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Quest Means Business

Trump Says He Wants 100 Percent Tariff On Foreign Movies; New Tariff Threat Add Uncertainty As Fed Prepares To Meet; CNN Goes Through Disputed Territory In Kashmir; Donald Trump Officials To Reopen Notorious Alcatraz Prison; Berkshire Hathaway Shares Fall After Warren Buffett Announces He Will Retire At Year's End. Aired 4-4:45p ET

Aired May 05, 2025 - 16:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[16:00:10]

RICHARD QUEST, CNN INTERNATIONAL HOST, "QUEST MEANS BUSINESS": Closing bell ringing on Wall Street. You and I start a new week together. The market has

been up. You'll see the closing bell. There we go. Let's have a hammer. One, two, three.

That's a sort of a tepid hammer to bring closing. Oh, well, it has been a tepid sort of day, tepid sort of start to the week. Those are the markets

and these are the main events of the day.

Hollywood rattled by President Trump's plan to put tariffs on movies that are produced overseas.

One of the largest U.S. sneaker brands, Skechers is going private in the midst of the trade war.

And what Warren Buffett's own letters tell us about his legacy. You'll hear from him on this program.

Live tonight, we are in New York, of course. It is Monday, May the 5th. I am Richard Quest, and I mean business.

Tonight, a blockbuster announcement from the Trump administration potentially coming to a theater near you.

(BEGIN VIDEO CLIP)

DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES OF AMERICA: Indonesia, Malaysia, Cambodia. Oh, look at Cambodia. 97 percent.

They said if that tariff isn't removed by tomorrow at 12:00, we are putting a 50 percent tariff on above the tariffs that we put on.

(END VIDEO CLIP)

QUEST: Tariffs on foreign movies. The White House clarified a short time ago: No final decisions has been made. The President had written he wants a

hundred percent tariff on movies produced abroad.

Hollywood has been struggling to stay ahead of the competition shooting in Los Angeles for more than 20 percent in Q1, compared to the same period

last year. The film office says that number has little to do with this year's wildfires.

More productions are moving to places with tax incentives and cheap labor. Hungary, for example, offers a tax rebate of 30 percent.

And now Budapest attracts movies like "Dune" and "The Brutalist." The President said Hollywood has paid the price.

(BEGIN VIDEO CLIP)

TRUMP: Hollywood doesn't do very much of that business. They have the nice sign and everything is good, but they don't do very much. A lot of it has

been taken to other countries, so we are going to meet with the industry. I want to make sure they're happy with it because we are all about jobs.

That's all what I am -- you know, it is very important. It is a big industry, but it is an industry now that's really left-- it has abandoned

the USA, where it started.

(END VIDEO CLIP)

QUEST: That's not strictly true, Brian Stelter, is it? I mean, there is still a great deal of production in the U.S. It is just not necessarily in

California, which is a very high base, but on this Hollywood, on this idea of overseas. How would it work? How do you tariff a movie?

Do you tariff the ticket sales? Tell me, tell me, sir.

BRIAN STELTER, CNN CHIEF MEDIA ANALYST: You just asked the hardest question in politics and media. You asked about some random Trump idea that came out

of nowhere and you said, how is it going to work?

I mean, this is what all of Hollywood wants to know. This is what people are asking me and I am just the reporter. You've got studio chiefs, you've

got agency heads, you've got financiers and lawyers all wondering today, how in the heck would this work? And they are all wondering, is this just a

half-baked idea from the American President? Has anyone at the White House thought this through? Is this going to go away, or is this going to be a

lasting issue that entertainment companies have to deal with?

After the strikes, after the fires, after all of the bad hands that Hollywood has been dealt, is this the next problem? And Richard, we don't

know. We don't know if this is going to be an idea that's going to stick around or not.

QUEST: Well, you could tariff the ticket sales from those movies. You could put an extra tax on the revenues that the studios would make from those

movies. I mean, there are ways -- none of this is easy by any means, is it? I mean, it is a minefield.

STELTER: No. And normally we talk about tariffs, we are talking about tariffs on goods. Films are intellectual property. They are a service. So

this is a whole new world of tariffs potentially.

And why is Trump just talking about movies? Some of the most interesting media out there these days are streaming T.V. shows. You know, shows are

the new movies, right?

