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we were just looking at disney hitting an all-time high you went and met walt disney he didn't know who the heck you were you called and asked for a meeting that was 49 years ago actually i went out there and i wasn't scheduled to meet with wall i was scheduled to meet with the the treasurer why to buy stock well we we owned the whole walt disney company at that time was selling for 80 million dollars with no debt the pirates ride was just about to be introduced to disneyland that was going to cost 17 million so here was a stock selling at less than five times rides now and walt came in and he said would you like to have lunch with me and uh it couldn't have been nicer it was a great experience the management today would he be proud of bob bob iger is is is a home run hitter i mean he he is really really good and and he's a great guy on top of that though why don't you own the stuff now well i mean i made a terrible mistake we you know we owned a chunk of of cap cities abc and emerged with disney and we kept the disney stock for a while and then we sold it that was before eiger took over but uh uh we probably shouldn't have sold cap cities abc because espn was we owned 80 80 of espn and that that of course has been the home run asset of all time dummy yeah exactly yeah well you're being kind the mistakes you don't see in in our case are way bigger than the mistakes that you see we owned five percent of the walt disney company in 1966 the whole walt disney company was selling for 80 million dollars in 1966 debt free four million dollars bought us five percent of the company that was they spent 17 million dollars on the pirates ride in 1966 building here was a company selling at less than five times rides you know they had a lot of rides i mean that is cheap uh i remember i i married and the the knockout on wall street that was that they were earning a lot of money that way here and and it was mary poppins and that there wasn't anything coming next year and and uh i remember i went to see mary poppins on a at a theater on broadway about 45th about two in the afternoon i've got a little anti-state case and everything i'm going to see mary poppins i got up to this woman took a booth and he said i've got a kid around here someplace i was going to see if i want this thing to be run over and over again in the future and but here they would have had 200 and some films of one sort or another in the can at that point they they had they had 300 acres down in anaheim with disneyland drawing at that time nine million people a year and the whole place was selling for 80 million bucks so we bought five percent before a million dollars and the great news is we sold five percent for six million about a year later that five percent now would be worth about a billion at uh but you don't see that that's that conventional accounting doesn't pick that up that's the kind of mistake i made i was just wondering if the surprise could be coming from disney because uh it seems to me they've been coasting up until very recently on the efforts of a a person is no longer with the company katzenberg who is one of those rare geniuses like spielberg that has his finger on the pulse of the american people and that they don't come along every day even in hollywood there might be a very different company now that all of his efforts are so to speak out of the pipeline you know if you finished her yes yeah i i uh katzenberg is a real talent i would say that uh that by far i mean by far the most important person at disney uh in the last 12 years or whatever it's been has been michael eisner i mean it doesn't it if you know him and what he has done in the business uh there's there's no one frank wells did a terrific job in conjunction uh with eisner but eisner has been the walt disney in effect of of uh of his tenure he uh he's he uh he knows the business he loves the business you know he eats and loves and and and and breeze it and uh he has been in my view by far the most important factor in in in disney's success now they face competition uh the the money is in you know the big money is in in the animated uh films and everything that revolves around that because you go from films to to parks to to character merchandising and back and i mean it's a circular sort of thing which feeds on itself uh there's there's going to be plenty of competition in that i mean they've uh you know you've seen what uh mca and universal is going to do with in the parks in florida and you've you you know what dreamworks is going to do in animation and and now you've got new technology and animation you know through steve jobs and there's a lot of things going on in that field so the question is ten years from now what place in the mind because it's a share of mind it's not you know they call it share a market but starts with share of mind and what place in the mind of billions of children around the world and their parents does disney itself have and their characters relative to that owned by other organizations and other characters and it's a competitive world so there will be people fighting for that but i would rather start with disney's hand than anyone else's by some margin and i would rather start with michael eisner running the place than with anyone else by some margin so i that that does not mean that that it can't become a much more competitive business because people look at the video releases of a lion king and they and they salivate that you know you sell 30 million copies of something that whatever it may be 16 or 17 and you can figure out the manufacturing costs and you know it gets your attention and it gets your competitors attention but going back i if if i had to if i thought the children of the world were going to want to be entertained 10 or 20 20 years from now and i had my choice of betting on who is going to have a special place if anyone has a special place in the minds of the those kids and their parents i think i would probably rather bet on disney and i would feel particularly good about betting on them if if i had the guy who has done what eisner has done over those years presiding in the future charlie well i think it helps to do the simple arithmetic suppose you have a billion children of low middle income uh 20 years from now and suppose you could make 10 per year per child after taxes from your position it gets into very large numbers and and i don't know about your children and grandchildren but mine want to see disney and they want to see it over and over and over again they don't want to see katzenberg well i mean in terms of the trade name it's a pretty good trade name i mean when you think about names around the world it's interesting that uh you know they're very hard to beat the name coca-cola but uh disney's got a it's a very very big name and charlie's point that they want to see them over and over again and then it's kind of nice to be able to resize recycle snow white every seven or eight years you hit a different crowd and it's kind of like having an oil field you know where you pump out all the oil and sell it and then it all seeps back in over seven or eight years with respect to eisner and disney how would you define michael eisner's circle of competence and are you concerned that he might step outside it well i would say that he has proven himself very good at understanding what disney is really all about and i and you can look back to the predecessor management between walt and and and eisner and they didn't really do much with that if you if you look at those years at uh uh you know what is this what is special about about disney and how do you make it more special and how do you make it more special to more people i mean those are the things that you want to make and you've got wonderful ingredients to work with when you're working with something like disney i mean it uh you know one of the advantages we were talking about about the mayo clinic and brain surgeons and the nice thing about the mouse is that he doesn't