2018: If Buffett only managed $1 billion, what would he do different?

AUDIENCE MEMBER: Hi, good morning, Mr. Buffett and Mr. Munger. My name is Stephie Yu from Horizon Insights, a China-focused research firm based in Shanghai. So I have a lot of mutual fund clients in China, who are very young — relatively younger — and they manage a smaller portion of funds.

So my question is, if you only have $1 billion in your portfolio today, how would you change your investments? Would you consider more investment opportunities in emerging markets such as China? Thank you.

WARREN BUFFETT: Yeah. I would say, if I were working with a billion, I would probably find — within a $30 trillion market in the United States, where I understood things better, generally, than I do around the world — I’d probably find opportunities there that would be better, incidentally, by some margin, than what we can find for hundreds of billions.

But I wouldn’t — there’s no way I’d rule out emerging markets. There was a time, 15 years ago or so, when just because it was kind of interesting and it took me back to my youth, I — on the weekend, I went through a directory of Korean stocks. And I bought — and these were small stocks — well, they weren’t small by standards of either Korean or American business. They were big, big companies.

But I found 15 or 20 in — that were statistically cheap and bought some of each one myself.

And there are opportunities with smaller amounts of money to do things that we just can’t do. And — but I — my first inclination always would be to comb through things in the United States. And —

But I’ve combed through — in other countries. I probably wouldn’t get into very, very small markets because there can be a lot of difficulties even in market execution and taxation, (inaudible).

You can find — if you can’t find it, you know, in America and China and Britain and a few other places — (laughs) — you probably aren’t going to find it someplace else. You may think you’ve found it. But that may be — it may be a different game than you know. Our problem is size, not geography.

Charlie?

CHARLIE MUNGER: Well, I already have more stocks in China than you do, as a percentage, so I’m with the young lady. (Laughter)

WARREN BUFFETT: OK. Well, you can — you want to name names? Do these stocks have names? Or — (Laughs)

CHARLIE MUNGER: No, I don’t. (Buffett laughs)

WARREN BUFFETT: Carol?

CAROL LOOMIS: This question is —

WARREN BUFFETT: I should just add one thing. You will find plenty of opportunities in China. Charlie would say you’ve got a better hunting ground than even a person with similar capital in the United States. Would you agree with —?

CHARLIE MUNGER: Yes, I do.

WARREN BUFFETT: Yeah, yeah. So — and in the sense they’re — it’s logical that should be the case because it’s a younger market, but still a large market. So that —

Markets probably work toward efficiency as they age. Japan had this very strange situation with warrants being priced out of line and all of that 30 years ago. And people notice after a while and it disappears. But there can be — some very strange things happen in markets as they develop. I think you’d agree with that, Charlie, wouldn’t you?

CHARLIE MUNGER: Absolutely.

WARREN BUFFETT: Yeah.