[0:04]
OtherPanel all here. Okay, we're back for action. And we'll go right to Becky.
Becky QuickAll right, this question comes from Ann Newman. She says that she's a shareholder of the Class B stock. And her question is, the primary investment strategy of 3G capital is extreme cost cutting after the purchase of a company. This typically includes the elimination of thousands of jobs. With the current U.S. President focusing on retention of U.S. jobs, will Berkshire Hathaway still can consider future investments in 3G capital if those investments results in the purchase of U.S. companies and the elimination of more U.S. jobs.
WarrenThe essentially 3G management, and I've watched them are very close at Kraft Hines, is basically they don't, they believe in having a company as productive as possible, and of course the gains in this world, for the people in this room and people in Omaha and the people throughout America have come through gains in productivity. If there have been no change in productivity, we would be living the same life as people lived in 1776. Now, the people, the 3G people do it very fast, and they're very good at making a business productive with fewer people than operated before. operated before, but that they've been, you know, we've been doing that in every industry, whether it's steel or cars, or you name it, and that's why we live as well as we do. We prefer at Berkshire, I wrote about this a year ago. We prefer to buy companies that are already run efficiently, because frankly, we don't enjoy the process at all of getting more productive. I mean, it's not pleasant, but it is what is enabled the country to progress, and nobody figured out a way to double people's consumption per capita without in some way improving productivity per capita. It's a good question in the whether it's smart overall if you think you're going to suffer politically because political consequences do hit businesses. So I don't know that I can answer the question categorically, but I can tell you that they not only focus on productivity and do it in a very intelligent way, but they also focus to a terrific degree on product improvement, innovation, and all of the other things that you want a management to focus on. And I hope that at the lunchtime, if you had the Kraft Heinz cheesecake, you'll agree with me that product improvement and innovation there is a, is just as much a part of the 3G playbook as productivity.
[3:11]
WarrenI don't, personally, we have been through the process of buying into a textile business that employed a couple thousand people and went out of business over a period of time or a department towards a business that was headed for oblivion. And it is just not as much fun to be in a business that cuts jobs rather than one that adds jobs. So Charlie and I would probably forego personally having Berkshire directly by businesses where the main benefits would come from increasing productivity by actually having fewer workers. But I think it's pro-social to think in terms of improving productivity and I think that people of 3G do a very good job at that. Charlie?
CharlieWell, I agree. I don't say anything wrong with increasing productivity. On the other hand, And there's a lot of counterproductive publicity to doing it. Just because you're right doesn't mean you should always do it.
WarrenYeah, I had to agree with that. Jay?
QuestionerBerkshire's cash and treasury bill holdings are approaching $100 billion. Warren, a year ago, you said Berkshire might increase its minimum valuation for share buybacks above 1.2 times book value if this occurred. What are your latest thoughts on raising the share we purchase threshold?
WarrenYeah, when the time comes, and it could come reasonably soon, even while I'm around, the, but we really don't think we can get the money out in a reasonable period of time into things we like. We have to re-examine then what we do with those funds that we don't think can be deployed well. And at that time, it would make a decision, and it might include both, but it could be. repurchases. It could be dividends. There are different inferences that people draw from a dividend policy than from a repurchase policy that in terms of expectations that you won't cut a dividend and that sort of thing. So you have to factor that all in. But if we really, if we felt that we had cash that was unlikely to be used, excess cash in a reasonable period of time, And we thought repurchases at a price that was still attractive to continuing shareholders was feasible in a substantial sum that could make a lot of sense. At the moment, we're still optimistic enough about deploying the capital that we wouldn't be inclined to move. to a price much closer, where there's only a narrow spread between an intrinsic value and the repurchase price. But at a point, the burden of proof is definitely on us. I mean,
[6:31]
WarrenI, the last thing we like to do is own something a hundred times earnings where the earnings can't grow. I mean, we're, as you point out, we've got almost $100 billion. It's a 90 plus billion dollars invested in a business, we'll call it a business, where we're paying almost a hundred times earnings, and it's kind of a lousy business. It's more after after tax earnings. Yeah. So, you know, we don't like that, and we shouldn't use your money that way for a long period of time. And then the question is, you know, are we going to be able to deploy it? And I would say that history is on our side. on our side, but it'd be more fun if the phone would ring instead of just relying on history books. And, you know, I am sure that sometime in the next 10 years, and it could be next week or it could be nine years or not, there will be markets in which we can do intelligent things on a big scale, but it would be no fun if that happens to be nine years off, and I don't think it will be, but but just based on how humans behave and how governments behave and how the world behaves. But like I say, at a point, the burden of approval really shifts to us big time. And there's no way I can come back here three years from now and tell you that we hold 150 billion or so in cash or more, and we think we're doing something brilliant by doing it. Charlie?
CharlieWell, I agree with you. The answer is maybe. He does have a tendency to elaborate. collaborator. Station 11. Thank you, Mr. Buffett and Mr. Munger. I am Anil Darong from Short Hills, New Jersey, and New Delhi, India. This is my 18th time to this wonderful event, and profoundly thank you for your extraordinary wisdom, generosity, and time. As I'm involved with sustainable investments that also do not directly harm animals, I would appreciate your perspective. perspective, if any, on the practices of your CTB subsidiary, which is somewhat involved in pig, poultry, and egg production, somewhat indirectly related as you shared your concern on nuclear war extensively at the last annual meeting. I would love to pick your brain on Albert Schweitzer's Nobel Peace Prize acceptance speech shortly after the first nuclear bombs were detonated. That compassion can attain its full breadth and depth if it is safe. not limited to humans only. Thank you.
WarrenWell, that's a pretty broad question. I would say on your first point, we have a subsidiary CTB run by Vic Mancinelli.
[9:42]
WarrenAnd I sit down with him once a year, and he's a terrific manager, he's one of our very best. You don't hear much about him. And they do make the equipment for poultry growers. And I can't answer your question specifically, but I would be glad to have you get in contact with Vic directly because I know that what's a question you raised is a major factor in what they do. I mean, they do care about how the equipment is used in terms of poultry and eight production. And as you know, a number of the largest purchasers and the largest producers are also in the same camp. But I can't tell you enough about it directly that I can give you a specific answer, but I can certainly put you in touch with Vic. And I think you would find him extremely well informed and doing some very good things in the area that you're talking about. In terms of the nuclear weapon question, I'm very pessimistic on weapons of mass destruction generally, although I don't think that nuclear probably is quite as likely as either biological, primarily biology, and maybe cyber. I don't know that much about cyber, but I do think that's the number one problem of mankind, but I don't think I can say anything particularly constructive on it. Now, Charlie?
CharlieWell, I don't think we mind killing chickens. And I do think we're against nuclear war, so. We are not actually a poultry producer, but we do, we do, they use our equipment. And that equipment has been changed substantially in the last 10 or 15 years. But again, I'm just not, I'm not that good on the specifics that I can give them to you, but I can certainly put you in touch with Vic.
Andrew Ross SorkinAndrew. Warren. Since Todd and Ted joined Berkshire, the market cap of the company has. doubled and cash on hand is now nearly $100 billion. It doesn't look like Todd and Ted have been allocated new capital on the same relative basis. Why?
WarrenWell, actually, I would say they have been. I think we started out with $2 billion. That could be wrong, but my memory was $2 billion with Todd when he came with us. So there have been substantial additions, and of course, their own capital is. growing just because, say, in a sense, they retain their own earnings. So, yeah, they are managing a proportion of Berkshire's capital, or also measured by marketable securities. I think they're managing a proportion that's pretty similar, maybe even a little higher than when each one of them entered and Ted entered a year or two after, after Todd.
[13:21]
WarrenAnd, you know, they, I think they would agree that it's tougher to run $10 billion than it is to run one or $2 billion. I mean, your expectable returns go down as you get into larger sums. But the decision to bring them on has been terrific. I mean, they've done a good job of managing marketable securities. They made more money than I would have made with that. same what is now $20 billion, but originally it was $2 billion. And they've been a terrific help in a variety of ways beyond just money management. So that decision, you know, that's been a very, very good decision. And they're smart. They're good, they have money minds. They are good specifically at investment management, but they're absolutely first-class human beings, and they really fit, fit Berkshire. So that was, Charlie gets credit for Todd. He met Charlie first, and I'll claim credit for Ted, and I think we both feel very good about the decisions. Charlie?
CharlieWell, I think the shareholders are very lucky to have them because they both think like shareholders. It came up that way. And that is not the normal way headquarters employees think. It's a pretence that everybody takes on, but the reality is different. And these people really deeply think like shareholders, and they're young and smart and constructive. So we're all very lucky to have them around.
WarrenYeah, their mindset is 100%. What can I do for Berkshire, not what can can Berkshire do for me? And believe me, you can spot that over time with people. And on top of that, you know, they're very talented. But, you know, it's hard to find people young, ambitious, very smart, that don't put themselves first. And I would, every experience we've had, they do not put themselves first. They do not put themselves first. I put Berkshire first. And believe me, I can spot it when people are extreme in one direction or other. Maybe I'm not so good around the middle, but, but you've got, you couldn't have two better people in those positions. But you can say, well, why don't you give them another 30 billion each or something? I don't think that would, I don't think that would improve their lives or their performance. They'll, they may be handling more as they go along, but the truth is, I'm, I've got more assigned to me than I can handle at the present time is proven by the fact that we've got this 90 billion plus around. I think there are reasonable prospects for using it, but if you told me I had to put it to work today, I would not like the prospect.
[16:33]
QuestionerCharlie? Well, I certainly agree with that. It's a lot harder now than it was at times in the past. Greg. Warren, plans for your ownership stake, which is heavily concentrated in Class A, shares are fairly well known. with the bulk of the stock going to the Bill and Melinda Gates Foundation and four different family charities over time. Your annual pledges to these different charities involve the conversion of Class A shares, which holds significantly greater voting rights in the Class B shares. As such, the voting control held by your estate will diminish over time with a whole layer of super voting shares being eliminated in the process. While the voting influence of Class B shareholders are expected to increase over time, it will not be large enough to have a big influence on Berkshers' affairs. With that in mind, recognizing the greater importance on having Berkshire buy back and retire Class A shares in the long run, I was just wondering if the firm has compiled a pipeline of potential future sellers from the ranks of the company's existing shareholders. Given the limited amount of liquidity for the shares, privately negotiated transactions with these sellers, like the one you negotiated in December 2012, would end up being in the best interest of both parties.
WarrenWell, again, it would depend on the price of Berkshire. So in terms of what I give away annually, you know, it's, the last two years it's been about $2.8 billion per year. That can be, you know, that's one day's trading in Apple. I mean, the amount I'm giving away is, in terms of, in terms of Berkshire's market cap, I mean, you know, you know, you're down to, you're down to, 7 tenths of 1% of the market gap. So it's not a big market factor. And it's really, really wouldn't be that illiquid. So I know a few big holders that, you know, might have 8,000 or 10,000 shares of A, but, but the market can handle it. Now, when we bought that block of, I think it was 12,000 shares of A, I mean, we bought it because we thought it increased the intrinsic business value of Berkshire by a significant amount. And we paid this. seller, what the market was at the time. And, you know, we are open to that up to 120% and who knows if it came along at the time, and it was 124% or something, it was a very large block, and the director decided that that was okay. It still was a significant discount. We might very well buy it.
[19:11]
WarrenBut in terms of the orderly flow of the market or anything like that, there will be no problems. Just as there haven't been, you know, when I've given away, I do it every July. when I've given away the last two years, some of the foundations may keep it for a while, but they have to spend what I give them. And they may build up a position in B for, you know, a fairly significant dollar amount, but they're going to sell it. And it is true that for a period after I died, there'll be a lot of votes still in the estate and later in a trust. But, uh, you know, that will get reduced over time. I see no problem with our capitalization over time. You know, I like the idea of a fair number of votes being concentrated with people that believe in the culture strongly and, you know, would not be thinking about whether they get a 20% jump in the stock if somebody came along with some particular plan. But eventually that's going to get diminished. It continues to get diminished. I think in terms of, you know, there's a very good market in Berkshire shares. And if we can buy them at a discount from intrinsic business value, and somebody offers them some, some, a big piece, and it may be at 100, stock may be selling at 122%, 124%. You know, I would pick up the phone and call the directors and see if they didn't want to make a change. And we did it once before. And if it made sense, I'm sure they'd say yes. And if it didn't make sense, I'm sure they'd say no. So I don't think we have any problem. in terms of blocks of stock or anything. I don't think people that own it have a problem selling it, and I don't think we have a problem in terms of evaluating the desirability of repurchasing it. Charlie?
CharlieNothing to add.
OtherOkay. Station one.
QuestionerMy name is Aaron Beyer, and I was born and raised in Pasadena, California, and I currently live in New York City. It's been a dream of mine to come here today. I've been a proud beer shareholder for almost 20 years. I asked my dad for stock for Christmas when I was 15. And I kept thinking at the opportunity to ask you a question today, that I should make it one that would change my life. Well, that question is, do you know any eligible bachelors living in the New York City area? But you certainly have the approach toward life that Charlie and I would. But the question that might make my Monday back in the office, back in 2011, you purchased Bank of America Preferred Stock with a warrant.
