32
Berkshire Hathaway Annual Meeting 2014 May 3, 2014 These notes are recollections only, without the aid of a recording device. They should not be relied upon. – PB (Paul Anka and Warren Buffett sing a duet in the opening movie: Warren sings a stanza or two to Debbie Bosanek, his long‐time assistant, and then Paul sings, but “but she doesn’t do Dallas…” [Ed note: Debbie doesn’t do Dallas – now that is subtle! Kudos to Debbie, Warren and Paul] WB: Good morning. Before we start, two very special guests have to stand up. Even though he was on tour, he took quick detour. My friend Paul Anka please stand up. [clapping] With all the talk about my succession I wanted to hook up with someone famous for a possible second career. We’re available for weddings, bar mitzvahs and funerals. We got offered $1000 for Paul and me, which seemed ridiculous. I was insulted, they said OK, and offered $10,000 for just Paul. We have one other very special guest. This affair doesn’t happen by itself. She even had a baby boy named Brady in September. She organized everything here today, please thank Carrie Sova. [clapping] Ok now we get to the minor players and will introduce the Board of Directors. We’ll have the shareholders meeting after, then recess for 15min, then at 3:45 begin the shareholder meeting. I’ll introduce the Board, but please hold your applause until I’m finished introducing then you can go crazy. In alphabetical order: Howard Buffett, Steve Burke, Susan Decker, Bill Gates, David Gottesman, Charlotte Guyman, Don Keogh, Charlie Munger, Tom Murphy, Ron Olson, Walter Scott, Meryl Witmer. That is Board of Directors of Berkshire. [clapping] We have a couple slides then we’ll move into questions until noon, back at 1pm, continue until 3:30pm. We released our earnings yesterday. We try to do that on a Friday so you have full weekend to digest the 10q which we make available. Don’t just look at the summary, it makes great reading. This is our summary slide for Q1, operating earnings were down a bit year on year, mainly accountable from our insurance underwriting business. On a quarterly basis, this segment is not very meaningful, often it is foreign exchange related. We have $77bil of float in our insurance business now that is ours to invest. It is underwriting profit if it doesn’t cost us to hold. Satisfactory in Q1 but down from Q1 last year. It is a liability on the balance sheet, but if cost free, it does as much good as net worth does on the balance sheet. If we average no underwriting profit over the life of the business I’ll be very happy and you should be too. We advise you to pay no attention to quarterly or annual realized gains in securities. We make no attempt to time sales in any quarter. We focus on gains over the longer term. But ignore it in shorter term earnings. With that I’d like to give you a preview of a vote that was taken, it is remarkable. We had a shareholder resolution to pay a dividend, implying we weren’t paying a dividend because we were living in this grand style to which we are accustomed, and shareholders were living bereft of millions. We have no proxy vote service companies, and we just counted the votes as they come in. Among class A, it was 90:1 against a dividend, but you may think that I stuffed ballot box, which I did. [laughter] So I took out my votes and it was 40:1 among untainted shareholders. But maybe it is Warren and his rich friends and all the plutocrats in the class A shares who voted against it? But among B shareholders, and we may have one million shareholders of class B, and remarkably, they voted against by a ratio of 45:1, and we were not making any calls to get their vote. I’m not sure any company in world would get quite that vote. And one more slide, which is the disturbing part of that vote, among B shareholders, 97% voted for me. It’s a close vote for either getting rid of me or paying a dividend. The number of people that wanted to have a dividend and wanted me to get out of the place were neck and neck. So you can see why I’m adverse to proposing the dividend to the Board of Directors.

2014 Berkshire Hathaway Annual Meeting

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Transcript and notes from the 2014 Berkshire Hathaway annual meeting. Charlie Munger and Warren Buffett answered questions from shareholders on Saturday May 3rd 2014.

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  • Berkshire Hathaway Annual Meeting 2014 May 3, 2014 Thesenotesarerecollectionsonly,withouttheaidofarecordingdevice.Theyshouldnotbereliedupon.PB

    (PaulAnkaandWarrenBuffettsingaduetintheopeningmovie:WarrensingsastanzaortwotoDebbieBosanek,hislongtimeassistant,andthenPaulsings,butbutshedoesntdoDallas[Ednote:DebbiedoesntdoDallasnowthatissubtle!KudostoDebbie,WarrenandPaul]WB:Goodmorning.Beforewestart,twoveryspecialguestshavetostandup.Eventhoughhewasontour,hetookquickdetour.MyfriendPaulAnkapleasestandup.[clapping]WithallthetalkaboutmysuccessionIwantedtohookupwithsomeonefamousforapossiblesecondcareer.Wereavailableforweddings,barmitzvahsandfunerals.Wegotoffered$1000forPaulandme,whichseemedridiculous.Iwasinsulted,theysaidOK,andoffered$10,000forjustPaul.Wehaveoneotherveryspecialguest.Thisaffairdoesnthappenbyitself.SheevenhadababyboynamedBradyinSeptember.Sheorganizedeverythingheretoday,pleasethankCarrieSova.[clapping]OknowwegettotheminorplayersandwillintroducetheBoardofDirectors.Wellhavetheshareholdersmeetingafter,thenrecessfor15min,thenat3:45begintheshareholdermeeting.IllintroducetheBoard,butpleaseholdyourapplauseuntilImfinishedintroducingthenyoucangocrazy.Inalphabeticalorder:HowardBuffett,SteveBurke,SusanDecker,BillGates,DavidGottesman,CharlotteGuyman,DonKeogh,CharlieMunger,TomMurphy,RonOlson,WalterScott,MerylWitmer.ThatisBoardofDirectorsofBerkshire.[clapping]Wehaveacoupleslidesthenwellmoveintoquestionsuntilnoon,backat1pm,continueuntil3:30pm.Wereleasedourearningsyesterday.WetrytodothatonaFridaysoyouhavefullweekendtodigestthe10qwhichwemakeavailable.Dontjustlookatthesummary,itmakesgreatreading.ThisisoursummaryslideforQ1,operatingearningsweredownabityearonyear,mainlyaccountablefromourinsuranceunderwritingbusiness.Onaquarterlybasis,thissegmentisnotverymeaningful,oftenitisforeignexchangerelated.Wehave$77biloffloatinourinsurancebusinessnowthatisourstoinvest.Itisunderwritingprofitifitdoesntcostustohold.SatisfactoryinQ1butdownfromQ1lastyear.Itisaliabilityonthebalancesheet,butifcostfree,itdoesasmuchgoodasnetworthdoesonthebalancesheet.IfweaveragenounderwritingprofitoverthelifeofthebusinessIllbeveryhappyandyoushouldbetoo.Weadviseyoutopaynoattentiontoquarterlyorannualrealizedgainsinsecurities.Wemakenoattempttotimesalesinanyquarter.Wefocusongainsoverthelongerterm.Butignoreitinshortertermearnings.WiththatIdliketogiveyouapreviewofavotethatwastaken,itisremarkable.Wehadashareholderresolutiontopayadividend,implyingwewerentpayingadividendbecausewewerelivinginthisgrandstyletowhichweareaccustomed,andshareholderswerelivingbereftofmillions.Wehavenoproxyvoteservicecompanies,andwejustcountedthevotesastheycomein.AmongclassA,itwas90:1againstadividend,butyoumaythinkthatIstuffedballotbox,whichIdid.[laughter]SoItookoutmyvotesanditwas40:1amonguntaintedshareholders.ButmaybeitisWarrenandhisrichfriendsandalltheplutocratsintheclassAshareswhovotedagainstit?ButamongBshareholders,andwemayhaveonemillionshareholdersofclassB,andremarkably,theyvotedagainstbyaratioof45:1,andwewerenotmakinganycallstogettheirvote.Imnotsureanycompanyinworldwouldgetquitethatvote.Andonemoreslide,whichisthedisturbingpartofthatvote,amongBshareholders,97%votedforme.Itsaclosevoteforeithergettingridofmeorpayingadividend.Thenumberofpeoplethatwantedtohaveadividendandwantedmetogetoutoftheplacewereneckandneck.SoyoucanseewhyImadversetoproposingthedividendtotheBoardofDirectors.

  • Withthatwelldoquestioningaswealwaysdo.Reporters,analysts,andshareholderswewillalternate.Q1.CarolLoomis.Wegethundredsifnotthousandsofquestions.Ifwedontgettoyourquestion,pleaseexcuseus.WehaventsharedwithWarrenorCharlie,buttheyreadthenewssosomeofthequestionsmaybefamiliar.ThefirstoneisfromWillEldridgeinNYC:CocaColarecentlyapprovedamagnanimouscompensationplan.Youdidnottellshareholdersbeforeyouvoted.Afterthevoteyousaiditwasexcessive,butyoudidntsaythatbefore.Andyoudidnotvoteagainst,youonlyabstained.Icannotseehowtheycanstandupunderexamination.ThisappearsverystrangeunBuffetlikebehavior.Whydidyouabstain?WB:StrangebehaviorisfrequentlyBuffettlike[laughter].Theproposalwasmadebyashareholderwhohadheldalongtime.Hiscalculationsondilutionwerewildlyoff.IdidtalktoMuktharKent,andtoldhimwewouldabstain,butthatweadmiredmanagement,butwhilesimilartootherplans,wewouldabstainbecausewethoughttheplanwasexcessive.Weannouncedthatshortlyafterthevote.Itishavinganeffectoncompensationplans.ThatwasthemosteffectivewayofbehavingforBerkshire.Wemadeaclearstatementaboutexcess,andwedidnotgotowarwithCocaCola,andwedidnotendorsesomecalculationswhichwereinaccurate.Idontthinkgoingtowarisaverygoodideaandifyouallywithsomeoneyouhavetobeverysureofwhomyougowith.Ireceivedsomelettersonit,aftertheyhadbeenreleasedtopress.Ithinkbesttobecarefulofallianceswithsomeoneyoudontknow.IthinkwegotthebestresultforCocaCola.Charlie?CM:IthinkwedideverythingrightIthinkyouhandledthewholesituationverywell.[laughter]WB:Wellthen,CharlieremainsViceChairman.[laughter]ItalkedtoCharliebeforethevote.Ishouldpointout,infairnesstoDavidWinters,hetookfiguresfromtheproxystatement,soIcantfaulthimforthat.Butforthoseofyouwholiketothinkaboutdilution,CocaColahasregularlyrepurchasedsharesissued,sosharecounthascomedownabit.Itinvolves500mshares,issuedoverfouryears.Illmakeitsimpler,andleaveoutoptionsversusperformanceshares.Thatisalotofshares.Assumingalloptionsareissuedat40,andwhenexercised,thestockis60,thenthisisa$10biltransferofvalue($20x500mshares).However,thecompanygetsataxdeductionfor$10bilexpense.Atpresenttaxrate,thisisworthabout$3.5bilinlesstax.Itgets$20bilofproceeds,add$3.5biloftaxsavings,andCocaColareceives$23.5bil.Companywilllikelybuyin391,666,666sharesat$60,soineffect,theCocaColacompanywouldbeout108mshares,on44.4biltotal.Dilution,assumingtheyarebuyingshares,isabout2.5%dilution.Youcanchangepurchasepricebutdoesntchangethingsverymuch.Idontlikedilution,andIdontlike2.5%,butitsmuchlessthanthenumbersquoted.Q2:JonathanBrandt:Berkshiressuccesshistoricallyhasbeenhandsoff.3Gismorehandson.IsthereawaytousezerobasedbudgetingonBRKsubsidiaries?Isitconsistenttohirea3GalumnustorunsubsidiaryofBerkshire?WB:Idontthinktwostylesblendverywell.3Gdoesmagnificentjobrunningbusinesses,andthereisnoquestionthatitisadifferentstyle.Idontthinkitwouldpaytotrytoblendthetwo.Ithinkwewillseemoreopportunitiestopartnerwith3G.TheyareasableasanyoneIhaveseeninmanagementof

  • businesses.Theyaremarvelouspartners,morethanfair.Weareverylikelytopartnerwiththem.Somethingswecoulddowouldbeverylarge.Idontthinkblendingoftwostyleswouldworkwell.ManagerswhentheyjoinBerkshirearejoiningalargebusinessunlikeanythingelse.Itisahugecorporateassetwehaveanditwillcontinuetogrow.Wewanttosendaclearmessagetoourmanagers.Butwewelcomechancetojoinwith3Ginfuturedeals.CM:Idontthinkweveeverhadapolicyofrewardingoverstaffing.WB:Atleastnotatheadoffice,whereweonlyfeelhappywhenpeoplearesittingineachotherslaps.[laughter]Wedontwishtoenforceastrongdisciplineonwhethersubsidiaryhasafewtoomanypeople.Itwontalwaysbetrue.Weencouragebyexamplebutnotbyedict.CM:Ithinkalotofgreatbusinessesspillalittle,becausetheydontwanttobefanaticsandthatsOK.Idontthinkyouneedtohavethelastnickeloutofthestaffingcosts.Q3:Station1:Doug,Colorado.WynnsaidObamaisthebiggestwetblankettotheeconomy.Othercountriesareloweringtaxesandreducingdebt.CanyouconvinceObamatochangethetrainsdirection?WB:DougIthinkIllletyoucommunicatewithhimdirectly.Idontagreewithanumberofthingsyousay.Americanbusinessisdoingexceptionallywell.Wewillhaveadifferenceofopiniononpolitics,andyouwontconvincemeandIwontconvinceyou.Justlookatcorporateprofits,andachartofcorporatetaxesasapercentageofGDP.Corporatetaxesaredownfrom4%to2%ofGDP,whenothertaxeshaveincreased.Americanearningsonnettangibleassets,themeasureofprofitabilityoverall,istheenvyoftheworld.Wehaveextraordinaryreturns.OurtaxrateforcorporatesislowernowthanwhenCharlieandIwereoperating.Wellcallatruce.IllletCharliecomment.CM:Imgoingtoavoidthisone.WB:Andpeoplecomplainaboutmeabstaining![laughter]Q4.BeckyQuick(BQ):Muchadmiration,butifmanagementwasntcapableofreturningbetterreturnthanindex,areyouchangingyardstick?MissedfiveyearaveragereturnversusS&P?WB:Wearenotchangingtheyardstick.Wesaidinthe2012annualreportthatwewoulddoworseingoodyears,andwesaidthatifthemarketwasstrongin2013,Ipredictedourstreakwillend.Ithinktherewere2yearsinlast40wheremarketdidbetterthanlastyear.Wewillunderperforminstrongyears,wewillmatchinmediumyears,andwewilldobetterindownyears.Overanycyclewewilloutperform,butthereisnoguaranteeonthat.CM:WBtalksaboutincreasingbookvalueafterpayingfullcorporatetaxesof35%.Indicesdonthavetopaytaxes.Inlast10years,Berkshirespretaxprofitsincreasedby$90billion.IfthisisfailureIwantmoreofit.

