2023 Annual Meeting2023 年度股东大会

Morning Session - 2023 Meeting

1. Berkshire’s own ‘King Charles’

WARREN BUFFETT: Good morning, good morning. And thanks for coming. Omaha loves it, I love it, Charlie loves it. We’re glad to have you here.

We’re going to make this preliminary, before the questions, very short because we want to get in at least 60 questions, half divided by the audience outside this arena and half from you.

So, I would just like to get right to the directors and the earnings that have been put up on a web page this morning, but we’ll cover those very fast and then we’ll get to the questions. Now, when I woke up this morning, I realized that we had a competitive broadcast going out somewhere in the UK.

And (Laughter) they were celebrating a King Charles, and we’ve got our own King Charles here today. (APPLAUSE AND CHEERING)

And next to him we have Greg Abel, who’s in charge of all the operations except for insurance. (Applause)

And next to Greg, we have a man I ran into in 1986 and has made us look good ever since. We have the man in charge of insurance, Ajit Jain. Ajit? (Applause and cheering)

2. Directors introduced

WARREN BUFFETT: And now we have our directors here in front. And if they would just stand briefly and then I’ll go onto the next one, and they’re all here today.

First of all, doing it alphabetically, there’s Howard Buffett, (Applause). There’s Susie Buffett, there’s Steve Burke, Ken Chenault, Chris Davis, Sue Decker, Charlotte Guyman, Tom Murphy Jr., Ron Olson, Wally Weitz, and Meryl Witmer.

That’s as good as you can get.

3. The woman who organized the whole thing

WARREN BUFFETT: And there’s one other person I would like to mention before we get onto the earnings that were put in the press release this morning. Well, let’s see who we have here. We’ve got —

This is hard to believe. Can you imagine a name, Melissa Shapiro Shapiro? (Laugh) And she was Melissa Shapiro till she married another Shapiro, and she put this whole thing together with no help from me, no help from Charlie, (Applause) and a lot of help from the people in the other room. Melissa. (APPLAUSE and CHEERING)

Yeah, it’s very easy. If you can remember her second name, you can remember her third name. So, Melissa Shapiro Shapiro.

4. Most Berkshire businesses will report lower earnings next year

WARREN BUFFETT: And with that, I would like to next move onto the earnings and a couple small slides that explain what we’re all about, and then we’re going to get to Q&A. And the slide is up behind me, and there it is.

We reported in the first quarter operating earnings a little over $8 billion. And when we talk about operating earnings, we’re basically referring to the earnings of Berkshire Hathaway as required under GAAP, excluding however, capital gains both realized and unrealized.

There’s a few other very minor items, but basically, we expect to make capital gains over time. Why would we own the stocks otherwise? Doesn’t always work out, but overall, it works out pretty well over time. But in any day, any quarter, any year, even occasionally over a five-year period, the stock prices move around capriciously.

Now, we own a lot of other businesses. We consider those stocks businesses. We own a lot of other businesses where they get consolidated, and they don’t move around in value. Now, if we had a little bit of Burlington stock outstanding, if we had a little bit of the energy stock trading, those stocks would move around a lot.

But the businesses are what count. So, the operating earnings, as you’ll see in the first quarter, came it at about $8 billion. And I would say that in the general economy, the feedback we get is that, I would say, perhaps the majority of our businesses will actually report lower earnings this year than last year.

In various degrees in the last six months or so, at various times, the businesses have left the incredible period, which is about extraordinary as I’ve seen a business since World War II, which poured out a lot of money to people who couldn’t get goods.

It was more extreme in World War II, but this was extreme this time. And it was just a question of getting goods to deliver. And people bought, and they didn’t wait for sales. And if you couldn’t sell them one thing, they would put another thing in their backlog. It was an extraordinary period.

And that period has ended. As you know, it isn’t that employment has fallen off a cliff or anything, in the lest. But it is a different climate than it was six months ago. And a number of our managers were surprised. Some of them had too much inventory on order, and then all of a sudden it got delivered, and people weren’t in the same frame of mind as earlier.

And now we’ll start having sales at places where we didn’t need to have sales before. But despite the fact that this year I think in general will be slower than last year, we actually are situated so that I would expect, and believe me when I say expect, nothing is sure.

Nothing is sure tomorrow, nothing is sure next year, and nothing is ever sure, either in markets or in business forecasts, or in anything else. And we don’t pay much attention to markets or forecasts unless the markets happen to offer something interesting to do.

But nevertheless, we are positioned in two respects, as you’ll see from this first report. Our investment income is going to be a lot larger this year than last year. And that’s built. I mean, as you’ll see in a minute, we’ve had $125 billion or so in very short-term investments.

And believe it or not, not that long ago we were getting four basis points, which is next to nothing on that $125 billion, which means we were getting $50 million a year. And now the same money, just the day before yesterday, we actually bought because of some funny twist the market, because of doubts about the debt ceiling.

We bought $3 billion of bills at 5-90. That’s 5.92 bond equivalent yield. So, we will have what produced just not that long ago on a 12-month basis was producing $50 million a year, producing something in the area of $5 billion a year. So, we’re in a position where the investment income is certain to increase quite a bit.

And insurance underwriting does not correlate with business activity. It depends on things like hurricanes, and earthquakes, and other events. So, on a perspective basis, on a probability basis, we’re likely to have a better year this year in insurance underwriting than we had last year.

It just isn’t affected by what you might call the business cycle or what applies to generally in industry, retailing, you name it. So, I would expect in one massive earthquake or one hurricane that came in at just the wrong place could affect that prediction. But on a probabalistic basis, our insurance looks better this year.

So, if you get two of the elements there of our main elements of earnings that look like they will swing in our direction, I would expect, but I can’t promise, that our operating earnings will be greater than last year.

And if we’ll move to the second slide, I give you those operating earnings figures just to give you a overview of what has happened since the pandemic started, and also the year before as a base. And we retain all our earnings, as you know.

So, if we’re retaining $30 billion or $35 billion, or whatever it may be, a year, they should expect more operating earnings over time. I mean, this number should be significantly higher five, or ten, or 15 years from now because we have the advantage of retaining earnings, and that’s what got us to these figures because they were essentially nothing when we started.

And they got there by retaining earnings and will keep retaining earnings. So, it’s no great triumph if these numbers move up. And what we hope is that they move up at a reasonable rate. Historically, they moved up at an unreasonable rate sometimes.

But we were working with much smaller sums then, and that can’t be repeated with our present capital base. Because I note there — I believe it’s on this slide. Let’s take a look. No, that will be — let’s see, it’s on the — well, on the next place, page. Let’s move to the next slide. We show that we had on March 31st, now what was it, $504 billion of GAAP net worth.

Now, what might surprise you is that there’s no other company in the United States that has a number that is that large. Now, that isn’t because we have the most valuable company in the United States. Other companies have used their money to repurchase shares.

They could’ve accumulated $504 billion in GAAP. But basically, we have more under GAAP accounting now than any other company in the U.S. And of course, if you measure return on equity that becomes a very big number to increase at a rapid rate, but we hope to do so.

Not a rapid rate, a decent rate. And right below that, you see something called float. And float is money that is left in our hands somewhat akin, but very importantly different, than a bank deposit. But you have to pay interest to get a bank deposit.

And you have to pay more interest these days, and you have to run a bank and do a lot of things. And basically, this is money that represents unpaid losses at this time. You get paid in advance in insurance. So, what shows up as a net liability on our balance sheet gives us funds to exercise with an amount of discretion that no other insurance company that I know of in the world enjoys, just because we have so much net worth.

And our float now comes to $165 billion, and the man sitting at the far left is responsible for moving that number up from a pittance in 1986 to this incredible figure, which in most years, practically all years, hasn’t cost us anything. So, it’s like having a bank with no employees, no interest, and no ability to withdraw the money in a hurry that we have working for us.

And it’s a very valuable asset that shows up as a liability. And Ajit is responsible for building up this treasure, which has been done by out-competing insurance companies all over the world. And now, a number of our insurance companies, in turn, are run by talented managers who contributed one way or another.

Start with GEICO at the beginning of my career. And that float, if you think about it, just think of a balance sheet. You have liabilities here and you have assets over here, and the liability side finances the asset side. It’s very simple. And stockholders’ equity finances it, long-term debt finances it, and so on.

But stockholders’ equity is very expensive in a real sense. Long-term debt has been cheap for a while, but it can get expensive, and it can also become due eventually and it may not be available. But float is another item that’s a liability but hasn’t cost us anything.

And it can’t disappear in a hurry. And it finances the asset side in the same way as stockholders’ equity. And nobody else thinks of it much that way, but we’ve always thought of it that way, and it’s a build up over time. So, I show at the bottom what’s happened with cash and Treasury bills through March 31st.

And I will tell you that in the month of April, we’ve probably added about $7 billion to that factor. Now, part of that is because we didn’t buy as much stock, because that reduces cash and Treasury bills. We bought about $400 million worth of stock in the month of April.

That’s a minus in terms of cash available. And we, however, sold, net, some stock, which produced maybe $4 billion. And of course, we had operating earnings, probably $2.5 billion or something in that area. And my guess is we probably increased our cash and Treasury bills $6 billion and $7 billion in the month.

And I just want to give you a feel for how the cash flows at Berkshire. And then if we move to the final — I think it’s the final one. We should have the one up there, Class A equivalent shares outstanding. And you’ll notice that every year the number of our shares go down.

So, if we own more businesses, and the businesses make more money, your share as shareholders at Berkshire increases every year without you laying out any money. Now you’re laying out the alternative which you could receive in dividends. But the reason we’ve gotten to where we are is because we kept the money.

We did pay a dividend in 1967, $0.10 a share. It was a terrible mistake. (Laugh) And I always tell people that I’d for the men’s room and the directors voted while I was gone. But that isn’t true. I was there, I confess. (Laugh) But we’ve reinvested, and it’s produced the $500 billion plus of shareholders’ equity and the $30 billion plus of operating earnings.

And we’ll continue to follow that policy because it makes a great deal of sense. And with that, I think we’ve taken care of the preliminaries. The 10-Q is on the web page. And if you have a week or two vacation, you could spend it reading the 10-Q.

But that is the essence of Berkshire.

5. Failure to guarantee Silicon Valley Bank’s deposits would have been ‘catastrophic’

WARREN BUFFETT: And with that, I will start with Becky Quick, and we will alternate between Becky and the audience. And her questions have come in from all of the country, and I believe you identified the sender. And go to it, Becky.

BECKY QUICK: Thanks, Warren. The first question comes in from Randy Jeffs in Irvine, California. And his question is, “If Silicon Valley Bank’s deposit had not been fully covered, what do you think the economic consequences would’ve been to the nation?”

WARREN BUFFETT: Well, I’d would just simply say it would’ve been catastrophic. (Laugh) And that’s why they were covered. And even though the FDIC limit is $250,000, that’s the way the statute reads, but that is not the way the U.S. is going to behave any more than they’re going to let the debt ceiling cause the world to go into turmoil.

And I can’t imagine anybody in the administration, in the Congress, in the Federal Reserve, whatever it may have been, FDIC — I can’t imagine anybody saying, “I’d like to be the one to go on television tomorrow and explain to the American public why we’re keeping only $250,000 insured, and we’re going to start a run on every bank in the country and disrupt the world financial system.” (Laugh) So, I think it was inevitable. Charlie, do you have anything?

CHARLIE MUNGER: No, I have nothing to add.

WARREN BUFFETT: OK.

Well, incidentally, I should mention this now, Ajit and Greg will be here in the morning session which ends at noon. And so, if you have questions to direct to them, the time to do it is in the first half of the show. And then after lunch Charlie and I will be back.

6. We’ve never made an emotional investing decision

WARREN BUFFETT: OK. Area one?

AUDIENCE MEMBER: Hi. Narav (PH) Patel, Harel (PH), Massachusetts. Mr. Buffett, Mr. Munger, it seems like you found the sweet spot between being too conservative and too aggressive as investors. Do you ever make bad investment decisions because of your emotions? And what do you do to try to keep that from happening?

WARREN BUFFETT: Well, we make bad investment decisions plenty of times. I make more than Charlie. I like to think it’s because I make more decisions, but probably my batting average is worse. (Laugh) But I can’t recall any time in the history of Berkshire that we made an emotional decision.

I know the movie had Jamie Lee [Curtis] in there, (Laughter) but that was for laughs. I mean, Jamie Lee, she’s good, but she’s not good enough to get me or Charlie to make an emotional decision. (Laughter) Charlie, I’m sure you have something to add on that.

CHARLIE MUNGER: Well, it’s a different movie than is shown in most corporate meetings. (Laughter)

WARREN BUFFETT: But have we ever made an emotional decision?

CHARLIE MUNGER: No. (Laughter)

WARREN BUFFETT: That’s in business we’re talking about. Yeah, no. You don’t want to be a no emotion person in all of your life, but you definitely want to be a no emotion person in making an investment or business decision.

You can argue that we’ve probably made an emotional decision, perhaps, when a manager has been with us for some period, and we’ve ignored the fact that perhaps they weren’t quite what they were earlier.

But our businesses are so good that they run better sometimes when — I mean, I’ve talked about Wesco, for example, the wonderful Louis Vincenti. And it ran on automatic pilot for a while, but I don’t think we suffered by it. But you can argue if Louis as much as we did, we might’ve spotted it a little bit earlier. But I don’t think it made any difference in the results. Would you agree with that, Charlie?

CHARLIE MUNGER: Yeah, (UNINTEL PHRASE) with it. I’m glad we the way we did at Wesco. By the way, we bought the thing for a few tens of millions, and it became worth $2 billion or $3 billion.

WARREN BUFFETT: Yeah, that wasn’t common in the savings and loan business, as you may have noticed. (Laugh) They really went crazy in that industry, and we had a wonderful guy in Louis.

CHARLIE MUNGER: We didn’t go crazy.

WARREN BUFFETT: Yeah, we didn’t go crazy. Yeah.

7. Jain: GEICO’s technology is ‘still a work in progress’

WARREN BUFFETT: OK, Becky?

BECKY QUICK: This question comes from Ben Knoll in Minneapolis. He says he’s a Berkshire shareholder of three decades and he’s attended many Berkshire meetings. He’s here again this year.

And this is addressed to Ajit and Greg. He says, “Last year I asked you about how GEICO and BNSF appeared to lose ground to their leading competitors, GEICO on telematics and BNSF on precision scheduled railroading.

“Ajit, you responded by saying how you expected GEICO to make progress in about a year or two. Greg, you spoke about your pride in BNSF, but you didn’t directly address the threat of precision scheduled railroading. Will each of you please provide perspective on these competitive challenges and our company’s strategies to address them?”

AJIT JAIN: In terms of GEICO and telematics, let me make the observation that GEICO has certainly taken the bull by the horns and has made rapid strides in terms of trying to bridge the gap in terms of telematics and its competitors. They have now reached a point where on all new business, close to 90% has a telematics input to the pricing position.

Unfortunately, less than half of that is being taken up by the policyholders. The other point I want to make is even though we have made improvements in terms of bridging the gap on telematics, we still haven’t started to realize the true benefit.

And the real culprit of the bottleneck is technology. GEICO’s technology needs a lot more work than I thought it did. It has more than 600 legacy systems that don’t really talk to each other. And we are trying to compress them to no more than 15, 16 systems that all talk to each other.

That’s a monumental challenge, and because of that, even though we have made improvements in telematics, we still have a long way to go because of technology. Because of that, and because of the whole issue more broadly in terms of matching rate to risk, GEICO is still a work in progress.

I don’t know if any of you had a chance to look at the first quarter results, but GEICO has had a very good first quarter, coming in at a combined ratio of 93 and change, which means a margin of six and change. Even though that’s very good, it’s not something we can take to the bank because there are two unusual items that contributed to it.

Firstly, we’ve had what is called prior year reserve releases. We’ve reduced reserves for the previous years, and that contributed to it. And secondly, every year the first quarter tends to be a seasonally good quarter for auto insurance writers.

So, if you adjust for those two factors, my guess is the end of the year GEICO will end up with a combined ratio just south of 100, as opposed to the target they’re shooting for is 96. I hope they reach the target of 96 by the end of next year.

But instead of getting too excited about it, I think it’s important to realize that even if you reach 96 it will come at the expense of having lost policyholders. There is a trade-off between profitability and growth, and clearly, we are going to emphasize profitability and not growth. And that will come at the expense of policyholders.

So, it will not be until two years from now that we’ll be back on track, fighting the battles on both the profitability and growth fronts.

8. Abel: BNSF continues to work on efficiency and safety improvements

WARREN BUFFETT: Greg? Yeah.

GREG ABEL: Moving to BNSF, I’ll start again by expressing great pride in the BNSF team. We have an exceptional group led by [CEO] Katie [Farmer] and her managers that show up every day to do great work on the railroad. At the same time, they would be the first to acknowledge there’s more to be done there.

The specific reference to precision scheduled railroading, the other large Class A railroads in the U.S. follow that, and including the two in Canada. We’re well aware what they’re doing, and obviously pay close attention to their operating metrics.

And our team strives every day to be more efficient, obviously. I would say we balance it with the needs of our customers. If I look back to pre-2022, so we look at the three-year period of 2019, 2020, 2021, the BNSF team made significant progress on their efficiencies, and delivering overall value back to the shareholders and to their customers.

And at the same time, maintaining a very safe railroad for our employees. So, we’re making excellent progress. That didn’t stop last year. They made great progress.

Again, the reality in 2022 is we did go through a period of time where we had to call it, “Reset the Railroad.”

We came out of the pandemic, there were the supply challenges. We had certain other labor issues and other things going on at the port.

And the reality is, our team prioritized getting the railroad back in place for the long-term, not a short-term focus on hitting certain operating metrics in 2022. We’re well aware of where we were relative to those metrics.

But the real focus was to get the railroad reset in a safe manner so it could deliver long-term value and long-term service to our customers. And that’s really what we’ll continue to see with that team.

There’ll be continual progress. There’ll be years where it’s not as quick, or even we go backwards. But over the long-term, we’ll see exceptional results from that team, and couldn’t be more proud that we have that asset. Thank you. (Applause)

WARREN BUFFETT: I would just — well, he deserves — but both of them deserve applause.

9. Todd Combs doing ‘wonderful job’ running GEICO

WARREN BUFFETT: I would like to add one thing. (Applause)

At GEICO, Todd Combs was Ajit’s choice and my choice to go back to GEICO to work on the problem of matching rate to risk, which is what insurance is all about. And he arrived with exquisite timing, right before the pandemic broke out and all kinds of things changed.

But Todd is doing a wonderful job at GEICO. And he works closely with Ajit. He has a home in Omaha, he comes back here, and we get together on the weekend sometimes too. So, that’s been a remarkable accomplishment under difficult circumstances. And he’s not all the way home, but he’s made a very, very big change in multiple ways at GEICO.

And one other thing I would like to mention, there have been a lot of public companies created in the last decade or thereabouts in insurance. And there’s none of them that we would like to own, and they always started out in their perspective saying, “This is a tech company, not an insurance company.”

Of course, they’re a tech company. Everybody, whether they’re insurance or a lot of other places, are using the facility but you still have to properly match rate to risk. And they invariably have reported huge losses, they’ve eaten up capital.

But there’s been one company that nobody has generally heard of. There’s only been one that I know of, company started in the last ten years, that has been an overwhelming success. And that’s a company that Ajit and four people who joined with him set to develop a new business. It’s called Berkshire Hathaway Specialty. What’s the float, Ajit?

AJIT JAIN: Coming up to $12 billion.

WARREN BUFFETT: Yeah. We’ve built more float than probably all these companies combined. It’s cost us essentially nothing in terms of an underwriting loss. The four people have turned into, I don’t know, 1,500 around the world. We took on the whole industry and we brought some unique talent in the four people that came.

And now have, like I said, 1,500 or so worldwide. And we brought capital, and we brought capabilities that really only Berkshire could supply. So, it was the combination of brains, and talent, and energy, and money.

And no one has really successfully entered this space — plenty of people in the space who didn’t like us coming. And we did it without it costing us a dime of entry. And it’s been unmatched by any of the companies that went public. And people have seen us do it, but they can’t duplicate it.

And that’s what Ajit has created. And Peter Eastwood has led this group, Berkshire Hathaway Specialty. And it’s just remarkable. So, anyway, with that — let’s go on — give them a hand for that. (Applause)

10. Munger on AI: ‘Old-fashioned intelligence works pretty well’

WARREN BUFFETT: OK, let’s go to section two.

AUDIENCE MEMBER: Hi, Charlie. Hi, Warren. I’m Karen, here from Singapore.

WARREN BUFFETT: I’m glad you got that in. Your priorities are right.

AUDIENCE MEMBER: Yes. I have questions on AI and robotics. Here’s my questions. As AI and robotics continue to advance, what do you believe will be the positive and the negative impacts of this technology on both the stock market and society as a whole? And there any specific industries and companies that you believe will be most impacted? (Applause)

WARREN BUFFETT: Karen, I thank you for asking Charlie that question. (Laughter)

CHARLIE MUNGER: Well, if you went into BYD’s factories in China, you would see robotics going at an unbelievable rate. So, we’re going to see a lot more robotics in the world. I am personally skeptical of some of the hype that has gone into artificial intelligence. I think old-fashioned intelligence works pretty well. (Laughter) (Applause)

WARREN BUFFETT: There won’t be anything in AI that replaces Ajit. State that unqualifiedly. It can do amazing things. You know, Bill Gates brought me out maybe not the latest version, but one he thought maybe I could handle. (Laugh) He has to be careful with me, in terms of leading me too fast.

And it did these remarkable things. But it couldn’t tell jokes. Bill told me that ahead of time, and it prepared me. And it just isn’t there. But you know, with things like checking all the legal opinions, you know, since the beginning of time and everything, and eliminating all the — I mean, it can do all kinds of things.

And when something can do all kinds of things, I get a little bit worried because I know we won’t be able to un-invent it. And you know, we did invent, for a very, very good reason, the atom bomb in World War II. And it was enormously important that we did so.

But is it good for the next 200 years of the world that the ability to do so has been unleashed? We didn’t have any choice.

When you start something — well, Einstein said after the atom bomb, he said, “This has changed everything in the world except how men think.”

And I would say the same thing may — not the same thing — I don’t mean that — but I mean with AI, it can change everything in the world except how men think and behave. And that’s a big step to take. It’s a good question, and it’s the best answer we can give.

11. Munger: Commercial real estate downturn will be ‘quite significant and quite unpleasant’

WARREN BUFFETT: Becky?

BECKY QUICK: This question comes from Tom Seymour. He says, “The first sentence of a recent Financial Times article read, ‘Charlie Munger has warned of a brewing storm in the U.S. commercial property market with American banks full of what he said were bad loans as property prices fall.’

“Please elaborate on what’s going on in commercial real estate. How bad will the losses be, and what sectors or geographies look particularly bad?”

I’ll just add an addendum from another viewer who wrote in and wanted to know if Berkshire would be more active in commercial real estate as a result.

CHARLIE MUNGER: Well, Berkshire’s never been very active in commercial real estate. It works better for taxable investors than it does for corporations to act the way that Berkshire is. So, I don’t anticipate huge effects on Berkshire. But I do think that the hollowing out of the downtowns in the United States and elsewhere in the world is going to be quite significant and quite unpleasant.

I think the country will get through it all right, but as they say, it will often involve a different set of owners.

WARREN BUFFETT: Yeah, and the buildings don’t go away, but —

CHARLIE MUNGER: The owners do.

WARREN BUFFETT: Well, (Laughter) but most people like to buy with non-recourse in real estate. And one time I asked Charlie, there was some real estate guy, we were talking to him, you know, “How do they decide how much a building like this is worth?” And the answer is, “It’s whatever they can borrow without signing their name.”

And if you look at real estate generally, you’ll understand the phenomenon that’s happening if you remind yourself that that’s the attitude of most people that have become big in the real estate business. And it does mean that the lenders are the ones that get the property.

And of course, they don’t want the property usually, so the real estate operator counts on negotiating with them, and the banks tend to, you know, extend and pretend. And there’s all kinds of activities that (UNINTEL) about us out of commercial real estate development, which occurs on a big scale.

But it all has consequences, and I think we’re starting to see the consequences of people who could borrow at 2.5%, and find out it doesn’t work at current rates, and they hand it back to somebody that gave them all the money they needed to build it. Charlie’s had more experience. Charlie got his start in real estate, though.

CHARLIE MUNGER: Yes, it’s difficult. I like what we do better. (Laughter)

WARREN BUFFETT: Well, as Charlie once said to me when I was leaving his house a few months ago — I was visiting him, we talked for a couple of hours. And as I left, there wasn’t anybody else in the house except one daughter. I said, “Charlie, I’ll just keep doing what we’ve been doing.” And Charlie, without looking up or pausing a second, said, “That’s all you know how to do, Warren.” (Laughter) He was right too.

12. ′ What gives you opportunities is other people doing dumb things’

WARREN BUFFETT: Station three, is it?

