2005: What was the single best investment of Buffett's and Munger's careers?

AUDIENCE MEMBER: Jonathan Mills (PH) from London, England.

What has been the single best investment of your careers? And why do you consider it to be the best, excluding Berkshire Hathaway itself?

WARREN BUFFETT: Yeah, well probably the best investment, if you’re talking about business, was getting Charlie as a partner. And he works cheap, too. (Laughs)

The — we’ve had — you can’t measure it by dollar terms because, obviously, we’re doing bigger things now than early on.

I mean, See’s was an enormously important part of our success. It doesn’t contribute a huge percentage of our net income now, but it provided income that let us buy other things in the past. It taught us a lot of lessons about business, all kinds of things.

So, we’ve — probably, in terms of what it’s done already and where it’s going to go over time, probably the single best investment was the first half of GEICO, which we purchased for $40 million. Now the second half cost us 2 billion. I’m glad I didn’t buy it in thirds. (Laughter)

But, you know, that 40 million will — for half the company — will turn out very well.

But GEICO — some of our businesses have growth potential, some don’t. And we don’t require growth potential as part of a business.

If a business makes good money and we can use it to buy other businesses, one of the advantages of the Berkshire system is we have a tax efficient and kind of frictionless way of moving money to the best opportunities. And GEICO, internally, has still enormous possibilities for growth.

Incidentally, we’ve — you know, I watched that movie and I kept touting the American Express card. But here is our GEICO card, which I’m sure all of you are eligible for.

And I don’t advise people using credit cards to revolve. But the truth is that people do, so use a GEICO card if you’re going to behave in — if you’re going to charge anything.

I still advise you to pay off your account before it starts revolving. And I think it’s a terrible mistake for people to get hooked on revolving credit at high interest rates.

And I — that’s the first thing I tell students is that, if they don’t remember anything else I say, just, you know, don’t fool around with charge cards and run up balances that keep getting larger and larger.

But GEICO — GEICO has well over six million customers now. As was mentioned, we entered New Jersey last year. We’re adding very rapidly there. It’s a great, great business model.

And it’s run by a superb human being and businessman, Tony Nicely. And I think it’s got a huge potential. But I love them all.

CHARLIE MUNGER: Well, but GEICO, after all, cost $2 billion for the second half and —

WARREN BUFFETT: Right.

CHARLIE MUNGER: — a significant number of tens of millions for the first half.

Now the search expenses that brought us Ajit Jain, now there was an investment that really paid a dividend. I can think of no higher return investment that we’ve ever made that was better than that one. (Applause)

And I think that’s a good life lesson. In other words, getting the right people into your system can frequently be more important than anything else.