  • Q5:JayGelb(JG):Intrinsicvalue,yousignalundervaluedversusintrinsicvalue.Whatcanyoudoaboutit?WouldyouconsideranIPOoftheoperatingunits?WB:Noonthesecondpartofthat.Wetrytoexplainintrinsicvalue(andIveneverseenanannualwhichusesthatterm)wherethereisadifferencebetweencarryingvalueandrealvalue.GEICOiscarriedat$1bilovertangible,butitisreallyworth$20bilover.Weareeagertobuystockat120%ofbookvalue.Bookis$230bil.AndobviouslyIthinkthat$45biloverthatfigurewearegettingabargainoverintrinsic.Itchangesfromdaytoday,butnotalot,butchangesoverthequartersandyears.IfyouaskCharlieandmetowritedownafigureastointrinsicvalue,Ithinkwedbewithin5%ofeachother,butnot1%.WewillcontinuetotrytogiveinformationtoshareholdersontheimportantunitsatBerkshire.Someofoursmallbusinessesmaybeworth$1biloreven$2bil,butthesmallonesdonthaveabigimpact.Railroad,utilityandinsurancearebig,andwetrytousethewordsandnumbersthatweusewhenthinkingaboutthosebusinessesourselves.Weonlybelieveinrepurchasingshareswhenwecanbuyatadiscounttointrinsicvalue.The120%isaloudshoutoutastoafigurethatwethinkissignificantlybelowintrinsic.Somecompaniesbuyinsharestocoveroptions.Youshouldntbuyitinifsharesareovervalued.Negatingdilutionisntrightwhensharesareexpensive.Ifmanagementcanbuyadollarbillfor90cents,theyaredoingshareholdersagoodjob.Ifspend$1.10,nothelping.CM:Weveneverwantedtoget[BRKshareprice]wayoverintrinsicvaluetobeabletoissueshares.Wedontwantanadvantageforourselvesanddisadvantageforthem.Thepeoplewhowantthepriceupwanteggintheirbeer.Itsokifitsalittlebelow.Ithinkstockwilleventuallygoabovewhetherwelikeitornot.WB:Wehavewatchedthisinpast,conglomeratesissuingstockathighpricestoissueandtakeovercompanies.Itworks,butifyoucheatonearningsandwheredoyoustop.Thatisagamewedontwanttoplay,itisverydistasteful.Anditcomesinwaves.Wedontwanttocomeclosetoplayingit.UnlessImcarefulCharliewillnamenamessowebettermoveon.[laughter]Q6:Station2:LosAngeles.Berkshireisknowntobuywholecompanies.Acquisitionsofothercompaniesisdisruptive.Whatdoyoudotogaintrust?WB:Wevekeptourwordtothem.Wehavetobecarefulaboutwhatwepromise.Wecantpromisenolayoffs.Wecanpromisethatwewontselltheirbusiness,evenifdisappointing,aslongasnothavingcontinuinglossesorlaborproblems.Youwouldnotgetapassinggradeinbusinessschoolifyouputdownourprinciplesforwhywekeepsomebusinesses,butwemadeapromise.Ifwedontkeepourpromise,wordwouldgetaround.Welisttheeconomicprinciples,somanagerswhoselltousknowtheycancountonit.Wecantmakesomepromises,andwedontpromisenevertosell.Butweveonlyhadtogetridofafewbusinesses,includingtheoriginaltextilebusiness.Wealsoletmanagerscontinuetoruntheirbusiness.Wearenowinclassthatishardtocompetewith.Aprivateequityfirmwontbeimpressedbywhatweputinthebackofourannualreport.PeoplewhoarerichandrunacompanytheirgrandfatherstartedtheydontwanttohanditovertoacoupleMBAswhowanttoshowtheirstuff.Aslongaswebehaveproperly,wewillmaintainthatasset,andmanywillhavetroublecompetingwithit.Itishowwewanttooperate.Ithinkitwillcontinuetoworkwell.

  • CM:Obviouslywebehavethewaywedobecauseweenjoydoingit.Numbertwo,ithasdoneprettywellsoweareunlikelytostop.WB:Youcantellhedoesntgetpaidbytheword.[laughter]Q7:ARS:GivenyoursonHowardvotedfortheCokepayplanasadirector,howwillhebeaProtectorofcultureatBerkshire?WB:Ivoted,asadirectorofvariouscompanies,Ihavevotedforacquisitionandcompplansthatdidntmakesense.Thenature,andthisisworthexploring,ofBoardsisthattheyarepartbusinessorganizationsandpartsocialorganizations.Theybehavewithbothabusinessbrainandasocialbrain.In55yearsofbeingoncorporateboards,19companiesotherthanBerkshire,Iveneverseenacompplancomeinandgetadissentingvote.Boarddelegatesdecisiontoacompensationcommittee.Thecompensationcommitteereportsonactivities.Youdelegatedtothiscommittee.Thatiswayitworks.Imnotsayingthatisthewayitshouldwork.Bearinmindthatindependentdirectorsreceiving$200kor$300k,theyarenotindependent.Forgoingtowork46timesayear,thereispleasantcompanywhengetthereitsgoodwork.Iwasoncompensationcommitteeonce,andtheresultwasnotgood,theydontlookforDobermans,theywantCockerSpanielswiththeirtailswagging.MysonHowards(andmytwootherchildrens)jobisnottoselecttheCEOortosetcompensation.HowardistheretofacilitateachangeifBoardofDirectorsdecideitisneeded.Howieisperfectguytocarrythatout.Ivotedforcompensationplansinvariousplacesthatwerefarfromperfect.IwasmadechairmanofSalomonsCM:WarrenwasvoteddownatSalomonInc.Ithinkgeneralideathatpeopleshouldshoutdowneverythingtheydisapproveofisntright.Inlifeyouhavetopickyourspots.Ifwealldidthat,wewouldntbeabletoheareachother.WB:Ifyoukeepbelchingatthedinnertable,youwillsoonbeeatinginkitchen.[laughter]Peopleneedtopicktheirspotsortheywillnotonlybeignored,butnotheardonotherissues.Charliegivesthemaritaladvicearoundhere.Attemptingtochangethebehaviorofothers...CM:Ioffendmorepeoplethanyoudo,andIamsatisfiedwiththelevelofdisapproval.Q8:GregoryWarren,Morningstar(GW):Themeasureofagoodmanagementisabilitytogenerateoutsizedreturns,butsheersizemakesithard.Whatiscostofcapitalnow,withnewcapexheavyfirms?WB:Thereisnoquestionthatsizeisananchortoperformance.Weintendtoprovethatuptothepointitstartsreallybiting.Wecanthavesamereturnsoncapitalbase,marketcapof$300bil.Archimedes,didnthesayhecouldmovetheworldifhehadalongenoughlever,andwishIhadthatlever.Wellanswertwoquestions.Costofcapitaliswhatcanbeproducedbyoursecondbestidea.Ourbestideahastoexceedthat.WeveheardsomanydiscussionsonhowtofigureoutthecostofcapitalCM:Iveneverheardanintelligentone.

  • WB:Wedontknow,IprobablyvoteifIdontlikeitbutsomeexceptionstothat.Therealtestovertimeisthatthecapitalweretainproducesmorethanadollarofmarketvalueovertime.Ifwekeepputtingbillionsin,andaddingmorethantheircost,wellkeepdoingit.Wearespendingcloseto$3bilonaCanadiancompany,andwewillbebetteroffandthatwasbestthingtodothatdaywiththat$3bil.IveneverseenaCEOwantingtodoadealandaCFOsayitdidntexceedcostofcapital.Wethinkwecanevaluatebusinesses,weknowourcapital.Weareconstantlymeasuringthatopportunitycost,itisanimportantsubject.CM:Aphraselikecostofcapitalwejustdontuseit.Warrensdefinitionofaddingmoreinmarketvaluethanweputinwillneverbetaughtinbusinessschoolthephrasetoretaintocreatemorevalue,isthebestdescription.Itssimple:wereright,andtheyarewrong.WB:Ilookgoodcomparedtohim,dontI?[laughter]Q9:Station9,Omaha.DidyoubuytheNebraskaFurnitureMartat85%ofbookvalue,or2xearnings?WB:Iwishwehadboughtitthatcheap.Wepaid11or12xp/efor80%ofcompany,anditwasnotadiscounttobook,$60mwastheequivalentfullpurchaseprice,andtherewasasecondtransactioninvolved.$60mfor100%,wasnotabargainpurchase,itwasmorethanbookatthetime.Itwouldhavebeenamultiple11xor12xpretax.Ithad$100msales,pretax7%margin,orabout4.5%aftertax.Thatisballpark.Itwasgreatbusiness,butitwasnotabargain.Itwasgreatopportunitytojoinwiththisgreatfamily.TherewasanothercompanyfromGermanytryingtobuyitattime.ErskineBowleswasrepresentingthemactually.Onmybirthdayin1983,inAugust,IgavealettertoMrs.B,andLouishersontoldherwhatwasinit.Iasked,didsheoweanymoney,didsheownbuilding?No,andyesshedid.Ifyouwanttotalkbargainpurchases,weshouldtalkaboutgoingouttoNFMforshopping.Wehadarecord$40minsalesfortheweeklastyear.Weareup7%nowvs.lastyear.OnTuesdaywedid$7.8m.WeownlargestfurniturestoreinReno,LasVegas,etc.OursalesonTuesdaywerelargerthanthemonthlysalesatanyofthoseplaces.Andgoodnewsthatthereisstilltime![laughter]IhavetogiveaplugforthenewDallasstore.Itisstoreyouwouldntbelieveithas1.8msquarefeet.Itwilldomorevolumethananyotherhomefurnishingsstoreinworldbyafactorof2.Weareevenputtinginstreets.Michelleshowedmearoundlastweek.MichellestartedworkatNFMasacashier,andnowsheisinchargeofahundredofmillionsdollarproject.ItisthegoodthingaboutAmerica.Andhernumbertwopersonwhocamewithus,thatwasMichelleshusband.Interestingpillowtalk,howmanycubicyardsdidyoumovetoday?[laughter]Q10:CL:Mostpopularquestionasked.Youaretrusteeforwifesbenefit,10%inshorttermbonds,and90%inS&Plowcostfund.Whyanindexfund,notBerkshireshares?IsitbecausetheIndexfundwilloutperformwhenthecompanyisrunbyanewCEO?WB:ThatletterdidntcomefromVanguardbyanychance,didit?[laughter]WhenIdie,everysinglesharewillgoto5foundations.Theywillbedistributedover10yearsaftermyestateisclosed.MyinstructionsaretonotsellanyBerkshiresharesuntiltheyhavetobesold.MyviewsonBerkshirearesosolidIcantthinkofanythingbettertodowithit.Formywife,itisnotaquestionofmaximizingcapital,itisaboutmaximizingsafetyandnotdoingworse.Itisapeaceofmindquestion.OnthepartI

  • careaboutmaximizing,Ihaveinstructedthethreetrusteesnottosellasingleshareuntiltheyhaveto,thatisgoodfor[5]yrs.CM:Warrenispeculiarabouthowhedistributesmoneytohisfamily.Ithinkheshoulddoashedamnwellpleases.[lightapplause]WB:DoIhearanyofmychildrenapplauding?CM:Youaredowntoafewtrifles,Warren,andSusiewasthesame,reallyisameritocrat.Hewantsmoneytogobacktocivilizationinwhichitwasearned.Ilikebeingassociatedwithit.Q11:JonathanBrandt:BNSFdoingwell,butUnionPacifichasgrownearningsmore?WB:Wevehandledmorevolumethaninpast.In2006,wedid219kpeakcarloads.Wevehadalotofserviceproblemsonthenorthernroute.WevebeenspendingmoremoneythanUnionPacific,andtheyspendalot,totrytoanticipateproblems.Andwhenyougetabigincreaseinvolumeonthatoneroute,fromBakkenshaleoil,therearealotoftrainsrunningnowthatwerentrunningfiveyearsago.MattRosemightaddressproblemsofcoldweather.Sendingpeopleouttoworkonproblematthattemperaturecanbelifethreatening.MattRose:Industrygrewat[+100k]units,andwehandled53%ofunits.Oilcamealotfasterthanweexpected,andwevebeenspendingtobuildintoit.IvebeenCEO13years,andIhaveneverseenweatherlikeitthispastwinter.Wehad83inchesofsnowinChicago.MultipledayswerenotoverzerodegreesinMinnesota.Weknowitisanoutdoorsport.Wehandled206kunitslastweek.Norailroadhashandled205kunits.Wearemakinginvestments.WB:Wewillspend$5bilontherailroadthisyear.Norailroadhasspentclosetothat.Igotaletterfromguywhowashavingproblemsgettingfertilizer.Wedid52[cars],andtheywillgetthereintimefortheplanting.Wetakeitseriously.Nowitcanfloodinthesummer.Wearefunctioningbetterandearningsarelikelytobebetter.Butincrediblefloodscanhurttoo.Wearedealingwith23,000milesoftrack.OneweaklinkisChicagoforallfourrailroads.ButyouarerightJon,incomparativefinancials,andMattandIarepayingalotofattentionandIthinkwillgetbetterovertherestofthisyear.Q12:Station4,Omaha.Berkshireusesnaturalgastogenerateelectricity.Howcanwegetanadequatesupplyofnaturalgas,andifpricegoesup,howcancompanysellelectricitywithsatisfactoryreturn?WB:Wearethelargestalternativeenergysourceinthecountry.By2015,40%ofourelectricityinIowawillcomethroughwind.Itisunlikeanyothercompanyyoucanfindinthecountry.Gregwillanswerspecificsonnaturalgasdependentunits.Imnotworriedabouttheissueyouraised,wehaveopportunitytoshifttocoal.GregAbel:MatttouchedontheverycoldwinterwehadintheMidwest.Wewerechallenged.Naturalgaswasavailabletoheathomesandkeeplightson.Butclearlywehavetolookatuniquesituation,aswemovetousingmoregasinUS.Thispastyearwewere,inrenewables,39%windinIowain2013.