AUDIENCE MEMBER: Hi. My name is (UNINTEL PHRASE), I’m from Santa Clara, California. And my question is to Charlie and Warren. Given the rise of disruptive technologies that can improve productivity significantly, and AI being one of them, how do you envision the future of value investing in this new era? And what adaptations or new principles do you think investors should adopt? And any recommendations for investors to remain successful in this rapid changing landscape? Thank you.

CHARLIE MUNGER: Well, I’m glad to take that one. I think value investors are going to have a harder time now that there’s so many of them competing for a diminished bunch of opportunities. So, my advice to value investors is to get used to making less.

WARREN BUFFETT: And Charlie has been telling me the same thing the whole time we’ve known each other. I mean, we get along wonderfully because —

CHARLIE MUNGER: Well, we are making less.

WARREN BUFFETT: Yeah. Well, but that mostly I think is (Laughter) (UNINTEL PHRASE) —

CHARLIE MUNGER: We did that when we were younger.

WARREN BUFFETT: Yeah, we never thought we could manage $508 billion.

CHARLIE MUNGER: No, we never did.

WARREN BUFFETT: You know, but I would argue that there are going to be plenty of opportunities. And part of the reason there are going to be plenty of opportunities, the tech doesn’t make any difference for any of that. I mean, if you look at how the world’s changed in the years since 1942 when I started, you’d say, “Well, how does a kid that doesn’t know anything about airplanes, that doesn’t know anything about engines and cars, and doesn’t know anything about electricity and all that?” But new things coming along don’t take away the opportunities.

What gives you opportunities is other people doing dumb things. (Laughter) (Applause) Well, the 58 years we’ve been running Berkshire, I would say there’s been a great increase in the number of people doing dumb things. And they do big, dumb things, and the reason they do it to some extent is because they can get money from other people so much easier than when we started.

So, you could start ten or 15 dumb insurance companies in the last ten years, and you could become rich if you were adroit at it, whether the business succeeded or not, and the underwriters got paid, and the lawyers got paid. And if that’s done on a large scale — which it couldn’t be done 58 years ago.

You couldn’t get the money to do some of the dumb things that we wanted to do, (Laugh) fortunately. And so, I think that investing has disappeared so much from this huge capitalistic market that anybody can play in, but that the big money is in selling other people ideas.

It isn’t outperforming. And I think if you don’t run too much money, which we do — but if you’re running small amounts of money, I think the opportunities will be greater. But then Charlie and I always differed on this subject. He likes to tell me how gloomy the world is, and I like to tell him, “We’ll find something.” And so far, we’ve both be kind of right. (Laugh) Charlie, would you budge an inch on that, or not? (Laughter)

CHARLIE MUNGER: There is so much money now in the hands of so many smart people, all trying to outsmart one another and out-promote one another, getting more money out of other people. And it’s a radically different world from the world we started in. And I suppose it will have its opportunities, but it’s also going to have some unpleasant episodes.

WARREN BUFFETT: But they’re trying to outsmart each other in arenas that you don’t have to play. I mean, if you look at that government bond market, at the Treasury bill market, I mean, you have this one bill that’s out of line with the others, and went (UNINTEL PHRASE) $3 billion of it the other day.

But the world is overwhelmingly short-term focused. And if you go to an investor relations call, they’re all trying to figure out how to fill out a sheet to show the earnings for the year. And the management is interested in feeding them expectations, so we’ll slightly be beaten.

I mean, that is a world that’s made to order for anybody that’s trying to think about what you do that should work over five, or ten, or 20 years. And I just think that I would love to be born today, and go out with not too much money, and hopefully turn it into a lot of money. And Charlie would too, actually. (Laugh)

He would find something to do, I will just guarantee you. And it wouldn’t be exactly the same as before, but he would have a big, big, big pile.

CHARLIE MUNGER: I would not like the thrill of losing my big pile into a small pile. (Laughter)

WARREN BUFFETT: But we might —

CHARLIE MUNGER: I like my big pile just the way it is. (Laughter)

WARREN BUFFETT: We agree on that, incidentally.

CHARLIE MUNGER: Yes, we do. (Laughter) You’re one of the most extreme lovers of the big pile. (Laughter)

13. AIG liability assumption deal is turning out to be ‘good but not great’

WARREN BUFFETT: Becky?

BECKY QUICK: This question is for both Warren and Ajit. Comes from Jason Plonner (PH) in Livingston, New Jersey.

He says, “In 2016, you entered into a very unique transition with AIG where you assumed up to $20 billion of liabilities in exchange for about $10 billion upfront. Can you please provide us with an update on this transition in light of the increase in interest rates?

And then in Tokyo just a few weeks ago, you talked about the risks of banks with assets that were susceptible to rising interest rates. Any insight as to how Berkshire liabilities are susceptible to duration would be appreciated.”

WARREN BUFFETT: Is that directed to Ajit, or me, or what?

BECKY QUICK: Both.

WARREN BUFFETT: OK. Let me introduce my one thing, but Ajit is the key to this. He’s the one that put the deal together. But we got handed $10 billion, we’ll say. But we weren’t restricted to putting that into bonds. So, interest rates affect us to some degree maybe, in terms of the deal we did with AIG, or anybody we would do a similar deal with like that.

But we don’t have to put it in matching bonds or anything of the sort. It goes into a general pool of assets, which we manage, and the liquid assets now are $130 plus. But it is not set aside in some little compartment like people like to think.

Now, no other insurance company could do it. But they can’t think that way. They aren’t even used to thinking that way. But they can’t think that way because they don’t have our balance sheet. We account for 26% or something like that of the net worth of all property casualty companies in the United States.

So far, the payments that we have had to make have run modestly. And Ajit will correct me on this if I’m wrong, because he paid attention. The amount we have had to pay has run slightly below the amount we anticipated having to pay in terms of our share of the losses.

But it served AIG’s purposes. It came to us where we are in a unique position. There’s nobody else that was able to write that, just like when we took on Lloyd’s. I mean, Lloyd’s said there was no choice other than Berkshire Hathaway when they essentially resuscitated their market by laying off a lot of liabilities on Berkshire Hathaway.

So, we won’t see those deals very often. If they’re for $500 million or something like that, somebody else will go in there and offer more money. And everybody’s looking for money on Wall Street. But if they start talking with the deal like the AIG deal, there isn’t any other stop now. Correct me on all my numbers there, Ajit. (Laughter)

AJIT JAIN: No. One way to look at how the deal is performing since we did the deal is at the point in time when we did the deal, we had made certain projections of how much we will pay out each year. And what we do is monitor what the action payments are since the inception of the deal, and how does that compare with what we expected to pay out.

As Warren mentioned, these two numbers are very close to each other. More specifically, the actual payouts are 96% of what we had projected to pay out at this point in time, which is good but not great. We are still ahead of the curve. If we do end up paying out less than what we projected, not only would we have borrowed money at a very attractive rate, meaning significantly less than 4%, in addition to that we would have made a fee, which in 2015 dollars would be $1 million.

So, we would’ve borrowed money at less than 4% and we would’ve made $1 million fee, which is slightly more than what we were expecting to do. So, net/net, we’re very happy with the deal, we’re happy we did it. But the game is not over. There are tort liabilities that are coming down the pike every second day. So, I’m cautiously optimistic that the deal will work out better than how we expected it to work out.

CHARLIE MUNGER: Well, the really interesting thing is that within Berkshire, the casualty insurance companies have four times as much stockholder capital behind each dollar of premium value. Four times normal. And of course, we see the big deals. Who would you trust if you had a big liability you wanted to dump on somebody?

WARREN BUFFETT: And we have $25 billion or more coming in from things other than insurance, uncorrelated to insurance, every year with no obligations. We don’t pay dividends. If we pay dividends, you know, and you cut your dividend, try going around trying to write insurance the next day.

I mean, and it’s a business where people are counting on you to pay. And when we take that $10 billion, we don’t agree to put it in five-year bonds and ten-year bonds. We don’t even think that way. And the people that do business with us know that they have somebody like nobody else on those that’s going to be able to pay $10 billion no matter what happens to the economy.

So, it’s not only the presence of enormous strength in the insurance companies, it’s the fact we have all these earnings that essentially come in every month, we don’t have a lot of debt. I mean, we have debt at the railroad and the energy level. But in terms of the rest of the operation — And we don’t guarantee that debt, but it’s (UNINTEL).

And there just isn’t another Berkshire, and Ajit recognizes that when he’s negotiating. So does the other party if the sums are big enough. There’s all kinds of people that love to get $500 million or $300 million, and they may think in terms of lending it out because that’s what their insurance companies can do at a somewhere higher rate. But that is not a game we play, and we don’t have any interest in playing in.

14. Never write a will without input from your children

WARREN BUFFETT: OK, station four?

AUDIENCE MEMBER: Hello. I’m Marvin Blum, an estate planning lawyer from Fort Worth, Texas, home to many of your companies. In fact, Warren, I met you at the memorial for our beloved Paul Andrews, who was manager of TTI. I’d like to get your thoughts on a widespread problem in the world of estate planning.

And that’s the failure of most parents to prepare the next generation for the inheritance coming their way. In particular, if the estate includes a family business, most parents fail to do business succession planning to plan for who’ll run the business on the day when, not if, the founder is no longer there to run it.

The kids aren’t prepared, unlike the other King Charles, not King Charlie Munger, (Laughter) who has been preparing for his job as King of England now for more than 70 years. I sometimes describe the situation like this: Picture a football game. At one end of the field is a quarterback.

He has great skills; he throws a beautiful pass to the other end of the field. And at the other end of the field are the receivers. They’ve never been to a practice, they don’t know the rules of the game, they don’t know how to work together as a team. They’re clueless. So, the quarterback is the patriarch and the matriarch. The football is the inheritance or the family business, and the receivers are the kids. So, what are the odds that they’re going to catch the football and go score a touchdown? Probably only around 10%.

WARREN BUFFETT: I have the picture. (Laughter) (Applause) Just because of my age, and to some extent because of things like the giving pledges, I probably observed as many particularly wealthy families, the problems, and they all are very particular to the family.

And in my family, I do not sign a will until my three children have read it, understand it, and made suggestions. Now, my children are in their 60s and that would not have been a great success if I’d done the same thing in their 20s. It depends on the family; it depends on how the kids feel about each other.

There’s all kinds of things. Depends on the kind of business you have. So, there’s a thousand variables. But I do think that if the children are grown, and when the will is read to them, it’s the first they’ve heard about what the deceased thought about things, the parents have made a terrible mistake.

And I’ve run into all kinds of situations, and some people don’t tell their children anything, and some of them try and get them to bend to their will by using their own personal will. They make a million mistakes. And that’s one you don’t get to correct. Well, Charlie’s had a lot of experience too with the —

CHARLIE MUNGER: Well, at Berkshire we have a simple problem of estate planning. Just hold the goddamn stock. (Laughter)

WARREN BUFFETT: Well, (Applause) but that doesn’t fit everybody, Charlie.

CHARLIE MUNGER: No, it only fits 95%. (Laughter)

WARREN BUFFETT: I don’t know necessarily whether if you have billions of dollars, you want to leave it to all of your children. I mean, that’s something —

CHARLIE MUNGER: Well, that’s another question. But if you’re going to place it somewhere, I’d just as soon have Berkshire stock.

WARREN BUFFETT: Yeah, oh, you’re solving the investment problems one. But you have the personal problem of the fact that when they were four, one of the kids pulled the other kid’s cat’s tail or something like that. I mean, you’re dealing with human beings.

And the biggest thing you want is you want your children to get along. And you want that all through your life, and the estate isn’t the only place where you can mess that up. But I mean, I know a number of cases where the people did not know what was in the will where there were huge sums involved.

And you know, within about 15 minutes each one of them had a lawyer, and you know, they don’t get along since. It’s important to handle it target. And if you want your kids to have certain values, it’s important that you live those values. It’s important that you talk about it to them. (Laugh)

They’re learning from you from the day they’re born, what you’re really like. And don’t think that a cleverly drawn will substitute for your own behavior in teaching your kids the values you hope that they will have. And then your will should be in conjunction with that.

And they grow older, and then they learn to pass along their values in connection with the size of the estate. If there’s family farms it’s one thing, if it’s a bunch of marketable securities it’s something else.

But I know one instance by a particularly rich fellow that once a year he’d get his kids together, and have a dinner, and do all kinds of things to get them to sign their income tax returns in blank, because he didn’t want them to know how much money they had and everything.

Well, that isn’t going to work. I mean, I don’t know necessarily what would’ve worked with him. But Charlie and I have said, if you want to figure out how you want to live your life, you write your obituary and reverse engineer it. You know, and Paul Andrews incidentally, who you mentioned at TTI, lived as great a life as anybody I’ve known.

And he thought about these problems, and he came to me. He was 61, I think, had all the money way beyond what he needed. He liked to give it to people. He had all kinds of good things he wanted to do. And he said, “For a year I’ve been worried about my business, TTI.”

And he said, “I have all the money I need. The family has all the money they need. But what do I do with the business? These people have helped me throughout my life.” And he said, “I can sell it to a competitor. And if I sold it to a competitor, they’d fire my people and keep their people when they put it together.

“And if I sell it to a private equity firm or something, they’ll be figuring out their exit strategy as they sign the papers.” And he said, “It isn’t that you’re such a great guy, it’s just that you’re the only one left.” (Laughter)

And we bought it, and we lived happily ever after. And that was a man that knew the life was about.

15. BNSF takes derailments ‘incredibly seriously’

WARREN BUFFETT: So, with that, let’s go onto Becky. (Applause)

BECKY QUICK: This question comes from Don Glickstein in Seattle. He says, “Warren has criticized Norfolk Southern’s handling of its train derailment, yet has been silent about BNSF’s conduct. A federal judge ruled in March that BNSF intentionally and illegally violated an easement agreement on tribal land in Washington State by transporting long trains of crude oil.

“The same money the judge made his ruling a BNSF train derailed on tribal land, spilling oil in an environmentally sensitive area” What is Warren doing to ensure that BNSF and the Berkshire subsidiaries fulfill their ethical responsibilities? He says he’s been a Berkshire owner for more than two decades and he’s concerned that Berkshire has no systems to identify and address what he calls reprehensible behavior at BNSF and other subsidiaries?

WARREN BUFFETT: Greg?

GREG ABEL: Sure. It is a valid issue that our team obviously has been dealing with at BNSF. We did move crude across that tribal land. We had an agreement that allowed us to move X number of units per day. And we did breach it. We went over it. There were some fundamental breakdowns there that our team didn’t understand the number of trains that they could move.

We have had significant discussions with the tribe looking to resolve the issues, recognizing we obviously benefited from moving those trains. And those type discussions will continue. I would say there’s lessons learned there that we have to, when we make a commitment, understand what that commitment is and live by it.

Or don’t assume we can just move our trains as we wish or the cargo as we wish. We have to respect those agreements. There’s been a moment learned there. But at the same time, we’ve taken it very seriously and attempted to reach a resolution. And at some point, I hope we do come to a true resolution that’s fair both to the tribe and to BNSF.

On the derailment side, we did have an issue around the track derailed. We worked very closely with the tribe to mitigate that issue instantly or at least over a very reasonable period of time. They were very responsive. Our team was very responsive. And there were really no long-term environmental impacts to that spill.

And as our teams highlighted in other comments, obviously derailments do occur in the industry. We take them incredibly seriously. They’re not all hazardous, but irrespective of that, we’re constantly looking at how do we prevent them. How do we detect them when we potentially have one that’s going to occur? And what do we do with our trains? And then ultimately it comes down responding properly. Because they will occur. And I think we have an incredibly dedicated team that’s always ready to respond to the communities they’re impacting.

WARREN BUFFETT: There are derailments. How many a year?

GREG ABEL: Yeah, well, there’s a thousand-plus in the industry.

WARREN BUFFETT: Yeah, yeah. You know, you start hauling freight, and we’re a common carrier. And we take very heavy freight. And we take them in 100° weather. And we take it at 0° and we go around curves. And we have grades. (Laugh) And even a 1% grade, if you’re going down a hill with, I don’t know how much weight behind you, I mean, railroading is not an easy business.

And of course, the systems were designed, you know, basically in the late 1800s, amid the late 1800s. And we have 22,000, I think it is, miles of track. And that doesn’t count sidings and some other things. It is not an easy business. We’ll make mistakes.

We’re not making a mistake because we have a derailment. We will have derailments ten, 20 years, or 30 years from now. And we have to carry certain products we wish we didn’t have to carry. We’re a common carrier. Do we like carrying chlorine and ammonia and all? No.

But they’re going to move from one place to another in this society. And we are a common carrier. And we load them if they select our railroad.

But we are better than we used to be. But we’ve got a long way to go. Is that a fair enough statement?

GREG ABEL: Absolutely.

16. Berkshire utilities focusing on clean energy but coordinated national effort is needed

WARREN BUFFETT: OK, station five.

AUDIENCE MEMBER: Hi, Mr. Warren and Mr. Munger. My name is Soo Jing Hua (PH) from China, (FOREIGN LANGUAGE) company. And first of all, I’m so excited and very honored to be here today. And my question is: With more and more people focusing now on environmental competition protection and the government supporting the new energy industry as well, so what are your thoughts on the continued development of new energy? How may the new energy firms achieve better developments in the future?

WARREN BUFFETT: Yeah, well, Greg I think, is the best to answer that because since we bought a company called MidAmerican but now called Berkshire Hathaway Energy. But he has been talking about it yearly, preparing reports hoping that we can help solve a number of the problems. And we probably spent more money than any utility, I would guess, in the United States.

GREG ABEL: Absolutely.

WARREN BUFFETT: And we’ve just scratched the surface. But it is not easy when you cross state lines. I mean, you’ve got different jurisdictions. And this country should be ahead of where it is in terms of transmission. We have been the biggest factor in helping that. But why don’t you tell them a little bit about it?

GREG ABEL: Sure, thanks, Warren. So, there’s no question there’s an energy transformation going on around the globe and as Warren touched on, in the U.S. And in some ways, I would hope here in the U.S. we’d at least have a clear plan across the nation as to how to approach that.

But the reality is it is state by state with some exceptions. So, as a result, when you think of Berkshire Hathaway Energy, we own three U.S. utilities there. And they all participate in multiple states. But they’re developing plans state by state and then trying to integrate them across the various states.

The opportunities are significant because there is a transformation going on. We’ve outlined our goal on where we’re going relative to carbon at BHE where they’ll by 2030 reduce their carbon footprint by 50% relative to 2005. So, that’s the Paris Accord and the standard they want to hold the utility industry or the utility companies to.

And we’re well on that path. But to achieve it is a true journey. I’ve often talked to Warren. When we bought Pacific back in the mid-2000s, we immediately recognized to build a lot of renewable energy like we’ve been doing in the Midwest and Iowa.

But that was basically in a single state. Now PacifiCorp, we’re in six states. We started that back in the mid-2000s. Here we are. And we laid out a great transmission plan. Here’s how we’re going to build it. Here’s how we’re going effectuate it, and all the benefits for our customers over that period of time.

Here we are in 2023, and we have a little more than a third of that. At the time it was a $6 billion transmission project. Today we have a little more than a third of it built. And we’ve spent probably closer to $7 billion. And it’s the right outcome.

It’s still a great outcome for our customers. But as part of the transformation, you absolutely have to build it to move all that renewable energy. And that’s sort of the complexity Warren was highlighting. You can’t just wake up one day and solve this problem.

You start with transmission, and then you build the resources. But at that same company, and if we look at what we’re doing across BHE Energy and that energy transformation, we have $70 billion of known projects that are really required to properly serve our customers and achieve that type of energy transformation across those utilities.

And that’s in the coming ten years. So, we have a team that’s absolutely up to the challenge. They’re delivering on their commitments. And it’s a very good business opportunity for each of our companies and for our shareholders. Because as we deploy that capital, we obviously earn a return on equity of it. But it will be a long journey. It’ll happen over an extended period of time. And the further you get out there, the more dependent upon the evolution of a variety of technologies that are progressing, but not there yet.

WARREN BUFFETT: You’ve raised a question. I want to just take an extra minute now because it’s so important. And I don’t really know whether our form of government is ideal at all in terms of solving the problem you describe. We have solved it one time. In World War II, we took a country that was semi-limping along.

And we found ourselves in a world war. And what we did in a world war is we brought a bunch of people to Washington at a $1 a year. I don’t know whether it was Sidney Weinberg or Goldman Sachs. You just name them. And we gave them enormous power to reorient the resources of the United States to face the problem that they faced, which was to create a war machine.

And what they did was they found Henry Kaiser, you know, and told him to build ships. And they went to the Ford Motor Company and said, “You build tanks and some airplanes.” And they reordered the industrial enterprise of the United States in a way that was unbelievable.

Because they had the power of the federal government. And they had the ingenuity of American business. And they had the facilities of American business. And it led to a very successful outcome. But can we do that in a peace time where you’ve got 50 states and you have to get them to cooperate?

And you can issue orders. But you can’t designate where the capital goes. It’s the other end. And, you know, we try and do it with tax incentives and all of that sort of thing. But we haven’t created the unity of purpose and the machinery that worked in World War II where essentially everybody felt their one job was to win the war.

And we figured out how to use our industrial capacity to in effect defeat the Axis powers. And how do you recreate that with, you know, the present democratic system? I’m not sure I know the answer. But I sure know the problem. And I think that if you’ve got an emergency on your hands, I mean, you really need to re-engineer the energy system of the United States.

I don’t think you can do it without something resembling the machinery, the urgency, whatever. The capital’s there. The people are there. The objective is obvious. And we just don’t seem to be able to do it in a peace time where we’re used to following a given set of procedures.

And, you know, China’s one country. And we’ve got 50 states. And we got a whole different system of government.

We should be up to the test, but so far it hasn’t worked. So, thank you for the question.

17. Abel will decide on next generation of Berkshire managers

WARREN BUFFETT: Becky.

BECKY QUICK: This question comes from Chris Freed in Philadelphia. He says, “We know that Greg Abel and Ajit Jain are the next generation of Berkshire leaders. Who are currently behind Greg and Ajit in their respective roles?”

WARREN BUFFETT: Well, that will be the question. Well, Greg will be, absent some extraordinary circumstance, but he’s going to succeed me. And then he will be sitting in a position where he needs his equivalent or something closer to his equivalent, because he’s better at many things than I’ve been.

He will need that substitute. And when the question comes, we know Ajit’s opinion on that. But Greg will probably be the one that will make the final decision, I mean, being his responsibility. And Ajit will give him his best advice. And I think the odds are very, very, very high (Laugh) that Greg would follow it.

But those are not easy questions. Everybody talks about the executive bench and all of that sort of thing, which is baloney. I mean, you know, they don’t have that many people that can run five of the largest net worth companies and all kinds of diverse businesses.

But you don’t need five people either. And you need a lot of good operating managers. And you need somebody at the top that allocates capital and makes sure that you’ve got the right operating manager. And we’ve designed something where we separate the insurance and the rest of the business.

And I think it’s a very good design. But we wouldn’t be smart to name that decision now about the two different areas of the business because a lot can change between now and then. And the most likely (Laugh) change is that this job changes. Charlie.

CHARLIE MUNGER: I got nothing to add. We have a lot of good people that have risen in the Berkshire subsidiaries. And there’s a reason why our operations have by and large done better than other big conglomerate companies. And one of them is that we change managers way less frequently than other people do. And that’s helped us.

WARREN BUFFETT: When Paul Andrews died, we knew who he thought should take over there. But there wasn’t any reason to announce that. I mean, we should live to be 100. We had one of our managers die not long ago. And how old was he, at Garan?

GREG ABEL: Yeah, mid-90s, Seymour.

WARREN BUFFETT: Yeah, Seymour Lichtenstein. And Seymour, I wrote him a letter when he was 80 and I said, you know, “I’m glad you’re 80. And I’ll write you again when you’re 90.” And (Laugh) I wrote him again when he was 90. And (Laugh) he didn’t make it to a hundred.

But he had a terrific fellow following him. And he really managed it jointly, to some extent, as the years went by. But it’s case by case. And the main thing to do is have the right person running the whole place.

18. America has too much ‘tribalism’

WARREN BUFFETT: OK. Station six.

AUDIENCE MEMBER: Good morning, my name is Hatch Okamamti (PH) from Miyazaki, Japan. Mr. Buffett, I was one of the 8,000 employees at Salomon Brothers that you saved. I was younger back then. I was working at 7 World Trade Center. I’ve always, always wanted to thank you in person for saving that company, its employees, including myself and my family. So, thank you, Mr. Buffett. (Applause)

WARREN BUFFETT: Thank you. (Applause) And thank Deryck Maughan who actually had been over in Japan before that and who I met for the first time the day before I put him in. And it wouldn’t have worked if Deryck hadn’t come. So, whatever you taught him in Japan, (Laugh) thank you.

AUDIENCE MEMBER: Thank you, sir. Now, my question time to time you have reminded us to not bet against America. What do you think are the most important things for you guys to remain strong? On the risk side, if the strength of the country’s undermined, what could be the reasons?

