Warren Buffett on His Investment Philosophy in 1992

Legendary investor Warren Buffett spoke to the Omaha Press Club in September 1992. The talk was one of Buffett’s earliest recorded and preserved speeches.

Here are some impressions by Jeremy Harris Lipschultz, Isaacson Professor at the University of Nebraska at Omaha:

“I decided to take the only VHS camcorder that was available, just in case the event could be recorded. From the back of the packed room, I taped a piece of history. The other day, while doing research for a documentary titled Mr. Buffett the Teacher, I carefully removed the old tape from its sleeve, copied it to DVD and then ripped and uploaded the video in its entirety to YouTube.”

Read more of Jeremy Lipschultz’s impressions from the event.

Warren Buffett: Howard Simons used to comment at the Washington Post about the authority of journalists. He was the managing editor at the time of Watergate under Ben Bradlee. Later, he went to the Nieman program. People constantly complain, as you in the news business know, about how journalists can write about business when they haven’t been in business. How can you write about sports when you haven’t been a football player yourself? His retort was you don’t have to be dead to write obituaries!

On the topic of dealing with the news media, the best advice I can give is that it’s like making love to a porcupine. You must be careful. Nevertheless, I have fond memories of the media because I wouldn’t be here if it weren’t for the newspaper business. In 1905 my grandfather bought the Cuming County Democrat in West Point, Nebraska. Believe it or not, there were two newspapers in West Point, a community of about 2,000 people in those days. They were the West Point Republican and the Cuming County Democrat. His grandson learned something of what it’s like to operate the two newspapers. My grandfather and his family – my mother, her sister, and her brother – lived above the newspaper in a little string of rooms on the second floor.

When my mother was 11, she could run the linotype. In fact, the Intertype people who made linotype in those days wanted her to travel to Des Moines to exhibit the operation of a linotype to prove their claim it’s such a simple machine, even an 11-year-old could operate it. Twice a day she would go down to the train station and get on the train when it stopped. The news was sparse in West Point. She’d interview people and write stories for the paper. She sold ads for the paper. When she was older in her high school years, she started the West Point High School paper. When she got out of high school, she was 16. She continued working for three years for the newspaper to get the money to go to school. She attended the University of Nebraska. When she got to school, one of the first things she did was to go to The Daily Nebraskan and apply for a job. It was my dad who interviewed her; he was the editor of The Daily Nebraskan.

A few months later, after the first semester, my granddad lost his foreman who bought a paper in Eustis, Nebraska. He called my mom and asked her if she’d come back to help with the paper, which she did. She took off a semester then returned to the University of Nebraska. A year or so later, she married my dad.

It was remarkable that two sides of the family had a strong interest in the newspaper business coupled with interest in the stock market price. My dad was a blind editor in a small town in Nebraska he was going to work for, but he had that idea at the time, which was long cast out of favor, that he would let his father, who had paid for his education, call the shots on his first job. My grandfather on that side had different ideas. He came to Omaha and became a stock salesman. I was born in 1930, but I was conceived right around November 30th. Most of you can put together what it would be like selling stocks in the fall of 1929. Through my conception, you’ll understand what happened.

That’s the story of how I got here, and I spent the rest of my life trying to figure out how to avoid having the media in my life. I guess that’s the subject of our seminar this evening, and I think the best way to do this is just throw it open for questions. I’ve been around newspapers for a long time. I worked for The Lincoln Journal in college. I delivered five newspaper routes when I was in Washington. I had 2/10 of 1% of all the Washington Post circulation in 1944. I had this marvelous system because I delivered both the Post and its competitor, The Times Herald. If my service was a little sloppy and people changed papers, they found my smiling face there, too. There was a publisher in Alabama many years ago who said he owed his prosperity to two fine American institutions, monopoly and nepotism. I figured out the monopoly aspect of it.

The following are excerpts of the Q&A session:

Participant: I take The Washington Post national weekly edition. Several years ago, Hobart Rowen wrote that the real national debt was something close to $14 trillion. That was three or four years ago. I was shocked by the statement. Nobody seemed to pick it up. I’m just wondering, was there nothing to it?

