2006: Is healthcare in the "too hard pile" at Berkshire?

AUDIENCE MEMBER: Dear Warren and Charlie, my name is Dr. Rashad Patel (PH). I’m a family physician from Taunton, Massachusetts. Two years ago I wrote you a letter; you responded with me back quickly. Thank you for that.

My question is, what are the criteria or principles to find a person like you in health care? It seems that a person moves up the ladder in this ethical business, they are more prone to become more unethical, get more options, sell shares, open a shop next door.

How do you find those checkpoints? Can you please express your view, on this soon $2 trillion economy, how to find the leaders so we don’t get a surprise in dog-eat-dog world?

WARREN BUFFETT: Charlie, did you get that? (Laughter)

CHARLIE MUNGER: Well, I will try that. I’m not sure I understood the whole — I think she’s asking about the health care business —

WARREN BUFFETT: That part I got.

CHARLIE MUNGER: — and whether or not, with the — much bad ethics being present — we have anything to contribute about doing well in that sector. Is that about right?

AUDIENCE MEMBER: Yes.

CHARLIE MUNGER: Yeah. Oh no.

WARREN BUFFETT: Now I understand the question, I still —it’s still yours. (Laughter)

I’d be glad to answer it, but I’m eating candy at the moment. (Laughter)

CHARLIE MUNGER: That has tended to go into the too hard pile — (laughter) — at Berkshire. (Applause)

A lot of people have made a lot of money writing health insurance. And I’ve watched the behavior of some of those people, wearing my hat as the chairman of a big central city hospital.

And you are right, there’s a lot of bad ethics in health care. There’s also a lot of good ethics. It’s a very, very complex field with a lot of change, a lot of technological differences.

And in terms of investments, I think the policy has generally been that it all goes into the too hard pile. We don’t — unless Warren has something he’s keeping secret from me.

WARREN BUFFETT: No. We have not owned much in health care. My only expertise is in diet. (Laughter)

But I appreciate the seriousness of the question. You know, there — it is just — it is a very, very tough problem on which I have no particular insights.

CHARLIE MUNGER: And you’re right. The worst of the ethics is really bad.