Those who have met him swear the conversation was laugh-a-minute and those who have watched him from afar vouch for his rationality. We have had the privilege of both. The world may know Warren Edward Buffett as a legendary investor but history could well remember him as an astute philanthropist. For, when it was time to give it all, his rationality and capital allocation acumen were again at the fore. Buffett’s genius is amply demonstrated in his decision to give away the bulk of his fortune to someone with scale and substantial skin in the game.
Buffett does not want his name on university buildings, hospital wings or commemorative monuments. Material indulgences have never fascinated him but the challenge of the chase has, and he was relentless till all the boxes were ticked. Make no mistake, though: he still wants to win. Even as he continues to learn furiously at the age of 83, the great man wants the world to remember him as a teacher. And he has been one — through his investment style, his writings, his annual meetings, the time that he spends with college students and the way he has lived his life. In this exclusive interview with N Mahalakshmi and Rajesh Padmashali, the Oracle of Omaha talks about why giving away his fortune was the rational thing to do.
When you were 20-something, you decided along with your wife that once your needs were met, you would give your wealth back to society. Where did that clarity come from, at such a young age?
It is hard to tell because you are formed by everything that you read and hear from your parents and all that sort of thing. I certainly read a book by Abraham Flexner when I was in my 20s but it seemed like a natural instinct. I really thought I was going to make a lot of money. My wife didn’t believe me, she didn’t care (about the money). It just seemed very logical and interestingly enough, just last night, I was with the directors of the foundation she and I set up (Susan Thompson Buffett Foundation — formerly The Buffett Foundation). It is having its 50th anniversary this year. We set that up in 1964. That was when we actually started a foundation and originally that’s the foundation, until she died, everything was going to.
I don’t remember exactly when we first talked about it. But it was when we were in our 20s. We started to implement it when I was 33, she would have been 31 at the time. We were in total sync on that. It just seemed like a natural thing to do because if we did have a lot of money, we would spend some. She used to say she was “the queen of inconspicuous consumption”. We also knew that we didn’t believe in dynastic wealth, so we weren’t going to leave any significant sum to the children. She would have been the perfect person to carry it out. She did a lot during her lifetime. She would have done a lot more had I died first.
You mentioned Abraham Flexner. When you read his autobiography, I Remember, for the first time, what were your key takeaways? What did you get inspired by?
I was enormously impressed with the story of what a single man who didn’t have the money himself could accomplish. It was a great story of somebody who could just think clearly. That was a scarcer commodity than the money. The money came to Flexner in the end, after he demonstrated his abilities. I felt that if I had made that kind of money, I already had the right person in my wife. When she died first, I had to look for similar people. Fortunately, I knew some people.
How did the insights derived from Flexner influence you when it came to finding those people?
How did I find the right people? Well, I had the right person in my wife. When she died, by then the money was on such a scale that I couldn’t do it in little bits here and there. I needed someone that either could operate on scale or was already operating on that scale. Bill and Melinda Gates had exactly the same view of the world as I did. They felt that every human life was of equal value. That was their creed but it couldn’t have been expressed better by me. We were on exactly the same page and they were operating at scale. They were young. They were pouring their entire lives into it. They were using their own money, which gave them a different calculus than 99% of the people in philanthropy. So they were an obvious choice.
But I continued in a very big way with the foundation my wife had already been working with because it was doing things that I felt were very important. I feel terrifically about that foundation. It could not operate on the same scale as the Gates Foundation but it can operate in a big way. It is in the top 10 in terms of giving in the US. And then I felt that, by this point in life, all three of my children were very capable of handling it, but they were not capable of handling the whole thing. They didn’t have the background for it and they didn’t have the people. But they would be very good at what they did and so I also included them. A couple of years ago on my birthday, I doubled what they got in my will. All of the balance Berkshire shares gets distributed over 10 years after my estate is closed. But there will be a residual even then. That residual goes to the Susan Thompson Buffett Foundation. That foundation will get an even further increase at that time.
Was there talk of philanthropy or giving back to society when you were growing up? It seems to run in your family. Even your older sister does a lot of philanthropy.
My older sister Doris does more than I do. She has given virtually every hour of every day for a lot of years and has done it without any publicity. She engages in what I call retail philanthropy, I am wholesale philanthropy. She can do what I do but I cannot do what she does. Every day she talks to a lot of people who have problems. She likes to hear individual stories. She is tough-minded and says ‘No’ a lot as she doesn’t believe in helping people who aren’t helping themselves. But she gives of herself as well as of the money and wants to give it all away. She is 86 now, has some health problems but it doesn’t stop her.
