Bill Gates, Warren Buffett on surviving the fin crisis

Quick: What do you think, Gates?

Gates: Well, we have a complex financial system which we have proven that we can make mistakes. But more fundamental than that is the innovation, the fact that you can create new companies, that people are willing to take risk and invest, that there's great science going on. This country still has the best universities, the best science, and we are going to tune our system of capitalism, you know. The idea that you have a lot of short-term loans covering long-term needs, the amount of leverage that was there, there are definitely some lessons. But the fundamentals of the system, a marketplace-driven system where we invest in education and a great infrastructure for the long-term, that's continued. And, you know, I will bet there are some inventions that took place in that fall in the darkest hour: People were working on new drugs, new chips, new robots and things to make life better for everyone in the decades ahead.

Quick: All right. Tonight is all about the students and why don't we start out and get right to it. Why don't you start out. You ready to go?

Q: We are honoured to have you here at the university. My question for you is directed to both of you, Gates and Buffett. I would like to know your perspective on whether greed and immoral behaviour, unethical behaviour, were key causes of the recent financial crisis.

Buffett: You went out toward the end, Quick.

Quick: Just wondering whether greed and corruption were behind what happened.

Buffett: It certainly played a part.  We have always had greed. That didn't get invented in the last few years. And greed, fear in the third quarter -- I mean, the American people were really panicked there for a while. And it affected their -- it started out on Wall Street but then spilled over into the general economy subsequently. But we are never going to get rid of greed. We are never going to get rid of fear. What we do have is a system, as Bill said, a market system where we have the quality of opportunity and the rule of law combined to unleash human potential in this country over the last couple of hundred years to the degree nobody would have believed possible a few centuries before that. There's nothing that's gone wrong with that system. Our economy was sputtering and still is sputtering some. But we have got the greatest engine ever devised. And it's just beginning. Greed will continue. Don't worry about that. Oliver Stone is putting out a second film here pretty soon. Probably get mentioned again in this one with Gordon Gekko making a return. But that is not what drives the American system. What drives the American system is the quality of opportunity in a market system and the knowledge that when you get out of here, you are going to enjoy the fruits of the knowledge you have gained. And it will keep working. I would love to trade places with any of you.

Quick: Gates, do you have any extra thoughts on that?

Gates: Well, the best systems are ones where you have good short-term metrics, great accounting, looking at profits, looking at risk and willing to do things long-term. Investing in new research, letting people build new companies. I was a huge beneficiary of this country's unique willingness to take risk on a young person. And, you know, I got to hire people who were older. I got to sell to people who were older. And it was kind of a dream come true. And that kind of thing is -- other countries have seen it and they are trying to create that same dynamic. And that's good for the world. It's excellent that China and India will borrow our ideas about universities, about entrepreneurship, simplification of business. None of us want to borrow this extreme leverage that we got into. But in a sense, that's kind of a -- I don't want to say minor, but it doesn't speak to the heart of why things have worked so well.

Quick: All right. Let's get to another question. How about right here?

Q: Hello. My name is Accosia Bagima. I am from the Northern Virginia area and I am a first-year student here at Columbia. And I want to thank, once again, both of you for coming. It's an honor. My question is directed toward Gates. Gates, I know you are not in the finance industry, but can you tell us what you were feeling when you first heard that Lehman was filing for bankruptcy?

Gates: I don't follow investment banks, you know, very closely. So it didn't strike me as fundamentally a terrible thing. In the technology business, the two companies I admired the most, Wang Industries and Digital Equipment, had both basically gone bankrupt. Digital actually got bought. And so the fact that there is these ups and downs, certain firms get knocked out, I didn't have any sentimentality over that particular firm. Now, this knock-on effect where other people had debts to them and those were going to be very hard to settle and that complexity might cause things to freeze up, that I called up Buffett and I said, "Should I be worried?"  And he said, "A little bit."

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