Bill Gates and Warren Buffett: Keeping America Great

I recently DVR'd the CNBC show Bill Gates and Warren Buffett: Keeping America Great. The show has the two titans of capitalism sitting down with a crowd of Columbia students for a back and forth discussion on 'keeping America great.' It was a great glimpse into a casual discussion between these two business geniuses and a group of driven young business students parched for knowledge. The show exposed me a bit more to Bill Gates, especially in a relaxed setting. And it reaffirmed my admiration for the simplistic character based wisdom of Warren Buffett. I love the reality driven optimism of both of these guys and seeing as they are at the world's forefront in both business and philanthropy there is definitely much to be learned as a business leader and more importantly as a human being living a life of excellence. There were plenty of great questions and great responses from these two icons. I have provided some paraphrased enlightenment from the show but I highly suggest you tune in and watch the entire thing. It is well worth your time.

Was there ever a doubt about this country?
Buffett: I put my money in when we were looking into the abyss.
Gates: This country still has the best schools the best opportunities for entrepreneurs.

Do you think bad ethical business practices are the cause of the financial crisis?
Buffett: It was one of the causes but we have always had greed and we will never get rid of it. We still have a system in place that allows for a quality of opportunity that is unparalleled. Our economy is sputtering but we still have the best engine in the world.
Gates: I was a huge beneficiary of this country's willingness to place a large amount of risk and responsibility on a young person. Other countries are trying to replicate that and it is good for the world.

Mr. Gates can you tell me what you thought when Lehman went under?
Gates: I don't really follow investment banks very closely. I called Warren and asked if I should be worried? He said a little bit.
Buffett:The dominoes were fully lined up and it wasn't realized how close the Lehman domino was to the next one. However I give credit to how the government officials handled the crisis overall.

Many of the villains of this industry were in fact business school graduates. What responsibility do you think the universities like Columbia should hold?
Gates: Remember that capitalism has been enormously successful. Standard of life, medicine, etc. Business schools pay a role in developing the skills necessary to move forward.
Buffett: The best place to learn ethics is in the home. Most of us learn what we know about ethics well before we step in a classroom. It is important to emphasize them but if I had to choose between learning them in the home or the classroom I would take the home. The thing is you can succeed marvelously with ethics. It is not a hindrance at all. Look everyone here has a bright future. Look at the last two centuries. Our country doesn't avoid problems it just solves them.

What industry do you think is going to produce the next Bill Gates because that is the industry I want to get into?
Gates: Information has been the most exciting as far as what has happened. Energy and medicine also has the opportunity to rival information.
Buffett: Find what turns you on and what you have a passion for. If I would have known that Bill's industry was the next big thing I don't think I would have done too well at it. I had a teacher Benjamin Graham that I offered to work for free for and he said I was overpriced but I went that direction and had a passion for it and here I am. You will do well in whatever turns you on.

CNBC took a poll of the attendees and asked if in their lifetime they would ever see a company as transformative as Microsoft and 92% said yes. Bill do you share that belief?
Gates: Yes. Capitalism is great. You have thousands of things going on in parallel and most fail, some are mediocre, but the ones that are truly special can grow and stun everybody.

There have been a of rumors regarding your investment in Burlington Northern. Can you share the real reasons for your exposure to the railroad sector at this time?
Buffett: When I was six I wanted a railroad set and my dad didn't get it for me. Railroads are a necessity within this country. You will have more people and they will be moving more and more within this country in the next 30 years. It is the most environmentally and most cost effective way of doing that. One train will supplant 200 trucks on the road. They will play a big role in the future.

We just went through hopefully the worst financial crises of our lifetime. It has kept a lot of people up at night worrying about their future. What if anything keeps you up at night?
Buffett: I try to live my life so that nothing keeps me up at night. Last fall was really quite exciting for me. There were opportunities available that weren't the year prior. This country was going to do fine no matter what.
Gates: The financial system fortunately has a lot of self correction in it. I think there are a few things that could shake us in the future. One being a large scale terrorist attack and the other a widespread pandemic. You have to keep your eye out for a few outliers like that. I worry about our education not improving as much as it should.

The recent run up in the market has been historic with many people questioning the sustainability. Do you think the rally is for real?
Buffett: What's going to happen tomorrow huh? I bought my first stock in 1942.. Do you know when the best calendar year was since then? It was 1954 of the heels of a recession. But the point is it doesn't matter. It doesn't matter what the market does next week. What matters is whether you are buying a good stock for the money or not. Have the right long term outlook and the right evaluation of the company you are buying and a bad market is your friend. I don't care whether next week, next month or even next year does well.

