100 framework, he went back to Omaha one last time, 00:08:05.160 --> 00:08:07.980 this time to start his own investment partnerships. 00:08:08.360 --> 00:08:10.500 And that really sets the stage perfectly for 00:08:10.500 --> 00:08:13.339 part two, the evolution of Berkshire Hathaway. 00:08:13.420 --> 00:08:15.759 This is where he goes from being a student of 00:08:15.759 --> 00:08:19.680 Graham's rules to a master who eventually... 00:08:20.300 --> 00:08:22.759 Kind of transcends them. He started Buffett Partnership 00:08:22.759 --> 00:08:27.579 LTD in 1956. And by 1962, he was already a millionaire. 00:08:27.899 --> 00:08:31.560 The partnerships were managing about $7 .2 million. 00:08:31.899 --> 00:08:34.620 And over a million of that was his own money. 00:08:34.759 --> 00:08:37.460 And this early period was just textbook Graham. 00:08:37.639 --> 00:08:40.080 Right. Finding super cheap assets. Pure textbook 00:08:40.080 --> 00:08:42.399 Graham. Finding businesses that were just... 00:08:42.519 --> 00:08:45.039 fundamentally cheap, often without much regard 00:08:45.039 --> 00:08:47.080 for the quality of the business itself. It was 00:08:47.080 --> 00:08:49.759 all about the numbers. And the Sanborn Map Company 00:08:49.759 --> 00:08:52.019 investment is the ultimate example of this. Oh, 00:08:52.039 --> 00:08:54.379 it's the perfect case study. Sanborn Map Company 00:08:54.379 --> 00:08:56.919 made these incredibly detailed maps for the fire 00:08:56.919 --> 00:08:59.980 insurance industry. But by the 60s, that business 00:08:59.980 --> 00:09:02.179 was becoming obsolete. But the company had something 00:09:02.179 --> 00:09:05.120 else on its books. It did. Over decades, it had 00:09:05.120 --> 00:09:07.519 built up this massive investment portfolio of 00:09:07.519 --> 00:09:09.919 stocks and bonds, and the market just completely 00:09:09.919 --> 00:09:11.970 ignored it. So what was the math? The math was 00:09:11.970 --> 00:09:14.509 incredible. Buffett found that Sanborn's stock 00:09:14.509 --> 00:09:18.129 was treating at $45 a share. But the value of 00:09:18.129 --> 00:09:19.970 its investment portfolio, which could be easily 00:09:19.970 --> 00:09:23.750 sold, was worth $65 a share. So you were paying 00:09:23.750 --> 00:09:27.970 $45 for $65 of liquid assets. Exactly. Which 00:09:27.970 --> 00:09:30.690 meant the market was valuing the actual map -making 00:09:30.690 --> 00:09:34.289 business at minus $20 per share. You were literally 00:09:34.289 --> 00:09:36.970 being paid $20 to take the business for free. 00:09:37.129 --> 00:09:40.179 That's the margin of safety in action. So how 00:09:40.179 --> 00:09:42.899 did he get that value out? He became an activist. 00:09:43.000 --> 00:09:46.360 He started buying up shares, got to 23 % of the 00:09:46.360 --> 00:09:48.840 company, and then he demanded a seat on the board. 00:09:49.159 --> 00:09:51.860 He allied with other shareholders who were also 00:09:51.860 --> 00:09:54.659 frustrated and basically forced management to 00:09:54.659 --> 00:09:56.820 use the investment portfolio to buy back shares 00:09:56.820 --> 00:09:59.299 at their fair value. And the result was a 50 00:09:59.299 --> 00:10:02.080 % return in just two years. It's a perfect example 00:10:02.080 --> 00:10:04.899 of what he called cigar butt investing. The ultimate 00:10:04.899 --> 00:10:07.259 cigar butt. You find one on the ground, there's 00:10:07.259 --> 00:10:09.929 one free puff left in it. you take the puff and 00:10:09.929 --> 00:10:12.289 you throw it away you're getting one last puff 00:10:12.289 --> 00:10:15.250 of profit from a dying business which is so different 00:10:15.250 --> 00:10:18.330 from what he would later become famous for and 00:10:18.330 --> 00:10:20.649 that brings us to the great irony of his entire 00:10:20.649 --> 00:10:23.750 career berkshire hathaway itself which he calls 00:10:23.750 --> 00:10:27.330 his worst trade he does he took control of the 00:10:27.330 --> 00:10:30.009 textile manufacturer berkshire hathaway in 1965. 00:10:31.009 --> 00:10:34.120 he was drawn in by the cheap valuation But the 00:10:34.120 --> 00:10:36.519 American textile industry was in a death spiral 00:10:36.519 --> 00:10:39.759 because of foreign competition. He later admitted 00:10:39.759 --> 00:10:42.139 he kind of got into it emotionally after a dispute 00:10:42.139 --> 00:10:45.080 with the old management. The last textile mill 00:10:45.080 --> 00:10:48.419 was finally sold in 1985. But the genius wasn't 00:10:48.419 --> 00:10:51.059 in the textiles. It was in what he did with the 00:10:51.059 --> 00:10:53.840 company itself. That's the masterstroke of capital 00:10:53.840 --> 00:10:56.259 allocation. Instead of just liquidating it, he 00:10:56.259 --> 00:10:59.169 kept the corporate shell. And he used the capital 00:10:59.169 --> 00:11:01.269 the business was generating, small as it was, 00:11:01.370 --> 00:11:04.409 to pivot into a totally different industry, insurance. 00:11:04.830 --> 00:11:06.649 And the insurance business gave him the float. 