WARREN BUFFETT: Well, we’ve had (Applause) a lot of tests. I mean, we’re such a young country. You know, when you think about Japan and you think about the United States, it’s just incredible how new we are to the block. I mean, you know, what are we? 234 years old since we started.

That’s nothing. I mean, you know, Charlie and I combined, we’ve lived two thirds the life of the country. (Laughter) I mean, we’ve been tested at 46 national elections. And we made some bad choices. And we’ve had a civil war. I mean, so the country has had enormous advantages though in some way.

Because we started with one half of 1% of the world’s population in 1790. And we now have something close to 25% of the world’s GDP. And it wasn’t because we had some incredible advantage in terms of the land. It was nice to have two oceans on each side back when people tried to rule the world by ruling the waves.

You know, and we’ve had good neighbors in Canada and Mexico. But it’s a miracle. And you say, “How do we keep the good parts of the system?” Well, culling out our obvious defects. And we do it in a very herky-jerky manner. But net, the United States is a better place to live than it was when I was born by a huge factor.

I mean, I just got a root canal a week ago. And I was just thinking, “I don’t know who invented Novocain, but I’m for him.” You know, I mean, (Laugh) but in a million ways. I mean, you can romanticize about the past. But forget it. It is work. But now we do have an atom bomb and we wish nuclear power.

You know, we wish the atom had never been split. But it has been. And you can’t put it back in the bottle. So, the challenges are huge. You know, my dad was in Congress back in the 1940s. And it looked like a mess then. Although it was unified by the war to some degree.

But it was still very partisan. Now the problem we have, I think, is that partisanship, it seems to me, has moved toward tribalism. And tribalism just doesn’t work as well. I mean, when it gets to tribalism, you don’t even hear the other side. And tribalism can lead to mobs.

I mean, it just flows. I mean, you’ve seen it (UNINTEL). We’ve seen it to a degree here. So, we have to refine in a certain way our democracy as we go along. We deal with the world we live in. But if I still had a choice of any place to be born in the world, I’d want to be born in the United States.

And I’d want to be born today. I mean, it is a better world than we have ever had. And with present-day communications, we can also see much more how terrible it is in many ways. And it’s got problems. When I was born in 1930, there were 2 billion in the world.

And now there’s maybe 7.7 billion and growing. And we went millennia with really no change in population. And of course, we’ve introduced energy in an incredible way into something where we now have 7.7 billion people using way more energy than they did when I was born when there were 2 billion people.

So, it’s an exciting world. It’s a challenging world. And, you know, I don’t know the solutions on things. I do think that we do need to think about different solutions in terms of how we get important problems solves and that we don’t kid ourselves that something magic will happen or that everybody will get together and we’ll all just cheer, and it’ll go away by 2050.

And how well we adapt to that, we will see. I would say so far it doesn’t look very promising. But then I’m sure that when Lincoln looked out at what was going on in the Civil War it didn’t look very promising either. So, I think that the U.S. is capable of doing remarkable things. And I think it wouldn’t surprise me if they do it again. Charlie may —

CHARLIE MUNGER: Well, I’m slightly less optimistic than Warren is. (Laughter) I think the best road ahead to human happiness is to expect less. I think it’s going to get tougher. And I think the solution of having a huge proportion of the young and brilliant people all go into wealth management is a crazy development in terms of its natural consequences for American civilianization. We don’t need as many wealth managers as we have.

WARREN BUFFETT: But Charlie was born on January 1st, 1924. And you’d hate to go back to that, wouldn’t you, Charlie? (Laugh)

CHARLIE MUNGER: Yes, I would. And I like more wealth managers who are just merely reflecting the fact there’s more wealth. But I don’t like everybody going into wealth management. Better go to MIT or something. I think the world’s a little crazy now.

WARREN BUFFETT: Take your choice. (Laugh)

19. No corporate raider will have enough money to target Berkshire after Buffett

WARREN BUFFETT: OK, Becky. (Laughter)

BECKY QUICK: This question comes from Dennis DeJaniero. As Warren stated in the 2022 annual report, Berkshire will always hold a boat load of cash in U.S. Treasury bills. It will also avoid behavior that could result in any uncomfortable cash needs at inconvenient times, including financial panics and unprecedented insurance losses.

After Warren passes away, his A shares will be converted into B shares and distributed to various foundations. These foundations will then sell the shares to fund their causes. Warren estimates it will take 12-15 years for all his shares to be sold.

I worry that a corporate raider like Carl Icahn or a group will buy up enough of these shares to take control of Berkshire and completely disregard Warren’s philosophy of holding a lot of cash and U.S. Treasury bills, and instead be greedy, reckless, and highly speculative and ruin Berkshire’s position as a rock-solid financial fortress. I also worry that changes might be made in how Berkshire’s subsidiaries are run. Do Warren and Charlie worry that these things could happen?

WARREN BUFFETT: Well, I think it’s fair to say we think about it plenty. But I don’t worry enormously. It is true that Greg and the directors will have a honeymoon period for a long time simply because other votes that will still remain. But it’s true that eventually they will get judged based on how well our operation fares versus others.

Now if we don’t pay any dividends in 12 or 15 years, you’re talking a trillion and a half that it would take to take over. And I think that limits the group. They like to think about how much they can borrow against it. (Laugh) It doesn’t work.

And there’s nobody that can come close to doing it themselves. And I think that the important thing is that Berkshire be regarded as a national asset rather than a national liability. We’ve got to be a plus to the country with our form of operation. And we certainly have got a record which will then be 12 or 15 years longer, done with much more capital, more companies.

More things will have happened where our hundreds of billions can work its way into the economy in terms of lots of jobs, lots of products, lots of behavior. And it can be compared with other things. So, I think we win out if we deserve to win out. And I think the odds of that happening are very, very, very high. Charlie.

CHARLIE MUNGER: Well, I don’t spend much time worrying about something that happened 50 years ago after I’m dead. I think if you sort of take care. Each day’s responsibility is pretty low. And think ahead as well as you can. Then you just take the results as they fall. So, I’m philosophical. But I’m not — I think he’s fretting unnecessarily.

WARREN BUFFETT: OK. Neither one of us are worried, basically. (Laughter) But we plan. We do plan. And, you know, I’ve got a model in my mind of what Berkshire has been the model. It’s been modified plenty of times over 58 years. The one thing I knew initially or very quickly was it shouldn’t be a textile company.

(Laugh) That was an important decision. (Laughter) And, I mean, we’ve just played the hand as it came along. And we made a few really good decisions. We’ll never make a decision that kills us. Only things that are a threat to the planet, we don’t have any answer for those.

But we keep ourselves in better shape than anybody else. And we just aren’t going to have big maturities of debt that come along. We aren’t going to have insurance policies that can be cashed in en masse. And we will sit with what looks a huge amount of capital.

And it is a huge amount of capital. But there’s a huge amount of earning power. There’s a huge amount of diversity, everything. So, our business model will be graded, and it’ll be graded against a lot of people that we like to be graded against. So, I think we’re handing something very secure over to the future.

And I think we’ve got a shareholder base like nobody has. I mean, there isn’t anybody in the country that I know of unless they’ve had a employee-owned company prior to going public or something of the sort. But this is the product of, you know, 58 years of regarding the shareholder as the owner of the company.

But what does that mean? That means having happy customers. It means being (Applause) welcomed by your community rather than having them turn you away. It means that the government feels better with you if there’s a financial crisis. Because you can provide something that actually the country can’t under some circumstances.

And you’ll be there. And at the same time, it’ll be good for the business. And we will have crises of one sort or another. But if they aren’t challenging the planet, which worries you in terms of some of the threats that we have, we’ll be a plus to the United States. And if we’re a plus to the United States, we’ll survive.

20. Stories about finding Ajit Jain and Ben Rosner’s Chicago submarine

WARREN BUFFETT: OK. (Applause) Station seven.

AUDIENCE MEMBER: Mr. Buffett and Mr. Munger, thank you for having us this weekend. My name is Beau Clayton (PH), and I’m from Durham, North Carolina.

One of the reasons that we are all here is that you’re great storytellers. And we carry those stories back home with us.

Can you please share a couple stories that maybe we haven’t heard before (Laughter) about Mr. Abel and Mr. Jain that capture their character and their caliber as leaders? (Applause)

WARREN BUFFETT: Well, I’ll start out with Ajit. (Laugh) He walked into the office in 1986, and I’d gotten the bright idea of going into the reinsurance business I think in maybe 1969. So, I’d stumbled along for 17 years. And I had a wonderful guy that ran it.

But he also liked certain brokers. I mean, he was running it the traditional way. Top quality and everything else, but he didn’t try and change the system. He tried to improve the system to some degree. And we went nowhere. Seventeen years wandering around in the wilderness.

And I thought we could have something good. And then Ajit came in on a Saturday and Mike Goldberg (PH) had steered him in, I think. And Mike deserves to be enshrined (Laugh) in perpetuity for that act. And I talked with him a while. I think maybe I was opening the mail on Saturday while I talked with him.

And he had absolutely zero experience with insurance. But he’d actually seen a good bit about how corporate America operated, because he’d been in management consulting. And after talking with him, I knew I’d struck gold. And so, I hired him and gave him the backing of some money.

And we hit a very good period in the market almost right away for him to act. And Ajit, you know, if I had the top pick of ten insurance managers in the world, I could take all ten and you can’t replace Ajit. And we still enjoy talking.

We don’t talk as frequently as we used to, but we used to talk about every day. But he’s one of a kind. And, you know, if you’re going to stick around long enough, you only need one of a kind. (Laugh)

Paul Andrews (PH) stuck around at TTI, had all the money in the world.

Every time I talked to him about getting a raise or something of the sort, he said, “We’ll talk about that next year.” He was not what you get when you get the top draft picks from the leading business schools. And I will say this, I have never looked at where anybody went to school in terms of hiring.

I mean, somebody mails me a resume or something, I don’t care where they went to school. And it just so happens that Ajit went to some pretty good schools. But he isn’t Ajit because he went to those schools. And Charlie, you can tell a story or two. How’d you find Louis Vincenti? (Laugh)

CHARLIE MUNGER: Well, he was there. But you’ve got to recognize him. I asked Louis once how he managed to play first-string football at, I think, Stanford when he only weighed 155 pounds. And he said, “Well,” he said, “I was pretty quick.” And he was pretty quick. But (Laugh) we have found a lot of people within our companies who are pretty quick.

WARREN BUFFETT: Yeah, we had one guy that quit at fourth grade, didn’t we? Ben Rosner. Am I wrong?

CHARLIE MUNGER: Oh yeah. Totally self-educated. Ben Rosner knew more about retailing in those old neighborhoods than anybody. And he watched everything in his business like a hawk, and he was amazing. Now there was an example. We never found anybody who could do what — when Ben died, that ability left us.

WARREN BUFFETT: Yeah, and you want a story that’s kind of interesting, because Ben Rosner had a partner, Leo Simon. And Leo Simon was Mo Annenberg’s son-in-law. And Leo, therefore, was very, very, very wealthy. And Ben started with nothing. But they liked each other.

And one time well before they got involved in the business we bought, they got the idea of buying a submarine from World War I and taking it to the Century of Progress, which was the World’s Fair, in effect, in Chicago I think in 1933. So, they bought the submarine for practically nothing.

And they figured the average guy from Omaha who’s going to his first World’s Fair could get a submarine for a quarter or something, that they’d pay it. So, they hauled it from Florida, wherever they got it, hauled it to Chicago. And then they got into Chicago, and they were hauling a submarine down the streets of Chicago. (Laugh)

And, you know, it was creating traffic problems like nobody could imagine. So, a cop came over and he said to Ben, he says, “Where do you think you guys are going with that submarine?” (Laugh) And Ben says, “You’ll have to talk to my partner, Mr. Capone.” (Laugh)

And the cop says, “You’re on. You know, just keep going.” And (Laughter) that was Ben Rosner. And then Leo Simon died, and when he died in 1967 or so, Ben Rosner kept delivering half the profits to his widow, who was incredibly rich, of course, being Mo Annenberg’s first-born daughter.

I think Mo had nine girls in a row before Walter came along, the tenth. I may be off by one. But anyway, I went to his fancy apartment. And anyway, Ben kept her in for half the deal. And he had her sign the rent checks just so she would look like she was doing something in this business.

And she didn’t need the money, obviously, but he just felt he was obligated once his partner, Leo, died. And then she started criticizing him. And at that point, Ben went to his lawyer, who was her lawyer, actually, Will Salsteiner (PH). I don’t know whatever happened to Will.

But he gave me a call because Ben wanted to call me because he wanted me to buy it. And he wanted me, if I bought it, he’d be rid of the ex-partner’s wife. And he had Charlie and me come back, and we went to Will Salsteiner’s office. And Ben says, “I’ll work until the end of the year, and that’s all. But I’ll sell you this thing for $6 million bucks.”

And I had $2 million in cash, and a couple of million in real estate, and a couple million of operating earnings. It was just crazy. But he felt if he was getting a lousy price, she was taking a half of the lousy price for half the money. So, he looked at me at some point. Charlie, you describe the rest of it. (Laugh)

CHARLIE MUNGER: He said, “I hear you’re the fastest draw in the West.” He says, “Draw.” (Laughter)

WARREN BUFFETT: We’re in a New York lawyer’s office. (Laugh) And this guy is selling his baby. And he told us he’s leaving. I got Charlie on the side, I said, “If this guy leaves at the end of the year, you can throw away every psychology book that’s ever been written. I mean, it isn’t going to happen.”

And so, we bought it and we lived happily ever after with Ben. And one time he was taking me over to see a property we had in Brooklyn. And along the way I said, “Ben, you know, I promised you I wouldn’t interfere in the business when we started.” And he knew a “but” was coming. And he just said, “Thank you, Warren,” and then he shut me up. (Laughter)

He was a lot of fun. We have so many Ben Rosner stories, but now you’ve heard one that hasn’t been published before.

21. Jain is happy with property catastrophe reinsurance portfolio

WARREN BUFFETT: OK, Becky?

BECKY QUICK: This question comes from Chai Gohill (PH). This he writes, this is for Ajit. “Reinsurance industry is going through one of the hardest pricing environments in the last 15 years. Berkshire historically has participated during these stressed times when economic returns are very attractive.

“This year, it appears Berkshire has not been interested in deploying its resources towards property cat reinsurance despite such strong returns. Can you elaborate on reasons for not participating despite these returns, and your broader view on how you’re planning to shape your reinsurance business post-acquisition of Alleghany?”

AJIT JAIN: OK. In terms of Alleghany, that’s an easy response. We treat our operating units independent of each other. And as far as Alleghany is concerned, they have a major presence in the reinsurance business under the brand name of TransAtlantic Re.

That company will operate the way it’s been operating in the past. There will be no change in terms of strategy or management. And they will keep doing what they’re doing. They’ve been very successful, and hopefully will keep being successful.

Now, in terms of the property cat business that I have been active in over these last several years, you’re right that the last 15 years has been a difficult time. Prices have not been attractive. And even though we have had some presence in the property cat business in the last 15 years, it really has been minimal.

This December 31st, which is a big renewal date for cat reinsurance, we were hoping that we would get a few days in the sun, and we’d be able to deploy our capital, and be able to write some fairly attractive business. As it happened towards the end of December, until about the third week of December, I was very optimistic that we would get a chance to put several billion dollars on the books.

But in the last ten days of December, unfortunately a lot of capacity came out of the woodworks. Pricing that we were expecting to realize didn’t really come and meet our pricing requirements, as a result of which January 1 was a big disappointment.

We did not write as much as we were hoping to write. Now, fast forward to April 1, which is another big renewal date, we had a lot of powder dry. And we were lucky that we kept the powder dry. Because April 1, suddenly prices zoomed up again, a lot higher than what they were on January 1, and started to look attractive to us.

So, now we have a portfolio that is very heavily exposed to property catastrophe. To put that in perspective, our exposure today is almost 50% more than what it was five, six months ago. So, I think we have written as much as our capacity will allow us to write.

We are very happy with what we’ve written. The margins have been healthy. The only thing that I want to mention to you is that, while the mentions have been healthy, we have a very unbalanced portfolio. What that means is if there’s a big hurricane in Florida, we will have a very substantial loss.

As opposed to that if we have a very big loss anywhere other than Florida, relative to our competition, we will have a much smaller loss. Net-net, I’m very happy with the portfolio. It is a lot better than what it’s been in the past. I don’t know how long it’ll last, and of course if the hurricane happens in Florida, we could lose, across all the units, as much as $15 billion. And if there isn’t a loss, we’ll make several billion dollars as profit.

WARREN BUFFETT: And, Ajit, when you called me and said you’d like to expose us to whatever it was, a couple billion more of exposure, how long I took to say yes. (Laugh)

AJIT JAIN: Yeah, so the way we think about our exposure is, you know, in the insurance operations collectively across the entire company. Given that we have about a little less than $300 billion of capital, we think of that as a 5% exposure that we’re willing to take on.

So, to complete Warren’s story, a few weeks ago we had about $13 billion of exposure all across the globe. And I called up Warren and I said, “We’re up to $13. It’ll be nice if we can go up to $15. That’s a good round number.” And that was less than a 30-second phone call. (Laugh) I think Warren said yes without even listening to what the numbers were. (Laughter)

WARREN BUFFETT: I hope he calls me again. (Laughter)

22. ‘We don’t get smarter’ but ‘we get a little wiser’

WARREN BUFFETT: OK, station eight.

AUDIENCE MEMBER: Hello. My name is Adal Flores (PH), and I’ve been a shareholder for about 16 years. And I’m coming from Guadalajara, Mexico.

My question is for Warren and Charlie. Companies have the eternal dilemma between building products that can make profits and increase their company’s competitive position.

In the best case, you can build products that have both characteristics at the same time, like Google did.

But most of the time, companies need to choose between short-term profits and long-term defensibility. For example, Amazon was focused on building their famous Amazon flywheel with limited profits initially, in order to obtain stronger network effects, with the hope of getting more defensible profits in the future.

When you invest, you constantly speak about the importance of building competitive moats. What advice would you give to CEOs about how to balance this dilemma, which is essentially short-term profits versus long-term defensibility? Thank you.

WARREN BUFFETT: Well, the answer is to control your destiny, which we’ve been able to do at Berkshire. We feel no pressure from Wall Street. You know, we don’t have investor calls. We don’t have to make promises. We get a chance to make our own mistakes, and occasionally find something that works well.

But we recognize that the people in this room and people like them are the ones that we’re working for. And we’re not working for a bunch of people that care about whether we meet the core estimate or anything. So, we have a freedom that we get to use.

And we’re interested in owning a wonderful business forever. We learned from many wonderful businesses. But we do learn a lot as we go along. Charlie and I have often mentioned how we learned so much when we bought See’s Candies, which we did.

But we learned when we bought Ben Rosner’s chain of women’s dress shops spread all over the eastern part of the country. We learned when we tried getting into the department store business back in 1966. And as the ink was drying on our purchase price, we realized we’d done something (Laugh) dumb.

I mean, we’re learning all the time how consumers behave. I’m not going to be able to learn the technical aspects of businesses. It’d be nice if I knew it, but it isn’t essential. And, you know, obviously we’ve got a business at Apple, which is larger than our energy business.

And we may only own five points, 6% or 7%. But our ownership goes up every year, and I don’t understand the phone at all. But I do understand consumer behavior. And I know how people think about whether to buy a second car. I know how they go out to different — we own auto dealerships.

We’re learning all the time from all of our businesses how people react to Garanimals versus selling them something else. And so, See’s was a sort of breakthrough. But we just keep learning as to more about how people behave and how a good business can turn into a bad business, and how some good businesses can maintain their competitive advantage over time.

And so, we don’t have some formula, Berkshire people. But we can also tell in ten seconds whether it’s something of interest. I mean, when I get these calls and we want to send decks and all that sort of thing, which is nonsense, I mean, it’s a bunch of guys (Laugh) that get paid for drawing up these projections of the future and everything like that.

If they knew the future, you know, we don’t know the future, but we do know certain kinds of businesses. We know what the right price is, and we know what we think we can project out in terms of consumer behavior and threats to a business. And that’s what we’ve been about and that’s what we’ll continue to be about.

We don’t get smarter over time, we get a little wiser, though, following it over time. And you can do it while sitting in the office with a telephone, too, which we like. Charlie?

23. Why Buffett invested billions in Japanese ‘trading houses’

CHARLIE MUNGER: Well, tell them the story of the Japanese investment. That should be told again. That’s a nice story.

WARREN BUFFETT: Well, it was pretty simple. I mean, back when I started other people were going through Playboy and I was going through Moody’s, I mean, basically. And there’s a movie out called “Turn Every Page,” which I saw again for the second time a couple of days ago, Lizzie Gottlieb.

And I recommend everybody in this world watch that, because I turned every page in the past. And I did it for thousands and thousands of pages at Moody’s, and I did it at the Department of Public Utilities in Boston. I did it in the insurance department. I just kept turning pages. Well, that goes on for a while. But now we need big ideas in order to find things. And what was your question, Charlie?

CHARLIE MUNGER: Tell them about the Japanese.

WARREN BUFFETT: Well, the Japanese thing was simple. I mean, Ben and I liked looking at companies. I mean, I like looking at figures about companies. And here were five very, very substantial companies, understandable companies. Most of them, maybe all of them we’d done business with in a dozen different ways.

If you go a couple miles from where this place is, our last coal generating plant was built by one of the companies. So here they were. They were sitting as a group where they were earning, we’ll say 14% on what we were going to pay to buy them.

They were paying decent dividends. They were going to repurchase shares in some cases. They owned a whole bunch of businesses that we could understand as a group, although it didn’t mean we had deep understanding on any. But we’d seen them operate and everything.

There wasn’t anything to it. And at the same time, we could take out the currency risk by financing in the end. And that was going to cost a half of 1%. Well, if you get 14% on one side and a half a percent on the other side, and you’ve got money forever, and they’re doing intelligent things, and they’re sizable, so we just started buying them.

I didn’t even probably tell Greg until maybe six months after we’d gotten going. And then when we hit 5% in all of them, we announced on my birthday, 90th, that we owned over 5%. And recently went over for the first time to visit with them. And we were more than pleasantly surprised, delighted, with what we find there. And now we own 7.4% of them. We won’t go over 9.9% without their agreeing, and we sold another $164, whatever it is billion by the end.

CHARLIE MUNGER: They would’ve done it for us if we only had $5 billion or something. And it made $10 billion simply in that way. We would look like heroes. Now $10 billion just sort of disappears as if it’s a little dot in Berkshire’s reports.

WARREN BUFFETT: But it’s fun.

CHARLIE MUNGER: It is fun, and it is $10 billion.

WARREN BUFFETT: And Charlie says it keeps (Laughter) me out of bars when I talk to him about it. And I probably talked to Charlie about those the year after I started. But who knows? I mean, I knew he’d like it, I mean, obviously.

CHARLIE MUNGER: We tried to do every dollar. We would do — we could only do about $10 billion.

WARREN BUFFETT: Well, not even quite that much. But, you know, we are $4 or $5 billion ahead, plus dividends. And we’ve got a carry that’s terrific. And they welcome us, and they should welcome us. But we love it the way we’re operating. We’re not there to tell them what to do in the least.

But we did say we’d never go over 9.9%, and we mean it. And they know that we’ll be true to our word. And I went over there, partly to introduce Greg to those people, because we’re going to be with them 10, 20, 30, 40 years from now. And they may occasionally find something that we can do jointly. And they look forward to doing that, and we look forward to it, and in addition we have some other operating businesses in Japan. So, Greg, do you have anything?

GREG ABEL: No, the only thing I would add is that 1) as, Warren, you went over there, it was to build the trust with these Japanese companies. Because we do hope there’s long-term opportunities. But fundamentally, as you highlighted, they’ve been a very good investment.

I’d also highlight the five meetings we had were really quite remarkable. I mean, these companies, the culture and the history around it, and how proud they are, you know, there’s just moments of learning from them. So, it was just a great experience to spend really two days with the five companies.

WARREN BUFFETT: And an issue that we intended to be 56 billion of yen that we were issuing and selling turned out to be 164.4 or something like that. And everything’s worked so well. And as Charlie says, you know, it doesn’t move $500 billion of net worth that much.

But this one, you know, will keep adding over the years to Berkshire’s value with this very widespread, probably $4 or $500 million a year. And, you know, we’ll just keep looking for more opportunities. And Japan, Berkshire is the largest borrower, outside of corporate borrowers, outside of Japan that exists.

And we didn’t set out to be that. But (Laugh) it’s turned out that way. And we’re not done. I mean, you know, in terms of what may come along there. And we have some direct operations there, as I mentioned. And we’ve got some really wonderful partners working for us. And I don’t have to do anything.

24. Apple is a ‘better business’ than any Berkshire company

WARREN BUFFETT: (Laughter) OK, Becky?