What are your thoughts on Apple and the job Steve Jobs has done as the CEO of Apple? (Awkward laugh from audience and an almost pissed off smirk from Gates)
Gates: He has done a fantastic job. They are in a bit of different business but he has done well. He brought in a team and inspired them to revive a company. It is great to have competitors and of all the leaders in the industry he has proven most inspirational and he saved a company to bring them back at an incredible rate.

What is the one thing your MBA didn't prepare you for when you got into the real world?
Buffett: It prepared me very well. I was lucky that I knew what I wanted to do. I had two professors that really inspired me so that really propelled me into a field that I already loved. Right now I would pay $100,000 for 10% of the future earnings of any of you so if anyone wants to see me after. If that is true you are a million dollar asset right now. You can improve upon that by working on your communication skills. If you can improve it by 50% its another $500,000 in terms of capital value and see me after class here and i will pay you $150,000.

Mr. Gates you obviously worked very hard to get where you are. Can you share what role pure luck played in your success?
Gates: I was lucky in many ways. Lucky to be born with certain skills lucky to have parents that created an environment that was good for me and I was lucky in terms of timing. The microprocessor invention impacted me incredibly at a young age. Lucky to meet the people I have met.

You have an interesting relationship. What do you both admire most about each other?
Buffett: He admires my athletic ability. What I most admire about Bill is the view he has of what to do with the money he has amassed. As he said he was born in the right country, at the right time, with the right wiring and he was very lucky to be where he is. But in the end he knows he is the beneficiary of a tremendous society and not everyone has that opportunity. He values every human life as much as the next and he is backing it up not only with money but with his time and his wife is backing it up as well. They are going to spend the second half of their lives improving the lives of the 6 and a half billion people of the world and that is what I admire most about him.
Gates: Well with Warren there is a lot you can pick. His integrity is an example to the world, his humor. But I think I would have to pick his ability to teach. He has the ability to take things that are very complex and make them so simple so that everyone has the benefit of the experiences and work that he has put in. He loves to teach and its a real gift that I admire incredibly.

R. Glenn Hubbard the Dean of Columbia business school had the opportunity to present the question that he was most excited to ask. Warren you have said that you never know who is swimming naked until the tide goes out. That says something for knowing when the tide is going to go out but it also says something about knowing context. How do we develop and encourage business leaders who understand context and can connect the dots?
Buffett: I think they have learned alot of that in the last year and some just never learn. I think that what I learned from Ben Graham is that having sounds principles takes you through everything. They take you through the good and the bad and in the end I don't worry about it.

Has your investment philosophy on buy and hold or any of the actual processes of how you invest been impacted by the recent crisis?
Buffett: No it hasn't. We like products like this (holds up coke bottle) how is that for shameless promotion? This started in 1886 and gone through all these events and in the end there are billions of servings of coke next year and more the year after that. I own fruit of the loom too but I am not going to do a product promotion of that!

How would you recommend that an individual investor who follows the Graham and Dodd philosophy allocate their capital today?
Buffett: Well it depends on whether they are active or a passive investor. If you are going to spend a lot of time on investing then look at as many things as possible and you will find some bargains. You have to look for yourself. The world isn't going to tell you about great deals you need to find them yourself and that takes a fair amount of time. If you are not going to do that then I just advise an index fund invested consistently over time. Cash is the worst investment. Cash is not king. Find a good business and stick with it. We always keep enough cash around so I feel comfortable and can sleep at night but it is not because I like cash as an investment. Cash is a bad investment over time but you always want to have enough so that nobody can determine your future.

I actually work at Goldman Sachs so thank you for your investment.
Buffett: Well why aren't you at work?
I would like both your opinions on the development of alternative energy for getting our economy back on track?
Gates: There will be many that are dead ends. But as a nation we want to make sure that we have an environment that encourages all of them because one will eventually lead to much cheaper and better energy. There is quite a bit of R&D but not as much as I would like to see. But it is one of these areas that is emphatic by nature. There is a lot of money going in and the return on investment as a whole is actually quite low much like cars and computers etc. You get these kind of bubbles so you will have to be a bit careful to make sure that it is one that has its cost structure in line and not just pushed along by subsidies. So its a good area but not necessarily one that is great for investment.

If America was a stock would you buy it?
Gates: You bet
Buffett: On Margin!