have an agent you know i mean the mouse is yours and uh he he's not in there renegotiating and you know every every week or every month and saying you know just look at how much more famous i've become in china you know or something so if you own the mouse you own the mouse and eisner understands all of that very well i i would say he's been very skillful in terms of uh how he's thought about it i worry about any manager that has nothing to do with michael eisner but charlie and i worry about ourselves in terms of getting out of our circle of confidence and we've done it uh it is very tempting and it's it's probably part of the human condition in terms of hubris or something that if you know that if you've as charlie would say if you've you know if you're a duck floating on a pond and it's been raining and you're going up in the world after a while you think it's you and not the rain you know that and we also come to that a little bit but i i i think that uh i think disney coca-cola july i think those companies are very focused i think our operating units are very focused and i think that gives us a huge advantage over the managers that are getting a little bored and decide that they better fool around with us or that to show just how talented they really are charlie yeah eisner is quite creative and he also distrusts projections and that is a very good combination to have in the motion picture business yeah charlie was a lawyer for um uh what 20th century in the uh yeah and he saw a little bit of how hollywood operated and it kept us out of buying motion picture stocks for about 30 years every time i go near one he'd regale me with a few stories of the past so it's it's a business where people are can trade other people's money for their own significance in the in their world and that is a dangerous combination where if i can buy significance in my world with your money you know there's no telling what i'll do part of the business reminds me of a an oil company in california and it was controlled by one individual and people used to say about it if they ever do find any oil that old man will steal it and the motion picture business it's only about half of it that has normal commercial morals no we're not we're not applying that to disney no disney disney is really uh disney's done an extraordinary job for the shareholders and they they make real money out of movies most movie companies have they made money for everybody associated with it but but not a lot has stuck to the shareholders um you owned disney once before and sold it you also owned uh advertising companies in the 70s i believe right and you sold them could we have some insight into your thinking as to why you sold them not sure i want to give you any insight into that thing well we'll start off with the fact that when i was 11 i bought some city service preferred at 38 and it went to 200 but i sold at 40.
so grabbing my two dollars a share of profit so i had everything we've ever sold uh has gone up subsequently but some of them have gone up more painfully subsequently than others and and certainly the disney sale in the 60s was a huge mistake i should have been buying i did forget about about holding and that's happened many times i mean we we think that anything we sell should go up subsequently because we are own good businesses and we may sell them because we need money for something else but we still think they're good businesses and we think good businesses are is gonna be worth more over time so every everything i sold in the past virtually that i can think of has gone on to sell it at a lot more for a lot more money and and i would expect that would continue to be the case that is not that's not a source of distress but i must say that that uh selling the disney was a mistake and actually the ad agencies have done very well uh since we sold them too now maybe some of that money went into coca-cola or something else so i i don't i don't worry about that uh i would worry frankly if i sold a bunch of things right at the top because that would indicate that in effect i was practicing the bigger fool type uh approach to investing and i don't think that can be practiced successfully over time i think the most successful investors if they sell it all will be selling things that end up going a lot higher because it means that they've been buying into good businesses as they've gone along charlie well i'm glad that the questioner brought this touch of humility because it it is really useful to be reminded of your errors i mean and i think we're pretty good at that i mean we kind of mentally rub our own noses in our own mistakes and that is a very good mental habit warren can tell you the exact number of cents per share that he sold and compare it with the current praise it actually hurts him it actually doesn't hurt the truth is i that you know because it you know you just keep on doing things but but it is instructive to look at to do post-mortems on on everything and say as long as you don't get carried away with it but every acquisition decision that kind of thing you know there should be postmortems done most companies don't like to do post-mortems on their capital expenditures i i've been a director of a lot of companies over the years and and they've not usually not spent a lot of time on on the post-mortems they spend a lot of time on i'm telling you how wonderful the acquisitions are going to be or the capital expenditures but they don't like to look so hard necessarily at the results think of how refreshing the board of directors meeting would be if they sat down and now we'll spend three hours examining all our stupid blunders and how much we've flown and then after that the compensation committee will be now that is not going to happen this is a question that came in i guess in regards to some of the controversy that was kicked up what was it specifically that prompted the idea for windowless dorm rooms please walk us through this decision i guess this is in in regards to your design for for student housing nobody in his right mind would prefer a blank wall in a bedroom to a ball with a window in it the reason you take the windows out is you're getting something else from the design considered as a hole if you stop to think about a big cruise ship has a huge shortage of windows and bedrooms because too many of the staterooms are either on below the water line or they're on the wrong side of the aisle and so in the very nature of things you get a shortage you can't change the shape of the ship you have to do without a lot of the windows to have a ship that's functional that's required by the laws of hydrodynamics and so we get the advantage of a big ship but it means a lot of staterooms can't have windows similarly if you want a bunch of people who are educating each other to be conveniently close to one another you get a shortage of windows and in exchange you get a whole lot of people who are getting a lot of advantage from being near one another and they have to do without a real window in the bedroom it doesn't matter the air can be as pure as you want it and the light that comes in through an artificial window can mimic the spectrum of daylight perfectly and it's an easy trade-off you pay twenty thousand dollars a week or something in a big cruise ship to have a a state room with an artificial window and for a long time on a disney cruise ship they had two different kinds of windows of of state rooms one with a window and one without a window and they charged more with the one they got a higher price in rent for the one with an artificial window than they got for a real one in other words they'd reduce the disadvantage to zero in fact they made an advantage and so it's it's a game of trade-offs that poor pathetic architect who criticized me is just an ignoramus he can't help himself i guarantee the one thing about him he's not fixable of course you have to make trade-offs in architecture um charlie another question came in about costco
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