Buffett: It’s a good figure, $14 trillion. Bart was probably referring to the actual debt, which might have been $3.5 trillion. Also, he might have been talking about the present value of actuarial promises to people in the social security system. When you promise virtually everyone a retirement income geared to inflation and you present value that, you get a huge sum. On the other hand, the federal government has the power to tax people in those future years to, in effect, make transfer payments. Social security isn’t an insurance fund or an insurance operation. It started out with that idea in mind, but it’s exactly what they call it, intergenerational transfer payment now. As long as the federal government has the power to tax, it might have to tax more and more because it’s under-taxing now in relation to its actuarial cost, but it has enormous assets, too. The value of all American corporations is $4 trillion. The government gets 34% of their profits. The stockholders get 60%. I’m leaving out state income taxes. You can say the government owns 34% of those corporations in terms of their earnings power, and it has the right to increase its ownership merely by passing a bill that they’re going to get 40% or 50% of the profits. There are enormous assets and liabilities. You can play around with either side of the equation. But the country has more taxing power than it uses, which is why people don’t get too upset about the $400 billion national debt. They know there is untapped taxing power. Maybe the politicians don’t have the will to tax, but that keeps government bonds selling as probably the safest investments in the world.

Participant: The Buffalo News has endorsed a candidate. Will you be participating in that endorsement?

Buffett: The Buffalo News endorses candidates. I think they had that policy when I went there, but I know they would have that policy under our ownership which began in 1977. Murray Light, editor of The Buffalo News, wrote a column on that just a few weeks ago. He writes a column every week. By and large, they determine their own endorsements. It’s interesting. We had five congressional candidates some years back from Buffalo. We made five endorsements. That was 1982. I think Jack Kemp was still a congressman then. I think he was a congressman because we endorsed Barber Conable, Jack Kemp, and Hank Brown, among others. If you look at these fellows’ voting records, you can see no similarity whatsoever. I discern that our policy at that time was to endorse incumbents. I don’t know what we’ll do this time, but we do have a policy of endorsing. We give opinions daily on every other subject in the world. If we back off giving an opinion, it doesn’t seem to make sense. I don’t think people pay much attention when you get to the presidential race. I think the less the public is interested in a race, the more a newspaper endorsement means. In the presidential race, I would guess the endorsement means virtually nothing, but I still think we ought to do it.

Participant: What stories do you think the media is missing the boat on these days? I’m thinking particularly along the lines of business stories, but feel free to take it beyond that. Are there stories you think they’re blowing out of proportion or ignoring? Is there a story ripe for exposure now?

Buffett: I’ve gotten this question over the last 20 years. When I attend the Pugwash Conference, they always ask about the big stories. Then you tell them, and then they groan. The trouble is the big stories are not the ones that happen like Hurricane Andrew. They’re the ones that happen over time. They get boring, and there’s never a news peg that grabs you where you can say it’s dramatic. No one has ever run a story on the fact that I gained three ounces today because I ate 500 calories more than I burned up. But, if 20 years later I weigh 200 pounds more than I weighed coming in, suddenly that might become a story. It’s hard on anything that has a slow, glacial-like impact on society to write about those things. It’s also difficult to legislate about. They say the problem is that often, on the important questions, the policy cycle is longer than the electoral cycle. The policy cycle is also longer than the news cycle. It’s easier to write about them after they happened, whether it’s the S&L debacle or whatever. But writing about them while they’re happening – because they’re happening one inch at a time – it’s difficult to cover them. The big story is the fiscal imbalance we have at the national level, but it’s been around so long. What more can you say on it? How much different is it if the deficit will be $378 million or $377 million? It’s tough to write about those subjects.