  • Thereisawaytomeetneedsofcustomersincosteffectiveway.Wehaveuniquewaysinourutilities,whenwepaymoreforgasforinstance,wehaveclearpassthroughsbacktoourcustomers.WB:Ourgaspipelinesmoveabout8%ofnaturalgasinUSA.Gasintothisareacomesthroughapipelineweown.WerenamedtoBerkshireHathawayEnergy.WhenweboughtitfromEnron(andDynergyinbetween),theyhadskimpedonmaintenance.Itwasranked#42outof42.Lastyearitwasranked#1.WentfromlasttofirstunderGregsmanagement,andsoItipmyhattohim.#2wasourotherpipeline,sowearerunning1and2atthemoment.Q13:BQ:Successorquestioniscommon,butanydiscussionaboutareplacementforCharlie?Dynamicduostill?WB:Charlieismycanaryinthecoalmine.Charlierecentlyturned90,andIfinditencouraginghowheishandlingmiddleage.[laughter]ButnowImgettingsensitiveyouraisedapointtheynevertalkaboutreplacingCharlie.IthinklikelythatwhoeverreplacesmeasCEOwillhavesomeonetheyworkwithveryclosely,itisagreatwaytooperate.Berkshireisbetteroffbecauseweworkedtogether,thereisnoquestion.[clapping]IdothinkGoizueta&Keogh,CapCitiesTomMurphy&DanBurke,andcompanyaccomplishedfarmorebecauseoftwoincrediblepeoplewithcomplimentarytalents.Itisgreatwaytooperate.Youcantwillittosomebody.Ifafewyearsaftersuccessortakesover,Idbeverysurprisediftherewasntsomerelationshiporpartnership,itcanenhanceachievementsandthefuntheyhave.ButnoonehasbroughtupsuccessortoCharlie.CM:Idontthinktheworldhasmuchtoworryabout.Most90yearoldmenaregonesoonenough.WB:Thecanaryhasspoken.[laughter]Q14:JG:ChairmanpositionatBNSFforMattRose?Ajit?WB:OnlysuccessionforAjitisreincarnation.Butwedonthavetoworryforalongtime.MattRosesdecisionhasnoimpactonsuccessionatBerkshire.MattsplanwasdesignedtofitforissuesatBNSF.IhavelettersfromeveryoneofmymanagerstellingmewhatIshoulddoifsomethinghappenstothemtonight.Insometheytalkaboutmorethanoneperson,andstrengthsandweaknesses.Iwouldntmakeassumptionsaboutsubsidiaries.CM:Iamnottheleastbitworriedaboutit.IwishmybiggestproblemwassuccessionatBerkshire.Weareinverygoodshape.Q15:Station5,Minnesota.Ifyouwererequiredtoinvesttotalnetworthincompany,in2009,itwasWellsFargo.Andtoday?WB:DidyouexcludeBerkshire?Itsagreatquestion,butitisnotgoingtogetananswer.CM:Youanswereditperfectly...

  • Q16:ARS:Proxystatements,highestpaidexecutives.Warren,CharlieandMarcOnly.Itwouldbeinstructivetoincludeothers,likeAjitorMatt.Wouldyouinspiritoftransparencyadd?HowmuchshouldnextCEObepaid?WB:ThenextCEOisentitledtoalot,howmuchtheyacceptisinterestingquestion.Iintendtowriteaboutitinthenextannualreport.WearefollowingtheSECrulesonofficersrequiredtobeinproxystatement.Inmysportingmood,Comcasthaspeoplewhomakealotmoremoneythanthoselistedinproxystatement.Isittobenefitofshareholderstolisteveryone,likethenewscasters?IthinkshareholdersofComcastwouldbehurtbylistingtopfivesalaries,atasubsidiarylikeCNBC.Ithinkthereisagoodreasonforusnotpublishingsalariesofourtoptenmanagers.AtSalomon,wementionedearlier,virtuallyeveryonewasdissatisfiedwithwhattheymade.Theabsoluteamountdidntmatter,itwasrelativetoothers.Whenmanagementmadesecretdealwiththearbitragegroup,wherebyMeriweathergotpaidalotofmoney,andIwouldarguetheyearnedit,butthejealousythatbrokeoutwasaproblem.Itisveryseldomthatpublishingcompensationaccomplishesmuchforshareholders.CorporateCEOswouldbebeingpaidalotlessmoneyifproxystatementshadntrevealedhowmuchotherswerebeingpaid.Americanshareholdersarepayingasignificantpricetolookatproxystatementseveryyear.CM:Inaspiritoftransparency,youareaskingforsomethingthatwouldntbegoodforshareholders.Sowearentgoingtodoit.WedontwanttoaddtothecultureofenvyinAmerica.Ourpracticesareenvydampeners.WB:NoCEOlooksatproxiesandsomecompetitorssalaryandthinksImworthless.CM:Envyisdoingthiscountryalotofharm.Q17:GW:Retainedearningsandcapitalspending?WB:BNSFisnotgoingtobuyanotherbusiness.BHEnergywillhavemultipleopportunitiestobuyotherbusinesses.WespentasubstantialamountonNVEnergy,andwejustboughttransmissionlinesinAlberta.Wevecomeupwithreallylargebusinessestobuy.AtBNSF,wewillspendalotofmoneytohavethebestrailroadpossible,butwewontbuyotherbusinessesatBNSF.WewilldistributesubstantialmoneyfromBNSF,andhaveagoodlevelofdebt.AtMidAmericanweneedmoneyfromshareholders,90%isownedbyBerkshireandGregandWalterScotthavebalance.Ifweneedmoreequitywewillhaveaproratasubscription,mayoptoutbutpurchaseswillimprovethevalueoftheirshares.Wemayinvestbillionsthere.ButatBNSFwewillspendtoimproverailroad.Wevespent$5bilonacquisitionsroughly,and$2.8bilonpropertyplant&equipment,butwearefindingthingstodothattendtosopupthecash.Wewillalwayskeep$20bilaround.Wewillneverbedependentonthekindnessofstrangers(AlthoughthatdidntworkouttowellforMarge[meantBlanche]DuBois.)Wecannotdependonanyoneelse,wehavetokeepourownstrength,wevespenttoomuchtimetohavethatonemomentdestroyus.WelenttoHarleyDavidsonat15%.Finecompany,buttheyneededtheycash.Whenyouneedcash,itistheonlythingyouneed.Cashislikeoxygen,youdontnoticeit99.9%ofthetime,butwhenabsentitistheonlythingyounotice.Above$20bil,welltrytofindwaystoinvestitintelligently.Butwellneverfeeltheneedtospendit.

  • CM:Ithinkweareveryluckytohavethesebusinessesthatcanemploynewcapitalatrespectablerates.Earlierwedidnthavesuchopportunities.Nowitisablessing.NooneinhisrightmindwouldwanttogetridofBNSFandMidAmerican.Ilovetheopportunitytospendmoneywhenshorttermratesare0.5%orlessWB:Compoundinterestwillcatchupwithus.Ithasdampenedthings,butnotdelivereditsfinalblowyet.Q18:Station6:PleasedontmoveannualmeetingtoDallas,Ivegotmysystemworkedout.Operatingcompanies,andcashtotheMothership.Doyoufightorarguewhenmanagingpartnership?WB:CMandIhaveneverhadanargument.WemetwhenIwas29andhewas35.Inthose55years,wevedisagreedonalotofthings.Butitneverhasandneverwillleadtoanargument.Wearguewithothers.IcalledCharlieontheCocaColavote.CM:Mostofthetimewethinkalike.Thatisproblem,ifoneofusmissesit,theotherislikelytotoo.WB:Thereallybadmistakeswevemade,Ivemadethem.ImalittlemoreinclinedtoactionthanCharlie.Wouldyousaythatsright,Charlie?CM:Youoncecalledmetheabominablenoman.WB:Backtothefirstpartofthequestion,thecashfromthesubsidiaries.Wedontcountthemoneyintheenergybusinessorrailroad.Iknowwhereitisandwherewecanmakeaphonecallandgetit.Withinterestrateshere,mostofcompanieshavemorecashthantheyusedto.Setupsweepaccountsmaybe?Notsomethingwethinkaboutdaytoday.Iknowwhenwewillneedcash.IknowwhatImaydowiththecash,and50/50probabilities.Iknowwherecashiscomingfrom.Maybeasweepaccountwouldmakesense.Wearenotbigdisciplinarians.ABerkshirecompanythathasalotofcasharoundeveryonceinawhilesendsmesome.Idontwanttoencouragemanagersaboutanewwayofbehaving,Isortofadapttothecompanies,unlessIreallyneeditthenIgrabit.CM:Andthatsjustfine.Q19:CL:IninterviewinApril,yousaidIhopewegetquestionsonourweakpoints.Whataretheyandwhatcanwedoaboutthem?WB:Thatwouldjustmakeiteasierforthejournalists.Wehavealotofweakpoints.Wepointthemoutwhenwecan.Ifweexecutedsweepaccountforsubsidiaries,wewouldhaveafewmoredollarsthanwehavenow.Weareverydisciplinedinsomeways,andbyordinarybusinessstandardsundisciplinedinotherways.AclearweakpointisthatIamslowtomakepersonnelchanges.CMandIhadwonderfulfriend,andwewereslowtomakeachange,anditwasntkillingusinthebusiness.Howlongdidwego?CM:Idontknowexactly.Sweepaccountsystem,itslikeafriendwhowenttogivebloodanditwasntflowingveryeasilyandtheystartedsqueezinghisarm.

  • WB:Ourmanagersarelistening,dontgivethemthatmetaphor.CM:Idontlikeideaofeverydollarthatcomesinthatitgetssweptaway.TeledyneandLitton,theyswepteverydimeeveryday,anditcreatedatoneinthecompanythatislessdesirable.WetookamanagerdirectlyfromtheexecutivechairdirectlytotheAlzheimershome.WB:ThatissensitivesubjectCharlie[laughter]CM:Iwanttobecareful.WB:Wewillbeslow.Therewillbetimeswhenourlackofsupervisionoversubsidiarieswillmakeusmisssomething.Givingourmanagersthefreedomtheyenjoyallowsthemtoaccomplishalot.Somethingwillhappen,andpeoplewillpointouttheleewaywegaveallowedaproblemtohappen.Theywillsaythatifwehadmoreoversight,itwouldnthavehappened.Theywillberight,buttheywontbeabletomeasurethegainswehaveachievedbecausewegavethemsomuchleeway.WehavenoHRandnogeneralcounseloffice.Thatisunthinkableformostcompanies.Nota100%benefit,butonbalanceitisbenefit.Youshouldhavebeenrestrictingtheactivities.Whenithappenswewillbecriticized,andourreactionwillbethatthattheyarewrong,butwewilllookbadinthatindividualcase.CM:Bythestandardsoftherestoftheworld,weovertrust,butareresultsarebetterbecauseofit.Wehaveselectedpeoplethatwecantrust.Placesworkbetterwhentheycreatecultureofdeservedtrust.Modernaccountingstandardswhichmeasuresinternalcontrolsitwilldomoreharmthangood.Q20:JB:Seescandiesgrewprofitsin80s,90s,butnotlastdecade.Why?WB:BoxedchocolatenotgrowingintheUS.Ifyouback100years,eachcityofanysizewascharacterizedbyshopsofchocolateshops.PredecessortoPepsicolawascandyshopcompany,mostshopswereinNYC.CM:[Charles]Guth.WB:LoftswasthenameofthecandystoresinNewYorkCity.Boxedchocolateshavelostpositiontoothersnacks.Seeshasdoneremarkablywellversusotherchocolatecompanies.Wecantdomuchaboutincreasingthesizeofthemarket.Wevetriedmovingoutofastronggeographymultipletimes.WhatwewereearninginCAin1970swasgreat,butwetriedtomovenationalandwedidntgetrich.Itdoesnttravelthatwell.CM:Sometimesitdoesandsometimesitdoesnt.Youfindoutwhatworksbytryingit.WB:InEasttheypreferdarkchocolate,inWestitismilkchocolate.WevedoneverywellinSees,ithasprovideduswithearningstobuyotherbusinesses,butreallyitopenedmyeyestothepowerofbrands.WeprobablymadethemoneyinCocaColabecauseweboughtSees.Weownedoneandsawpossibilitiesandwhatyoucando.IfwehadnotownedSees,wemayhavenothaveownedCoke.CM:MaincontributiontoBerkshirewasignoranceremoval.Ifitwerentforfactthatwewerentsogoodatremovingignorance,wedbenothingtoday.Wewereprettydamnstupidwhenwebought