00:11:06.830 --> 00:11:09.649 That's the magic ingredient. The float is all 00:11:09.649 --> 00:11:12.070 the premiums customers pay up front, which the 00:11:12.070 --> 00:11:14.029 insurance company gets to hold and invest for 00:11:14.029 --> 00:11:16.190 its own benefit before it has to pay out any 00:11:16.190 --> 00:11:19.750 claims. That float provided a stable, massive, 00:11:19.809 --> 00:11:22.309 and continuous source of capital that funded 00:11:22.309 --> 00:11:24.450 all of his legendary investments for decades 00:11:24.450 --> 00:11:27.629 to come. So that shift in the 70s and 80s led 00:11:27.629 --> 00:11:30.450 to some iconic acquisitions. The Washington Post 00:11:30.450 --> 00:11:32.590 was an early one. Yeah, the Washington Post in 00:11:32.590 --> 00:11:35.269 1973 was a key moment. It showed him starting 00:11:35.269 --> 00:11:37.269 to invest based on the quality of a business 00:11:37.269 --> 00:11:39.690 and its management. He became very close friends 00:11:39.690 --> 00:11:42.649 with its leader, Catherine Graham. Then in 77, 00:11:42.870 --> 00:11:45.490 he bought the Buffalo Evening News, which was 00:11:45.490 --> 00:11:47.750 a much more aggressive move. It actually led 00:11:47.750 --> 00:11:50.129 to antitrust charges until the rival paper went 00:11:50.129 --> 00:11:52.509 out of business. It showed he could play hardball. 00:11:52.909 --> 00:11:54.909 But the deal that really showed his new role 00:11:54.909 --> 00:11:57.649 as a financial stabilizing force was Capital 00:11:57.649 --> 00:12:02.070 Cities ABC in 1985. That was a masterclass. Capital 00:12:02.070 --> 00:12:04.649 Cities was a smaller company trying to buy the 00:12:04.649 --> 00:12:09.269 much larger ABC network for $3 .5 billion. Buffett 00:12:09.269 --> 00:12:12.110 came in and helped finance the whole thing, getting 00:12:12.110 --> 00:12:14.970 a 25 % stake in the combined company in return. 00:12:19.780 --> 00:12:22.919 And his ability to step into a crisis was really 00:12:22.919 --> 00:12:25.450 tested a few years later with Salomon, Inc. Oh, 00:12:25.490 --> 00:12:28.490 the Solomon scandal in the early 90s was an existential 00:12:28.490 --> 00:12:30.769 threat to one of Wall Street's biggest firms. 00:12:31.230 --> 00:12:33.629 Berkshire was the largest shareholder with a 00:12:33.629 --> 00:12:36.590 12 % stake and Buffett was on the board. What 00:12:36.590 --> 00:12:38.870 was the scandal exactly? A rogue trader, Paul 00:12:38.870 --> 00:12:41.549 Moser, had been submitting illegal bids in U 00:12:41.549 --> 00:12:43.769 .S. Treasury auctions. It was a massive breach 00:12:43.769 --> 00:12:46.590 of market rules. And the CEO, John Gutfreund, 00:12:46.649 --> 00:12:49.340 didn't handle it well. Not at all. He found out 00:12:49.340 --> 00:12:51.000 about it, but didn't report it to regulators 00:12:51.000 --> 00:12:53.720 immediately. That cover -up threatened to get 00:12:53.720 --> 00:12:55.919 Solomon barred from the Treasury market entirely, 00:12:56.259 --> 00:12:58.620 which would have destroyed the firm. The government 00:12:58.620 --> 00:13:00.679 was ready to shut them down. So Buffett had to 00:13:00.679 --> 00:13:03.440 step in, which was a huge risk to his own reputation. 00:13:03.820 --> 00:13:06.519 An immense risk. He became the interim chairman. 00:13:07.049 --> 00:13:10.110 He came in and immediately imposed total transparency 00:13:10.110 --> 00:13:13.250 and a zero tolerance policy for ethical breaches. 00:13:13.470 --> 00:13:16.549 His personal reputation for integrity was the 00:13:16.549 --> 00:13:18.470 only thing that convinced regulators to give 00:13:18.470 --> 00:13:21.090 the firm a second chance. He stabilized it and 00:13:21.090 --> 00:13:22.889 protected his investment. But if we're talking 00:13:22.889 --> 00:13:26.149 about pure investment returns, the defining deal 00:13:26.149 --> 00:13:29.169 of that whole era has to be Coca -Cola. Absolutely. 00:13:29.250 --> 00:13:32.600 In 1988, he started buying Coke. He ended up 00:13:32.600 --> 00:13:35.279 with 7 % of the company for just over a billion 00:13:35.279 --> 00:13:38.039 dollars. And this was not a Sanborn map cigar 00:13:38.039 --> 00:13:40.799 butt. This was a world -class business with a 00:13:40.799 --> 00:13:43.960 powerful brand, incredible pricing power, and 00:13:43.960 --> 00:13:46.500 a durable competitive advantage. This was the 00:13:46.500 --> 00:13:48.960 moment that really cemented his shift to buying 00:13:48.960 --> 00:13:52.100 quality. Now, moving into the 21st century, it 00:13:52.100 --> 00:13:55.389 wasn't always smooth sailing. The general reacquisition 00:13:55.389 --> 00:13:58.509 in 1998 caused some major problems. Yeah. Genry 00:13:58.509 --> 00:14:00.610 had two big issues. First, their underwriting 00:14:00.610 --> 00:14:02.629 standards were pretty poor, which led to big 00:14:02.629 --> 00:14:05.269 losses. But second, and maybe more damaging, 00:14:05.450 --> 00:14:07.149 was what they called a problematic derivatives 00:14:07.149 --> 00:14:09.029 book. Can you break that down for us? What does 00:14:09.029 --> 00:14:11.529 that mean? So a derivative is a financial contract 00:14:11.529 --> 00:14:14.429 whose value is based on an underlying asset like 00:14:14.429 --> 00:14:17.730 a stock or currency. They can be incredibly complex 00:14:17.730 --> 00:14:21.570 and leveraged. Jenry had this huge tangled portfolio 00:14:21.570 --> 00:14:25.009 of these things that exposed Berkshire to massive 00:14:25.009 --> 00:14:28.070 hard to predict risks. It was exactly the kind 00:14:28.070 --> 00:14:30.470 of complex finance that Buffett usually avoided. 00:14:30.690 --> 00:14:32.629 And the fallout from that went beyond just money. 00:14:32.750 --> 00:14:35.769 It dragged Berkshire into a huge accounting scandal. 00:14:35.909 --> 00:14:38.750 It did. Jenry executives were implicated in the. 00:14:38.919 --> 00:14:41.179 AIG accounting fraud scandal, which was one of 00:14:41.179 --> 00:14:43.620 the biggest of the decade, it actually forced 00:14:43.620 --> 00:14:47.299 AIG's legendary CEO, Hank Greenberg, to resign. 