Most Powerful Women Entrepreneurs

In partnership with American Express, Fortune searched the U.S. for outstanding female business builders. Fortune honored these game-changers at its recent Most Powerful Women Summit. From Lauren Bush to environmental innovators, here are the winners.

I love these entrepreneur lists. Fortune has compiled one for powerful women entrepreneurs and some of the stories of their successes are pretty impressive. In a recent book I read by Peter Drucker called Innovation and Entrepreneurship one of the things that really resonated with me was a statement regarding the greatest praise an entrepreneur can receive. The book said something along the lines of the greatest praise an innovator can receive is “This is obvious. Why didn’t I think of that?” It resonated with me because that is how I know a good idea when I hear about it. That feeling is so consistent when i come across great ideas, so it was great to have Drucker package it into such a digestible concept for innovation judgement. The two ideas from the list that struck that chord within me were the Sheex idea and the solar panel idea. I have included an excerpt of each below. Check out all the stories, they are definitely worth the time.

Sheex:

When they were coaching women's basketball at the University of South Carolina, Walvius and Marciniak came up with the idea to apply performance-fabric technology -- the technology that wicks moisture in Nike athletic apparel -- to bedsheets.

Crazy? Not so. Walvius and Marciniak got R&D help from the university's business school and raised $1 million for their "performance bedding" start-up. In May of last year, they quit their coaching jobs. They lined up manufacturing in California soon after, and launched Sheex.com this past April. This month, they cut a deal to sell in the NBA's flagship store in Manhattan.

Their marketing strategy is grassroots and viral, with Twitter and Facebook promos by pro athletes like the New York Giants' Steve Smith and the LPGA's Christina Kim.

Being hard-charging athletes themselves, Walvius and Marciniak are naturally inclined to race for a win. But the best advice they got? "Crawl, walk and then run," says Walvius. In business, as in coaching, she adds, "You're either getting better or you're getting worse with each day. There's no such thing as staying the same." --P.S.

SunRun Inc:

Many environmentally-minded folks like the idea of installing solar panels on their home, but find it's just too expensive.

Enter SunRun, a start-up that pays for the panels and installation; homeowners then buy solar power from SunRun at an average savings of 10% to 15% versus their current energy bill.

Jurich and her business partner started SunRun in 1997 while attending Stanford Business School. But Jurich didn't get a lot of encouragement from her classmates. "That's one of the problems of business school, is that people love to shoot down ideas, they love to say 'that's not going to work,' " she explains. But even with a job in venture capital finance waiting for her at graduation, Jurich took the entrepreneurial route.

SunRun has since raised $30 million from Accel Partners and Foundation Capital, and this week secured $90 million in tax-equity financing from U.S. Bancorp, following an earlier commitment of $105 million in project financing.

Jurich's idea also earned her a ticket to the White House: In early December, she attended a roundtable with President Obama to discuss renewable energy and ways to expand solar adoption in 2010. Her hope is that the U.S. replaces half of the $150 billion annual residential electricity market with solar power over the next two years. --J.S.

Checking For Charity Corporation - A Journey In The Formation Of A Movement

Yesterday the paperwork went through for the formation of my first company. Oddly with all my posts about personal finance and business, my first venture is a non profit. I never really planned to have my first company be a non profit but it just kind of worked out that way and I am excited to see how it goes. Combine learning about business with a great cause and I couldn't be any more excited to make this journey a success. For all you BadskiBlog readers I plan to update you on the successes and struggles associated with the formation and creation of the Checking For Charity movement.

Since I moved to New Jersey I have played men's league hockey. Having finished a Division I college hockey career just prior to the move, I was looking for something to fill the void. About the time I arrived something interesting was beginning to form amongst the hockey has beens (and never was') in our area. A Sunday skate rental began to grow into very tight knit group of guys that formed their own little hockey community; a tribe if you will. After skates we would all hang out and drink a few barley pops and barbecue. A powerful network was formed.

I don't know how it happened but I came up with the idea of putting on a hockey tournament. I thought I could start a business surrounding something I was familiar with, hockey. I could learn something and maybe make a few bucks in the process. Then I thought it would be cool to donate some of the profits to charity. As I started messing around with the numbers I realized that the profit margins of a typical hockey tournament aren't the greatest, especially if you aren't the owner of the ice, and a small percentage of the profits would also be quite a small monetary portion as well. Well why not make it where we donate all the money to charity?