  • Seesjustalittlelessstupidenoughtobuyit.ThebestthingaboutBerkshireisthatwehaveremovedalotofignorance.Thenicethingiswestillhavealotmoreignoranceleft.WB:ThatswhathappenswhenIcallonhim.[laughter]Q21:Station7:BAMLinvestmentandTier1capital.AnybenefittoBerkshire?WB:Itcameaboutagoodmanymonthsago,BrianMoynihancalledmeandaskedmeifwewouldchangeourpreferredfromcumulativetononcumulativepreferred.Therearecertaindefectstoit.Theyareaterriblyweakformofsecurity,buttheycountdifferentlyincapitalcosttobanks.Butifyoudoit,Briansaidwewouldbewillingtomakeyourpreferrednoncallablefor5years.Inworldof5basispointmoney,Iwasverywillingtomakethattradeoff.Igetfiveyearnoncallable6%preferreds,whichIcanuseaspaymentforthewarrantswehave.BofAgetstouseittotheirbenefitincalculationofcapital.TheerrorwasdonebeforemiscalculationonsomestructurednotesatMerrillLynch.Thaterrordoesntbotherme.Wehavea20kpagetaxreturn,youdobestyoucan.ErrordidntaffectGAAPincome.Theywillpaypenalty,butdoesntchangemyfeelingaboutBAMLortheirmanagementteam.Noncumulativeriskisverylowforus,and5yearnoncallableisverygoodforus.Charlie?CM:Well,Iagreewithyou.Q22:BQ:NetJets,growth10yearsago,howisitnow?WB:Itisaperfectlygoodbusiness.NetJetsthenumberofnewunitvolumewascorrelatedwiththestockmarketin2007/2008.Wehadfairnumberofpeoplewhoseincomewasdependentonstockmarketbehavior,particularlyhedgefundmanagers.Whencontractsranout,mostlyin2011and2012,theydidntrenew.Untilthelastsixor8months,netownershipwasdecliningjustslightly.Thathasturnedaroundslightly.Butitisnotahugegrowthbusiness.Weare60%oftheindustry,andnooneisremotelycloseassecond.ButIdontseemarketdoublingortripling.WearegoingtoChinasoon.Butthatisaverylongrangeplay.WeareinEU,butthatstillisdeclininginunitvolume.Flighthourshavepickedupinlastsixmonthstoayear.Thatfelloffpreviously.Iwouldnotcharacterizeitasgrowthbusiness,butitissatisfactory.CM:Idemonstratedmyoptimismbybuying25morehours.WB:Itwasatoughsell.[laughter]Q23:JG:Acquisitions,howbig?SourcesoffundsfromIBMandotherstockholdings?WB:Theycouldbeasourceoffundsbutunlikelytosellthem.Ourgoalistobuybigbusinesses.Weareaboutbuildingearningpower.WearelookingtoaddearningpowertoBerkshire.Wedontgetopportunitiesthatoften.Ifopportunityislargeenough,wecandipintohugereservoirofsecurities.Wehave$40bilandImwillingtotakeitto$20bil.Thatcouldhappen,thisyear,ortenyearsfromnow,youneverknow.

  • CM:Ithinkouracquisitionshavebeenirregularinpast,andwillbeirregularinfuture.WewillgetmoreautomaticreinvestmentofcapitalinBNSFandenergy.WB:Whatreallyturnsusonisfindingabusinessthatwillbeearningmoney2030yearsfromnow.Profitsfrommarketablesecuritieshavehelped.WehaveToddandTedthinkingaboutmarketablesecurities.Butwhatwearereallyspendingourtimeonisbuyingbusinesses.Ifwewantedtoraise$10bil,thestockswewouldsellwouldnotbethenamesyoumentioned.Q24:Station8,GenoaItaly.IncreasingleverageforBerkshire?FollowingacquisitionofBNSF,afewyearsago,partiallyfinancedbyBerkshirestock,wehadcasharound.Increaseleveragetoday?Whynotgooutforseveralbillionsinbondswithlongmaturityandmakegooduseofit?WB:Whatyousaymakesgreatsense.ButifyouaskedCharlieandme40yearsagoifwewerelookingatpresentsetofinterestrates,andwouldweborrowmoneyforlongterm,wewouldhavesaidyes.CM:Itwouldnthavebeenaharddecision.WB:Wehavewaytogeneratecashthroughourinsurancefloatof$77bil.Wedontliketooperateconservativeleveragedcompanyandthenchangepath.WedontwanttoimpactthevaluetopeoplewhohaveboughtAAdebtatparinthepast.WehavenoproblemleveragingtheutilityorBNSF.Butifyouanalyticallylookatthem,bothcouldwithstandmoredebt.WhenweboughtBNSF,usingequityhelpedthemmakethedeal.Itwasnotasmartdeal.Icouldhaverepurchasedstockafterandshouldhave.Another$3040bilofdebtwouldbenothing,wouldcostverylittle.Wedonthavegreatplacestoputithowever,evidencedby$25bilofexcesscash.Wearesellingstructuredsettlementsthathaveverylongduration,andinterestcostsarelessthansellingbonds.Ifseeareallygood$50bildeal,wedfindwaystoborrowthemoneyafterwedidit.CM:Ithinkwedwelcomeit.Butwewouldnotdoitinadvance.Q25:ARS.GalenaILBYDislikeTesla.Coalhaulingbusiness.Howaboutrisksandopportunitiesinclimatechange?WB:Statedfactsonalotofbusinesses.Itcanhaveanimpactoninsurance.BNSFwillcarrylesscoalatsomepointtoo.Butthechangesdontoperateinthetimeperiodofourbusinesses.WhenAjitandItalkaboutcatastropheinsurance,itaboutearthquakesinNZ,etc.Theimpactofclimatechangeonyeartoyearcatastropheprobabilitiesisverylow.Wellcontinuetodevelopalternativeformsofenergy.Werehappytocarrythecoal.Weareacommoncarrier.Wemightwantnottocarryammonia,butweareacommoncarrier,sobylawwehavetocarryfreightofferedtous.InmakinginvestmentdecisioninBHormostcountries,Idontthinkclimatechangeshouldbefactorindecisionprocess.CM:Ithinkthatmostwhoclaimclimatechangewillchangetornadosandstorms,aremostlyoverclaiming.Mostaretalkingthroughtheirhats.Weareagnostic.Thereclearlyisglobalwarming.Butthereisaclassofpeoplewholikehavingcatastrophestoworryabout.Weareverywelllocatedlongtermnomatterwhatweather.Wellhavetoproducemoreelectricityfromwindandsun.GEICOmade

  • alotofmoneyfrominternetwhichtheydidntplanon.Weareingoodshapebutdontdeservecreditforit,wejuststumbledintoit.Q26:GW:$7bileachnowforToddandTed.Howmuchnowrunning,andwhatgrowinginto?Howwillrolesexpand?WB:Igotthroughcollegeansweringfewerquestionsthanthat.[laughter]Itis$7bilnow.Wewillchangethatupwards,butnotmonthbymonth.Theywillbehandlingmoremoneyinfuturethantheyarenow.Theyareseeingitgetsalittlemoredifficultassumsgetlarger.Itisbettertomovemoneytothemandawayfrommeastimepasses.TheyarebothterrificforBerkshire,theyeachknowawholelotaboutbusinessandawholelotaboutmanagement,andalotcomesacrossmydesk,andIgetanideaonit,buttheycangetinvolved.Itisacinchthatthatthiswillcontinue.Theydontaskforextracompensation.Theyare100%attunedtoBerkshire.TheyknowhowIthink.ItsbeenabigbigplusforBerkshire.Theywillbemoreimportantasyearsgoby.CM:Ivenothingtoadd.Q27:Station9.Toronto.Lowrateshaveledtohousingbubble,andpotentiallyabondbubble,doyouseeneedforhikeinrates?WB:Whowouldhaveguessedratesthislowforthislong?IwouldsayIamsurprisedathowwellthingsaregoing.Itisworkingwell.IwouldliketosayIwouldhavedonesamethingandtakecredit.Iwassurprised.Itisveryinterestingmovie,wehaventseenbefore,andwedontknowhowitends.IthinkBernankewasaheroattimeofcrashandsubsequently.Verysmartman,hehandledthingsverywell.WhenminutesofFedbecameavailablefor2007and2008,wesawthatmembersofFedwerenotgettingit.Itwasfascinating.Theydidntseemtounderstandhowseriousthingswere.Hewasnotgettingunanimousviewfromthosearoundhim.Buthewentaheadwiththem,anddidmasterfuljob.Wewillseehowthismovieplaysoutifwekeepratesclosetozeroforlongtime,andtaperingbutstillbuying.CM:NooneinJapanwouldhaveanticipatedthatratescouldstaydownfor20yearsandcommonstockswoulddeclinefor20years.Strangethingshavehappened,anditisconfusingtoeconomists.AtBerkshirenotmanylongtermbondsarebeingbought.WB:Cashwasking,butonlyifyouusedit.Peopleclingtocashatwrongtimes.Zerointerestrateshashadhugeeffectoneconomyandassetprices.Thisisnotabubblesituationwearelivingin,butitisunusual.CM:No,Imasconfusedasyouare.[laughter]WB:Thatswhywegetalongsowell.[laughter]Q28:CL:Youhavebeenlookingforbear,butthatissilly.ImnotabearonBerkshire.Butconglomerateshavenotworkedparticularlywell.Butprobabilitiesnotfavorablethatsuccessorswillhaveitworkwell.

  • WB:ModelhasworkedwellforAmericaactually,asdisparatebusinesseshavedonewellovertime.DowJonesasoneentity,asachanginggroupofcompaniesovera100yearperiod.Seeingtheindexrisefrom66to11,000suggestsitisgoodmodel,althoughagreethatitisnotallunderonemanagementteam.Owninggoodbusinessgroupisgoodidea.LittonIndustries,andGulf&Western,theywereputtogetheronideaofserialacquiring:issuingstockat20xtobuybusinessesat10x.Itisanideaoffoolingpeopletorideonachainletterscheme.Ithinkourbusinessplanmakessense.Groupofdiversifiedbusinessesandconservativelycapitalized.Capitalismisaboutallocationofcapital.Wehavesystemwherewecanallocatecapitalwithouttaxconsequences.Wecanmovethecapitaltowhereitcanbeusefullyemployed.Nooneelsebettersituated,anditmakesgoodsense,butmustbeappliedwithbusinessprinciplesinsteadofstockpromotionprinciples.Andsomeconglomerateswerestockpromotiontechniques,andwereserialacquirersandissuersofstock.Ifissuingstockcontinuously,chainlettergamegoeson,thatdoescometoanend.CM:Thereareacoupledifferencesbetweenusandthefailuresintheconglomeratemodel.Wehaveanalternativewhentherearenocompaniestobuy,aswehavetheinsuranceportfoliotoinvest.Andwefeelnocompulsiontobuy.MellonBrothersdidvery,verywellfor5060years,theywerealotlikeus.WearenotastandardconglomeratelikeGulf&Western.ItisasifMellonbrothershadgoneonforever.WB:Nowyouretalking.[laughter]Q29:JB:ForestRiver,whyisitdoingsowell?IsForestRivertakinglowermarginstobeatThor.Withthreecompanieswith85%ofthemarketitishardertohavenewcompetitorenter.WB:WeboughtForestRivertenyearsago.Peterunsit,andhesnotanMBAtype,buthesaterrificguy.[laughter]Thatwasnotastatementbutanobservation.Petebuiltaverysuccessfulbutmuchsmallerbusiness.Hesoldittoprivateequity,theyhaddifferentideasaboutthingsandhetoldthemtogotohell,andnotlongafteritwentbankrupt.Heboughtitoutofbankruptcyandonedaycametoseeme.Wewenttodinnerthatnight,andhebroughthiswifeanddaughter,madeafewpromises,andwevelivedhappilyeverafter.IveneverevenbeentothefactoryinElkhart,Indiana,andIhopeitisthere![laughter]Wemadeadealonincentivecompandbasecomp.Anditwilldoover$4bilofrevenuethisyear.Ihavehadthreeorfourphonecallswithhimthewholetime.IdontknowaboutThorversusForestRiver,butIthinktoughtocompetewithPeteunderanycircumstances.TheITdepartmentconsistsof6people,heknowswhatisgoingonintheplace.Theimportantthingisthatitishiscompany,andyouworkonnarrowmargins.IknowIcantrunanRVcompany.Probably1112%grossmargins,56%SG&A,somarginsin6%orsorange.Weworkedoutanincentivecompthatafternoon.Ithasworkedforhim,andforus,therecouldntbebetterarrangement.Wecoulduse20morelikeit,itisleaderinitsindustry.Q30:Station10.Toronto,Canada.YourviewonoilsandsandtheimpactonBerkshire?WB:Intermsofoilsands,itisnotahugeimpactonBerkshire.WehaveacranebusinessatMarmonthatdoesalotofbusinessinoildevelopmentgenerally.Itisactiveinoilsands.Wewillhavethetransmissioncompanycovering85%ofAlberta,8kmilesorsooftransmissionlines.Oilsandsarehuge.

