Buffett & Gates on Success

You ought to be happy where you are working. I always worry about people who say, you know, I'm going to do this for ten years, I really don't like it very well, and then I'll do ten more years of this. That's a little like saving up sex for your old age. I mean, not a very good idea. When I started Microsoft, I didn't think of it as all that risky. You've always got a job with me, Bill. And the thing that was scary to me wasn't quitting and starting the company. It was when I started hiring my friends, and they expected to be paid. Laughter Music Buffett & Gates on Success was made possible by the Floyd and Dolores Jones Foundation, supporting efforts to enhance public education and a better understanding of business and investing in the American economy. This program is brought to you by the NASDAQ Stock Market. Timely investment information is available at nasdaq.com. And by The New York Stock Exchange. The world puts its stock in us. Each spring in Omaha, Nebraska, thousands of investors gather from around the world. How long does it take to get over here from Paris, France? Ten hours. For Sweden? Roughly, it's a day flight. A lot of people. It reminds me of New York, a lot of people. They come for the annual shareholders meeting of an investment company, Berkshire Hathaway. Many come just for a chance to meet Berkshire's legendary chairman, Warren Buffett. Obviously when the stock goes up a lot, it creates interest. During the past four decades, Buffett's uncanny success in picking stocks has made big money for Berkshire shareholders, including Buffett himself. His net worth is estimated at more than $30 billion. One highlight of the annual meeting is Berkshire Hathaway Day at an Omaha Royals baseball game. Buffett throws out the first pitch. Books analyzing Buffett's investment philosophy have acclaimed him the world's greatest investor. But he's made his fortune in companies well known to all. Companies such as Coca-Cola, Gillette, and Dairy Queen. He avoids anything high-tech. So how long have you been using the computer? Yet one of Buffett's good friends is Bill Gates. Microsoft's co-founder and CEO is 26 years younger. His enormous success has come from a technological revolution that he has done much to pioneer and popularize. Gates started Microsoft with his high school friend Paul Allen when Gates was still in his teens. Their investment? $1,500. The ski jumping. That's pretty exciting, isn't it? Today, Microsoft's annual sales exceed $14 billion. It is the world's leading developer of software for the personal computer. And Gates is the PC's globetrotting evangelist, celebrating its many benefits. Am I going to have time to get everybody? Success has made Bill Gates the world's wealthiest and perhaps most famous entrepreneur. It also has made Microsoft a target of controversy. The popularity of its Windows software has brought legal challenges from government antitrust regulators. They've tried to limit Microsoft's expansion into new fields, such as the Internet. Bill Gates and Warren Buffett share a restless curiosity and fascination with the future. Together, in the spring of 1998, they came to the campus of the University of Washington in Seattle. They came to share their experience and their combined wisdom in conversation with students from the university's business school. Young people overflowed the student union auditorium for an extraordinary conversation with two of the most successful business leaders of our time. So please join me in giving a University of Washington business school welcome to Bill Gates and to Warren Buffett. Well, I thought I ought to start this off by announcing that Bill and I have a small bet as to who would get the most applause. I suggested that I bet my house against his. But we settled on a small sum, but evidently it isn't so small to Bill because just before we came out, he gave me this Nebraska Cornhusker shirt to wear and he puts on this purple shirt. We're going to answer your questions. Whatever you want to talk about is fine. We don't want any softballs. And I thought by wearing this Cornhusker shirt that I could guarantee hardballs right in my head. When we went to the game last year, about halfway through the first quarter, Bill said, what's that big N stand for on those guys of yours? I said, what the hell? I said, it's knowledge. We all agree on that, Nebraska. Well, they've asked us to start out talking, the two of us, on one question, but then it's going to be your questions and we're going to just have you line up behind the microphones and we'll go back and forth. They did ask that we might start off with talking about sort of what got us here. It's pretty simple in my case. It's not IQ. I'm sure you'll all be glad to hear that. Everybody in this room has more IQ than they need to do my job. The big thing is rationality. I always look at IQ and talent as sort of representing the horsepower of the motor, but then in terms of the output, the efficiency with which the motor works, that depends on rationality, because a lot of people start out with 400-horsepower motors and get 100 horsepower of output. It's way better to have a 200-horsepower motor and get it all into output. So why do smart people do things that interfere with really getting the output they're entitled to? It gets into habits, into character, into temperament. It really gets into behaving in a rational manner, not getting in your own way. As I say, everybody here has the ability absolutely to do anything I do and much beyond. Some of you will and some of you won't. The ones that won't will be because you get in your own way. It won't be because the world doesn't allow you to. It