Warren Buffett Questions

Question 1

When asked questions about investing in a business, industry trends, or your personal investments, be sure to ask what 2 questions?

Answer 1

1. Always ask what the business or investors goals are

2. Always ask what constraints, limitations, time horizons, or any other limiting factors there may be

Question 2

Lets say you had $10 million to invest in anything, what would you invest in?

Answer 2

Always ask what the investors goals are. Are they looking for big capital gains over 30-40 years, tax-free retirement income? What types of assets interest them?

Then base your answer on that. If you have 30 to 40 years, then a well balanced portfolio. If tax free income, then muni bonds.

Question 3

If you owned a small business and were approached by a larger company about an acquisition, how would you think about the offer and how would you make a decision on what to do?

Answer 3

Terms to consider:

1. Price
2. Form of payment
3. Future plans for your company

You’d weigh each of these and also think about any deal breakers you couldn’t allow to happen.

Question 4

If interviewing for a specific industry group, do your research on current trends, this will most likely come up.

Answer 4

Three mistakes often made

1. Interviewee describes unrelated or recent info.
2. They don’t explain the “why” that trend is occurring
3. They don’t explain the impact to the industry as a whole.

Question 5

Lets say you could start any business you want and you have $1 million in initial funds. What would you do?

Answer 5

Ask follow up questions to see if there is anything more specific they’re looking for. If not, explain you’d want to start a niche business with high margins and little startup capital, and explain why (niche businesses aren’t likely to be in industry dominated by major companies)

Question 6

Can you talk about a company you admire and what makes them attractive?

Answer 6

Try to pick an obscure company to show you’ve done your research. Emphasis qualities that investors would find interesting.

Question 7

Lets assume you start a laundry machine business. How would you analyze it’s viable?

Answer 7

Viable = profitable. You’d start by looking at location, estimate how many customers you could get, how frequently they do laundry, and how much they pay each time. On the expense side, upfront construction and purchase of machines are biggest costs, requiring a loan. You’d need to take into account Maintenence and servicing costs, hiring staff for cleaning and operations. Location would be the biggest key.

Question 8

Tell me about an M and A deal that interested you recently?

Answer 8

You’d say who the buyer and seller are, as well as price and multiples (purchase price/ revenue, purchase price / EBITDA). Know the news regarding it, how it developed and what implications there are for the industry.

Question 9

Pitch me a stock.

Answer 9

You can pick the company you admire here, but you need to mention specific financials. Know it’s P/E multiple and how it compares to competitors

Question 10

Can you explain to me, in simple terms, the subprime crisis?

Answer 10

Due to low interest rates, banks made mortgage loans to people who couldn’t pay them. Those loans were packaged into securities the banks traded, labeling them AAA rated without actually knowing what was inside them, due to there being so many they believed risk was eliminated. The values of these plummeted to zero overnight as people defaulted and the values of the banks holding these then collapsed, causing the crisis.

Question 11

Do you agree with the $700 billion bank bailout.

Answer 11

Yes, because financial institutions are so tied to the economy that their collapse could’ve created a much worse crisis than we experienced. While I do think there’s the case of moral hazard here, I don’t think there was much of a choice here.