[22:02]
WarrenWell, it's almost, well, if the price of the stock is above $7 a share, which seems quite likely, whether we were going to keep it or not, it would still make sense first to exercise the warrant shortly before it expired, because it would be a valuable warrant, but it's only a valuable warrant if it's converted or if it's exercised and exchanged into common, and that warrant does expire. So as I put in the annual report, our income from the investment would increase. if the Bank of America ever got to where it was paying 11 cents quarter, we get $300 million off the year off the preferred, and for us to use the preferred as payment in the exercise of the warrant, we would need to, we would want to feel we were getting more than $300 million a year and that would take 11 cents quarterly. They may or may not get to where they pay that amount before the warrant expires in 1921, or 2021. If we, if it does get to there, we'll exercise the warrant, and then instead of owning the five billion of preferred and the warrant, we'll have 700 plus million shares of common, then that becomes a separate decision. Do we want to keep the 700 million shares of common? If it were to happen today, I would definitely want to keep the stock. Now, who knows what other alternatives may be available in 2021, but as of today, if our warrant were expiring tomorrow, we would use the preferred to buy 700 million plus shares of common, and we would keep the common. If they get to 11 cents quarterly dividend, we'll convert it and we'll very likely keep the common. And if we get to 2021, if the common is above $7,000, $7, which I would certainly anticipate, we will exercise. So that's all I can tell you on that, but I certainly wish you success on your other objective. And I think probably the fellow will be using very good judgment, too.
QuestionerOkay, Charlie.
CharlieWell, I think it's a very wise thing for a woman that owns Berkshire stock and is a good-looking woman to put her picture up like that. It does give me a thought, though we might we might actually start selling ads in the annual report and okay that
[25:22]
Warrenincident that B of A purchase it literally was true that I was sitting in the bathtub when I got the idea of checking with the B of A whether they'd be interested in that preferred but I've spent a lot of time in the bathtub since that nothing's come to me so clearly I either need a new bathtub or we got to get in a different kind of market.
QuestionerThis question from George Ben Arroya, and it adds the layer to the discussion about 3G a little bit ago. He says, I am a very happy long-term shareholder, but this is a concern I have regarding Berkshire Hathaway's Kraft-Hine's investment. This investment has done well in economic terms. The carrying value is $15 billion, and the market value was $28 billion in 2016. But the DNA of 3G is quite different from ours. We do not make money by buying companies and firing people. 3G fired 2,500 employees at Kraft Heinz. That is what private equity firms do, but we are not a private equity firm. Our values have worked for us for over 450 years. There is a risk that as 3G continues to deviate from our principles, they will eventually harm both our value and our values. How do we prevent that from happening?
WarrenWell, that's interesting. I mentioned earlier that it was very gradual, but it would have been probably a better decision. We fired 2,000 people over time, and some retired and left and all of that, but at the textile operation. You know, it didn't work. And at the wholesale operation, you know, it, it didn't work. And at Hoshel Kohn, the successor, we fortunately sold it to somebody else, but eventually they closed up the department stores because department stores, at least that particular one, and a good many, actually, including our competitors in Baltimore, could not make it work. Walmart came along with something, and now Amazon's coming along with something that changed the way people bought them. You, you, we mentioned our poultry, the CTB, which is a lot of different farm equipment. The farm equipment, often that CTB develops, the idea is that it's more productive than what already is out there, which means fewer people are employed on farms. We had 80% of the American population, working population, working on farms a couple of hundred years ago. And if nobody had come up with things to make it more productive farming, we'd have 80% of people working on farms now to feed our populace. and we, it means that we'd be living in a far, far more primitive way. So there, you know,
[28:20]
Warrenif you look at the auto industry, it gets more productive. If you look at any industry, they're trying to get more productive. Walmart was more productive than department stores, and that will continue in America, and it better continue, where we won't live in, our kids won't live any better than we do. Our kids will live better than we do because America does get more productive. it goes along and people do come up with better ways of doing things the uh when craft hines finds that they can do uh whatever amount of business 27 billion dollars worth of business or something and they can do it with fewer people they're doing what what american business is done for a couple hundred years and why we live so well but they do it very fast they're they're more than fair in terms of severance pay and all of that sort of thing but they don't want to have two people doing the job that one can do and i frankly don't like going through that having having faced that i faced that down at dempster and beatrice nebraska and it really needed change but the change is painful for a lot of people and i just would rather spend my days not doing that sort of thing having had one or two experiences but i think that it's absolutely essential to america that we become more productive because that is the only way we have more consumption per capita is have more productivity for capital. Charlie?
CharlieWell, you're absolutely right. We don't want to go back to subsistence farming. I had a week of that when I was young on a western Nebraska farm and I hated it. And I don't miss the elevator operators used to sit there all day in the elevator and run the little crank, you know. So on the other hand it, as you say, it's terribly unpleasant for the people that have to go through it and why would we want to get into a the business of doing that over and over ourselves we did it in the past when we had to when the businesses were dying i don't see any moral fault in 3g at all but uh i do see that there's some political reaction that doesn't do anybody any good Milton freeman i think it was used to talk about the time probably probably apocryphal he would talk about the huge construction project in some communist country and they had thousands and thousands and thousands of workers out there with shovels digging away on this major project and then they had a few of these big earth-moving machines
[31:06]
Otherbehind which were idle and which could have done the work in one 20th of the time of the workers so the economist suggested to the the local party worker or whoever it was that you know why in the world didn't they use these machines to get the job done at 1 10th or 120 at the time instead of having all these workers out there with shovels and the guy replied well yeah but that would put the workers out of work and freeman said well then why don't you give them spoons to do it instead you know jonathan
Questioneri understand that berkshire is much more liquid than is ideal right now with 113 billion of consolidated cash and bonds versus policyholder float of 105 billion but i have trouble calculating how much incremental buying power berkshire has at any point in time you've talked about having a minimum of 20 billion in cash on a consolidated basis but for regulatory risk control or liquidity purposes is there's some minimum amount of float beyond the 20 billion that has to be in cash bonds or say preferred stocks or can all but 20 billion be put into either common stocks or invested into or invested into whole owned businesses if you found attractive opportunities yeah what what does the balance sheet look like if you were fully invested and where does additional debt fit into the equation if at all
Warrenyeah the I wouldn't I wouldn't conflate the cash and the bonds I mean when we talk about 20 billion of cash we could all no bonds beyond that 20 billion would be the absolute minimum it's a practical matter I've never since I've said 20 billion is a minimum and I'm not gonna operate with 21 billion any more than I'm gonna see a on a highway a truck sign that says maximum mold 30,000 pounds or something and then drive 29,800 across at them so we won't come that close but the answer is that uh a we could use we're not inclined to use debt obviously we found something that really lit our fire uh we might use some more debt although that'd be a some more unlikely under today circumstances, but we can 20, 20 billion is an absolute minimum. You can say that because I say 20 billions in absolute minimum, it probably wouldn't be below with 24, 25. And we could do, we could do a very, a very large deal if we thought it was sufficiently attractive. I mean, we have not put our, put to the floor on anything for really a very long time, but if if we saw something really attractive. We spent 16 billion back when we were much smaller
[34:01]
Warrenin a period of two or three weeks, probably three weeks maybe, in the fall of 2008. And we never got to a point where it was any problem for me sleeping at night. And now we obviously have a lot more money to put out. So if a good, Charlie, at what point if I, at what point, if I call you would you say I think that's a little bit big for us today I would say about 150 billion dollars well in that case I'll call you don't don't I'm a little more conservative on that that actually Charlie but we both would do a very very big deal if we don't have to agree perfectly yeah it'd have to be but if we find a really big deal that makes compelling sense now you're talking we're gonna do it
CharlieI would say about 150 billion dollars
Warrenwell in that case I'll call you don't don't I'm a little more conservative on that that actually Charlie but we both would do a very very big deal if we don't have to agree perfectly
Charlieyeah it'd have to be but if we find a really big deal that makes compelling sense now you're talking we're gonna do it
OtherOkay, station two.
QuestionerHello, Mr. Buffett, Mr. Manager. My name is Felipe P. Keone. I'm 19 years old from Brazil. And your partnership with George Paulo Lehman and his associates at 3G has been very successful, taking you to account great outcome of transactions such as the Kraft Heinz merger. Even though you and George Paulo have different investment methods, would you and Charlie consider him to be a member of your board or even your successor?
WarrenI don't think that will happen, but I'd I think it would complicate things in terms of the board membership. But we love the idea of being their partner and I don't think, I think there's a good chance that we will do more and perhaps even bigger things together. But the, we're probably unlikely to be doing much change in the board, certainly in the next few years. And there will be a successor, and the successor could very very, well be while I'm alive. But that will be, there's a very high probability that will be from somebody that's been in our company for some time. I mean, the world could change in very strange ways, you know, but that's a very, very high probability. Charlie?
CharlieAll I can say is that my back hurts and I come to these functions because I want to indicate to the, my fellow shareholders that they probably we've got seven more good years to get out of war on. Charlie is inspiring to me, I've got to tell you that. But we've been very, very, very lucky in life. And so far, our luck seems to be holding.
OtherOkay, Becky. This question comes from Drew Estes in Atlanta, Georgia.
QuestionerAnd he asks, is Fruit of the Loom experiencing difficulties related to the distribution channel shift towards online? and the troubles in the brick and mortar retail world. If so, do you believe the difficulties
[37:19]
Warrenare short-term in nature? And then Drew goes on to add, I'm hoping millennials haven't bucked the underwear trend too. Yeah. Well, he may know more about that than I do. The answer is essentially no so far, but anybody that doesn't think that online isn't changing. retail in a big way and that that anybody who thinks they're totally insulated from it is correct. I mean, the world is changing big time. And like I say, at food of the loom, I don't, it really hasn't changed. And in our furniture operation, which is setting a record so far again this year for the shareholders weekend. You know, I mentioned in the report, I think we did $45 million in one week. And our furniture operations, it's hard to see any effect from online, outside of our own online operations. It had really good same store gains. You can take, you know, whether it's a Nebraska Furniture Mart, but R.C. Willie, whether it's in Sacramento or Reno or Boise or Boise or it's all. Lake City or Jordans, which in Boston has done very well on the same store basis. So we don't really see it, but there were a lot of things we didn't see 10 years ago that then materialized. So one thing you may find interesting is it the furniture mart here in Omaha, which is an extraordinary operation. The online is growing very substantially. And I may be wrong on this, but I think it's getting up to, I'd like to change. check this with the Monpkins before I say, but I think it's getting pretty close to 10% or so of volume, but it's a very significant percentage of those people still go in and pick the product up at the furniture mark. So apparently, it's the time spent entering the store or maybe a check-out lines or whatever it may be. I'm surprised that it gets to be that percentage. But the one thing about it is we keep looking at the figures and trying to figure out what they're telling us. So far, not say that it's affected fruit of the loom in a significant manner. I would not say it's affected the furniture operation in a significant manner, but I have no illusions that 10 years is going to look from now is going to look anything like today. If you think about it, you know, if you go back 100 years to the great department stores, what did they offer? They offered incredible selection. You know, if you had a big department store in Omaha, you had the 1,000 bridal dresses, and if you live in a small town around, the local guy had two or something of the sort.
[40:20]
WarrenSo the department store was the big, exciting experience of variety and decent prices and convenient transportation because people took the street cars to get there. And then along came the shopping center, and they took what was vertical before, and they made it horizontal, and they changed it into multiple ownerships, but they still kept incredible variety and assortments and convenes of going to one place. and and accessible transportation because now the car was the method and now you go to and you know and then we went through the discount stores and all of that but now you've got the internet and you've got the ultimate in terms of of of assortments and you've got you've got people that are coming in at low prices and and the transportation is taken care of entirely so the evolution that has taken place the department stores is is online now basically except much expanded in assortment much more convenient and lower prices so uh the world has evolved and it's going to keep evolving but the speed has has increased dramatically and what will happen with the brands are are going to be tested in a variety of ways that that that and have to make decisions as to whether they try to do it online themselves or work through through an amazon or whether they try to hang on to the old methods of distribution while embracing new ones there's a lot of questions in retail and in branding that are very interesting to watch and and you'll get some surprises in the next 10 years i can promise to that charlie
Charlieit's it would be certainly be unpleasant if we were in the department store business just think of what we avoided
Warrenyeah we got very lucky actually because we were in the department store business and our business was so lousy that we recognized it if it didn't a little bit better we would have hung on and we owe a tremendous our tremendous gratitude uh to sandy goddism when our director who's here in the front row because he got us out of the business when charlie and i and sandy were partners in that and something that we paid six dollars a share for i think it's worth about a hundred thousand dollars a share now because we got out of the business and if it had been a somewhat better business you know it might be worth ten or twelve dollars a share now so so sometimes sometimes you get lucky uh we don't miss it either do we
Otherjohn
Otheroh shall go no we don't miss it
[43:01]
Questionerno we don't miss it j jay this question is on berkshire's intrinsic value a substantial portion of the company's value is driven by operating businesses rather than the performance of the securities portfolio the values of previously acquired businesses are not marked up to their economic value including geico mid-american and burlington northern based on these factors is book value per share still a relevant metric for valuing berkshire
Warrenwell it's got some relevance but it's got a whole lot less relevance than it used to and that's why i don't want to drop the book value per share factor but the market value tends to have more significance as the decades roll along it's a starting point and clearly our securities aren't worth more than we're carrying for and uh carrying them for at that time and on the other hand we've got the kind of businesses you mentioned but we've got some small businesses that are worth ten times or so you know what would they're carried for we've also got some clunkers too uh but i think the best method of course is just to calculate intrinsic business value but it can't be precise we know we think the probability is exceptionally high that 120 percent understates it although if it was all in securities you know 120 percent be too high but as the businesses have evolved as we built in unrecognized uh value at the operating businesses unrecognized for accounting purposes uh i think it still has some use as being kind of the base figure we use uh if it were a private company and ten of us here owned it instead we just sit down annually and and calculate the businesses one by one and and and use that as a base value but that gets that gets pretty subjective when you get as many as we do and uh so i think the easiest thing is to use the standards we're using now recognizing the limitations in them
Questionercharlie
CharlieYeah, I think equities in an insurance company, offsetting shareholders equity in the company, are really not worth the full market value because they're locked away in a high-tax system. And so I basically like it when our marketable securities go down and our own businesses go up.