When I watched "Adolescence" on Netflix series, it was made in the U.K. Is Netflix going to pay to import that show to the U.S.? I don't think so.

Now, obviously stocks from Netflix and Disney and all the rest did decline today. There is a lot of uncertainty about this, including among investors,

but there are so many unknowns to this.

[16:05:10]

I spoke with some studio chiefs today who think this might just go away, it might just fade away because it is so almost impossible to imagine. But we

know that Donald Trump, when he gets an idea in his head, does sometimes try to pursue it. So maybe he is going to try to put a levy on specific

movies that are only entirely made internationally.

But then what happens if a movie starts in California? It is made in Hungary, and then its post-production is back in California? Those are the

kinds of unknowns we just don't have answers to.

QUEST: There is a difference, though, isn't there, in terms of different countries doing this. If you take -- and maybe because I am British, I will

sort of fly the flag.

I mean, movies have been made in the U.K. since pretty much the whole thing started. And the vast whether its Shepperton, Elstree, Pinewood, the new

Sky Studios, there is a vast industry and same in Vancouver where there are deep, long standing roots and skills bases in those places.

STELTER: Yes, yes. Look, I had one of these executives say to me today, is he just mad about Canada? Is this about Canada? I had another executive

say, is he just trolling us because we didn't vote for him? You know, there are all of these questions about whether this is a form of retribution in

some fashion. To hear Trump say it, he wants to have producers and production teams working again in California.

There are a lot of below the line crew members from the hairdressers, you know, to the special effects artists who are out of work these days because

so many productions have left California. That's partly a state issue involving Gavin Newsom, the Governor, and Trump has been critical of

Newsom.

There is this effort to bring production back to California, but what Trump is talking about is a stick-based approach. What you hear studios want are

carrots. They want tax incentives. They want a federal film tax incentive. Maybe that's the kind of direction this conversation will move in, more of

a carrot, less of a stick -- Richard.

QUEST: That's a fascinating idea. Get the tax breaks back in the other way.

Brian, good to see you, sir. Brian Stelter talking to us.

Now, the suggestion of new tariffs adds further uncertainty as the Fed prepares to meet this week. The Chair, Jerome Powell, told Raghuram Rajan A

few weeks ago it is unclear how the Trump administration's new policies will affect the economy.

(BEGIN VIDEO CLIP)

JEROME POWELL, U.S. FEDERAL RESERVE CHAIRMAN: These are very fundamental changes, long held in some cases, policies in the United States, and there

is not any real experience.

I mean, the Smoot-Hawley tariffs were actually not this large and they were 95 years ago. So there isn't a modern experience of how to think about

this. And businesses and households are saying in surveys that they are experiencing incredibly high uncertainty.

(END VIDEO CLIP)

QUEST: Raghuram Rajan is the former Governor of the Reserve Bank of India, Professor of Finance at University of Chicago's Booth School.

Good to see you as always, sir. Great to see you.

Do you get the feeling that the Fed knows what needs to be done and is just dreading having to do it? In a sense that until it sees what -- I mean, but

it knows that if there is inflation, they can't cut and it is just going to have to deal with as the Chair said, whichever is the more pressing crisis

on the dual mandate.

RAGHURAM RAJAN, FORMER GOVERNOR OF RESERVE BANK OF INDIA: Absolutely. I don't know if it is dreading and if it knows, but it certainly understands

that it may be in great difficulty because on the one hand, you're likely to see growth fall off because of all the uncertainty, because households

are pulling back, especially at the lower end.

And on the other hand, the direct effect of tariffs is companies pass them on to consumers to some extent. And so you have higher prices. So does it

deal with higher prices and inflation or does it deal with lower growth?

QUEST: Which would you deal with? You're a central banker or former central banker. Which would you deal with?

RAJAN: Almost surely, I will wait until I see a significant fall in growth, and that's part of the problem that if the Fed attacks the inflation --

attacks the growth problem when it is not significant, it risks reigniting growth.

You see, part of the problem is that when you raise tariffs, you create snafus in the supply chain. For example, right now we are not importing

anything from China into the United States and a bunch of parts aren't coming in. So those supply chains are snagged.