00:14:48.419 --> 00:14:50.860 In the end, Jenry had to settle with the government 00:14:50.860 --> 00:14:54.220 for $92 million. It was a real black eye and 00:14:54.220 --> 00:14:56.340 a reminder that even the Oracle can make a huge 00:14:56.340 --> 00:14:59.039 misjudgment. And yet, around the same time, he 00:14:59.039 --> 00:15:01.539 was making these huge, shrewd bets that paid 00:15:01.539 --> 00:15:03.919 off beautifully, like his bet against the U .S. 00:15:03.940 --> 00:15:07.590 dollar. That showed his macro thinking. In 2002, 00:15:07.850 --> 00:15:10.730 he became very bearish on the U .S. dollar. He 00:15:10.730 --> 00:15:13.710 entered into $11 billion worth of contracts betting 00:15:13.710 --> 00:15:16.809 against it. It was a massive currency speculation, 00:15:16.809 --> 00:15:20.830 and by 2006, he'd made over $2 billion from it. 00:15:21.129 --> 00:15:23.789 It proved he could handle complexity, but only 00:15:23.789 --> 00:15:25.889 when the underlying idea was simple enough for 00:15:25.889 --> 00:15:28.269 him to understand completely. That's a perfect 00:15:28.269 --> 00:15:30.629 transition to part three, where we really nail 00:15:30.629 --> 00:15:33.549 down this... investment philosophy, how he moved 00:15:33.549 --> 00:15:36.350 from buying cigar butts to businesses you hold 00:15:36.350 --> 00:15:39.169 forever. This evolution is really the whole intellectual 00:15:39.169 --> 00:15:41.629 story of his career. Like we said, he started 00:15:41.629 --> 00:15:44.429 with pure gram, finding those cheap stocks where 00:15:44.429 --> 00:15:46.409 the quality of the business almost didn't matter. 00:15:46.549 --> 00:15:49.169 It was just a numbers game. But that strategy 00:15:49.169 --> 00:15:51.289 has its limits, especially when you're managing 00:15:51.289 --> 00:15:53.950 billions of dollars. You can't just buy tiny, 00:15:53.990 --> 00:15:56.009 failing companies anymore. And this is where 00:15:56.009 --> 00:15:58.210 his partner, Charlie Munger, had a huge influence. 00:15:58.700 --> 00:16:01.120 Munger is absolutely critical to this story. 00:16:01.240 --> 00:16:03.940 He's credited with really shifting Buffett's 00:16:03.940 --> 00:16:06.700 thinking. Munger's famous line is, it's far better 00:16:06.700 --> 00:16:08.940 to buy a wonderful company at a fair price than 00:16:08.940 --> 00:16:11.460 a fair company at a wonderful price. So the focus 00:16:11.460 --> 00:16:14.419 shifted to what they called durable competitive 00:16:14.419 --> 00:16:17.460 stocks. What does that actually mean in practice? 00:16:17.779 --> 00:16:20.850 They call it a moat. A business's moat. And they 00:16:20.850 --> 00:16:23.149 look for a few key things. Strong brand loyalty, 00:16:23.429 --> 00:16:25.929 like you see with Coca -Cola. Strong, consistent 00:16:25.929 --> 00:16:28.389 and predictable earnings. A real competitive 00:16:28.389 --> 00:16:30.730 advantage. Something that's hard for anyone else 00:16:30.730 --> 00:16:33.929 to copy. And most importantly, pricing power. 00:16:34.470 --> 00:16:37.570 The ability to raise prices without losing customers. 00:16:37.830 --> 00:16:40.110 That's the ultimate test of a great business. 00:16:40.250 --> 00:16:42.710 If you have pricing power, you have a durable 00:16:42.710 --> 00:16:45.250 advantage. And this new focus on quality meant 00:16:45.250 --> 00:16:48.179 he had to change his time frame, too. It led 00:16:48.179 --> 00:16:50.340 to the idea that the best holding period for 00:16:50.340 --> 00:16:53.620 a stock is forever. It's the only logical conclusion, 00:16:53.799 --> 00:16:56.019 right? If you own a piece of a truly wonderful 00:16:56.019 --> 00:16:58.519 business that's compounding its value year after 00:16:58.519 --> 00:17:01.100 year, why would you ever sell it? He summed it 00:17:01.100 --> 00:17:03.580 up in 96. He said, if you aren't willing to own 00:17:03.580 --> 00:17:05.779 a stock for 10 years, don't even think about 00:17:05.779 --> 00:17:08.279 owning it for 10 minutes. Short -term price moves 00:17:08.279 --> 00:17:11.259 are just noise. And all of this is built on his 00:17:11.259 --> 00:17:14.079 two famous rules. Rule number one, never lose 00:17:14.079 --> 00:17:17.099 money. And rule number two, never forget rule 00:17:17.099 --> 00:17:19.720 number one. Now, obviously, that's not literal. 00:17:19.779 --> 00:17:22.200 He's had losing investments. But it's about a 00:17:22.200 --> 00:17:24.880 mindset. It's about making the preservation of 00:17:24.880 --> 00:17:27.259 your capital that absolute top priority before 00:17:27.259 --> 00:17:29.740 you even think about returns. He also had a really 00:17:29.740 --> 00:17:32.180 pointed warning about inflation, calling it a 00:17:32.180 --> 00:17:35.009 kind of hidden tax. Yeah, he said inflation is 00:17:35.009 --> 00:17:38.109 a far more devastating tax than any law Congress 00:17:38.109 --> 00:17:40.829 could pass. And it makes sense, right? Income 00:17:40.829 --> 00:17:43.750 taxes take a percentage of your earnings. Inflation 00:17:43.750 --> 00:17:45.990 eats away at the purchasing power of your actual 00:17:45.990 --> 00:17:49.329 capital. It's a silent destroyer of wealth, especially 00:17:49.329 --> 00:17:51.990 for people on fixed incomes. So his belief that 00:17:51.990 --> 00:17:54.559 he could consistently beat the market. Put him 00:17:54.559 --> 00:17:56.799 in direct opposition to the big academic theory, 00:17:56.920 --> 00:17:58.900 the efficient market hypothesis. Right. The efficient 00:17:58.900 --> 00:18:00.960 market hypothesis basically says you can't beat 00:18:00.960 --> 00:18:03.440 the market over time except by luck because all 00:18:03.440 --> 00:18:06.279 information is already priced into stocks. Buffett 00:18:06.279 --> 