  • WeownsomeExxonMobil,theyhaveoilsands.Wearemoving700kbarrelsofdayofcrudeoilonourrailroad.Wehave9unittrainsthatcarry100cars,andeachcarhas650barrels.Thereissignificantadvantagetotakeittodifferentplaces,spreadsaredifferent.Mentallyyouthinkofoilgushingthroughpipelines,butthepipelineistwiceasfast.WerecentlyboughtacompanyfromPhillips66whosemainproductisachemicaladditivethatmovesoil10%fasterthannormal,takeadayoffthetrip.Ithinktheoilsandsareanimportantassetformankindoverthecenturiestocome,butIdontthinkitwilldramaticallychangeanythingatBerkshire.CM:Alotoftheoilsandproductionusesnaturalgastoproducetheheavyoil.Itiseconomiconlyifoilstaysatahighprice,butitneedsnaturalgaspricestostaylowtoo.MattRose:Nothingtoadd.WB:[Putsupslideofperformancefrom20082013ofhedgefundperformance(+12.5%)vsS&PIndex(+43.8%)]SixyearsagoImadeabetforcharity.ItwasanS&P500Indexfundversusagroupofhedgefunds.Withthosenumbers,thecomparisonisgettingmorefuneveryyear.Thepeoplewhoselectedthesefundsaresmartpeople.Theyhaveeveryeconomicincentivetopickthebest.Theychoosefromatleast200hedgefundswhosemanagersarealsoincentivizedtoenhancetheirownincome.Thefirstyeartheydidconsiderablybetter,butinfiveyearssubsequentlytheS&Phasbeenrunningaway.Weputin$350keachinto10yeartreasuries.Thewayinterestrateschangedwesoldthebondsat96andputitallinBerkshirestock,andIguaranteeditfor$1mil.Itwillbesignificantlymorethan$1milwhen10yearscomesalong.Wellcomebackat1pmandmoveonfromthere.AFTERNOONSESSIONWB:Ifyoucanfindyourseats,wellgetstarted.Illgiveyouanotherminuteortwotosettledown.WB:Wesentoutabout11,000moreticketsthisyear,andclearlythisyearwehavesubstantiallymoreattendantsthaninyearspastandIhopespendingpatternsreflectthat!Q31:BQ:MichaelLacheq(sp?).EnergyFutureHoldingsbankruptcy.Whatotherbusinessesmaybesubjecttotechnologychange?IBM,Cokeregulation,etc.WB:IwouldbeunwillingtosharecreditformydecisiononEnergyFutureHoldings.Thatwasmymistake,anditwasabigone.Thebasicerrorwastheassumptionthatgaspriceswouldstayatthatlevelorgohigher.Insteaditwentwaylower.Allbusinessesshouldthinkaboutwhatcanmessuptheirposition.Welookatallofourbusinessesassubjecttochange.GEICOsetoutin1936tooperatewithlowcostsandpassonthosepricestothecustomer,onanecessitybeingautoinsurance.Theyoriginallydiditwithmailofferingstogovernmentemployees.Theyveadaptedovertheyears,towideningclassifications,toUSmail,totelephone,tointernetandsocialmedia.Andintheretheystumbled,whentheyleftgovernmentemployeesandgottooaggressiveaboutexpanding,andtheyreallydidgobroke.Wewantmanagerswhoarethinkingaboutchange,andwhatisneededforthebusinessmodelinthe

  • future.Weknowitwontlookthesame.BNSFislookingatLNGforlocomotives.Ourbusinessesarestrongandaregenerallynotsubjecttorapidchange,butsometimesslowchangecanbehardertoseeandlullyoutosleepeasierversusrapidchangewhichyoucansee.Iwillmakemistakesinfuture,thatisguaranteed.Wenevermakebetthecompanydecisionsthatcauserealanguish.Occasionallytheyworkoutverywell.In1966,weboughtadepartmentstoreinBaltimore.Therewasnothingdumber.The$6milinthatstorebecame$45bilovertimeinBerkshire.Youhavetobeveryalert,andCharlieandIandourdirectorsthinkaboutit.CM:Ispokeearlieraboutthedesirabilityofremovingignorancepiecebypiece.Anothertrickisscramblingoutofyourmistakes,itisenormouslyuseful.Wehadasuretofaildepartmentstore,atradingstampbusinesssuretofoldandatextilemill.OutofthatcomesBerkshire.Thinkabouthowwewouldhavedoneifwehadbetterstart![laughter]WB:Myunclewrotealetterin1942thatthedayofthechainstorewasover.Ourgrocerystorewentoutofbusinessin1969.Thewishbeingfathertothethought.Q32:JG:Heinzwhatwillitearnthisyearafterthecostsavings?WB:Heinzyouwillgeta10qfromHeinz.Itwasareasonablyrunfoodcompanywith15%pretaxmarginsformanyyears,notanunusualoperatingmargininfoodbusiness.Ithinkthemarginswillsignificantlyimprovedfromhistoricalfigures,havetowatchquartertoquarter.WhatBernardohasdoneisrestructurethebusinessmodelandthebrandsareasstrongasever,andtheywillhavestructurallylowercosts.Idontwanttonameanumber,youwillfinditoutsoonenough.Q33:Station11.Philadelphia.Fundmanager.Canyouexpandonhowyoucompareinvestmentopportunity?Whenyoucanbuymoreofafavoritein2008/2009,howdidcaseofmoreofcompanylikeCokeorMoodys,comparewithotherthingswhichyoudid.CouldBerkshirehaveachievedmorewithmoreconcentratedportfolio?WB:Dependsonwhichfavoritenamewehadwashitharderin2008/2009.Ispentaconsiderableamounttooearlyin2008,andbottomwasquiteabitlowerthanSeptandOctof2008whenwespent$16bil.Wewerealsocommittedto$6bilofMarsfunding,whichwehadcommittedearlier.Wedidntdoasremotelyaswellifwehadkeptpowderdryandspentitallatonceatbottom.Timingcouldhavebeenimproveddramatically,butwewillneverbeabletofigureouthowtodoit.ButweboughtBNSFinOct2009whichwillbeenormouspartofourfuture.WhenweboughtHDbondsat15weshouldhaveboughtthestock,butthatwillalwaysbethecase.Whatwewanttodoatourpresentsizeandscope,wewanttobuygoodbusinesseswithgreatmanagementatareasonablepriceandtrytobuildthemovertime.Wewanttobeabletoaddthemwithoutissuingshares.Lookingbackwecandoitbetterthanwevedoneit.Ifeelthegameisstillaviableone,butitcantbeforever.Butstillhasjuiceleftinit.CM:Privatebusinesseshavegottentobeabiggerportion.Weusedtobeworthmoreinstock,notprivates,butnowbiggerinprivates.

  • WB:Whenrightonstocks,showsupinnetworth,andwhenrightonbusinessesitshowsupinfutureearnings.Itdoesntrequireusgoingfromflowertoflower.Wevemovedintophase2.CM:Whenwewerejustinvestingmodestamountofcapitalwecouldgetalittlebitatthebottom,butthereisnosignificantvolumeofsharesatthatprice.Whenwebuybusinesseswegetlargepositions.Weareforcedintothisbypastsuccess.IlovebuyingtransmissionlinesinAlberta.Nothinghorriblewillhappen.WB:Ifitdoeswewontknowit.CM:Wehaveadaptedandthechangeshavebeenverymuchinourinterest.Theremaybefuturechangesjustasdesirable.Sincechangeisinevitable,howyouadapttoitisthekey.WB:WeveboughtafairamountofWellsFargooverlastfewyears.Butthemostmoneywasmadebybuyingbanksoflesserquality.Theyneededbettereconomytorecover.Butwefelt100%comfortablebuyingWellsFargo,and50%comfortablesomewhereelse,sowewentwhereweweremostcomfortable.Q34:ARS:Usagebasedpricing,autoinsuranceindustry,tracking.MoatatGEICO?Googlesays5yearsawayforselfdrivingcars.WouldyousellGEICO?WB:No.Noquestionthatknowinghowcustomersdriveisvaluableinputtoassessproperpremium.Progressivehasdonealotofworkonit,itscalledSnapshot.Insuranceisallaboutevaluatingthepropensityoflosstoestablishproperpremium.Ifsomeoneis90,besidesCharlieofcourse[laughter],theyaremorelikelytodie.Therearevariablesininsurance,andasetprice.Ifyouliveinstateof1ratherthan100mil,alotlesschanceofaccident,lackofdensity.Throughstudyingusagebyvariousmethods,Progressiveistryingtogetbetterinformationaboutthatparticulardrivertobeinanaccident.Wethinkwehaveaprettygoodsystem,andthathasbeenprovencorrectbutwellcontinuetolookatmetrics.IfeelverygoodaboutGEICOandtheirabilitytoevaluaterisk.IdontthinkanyoneisbetterthanGEICOspeople.Wewillkeepasking.Selfdrivingcarwillberealthreattoautoinsurancealthoughitwouldbegreatforsociety.Idontknowhowtoevaluateit,oroverwhatperiod.Itcertainlycouldhappen.ItwouldnotcauseustothinkaboutsellingGEICO.CM:Someofthesethingshappenmuchslowerthanyouthink.Iwenttoaspeechabout30yearsago,aboutcolormoviescomingintoahouseondemand,thatitwasjustaroundcorner.Ithinkselfdrivingcarshavinghugeimpactonmarketwilltakesometime.Thatwouldbemyguess,butcouldbewrong.WB:Butwellbewrongtogether![laughter]WB:GEICOwillbedoingmorebusinessin5yearsand10yearsfromnow,in30yearsIllgoawaypeacefullyandyoullknowandIwont.[laughter]Q35:GW:BerkshirehasdeployedverylittlecapitaloutsideUS.Why?

  • WB:WeveneverturneddownachancetomakeasignificantacquisitionoutsideUSbecausewepreferredtobehome.WehavenothadasmuchluckgettingonradarscreenofownersaroundworldversustheUnitedStates.Ourstrongsuitisbuyingfromfounders,andinUSeveryonewithsizethinksofus.Afairnumberwouldpreferus.ThatisnotsameoutsideUSA.Wertheimerwroteusaletter,andsaidiftheydidntselltoustheywouldntsell.Ihavebeenalittledisappointedwehaventhadmoreluck.JacobHarpazrunsIscar,whichsetanewrecordinApril.Mayhavesomeslightmeaning,theyselltinylittlecuttingtoolsthatgointobasicindustryallovertheworld.Theybuythembecausetheyareusingthemup.InMarchandApriltheyareseeingstrengthinbusiness,soitishardtoseethatthismeansweaknessinindustrialworld.Iscarhasbeenwonderful,wishIcouldfindafewmorelikeit.Thisyearwehavenotbeencontactedbyanysignificantonesthatmadesense.Wehaveheardfrompeoplebutnothingthatmakessense.Q36:Station1.SanFrancisco.Circleofcompetencehowdoyoufigureitout?WB:Itisaquestionofbeingselfrealistic,thatappliesoutsideofbusinessaswell.Wehavebeenreasonablygoodidentifyingperimeterofthatcircle.Ivegoneoutinretailmorethaninanyotherarena,Ithinkeasytothinkyouunderstandretail.IboughtBerkshirewhichwasprobablyadumbdecision,butitworkedout.Beingrealisticinappraisingowntalentsandshortcomings,someareawholelotbetteratitthanothers.ThereareanumberofCEOswhohavenoideawheretheircircleofcompetencebeginsandends.Wehavemanagerswhoreallyknowit,andtheydontgooutsideofthatgame.Mrs.Bdidnotwantstockforthedeal.Sheknewwhattodowithrealestateandcash,andittookheralong,longwayinbusiness.Thatabilitytoknowwhenyouroddsaregoodvs.playingoutsidethatgameisahugeasset.Friendswhoknowyouwell,maysay,whatthehelldoyouknowaboutthat?CM:Idontthinkitisadifficulttofigureoutcompetence.Ifyouare52saynotoprofessionalbasketball.92yearsold,youarenotgoingtobetheromanticleadinHollywood.350lbssodontdanceleadinBolshoiballet,ifyoucantcountcards,dontcompeteinpoker.WB:YouarerulingouteverythingIwanttodo!CM:Competencyisarelativeconcept.IrealizedthatwhatIneededtodoiscompeteagainstidiots,andluckilythereisalargesupply.Q37:CL:Rationalcompany,butdontseerationalitycomparingindextooperatingcompanybookvalue.Whyannuallymakethiscomparison?CM:Illanswerthisone.Theanswerisyouaretotallyright,itisaridiculous.ItmakesithardforWarrentolookgood,buthelikestoclimbmountainsthataredifficult.Itsinsane.IfyouliketowearahairshirtWB:NormallyIliketoclarifywhenhegoesallwishywashybutIwontthistime.Q38:JB:MarmonandIscarwhypaysomuchforlaterstakes?