will be because you don't allow yourself to. So I have one little suggestion for you. Pick out the person in the class that you admire the most and then write down why you admire them. Put down a list of qualities. You're not to name yourself in this. And then put down the one that, frankly, you can stand the least in the whole group. And put down the qualities that turn you off in that person. And look at that list. And you won't find it's a bunch of things like throwing a football 70 yards or anything of the sort. The qualities of the first one that you admire are qualities that you, with a little practice, can make your own and which, if practiced, will become habit-forming. The chains of habit are too light to be felt until they're too heavy to be broken. I mean, my age, I can't change any of my habits. I mean, I'm stuck. But at your age, you will have the habits 20 years from now that you decide to put into practice today. So I just suggest that you look at the habits you admire in others or the behavior you admire in others and make those your own habits. And you look at what you really find somewhat reprehensible in others and just decide those are things you're not going to do. Ben Franklin did that a few hundred years ago, and it still works today. And if you do that, you'll find that you convert all your horsepower into output. So with that sermon, I'll let Bill give you another one, and then we'll get into your questions. Well, I think Warren's absolutely right about habit. I was lucky enough when I was quite young to have an exposure to computers, which were very expensive and kind of limited in what they could do, but still fascinating. And some friends and I really talked about that and decided that they would change because of a miracle technology of chips into something that everybody could take advantage of. And we really thought writing software was a neat thing. We hired our friends who wrote software. We thought about what the potentials were and really didn't see any limit. And so that vision of getting our friends together, getting them to work as a team, really seeing what kind of tool this could be, a tool of what we talked about as the information age, where the key thing is magnifying your brain power instead of just your muscle power. And by pursuing that with a pretty incredible focus and being there at the very beginning of the industry, we were able to build a company that has played a very central role in what's been a pretty big revolution. Now, fortunately, the revolution is still at the beginning. It was 23 years ago when we started the company, but there's no doubt that taking the habits we formed and sticking with those, which would be hard to change, the next 23 years are going to give us a lot more potential and maybe even get us pretty close to that original vision, which was a computer on every desk and in every home. And that's a fun, fun thing to be involved with. Okay, fire away. I was wondering how you define success personally. Well, I can certainly define happiness, because that's what I am. I mean, I get to do what I like to do every single day of the year. And I get to do it with people I like. I get to... I don't have to associate with anybody that causes my stomach to churn. And the only thing in my job I don't like, and this only happens about every three or four years, occasionally I have to fire somebody, and that's the only thing. I tap dance to work, and I get down there, and I think I'm supposed to lie on my back and paint the ceiling, you know, or something. I mean, that's the way I feel. And it doesn't diminish. It's tremendous fun. They say that success is getting what you want, and happiness is wanting what you get. Well, I don't know which one applies in this case, but I do know that I wouldn't be doing anything else. I do advise you, when you go out to work, go to work for an organization that you admire, people you admire, because it'll turn you on. You ought to be happy where you are working. I always worry about people who say, you know, I'm going to do this for ten years, I really don't like it very well, and then I'll do ten more years of this. I mean, that's a little like saving up sex for your old age. Not a very good idea. So get right into what you enjoy. And you'll be successful at it. You really will. You won't be able to miss. I don't regard what I do as the most important thing in the world at all, but it's right for me. I mean, I happen to be wired in a certain way that what I do works in this. If I had to do what Bill does, I mean, it'd last about ten minutes. And that's true of a lot of things. But luckily, I kind of stumbled into the thing that I do best. And it's worked out well. Bill? Well, I think that the key point there is you've got to enjoy what you do every day. And for me, that's working with very smart people. It's working on new problems. You know, every time we think, hey, we've had a little bit of success, we're pretty careful not to dwell on it too much because the bar gets raised. People's expectations of the products. We've always got customer feedback telling us that machines are too complicated, they're not natural enough. And the competition, the breakthroughs, the research, make the field I'm in, I think, the most exciting field there is. There's some other good fields. Biotechnology is a good field because it's changing the world of medicine and health. But the computer industry, in particular software, I think is the most exciting, and I think I have the best job in that business. Don't you think Dairy Queen is more important to the country? You can manage Dairy Queen. I'll go and buy the Dilly Bars. I'm counting on it. We'll raise the