The second thing is that sometimes they get intricate. At the Sun, many years ago, I talked to Paul Williams, a marvelous editor, about the industrial loan scandal that you could see would come in Nebraska. If you looked at the balance sheets, which were sketchy, of the industrial loans and you saw the regulation on it and you knew there was going to be a significant problem, we didn’t have anyone at the Sun who could write that. We debated bringing in somebody from the outside, just hiring somebody who knew a lot about accounting and banking to work on a special assignment for it. We didn’t have the depth of manpower or specialization to write that story. It’s easy to write it after it happened; it’s a cinch. But that is the tough problem.

Take the population problem over time. If we started writing about it, it means taking a lot of abuse for a couple of hundred years. It’s no fun to be a hero 50 years after you die. To come on the news some night and say, “We have this terrible problem. We’ve got 28,000 more people in the country than we had yesterday, five billion,” and run for Planned Parenthood or whatever, it’s a little difficult. It’s best to attack something like that by occasionally doing something in a way of a special. I think the fellows down at the Enquirer have two or three of it in the last five or six years. They have enormous requests for reprints. Those will probably have some impact. The undiscovered flaw to something like that – if I knew about it, I’d be shorting the stock. It’s hard to come up with a blockbuster story that also has reader or viewer impact.

Participant: Have you lost your confidence in Wells Fargo?

Buffett: I won’t comment on the stocks. I never get into recommending or even commenting on individual companies.

Participant: If you were limited in your reading to two financial publications, which two would you buy?

Buffett: I would have answered differently 5 or 10 years ago. Now I’d probably go with The New York Times and probably Fortune. I’m assuming I can still get all the things from Value Line and all the statistics.

I’ll tell you an interesting story about that. Roughly four or five years ago up in the lead paragraph of Sulzberger’s New York Times letter, it said The New York Times was distributed on a same-day basis to virtually every important metropolitan city in the United States. But it wasn’t distributed in Omaha. I wrote a letter and said, “It’s a shame to have a qualifier in there.” I said, “I find it galling to have a friend in Des Moines, which has a population half of Omaha’s, who gets the paper delivered daily. Here we are in Omaha, and we can’t get it.”

I sent a copy to my friend in Des Moines who did not know Sulzberger, Joe Rosenfield, and he wrote him a letter. He said, “Dear Mr. Sulzberger, I understand you’re hearing again from that nut in Omaha.” He went on to say it’s true that Des Moines is smaller than Omaha. He said, “Those people spell the name of their state backwards.” But he said, “I’ve considered his request,” and he said, “You probably should do it because you could look at it as part of your outreach program.” He said, “First, they’ll only read the horoscope, but later, who knows what will happen.” Consequently, we started getting The New York Times. I don’t know if it was my letter or Joe’s, but I got it in the same day.

Participant: Would you comment on your attitude or policy on interviews? You particularly do not give interviews, as I understand, to anyone who wants to write a profile type of interview. I’m wondering how long ago you started that, why you started it, and do you think it’s a good idea?

Buffett: I have probably spent more time over the last 10 years and over the last year with media people – reporters – than any other CEO I know. Each one takes a lot of time. I’ve had five profiles in the last four years by some form of national media including Linda Grant in the LA Times, L. J. Davis in The New York Times. I can’t think of the gal’s name in Forbes. On top of that, I get all kinds of people calling me on special aspects of certain things. Now, I don’t know whether I average two hours a week or something like that, but if I didn’t control it, it would be 80 hours a week. The number of reporters wanting to talk individually is astronomical.

I never knew L. J. Davis or Linda Grant and those people before. But in terms of specific stories, somebody’s calling about the S&Ls or accounting or banks. I try, as much as possible, to talk to people who know a fair amount about the subject because, otherwise, you can spend 45 minutes or an hour giving a course on insurance 101 or something of the sort. Then it’s especially disappointing to discover they don’t know how to write a good story. Some of the issues get complicated. I’m willing to spend 45 minutes or an hour with somebody who knows a lot about it already but is looking for the nuances.

