QUESTION: I'm Peter Lawrence, first-year student from Columbia. And, first of all, thank you both so much for coming here. Mr. Buffett, the recent runup in the market has been historic. And it seems that many people question the sustainability of the current price level. Do you think the rally is for real?
BUFFETT: What's going to happen tomorrow, huh? [APPLAUSE] Let me give you an illustration. I bought my first stock in 1942. I was 11. I had been dillydallying up until then. I got serious. [LAUGHTER] What do you think the best year for the market has been since 1942? Best calendar year from 1942 to the present time. Well, there's no reason for you to know the answer. The answer is 1954. In 1954, the Dow … dividends was up 50%. Now if you look at 1954, we were in a recession a good bit of that time. The recession started in July of '53. Unemployment peaked in September of '54. So until November of '54 you hadn't seen an uptick in the employment figure. And the unemployment figure more than doubled during that period. It was the best year there was for the market. So it's a terrible mistake to look at what's going on in the economy today and then decide whether to buy or sell stocks based on it. You should decide whether to buy or sell stocks based on how much you're getting for your money, long-term value you're getting for your money at any given time. And next week doesn't make any difference because next week, next week is going to be a week further away. And the important thing is to have the right long-term outlook, evaluate the businesses you are buying. And then a terrible market or a terrible economy is your friend. I don't care, in making a purchase of the Burlington Northern, I don't care whether next week, or next month or even next year there is a big revival in car loadings or any of that sort of thing. A period like this gives me a chance to do things. It's silly to wait. I wrote an article. If you wait until you see the robin, spring will be over.
BECKY: But at the same time -- [APPLAUSE] Warren, you have repeatedly said over the last year that investing in American areas is a bet on the future of America. But you have also invested overseas,companies like BYD. You both spent some time in China. Are there more opportunities overseas or right here in America?
BUFFETT: I see more opportunity in the United States. We're the biggest economy and we're looking for big deals. But I am delighted to find something, you know, whether it's in China or whether it's in Israel, like Iscar or whatever it may be. There are more opportunities in the United States than anyplace else.
BECKY: Bill, you agree with that?
GATES: Well, yes. The U.S. benefits as the globe benefits. You're not going to have a case where the rest of the world does poorly and the U.S. does well. Our fate is tied to open trade, innovation everywhere. You know, even the Burlington, some of the stuff that's on those railroads might come from other countries.
BUFFETT: I hope so.
GATES: It's exciting to see what's going on in China. It's great for us. If we had a choice for all the people in China to be as rich as we are versus be as poor as they were back in 1979, we'd be way better off to say, you know, let's have them be consumers and inventors just like we are. They are a long ways away from that. But they are a large enough population that great things are happening there. And, you know, many countries that we thought of as basket cases and we sent lots of aid to, like Brazil or Mexico or Thailand, are now big contributors. So it's good for the world that it's not as dependent just on the U.S. But the U.S. is where the energy revolution is likely to happen, the IT revolution will continue. We are expected to lead the way.
QUESTION: My name is Erica Braley and I am a second-year student. My question is for Mr. Gates. What is the most important thing you do every day?
GATES: Hmmm. [LAUGHTER] [APPLAUSE] Well, I do a lot of variety. I think reading a lot, you know, and continuing to learn. I'm in a lot of new areas in the Foundation, education, health. And I love reading a lot. So I think, you know, arming myself with that knowledge and sitting down with people who live the topic and brainstorming with them, that's what helps me back the right people and make sure I know what's going on. So I guess I'd say learning is what is the key thing. [LAUGHTER] [APPLAUSE]
QUESTION: Mr. Buffett, Mr. Gates, thank you for being here tonight. I am Ibrahim Dolly, first year here at Columbia. I came from Portugal. I have a question for both of you. You both knew early in your careers what you wanted to do in your life. What advice do you have for those of us who are a little bit unclear?
GATES: Well, finding the thing that you are passionate about and that you are good at can sometimes take a period of years. I think Warren and I were lucky we kind of ran into it. I wasn't even sure it was software. I was kind of obsessed with it but then it wasn't clear it could be a career. When that happened, it was great. I think most other people get into their 20s and have to try out some different experiences. And some things will expose you to a lot of different businesses, a lot of different work opportunities. And I think you can make your first few jobs optimized for getting that exposure. And then when you want it, see the thing that you want to be fanatical about and just jump on to that.
