Warren Watch: Buffett urges better behavior in business

What the world needs, Warren Buffett says, is good behavior, and the trick on Wall Street is to make good behavior worthwhile.

“Too many people have walked away from the troubles they have created for society,” Buffett said about Wall Street executives who contributed to the past year's financial breakdowns. “And they've walked away rich.”

He talked with Cathy Baron Tamraz, president and CEO of Business Wire, a division of Berkshire Hathaway Inc., the Omaha investment company Buffett heads.

The two attended Fortune magazine's recent meeting on successful women in San Diego. Business Wire posted a video of the discussion on PYMNTS.com, a new Business Wire Web site aimed at the payments industry.

Tamraz asked about what many view as excessive salaries and bonuses paid to executives of financial firms. Buffett said Congress could take steps to improve the system.

“Wall Street will always be about trying to make a lot of money,” he said. “It raises lots of money ... and some people get paid very well for it.”

But the pay system needs “sticks” in addition to “carrots,” he said. “It can't be a one-way street. … You have to put in something that is downside to people who really mess up large institutions. We need some new help with that.

“There's got to be incentives not only to get rich but to behave well.”

Regarding the economy, Buffett said he expects consumer spending to recover but not quickly.

“I think people had an experience a year ago that they're not going to get over quickly.”

In the long run, the American economy works because business gives consumers what they want.

“You can push them around for a week or a month … but you either figure out what's in your customer's mind, and decide they're right and you're wrong and you're going to serve them, or you're not going to be in business.”

Buffett said business can work its way out of the weak economy by “just taking care of the customer. We're not going to run out of customers in this country. … In the end, nobody who's ever taken care of the customer has ever lost.”

In discussing the payment industry, Buffett said he was an early investor in American Express and watched the card industry grow from its infancy.

In the 1950s, Diner's Club had a jump on American Express, he said, but its card looked cheap while American Express charged a higher fee and created a dignified card with the image of a “centurion” who looked like “Mr. Integrity.”

“They actually took over the field by establishing themselves not as a low-price competitor but as the class competitor. It was a great, great marketing arrangement.”

Times article

One year after Buffett wrote an article in the New York Times saying he was buying American stocks despite the stock market's slide, the Standard & Poor's index of 500 stocks was up 15.6 percent.

Berkshire Hathaway's stock price was down 11.1 percent between Oct. 17, 2008, when the article appeared, and one year later.

The article had been criticized as being premature because stock values kept falling through March 2009. But the past several months' rally has regained those losses, although the market remains below its record peak of 14,164.53.

The S&P 500 set its record of 1,565.15 on Oct. 9, 2007, and closed Friday at 1,079.60, down 13.31. Berkshire set a record of $149,200 per share Dec. 10, 2007, and closed Friday at $100,600, down 600.

Mentor's daughter

The dedication of a new school library in Newtown, Pa., had tender and funny moments as Buffett shared time with the Barbara Dodd Anderson, the daughter of his mentor from nearly 60 years ago, David L. Dodd.

Anderson donated $5 million toward the new library at George School, a Quaker boarding school she attended from age 13 through high school. Her father enrolled her there after her mother, his wife, became seriously ill. She told the Philadelphia Inquirer and Times of Trenton, N.J., that she found a second family there among the teachers and students.

In an interview before the dedication ceremony, Anderson, 77, briefly lost her train of thought and then said cheerfully, “Dementia stinks.”

She spoke charmingly in the interview and during the dedication ceremony, where Buffett stood by holding her hand.

Beaming at Buffett, she said: “I, too, have been fortunate in knowing Warren. He's a wise and talented man. I loved him, but someone else beat me to him.”

The audience laughed, and she said she was pleased with the library and with her decision to donate to the school while she still could see the results.

She named the library after her granddaughter, Mollie, 12, an avid reader.

Mollie said: “It's kind of weird. I was kind of like ‘What? There's a building named after me?' ”

For his part, Buffett reminisced about the influence of David Dodd and his book, “Security Analysis,” when Buffett went to Columbia University to study business. Later, Dodd invested in Berkshire, which led to his daughter's wealth and to her donations to George School, totaling more than $135 million.

Buffett said Dodd treated him like a son.

“He taught me about stocks, but he also taught me a lot about life. I not only got an education in the classroom, but I was getting a real education on the influence one person can have on another.”

As for donating money, Buffett said: “If you do it just right, you'll have your last check bounce.”

He said he read every book on investing and finance at the Omaha Public Library by the time he was 11.

“I wasn't good at athletics, girls weren't into me, so there I was in the library.”

Conrad Teitell

Buffett called Conrad Teitell by his first name probably 20 times in the few minutes they talked before testifying at a U.S. Senate hearing on estate taxes in 2007.

Teitell, a Connecticut attorney and estate planning consultant who was giving seminars in Oklahoma, told the Daily Oklahoman that Buffett started every sentence with “Conrad.”

“Then I read his biography,” Teitell said. “One of few things that he has hanging on his wall was a certificate he received from going to a Dale Carnegie course. Then of course it clicked in: Dale Carnegie said always use a person's name because that is the most beautiful word in the language.”

“He's a very interesting man,” Teitell said. “He has no airs whatsoever. If you didn't know he was Warren Buffett, you would have thought he was a very nice man you met at the Rotary Club.”

General Re

The State of Connecticut is loaning General Reinsurance Corp., a division of Berkshire, $9 million to keep its headquarters and more than 900 jobs in Stamford rather than moving to Westchester County, N.Y., the Hartford Business Journal reported.

Gov. M. Jodi Rell said the state bond commission is expected to approve the deal at a meeting Friday.

General Re, which has been in Connecticut since 1974, is moving to a new 300,000-square-foot office, and the money will go toward fixtures and equipment.

“We were not going to lose those dependable jobs and their (insurance and financial services) expertise without a fight,” Rell said.

Bloomberg News reported that the 20-year, 2 percent loan requires General Re to keep an average of 820 workers in Stamford through 2013.

Berkshire's auto insurance company, Geico Corp., is to receive about $1.5 million over five years in New York State tax credits as the company opens a new site and hires 300 people in Amherst.

NetJets dealings

NetJets, the fractional aircraft ownership division of Berkshire, may be in for some more changes, the Financial Times reported, following last August's replacement of its founder and CEO, Richard Santulli, with Omahan David Sokol.

Santulli may have left because he didn't want to make the deep cuts necessitated by the economic downturn, which caused a glut of business jets and a sharp decline in private jet travel.

Sokol cut more than 300 NetJet jobs, about 5 percent, and replaced its European operations chief with P. Eric Connor, a longtime executive of MidAmerican Energy Holdings, the Berkshire division of which Sokol is chairman.

NetJets may forge stronger ties with Marquis Jet, which sells cards good for blocks of 25 flight hours. The arrangement would give NetJets greater flexibility in the slow-recovering business jet industry, the financial newspaper said.

Contact the writer:

444-1080, steve.jordon@owh.com

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