Two unexpected revelations in Warren Buffett's CNBC interview

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(This is the Warren Buffett Watch newsletter, news and analysis on all things Warren Buffett and Berkshire Hathaway. You can sign up here to receive it every Friday evening in your inbox.) Two unexpected revelations in Buffett's CNBC interview In a nearly one-hour interview with CNBC's Becky Quick on the day he publicly revealed he is cutting off the Gates Foundation from future donations, Warren Buffett downplayed the role Bill Gates' association with Jeffrey Epstein played in that decision. He also revealed he initiated Berkshire Hathaway's now $30 billion position in Google-parent Alphabet, which many had thought was Greg Abel's first major investment decision as CEO. Buffett: Gates-Epstein ties 'distasteful' but everyone makes mistakes While Warren Buffett found Bill Gates' ties to notorious sex-trafficker Jeffrey Epstein "distasteful," he says his decision to end future contributions to the Microsoft co-founder's foundation was driven by his three children demonstrating they are now able to responsibly give away "vast sums of money." Over the same 20 years he gave the Gates Foundation nearly $48 billion in Berkshire shares, as valued at the time of the donations, he also donated almost $18 billion to Susie Buffett's Sherwood Foundation, the Howard G. Buffett Foundation, Peter Buffett's NoVo Foundation, and the Susan Thompson Buffett Foundation, named for his late first wife. He told Becky, "I'm impressed by the fact that my kids really want to give the money away" efficiently, without constructing huge buildings or holding conferences "at esoteric places and all kinds of things." Buffett said he didn't have that same confidence in his children in 2006 when he started his donations to the Gates Foundation. In a March interview with CNBC, Becky asked if he would continue his "lifetime" commitment to make annual donation to the Gates Foundation in light of revelations in the Jeffrey Epstein files about his connections to Gates. At that time, he replied, "I'll wait and see what unfolds ... I don't have to make that decision today. And I haven't made it today." "I've learned things I didn't know about something for all these years." Now Buffett says he's read a "great deal" about the matter, including Gates' congressional testimony last month, and presumably, the February Wall Street Journal report that in a meeting with foundation staff members, Gates "acknowledged that he had two affairs with Russian women that Epstein later discovered, but that they didn't involve Epstein's victims." Buffett's assessment: "While it's distasteful, while he made mistakes, I made mistakes in hiring all kinds of people or choosing friends and then finding out later that they — that one way or another, they weren't what I thought they were. And so, I found nothing in there that that was beyond what I could see — I could picture myself doing." In March, Buffett said he had not talked with Gates "at all since the whole thing" with the Epstein files "was unveiled." That's no longer the case. Buffett told Becky that Gates came to Omaha within the last several weeks "and we spent three hours talking together" and "he intends to call me" to maintain contact. Buffett said that "at some point" he told Gates he is ending his annual donations before announcing the move this week and Gates is "OK" with the decision. "It's been a wonderful friendship." In a statement emailed to CNBC by a representative, Bill Gates said, "Warren is one of the greatest philanthropists of all time, and a dear friend. His wisdom, generosity, and deep sense of purpose have defined both his life and his philanthropy." Gates credits Buffett's "unprecedented support" with helping to save millions of lives. "My gratitude to Warren is immeasurable, and I cherish the time we spend together. I hope we have much more of it ahead." Why Buffett is picking up the pace of his stock donations At the same time, Buffett is shifting where his philanthropic donations will be directed, he is also speeding up the pace of those gifts. In his previous philanthropic plans, for both the Gates Foundation and the four family foundations, the number of shares donated each year decreased, although the value of the gifts usually was higher than the year before as the price of Berkshire's stock increased. Starting now, he is going to give away more shares each year so he can "dispose of all of my Berkshire shares within about eight years," in part because his children, who will be deciding what to do with the money, are "unfortunately growing older." Buffett does acknowledge his children have a tough job ahead of them: He also said having Greg Abel at the helm of Berkshire makes him feel comfortable about giving up his, and the family's, control of the company sooner rather than later and explained why the foundation named after his first wife will be getting more shares than the foundations