You need this to play out and you don't do it by cutting interest rates too sharply and elevating demand and ensuring the inflation persists.

So you have to play it a little carefully, wait till growth slows down, and then cut interest rates so that you can revive the economy at that point.

[16:10:10]

QUEST: When we saw the Fed increase rates to squeeze out inflation, many of us, myself certainly included, thought, oh come on, you can't have eight

rate hikes in such a short period of time and not have a recession of sorts. Well, I was wrong as others were, because the resilience and the

productivity gains in the U.S. economy took us all to some extent by surprise. Is it likely that that resilience and A.I. productivity gains

could prevent the economy going into a deeper recession against the headwinds of current tariffs?

RAJAN: Well, yes, it is too early for AIA to come in, in a large measure. But you're certainly right that the resilience of the economy (AUDIO GAP)

beginning of the year was on the verge of bringing the economy down into a soft landing. Certainly, as the Fed contemplates the future, it is going to

wonder what it is missing. That's what you heard Chair Powell say at the beginning of our conversation.

And so what they are going to do is watch and wait. Maybe the economy is resilient and continues and it doesn't need the additional medicine of

lower rates. Maybe it falls off a cliff, in which case the Fed can then come to the rescue knowing that it is not going to trigger more inflation.

So, it is a wait and see.

And unfortunately, right now, the pressure from the administration is for the Fed to cut rates, which means if the economy tanks, the Fed will be a

little bit of a scapegoat.

QUEST: The headwinds of tariffs, never mind what comes next, never mind what exemptions there might be, just as you and I are talking now, there is

145 percent on China, so there is no business. You've got 20 and 25 percent on auto parts, steel, and aluminum.

Youve got a general tariff rate of 10 percent, which is three times the previous average. That is a formidable headwind for the U.S. economy to be

sailing into and it is happening while you and I are talking.

RAJAN: It is. It is a huge headwind because average tariffs have gone up from three to 23. But if it was just that, you could pay it. The problem is

some critical parts are at 145, and as a result you're not buying any more of them. And this is why to my mind, the administration cares very much

that there is a deal sooner rather than later.

I think they've put out feelers to the Chinese. The Chinese aren't accepting anything right now. There is going to be a situation where both

leaders sort of hold their breath to see who gives in first.

QUEST: One final question, I just want to put to you this -- today, we had Emmanuel Macron and Ursula von der Leyen talking about education, and the

comment was made again and again -- the short sightedness of canceling grants on science, canceling grants on research. As somebody who has been

on both sides of this, this is the long term seed corn of the next few generations of Americans' advancement, isn't it? This investment in

research, education, we won't see the effect of that for 20 or 30 years arguably.

RAJAN: Well, I mean, you could do some forms of education which bite sooner. You put the finger on the nail here. The real problem coming

towards us is service jobs, not manufacturing jobs. Service jobs, which are going to be taken up by A.I. And for people to actually deal with it to

preserve their jobs, some reskilling, some upskilling may be necessary.

And for that, we need research, we need education, we need skilling and that's very different from the -- you know, important priorities of this

administration so far.

QUEST: I am grateful to see you, sir. Thank you very much indeed. I look forward to talking more again in the future. Thank you.

Skechers, the shoe brand of comfort, arguably, is going private in a deal worth more than $9 billion. The shares were up more than 20 percent on the

announcement.

Skechers has been around for 30 years. You'll remember the early days when the brand originally targeted children.

(SKECHERS ADVERTISEMENT VIDEO CLIP PLAYS.)

QUEST: Now, more recently, California based companies changed tack, appealing to a wider demographics. There were celebrity endorsements that

have helped to get along with it.

(SKECHERS ADVERTISEMENT VIDEO CLIP PLAYS.)

QUEST: Oh, I could do with a bit of that.

It comes as the tariffs hang over the industry. All of the shoes Skechers sell in the U.S. are made overseas, 40 percent or so from China.

Vanessa is with me.

So going private is an interesting one, isn't it? Why private?

[16:15:10]

VANESSA YURKEVICH, CNN BUSINESS AND POLITICS CORRESPONDENT: Certainly and it is certainly an interesting point to be going private right now.