  • WB:ThemultipleonIscarwasagreedaspartoftheoriginaltransactionmultiplesofearningsandallowedforcash.Stuckformulainforputandcalloption,theyhadputandwehadcall,togovernbetweennowandjudgmentday.Therewasnovariation.Putandcallatsameprice,followingsameformula.Theyputittousatexactlyonsamebasis.ButMarmonwasaninstallmentsale.Weintended60%butdid64%.Welookedatconsequencesofformulainfuture.Theywouldnthavesoldthe1stpieceiftheydidnthavethesecondandthird.Weknewwewouldbepayingmoremoneylateron,butitwasallbuiltintooriginaldeal.CM:Thepricewentupbecausethevaluewentup.Weagreedwedpayvalue.WB:PrtizkerfamilyandWertheimer,theycouldnthavebehavedbetter.Feelingsaregoodonbothsides.CM:Wehaveenormousrespectforintelligenceinthosefamilies.Amazingwhateachfamilyhaddone.WB:Thoseweretwoimportantacquisitions,partlyduetoaccountingpeculiarities.Carryvalueismuchlowerthanintrinsic.CM:ThetankerbusinessinMarmonisJohnDRockefellersoriginalbusiness.AmazinghowbusinessescankeeptheirvalueWB:Lifecirclesbackaround,youmaymeetpeopleyouthinkareonestopshopsbuttheyarent.Q39:Station2,NewJersey.Techandentrepreneurship,ifyouwere23yearold,inwhatnontechindustrywouldyoustartabusinessandwhy?WB:IdprobablydowhatIdidwhenIwas23.Iwouldlookatlotsofcompanies,andtalktolotsofpeople,andlearnaboutlotsofindustries.IwouldseeCEOsof8or10coalcompanies.Ioftendidntmakeappointments,buttheyalmostalwayswouldseeme.Iwouldaskthem,iftheyhadtoputalloftheirmoneyintoanycoalcompanyexcepttheirown,andgoawayfor10years,whichonewoulditbe?Andwhichwouldtheysellshortover10yearsandwhy?IfIdidthat,Iwouldknowmoreaboutthecoalcompaniesthananymanagerwould.ButyouwouldntlearnabouthowtostartGoogleorFacebookthatway.Youneedrealcuriosityaboutit,ithastoturnyouon.Askingquestionsaboutcoalcompanies?Imeanreally,youhavetobealittleoddtoo.Imightfindanindustrythatparticularlyinterestedyou,andyoumightbecomeverywellequipped,andcanstartorgotoworkforsomeonegood.Ifyouareopentothingsandkeeplearningthingsyoullfindsomething.CM:TherewasatrickLarryBirdused,heaskedeveryagentwhyheshouldbeselectedtorepresenthim,andwhichtouseifLarrydidntpickhimasagent.Everyonelistedsameguyas#2,sohewentwitheveryones#2andhenegotiatedbestdealinhistory.WB:IdidthesamethingatSalomon:ontheweekendwhenTokyowasopeningSundayat6pm,Icalledineightpeople,andIaskedthemwhobesidesyouwouldbebestpersontorunthis,andwhy?Oneguysaidnoonebuthim.Butitisnotabadsystemtouse.Youreallylearnalotbyasking.IsoundlikeaYogiBerraquoteperhaps.Butifyoutalktoenoughpeopleaboutsomethingtheyknowalotabout,

  • peopleliketotalk.Herewearetalkingourselves.Youwillfindyourspot.Iwasverylucky,IfoundwhatfascinatedmewhenIwas7or8yearsold.Ifyouareluckyyouwillfinditearly.CM:Ifitisaverycompetitivebusiness,andrequirescompetitiveabilitiesyoulack,youshouldlookelsewhere.IimmediatelydecidedIwasntgoingtobethermodynamicsprofessoratCaltech.Ididthatoverandoverandsoontherewereonlyoneortwochoicesleft![laughter]WB:Ihadsimilarexperienceinathletics.[laughter]Q40:BQ:OmahahotelpricesareupandyoumadenegativecommentsIsntthissupplyanddemandandcapitalism?WB:Yes,thatiswhyweencouragedAirbnbtocometoOmaha.Industriessizethemselveswithconferences.AbigindustryhastogotoLasVegasoraplacewithlotsofrooms.Ifyouhaveeventwhichcantbesizedbypeopleschedulingit,youcanoutstriptherationalsupplyofrooms.TheMastersGolftournamentinAugustahasthisproblemasthetournamentwontmoveanyplaceelse.OmahacantsizetotheBerkshiremeeting,ourattendancehasgrownabovewhatweanticipated.Thethreedayminimumswereirritatingtome.Pricesweregettinghigh.TheOmahaHiltonhasbeenmagnificentformanyyears.Afewhoweverwerereallypushingthings.Wedidntwanttocutbackondemand.WedidntwanttomovetoDallas.Omahapeoplelovethisevent,peoplegetagoodimpressionofOmaha,andsotherearegoodthingsaboutmeetinginOmaha.Andwewanthotelstobeabletomakemoney.Airbnbisaflexiblesupplyarrangement,andseemstomakealotofsense.Itwillbemoredevelopednextyear.Buttheycantpushittotheextremeofscarcityproduct.CM:Ivenothingtoadd.Q41:JG:GEICO.Largestadvertisingbudgetwhilemaintainlowcost.WillGEICO(now10%share)overtakeStateFarmat19%marketshare?WB:Nooneknowsanswer.WepassedAllstatethisyear.StateFarmhasoneofgreatcompanyhistoriesinAmerica.FarmerfromMernaIllinoisstartedit,startedaround1920,thereisabookaboutit.Itwasabetterbusinessmodel,GEICOthoughhadanevenbettermodel.StateFarmwashuge,andnowGEICOhastakenussince1926togetto10%.Oncurrentprojectionsarethatwewillbe#1thesameyearIam100.ItellGEICOthatIwilldomypart.Wewillgainshareaslongaswetakeextremelygoodcareofcustomer,andwecanproperlyraterisk.TonyNicelyhasdoneajobthatbelongsintheworldhalloffame.15yearspriortoTonytakingover,marketsharehadhoveredat2%.Sincehetookoverin1993,wehavegainedandnowstandat+10%.Itwillkeepgoing.StateFarmhasnetworthof$6070bil,andastronghomeownersbusiness,strongagencyforceandalotofsatisfiedcustomers.Itwontcomefast,butitwillcome.CM:GEICOislikeCostco.Theyfeelaholydutytohavewonderfulproductandawonderfulprice.Companieslikethatgetaheadovertime.

  • WB:WhatistrueaboutCostcoisalsotrueaboutGEICO:ourpeopledontcomeandgo.Peoplecometousandtheydontleaveus.Wehaveveryfewmanagersfromotherinsurancecompanies.Theyhavetheirownideaabouthowtodoitanddoitright.Itisreinforcedbysuccesstoo.CM:Costcoisunbelievable.Itisagainsthumannatureofmanyentrepreneurialpeopletogetpricedownandgetserviceup,likewearingtheultimatehairshirt.Butitworks.Q42:Station3,NealPatel,Chicago.Frugality?WB:Whoismorefrugal?CM:Inpersonalconsumption,Warrenismorefrugal.WB:Wouldyoucaretogiveexample?[laughter]CM:Samehousesince1950s.WB:Imovedinin1958.CM:Imovedinayearlaterandpaidarchitect$1900dollars,30%oftheregularprice.WB:IhaveeverythinginlifeIwanted.Standardoflivingdoesnotequatewithcostofliving.Thereispointwhereyougetinversecorrelation.MylifewouldbeworseifIhad6or8houses.Itdoesntcorrelate.Youcanthavemorethanthat.Itmakesadifferenceuptoapoint.Youcanstartthinkingdifferentlyatxdollars.Butitdoesntmakeadifferenceat10xor1000x.CM:FrugalityhashelpedBerkshire.Ilookoutataudience,andIseefrugalunderstatedpeople.WecollectthesepeopleWB:Butforgetthatthisweekendthemoreyoubuythemoreyousavethisweekendpeople![laughter]Q43:ARS:NYC.Pfizertaxefficiency?WB:No.Charlie?CM:Itwouldbecrazytobethisprosperousandtrytotakeourtaxestozero.WB:WecouldnothavedoneBerkshireinanyothercountry.Americahasreallyhelpedusbecomeveryveryrich.CM:Ivegotnocomplaints.Iseeothersatbreakfast,andIdontthinkpeoplearegnashingtheirteeth.WB:Wedontaddatipof15%onourtaxreturn.Butwearenotholierthanthou:wedotaketaxcredits,windenergyandsolardeals,theywontmakeeconomicsenseotherwise.Wefollowtherules.Butwedontbegrudgethetaxeswepay.Weveearnedalotofmoney.

  • Q44:GW:UnionPacificgenerates10%ofrevenuefromfreighttoMexico.HowattractiveisMexicanfreightmarket?KansasCitySouthernhalfoftheirrevenueisfromMexicanfreight?WB:UnionPacifichasabigedgebecauseitsroutestructureismuchbetterthanours,itcrossesborderinsixplaces.KansasSouthernhasverysignificantpresenceinMexico.Intermsofwhatwecandowithourmoneytherearegoodprospectsthere.MathdoesnotworkforMexico.WellcontinuetothinkaboutMexico,butwearethinkingaboutothermarketstoo.TherearelotsofwaystomovemorefreightatBNSF.CM:Itisawfullyeasytoimaginecombinationswithaslightofhand,easytomakemoneybybuyingcompetitors.Butatoursize,wewouldntget[government]approval.ImafraidBNSFwillhavetogetaheadonitsown.WB:Anditwill!Q45:Station4,LosAngeles.Howdoesmanagementfactorintovaluinginstrinsicvalue.Whichcompanydoyoufearthemost,asevenCocaColahastheirPepsi?WB:ActuallyBenGrahamdidntgettoospecificaboutintrinsicvalueintermsofcalculations.Nowitisequatedrightlywithprivatebusinessvalue.Aesopwasthefirstwhocameupwithit.Itisintrinsicvalueifyoucanforeseethefuture,thepresentvalueofallcashthatwillbedistributedbetweennowandJudgmentDay.Youputmoneyinandyoutakemoneyout.Oneinhandisworthtwoinbush.Thequestionishowsureareyouthattwoareinthebush,howfarawayisbush,whataretheinterestratesAesopwantedtoleaveussomethingtoplaywithovernexttwothousandyearssohedidntspellitallout.Incalculatingit,Benwouldsayhewantedtwodollarsofcashinthebushandpayadollar.Fischerwouldusequalitativefactorstoestimatethenumberofbirdsinthebush.IstartedoutveryinfluencedbyGraham,somorequantitative,butCharliecamealongandsaidlookmoreatqualitative.IfyoubuyMcDonaldsfranchise,youthinkaboutthecashin,thecashout,when,andatwhatdiscount.Silverbulletquestionarethereanythreats?IdontseebigcompetitortoBerkshire.Privateequityisbuyingbusinessesandleverageischeapsotheyarecompetingwithus.ThatismainoccupationformeandCharlie.Idontseeanyonewhohasamodeloristryingtobuildmodelwhichisgoingafterwhatwearetryingtoachieve.CM:AsIsaidearlier,theBerkshiremodelasitisnowconstructed,astheysayinshowbusiness,haslegsandwillgoalongtime.Itiscredible.Ithasenoughadvantageitwillgoalongtime,andmostbigbusinessesdonthaveit.Ofthosewhohavegottenbig,fewhavestayedbig.Weareinterritorywheremanystopgoingwell,butIthinkwellbelikeStandardOil.Thepeopleupherearenolongerthatimportant.Youyoungpeopleintheaudiencedontbetooquicktosellthestock.WB:Whynotmorecopycats?CM:ItslikeourfriendEdDavis,thesurgeon,hefiguredouthowtodoanoperationwithinstrumentsofhisowncreation,anddeathratewas2%versusotherswhowere20%.Surgeonscametowatchand

  • theysaidwellthatlookstoohardtodoanditwasslow.ThereisnothinginbusinessschoolthatteachespeopletodowhatwedoatBerkshire.WB:Slownessdetersmorepeople.CM:Thedifficultywithbeingslowisyouredeadbeforeitsfinished.[laughter]WB:Whysocheerful?[laughter]Q46:CL:Ihavemoreonthecheerfulside,thisquestionisaboutinflation.Returnsonequityandinflationitishardtofunctionunderinflationarycondition.Noweveryonewantsinflation.Goodfordebtorsnotcreditors.Shouldwethinkabouthigherinflation?Howwouldyoubehavedifferently?WB:Inflationwouldhurtus,butotherbusinessesmore.Someassetswoulddobetterunderinflation.Ifdronessetoffanddrop$1milineveryhousehold,wouldeveryonebebetteroff?Berkshirewouldbeworseoff.Trickistofindoutyouhave$1mbeforeanyoneelsedoes.Youdontcreatewealthwithinflation,butyoucanmoveitaround.YoudontwithafirmlikeBerkshire,ourearningspershareup,intrinsicvaluepersharewouldbeupbut,unlessweleveragedthebusinesses,thevaluepershareinrealtermswouldgodown.CM:InWeimarGermanypeoplewhoownedcompanieslikeBerkshiresurvivedthough..Banksandlifeinsurancewereallwipedout.Butitisnotagoodthingtoletthingsgothatfar.Idontlikethehugeconfidencethatitwillallkeepworking.Wecanhandlesubpargrowth,butitwouldbecrazytoletpoliticiansprinttoomuchmoney.WB:Butifyouhaveahome,mortgagegoesdowninvalueandyoustillhavethehome.CM:InWeimar,theygaveyouthemortgageback.Theygotthatright.Q47:JB:Leverageandacquisitions?CM:SumtotalofallacquisitionsinAmericahasbeenlousy.Itisthenatureofsuccessfulcompaniesthattheywillbetalkedintodumbdeals.Ithasbeenpathtowealthforus,butluckilymanydontwanttobepeculiarinourway.WB:Whenwereadthatacompanyweownbutdontcontrolisgoingtomakeanacquisition,Immorelikelytocrythansmile.Butwelovethemourselves.IhavesatinonhundredsofacquisitiondiscussionsconductedbypeopleIdidntcontrol.MosthavebeendisastersCM:Somearemediocre.WB:LookatGEICOithadbeenanincrediblebusinessuntilthe1970s.Theymadeacquisitionsaftergettingbackontrackandthentooktheireyesofftheball.Accountingcostofthosetwoacquisitionswaspoorbutnotdisastrous.Butsecondaryeffectswerehuge.Itwasadozenyearstherethattheycouldntgetback.Weboughthalfthecompany,soitwaswonderfulforBerkshire.Itishumannature,CEOshaveanimalspiritsandsupportingstaffsensesthattheyliketodothings.Theykeepcomingin