run by his three children: Berkshire Hathaway shares initially fell on Tuesday's news that Buffett will be accelerating his sales but then recovered to end the week slightly lower. Buffett 'initiated' big Alphabet investment, with Abel's approval The biggest surprise in Tuesday's interview was Buffett's revelation he is responsible for Berkshire's big investment in Alphabet, Google's parent. After purchasing roughly $4.3 billion of shares in last year's third quarter and adding $11.5 billion in this year's first quarter, Berkshire invested another $10 billion in Alphabet by purchasing shares directly from the company as part of its larger plan to fund its AI ambitions. Given Buffett's long-standing practice of almost always avoiding tech stocks, many observers, including me, thought making Alphabet one of Berkshire biggest stock holdings was the result of new CEO Greg Abel flexing his investing muscles. Wrong, said Buffett: "I initiated it." He did go on to say, "I am not doing anything that [Abel] doesn't approve of. He's not doing anything I don't approve of. We talk all the time... but he is the decider." Even though Alphabet is "putting out huge amounts of money" on AI infrastructure and he doesn't "like [the stock] as well as at least four or five other businesses that we own," Buffett said, "I think they're more likely to be a winner, based on their record, than — than probably 90 percent or — or 95 percent of what gets merchandised through Wall Street, because Wall Street is just interested in whether they can sell something." Buffett again acknowledged in Tuesday's interview he made a "mistake" by not adding Alphabet to Berkshire's portfolio earlier. In a 2017 CNBC interview, Buffett admitted he should have known about Google's profit potential because Berkshire's GEICO had been buying a lot of advertising from the company. Buffett remains bullish on Apple Buffett is disappointed Tim Cook will be stepping down as the CEO of Apple, Berkshire's largest equity holding at $76 billion, but he's still happy with the stock. Warsh will 'do the best he can' as new Fed chairman Buffett thinks Kevin Warsh is a "good choice" to be the new Federal Reserve chairman, although he "can't be perfect at it, just like I know I couldn't be perfect at taking people's money and earning super returns on it." Still, "I think he will do the best he can at achieving the job he was assigned to do, which is 2% inflation and maintaining maximum employment." Buffett again sounds alarm on 'gambling' in financial markets Buffett is still worried there is too much "gambling" in financial markets. "It's tough to find values when everybody is preferring gambling," he said. "Since humans love to gamble so much, there's more money in — in actually cultivating gamblers than there are cultivating investors." 'I broke a leg' As the interview was ending, Becky asked Buffett how he was feeling that day. "I broke a leg ... a few weeks ago," he replied, without elaborating on exactly what happened. It is his first broken leg "in my life until now" so "I've been very lucky on that sort of thing." Berkshire buybacks are really back It appears Berkshire's relatively small, and publicly previewed, $234 million of share repurchases in the first quarter was not a one and done resumption after a two-year hiatus. Barron's estimates Berkshire bought between $5 billion to $11 billion of its shares in the second quarter. That's based on a rough calculation derived from Buffett's SEC filing this week on his foundation gifts that disclosed his 188,920 Class A shares, after the contributions, is 13.2% of all of Berkshire's outstanding shares. Barron's says the estimated buyback range is fairly large because it doesn't know yet exactly when the buybacks were made and because Buffett's ownership percentage is presented with just one decimal point. We'll get the exact number when Berkshire releases its Q2 earnings early next month. The complete 1-hour interview 1. 00:00 - Buffett on his decision to stop donations to Gates Foundation BECKY QUICK: Warren, first of all, thank you for sitting down and talking with us today. I appreciate it. WARREN BUFFETT: It's always good to sit down. (Laughs) BECKY QUICK: Yes, I find the same thing. The last time we sat down and spoke with you, or I guess it was two times ago in March when we sat down with you to talk about what you were doing with your charitable giving, you said that you were going to be watching and waiting, that you were kind of waiting to see what came out about Bill Gates and the Epstein files and what had happened. You said you hadn't determined what you were going to do. Today you put out a release saying that you will be increasing the amount of money that you give to the Susan Thomas Buffett Foundation, your three children's foundations, but there will be nothing given right now to the Gates Foundation. Is that your decision? WARREN BUFFETT: That's correct. That's correct. But — but in interpreting that, I would point out