WarrenYeah, we're working to that end. We've been working that way for 30 years now or something like that. We've done a pretty good job, too.
Charlieyeah we have a lot of we've replaced a lot of marketable securities with unmarketable securities that are worth a lot more yeah and it's actually a more enjoyable way to operate too
[46:13]
Questionerbeyond that but we know a lot of people we wouldn't otherwise yeah be with good people okay station three hello hi my name is michael monahan and i'm from long island new york i don't know if this question qualifies as investment advice so i have a short different question if you don't want to answer this one unlike the last shareholder from zone three this will not be a some speech nor a protest one of your most well-known pieces of investment advice is to buy what you know additionally you said earlier one of the main criteria for buying is if you could ever understand the business Ever since I came to my first meeting in 2011, you were not known for being a tech guide. You have said smartphones are too smart for you. You don't have a computer at your desk and you've only tweeted nine times in the last four years. It was either that or going to a monastery. Despite this, you've recently been investing, looking, and talking more about tech companies. My question to you and also to Charlie to comment, is what turned you from the Oracle of Omaha to the Tech Maveno of Omaha?
WarrenWell, I don't think I would, I don't think I've talked that much about tech companies, but the truth is we made a large investment in IBM. I made a large investment in IBM, which has not turned out that well. We haven't lost money. But in terms of the bull market we've been in, it's been a significant laggard. And then fairly recently, we took a large position in Apple, which I do regard as more a consumer goods company in terms of certain economic characteristics, although that, you know, it has a huge tech component in terms of what that product can do or what other people might come along to do to leapfrog it in some way. But I've, I, I, um, I think I'll end up being, no guarantees, but I think I'll end up being one for two instead of 0 for two, but we'll find out, Charlie. I make no pretense whatsoever of being on the intellectual level of some 15-year-old that's got an interest in tech. I think I may know, have some insights into consumer behavior. I certainly can get a lot of information on consumer behavior and then try to draw inferences about what that means about what consumer behavior is likely to be in the future. But we will find with the one, the other thing I'll guarantee is, I'll make some mistakes on marketable securities, and I've made them in other areas than tech. So you'll not bet a thousand
[49:36]
Warrenyou know, no matter what industries you, you try to stick. I know insurance pretty well, but I think we probably lost money on an insurance stock, perhaps, you know, once or twice over the years. so it, you know, about a thousand. But I have gained no real knowledge about tech in the last, well, since I was born, actually.
CharlieI think it's a very good sign that you bought the apple. It shows either one or two things. Either you've gone. one crazy or you're learning. I prefer the system. I prefer the learning explanation.
WarrenWell, so do I, actually.
Andrew Ross SorkinAndrew? Hi, Warren. This one's a fun one. Thomas Kameh is here. He's a 27-year-old shareholder from Kenfield, California. And I should preface this question by saying that he was here 17 years ago, at 10 years old, asked you a question from the audience, asking you if the Internet might hurt some of Burrfield, at the time you said you wanted to see how things would play out. He's now updated the question. What do you think about the implications of artificial intelligence on Berkshire's businesses beyond autonomous driving in Geico, which you've talked about already? In your conversations with Bill Gates, have you thought through which other businesses will be most impacted? And do you think Berkshire's current businesses will have a significantly, will have significantly more or less employees a decade from now as a function? of artificial intelligence?
WarrenWell, I've mixed a couple questions together. Yeah. I certainly have no special insights on artificial intelligence, but I will bet a lot of things happen in that field in the next couple of decades and probably a shorter timeframe. They should lead, I would certainly think, but again, I don't bring much to this party, but I would certainly think they would result in a significantly less employment in certain areas, is, but that's good for society, and it may not be good for a given business. But let's take it to the extreme. Let's assume one person could push a button and essentially, through various machines, robotics, all kinds of things, turn out all of the output we have in this country. So everybody, there's just as much output as we have. It's all being done by, you know, instead of 150 some million people being employed, one person, you know, is the world better off or not? well, certainly would work about less hours a week, of work per week, and so on.
[52:18]
WarrenI mean, it would be a good thing, but it would require enormous transformation in how people relate to each other, what they expect of government, you know, all kinds of things. And, of course, there's a practical matter more than one person would keep working. But pushing the idea that way is one of the, you'd certainly think that's one of the consequences of making great progress. and artificial intelligence. And that's enormously pro-social, eventually. It's enormously disruptive in other ways, and it can have huge problems in terms of a democracy and how it reacts to that. It's similar to the problem we have in trade, where trade is beneficial to society, but the people that see the benefits day by day of trade don't see the benefits day of trade don't see a price of Walmart on socks or whatever they're importing that says, you know, you're buying, you're paying X, but you would pay X plus so many cents if you bought this domestically. So they're getting these small benefits and invisible benefits. And the guy that gets hurt by it, who's the roadkill of free trade, feels it very specifically. And that translates into politics. And so you can, it gets very uncertain as the how the world would adjust, in my view, to great increases in productivity. And without knowing a thing about it, I would think that artificial intelligence would have that hugely beneficial social effect, but a very unpredictable political effect if it came in fast, which I think it could. Charlie?
CharlieWell, you're painting a very funny world where everybody's engaged in trade, and the trade is. I give you golf lessons and you dye my hair. And that would be a world kind of like the royal family of Kuwait or something. And I don't think it would be good for America to have everything produced by one person and the rest of us just engaged in leisure. How about if we just got twice as productive? What? How about if we got twice as productive in a short period of time so that 75 million people could do what 150 million people are doing now? I think you'd be amazed how quickly people would react to that. in what way favorably i that's what happened during the period whenever everybody remembers that such affection back in the ice hour years five percent a year or something people loved it nobody complained that they were getting air conditioning and didn't have it before nobody wanted to go back to stinking sweating nights in the south and well if you got everybody's
[55:10]
Warrenhours and a half it's one thing but if you if you if you fire half of the people and other people keep working uh i just think it gets very unpredictable. I mean, I think we saw some of that in this election because I think that... Well, we've adjusted to an enormous amount of it. It just came along a few percent per year. Well, and the question then is... I don't think you have to worry about it coming out of 25 percent a year. You know, I would... I think you have to worry about it. You're going to get less than two percent a year. That's what's worrisome. Okay, we'll move on. But it will be, you know, it's an absolutely fascinating subject to see what happens. with us, but it gets very, very hard to predict. If in some way, you know, we've got 36,000 people, say, employed at Geico, you know, and, uh, if you could do the same, perform all the same functions, virtually all the same functions even, and do it with five or 10,000 people, and it came on quickly, and the same thing was happening in a great many other areas, you know, I don't think we've ever experienced anything quite like that, and maybe we won't experience anything like in the future. I don't know that much about AI, but, but, uh, I don't think you have to worry about that. Well, that's because I'm 86. It's not going to come that quickly. Okay. Greg.
Greg AbelWarren, during the past five years, Berkshire Energy's investments in solar and wind generation have been about equal, with around 4.7 billion dedicated to capital projects in each segment. Based on the company's end of year capital spending forecast for 2017 through 2019, investments in wind generation were expected to be more than seven times greater than investments in solar generation in the next three years, with just over $4.5 billion going into wind generation. Just wondering how much of that future spending is tied to Pacific Corp's recently announced $3.5 billion expansion plan, which is heavily weighted towards improving and expanding the subsidiary's existing wind fleet, and whether the economics for wind are that much better than solar, given that mid-American is also been spending heavily on wind investments, or is this just this disparity between the two segments being driven more by genuine capacity needs, which would imply that you have much more solar capacity than you need?
WarrenYeah, it is, we don't, uh, we don't look at it as having more solar capacity than we need
[57:40]
Greg Abelor anything like it. It's really a question of what comes along. I mean, and these, the projects, they're internally generated, they're externally offered to us, and we've got a big for wind or solar, we have seen, you know, just based on those figures, we have seen more wind lately, but we have, we have no bias toward either one. I mean, if we saw five billion of attractive solar projects we could do and didn't happen to see any wind during that period, it wouldn't slow us down from doing the five billion or vice versa. So we are, we all, we have an appetite, a huge appetite for projects in either area. We're particularly well situated, as I think I've explained or talked about in the past, because we pay lots of taxes, and therefore solar and wind projects all involve a tax aspect to them, and we can handle those much better than many other, certainly electric utilities. Most electric utilities really a, don't have that much money left over after dividends, and these, frequently the taxes aren't that significant. At Berkshire, we pay lots of taxes and we've got lots of money. So it's really just a question of doing the math on the deals as they come along. We've been very fortunate in Iowa in finding lots of projects that made sense. And as a result, we've had a we've got a much lower price for electricity than our main competitor in the state. We've got a lower price than in any states that touch us. We've told the people of Iowa, they won't have a price increase for many, many, many years, guaranteed that. So it's worked out extremely well. But if somebody walks in with a solar project tomorrow and it takes a billion dollars or takes three billion dollars, we're ready to do it. There's no specific. And the more, the better, There's no specific preference between the two. Obviously, it depends where you are in the country. I mean, I was terrific for wind, and obviously, California is terrific for sun. And there are geographical advantages to one or the other. But from our standpoint, we can do them anyplace, and we will do them anyplace. And we will do them anyplace.
OtherOkay. Station four.
QuestionerHi, my name is Joey, and I'm an MBA candidate at Wharton. Thank you for having us. Amazon has been hugely disruptive due to the brilliance of Jeff Bezos, whom Charlie earlier called the business mind of our generation. What is your current outlook on Amazon, and why hasn't Berkshire bought in?
[1:00:48]
WarrenWell, because I was too dumb to realize what was going to happen. Even though I admired Jeff, I've admired him for a long, long time, and watch what he he was doing. But I did not think that he could succeed on the scale he has. And I certainly didn't even think about the possibility of doing anything with Amazon Web Services or the cloud. So if you'd ask me the chances that while he was building up the retail operation, that he would also be doing something that was disrupting the tech industry, you know, that would have been a very, very long shot for me. Now, underestimated, I've really underestimated the brilliance of the execution. I mean, it's one thing to dream about doing this stuff online, but it takes a lot of ability. And, you know, you can read his 1997 annual report, and he laid out a roadmap, and he's done it and done it in spades. And if you haven't seen his interview on Charlie Rose, three or four months ago, Charlie Rose.com go to and listen to it because you'll learn a lot. At least I did. So I just, I just plain, it always looked expensive and I really never thought that he would be where he is today. I thought he would do, I thought he was really brilliant, but I did not think he would be where he is today when I looked at it three, five, eight, 12 years ago, whenever it may have been.
WarrenCharlie, how did you miss it?
CharlieWhat was done there was very difficult, and it was not at all obvious that it was all going to work as well as it did. I don't feel any regret about missing out on the achievement of the achievements of Amazon. But other things were easier, and I think we screwed up a little.
WarrenNo. We won't pursue that line.
CharlieWell, I meant Google.
WarrenWell, we missed a lot of things.
CharlieYes. We miss a lot of things. And we'll keep doing it.
WarrenYeah. And we'll have a choice. Like we don't miss everything, Warren.
CharlieThat's our secret. We don't miss them all.
WarrenOkay, we better move on, I think. He may start getting specific.
Carol LoomisCarol.
OtherThe creator of this question, Jim Kiefer of Atlanta, has even higher expectations for Warren's longevity than Charlie does. Mr. Buffett, we all hope you win. We all hope you win the record as mankind's oldest living person. But at some point, you and or Charlie will go. And Berkshire stock may then come under selling pressure. My question is, if Berkshire stock falls to a price where share repurchase is attractive, can we count on the board and top management to repurchase shares?
[1:04:11]
QuestionerI asked this question both because of past comments you have made about not wanting to take advantage of shareholders and because some of the passages in the owner's manual lead me to believe this might be an instance when the board does not choose to repurchase shares. Can you clarify what course of action we might expect about repurchases in the circumstances I have outlined?
WarrenYeah, as far as I'm concerned, they're not taking advantage of shareholders if they buy the stock when it's undervalue. That's the only way they should buy it. And they should, but in doing so, There were a few cases back when Charlie and I were much younger, where there were very aggressive repurchases or the equivalent of repurchases by people, and the repurchases instantly made a lot more sense than they do now. But they were done by people who either, for various techniques, try to depress the shares. And if you're trying to encourage your partners to sell out at a lot. a depressed price by various techniques, including misinformation, but there's other techniques. You know, I think that's reprehensible, but our board wouldn't be doing that. I'll take exception to the first part of it, but I'll still answer to the second. I think the stock is more likely to go up. If I died tonight, I think the stock would go up tomorrow. And there'd be speculation about breakups and all that sort of things. It would be a good Wall Street story that, you know, this guy that's obstructed, breaking up something where some of the parts might sell for more than the whole, they wouldn't necessarily be probably be worth less than the whole, but might sell for temporarily for more than the whole. And it would happen. So I would bet in that direction. But if for some reason it went down to a level that's attractive, I don't think the board is doing anything in the least this reprehensible by buying in the stock at that point. I don't think the board is doing anything in the least this reprehensible by buying in the stock at that point. No false information, no nothing. And they're buying means that the seller would get a somewhat better price, or if there are a lot of sellers, they'd get a mildly better price than if they weren't buying, and the continuing stockholders would benefit. So I think that I think it's obvious what they would do, and I would think it's obvious that it's pro-shareholder to do it.