I started tooling around with the idea of how we could get creative with a charity tournament and thought that each team could declare a charity that they were going to play for. Each team would receive money for their charity and all teams would have the opportunity to win more of a percentage based on how they finished in tournament play. I thought it was a pretty cool idea that would add some competition to a good cause. I also thought it would incentivize each team to hit the donation push. Team's would be more likely to tell their friends, coworkers, and neighborhood businesses to donate to a tournament in which they have a vested interest; their cause. To be honest I just didn't want to be the only one out their drumming up donations for the tournament pot. I felt that this was the easiest way to get everyone involved. I brought it up to a few friends and they thought it was a cool idea so I mentioned it to the Sunday hockey guys. That is when things really started to get interesting. Guys started volunteering to help out. People started soliciting ideas to make the tournament better. People basically appointed themselves to the tournament committee. The whole idea just started to take off. It truly was and continues to be a pleasure to be surrounded with people who are willing to step up and create something special. We are only in the beginning stages but already professionals such as lawyers, bankers, and everything in between are offering their services for free just to be a part of this idea.

Not only is the volunteer base growing, but the scope of possibility surrounding what Checking For Charity is all about it growing. It went from being some little tournament to something bigger, something that feels a little bit more exciting. I think that it is turning into a movement, and I really hope that I am right. I think this is the story of a bunch of guys who feel lucky and blessed enough to live a life where they can play the game they love, drink some beers, and hang out with good dudes. The story of normal people who want to create something larger than themselves. I don't want to give away all the surprises on the first Checking For Charity update, but my gut tells me that this thing is brewing and it may well turn into something worth talking about. If you feel the same forward this post, digg this article, spread the word.

Badski's Consumer Report - Toms Shoes

Badski's Consumer Report - Today I watched a show I DVR'd about two months ago called The Entrepreneurs. The show airs on CNBC and features two cool entrepreneurs each in a short half hour segment. I have seen it before but when I watched it today there was one brand that caught my attention. That brand is Toms shoes.

Toms shoes has a simple mantra; one for one. For every pair of shoes that is purchased the company donates a pair of shoes to a child in need of shoes. This socially conscious business model is something I have become very interested in lately. The concept is very appealing to me. The business raises money for charity that wouldn't have been raised otherwise and they are rewarded with business and profit from people who are seeking a simple way to make a difference. To me this is the way of business in the future. It almost serves as a competitive advantage to give some of your money to a worthy cause as there is a certain buzz around your product or service that traditional companies just don't have. I think the younger generations embrace this concept more so than previous generations and I look forward to hopefully creating a socially conscious for profit of my own some day (I am currently working on my first non profit).

In 2006 an American traveler, Blake Mycoskie, befriended children in Argentina and found they had no shoes to protect their feet. Wanting to help, he created a company that would match every pair of shoes sold with a pair given to a child in need. One for One. Blake returned to Argentina with a group of family, friends and staff later that year with 10,000 pairs of shoes made possible by caring TOMS customers.

Since our beginning, TOMS has given over 140,000* pairs of shoes to children in need through the One for One model. Because of your support, TOMS plans to give over 300,000 pairs of shoes to children in need around the world in 2009.

Our ongoing community events and Shoe Drop Tours allow TOMS supporters and enthusiasts to be part of our One for One movement. Join us.

Mycoskie explained in the feature I watched how they use very little advertising to further their brand. They rely heavily on their story to spread and through celebrity endorsements. Having read a few Seth Godin books lately (see Personal MBA Updates), I can tell that Mycoskie gets it. He is a proven entrepreneur and with Toms he is a living how to guide for the new era of business. He has created a tribe, a movement to spread his story. Yeah his shoes are cool and they are based on the native shoe design of the very people he started out helping in Argentina, but people can get shoes anywhere. He has created a movement, even calling it such on their website. Their shoe drop tours allow consumers to help deliver shoes to needy kids. Not only do they deliver they shoes, every shoe is placed on the feet of those children. That is commitment to a cause; that is a movement. He has laid out a vision for the future, taken the lead, and empowered others to spread the word. What the company does not spend in advertising allows them to carry out their one for one mantra and still remain profitable. Their story is remarkable and therefore it will spread. Mycoskie gets it. Still don't believe me? Check out the video below and you will see why this isn't a shoe company, but a movement.

Although this isn't the typical Badski Consumer Report, I felt I had to showcase an excellent business model that is the embodiment of many of the lessons I have been reading about lately in my personal education quest. I plan to purchase my first pair of Toms in the next week or so, but even more powerful than purchasing shoes is spreading the word about a great idea. Hopefully my soon to be unveiled non profit venture can emulate some of what the Toms movement has created. Hopefully our story will create a movement.