2010: How much of our current prosperity is due to oil?

AUDIENCE MEMBER: Mike McCoy (PH) from San Francisco.

Chairman Buffett, you frequently speak favorably about the prosperity of future generations, that our children and our children’s children will live better than us.

How much of our current prosperity do you attribute to us being able to get oil out of the ground at a fraction of the cost of its value to us in the economy?

And how will we be able to live better in the future when we can no longer get more and more of this free lunch and we become dependent on more dilute sources like solar and wind?

Couldn’t this turn out like trying to satisfy a drug addict with a Coca-Cola?

WARREN BUFFETT: The oil business — obviously, the discovery of oil — what was it, about 1850- something? Colonel Drake at Titusville, Pennsylvania, or something?

That changed the world in a very major way, and it was only 150 years ago.

And since then we’ve been sticking straws into the earth at an incredible pace. There’s over 500,000 producing wells in the United States, would you believe that? I mean, 11 barrels, 10 barrels a day average or something of the sort.

We have really exploited what may have taken, I don’t know, whether it was hundreds of thousands of years or millions of years to create.

It’s contributed in a huge way to the prosperity of the world, but the world, in my view, will not be dependent upon that particular — call it “windfall” — for the next hundred years.

And Charlie knows way more about this subject than I do, but there will be other free lunches available. You know, whether it’s solar or — there’s lots of possibilities.

Don’t ever give up on humans’ ability to innovate in ways that create solutions to problems that seem insolvable.

We’ve faced all kinds of predictions. You know, all of the inventions having been invented — there’s some famous statement, I forget who made, on that.

We haven’t really started. I mean, if you could pick a time in history when you would want to be born — leaving out the nuclear, chemical and biological threat, which is something to leave out — but I would pick today. The world has a bright future.

Now, Charlie will give you the other side of that. (Laughter)

CHARLIE MUNGER: No. I think you’re failing to recognize something really important. In the technology of 150 years ago, they really needed the oil to get ahead.

In our advanced civilization, which has benefited from this last 150 years of technological expertise, we can get ahead without the oil if we have to.

Now, Freeman Dyson is a physicist who is not an economist but a genius, and he’s been very good at pointing out that it isn’t that horrible to contemplate a world which goes off oil, provided that world is as rich and knowledgeable as ours is now.

So the fact that they couldn’t have got to where we are now without the oil starting 150 years ago, does not mean we can’t do without the oil if we have to.

We need the oil and the gas, and the coal, eventually, for chemical feed stocks more than we need it for keeping warm and propelling our vehicles.

WARREN BUFFETT: And the adjustment, fortunately, will be fairly gradual. I mean, it isn’t like 85 million barrels in the day goes to 50 million or something in five or 10 years. So it’s a workable period of adjustment, in my view.

CHARLIE MUNGER: If it doesn’t bother Freeman Dyson, who knows more about it, I don’t think it should bother you too much. (Laughter)

WARREN BUFFETT: He’s always pulling that on me. (Laughter)