[0:00]
OtherWell, it's 345 in Omaha, and this is the annual meeting of Berkshire Hathaway.
WarrenIt doesn't look like an annual meeting. It doesn't feel exactly like an annual meeting, and it particularly doesn't feel like an annual meeting because my partner is 60 years. Charlie Munger is not sitting up here, and I think most of the people that come to our meeting really come to listen to Charlie. but I want to assure you, Charlie at 96 is in fine shape. His mind is as good as ever, his voice is as strong as ever, but it just didn't seem like a good idea to have him make the trip to Omaha for this meeting. Charlie is really taking to this new life. He's added Zoom to his repertoire. so he has meetings every day with various people and he's just skipped right by me technologically but that really isn't such a huge achievement it's more like you know kind of like stepping over a peanut or something but nevertheless I want you to sure it Charlie is in fine shape and he'll be back next year and we'll we'll try to have everything in the show that we normally have next year a G. Jane also who is the was a vice chairman in charge of insurance safely in New York and again it just didn't not seem worthwhile for him to travel in Omaha for this meeting but on my left we do have Greg Abel and Greg is the vice chairman in charge of all operations except insurance so Greg Greg manages a business that has more than 150 billion in revenues and crosses across dozens of industries and has more than 300,000 employees and he's been at that job a couple of years and frankly I don't know what I'd be doing today if I didn't have a jeaton Greg handling the duties that I was doing only about a quarter as well a couple of years ago so I A lot of thanks to Greg and you'll get exposed to him more as this meeting goes along. The meeting will be divided into four parts in a moment or two. I will talk sort of a monologue with slides. I've never really used slides before. I've taught college classes intermittently, but pretty steadily from 21 to age 88 and I never recall using a single slide but you know who says you can't teach an old dog new trick so we'll see whether you can't or not and I've got a number of slides and I would like you to take you through those in the first section which will start in just a minute and then we'll move on on to the a brief recap of Berkshire's first quarter results now we put
[3:43]
Warrenthose up in the 10 Q which was posted on the internet and Berkshire aathaway.com this morning and and there's lots and lots of detail in there so I'm not going to go through that I'll just have a point out one or two things that may be of interest to you and actually I'll talk a little bit about what we did in April which is something that is new to Berkshire to be that current but I'll give you that then we'll have the the formal meeting which will take maybe 15 or 20 minutes and from there we'll go to Becky quick who for a couple of hours will grill me and Greg on a question she's selected from a huge batch that I'm told she's received they went to Carol Loomis and Andrew Ross Sorkin as well as to Becky but to simplify things we've consolidated all those questions that Becky will ask and like I say we'll go for a couple of hours and and there's no specified cutoff time at present we'll just see how how things develop what's of course on everybody's mind the last two months or so is you know what what's going to be the situation on terms of health in the United States and what's going to be the economy in the United States in the United States in the months and perhaps the years to come and I don't really have anything to add your knowledge on health I in school I I did okay in accounting but I was a disaster in biology and I I'm learning about these various matters the same way you are and I think personally I I feel extraordinarily good about being able to listen to Dr. Fauci who I never heard of a year ago but I think we're very very fortunate as a country to have somebody at 79 years of age who appears to be able to work 24 hours a day and keep a good humor about him and communicate in a very very straightforward matter about fairly complex subjects and tell you when he knows something and when he doesn't know something so I I'm not going to talk about any political figures at all or or politics generally this afternoon but I do feel that that I owe a huge debt of gratitude to Dr. Fauci for educating and informing me actually along with my friend Bill Gates too as to what's going on and I know I get it I get it from a straight shooter when I get it from either one of of those so thank you Dr. Fauci The when this hit us and as I said here in this auditorium was 17 or 18,000 empty seats the last time I was here it was absolutely packed Creighton was playing Villanova and there were 17 or 18,000 whatever it holds
[7:30]
