QuestionerThis question comes from Paul Speaker of Chicago, Illinois. I believe he may be here today. He writes, One of your more famous and perhaps most insightful quotes goes as follows. Should you find yourself in a chronically leaking boat, energy devoted to changing vessels, is likely to be more productive than energy devoted to patching leaks. In light of the unauthorized accounting scandal at Wells Fargo, of its admission that it charged customers for duplicate auto insurance, insurance, of its admissions that it wrongly fined mortgage holders in relation to missing deadlines caused by delays that were its own fault, of its admission that it charged some customers and proper fees to lock in mortgage interest rates, of the sanction placed upon it by the Federal Reserve, prohibiting it from growing its balance sheet, and of the more than recent $1 billion penalty leveled by federal regulators for the aforementioned misbehavior. If Wells Fargo Company is a chronically leaking boat, at what magnitude of leakage would Berkshire consider changing vessels? consider changing vessels?
WarrenWells Fargo is a company that proved the efficacy of incentives. And it's just that they had the wrong incentives. And that was bad. But then they committed a much greater error, and I don't know exactly how or who did it or when. But ignoring the fact, that they had a faulty incentive system, which was incenting people to do things that were kind of crazy, like opening non-existent accounts, et cetera. And, you know, that is the Cardinal Senate at Berkshire. We know people are doing something wrong right as we sit here at Berkshire. You can't have 377,000 employees and expect that everyone is behaving like Ben Franklin or something out there. I don't know whether there are 10 things being done wrong as we speak or 20 or 50. The important thing is we don't want to incent any of that if we can avoid it. And if we find that when we find it's going on, we have to do something about it. And that is absolutely the key to it. And Wells Fargo didn't do it, but Solomon didn't do it. And the truth is we've made a couple of our greatest investments. investments where people have made similar errors. I see no reason why Wells Fargo as a company from both an investment standpoint and a moral standpoint going forward is in any way inferior to the other big banks with which it competes. They made a big mistake.
[2:55]
WarrenIt costs, I mean, we've still got, I mean, we have a large, unrealized gain in it, but that That doesn't have anything to do with our decision making. But the, I like it as an investment. I like Tim Sloan as a manager, you know, and it is correcting mistakes made by other people. I think Wells Fargo is going to be better going forward than it would have been if these leaks had never been discovered. Or it happened. Yeah, so I think it, it, but I think Harvey Weinstein has done a lot for improving behavior, too. It's, it was clearly an error and they're acutely aware of it and acutely embarrassed and they don't want to have it happen again. No, I, I, I, if I had to say which bank is more likely to behave the best in the future, you know, it It might be Wells Fargo, of all of them.