Charlie Rose Interviews Warren Buffett

Charlie Rose recently interviewed Warren Buffett on his show.  The wide ranging interview covered topics ranging from Buffett's recent acquisition of Burlington Northern Santa Fe, the response to the financial crisis, the budget deficit, China's emergence as an economic power, tax policy, and more.

Here are some highlights.

On his purchase of the remainder of Burlington Northern Santa Fe that his holding company, Berkshire Hathaway, doesn't already own:

I felt it was an opportunity to buy a business that is going to be around for 100 or 200 years, that's interwoven with the American economy in a way that if the economy prospers, the business will prosper.  It is the most efficient way of moving goods in the country.  [I]t moves a ton of goods 470 miles on one gallon of diesel.  [A] train replaces 280 trucks on the road.  It emits far less into the atmosphere that's damaging than trucking.

On what he's seeking for in his investments:

Reasonable return is good enough, Charlie.  I mean, 50 years ago, I was looking for spectacular returns, but I can't...get them.  We have...eight to ten billion to invest every year.  [When] we're building things that are essential to society...they really don't have any choice...and we should get a decent return on that.  Enough to encourage us to keep putting money in the business, but we're not entitled to spectacular returns.

On cash as an investment:

[C]ash is always a bad investment.  I mean, when people say cash is king...that's crazy.  Cash [is] sure to go down in value over time.  You don't need to have excessive amounts of it around.

On the financial crisis of last year and its effects on the economy:

Because we're in a recession, there's not as much demand for money, and money isn't flowing to really dumb projects like it was a few years ago. But money is available now.  And the panic is gone.  But that panic that spilled over into the real economy last fall...has...left real scars on the American public psyche.  The American economy will come back.  It won't be tomorrow...and it won't be exactly the same.  Businesses will expand.

On China's growing economy and its potential to replace the United States as the world's largest economy:

They have four times as many people as we do...they will have a larger economy.  You know, they will grow faster than we will grow, but they're starting from a much lower base.  I mean, you know, I'll meet some guy in the street today whose net worth will be growing faster than mine on a percentage basis, but if I start with a big enough number, it will be a while before they catch me.

On the deficit:

[Congress], once the economy is rolling again...they've got to raise taxes now that income will go up as the recession ends anyway.  They're going to have to close the gap between expenditures.  The gap between [expenditures and revenue] is wider as a percentage of GDP than we've seen except in wartime.  If we have a gap of two, 2.5 percent and we have sort of normal growth, then debt as a percentage of GDP doesn't grow.  So, the country gets more valuable over time and we have more productive capacity and all.  So we can handle more debt, but...it should be proportional to...the wealth and earnings of the country.

On taxation and marginal tax rates:

I don't...like [a value added tax because]...it's regressive and you know, we don't need any more regressive taxes in the United States.  And I worked with the rich people...even when the top rate was 70 percent.  I worked with them when capital gains rates were 39.6 percent and not one of them said, you know, it's 1:00, and instead of working this afternoon I think I'll go to the movies because my marginal rate is so high.  I mean, if anything, they worked harder.

[T]axation is a way where you get to the excesses of what the market system produces and where you take care of the people who get the short straws

On income inequality:

[Y]ou want a prosperous country so you want a whole bunch of rich people, but you also want everybody to do reasonably well in something as prosperous as we have.  We have $45,000 of per capita GDP in the United States...but we've got almost 60 million people living in households where...the top income is $21,000 or less.  But a prosperous country should not just be prosperous for the people like me.  I'm prosperous because of the society around me.

There's a lot more, and it's well worth listening to the entire interview.  Consider this -- every year, Buffett auctions off a chance to have lunch with him, with the proceeds going to charity.  Earlier this year, that lunch cost the winner $1.68 million.

You'd get a chance to chat with Buffett for about an hour at that lunch.

If you don't have the coin to buy that lunch, you can watch the interview with Charlie Rose for $1.68 million less.