I spend a fair amount of time, but on some of the stories that broke, we might have had a hundred calls. Each would take 10 minutes, and we don’t have a public relations function. Salomon Brothers has a dozen people or so in public relations. When the scandal broke, Salomon Brothers took on all kinds of temporary help. I don’t know what the maximum number of people they would have had at one time there. Twelve was the normal component in that department, and I wouldn’t be surprised if they got up to 30 or 40 people. They answered phones all the time.

We’re not equipped to do that. We don’t need to do it. I find it interesting to talk to some journalists sometimes, but I don’t find it productive or interesting to do it full time.

The guideline is this: If I know they’re good, I want to spend more time with them. Of course, I know some that are good right now, and I’m not inclined to do a lot of experimenting. I don’t go to a lot of new restaurants either.

Participant: Here’s a quote from the book Feeding Frenzy: “Public officials and many other observers see journalists as rude, arrogant and cynical, get into exaggeration, harassment, sensationalism, and gross insensitivity.” How do you comment on that?

Buffett: I might be wrong about this, but there are 1,600 newspapers in the country and the only one I can think of with a media critic that writes regularly is the LA Times with David Shaw. David writes some good stuff. In fact, maybe they’ve already done it, but I would think it a good idea to put some of his pieces together in a book. David interviewed 40 editors, probably all of whom with names you recognize. They include Brokaw and a few people like that. David asked them about the stories written about them. Of course, they came out with a lot of those adjectives. He found the biggest problem they had was accuracy. The second biggest problem they had was with a predetermined conclusion.

That’s the problem when talking to anybody who calls. So often you have somebody who’s already written the story in their minds. They know what they want. They’re looking for one sentence they can get from you in a 45-minute interview they can use to support their predetermined conclusion. They are disinterested in a logical development of the subject. They’re quotation shopping. They can afford to spend 45 minutes with you to get the one sentence they’ll stick in.

These editors Shaw interviewed – Tom Winship, all the people you know – that was their second biggest peeve. Once they had it done to them, it made them a little more sensitive. One guy said he tried subsequently to write a good story, and it didn’t work out as he hoped.

You get people under deadline, which creates a certain pressure you don’t get with, say, the magazine field or something of the sort. You get a bell-shaped curve of human behavior and of talent. If you look at the military, religious organizations, business, or anyplace else, you get some people who are talented. Then you get some people who are not talented at all. You get a lot in the middle. You get a lot of mediocrity. You get some people who are super ethical. And you get a great majority who are reasonably ethical, but if the story’s big enough, they might forget to mention they’re a reporter for just a few minutes into the interview. Then you get a few who are unethical. It’s not an unusual selection or distribution of people compared to other activities.

If you deal with a lot of people over a lot of time, you have a lot of different experiences. Overwhelmingly, people are just as you would expect. The people at the Nebraska Furniture Mart, or any other place, are trying to do their job well and achieve various levels of compliments, partly related to their talent, partly related to their experience. You have mostly good experiences, but we have some people at the mart who will have a bad experience when buying something. We’ll have the rude salesperson. It’s not way different, I don’t think, in the press. If you have a lot of experiences, you’ll have a few bad ones.

The tough part about it is that there is no one, with the exception of an assassin, who can do you as much damage as somebody can in the press if they do something the wrong way. There are other people out there who might be innocent – or it might be intentional, but it depends on the circumstances. There might be doctors out there whom you initiate the transaction with. You go and see the guy and they make you sign a consent form. Or maybe lawyers can do you way more trouble. But you mostly have the ability to opt in or opt out of the transaction.

You walk into Furniture Mart and you might have a bad experience. But most of the time you get a good experience.

In the news business, you don’t have the choice to opt out of the story. You can decide how you’ll maintain the relationship, and you can’t opt out. If you do get the worst of either human nature or reporting skills or something, there’s no way that you won’t be a participant.

That’s an unusual arrangement in society. One person who has a similar power, but again, largely involves somebody else initiating, federal prosecutors or any prosecutor have the decision to prosecute or not prosecute. The fact they prosecute can do a lot of damage whether you’re innocent or not. That person has the power, simply by initiating something, to cause you all kinds of trouble no matter how innocent you might be. That isn’t used that extensively, but the news business has that power. It’s the nature of it.