that I've read a great deal since January 1 in terms of what happened with Bill and Epstein, and I've read his remarks to Congress given under oath, and I've read cross examination, and while it's distasteful, while he made mistakes, I made mistakes in hiring all kinds of people or choosing friends, and then finding out later that they — that one way or another, they weren't what I thought they were. And so I found nothing in there that that was beyond what I could see — I could picture myself doing. And, you know, he ended it. And I've had situations where I made mistakes about people or people may have felt they made mistakes about me. But they — you know — life goes on and — and no one — no one bats 1.000 in the business of choosing people, BECKY QUICK: You're talking about hiring decisions, maybe who you're associating yourself with, and there were certainly some questionable decisions on that that came up in the release of these files, but there was also other, you know, personal information. WARREN BUFFETT: Yeah. No. He — which he admitted to. BECKY QUICK: Yeah. WARREN BUFFETT: Yeah. No. And there again, I would say that, you know, I would — I've known some pretty wonderful people, and I still know some wonderful people. I don't think they've made every decision correctly. BECKY QUICK: So why, if that's your opinion on it, why are you no longer giving money to the Gates Foundation? WARREN BUFFETT: Well, I reevaluated my whole situation. It's just like I've been doing since I was in my 20s, and we'd gotten married, Susie and I, and we didn't really have any money, but we did know that we intended to live fine, and we intended to have a family, and — but we did not have aspirations of, you know, having six houses or a 500-foot yacht or anything of the sort. So even then, we talked about what we would do philanthropically. But my idea, and conviction, was that I would compound money at a better rate than society generally, and that Susie would give it away better than 99.9 percent of the people that were giving it away, and she would get involved personally with the gifts, whereas I like to do things wholesale, and she liked to do things retail. So we had a plan, but we didn't have any money. And over time the money started to pile up, and she would say, "Are we rich yet?" And I would say, "No, but we're getting closer." But I was not in a hurry to do anything. We did some small things as we went along. I did it. I felt the most important threat to mankind was — was the — was the nuclear bomb. And so I had sort of grandiose plans in my mind about how I could change the probabilities of that happening, and I finally came to the conclusion, after decades, that I could not have a 100th, or 1,000th, of 1 percent chance of succeeding in that. And, you know, it's nice to bet on long shots, but betting on things that are essentially — BECKY QUICK: So you've changed your plans? WARREN BUFFETT: So I changed plans. BECKY QUICK: Why did you change your plans? WARREN BUFFETT: Well, we changed plans because of what I've set out here. The money began — the money began to pile up — BECKY QUICK: No, but you changed your — you changed your plan now. In 2024, you said it was a lifetime pledge to the Gates Foundation. Now in 2026, you are saying that's not the case. What happened? WARREN BUFFETT: Well, what happened was that I gave the Gates Foundation a great deal of money — BECKY QUICK: Maybe 47 billion dollars in total? WARREN BUFFETT: Yeah. And I had no — and I thought that was a good decision. I think it was a decent decision. But I did not think my kids were in any way ready to give away vast sums of money. We'd started — Susie and I started with them — I think we gave them — we may have given them a hundred thousand dollars each. BECKY QUICK: This goes back 30 years at this point, or longer? WARREN BUFFETT: That's about right. Yeah. But they were growing children. You know, they had children, you know, they had children of their own by that time. But still — they —they — I don't think they were ready for it. And I certainly wanted to treat them all equally. So that's always a problem — is — if they have unequal talents of something. Now, I can't turn them all into musicians, and I can't turn them all into baseball players or anything. But I really hoped in the charitable field that they would have common goals and be able to work out among themselves a way where, with vast amounts of money, that everybody felt there was plenty to do what they wanted to do. And I have the — BECKY QUICK: And you think that's the case today? WARREN BUFFETT: Pardon me? BECKY QUICK: You think that's the case today? WARREN BUFFETT: I feel the probabilities of that are extraordinarily high. And — now — is — could something happen to this plan? Of course. I mean, I've got three children that are 72 and 71, and look at my age. I mean, things can happen in this world that cause you to change — to change. But I have no expectation of changing. I mean, as far