Berkshire Hathaway 2009 Annual Meeting Audience Question # 2

There’s a problem with financial literacy with our current generation

Warren Buffett:

OK, we’ll go to zone 1.

Audience Member:

Hi. My name’s Scott Slaybee. I’m from Denver, Colorado.

First off, I’d like to thank Mr. Buffett and Mr. Munger for having us out here today. I appreciate you bringing us out here so thank you very much.

Warren Buffett:

And thank you.

Audience Member:

And it’s great that you answer our questions.

I’m a former teacher. Or I’m a teacher. I shouldn’t say former. Being a former teacher yourself, I see a problem with financial literacy with our future generations.

And I’m curious what you think future generations should know and if there’s anything that needs to be in school curriculums to teach younger people financial literacy as we move forward?

Warren Buffett:

Yeah. I think there’s a problem with financial literacy with our current generation.

There’s a… Andy Heyward, who has helped us with the cartoon, has a… will have a… he sold his company last year, but he has a new company.

And he will have a program coming out that works on that question. And that I play a very small part in.

ABC has a program coming up with a number of well-known personalities in it that will deal with the question of financial literacy.

And it’s, you know, it is a tough sell in a world of credit cards and, you know, a world that depends on calculators rather than people sitting down and doing actual arithmetic and all of that, to teach people. But in the end, I think we make progress over time.

I mean, I hope our annual reports contribute to that sort of thing.

But you’re going to have people doing very foolish things with money.

I remember on my honeymoon. I was 21 and my wife was 19. And we drove west. I’d never been west. And we went through Las Vegas. And it was 1952. And we stopped at the Flamingo. And people were better dressed in the casinos then.

And there were a bunch of Omaha fellows that actually owned part of the Flamingo at that time, terribly nice to us.

But I looked around at that casino and I saw all kinds of well-dressed people who had traveled thousands of miles to do something very dumb. And I thought this is a country where you’re going to get very rich.

If people are going to get on a plane in New York and fly a couple thousand miles to stand there and do things with a mathematical expectation that’s negative on every action they take, that is a world of opportunity. So…

I, you know, I recommend that you and… you work with your students. I started teaching at the University of Omaha, you know, when I was 21. And you work with your students to make them literate. And they will have a terrific advantage.

Charlie?

Charlie Munger:

Well, a world where legalized gambling is now conducted by a great many states in the form of lotteries where people are encouraged to bet against the odds and a world where we have a vast overuse of high-cost credit card debt, it needs a lot more financial literacy. I would argue… literacy.

I think we’ve been going in the wrong direction. So I don’t think you can teach people high finance who can’t use a credit card… intelligently.

Warren Buffett:

Yeah. If you’re… I talk to students about that. If you’re willing to pay 18 or 21 percent on a credit card…

And the credit cards companies need it, incidentally, currently, because you have losses running close to 10 percent. So with expenses, they may need that.

But there’s no way that you’re going to financially come out borrowing money at those kind of rates. And I wouldn’t know how to do it. And it’s too bad. On the other hand, it’s probably good for our business.

I mean, one of… you know… we are looking for things that are mispriced. And the more people think that borrowing money on credit cards is intelligent, they probably will not think that doing long-term equity put contracts is intelligent. And we’ll go our way and they’ll go their way.

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