Warren Buffett 87th Birthday CNBC Interview - Hurricane Harvey, North Korea & GDP

This lunch auctioned for $2.679M. Over 18 years raised $25M+ for Glide. Cecil Williams assigned 1960s to dying Tenderloin church - 120 white parishioners left when black minister arrived. Built remarkable social organization from scratch. Helps people world gave up on, never gives up. Featured in Pursuit of Happyness. Served 700K+ meals last year, brings people back from bottom. Buffett's wife introduced him, he was skeptical but visiting convinced him of Cecil's remarkable work.

Harvey dropped 14 trillion gallons (2000 gallons per person globally). Insured losses large but high uninsured proportion. GEICO: 10% Texas auto market, ~500K cars in affected area, expect 50K total losses. Similar to Sandy but lower TX penetration vs NY. Performance at crisis defines insurance company - getting tens of thousands replacement cars with full gas tanks. JP Morgan estimated $10-20B insured, Farmers CEO suggested $150B uninsured - Buffett agrees reasonable.

Berkshire exited super cat reinsurance. Used to be biggest writer but after 10-11 year hurricane drought (longest since 1840 records), rates plummeted. Wind doesn't know rates - will lose money at wrong price. As rates fell, exited almost entirely. Wouldn't hit big like 10 years ago. Problem: more coastal houses worth more, plus cat bond capital outside insurance pushed rates down further. Not good business recently unless rates rise substantially.

NFIP already $25-26B in hole before Harvey. Fundamental problem: only people who buy are people who will need it. House on Omaha hill won't buy - no risk spread like auto/homeowners. Fire random, flood not random. People in flood plains only buyers. Normal insurance can't handle this adverse selection so government stepped in. Already deep in hole, will be much worse after Harvey.

Doesn't feel like 3% economy. Been ~2% annually since fall 2009 (8 years), remarkably consistent. Quarterly reporting multiplies by 4 (not year-over-year) so seasonal adjustments create noise - don't take quarters seriously. Periodically expect acceleration or double-dip but always returns to 2%. Two percent not bad: over 25 years generates $19K GDP gain per capita. Certain industries fluctuate (autos faster recovery than homes, now tailing) but aggregate stays 2%.

10-year at 2.1% - if knew that coming, many past decisions would look different. Unbelievable rates stayed this low, nobody expected it including Berkshire. Analogy: 1991 Solomon Brothers thought surest trade was shorting Japanese 10-year (rates couldn't stay that low). 26 years later still wrong - 'widow maker' trade. Lesson: don't bet against low rates persisting longer than seems possible.

Concerned since 1945 first bomb. Over 72 years developed civilization-destroying ability, others developing too. Only real existential cloud - million other problems get solved but this is ultimate. Kennedy/Khrushchev 1960s example: wrong behavior kills millions. Individuals, groups, few nations want inflict damage. Can thwart 99.9% but worst-case problem. More weapons holders, more generations, more dice rolls - eventually remote probability happens. North Korea poor country spending on ICBM to hit US - doesn't make sense unless dangerous intent. Who knows leader's mind in 5 years.

Asked why silent vs Tim Cook: worked for Hillary, raised money, voted for her, disappointed she lost. But we have a president, North Korea, etc. Not in business attacking presidents. Lived under 15 of 45 total presidents (one third). Bought stocks under 14 of 15 - only exception Hoover (age 2). Dad thought world ending when Roosevelt elected, still invested. Country moves forward. Will take 2018/2020 positions but won't quit if candidate loses - half the time they haven't won.