BECKY QUICK: This next question comes from Ellie Amin Tebet (PH), who asks, “During an episode of Investing the Templeton Way podcast, Professor Damodaran, who he respects almost as much as Warren and Charlie, mentioned that he is not comfortable with positions becoming a large part of his portfolio. For example, when they reach 25-35%. He mentioned that Apple is now 35% of Berkshire’s portfolio and thinks that that is near a danger zone.” Wonders if Warren and Charlie can comment.

WARREN BUFFETT: Well, I’d like to make one comment first, but Charlie will come up with —

CHARLIE MUNGER: I think he’s out of his mind.

WARREN BUFFETT: Yeah, I knew that was coming. (Laughter) Apple is not 35% of Berkshire’s portfolio. Berkshire’s portfolio includes the railroad, the energy business, Garanimals, you name it, See’s Candies, they’re all businesses. And, you know, the good thing about Apple is that we can go up.

They buy in their stock, and instead of owning 5.6%, they got about 15 billion, 700 and some million shares outstanding. They get down to 15 and a quarter billion without us doing anything. We got 6%. So, we can’t own more than 100% of the BNSF.

We can’t own more than 100% of Garanimals or See’s Candies. And it would be nice. We’d love to own 200%, but it just isn’t doable. But they’re all the same. They’re good businesses. And to think that our criteria for Apple is different than the other businesses we own, it just happens to be a better business than any we own.

And we put a fair amount of money in it, but we haven’t got more money in it than we’ve got in the railroad. And Apple is a better business. Our railroad is a very good business. But it’s not remotely as good as Apple’s business. Apple, you know, has a position with consumers where they’re paying, you know, maybe the $1,500 bucks or whatever it may be for a phone.

And these same people pay $35,000 for having a second car. And if they had to give up a second car or give up their iPhone, they’d give up their second car. I mean, it’s an extraordinary product. We don’t have anything like that that we own 100% of.

But we’re very, very, very happy to have 5.6%, or whatever it may be, and we’re delighted every tenth of a percent that goes up. That’s like adding $100 million to our share of the earnings. And they use the earnings to buy out our partners, which we’re glad to see them sell out, too.

The index funds have to sell if they (Laugh) bring the number of shares down. And, you know, we went up slightly last year, and I made a mistake a couple years ago when I sold some shares when I had certain reasons why gains were useful to take that year from a tax standpoint.

But having heard me say that, it was a dumb decision. (Laugh) And, Charlie, you’ve already given your comment about it. But we do not have 35% of Berkshire’s portfolio. Berkshire’s portfolio is the funds we have to work with. And we want to own good businesses. And we also want to have plenty of liquidity. And beyond that, you know, the sky’s the limit or our mistakes. Who knows what the bottom is? (Laugh) Charlie, do you want to add anything to your earlier comment?

CHARLIE MUNGER: Well, I think one of the inane things that’s taught in modern university education is that a vast diversification is absolutely mandatory in investing in common stocks. That is an insane idea. It’s not that easy to have a vast plethora of good opportunities that are easily identified.

And if you’ve only got three, I’d rather be in my best ideas instead of my worst. And now, some people can’t tell their best ideas from their worst. And the act of deciding that an investment is already good, they get to thinking it’s better than it is.

I think we make fewer mistakes like that than other people. And that is a blessing to us.

We’re not so smart, but we kind of know where the edge of our smartness is. That is a very important part of practical intelligence. And a lot of people who are geniuses on IQ tests think they’re a lot smarter than they are. And what they are is dangerous.

But if you know the edge of your own ability pretty well, you should ignore most of the notions of our experts about what I call “deworsification” of portfolios.

25. U.S. and China both need to reduce ‘stupid, stupid, stupid’ economic tensions

WARREN BUFFETT: OK. (Applause) Station nine?

AUDIENCE MEMBER: Hi, Charlie and Warren. Thank you for this superb shareholder meeting celebration. My name is David Chung (PH) from Hong Kong, and a proud graduate of Chicago Booth. I’m also here with my two sons, Aiden (PH) and Ashen (PH), who are currently studying at the University of Chicago as a freshman and sophomore.

This is my second time attending the conference, last being 2019 four years ago, which I was only a guest shareholder of my friend, Andrew. So, after the shareholder meeting, I have decided to buy into Berkshire Hathaway, which has given me a great return of 62% since 2019.

So, I wanted to thank you for that. (Applause) I have also taken your advice to give my children a share for each of their birthdays. Although they want Berkshire Hathaway A shares, (Laughter) they will do just fine with B shares. (Laughter)

My question is how do you see the current U.S./China internet companies’ valuation and the price disparity, given there have been many uncertainties such as geopolitical tensions, significant cost optimizations with leading U.S. tech firms, while China tech has been through all that already? Thank you.

WARREN BUFFETT: Charlie, you want to?

CHARLIE MUNGER: Well, there’s been some tension in the economic relationship of United States and China. I think that that tension has been wrongly created on both sides. I think we’re equally guilty of being stupid. If there’s one thing we should do, it’s get along with China.

And we should have a lot of free trade with China in our mutual interest. (Applause)

And I just can’t imagine. It’s just so obvious. There’s so much safety and so much creativity that’s possible. Think of what Apple has done by engaging in a partnership with China as a big supplier.

It’s been good for Apple and good for China. That’s the kind of business we ought to be doing with China. And more of it. Everything that increases the tension between the two countries is stupid, stupid, stupid. It ought to be stopped on each side. And each side ought to respond to the other side’s stupidity with reciprocal kindness. That’s my view.

WARREN BUFFETT: And it creates one enormous problem, of course, which is that you have the two superpowers of the world, and they know they have to get along with each other. Either one can destroy the other. And they’re going to be competitive with each other. But part of it is, always in a game like that, is trying to judge how far you can push the other guy without them reacting wrong.

And, you know, if either side is a bully in some ways, they can get away with it, to an extent, because the alternative would drive them both into destruction. But if they push it too far, they increase the probability that something really does go wrong.

So, it’s one of those game theory dilemmas. But you really need the leader of both countries. And you need the populace to understand, at least, the general situation in which these countries are going to operate over the next century. And know that some leader that promises too much can get you in a hell of a lot of trouble.

And, you know, you’ve got one kind of a system that gets its leader one way. They’ve got another system that gets its leader another way. And keeping either side from trying to play the game too hard, and thinking the other side will go along, you know, it’s like playing chicken, you know, and driving toward a cliff.

So, if you’ve got any diplomacy skills, persuasive skills, or anything like that, you really want people that will convince the other country, as well as his own or her own country, that, “This is what we’re engaged in. We’ve got to do it right. We won’t give away the store, but we won’t try and take the whole store, either.”

And we’re just at the beginning of this, unfortunately. I mean, we learned what the situation was. It used to be the Soviet. And mutually assured destruction was our policy then. And that kept a lot of things from happening, but it also came with a very, very, very close call with Cuba.

And these are different games that existed hundreds of years ago. Britain might rule and seize France or Spain, but now you’re playing with a game that you can’t really make a huge mistake in. And I think that the better that’s understood in both countries, the more the leaders feel that their citizenry does understand that, the better off we’ll be.

And that a lot of demography, or a lot of inflammatory speaking, but a lot of authoritarian action, I mean, it all carries its dangers. And the world has stumbled through the years post 1945 with a lot of close calls in the nuclear arena.

And now we’ve got pandemics. And we’ve got cyber, and a whole bunch of other things. So, we’ve got more tools of destruction than the world’s ever had. And it’s imperative that China and the United States both understand what the game is and understand that you can’t push too hard.

But both places are going to be competitive. And both can prosper. That’s the vision that is out there, that China will have a more wonderful country, the United States will have a more wonderful country. And the two are not [incompatible].

They’re almost imperative in terms of what’s going to happen in the next 100 years or so. And I think that the leaders of both countries have got an important job in having that understood, and not to do inflammatory things. And we’ll see whether the luck that has taken us from 1945 to present holds out. And I think we can affect, to some extent, that luck. And with that cheery message, we will hand it to Becky. (Laugh)

26. ‘I feel better about the capital we’ve deployed in Japan than Taiwan’

BECKY QUICK: This question comes from Roheet Bellany (PH). “Berkshire bought a substantial position in Taiwan Semiconductor, and contrary to its normal holding timeline, sold almost the entire position within a few short months.

While you cited in a CNBC interview that geopolitical issues were the catalyst, these issues were seemingly no different when you acquired that stock.

So, what else, if anything, changed in those few months and prompted the firm to offload close to $5 billion worth of Taiwan Semiconductor shares?”

WARREN BUFFETT: Taiwan Semiconductor’s one of the best managed companies and important companies in the world. And I think you’ll be able to say the same thing five, or ten, or 20 years from now.

I don’t like its location. And I’ve reevaluated that. I mean, I don’t think it should be any place but Taiwan, although they will be, obviously, opening up chip capacity in this country.

And actually, one of our subsidiaries that we got in Alleghany is participating in their Arizona construction activities.

But it’s a question of we would rather have the same kind of company. And there’s nobody in the chip industry that’s in their league, at least in my view.

And the man that is a 91-year-old or so connected with it, that I think I played bridge with in Albuquerque, and they’re marvelous people, marvelous company. But I’d rather find marvelous people — and I won’t find it in the chip industry.

But marvelous people and marvelous competitive position and everything, I’d rather find it in the United States.

I feel better about the capital that we’ve got deployed in Japan than Taiwan. I wish it weren’t so, but I think that’s the reality. And I’ve reevaluated that in the light of certain things that were going on. Charlie?

CHARLIE MUNGER: Well, my view is that Warren ought to feel comfortable if he wants to. (Laughter)

WARREN BUFFETT: Yeah, yeah. Put that in the minutes. (Laughter)

27. Ben Graham’s great investment book is still popular

WARREN BUFFETT: OK, station ten?

AUDIENCE MEMBER: First of all, thank you for making our lives better. My name is Bugomil Baranowsky. I’m a founding partner of Sicart Associates in New York. We manage multi-generational family fortunes, hence my question. Mr. Buffet, in 1976 in your tribute to Benjamin Graham you wrote, “Walter Lippmann spoke of men who plant trees that other men will sit under.” Ben Graham was such a man. You’re both such people. Could you share with us your 100-year vision for Berkshire? It’s a question to you both.

WARREN BUFFETT: Yeah. I would like to add one thing about Ben Graham. Ben Graham did all kinds of things for me, and he never expected one thing in return. I mean, just you name it, and he did it, and there wasn’t any hidden — you know, the slightest hint, I should say, of anything he expected in return.

And I checked: He wrote a book in 1949 that, in a sense, said to me, in very persuasive terms, that what I’d been spending the previous eight or nine years worked at, and loving, was all wrong. And that book has been — I check it every now and then on Amazon where it ranks, and, you know, Amazon ranks hundreds and hundreds and hundreds of thousands of books by sales.

And Ben Graham’s book has been up there, like, number 300, or 350, or something like that, forever. And there isn’t book like it. I wrote Harper Collins a note the other day because they’re bringing out another edition. And I asked them how many copies have been sold. And they said the records didn’t go back far enough, but they had 7.3 million copies of this little book that changed my life and continues to outsell every investment book ever.

Investment books come along and, you know, they’re number 400, or 1000 or something for a while, and then all of a sudden, they’re number 25,000, or (Laugh) 200,000.

And this book — you know, in how many areas can you find any book that has had that sustained position? You go back and look at number one in 1950, or number two or number three, and you look at it in ’51 and ’52: They don’t continue.

I mean, they just don’t continue. Cookbooks, maybe one or two of them, last for a while, but there is nothing. And this book lives on, and everybody keeps bringing out new books, and saying a lot of other things. But they aren’t saying anything that’s as important as what he said in 1949 in this relatively thin little book.

So, you know, our vision for Berkshire is exactly what we said today: We want it to be a company that is owned by shareholders and behaves in a way that society is happy that it exists, and not unhappy. And we will have unlimited capital, we’ll get lots of talent, and we’ve got a base that can’t be beat.

And there’s no reason why it can’t be perpetuated, just like Ben’s book, and maybe be an example to other people. And, if so, we’ll be very happy. Charlie?

CHARLIE MUNGER: Yeah. One of the really interesting things about Ben Graham: He was a really gifted teacher, a very honorable profession. And that is what has lasted. However, an interesting fact that he was sheepish about in his old age, was that more than half of all the investment return that Ben Graham made in his whole life came from one stock, one growth stock: GEICO, Berkshire subsidiary.

And at the time he operated, there were a lot of sort of lousy companies that were too cheap, and you could make a little money floating from one to another. But the big money he made was one growth stock, buying one undervalued great company is a very good thing, as Berkshire has found out again and again and again.

WARREN BUFFETT: And Ben wrote a postscript to the ’49 edition pointing out exactly that fact, and acknowledging it, but also took some good lessons from it. “You know,” he said, “that’s the way life is: That you prepare, and you, you know, don’t lose on everything along the way, and then something comes along.”

And GEICO came along because a banker in Fort Worth that had financed Leo Davidson, and I think the banker got three-quarters of it. I don’t mean “Leo Davidson,” Leo Goodwin, who founded GEICO then called Government Employees Insurance Company, and you can figure out the acronym.

The deal almost fell apart. The deal was, as I remember, for maybe a million and a half or something like — a million and a quarter. And it almost fell apart because of a difference of $25,000 in the net worth delivered. This is a business that’s, you know, worth tens of billions.

But he pointed out the irony in that, too. I mean, he was honest, he was totally intellectually honest about the failings, and also the strengths, of his approach. And, to some extent, you know, Charlie and I have seen that in our lives.

I mean, sort of the prepared mind, the willingness to act when you need to act, and the willing to ignore every salesman in the world — and it’s imperative to ignore them, and it’s one or two things that make the right decision.

If you make the right decision on a spouse, I mean, you’ve won the game. You know, there’s an enormously important decision, and you’ve got all the time in the world. I mean, you’ve got more time than you used to have when I was a kid to make that decision.

And, you know, I don’t know whether a third, or whatever percentage, blow that one. You know, it is really interesting.

The thing to do is just keep trying to think things through and not do too many stupid things, “And, sooner or later, you have a lollapalooza,” as Charlie would say.

28. GEICO is talking to carmakers about selling insurance in the showroom

WARREN BUFFETT: OK. Becky?

BECKY QUICK: “All right. This question comes from Terafta (PH), a shareholder in Sierra Vista, Arizona, who is asking a question of Ajit.

He wants to know about electric vehicles getting insurance from the manufacturer instead of car insurance companies. A recent article in The Wall Street Journal shows that EVs are a small-but-growing percentage of sales. Tesla and GM are offering their own electric vehicle insurance: What will GEICO do to combat this?

AJIT JAIN: Yeah. So, GEICO is talking to a number of original equipment manufacturers as well to try and see how best they can work with the auto manufacturers and offer insurance at the point of sale. There haven’t been very many success stories (Laugh) as yet.

So, we’ll wait and see. You know, clearly, it is a very convenient way to sell auto insurance at the point of sale. But there’s a fair amount of data that needs to be collected on the driver, not just the car. And that makes it a little more complicated.

So, we are talking to some auto manufacturers ourselves, we are hopeful that we will strike a deal with some of them before too long.

Tesla and GM both have talked a lot in the press in terms of getting into the insurance business. And, in fact, GM, I think, has projected they’ll write $3 billion of premiums. Which, you know, it’s hard to imagine where it’ll come from. But there all hot to trot. I think somebody will find the secret sauce before too long, and we ourselves are in that race.

WARREN BUFFETT: Yeah. I would point out that — General Motors Insurance, for decades — and, I mean, this is not a new idea. And Uber wrote a lot of insurance for a while, they laid it off with somebody, and that company got killed by it. But — and I don’t know the deal between Uber and — I forget the name of the company that took it on, Ajit would probably know.

AJIT JAIN: James River.

WARREN BUFFETT: James — yeah. And, you know, it is not a new idea, it’s not magic in the least. I mean, it is hard to come up with something that is better at matching risk to reward — I’m sorry, risk to price, than a bunch of very smart people are doing at Progressive, and a bunch of very smart people are doing, to a greater extent, at GEICO.

And, I mean, it just was fascinating to me when Uber went into it, you know? And they were going to get their head handed to them. But they laid off a good bit of it — a very substantial percentage of it, with somebody else, who got their head handed to them.

(Laugh) And, you know, but it was a story, you know, and Wall Street loves it. We’ve got 80 car dealerships that do a lot of business, and, you know, we’ve got the people buying the cars, and the place, and we form an insurance company around those dealer groups, for some reason, that writes insurance: You know, it’s hard to improve on the present system. And — (Laugh)

AJIT JAIN: Yeah.

WARREN BUFFETT: I wouldn’t pay a penny — oh, I’d pay to avoid it, actually. I mean — (laughs) and — go ahead, Ajit.

AJIT JAIN: Yeah. The only point I’d like to add is the margins on writing auto insurance are 4%. Which is a very small number, and once there are more people that are trying to take a bite of the apple, it just becomes very, very difficult to keep all the mouths fed in a profitable manner.

WARREN BUFFETT: Yeah. You can say there was one big, new idea in property — in car insurance, back in 1920 or so when State Farm started, and State Farm still has it. Next to Berkshire, it’s the leader in having net worth. It’s a mutual company, but some guy just figured that there was a cartel running car insurance. “A Farmer from Merna” is the name of the book, I think, over in Illinois, and he created a system where he really took 20 points or so out of the cost.

And surprise, surprise, here he is, you know? And nobody’s owned stock in State Farm — it’s an insult to capitalism, actually. Everything (Laughs) you learned at the business school says it shouldn’t work, because nobody owns it, nobody’s going public with it, no nothing.

But it’s got more net worth — it’s almost probably double. Leaving Berkshire out of the picture, it’s probably double the next guy, and nobody’s really improved on their system that much.

So, it’s fascinating how people don’t really look at the essence. You know, these are cases that should carry a message. But the truth is, in Wall Street anything can get sold.

The test is whether you can sell it or not. If you can sell it, it’ll get sold, and a bunch of insurance companies came along and got it sold. And this can be a story about this stock or that stock, and it sounded good when they talked about it at Uber for a while. And it is really interesting. The investing public does not learn much.

29. Index funds are ‘backing off’ from using voting power

WARREN BUFFETT: OK. Station 11.

AUDIENCE MEMBER: Hi. My name’s Jeff Merriam (PH). I’m from Edina, Minnesota. We’ve been coming for years. To make that professor from the earlier question really nervous, half our family’s wealth is in Berkshire Hathaway. (Laugh)

WARREN BUFFETT: (Laugh) But let’s make Charlie nervous. (Laugh)

AUDIENCE MEMBER: My question has to do with voting control in the future. There was a question earlier about corporate raider. I was more wondering about who is actually going to own the voting control? Is it going to be institutions? CalPERS? BlackRock? Are they eventually going to get their way with the ESG checkboxes that we’re going to have to check? And what should we be thinking about that?

WARREN BUFFETT: Well, you’re thinking very well. And the interesting thing is the big aggregations look like, of course, they’d be in index funds. But what index funds want is they want a world in which society doesn’t get upset with them about the fact they’ve got all the voting power. And I would say in the last year or two it’s looked like a better idea for them not quite to get as — what was the phrase that Charlie used?

CHARLIE MUNGER: But they’ve backed off a lot.

WARREN BUFFETT: Yeah, they backed off a lot. And it’s in their interest to back off. And, interestingly enough, in looking at money management, you know, the game is not performance, it’s assets under management. And index funds produce a tiny, tiny, tiny fee on assets under management. Because it was pioneered by Vanguard, and when it became successful it was very easy to replicate. Not so “easy,” but, I mean, it was inevitable that it be copied.

But it came with a management fee of two basis points. So, what people that have offered index funds would really like is you to buy their other funds, or let them manage money in some other way, so that they get higher fee on assets under management.

Which, of course, is (Laugh) exactly why the index fund was invented in the first place. So, it’s not a “loss leader,” but it is a way to pull money in, and then you hope that people ignore what was said by —what’s the name that — you know, that — John Bogel — Jack Bogel — ignore him.

And, essentially, they give up the (UNINTEL) idea, “And that we’ll offer you a fund that does this in India, and we’ll offer you another fund that does that.” And, of course, those management fees are higher.

So, they’re really counter-selling the idea that John Bogel came along with. But in the process, they have achieved a lot of votes, and that was fun for a while, but the last thing in the world they want to do is have Washington, or the American public, decide that they’re throwing around their weight too much.

So, they’re tending to back off. Now, if you figure out where their self-interest is, you can judge where their behavior is going to go. Charlie? You want to defend them? (Laugh)

CHARLIE MUNGER: No, you can square what you just said. (Laugh) You’re totally right on everything.

WARREN BUFFETT: Well, in that case I won’t ask anybody else.

30. Buffett: Greg Abel ‘understands capital allocation as well as I do’

WARREN BUFFETT: OK. Becky? (Laughter)

BECKY QUICK: All right. This question comes from Almu (PH) Grinnell (PH), and this is for Warren and Greg.

“Since 2019 Berkshire repurchased huge amounts of stock, reducing approximately 10% of the share count, and increasing the intrinsic value per share for the continuing shareholders. Greg is expected to be the successor of Warren as CEO, so will he be in charge of the main capital allocation decisions, including future share buybacks?

Greg has been key in the development of Berkshire Hathaway Energy, and I think a good capital allocator. Has he been involved in the share repurchases that have been executed over the past years?

And do you, both Warren and Greg, work together in the estimation of Berkshire’s intrinsic value, and the share buyback decisions?”

WARREN BUFFETT: Well, the answer is that Greg — I’m going to turn it over to him, but the answer is Greg understands capital allocation as well as I do, and that’s lucky for us.

And he will make those decisions, I think, very much in the same framework as I would make them. And we’ve laid out that framework now for 30 years, (Laugh) or something like that. People make it way more complicated than — I mean, particularly if you’re working on a doctorate or something, it’s just a great subject to have lots of footnotes in, you know, 50 pages, or 100 pages.

But it’s no more complicated than if you and I and Charlie had a business, and you wanted to sell your interest, and we could buy it for less than we thought it was worth, and without misleading you in any way about what was going on. And we’d buy it then. But, Greg, you’re on because you’re going to be doing it in the future. (Laugh)

GREG ABEL: Right. Yeah, well, I think, Warren, you said it really well. I mean, the framework’s been laid out, we know how you approach it, and how you and Charlie have approached it, and really don’t see that framework changing. When the opportunity present itself, we’ll want to be an active repurchaser of Berkshire shares. We think it’s a great outcome for Berkshire shareholders to own a larger piece of each of our operating businesses and the portfolio of the equity companies when the opportunity presents itself.

WARREN BUFFETT: It can be the dumbest thing you can do, or it can be the smartest thing you can do. And (Laugh) you know, to make it more complicated than that, and start getting into all this (UNINTEL), you obviously do what the business needs to do first if the opportunities are there: Grow your present business, buy additional businesses, whatever it may be.

And then you make a decision on dividends. But that decision becomes pretty irrevocable because you don’t cut dividends without having major effects in your shareholder base and a lot of things.

And then, if you’ve got ample capital, and you don’t see that you’re going to use it all, and your stock is attractive, and it enhances the intrinsic value for the remaining shareholders, it’s a no-brainer.

And if it’s above the price of intrinsic value, it’s a no-brainer that you don’t even listen to anybody, no matter what investment banker comes in and tells you, “Here’s how to do a repurchase program.”

31. Munger has two words for COVID vaccine skeptic

WARREN BUFFETT: OK: Station 1.

AUDIENCE MEMBER: I’m Tom Nelson, a podcaster from North Oaks, Minnesota.

Charlie, in 2022 you used phrases like, “really massively stupid,” “massive kind of ignorance,” and “crazy” to describe what you said was the 30% of Americans hesitant to submit themselves to untested mRNA COVID gene therapy. Do you stand behind those quotes today?

CHARLIE MUNGER: Yeah. Sure. (Laughter and applause)

WARREN BUFFETT: Well, we got time for one more, then, before lunch.

32. ‘It’s hard to judge successor management in a really good business’ like Berkshire

WARREN BUFFETT: (Laughter) Becky?

BECKY QUICK: OK. (Laughter) Thought I was out, but let’s see. How about — let’s see here — (Laughter)

WARREN BUFFETT: Could be, “How about lunch?” pretty soon. But —

BECKY QUICK: (Laugh) No, no, OK. Let’s take that one for you. This one comes from Drew Estes. This is a question for Warren: “In your 1969 Letter to Partners you said, ‘In any company where the founder and chief driving force behind the enterprise is still active, it’s still very difficult to evaluate second men.’”

‘“The only real way to see how someone is going to do when running a company is to let them run it.’

This wise statement now applies to Berkshire. Once the ‘second men’ are running Berkshire, what would you advise owners of Berkshire to watch for? Specifically what actions, if taken, should give us concern?”

WARREN BUFFETT: Well, I think I would have some comfort in the fact that 99% of my net worth is (Laugh) in the company — so I’ve probably got a stronger interest in it, and perhaps $100 billion or more of philanthropy will be affected by it. But I would say that I don’t have a second choice. I mean, it is that tough to find, but I’ve also seen Greg in action, and I feel 100% comfortable.

