Warren Buffett’s Warning: The Economy Is Becoming a Casino | Berkshire 2025

[Transcript]

BECKY QUICK: This question comes from Achie Patel (PH) and it’s about the big cap technology stocks. In the 2017 annual meeting, you said Warren, you really don’t need any money to run these companies and referred to them as ideal businesses, referring to the big tech companies – Apple, Alphabet, Microsoft, and Amazon. With all of those companies now announcing massive capital investment endeavors around AI ambitions, have you rethought the above comment just in terms of them being asset light and what you think of them as a result?

WARREN BUFFETT: Well, it’s always better to make a lot of money without putting up anything than it is to make a lot of money by putting up a lot of money. And so a business that takes no capital to speak of – Coca-Cola, the finished product which has gone through bottling companies and everything that takes a lot of capital, but in terms of selling the syrup or the concentrate that goes to it, it doesn't take a lot of capital.

So one is a fabulous business and one is a – you know, it depends where it is and everything like that. Coca-Cola is popular every place, but some places – I mean if you're in the bottling business, it costs real money. You have real trucks out there and you have all kinds of machinery, and you have capital expenditures coming up.

And you know, we've got businesses that take very little capital that make really high returns on capital. And the ones the politicians talk about as making high returns actually aren’t making high returns usually in terms of capital. Property casualty insurance is kind of a rare business because you need capital as a guarantee fund that you will keep your promises, but you can use it to buy other low intensive capital businesses.

I mean you can buy a whole – you can buy Apple and have it support that business. That can be a pretty good business and it’s one of the reasons we’ve done well over time. Well it’ll be interesting to see how much capital intensity. Certainly there's more capital intensity going on with the Magnificent 7 than they were a few years ago.

I mean, basically, Apple has not really needed any capital over the years and its repurchased shares that at dramatic amount of reduction. Whether that world is the same in the future or not is something. Hollywood’s answer was always to get their money from other people to put up the capital. (Laughs)

A lot of people have gotten very rich in the country by essentially figuring out how to get others to put up the capital. And that’s what people do in the money management business. And they get very, very rich because they get an override on other people’s capital.

Incidentally, if all of you were paying 1% for investment management fees at Berkshire last year, you would have paid $8 billion for managing, and you really wouldn’t have had to do it, but you know investment management is a very good game because other people put up the capital and you charge them for the capital, whether they do well or not. And then you can charge them a lot more if they do well.

I mean it’s a well-designed business for the people who practice it, and who can blame them, I mean, that is capitalism. I saw that in operation when I was working at Solomon, but I didn’t need to see it. I knew it existed anyway. The trick in life is to get somebody else’s capital, and get an override on it.

Charlie and I decided it wasn’t too elegant the business after a while, but we were not criticizing the efficacy of it. We were just – it just didn't appeal to us after a while. I did it for 12 years, though, or something.

The one difference that Charlie and I did from other people is we put all our own money into it. So we really did share the losses with our own capital, but we got an override on other people’s capital. People have made advances where they get the override on other people’s capital without putting up any of their own capital to speak of.

That’s a very good business, but it can lead to a lot of abuse. But originally, with the Rockefellers and Carnegies and all that, they actually put up money to build a steel mill, you know whatever it may have been, with Rockefellers' refineries and pipelines and all that sort of thing. They put up money to do it. Now, the trick is to use other people’s money, basically.

And you know you can’t blame human beings for behaving like humans, but you should be aware of what their motivations are. Capitalism in the United States has succeeded like nothing you’ve ever seen. But what it is is a combination of this magnificent cathedral which has produced an economy like nothing the world’s ever seen, and then it’s got this massive casino attached.

So you got the cathedral and the casino. And in the casino, everybody’s having a good time and there’s lots of money changing hands and everything, but the cathedral is what you’ve got to make sure cathedral gets fed too. Because the temptation – and the temptation is very high now, is to go over to the casino where people say you know we’ve got magic boxes and all kinds of things that'll do wonderful things for you.

And that's where people are happiest, that's where you get the most promised to you, that's where the most money is for the people that are pushing things. And you know, the balance between the capital at the casino and the cathedral are – it's very important that the United States in the next hundred years make sure that the cathedral is not overtaken by the casino.

Because people really like to go to casinos – (Laughs) – it’s just so much more fun. And they bring bells when you win, you know they bring you drinks and everything else. It’s designed to move money from one pocket to another.

And in the cathedrals, they are basically designing things that will be producing goods and services for 300 and some million people, like it’s never been done before in history. It’s an interesting system we developed, but it’s worked.

It dispenses rewards in what seems like a terribly capricious manner. I mean the idea that people get what they deserve in life – it’s hard to make that argument. But if you argue with it that any other system were seems to work better, the answer is we haven’t found one.

So we’ll leave it to the next generation to send me the answer by Ouija board or whatever works. (Laughter)

Source: https://buffett.cnbc.com/2025-berkshire-hathaway-annual-meeting/

 

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