2011: How would Buffett incentivize kids?

AUDIENCE MEMBER: Sumat Mehra (PH) from Kashmir in India. Mr. Buffett, hope you enjoyed your first trip to India.

WARREN BUFFETT: I sure did.

AUDIENCE MEMBER: Here’s my question. One of the most important things that drive people are incentives, but if you live in a rich society it’s very hard to get your kids to work hard and reach their full potential because they just don’t need to.

So if you or Charlie decide to have a kid in the next five years — (Laughter)

CHARLIE MUNGER: It would be a star in the east.

WARREN BUFFETT: It will take more than a decision. (Laughter)

AUDIENCE MEMBER: How would you incentivize him or her —

WARREN BUFFETT: I thought you were going to say, “How would you?” (Laughter)

No, it’s a good question. I apologize for interrupting.

AUDIENCE MEMBER: How would you incentivize him or her to compete among the hungry and highly motivated kids from emerging markets like China, Brazil, Russia, or India?

WARREN BUFFETT: I think certainly that if you are very rich and you bring up your kids to think that they are more important in society, or that they have some special privilege, simply because they came out of the right womb, that, you know, that’s just a terrible mistake.

But Charlie has raised eight children that I know quite well, most of them, and I don’t think any of them have that sense.

But it’s — if you really are going to raise your kids to think that other people should do all the work for them and that they will be entitled to sit around and fan themselves for the rest of their lives, I mean, you know, you will probably not get a good result.

I — you know, in my — Charlie has been rich most of the time when his kids — many of his kids — were growing up — some of his kids were growing up,

I’ve been rich while my kids were getting — certainly when they got into high school and college — but I don’t think — I certainly didn’t want to give them the idea that they were special just because their parents were rich.

And I don’t think you necessarily have to get a bad result or have children that don’t have any incentives simply because their parents are rich.

The one thing I don’t think you want to give them an incentive to do is try and outdo their parents at what their parents happen to be good at.

I don’t think that makes sense, whether if you are a professional athlete, or a rich person, or whatever it may be, a great novelist, you name it.

But I really think if you’re rich and your kids turn out to have no incentives, I don’t think you should point at them. I think you should probably point at yourself.

Charlie?

CHARLIE MUNGER: Well, I don’t think you can raise children in an affluent family and have them love working 60 hours a week in the hot sun digging fence post holes or something. That’s not going to work.

So to some extent, you are destroying certain kinds of incentives. And my advice to you is to lose your fight as gracefully as you can. (Laughter)

WARREN BUFFETT: I’m not sure if you’re poor if you can get your kids to love the idea of working 60 hours a week. They may have to, but —

CHARLIE MUNGER: Kids that really get interested in something will work no matter how rich they are.

But it’s rare to have an Ajit-like intensity of interest.

You know, if you were a proctologist, you might not like your day as it went on and on. (Laughter)

WARREN BUFFETT: I think we better move along. Becky? (Laughter)