Warren Buffett Interview with Jeff Cunningham - Media, Journalism & Communication Philosophy

Buffett on communication skills: 'I was terrified of speaking in public. When I was in high school I avoided any class that would require it, in college. Then I finally signed up for a Dale Carnegie course when I got out of school. I realized I had to talk to people.' Investment: 'I spent 100 bucks, I got this little diploma. I proposed to my wife during the term of the course so I really got my money's worth there.' Public speaking transformation: 'I really had to force myself on that. In terms of talking privately they couldn't stop me from the moment I started.' Daily routine: 'I just read and read and read. I probably read five to six hours a day. I don't read as fast now as when I was younger. I read five daily newspapers, a fair number of magazines, I read 10Ks, I read annual reports. I've always enjoyed reading. I love reading biographies for example.'

2008 optimism: 'I wrote an op-ed piece for the New York Times in October of 2008 just when the world was kind of falling apart and I said the world is going to fall apart for a while but don't worry about it, we're going to come out fine on the other side and I said buy stocks.' First investment: 'I bought my first stock in the spring of 1942. I was 11. If you remember - you don't remember, no one watching this will remember - we were losing the war at that time. We were getting totally creamed in the South Pacific, the Philippines fell, the death march at Bataan. It was not until the Battle of Midway which was a little later that things started turning around.' Optimism then and now: 'I was optimistic on the country then and I've been optimistic on the country ever since. Incidentally the Dow Jones average then was 117. No one has ever been a success betting against America since 1776 and they're not going to be a success in the future doing it either.' Frothy moments rare: 'There were a couple of times when it looked too frothy to me but that's in 50 years. I gave a talk in 1999 that's gotten reprinted in Fortune subsequently. There have been a couple of times when it really looked to me like people have gotten too excited but even then I knew that the country would, any marker that we'd established we were going to surpass later on and that continues true today. This country's just getting started.'

Communication structure: '330,000 people work for maybe 70 or so CEOs and in turn work for me. So my job is to have those 70 CEOs sending out the right message.' Every two years letter: 'I write them a very simple letter, it's a page and a half. I don't believe in 200 page manuals because they put out a 200 page manual everybody's looking for loopholes basically. But page and a half it's very hard for them to argue about what I'm talking about.' Core message: 'My reputation, Berkshire's reputation is in their hands. We've got all the money we need, we'd like to make more money but we got all the money we need. We don't have an ounce of reputation beyond what we need and we can't afford to lose it. So we never will trade reputation away for money and they're the ones that are the guardians of that.' The test: 'I want them to not only do what's legal obviously but I want them to judge every action by how it would appear on the front page of their local paper written by a smart but semi-unfriendly reporter and who really understood it, to be read by their family, their neighbors, their friends. It has to pass that test as well.' Keep it simple: 'I tell them I don't want anything around the lines. I tell them there's plenty of money to be made in the center of the court and I'm 84 and my eyes aren't that good anymore, I can't quite see the lines that well. So just keep it in the center of the court and if they have any questions call me.'

Crisis management advice: 'When you find out about bad news, correct it and if it's necessary to report it to the authorities, report it immediately.' Salomon problem: 'The big problem with Salomon was not what a fellow named Mosher did which was to defy the US government - not ever a very good idea. But that could have been handled but he reported it - he didn't report it. John Meriwether his supervisor picked up on it in late April of 1991 and went to the president and the chairman and the chief legal counsel of Salomon and said here's what this fellow Mosher has been doing and they all agreed it was wrong, they all agreed it was reportable to the Federal Reserve promptly and unfortunately nobody did anything.' Compounding: 'Then in the middle of May Mosher went out and did it again and now you've got a terrible problem because you knew the guy was a bad actor a few weeks earlier and you hadn't reported it and now that compounded and then you're in a real pickle.' Four rules: 'Get it right, get it fast, get it out, get it over. Get it right is important - there wasn't any question that Mosher had done it - but to get it fast and get it out they missed on.' Reality of scale: 'I got 330,000 people. I will guarantee you that probably dozens of them are doing something wrong right now and I just hope I find out about it early and the person below me finds out and lets me know if it's bad enough and that they stop it. You can't have a city of 330,000 without an occasional crime of some sort. So it's going to happen and you've got to do something about it fast.'

