Two unexpected revelations in Warren Buffett's CNBC interview

In a nearly one-hour interview with CNBC's Becky Quick on the day he publicly revealed he is cutting off the Gates Foundation from future donations, Warren Buffett downplayed the role Bill Gates' association with Jeffrey Epstein played in that decision.

He also revealed he initiated Berkshire Hathaway's now $30 billion position in Google-parent Alphabet, which many had thought was Greg Abel's first major investment decision as CEO.

While Warren Buffett found Bill Gates' ties to notorious sex-trafficker Jeffrey Epstein "distasteful," he says his decision to end future contributions to the Microsoft co-founder's foundation was driven by his three children demonstrating they are now able to responsibly give away "vast sums of money."

Over the same 20 years he gave the Gates Foundation nearly $48 billion in Berkshire shares, as valued at the time of the donations, he also donated almost $18 billion to Susie Buffett's Sherwood Foundation, the Howard G. Buffett Foundation, Peter Buffett's NoVo Foundation, and the Susan Thompson Buffett Foundation, named for his late first wife.

He told Becky, "I'm impressed by the fact that my kids really want to give the money away" efficiently, without constructing huge buildings or holding conferences "at esoteric places and all kinds of things."

Buffett said he didn't have that same confidence in his children in 2006 when he started his donations to the Gates Foundation.

In a March interview with CNBC, Becky asked if he would continue his "lifetime" commitment to make annual donation to the Gates Foundation in light of revelations in the Jeffrey Epstein files about his connections to Gates.

At that time, he replied, "I'll wait and see what unfolds ... I don't have to make that decision today. And I haven't made it today."

"I've learned things I didn't know about something for all these years."

Now Buffett says he's read a "great deal" about the matter, including Gates' congressional testimony last month, and presumably, the February Wall Street Journal report that in a meeting with foundation staff members, Gates "acknowledged that he had two affairs with Russian women that Epstein later discovered, but that they didn't involve Epstein's victims."

Buffett's assessment: "While it's distasteful, while he made mistakes, I made mistakes in hiring all kinds of people or choosing friends and then finding out later that they — that one way or another, they weren't what I thought they were. And so, I found nothing in there that that was beyond what I could see — I could picture myself doing."

In March, Buffett said he had not talked with Gates "at all since the whole thing" with the Epstein files "was unveiled."

That's no longer the case. Buffett told Becky that Gates came to Omaha within the last several weeks "and we spent three hours talking together" and "he intends to call me" to maintain contact.

Buffett said that "at some point" he told Gates he is ending his annual donations before announcing the move this week and Gates is "OK" with the decision. "It's been a wonderful friendship."

In a statement emailed to CNBC by a representative, Bill Gates said, "Warren is one of the greatest philanthropists of all time, and a dear friend. His wisdom, generosity, and deep sense of purpose have defined both his life and his philanthropy."

Gates credits Buffett's "unprecedented support" with helping to save millions of lives. "My gratitude to Warren is immeasurable, and I cherish the time we spend together. I hope we have much more of it ahead."

At the same time, Buffett is shifting where his philanthropic donations will be directed, he is also speeding up the pace of those gifts.

In his previous philanthropic plans, for both the Gates Foundation and the four family foundations, the number of shares donated each year decreased, although the value of the gifts usually was higher than the year before as the price of Berkshire's stock increased.

Starting now, he is going to give away more shares each year so he can "dispose of all of my Berkshire shares within about eight years," in part because his children, who will be deciding what to do with the money, are "unfortunately growing older."

Buffett does acknowledge his children have a tough job ahead of them

He also said having Greg Abel at the helm of Berkshire makes him feel comfortable about giving up his, and the family's, control of the company sooner rather than later and explained why the foundation named after his first wife will be getting more shares than the foundations run by his three children

Berkshire Hathaway shares initially fell on Tuesday's news that Buffett will be accelerating his sales but then recovered to end the week slightly lower.

The biggest surprise in Tuesday's interview was Buffett's revelation he is responsible for Berkshire's big investment in Alphabet, Google's parent.

After purchasing roughly $4.3 billion of shares in last year's third quarter and adding $11.5 billion in this year's first quarter, Berkshire invested another $10 billion in Alphabet by purchasing shares directly from the company as part of its larger plan to fund its AI ambitions.

Given Buffett's long-standing practice of almost always avoiding tech stocks, many observers, including me, thought making Alphabet one of Berkshire biggest stock holdings was the result of new CEO Greg Abel flexing his investing muscles.

Wrong, said Buffett: "I initiated it."

He did go on to say, "I am not doing anything that [Abel] doesn't approve of. He's not doing anything I don't approve of. We talk all the time... but he is the decider."

Even though Alphabet is "putting out huge amounts of money" on AI infrastructure and he doesn't "like [the stock] as well as at least four or five other businesses that we own," Buffett said, "I think they're more likely to be a winner, based on their record, than — than probably 90 percent or — or 95 percent of what gets merchandised through Wall Street, because Wall Street is just interested in whether they can sell something."

