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QuestionerThe airline industry seems to have few, if any, advantages. Even with the consolidation we've seen during the past 15 years, the barriers to entry are few, and the exit barriers are high. The industry also suffers from low switching costs and intense pricing competition. Could you walk us through what convinced you that the airlines were different enough this time around for Berkshire to invest close to $10 billion in the four major airlines?
WarrenYou couldn't pick a tougher industry, you know, ever since, since Orville went up. you know, that if anybody really been thinking about investors, they should have had Wilbur shoot him down and saved everybody a lot of money for a hundred years. It's a fiercely competitive industry. The question is whether it's a suicidally competitive industry, which it used to be. It has been operating for some time now at 80% or better of capacity being available seat miles. I think it's fair to say that they will operate at high. higher degrees of capacity over the next five or ten years than the historical rates, which caused all of them, they go broke. Now, the question is whether even when they're doing it in the 80s, they will do suicidal things in terms of pricing remains to be seen. There's no cinch that the industry will have some more pricing sensibility in the next. 10 years than they had in the last 100 years, but the conditions have improved for that. The investment world has gotten tougher with more competition, more affluence, and more absolute obsession with finance throughout the whole country. And we picked up a lot of low-hanging fruit in the old days where it was very, very easy, and we had huge margins of the safety. Now we operate with a less advantageous general climate. and maybe we have small statistical advantages where in the old days it was like shooting fish in a barrel. But that's all right. It's okay if it gets a little harder after you get filthy rich. Charlie's more philosophical than I am on that point.