Experience with journalists: 'I probably as a CEO have spent more time talking to journalists than perhaps any CEO in the country, partly that's because I'm 84 but partly because I like to talk to journalists too.' Biggest sin: 'You've got to start a story with a hypothesis - you're looking into something because you have a working hypothesis. But you have to give up that hypothesis if it turns out not to be correct or if it's misleading in a major way.' Quote shopping: 'I always worry about the journalist that calls me - they've decided what story they're working on and all they're looking for is confirmatory evidence. I call it quote shopping. They'll talk to me for 45 minutes hoping they get one quote that confirms their story and ignoring the other 43 minutes while I tell them things that should limit the story.' Natural momentum: 'It's very natural - you get time invested in it, you've got this working hypothesis. You know, terrible what Walmart does with their employees or whatever it may be and you may have some people who have an interest in it feeding you a lot of material along that line. Once you've invested a lot of hours and your editor knows you've invested a lot of hours, maybe it was the editor's working hypothesis to start with, now you've got to go back and tell him he's wrong or her. There's a lot of momentum toward a bad story, a lot of momentum toward a good story too, but you have to be able as a writer to say my hypothesis is no longer correct and all it was was a hypothesis. That's no sin to say that but it's hard to do.'

Headlines vs reality: 'You know most of the things that JP Morgan got penalized for were acts at WaMu which they took over or Bear Stearns which they took over. At the time they took over those two institutions the United States government was on their knees begging them to do it basically through the various agencies.' Public service: 'They were doing something as a public service. That doesn't mean they didn't think they'd benefit by it but they were totally following through on something that the government wanted to have happen very badly.' Fast contracts: 'They picked up unfortunately - they wrote those contracts very fast - and they picked up the sins of those organizations which they had nothing to do with. Now that doesn't mean that JP Morgan hasn't gotten fined for some things they did as well but overwhelmingly those were huge fines from the past.' No choice on fines: 'When the government wants to levy a fine you just salute and smile and say do it again basically. We got a fine $290 million at Salomon. If the figure had been 100 million, if it had been 500, there was nothing I could do about it. I had to agree to it and that's just the way it is.' Crisis role: 'Jamie Dimon runs a - has done a terrific job of running JP Morgan. It was very fortunate for the United States citizens that Jamie Dimon was running JP Morgan during the financial panic.' Melting dominoes: 'WaMu came along right after Wachovia, after Freddie Mac and Fannie Mae and all the dominoes were toppling and here was another very big domino. The FDIC could have taken it on but that would have - there were a lot of problems connected with that and JP Morgan stepped up. Believe me the panic of 2008 would have been far worse if JP Morgan hadn't been there and Jamie Dimon hadn't been running it.'

The issue: 'I disagreed with the level of options being authorized which the Coca-Cola company stated in the proxy material would likely be issued within four years. I thought it was excessive.' Strategy: 'I abstained from voting. I announced my abstention after the vote. I did not want to be leading a proxy contest or anything of the sort. I think the management of Coca-Cola is first class. I think they've got some difficult problems to take on but I think they've got some tremendous assets working for them as well.' Reasoning approach: 'I thought they're very decent people and I thought if they were reasoned with and talked to that they might well change things. And they have. They've dramatically changed that plan so that instead of over four years it'll be over 12 years. Well that's cutting it by two-thirds.' Result: 'The abstention accomplished something very significant for Coca-Cola shareholders. Look at what we've accomplished by the abstention. We're still the largest shareholder of Coca-Cola, we want to be the largest shareholder, we want to be helpful to Coca-Cola, they want to do the right thing. There is no basic conflict at all between us and the Coca-Cola company. In fact there's admiration on my part for the Coca-Cola management.' Alternative would have failed: 'Voting no and creating a ruckus would have been a very dumb thing. It would accomplish nothing. They would have dug in their heels and all likely - that's human nature. It might have been more fun for the press but it wouldn't have accomplished the goal.' Understanding boardrooms: 'People don't really understand - you're dealing with a human institution. These are decent high-grade human beings as directors. I hadn't talked with them about the plan. I was not a director - my son was the director but I wasn't. I did not know they were going to say they were authorizing those shares to be issued over four years. When I read it I thought it was a mistake. What should I do? Should I start condemning all these people to Coca-Cola, telling the world they're terrible people? They're not terrible people. What I should do is convey my feelings to them and I'm not going to vote for it and then talk to them afterwards. And now we've got a very sensible plan and no personal relationships have been damaged. People do not feel they've got an enemy out there which they don't have. It just makes sense in terms of human behavior but it would have been a better story if I'd taken out hands or something and said this is the worst thing that's happened in history.'

