One On One With Warren Buffett, Chairman of Berkshire Hathaway
Monday, May 08, 2006GHARIB: A good day for investors of billionaire investor`s Warren Buffett`s Berkshire Hathaway. Shares of the class "A" stock rose $490 a share today, closing at $89,200. The move came after the company`s annual shareholder`s meeting this weekend in Omaha and news Friday that Berkshire was buying 80 percent of an Israeli tool-making firm. NIGHTLY BUSINESS REPORT`s" Linda O`Bryon sat down with Buffett in Omaha. They talked about what`s next for the firm and looked back at how Buffett turned a small company into one of the nation`s largest.
LINDA O`BRYON, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Berkshire Hathaway annual meeting is like no other in America, with a record 24,000 shareholders from all over the world coming to hear the words and wisdom of Warren Buffett. He greets shareholders and employees from Berkshire`s far- flung operating companies, now numbering more than 60. They range from insurance to ice cream to manufactured homes and this year, news of a $4 billion acquisition of 80 percent of Iscar, a metal-cutting tools producer, headquartered in Israel. It will be Berkshire`s first acquisition of a company based outside the United States.
WARREN BUFFETT, CHAIRMAN, BERKSHIRE HATHAWAY: I`ve always hoped we could do this. We were -- people were aware of Berkshire around the world, but in this country, we really were on the radar screen. When somebody had a big private business they wanted to sell, they thought of Berkshire. Around the world I don`t think that was true. Fortunately, these people did in Israel. And I think the fact that this one has been purchased will perhaps cause someone someplace, in some other country -- Germany, the UK, someplace -- to think maybe I better call Berkshire.
O`BRYON: And you`re looking for those calls?
BUFFETT: I`m just like an eager teenage girl just sitting by the phone.
O`BRYON: Well, is there a risk, though, political risk, international risk of going outside the U.S.?
BUFFETT: There`s always some risk, some kind everyplace. But Iscar, for example, operates in 61 countries. I mean they have plants all over the world. They have sales all over the world, but it`s very definitely Israel-based. I mean, the headquarters will always be there. The people will be there. But the talent, in effect we get the worldwide effect of it. That`s a very talented management there. And they`re thinking about every country in the world.
O`BRYON: What about the whole notion of acquisition, which really is how, has been how you`ve been growing the company? Is there a point where you get too many companies, too large?
BUFFETT: I don`t think so. I mean, it`s not a problem. We have I don`t know, 60-odd businesses, maybe 40 managers that report to me. Some of them have multiple units. And they`re so good, I don`t have anything to do. I leave them alone. You can think about the next acquisition.
O`BRYON: A large part of your business is insurance, including reinsurance. What has been the impact over the past two years of the major hurricanes?
BUFFETT: Well, it`s caused the market to get tighter in what we call the super-cat or mega-cat arena, particularly for wind insurance. We`re not sure whether the two-year experience, which has been terrible on hurricanes or the 100-year experience is the more valid. But you have to worry some. The water temperature is warmer, and that gives energy to hurricanes. So it may be that the exposure has increased dramatically. We saw a couple of category five`s. They weren`t category five`s when they hit the mainland. But both the intensity and the frequency of the last couple of years scares you somewhat. Now, we still don`t know. I mean, we could have a benign season, but I wouldn`t want to bet on that.
O`BRYON: You have a lot history with newspapers, starting with your own paper route in Washington DC, ownership of the "Buffalo News" and a large investment stake in the "Washington Post." What do you foresee for the newspaper industry?
BUFFETT: I think the economics are going to deteriorate. We all have two eyeballs and we all have 24 hours a day to look for education or information or for entertainment. And the newspapers` preeminent position in terms of information, particularly local information even, has eroded to some degree and it will continue. There are way more ways that you can get news now and there`s way more ways that you can entertain yourself than before.
O`BRYON: Well, would you consider selling some of your holdings in newspapers for another type?
BUFFETT: We don`t sell, probably should as a strict mathematical decision. But one of the principles I lay out in the annual report is that we won`t sell something simply because it isn`t working out quite as well as we hoped originally or because somebody offers us a fancy price. We buy to keep.
O`BRYON: Fifty years ago when you created Buffett Associates, did you ever think you could create this kind of value and be CEO of one of the nation`s largest companies?
BUFFETT: Never dreamt it, Linda. No.
O`BRYON: How did it happen?
BUFFETT: It happened just by putting one foot in front of the other. I mean, we just -- at the start of every year you never know what`s going to happen. We just had this acquisition the other day of Iscar, for example. You just keep your eyes open and try to do rational things. Sometimes you get a chance to do some big ones. Sometimes you get a chance to do many of them. Sometimes not much happens. But 50 years is a long time and a lot of good things have happened.
