Berkshire Hathaway 2006 Annual Meeting Audience Question # 24

Teaching in finance departments has improved “quite a bit over 20 years ago”

Warren Buffett:

Number 9?

Audience Member:

Hi, Warren. Hi, Charlie. My name is Jeremy Cleaver, and I come from Lawrence, Kansas. I’m a Jayhawk.

And what do believe is the best finance program in the U.S.?

Also, I will be graduating in a year. Could you compare and contrast the financing opportunities now and when you graduated college?

Warren Buffett:

He comes from a school that has set some classes up in the last couple years that are absolutely terrific.

I’ve had… I will have in this school year, probably close to 40 schools where the students come out. And now I usually double up schools, because 20 of these a year is about all I can handle.

And we’ve had some terrific groups come out. And I would say that the teaching in finance departments, based on what I’ve seen, has improved quite a bit over 20 years ago. But that was from a very, very low base.

The orthodoxy of 20 or so years ago where, really, you know, the flat Earth was being embraced, has improved considerably.

And one particular place is KU. Professor Hirschey has done a great job.

Missouri, Florida, Columbia, a lot of good schools… Stanford… have got people in those departments that are doing a very good job.

And 25 years ago, you’d have had a tough job getting a position at a finance department, and you certainly would have had your advancement stifled, unless you went along with the orthodoxy: efficient markets and modern portfolio theory and a lot of stuff that, not only wouldn’t do you any good, but might get you in trouble.

And that has… that’s improved a lot. And I enjoy seeing these groups of students as they come out, because it’s quite encouraging. Now, they all think they’re going to get rich by, sort of, copying what Charlie and I did many, many years ago. I wish them well.

It’s… the amount of brain power going into money management gets a little distressing, particularly to Charlie. But I would… you know, it’s a great time to be 22 or 23 or 25 and getting out of school.

So, you can look ahead to a very… I think a very interesting future in this country, even though you may find that the method of using the talents you have in investing get used in a somewhat different manner than where they… where they’re used presently.

I mean, right now an awful lot of the students that come to visit Omaha say private equity or hedge fund, and it’s hard to imagine a world where everybody is running a hedge fund. I’m not sure exactly what we would do for food and clothing, and a few things like that.

But I am encouraged by the kind of students I meet. When the KU group comes up… we had a great time. They put on various skits. They tried to sell me companies. I’m hoping they succeed.

We haven’t had any luck yet, but they keep coming up with good ideas, and I’ll keep pursuing them. And one of these days, every one of those students will get… I’ve offered them two B shares, and that’s a limited-time offer to try to spur extra activity.

And I hear from a lot of students later, and I think a lot of them have their heads screwed on right. Charlie?

Charlie Munger:

Well, I’ve heard that something like half of the business school graduates in the elite eastern schools want to go into private equity or hedge funds.

And those whom I bump into seem to judge their progress in life as to whether or not they’re keeping up with their age cohort at Goldman Sachs. That appears to be the minimum standard by which progress of life is measured, and this can’t possibly end well.

Warren Buffett:

You can see why they come…

Charlie Munger:

… in terms of satisfying all these expectations.

Warren Buffett:

That’s why they come to see me instead of Charlie.

He’d give them better advice, don’t misunderstand me, but go away with very long faces.

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