Warrenit was full and there wasn't one person in that crowd this was in January it wasn't one person in that crowd that didn't think that that March Madness wasn't going to occur. I mean, it's been a flip of the switch in a huge way in terms of national behavior, the national psyche. It's dramatic. And when we started on this journey, which we didn't ask for, it seemed to me that it was an extraordinary, very wide variety of possibilities on both the health side and on the economic side. I mean, it was, in other words, DEFCON 5 on one side and DEFCON, one on the other side, and nobody really knows, of course, all the possibilities that there are, and they don't know what probability factor to stick on them. But in this particular situation, it did seem to me that there was an extraordinary range of things that could happen on the health side and they're an extraordinary range in terms of the economy and of course they intersect and affect each other so they're they're bouncing off each other as you go along and I would say again I don't I don't know anything you don't know about health matters but I do think the range of possibilities have has narrowed down someone in that respect. You know, we're not getting a best case and we know we're not getting a worst case. The possibility initially of the virus was hard to evaluate and it's still hard to evaluate. There's a lot of things we've learned about it and a lot of things we know we don't know, but at least we know what we don't know and some very smart people are working on and we're learning as we go along. but the virus obviously has been very transmissible and it's but on the good side and it's not not bad good but it is not as lethal as it might have been we had a we had a Spanish flu in 1918 and my dad and four siblings and his parents went through it and they have a terrific story on March 15th addition of the Omaha World Herald that you can go to Omaha.com and look up. It's also on the first page I believe on Google if you put in Spanish flu Omaha and during that particular time and maybe four months or so Omaha had 9774 I believe deaths and that was a half of 1% of the population and that was a half of 1% of the population and that figure wasn't greatly different than around the country so if you think of a half of one percent of the population now you're talking a million seven or thereabouts people and one fortunately in terms of the worst case this does not appear
[11:08]
Warrento in fact I think it almost ruled out it being as lethal as the Spanish flu was but it's very very transmissible and of course we have the problem we don't know the denominator in terms of exactly how I feel it is because we don't know how many people have had it didn't know they had it but in any event that the range of probabilities on health have narrowed down somewhat I would say the range of probabilities or possibilities and on the economic side are still extraordinarily wide you know we do not know know exactly what happens when you voluntarily shut down a substantial portion of your society in 2008 and 9 our economic train went off the tracks and there were some reasons why the roadbed was weak in terms of the banks and all of that sort of but this time we just pulled the train off the traction and put it on a siding and I don't really know of any parallel of terms of a very very well the most important country in the world most productive huge population in effect sidelining its economy and its workforce and its workforce and obviously and unavoidably creating a huge amount of anxiety and changing people's psyche and causing them to somewhat lose their bearings in some many cases understandably this is quite an experiment and we may know the answer the most of the questions reasonably soon but we may not know the answers to some very important questions for many years so it still has this enormous range of possibilities but even facing that I would like to talk to you about the economic future of the country because I remain convinced as I have I was convinced of this World War II I was convinced of it during the Cuban missile crisis 9-11 the finessellivan financial crisis that that nothing can basically stop America. And we faced great problems in the past. We haven't faced this exact problem. In fact, we haven't really faced anything quite resembles this problem. But we faced tougher problems, and the American miracles, the American magic has always prevailed. prevailed and it will do so again. And I would like to take you through a little history to essentially make my case that if you were to pick one time to be born and one place to be born, and you didn't know what your sex was going to be, you didn't know what your intelligence would be, you didn't know what your special talents or special deficiencies would be, that if you could do that one time, you would not pick 1720,
[15:12]
Warrenyou would not pick 1820, you would not pick 1920. You'd pick today, and you would pick America. And of course, the interesting thing about it is that ever since America was organized in 1789, George Washington took the oath of office, people have wanted to come here. Can you imagine that? I've been out for 231 years. There's always been people that have wanted to come here now. My friend, I think, has jumped just a shade on putting up slide one. But I'm going to call from some slides as we go along. But the interesting thing about this country is what is on slide one. Let's put it up. And this is an extraordinary. an extraordinarily young country. Now, I'm comparing it to a couple of guys that are pretty old, but when you think about the fact that my age, Charlie's age, or our life experience, and then we'll throw in this young guy over here, Greg Abel, and if our life experiences combined exceed the life of the United States, we are a very, very young, country. But what we've accomplished is miraculous. Now, just think of this, there's a little spot in history. And if we'll go to slide two, I've tried to