[1:06:40]
WarrenAnd I think they would engage in pro-sharholder acts. And as far as the eye can see, I mean, we've got that sort of board.
CharlieWell, I think you or I might suddenly get very stupid very quickly, but I don't think our board is going to have that problem.
WarrenWell, I want to think about that one. Okay, Jonathan.
QuestionerWarren, in the past, you've enjoyed discussing accounting for options grants. So I'm curious, what's your view of the new accounting standard, which mandates the companies report lower tax provisions based on so-called excess tax benefits enjoyed when share-based compensation ends up being more profitable for the grantees than when it's initially modeled. These so-called benefits, excess benefits, used to go through the shareholders' equity line on the balance sheet. Which accounting method makes more sense to you, the old method or the new?
WarrenJohnny, I think you know a lot more about it than I do. So if I were asked to answer that question, I'd probably call you up and say, what should I say? It's not a, it's not a factor that will enter into Berkshire, so I really have not, I mean, I've heard it just a little bit about that accounting standard, but I really don't know anything about it.
CharlieIt's not a big deal, Warren.
WarrenYeah, well, I know that. Yeah. We, there are a few things in accounting we really disagree with, and whether they might be material to somebody trying to evaluate Berkshire. And, you know, that primarily gets in amortization of intangibles that will start. certainly gets into realize capital gains and that sort of thing. And we will go to great links to try to tell our partners, basically, not all of whom, you know, are accounting experts or anything. And we will try to make clear to them, at least what our view is, you know, the same way as if I had a family business and I was talking to my sisters or something about it. But unless it's material, we'll probably stay away from trying to opine on any new accounting standards. If it's material to Berkshire, we'll go to great lengths to at least give our view.
CharlieWell, I certainly agree with that.
QuestionerOkay. That is that what he's talking about is not very material to Berkshire.
CharlieNo, it isn't. And it really won't be, you know. Some of these others are, though, and we will bring those up as they come up.
WarrenThey, yeah, we are. Porting 400 and some million dollars less in our earnings than a precision cast parts had remained a public company.
[1:09:31]
WarrenWell, is precision cash part? I mean, are the earnings less real? Is the cash less real? Is anything? Because it's moved, the ownership? I don't think so. And I want to convey that belief to shareholders, and they can debate whether it's right or wrong. But I think it's a mistake. Not to comment if, and just assume that the owners understand that because it's, you know, it's a fairly arcane point. And so we pointed out, but we also point out if we think depreciation is, is inadequate as, for valuation purposes, that depreciation is inadequate at a very capital intensive business like BNSF, which we, I must say, still love anyway.
WarrenCharlie, any more?
CharlieNo.
WarrenOkay. Thank you.
OtherAnd good afternoon. I'm Adam Bergman with Sterling Capital in Virginia Beach, Virginia. Earlier today, Mr. Munger commented on the valuation of China versus the U.S. market. My question for you is, are market cap to GDP and cyclically adjusted P still valid ways to consider market valuation? and how do those influence Berkshire's investment decisions? Thank you.
WarrenCharlie, I think you, well, distracted. I guess Charlie's overall value in China. I would say that both of the standards you mentioned are not paramount at all in our valuation of securities. It's harder. People are always looking for a formula. And there is an old-oamut formula, but the, trouble is you don't know what to stick in for the variables in it. But the, and, you know, that's the value of anything being the present value of all the cash that's ever going to distribute. But the, the T.E. ratios, I mean, every number has some degree of meaning, means more sometimes than others. A valuation of a business is, it's not, it's not reducible to any formula. where you can actually put in the variables perfectly. And both of the things that you mentioned get themselves, get, get, uh, bandied around a lot. It's not that they're unimportant, but sometimes they're, they're, they're going to be very important. Sometimes they can be almost totally unimportant. It's just not, it's not quite as simple as, as having one or two formulas and then saying the market is undervalued or overvalued. or a company is undervalued or overvalued. The most important thing is future interest rates. And, you know, people frequently plug in the current interest rate saying that's the best they can do. After all, it does reflect a market's judgment. And, you know, the 30-year bond should tell you what people who are willing to put out money for 30 years
[1:12:47]
Warrenand have no risk of dollar gain or dollar loss at the end of the 30-year period. what better figure can you come up with. I'm not sure I can come up with a better figure, but that doesn't mean I want to use the current figure either. So I would I would say that I think Charlie's answer will be that he does not come up with China versus the U.S. market based on what you've mentioned as yardsticks. But now, Charlie, you tell him.
CharlieAll I meant was that, when I said before, that the first rule of fishing is to fish where the fish are, is that a good fisherman can find more fish in China if fish is the stock market. That's all I meant.
WarrenYeah. It's a happier hunting ground. This doesn't really directly relate this. I want to go back to one question that was mentioned earlier. I really think if you want to be a good evaluator of businesses, an investor, you really ought to figure out a way without too much personal damage to run a lousy business for a while. I think you'll learn a whole lot more about business by actually struggling with a terrible business for a couple of years, then you learn by getting into a very good one where the business itself is so good that you can't mess it up. I don't know what I don't want to whether Charlie has a view on that or not. But it certainly, it was a big part of our learning experience. And I think a bigger part in the sense than running, being involved with good business was actually being involved in some bad businesses and just seeing how awful it was. How awful it is and how little you can do about it and how IQ does not solve the problem and a whole bunch of things. It's a useful experience, but I wouldn't advise too much of it.
CharlieWell, you think so, Charlie here. It was very useful to us. There's nothing like personal, painful experience, if you want to learn. We certainly had our share of it.
Becky QuickOkay, Becky. This question comes from Tom Spanfellner, and he'd like to be called Tom Span from Pennsylvania. He says, in life, business, and investing, strategies often work until they don't work. Other than a massive insurance loss, any thoughts on what could cause the Berkshire Enterprise to not work.
WarrenI think the only good question. Yeah. Well, if there were some change, if we got some infection, uh, outside agent of some sort to change the culture in some major way, you know, an invasion of, of, of, of different thought. But as a practical matter, uh, I don't think
[1:15:59]
Warrenanything, you know, it's the things you can't think of, but I can't think of anything. that can harm Berkshire in a material, permanent way, except weapons of mass destruction, but I don't regard that as a low probability. It would take a recession, a depression, a depression, a panic, you know, hurricanes, earthquakes, all would have some effect. And in some cases, it might even need that we would do better because of them. But if there were a successful, as measured by the aggressor, nuclear chemical sign, biological or cyber attack on the United States, and there are plenty of people that would like to pull that off for organizations and maybe even a few countries, it could disrupt society to such an extent that it would harm us. But I think with the variety of earnings streams, with the asset positions, with a general philosophy of the political I think that we would be very close to the last one affected. But if somebody, somebody figures out how to kill millions of Americans and totally disrupt society, then, you know, then all bets are off. Charlie?
CharlieWell, I agree. It would take something really extreme. Yeah. And just take the question, like, British Petroleum took a huge loss with one oil well blowing. And Berkshire has all these. independent subsidiaries and they really are independent. And the parent company is not on it. If there's one horrible accident somewhere, we would tend to pay, of course, maybe more than our legal liability. But we are not one accident and one subsidiary that caused a big lot of damage. We're better protected than most companies.
WarrenYeah. In every way, Berkshire is structured to handle stresses. It's the kind of thing we think about all the time and we've thought about it since we started. But I really don't know any company that could take more general adversity or even some specific adversities. But if you get into what could happen with weapons of mass destruction, that is something we can't protect about. But if that ever happens, there'll be more to worry about than the price of Berkshire.
QuestionerJay. Hathaway Specialty Insurance generated $1.3 billion of premium volume in 2016. This business is on the smaller end of commercial property casualty insurers in terms of scale, although its volume did grow 40% last year. In a highly competitive commercial P&C environment, what gives you confidence that Berkshire Hathaway specialty is destined to become one of the world's
[1:19:11]
Ajit JainYeah, I think it will be, and I think how fast it grows depends very, it does depend very much on the market. I mean, we are, we are not, we are not interested in trying to be a price cutter in a market where the prices already aren't that attractive. But we have built the scale worldwide, and a lot of this just have been added in, you know, recent months and just over the past year. We have, we will grow, we will grow a lot, but if the market should turn hard for any reason, we would grow a lot faster, but we are destined at Berkshire Hathaway's specialty to be one of the leading PC firms. And in the world, just as we were destined to have, when a cheat came in, even though we had nothing, uh, we were destined to become, a very important reinsurer throughout the world, and in certain ways, almost the only reinsurer for certain types of risks in the world. And we've got the people, we've got the people, we've got the capital, we've got the reputation. There is no stronger company in the insurance world, and there won't be than the Berkshire Hathaway insurers. We've got the talent there. So it will grow. It may grow. Slowly, some years, it may have big jumps, just like the reinsurance operation did many years ago. But it's a very important addition to Berkshire that brought that on. I just wish we could have started a little earlier, but we had to have the right people and they came to us. And as you say, we wrote whatever it was, a billion three or a billion four last year. And we'll write more this year, but we won't write as much as if if we were in a hard market.
QuestionerStation six. Good afternoon. My name is Sally Burns. I'm from Australia, but I currently reside in Austin, Texas. My question, Mr. Buffett, I have heard that Mr. Munger says your greatest talent is that you're a learning machine, that you never stop updating your views. What are the most interesting things you've learned over the last few years.
WarrenWell, it is fun to learn. I would say Charlie is much more of a learning machine than I am. I'm a specialized one and he's a much, and he does as well as I do in my specialty, and then he's got a much more general absorption rate than I have about what's going on in the world. But, you know, it's a world that gets more fascinating all the time. And a lot of fun can occur when you you learn you were wrong on something. That's when you really, when you really learn that the
[1:22:26]
Warrenold ideas really weren't so correct and you have to adapt a new one, new ones, and that, of course, is difficult. I don't know that I would pick out, well, I think actually what's going on, you know, in America is terribly, terribly interesting, you know, and politically, all kinds of things, but just the way the world's unfolding. It's moving fast. I I do enjoy trying, you know, to figure out not only what's going to happen, but what's even happening now. But I don't think I've got any special insights that would be useful to you. But maybe Charlie does.
CharlieWell, I think buying the apple stock is a, is a good sign in Warren. And now, he did run around Omaha and ask he was to take his grandchildren's tablets away. And I mean, he did market research. I do think we keep learning. And more important, we keep, we don't unlearn the old tricks. And that is really important. You look at the people who try and solve their problems by printing money and lying and so forth. Take Puerto Rico, who would have guessed that the territory of the United States would be in bankruptcy. Well, I would have predicted it because they behaved like idiots. We did not buy any Puerto Rico bonds. No. And if you go to Europe, I'm talking about, you go to Europe, you look at the government bond portfolios, bond portfolios were required to hold in Europe. There's not only no Greek bonds, they're the bonds of nobody but Germany. Just, everywhere you look in Berkshire, somebody is being sensible. And that is a great pleasure, and to combine that with being very opportunistic, so that when something comes along, like a panic, it's a nice, it's like, it's like, it's like, It's like playing with two hands instead of one in a game that requires two hands. It helps to have a fair-sized repertoire. And we've learned so damn much. There are all kinds of things we've done in the last 10 years. We would not have done 20 years ago.
WarrenYeah, that's true, although if you take, it's interesting, I've mentioned this before, but one of the best books on investment was written, I think, in 1958, I think I read it around 1960, by Phil Fisher called Common Stocks and Uncommon Profits. And all the countries, companies went to hell eventually. But it talked about the importance, I mean, or the usefulness of what he called the scuttlebut method. And, you know, that was something I didn't learn from Graham, but every now and then,
[1:25:34]
Warrenit turned out to be very useful. Now, it doesn't solve everything, and I mean, there's a whole lot of more aspects. I saw you to do it with American Express and the salad oil scandal. Yeah. You're still doing it on Apple, you know, decades later. Yeah, it, in certain cases, you actually can learn a lot just by asking a lot of questions. And I give Phil Fisher credit. That book goes back a lot of years, but, but Charlie said some of the companies he picked as Winners Forever did sort of peter out on him. But, but the basic idea, you can learn. a lot of things just just by asking in some cases. I mean, I used to, I mean, if I got interested in the coal industry, just say, to pick, pick one out of the air, you know, when I was much younger, more energetic, if I went and talked to the heads of 10 coal companies, and I asked each one of them way later into the conversation after they got feeling very, uh, felt like talking, and I would just, you know, I'd just say, if you had to go away for 10 years on a desert island, and you had to put all of your family's money into one of your competitors, which one would it be, and why? And then, you know, then I'd ask them if they had to shell short one of their competitors for 10 years and all their family money, why. And they, everybody loves talking about their competitors. And if you do that with 10 different companies, you'll probably have a better fix on the economics of the coal industry than any one of those individuals has. I mean, there's ways of getting at things, and sometimes they're useful, sometimes they're not, but sometimes they can be very useful. And, and, and, and, and, and, and, and, and, and, and, and, and, and, You know, the idea of just learning more all the time about, I'm more specialized than that by far than Charlie. I mean, he wants to learn about everything, and I just want to learn about something. It will help Berkshire, but it's a very, you know, it's a very useful attitude toward, have toward the world, and, of course, I don't know who said it, but somebody said the problem is not in getting the new ideas, but shedding the old ones, and there's a lot of truth to that. We would never have bought ISCAR if it had come along 10 years earlier. We would never have bought precision cast parts if it had come along 10 years earlier. We are learning, and my God, we're still learning.