price when you come. You don't want to get in... I have turned down business deals that were otherwise decent deals because I didn't like the people that I would have to work with. I didn't see any sense pretending. To get involved with people that really cause your stomach to churn, I say it's a lot like marrying for money. It's probably a bad idea under any circumstances, but it's absolutely crazy if you're already rich, right? Both of you are innovators in your given industry. I was wondering what your definition of innovation is. Well, I don't do a lot of innovating in what I do. I really have just two functions in my job. One is to allocate capital, which I enjoy doing, and the second one is to have a group of managers, to keep a group of people, 15 or 20 managers, enthused about what they do when they have no financial need to do it whatsoever. At least three-quarters of the managers we have are rich beyond any possible financial need. Therefore, my job is to figure out how to cause them to want to jump out of bed at six in the morning and work with all of the enthusiasm they did when they were poor and starting. If I do those two things, they do the innovation. Bill innovates now. He can tell you about it. Well, the technology business has a lot of twists and turns. Partly why it's such a fun business is that no company gets to rest on its laurels. IBM was as dominant or more dominant than any company will ever be in technology. That's just not going to happen again. They had the smartest people and they had all the customer feedback, and yet they missed a few turns in the road. That makes you wake up every day thinking, hmm, let's try to make sure today's not the day we miss the turn in the road. Let's find out what's going on in speech recognition. Let's go find out what's going on in artificial intelligence. Let's make sure we're hiring in the kind of people who can pull those things together and make sure we don't get surprised. Sometimes we do get taken by surprise. For example, the Internet came along and we had it sort of as a fifth or sixth priority. It wasn't like somebody said Internet to me and I said, oh, I don't know how to spell that. I said, yeah, I got that on my list, I'm okay. But there came a point where we realized it was happening faster and it was a much deeper phenomena than it had been recognized in our strategy. That was a case where as an active leadership I had to create a sense of crisis and have a couple months where we all just threw ideas and sent electronic mail around, went on a bunch of retreats, and then eventually coalesced around a few ideas where we said, okay, here's what we're going to do, here's how we're going to measure ourselves internally, and here's what the world should think, here's what we're going to tell them about what we're going to do. And that kind of crisis is likely to come up every three or four years or so. Next time it comes up, remember Yogi Berrabell, when you reach a fork in the road, take it. Growing up, who were your biggest role models and what kind of a role did they play in your success? I had great parents, both of whom were involved in lots of interesting activities and would come home and talk to us about the world of business or law or politics or the charitable activities they were involved in. And so that made us, myself, my sisters always thought about, well, what are we going to do out there? They had us as avid readers. And so we had pretty broad interests in reading. Scientists were a group that I gravitated to because this notion that just out of their heads they came up with neat ideas, that sort of fascinated me. So quite a bit of the time I thought I'd be a mathematician or a scientist. It was only when I got to Harvard that I started to think of this sort of all-absorbing hobby I'd had, computer stuff, which I just thought, okay, I've got to get rid of this and decide to do something serious. I started to realize, you know, this is pretty serious. And it's actually more interesting and more impactful than going and trying to come up with a new theory in math or anything else. And so I had that dilemma for a couple of years but eventually decided that computer really was a great thing to be involved with. Yeah, I think you're 100% on the money and focusing. Instead of calling them role models, I call them heroes, actually. And I think if you tell me who your heroes are, I can tell you how you're going to turn out to quite an extent by this point in life. And I have been extraordinarily lucky in that none of my heroes ever let me down. I mean, the ones I came up with throughout their lives, I've never felt that I've been let down in any way with it. I think number one was my dad and had a huge impression on me. My wife, who is here, is one of my heroes. I mean, she is, you know, in terms of, she's taught me a tremendous amount and never seen anybody any better with human beings than she is. And you can, you know, Yogi Berra again said, you can observe a lot just by watching. And I, you know, I watched my dad and I watched her. And I had a professor, Ben Graham, back at Columbia and had a huge impact on me. So I have been lucky in that I've had terrific heroes and they haven't let me down. And that takes you a long, long way. I've gone through one or two periods where we're kind of tough in life, but not, I mean, everybody's had that. But having the right heroes will take you right through it. The Internet exposes us to vast amounts of information. And in particular, children are being exposed to more and more complex issues at very young ages. Yourself being a father, Mr. Gates, I was wondering if you had any comment on the access now to information