Analysts suggest that the reason that Skechers, really a family-owned brand, decided to go private is because of the trade war with -- especially

with China, as you mentioned, 99 percent of footwear that is consumed here in the United States, made abroad and Skechers in particular, just such a

high percentage of shoes made in China.

So you have 3G Capital buying Skechers for $9.4 billion. The company actually shares have fallen over the course of the beginning of this year

by 30 percent. The company never really recovering because of the fact that investors know that they're going to be hit hard by this trade war, because

as you were talking with your previous guest, there is 145 percent tariff on any shoe coming out of China right now.

Go ahead -- Richard.

QUEST: Yes, but how does going private help it? Because I mean, other than it doesn't -- it not at the whim of the market's brutality in terms of

share prices, arguably a P.E., private equity or a private investor will just sort of ride it out because at the end of the day, they are still --

they are still in the same trading selling environment.

So what does going private help?

YURKEVICH: Yes, I think it is just a little bit more certainty in a time of uncertainty. As you said, they are not going to be at the whim of the

market, but the problem still exists as you said.

It is not like going private is going to change the business model per se. But this is a company, Richard, that still has strong standing in the

United States, 3,500 stores worldwide, the third biggest shoemaker in the country right now.

But ultimately, as you said, Skechers wrote this letter along with Adidas and really big brands out there sending it to the administration, asking

for them to be exempt from this 145 tariff rate tariff on China just because of the damage it was going to do to their business. So I think part

of it is trying to create a little bit of certainty by being bought, by being privatized, and at the same time trying to work behind-the-scenes to

get them off of this high tariff list, essentially hoping, praying that these tariff rates will soon come down and turn around business a little

bit.

QUEST: I guess, footwear is not as sexy as electronics, and when it comes to actually getting off the tariffs list. I am grateful for you, Vanessa.

Thank you.

YURKEVICH: Thanks.

QUEST: Relations between Pakistan and India are in a nosedive. In a moment, the tensions are escalating over the deadly attack in Kashmir. And to do

this story or to tell you this story, we are going to take you to the forest in the Pakistani administered Kashmir.

(COMMERCIAL BREAK)

[16:20:25]

QUEST: Pakistan has carried out its second missile test in three days as tensions with neighboring India are continuing to simmer. Pakistan's

missile test from Saturday, that's what you were looking at a moment ago on the screen.

Now, relations have suffered greatly since gunmen killed 26 people in the Indian Kashmir last month. India has accused Pakistan of being involved.

This is something that Islamabad is denying roundly.

The countries have shut their land borders, suspended trade, closed airspace to each other's airlines.

CNN's Nic Robertson reports.

(BEGIN VIDEOTAPE)

NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR (voice over): High in the Himalayas, Pakistan's Army is taking us deep into disputed Kashmir,

toward the line of control, the de facto border with India, and one of the most militarized conflicts in the world.

Tensions between the two nuclear armed neighbors rising since a terror attack killed 26 civilians, mostly Indian almost two weeks ago.

Militaries on both sides readying for possible escalation as India blamed Pakistan and Pakistan denied responsibility.

It is a war of words. Civilians on both sides of these rugged mountains fear not for the first time, will be victims of events way beyond their

sway, control of the towering peaks unresolved for 75 years.

ROBERTSON (on camera): Just driving through the mountains here, it is easy to understand why Kashmir is still a disputed area, so hard to find a

decisive war in this rugged terrain.

ROBERTSON (voice over): The other thing you see here is poverty. Meager villages clinging to the hillside. People here say the spiking tensions

making it harder to eke a living as we are about to find out.

On foot now, the village, we are heading to a few hundred feet from the line of control.

ROBERTSON (on camera): And just look over there, you can see how close the front lines are. That's the last Pakistani position there, the Indian Army

position a few hundred meters away, and those trees, that's the line of control.

When we arrive, most villagers clustered around one house, some hiding in the dark inside. Children peeking from unglazed windows.

(AMJAD BEY speaking in foreign language.)

ROBERTSON (voice over): This villager telling us they live in fear now. "Elderly, children and women are incredibly scared," he says. "We want to

take our livestock out to pasture, but the Indians are right there in front of us and we are very concerned."

Their fears may be well-founded.

This 17-year-old says Indian troops killed his father, Malik Farooq.

(MALIK OMAR speaking in foreign language.)

