AUDIENCE MEMBER 00:08
Good afternoon, gentlemen. My name is Zeke Turner, and currently finishing up my senior year at Taylor University in Indiana. So four more weeks, and I’m out of there. (Buffett laughs)
As someone studying finance, I do appreciate your comments as to the teaching of investment in academia. It certainly has some development it can make there. I do say that with hope that very few grad school admissions officers are listening right now.
But I do want to say a special thank you quickly, if I could, to all those professors who do have the intelligence and the guts to actually teach value investing on that level and go away from efficient market theories. I do kind of wish Benjamin Graham were still teaching.
Many questions have been asked as far as technology and its development into the business model. I think the greatest effect of this will probably be in the globalization of the economy. This has had, and will continue to have, a significant impact on the business model as we know it today.
Now, except for certain growth opportunities, this may have a smaller effect on companies such as See’s Candy or Nebraska Furniture Mart, but has had and probably will continue to have a dramatic effect on companies like Gillette, Coke, who have significant international presence.
My question is, how does your approach change, if at all, in light of the international expansion?
I’m particularly interested in the introduction of greater difficulty in understanding the business models, in the understanding of the economic future and the economic risk associated with the international scene. In addition, do you actively search for a global scene for investment opportunities?
WARREN BUFFETT 01:38
Yeah. The answer is that we obviously like businesses that are good businesses at present volume and that have the chances to expand significantly with similar economics.
And with any business that’s been around the United States a long time, there’s probably more opportunity, potentially anyway, around the rest of the world than here.
And Coke has grown faster. Oh, it’s grown well here. But it’s grown faster around the world than here. And that’s been true at Gillette, also, just because we were a more mature market.
So we love the idea of products that will travel. Some travel well. Some don’t. I mean, it’s an incredible world that way.
Candy bars don’t seem to travel so well, you know. Soft drinks travel terrifically. And razor blades travel terrifically. But the Cadbury bars sell in England. And, you know, and the Hershey bars sell here. And it’s very hard, with some items, to try —
In fact, within this country, it’s amazing to me. We talk about having a mobile society. And people are moving all the time. And we’re all watching the same television and everything else.
And the supermarket share of Dr. Pepper in Dallas is 18 and a fraction percent. And in Boston, it’s six-tenths of one percent. I mean, 18 to 0.6, 30 times the market share.
Dr. Pepper’s been around forever. You know, people move back and forth and everything. And how can you have that sort of a differential in this country?
Royal Crown Cola, 3 percent in Chicago, one-tenth of a percent, you know, maybe, in Detroit, a couple hundred miles away, same kind of people, all that sort of thing. And Royal Crown’s been around for 75 years or whatever it may be, 50 years, at least.
And you get these incredible differences in what people do, even within this country. So it’s not easy to predict how — if you can’t predict how Dr. Pepper — if you can’t figure out how to make Dr. —
If I owned Dr. Pepper and was selling 18 percent of the market in the supermarkets of Dallas, it would drive me crazy, you know, I was getting six-tenths of a percent in Boston. Or, I think it’s five-tenths, maybe, in Detroit. That would drive me crazy, although maybe I should just be grateful that I’ve got 18 percent in Dallas.
It just — it’s very hard to predict how products will travel. With See’s Candy, you know, we have this incredible penetration in the West and particularly in California. We know it’s the best candy.
Now, boxed chocolates just do not sell big in this country. The annual consumption is low. But it still seems that, if we can make a lot of money in California, we ought to be able to make some money in New York or Pennsylvania.
But we haven’t figure out how to do it. And we’ve tried a lot of things.
So, the answer is we’re always interested in geographical expansion, whether it’s even in the United States or, going beyond that, into other countries.
It’s not as easy as it looks. But when the chance to do it comes, then you ought to just pound and pound and pound.
And we occasionally have bought stocks in other countries. I wrote a fellow the other day that I read about in Germany about his business. I’ve never met him or anything else. But it sounded like he had a pretty good business. And it sounded like he might be my type of guy.
So I just wrote him a letter. Haven’t heard back, either. But I may. The odds are against it. But it sounded to me like I’d buy his business, if he chose to write back and wanted to do something.
And we’re very willing to do business, you know, in any country in the world, where we think we understand the nuances of the corporate governance system and taxation and that sort of thing.
We don’t understand all 200 countries, by a long shot. But there’s plenty we’d love to be in business in.
We looked at a very significant company in Japan a couple years ago. And some other fellow I know bought it and has done very well. It would’ve made sense for us. And we missed it.
We will continue to look at things, internationally. It makes a lot of sense. And we’ve got a lot of capital to employ.
We’re more likely, by some margin, to find things here. But we may find a big one outside of this country.
CHARLIE MUNGER 06:01
Nothing to add.
WARREN BUFFETT 06:04
OK. Number 1.
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Every geographical areas is different.