and how do we handle that? Definitely the Internet has every kind of information you can imagine. All the worst things and best things that people are interested in are out there in great, great quantity. And so there's a decision a parent has in terms of do you let your kid go out onto the Internet. One great thing about the Internet is if you set it up the right way, there's a log of exactly what the person's gone and looked at. So you have to decide up to what age do you think it's legitimate that you have access to see where they're going and what they're interested in. And personally, I'd rather see what my kid is interested in and talk to them about it than try and block altogether them ever learning anything about it. Because some day in their life, whether it's a magazine or a friend or a terminal that I don't control, if they're curious about something, they're going to find out about it. So my theory is not that my child would be okay as long as they don't hear about things. You want to have the full experience. But I think on the whole, the fact that a kid has this tool to be curious about all these topics, that's got to be a fantastic thing. I can't improve on that, but I just got to the age where Bill lets me watch the Internet alone. I've been trying to evangelize personal computers to Warren ever since we met, which is over about seven years ago now. It was amazing. I talked about stock quotes and spreadsheets and all these things. In the end, it wasn't my talking at all that got him on it. It was the ability to play bridge with his friends. Now he's incredible. He's an addict. Do you feel that technology has made businesses more efficient to the point where you can pay more for them? I'm sure technology has made them more efficient. If I thought otherwise, I'd be afraid to say so with Bill sitting next to me. But a lot of things in business, including maybe much of technology, really has the same effect as if you went to a parade and the band started coming down the street and all of a sudden you stood up on tiptoe. In another 30 seconds, everybody would be on tiptoe. It'd be hell on your legs and you wouldn't be seeing any better. There is that aspect to business, that there's a self-neutralizing aspect. Now, Bill, tell them how much technology you'll pay for them. I think there's definitely a one-time lift where you go from not using technology well to using it well, particularly if U.S. companies are doing that better than their competitors outside the United States. And so you get all this ability to communicate, and so you get global scale in a lot of businesses that wouldn't have had it before. If you look at the really big earners who are generating this 20% return on equity, a lot of them are companies like Coke or Microsoft or Boeing or GE, which are going to that worldwide marketplace. And I know every one of those has been helped by technology. But that cannot explain why 10 years from now they'd be getting that type of return on equity. There's something almost certainly ephemeral about current conditions. Capitalism tends to be self-neutralizing in terms of improvements, but that's marvelous because it means we've got better everything than otherwise. But the real trick is to stand up on tiptoe and not have anyone notice it. I mean, if you can do that, then you do very well. Bill Warren, the world is becoming a much smaller place, both in technology and in finance. How do you see yourselves as businessmen taking your businesses globally, and how do you view that individually as a person? Well, I've got an easier answer, so I'll let Bill think while I get the easy answer. We don't do it directly. I mean, our two largest commitments are Coke and Gillette. And Coke has 80% of their earnings coming from abroad, and it'll be larger in the future. Gillette has two-thirds of their earnings coming from abroad, and that'll be larger in the future. So they are participating in a worldwide improvement in living, and they'll continue to participate. So we do it by piggybacking them. And I can sit in Omaha and let Doug Ivester at Coke fly all over the world and do a tremendous job doing it. Bill has to get out there and do it for Microsoft, and I'll let him tell you how. One great thing about our business is it is global. What do you need in a spreadsheet about the same thing in Korea and Egypt as you need in the United States? And the PC standard is a global standard. We have to do some adaptation for the local languages, and that's a fun part of our business, understanding bidirectional languages and the large alphabets that you have in Chinese, Japanese, and Korean. And over the years, we've gotten very, very good at that. In fact, our market share is much higher outside the United States than it is inside the United States because it's relatively hard to set up subsidiaries, understand local conditions, local distribution and relationships. And so since most of our competitors are in the U.S. and aren't as good at doing international business, we thrive even better in these other countries. Most of our growth will come from outside the United States. The United States will get to the point where it's largely a replacement market. Most homes and business desktops will have PCs. Now, that doesn't mean they won't replace them. They won't want better software that can see, listen, and learn. But outside the U.S., we still have that early slope phenomenon. So it's very much a global business. When you think about it, many of you are probably too young to remember with clarity. Fifteen years ago, this country almost had an inferiority complex about its ability to compete in the world. With software and the whole development