Warren Buffett - CNBC Squawk Box 50th Anniversary Interview (2015)

Warren Buffett discusses the 50th anniversary of Berkshire Hathaway, reminiscing about the early annual shareholder meetings held in National Indemnity's lunchroom with just 8-10 people. He explains the longer-than-usual annual letter, which included retrospective pieces by both him and Charlie Munger looking back 50 years and ahead 50 years.

Buffett addresses the succession question after Charlie Munger's letter mentioned both Ajit Jain and Greg Abel as exceptional managers. He clarifies that the board has one specific person in mind for CEO succession, with a detailed plan ready to implement within 24 hours if needed, but declines to reveal who it is.

Buffett defends his IBM investment despite underperformance, discussing the company's transition to cloud computing and hybrid cloud solutions. He emphasizes IBM's sticky enterprise relationships and explains his average cost basis around $170 per share, stating he's happier to buy it cheaper now.

Buffett explains his philosophy on buying and selling stocks based on fundamentals rather than price movements. He discusses selling Tesco at a loss when the business deteriorated and contrasts this with situations where he bought Berkshire stock at progressively lower prices during the 1973-74 bear market.

Discussion of the increased position in Deere & Company, which was purchased by both Buffett and one of his managers. Buffett explains how Ted Weschler and Todd Combs run separate portfolios independently, with minimal oversight except for regulatory restrictions on certain purchases.

Buffett acknowledges Burlington Northern disappointed customers in 2014 due to service delays affecting coal shipments, fertilizer delivery, and grain transportation. He explains the massive capital expenditure program to improve service through double-tracking and infrastructure improvements.

Buffett discusses the benign hurricane season in 2014 with only 8 named storms and explains how Berkshire reduced catastrophe insurance writing in the US as rates declined. He reiterates his position that climate change has not adversely affected the insurance business in the past five years.

Buffett discusses American Express losing the exclusive Costco credit card relationship, explaining it as a negotiation where the bid and ask didn't meet. He defends the company's transparency about the importance of the relationship and discusses Berkshire's significant position including Bank of America warrants.

Buffett defends 2% economic growth as historically solid, noting real GDP per capita has increased six-fold in his lifetime. He advocates strongly for expanding the earned income tax credit as the best solution to income inequality, arguing it's superior to minimum wage increases which distort markets.

In response to a video question from LeBron James, Buffett recommends making monthly investments in a low-cost index fund throughout his career and beyond. He warns against promoters pushing restaurants or real estate deals on athletes, emphasizing the simplicity and effectiveness of owning America through index funds.

Buffett discusses his support for Hillary Clinton while noting he has voted for and contributed to Republicans. He criticizes Elizabeth Warren's angry tone while agreeing with Democratic positions on social matters, and praises bipartisan cooperation like that between Orrin Hatch and Ron Wyden on potential tax reform.

Buffett explains how private equity firms prefer maximum leverage, noting that 'equity is a dirty word' for many PE buyers. He distinguishes Berkshire's all-equity approach from the typical leveraged buyout model, while praising 3G Capital as exceptional operators despite their different strategy.

Buffett critiques investment bankers who constantly urge acquirers to pay 20-50% premiums because they are paid for action and transactions. He uses a memorable dentist analogy to illustrate the conflict of interest when advisors are compensated based on the number of deals completed.

Discussion of Charlie Munger's observation in his letter that Berkshire's biggest errors were opportunities not seized. Munger specifically noted that not buying Walmart stock earlier cost Berkshire at least $50 billion in net worth, highlighting the massive opportunity cost of hesitation.

Buffett strongly endorses Mary Barra's leadership at GM and criticizes the proposal to add Harry Wilson to the board, arguing that Wilson's two-year profit participation creates the wrong incentives. He emphasizes the importance of long-term thinking over short-term stock pops.

Buffett critiques activist investor David Winters for complaining about Coca-Cola's compensation while running an underperforming fund with high fees. However, he praises Coca-Cola's compensation committee for dramatically improving their plan, moving from top quartile to bottom quartile in stock issuance.

Buffett argues the European Union has fundamental structural weaknesses due to linking diverse economies with different fiscal policies and cultures. He suggests Greece should either conform to EU requirements or exit, comparing it to a hypothetical failed Western Hemisphere currency union.

Buffett defends the current banking system while warning that excessive capital requirements based on size could make banking unprofitable. He argues US banks are in better shape than global competitors and that the regulatory framework, while potentially punitive to large banks, serves the economy well.

Buffett raises concerns about subprime auto lending after seeing data showing 50% default rates within the first year at some lenders. He supports Wells Fargo's decision to cap their subprime exposure and suggests weakening credit standards contributed to the auto sales rebound.

In response to a question about California's $500 billion in unfunded pension liabilities, Buffett discusses the challenge of pension accounting and the political difficulty of addressing these obligations. He emphasizes the importance of honest accounting while acknowledging the complexity of solving the problem.

Buffett states he would approve the Keystone Pipeline despite Berkshire's ownership of Burlington Northern, which transports oil by rail. He emphasizes the importance of maintaining good relations with Canada and suggests the pipeline would not significantly impact railroad operations.

Buffett concludes with his core investment message for young investors: consistently buy American businesses through index funds over 50 years without trying to time the market or pick individual stocks. He expresses optimism that America's best days lie ahead for patient investors.