Andrew Ross SorkinOkay, Andrew. Hi, Warren. This is my final question.
[1:28:04]
QuestionerIn 2012, you were quoted as saying, I think the health care problem is the number one problem of America and of American business. We have not dealt with that yet. Do you believe that the current administration's plan to repeal and replace ACA will ultimately benefit the economy in Berkshire or not?
WarrenYeah. Well, I'll answer, I'll give you two answers here. The first one being that if you go back to 1960, or thereabouts, corporate taxes were about 4% of GDP. I mean, they bounced around some, and now they're about 2% of GDP. And at that time, health care was 5% of GDP, and now it's about 17% of GDP. So when American business talks about taxes strangling our competitiveness or that sort of thing, they're talking about something that as a percentage of GDP has gone down from 4 to 2, while medical costs, which are born to a great extent, by business, have gone from 5% to 17%. So medical costs are the tapeworm of economic, American economic competitiveness. I mean, if you're really talking about it. And that, business knows that. They don't feel they can do much about it, but it is not, the tax system is not crippling Berkshire's competitiveness around the world or anything of the sort. Our health costs have gone up incredibly and will go up a lot more. If you look at the rest of the world, there were a half a dozen countries that were around our 5% if you go back to the earlier years. And while we're at 17, now they're at 10 or 11. So they have gained a five or six point advantage, the world, even in these countries with fairly high medical costs. And that's with socialized medicine. Yeah. So it's a huge, whatever I said then goes and is accentuated now. And that isn't a problem, I mean, that is a problem the society is having trouble with and is going to have more trouble with. And regardless of which parties in power or anything of the sort, it's almost transcends that. In terms of the new act, it was passed a couple days ago versus the Obama administration act, it's a very, it's a very, interesting thing. All I can tell you is the net effect of that act on one person is that my taxes, my federal income taxes would have gone down, down 17% last year if the act, if what was proposed went into effect. So it is a huge tax cut for guys like me, and you'll have to figure out the effects of the rest of the act. But the one thing I can tell you is if it goes through way the House put in, I mean, anybody with $250,000 a year of adjusted gross income and a lot of
[1:31:25]
Warreninvestment income is going to have a huge tax cut. And when there's a tax cut, either the deficit goes up or they get the taxes from somebody else. So as it stands now, that is the one predictable effect if it should pass, is it? And the Senate will do something different and go to a conference and who knows what happens. But that is in the law that was passed a couple of days ago. Charlie?
CharlieWell, I certainly agree with you about the medical care. What I don't like about the medical care is that a lot of it, we're getting too much medicine. There's too much chemotherapy on people that are all but dead. And all kinds of crazy things go on in Medicare and in other parts of the health system. And everything. There are so many vested interests that it's very hard to change. But I don't think any rational person looking objectively from the outside of the American system of medical care. We all love the new life-saving stuff and the new chemotherapies and the new drugs and all that. But my God, this system is crazy. And the cost is just going wild. And it does put our manufacturers at a big disadvantage with other people where the government is paying the medical costs. And so I agree with the Warren totally. If you had to bet 10 years or now, we'll be at higher or lower than 17% of GDP. Well, if present trends continue, it'll get more and more. They're huge vested interests in having this thing continue the way it is. And they're very vocal and active and the rest of us are indifferent. So naturally we get a terrible result. And I would say that on this issue both parties hate each other so much that neither one of them can think rationally. And I don't think that helps either.
WarrenIt is kind of interesting that, you know, the federal government spends, or raises, we'll say, three and a half trillion or something like that. And I mean, the degree of concern everybody has about that, although that's stayed fairly steady in the 18% or so of GDP plus or minus a couple points. But three trillion plus is spent on health care. and everybody wants the best and it's perfectly understandable, but it's a very, very, it's a big number compared to the whole federal budget. I mean, there's some overlap and all of that, but it's, if you talk about world competitiveness of American industry, it's the biggest single variable where we keep getting more and more out of whack with the rest of the world.
[1:34:24]
CharlieAnd it's very, it's very tough for political parties to attack it, you know, basically it's a political subject. A lot of it is deeply immoral. If you have a group of hospital people and doctors that are feasting like a bunch of jackals on the carcass of some dying person, it's not a pretty sight. Tell them about that group out in California that...
WarrenOh, yes. This is a good story. This is one of my favorite stories. There are a bunch of very ambitious cardiologists and heart surgeons and ready. And they got the thought that really what a heart was was a widow maker. So everybody, every patient that came in, they said, you've got a widow maker in your chest, and we know how to fix it. And so they recommended heart surgery for everybody. And of course, they developed a huge volume of heart surgery, and they got very wonderful results because nobody comes through heart surgery better than the man who doesn't need it at all. And they made so much money, that the hospital chain, which was tenant, brought all its other hospitals. Why can't you be more like Reading? And this is a true story. And it went on and on and on. And finally, there was some beloved Catholic priest. And they said, you've got a widowmaker in your chest. And he didn't believe them. And he blew the whistle. He was a priest, and you can see why I didn't believe him. And at any rate, he...
CharlieWell, you got a routine, you just keep using it, you know. using it, you know. The heart is a widow maker. It's a widow maker. Later, I met one of the doctors who threw these people out of the medical profession. And I said to him, in the end, did they think they were doing anything wrong? He said, no, Charlie. They thought that what they were doing was good for people. That is why it's so hard to fix these things. The self, the delusion that comes into people as they make money and get more successful by doing God a whole things should never be on. underestimated. And it's, there's a lot of that goes on. And it, and it, and it, you've been onto such gross craziness. And you thought a little Wells Fargo looks like innocence, you know, had a little trouble with this incentive system. But when the heart surgery rate was 20 times normal or something, you'd think you'd notice if you're running a hospital. And, but they did notice they did notice, they were one of the other households to be more like it. That at a terrific success ratio.
[1:37:12]
QuestionerOkay, Greg. Yeah. Thank you, Warren. As you look forward in taking into consideration some of the headwinds face in the U.S.-based utilities, including weaker electricity demand growth as increasing energy efficiency impacts demand. Distributed generation, which hits vertically integrated utilities, doubly hard as they face both declining energy sales revenue and increased network costs to support reliable delivery. And third, higher interest rates, which would increase borrowing. costs, what are the key attributes that Berkshire Energy would be looking for in future acquisition candidates? Yeah. Oh, excuse me. I'm sorry. Oh, I'm sorry. In particular, are there advantages or disadvantages attached to, say, transmission assets relative to generation assets that would make you favor one over the other?
Greg AbelYeah. Well, generation assets, you can say have inherently more risk because that some of them are going to be stranded, stranded or, yeah, and obsolete. Now, the question is how they treat stranded and all that sort of that. We, on that hand, more of the capital investment is in the generating assets, so that tends to be where a good bit of the capital base is. We like the utility business okay. I mean, the electricity demand is not increasing like it was, as you point out, they're going to be stranded assets. They, if they're stranded because of rank foolishness, you know, they will probably be less or the utility commissions will be less inclined to let you figure that in your rate basis you go forward as opposed to things that are more societal demands are just changing. But we still think the utility business is a very decent asset. The prices are very high, but that's what happens in a low interest rate environment. I would be, I'd be surprised if 10 years from now we don't have significantly more money in not only wind and solar, but probably, we'll probably own more utility systems than we own now. We're a buyer of choice with many utility commissions. In fact, we can put up the slide. There's a slide which shows something about our pricing compared to other utilities and Greg Abel and his group have done an extraordinary job. They've done it in safety, they've done it in reliability, they've done it in price, they've done it in in renewables. It's hard to imagine a better run operation than exists in mid-American energy. And people want us, with that record, people want us, with that record, people want us
[1:40:14]
Warrento come to their state in many cases. But when prices get to the level they have, I mean, some utilities have sold at extraordinary prices. And we can't pay them and have it make sense for Berkshire shareholders. But just because we can't do it this year doesn't mean it won't happen next year or the year after. So I think we'll get a chance. And our utilities are not normal. The way Greg has run those things, they're so much better. much better run in every way that normal utilities, they're better regarded by the paying customers, they're better regarded by the regulators, they have better safety records, they try. It's just everything about it is way the hell better. And it's a pleasure to be associated with people like that and have assets of that quality. And it's a lot safer. If somebody asked Berkshire to build a $50 billion nuclear plant, we wouldn't do it.
Greg AbelYeah, I mean, we have public power here in Nebraska. I mean, it's been sort of the pride of Nebraska for many decades. It's all, there are no privately held utility systems and totally public power. And, you know, those utilities have no requirements for earnings on equity. They have, they can borrow a tax exempt rates. We have to borrow a taxable rates. And Nebraska, you know, the wind, And not that much different than Iowa, and we're selling electricity across the river a few miles from here, you know, at lower prices than exist in Nebraska. So it's an extraordinary utility, and it was lucky when we got involved in, I think, Walter Scott, our director for, or introducing me to it almost 17 or 18 years, 18 years ago or so. But I don't think. utility business as such. I mean, if I were putting together portfolio stocks, I don't think there would be any utilities in that group now. But I love the fact we own Berkshire Hathaway Energy. But it's different, radically different, and better. A lot better, actually.
QuestionerStation 7. Hi. My name is Grant, Mr. Lee, from beautiful historic St. Augustine, Florida. I've been a fan of yours and of Berkshire, I was a kid looking through the stock pages and seeing one crazy stock that traded for $10,000 a share. Unfortunately, I wasn't able to convince my parents to buy it at that point. But now I'm a shareholder as an adult, and I'm here with my daughters, Mabel, who's seven, and Willa, who's one-year-old, my wife. I voraciously read the letter every year. And I love the stories from the different companies, GEICO and C's, BNSF, that kind of teach investing lessons.
[1:43:16]
QuestionerAnd this year, when I was looking through the accounting information in the back, I noticed that One company, McLean, contributes a lot of revenue, a large portion of Berkshire's revenue, and to a lesser extent, earnings, but I don't ever see much about it in the annual report. So I'm curious why we don't hear more about that company. And are there any investing lessons like we get from Seas and Geico that you can share about that company?
WarrenYeah, McLean, the reason you see their figures separately is because the SEC has certain requirements that are based on sales. McLean is a company that has an extraordinary amount of sales in relation to intrinsic value or to net income. It basically is a distributor of, well, it's a huge customer, for example, of the food companies, the candy companies, the cigarette companies that go up and down the line of anything that goes into convenience stores. But we bought it from Walmart. And Walmart is our biggest customer. I can't tell you the precise volume, but, well, to get Walmarts and Sam's together, you know, you're getting up to 20% plus. But it's nationwide, but in the end, it operates on about 6% gross margins and 5% operating expenses. So it has a 1% pre-tax margin. And obviously, a 1% pre-taxed margin. tax margin only works in terms of return on capital if you turn your equity extraordinarily fast. And that's what McLean does. Being a wholesaler, it's moving things in, moving things out, very fast, very efficiently, and it does this. It also has a few liquor distribution subsidiaries that have wider margins. But the basic McLean business is, you know, $45 billion plus makes 1% pre-tax on sales. But the return on capital is very decent. But it sort of has an outsized appearance simply because of this huge volume of sales that go through it. Grady Rozier, who runs it, is exceptionally. He was there when we bought it from Walmart, whatever it was a dozen years ago. And I've been there once. We've got thousands and thousands of trucks. Big distribution centers all over the country is a major factor in moving goods that's wholesale. I mean, if you're Mars candy or something of the sort, I mean, we're the, we'll be the biggest customer. But that pretty well describes the business. You know, it's a business that earns good returns in relation to invested capital and in relation to our purchase price. But, you know, every, every tenth of a cent is important in the business.
[1:46:24]
WarrenAnd moving your receivables exceptionally fast, and consequently, you know, you have payables moving big time. So the sales are 30 times receivables or times receivables and 30 times payables. You've gotten, and maybe, yeah, 35 or so times inventory. I mean, this is a business that's moving a lot of goods. in terms of its, it's an important subsidiary, but not as remotely as important as would be indicated by the, by the sales. It's still very important making the kind of money that shows up in the 10K.
CharlieCharlie?
CharlieYou said it all. That was an interesting thing. Walmart wanted to sell it. They came to see us, and we made a deal. The CFO came. We talked for a while. He went into the other room. Call the CEO and came and packed and said you have a deal. And Walmart has told me subsequently that they never had a deal that closed as fast as the one with Berkshire. I mean, they, you know, we said what we would pay. It was cash. And we got it done very promptly, and they were terrific on their side. By the way, that reputation for being quick and simple and doing what we promised and so on, has helped at Berkshire time after time.
