QuestionerMy name is Daphne Kalear Starr. I'm eight years old and live in New York City. Could you please explain why Berkshire's largest recent investments have been departed from your old capital efficient philosophy and why specifically have you invested Burlington Northern instead of buying a capital efficient company like American Express.
WarrenYou're killing me, Daphne. I'm certainly glad she's not nine years old.
CharlieYeah. I'm just sitting here thinking which of the six panelists were going to bump next year and put you in play.
WarrenWell, I thought I was doing well when I bought that city service at 11. The answer is that we... The answer is that we have, we'd love, we always prefer the businesses that earn terrific returns on capital, like a seized candy when we bought it or a good many of the businesses. And we've, you know, American Express earns a terrific return on equity and has for a very long time. The fact that we buy them. By Burlington, BNSF, Burlington Northern, means that essentially we can't get more money deployed in capital light businesses at prices that make sense to us. And so we have gone into more capital-intensive businesses that are good businesses, but wouldn't it be wonderful if we could run the railroad without trains and track and tunnels and bridges a few things. We get a decent return on the capital intensive businesses. We bought most of them at very decent prices, and they've been run very well since we've bought them. We still love a business that takes very little capital and earns high returns and continues to grow and requires very little incremental capital. We can't deploy as much money as we have in doing that. And so is the second best choice still a good choice? The answer is yes. It's not as good as the best choice. The reason we're satisfied with our utility returns and our railroad returns is they're quite satisfactory. And quite satisfactory. I wish we had two more just like them.
CharlieDon't you, Warren?
WarrenYeah, definitely. So the answer is they're good enough and you're asking us to get perfection. get perfection. You've got to spend a lot of money to buy businesses like that, very fewer for sale, and the answer is we have not foregone any opportunity to buy businesses that earn high returns, very high returns on equity capital, or when we could buy them at a sensible price, to buy these other businesses, so they haven't shoved anything else off the table. But you are, you definitely have a job in our capital allocation department. Thank you.