The other unusual aspect of the newspaper business is that, unlike in my grandfather’s day, there are 1,600 plus daily papers in the United States. Essentially, with the exceptions you can almost count on one hand, there are no competing papers. The reason, of course, is the essential economics of the business drive toward one newspaper for a city or town or metropolitan area. There’s nothing evil about it or anything of that sort. It’s just what Tom Lynch called survival of the fattest. There is no red ribbon in the newspaper industry. If you come in second, you don’t come in. There’s virtually no business like that in the country. If you had 1,600 towns, each with one hamburger stand, each with one bank, each with one women’s shoe store, each with whatever it may be, there would be competition that would come in against them. The guy that runs the best shoe store in the country or the best hamburger chain in the country will look at the town with the worst and he would come in on top of them. But that doesn’t happen in the newspaper business.

Ten years ago, everybody talked about how terrible the Manchester Union Leader was when Loeb ran it. They said it was the worst newspaper in the country. These were great news organizations with enormous resources, money coming out of their ears. They said, “We can put out our wonderful newspaper while Loeb opens up a terrible newspaper,” but they didn’t want to compete with him because it doesn’t lend itself to competition. Therefore, you essentially have a business that will make a lot of money if you’re terrific. It will make a lot of money if you’re lousy. There’s no difference. You pick a paper you think is lousy and I will show you one with 30% profit margins. People always laughed at Roy Thomson, but he knew the figures. I don’t have any feelings about that at all, but a lot of people knocked Thomson’s newspapers in those years, but they had the highest profit margins. All of these people who wanted to say excellence produces profitability and we’re rich because we’re good, it doesn’t hold water because on that basis, Thomson was the best of them all. There is no correlation between profits and excellence. So that means how good a newspaper is depends entirely on the wishes of its owners.

It’s interesting. There’s nothing quite like that in American business. If you saw a hamburger stand, you turn out lousy hamburgers, McDonald’s is going to be next to you or whomever and you won’t be around a year later. If you give terrible service in a business or the prices are too high or anything else, you will be put out of business by somebody else unless you have a regulated monopoly but then, your profits are limited, like when you have an electric company or phone company.

In the newspaper business, you are as good as you want to be, and you’re as bad as you want to be. There are 1,600 papers, and there’s a wide variety of excellence among those papers, but there is no correlation between excellence and probability. That’s something publishers hate to talk about. Maybe it’s a good idea not to talk about it because you can whip up the troops all the time and tell them, “The only way we’re going to stay alive is if you guys are terrific.”

Participant: Would you apply those same thoughts to television journalism? When will the central economics of the business create one television station, one television news organization?

Buffett: If you take the hundred top markets in the country, and I have, and you look at who leads in the nightly news broadcast, whoever leads – whether it’s Brokaw, or Rather, or Jennings – it will be whoever leads the local news before that. In other words, it’s the feed-in that counts.
In Philadelphia, we had as great an audience for Jennings, probably still do but I know we did in the past, as Rather and Brokaw combined, but we had this terrific feed-in from the local news before them. This is tough on the anchorman’s ego, but it’s true.

What’s the biggest factor in what local news is watched? It’s the feed-in before. That’s why you wanted Oprah. It’s dynamite to have the feed-in from a 40 share or something like that coming from Oprah. You say, well, this is all circular. You’re going to have trouble at some point. Incidentally, Good Morning America, the morning show on NBC, used to get a benefit from the feed-in from people that dialed in on Carson from the previous evening. It’s amazing. Somebody wants to set their dial and it runs around the clock.

Cap Cities/ABC is number one in local news in every market they’re in. They’re in New York, Chicago, LA, San Francisco, Philadelphia, Houston, Fresno, Raleigh-Durham. It’s hard for me to figure out exactly why those guys are terribly smart programmers. I mean, they’re dynamite. In Buffalo, the ABC affiliate has been there 30 years. People build up real followings. That’s why an anchorperson who is drawing, particularly in a larger city, a huge audience is worth a lot more than anybody on the newspaper.