Understanding needed: 'If you're going particularly if you're going to be a business journalist or a political journalist you really should understand business. Going back to our boardroom example, boards are social organizations as well as having business responsibilities. It's very important to understand how human beings act.' Buffett's experience: 'I've been on 19 boards. I can tell you that most journalists probably and most Americans and maybe many people are right about business - they really don't understand the dynamics within a boardroom and it's a little hard for journalists to be planted in boardrooms around the country.' Essential skills: 'Business journalists: a) they have to understand accounting. You can't write about business without understanding accounting and I run into a lot of journalists that really don't understand accounting and that's too bad. It's just the language of business and that's important to understand.' Carol Loomis example: 'The best business journalist I've known has been Carol Loomis. She didn't start out knowing anything about business but she wanted to learn and she is smarter at the end of every day than she is at the start of the day. Not very many people you can say that about but she just wanted - she learned about accounting, she learned about all aspects of business and as a result she became the best business writer in the United States or maybe the world.' Changing hypothesis: 'I've seen her start stories and find out that she was wrong in her working hypothesis and she wrote according to the facts that she found out and she was very good at finding out facts, very diligent. That's why she wrote relatively few per year but any story she wrote you were going to learn something by reading.'

Changed world: 'It's really changed the world big time and you can see it. In newspaper daily newspaper circulation United States I guess there's maybe 1400 or so daily papers left, there were 1700 not so long ago and their numbers are going to go down and their circulation is going to get down and then the earnings are going to go down.' Decline inevitable: 'The print daily newspaper is, you know, it's been in decline for some period, it's going to continue in decline.' Instant information: 'People with their computers, their mobile phones, whatever it is, they get things instantly. I used to have to wait till the next day to look at the box score of what the Cardinals did the night before and find out how Musial hit and everything and now I can go to ESPN.com and get it play by play.' Consequences: 'The world has really changed and people are - they've gotten used to and demand instant reporting basically and that means that they get a lot of stuff before the facts are out but it means they get the facts very quickly too. They can get their financial news much faster now than when they waited the next day to see where their stocks had closed.' Washington Post timing: 'The Washington Post was selling the newspaper basically and that changed my forever commitment to it and I also felt that I wouldn't be running Berkshire someday and this would be a smaller commitment than we would usually make to marketable securities. There was a very logical deal that could be worked out to redeem our shares that would be good for both the company and for Berkshire. So it was not really my feeling about newspaper journalism - Washington Post was getting out of the newspaper business, we were getting into it more at about the same time.'