00:18:08.519 thought that was just nonsense. And he actually 00:18:08.519 --> 00:18:11.079 set out to prove it was nonsense. He did. He 00:18:11.079 --> 00:18:13.420 wrote an essay called The Super Investors of 00:18:13.420 --> 00:18:16.349 Graham and Doddsville. In it, he tracked the 00:18:16.349 --> 00:18:18.549 records of a bunch of different investors, people 00:18:18.549 --> 00:18:21.150 like Walter Schloss and Charlie Munger, who all 00:18:21.150 --> 00:18:23.769 came from the Ben Graham school of thought. And 00:18:23.769 --> 00:18:25.970 he showed that they all consistently beat the 00:18:25.970 --> 00:18:28.970 market averages for decades. It wasn't luck. 00:18:29.170 --> 00:18:32.190 It was a shared, disciplined philosophy. OK, 00:18:32.289 --> 00:18:34.809 so here's the big contradiction then. If he believes 00:18:34.809 --> 00:18:37.970 so strongly that active management works, why 00:18:37.970 --> 00:18:41.349 is he such a famous and vocal advocate for low 00:18:41.349 --> 00:18:44.609 cost S &P 500 index funds for the average person? 00:18:44.769 --> 00:18:47.309 That's the billion dollar question, isn't it? 00:18:47.329 --> 00:18:50.009 And the answer is pure pragmatism. He believes 00:18:50.009 --> 00:18:52.470 active management can work for him and for a 00:18:52.470 --> 00:18:54.269 very small number of other highly disciplined 00:18:54.269 --> 00:18:56.710 people. But for the vast majority of investors, 00:18:56.970 --> 00:18:59.250 he thinks they just don't have the time or more 00:18:59.250 --> 00:19:01.529 importantly, the emotional temperament to do 00:19:01.529 --> 00:19:03.369 it properly. And he thinks the financial. industry 00:19:03.369 --> 00:19:05.369 is basically set up to take advantage of them 00:19:05.369 --> 00:19:08.819 if they try. 100%. He's incredibly skeptical 00:19:08.819 --> 00:19:11.180 of Wall Street's high fees. He believes that 00:19:11.180 --> 00:19:13.240 when you have trillions of dollars being managed 00:19:13.240 --> 00:19:15.680 by people charging 2 % a year plus performance 00:19:15.680 --> 00:19:18.279 fees, the only people guaranteed to get rich 00:19:18.279 --> 00:19:21.180 are the managers, not the clients. The fees just 00:19:21.180 --> 00:19:23.440 eat away at all the returns. Which is what led 00:19:23.440 --> 00:19:25.980 to his famous bet against hedge funds. The famous 00:19:25.980 --> 00:19:30.019 bet from 2007. He wagered that a simple, boring, 00:19:30.160 --> 00:19:34.000 low -cost S &P 500 index fund would outperform 00:19:34.000 --> 00:19:36.339 a hand -picked portfolio of... hedge funds over 00:19:36.339 --> 00:19:39.339 10 years. And by 2017, it wasn't even close. 00:19:39.539 --> 00:19:43.220 The simple index fund won decisively. It proved 00:19:43.220 --> 00:19:45.720 his point that for most people, fees and complexity 00:19:45.720 --> 00:19:48.000 are the enemy. Let's pivot to a couple of assets 00:19:48.000 --> 00:19:51.440 he famously disliked, gold and technology. Why 00:19:51.440 --> 00:19:53.839 was he so critical of gold? Because his entire 00:19:53.839 --> 00:19:56.539 philosophy is based on owning productive assets, 00:19:56.799 --> 00:19:59.059 businesses that generate cash and reinvest it 00:19:59.059 --> 00:20:01.900 to grow. Gold doesn't do that. It's not productive. 00:20:02.079 --> 00:20:03.960 Right. He had that famous quote about it. He 00:20:03.960 --> 00:20:07.480 did. In 1998, he said, it gets dug out of the 00:20:07.480 --> 00:20:10.259 ground in Africa, then we melt it down, dig another 00:20:10.259 --> 00:20:12.619 hole, bury it again, and pay people to stand 00:20:12.619 --> 00:20:16.039 around guarding it. It has no utility. His point 00:20:16.039 --> 00:20:19.140 is that it's an inert asset. Its value is based 00:20:19.140 --> 00:20:21.480 purely on what someone else will pay for it tomorrow, 00:20:21.680 --> 00:20:24.299 not on what it produces. And that same logic 00:20:24.299 --> 00:20:26.319 explains why he stayed away from tech companies 00:20:26.319 --> 00:20:28.980 for so long. Exactly. His number one rule is 00:20:28.980 --> 00:20:31.960 never invest in a business you cannot understand. 00:20:32.720 --> 00:20:34.700 For years, he felt that tech companies were just 00:20:34.700 --> 00:20:37.640 too complex, and it was impossible to confidently 00:20:37.640 --> 00:20:39.960 predict what their earnings or competitive position 00:20:39.960 --> 00:20:43.079 would be 10 or 20 years out. It was outside his 00:20:43.079 --> 00:20:45.279 circle of competence, so he stayed away. But 00:20:45.279 --> 00:20:48.500 then came the big surprise in 2011. He bought 00:20:48.500 --> 00:20:51.809 IBM. A huge shock to everyone. He invested $11 00:20:51.809 --> 00:20:55.450 billion in IDM, and his justification was fascinating. 00:20:55.849 --> 00:20:58.089 He said he wasn't buying it for the complex technology. 00:20:58.430 --> 00:21:00.789 He was buying it because he'd studied how sticky 00:21:00.789 --> 00:21:03.269 their corporate clients were. He saw their customer 00:21:03.269 --> 00:21:05.930 retention as a powerful, understandable moat, 00:21:05.930 --> 00:21:07.950 even if he didn't understand every line of code. 00:21:08.150 --> 00:21:10.980 It showed he could adapt. But on the next wave 00:21:10.980 --> 00:21:13.700 of technology, cryptocurrencies, he went right 00:21:13.700 --> 00:21:15.940 back to his old skepticism. Oh, with a vengeance. 00:21:16.259 --> 00:21:18.779 He's been completely uncompromising on Bitcoin. 