It’s sad for those of us who like newspapers, but you can be the world’s greatest newspaper writer and you can’t make a fraction of what an anchorperson can make that draws an extra share point or two on the news in LA or New York. When I watch those local news shows in those bigger cities, I have trouble seeing the difference myself. I know they’re in the sweeps period. We jazz them up.

The newspaper and television business are two fundamentally different businesses because people only want to read one newspaper a day. You can’t attract them by offering it for $0.20 instead of $0.25, or $0.15. When you’ve gone through a paper, 9 people out of 10 don’t want to read a second paper. But with a television station, you can jump from station to station. It would be different if the television set had developed like the VCR, so you had to make a decision between VHS and Beta, you literally had to go with one or another. Let’s say when you bought your television set, let’s say technology forced you to only buy one channel. Now, we’d have 12 television sets, around a thousand bucks each and you go from set to set. If the world had developed that way, you would have had one network become preeminent and drive the others out of business because you would have gotten, again, a survival of the fattest type thing where as it happened to VCRs where the VHS format went far enough ahead of the Beta, it puts the other out of business. But essentially, with television, you can roam among newspapers, and you can do it easily. They’re just sitting there. You don’t have to move and you don’t have to buy another product or anything else. That creates a whole different dynamic. It’s an awful good business, but it’s a different dynamic.

Participant: Can you comment on another branch of journalism? I’m thinking now of the journalistic books such as Michael Lewis’s Liar’s Poker. Do you read them? What do you think of them?

Buffett: Yeah, I read them. I read everything. I spend about seven hours or so a day reading. My family thinks it’s more. The journalistic book is just like the docudrama on television. I’ve just gotten through reading a screenplay for Barbarians at the Gate. I know a lot of the characters in it. I read the book. I’ll tell you, what 10, 20, 30 million people are forming an opinion on Henry Kravis and Ross Johnson and all of them, it is entirely on some screenwriter who wrote that. The screenwriter sticks, to some extent, to facts, but he makes them interesting. He makes them caricatures to some degree. I know the guy that bought screen rights. 25,000 bucks. He tried to get Henry Kravis to cooperate with him. He said, “Henry, cooperate and I’ll have Arnold Schwarzenegger play you. And if you don’t cooperate, I’ll have Danny DeVito play you.” I don’t know whether he cooperated or not and whether he got the Danny DeVito treatment. Having known the real facts about a number of books, you get suspicious about what you read in them, but I still find them interesting and I read them.
Participant: Will you comment on Liar’s Poker?

Buffett: I can say some things are dramatically inaccurate. For example, just the lead part of it, Lewis was never in New York. I know John Meriwether well, and I just think it’s unlikely that took place. But it’s a good story and there’s nothing you can do about it. Once it’s written, millions of people will believe it’s true, and there’s nothing John Meriwether or John Gutfreund or anybody else can do about that. I personally would bet a lot of money it isn’t true, but I can’t prove it either. I wasn’t standing on the trading floor every minute of the day. But it makes a better book, and there’s an enormous temptation. I know authors working on books where the publisher is pushing them to jazz up the book. They want to sell books. After giving somebody $500,000 or $1 million – I’ve gotten big advances offered to me, and I would never take an advance on a book. I’ll write the book, but I wouldn’t take an advance on it because I wouldn’t want to feel indebted to any publisher until I decided what I want to do when I got all through with it. But if somebody’s giving you $500,000 or $1 million, they expect a book that’s going to sell.

I feel sympathetic to anybody, especially on the docudrama. What you can do to somebody on that is just terrible. It doesn’t mean everyone that’s done is terrible or anything like that, but the potential to be taken and put on a screen. I don’t know whether Nixon was down on his knees praying with Kissinger during Watergate, but it doesn’t make any difference. Once you’ve put it on the screen, that’s what tens of millions of people will think. That’s what I personally hated about JFK. I think the odds of that being an accurate rendition of history are extraordinarily low, but 20 years from now, more people may believe that than any other rendition. The screen is powerful. Books are powerful too, but the screen is incredibly powerful.
Participant: What’s your response to the criticism that you used the media in handling the Salomon debacle?