  • withdeals.Investmentbankersarecallingthemdaily.Alltheseforcespushtowardsdeals.Wevetriedveryhardtonotbeeagertododeals,justtobeeagertododealsthatmakesense.Thatwouldbeharderifwehadstrategydepartmentspushingus.Thesettinginwhichyouoperatecanbeveryimportant.CM:Notehowheismuchmoretactfulthanme.WB:Thecomparisonisnotdifficult.[laughter]Q48:Station5,Wisconsin.Iamhopingthatyouwillmakeusmoney.Neverwouldyoucheatusoutofourmoney.Ininvestmentbankingbusinessconfidencehasfallen.DistressingreportsinNYTaboutprivatemeetingsintheJusticeDepartmentandFedaboutneedordesiretobringcriminalchargesagainstlargestbanks,launderingbillionsofIraniandollars.Doyoubelieveafinancialcrisiswilloccurasaresultofcriminalactivityorisitbeinginstitutionalized?CM:IthinkbehavioronWallStreetisenormouslyimprovedduetotrauma.Youwillneverhaveperfectbehaviorwhenhumansliveinmiasmaofeasymoney.WB:Whataboutprosecutingindividualsversuscorporations?CM:Hardlyanythingchangespeoplefasterthanprosecutingindividuals.Ithinkafewcriminalprosecutionschangesbehavioralot,andwellgetafew.Ifyouputeaglescoutsinjailafterfixingsteelpricesyoureallygetbehaviorchange.WB:Ileantowardsprosecutionofindividuals.AtSalomon,Isawbadactsbyonlyafewpeople,andnegligencebyacouplemore,comeclosetodestroying1000sofotherlives.Itiswayeasiertoprosecuteacorporation,aprosecutorwillgetawinagainstacompany.Theywillcaveandwriteacheck.Itisatougherjobagainstindividuals:theyaretryingtostayoutofjail.Cangetheadlinegrabberswhengoingagainstcorporation.Ileantowardsgoingagainstindividuals.CM:ThatiswhatImeant.Whenantitrustisconsideredvenalsin,itchangedbehavior.Wechangedindividualbehaviorinpricefixing.Weprobablyneedsomemoreinfinancetochangebehavior.WB:Wehavethreehundredthousandemployees,sosomeoneisdoingsomethingwrong.Tooadegreeitisoutofourhands.Icantellmanagersthatreputationmeansmorethananythingelse.Butitdoesntcureeverything.Wewanttofinditoutearlyanditisuptoustodosomethingaboutit.Wewillhaveaproblem.Threehundredthousandpeoplewillnotbehaveproperlyeveryday.Individualprosecutionhelps.Thewaytochangebehavioristohavethefearthatitwillcomehometothemandhitthemhard.Ifonlyfeariscompanywillwritebigcheck,therewillbemuchlesschangethanifyoutargetindividual.Q49:BQ:Insurancefundtoprotectrailroadindustryincaseofworstcaseaccidentscenario?Isindustrylackinginsurance?

  • WB:WeareonbothsidesofthatsinceAjithasofferedtherailindustrysomeveryhighlimits,toallthemajorrailroads,buttheydontlikehisprice.Thefourmajorrailroadshavefinancialcapacitytopayhugeawardifthereisdamage,andascommoncarrier,weallhavetocarryhazmatmaterial,buttheywouldrathernotcarryit.Probablycantgetpaidenoughpercarloadtogetpaidforrisk.ButIthinkbigfourhavefinancialcapabilitytohandlethattypeofaward.TheycanbuyinsurancefromAjit,butnoonehasyet.Notadvisabletodiscussinsurancelimitspublicly.Nuclearriskgovernmentdecidedwastoobigtobebornebyprivateindustry.Idontthinkanymajoraccidentbyprivateindustrycouldbelargerthantheycouldpay,butcouldbevery,verylarge.CM:BigsurprisewasBritishPetroleum.Noonethoughtlossfromonewellwouldbemanybillionsofdollars.AfterthatIwouldhavelessenthusiasmfordrillinginGulf.Suchabiglosscanoffsetanypossiblegain.Thebiggestrailaccidentcost$200m.WB:NorfolkSouthernneverannouncedwhatitcost.Wedonotgetpaidenoughtocarrychlorineandtheywillmovesomehow.Butthatdoesnotkeepmeawakeatnights.WB:Biggestriskisroguestateorterroristact.Butwaractsareexcludedfrominsurance.Butyoucouldhavesomekindofterroristactthatwouldcreatedamageslikewehaveneverseen.Thereisareasonableprobabilityofthishappeninginthenext50years.WhatitisIdontknow,butitisnotinsignificant.CM:Wesawwhatonepilotcandointhisairline[Malaysia].Weareluckytohavebigcorporationsthatcanhandlethelosswhenitoccurs.Betterthanabunchofflippers.Q50:JG:WhyisBerkshireexpandingintocommercialcasualtyinsurance,andinLloyds,whenpricingispeaking?WB:Weenteredcommercialinsurancefieldmiddleoflastyear.Wehadsomewonderfultalentthatwantedtojoinus.Wehavegreatamountofcapital,andgoodreputation.Wethinkwehaveabilitytounderwritemoreintelligentlythanmost,withbiggerrisks,andcostsbelowaverage,andthenthrowinAjitJainoverseeingtheoperation.Weentereditbecausewehadterrificpeople.Wewerentlookingatthetiming.WeveaddedtogroupPeterEastwoodrunsit.Wewillbuildasignificantcommercialinsurancebusinessovertimeandarelikelytooperatewithbetterresultsthanthecompetitors.CM:Itislogicalthingforustodo.Whenlogicalwedontholdbackbecauseoftheplaceinthecycle.Itislongtermplay,wearentgoingawaybasedonshorttermtroubles.WB:Whenweseechancetoenterabusinesswithstrongpeopleandcompetitiveposition,wellplaygameandplayithard.Q51:Station6,EdBoyle,Chicago.Buyingsportsteam,orsportsmanufacturingcompany?CM:Warrenhasalreadydoneit.

  • WB:Iown25%ofthelocalminorleagueteambutitisnotresponsibleformypositionontheForbes400.Ifyoureadthatwearetalkingaboutbuyingasportsteam,itistimetotalkaboutsuccessors.Sportsequipmentisnotagreatbusiness.WeownSpaldingandRussell.Generallyspeaking,ifyoulookatpeoplewhohavemadegolfequipment,baseballgloves,etc.itisnotaparticularlyprofitablebusiness,andcertainaspectsofit,likeahelmetcompany,shouldbeownedbysomeonewithanetworthofnegative1milandnotadollartohisname.WegotanoffertobuyPinkerton,whichmainlymanagesguardsatairports,whichisasuperrichtarget.Youwontseemuchofusinsportsarena.CharlieareyoulookingattheClippers?CM:Shakinghishead.WB:NowImthinkingheis.[laughter]CM:WhateverWarrenlikesaboutsportsteams,Ilikeitless.Q52:ARS.AckmanbuyingAllerganinopenmarketgotpermissiontodelayreporting.JustlikeBerkshirewithCoke?WB:IdontseethecomparisontoCoke.Wehaveneverusedderivativestogetaroundrulesofreporting.Activism?Itwontgoawayandscaresthehelloutofalotofmanagers.Therearecaseswherecorporatemanagersshouldbechanged.Generallyspeakingtheactivistiftheygetpriceofstockupthatwillendtheirinterestinbusinesstheynotlookingforpermanentchangesinthebusiness.Itisattractingmoreandmoremoney.Fundsareflowingtotheseactivists,sotheycanplayonbiggerscale.Ifsuccessfulwillcreatefundflowuntilnolongersuccessful.CM:Creatingmoreofstirinmanagements,and2030%ofstockcanchangehandsquickly.Entrenchedmanagementissuddenlythreatened.Byandlargetheyaremakingmoneyandmostpeopledontcarehowthatmoneyisearned.Sothatmakesitgrow,likeJacksbeanstalk.Youllfindanactivistwhoyoudontwanttomarryintoyourfamily;itislikefoxhuntingthepursuitoftheuneatablebytheunspeakable(OscarWilde).IdontthinkgoodforAmericawhenaveragedout.WB:Biggerinthreeyears?CM:Bigger.WB:Wowthanitwillbereallyserious,esp.ifyouthinkaboutthecompounding.Q53.GW:Whichisbetter,largercollectionofsmallercompaniesthataregrowingorbigelephantsnearingmaturity?Payhigherpriceforgrowth.Opportunitycosttokeepcashonhand.WB:Wedbedelightedtobuysomethingfor$23bilthatwillgrowovertime.Asubsidiarycouldbuysomethingforacouplehundredmillion.Wearenotpassinganythingofanyrealsizethatwillhaveimpact.Wehadtwentyfivetuckinacquisitionslastyear.One$30bilis10$3bildeals.RealityisthatweareworkingtobuildearningpowerintoBerkshire,andsoourmainemphasisonbiggerdeals.CM:Iagreewiththathundredsofsmallbusinesses?Itwouldbeanathema.

  • WB:Thereislotsofcompetitionforthesmalldealsfromprivateequity.Someareevensellingtoeachother.Wearenotenvious.Butwewillfindsomesmalldeals.Butonedoesnotprecludetheother.Q54:Station7,SanFrancisco.Whatismostintelligentquestiononinvestingandwhatisanswer?CM:IalreadydidthatwhenIspokeaboutBerkshirescomparisontoindexperformance.Therearealotofinterestingquestionsthatdontgetmuchattentionandthereisalotofirrationality.WB:Bestquestioninpast?CM:Idontlikequestion,doyou?Idontthinkitisfair.WB:ThatiswhyIletyougofirst.[laughter]WB:Weareat54questions,soIllmovetoStation8?Q55:Station8,NewHampshire.Lookingatpage64segmentdatafortheenergybusiness,whenItakeebitdalesscapex,theresultisnegativeoperatingcashflow.WhenIrepeatexerciseineachoflastfiveyears,inbestyears,$300mofoperatingcashflow.Dividebytangibleassets,0.8%return,whyallocatingcapitaltoabusinesswithsuchlowreturns?WB:Youweredoinggreatuntilreturnontangibleassets.Welovethemathyoudescribe,aslongaswegetreturnoncapitalinvestment.Wearelookingforwardtoputtingmorecapitalin,aslongitistreatedfairly,andwewillgetappropriatereturnsonthat.Itisnotcashminusincreasedcapex,itisoperatingearningslessdepreciation.Therearetimeswhennonetinvestmentisrequired,butwepreferwherenetinvestmentmustbehigherbecausewegetmorecapitalinandourbetisthatregulatorswilltreatusfairlyinfuture.Onereasonwebelievethisistrueisthatwehavedonesomuchbetterthanmanyatdeliveringelectricityatlowerratesthanchargedbymost.InIowathereisapublicutility,andourratesaresignificantlybelowcompetitors.Afriendwithafarmwhoisservedbytwoutilitiestellsmethatratefromusisdramaticallylowerthanthecompetitors.Wehaveadeservedgoodreputationwithregulators,includingsafety.Theywelcomeuswhenwecometonewstates.Ifwecanputnewmoneyintothoseprojects,wewillgetgoodreturn.Butyouwillgetnegativereturnsifyouincludeaddingtocapitalspending.Thisissomewhatsimilarattherailroad.CM:ifnumbersyourecitedcomefromadecliningdepartmentstore,wewouldhateit.Butwehaveconfidencethatthereinvestedcapitalwillgiveusagoodreturnfromagrowingenergybusiness.Itisthatsimple.WB:Greg,canyouquotesomerates?GregAbel:Wearegenerallylowestquartile,ifnotcheapest.WerecentlytookthefirstrateincreaseinIowain16years,andwedontseeoneinnearfuture.Thereisa1000megawattprojectaddingupto$1.9billion,anddeployingover2yearsandweareearningan11.6%returnonit.Wetrytokeepourcapitalclosetodepreciation.Butthelionshareofourcapexisgrowthcapital.WB:Techcompanies?

  • GregAbel:WeserviceGoogleinCouncilBluffswitharelativelysmalldatacenter.Theyaretakingitto4050MW,butarelookingtobuilditto1000MW.Wegivethemexceptionallylowrates,andasignificantportioncomesfromrenewableenergy,andtheywanttobeassociatedwithautilityproducinggreenpower.Q56:Station9,Shanghai.EducationinvestmentwhatisdifferentnowandinthefutureinUSandChina?CM:Wecertainlyaregettingtheeasyquestions![laughter]WB:WhateverhesaysIagreewith.[laughter]CM:IthinkAmericamadehugemistakewhentheyletpublicschoolsgotohell.IthinkAsianculturesarelesslikelytodothat.Iwishweweremorelikethem.WB:Itremindsme,thatwheneverIgetalittleworriedaboutCharlie,maybeIshouldnttalkaboutit.Thereisajokeaboutnothearingwellthatgoeslikethis:Ihavethiswonderfulpartner,butIthinkhishearingisgoing.WhatshouldIdo?Doctortoldmetostandacrossroom.SoIstoodacrossroomandsaid,IthinkweoughttobuyGMat35.Noresponse.Igohalfwayacrossroom,sayitagain,andnoresponse.SoIwalkrightovertohimandsay,CharlieIthinkweoughttobuyGMat35.Andhesays,forthethirdtime,YES!Sospeakup...Q57:Station10,Chicago.ShouldtheUSchangethewayitfinanceshomepurchasesandistheiraroleforBerkshire?WB:The30yearfixedloanisterrificboontohomeowners.Notgreattoownasinvestmenthowever.Butitletspeoplegetintohomesearlier.Itkeptcostsdowntoquiteadegree.Governmentguaranteedparttokeepcostdown.Noprivateorganizationcandoit.Itisan$11trillionmarket.Privateindustrycantdoit,rateswouldbehigher.Theproblemishowdoyoukeepgovernmentinpicturebutdoitwithoutkeepingpoliticsinit?FannieandFreddiedidsomedumbthingontheirown,butalsoproddedintodumbthingsbypoliticians.Iwroteanarticlewhensavingsandloanwerefallingapart,andsuggestedFDICtogetprivatesectorintopricingandevaluatingwithgovtasmaininsurer.Theremightbeawaythatmodelworksintermsofhomemortgageinsurance.Welikelywouldntbeaplayer,otherswouldbemoreoptimisticinsettingrates.Privateindustrymightprice5%,andgovttook95%,andmaybeguaranteedtheprivatesiftheywentbroke.Importanttogetthecorrectnationalpolicy,Iknowitisbeingworkedon,anditisveryunlikelythatBerkshirewouldplayanypart.CM:Whenprivateindustrywasallowedtotakeoverthesystem,wegotbiggestthievesscrewingitup.AsmuchasIhategovernment,Imnottrustfulofprivateindustryinthisfield.Existingsystemisprobablyprettysound.AtmomentFannieandFreddiearebeingprettyconservative,andIthinkthatisok.Imnotanxioustogobacktotheracetothebottomwithinvestmentbankscreatingphonysecurities.Letthemkeepdoingwhattheyaredoing.