estimate, well, let's go back, and we'll stay with slide two, but the population in 1790, you know, we had 3.9 million people here. And suddenly when you look up census figures, you find out that the they had a big fire in the Department of Commerce Building in 1921, so they lost a lot of the census records. So these are not quite as, there's some things where there's a few gaps, but there were 3.9 million people in the United States. And actually, I've got 0.6 million, it's closer to 0.7 million. There were 700,000 of those people were slays at the time. But those 3.9 million people were one half. were one half of 1% of the population of the planet. And if you'd asked any of those 3.9 million people, any of them, to imagine what life would be like 231 years later, even the most optimistic person, and they could have been drinking heavily and even had a little bit and even had a little pot of them. And they still could not in their wildest dreams have thought that in three lifetimes, Charlie's, mine and Greg's, that in that period, you would be looking at a country with 280 million vehicles shuffling around its roads. Airplanes, maybe not today so much, but they'll be back again, and they were flying people at 40,000 feet, coast to coast, five hours that great universities would exist
[18:57]
Warrenin one state after another, great hospital systems, and entertainment would be delivered to people in a way nobody could have dreamt of in 1790s. This country, in 231 years, has exceeded anybody's dreams. I went to the internet and trying to prepare for this. to prepare for this. And I tried, if you'll move to the next slide, I tried to find out what was the wealth of the country in 1789, our starting point. And I punched in the United States wealth. I tried 1789, I thought it might be a little easier in terms of a round year. And I think four million or so references came up, and I didn't look at all four million, but I can tell you the data collection in those early days on many fronts was not anything like today. You really can't find what I would consider reliable figures. You can find out how many mules there were that how many mules there were in the country and a few things like that, and trying to add them up. But in real estate, you know, when you find them, when you're looking at houses or apartment houses or office buildings, that, you know, they're each slightly different than each other, but they look to comparable sales. So it's hard to find a lot of countries that have been sold. where the wealth has been estimated. But it was interesting to go back and think about the fact that in 1803, we purchased for $15 million. We made the Louisiana purchase that. That's a little later than 1789. But that's the best comp, as they say, in real estate. That's the best comp we could find for land mass anyway. When we purchased, made that purchase, that was equal, incidentally, to about a quarter, about 800,000 plus square miles, but it was about a quarter of what the lower 48 states now contained. So we bought about a quarter of the lower 48 for this $15 million back in 1803. And if you If you live in Texas, and your grandfather is close to dying, and he calls the grandchildren around him. And in his final words, he always says, don't sell the mineral rights. Well, the French told us the mineral rights on that $15 million deal as well. We got that whole strip there. We got all of Kansas and essentially all of Oklahoma. And they produced 21 billion barrels of oil for us and a lot of natural gas since the purchase. One of the sidelines is that we paid our $15 million for the Louisiana purchase. We paid $3 million of it, 20% of it. We paid with a, with $1,000.
[23:10]
Warren200,000 ounces of gold valued at 15 bucks an ounce. And that 3 millionth of the French took. And we got South Dakota as part of the Louisiana purchase and the home state mine up there before it closed, produced well over 40 million ounces of gold and 40 million ounces of gold. And it comes to about $60 billion dollars worth And like I say, 200,000 ounces took care of 20% of our purchase price. So the Louisiana purchase was a bargain, but it's what the going price was for 800,000 square miles, I guess, at the time. And three cents an acre. And so I decided by playing around with various numbers such as that, that it has a reasonable estimate. reasonable estimate of the worth of the country, 1789. A billion was not a crazy figure. Now, if I'd been an academic mission or something, I would have put a billion, 107,400 or something like that. I would have made it look respectable, but it's a wild guess, but it's not a crazy figure. So what has happened? Let's move on to the next slide. To the wealth of the last slide. the country since then. And here we have some figures that come out pretty regularly. Well, they do come out regularly, where the Federal Reserve estimates the net household worth of people in the United States, all the households in the United States. And you can look these up, and you'll see that, you know, there's 30 trillion of stocks, and I think maybe single fans. maybe single-family homes, whatever. There's 82 million or so owner-occupied single families, and maybe 45 million rental apartments and so on. So you started adding all these up, and the Federal Reserve tells us, and I invite you to look at the data, it's kind of interesting, that we now, in the United States, 231 years later, we have 100 trillion, we have more than 100 trillion of household wealth, even though the stock market's gone down somewhat since the last quarterly report. So you say, well, you know, we've got a lot of inflation and everything. We actually, in the United States, for the first half of our existence, roughly, we didn't really have that much inflation. We had inflationary periods and deflationary periods, but the general price level did not change that dramatically. But I will have. We'll assume again for this calculation that there's been 20 for one inflation. It's way less than that in many commodities, and it's very hard to measure and talk about equivalent