00:21:18.980 --> 00:21:22.299 He called it rat poison squared. He thinks, much 00:21:22.299 --> 00:21:24.980 like gold, it's a nonproductive asset with no 00:21:24.980 --> 00:21:27.960 intrinsic value. He has predicted over and over 00:21:27.960 --> 00:21:30.160 again that it will come to a bad ending. It just 00:21:30.160 --> 00:21:32.700 fails every single one of his fundamental investing 00:21:32.700 --> 00:21:35.559 tests. OK, let's move into part four and look 00:21:35.559 --> 00:21:37.859 at his leadership during a moment of true systemic 00:21:37.859 --> 00:21:42.410 crisis. The Great Recession in 2007 and 2008. 00:21:42.710 --> 00:21:45.789 That was a brutal time, even for Berkshire. Their 00:21:45.789 --> 00:21:48.589 earnings fell by 77 percent in the third quarter 00:21:48.589 --> 00:21:51.750 of 2008 alone. The market was genuinely worried 00:21:51.750 --> 00:21:53.769 about their exposure to the financial sector. 00:21:53.970 --> 00:21:56.150 But his response wasn't just to manage his portfolio. 00:21:56.349 --> 00:21:58.910 It was very public. It was. He sort of took on 00:21:58.910 --> 00:22:00.710 the role of cheerleader -in -chief for the American 00:22:00.710 --> 00:22:03.210 economy. He wrote that famous op -ed for The 00:22:03.210 --> 00:22:06.109 New York Times in October 2008 called Buy American, 00:22:06.450 --> 00:22:09.670 I Am. At a moment of peak panic, he was publicly 00:22:09.670 --> 00:22:11.890 putting his money and his reputation on the line, 00:22:12.009 --> 00:22:14.210 signaling his confidence in the country's long 00:22:14.210 --> 00:22:16.690 term future. And he was putting real capital 00:22:16.690 --> 00:22:19.190 to work, too, in some very instrumental deals 00:22:19.190 --> 00:22:22.220 like the Goldman Sachs investment. That Goldman 00:22:22.220 --> 00:22:25.220 deal was a classic Buffett move. He didn't just 00:22:25.220 --> 00:22:28.579 buy common stock. He bought 10 % perpetual preferred 00:22:28.579 --> 00:22:32.279 stock. It paid a massive 10 % annual dividend 00:22:32.279 --> 00:22:35.019 and it gave him warrants to buy common stock 00:22:35.019 --> 00:22:38.440 cheaply later. It was a fantastic safe deal for 00:22:38.440 --> 00:22:41.039 Berkshire. And for Goldman, it was a desperately 00:22:41.039 --> 00:22:43.559 needed injection of cash and more importantly, 00:22:43.759 --> 00:22:46.059 a stamp of approval from the Oracle himself. 00:22:46.380 --> 00:22:48.400 He did something similar for Dow Chemical, right? 00:22:48.480 --> 00:22:52.059 Yes. He provided $3 billion. to help Dow finance 00:22:52.059 --> 00:22:55.220 its takeover of Roman Haas. At that point in 00:22:55.220 --> 00:22:58.140 late 2008, credit markets were completely frozen. 00:22:58.559 --> 00:23:01.259 Capital was impossible to find. Buffett's involvement 00:23:01.259 --> 00:23:03.859 was a sign of stability in a sea of chaos. Now, 00:23:03.920 --> 00:23:06.400 we talked about derivatives before. His own company 00:23:06.400 --> 00:23:08.619 had some major exposure to them that led to some 00:23:08.619 --> 00:23:11.180 huge paper losses during the crisis. This is 00:23:11.180 --> 00:23:13.539 a really interesting point. Berkshire had sold 00:23:13.539 --> 00:23:15.960 a lot of put options, which is basically a bet 00:23:15.960 --> 00:23:18.119 that the market won't crash. They collected the 00:23:18.119 --> 00:23:20.920 premium up front. But when the market did crash, 00:23:21.220 --> 00:23:23.500 they were suddenly facing enormous potential 00:23:23.500 --> 00:23:26.299 liabilities. How big were the losses? By late 00:23:26.299 --> 00:23:29.119 2008, the mark to market losses on those contracts 00:23:29.119 --> 00:23:31.460 were running at about six point seven billion 00:23:31.460 --> 00:23:34.819 dollars. The potential liability was so big that 00:23:34.819 --> 00:23:37.500 the SEC actually stepped in and demanded that 00:23:37.500 --> 00:23:40.200 Berkshire provide more robust disclosure about 00:23:40.200 --> 00:23:42.680 how they were valuing these complex. long term 00:23:42.680 --> 00:23:45.640 contracts. It just shows the level of risk, even 00:23:45.640 --> 00:23:48.180 for someone so focused on safety. And he was 00:23:48.180 --> 00:23:49.819 also willing to admit when he just made a flat 00:23:49.819 --> 00:23:52.660 out mistake, like with Canoco Phillips. The Canoco 00:23:52.660 --> 00:23:54.839 Phillips investment is a great lesson in humility. 00:23:55.259 --> 00:23:57.880 He'd bought a huge stake in the oil company when 00:23:57.880 --> 00:24:00.220 energy prices were near their peak. He later 00:24:00.220 --> 00:24:02.160 told shareholders that his decision to sell a 00:24:02.160 --> 00:24:04.460 large part of it at a loss was dead wrong and 00:24:04.460 --> 00:24:07.779 cost Berkshire several billion dollars. He took 00:24:07.779 --> 00:24:10.289 full responsibility. But at the same time, he 00:24:10.289 --> 00:24:12.890 was making his biggest acquisition ever, buying 00:24:12.890 --> 00:24:16.089 the BNSF Railroad. Right. The Burlington Northern 00:24:16.089 --> 00:24:20.069 Santa Fe acquisition in 2009 for $34 billion. 00:24:21.089 --> 00:24:23.529 That was a game changer. It was the ultimate 00:24:23.529 --> 00:24:27.039 forever holding. Railroads are essential infrastructure. 00:24:27.279 --> 00:24:29.319 They have an incredible competitive moat because 00:24:29.319 --> 00:24:31.039 you can't just go out and build a new railroad. 00:24:31.279 --> 00:24:34.019 It diversified Berkshire into the physical economy 00:24:34.019 --> 00:24:36.720 away from the volatility of finance. And by the 00:24:36.720 --> 00:24:38.720 middle of the next decade, all these moves were 00:24:38.720 --> 00:24:41.869 paying off. In a huge way. A huge way. In the 00:24:41.869 --> 00:24:44.630 second quarter of 2014, Berkshire posted its 00:24:44.630 --> 00:24:48.349 biggest quarterly profit ever, $6 .4 billion. 