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| Warren Buffett In India |
A: It will be the philosophy at everyplace, we want, what we need, our present size Berkshire has a market capitalization about USD 200 billion. So to move to USD 300 billion or USD 400 billion over time, we need run our present businesses very well and then we need to make big acquisitions. I am looking for bigger businesses as time goes by. We will find one from time to time and to some extent they seek us out. We are good home for businesses but they do have to be big and India has got some big businesses.
Bhan: So, the next deal that you could look at could top USD 9 billion not in India specifically but globally?
A: I don’t know what it will be that makes my job so much fun. If I knew what was going to happen tomorrow, the next day and the next week my job wouldn’t be as much fun. I tap dance down to the office every morning because I am just waiting for that letter to come in and most days it doesn’t but when it does then that makes it all.
Q: Two of the major economies of the world Japan and US are in doldrums and with crude on the boil because of Middle East. Do you see the growth continuing across the world?
A: Growth is continuing though it is tough in Japan for a significant period. Japan is an important country but the engine of growth that is been moving in the last two years throughout a very high percentage of the world. We have businesses that do business in more than 100 countries and we see practically every place except in residential construction in the United States. We see growth occurring throughout the world and thought the Japan tragedy interrupts Japan for a period although it will come back strong. It will not take the rest of the world off-track.
We have business in electronic components for example and the figure is coming from Asia and Europe just keeps growing. People are using these things, they are using the products of TaeguTec and you see growth of TaeguTec occurring and it will continue to grow. Hence, I would predict that the output of the world a year from now will be up significantly up from what it is now, on per capita basis. It’s been happening for two years and it will continue.
Bhan: One of the fear or concerns is that the setbacks are coming one after the other. There has been Japan, then the crises in the Middle East that’s led to the crude spike. What worries you? What is the number one threat to the world economy at this point in time? Are central banks losing out on options now? We had the quantitative easing take place in the United States, interest rates at rock bottom, are central banks left with no options on what to do at this moment?
A: They have used most of their ammunition about interest rates. We have had a very stimulative fiscal policy in United States. We don’t call it stimulus because when you are spending 10% more of your GDP than you are taking in as a government that is a huge stimulus. So it is true that those two tools have been used very extensively. However, the most important point in my view, those are the ones you can measure; you can measure interest rates and deficits but the one you cannot measure, most importantly, is the human spirit that wants to do something better tomorrow than the day before.
When Steve Jobs at Apple may be working on some product that you and I don’t even know about, he is thinking of something. So, there are tens of thousands of people doing that everyday and that’s what makes economies move forward over time. Look at what has happen at TaeguTec. TaeguTec is doing things better than they were six months ago. Its doing better than it was a year ago and that moves the world. It can’t by the story about what exactly it is like Federal Reserves dropping interest rates a quarter point or something of that sort. Nevertheless, it is what causes the economies of the world to move forward.
Q: What is your investment plans in the next five years? What are the sectors you plan to invest in?
A: We don’t have a master plan at Berkshire. In 1965, Berkshire was a textile company in the North Eastern part of the United States; it did not have a future. I did not have some plan that some day we are going to buy the Burlington Northern rail road or anything of that sort. I just kept looking for things that were commensurate with what I understood and with the resources we had to deploy. At first those were small things, so we bought some very small operations. However, as time has gone by, we can buy bigger and bigger things. I still have to keep them within my field of competence, so I have to look for that.
However, I don’t want to narrow the world down, into saying; I want to buy into this sector or that sector. I have enough in the whole world as my possibility. So, if you have got a good business and a big business and you write me tomorrow, I am not going to worry about whether that was on some master plan that I had some six months ago or a year ago, I am going to be very responsive.
Bhan: Are you going to go back to textile?
A: I still have the scars on my back from that.
Q: What are some of the key attributes you look at when you choose people?
A: I look for passion about what they are doing. I cannot put passion into people, if I handle things right, I can preserve the passion that is there. It doesn’t make a difference whether they are 25 years of age or 70 years of age, I am looking somebody who loves their business. I get approached all the time with companies that are for sale, some of the people love the money that they are going to get, others like the money but they love their business still. For one reason or another need to find a new home for it, maybe some complication in the family or taxes or whatever but the one thing I am looking in their eyes is that they love that business because they are going to keep running it.
We do not have contracts with any of the managers in the 70 plus businesses we have because it wouldn’t hold them. If I hand somebody a USD 1 billion dollars for a business and I rely on a contract to keep them enthused about it six months from now or a year that isn’t going to work.
What I need is for them to love nothing more than to get up every morning to figure out how to run their business better. Now they have that passion then Berkshire Hathaway is a good place to keep that from getting extinguished. We appreciate people like that, they are heroes to us. We find those people from time to time.
When Eitan came to see me, I knew he was still in love with his business, I knew Jacob was in love with the business. They are going to be as excited about that business a day later, a month later, a year later and that is the quality I am looking for. I know these people are all good, and they have built outstanding businesses. However, I don’t want the fellow that is going to sell to me and then decide to buy a boat to spend the rest of his time on it and I am not going to have a contract to keep him on that boat, I have got to decide whether he really likes to be on a boat or really likes running the business.
Bhan: I want to ask you a question that a lot of entrepreneurs in India dealing with and that’s the diversification dilemma. As the Indian market grows, as the global opportunity beckons most Indian entrepreneurs sometimes perhaps moving outside of their circle of competence. How much is too much and how would you ask entrepreneurs to deal with this diversification dilemma that they are currently dealing with in a growing market?
A: There is a temptation for some people to move outside their competence and that’s not only true in operating businesses but its true in investments and it’s a big mistake. There is usually plenty of money even in a relatively small circle of component. Thomas Watson who created IBM said I am no genius but I am smart. He stayed around those spots and some people get inclined to go beyond those spots and frequently they run into trouble.
You should stick with what you should be good at. You can try to enlarge the area that you are good at and you should. Over time, at Berkshire we have done a lot of that but just to spread out because you are getting a little bored with your present business or because there is a lot of cash around and it is a terrible mistake.
Q: What was your biggest challenge that you overcame in your life?
A: I have over come certain number of challenges but I would say when I was in high school, in college and shortly thereafter I was terrified of public speaking to a point. I couldn’t do it and its important you are able to communicate. If you cannot communicate it’s like winking at a girl in the dark and nothing happens. S,o I knew that I had to get over that but I would get physically ill at the idea of trying to do it.
When I was about 21 or so I paid USD 100, I paid in cash because earlier I had gone to the same course and written a cheque for and then I lost my nerve in and cancelled the cheque. So the second time around I gave the instructor a USD 100 in cash and I joined a group of about 30 people and none of us got up in front of the crowd to say our name. It makes you feel good – I felt like a great speaker compared to all these other people who couldn’t give their name. However that course changed my life in an important way. As a matter of fact, during that course every week the person who did the most with what they learned in the course in the previous week received a pencil and that was our price and during one week. I proposed my wife and she accepted and so I got the pencil that week.
Sources: http://www.moneycontrol.com