as I'm as concerned, we've reached the ideal point. We — we kicked. Well, Susie died in 2004, so it's been more me kicking up the amount they receive annually. And clearly, they feel happy with the job, too. I mean, there's no sense sticking people in a job that they — they aren't fit for, or that — where they differ totally from you and your views. I mean that — that — I had different views in life than my dad, who I admired more than anybody in the world, but it still didn't mean that I joined his church or, you know, did — did anything identically. And — and he encouraged that view. He would — he would quote to me Emerson, which — where Emerson said something to the effect that the force in you is new in nature. You know, he's saying, you know, you're one of a kind. Find out what that one is. And I think I found it very young by luck, circumstance, and pretty purposeful pursuit myself. My kids did not. They behaved like — like most kids. They — they flirted with a lot of different ideas. And — but I feel 100 percent now about what I have seen them do. My son Howard just published a 100 page or so report explaining what he's doing, why he's doing, what it's costing. BECKY QUICK: An annual report for the Howard Buffett Foundation? WARREN BUFFETT: Yeah. And it's better than I could write. He's — he — he has a sense of stewardship, and — and he also has enormous empathy for people he sees that don't have it as lucky as he has. BECKY QUICK: So then is it fair to say 20 years ago in 2006, when you made this decision, you trusted the Gates Foundation more than your children, and now you trust your children more than the Gates Foundation? WARREN BUFFETT: No, the amounts were different. It isn't to say that I trusted them differently, but I felt they were capable of handling — And I was certainly not going to turn something over to my kids and then pull it back from them. I mean, and — And the Gates Foundation has turned out to earn far more money than they expected to do. They spend more money than anybody in the world that I can think of. BECKY QUICK: Yeah. They have an endowment of — north of 90 billion dollars, I think it is. WARREN BUFFETT: It's around that figure, and Bill has very substantial resources outside, which he intends to give, and I believe — a hundred percent — I believe that they will go there. And I, you know — I've really done the same thing as Bill, in a certain sense. I'm — except I'm — when I put it in, I tell the three children that that it is theirs and it's their responsibility to get it done well. And — and you may find this hard to believe, but it's true. I've never looked at their Form 990s, which they file. I — I'm not judging each action as it takes place, because you take actions where you think there's only a 10 percent or 20 percent probability of success. It's not like investments. BECKY QUICK: But what are your goals for the money? And you kind of intimated that the kids have similar goals as to what you have. WARREN BUFFETT: There's — there are all kinds of ways in which the world is as unequal as you can possibly imagine. I mean, just imagine in health, or the luck of birth, or all of those sort of things. And the ultimate goal is to make life better for the people who get short straws. And there's a lot more people who get short straws than we'll ever be able to take care of, and — and my kids will have more insight into certain areas than I would. And I have more insight than — than they do just because of different interests and exposure. But the one thing I'm convinced of is that they will be attempting to do something, and they'll be better at it. And the probability is that they've got more years to live than I do. So, I mean, it really sneaks up on you when you get to be in the 70s or something like that. But I wouldn't — I can't think of a person in the world that — 30 or under, for example — I would trust to do it. I think there's all kinds of brilliant people that are 30 or under, and they may turn out to be leaders of society and — and terribly important writers, or whatever it may be. But I do think there's something to seeing how people behave under different circumstances. BECKY QUICK: The kids are going to come under pressure, and probably already have, from a long list of people who think that they should fund their ideas. I saw something today on X that Brad Gerstner put out suggesting that you give the money to Trump accounts, that there are other great things to do. What do you say to the lots and lots of people who will say this is where you should put that money, or what do you think they should say? WARREN BUFFETT: If you take 8 billion people in the world and feel that everybody should have an equal chance, I mean, you could — you could spend a thousand dollars or 10 thousand dollars, and you know, to solve everybody's problems. You're never going to solve everybody's problems. The idea of serving — solving a societal problem, which is what I started out as, with — with a