ROBERTSON (voice over): "He had gone to the line of control to chase our cattle," he says. "The Indians shot him and accused him of being a

terrorist. He is not. He is a good man."

The day after the massacre in Indian administered Kashmir, the Indian government announced it had foiled a terror plot, killing two Pakistanis.

Malik's brother denies the allegations, too, and says he was just a herder like me, believes India wants their land before breaking down in tears.

(AMJAD BEY speaking in foreign language.)

ROBERTSON (on camera): It's okay. It's okay.

(AMJAD BEY speaking in foreign language.)

ROBERTSON (voice over): "India has done a great cruelty to us," he says. "If they want me to leave, put a bullet in my head. That's the only way

I'll go."

With no end in sight on both sides of the border, civilians as ever, the losers in this decades' old conflict.

(END VIDEOTAPE)

QUEST: Nic Robertson, now, with this decades' long conflict showing no signs of resolution, there is no shortage of grievances and accusations.

Both sides leveeing it. Officials in India have long accused Pakistan of backing armed groups and separatist forces inside the Indian administered

portion of Kashmir.

Pakistan says this was true in the past, but it is not happening now. With the killing of 26 civilians still fresh in the minds of many across the

border and calls for revenge, it is no surprise that global powers, including the U.S. and China, have stepped in to urge restraint in this

intense standoff.

Nic is with me now from Islamabad.

[16:25:10]

You had certainly a spectacular scenery and magnificent vistas and the people that you were able to spend time with. But what a mess

geopolitically, where there is no easy, obvious solution here.

ROBERTSON: Indeed and we are just finding out the geopolitical mess, if you will, is sort of getting a little bigger. The French airline, Air France,

the German Lufthansa Airline announced this evening that neither of them will fly through Pakistani airspace now.

They don't fly here and land here, they haven't been doing that for a while, but they will avoid the airspace. That's one of the knock-on

effects. You have today as well, despite these tensions, despite the diplomatic efforts, India is saying it will shut off some of that water

supply, the vital water supply to Pakistan.

So, you know, it is drawing attention because it could go so badly wrong. But when you get out there on the ground and you see how impoverished it

is, there is no margin there, Richard, like these people, they are living on the thinnest of existences already.

You know, don't let them get their cattle onto the grazing lands, they'll get no milk from their cows. They'll have no income from their land, their

cows.

It is a very, very fragile economic life situation at the border. But yes, it is spilling out globally and we are witnessing some of that with these

now lack of overflights starting this evening.

QUEST: And Nick, I am grateful. Thank you very much indeed, in Islamabad tonight, Nic Robertson.

European countries are ramping up arms, we've talked about it many times on this program, as the Russian war in Ukraine drags on and U.S. support

waivers.

So what does this mean in practicalities? How do you ramp up and actually provide more arms when already defense production seems to have been at

record levels.

CNN's Ben Wedeman has been working to see what it is like at an arms factory in Italy.

(BEGIN VIDEOTAPE)

BEN WEDEMAN, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice over): The time has come for Europe to beat plowshares into swords. Workers are putting the

final touches on combat vehicles at this Leonardo factory in Northern Italy.

Leonardo is Europe's second largest defense company. The days when the continent looked to Uncle Sam for protection are over, says CEO, Roberto

Cingolani.

ROBERTO CINGOLANI, CEO, LEONARDO: And after the invasion of Russia in Ukraine, we realized that peace must be defended. Peace has a cost. And

that was quite a wake-up call.

On top of that, there was a change of policy in U.S. very recently that has made the NATO umbrella less perceivable.

WEDEMAN (voice over): Leonardo is ramping up production of all its systems from tanks and armored personnel carriers to ammunition, naval guns, drones

and aircraft.

UNIDENTIFIED MALE: Production is increasing and this system is the state of the art.

WEDEMAN (voice over): Leonardo has begun a joint venture with Germany's Rheinmetall, a major arms manufacturer, to co-produce the next generation

of main battle tank, the emphasis, a weapon with a made in Europe label.

WEDEMAN (on camera): The European Commission came out with an initiative called Rearm Europe, a strategic defense initiative that would involve

spending as much as 800 billion euro, almost $900 billion to strengthen Europe's defense capabilities. However, they ended up changing that to

Readiness 2030 after objections by some members of the European Commission.