Buffett again acknowledged in Tuesday's interview he made a "mistake" by not adding Alphabet to Berkshire's portfolio earlier.

In a 2017 CNBC interview, Buffett admitted he should have known about Google's profit potential because Berkshire's GEICO had been buying a lot of advertising from the company.

Buffett is disappointed Tim Cook will be stepping down as the CEO of Apple, Berkshire's largest equity holding at $76 billion, but he's still happy with the stock.

Buffett thinks Kevin Warsh is a "good choice" to be the new Federal Reserve chairman, although he "can't be perfect at it, just like I know I couldn't be perfect at taking people's money and earning super returns on it."

Still, "I think he will do the best he can at achieving the job he was assigned to do, which is 2% inflation and maintaining maximum employment."

Buffett is still worried there is too much "gambling" in financial markets.

"It's tough to find values when everybody is preferring gambling," he said.

"Since humans love to gamble so much, there's more money in — in actually cultivating gamblers than there are cultivating investors."

As the interview was ending, Becky asked Buffett how he was feeling that day.

"I broke a leg ... a few weeks ago," he replied, without elaborating on exactly what happened.

It is his first broken leg "in my life until now" so "I've been very lucky on that sort of thing."

It appears Berkshire's relatively small, and publicly previewed, $234 million of share repurchases in the first quarter was not a one and done resumption after a two-year hiatus.

Barron's estimates Berkshire bought between $5 billion to $11 billion of its shares in the second quarter.

That's based on a rough calculation derived from Buffett's SEC filing this week on his foundation gifts that disclosed his 188,920 Class A shares, after the contributions, is 13.2% of all of Berkshire's outstanding shares.

Barron's says the estimated buyback range is fairly large because it doesn't know yet exactly when the buybacks were made and because Buffett's ownership percentage is presented with just one decimal point.

We'll get the exact number when Berkshire releases its Q2 earnings early next month.

BECKY QUICK: Warren, first of all, thank you for sitting down and talking with us today. I appreciate it.

WARREN BUFFETT: It's always good to sit down. (Laughs)

BECKY QUICK: Yes, I find the same thing.

The last time we sat down and spoke with you, or I guess it was two times ago in March when we sat down with you to talk about what you were doing with your charitable giving, you said that you were going to be watching and waiting, that you were kind of waiting to see what came out about Bill Gates and the Epstein files and what had happened.

You said you hadn't determined what you were going to do.

Today you put out a release saying that you will be increasing the amount of money that you give to the Susan Thomas Buffett Foundation, your three children's foundations, but there will be nothing given right now to the Gates Foundation. Is that your decision?

WARREN BUFFETT: That's correct. That's correct.

But — but in interpreting that, I would point out that I've read a great deal since January 1 in terms of what happened with Bill and Epstein, and I've read his remarks to Congress given under oath, and I've read cross examination, and while it's distasteful, while he made mistakes, I made mistakes in hiring all kinds of people or choosing friends, and then finding out later that they — that one way or another, they weren't what I thought they were.

And so I found nothing in there that that was beyond what I could see — I could picture myself doing.

And, you know, he ended it. And I've had situations where I made mistakes about people or people may have felt they made mistakes about me.

But they — you know — life goes on and — and no one — no one bats 1.000 in the business of choosing people,

BECKY QUICK: You're talking about hiring decisions, maybe who you're associating yourself with, and there were certainly some questionable decisions on that that came up in the release of these files, but there was also other, you know, personal information.

WARREN BUFFETT: Yeah. No. He — which he admitted to.

WARREN BUFFETT: Yeah. No. And there again, I would say that, you know, I would — I've known some pretty wonderful people, and I still know some wonderful people.

I don't think they've made every decision correctly.

BECKY QUICK: So why, if that's your opinion on it, why are you no longer giving money to the Gates Foundation?

WARREN BUFFETT: Well, I reevaluated my whole situation.

It's just like I've been doing since I was in my 20s, and we'd gotten married, Susie and I, and we didn't really have any money, but we did know that we intended to live fine, and we intended to have a family, and — but we did not have aspirations of, you know, having six houses or a 500-foot yacht or anything of the sort.

So even then, we talked about what we would do philanthropically. But my idea, and conviction, was that I would compound money at a better rate than society generally, and that Susie would give it away better than 99.9 percent of the people that were giving it away, and she would get involved personally with the gifts, whereas I like to do things wholesale, and she liked to do things retail.

So we had a plan, but we didn't have any money. And over time the money started to pile up, and she would say, "Are we rich yet?" And I would say, "No, but we're getting closer."

But I was not in a hurry to do anything. We did some small things as we went along. I did it.

I felt the most important threat to mankind was — was the — was the nuclear bomb. And so I had sort of grandiose plans in my mind about how I could change the probabilities of that happening, and I finally came to the conclusion, after decades, that I could not have a 100th, or 1,000th, of 1 percent chance of succeeding in that.