of the computer, now the rest of the world is looking to us. And Willis played a big part in that. He has contributed in a major way to a change in our attitude about this country and the world's attitude about this country. So what impelled you to make a trip together to China in 1995? And what's your perception before and after the trip? And most interestingly, the next question is, what has that trip affected your global business decision in that region since? Well, we went to China for a lot of reasons. Partly to relax and have fun. We found a few McDonald's there, so we didn't feel too away from home. It was also exciting to go and see all the changes taking place. I mean, it's so amazing what's going on there. And we saw different parts of the country, got to see some of the leaders. It's a market that Microsoft had already been investing a lot, and we've upped that quite a bit since then. Although about three million computers get sold every year in China. People don't pay for the software. They will, though. As long as they're going to steal it, we want them to steal ours. I sort of get addicted, and then we somehow figure out how to collect sometime in the next decade. So, you know, it's a great, great place to be involved in. And it was a lot of fun, which was, I guess, the key goal. My family was amazed I went. I'd never traveled more than maybe the outer reaches of the county in Nebraska. And I just went and had a terrific time, and also confirmed my feeling that there could be a lot of Coca-Cola sold there in the future. I told everybody over there it acted as an aphrodisiac. As two of the most successful business people in the country, what role do you see for yourselves in giving back to your respective communities, and how do you use your influence to get others to give back as well? Well, I think we both have quite a similar philosophy on that. I know in my own case that 99% plus will go back to society. And that'll actually count everything that my family and I have lived on during our entire lifetimes. But just because we've been treated extraordinarily well by society. You know, I'm lucky. As Bill said, if I was born a long time ago, I'd have been some animal's lunch. I don't run very fast. But I'm wired in a particular way that in a market economy, big capitalist economy, lots of action, I'm well adapted for that. I'm not adapted for pro football. I'm not adapted for violin playing. I just happen to be in something that pays off huge in this society. And basically, I get the fun of playing around with that while I live, but it will all go back to society. I think it would be wrong to be otherwise, frankly. If I'd been dropped down in some remote country, or almost any other place in the world, I wouldn't have been worth a damn. I am here because of a tremendous society that surrounds me. And the fact that I happen to be well adapted to a certain part of it. So it's all going to go back to society. And I know Bill feels very similar. I think that's a great philosophy. Not to mention the fact that passing along lots of money can be a bad thing for the people who receive it. They might not think so at times. I've never put it to a vote. I really don't think it's right that the, frankly, I don't think it's right that the quarterback of the Nebraska football team next year should be the eldest son of the quarterback of 22 years ago. Nor do I think that our Olympic team in 2000 should be chosen as to be from the same family that was on the Olympic team in all the respective sports in 1976. I mean, we believe in a meritocracy when it comes to athletics and all kinds of things. Now, why not have a meritocracy in terms of what you go out into the world with in terms of the productive goods? Let the resources flow to those who use them best. But then I think they ought to give it back to society primarily when they get through. I do not believe in a divine right of the womb. I mean, I do not think that if you select the right womb that you're entitled to do nothing the rest of your life. Hi, there's been a lot of discussion about how the information age is revolutionizing society. And I would like to get your opinion about which countries and industries and companies are best prepared to take advantage of these changes and what factors would account best for their success. Maybe I'll start with that. If you look at what's happened in personal computers or what's happened in business in general in terms of how we allocate capital and let labor move around, the United States has emerged in a very strong position. And so the first beneficiary of all this information technology will be the United States. There are a few other areas like Singapore, Hong Kong, the Scandinavian countries where they're adopting the technology at basically the same rate that we are. There's a few countries that even relative to their level of income are going after the technology because they believe so much in education. In Korea and many parts of China, we see incredible penetration of personal computers even at very low income levels because they basically decided it's a tool to help their kids have access to information and to get ahead. The whole world is going to benefit in a big way. There'll be this shift where instead of your income level mainly being derived by what country you're in, it'll be derived by what your education level is. So today, a Ph.D. in India doesn't make nearly as much as a Ph.D. in the United States. Well, as you get the Internet allowing services and advice to be transported as efficiently as goods are being transported through shipping and all those things, then you'll get essentially an open market bidding for that