You told both your son Howard and Bill Gates to, “Concentrate your resources on needs that would not be met without your efforts, expect to make some mistakes and nothing important will ever be accomplished if you make only safe decisions.” Isn’t this an antithesis of your investment style?
Yeah, it is an entirely different game. In business, you are looking for easy things to do where you have a very high probability of success. Now, maybe that is not how Steve Jobs operated. But in terms of the business or investments, that is how most people should operate. There are a few people who can swing through the fences, who have that kind of ability. But, generally speaking, in business you get very well paid for stepping over one-foot bars. That is not a degree of difficulty that will apply if you are in the Olympics for gymnastics or diving.
Business is about looking for the easy pitches. In philanthropy, if it is an easy pitch, it has already been taken care of, if it is important. If there is a need for a new hospital, it’s probably been taken care of. If Harvard needs a new building, it is going to get taken care of.
So, you might as well look for problems that are important to society that have defied both intellect and money in the past. Well, you are going to fail in a lot of those because other people have failed as well. But they are still important problems for society and just because they are difficult does not mean that they should be ignored, assuming that they have real societal consequences. Philanthropy is the area where you can tackle those. If government tackles them, politicians are going to be afraid of failure because failure for their policies probably means failure for them at the next election. Business has got no reason to do it because the math may not be favourable. But philanthropy can do it. And when you get to the scale that we have or Gates or somebody like that has, we should tackle those. Somebody working with small sums may not feel that this makes much sense since if it has defied large sums in the past, probably small sums aren’t going to get the job done. But the people working with big sums should particularly tackle things where they are going to fail quite frequently. If you just win on one big thing, it will make the whole thing worthwhile. If you try five and do one successfully, you have done something for society that otherwise would probably have not been done.
From what you just said, is the flaw in the existing economic structure? Does capitalism in itself breed inequality?
Almost every system breeds inequality except maybe on a desert island if there are just two of you. At that point, you can’t afford to have much inequality. Human competition and human differences breed inequality. Maybe some systems emphasise it more than others. I would agree with your premise totally that capitalism or the market system breed inequality. But I would accompany that with the statement that, really, humans breed inequality. Every human being is looking for things to be a little unequal in their favour.
In that case, is there a greater role for the state in removing inequality or is a self-correcting mechanism already at play?
In my view, it is not a self-correcting role. That is the point of government. The government has a lot of functions. One of the functions it has, in my view, is — particularly in a rich society — to take care of the people who get the short straws. Government is what makes a nation a family. It should look at family problems. Now, it should make sure that the family is prosperous too. The government has to take care of those people who aren’t really well equipped to do even moderately well in the market system and there are plenty of people like that.
I am lucky I fit into the system very well but lots of people aren’t lucky. A rich family would take care of all its children, even the ones who didn’t turn out to be as productive as others. I believe a rich society should do that and we have done that to a reasonable degree in this country. But we get richer and richer and we should think more and more about that. The government has to do that. It is not a self-correcting thing. It is still better to have an enlarging pie all the time. But you want to make sure that more than tiny little crumbs go to people who don’t produce the pie.
Philanthropy itself has its deficiencies as it is not a market-driven mechanism. Is there a way to do it better?
Well, you are looking to do anything you do better. In your marriage, you are looking to do better. In business, you are looking to do better. There are lots of natural weaknesses in philanthropy. In many cases, the very fact that people are spending money that they have had nothing to do with earning, creates a possible problem. Every large philanthropic effort that is set up in perpetuity is going to face the problem of losing its way, just as businesses lose their way and institutions lose their way. An institution can forget about why it was created. In bureaucracy, over time, there is a natural tendency towards thinking more about perpetuating itself than doing what it set out to do. That is true in philanthropy and it will be true a hundred years from now. Hopefully, it will develop natural techniques of modifying that natural tendency. I have written about what I call the ‘institutional imperative’ in business but it exists in philanthropy, the military, the church, you name it.
Social entrepreneurship is a middle ground. But you have said, “It is tough to serve two masters.”