Buffett: There’s no question we had to talk to people. They’ll write something every day. The first day I went in there, we called a press conference. It was a Sunday in August. All the journalists, I think a couple of hundred of them, showed up in shorts. I had to tell them what I had learned in the previous 48 hours to the best of my knowledge. I couldn’t be sure that every fact was right, and I told them that ahead of time, but I could tell them exactly what I knew at that time. I didn’t have any problem doing that. At least they had the opportunity of starting from the same fact base I started from. I had the further opportunity in talking before Congress because we made these 50 to 60-page submissions which laid out every fact we knew, and we told them what we got every time we knew additional facts. But there’s no question that if you have a scandal on your hands, the best thing to do lays out everything you know, and never lie under any circumstances.

Don’t pay any attention to the lawyers. I’m probably offending half the audience, but I’ll get to the other half later. If you start letting lawyers get into the picture, they tell you not to say anything. The world is out there making a judgment about some fast story they don’t quite understand. They don’t even quite know the name of these people yet. Remember Watergate originally? After a while, you started to get things straightened out for you. You have these characters coming and going, and people making self-serving statements, and the press getting it wrong sometimes on a lot of things. You got to do the best you can beginning with your fact base.

The biggest problem, of course, is if you get surprised and you find out something you had told was wrong and it’s something major. Then, just lay it out, and I think it will be obvious you probably didn’t know it earlier. But run straight through, I figured that if we told everything we knew, we could waive attorney-client privilege. We gave all our material to the government. A lot of that became publicly available immediately.

We ran into people who used the press in other ways. We had short sellers in the stock that would call a set of committees or subcommittees, call the press. There was a call from the LA Times telling me four or five different rumors about foreign exchange problems and other things. It’s a multidimensional thing and you can’t do it perfectly, but you’ll never get tangled up if you just play it out as you see it. It’s fortunate when you aren’t implicated in any way yourself. It would be a different thing if you’re John Lehman or something. Incidentally, my friend Jim Burke had a problem with Tylenol. He ignored the lawyers. He was told about product liability and everything out there, but Jim kept running it as he saw it. He was up 18 hours a day doing that, but it only lasted about five or six weeks. It’s not a bad example.

Your problem is what everybody has called the lowest common denominator in journalism. Somebody will write it, and then once they write it, it moves along the food chain. Arthur Ashe, I wouldn’t write that story myself. Now, if I’m editor of some major paper and every other paper in the country is carrying it, or I’m the news director at the network, I think the momentum tends to push it along once it starts. There’s nothing in the constitution about the peoples’ right to know. We trot that out occasionally when we want to justify something we’ve done we feel we shouldn’t have, but there’s nothing there about peoples’ right to know. What you’ve got is the right to say something, but I don’t have any right to know, as far as I’m concerned, constitutionally or any other way, about Arthur Ashe’s health. He’s not playing tennis. He’s not taking my daughter out. It’s not a concern to me. But it will keep coming. It won’t stop.

Participant: Is the media a good investment today? And if not, what general areas might be without naming specific companies?

Buffett: I wrote a section in the 1991 annual report of Berkshire, which we’ll be glad to send you, about media investment. What I say is it’s terrific, but it’s not quite as terrific as it used to be. That’s one of the reasons the American Newspaper Publishers Association is fighting with the telephone companies. They are not wild about the idea about freedom of speech for the federal companies.

I was with my friend, Todd Murphy, watching a Monday night football game at my sister’s house, terrific 45-inch picture. I said to Murph, and this was ABC, of course, “What a terrific picture.” Of course, then there were only three of us. When Anheuser wanted to sell a beer, they came to us. When General Motors wanted to sell Buicks, they came to us. Another year, we just raise the prices, and it was a great business. That business has gotten diluted.