engineer in India versus the engineer here in the United States. And that benefits everyone because you're taking better advantage of those resources and people are better off. So the developed countries will get the early benefit from these things. In the long run, the people who are lucky enough to get a good education in developing countries will actually get an absolute, the biggest boost from all these things that go on. I didn't get it at first, but it's huge. And it will change the world, the technological revolution, in dramatic ways and quickly. Ironically, our approach to that is just the opposite of Bill's. His is the right one for the world. Ours is the right one for me. I look for businesses where I think I can see what they're going to look like in 10 or 15 or 20 years. We don't own any, but if you take Wrigley's chewing gum, I don't think the Internet's going to affect how people chew gum. Bill probably does. But I don't think it's going to affect the fact that Coke will be the drink of preference and will gain in per capita consumption around the world. I don't think it will change whether people shave or how they shave or the fact that they like a better shaving system, as the Mach 3 is going to be very shortly, I might add. So we are looking for the very predictable, and you won't find the very predictable in what Bill does. You'll find the more exciting things, the things that are going to change society more. So I have a little different opinion. As a member of society, I applaud what he's doing, and as an investor, I keep a wary eye on it. It's a different approach to investing. Most people think about all this opportunity, and it has been opportunity. The Internet stock has gone crazy here in recent months, but I don't know how to look at one or the other and tell the winners. This is an area I agree strongly with Warren on. I think the multiples of technology stocks should be quite a bit lower than the multiples of stocks like Coke and Gillette because we are subject to complete change in the rules. I know very well that in the next 10 years, if Microsoft is still the leader, there will have been at least three crises that we will have had to really prove our excellence in. I accidentally once, when we were on a panel with the CEO of Coke, I said something like, I couldn't run my business when I get to be 60 because it's such a hard business, not like Coke. And I offended him without meaning to. You won't offend me. I want to be in a business I can run when I'm 100 because I plan to do it. I'm going to retire about five years after I die. Maybe. Starting a new company is very risky. How do you determine when is the best opportunity to start a new company, and how can you get people to support you? When I started Microsoft, I didn't think of it as all that risky. I was so excited about what we were doing. It's true I could have gone bankrupt, but I had a set of skills that were highly employable. In fact, my parents were still willing to let me go back to Harvard and finish my education if I wanted to. You've always got a job with Maybell. The thing that was scary to me wasn't quitting and starting the company. It was when I started hiring my friends, and they expected to be paid. Then we had customers who went bankrupt, customers that I'd counted on to come through. Then I got this incredibly conservative approach that I wanted to have enough money in the bank to pay a year's worth of payroll, even if we didn't get any payments coming in. I'm almost true to that the whole time. We have about $10 billion now, which is pretty much enough for the next year. If you're going to start a company, it takes so much energy that it better overcome your feeling of risk. I don't think that you necessarily, if you're going to start a company, should do it at the start of your career. I think there's a lot to be said for working for a company, learning how they do things. If you're young, it's hard to go lease premises. They made that hard for me. You couldn't rent a car when you were under 25 at the time, so I was always taking taxis to go see customers. People would say, well, we're going to go have a discussion in the bar. Well, I couldn't go to the bar. That's fun, because I'll tell you, when people are first skeptical, and they go, this kid doesn't know anything, then when you show them you've really got a good product and you know something, they actually tend to go overboard. They think, whoa, they know a lot. Let's really do an incredible amount with these people. Our youth, at least in this country, was a huge asset for us once we reached a certain threshold. It's hard to hire older people, because they'll be a little bit conservative about whether they should come and take the risk. It took three or four years before we could go out into the normal employment pool. Those problems that come with starting a firm, you better think of those as part of the pleasure, part of the challenge, that is part of the excitement. I was curious what each of you felt was the best business decision you'd made throughout your career. The best what? Business decision. I think just jumping in the pool, basically. I've always enjoyed what I've done, and a few things have worked out very well. The nice thing about the investment business is that you don't need very many. Joe, you'll see plenty of times when you get chances to do things that just shout at you. The thing you have to do is, when that happens, you have to take a big swing. That is no time to be reading a book on the theory of diversification. When you find something where you know the business, it's within your circle of competence, you understand it, the price is right, the people