00:24:48.930 --> 00:24:51.869 And that August, the Class A stock price crossed 00:24:51.869 --> 00:24:55.450 $200 ,000 a share for the very first time. That 00:24:55.450 --> 00:24:57.329 financial strength brings us to the more recent 00:24:57.329 --> 00:24:59.829 history, particularly the long, long -awaited 00:24:59.829 --> 00:25:02.059 succession plan. Yeah, succession was the big 00:25:02.059 --> 00:25:04.240 question for decades, and the plan finally came 00:25:04.240 --> 00:25:06.400 into focus. He'd been talking about it since 00:25:06.400 --> 00:25:09.680 2007, but at the 2025 investor meeting, he made 00:25:09.680 --> 00:25:11.940 it official. He asked the board to name Greg 00:25:11.940 --> 00:25:13.940 Abel, who runs all the non -insurance businesses, 00:25:14.240 --> 00:25:16.900 as the new CEO. And that transition happened 00:25:16.900 --> 00:25:20.680 at the start of 2026. Correct. Abel became president 00:25:20.680 --> 00:25:24.440 and CEO on January 1st, 2026. Buffett stayed 00:25:24.440 --> 00:25:26.680 on as chairman, still overseeing the big capital 00:25:26.680 --> 00:25:29.019 allocation decisions, but it marked the beginning 00:25:29.019 --> 00:25:32.450 of a new era. But just before that, in 2023, 00:25:32.869 --> 00:25:35.329 a report came out that raised some tough questions 00:25:35.329 --> 00:25:37.470 about his personal trading activities. Right. 00:25:37.549 --> 00:25:40.390 A ProPublica article based on leaked IRS data 00:25:40.390 --> 00:25:44.089 alleged that between 2009 and 2012, Buffett made 00:25:44.089 --> 00:25:47.369 about $80 million in personal trades in stocks 00:25:47.369 --> 00:25:49.950 like Johnson & Johnson and Wells Fargo at the 00:25:49.950 --> 00:25:52.210 same time that Berkshire itself was trading in 00:25:52.210 --> 00:25:54.089 those sectors. The implication being a potential 00:25:54.089 --> 00:25:56.170 conflict of interest. Exactly. It raises questions 00:25:56.170 --> 00:25:58.150 about whether he was acting on privileged information. 00:25:58.490 --> 00:26:00.430 Now, Buffett himself didn't comment. But Charlie 00:26:00.430 --> 00:26:02.549 Munger defended him fiercely, saying there was 00:26:02.549 --> 00:26:04.789 not the slightest chance he was doing anything 00:26:04.789 --> 00:26:07.009 unethical. But it does highlight the complex 00:26:07.009 --> 00:26:10.589 issues that arise when a CEO is also a major 00:26:10.589 --> 00:26:13.369 personal investor. That tension between the public 00:26:13.369 --> 00:26:15.450 figure and the private man is a perfect segue 00:26:15.450 --> 00:26:19.829 to part five. Frugality, family and his radical 00:26:19.829 --> 00:26:22.410 approach to philanthropy. It's just such a core 00:26:22.410 --> 00:26:24.910 part of his story. We know about the house. But 00:26:24.910 --> 00:26:27.349 his salary has always been tiny for a CEO of 00:26:27.349 --> 00:26:30.390 his stature, around $100 ,000 a year in the mid 00:26:30.390 --> 00:26:34.130 -2000s. He drives his own car, eats McDonald's. 00:26:34.130 --> 00:26:36.230 It's almost like a performance. But there's one 00:26:36.230 --> 00:26:40.170 famous exception to the frugality, the private 00:26:40.170 --> 00:26:43.150 jet. Ah, yes, the private jet. It's a great story. 00:26:43.309 --> 00:26:46.170 He had spent years criticizing CEOs for corporate 00:26:46.170 --> 00:26:49.309 excess, especially private jets. But in 1989... 00:26:49.740 --> 00:26:52.480 Berkshire bought one and he cheekily named it 00:26:52.480 --> 00:26:55.880 the indefensible. But he later renamed it the 00:26:55.880 --> 00:26:59.799 indispensable. What changed? Reality and scale. 00:26:59.980 --> 00:27:02.779 As Berkshire became this global behemoth, his 00:27:02.779 --> 00:27:05.059 time became the company's most valuable asset. 00:27:05.720 --> 00:27:08.079 Flying commercial was just too inefficient. The 00:27:08.079 --> 00:27:10.119 name change was his way of admitting that sometimes 00:27:10.119 --> 00:27:12.220 what looks like an extravagance is actually a 00:27:12.220 --> 00:27:14.579 necessity for operating at that level. His resistance 00:27:14.579 --> 00:27:16.880 to technology has also been legendary. Oh, for 00:27:16.880 --> 00:27:19.720 decades, he was a digital hermit. In 2006, no 00:27:19.720 --> 00:27:22.019 cell phone, no computer on his desk. As late 00:27:22.019 --> 00:27:25.039 as 2013, he was still using an old Nokia flip 00:27:25.039 --> 00:27:27.220 phone and bragged that he'd only ever sent one 00:27:27.220 --> 00:27:30.140 email in his life. To Jamie Dimon, the CEO of 00:27:30.140 --> 00:27:33.220 JP Morgan. He finally upgraded to an iPhone in 00:27:33.220 --> 00:27:36.759 2020, but his habits are still very analog. He 00:27:36.759 --> 00:27:40.259 reads five newspapers, physical newspapers, every 00:27:40.259 --> 00:27:42.859 single day. His personal life has also been, 00:27:42.920 --> 00:27:45.440 let's say, unconventional. The relationship with 00:27:45.440 --> 00:27:47.279 his wife, Susan, and his longtime companion, 00:27:47.559 --> 00:27:49.500 Astrid Makes. It was a very unique arrangement. 