BECKY: All right.
BUFFETT: First of all, I'd say marry the right person. [LAUGHTER] And I'm serious about that. [APPLAUSE] It will make more difference in your life. It will change your aspiration, all kind of things. It's enormously important who you marry. Beyond that, I would say that do what you would do if you were in my position, where the money means nothing to you. At 79, ... I work every day. And it's what I want to do more than anything else in the world. The closer you can come to that early on in your life, you know the more fun you're going to have in life and really the better you're going to do. So don't be driven where you think the last dollar is presently or anything of that sort. And then also go to work, if possible, for an organization or an individual that you admire. I mean I offered to go to work for Ben Graham because there was nobody I admired more in the business than him. I didn't care what he paid me. When he finally did hire me in 1954, I moved from Omaha to New York and I didn't know what I was getting paid until I got my first paycheck. But I knew I wanted to work for Ben Graham. And I knew I would jump out of bed every morning and be excited about what I would do and I would go home at night smarter than I was in the morning. Go to work at a job that turns you on and a person that turns you on and institution. [APPLAUSE]
QUESTION: Hi, I'm Brian Seedabalker. I'm a second-year student. Mr. Buffett, it's great to see you again. I was on the trip to Omaha last month. Thank you for hosting us. My question is, how would you recommend an individual investor who follows the Graham and Dodd philosophy to allocate their capital today?
BUFFETT: Well, it depends whether they are going to be an active investor. Graham distinguished between the defensive and the enterprising and that. So if you are going to spend a lot of time on investment, you know I just advise looking at as many things as possible and you will find some bargains. And when you find them, you have to act. It doesn't -- it hasn't changed at all since I was here in 1950, 1951. And it won't change the rest of my life. You start turning pages. When I got out of school, I turned every page in Moody's 10,000-some pages twice, looking for companies. And you have to find them yourself. The world isn't going to tell you about great deals. You have to find them yourself. And that takes a fair amount of time. So if you are not going to do that, if you are just going to be a passive investor, then I just advise an index fund more consistently over a long period of time. The one thing I will tell you is the worst investment you can have is cash. Everybody is talking about cash being king and all that sort of thing. Most of you don't look like you are overburdened with cash anyway. [LAUGHTER] Cash is going to become worth less over time. But good businesses are going to become worth more over time. And you don't want to pay too much for them so you have to have some discipline about what you pay. But the thing to do is find a good business and stick with it.
BECKY: Does that mean you think we are through the roughest times? You had always kept the cash word around, too.
BUFFETT: We always keep enough cash around so I feel very comfortable and don't worry about sleeping at night. But it's not because I like cash as an investment. Cash is a bad investment over time. But you always want to have enough so that nobody else can determine your future essentially. The worst -- the financial panic is behind us. The economic spillout which came to some extent from that financial panic is still with us. It will end. I don't know if it will end tomorrow or next week or next month. Or maybe a year. But it won't go on forever. And to sit around and try and pick the bottom, people were trying to do that last March and the bottom hadn't come in unemployment and the bottom hadn't come in business but the bottom had come in stocks. Don't pass up something that's attractive today because you think you will find something way more attractive tomorrow.
QUESTION: Hi, I'm Josh Austin. I'm a second-year MBA student. My question is for you, Mr. Buffett. Value investors, such as yourself, believe that fundamental analysis, deep fundamental analysis is critical to intelligent investing. However, you have said several times in the past that you have made very rapid capital allocation decisions, sometimes in less than five minutes. I was wondering exactly which data gave you confidence in your decision.
BUFFETT: Well, that's 50 years of preparation and five (minutes) of decision making. [APPLAUSE]
BECKY: Can you just look at the spreadsheet? Can you look at an annual report and make a decision like that?
BUFFETT: Yeah. Sometimes I can. Just take Coca-Cola, for example. I sampled the product for 60 years and then I saw a couple of key ingredients, you know, that essentially tipped the scale in terms of buying it back in 1988. But the good big decisions, they don't take any time at all. If they take time, you're in trouble.
BECKY: All right. Welcome back, everybody. Gentlemen, last question today. If America was a stock, would you buy it? Bill.
GATES: You bet.
BUFFETT: On margin. [LAUGHTER]