Direct communication: 'We communicate with our shareholders more than any other company that I know. I've just gotten through writing the 2014 annual report - 20,000 words and those are my words. They're not some investor relations department or public relations department. They're not part of a sales document.' Honesty: 'We fell on our face in one respect last year and I talk about it. I try to write that as exactly as I would write it to my sisters assuming that they had virtually all of their net worth in Berkshire. They were interested in it but they didn't follow it day by day and they want to know what I think and what went wrong and what's going right and how I think the world will develop and a whole bunch of things.' Philosophy: 'We want to communicate directly with people and I really feel that if you want to talk to people honestly about a subject in which they care about - certainly they care about their money - they'll listen. I do not worry about the number of words when I write that report. I worry about telling them the things I'd want to know if our positions were reversed and they were telling me about my investment.' TLDR understanding: 'The operative term today is TLDR - too long didn't read - and you understood that if things were too long people wouldn't read it a long time ago. In some respects you've seen where social media is going and you anticipated it.' Keep it short for managers: 'I also want to make it short because there's really only a few fundamental ideas I want to give those managers and I want to make sure that they don't get lost on page 83 or something of the sort. People usually can't absorb 15 or 20 messages. But in terms of writing about Berkshire or talking about it I feel we want to get people every bit of information that I would like to receive if I were on the other end.'

Mark McCormick lesson: 'I spent some time with Mark McCormick who's the founder of IMG, the famous sports manager. He put a contract together and his legal team got back to him and he sent back a note with crayon at the top: this is too over-lawyered, get it back to me in one page. And this is coming from a lawyer.' Buffett practice: 'I'm enclosing in our annual report this year the one and a half page contract we used to buy National Indemnity for 8.6 million dollars. National Indemnity now is the largest insurance company in the world by net worth and it was one and a half pages. We've had one-page contracts for other companies.' Current reality: 'I can't seem to pull this off anymore. I send these one pagers out to our lawyers and say let's get it down to this and let's get it done by next week but the world seems to change on that. I still would go for the one page contract.' Philosophy: 'I like to deal with people where I feel a one-page contract will do the job. If I have to have 50 pages in there to protect me against the guy I'm dealing with I'll always wonder whether I needed 51.'

Jim Michaels: 'Incredible editor. He could put out the whole magazine and he proved every story, he edited it and he edited them all. It was improved by his touch.' Barney Kilgore vision: 'Sensational. He envisioned a world defined by interest rather than by geography. So he took a daily newspaper and said I'm not trying to make this interesting because you live in Omaha or you live in Peoria. I'm going to make it interesting because you live in the city of business. And he created a fantastic paper.' Ben Bradley: 'A great editor - not a business editor but he was a great editor.' Future: 'I think you'll see other great editors in the future. The talent required for being a great editor has not been extinguished. Maybe the formats have been reduced to which that editor can apply his talents or her talents but I think you'll see other great ones.' Media future: 'I think we'll see movie star selfies and cats on the front page of the New York Times but we'll see them every place else. People magazine became the most profitable magazine in the United States and by quite a margin. Fortune magazine was still turning out things that I love to read but it was People that sold.' Two audiences: 'Unfortunately I think the great majority of people are going to like things very very brief, they're going to like personalities. But there will be people also that care about more in-depth journalism. There will be first class journalism in institutions devoted to that or publications devoted to that and there is a big enough market for that. It's not where most of the money will be and money will drive what the public sees.'

Love for journalism: 'I think it's wonderful. If I didn't do what I do in my life I would want to be a journalist. I mean I consider myself a journalist to some extent. I assign myself a story.' Examples: 'I say is the Washington Post company worth 22 dollars a share in 1973? I say is the BNSF railroad worth us paying 34 billion? I assigned myself the story. It's my working hypothesis that it is but then I go and look for the facts and I try not to be selective about the facts that I use as input. So journalism it's fascinating. I love it.' Rules to follow: 'a) You should always observe that rule about not letting the hypothesis determine the story. b) You've got to learn, you've got to learn about accounting, you've got to learn about how business works if we're talking about business journalism and you can always get smarter. And if you do the right kind of a job you will attract the right kind of sources.' Personal experience: 'I am a source for certain journalists and the reason I am is because I admire their work and the others get no place with me. So it's very important to if you want to become a great journalist to behave like one as you go along and then all the other pieces will fall into place.' Opportunity: 'You want to have a curiosity about business. There are so many good stories that haven't been written yet, a few of which I know. So you couldn't be working in a better area and there's always going to be business. Business is always going to be important to the body politic as well as be interesting to a lot of readers and there are so few that are good that you're going to stand out if you really work at it.'