00:27:50.000 --> 00:27:52.920 He married Susan Thompson in 1952, and they had 00:27:52.920 --> 00:27:55.940 three kids. But in 1977, they started living 00:27:55.940 --> 00:27:58.200 apart, though they never divorced. She passed 00:27:58.200 --> 00:28:01.559 away in 2004. But his companion, Astrid Manx, 00:28:01.619 --> 00:28:04.720 had lived with him since 1977 with Susan's full 00:28:04.720 --> 00:28:06.980 knowledge and blessing. The Christmas cards were 00:28:06.980 --> 00:28:09.359 the famous proof of this. Yes. For years, a family 00:28:09.359 --> 00:28:11.660 Christmas card was signed, Warren, Susie, and 00:28:11.660 --> 00:28:14.619 Astrid. It speaks to this very long -term, pragmatic, 00:28:14.940 --> 00:28:17.180 and respectful approach to relationships that, 00:28:17.279 --> 00:28:20.059 in a way, mirrors his business philosophy. He 00:28:20.059 --> 00:28:22.799 married Astrid in 2006. And his views on what 00:28:22.799 --> 00:28:24.660 he'll leave to his children are just as unique. 00:28:24.920 --> 00:28:27.960 He's been very clear that his kids will not inherit 00:28:27.960 --> 00:28:31.119 the bulk of his fortune. And his reasoning is 00:28:31.119 --> 00:28:34.420 famous. He said, I want to give my kids just 00:28:34.420 --> 00:28:36.079 enough so that they would feel that they could 00:28:36.079 --> 00:28:38.440 do anything but not so much that they would feel 00:28:38.440 --> 00:28:40.559 like doing nothing. He's giving them a head start, 00:28:40.680 --> 00:28:44.380 not a free ride. Which brings us to the absolutely 00:28:44.380 --> 00:28:48.019 unprecedented scale of his philanthropy and the 00:28:48.019 --> 00:28:50.400 giving pledge. The scale is just staggering. 00:28:50.519 --> 00:28:53.619 He has pledged to give away 99 % of his wealth. 00:28:53.940 --> 00:28:56.160 The biggest piece of that went to the Bill and 00:28:56.160 --> 00:28:59.720 Melinda Gates Foundation. In 2006, he made what 00:28:59.720 --> 00:29:02.019 was then the largest charitable donation in history, 00:29:02.480 --> 00:29:05.000 10 million Berkshire shares. And that gift came 00:29:05.000 --> 00:29:07.089 with some specific rules, didn't it? It did. 00:29:07.269 --> 00:29:09.930 Very smart rules. One, either Bill or Melinda 00:29:09.930 --> 00:29:11.950 Gates has to be alive and active at the foundation. 00:29:12.430 --> 00:29:15.349 Two, it has to remain a charity. And three, this 00:29:15.349 --> 00:29:17.789 is the crucial one, the foundation has to spend 00:29:17.789 --> 00:29:20.910 the value of his gift every year, plus 5 % of 00:29:20.910 --> 00:29:23.410 its own assets. So the money can't just sit in 00:29:23.410 --> 00:29:26.130 an endowment forever. It has to be put to work. 00:29:26.480 --> 00:29:29.019 It has to be deployed. He doesn't want to create 00:29:29.019 --> 00:29:31.880 a permanent, ever -growing pool of capital. He 00:29:31.880 --> 00:29:34.519 wants it spent. And he's also given billions 00:29:34.519 --> 00:29:37.259 to his own children's foundations. As of mid 00:29:37.259 --> 00:29:40.579 -2025, his total giving was already over $60 00:29:40.579 --> 00:29:44.779 billion. Wow. Okay, that sets us up perfectly 00:29:44.779 --> 00:29:48.160 for our final section, part six. His public policy 00:29:48.160 --> 00:29:50.700 views. This is where that tension we talked about 00:29:50.700 --> 00:29:52.859 at the beginning, the frugal billionaire, really 00:29:52.859 --> 00:29:55.660 comes to a head. It really does. And his views 00:29:55.660 --> 00:29:57.940 on taxes are probably the most shocking to people, 00:29:58.059 --> 00:30:00.539 coming from someone who benefited so much from 00:30:00.539 --> 00:30:03.660 the system. It all blew up with his class warfare 00:30:03.660 --> 00:30:06.759 quote in 2006. Remind us of the numbers he was 00:30:06.759 --> 00:30:08.900 talking about. He pointed out that his own federal 00:30:08.900 --> 00:30:12.380 tax rate was only 19%. The reason was that most 00:30:12.380 --> 00:30:14.660 of his income came from capital gains and dividends, 00:30:14.900 --> 00:30:17.799 which are taxed at a much lower rate. Meanwhile, 00:30:18.000 --> 00:30:20.440 his employees, who earned salaries, were paying 00:30:20.440 --> 00:30:23.759 an average of 33%. He thought that was just fundamentally 00:30:23.759 --> 00:30:26.660 unfair. He called it out directly. He said, there's 00:30:26.660 --> 00:30:28.660 class warfare, all right, but it's my class, 00:30:28.740 --> 00:30:31.559 the rich class, that's making war and we're winning. 00:30:32.190 --> 00:30:34.670 That single statement that he was paying a lower 00:30:34.670 --> 00:30:37.230 tax rate than his secretary led to the whole 00:30:37.230 --> 00:30:39.210 debate around the Buffett rule. And he's also 00:30:39.210 --> 00:30:41.670 a big defender of the estate tax or the inheritance 00:30:41.670 --> 00:30:44.869 tax. A huge defender, which is very unusual for 00:30:44.869 --> 00:30:47.930 someone in his position. He sees it as a tool 00:30:47.930 --> 00:30:50.910 to prevent the creation of a permanent aristocracy 00:30:50.910 --> 00:30:54.410 of wealth. He believes in meritocracy and he 00:30:54.410 --> 00:30:56.769 thinks just passing down massive fortunes from 00:30:56.769 --> 00:30:59.730 generation to generation stifles that. He used 00:30:59.730 --> 00:31:01.450 a great analogy for it. A brilliant analogy. 00:31:01.680 --> 00:31:04.000 He said getting rid of the estate tax would be 00:31:04.000 --> 00:31:06.599 like picking the 2020 Olympic team by just choosing 00:31:06.599 --> 00:31:09.039 the eldest sons of the guys who won gold medals 00:31:09.039 --> 00:31:12.420 in 2000. It makes no sense in sports and he believes 00:31:12.420 --> 00:31:14.980 it makes no sense for the economy either. Beyond 00:31:14.980 --> 00:31:17.359 taxes, he's also been a really sharp critic of 00:31:17.359 --> 00:31:19.440 the U .S. health care system. He calls U .S. 00:31:19.460 --> 00:31:22.880 health care costs an economic tapeworm. He argues 00:31:22.880 --> 00:31:25.099 that the enormous cost of providing health care 00:31:25.099 --> 00:31:27.859 to employees makes American manufacturing completely 00:31:27.859 --> 00:31:31.519 uncompetitive on the global stage. We spend 17 00:31:31.519 --> 00:31:34.420 percent of our GDP on health care, way more than 00:31:34.420 --> 00:31:36.420 other countries, and often get worse outcomes. 