Warren Buffett: We invested in tobacco companies 🚬 Charlie Munger: We also distribute cigarettes 💰

Here is a complete transcript of the video.

It’s fraught with questions that relate to societal attitudes and you can form an opinion on that just as well as I could.

But, I would not like to have a significant percentage of my net worth in the tobacco business myself, but —They may have better futures than I envision.

You have to come to a conclusion as to how society is going to want to treat — and the present administration for that matter. And the economics of the business may be fine, but that doesn’t mean it has a great future.

Does Berkshire own any tobacco stocks, and are some of these stocks attractive now that prices are down on some of them?

WARREN BUFFETT: Yeah. We have owned — we won’t comment on what we own now — but we have owned tobacco stocks in the past. We’ve never owned a lot of them, although we may have made a mistake by not owning a lot of them.

But we’ve owned tobacco stocks in the past.

We own a newspaper in Buffalo. It carries tobacco advertising. We don’t — well, actually, Charlie’s a director of a sensational warehouse chain called Costco, which used to be called PriceCostco. You know, they sell cigarettes.

So we are part of the distribution chain in — with a hundred percent-owned subsidiary in the Buffalo News. And so we have felt that if we felt they were attractive as an investment, we would invest in tobacco stocks.

We made a decision some years ago that we didn’t want to be in the manufacture of chewing tobacco. We were offered the chance to buy a company that has done sensationally well subsequently, and we sat in a hotel in Memphis in the lobby and talked about it, and finally decided we didn’t want to do it.

CHARLIE MUNGER: But it wasn’t because we thought it wouldn’t do well. We knew it was going to do well.

WARREN BUFFETT: We knew it was going to do well.

But now, why would we take the ads for those companies, or why would we own a supermarket, for example, that sells them, or a 7-Eleven, you know, or a convenience store that sells them or something of the sort, and not want to manufacture them? I really can’t give you the answer to that precisely.

But I just know that one bothers me and the other doesn’t bother me. And I’m sure other people would draw the line in a different way.

So the fact that we’ve not been significant holders of tobacco stocks has not been because they’ve been on a boycotted list with us. It just means that overall we were uncomfortable enough about their prospects over time that we did not feel like making a big commitment in them.

Each individual, has to draw its own ethical and moral lines, and personally, I like the messy complexity of having to do that. It makes life interesting.

Probably the biggest distributor of — the biggest seller — of cigarettes in the United States is probably Walmart, but — just because they’re the biggest seller of everything. They’re the biggest seller of Gillette products, and they’re huge.

And you know, do I find that morally reprehensible? I don’t. If I owned — we owned all of Walmart, we’d be selling cigarettes at Walmart. But other people might call it differently, and I wouldn’t disagree with them.

I think the legislative threat to tobacco is serious, and I haven’t the faintest idea of how to predict it.

We passed one time on the chance to buy an extraordinarily profitable company, because Charlie and I met the people that ran it. And they were perfectly decent people, too.

And we went down in the lobby of the hotel that we met them in, and we just decided that in the end we didn’t want to be involved in that.On the other hand, I would have bought stock, as a publicly traded stock, in the same company. Charlie will give you his view on that later.

So, I do not have a problem buying stock in companies — marketable securities — the bonds of companies in the market — that engage in activities that I wouldn’t probably endorse myself.I would have trouble owning outright, and actually directing the activities, of some of those companies.

But, you know, the — any major retailer in this country is — virtually — is going to be selling cigarettes, for example. And if they’re not declared illegal, it does not bother me to own — it would not bother me to own those retailers outright — or it does not bother me to own the stock.

CHARLIE MUNGER: Yeah, but you wouldn’t buy a company that made the tobacco and concocted the advertisements.

We would not be in the manufacture of it, but I — we owned stock at one time in R.J. Reynolds. Before it had the LBO, we owned bonds in it. And, you know, I would still be doing it if I liked either the bonds or the stockWe would not buy the manufacturer.

CHARLIE MUNGER: We don’t claim to have some kind of perfect morals. You can draw these lines where you wish.