WarrenYeah. Yeah, we wouldn't have made that deal with that. about essentially having that reputation. But they knew. Well, you bought the Northern Natural Gas Company in one weekend. And they wanted the money on Monday. They needed the money on Monday. Before the lawyers could compete the legal papers. We managed to do it. Well, not only that, but I think it took some clearance by, uh, in Washington. And essentially, I think I wrote a letter and said that if they didn't, if they decided after looking at it, they didn't want to clear it, we'd undo the deal. but these guys needed the money so bad we were going to give them the money, essentially based on the deal clearing. And there wasn't any reason why it wouldn't clear, but there was just a procedural problem. But most companies can't do that. I mean, we can, we've got a flexibility that really in most large companies just plain doesn't exist. There's too many people have to sign off on it or something of the sort. So the Northern Natural deal would not have been made if we'd had to follow the normal. timetable. But, uh, that's a lovely business to own.
CharlieYeah, yeah, absolutely.
OtherNow, we, we're moving from one station to another between now and 3.30, so we now go to Station 8. Good morning or good afternoon, Warren, Charlie John, Norwood, from West Des Moines, Iowa. You guys have iron bladders.
[1:49:17]
QuestionerWe won't tell you the secret of that. I'm wondering about a contraption under the table.
WarrenNo, no. You can come down and inspect.
QuestionerAll right. Hey, I had a question for each. Warren, I was fortunate to ask you a question, I think, in 2011 about legacy and what you wanted to be known for 100 years from now. And I'm kind of curious to hear what Charlie would like to be known for. And that Warren, I'm 52. So I guess you started this, doing this when I was born. And I'm kind of interested in a memory from your first annual meeting.
WarrenMy first memory when Warren got on this subject and they asked him, what he wanted said at his funeral. He said, I want them to all be saying that's the oldest looking corpse I ever saw. And that may be the smartest thing I ever said.
CharlieNo, well, with me, very simple, I mean, I really like teaching. So basically, that I've been doing it formally and you can say somewhat informally all my life. And I had certainly had the greatest teachers you can imagine. So if somebody thought that I did a decent job at teaching, I'd feel very good about that.
WarrenYeah, it makes the teaching and durable. It has to have a bit of wise assery in it. And that we've both been able to supply. And for those of you who are old-time basketball fans, I might mention that on Wilk Chamberlain's tomb it was reputed, it was going to say, at last I sleep alone.
QuestionerOkay. Question 9. Good afternoon, Mr. Mung and Mr. Buffett. My name is Ji Wen Yan. I'm come from China. It's my first time to come to this meeting. And I think I'm very lucky to have a chance to ask a question.
WarrenWe're glad to have you.
QuestionerThank you. And everyone has personal dreams and at different age. maybe dreams will come differently. And what's your dream now?
WarrenCharlie, I don't want to quite hear that. What's your dream now? She says, my dream.
CharlieWell. Let's skip the first one. Sometime when I'm especially wishful, I think, oh, to be 90 again. And I get some. advice for the young. If you've got anything you really want to do, don't wait till you're 93. No, do it.
WarrenNo, that's the same thing I would tell students is that you can't always find it the first time or the second time. But when you go out in the world, look for the job that you would take if you didn't need a job. I mean, don't postpone that sort of thing. Somebody, I think it's Kirkagard said that, you know, life must be evaluated backwards, but it must be lived forwards.
[1:53:11]
WarrenAnd you want to, you want to sort of, Charlie says, all he wants to know is where he'll die, so he'll never go there, you know. And so you do want to do a certain amount of reverse engineering in life. I mean, that doesn't mean you can do everything that way, but you really want to think about what will make you feel good when you get older about your life. And you at least generally want to keep going in that direction. And, you know, you need some luck in life. you've got to accept some bad things that are going to happen as you go along. But life has been awfully good to me and Charlie, so we have no complaints. What you don't want to be is like the man, and they have his funeral, and the minister said, now it's the time for somebody to say something nice about the deceased. And nobody came forward. And nobody came forward. He says, surely somebody can say somebody, something nice about the deceased. And nobody came forward. And finally, one man came up and he said, well, he said, said his brother was worse. Yeah. Okay, we'll move to station 10 and see if we can improve them.
QuestionerHi. My name is Andy Lee Gingling, I'm from Loyal Valley Innovation Capital from Shanghai. This is my sixth year from Shanghai to here. I have to say to you too, Warren and Charlie, you are highly respected and deeply loved by millions and millions or even globally. I have two questions today. First question, in your letters to shareholders. You said you believe EBDA is not a good parameter to value a business. Why is that? Can you elaborate on that? Second question, you both have very successful and happy lives. With great respect. My question. is to each of you, in retrospect, from a personal standpoint, do you have regrets in life? If there is one thing you would have done differently in your life, family, personal, or business? What is it? Thank you very much.
WarrenYeah, I don't think you should expect us to answer that on personal, but if in business, I would say I wish I had met Charlie earlier. We've had a lot of fun ever since I was 29 and he was 35, but it would have been even more fun if we'd started many, many years earlier. We had a chance to. We worked in the same grocery store, but not at the same time. In respect to EBidon, depreciation is an expense, and it's the worst kind of an expense. You know, we love to talk about float, and float is where we get the money first, and we have the expense later. Depreciation is where you spend the money first,
[1:56:36]
Warrenyou know, and then record the expense later. And it's reverse float, and it's not a good thing. And to have that enter into a multiple, it's much better to buy a business that has everything else being equal, has no depreciation, because it has essentially no investment in fixed assets and makes X, than it is to buy a company that, where there's a lot of depreciation in getting to X. And actually, I may write a little bit more on that next year, just because it's such a mass delusion. And of course, it's in the interest of Wall Street enormously to focus on something called EBA DA because it results in higher borrowing power, higher valuations, and all of that sort of thing. So it's become very popular in the last 20 years, but it's a very misleading statistic can be used in very pernicious pernicious ways. Charlie, on either one of the subjects.
CharlieI think you've understated the horrors of the subject and the disgusting nature of the people that brought that term into the valuation of business. It was just, it would be like a leasing broker of real estate who's, you had a thousand square foot new suite to be leased, and he says it's got 2,000 feet in it. That's not honorable behavior. And that's the way that term got into common usage. Nobody in his right mind would think that depreciation is not an expense.
WarrenYeah, but it's very much in the interest of Wall Street.
CharlieYes, that's why they did it.
WarrenYeah. It made the multiple seem lower.
CharlieAnd what's amazing is the way it's accepted, actually. But anyway, it just illustrates how people use Langeville. use language, you know, and sell concepts that work to their own use. And 2 and 20 has the same sort of thing. I mean, the number of people, the amount of money that's overperformed after paying 2 and 20 compared to the expenses of the men incurred, I will sure you makes for a terrible indictment of that particular arrangement. But as long as it can get sold, it will get sold. And now they use it in the business schools. Now, that is horror squared. I mean, it's bad enough that a bunch of thieves start using a term, but when it gets so common to the business schools, copy it. That is not a, that's not a good result.
OtherOkay. Station 11. Good afternoon. I'm Whitney Tilson, a shareholder from New York. My question is related to the ones asked earlier about job cuts. Perhaps the only thing that makes American workers angrier than layoffs
[1:59:42]
Questioneris to shut down an operation entirely and move the jobs overseas. Ask anyone in Ohio or Michigan, and they'll tell you stories about companies that have been operating in those states for decades, benefiting from the educational system, infrastructure, and so forth, things that were paid for by local taxpayers. But then some high-paid consultants came along and showed the company how it could reduce its costs by relocating production to Mexico or China, and poof, the good U.S. jobs disappeared. My observation is that most investors and those in corporate America today worship at the altar of maximizing shareholder value, which is code for doing whatever is necessary to boost the share price as high as possible. But in doing so, companies are taking actions that make millions of workers feel at best, fearful, and left behind, and at worst, deeply harmed by corporate America. It makes so many people so angry that I think it's testing the post-World War II economic order, which is rooted in free trade, and even the strength of our democracy. I'd argue that it was decisive in our last election. So my question to you is, do you think that? businesses should consider factors outside of pure economics when making these types of of decisions? What obligations, if any, do they have to their employees and communities in which they operate? And lastly, if a Berkshire CEO came to you and asked for your approval to close a U.S. operation and relocate it overseas to save money, what questions would you ask beyond the economics of this decision? Thank you.
WarrenYeah, well, the truth is that in certain cases, production that would otherwise that formerly been in the United States has definitely been supplanted by production that come from other parts of the world. Originally, I was there when food of the loom was called Union Underwear and bought by Graham Newman Corp in 1955, I believe, and it was probably all domestic then. And the truth is, if it was all domestic now, it wouldn't exist. We had the same thing happened with Dexter's shoe and a wonderful company and skilled workers. And in the In the end, if we sold the shoes at a product that yielded what they cost us, they were not competitive with shoes from around the world. A trade, I would argue, both ways, export, import, massive trade, should be and is actually enormously beneficial, both the United States and the world. I mean, it will, greater productivity will
[2:02:10]
Warrenbenefit the world in a general way. But to be roadkill, to be the textile worker in New Bedford that was put out of a job eventually, to be the shoe worker in Dexter, a dexter to be put out of work, is, I mean, it would be no fun to go through life and say, I'm doing this for the greater good and so that shoes are underwear, it was offered 5% less or something, and the American public will actually never know. So what you need is two things, in my view. You've got an enormously prosperous country. You've got almost $60,000 of GDP per capita. It's unbelievable. Six times what it was when I was born in real terms. So we've got the prosperity, and that prosperity is enhanced by trade. We were only exporting 5% of our GDP back in 1970, and that I think it's around 12% or something like that. Now, we are doing what we do best. But We need an educator in chief who, logically the president, I don't mean this specific president, as I mean, any president that's been around for decades, has to be able to explain to the American public the overall benefits of essentially free trade. And then beyond that, we have to have policies that take care of the people that become the road caught, kill in the process, because it doesn't make any difference to me as far as I'm concerned if my life is miserable because I've been put out of business by something that's good for 320 some million people in some infinitesimal way. And it's messed up my life when I've tried to live it in a proper way. So we have got the resources to take care of those people. The investors, I don't worry about. I wrote about this a few years ago. The investors can diversify their investments in such a way that overall trade probably benefits them and they don't get killed by a specific industry condition. But the worker, in many cases, can't do that. You're not going to retrain some 55-year-old worker in New Bedford who may not even speak English in our textile mill or something. I mean, if they get destroyed by something that's good for society, they get destroyed unless government puts in some policies that takes care of people like that. And we've got a rich society that can do that, and we've got a society that will benefit by free trade. and I think we ought to try to hit both objectives of making sure that there is not roadkill and that at the same time we get 320 million people get the benefits of free trade.
[2:04:56]
WarrenCharlie? Well, they don't quarrel with that. And we have unemployment insurance for that exact reason. But I'm afraid that the capitalist system is always going to hurt some people as it modifies and improves. There's no way to avoid it. Capitalism is brutal to capital, if you're in the wrong businesses, and like I say, you can diversify those results. Capitalism is brutal to people that have the bad luck to be skilled or develop their skills for decades. But a rich, a very rich society can actually, if it's beneficial to society overall, it can take care of those people. I mean, it just, you know, the new tax, the bill that was passed a couple days ago reduces my taxes, you know, by 17%. And, you know, is that needed by the government or anything? I wouldn't start spending the money. No, and I, but, but that was, that was the will, I mean, no, I agree. I don't think, who knows what happens with the bill. But I'm just to have that happen, and I don't think that, I think if you pulled a thousand people in Omaha that were walking through a shopping center as to whether my tax bill had been fed by some very large sum, because of what passed, I don't think many people would have the faintest idea of what happened in terms of the coverage of it and all of that that took place. So we've got, we do have, it's probably more like $57 or $58,000 of GDP per capita, a family of $230,000. But what? Nobody should be roadkill in this sort of society.
CharlieWell, remember what Bismarck said, there are two things that nobody should have to watch. One is the making of sausage and the other is the making of legislation.
WarrenYeah. Well, I would say there's somebody ought to watch. Anyway, we've hit the magic hour of 3.30. We'll reconvene at 3.45 to do, have a formal board, formal shareholders meeting. And that may take a while. So if you're welcome to stay and watch that or you're welcome to shop. And I might even have a small preference of that, but go do whatever will you wish.
OtherOkay.
WarrenOkay. Let's regroup. I'll all take your seats. We'll begin the formal meeting. And I'll all. work from a script in this. The meeting will now come to order. I'm Warren Buffett, Chairman of the Board of the Directors of the Company. I welcome you to this 2017 annual meeting of shareholders. This morning, I introduced the Berkshire Hathaway directors that are present. Also with us today are partners in the firm of Deloitte and Tushar auditors. Sharon Hick is Secretary of Berkshire Hathaway
[2:07:57]
Otherand she will make a written record of the proceedings. Becky Hammett has been appointed inspector of elections at this meeting and she will certify to the count of votes cast in the election for directors and the motions to be voted upon at this meeting. The name proxy holders for this meeting are Walter Scott and Mark Hamburg. Does the Secretary have a report of the number of Berkshire shares outstanding, if you don't mind keep the lights on a little more so I can read this, outstanding, entitled to vote and represented at the meeting?
OtherYes, I do. As indicated in the proxy statement that accompanied the notice of this meeting that was sent to all shareholders of record. on March 8th, 2017, the record date for this meeting. There were 770,994 shares of Class A, Brookshire-Hathaway Common Stock Outstanding, with each share entitled to one vote on motions considered at the meeting, and $1,310,304,247 shares of Class B, Brookshire-Hathway Common Stock Outstanding, with each share entitled to one 10th, 1,000th of one vote on motions considered at the meeting. Of that number, 538,915 Class A shares, and 734,450,954 Class B shares are represented at this meeting by proxies return through Friday afternoon, May 5th.