And, like I say, I don’t know: If something happened to Greg I would tell the directors, you know, they have a problem, and I don’t have anybody to name, and if they put somebody in Berkshire on automatic pilot, it can work extremely well for a long time.

I mean, it isn’t like the businesses go away or any other thing of the sort. And it’s hard to judge successor management in a really good business. Because if they don’t show up at the office, it’ll keep working for a long time. And maybe that lack of useful input may show itself in five years. I mean, it may go a long, long, long time.

And how are the shareholders, you know, advised by a bunch of people that are concerned about whether you’re meeting earnings projections or something telling them whether the management’s any good? It is very, very hard, it’s very hard. I’ve been on the board of 20 companies: It’s very hard. If you asked me to rank the management of each one, it’s very difficult to do.

Because some are just better businesses than others. Some would be better off not managed hardly at all. Others really need help, but they got a lousy business. And Tom Murphy told me a long, long, long time ago, he said, “The secret of business is to buy a good business. And it’s OK to inherit one, too.” (Laugh)

And Greg is inheriting a good business, and I think he will make it better. But I don’t think it’s easy to put any one of the next ten nominees in and try and judge, three years later, whether they’ve done a good job or not. So, that’ll be a very interesting job for the board.

But it shouldn’t listen to Wall Street on it. They’ve got the job. If they put somebody in — if there’s a surprise, we both go down in a plane, they put somebody in, they’ve got a real job in assessing that person. I mean, it will depend on how good he or she is as a talker, it’ll depend on, you know, them courting Wall Street to be supportive of them, all kinds of things.

And we’ve got some very good people on the board, but they would be challenged in that position, as would I, where I have been in that position in other companies, where a very great leader has left, and on the way from the funeral, you know, nobody knows what to do exactly.

Afternoon Session - 2023 Meeting

1. Washington should explicitly guarantee all U.S. bank deposits

WARREN BUFFETT: OK, so take your seats please. Sales are terrific out there, so you're my kind of crowd. (LAUGH) I've been getting reports we're breaking all kinds of records. And we're going to start off with question number 26, which goes to station two.

AUDIENCE MEMBER: Hi Warren and Charlie. My name is James from Malaysia. Given the recent challenges faced by the U.S. banks, what is your outlook on the banking industry? How do you assess the risk and the opportunity in this section?

WARREN BUFFETT: Well, anticipating a few questions on banks, I decided we should start using bank language here to (LAUGHTER) describe —

And Charlie. (LAUGHTER AND APPLAUSE)

The situation in banking is very similar to what it's always been in banking, that fear is contagious, always.

And historically sometimes the fear was justified, and sometimes it wasn't. My dad lost his job in 1931 because of a bank run, and they had a bank run on state banks. And the head of the Alamo National Bank said, "Well, we're a national bank, and they didn't never a run on the national banks."

And, of course, they both faced the same problem. So, it used to be that if you saw people lining up at a bank, the proper response was to get into the line. And they'd always leave it. And the story is that Sidney Weinberg of Goldman Sachs, during one of the bank runs back in 1907 or thereabouts, had a job as a runner at Goldman Sachs, and asked his boss if he could take the week off.

And the boss said, "Sure, not much is going on anyway." So, he got in line, whether it was the Knickerbocker Trust or wherever. And as he got toward the front of the line, he sold his place in line to somebody. He didn't have an account at the bank, but that was an asset. (LAUGHTER)

And the banking system has changed so much over the years. And we did something enormously sensible, in my view, when we set up the FDIC. As many as 2,000 banks had failed in one year back after World War I. I mean, bank runs were just part of the picture.

And if you have people that are worried about whether their money is safe in the bank and are all trying to withdraw, you can't run an economy very well. So, the FDIC was very logical. It's got changed over the years some, but here we are in, you know, 2023.

And we actually see the FDIC pay off at a hundred cents on the dollar to everybody or make it available on all demand deposits. And yet you still have people very worried about their — periodically, geographically, all kinds of crazy ways.

And that just shouldn't happen. So, the messaging has been very poor. It's been poor by the politicians, who sometimes have an interest in having it poor. It's been poor by the agencies, and I would say it's been poor by the press.

I mean, you shouldn't have so many people that misunderstand the fact that although there may be a debt ceiling, it's going to get changed.

Although there's a $250,000 limit on FDIC, the FDIC and the U.S. government and the American public have no interest in having a bank fail and have deposits actually lost by people. We had a demonstration project the weekend of Silicon Valley Bank, and the public is still confused.

So, it really, it's something to have a law that became effective in 1934, although mollified it in some ways, not understood about something as important as the banking system.

I don't think the American public is that dumb, and I just, well, I made that offer over in Tokyo, incidentally, that I haven't heard from anybody that wants to take up my $1 million bet on whether the public will lose money if they have a demand deposit at a bank, no matter what the size.

So that's the world we live in. It means that a lighted match can turn into a conflagration, or it can be blown out. And who knows what will happen. And we don't have any worry — we keep our money in cash and Treasury bills at Berkshire, because we keep $128 billion or whatever it was at the end of the quarter.

And we want to be there if the banking system temporarily even gets stalled in some way. It shouldn't, I don't think it will, but I think it could. And I think that the incentives in bank regulation are so messed up, and so many people have an interest in having them messed up, that it's totally crazy.

I mean, Fannie Mae and Freddie Mac were doing 40% or so of the mortgage business in the United States. That is huge. They were regulated, just those two companies were regulated by some group. I forget what they called it. But they had 150 people that were in charge of just figuring out whether Freddie and Fannie were doing the right thing.

Well, I could've done it. You know, Charlie could've done it. You know, and I'm not sure they needed an assistant even to do it. But the incentives were all wrong. And Freddie and Fannie, which were doing fine in August, or apparently doing fine in July and August of 2008, were put into conservatorship, you know, early in September.

And the things that followed from that were just incredible. So, there are second order and third order and fourth order effects that are somewhat unpredictable, as to what they will be and the sequence and all that. But things change. And if people think that deposits are sticky anymore, they're just living in a different era.

You know, press a button, you don't have to get in a line and wait for days and have the teller counting out the money slowly in gold so (LAUGH) that you hope the line goes away. You're going to have a run in a few seconds. So, the way it hasn't been addressed properly is a problem.

And who knows where it leads.

2. Buffett: CEOs of failed banks should be punished

WARREN BUFFETT: But you will have to have a punishment for the people that do the wrong thing. And if you take First Republic, for example, you could look at their 10-K and see that they were offering non-government guaranteed mortgages to, in jumbo amounts, at fixed rates, sometimes for ten years before they changed to floating.

And that's a crazy proposition. If it's to the advantage of a bank, they've got the guy coming in and says, "I'll refinance at 1.5% and then 1%," and if it's to the advantage the other way, they keep it out ten years. You don't give options like that.

But that what First Republic was doing, and it was in plain sight. And the world ignored it till it blew up. And some of the stock in some of these banks that were held by insiders was sold. And who knows whether they had a plan, or some plan that was innocent, or whether they started sensing what was coming.

But you do know that the directors are not going to be able to read some book or anything like that. But they do have the ability to hold the CEO accountable. The CEO gets the bank in trouble, both the CEO and the director should suffer.

The stockholders of the future shouldn't suffer. They didn't do anything. It doesn't teach anybody any lessons or anything, it teaches the lesson that if you run a bank and you screw it up, you're still a rich guy and the clubs don't drop you and the charity groups don't quit asking you to their benefits.

And the world goes on. And that is not a good lesson to teach people who are holding the behavior of the economy in their hands. So, I think there's some work to be done, but it's not a difficult problem. It's just we've screwed up the answer and we've screwed up the communication of it. Charlie?

CHARLIE MUNGER: Well, I'm so old fashioned that I kind of liked it that when banks didn't do investment banking. That makes me very outmoded in the modern world.

WARREN BUFFETT: And the country decided it was contrary to public interest for a while, and then the banks wanted to get back into it.

CHARLIE MUNGER: Did they ever.

WARREN BUFFETT: Yeah. No, I mean —

CHARLIE MUNGER: And I don't think having a bunch of bankers, all of whom are trying to get rich, leads to good things. But I (APPLAUSE) think a banker should be more like an engineer. He's more, like, into avoiding trouble than he is getting rich.

WARREN BUFFETT: Yeah, and they could do fine.

CHARLIE MUNGER: They can do fine that way. And I think that we're making a big mistake when we get a bank where everybody who joins it plans to get rich. It's a contradiction in values.

WARREN BUFFETT: And we came to that conclusion, I don't know when Glass-Steagall was passed or anything, but then they want to get back in. How many of you know, and maybe I'm wrong on this, I haven't looked lately, but the Federal Reserve actually was given the responsibility for setting margin requirements.

And they change margin requirements a lot of time because it was known that people that borrow a lot of money cause a danger to the banking system if you get too many in the picture and all of that sort of thing. And what's happened? The banks figured out a thousand different ways to get so you could borrow on 100% margin, you know? I mean, through derivatives and everything, they just totally distorted all the lessons that were learned in the '29 crash and —

CHARLIE MUNGER: Imagine taking banking into derivatives trading. Who in his right mind would have allowed that?

WARREN BUFFETT: Yeah. Well, there's more money in it. And —

CHARLIE MUNGER: Well, that's why they're in on it.

WARREN BUFFETT: Yeah. And —

CHARLIE MUNGER: And but it isn't necessarily a great social outcome for the rest of us.

WARREN BUFFETT: That's what those Senate committees decided back in 1931 and '32. And then in the late 1990s, particularly, I mean, very decent people, but, you know, Bob Ruhlman and some of the people, you know, they said this was the modern world. And here's what the modern world has turned out to hand us. And banking can have all kinds of new inventions, but it needs to have old values. And —

CHARLIE MUNGER: Well, if we do —

WARREN BUFFETT: —we don't know what's going to happen. You know, because there are a lot of things that could happen out of the present situation.

Depositors will not lose money. Stockholders and debt holders, the holding company and all that, they should lose money.

And people borrowed out on commercial real estate and now it isn't, the loans aren't getting extended, they should leave. It's too bad. That's part of borrowing on 100% margin, which is what people have been doing with commercial real estate.

You've got to have the penalties, hit the people that cause the problems. And if they took risks that they shouldn't have, it needs to fall on them if you're going to change how people are going to behave in the future. (APPLAUSE)

3. Aside from Bank of America, Berkshire is being cautious on bank stocks

WARREN BUFFETT: OK, Becky?

BECKY QUICK: This question comes from Davis Hans in Houston, Texas. He writes, "What do you think about the business models of the big banks as compared to the regional banks in the wake of the events at Silicon Valley Bank? And how does the perceived implicit guarantee of all deposits at all banks affect big banks and those regional banks?"

WARREN BUFFETT: Yeah. Well, I can say this. If you follow sound banking methods, which means not doing some things that other people do, a bank can be a perfectly decent investment. And in fact, Charlie and I, well, me originally in 1969, we bought a bank at Berkshire.

And we had $19 million invested in that bank. And we had $17 million I think invested in our insurance companies. And if the Banking Holding Company Act of 1970 hadn't been passed, we might've ended up owning a lot of banks instead of a lot of insurance companies.

We were looking at more banks, and Harry Keefe was taking us around Chicago. And there were other things we could do. And then, bingo, they passed the 1970 Bank Holding Company Act, and we had to divest ourselves of that bank in ten years, which we did —

CHARLIE MUNGER: By the way, it never had a bad debt.

WARREN BUFFETT: Oh, it —

CHARLIE MUNGER: It never had an unnecessary cost. It made nothing but money with no risk. It never presented any deposit insurance risk to the government.

WARREN BUFFETT: Zero.

CHARLIE MUNGER: It was a lovely, sound, constructive institution in this community. And any person who went in and deserved credit could get credit.

WARREN BUFFETT: Yeah, and we were going to buy more banks.

CHARLIE MUNGER: And we were forced out of it.

WARREN BUFFETT: We were going to buy more banks. And if we bought more banks, we probably wouldn't have expanded the insurance business. But, you know, the law changed and so we divested, and we've done OK in insurance. But banking was more attractive to us. It was bigger and there were more targets to buy.

And you could run a perfectly sound bank then, and no negotiable certificates of deposit. All these things, all the inventions that came later, and you could still run them today and you could earn good money. Very good money. And we would've found more banks. But we're precluded from doing that.

And we've sold banks, bank stocks in the last, well, we sold them first when the pandemic broke out, and then we sold some more in the last six months. And we don't know where the shareholders of the big banks, necessarily, or the regional banks or any bank, are heading now.

I've got my own personal money, and I'm probably above the FDIC limit, and I've got it with a local bank. And I think, I don't worry about it in the least. But in terms of owning banks, events will determine their future. And you've got politicians involved.

You've got a whole lot of people who don't really understand how the system works. And I would say you've had something less than a perfect communication between various people and the American public. So, the American public is probably as confused about banking as ever.

And that has consequences. And nobody knows what the consequences are because every event starts recreating a different dynamic. I mean, in physics you know that pie is going to be 3.14, you know, infinite number of numbers after that, but no matter what happens.

But you don't know what has happened to the stickiness of deposits at all. It got changed by 2008. It's gotten changed by this. And that changes everything. And so, we're very cautious in a situation like that about ownership of banks. And we do remain with one bank holding, a deal, but we originated that deal with the Bank of America.

And I like Bank of America. I like the management. And I proposed the deal with them, so I stick with it. But do I know how to project out what's going to happen from here? The answer is I don't, because I've seen so many things in the last few months which really weren't that unexpected to me to see.

But which reconfirmed my beliefs that the American public doesn't understand our banking system, and some people in Congress perhaps don't understand it any more than I don't understand why the spaceships go up. I mean, there's all kinds of things I don't know about. But if you're in Congress, you have to take a position on everything. And sometimes it's to your advantage if you really understand it not to say exactly what you feel. And here we are. Charlie?

CHARLIE MUNGER: Well, a lot has happened in banking in my lifetime. I welcomed all that early banking of the deserving immigrants by the early Bank of America. And I think all the credit cards when they came in as original bank cards were a great contribution to civilization.

CHARLIE MUNGER: And but the gamier it gets and the more it looks like investment banking, the less I like it, as a citizen. I don't want, I am always, I am deeply distrustful of situations in which everybody wants to get rich and envies everybody else. I regard that atmosphere as utterly toxic.

And to people who like one story, which this is, again, a true story, and I'm not naming the name, and it wasn't Pete Jefferies, because he might fit this name, but it wasn't Pete. But our hero, Gene Abegg, was going to have to retire at some point.

And so, we hired a future replacement. This is kind of a little bit of the problem I talked before, about having the perfect business, and now we're going to bring in somebody. We actually bring in somebody who went to Central High with Charlie, although —

CHARLIE MUNGER: My class.

WARREN BUFFETT: Yeah. (LAUGH) And Charlie didn't know I was picking out this guy. He wasn't —

CHARLIE MUNGER: If he'd have asked me, we wouldn't have hired him. (LAUGHTER)

WARREN BUFFETT: Well, if I asked you, I probably wouldn't have hired anybody, but that's another question. But this guy comes over, and perfectly decent guy, but presentable, you know, looks like a banker and everything. And, of course, the first thing he wants to do, we've got this wonderful bank, but we've got the crummiest looking building in Rockford.

And we don't need a great building, we just need a great banker. And naturally this guy wants to build a new building. And because we were the most profitable bank, but we didn't look like we were the most profitable (LAUGH) bank. So, I told him he could have any building he wanted, as long as it was not higher than, it had to be shorter than our nearest competitor.

And he lost interest totally. (LAUGH) He wanted to be on the top floor of the biggest building in town, and I told him he could horizontally do anything he wanted but he couldn't do it vertically. And it taught me a lot about the guy's motivations in life. But — and he didn't end up running the bank anyway. Anyway, that's all I know about banking and probably more.

4. It is 'madness to keep printing money'

WARREN BUFFETT: Station three?

AUDIENCE MEMBER: Mr. Buffett and Mr. Munger, hi.

WARREN BUFFETT: Hi.

AUDIENCE MEMBER: My name is Daphne. I'm 13 years old, and this is my sixth annual Berkshire Hathaway Shareholder's Meeting. (APPLAUSE) And I've had the privilege to ask you both questions in years past.

My question for you today is the following. As you know, the U.S. national debt is currently at an estimated $31 trillion, making up about 125% of the U.S. GDP.

In the meantime, over the past few years, the Federal Reserve has telegraphed that they intend to monetize the debt by printing trillions of dollars, even as they insist that they're fighting inflation. Already other major economies in the world, such as China, Saudi Arabia, and Brazil are moving away from the dollar in anticipation of this.

My question is are we likely to face a time in the future when the U.S. dollar is no longer the global reserve currency? How is Berkshire prepared for this possibility? And what can we do as American citizens to attempt to shelter ourselves from what's beginning to look like the beginnings of de-dollarization?

WARREN BUFFETT: Well, (APPLAUSE) I should ask you to come up here and answer some questions. I mean, (LAUGHTER) maybe. It's very interesting, I mean, we are the reserve currency. I see no option for any other currency to be the reserve currency. And I think that nobody understands the situation better than Jay Powell.

And but he's not in control of fiscal policy, and every now and then he drops a few hints. And there was no question that when the pandemic broke out, I mean, it was a semi-war-like situation. But nobody knows how far you can go with a paper currency before it gets out of control.

If, and particularly if you're the world's reserve currency, nobody knows the answer to that. And you don't want to try and pick out the point at where it does become a problem, because then it's all over. And I think we should be very careful.

I mean, you know, we all learned Keynesianism and we applied it in World War II to the advantage of the country, and we did everything we could to prevent inflation during the war. And then the war ended in August of '45 and I think in January of '46, and I'm not giving you exact figures at all now, but in January of '46 I think the rate of inflation was at, you know, something like 1% or thereabouts.

And by the end of the year, I think it was at, like, 15%. And again, I'm doing this from long memories. But it's easy for America to do it a lot, but if we do too much it's very hard to see how you recover once you let the genie out of the bottle.

And people lose faith in the currency. And they behave in an entirely different manner than they do when they feel that if they put some money in the bank or have a pension plan, or whatever it may be, that they're going to get to have something with roughly equal purchasing power.

And it just changes the (UNINTEL). And all kinds of things can happen then. And I can't predict them and nobody else can predict them. But I do know they aren't good. And we will see, and I do this as, you know, I've voted for both parties. And it's not limited to politicians of either party or anything of the sort.

But people take positions, some of them understand what they're doing, some of them don't understand what they're doing. And, you know, if they put me on some medical board, I don't understand what I'm doing. You know, there's nothing wrong with the fact that you can't master everything.

We can't all be Isaac Newton. But you can't go around pretending you do or making decisions on it. And we are not as well off in relation to curbing inflation expectations, which become self-fulfilling, then we are not as well off as we were earlier.

And Berkshire is better prepared than most investments for that kind of a period. And, I mean, I said this in the annual report, but we aren't perfectly prepared, because there's no way to perfectly prepare. You don't know what course of action will occur.

And it's a very political decision now. It's a tribal decision to some degree. And you hope for leadership that actually will do something, recognizes the problem. And America's an incredible society, rich, you know? We've got everything going for us. But that doesn't mean we can just print money indefinitely as debt. And it'll be interesting to see how it turns out. Charlie?

CHARLIE MUNGER: Well, at some point printing money to buy votes will be counterproductive.

WARREN BUFFETT: Yup.

CHARLIE MUNGER: And we don't know (APPLAUSE) exactly where that comes. And if something is going to be dangerous and unproductive, you ought to keep it a fair distance away. Now, if you have a culture that is exceptionally strong, like Japan, they have done some strange things there.

WARREN BUFFETT: But they couldn't have been a reserve currency.

CHARLIE MUNGER: No, of course not. And, but Japan bought back most of the national debt and most of the, a lot of the common stocks and debt. Just the federal reserve owns practically everything in Japan, and the country's working. It's had 30 years of economic stasis, but it's not going to hell. I really admire Japan. And, but I don't think we should try and imitate it. I don't think we're as good as Japan at taking —

WARREN BUFFETT: They have a cohesive culture, and we don't, Charlie. We —

CHARLIE MUNGER: Yeah, that's exactly right.

WARREN BUFFETT: Yeah.

CHARLIE MUNGER: In Japan, everybody's supposed to suck it up and cope, and in America we complain. (LAUGHTER)

WARREN BUFFETT: So, I hope you come next year with a tougher question. (LAUGHTER) But — and thank you.

And I predict, I would love to be being born again today in the United States. I mean, we can do a lot of dumb things and get away with it. We can't do an unlimited number.

There are people who care about that. And, you know, you have to be willing to be extraordinarily unpopular. I mean, Paul Volcker, there are other Federal Reserve chairpeople that would not have done what he did. It's just, it's too uncomfortable.

And there used to be a politician in Nebraska, and if you asked him some really tough question like, you know, how do you stand on abortion, he would look you right in the eye and he'd say, "I'm all right on that one." And then he'd move next.

Well, that's what people have done basically on inflation. And they, one way or another, they say, "I'm all right on that," and then they don't really think about what the consequences of their actions could be, particularly. And it's so much fun to, if there's 435 of you, to just be one of 435 instead of being the person actually responsible.

Anyway, I am still, next to the question of two superpowers and when you get in to really destroying a planet, destroying the reserve currency of the world when there's really no substitute, and forget about all the toys, you know, I mean, it's a joke to think of any tokens or (LAUGH) that sort of madness.

But it's also madness to just keep printing money, yeah. And we know how to do it, and we actually came from a money-printing economy in World War II, which was required. And we suffered significant inflation, the price level — I mean, there's a million ways to judge it — but it's maybe ten times what it was then or something like that.

Well, that's getting close to the edge of where you don't want to hold dollars anymore, you want to hold something else. You want to hold real estate; you want to hold interest in a business. There's a lot of good, and your best defense is your own earning power.

If you're the best doctor in town, if you're the best lawyer in town, if you're the best teacher in town, or even if you're the tenth best, you're going to make a good living. You know, the economy is productive. And you will succeed with your talents. But you won't succeed by hoarding dollars, you'll just succeed by the fact that your value to the community, which is a rich community overall, is sustained. And so the best investment is always in yourself. That's the answer I would give you.

CHARLIE MUNGER: Well, we have a situation where we've learned to print money in gobs, and a big chunk of our young people go right into wealth management. (LAUGHTER) This is —

WARREN BUFFETT: Like we did. (LAUGH)

CHARLIE MUNGER: Yeah, like we did, like we did. Yes, we're bad examples.

And I want to say that I didn't realize wealth management was going to get so big when I went into it. And I want to apologize for what's happened. (LAUGHTER)

WARREN BUFFETT: Yeah, well. Anyway, you did well. (LAUGH)

5. Buffet would have preferred to buy more of Pilot earlier, but it wasn't for sale

WARREN BUFFETT: Becky?

BECKY QUICK: This question comes from Gary Gambino in Parma, Ohio, who says he's been a Berkshire shareholder since 2004.

He says, "The amount paid this year for the 41.4% stake in Pilot values the entire company at around $19 billion. That's about six times what BP is paying for Travel Centers of America, but Pilot's market share is just three times Travel Centers of America's.

"Was it a big mistake to base the final price in 2022 earnings, which has unusually high fuel margins?"

WARREN BUFFETT: Yeah. Well, that's a very good question. And the answer is that we arranged to buy it in three stages, with the third stage being at the option of the owner of 20%. The first stage we bought at what turned out to be a very attractive price. The second stage turned out to be a very good year for the diesel business, which means that the seller got a very good price.

And I would say that overall, we feel very good about the fact that we own the 80% at the price that we do, but we would've been better if we just bought the 80% to start with. And the last 20% the seller has the option, and that's always an unintelligent way of structuring something.

We've had that arrangement with other, well, we had it with the Furniture Mart, we bought 80% of the [Nebraska] Furniture Mart on August 30th, 1983, almost 40 years ago, and it's worked out perfectly. But when you give the other person the option, they've got some advantage.

We have 80% now of a business we like very much, and the comparison to Travel America is really spurious, because Travel America is not only much smaller, but they rent all their properties. And we have hundreds and hundreds of locations on the interstate that are zoned for what we, commercial, maybe 15 acres or, there's nothing like it.

And they're not going to move the interstate two miles to the right or something, you know, or anything of the sort. So, we've got a position that, you know, BP may or may not have made a fine deal. I've read the prospectus and I can understand.

I mean, it's a big source of output for BP. But I like the management we have had at Pilot. I like very much the fellow who's coming in that's the new CEO. I just have to tell you a little bit about Adam Wright, who's taking that job on. He came from Omaha.

He wasn't selected because he came from Omaha. He came from Omaha. He came from North High, a public school that my wife graduated from. I've got grandchildren that graduated from there. He went to the University of Nebraska and almost set the rushing record in football, which will never be beaten because they've given up football, but I think he rushed for maybe (LAUGHTER) 3,600 yards.