are right, then you take your thumb out of your mouth and you barrel in. We were talking at breakfast this morning about, of all Warren's investments decisions, which was the worst decision. It's amazing, and they're tough to find, because the track record is unbelievable. But we, I think, decided that by some metric, buying the company that his company is named after was probably the worst investment decision. That's true. We went into a terrible business because it was cheap. It's what I refer to as the used cigar butt approach to investing. You see this cigar butt down there, it's soggy, but there is one puff in it and it's free. And that's what Berkshire was when we bought it. I mean, it was selling below working capital. Actually, buying Berkshire Hathaway, buying control of it, was probably the biggest single bad decision that I've made. I've made all kinds of decisions that have cost us billions of dollars, but they've been mistakes of omission rather than commission. I mean, there were businesses that we knew enough to buy a lot of. I don't worry about not buying Microsoft, because I didn't understand that business. I didn't understand Intel, but there were businesses that I did understand. Fannie Mae was one. I made a decision to buy it, and I just didn't execute. And we would have made many billions of dollars on something that was within my circle of competence, and I didn't do it. And you don't see that. Conventional accounting doesn't record that, but believe me, it happened. In my case, I'd say my best business decisions really have to do with picking people. Deciding to go into partnership with Paul Allen is probably at the top of the list. And then, subsequently, hiring a friend, Steve Ballmer. And having somebody who you totally trust, who's totally committed, who shares your vision, and yet has a little bit different set of skills, and also acts as a check on you. Some of the ideas you come up with, you run by them, because you know they're going to say, Hey, wait a minute. Have you thought about this and that? And just the benefit of sparking off of somebody who's got that kind of brilliance. It's not only made it fun, but it's really led to a lot of success. So picking a partner is crucial. I've had a partner like that, Charlie Munger, for a lot of years. And it does for me exactly what Bill was talking about. You have to calibrate with Charlie, though, because Charlie says everything I do is dumb. But if he says it's really dumb, then I know it is. But if he just says it's dumb, I take that as an affirmative vote. If you can change one thing in your life, what would it be and why? My age. You know, I never look back. I just don't worry about anything. So I consider myself unbelievably lucky. So the idea of saying I could have even been a little luckier if this or that had happened, I mean, I could have been a lot better looking or I could have been a better athlete or all that stuff, but so what? You play the hand you get, you play it as well as you can, and you're thankful if you're lucky enough. The odds were, when I was born, the odds were over 50 to 1 against me being born in the United States. I mean, I had a 2% probability. If I'd known that, I might have given up and not come out. But here it was. I was lucky enough to be born here, and I was lucky enough to have two terrific parents. They raised the three kids in a way that helped me enormously in life. So when you've got all that going for you, I just don't think you look back and think about anything that could be changed better. I'm thankful. Isn't there at least one bridge hand you would have played differently? I have a partner who says I should have played every bridge hand differently. I asked her one time, I said, how should I play that hand? And she said, under an assumed name. I think the key resource you have to deal with is your time and how you spend time. And I'm pretty rigorous at looking back each year. I even get my friend Steve Ballmer to come in and look at my schedule and criticize, hey, you didn't really need to spend time on this or that. That's pretty useful because if I can get more time to sit down with the engineers, if I can get more time to get out with some customers, those are the things I just love to do. It just gets me excited. It clears my mind. And so I'm always trying to make sure that I'm only doing the things that are important. Hypothetically, if you were to lose everything today, keep everything in the past, but right now starting fresh, and you could only keep three things in your life, tangible or intangible, what three would those be? Well, I'm not sure how you define the three. I mean, you'd like to know everything that you now know. Essentially, the things I've applied in the past are going to be applicable in the future. If I lost it all without losing any money of any other people, it wouldn't bother me a lot. If I took other people down with me, it would kill me. That is the one thing that would destroy me because I'm not sure I'd recover from that. But if it was just my money, it wouldn't make any difference at all because I'd keep living about the same. I'd have to give up the plane. I mean, I eat the same way everybody in this room eats. He eats a lot worse than you guys do. Well, it depends on how you define worse, but I think you're right. In terms of medical care or anything, there's very little difference in how the people in this room live now and are going to live in the next ten years than the way I do. So I wouldn't miss anything. I would like to keep playing the game because I enjoy it. So if I had the knowledge that I've had that's gotten me here and I had anything to work with at all, then I could