[26:38]
Warrenbenefits from different kinds of products and so on and costs. But I think it's reasonable to say that the United States, in real terms, has an increased and wealth, that's something in the area of 5,000 for one, which is really, it's mind-blowing, 5,000 for one in real terms, in a country that had a half a percent of the, and a bunch of raw land. But a vision that, to accomplish that in 231 years, there's just no denying that that that's denying that that that's beyond what anybody could have dream earlier. But it was not done, and this is important, because we've now hit a bump in the road. It was not done without some very, very serious bumps in the road. It was not 231 years of steady progress. And matter of fact, we had been in the in the, in this birth of this country we'd been what into it 72 years and if we go to the next slide uh 1861 we now had about 31 million people with the 1960s that showed around 31 million people thereabouts in the country and four million of them were slaves and we had never really resolved the very much unfinished business of what was involved in the very much unfinished business of what was involved in compromises in 1789 and we'll have more to say about that later. But we had something that that not too many countries experienced. And if you told people in 1789 that in 72 years you were going to have a division that caused the President of the United States at Gettysburg to 702 years, you were going to have a division that caused the President of the United States at Gettysburg to say that testing whether that nation or any nation so conceived and dedicated can long endure imagine the President of the United States wondering aloud whether the country that he was presiding over could long endure only 72 years or 74 years at Gettysburg had taken place so all While this marvelous dream was being played out, roughly a third of the way through it, we faced this, this really moment of decision. And we entered into a contest that, if we'll go to the next slide, I made an estimate, then literally killed roughly 6% of the next slide, we made an estimate. that literally killed roughly 6% of the males in the country who were between 18 and 60. I'm assuming that there were more than 600,000 deaths in the war. And I think it's a reasonable estimate that that 18 to 60 group was males were by far the proportion. So imagine 6% of your working prime age males in a country are wiped out in four years.
[30:55]
WarrenSo when we look at the progress of this country, then we think of our own problems now, I just ask you to ponder. And we'll move to the next slide. That would be equivalent today to having four million males been that same age group similarly wiped out. So that was one incredible interruption which this country nevertheless worked through while compiling this American dream that is one of the wonders of the world, perhaps the wonder of the world, perhaps the wonder of the world in many senses. Let's move on to another crisis of a different sort that hit the country. And this, of course, is the 1929 crash, which led to the Great Depression. And here, the Dow Jones average, which we'll use through this, at that time, that's the one everybody paid attention to, actually. The second most important average at that time, if you look at the papers, was an New York Times average, which has disappeared. And of course, the standard and pores has probably regarded as a superior yardstick. But the Dow Jones is a perfectly adequate yardstick. And on September 3rd, 1929, the Dow Jones average closed at 381, 17, and people were very happy. And buying stocks on margin had worked wonderfully in the roaring 20s. had a good feeling to it with the auto coming of age and the day of air travel coming along and all kinds of new appliances and the telephone getting wider use, pretty good or not, but hadn't really caught on that much prior there too. But the movies were coming on. It was a happy place. And then, of course, if we'll move to the next slide, we'll look at what happened in the couple of months. after September 3rd, and the Dow Jones average almost got cut in half. And that was pretty impressive until we had this recent situation where, in a shorter period of time, we lost about a third. But the crash, and there's a great book about it, called The Great Crash by John Kenneth Galbra. I'm going to interject one little plug here. There's a small big. business in all mon. I hate what this, what truncating this meeting or changing so dramatically has done to many of the businesses in all more because I think small businesses beneficiary were the beneficiaries of a really, they got a lot of business with the Berkshire meeting and they're going to get it in the future. But they suffer during a period like this. And they just had a story about the bookworm. Well, the bookworm, if you buy any books that come out of anything I recommend,