He held three jobs while he went through there. He interned at MidAmerica 20 years ago, his mother worked to put him through school. I mean, it's just, it's Horatio Alger-squared. And we have him to manage Pilot. And the Haslams have given us a wonderful business, "Big Jim," and now he (UNINTEL) great people. And here we are.

And I'm very glad we own Pilot, I just wish we bought 100% (LAUGH) of it when I first made the deal, but that was not the deal that was offered to us —

CHARLIE MUNGER: Warren, it wasn't for sale.

WARREN BUFFETT: It wasn't for sale. Yeah. And the last 20% of the Furniture Mart wasn't for sale when we bought it, so we bought 80% of it. And that's worked out well. And we've done various deals various ways. The best way to do it is just write people the check and get the stock.

But we did that with TTI, but you can't always make the same deal. If we like the business well enough and the people well enough, we will tailor it differently, but our preference is to write a check and own the whole place and keep the management in place. Charlie, anything to add on?

CHARLIE MUNGER: No.

WARREN BUFFETT: Yeah. It's really wonderful to watch something like Adam Wright work out. I mean, basically, you know, I don't know what his mother was earning, but he went to North High, which is probably four or five miles from here. Public school graduate. And worked his way up.

Went through a short period at Pacific Gas and Electric, and we brought him home there on Pilot. And Pilot, well, Pilot, the prices on diesel were way different last year. Pilot was close to $80 billion of sales last year, but more normal prices this, it's significant, you know, it's half that or thereabouts, maybe a little more.

But he is, I don't know how old Adam would be, but he's in his 40s. And he came up through the organization that Greg Abel was involved with. And now here he is, running a very major business. It's good at Berkshire to be able to do that. And I don't, you know, somebody else may have gone to more prestigious business schools, and I think so what? You know, we've seen what Adam can do.

6. 'You should write your obituary and then try and figure out how to live up to it'

WARREN BUFFETT: OK, station four?

AUDIENCE MEMBER: Good afternoon Mr. Buffett, Mr. Munger. My name is J.C. I am 15 years old and I'm from Ohio. This is my fourth in-person Berkshire meeting. I have a lot of passion learning from your speeches, interviews, and articles. Thank you for sharing your wisdom all the time.

Mr. Buffett, in your annual shareholder letter this year, you said that Berkshire's journey consisted of "continuous savings, the power of commanding, the American tailwind, and avoidance of major mistakes". You have humbly admitted in the past that you have made many mistakes.

But this is the first time that major mistakes stood out to me. Could you please advise us on what major mistakes we should avoid in both investing and in life? I would also like to have Mr. Munger's thoughts too, please. Thank you very much.

WARREN BUFFETT: Well, the main, (APPLAUSE) Charlie said the major mistake you could make, you know, you're lucky if you're in the United States. If you go around the world you don't have a lot of choices in some places.

But you should write your obituary and then try and figure out how to live up to it.

And, you know, that's something you get wiser on as you go along. The business mistakes, you just want to make sure you don't make any mistakes that take you out of the game or come close to taking you out of your game. You should never have a night when you're worried about investing, I mean, assuming you have any money to invest at all.

And you should just spend a little bit less than you earn. And you can spend a little bit more than you earn, and then you've got debt, and the chances are you'll never get out of debt. I'll make an exception in terms of a mortgage on your house.

But credit card debt, and we're in the credit card business big time, and we'll stay in the credit card business, but why get behind the game? And if you're effectively paying 12% or 14% or whatever percent you're paying on a credit card, you know, you're saying, "I'm going to earn more than 12% or 14% of my money."

And if you can do that, come to Berkshire Hathaway. So, it's, I hate to say this when Charlie's around me, but it's straight out of Ben Franklin. I mean, (LAUGH) and it's not that complicated. But you, well, I'll give you a couple lessons.

You know, Tom Murphy, the first time I met him, said two things to me. He said, "You can always tell someone to go to hell tomorrow." Well, that was great advice then. And think of what great advice it is when you can sit down at a computer and screw your life up forever by telling somebody to go to hell, or something else, in 30 seconds. And you can't erase it.

And, you know, haven't lost the option. And he said, you know, "Praise my name, criticize my category." Well, what makes more sense than that? I mean, who do you like that criticizes you all the time? And you don't need to vilify anybody to make your point on subjects of discussion.

And then the other general piece of advice, I've never known anybody that was basically kind that died without friends. And I've known plenty of people with money that have died without friends, including their family. But I've never known anybody, and you know, I've seen a few people, including Tom Murphy Sr. and maybe Jr., who's here, (LAUGH) but certainly his dad, I never saw him, I watched him for 50 years, I never saw him do an unkind act.

I didn't see him do very many stupid acts either. I mean, it wasn't that he was non-discriminating, he just decided that there was no reason to do it. And wow, what a difference that makes in life. Charlie?

CHARLIE MUNGER: Well, it's so simple to spend less than you earn, and invest shrewdly, and avoid toxic people and toxic activities, and try and keep learning all your life, et cetera, et cetera, and do a lot of deferred gratification because you prefer life that way.

And if you do all those things, you are almost certain to succeed. And if you don't, you're going to need a lot of luck. And you don't want to need a lot of luck. You want to go into a game where you're very likely to win without having any unusual luck.

WARREN BUFFETT: I'd add one more thought too, you need to know how people can manipulate other people, and you need to resist the temptation to do it yourself.

CHARLIE MUNGER: Oh yes, the toxic people who are trying to fool you or lie to you or aren't reliable in meeting their commitments. A great lesson of life is get them the hell out of your life.

WARREN BUFFETT: Yeah.

CHARLIE MUNGER: And do it fast. (APPLAUSE) Do it fast.

WARREN BUFFETT: And I would add, Charlie would totally agree with me, do it tactfully, if possible, too. (LAUGH) But do get them out of your life.

CHARLIE MUNGER: Yes. Yeah, I don't mind a little tact. (LAUGHTER) Or even a little financial cost. But the question is getting them the hell out of your life.

7. 'Tough problem' when family members are negative

WARREN BUFFETT: OK, Becky?

BECKY QUICK: All right, this comes from Roger Lee Tan. He says, "My name is Roger from Hong Kong, a long-term shareholder of Berkshire, admirer and follower of Mr. Buffett's and Munger's wisdom and principle. Both of you have said before that the most difficult problems in life are always people problems.

"And one of the key lessons you have learned to be able to live a happy life and a successful life is to stay away from negative people. My question is what to do if those negative people are your families, the people (LAUGHTER) whom you can't simply stay away from?"

WARREN BUFFETT: Yeah. You minimize it. But you can't, no, I mean, there's no question about it. And Charlie gave an answer I thought was master of tact the other day when he says, "You always ought to interact with people who behave well." He says, "Of course, you have to make some exceptions for your family."

But (LAUGH) it's true. And, you know, you really, I don't know what it's like to have, you know, a drunken, you know, bully-ish, probably father, but parent, just generally. I mean, you know, how do you handle it? It's very interesting that the MacArthur family, the very famous John MacArthur, the man who set up the MacArthur Foundation, he had five kids.

And four of them turned out to be superstars of one sort or another, and then they had this crazy, itinerant, drunken father. But they all decided that the thing to do was to get the hell out of the house.

And so, he had this, the father of the — of the MacArthur Foundation that did that along with three of the siblings out of five.

So, you know, I was lucky, I mean, and Charlie was lucky that, you know, if you have, I mean, our fathers saw plenty of shortcomings in both of us, but, you know, they would still be there for us.

And if you have one that won't be there for you, you know, it's a very tough problem. And I think one way or another I probably would have gotten through with that, if I had that situation, but I think my life would've been a lot different. Charlie?

CHARLIE MUNGER: I have nothing to add.

8. Why are Garanimals only sold at Walmart?

WARREN BUFFETT: OK, station five?

AUDIENCE MEMBER: Hey Warren and Charlie, good afternoon. My name is Sudakaredi Anapredi. I am from Bentonville, Arkansas, home of Walmart. I'm a shareholder since 2019, and my daughters are shareholders since 2020. My question is, this is my first time coming to shareholders, and my question is Walmart and Berkshire Hathaway has a very great relationship with BNSF, McLane, and consumer goods like Fruit of the Looms and Garanimals, and et cetera.

My question is Garanimals is exclusively sold at Walmart, and Fruit of the Loom is sold at many other retailers. How does Berkshire Hathaway decide some items are sold at some retailers exclusively, versus others are sold at many retailers?

WARREN BUFFETT: Well, that's a good question. But obviously you'd love to control, if you have a product, you'd love to control the distribution. And you're probably going to get better gross of margins if they ask for you by name. I mean, they just had an article about Bernard Arnault, who built LVMH, and you know, he's got a blue box at Tiffany.

And the blue box itself means something. And Coca-Cola, the bottle meant something. In the 1920s, I think, there was a study that kind of (UNINTEL) bottle and blindfolded, and a very high percentage of the population could recognize it was Coca-Cola.

When they can recognize not only the product, but the container, you know, you're going to have good gross margins. And if you're just another cola, and there have been hundreds of them, and even if you have distribution through something like Walmart, who has Sam's Cola, it just doesn't, it's not the same.

I mean, here I am, you know? And 1886 or so, John Pemberton in Atlanta created it, and they spent a very significant amount of money advertising. And on the other hand, Hershey's didn't spend any money on advertising. So, we have observed, Charlie and I both, have observed so many products, so many methods of retail.

And we really think we know quite a bit about them, and we also know how much we don't know about it at the same time. And it doesn't mean that we want to go into retailing ourselves, but it does mean we've learned, to some extent, what to avoid.

And we've learned when somebody really has something. And Garanimals has something. It's just that there's only been, you know, Walmart does a great job of distribution for us. And it's a good product for Walmart, it's a good product for us.

And on Fruit of the Loom, they can sell lots of types of underwear, and they can do a big volume, but we're not going to make as much money, as well as I believe the capital employed or anything, with a product that has a whole bunch of competitors.

And if the kid wants a Garanimals, well, pajamas or something, it's not the sort of product that causes people to drive 20 miles out of their way to buy it, or anything of the sort. But if you're in the Walmart and you're picking out pajamas or something for the kid, and he or she wants a particular product, and it's reasonably priced and everything, and wears well and everything, you know, we're happy to have it distributed through somebody with the distribution power of Walmart.

And they're very happy to have the product. On balance it's obviously better if you own See's Candy than if you own the no-name candy company. You know, particularly when people buy it as gifts a couple times a year. I mean, they know that if they give their girlfriend, if they give somebody in the hospital, if they give a gift at Christmas or going to a dinner, they know if they hand the box of candy to somebody they don't say at the same time, "Here, I got a wonderful deal on this candy."

I mean, that just kills the moment, right? What they really want to see is a smile on the other person's face that they're receiving it, and they get it. So, knowing what customers, and See's boxed chocolates, A, are not remotely the market that soft drinks are.

And the product does not travel particularly. Hershey's chocolate didn't travel. I mean, if you look at candy bars, what's popular in the U.K. isn't that popular in the U.S. and all kinds of things. Coca-Cola travels. There's 200 countries, roughly, and probably 180 of them it's the dominant product.

And how do you do it? Well, it helps if you started in 1886 (LAUGH) and go from that point forward. So, we've learned a lot. We got lots to learn. But we did learn that something like Garanimals we understood. When it came around nobody had ever heard of it and we bought it for a very low price, as it turned out.

And 20 years ago, and still nobody knows it, or that we own it, and that's fine. But they know what Garanimals are, and it has legs. It just keeps going year after year. And some things are like pet rocks. And we're learning all the time. Charlie? (LAUGHTER)

CHARLIE MUNGER: I have nothing to add.

WARREN BUFFETT: OK. You probably have never bought any Garanimals.

CHARLIE MUNGER: No. I never have. (LAUGH) I don't even wear them. (LAUGHTER)

WARREN BUFFETT: You wouldn't fit. (LAUGH)

9. Paramount Global faces tough competition in streaming

WARREN BUFFETT: OK, Becky?

BECKY QUICK: This question comes from Barry Laffer in New York City. "Berkshire owns about 94 million shares of Paramount Global as of the last published data. This asset-rich company has disappointed on recent quarterly earnings reports, and just this week slashed its dividend by 80%.

"How do you see the streaming wars evolving? And do you still have conviction in your investment thesis? Is your investment thesis based on the company being an acquisition target, or based on its fundamentals?"

WARREN BUFFETT: Yeah. And how would you like to manage my money for nothing? (LAUGH) They, you know, we are not in the business of giving stock advice to people. And people who don't know anything about stocks can make a lot of money doing that, and we don't think it's something we should give away.

But I will say this, it's not good news when any company passes its dividend or cuts its dividend dramatically.

And the streaming business is extremely interesting to watch, because there's, people love to use their iPhones, watching, being entertained on a screen in front of them, or a phone, or whatever it may be.

But there's a lot of companies doing it. And you need fewer companies, or you need higher prices. And, well, you need higher prices, or it doesn't work. And you don't lock in people when you get them to join up for the streaming period when your serial runs.

I mean, you know, you keep them on for a while, but you get them for, like, a month. And we'll see what happens. I mean, I had a gasoline station when I was 21 or 22, and it's about three or four, four or five miles from here. And we had one competitor.

And he determined our profit, because we looked at his price every day. And if we cut the price he'd match it, and we couldn't raise the price. And he did twice the gallonage, so he won. And there's just basic business problems that you see with certain industries that you don't see with the other.

Disney was unique in its animated — what it offered, you know — in the '30s and '40s. And they wrote the stuff off at the first showing, and then they rejuvenated Snow White and all these other people every seven years, and that was fine.

But this is a different world. And the eyeballs aren't going to increase dramatically in the time they can spend is not going to increase dramatically. And you've got a bunch of companies that don't want to quit. And who knows what pricing does under that. But anybody who tells you that they know what pricing will do in the future is kidding themselves.

Charlie? Charlie's had a lot of experience, incidentally, with Hollywood. I mean, he used to, before I even met him —

CHARLIE MUNGER: I think the movie business is one tough business.

WARREN BUFFETT: Yeah.

CHARLIE MUNGER: That's my view.

WARREN BUFFETT: The talent will make the money; the agents will make the money. And if you've got a theater, you know, the theaters are now doing 70% of the business that they did before the pandemic. And big hits, you know, have enormous grosses. But you can't reduce the supply.

People have only got so many hours in the day. They've only got two eyeballs. And they've got more choice than ever before, and they've got stuff that's cheaper that offers them the same experience. And some of them like the experience, you know, particularly with the big hits of going.

But it isn't like you can double the number of people or double the eyeballs or anything like that. And you've got a lot of people. The talent will always get paid. And when you essentially are packaging that talent one way or another, and you need to get higher prices, and you've got a lot of strong companies who don't want to quit, that's an interesting equation.

CHARLIE MUNGER: And if you think the movies are tough, try to invest in a New York show on a conventional stage. There they think it's a breach of faith in that business to let the person who put up the money to ever get any money back. (LAUGHTER)

WARREN BUFFETT: Yeah. Yeah, well, Charlie saw a lot of that actually when —

CHARLIE MUNGER: Yeah. I don't like those businesses.

WARREN BUFFETT: Tell them what happened on "Cleopatra, Charlie." (LAUGHTER)

It, no, it's a business that everybody's tempted. They love the idea of going in it, you know, and they get a certain amount of psychic income. But —

CHARLIE MUNGER: I never owned any racehorses, either.

WARREN BUFFETT: Well, my father-in-law and I used to talk about claiming a horse at AK-SAR-BEN, but we never quite got around to it. And we had a lot of fun going to the track together. (LAUGH)

10. 'Our record in wind and solar has not been topped by any utility'

WARREN BUFFETT: OK, section six?

AUDIENCE MEMBER: Good afternoon. My name is Hannah Hayes and I'm a high schooler from Iowa. You said earlier today that transitioning to renewable energy has the people and capital to support it.

So, with enough investment in renewables, the development of energy storage technology to soon meet Iowa's energy needs, and support from the government system through Inflation Reduction Act funding, why hasn't Berkshire Hathaway Energy truly invested in the future by accelerating retirement plans for the coal plants, which have high operating costs and are currently Iowa's biggest carbon polluter, and will continue to be until they're finally retired in 2049, which is too late to be curbing emissions, according to the IPCC?

WARREN BUFFETT: Yeah. It's very interesting. In Iowa, we have actually produced more wind energy than is the total amount of energy used by our customers. But it's not producible 24 hours a day necessarily. So, there's problems. And incidentally, in Iowa, a significant majority of counties welcome us when we come around and want to put in wind.

And some don't want it. I mean, you know, there's a not-in-my-backyard someplace. There's other places where they love the money they get from a small plot of ground. And people like the taxes that are paid. But I would say that if there's one state in the Union that stands out in the development, it's Iowa. But what's also interesting in Iowa is that we have one other major company.

There's always loads of little co-ops and all kinds of things that sell electricity. But we have one major competitor. And our prices are significantly lower. And, as a matter of fact, we are now in the Omaha Public Power District. And three miles or four miles away, we're selling the electricity in Iowa.

And we are selling it cheaper, even though public power was invented in Nebraska, and has been — I think it's going on — George Norris did it back in the 1930s. And, you know, Nebraska's resisted, to some extent wind power, more than Iowa. But like I said, our competitor — alternate source — hasn't really pursued it the way we have.

But I would say that our record in wind and solar has not been topped by any utility in the United States. And, of course, it's been aided by the fact that most utilities pay out 70% or 80% of earnings and dividends. And we haven't taken a common dividend, you know, for 20 years. We reinvested I don't know how many billion.

That's the reason why the earnings have gone from $200,000,000 to $4 billion, but we're not earning a higher rate of return on capital than we were when we started. We just put way more capital into the business as we went along, kept reinvesting the capital.

So, I wish Greg were here to tell you more details about it. But I would say that we'd really put up Berkshire Hathaway Energy's record against any utility in the United States. Charlie, you've watched it.

CHARLIE MUNGER: Well, I have. And I'm not personally at all sure how bad the global warming is going to be. I don't think anybody knows for sure whether the seas are going to rise two inches or 20 feet. And so, I think there's a lot of false claims here in a world where much is not known.

WARREN BUFFETT: Yeah. (APPLAUSE) There is a lot of wind in Wyoming. And we are building transmission lines that extend out through the West. But it was World War II when they told us to do it. And we had a czar in Washington that could say, you know, "Just get it done," like they said to said Henry Kaiser on building ships.

You know, you can't believe how ahead we would be down from where we are. But we've got the money. We've got the know-how. This year our depreciation in our utility company is on the order of $4 billion. And we spend maybe $3 billion additional to that. So, maybe we spend $7 billion.

And there are very few companies in the utility industry that are spending, you know, that percentage of their depreciated money.

But we'd love to be spending more, but there are people all over that don't want the pipeline to go through there. They don't want the tower, whatever it may be.

And that is the problem of a democracy. And even, as I mentioned, within Iowa, you've got a great many counties that — majority, great majority of the counties I think would welcome the wind power.

And you've got some counties that don't like it. And we're obviously going to work with the ones that want to work with us. We do not have the ability to go in and tell anybody what do on that.

And there's a public utility commission in every state that basically governs what we earn on it, what we do, and that's the way the industry's developed. And that's not bad, unless you get into the things that in effect, you know, extend — they're part of a country-wide system, rather than state-wide system.

CHARLIE MUNGER: I think also that even if we weren't worried about global warming, it would make sense to —

WARREN BUFFETT: Sure.

CHARLIE MUNGER: — shift to renewables to conserve our hydrocarbons. There're certain things hydrocarbons can do that nothing else can do. And there's only so much of them there. Why not be cautious in conserving them?

WARREN BUFFETT: And the cost, they've gotten so much more efficient, too. I mean, the wind. I mean, if you look at what we're doing now, those towers are way more efficient than —

But there's a lot of people that are talking about things that can't be done. And then there's —

CHARLIE MUNGER: There's a lot of nonsense in this field. If you like nonsense, this is the field for you. (LAUGHTER)

WARREN BUFFETT: But we're in the field, so. (LAUGHTER)

CHARLIE MUNGER: I know. I know.

11. 'We will not be making any offer for control of Occidental'

WARREN BUFFETT: Ok, Becky.

BECKY QUICK: This is a question from Monroe Richardson (PH). The Wall Street Journal reported in March that oil producers are producing less oil and may have reached their peak in the Permian Basin.

Given the major positions of both Occidental Petroleum and Chevron in the Permian, which you please explain the rationale for Berkshire's significant holdings of both those companies, considering that future outlook for oil there?

WARREN BUFFETT: Well, there's no question — it's really interesting about oil, and Charlie knows way more about oil than I do, when did you buy that royalty in Bakersfield, or wherever it is? But that was before I met you, right?

CHARLIE MUNGER: Yes — no, it wasn't before — it was — yes, it was. It was just before. You're right. And that goddamn royalty is still paying me $70,000 a year.

WARREN BUFFETT: What'd you pay for the royalty?

CHARLIE MUNGER: A thousand dollars.

WARREN BUFFETT: Yeah. Yeah. Now that's the opposite of the Permian. My dad bought $1,000 or $1,500 worth of royalties before he died in 1964. He left them to my mother. My mother left them to her two daughters. And my older sister died. And my younger sister is here today.

And she gets these checks every month. And she knows about all these different fields, and what they're producing. And that's the reality of half of the oil production, or something around that, in the United States. And then the other half is shale.

And, you know, if you've gone to the movies, and ever watched oil, you've never watched the things that are pumping Charlie's royalties in California. You'll see these gushers of oil. Well, in the Permian, this should sink in on you, in the first day, the first day when you bring in a well, you know, it may be 12,000 barrels, or maybe 15,000 barrels.

And it's dangerous. Occidental had one come in at I think at 19,000 barrels or something like that in one day. And in a year, year and a half, it becomes partly nothing. It's a different business in effect. In the United States, it's interesting. We use maybe 11 and a fraction — well, we produce 11 and a fraction million barrels of oil equivalent a day.

But if shale stopped, I mean, it would drop to six million very fast. Well, just imagine taking five million barrels a day out of production in the world. And then we're also taking down our strategic petroleum reserve. Strategic petroleum reserve is the ultimate oilfield. You don't have to drill. It's just we've got them.

And it was supposed to be strategic, but it gets involved in politics. And so, there's all — when you talk about the oil business, you're talking about different kinds of businesses, basically. And we like Occidental's position in the Permian. And we wouldn't like that position — well, it got to minus one day. It got to minus $30 a barrel.

That was crazy, of course. But if oil sells at X, you know, you do very well. And if it sells at half of X, you know, your costs are the same, and it doesn't change the production. And it doesn't work as well, but it also brings down the oil production of the United States very fast.

So, we don't know what oil prices will be. But we do very much like the Occidental position they have. And that's why we financed them a few years ago, when it looked like it was a terrible mistake. Then the oil market just totally collapsed. And then it changed around. And we bought a lot of the common stock.

In the last few months, they've reduced our preferred, which we don't like, obviously. But we'd be disappointed in them if they didn't reduce it. It's intelligent from their standpoint. So, we've taken — of the $10 billion preferred, we've gotten maybe $400,000,000 or $500,000,000 of it, retired at 110% of par.

But, Vicki Hollub, she's an extraordinary manager of Occidental. Her first job was with Cities Service. That was the first stock I bought in 1942. She knows what happens beneath the surface. I know the math of it. But I wouldn't have the faintest idea what to do if I was in an oil field.

I mean, I can dig two feet down in my backyard. And that's my understanding of subsoil in the world. I can't picture the field that Charlie has been collecting that monthly check from, from 50-plus years, 60 years roughly, or my sister, getting at various fields, where they just keep pumping, and pumping, and pumping.

And we, in the United States, we're lucky to have the absolutely to produce the kind of oil we've got from shale. But it is not a long-term source, like you might think, by watching movies about oil, or something of the sort. Charlie, do you have anything to add?

CHARLIE MUNGER: Yeah. It really dies fast, those shale wells. If you like quick death in your oil wells, we have them for you.

WARREN BUFFETT: But Occidental, they're doing a lot of good things.

CHARLIE MUNGER: Yeah. They drill a lot of new wells. And they're doing it at a profit, but it's a different kind of oil than this.

WARREN BUFFETT: It's just different. Yeah. Yeah. And that's true of almost half the oil produced in the United States. And there's times —

CHARLIE MUNGER: There's a lot of oil down there that nobody knows how to produce. And they've been working at it for, like, 50 years. But they worked at the existing shale production for about 50 years before they figured it out. And it was weirdly complicated when they finally were able to do it. There's only one type of sand that works.

WARREN BUFFETT: Can you imagine a horizontal pipe, you know, maybe a mile and a half or something? It's just so different than what you think about.

CHARLIE MUNGER: It goes laterally for three miles, two miles down. How in the hell do you drill two or three miles laterally, when you're already two or three miles under the Earth? They have mastered a lot of very tricky technology to be able to get any oil out of these wells at all.

WARREN BUFFETT: And we love the position with Occidental. And we love having Vicki run it. And they've been —

CHARLIE MUNGER: And there's a lot more oil down there, if anybody can figure out another magic trick. That's all we need is another magic trick.