There were three electronic highways in the United States 30 years ago pumped into virtually every household in the United States. Think of that. The short factor in distribution were these highways. There’s lots of talents, lots of heavyweight fighters out there, lots of people watching at the other end, only three highways. The highway guy makes all the money then.

There are all kinds of highways, so Mike Tyson makes all the money or whomever, because talent is the short commodity now. We’re just another electronic highway, and that diminishes. The newspaper is terrific, but of course, an ad bill comes along. The US Postal Service is the biggest threat to the newspaper business. Let the Washington Star have top draft pick of a hundred journalists, any person in the United States. All they need to do is name the name and they all come over to Washington Star. It’s not worth an eighth of a point of the Washington Post stock. But ad bill, let the US Postal Service drop its third class rates 20%, then you can have an appreciable effect on a paper. That’s where the competition comes.

Participant: You’ve written about the impact emotions have on the market. To what extent can the media influence those emotions on a macro basis? To what extent does the media have influence on the market?

Buffett: The media generally are on a short time cycle, so it’s hard for them to say anything of any importance. What I want to know is what’s going to be – if you bought Coca-Cola in 1990 and you paid $40, you got $1.8 million for that $40. I want to know what the next Coca-Cola is, but that’s a little slow in unfolding for newspapers so you’re not going to get a lot out of that. But there is this interesting aspect. I was thinking about this on the way down. News people and I are in the same business. I go out and I try to report on a company. I try to evaluate its management. I try to value its competition, its product, its services, its prices, its cost, everything. I try to do a reportorial job on that business. I may never have heard of it before, and that is my job. I assign myself a story. Every morning when I come to work, it may be triggered by some event, but I assign myself a story. The story always happens to be what is X worth, but that’s a story.

In 1973, we were buying The Washington Post company with a total valuation of $80 million and Woodward was working on Watergate. Let’s say Woodward had assigned himself a story, just exactly like Bradlee coming in and said, “Woodward, I want you to spend the next week doing a story on what The Washington Post company is worth.” If Woodward had that assignment and he’d gone out for the week, he’d have come in with a pretty damn good story at the end of the week. He would have come in with a story that would have said The Washington Post company is worth about $400 million, and it was selling for $80 million. If he’d assigned himself that story, he would have made a ton of money. It’s assigning yourself the right story. I’ve said this to him, “Why don’t you just assign yourself a story to work on between 6 and 7 in the morning? And the other 8 or 10 hours, you work for Bradlee?”

Essentially, that’s a lot easier story than stories he’s trying to get. He’s trying to get a story at the CIA or something, or what he’s mumbling up in his hospital room. Essentially, it is a hell of a lot easier to figure out what The Washington Post company is worth. They had, at that time, four big TV stations. You go interview some TV brokers. You find out what other sales were. It is not a tough story.

The interesting thing to me is that all of the journalists that have covered Berkshire over 25 years – they come in, they write about Berkshire and look at the facts, but virtually none of them bought the stock. It’s usually not against the code of ethics. In most publications, certainly all the big magazines, they must only give the information to their editors as to what they’re doing and not buy right before an article publishes. But here are all these people, they’ve done all this work on Berkshire, they’re trying to figure out what I’m thinking and what we’re doing. They look at the record, but they never do anything about it. They write a story and then they go on to something else. I just say that somehow, their brain isn’t quite connected to their eyeballs. All the time they’re saying, “What will I do with my money?” I say 90% of investment is assigning yourself the right story. The reporting of it is fairly easy.

Participant: What are your thoughts about using network news for information about presidential elections?

Buffett: I’ve said this every four years about elections. It is tough because people love the horse race aspect of the elections. Journalists love the horse race aspect of it. In the network news, it’s tough, and I don’t get much about the campaign on the network news. I’d say the New York Times and the Post do a good job covering the candidates. If you get the Washington Post weekly, there was a lot in there. They make a good attempt. You won’t get it on network news. 22 minutes doesn’t do it.