In mathematics, you can’t maximise two variables. It is very tough if you have two objectives. It is very important the money gets invested right in philanthropy so that you have lots of money to work with. And it is important that you carry out your mission as efficiently as possible. If you start making investments that you don’t think are quite as good as the other investments, you can make compromises on the others, I don’t think it is the best way to proceed. I don’t have any objection to people doing it if they want to conduct their philanthropy that way. Who knows, they may know how to do it better than I do. But in my judgement, I think it is better to separate the functions.
Your partner Charlie Munger has said, “Costco has done more for civilisation than The Rockefeller Foundation.” He also says, “When there are intelligent minds in a room talking about doing good, I really squirm in my seat.” What was Charlie trying to convey and do you think there is something wrong with the way philanthropy is largely practised today?
Well, there is something wrong with almost everything. The question is whether it is going in the right direction. He’s actually said in one of the press conferences that he thought Exxon Mobil had done well too and they needed to make it stronger. He has a very strong point: that any business that brings goods and services to people in a better form or at less cost to them than existed prior to their activity is doing something very important for humanity. Henry Ford did something very important for humanity. So, how do you measure that against somebody who does something to reduce malaria? You will have to go to a higher power than me to get that answered. Charlie would get distressed by what he regarded as squishy thinking in any activity, whether it is education, religion, business or philanthropy. He expresses himself in colourful terms but he may be right. Costco has done a lot of good and he is correct about that. How you measure that against a given philanthropy, I am not quite sure.
You have a great partnership with Charlie. Can you recall your greatest moment with him?
We have had a good time the whole way [55 years]. We met in 1959. We have never had an argument. I look forward to seeing him. The best part of the annual meeting as far as I am concerned is getting up there with him and listening to what he is going to say because I don’t know what he is going to say. I think sometimes, he doesn’t either. We always have a good time together. I learnt an enormous amount from him. There is no question that Berkshire has done far better because of him. My family is way better off, knowing him. I have had a wonderful group of friends but Charlie is right on top of the list.
About your first meeting with Charlie, you said, “He was rolling on the floor laughing at his own jokes...that is my kind of guy.”
He still does it, but now we don’t roll on the floor as much as it is harder to get up.
Is there any one moment that still makes you grin whenever you think of it?
I have pretty much told all the stories. I have not been holding back any stories for my 90th birthday. Maybe Charlie has. You can’t help but be with Charlie for the time I have and not learn something. You can learn a lot if you listen carefully.
You said you never had an argument with Charlie. Is there anything that you have disagreed on vehemently?
We have disagreed on all kinds of things.
How does that get resolved?
It usually gets resolved by each of us going our own way. When it gets down to buying a business or a stock, that decision has to be made and he does not have any problem in letting me make the decision if I disagree with him. He may change my mind on it, though, too. But if he doesn’t change my mind and I want to go ahead, I will go ahead.
It is said when you spoke to Charlie about giving the majority of your wealth to the Bill and Melinda Gates Foundation, he said, “Finally, you have a good idea.” Did that really happen or is it another urban legend?
He said it was a good idea. But I don’t think he said “finally”. He might have thought that. Charlie isn’t tactful but I don’t think he said it that way. I may have actually called him to say, “Finally, I have a good idea.” He might have agreed. He may seem like he goes out of his way to gratuitously challenge people but he would not say that. We could not have a better relationship than the two of us have.
You have led a simple life despite your material success. You have never had an indulgence except your jet, ‘The Indefensible’. Is there a secret to not being overly egocentric?
I would say my life is very egocentric because I do exactly what I want. I am not affected by what other people think I should want or what they would want if they were in my position. Your standard of living does not correlate to your cost of living. It really has no correlation beyond having enough to be able to do what you want. I don’t think an extreme quantity of material possessions makes people happier. I have had a lot of chances to observe that situation.
If there was anything I wanted to do or own, I would do it. I have what I want. Charlie has what he wants. Charlie can do pretty much anything he wants to do. He has the money to do it. He actually likes designing houses. So he may do more of that. But with him, it is not the fact that he has got a house to show off. It is the fact that he enjoys designing. It is the process.
My behaviour is about as egocentric as you could find. But it doesn’t lead me in the direction that is the case with some other people. I have not seen people happier because they have lots of houses or planes or cars or anything of the sort. It often produces a lot of trouble.
You have been interviewed many a times. Is there any question that you had wish should be asked and has not been?
That is the question that all the students say to me. If I wanted a question to be asked and it wasn’t, I would answer it no matter what the question was.