nuclear weapon — I mean, everybody who worked on the nuclear weapon regretted the fact that they had to put together something like that. The most brilliant people in the world, but they never figured out how to put the [genie] back in the bottle. And, you know, that — that is not something that society in the first couple hundred million years of existence there — couple million — BECKY QUICK: Do any of those plans, though, like the Trump accounts, appeal to you? Do you think they appeal to the kids? Do you — or do you just leave it to the kids and say, you figure it out? WARREN BUFFETT: I leave it to the kids. But I do have this provision in my will, not in these gifts that I'm giving now, but in the — the bulk of my fortune is likely to be left upon my death, even though I'm stepping up the — BECKY QUICK: Yeah. I will say right now it's 140 billion dollars that you have left, based on yesterday's closing stock price, in terms of the Class A shares you have left. If — the money you gave out this year is 6 billion dollars. WARREN BUFFETT: Yeah. It'll have to go up. BECKY QUICK: Right, it's 17 and a half billion dollars, at least, annually, and that's assuming that Berkshire doesn't go from here — WARREN BUFFETT: Yeah — BECKY QUICK: — if you want this to be given out in eight years, as you've said. WARREN BUFFETT: — which is a terrible assumption, incidentally. I mean, that is not a realistic assumption. BECKY QUICK: To give 17 and a half billion dollars away, annually? WARREN BUFFETT: No. That — that an investment produces nothing. BECKY QUICK: Oh, correct. So — WARREN BUFFETT: I get about 5% Treasury bills, you know. BECKY QUICK: Right. How much did you have when you started making these donations in 2006? We were talking about less than a hundred billion dollars at that point, right? WARREN BUFFETT: Yeah. Yeah. BECKY QUICK: So you've given away 67 billion dollars, and now you have 140 billion dollars left to give as of today. WARREN BUFFETT: Which is the nature of compound interest. BECKY QUICK: Right. WARREN BUFFETT: That's one thing I understand. (Laughs) I may not understand all these other things, but —and — BECKY QUICK: But 17 and a half billion dollars, even if it weren't to go up, is more money than anybody is giving away right now. And the Gates Foundation gave away, what, 8 billion dollars last year? WARREN BUFFETT: Yeah, that's — that's about right. And — BECKY QUICK: That's a lot. WARREN BUFFETT: And they did it — they did it employing, you know, a few thousand people, which almost any foundation would, that had that kind of money. And — and I — I'm impressed by the fact that my kids really want to give the money away rather than do other things with it as they go along. So they — BECKY QUICK: You mean rather than spend it on themselves? WARREN BUFFETT: Yeah, or buildings or anything of the sort. Now, when they're — they'll need more help as they go along. But I — I think — I think the foundations employ something between — there's three of them now — BECKY QUICK: Four of them, with the STB (Susan Thompson Buffett) Foundation. WARREN BUFFETT: Well, with STB. Well, let's take the kids first, because there they make the total decision as to what they're doing. And they have between 11 and 25 employees, and — BECKY QUICK: Total? Between the three foundations? WARREN BUFFETT: No, each. BECKY QUICK: Each. OK. WARREN BUFFETT: Yeah. And — and they have expense ratios far below that of institutions that are much better known and — BECKY QUICK: Expense ratios closer to one percent or less? WARREN BUFFETT: What they've shown — they've shown — they've shown that they're not regarding it as play money. BECKY QUICK: Right. Right. Meaning that the bulk — almost everything they get goes back out the door. WARREN BUFFETT: Well, it really all goes out the door eventually, but — BECKY QUICK: Yeah. WARREN BUFFETT: But yeah — yeah. They — they're not going to build, you know, huge office buildings or hold conferences at esoteric places and all kinds of things. You know, there's nothing wrong with doing that. I mean — But the important thing is whether people that have, you know, a hundred times what they need and don't pass it along to somebody else for the next generation. And — and many parts of the world have been doing that for thousands of years. BECKY QUICK: Yeah, you're not a big fan of bureaucracy. Berkshire Hathaway was run here, in this office, with 25 people or something in the home office. WARREN BUFFETT: Twenty-five people. And we probably went up — we probably grew in size 10-for-one before we added the last two or three. BECKY QUICK: Uh huh. Before we move on, does — does Bill Gates know about this? When we spoke with you in March, you said you had not spoken with him since any of these allegations started coming out. He said the same thing last month in — in June when he sat down with this congressional testimony, that he had not spoken with you since January. Have you spoken with him since? And does this come as a