OtherThank you, Sharon. That number represents quorum and we will therefore directly proceed with the meeting. The first item of business will be a reading of the minutes of the last meeting of shareholders. I recognize Mr. Walter Scott, who will place a motion before the meeting.
OtherI move that the reading, the minutes of the last meeting of shareholders be dispensed with and the minutes be approved.
OtherDo I hear a second?
OtherI second the motion.
OtherThe motion has been moved and seconded. second and we will vote on the motion by voice vote. All those in favor say aye. I didn't hear very many, but opposed? The motion is carried. The next item of business is to elect directors. If a shareholders present who did not send in a proxy or wishes to withdraw a proxy previously sent in, you may vote in person on the election of directors and other matters to be considered at this meeting. Please identify yourself to one of the meeting officials in the aisle so that you can receive a ballot. I recognize Mr. Walters, Mr. to place a motion before the meeting with respect to election of directors.
OtherI move that Warren Buffett, Charles Munger, Howard Buffett, Stephen Burke, Susan Decker, William Gates,
[2:10:55]
OtherDavid Goddisman, Charlotte Geiman, Thomas Murphy, Ron Olson, Walter Scott, and Merrill Whitmer be elected as directors.
QuestionerThere's a second.
OtherI second the motion.
OtherIt's been moved and seconded that Warren Buffett, Charles Munger, Howard Buffett, Stephen Burke, Susan Decker, Dr. William Gates, David Goddisman, Charlotte Geimann, Thomas Murphy, Ronald Olson, Walter Scott, and Merrill Whitmer be elected as directors. Are there any other nominations or any discussion?
OtherThe nominations are ready to be acted upon. If there are any shareholders voting in person, they should now mark their ballots on the election of directors and deliver their ballot to one of the meeting officials in the aisles. Ms. Hammack, when you are ready, you may give you a report.
OtherMy report is ready. The ballot of the proxy holders, in response to proxies that were received through last Friday afternoon, cast not less than 601,375 votes for each nominee. That number exceeds a majority of the number of the total votes of all Class A and Class B shares outstanding. The certification required by Delaware law of the precise count of the votes will be given to the Secretary to be placed with the minutes of this meeting.
Otherminutes of this meeting. Thank you, Ms. Amick.
OtherWarren Buffett, Charles, Munger, Howard, Buffett, Steven, Burke, Susan Decker, William Gates, Gates, David Goddustman, Charlotte, Guyman, Thomas, Murphy, Ronald, Olson, Walter Scott, and Merrill Whitmer have been elected as directors.
OtherThe next item on the agenda is an advisory vote on the compensation of Berkshire Hathaway's executive officers. I recognize Mr. Walter Scott to place a motion before the meeting at this time.
OtherI move that the shareholders of the company approved. on an advisory basis the compensation paid to the company's named executive directors as disclosed pursuant to item 402 of regulation SK, including the compensation discussion and the accompanying compensation tables and the related narrative discussion in the company's 2017 annual meeting proxy statement.
QuestionerIs there a second?
OtherI second the motion.
OtherIt has been moved in second. that the shareholders of the company approve on an advisory base that the compensation paid at the company's named executive officers. Ms. Amick, when you are ready, you may give you a report.
OtherMy report is ready. The ballot of the proxy holders in response to proxies that were received through last Friday afternoon
[2:13:38]
Othercast not less than 608,765 votes to approve on an advisory basis, the compensation paid to the company's named executive officers. That number exceeds a majority of the number of the total votes of all Class A and Class B shares outstanding. The certification required by Delaware law of the precise count of the votes will be given to the Secretary to be placed with the minutes of this meeting. Thank you, Ms. Amick. The motion to approve on an advisory base of the compensation pay to the company's named executive officers has passed. The next time I'm on the agenda is an advisory vote on the frequency of a shareholder advisory vote. vote on compensation of Berkshire Hathaway's executive officers. I recognize Mr. Wall or Scott to place a motion before the meeting on this item.
QuestionerI move that the shareholders of the company determine on an advisory basis the frequency, whether annual, biannual, or tri-annual, with which they shall have an advisory vote on the compensation paid to the company's named executives as set forth in the company's 2017 annual meeting, proxy statement.
OtherIs there a second?
QuestionerSecond the motion.
OtherIt has been moved and seconded that the shareholders of the company determined the frequency with which they shall have an advisory vote on compensation of named executive officers, with the option being every one, two, or three years. Ms. Zamick, when you are ready, you may give you a report.
OtherMy report is ready. The ballot of the proxy holders in response to proxies that were received through last Friday afternoon cast 131,200,000. 268 votes for a frequency of every year, 1,954 votes for a frequency of every two years, and 476,661 votes for a frequency of every three years of an advisory vote on the compensation paid to the company's named executive officers. The certification required by Delaware law of the precise count of the votes will be given to the Secretary to be placed with the minutes of this meeting. Thank you, Ms. Amick. Shareholders of the company have determined on an advisory basis that they shall have an advisory vote on the compensation paid to the company's named executive officers every three years. The next item of business is a motion put forth by clean yield asset management on behalf of shareholders, Tom Beers, and Mary Durfee. The motion is set forth in the proxy statement. The motion requests that the company provide a report on its political contributions,
[2:16:17]
Otherand the directors are recommended that the shareholders vote against the proposal. I will now recognize Eileen Dury, I hope I'm pronouncing that right, to present the motion. To allow all interested shareholders present their views, I asked to limit her remarks to five minutes. And the microphone at Zone 1 is available for those wishing to speak for four against the motion. Zone 1 is the only microphone station in operation. For the benefit of those present, I ask that each speaker four against the motion, with the exception of the original proposal, limit themselves to two minutes and confine your remarks solely to the motion. And do we have at Station 1, the representative of Clean Yield Management, or Sorry. I think you'll last that management.
QuestionerGood afternoon, Mr. Chairman, Board of Directors, and my fellow shareholders. My name is Eileen Durie, and I have been asked to read the following statement by the filers of this proposal, Tom Beers and Mary Durfee. Our proposal, number four, on the proxy ballot, calls on Berkshire Hathaway to fully disclose the extent of its political spending. Why do we ask for this? The corporate political spending is a controversial activity that must be carefully managed and overseeing at the most senior levels of management. Mismanagement or misjudgment around political contributions can bring reputation, damage, political risks, and legal consequences. In recent years, at the urging of shareholders and other stakeholders, scores of companies have adopted stronger disclosure and better oversight of political contributions. Best practices in this area include full disclosure of direct and indirect political contributions, descriptions of policies and procedures to ensure full legal compliance and a commitment to board oversight. But our company's policies in this area are so non-existent or hidden that they have earned it a score of zero for six years running on the leading rating system for corporate political disclosure and accountability. The CPA ZICT. index. In contrast, 56% of the S&P make public a detailed policy governing political expenditures from corporate funds. Peers such as GE, Travelers, Unum, CSX, and Norfolk Southern disclosed political spending. In contrast, all we know about Berkshire's political spending is contained in the two-paragraph response to our proposal in this year's proxy statement. which seeks to reassure us that Berkshire's political spending is small relative to its size.
[2:19:25]
QuestionerBut management statement raises more questions than it answers. It says nothing, for example, about whether Berkshire gives to third party like trade associations and 501C4s, which are leading sources of dark money contributions that are nearly impossible to trace. Since 2012, over $670 million in dark money was spent in the U.S. election, with no disclosure of who the underlying donors were. Fellow shareholders, as you know, our company is a large and complicated enterprise. Berkshire Hathaway ranks number four in the Fortune 500. At a time when the trend among large companies is to be more open about their political spending and their policies regarding dark money vehicles, it doesn't be who or benefit Berkshire Hathaway to be so secretive if it has nothing to hide. If you agree, please vote, please vote in favor of proposal number four. Thank you.
OtherAre there other people who wish to speak on a motion? Not that I know of. Okay. Thank you.
WarrenI will tell you that, to my knowledge, in 52 years, Berkshire Hathaway, at the parent company level, has not made a political contribution. I don't, I personally disagree strongly with the Citizens United decision, which was a five to four vote. And I think that having unlimited contributions by wealthy individuals through super PACs and or wealthy corporations, I do not think it's a plus at all. I think it's a minus in our democracy, and I think that big money does, can often distort the political process. It's a reality that any of our subsidiaries in heavily regulated industries are probably going to have to make some political contributions that competitors do it, and I tell our managers, basically, if they essentially, I don't want them making contributions on their own personal preferences in elections to be made from corporate funds, and I would regard that as a breach of trust with Berkshire. But I do recognize that if they're in the railroad industry or the electric utility industry or whatever it may be, that there is an essentiality industry, that there is a necessity essentially to make political contributions. I'm sure they give money to people that I wouldn't vote for. But that is a reality of doing business in certain businesses which have a significant political aspect to their activities. So I'm probably my heart is with you to some extent in terms of I wish citizens united had gone the other way. I don't like the idea of great sums being spent.
[2:22:59]
WarrenBut I do not think we, I think it, personally, I think that it could be dis-adadadadages to actually list all of the, all of the political organizations to which people contribute when competitors don't. And I think there's expense involved in all three of the proposals that are coming up on this one. So I personally voted against the proposition. But I do hope, like you, that money plays a lesser part in politics, big money in the future and not disclose money than it does now. And I don't think the odds are good that the Supreme Court is going to reverse Citizens United. So with that, I would say the motion is now ready to be acted upon. If there are any shareholders voting in person, they should now mark their ballot on the motion and deliver their ballot to one of the meeting officials in the in the aisles.
OtherZamek, when you're ready, you may give you a report. My report is ready. The ballot of the proxy holders in response to proxies that were received through last Friday afternoon cast 64,449 votes for the motion and 542,39 votes against the motion. As a number of votes against the motion, against the motion exceeds a majority of the number of votes of all Class A and Class B shares properly cast on the matter, as well as all votes outstanding, the motion has failed. The certification required by Delaware law of the precise count of the votes will be given to the Secretary to be placed with the minutes of this meeting.
WarrenThank you, Ms. Amick. The proposal fails. The next item of business is put forth by Baldwin Brothers' anchor. on behalf of shareholder and Marsha Sage. The motion is set forth in the proxy statement. The motion requests that the company provide a report reviewing the company's policies, actions, plans, and reduction targets related to methane emissions from all operations. The directors have recommended that the shareholders vote against the proposal. I will now recognize Hylene Dori to present the motion. To allow all interested shareholders to present their views, I ask her to limit the motion. or to limit her remarks to five minutes. The microphone at Zone 1 is available for those wishing to speak for against the motion. Zone 1 is the only microphone station in operation. For the benefit of those present, I ask that each speaker for or against the motion limit themselves to two minutes, although, Mr. Ray, that's five minutes in your case, and to combine your remarks solely to the motion.
[2:25:55]
QuestionerGood afternoon, Mr. Chairman, members of the Board, and fellow shareholders. fellow shareholders. My name is Eileen Dury. I am here to move Arjuna Capital and Baldwin Brothers proposal on behalf of Marcia's Shage, a long-term investor in our company. Proposal five seeks to protect shareholder value by ensuring the transparent disclosure of our information regarding methane emissions. The reason for this proposal are clearly in the interest of protecting long-term shareholder value. Leet gas has a direct economic impact on our company, as it is no longer available for sale, establishing a clear business case for reduction targets and control processes. In fact, leaked methane represented $30 billion of lost revenue in 2012, equivalent to 3% of gas produced globally. The National Resources Defense Council estimates that capturing currently wasted gas for sale could reduce methane pollution by roughly 80%. While the climate benefit of replacing coal with natural gas has been widely publicized, that benefit is negated when leakage rates exceed 2.7%, as methane carries 84 times the global warming impact of CO2 over a 20-year period. Recent academic studies are particularly troubling as they have identified methane leakage far north of current EPA estimates. Additionally, gas storage presents outsize risk. The 2015 failure of a gas injection well at Southern California gas company's Elisa Canyon storage field in Los Angeles revealed major vulnerabilities in the maintenance and safety of natural gas storage facilities. The incident exposed both a lack of oversight and contingency planning in the face of a well blowout. Berkshire Hathaway has storage facilities that face similar risks, as it is estimated to hold the 11th highest volume of natural gas in the country. There are over 400 gas storage facilities around the country, many of which were drilled decades ago. Numerous independent researchers have concluded that if natural gas is to lead to a more sustainable energy future, then missing emissions must be addressed. Ongoing concerns have spurred public debate and led to regulatory action at the state and federal level. A strong program of target-setting measurement, mitigation and disclosure would indicate a reduction in regulatory risk, as well as efficient operations, maximizing gas for sale and shareholder value. Given this, we believe our company has a tremendous
[2:28:41]
Otheropportunity to move forward by providing shareholders with this important information. ISS, the leading provider proxy voting advice agrees and has a recommended to vote in favor. Noting such disclosures would allow shareholders to better understand the company's management of its method emissions and any related risks. Thank you for your consideration.
OtherAre there other people who wish to speak on this motion? I don't believe so. Okay. The motion is now ready to be acted upon if there are any shareholders voting in person. They should now mark their ballot on the motion and deliver their ballot to one of the meeting officials in the aisles. The Samick, when you're ready, you may give your report.