WARREN BUFFETT: But Occidental has some other things too.

CHARLIE MUNGER: Yes. Yes. But —

WARREN BUFFETT: But the price of oil still is incredibly important in terms of the economics of short-lived oil. I mean, no question about that.

CHARLIE MUNGER: Well, if it's —

WARREN BUFFETT: And we will incidentally — you know — There's speculation about us buying control. We're not going to buy control. (Laughs) We don't want to run — We've got the right management running it. We can't — we wouldn't know what to do with it. And (UNINTELLIGLE) wouldn't know what to do with an oil field.

CHARLIE MUNGER: Admitting you're buying coal would be like going out and seeking to acquire cancer or something. You can't even borrow to expand a coal mine now. It got very unfashionable.

WARREN BUFFETT: Yeah. And we think, frankly, some of the things said are ridiculous.

And on both sides. In both extremes.

I mean, you're dealing with physics. You're dealing with — the politicization of positions on something that's enormously important in terms of energy just lends itself to demagogues, and fundraisers, and advisory organizations, and everybody in sight. And we will make rational decisions. And we do not think it's un-American to be producing oil.

CHARLIE MUNGER: And there is no oil basin in the United States that compares to the Permian, in terms of promise.

WARREN BUFFETT: Yeah. We were lucky.

CHARLIE MUNGER: Well, I don't —

WARREN BUFFETT: We didn't know it was there until –

CHARLIE MUNGER: Yes.

WARREN BUFFETT: — not that many years ago.

CHARLIE MUNGER: It had sort of been used up. And then they always knew the shale oil was there. But they thought it was going to stay unrecoverable forever.

WARREN BUFFETT: The second or third stock I bought was Texas Pacific Land Trust. And they owned 3,000,000 acres down there. And they were raising revenues of $10,000 a year or something like that. And they were sitting on this incredible amount of oil. And basically, that company is now actually part of Chevron.

And it went through Texaco and did all kinds of things. And there's still a Texas Pacific Land Trust. But a lot of that property is fee owned by — the minerals are owned by Chevron, which is some advantage. But it's an interesting subject, I'll put it that way.

And we will not be making any offer for control of Occidental. But we love the shares we have. And we may or may not own more in the future. But we certainly have warrants, which we got as part of the original deal, on a very sustainable amount of stock, at around $59 a share. And those warrants last a long time. I'm glad we have them.

12. Elon Musk is a 'brilliant, brilliant guy' who 'likes taking on the impossible job'

WARREN BUFFETT: OK. Station seven.

AUDINCE MEMBER: My name is Max Joa (PH). I'm from Toronto, Canada. I have a question for Charlie regarding a statement you made in the past.

You once mentioned that you'd prefer to hire someone with an IQ of 130 who believes it's 120, over someone with the IQ of 150 who thinks it's 170.

I understand that you are referring to Elon Musk. (LAUGHTER)

Given the recent success of his ventures, such as Tesla, SpaceX, and Starlink, I'm curious to know if you still hold the view that Elon Musk overestimates himself. Thank you so much. (APPLAUSE)

CHARLIE MUNGER: Well, yes. I think Elon Musk overestimates himself. But he has a — he is very talented. So, he's overestimating somebody who doesn't need to overestimate to be very talented.

WARREN BUFFETT: There's a Bill Maher program, about a week old, maybe two weeks old.

But he interviews Elon. And Elon does a terrific job toe-to-toe with Bill Maher. It's worth watching.

And Elon is — he's a brilliant, brilliant guy. And I would say that, you know, he might score over 170.

But he — you know, it's — he dreams about things. And his dreams have got a foundation.

CHARLIE MUNGER: He would not have achieved what he has in life if he hadn't tried for unreasonably extreme objectives.

He likes taking on the impossible job and doing it. We're different, Warren and I. Warren and I are looking for the easy job that we can identify. (LAUGHTER)

WARREN BUFFETT: Yeah. If we can do it playing tic-tac-toe, we'll do it, you know? (LAUGHS)

CHARLIE MUNGER: We have a totally different way of going about it.

WARREN BUFFETT: But we don't want to compete with Elon in a lot of things.

CHARLIE MUNGER: We don't want that much failure.

WARREN BUFFETT: Yeah. (LAUGHTER) Yeah.

And it takes over your life in a way that it just doesn't fit us. But there are going to be — well, there have been important things done by Elon already. And it requires — fanaticism isn't the word.

CHARLIE MUNGER: Yeah. It is the word.

WARREN BUFFETT: OK. (LAUGHTER)

Well, it isn't quite the word. But it's a dedication to solving the impossible. And every now and then, he'll do it. But it would be torturous to me or Charlie. And I like the way I'm living. And I wouldn't enjoy being in his — but he wouldn't enjoy being in my shoes, either.

Watch the Bill Maher interview.

13. We want to save Berkshire's cash to buy businesses

WARREN BUFFETT: OK. Becky.

BECKY QUICK: This question comes from Foster Taylor (PH).

"At the 2010 Berkshire annual meeting, you said the one question that you would ask of the Berkshire CEO would be about the distribution of cash to shareholders, as the Berkshire cash pile grows larger and larger.

"So, let me ask that question. Do you still feel confident of the future prospects for our over $100 billion in cash on hand, or are we getting closer to cash distributions?"

WARREN BUFFETT: Well, the one thing, if Berkshire shares are selling for less than we think they're worth, that could be a pretty big way to distribute cash. But what we would really like to do is buy great businesses. If we could buy a company for $50 billion, or $75 billion, $100 billion, we could do it.

And we could do it. And our word's good. It's difficult with a public company, because in effect, if you bid on a company, you make the bid, and their shareholders vote months later. And you're giving out an option. If we're good for it, and the other guy has a way to —

CHARLIE MUNGER: Top you.

WARREN BUFFETT: —top you, or all kinds of things, they can get out of it. And then you get paid 2% for that, or 1% that, that is not an appropriate price. And on the other hand, Delaware will decide whether they should do it or not. And that's the way the world is. I mean, that's the law. So, it'd be easier to do with a private company.

And there aren't very many that are big. On the other hand, there's nobody else that can quite make a deal like we can, under the right circumstances. And there could be a situation where a number of very decent companies have got a very uncomfortable borrowing structure, and money comes due to them at the exact wrong time.

And that's when they pick up a phone, as did Tiffany, and Harley-Davidson, and you name it. I mean, a whole bunch of companies in 2008. That sort of thing will happen again, whether it results in us getting the calls, or what the world is exactly at that time.

But the one thing we know is that the number of phone calls that you can make at a time like that is very, very limited. And there can be good companies, they don't want to sell the company necessarily, but they just may need $5 billion, or $10 billion, or $20 billion, depending on what company you're talking about.

And that can happen. And our own shareholders can be selling the stock too cheap. And we'll never do anything to make them sell it cheap. And we'll tell them the truth about what the business is. But if market circumstances result in us being able to buy in $50 billion of our own stock, we'll buy it.

So, we'll see what the world holds. But we don't have the opportunities we used to have. But we've got enough. And we're making money with the things we have. It isn't killing us to hold $130 billion of bills at 5% plus bond equivalent yields.

And everybody says, "Well, yields are going to go down in the future." I don't have the faintest idea what yields are going to do in the future.

And, you know, the prime rate was 21.5% in 1981 or '2. And people were worried that it was going to go totally out and spin out of control. And [Federal Reserve Chairman Paul] Volcker kept it from happening.

But if Volcker hadn't been in there, who the hell knows what would've happened.

So, we're running Berkshire so that we'll do OK. And maybe we'll do a little bit better than OK. Charlie?

CHARLIE MUNGER: OK. Maybe. Fine.

14. Munger: 'Life is too short' to be an ambitious lawyer

WARREN BUFFETT: OK. Station eight.

AUDIENCE MEMBER: Hello, Mr. Buffett and Mr. Munger. My name is Carlos Sanchez (PH). And I am honored to be here from Guadalajara, Mexico. Mr. Munger, as a fellow lawyer, I have a question regarding corporate law.

Considering your experience and success, if you were to offer guidance to someone like Ralph Tortorella when he was at the beginning of his career, and before becoming Berkshire Hathaway Company's lawyer, what key principles or lessons would you suggest to help him excel in his profession?

CHARLIE MUNGER: Well, I'm not sure I quite caught all of that. But I don't think I have a lot of advice about how to succeed as a lawyer. I have a son-in-law who describes modern law practice in a big firm.

He says, "It's like a pie-eating contest where if you win you get to eat more pie." (LAUGHTER) And I advise you to avoid that kind of a law firm. Life is too short to just do nothing but eat pie.

WARREN BUFFETT: Yeah. Charlie has not practiced law since what 1964 maybe, whatever it was.

CHARLIE MUNGER: 1962.

WARREN BUFFETT: '62. And Charlie has given me four or five pieces of advice that don't really come from his legal background, but because he knows the system so well, and, you know, really did do quite well at Harvard Law School, despite his taunting of teachers in a few things.

He has given me four of five solutions on things that nobody else in the world would've given me, law firm or otherwise. And it's been within a nanosecond of when I described the problem to him. And he just gave me the answer that nobody else would've come up with.

And I told you one of them last year. So, I won't repeat it at this meeting. But we've got the best lawyer in the world in Charlie, if it's something that really matters. And there've been times when I've taken advantage of that. And Charlie didn't want to be a lawyer.

He didn't want to sell his time, maybe at 20 bucks an hour or something, to people he thought were making the wrong the decisions. And he knew more about it than they did. And that just did not strike him as a good way to go through life. And I think he's probably right on that.

I think he'd have really gotten to be miserable if he had to keep doing that. It's just no fun. It'd be like me giving investment advice to somebody that — or taking it from somebody. I just wouldn't want to do it. And Charlie figured that out. And so, we decided to work for ourselves. And this worked. Been happy, happily ever after.

CHARLIE MUNGER: We have no complaints.

WARREN BUFFETT: Yeah. None.

15. New minimum 15% corporate tax 'doesn't bother me in the least'

WARREN BUFFETT: OK. We're at Becky.

BECKY QUICK: This question come from Ryan Harding (PH). And it's about the new 15% corporate minimum tax rate. As he sees it, its implementation is currently understood, he thinks as he understands it, to apply over rolling three-year periods, and to be based on reported earnings.

First, does the inclusion of unrealized gains and losses in reported earnings under the current financial reporting standards contribute to the calculation for corporate minimum tax rate purposes?

And could it potentially convert some of those notional deferred taxes into cash taxes, even if a rise in the market price of a major holding is only temporary, but rather extreme? And then second, could it reduce the effect of some of the renewable energy tax incentives, and others?

WARREN BUFFETT: I think the answer on the second part, probably, is no. But I don't want to say it is for sure, because he's asking the same questions I ask of Marc Hamburg, who's the smartest guy on combining understanding a business, understanding the tax code, understanding SEC rules, and everything else, that you'll find in corporate America.

And these questions — the particular question on marginable securities — I don't think has been answered yet. And I think that there are a number of things about the new tax act that were not enacted yet. But I would say this. We have said ourselves what we think the proper approach to operating income.

We didn't design that because this tax law came along, we did some years back. So, we would think that you wouldn't include capital gains, unrealized capital gains in. But we've got enough, I think no matter how things turn out. The 15% tax doesn't bother me in the least.

And we can figure ways, once we know the rules, where we will pay the 15% tax. And, you know, we were paying 52% tax as federal income taxes when I bought control in the partnership of Berkshire Hathaway. I mean, the tax rate has come down dramatically.

And the deferred tax that was embodied, for example, at Sanborn MAT, when it was involved in a system that was allowed under the tax law to avoid that tax. But that was a huge tax, 52%. So, we will live with this tax code. And we do not think corporations are overtaxed in the United States.

And, you know, I think that the conversation about how we'd lose out to the world, and all that sort of thing is really nonsense. But we've got a new law that the regulations haven't been written on. And when we know what the game is, we will absolutely figure out a way to pay 15% every year, which generally, we've been paying anyway.

And as I pointed out, if there were a thousand corporations in the United States that paid what Berkshire has been paying, nobody else in the United States, no individual, no corporation, would ever pay any income tax, social security tax, gift tax, estate tax, anything else.

A thousand like Berkshire Hathaway would produce the revenue that's being derived under the present tax code from everybody in the United States. And I don't feel badly about that. And I love to get it to one five-hundreth, or something of the sort. But I'd like to do it — we can do it at this rate. I'm happy to do it.

I think we are privileged to live in the United States. But we also have to control spending. And that's something that Congress doesn't quite like to do. And they didn't like to do it when my dad went to Congress. But they've dug in more, as the years have gone by. Charlie?

CHARLIE MUNGER: Well, we covered this subject earlier.

WARREN BUFFETT: OK. (LAUGHTER)

16. We are in 'the perfect sort of game'

WARREN BUFFETT: Station nine.

Am I right on this? Yeah.

AUDIENCE MEMBER: My name is Avlon Gross (PH). And I am from Los Angeles, California. I am a shareholder. And it's my fourth year coming to the "Woodstock of Capitalism." (LAUGHTER)

WARREN BUFFETT: We're glad you came.

AUDIENCE MEMBER: Thank you so much for everything Warren Buffett and Charlie Munger.

What is the funniest story that you have never told about each other? And also, what is the hardest part of your business? (APPLAUSE)

WARREN BUFFETT: I'll answer the second. The second part of your question is that we don't have a hard business. We love our business. Every morning, when I get up, I feel good. I don't know what's going to happen that day. Maybe nothing will happen. But maybe something will happen.

And if nothing else, I'll roll some T-bills or something. But I work with the greatest group of people you can imagine. I mean, we like each other. And nobody is after anybody else's job, or anything of the sort. It's ideal working conditions. And it's five minutes from my home, or thereabouts. So, I haven't spent my life commuting. I just can't imagine having anything better.

And Charlie's got a lot of funny stories you haven't heard. But we'll see which one he comes up with.

CHARLIE MUNGER: Well, I think Warren and I are naturally so ridiculous that we don't need very many funny stories. We each do things that are peculiar enough so that we can keep one another amused.

WARREN BUFFETT: Tell them what you told the lawyer when we were buying Hochschild Kohn.

CHARLIE MUNGER: I don't remember. You tell them.

WARREN BUFFETT: Well, you remember? (LAUGHTER) It was 1966, and we were down in Baltimore, buying a department store. And we needed a lawyer. And we needed a lawyer who was nearby and would do exactly as told. And Charlie came up with a very good lawyer from Wilmer Cutler's, I believe. And I don't know whether Charlie remembers the instructions he gave the lawyer or not.

CHARLIE MUNGER: No. I don't.

WARREN BUFFETT: Well, Charlie told the lawyer, who we never met before. And he said, "Treat Warren like" — I was 36 at the time or 35. He said, "Treat Warren like any other 90-year-old client." (LAUGHTER)

This guy knew exactly what he meant. And we made the deal in a hurry. And then we went to the bank, First National Bank, I believe it was — or Maryland National Bank, actually. And there was a fellow named Cammy Slack there, wasn't there, Charlie?

CHARLIE MUNGER: Yeah.

WARREN BUFFETT: We wanted to borrow $6,000,000 bucks against a $12,000,000 purchase. And Cammy looked at us with bewilderment. And he says, "You want you borrow $6,000,000 for this little old Hochschild-Kohn?" And Charlie and I said something to the effect, "Well, the Maryland National was our first call. And if they didn't want to do it, we had another bank we'd go to."

And, anyway, they lent us the money. But when he said little old Hochschild-Kohn, we immediately started thinking, "Maybe this isn't the best deal we've ever seen in our lives." And from that point on, we were trying to figure out how to sell it. Sandy Gottesman was involved with us then too.

And we had as much fun out of deals that didn't work in a certain sense as the ones that did work. I mean, if you knew you were going to play golf and you were going to hit a hole in one on every hole, you just hit the ball, and it went in the hole that was 300 yards away, or 400 yards away, nobody would play golf.

I mean, part of the fun of the game is the fact that you hit them to the woods. And sometimes you get them out, and sometimes you don't.

So, we are in the perfect sort of game. And we both enjoy it. And we have a lot of fun together. And we don't have to do anything we don't really believe in doing.

I mean, we are not dictated to by any group. And so, we get to forge our own destiny. And in a sense, forge the principle by which we can run the company. And that's a huge luxury in life.

And we don't want to be president of any other company in the world, or CEO, or anything else. We'd have to conform to certain things that we really don't want to conform to.

Is that a fair description, Charlie?

CHARLIE MUNGER: Yeah, it is.

WARREN BUFFETT: Yeah.

17. Arbitrage bet on Activision isn't looking good

WARREN BUFFETT: OK, Becky.

BECKY QUICK: This question comes from David Kass, who is a professor at the business school at University of Maryland.

He says, "At last year's annual meeting, Warren mentioned that Berkshire had taken a large stake in Activision Blizzard as a merger arbitrage play. Since the U.K. regulator has blocked its acquisition by Microsoft, has Berkshire reduced or sold its stake?"

WARREN BUFFETT: Well, I think in terms of what we do with stocks, we don't give information except when required to, which is in the 13F, or whatever we file. And there's certain things you can actually figure out by looking at our 10-Q, which we filed this morning.

But you have to look pretty hard. But I would say this. I think Microsoft has been remarkably, what's the word, willing to cooperate with governing bodies. I mean, they want to do the deal. And they've met the opposition, it seems to me, more than halfway.

But that doesn't mean that it gets done if a given country, in this case the U.K., wants to block it. They're in a better position to block it than the United States, by just the way the world works. And that doesn't get solved by offering more money.

So, I don't know how it turns out. But if it doesn't go through, I don't think it's through any shortcoming by either Microsoft or Activision. But not everything that should happen does happen. And, well, we ran into it when we made the deal with Dominion Energy 18 months ago. And they let us buy a good bit of what we wanted to buy.

And then the government in effect said, "You can't buy something else," which I think we would've done a better job with than anybody else did, and which the states involved did not object to it, which the customers didn't object to it. But you don't take on the United States government, you know?

And you try and figure out things that you won't have a problem with. And I think in that case, the U.S. government made a mistake. I think the British government's making a mistake in this case.

But that's life in the big city, as Charlie would say.

And what we do will depend on a lot of things. Charlie?

CHARLIE MUNGER: Well, I think — well, we do — yeah — you kissed that one off beautifully. (LAUGHTER)

18. If you can't work for yourself, working for Berkshire is almost as good

WARREN BUFFETT: OK. Station 10. (Laughter)

AUDIENCE MEMBER: Hi, Warren. Hi, Charlie. My name's Anderson Fuller (PH). And I'm from Avonport, Nova Scotia in Canada.

And before I ask my question, I just want to thank you for all you've done to give us insight into your minds as investors.

So, for me, the most compelling takeaway from Berkshire is your guys' emphasis on and successful use of properly aligned incentives.

In my view, owning and leading a business has two central benefits. First, you directly benefit as the company grows, through your equity in it, and second, you have autonomy. Incentives for employees are a bit easier to understand, such as offering benefits, fair pay, and creating a strong culture.

But I've always struggled to understand them at the highest level. Even though you say Berkshire gives its managers significant flexibility, it must be less than what they had when they were independent.

Additionally, you would think passion and a willingness to sell would be inversely correlated. So, how exactly does Berkshire bridge this gap and incentivize owners of its subsidiaries to give up these benefits to Berkshire? Thank you.

WARREN BUFFETT: Well, what we really hope to find is managers who love their business, but don't like a lot of what comes with it as a public company. I mean, if they have to spend a lot of time listening to people tell them what to do about this or that, and they can't afford to irritate them, or they have to go along with their trade association, or whatever they may call it, because you don't want to look like a free rider.

There's all kinds of things, compromises that people have to make in most jobs. And Charlie and I solved that problem. I had five bosses in my life. And I liked all five of them. And two of them were just huge factors in making my life better. But I liked all five of them.

A couple of them were, you know, some people hear JCPenney, Cooper Smith, you know, I worked for 75 cents an hour and I loved working at Penny's. Well, I didn't love working at Penney's. But I loved working for Cooper Smith. And, you know, it was 75 cents an hour.

But I had to do what they told me to do, which was to sell men's shirts first, and then men's clothing, and then children's clothing, and so on. And I loved working for the newspaper. And I had a great manager when I was at the University of Nebraska. I got to work for Ben Graham. I mean, everything worked out.

But there's nothing like working for yourself. And if you can't own a big company, working at Berkshire Hathaway, from running a company is the closest thing you will get. You don't have to spend time courting analysts who you'll probably have contempt for in many cases.

You don't have to spend time with banks, you know, getting money, and particularly in terrible times.

There's all kinds of — you get a lot in the way of freedom that I would think would be meaningful to me. And it might be better if you own the whole place yourself.

But maybe you've got siblings that want out. Maybe — there's a million reasons why you may not be able to achieve that unless you sell to Berkshire. And that's easier, probably, if you have a family business, where people want to go in different directions, than it is with a public company. But there's still possibilities there.

So, that's why I think if I owned a public company, and it was worth a great many billions of dollars, and Berkshire Hathaway wanted to buy it, and the shareholders were willing to vote it, I would consider the way I would feel about life, for one thing, I wouldn't want to retire at 65. I'd want to keep working.

And there are reasons to sell to Berkshire, which Charlie and I, in certain positions, if we were on the other side, would take the deal. But it isn't for everybody. Charlie?

CHARLIE MUNGER: I think we have a pretty good one. We've been very lucky. And I don't know. It seems to me that most of the people who are going to end up the way we did, they almost already know how to do it.

WARREN BUFFETT: But the most important purchase, in retrospect, that we may have made was National Indemnity. Now because specifically what it did, but what it led to. And Jack Ringwalt controlled the company. And I knew him and liked him. And he knew me. And once a year, he'd get irritated when the Nebraska Department of Insurance, or somebody would come around.

And he said they always came around when the AK-SAR-BEN racetrack was open. I mean, he had all these theories about why it was a pain in the neck to be regulated. And I told Charlie Heider, "Next time Jack is in that mood, where he's ready to sell, just because he's tired of fooling around with all these guys, be sure and find him."

And so, Charlie called me one day. And he says, "Jack is in heat." And I said, "Bring him over." And we made a deal. But that's why Jack sold. And he was happy after he made the deal. And I was happy after we made the deal. So, there's a man that controlled a business, but just decided these people didn't seem to bother him as much once they were my problem and not his.

And you just can't tell when lightening will strike. And that didn't do magnificent things for us initially. But just look at what it led to, you know?

So, you never — you know, if you knew how you were going to shoot all 18 holes, it wouldn't be any fun playing. You wouldn't get out on the first tee. I mean, it's the uncertainty, the fun of playing the game, the opponents, all kinds of things that make a game interesting. And I think Charlie and I are in the most interesting game in the world.

19. See's Candies is a 'wonderful brand that doesn't travel'

WARREN BUFFETT: OK. Becky?

BECKY QUICK: Here's a question from Simon Withers (PH), in Perth, in Western Australia.

"It's been a long time since we've heard about See's Candy and NetJets. Could you please give us an update on See's performance, and when you project it will run out of places to open stores in the United States?

"And could you also give us an overview of how NetJets has performed since its acquisition, and whether it's achieved the potential you saw at the time of that acquisition?"

WARREN BUFFETT: Well, with See's it hasn't been a question of opening stores. We found out that we have this wonderful brand that doesn't travel. You know? The mystique, the actual product, the feelings people have about some things, as we said before, I mean, it sometimes it's limited to given markets.

Dr. Pepper sells at a huge rate in Dallas-Fort Worth, and maybe at 10 times the percentage per capita, maybe that it has in Detroit, or Boston. And you say, "Well, how can that be with a product that's been around for a century?" And people travel. You have national advertising.

And I'm not sure. But I keep learning more, as I watch different brands. And Charlie and I, our economics were so good in California, that we tried in many cases the same experiment over and over again. It doesn't cost much to experiment. And we've tried everything in the world to cause a brand to travel.

And we always think we were right for the first week. And then we find out that the magic — we can beat any other candy store, pretty much. But there aren't any candy stores anymore to speak of, as the world has changed. So, See's is 101 years now. It has magic.

And it has limited magic in sort of the adjacent West. It's gravitational, almost. And then you get to the East. And incidentally, in the East, people prefer dark chocolate to milk chocolate. In the West, people prefer milk chocolate to dark. In the East, you can sell miniatures, and dark — in the West —

I mean, there's all kinds of crazy things in the world that consumers do. But you want to keep observing it, because you do learn a little. And with Charlie and I, the temptation to keep trying things, because the economics were so good if we succeeded, so we tried various things. And, of course, every manager wants to try that comes along.

Because they've learned that it should work. But it doesn't work. So, but that's what makes it very interesting.

20. NetJets is a 'marvelous' company

WARREN BUFFETT: And NetJets, we have really learned how to distinguish, and justifiably distinguish a service to people that you have to be very well to do to use it.

