If somebody bought Berkshire Hathaway in 1965 and they held it, they made a great investment — and their broker would have starved to death."
Warren E Buffett was sitting across from me over lunch at a private club in Midtown Manhattan last week, lamenting the current state of Wall Street, which promotes a trading culture over an investing culture and offers incentives for brokers and traders to generate fees and fast profits.
"The emphasis on trading has increased. Just look at the turnover in all of the stocks," he said, adding with a smile: "Sales people have forever gotten paid by selling people something. Generally, you pay a doctor for how often he gets you to change prescriptions."
Buffett, 82, is famous for investing in companies that he sees as solid operations and essential to the economy, like railroads, utilities and financial companies, and holds his stakes for the long run. The argument that the markets are better off today because of the enormous amount of liquidity in the stock market, a function of quick flipping and electronic trading, is a fallacy, he said.
"You can't buy 10% of the farmland in Nebraska in three years if you set out to do it," he said. Yet, he pointed out, he was able to buy the equivalent of 10% of IBM in six to eight months as a result of the market's liquidity. "The idea that people look at their holdings in such a way that that kind of volume exists means that to a great extent, it's a casino game," he said. Of course, unlike many investors, he plans to hold his stake in IBM for years.
Buffett was in a reminiscing mood about a bygone era, in part because he was in New York to make the rounds on television to discuss a new book chronicling his 61-year career, which began in 1951 at Buffett-Falk & Company in Omaha.
The book, Tap Dancing to Work, by a longtime journalist and good friend of his, Carol Loomis of Fortune magazine, is a compendium of articles that she and others wrote in Fortune that creates a series of narratives spanning the arc of his career.
Loomis, who first met Buffett in 1967 — and whose long career is a story unto itself — also came to our lunch. Loomis may know more about Buffett than he knows about himself.
As we talked about the "good old days" —