1998: What does Buffett think about the global financial environment and the America's competitive position?
AUDIENCE MEMBER: My name is Paul Yoon (PH) from L.A., California.
Mr. Warren Buffett, Mr. Charles Munger, I am one of the persons who highly admire you both. I have two questions.
Question one: your view on the world financial business environment in the next decade.
Question two — (laughter) — U.S. position for economic competition in the next decade. Thank you.
WARREN BUFFETT: Well, you’ve asked two big questions, but you’re going to get very small answers, I’m afraid. (Laughter)
And that’s no disrespect. But we — we just — we don’t have that. We don’t think about those things very much.
We just are looking for decent businesses. And incidentally, our views in the past wouldn’t have been any good on those subjects.
We try to think about two things. We try to think about things that are important and things that are knowable.
Now, there are things that are important that are not knowable. In our view, those two questions that you raised fall in that. There are things that are knowable but not important. We don’t want to clutter our minds up with those.
So we say, “What is important and what is knowable?” And what among the things that fall within those two categories can we translate into some kind of an action that is useful for Berkshire.
And we really — there are all kinds of important subjects that Charlie and I, we don’t know anything about, and therefore we don’t think about them.
So we have — our view about what the world will look like over the next ten years in business or competitive situations, we’re just no good.
We do think we know something about what Coca-Cola’s going to look like in ten years, or what Gillette’s going to look like in ten years, or what Disney’s going to look like in ten years, or what some of our operating subsidiaries are going to look like in ten years.
We care a lot about that. We think a lot about that. We want to be right about that. If we’re right about that, the other things get to be — you know, they’re less important. And if we started focusing on those, we would miss a lot of big things.
I’ve used this example before, but Coca-Cola went public in, I think, it was 1919. And the first year one share cost $40. The first year it went down a little over 50 percent. At the end of the year, it was down to $19. There were some problems with bottler contracts. There’s problems with sugar. Various kinds of problems.
If you’d had perfect foresight, you would have seen the world’s greatest depression staring you in the face, when the social order even got questioned. You would have seen World War II. You would have seen atomic bombs and hydrogen bombs. You would have seen all kinds of things.
And you could always find a reason to postpone why you should buy that share of Coca-Cola. But the important thing wasn’t to see that. The important thing was to see they were going to be selling a billion eight-ounce servings of beverages a day this year. Or some large number.
And that the person who could make people happy a billion times a day around the globe ought to make a few bucks off doing it.
And so that $40, which went down to $19, I think with dividends reinvested, has to be well over $5 million now. And if you developed a view on these other subjects that in any way forestalled you acting on this more important, specific narrow view about the future of the company, you would have missed a great ride. So that’s the kind of thing we focus on.
CHARLIE MUNGER: Yeah, we’re predicting the currents that will come, just how some things will swim in the currents, whatever they are.