Highlighting a few excellence values from the October 7, 2013 issue of Forbes, by Kerry A. Dolan
FORBES: Warren, let’s start with you. How do the very affluent raise children to share their values? How did you do this in your family? You’ve successfully raised three children who are very active in philanthropy.
WARREN BUFFETT: Our kids had a very normal growing-up. I mean, they’ve only and I’ve only lived in one primary house that I’ve owned in my life, and I bought that in 1958. So they did not see us moving into progressively fancier houses; they did not ride in private planes. They went to school on the bus. Every member of the Buffett family in Omaha has gone to a public school. They went to the same school that their mother had gone to. They went to the same high school that she’d gone to. We were living in an area where, in today’s dollars, our neighbors were making maybe $75,000 a year, or something of the sort. So they never really thought that we were economically different.
FORBES: As your wealth grew, did you actively try not to change your lifestyle?
WARREN BUFFETT: No, I just lived the life I wanted to live, and my wife lived the life she wanted to live. And our kids grew up that way.
There wasn’t anything that we wanted that we didn’t have, but we didn’t crave a lot of possessions or anything like that. We were enjoying our life. Our house was the center of activity, particularly for my daughter’s friends. And the neighbors didn’t think of us as doing anything special. They kind of wondered what I did, because for six years I didn’t even have an office.
For six years I worked at home out of a room off my bedroom and had no secretary and no bookkeeper. So there was no reason for our kids to develop any unusual feelings about money.
FORBES: Peter, when you started seeing that your father was on the FORBES list of richest Americans, how did you square that with your father and how he raised you?
PETER BUFFETT: Well, that would be about the time that we found out how much money we had as a family. I’m not kidding. It was when I was in my 20s that my mom and I talked at some point, because there he was, on this list. And we laughed about it, because we said, “Well, isn’t it funny? You know, we know who we are, but everybody’s treating us differently now.” It was a fascinating switch, although not a huge one because we didn’t live in that world or a cultural framework where there was a lot of wealth being shown. Our friends were as surprised as I was.
WARREN BUFFETT: The kids were formed by that time, and they knew who their friends were, and their friends were their friends because they liked ‘em, and not because they were the rich kid on the block or anything of the sort.
FORBES: Warren, talk about when you made the decision to give away most of your money, and how you decided how much you wanted your kids to have and why you decided your kids should be running foundations.
WARREN BUFFETT: My wife and I made the decision when we were in our 20s, once we had everything we wanted or needed. I kept telling her that there’d be a lot of money, and she laughed.
The idea always was to give it away. We formed the family foundation back in the 1960s. We also jointly came to the conclusion that, although we might have one big family foundation, that it was important that each of the three children have a separate one.
I’ve seen some foundations that are created where lots of problems have occurred because there’s three or four or five children on the foundation board, and some of them feel that their interests get slighted and so on. And those things tend to grow, and then they start remembering that one of them twisted the tail of the cat back when he was 6 years old [laughter], and you know, it can accelerate.
So I guess probably 25 years ago, we set a relatively small sum aside that each one would get. But then in the late ’90s I just formed three dummy corporations. Then, at Christmas, I presented these three corporations to each of the three children. We started them with $10 million each, but we told them there would be more and we would not judge them one against the other. That in philanthropy who knows what activities will pay off when? So we were going to add to it as we went along, but we would add equally.
I was not on the board of those foundations. My wife was not on the board of the foundations. They were entirely left up to them. We increased those several times, and then last year on my birthday I doubled the amount that goes to each of the foundations. The letters explaining what I expect the kids to do are on BerkshireHathaway.com, and I told them I expected them to fail on some things; if they didn’t fail, they weren’t doing important things. And that I was proud of all three of them, and I knew I’d be proud of what they did with this money. It’s a pretty simple approach.
FORBES: And have you been failing, as your dad would like you to do, in terms of taking risks with your philanthropy?
PETER BUFFETT: Absolutely. I feel like if you’re not on the edge, you’re taking up too much room. We’re out there trying to do things all the time that not only do I hope some of them fail but I also know they’re going take a lot of time. I know it’s going be 10 years, 20 years, generational change we’ll never see. That’s the other thing: Time horizon is a big issue for us, in a good way.
FORBES: How important is it to encourage children to do what they want to do?
WARREN BUFFETT: We never gave any instructions on specifics, but I think they did pick up the values that were meaningful to their mother and to myself. One of the things I’m most grateful to my father for, particularly, was whatever I did he was for. He was not trying to live his life through me. I tried to pass that on to my children.