But if you're very well to do, in effect, you're spending your heir's money. I mean, it's what I told my Aunt Alice after she went from teaching to be worth millions and millions of dollars. And she came to see me. She'd never been married. And she said, "Can I afford to buy this fur coat?" in 1968 or '69. And I said, "Alice, you aren't buying it. Your nieces and nephews are buying it, because that's who you're leaving your money to."

"Speaking on behalf of your nieces and nephews I would say we want you to buy it." And it's the same way. Do your heirs want you to fly around in that jet? Or do they want you to leave a little more money to your foundation or your kids? And the way to solve that one is to offer your kids a few hours themselves.

Then their attitude can change. So, it's in a class by itself. It's done what Ferrari has done in a different sort of way in cars. Ferrari sells 11,000 cars a year. I mean, maybe 12,000. And they're known throughout the world. And we'll have a Chevy dealership in Boston or something. We'll sell as many cars. But we're not Ferrari.

And NetJets has 600 — well, counting Europe, I mean, it's maybe 650, but we're going to buy 100 planes this year. And we won't sell any, because we've got a backlog. And we took a NetJet flight over to Tokyo. And we arrived in good shape. And we spent a couple days there. And we flew back.

And there's just nothing to it. Now, you can say, "Well, you're getting sort of decadent and all that in your old age." But the money will go to philanthropy. And the money will probably be a hundred billion or more. And I figured the philanthropies want me to spend a few bucks on myself.

All it has to do is be better than the last dollars that are spent by various philanthropies, which have plenty of problems finding things to do that make lots of sense. So, NetJets, there isn't any competitor. We had looked the other day at Wheels Up.

Stock came out at $10 a couple years ago. It was selling at 48 cents the other day. And they've got 12,600 people that have given a billion dollars, a little over a billion dollars on prepaid cards where they've given them money, and they get a certain number of hours later on.

And they don't — I think there's a good chance that some people are going to be very disappointed later on.

When they have money to do the NetJets, they know they'll get on the same planes, with the same pilots as I and my family have flown on since before we bought the company. So, the decision wasn't shaped by some commercial objective.

A couple years before, I'd never heard of NetJets. And Frank Rooney mentioned it to me. And I bought share immediately. And we bought the company. And, well, my kids have to fly commercial sometimes. But sometimes they get to use ours, too.

But I've never flown anything else. And why would I? I mean, it's the gold standard. And nobody will match our fleet. I mean, if you got 600 planes, you've got them a lot more places in the United States than anybody else will have theirs. I think we're the second largest fleet (UNINTEL) commercial airliners.

And our fleet's growing, like I said, at the rate of a hundred planes a year. So, it's a marvelous company.

And Adam Johnson has performed. You just can't believe what he's done with the business. It was a tough model for a long time. But he's brought it where it is. And we should have a wonderful company forever. Charlie?

CHARLIE MUNGER: Well, NetJets has been remarkable. You can argue that it's worth as much as any airline now.

WARREN BUFFETT: It's so different. And Charlie — we had a hard time selling Charlie a NetJets membership. And then we figured the way to get him to buy a membership was to put a coach seat in the fuselage. (LAUGHTER)

And that really knocked him off. I think he's the only one we sold on the basis of that.

CHARLIE MUNGER: I used to come to the Berkshire annual meetings on coach from Los Angeles. And it was full of rich stockholders. And they would clap when I came into the coach section. I really liked that. (LAUGHTER) (APPLAUSE)

WARREN BUFFETT: But I've got to tell you, we semi-corrupted him. He feels he kind of has to explain it, but he still flies in NetJet himself, so. And it'd be crazy not to. You know, your heirs are paying for it. I mean, find me anybody whose estate came in at less than zero because of what they spend on NetJets, threw them into that position, let me know.

But I've never seen a case yet. And it won't be the case for the Buffett family. And it's the residual bottom beneficiary that's paying for your membership.

And it's a little hard to get used to paying that much money though, when you've lived like Charlie and I have most of our lives.

21. Auto industry is fascinating but hard to predict

WARREN BUFFETT: OK. We will go to section 11.

AUDIENCE MEMBER: Hello. My name is Humphrey Liu, I'm from Charlottesville, Virginia.

WARREN BUFFETT: Ah!

AUDIENCE MEMBER: First, I wanted to add my thanks to you and Mr. Munger and Mr. Buffett, and all of Berkshire, for throwing this grand event each year.

Looking at the global trends, it increasingly does seem that zero-emission vehicles may have finally reached the cusp of mass adoption. Do you see any opportunities in this space, either in specific vehicle manufacturers or in related technologies?

WARREN BUFFETT: Well, I would say that Charlie and I, we long have felt that the auto industry is just too tough. You know, the Ford Motor Company, I mean, Henry Ford, looked like he owned the world with the Model T. And he brought down the price dramatically, he took up wages dramatically. He might have been, with a different personality, or some different views, elected President of the United States.

I mean, there's a good book that came out on that recently that told about the story — it tells a little about Nebraska in terms of it, but Henry Ford and Thomas Edison joining up, maybe a year or two it was. If you're interested in autos, you ought to read that book.

But Henry Ford did that, you know, and 20 years later they were losing money. And the other guy, with a gun in his pocket, I think Harry Bennett, you know, was running the Ford Motor Company. It was on its way to the junk heap when the whiz kids came in.

And Henry Ford II, "Hank the Deuce," as they called him, brought in Tex Thornton, and my friend RJ Miller, and a few people. I was reading the other day, actually, the 1932 Annual Report of General Motors. And it's one of the best annual reports I've read. It's a totally honest, you know, assessment of exactly where they were: They had 19,000 dealers then, and the population, as I mentioned earlier, was about 120 million or so.

And now, with 330 million people, all brands in the United States have, like, 18,000 dealers or something. It's just a business where you've got a lot of worldwide competitors, they're not going to go away. And it looks like there are winners in any given time, but it doesn't get you a permanent place. Although, as I mentioned, I would say Ferrari is in a special place.

But they only sell 11,000 or 12,000 cars a year. In the U.S. last year, I think there were 14 million-something. And it's not a business where we find it fascinating to be in. We like our dealership operation, but I don't think I can tell you what the auto industry will look like five or ten years from now.

I do think that you're right that, you know, you will see a change in the vehicles. But you won't see anybody that owns the market because they changed the vehicle. Charlie?

CHARLIE MUNGER: Well, the electric vehicle is coming big time, and that's a very interesting development. At the moment, it's imposing huge capital costs and huge risks. And I don't like huge capital costs and huge risks.

WARREN BUFFETT: And we're subsidizing it in the United States, and we're actually doing it — tried putting in a pro-labor-type — I mean, it is subject to politics like you can't believe, too. But it's going to be with us, we're not going to quit driving cars, and — the American public has love affair with them.

But I think I know where Apple's going to be in five or ten years, and I don't know where the car companies are going to be in five or ten years. And I may be wrong. But Charlie and I follow the auto business with intense interest. Charlie's firm was the specialist at General Motors on the Pacific Coast Stock Exchange, and that was a franchise, wasn't it, Charlie?

CHARLIE MUNGER: Yeah. By working very hard, we could make a minor amount of money.

WARREN BUFFETT: Yeah. Yeah. Wasn't "minor" at the time, though. Come on — (LAUGH) but —

CHARLIE MUNGER: Yeah, it was. It was —

WARREN BUFFETT: Was it?

CHARLIE MUNGER: — pretty minor at the time even.

WARREN BUFFETT: Yeah? Well, it was pretty minor.

22. Buffett isn't worried about the Federal Reserve's balance sheet

WARREN BUFFETT: OK. Becky?

BECKY QUICK: This question comes from Lindsay Peter Schumacher in Cedar Rapids, Iowa.

"Does the current size of the Federal Reserve balance sheet concern you? In particular, the result of quantitative easing — the Federal Reserve expanded its balance sheet out of nothing. The net effect in essence is a form of single-entry accounting creating something of value out of nothing other than a series of book entries. And wondering what Mr. Munger thinks about this as well."

WARREN BUFFETT: Well, I don't think the Federal Reserve is the problem, and I think they can't solve the fiscal problem. I do not worry about the Federal Reserve. I think it's fulfilling the functions for which it was established. They have two objectives, and I would not have been one probably that would have changed the inflation objective: to 2% a year from 0.

You know, I think that if you tell people that you're shooting to depreciate your currency at 2% a year, that has a lot of implications. Although it feels good to a (LAUGH) lot of people. A lot of people want a little inflation, but nobody wants a lot of inflation except somebody's that got a lot of debts.

And I do not worry about the Federal Reserve balance sheet. I enjoy looking at it, and the numbers are big — I always like big numbers. But it's interesting: One of the most interesting figures, to me, is currency in circulation. I mean, it has gone — they were saying, "Cash is trash," back in 2007 and '08, "and all that cash is going to disappear."

Well, if you look at the Federal Reserve balance sheet, it's gone from $800 billion to $2.2 trillion, and most of that's in hundred-dollar bills, overwhelmingly. And I figured out I think there's about 50 $100 bills per person — babies, everybody, in the United States, and I would really like to know where all of that is.

I mean, nobody's hoarding eurodollars, you know, in South America, or Africa, or wherever. And the demand for currency now — you know, some of it may be subtle drug dealers' activities and of that. But anybody who thinks "cash is trash" ought to look at the Federal Reserve balance sheet. And, actually, you can look at how many $5 bills and $2 bills, and ones and all that, and the action has been in $100 bills.

I mean, it is just astounding the way that hundred-dollar bills have spread. And, of course, I don't know where they are, and I don't think the Fed can know exactly, but they'd probably make a lot better guess than I could. But I do it's happened, and you can watch it every week, and you'll watch currency in circulation probably grow a little bit. And, believe me, "cash" is not trash. Charlie?

CHARLIE MUNGER: Well, I don't know where we're headed with all of this. It's been very extreme. I think you could be pretty extreme in fighting it: depressions and so forth, if you reverted afterwards to a period of some discipline. But if you just —

But if you're going to just keep printing money and spending it, I think eventually it causes bad trouble. And you can see it Latin America. Latin America let its currency get out of control all the time, and, of course, it lagged the United States in economic achievement greatly. So, I think we pay a price if we ever give up our old ways entirely and go into a new world where we just try and print money, just make it easier to get through the year.

WARREN BUFFETT: We paid a price in World War II, I mean, everybody: school kids and everybody else, myself included. And we bought what were originally called "War Bonds," and "Defense Bonds," and "Savings Bonds," and all that. But from 1942 to 1944 or '45, you paid out $18.75 and you got $25.00 back, and every kid saved savings stamps and all that.

But when you got all through, you know, you had 120% of GDP in the national debt instead of 30% or 40%. And we had a lot of inflation subsequently, a lot. So, the people that really bought those bonds and supported the war had a portion of their purchasing power taken away from them.

Well, there wasn't anything wrong with that, particularly. But when the country gets in the habit of doing that, I think it's tough to figure out where the breaking point is with society. But I don't think you want to come anywhere close to it.

CHARLIE MUNGER: Yeah, but it's also tough to have a mass of people unemployed. That's the tension.

WARREN BUFFETT: Yep. Well, that's why the Fed has two objectives, in terms of employment and inflation. But they are not the ones that could create the deficits. And so far, the system has worked pretty well, although, like I say, it's been —

CHARLIE MUNGER: So, far, the man who just jumped off a tall building —

WARREN BUFFETT: Yeah, right.

CHARLIE MUNGER: — is all right until he hits the ground.

WARREN BUFFETT: Yeah. (LAUGHTER) Well, but there could be ways we can stop now at the third floor, or the sixth floor. We don't know what floor it is, but we know it hasn't hit the ground. But, you know, politically it's very, very, very tempting to vote appropriations, and it's not fun to vote taxes.

And Russell Long, head of the Senate Finance Committee, they've got a building named after him now, he said, "You know, don't tax you, don't tax me, tax that guy behind the tree." And (LAUGH) basically that is the attitude — I mean, it's the reality of what is useful in politics.

And so far, this country's managed to work very well with lot of things that could theoretically cause a lot of problems. But it doesn't guarantee us the future on it and being the reserve currency lets us do a lot of things, but it also creates a lot of consequences if we screw it up. Charlie?

CHARLIE MUNGER: Well, we're beating a subject to death, but it is a problem. I wish we had a solution.

23. We need to take care of people displaced by capitalism

WARREN BUFFETT: OK. With that we'll go to station one and see if we —

AUDIENCE MEMBER: Hello, Mr. Buffett and Mr. Munger. My name's Connor, I'm an economics student at the University of Nottingham.

My question for you today is during the pandemic we witnessed supply chain shortages, especially from Asia. As a result, companies have chosen, with political intentions, to move production away.

Should companies make these decisions? And should the government support them?

WARREN BUFFETT: Charlie?

CHARLIE MUNGER: Well, that's a good question.

WARREN BUFFETT: Yep.

CHARLIE MUNGER: Obviously, it's logical — if you're in business and you can make the thing in Mexico way cheaper, it's natural to open a factory in Mexico and get your parts cheaper. And a lot of the auto manufacturers have done exactly that.

On the other hand, nobody wants to hollow out the whole country, so all the manufacturing jobs are elsewhere and we're all living like a bunch of farmers: You know, like English colonies in 1820 or something. And these ideas are, of course, in big tension. We don't have that much foreign production, right, Warren?

WARREN BUFFETT: Yeah. Well, but we've lost — well, originally Berkshire Hathaway, as a textile manufacturer, lost because the South became feasible versus the North. And, of course, then eventually —

CHARLIE MUNGER: The South got expensive —

WARREN BUFFETT: South got —

CHARLIE MUNGER: — and moved to China.

WARREN BUFFETT: Sure. And society benefits and some people get killed in that sort of a situation. And a rich society should take care, one way or another, of people that worked in our shoe factories, people who worked in our textile companies. I mean, if you worked in our textile operation, in 1964 when we took it over, half our workers only spoke Portuguese.

And, you know, they weren't getting great wages at all. But now you could do it in the South, and we were doomed to go out of business. And it wasn't the fault of the worker in any way, shape, or form. It wasn't our fault: We kept trying to compete.

CHARLIE MUNGER: Well, TVA had cheap power down there.

WARREN BUFFETT: Sure.

CHARLIE MUNGER: And tax dollars really can yield power.

WARREN BUFFETT: And air conditioning changed everything because the heat in those damn places was impossible. And so, a lot of things. But then it moves offshore in many ways, and net the country is better off because of it.

But it displaces a lot of people who really can't do something else in life. You can't talk about "retraining" somebody that's 55 or 60, and speaks only Portuguese, and really tell them they're going to have "a great future" in New Bedford, Mass.

You know, and so you don't want to be glib about it. And we can afford to take care of those people. And we've got some systems that work reasonably well, but there's a tension between — you know, what about the person that doesn't do anything and all that kind of stuff. So, these are not easy problems to solve.

But I would say that, by and large, we want the whole world to prosper, we do not want the United States to be a country of extraordinary prosperity, and have the rest of the world —

CHARLIE MUNGER: — starving.

WARREN BUFFETT: No. It isn't going to work. And it particularly isn't going to work in a nuclear world. So — and you can have your own feelings about it as a humane person, but it can be done better. And we've got the resources to do it. I mean, the output of this country, one, can be done with a lot fewer people, and doing more specialized things.

And, of course, it has been. The workweek in the United States, you know, in my lifetime, has dropped dramatically. And people still feel busy. And it will be the human lot to say, you know, "How can I get all these things done?" But my mother didn't drive three kids anyplace, I mean, if you wanted to go anyplace, if you were lucky and you got old enough, you had a bicycle.

And the world just keeps looking at everything moving up as becoming sort of a base that leaves them somewhat dissatisfied. And with our prosperity, we can do a lot of things we couldn't do in 1930, including taking care of people that got displaced by the fact that somebody else can do that work and improve their lot in life.

And we've got to make sure that we have the best system that takes care of the people who get displaced by that. But doing that in the political system we have and everything, we'll make a lot of mistakes along the way. But we've got to keep moving in that direction. And I'd say —

CHARLIE MUNGER: The really interesting thing about it is that Adam Smith was right: that free market capitalism automatically leaves a property in private hands. And free trade and all that automatically creates GDP per capita that grows and helps everybody, including the people at the bottom: helps everybody a lot.

But inherent in the process, there's a lot of pain in that free market capitalism: for instance, for the Portuguese workers in a textile company in New Bedford. And nobody's ever figured out how to take all the pain out of it. We do have government safety nets that take some of the pain out, and we make those safety nets a little bigger as time goes by.

But, apart from that, if you try and take all the pain out, you'll also take all the gains out of it. We won't have a growing GDP per capita. You'll have an economy like Russia's, which has been characterized as saying: "They pretend to pay us, and we pretend to work." (LAUGHTER)

WARREN BUFFETT: Yeah. The other systems haven't worked better, but it also produces more and more disparities in wealth. And people that do nothing but get assets under management without actually performing anything extra make fortunes. And, I mean, it's a job of government to keep the best aspects of capitalism, while not causing people that only speak Portuguese to suffer in the process.

I mean, the two aren't compatible politically over time. And we stumble along making progress on things like Social Security and all that. And we are a lot better off than we are when I was born.

CHARLIE MUNGER: Net, the United States has done a very good job of this tension between capitalistic growth and a growing social safety net. We can be pretty proud of our country, looking backward.

WARREN BUFFETT: Yeah. That may be why we have 25% of the world's GDP starting with a half-a-percent of the population and did it in a few centuries. I mean, it's a miracle. And it wasn't because we're smarter, but we've got to say there must be something to the system that's worked pretty well even though it's produced a civil war and all kinds of things, you know?

And women, you know, not getting a shot at anything, you know, even after they passed the 19th Amendment. But it's a work in progress. I think actually there's been progress, but it's mankind's nature to see the things wrong with it if you —

CHARLIE MUNGER: It's even worse: It's man's nature to take the progress as a right. Not something to be earned or strive for, but something that should automatically just flow in over the transom. And that attitude is poison. It doesn't do anybody any good.

24. When it comes to accounting, 'We'll consistently do what is legal, and we'll consistently say what we think is right'

WARREN BUFFETT: OK. Now ask us an easy question, Becky. (LAUGH) (APPLAUSE)

BECKY QUICK: This question comes from Doug DeShiel (PH). "Since the accounting rules changed requiring Berkshire to report the change in fair value of its equity investments through the income statement, Mr. Buffett has repeatedly told shareholders to ignore those changes as they're not reflective of the long-term returns that those investments will produce.

"Recently, Mr. Buffett has argued that hold-to-maturity accounting used by the banks to avoid reflecting the changes in fair value of bank investment portfolios in the income statement and the shareholder equity account do a disservice to its various stakeholders. Can Mr. Buffett elaborate on why he views mark-to-market accounting differently for banks in comparison to Berkshire?"

WARREN BUFFETT: Well, I believe, in both cases, in doing it on the balance sheet and not in the income statement. And it's a very tough problem the auditors face is that obviously the income statement feeds into the balance sheet. But the balance sheet tells you whether deposits can be paid, it tells you a lot of things.

And we show it on our balance sheet. We believe in showing market values on our balance sheet. We just don't believe in running it through the income account. And in getting there we would put in "other comprehensive income," like it was for a long time.

So, I sympathize, to some extent — a far extent, with the audit group. But they have to really decide whether they want the balance sheet to represent values — except it doesn't reflect them on the upside if we buy a See's Candy and it's worth way more money, so it's conservative in that sense; or whether they want to have an income account that becomes meaningless to people. Because it really changes every five seconds, you know?

I mean — well, the market's closed today, but, you know, I guess Apple was up, what, seven or eight points or something on Friday. I mean, that's $7 billion: I mean, that's a crazy income account. It is a reflection of where we stand at that point.

And, of course, if you're a bank, where you're putting out money really at things — mortgages, I mean, primarily, that are terrible instruments for a bank to own, but a great instrument for a consumer to buy; and built-in to the whole society now in a way that is entirely different than in the past, you've got to pay attention to whether they've gotten out of whack in terms of the value of what they own and what can be demanded of them tomorrow morning. (LAUGH)

And if we had all of our money that could be demanded from us tomorrow morning, we'd have to behave a lot differently than Berkshire does. So, I really think the way to do it is the way we recommend doing. Which is exactly what was being done until a few years ago. I recommend the shareholders look at it that way, but we're going to follow the rules, obviously that the SEC, you know, the state authorities and everybody require of us.

But I'll still explain to the shareholders exactly what I would explain to my sister about what really counts at Berkshire. And I think every management actually has an obligation to that, and instead of it, they go in the other direction and give them a lot of figures that are total nonsense.

You can't imagine some of the — you know, EBITDA, I thought, was about as bad as you could get. But they've kept going. You know, earnings before everything: EBE. (LAUGHTER) But that doesn't change what I would tell my sister, who's here in the audience, I hope. And I should tell this to all the shareholders: "We'll consistently do what is legal, and we'll consistently say what we think is right." Charlie?

CHARLIE MUNGER: Yeah. (APPLAUSE)

WARREN BUFFETT: We want owners who understand what they own. You know? That doesn't mean they have to understand the detail of it. But that's why we have people that have been around 50 or 60 years. That doesn't mean that they read the 10-Qs or anything like that. But they feel we're telling it to them like, you know, they lived next door to us.

CHARLIE MUNGER: Yeah, I don't know what the accountants were thinking when they made that change. It strikes me as bonkers, absolutely bonkers. I don't see how anybody who understands how businesses really operated, and should be operated by owning managers, would have made that accounting change. The accountants did it just because they had a wild moment.

WARREN BUFFETT: Twenty-five years ago, I suggested to the audit profession that the audit committee ask auditors four questions, and the shareholders would know a lot more about the company if those questions were asked. But it wasn't good for the auditors to be asked those questions because it might increase their liability if they answered them. And the client didn't want them to answer them because the management didn't want them to.

CHARLIE MUNGER: No, they want a system where, if they follow certain rules, they're safe. And that's understandable. But I don't think the past year, this rule requiring changes in marketable securities to go through the income account quarterly, they didn't do that to protect themselves from —

WARREN BUFFETT: No.

CHARLIE MUNGER: — liability. They just did that for some crazy reason of their own.

WARREN BUFFETT: Yeah.

CHARLIE MUNGER: You get a bunch of people who will all be drawing a lot of pay out of a big, complicated system, and rising in it like so many of our officers in the Army, God knows what they'll do if you put them in a little room by themselves and tell them to invent new accounting standards.

WARREN BUFFETT: Well, to our auditor, remember that's Charlie talking, and he doesn't really — (LAUGHTER)

But I agree with him, (LAUGH) 100%. He's 99, he can get away with more than I can get away with. (LAUGHTER)

OK. Station two —

But what he said is enormously important. I mean, you've got to have some insights into what the hell really goes on.

CHARLIE MUNGER: Even if you're (inaudible) accountant.

WARREN BUFFETT: Yeah.

25. Munger: I'm 'philosophical about my grandchildren not thinking exactly the way I do'

WARREN BUFFETT: OK, Station two.

AUDIENCE MEMBER: Dear Warren, dear Charlie. My name is Victoria Winthrop, I am 22 years old, and I study in Munich at the CDTM, the Center of Digital Technology and Management.

As your grandchildren are more in my age group, let me ask you: How do you transfer your wisdom to your grandchildren and heirs? How do you lead them to investing? Do you see value in investing as a family, or individually? Thank you.

WARREN BUFFETT: I'm going to let Charlie do the answer now. He's got more —

CHARLIE MUNGER: Well, I have more grandchildren. But (LAUGH) I am quite philosophical about my grandchildren not thinking exactly the way I do.

It seems to me that's almost the natural course of life. And I just live my life my own way, and they can observe it as an example if they want to. And if they don't, they can try some other way.

I don't like it when they try some other way. (LAUGHTER)

And I have to pretend that I like some of the boyfriends and girlfriends I don't like, (LAUGHTER) but I just struggle through like everybody else. (LAUGHTER)

And usually, I just bite my tongue and keep silent. That's my way of handling it.

WARREN BUFFETT: Well, I would say that I think, in my case, my three children have grown a lot smarter in the last 30 years, and I think I've grown smarter. (LAUGH) And —

CHARLIE MUNGER: Well, I know, but you needed a lot of help.

WARREN BUFFETT: That is for sure — (LAUGHTER) no, I would totally acknowledge that. That's why I have the room to grow. I mean, I have plenty of room for improvement. But —

CHARLIE MUNGER: We all had a lot to grow. I worked a year for US Steel, which was in their fabrication department in Los Angeles, a big operation. The thing was utterly doomed, and three years later it went back to greenfields. The whole thing was razed to the ground.

I did not see it coming. Now, to be that ignorant as I was at that age, it was a sin. And my professors by and large were even more ignorant than I was. Nobody had observed the basic economics of business in a scientific way at all when I was young.

WARREN BUFFETT: Well, if we're getting into confession time, I have to tell you: It's 3:30. So, (LAUGH) we don't want to keep going on: Who knows what we'll be saying in another half-hour. So, (LAUGHTER) I thank you all very much for coming. At 4:30 we will have the shareholders meeting here.