2007: Will gambling companies do well in the future?

AUDIENCE MEMBER: Hello, hello. My name is Johann Fortenberg (PH) from Hanover, Germany.

Do you think gambling companies will have a great future? Thank you.

WARREN BUFFETT: What kind of company?

CHARLIE MUNGER: Gambling companies.

WARREN BUFFETT: Gambling companies. Gambling companies will have a terrific future, if they’re legal.

You know, which ones or anything, I don’t know anything about that.

But the desire of people to gamble and to gamble in stocks, incidentally, too. Day trading, I would say, very often was — came very close to gambling as defined —.

But people like to gamble, you know. I mean, it’s a — if the Super Bowl is on — better yet, if a terribly boring football game is on but you don’t have anything to do, and you’re sitting there with somebody else, you’re probably going to enjoy the game more if you bet a few bucks on it one way or the other.

As you know, I mean, we insure hurricanes, so I watch the Weather Channel. But that’s a — (Laughter)

It can be exciting. (Laughter)

But people — the human propensity to gamble is huge. Now, when it was legalized only in — pretty much in Nevada — you had to go to some distance, or break some laws, to do any serious gambling.

But as the states learned to — you know, what a great source of revenue it was, they gradually made it easier and easier and easier for people to gamble.

And, believe me, the easier it’s made, the more people will gamble.

I mean, when I was — my children are here, and 40 years ago I bought a slot machine and I put it up on our third floor, and I could give me kids any allowance they wanted as long as it was in dimes. I mean, I had it all back by nightfall. (Laughter)

I thought it would be a good lesson for them. Now they weren’t going to Las Vegas to do it, but believe me when it was on the third floor, they could find it, you know.

And my payout ratio was terrible, too, but that’s the kind of father I was. (Laughter)

The — but gambling, you know, people are always going to want to do it.

And for that reason, I particularly think that access — you know, in terms of friendly gambling or anything like that, I’m not a prude about it, but I do think that to quite an extent, gambling is a tax on ignorance.

I mean, if you want to tax the ignorant, people who will do things with the odds against them, you know, you just put it in and guys like me don’t have to pay taxes.

I really don’t — I find that — I find it kind of socially revolting when a government preys on the weaknesses of its citizenry rather than acts to serve them. And, believe me, when a government — (Applause)

WARREN BUFFETT: When a government makes it easy for people to take their Social Security checks and start pulling handles or participating in lotteries or whatever it may be, it’s a pretty cynical act.

It works. It’s a pretty cynical act. And it relieves taxes on those, you know, who don’t fall for those or who don’t — who aren’t dreaming about having a car instead of actually having a car or dreaming about a color TV instead of having one.

So it’s not government at its best, and I think other things flow from that over time, too.

Charlie?

CHARLIE MUNGER: You know, I would argue that the gambling casinos use clever psychological tricks to cause people to hurt themselves.

There is undoubtedly a lot of harmless amusement in the casinos, but there’s also a lot of grievous injury that is deliberately caused by the casinos.

It’s a dirty business, and I don’t think you’ll find a casino soon in Berkshire Hathaway. (Applause)