  • WB:TheonethingthatledFannieandFreddieastraywasservingtwomasters:tryingtodeliverdoubledigitearningsincreases.Likeiftheyjustinsured,ratherthanbuyingportfoliosandturningthemselvesintobighedgefunds,andjustborrowedcheapandlentlongitwouldhavebeenok.CM:Ithinktheyarebeingconservativenow.WB:Andportfolioactivity?CM:Ithinkitisamistaketohaveprivatecompaniestakingoverthewholemortgagemarket.Thereisnoneedtohaveprivateportfolios.Ithinkthatparticularexperimentinprivatizationwasatotalfailure.Andwemadeabilliondollarsoutofit.WB:Iwasntgoingtomentionit.Q57:Station10,WhitneyTilsonthereisanewbookavailable,wasinPortuguese,on3G.CM:WhywouldyouassumeshareholdersdontreadPortuguese?Whitney:TheonlyEnglishprintcopiesintheworldarehereonAmazonitisaKindlebook.WB:Wewillraisetheprice.Whitney:IsthereaBerkshirestampofapprovalontheirdeals?WhatwillhappentothevalueoftheBuffettbrandtobuycompanies?WB:ItwillbecometheBerkshirebrandthatcontinueswithoutme.Thepersonthatfollowsmewillbringsamequalities,includingabilitytowriteverylargecheck.Brazilianfriendstheyareverysmart,veryfocused,hardworking,determined,neversatisfied.AsIsaidearlier,whenyoumakeadeal,theydontoverreach,theydontoverpromise.Ifyoureadthebook,youlllearnalotmore.Wewanttobeagoodpartnerasitattractsgoodpartners.Takesalotofotherpeoplebehavinginwaytomakepeoplewanttojoinandtrustus.CM:Thewaytogetagoodspouseistodeserveone.Itissameonpartners.Stillworksinmoderntimes.Behavecorrectly,amazinghowwellitworks.WB:Whatcanwelearnfrom3G?CM:Cantskirtthefactthattheyareverygoodatremovingunnecessarycosts.Idontconsiderthatimmoral,itisaservicetocivilization.ItshouldbedonewithsomemercyWB:andsensitivity.CM:Butoursystemshouldnothavemakework.WB:WearelearningfromthemCM:Somereluctantly.Q58:Station11,Taiwan.InamedmysonWarrenafteryou.

  • WB:Howishedoing?Q58:Hesonly4.HecallsyouWarrenBuffaloes.WB:Ivebeencalledworse.Q59:Station1.Marketcap$1.2trilifdoublesthendoublesagain.WhatwillBerkshirebein20years?WB:Idoplanonwritingaboutthatnextyearnoquestionwewillhavemorecashthanwecanintelligentlydeployinbusiness.Thatwilldependoncircumstancesattime.Ifstockcanbeboughtinthatmakessenseforcontinuingshareholders,thatvaluebetterforthem,Iwouldbeaggressive.Wewillhavemorecashthanwecanintelligentlyinvestinthefuture.Ihopeitisntrealsoonbutdontthinkitisonthedistanthorizon.Thenumbersaregettingtothatpointbutmaybecanrepurchaseshares.Butwhatisdonewillbedoneininterestofshareholders.Wedontknowwhattaxeswillbe,buteverydecisionwillbedoneinprincipaloftheshareholder.CM:Itisnotatragedytosucceedsomuchthatfuturereturnsgodown.Q60:Station2,WashingtonDC.Sharingeconomy?WB:Wheneveranexistingbusinessisthreatened,thatbusinesseswillfightback.WhenStateFarmstartedinthe1920s,theagencysystemwassacrosanct:allagenciesworkedthatway.Theyfoughtoverhaving#1agencyintown.Yourobjectivewastogettheagent.Policyholderwasntbeingthoughtabout.ThenStateFarmcamewithbettermousetrap,thenGEICO.Insuranceagenciesstartedtoinsistonstatelawsaboutwhatcanbedonewithagentsandwithout.2ndand3rdbestmousetrapswillfightback.Butintheendthebettermousetrapwillusuallywin.Westayawayfromthatsortofthingweknowwillchangeandwedontknowwhothewinnerswillbe.Energycompanyandtherailroadbothverylikelytobewinnersovertime.Wherechangeisinvolvedinotherfields,wesitandwatchbutdontgettempted.CM:Newtechnologywillbequitedisruptivetoalotofpeople.Retailinginparticularlyisfacingparticularthreats.WehaveapowerplantservingoneGoogleserverfarm.Itischangingtheworld.Itwillhurtalotofpeople.Berkshireisbyandlargeinprettygoodshape.WB:Wherearewemostvulnerable?CM:Idontwanttonamethem.WB:Nowyouhavethemwondering.[laughter]Q61:Station3,Florida.Publiceducation:canwedomoretoprepareourchildrentobefinanciallyliterate?WB:Certainlytheearlierthebetter.Habitsaresuchapowerfulforceineveryoneslife.Igetlettersfrompeoplewhomadeterriblemistakesfinanciallunacybuttheydidntknowit.Veryharddiggingyourselfoutofholesthatilliteracycancause.Forchildren,wehavetheSecretMillionairesClubthere

  • isanexhibitinthehall.Wewanttotalktopeopleatveryyoungage.Happensinalotoffamilies,wherethereisabigproblemwithadultfinancialliteracy.AlotcanbedoneonTVortheinternet,butitisimportanttohavegoodfinancialhabits.Anythingyoucandoveryearlythroughschoolsystemwillhavemyvote.CM:Notsureschoolsatfault.Thebehaviorofparentsisthemostpowerfulexample.WB:Noteveryonegetsrightparents.Howwouldyoufixthem?CM:Itisveryhardtofixpeoplewhohadwrongparents.Itgetssoimpractical.IdontthinkImgoodatthat.OnlythingImgoodatisraisingthetophigher.IdontthinkIamanygoodatit.Idontthinkyouaresohoteither.Maintroublesineducationareprobablynotinthegradeschools.Thereisalotofasininityatuniversities,evenintheeconomicsdepartments.Whenitgetshighfalutindoesntmeanitgetsalotbetter.WB:Periodfor20yearswhenthenetutilityoffinancemajorsknowledgewasnetnegative.CM:Itwasasinine.WeshouldusenormalEnglish.[laughter]WB:Towatchextraordinaryuniversitiesteachpeopleverydumbthingsandeventoobtainpositionsindepartmentsinthoseschoolsyouhadtosubscribetotheorthodoxy.Butthatmayhavesouredmyfeelingsonhighereducation,anditwasbad.Wasmylanguageok?CM:Youwouldhavelikedacademicsbetterifyouhadtakenphysicsratherthanfinance.Q62:Station4,Ontario.Dividendsnooneknowshowtoevaluateit.Breakupcompanyinto4groupsandunlockvalue.Allocatecapital?WB:WewouldlosesignificantvalueifwebrokeBerkshireintofourcompanies,duetothetaxsituationandcapitalallocation.Berkshireascurrentlyconceivedhasgreatestvalue.Wedidhavevoteandthereisnotawaytodeliveradividendtoonlyafewshareholders.Thereisawayforinvestorstomaintaintheirinvestmentandstillcashoutannuallyjustlikeapartnershipandincurfairlylittletax.ButthereisnoadvantagetobreakBerkshireintopieces.Itwouldbeterriblemistake.CM:Youarenotbeingdeprivedwhenstockgoesfrom100to200andyoudidntgetadividend.WB:In45:1votepeoplepreferredpresentpolicy.Itsurprisedme.Itwouldbebigmistaketochange.

    NotescourtesyofPeterBoodell,PortfolioManagerandManagingPartner,Boodell&CompanyCapitalManagementLLC,locatedinNewYorkCity.EditscourtesyofRickSchmidt,PortfolioManager,HardingLoevner,locatedinBridgewater,NJ.Pleaseaddressanycommentsorconcernsaboutthisdocumenttoinfo@boodellco.com.Ofnote,norecordingdeviceswereusedtocreatethesenotes.Assuch,theyshouldnotbereliedupon.Petershighschooltypingteacher,Mr.Eagle(mayherestinpeace),deserveswhatevercredit,ifany,isdue.


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Tilson Berkshire Hathaway

Documents
Berkshire hathaway annual meeting notes by ingrid R. … · 2017-06-26 · 2017 BERKSHIRE HATHAWAY ANNUAL MEETING NOTES BY INGRID R. HENDERSHOT, CFA Warren Buffett: We at Berkshire

Berkshire hathaway annual meeting notes by ingrid R. … · 2017-06-26 · 2017 BERKSHIRE HATHAWAY ANNUAL MEETING NOTES BY INGRID R. HENDERSHOT, CFA Warren Buffett: We at Berkshire

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Berkshire Hathaway 07 Annual Meeting Notes

Berkshire Hathaway 07 Annual Meeting Notes

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Peter Boodell - Berkshire Hathaway Annual Meeting May 3 2014 (1)

Peter Boodell - Berkshire Hathaway Annual Meeting May 3 2014 (1)

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Berkshire Hathaway Report

Berkshire Hathaway Report

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GATE - Berkshire Hathaway HomeServices The Preferred Realty...Berkshire Hathaway HomeServices and Berkshire Hathaway HomeServices symbol are registered service marks of HomeServices

GATE - Berkshire Hathaway HomeServices The Preferred Realty...Berkshire Hathaway HomeServices and Berkshire Hathaway HomeServices symbol are registered service marks of HomeServices

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Berkshire Hathaway 2010 Annual Meeting Notes

Berkshire Hathaway 2010 Annual Meeting Notes

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Berkshire hathaway annual meeting notes by ingrid R. Hendershot, … · 2017-07-17 · 2015 BERKSHIRE HATHAWAY ANNUAL MEETING NOTES BY INGRID R. HENDERSHOT, CFA financing. At Clayton,

Berkshire hathaway annual meeting notes by ingrid R. Hendershot, … · 2017-07-17 · 2015 BERKSHIRE HATHAWAY ANNUAL MEETING NOTES BY INGRID R. HENDERSHOT, CFA financing. At Clayton,

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Berkshire Hathaway · PDF fileby Berkshire Hathaway, ... and our strategic partners have also been ... n Berkshire Hathaway Energy ranked first among U.S. holding

Berkshire Hathaway · PDF fileby Berkshire Hathaway, ... and our strategic partners have also been ... n Berkshire Hathaway Energy ranked first among U.S. holding

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T2 Partners Berkshire Hathaway

T2 Partners Berkshire Hathaway

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BERKSHIRE HATHAWAY ANNUAL MEETING 2019 …...BERKSHIRE HATHAWAY ANNUAL MEETING 2019 Edited Transcript provided by Yahoo Finance: Warren Buffett: Good morning and welcome to Berkshire

BERKSHIRE HATHAWAY ANNUAL MEETING 2019 …...BERKSHIRE HATHAWAY ANNUAL MEETING 2019 Edited Transcript provided by Yahoo Finance: Warren Buffett: Good morning and welcome to Berkshire

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2013ar-Berkshire Hathaway

2013ar-Berkshire Hathaway

Real Estate
Adam Blum's 2017 Berkshire Hathaway annual meeting notes ... · Adam Blum’s 2017 Berkshire Hathaway annual meeting notes May 6, 2017 1 Friends, Here are some of the notes I took

Adam Blum's 2017 Berkshire Hathaway annual meeting notes ... · Adam Blum’s 2017 Berkshire Hathaway annual meeting notes May 6, 2017 1 Friends, Here are some of the notes I took

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BERKSHIRE HATHAWAY INC - University of Notre Damescorwin/fin70610/documents/BRK_BuffettLetter... · BERKSHIRE HATHAWAY INC. To the Shareholders of Berkshire Hathaway Inc.: Our gain

BERKSHIRE HATHAWAY INC - University of Notre Damescorwin/fin70610/documents/BRK_BuffettLetter... · BERKSHIRE HATHAWAY INC. To the Shareholders of Berkshire Hathaway Inc.: Our gain

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Berkshire Hathaway rvbiz

Berkshire Hathaway rvbiz

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A BERKSHIRE HATHAWAY COMPANY - · PDF fileA BERKSHIRE HATHAWAY COMPANY. Shadow Interior

A BERKSHIRE HATHAWAY COMPANY - · PDF fileA BERKSHIRE HATHAWAY COMPANY. Shadow Interior

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