probably talk somebody into giving me a few bucks to start it. But I would have a lot of fun playing the game again. I'm not sure I want to follow your experiment, but I think it'd be just about as much fun as what I do. As long as people didn't go down with me, that would be no fun. Starting out at a small scale again, it's got a certain attraction to it. I think it's interesting. Our business is not one where money makes that much difference at all. In fact, somebody was saying to me recently that Microsoft has such a strong position in our business. I was saying, hey, if you took 30 of the top people and drafted them over to the other team, the score would change very, very quickly. First of all, not only would the 30 go, the people who like working with the 30 would go with them. So there's not some asset there. All the products are going to be obsolete very, very rapidly. It's the people and their sense of how to do things and their enjoyment in working with each other. It'd be a shame to give that up, but starting another company like that again, I'd have a blast doing it. In light of public controversy that's caused a lot of confusion in my mind and has polarized most of my friends and associates, and perhaps has caused one or both of you to lose some sleep, I'd like to ask you to share your perspective of what purpose or what appropriate role antitrust legislation should play in American business. I am no antitrust scholar, I think. I met Bill eight years ago, and he's a terrific teacher. So he spent about six or seven hours explaining his business to me. Here I am, the world's biggest dummy on technology, but he explained it to me pretty darn well. And when he got through with it, I bought 100 shares of stock just to keep track of him. And I think that shows two things. One is that I've got an IQ of about 50. And the second is, I didn't think he had any monopoly. Well, the key goal of competition law is to protect consumers and to make sure that new products get created and that those products are very innovative. And you can look in the economy at different sectors and say, where is that happening very well and where is it not happening as rapidly? No matter how you score it, there's no doubt that one sector of the economy would stand out as absolutely the best, and that's the personal computer industry. And so the price of computing before the PC came along was going down at a certain rate. The PC came along, and now it's gone down at an incredible rate. The variety and quality of software has also increased at a phenomenal rate. We're absolutely at the peak of that today. The number of new software companies being started, the number of software jobs, the level of investments, the number going public. I mean, it's way beyond even what it was three years ago. It's on a big uptake. And so consumers are doing very, very well. And so it is somewhat of a surprise to find ourselves in an antitrust controversy. And thank goodness for the judiciary, which is an environment where facts are tested in an appropriate way and people can see. Has the competition worked in the way it should? Has it been beneficial to consumers? And there's no doubt in our mind where that's going to come out. It seems to a lot of people that in both your companies, the success is driven by your enthusiasm and your leadership skills. How do you see your organizations in the post-Buffett and post-Gates era, and how do you prepare your companies for that period? Well, your assumption is wrong, because I will keep working until about five years after I die, and I've given the directors a Ouija board, and they'll be in touch. But the Ouija board doesn't work. We have outstanding people that can do what I do, and we've got the people identified to do that, and the board of directors at Berkshire knows who they are. In fact, I've got a letter. I've already sent out a letter that tells what should be done, and I've got another letter that's addressed, which will go out at the time, and it starts out, Yesterday I died. And then it just tells what the plan for the company is, and it's all taken care of. It's all written. I put down at the bottom of it, I put dictated but not read. Yeah, my attitude is a lot like Warren's. I want to keep doing what I'm doing for a long, long time. I think probably a decade from now or so, even though I'll still want to be totally involved with Microsoft, because it's my career, I will pick somebody else to be CEO. I see some hands in the audience there. That's a big transition for a company. Sometimes you find somebody who does better, and sometimes you don't. No, actually, I'm interested in people who want the job. It's got some fun parts to it. I just want to make certain that they hear that we specifically and formally thank Warren Buffett and Bill Gates for visiting the University of Washington Business School. Please show them your appreciation as I show them out of the auditorium. So what did you think? Both Bill and Warren were both very entertaining, and a lot of the questions were on a personal basis, so that was kind of nice to see another side of them as opposed to the business side. Warren Buffett's comments about being true to yourself and following what it is that feels right rang true to me. That was good to hear that message, especially from someone who's been so incredibly successful in what he's done. Both of them mentioned about in order to succeed, you must be happy in what you do, and that I find to be much more important than acquiring wealth and fame in the sense that you have your internal sense of achievement that you have done something that is different. 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