Two questions Buffett asks CEO - Andy Lin's Long-term Stock Investment Blog

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Buffett’s famous “Desert Island”

Two questions Buffett asks CEO:

“Which company would you most like to short?” This question identifies the weakest competitor, usually the one with the poorest management or least sustainable business model.

“If you had to buy a competitor’s stock with all your money and hold it for 10 years, which company would you choose and why?” This question aims to find the “best” competitor with the most sustainable competitive edge.

Buffett’s explanation of the “Desert Island”

In 2025 Berkshire shareholder meeting, Buffett said (text in italic):

But I will give you one tip. I found that when I was very young, I would drive around to various companies all over the country. Because I was very young and these were offbeat companies, they didn’t have investor relations departments then, almost every CEO would see me because they figured they’d never see me again. And they weren’t getting calls like that.

I would ask them two questions. I would explain to them – it’s not a bad idea, incidentally – if you’re going to walk into somebody’s office and you say you want 10 minutes of their time, take an hourglass and stick it on the desk of the person you’re talking to and turn it up so it’s going to go for 10 minutes. You say you’re going to leave in 10 minutes unless they ask you to stay. That sets the terms.

But once you have that, if they’re in the coal business, which happened to be one that I was interested in 70 years ago or so, you just ask them one question: if they were to be stuck on a desert island and they had to own only one of their competitors’ stock during the 10 years they were going to be on that island, which one would it be, and why? And then after they give you that answer, you ask the same thing if they were to short one of their competitors’ stock, which would it be and why?

Because every manager likes to talk about their competitors. They’re like little school kids when they get into talking about their competitors. I probably learned more about various industries by just making sure that they didn’t think I’d stay too long and that in the meantime they would have the floor and talk about their competitors. I kept my own mouth shut in those days. That’s a lesson I’ve lost somewhere along the line.

Buffett repeatedly mentioned “Desert Island”

The 2025 Berkshire shareholder meeting was Buffett’s most recent interpretation of the “desert island survival” problem. He had actually mentioned it in many places before, which shows how important the “desert island” problem is. Investors can use these two questions to quickly filter suitable investment companies.

1999 Berkshire annual meeting

The Bill Gates conversation (1999 Berkshire annual meeting): Buffett recalled asking Bill Gates the first time they met in 1991: “If you’re going to go away on a desert island for 10 years, you had to put your stock in two companies in the high-tech business, which would they be?” Gates named two very good stocks, and Buffett noted they would have made more money had he bought them than from buying Coca-Cola.

On investing in 1973

On investing in 1973 (bear market frustration): Buffett quipped about the lack of buying opportunities: “I feel like an oversexed guy on a desert island. I can’t find anything to buy.” Then in 1974, after the market crashed: “I feel like an oversexed man in a harem. This is the time to start investing.”

The “Ovarian Lottery” speech

The “Ovarian Lottery” speech (University of Florida, 1998): Buffett used the desert island as a metaphor for humility about his own skills: “If all of us were stranded on a desert island somewhere and we were never going to get off of it, the most valuable person there would be the one who could raise the most rice over time. I can say, ‘I can allocate capital!’ You wouldn’t be very excited about that.”

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