2013: Does the game of investing interest Buffett more than the profits?

DOUG KASS: Thank you, Warren.

Mae West once said, “The score never interested me, only the game.”

Are you at the point now where the game interests you more than the score? But before you answer the question, let me explain to you why I asked it.

In the past, your research has been all-encompassing, whether measured in time devoted to selecting investments and acquisitions, or the intensity of analysis, your interest in the old days of knowing the slightest minutia about a company.

You once said, in characterizing Ben Rosner, quote, “Intensity is the price of excellence,” closed quotes.

Your research style has seemed to morph over time from a sleuth-like analysis — American Express comes into mind when you hired Jonathan’s dad, Henry Brandt. You and he conducted weeks of analysis and sight visits and channel checks.

Not so much in the later investments. As an example, you famously thought of making the Bank of America investment in your bathtub.

There is an investment message of this transformation from being intense to less intense.

Would you please explain the degree it has to do with the market, Berkshire’s size, or some other factors?

WARREN BUFFETT: Yeah. I think, actually, you have to love something to do well at it. There may be exceptions on that, but it is an enormous, enormous advantage if you absolutely love what you’re doing, every minute of it.

And the nature of it is that that intensity adds to your productivity.

And I have every bit of the intensity — not manifested exactly the same way — but it’s there every minute. I mean, I love thinking about Berkshire. I love thinking about its investments. I love thinking about its businesses. I love thinking about its managers. It’s part of me.

And it is true, you can’t separate the game from the scorecard. I mean, you — so your score card is part of playing the game and loving the game.

The proceeds are — you know, to me — are unimportant, but the proceeds are part of the score card, so they come with a score card.

But it’s much more important — I mean, I would — no question about it, I wouldn’t be — feel — the same way about Berkshire at this point if I didn’t own a share of it, if I didn’t get paid. I mean, it’s what I like doing in life, and that’s why I do it.

So, I don’t think you’ll — I don’t think it’s actually a correct observation — and Charlie can comment on this — to say that because we’re doing things in a somewhat different way, that any of the intensity or the passion has been lost.

There’s nothing more fun for me than finding something new to add to Berkshire, and that was true 40 years ago. It’s true now. And it’ll be true 10 years from now, I hope.

Charlie, how would you answer that?

CHARLIE MUNGER: Well, I think when you bought American Express for the first time, you didn’t know that much about it, so, naturally, you were digging in rather deeply.

The second time you bought it, I remember you got on the golf course with Olson —

WARREN BUFFETT: Frank Olson, yep.

CHARLIE MUNGER: — and you just saw how he couldn’t get rid of American Express if he wanted to, and then you bought it the second time.

The research is still — the first one was hard, and the second was easy.

WARREN BUFFETT: It’s all cumulative.

CHARLIE MUNGER: Yeah, it’s cumulative, eventually.

WARREN BUFFETT: Yeah. And, you know, what I learned sitting with Lorimer Davidson on a Saturday at GEICO in January of 1951 is still — is useful to me, and I don’t have to learn it a second time. I can build on it.

But that’s one of the great things about investing. I mean, the universe, there’s enough in it so that you can finds lots of opportunities, but there — it’s not like it’s changing dramatically all the time.

There’s some things that may change, and we just don’t play in that part of the game if we don’t understand them.

But what Charlie says is true. I didn’t know a thing about American Express when the Salad Oil Scandal hit in November of 1963. But I thought I saw an opportunity, so I learned a lot about it.

I went around to restaurants and talked to people about travel and entertainment cards, as they were called then. I learned about traveler’s checks. I talked to banks. And I was absorbing some knowledge.

And then, as Charlie said, when we were up at Prouts Neck playing golf with Frank Olson, and he was running the Hertz Corp., and he was telling me that there was no way in the world that he could get rid of American Express, or even get them to cut their fees. That was my kind of business.

And I knew enough to proceed to buy a fair amount of stock, and now we own whatever it is, probably 13 percent of the company or thereabouts. And they keep buying in their stock. We can’t buy anymore stock ourselves.

I got asked that question in March of 2009 by Joe Kernen, “Why aren’t you buying the stock of American Express?” Well, it was a bank holding company, and we couldn’t add a share.

But they are doing it for us, and I love it.

At Coca-Cola, at Wells Fargo, to a lesser degree, at IBM, at most of our companies, our interest in the company goes up every year because the companies are repurchasing shares and they probably earn more money so we got a double play going for us.

But the passion is not gone, I promise you.