OtherMy report is ready. The ballot of the president. proxy holders in response to proxies that were received through last Friday afternoon cast 57,600 votes for the motion and 542,870 votes against the motion. As the number of votes against the motion exceeds a majority of the number of votes of all Class A and Class B shares properly cast on the matter, as well as all votes outstanding, the motion has failed. The certification required by Delaware law. by Delaware law of the precise count of the votes will be given to the secretary to be placed with the minutes of this meeting.
WarrenGreg, incidentally, is there a live microphone? Yeah, there we might talk a little bit about the methane situation.
Greg AbelSure, Warren. So thank you for your comments. And when you think about methane emissions, it is a serious issue relative to carbon. It was highlighted 84 times worse than a carbon emission. But I'd be very pleased. report on our situation at Berkshire Hathaway. So three different issues were raised in the comments. One was overall emissions from oil and gas production. So the first thing I would just highlight is that we do not own any oil and gas producing assets. So we don't have any wells and effectively don't have that risk. The second thing that was highlighted was the significant loss of gas at Alyso Canyon. It was a injection well that failed. It took many months to fix a well. And if you fundamentally look at the problem there, and we do own other storage facilities, but we do not use their technology or that type of well. All of our wells are case to the top, which creates a very different risk, and literally can be mitigated within hours. And then the third issue which was raised was leakage rates.
[2:31:36]
Greg AbelAnd it was highlighted, at least in a second response to the proposal, that the leading companies in the industry have a leakage rate of 1%. Or they've put together programs to achieve a leakage rate of 1%. And I'm happy to report when we look at our leakage rate from our pipelines, we're at 0.53 of 1%. So basically half of the leading companies in the industry. So that obviously support the rate. support the recommendation of the shareholders. Thank you.
OtherThanks, Greg. You've heard the vote and the proposal fails. The next item of business is a motion put forth by a shareholder, the Nebraska Peace Foundation. The motion is set forth in the proxy statement. Motion requests that the company divest of its holdings and companies involved in the extracting, processing, or burning of fossil fuels. The directors are recommended that the shareholders vote against the proposal. I will now. recognize Mark Vassina to present the motion. And again, to allow all interested shareholders to present their views, I asked him to limit his remarks to five minutes. And the microzone is available for those wishing to speak for against the motion. Zone 1 is the only microphone station in operation. And for the benefit of those present, subsequent speakers, I ask that they limit themselves to two minutes and combine your remarks solely to the motion. solely to the motion. With that, if you'll proceed.
Mark VassinaThank you. My name is Mark Vassina. I represent the Nebraska Peace Foundation. We're here to present our proposal asking Berkshire Hathaway to divest of its carbon-based assets over a period of 12 years. A period of time, we believe, is a very modest proposal indeed. Last year, we were here with a proposal that Berkshire Hathaway evaluate and report on the impact of climate change on their insurance companies. After the meeting, we were approached by a number of shareholders who suggested we were pulling our punches, and they suggested the real question is divestiture. So we thought about it, we came back to ask for divestiture of the carbon-based assets. We recognize that for a public company that's involved in investing in other companies, divestiture represents different kinds of challenges from those of university endowments, pension plans, public foundations such as the Bill and Melinda Gates Foundation, organizations which have divested or or have implemented divestiture plans.
[2:34:42]
QuestionerHowever, we believe that the necessity for divestiture involves more than just a social or ethical or even moral question, but also involves financial risk as the Bank of England in their recommendation to the insurance companies that they regulated, that they investigate and report on the the climate change risk to these companies, they pointed out that financial risk of holding these carbon-based assets was real, unpredictable, things like regulatory risk, political risk, technology changes, investor sentiment changes. These things pose risks towards the financial value of assets in this type of investment. So, we are proposing, as I said, divestiture of all carbon-based assets over 12 years. I'm going to be followed by three prominent American climate scientists, Frank Lemire of the Winnebago tribe of Nebraska, and Richard Miller, Creighton University Theologian. Thank you for giving us the opportunity to make our case for this proposal. for this proposal.
OtherThank you. And we'll proceed to the next speaker, please.
QuestionerChairman Buffett, board members and shareholders. My name is Michael Mann. I am a professor at Penn State University and a climate scientist. And as a scientist who spends much of my time communicating the reality and threat of climate change, it's an honor to have this opportunity to speak to you today. Warren Buffett, known as the Wizard of Omaha, is an inspiration to many, a symbol of the value of work ethic, self-made success, and the great reward that comes with foresight. Now, foresight means recognizing both opportunity and risk, and when it comes to risk, there is no better example than climate change. I recently co-authored an article in the journal Scientific Reports, for example, demonstrating that climate change played a key role in the onslaught of unprecedented, devastating droughts, floods, and heat waves in recent years. And the impacts we're seeing now are just the veritable tip of the iceberg. Carbon emissions must be broken. brought down dramatically within the next few years if we are to avert the worst impacts of climate change. Mr. Buffett coined the term Noah's Law in his 2015 shareholder letter to describe the risk posed by climate change, stating, if there is only a 1% chance the planet is heading toward a truly major disaster and delay means passing a point of no return, in action now is foolhardy. Well, I couldn't agree more.
[2:37:43]
QuestionerAnd the science tells us that we are heading toward disaster in the absence of substantial reductions in greenhouse gas emissions. Board member Bill Gates demonstrated bold leadership a year ago when the Bill and Melinda Gates Foundation announced it was divesting of fossil fuel holdings. Where Mr. Buffett to follow suit, it would send a profound message to the rest of the global business community, a message that we can both mitigate risk and seize opportunity in the form of massive growth in clean energy technology by tax. this problem now head on before it's too late. Thank you.
OtherThank you. And I believe there's another speaker or maybe two. Be able to identify yourself, please.
Richard SomervilleMy name is Richard Somerville. I'm a climate scientist and a professor at the University of California, San Diego. Chairman Buffett, board and shareholders. The world is warming. It is due to human activities. It is getting worse. The observational evidence is overwhelming. All the warmest years globally are really. recent years. We see the weather changing. We see more severe floods and droughts. Sea level rise is accelerating. Ice sheets and glaciers are shrinking worldwide. Climate change will become more and more serious unless emissions of heat-trapping gases and particles are quickly and drastically reduced. The biggest unknown about future climate is human behavior. Everything depends on what humanity does now. We have our hands on the thermostat that controls the climate of our children and grandchildren. In 2015, the nations of the world agreed in Paris on how much warming can safely be allowed. The Paris target was informed by science, and the science shows that to meet the target, emissions need to be reduced drastically and quickly. We cannot just muddle through. Dithering and procrastinating lead to catastrophe. Alleviating the disruption of climate change is cheap, compared to coping with the damage that unmitigated climate change will cause. One example? Doing nothing about climate change means that sea level will become so high, that coastal cities must eventually be abandoned. We cause this problem, we can solve it. And polls show that most Americans want strong actions to limit climate change. The forces driving clean energy are powerful. The market is turning against fossil fuels. The prices of solar and wind energy are dropping. They can already compete without subsidies.
[2:40:05]
QuestionerVehicle electrification is happening fast. Clean energy provides jobs and economic growth. Progress and prosperity do not require emitting heat-trapping gases. gases. Berkshire Hathaway and Warren Buffett are rightly admired and respected worldwide. Helping the world confront climate change should be an important part of their legacy. We owe it to our children and grandchildren. Thank you.
OtherThank you. I believe there's one more speaker. Thank you, sir.
QuestionerI am David Titley, retired Rear Admiral, former oceanographer of the Navy, and now a professor of practice at Penn State. I've been a shareholder of Berkshire Hathaway since December 2000. Thank you, sir for your leadership of this enterprise. When I was stationed at the Pentagon, I had the privilege of working directly for the Pentagon's foremost strategic planner, Mr. Andrew Marshall. He taught me how to think about risk, and especially risks that may seem distant or low probability, but one with very high impacts, such as weapons of mass destruction. Climate change is a fat-tailed, emerging risk. It's really a risk to people, to us. And when this risk is not managed, we have a security problem. One example would be Syria. Climate is one of the links in a long chain of events. that led to the tragic outcome. Non-climate events, such as over a million refugees, pouring into Syrian cities from the Iraq War, stressed Syrian governance. Then about a decade ago, an exceptionally intense drought and heat spell, linked with high confidence to a changing climate, devastated Syrian agriculture. Now you have millions of desperate people with nothing and a breeding ground for extremists. Syria is an example of why in the security community, we say that climate change accelerates the risks of insecurity. the risks of instability. It can make bad places worse, a lot worse. Senior military officers know you must address risks and take precautions while you can, before it's too late. The U.S. Defense Department understands the risks of climate change, and has been working quietly to adapt to the changing climate for years. Winston Churchill is alleged to have said Americans can always be counted upon to do the right thing after exhausting every other possibility. But we will prevail, and you, sir, can help. help. Here's my ask. What are government and business leaders doing to stabilize a climate? We should reduce rather than accept the risks of unchecked climate change.
[2:42:30]
QuestionerBecause the ice doesn't care which party controls the White House or the Congress, it just melts. Thank you. I am Frank Lamere, the Bear Clan of the Winnebago tribe of Nebraska. It was the indigenous people of this continent who first consecrated the ground on which we live and grow, who offered up prayers and petitions asking that we be allowed to live and to provide a way for the generations to come. In exchange for the blessings given by the Creator, our forebears agreed to be good stewards of the land. The stewardship of our Mother Earth who provides for us has now changed, but the covenant remains the same. Let there have been no mistake about that. If we continue to disrespect our Earth Mother, those things given us, Bountiful harvests, protection for the elements, and good clean water will surely be taken from us. Our elders speak of this, it has been foretold. On Christmas Eve, my son came from Standing Rock to visit us for one hour. His mother and I worried about him. How is it there? Why did you go? I asked. He said, it is dangerous, Dad, but someone has to protect our water. I nodded. I said, ah-ho, that is good. He is a water protector. I stand on his shoulders, meaning which honi, the protectors proclaim, water is life. Baring that in mind, I am told that this waterway flowing south from Standing Rock and passing just a short walk from here would be followed by any kind of breach in the Dakota Access pipeline. My sense in my years tells me that this will have happened. Millions would be poisoned. I am further told that this collective body holds a 15% interest in an oil company that is a 25% shareholder in the Dakota access pipeline. I would ask that you walk away from that investment. Stand with Mother Earth today. I'm a Winnebago Indian. The Missouri River brought us here when we had no place to go. We stand with our Mother Earth now as she stood with us. Think about that. Many Wichone, water is life. Pinagigi, thank you. Thank you. Thank you.
QuestionerDear Chairman Buffett, board members, and shareholders. I am Richard Miller. I'm an associate professor of philosophical theology and sustainability studies at Creighton University. I write and teach on ethical issues raised by the climate crisis. As a rationale for voting no on that investment resolution, the Board maintained that Berkshire should not limit its universe of potential investments based upon complex, social, and moral issues,
[2:45:57]
Questionerand that following state and federal laws was sufficient to meet your obligations. There is not only an overwhelming consensus, in the scientific community about the reality and dangers of climate change. But there is also an overwhelming consensus among all major ethical theories that one is not morally justified to use increased profit as a rationale for doing harm to others. By continuing to invest in and thus promote the extracting, processing, and burning of fossil fuels, Berkshire is doing harm to people around the world and creating conditions that will threaten future generations. While one is not morally justified to use increased profits as a rationale for doing harm to others, one cannot also opt out out of ethical considerations by appealing to moral complexity. When you're doing harm to others, especially at this scale, There is no neutral space. Nor can you simply appeal to the fact that Berkshire is following state and federal laws when those laws are themselves unethical and that they allow the United States to violate the human rights of people around the world and set in motion catastrophic future for young people. The consensus among ethical theories will in due time become self-evident to the average person. Analogous, of the way slavery as an evil is self-evident today. Indeed, the recognition of the immorality of investing in fossil fuels is rapidly gaining ground as more and more institutions divest their fossil fuel holdings. Mr. Buffett, you're standing on an ethical house of cards and is only a matter of time before it comes tumbling down. Like the thousands gathered here and the millions on live stream, I admire your considerable achievements. achievements. But I am afraid that if you do not change course very soon, history will not judge you kindly. Thank you for your time.
OtherOkay, thank you. The motion is now ready to be acted upon. If there are any shareholders voting in person, they should now mark their ballots on the motion and deliver their ballots in one of the meeting officials in the aisles. Ms. Amick, when you are ready, you may give your report.
OtherMy report is ready. The ballot of the proxy holders in response to proxies that were received through last Friday afternoon cast 7,784 votes for the motion and 594,044 votes against the motion. As the number of votes against the motion exceeds a majority of the number of votes of
[2:48:58]
Otherall Class A and Class B shares properly cast on the matter, as well as all votes outstanding, the motion has failed. The certification required by Delaware law, by Delaware law of the precise count of the votes will be given to the Secretary to be placed with the minutes of this meeting. Thank you, Ms. Amick. The proposal fails, and Mr. Scott, do you have a motion?
QuestionerI move the meeting be adjourned.
OtherIs there a second?
QuestionerI second the motion.
OtherThe motion to adjourn has now been made and seconded. We will vote by voice. Any discussion? It's not all in favor say aye.
QuestionerAye.
OtherAll opposed say no. The meeting. as adjourned. Thank you all for coming and come again next year.