AUDIENCE MEMBER 00:00
Good afternoon. Scott Jeffords (PH) from Davidson, North Carolina.
The major pharmaceutical companies have faced a myriad of fundamental and legal challenges in recent years.
With that in mind, and given the apparent ongoing nature of those obstacles, how should investors be thinking about the long-term prospects for this very important industry?
WARREN BUFFETT 00:24
Well, my answer is, I don’t know. But maybe Charlie will. And it’s — you know, it’s a terrific question.
It’s just that — that industry is in a state of flux now. It does very important things for mankind. It’s historically earned good returns — very good returns — on invested capital.
But it’s going — it could well be that the world will unfold differently for those companies in the future than the past. It may — that may not be the case.
And I’m — I don’t think I’m really qualified to give you a good answer on that because much of it is in the political realm. And my judgment about the — what politicians will do is probably not better than yours.
CHARLIE MUNGER 01:14
I share Warren’s agnosticism on the subject. We just throw some decisions into the “too hard” pile and go on to others. (Laughter)
WARREN BUFFETT 01:28
Incidentally, there’s a lot of wisdom in that remark. I mean, there are things in life that you don’t have to make a decision on and that are too hard.
And many years ago on one of the reports, I said one of the interesting things about investment is that there’s no degree of difficulty factor.
I mean, if you’re going to go diving in the Olympics and try to win a gold medal, you get paid more, in effect, for certain kinds of dives than others because they’re more difficult. And they properly adjust for that factor.
But in terms of investing, there is no degree of difficulty. If something is staring you right in the face and the easiest decision in the world, the payoff, can be huge. And we get paid, not for jumping over 7-foot bars, but for stepping over 1-foot bars.
And the biggest thing we have to do is decide which ones are the 1-foot bars and which ones are the 7-foot bars so when we go to step we don’t bump into the bar. And that is something that I think we’re reasonably good at.
Now maybe we cast out too many things as being too hard and thereby narrow our universe. But I’d rather have the narrow — the universe be a little too — interpret it as being a little too — a little smaller than it really is, than being interpreted as larger than it is.
CHARLIE MUNGER 02:54
WARREN BUFFETT 02:56
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