surprise to him? WARREN BUFFETT: No — no, it does not come as a surprise. And — and B), he came by Omaha, I don't know, three weeks ago — or — I kind of lose track on time — but certainly not three months — but three — since we talked. And we spent three hours talking together, and — and — and he's — he — he intends to call me. He's the one that initiates calls, just generally. And — and as you can see, I'm available anytime. (Laughs) But — he's — he's much more organized than I am, and — but he already proposed another one, and — BECKY QUICK: Another meeting? WARREN BUFFETT: Yeah. And — and — he is — we have had an enormous number of good times together since we met — whenever it was — what was it, 1991? And he's always done more than his share of it — always more than his share. You don't see me doing the planning or doing — BECKY QUICK: In the friendship, you mean? WARREN BUFFETT: Yeah. It's — it's — it's been a wonderful friendship. And — and Bill and I are interested in enough things that overlap that we find plenty to talk about, and then each of us has got his own specialty to some extent. BECKY QUICK: But you told him three — three weeks ago or so when you met him that you would not be making any more donations to the Gates Foundation? WARREN BUFFETT: Yeah, I may have even — may have been even — I can't tell you exactly when I told him. But — but at some point, I had read the — I had read what Congress came up with. I'd read everything. And — and all I can say is, you know, I've — I don't know whether I've done dumper things, but I've done things that — I've just done many dumb things in life. I mean, that is — all I have to do is look at our portfolio. I mean, four out of five of our — at least four out of five of — of the decisions I've made have not been anything out of the ordinary. But — BECKY QUICK: But he was OK when you told him — WARREN BUFFETT: Yeah. BECKY QUICK: — that this was — OK. WARREN BUFFETT: Yeah. BECKY QUICK: So he's on board. None of this is news to him. WARREN BUFFETT: Yeah. Bill, unlike me, more or less, I think wants it to end when — when he dies. Then of course he doesn't know when he's — BECKY QUICK: His foundation? WARREN BUFFETT: The Gates Foundation. Whereas, I hope that my kids live a lot longer than — than I do, and I hope all three participate. And I think all three will be better off for doing it. But that — that's not a decision that was made — well, when Susie and I started giving them — I think we moved it up to, maybe, 30 million a year, and — BECKY QUICK: To the kids' foundations? WARREN BUFFETT: No, actually to — BECKY QUICK: Oh. WARREN BUFFETT: — to — but — to their foundations. I don't remember the exact figures at all. But we gave it to them when we were 99 percent sure that — that they — well, we knew they were willing and — and in some cases, in a certain way, eager, to do things for other people. They — they've had a good life. They haven't — they haven't — Well, they've followed that rule that somebody told me a long time ago, but — which I get credit for, but I didn't think of it myself — which is that if you're the child of some very rich family, that you should have enough — you should be given enough to do — to do — to do something, but not enough to do nothing. BECKY QUICK: Right. WARREN BUFFETT: And that's — that's exactly what's been going on at an increased scale, but — BECKY QUICK: Just to — WARREN BUFFETT: But I have to step it up now, because, you know, at my age, you know, the probabilities really get against me. So that the last will I wrote is — is very likely to be my final will. Whereas the wills that I was writing when I was 30 or 40 or 50, I knew they would change. BECKY QUICK: Right. Let's — let's talk about that. 2. 21:23 - Accelerating the pace of donations BECKY QUICK: The other thing that you're announcing in this is that you would like to see the money go out at an expedited — and the shares go out — at an expedited rate. To this point, it had kind of been 10 years after your death, you thought the shares would all be disbursed to charity. Now you're saying that you would like all of those shares to be disbursed eight years from now, by the end of 2034. WARREN BUFFETT: Yeah. BECKY QUICK: What — what changed your mind on that, and what does that mean? WARREN BUFFETT: Well, it certainly means that I had — I had two purposes in — in all the philanthropy, and — and in particular with all — essentially, a hundred percent of my money in — in Berkshire — You know, that's my painting, and — and I like the painting, I like the people associated with it, and it's been refined over time. You know, I've added an (inaudible) over here or something. (Laughs) And — and I don't think — I don't know of 10 people in the United States that I would trust to hand it over to. I don't know — BECKY QUICK: Your company? You're talking your company? WARREN BUFFETT: The company. BECKY QUICK: Right. WARREN BUFFETT: I don't know of five people, and I know a lot of people. And —