00:31:36.680 --> 00:31:39.420 And he blames the incentives in the system. He 00:31:39.420 --> 00:31:41.900 specifically calls out the fee for service model, 00:31:42.059 --> 00:31:44.359 where doctors and hospitals get paid for doing 00:31:44.359 --> 00:31:46.680 more procedures, not for making people healthier. 00:31:47.130 --> 00:31:49.509 He thinks it creates a powerful incentive for 00:31:49.509 --> 00:31:52.430 overtreatment and unnecessary care which just 00:31:52.430 --> 00:31:54.829 drives costs through the roof. And finally his 00:31:54.829 --> 00:31:57.680 political engagement. He's a Democrat. A lifelong 00:31:57.680 --> 00:32:00.140 Democrat. Yeah. He's been a vocal supporter of 00:32:00.140 --> 00:32:02.579 candidates like Barack Obama and Hillary Clinton. 00:32:02.880 --> 00:32:05.440 And he's very concerned about things like population 00:32:05.440 --> 00:32:07.259 growth, which is why his foundation has given 00:32:07.259 --> 00:32:10.299 over a billion and a half dollars to family planning 00:32:10.299 --> 00:32:13.099 and reproductive health, including hundreds of 00:32:13.099 --> 00:32:15.019 millions to Planned Parenthood. And he really 00:32:15.019 --> 00:32:17.740 put himself in the political arena in 2016 when 00:32:17.740 --> 00:32:19.539 he challenged Donald Trump on his tax returns. 00:32:19.779 --> 00:32:22.440 That was a fascinating moment. Trump's excuse 00:32:22.440 --> 00:32:24.440 for not releasing his returns was that he was 00:32:24.440 --> 00:32:27.099 under audit. So Buffett just called his bluff. 00:32:27.460 --> 00:32:30.339 He released his own tax returns for 2015 and 00:32:30.339 --> 00:32:32.660 said, look, I'm audited all the time. There's 00:32:32.660 --> 00:32:34.819 no law that says you can't release them. It was 00:32:34.819 --> 00:32:37.619 a direct challenge using his own reputation for 00:32:37.619 --> 00:32:40.119 transparency as a political tool. That really 00:32:40.119 --> 00:32:42.559 brings everything full circle. The investor, 00:32:42.759 --> 00:32:45.299 the man, the political advocate, they're all 00:32:45.299 --> 00:32:47.740 connected. So let's try to boil this all down. 00:32:47.880 --> 00:32:49.900 What are the key takeaways you should remember? 00:32:50.140 --> 00:32:52.579 I'd say remember the childhood pinball empire, 00:32:52.799 --> 00:32:55.539 which showed his early grasp of compounding. 00:32:55.559 --> 00:32:58.140 Remember the jet changing from the indefensible 00:32:58.140 --> 00:33:00.420 to the indispensable, which shows how he adapted 00:33:00.420 --> 00:33:03.319 to scale. Remember his bet on the simple S &P 00:33:03.319 --> 00:33:06.220 500 fund, which shows his pragmatism. And of 00:33:06.220 --> 00:33:08.980 course, the $60 billion commitment to give his 00:33:08.980 --> 00:33:11.940 wealth away. In terms of his philosophy, it's 00:33:11.940 --> 00:33:14.539 that synthesis. He started with Ben Graham's 00:33:14.539 --> 00:33:17.279 cigar butts, buying cheap things, and evolved 00:33:17.279 --> 00:33:19.819 with Charlie Munger's help to buying wonderful 00:33:19.819 --> 00:33:22.079 businesses to hold forever. That's the whole 00:33:22.079 --> 00:33:24.319 intellectual journey right there, from cheap 00:33:24.319 --> 00:33:27.619 stocks to great companies. But I think the most 00:33:27.619 --> 00:33:29.759 important thing to leave with is that profound 00:33:29.759 --> 00:33:32.359 tension that we started with. The tension between 00:33:32.359 --> 00:33:34.960 how he made his money and how he thinks it should 00:33:34.960 --> 00:33:37.700 be distributed. Exactly. On one hand, he believes 00:33:37.700 --> 00:33:40.339 the market economy is the greatest engine for 00:33:40.339 --> 00:33:43.920 prosperity ever created. It rewards genius and 00:33:43.920 --> 00:33:46.799 hard work with outsized returns, like his own. 00:33:47.160 --> 00:33:50.819 nearly $150 billion fortune. But at the same 00:33:50.819 --> 00:33:53.819 time. At the very same time, he argues that this 00:33:53.819 --> 00:33:56.079 system creates unacceptable levels of inequality. 00:33:56.599 --> 00:33:59.579 So he fiercely advocates for higher taxes on 00:33:59.579 --> 00:34:02.619 the rich, for the estate tax, and then he personally 00:34:02.619 --> 00:34:05.859 commits $60 billion to counteract the very outcomes 00:34:05.859 --> 00:34:07.680 of the system that made him wealthy in the first 00:34:07.680 --> 00:34:10.280 place. Which leaves us with a really big, provocative 00:34:10.280 --> 00:34:12.739 question to end on. It's the central question 00:34:12.739 --> 00:34:15.500 of modern capitalism, and Buffett embodies it 00:34:15.500 --> 00:34:18.639 perfectly. How should a society reconcile the 00:34:18.639 --> 00:34:21.559 creation of these massive fortunes, which clearly 00:34:21.559 --> 00:34:24.500 drive innovation and productivity, with the ethical 00:34:24.500 --> 00:34:27.159 responsibility to redistribute that wealth so 00:34:27.159 --> 00:34:29.980 that society remains fair and stable? And how 00:34:29.980 --> 00:34:32.099 do you do that without killing the incentives 00:34:32.099 --> 00:34:34.159 that created the wealth in the first place? That 00:34:34.159 --> 00:34:36.500 is the puzzle, a fantastic thought to end on. 00:34:36.559 --> 00:34:39.139 Thank you for walking us through the life and 00:34:39.139 --> 00:34:41.360 the many contradictions of the Oracle of Omaha.