WEDEMAN (voice over): The term "rearm" was seen as too alarmist.

For decades, the bond between the U.S. and Europe was a given, but all of that has changed under the new Trump administration.

TRUMP: So, I think the European Union has been absolutely terrible to us on trade. Terrible.

WEDEMAN (voice over): President Trump is waging a trade war against friend and foe alike. Old alliances no longer seem solid, says defense analyst,

Gregory Alegi.

GREGORY ALEGI, PROFESSOR, LUISS UNIVERSITY: The cornerstone of the U.S.- European relationship has always been Article V of NATO, which is basically a promise that all the allies will intervene to support each other in case

any one of them is attacked. And the Trump administration has been calling that into question.

If that fundamental promise no longer holds, well, you know, it is like an open marriage, you don't know how long it is going to last.

WEDEMAN (voice over): In such uncertain times, perhaps the best tactic is to prepare and arm oneself for the worst.

Ben Wedeman, CNN, La Spezia, Northern Italy.

(END VIDEOTAPE)

QUEST: As you and I continue our Monday together, Warren Buffett is retiring as the chief executive of Berkshire Hathaway. It will happen at

the end of this year.

Now, Lawrence Cunningham will be with us, literally wrote the book on Buffett. He joins me next.

(COMMERCIAL BREAK)

[16:33:35]

QUEST: President Trump says he wants to start putting criminals in Alcatraz again. The president said at the weekend, he's directing officials to

rebuild and enlarge the prison. It's one of the most notorious jails in the world, so famous, there have been movies made about it.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: No one has ever escaped from Alcatraz.

UNIDENTIFIED MALE: I'm in.

UNIDENTIFIED MALE: Me too.

UNIDENTIFIED MALE: And no one ever will.

(END VIDEO CLIP)

QUEST: Alcatraz sits on an island off the coast of San Francisco. It was a high security prison used mostly for inmates who didn't follow the rules at

other prisons. It's been closed in 1960s and become a big tourist attraction. More than a million people visit each year, I've certainly one

of those people who have visited and indeed locked myself up in one of those cells. And you know (INAUDIBLE).

Kevin's with me. Kevin at the White House. I never thought I'd ever ask these sort of questions when the president says something about or in

previous years, is this serious?

KEVIN LIPTAK, CNN WHITE HOUSE REPORTER: Well, the Bureau of Prisons certainly seems to be taking it seriously. They say that they're starting

to look into the feasibility of turning Alcatraz back into a maximum security prison, but it's not at all clear how realistic this plan actually

would be. It would cause millions and millions of dollars to retrofit what is essentially a decrepit prison covered in bird guano back into a maximum

security penitentiary for what the president says will be the worst offenders in the United States.

[16:35:09]

And so, in a lot of ways, this seems like a symbolic move by the president. He wants to make the point that he's serious about law enforcement, that

he's serious about locking up some of the worst offenders.

But I should note, you know, the year before it closed in 1962, three men did actually escaped from Alcatraz, it was viewed as this kind of

unescapable prison there in the cold waters of the San Francisco Bay. No one knows what ended up happening to those three prisoners.

The current supermax prison in Colorado has never had anyone escape from it, and so even from a law enforcement and an imprisonment standpoint, it's

not precisely clear what the president is going for here.

QUEST: Kevin, I'm grateful for you. Kevin Liptak, who has not yet escaped the White House, he's still there. Good to see you tonight, sir. Thank you.

Shares of Berkshire Hathaway fell sharply after the chief exec Warren Buffett announced his retirement. Not surprisingly, it's not as any

investor, it's Warren Buffett. They were down five percent, $42,000 loss for single class, for a share of the class A stock which trades, as you

see, three quarters of a million.

The Oracle of Omaha, Sage of Omaha, told shareholders he will step down by the end of the year, the end of a remarkable run. He's delivered 5.5

million percent return to investors.

In 2002, I spoke to Warren Buffett and what he -- could have been yesterday for the prescient and important ways in which he put the investment

strategy.

(BEGIN VIDEO CLIP)

WARREN Buffett, CEO, BERKSHIRE HATHAWAY: If you take the last century, 100 years, when the Dow went from 66 to over 11,000, there were many periods in

there where people had all kinds of reasons to lose confidence, the Great Depression, the wars, the Cold War, all a number of things.

I don't -- I don't think -- I don't think it's important whether you're confident about tomorrow or next week. I mean, you can be very confident

about the economies of Europe, economies of the U.S. over time, but you can't predict what will happen in any given quarter. You get surprises, and

I don't try to, and it doesn't really make any difference.

QUEST: So, hunker on down. Don't worry too much about it at the moment, and things will get better.

BUFFETT: Things will over time. Things will get better.

(END VIDEO CLIP)

QUEST: Clearly, my hair has got not much better. Warren Buffett. Greg Abel will be the next chief executive on Mr. Buffett's recommendation. The 25

year veteran of Berkshire has big shoes to fill.

Lawrence Cunningham is the author of The Essays of Warren Buffett, written in collaboration with Mr. Buffett himself. He also co-wrote Margin of

Trust: The Berkshire Business Model.

It's too simplistic to say the folksy way of Buffett was invest in what you know, American greatness will always win. That -- it's more sophisticated

than that, isn't it what he did?

LAWRENCE CUNNINGHAM, AUTHOR "THE ESSAYS OF WARREN Buffett": Yes, indeed, and that collection of the essays contains a lot of the elegant

elaboration. At core, I think he does try to keep it simple, and he's got a few profoundly simple ideas. But then, when you put them all together, it

can seem like a career thing to master.

QUEST: How serious was the passing of Charlie Munger for him, you know, sidekick for decades, they were both -- they were both elderly men, so it's

not surprising that one of them went -- you know, went but it took its toll.

CUNNINGHAM: Yes, I think one of the most important lessons in that book and that we should take from Warren in terms of executive leadership and maybe

even running your own life, is to have a number two.

And Warren and Charlie were a dynamic duo, and they almost never did anything without the others assent. And I think it made running Berkshire a

lot of fun for Warren.

And I do think his passing last year was a factor in Warren deciding this year is the time to, you know, ask the board to have Greg succeed him. I

think if Charlie was still around, they'd do it for another year or two. So, I think it's critical.

QUEST: Many of us have -- many of us have looked at the recent investment strategy. They've been going into cash because they say there aren't

investment opportunities there. And many of us are thinking, hang on. I wish I'd thought to do that. What did he know?

You know, his strategy has always managed to be -- it's not just playing safe, it's always managed to be sensible, sensibly safe.

CUNNINGHAM: Yes. He thinks that his mentor was Ben Graham, who argued that the most important thing you can do in making an investment is have a

margin of safety. Have a big gap between the price that you pay and the value that you get. And Warren live by those words. He told me once that

those are still the most important words.

[16:40:12]

But the other part of it, you're right, is then to have your assets, your resources available to deploy them opportunistically, when that gap widens,

and that's always been a tentative faith at Berkshire, they've always had meaningful cash resources to deploy on a moment's notice, and they did so

spectacularly after the .com bubble burst, after the financial crisis of '08, '09, that accumulation of cash now is so massive, just because

Berkshire itself is massive, almost a trillion dollar market cap.

And they're, you know, talking yesterday that they might -- they've got a 10 billion acquisition kind of on the table in the works, and that would be

big for most companies. For them, it's trivial. They're looking for the elephant, and who knows when it will come, but it often does.

QUEST: And he never split the stock. And he says even now, he's not going - - he's not going to sell a share.

CUNNINGHAM: That's the third most important thing to get from Buffett is the always wanted quality shareholders to own Berkshire, meaning people who

are focused on his business, not on the market, and long term, not looking for short term pops.

And he thought like the way to do that is to write good letters, bring them to the meetings, and never split the stock.

And so, you know, loads -- a lot of people have stock, but $800,000 it's hard to sell them. And so, that was part of it, he wanted shareholders who

would be willing to hold through thick and thin.

QUEST: I'm grateful to you. Thank you, sir. Thank you. I appreciate it.

And that is QUEST MEANS BUSINESS for the moment. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, it won't be as profitable

maybe as Warren Buffett and Berkshire Hathaway, but I hope it's profitable. And for you next, "CONNECTING AFRICA," I'll see you tomorrow.

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(CONNECTING AFRICA)

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