[34:31]
WarrenAnd think about just putting bookworm in Omaha. And the Great Crash is a wonderful book. And John Calvert describes it. But I would like to get into a bit of a personal note, which will have some relevance, not too much, but some relevance to the story of the Great Depression. Because in 1920, my dad, who was 26 years of age then, was employed as a security salesman by a local small bank. And he sold stocks and bonds, but he mostly sold stocks. And when stocks fall, 48%, and they were selling them to people a few months ago, you really don't feel like going out and facing those same people. So I think most people. my dad probably elected to do, as they say now, shelter in place, which means stay at home. And there really wasn't that much in our house. We just had a small yard. It was wintertime anyway. My dad wouldn't have been puttering on the yard anyway. And it really wasn't, you know, television wasn't there. And he and my mother got along very well. got along very well. So under those conditions, if you'll turn to the next slide, I was born about nine months later. But at that time, I was actually born on August 30th, but the stock market was closed that day, and so I'm using the previous day figures. But it wasn't, I didn't notice at the time that the market was closed, but the stock market had actually recovered. over 20% during that nine-and-a-half-month period or thereabouts. People did not think in the fall of 1930, they did not think they were in the Great Depression. They thought it was a recession very much like had occurred at least a dozen times, although not always when stock markets were important. But we'd had many recessions in the United States over the time. And this didn't. not look like it was something dramatically out of the ordinary. But and for a while, actually for about 10 days after my birth, that view held on with and the stock market actually managed to go up all of 1 or 2% there in those 10 days. But that's the last day. Well, from that point, point, if you'll turn to the next slide, the stock market went from the level of 240 to 41, which was a noticeable decline because if somebody had given me $1,000 on the day I was born and I'd bought stocks with it and bought the Dow average. My $1,000 would have become $170 in $1,000. in less than two years. And that is something that none of us ever experienced that we may have had it with one stock occasionally, but in terms of having a broad range of America marked down 83% in two years and marked down 89% of the peak that was in September 3rd, 1929, was extraordinary.
[38:47]
WarrenIt was extraordinary. And in that intervening period, less than one year after I was born, just slightly less than one year, my dad went to the bank where he worked and had his account. And of course, the bank had a sign on a closed. And so he had no job. And he had two kids at that point. And his father had a grocery store, but Charlie and I both worked for my grandparents. My grandfather, Charlie worked there in 1940. I worked there in 1941, so we didn't know each other. But my grandfather said to my father that, don't worry about your groceries. I already says, I'll just let your bill run. My grandfather's not exactly. He was, he cared about his family, but he wasn't going to go crazy. And one of the things as I look back on that period, and I don't think the economists general I'd like to give it that much of a point of importance, but if we'd had the FDIC, 10 years earlier, the FDIC started on January 1, 1934, it was part of the sweeping legislation that took place when Roosevelt came in. But if we'd had the FDIC, we would have had a much, much different experience, I believe, in the Great Depression. and people blame it on smooth haul here. I mean, there's all kinds of things and the margin requirements in 29. And all of those things entered into creating a recession. But if you have over 4,000 banks fail, that's 4,000 local experiences where people save and save and save and put their money away, and then someday they reach forth and it's going. reach for it and it's gone. And that happens, you know, in all 48 states, and it happens to your neighbors and it happens to your relatives. It has to have an effect on the psyche. That's incredible. So one very, very, very good thing that came out of the depression, in my view, is the FDIC. And it would have a have been a somewhat different world, I'm sure. The bank failures hadn't just rolled across this country and with people that thought that they were savers found out that they had nothing when they went there and there was a sign that said closed. Incidentally, the FDIC, I think very few people know this, but, or at least they don't appreciate it. the FDIC has not cost the American tax paradigm. I mean, its expenses have been paid, its losses have been paid all through assessments on banks. It's been a mutual insurance company of the banks backed by the federal government associated with the federal government.
[42:21]
WarrenBut now it holds $100 billion, and that consists of premiums that were paid in and investment income on the premiums, less the expenses, and paying of all the losses, and think of the incredible amount of peace of mind that's given to people that were not similarly situated and when the Great Depression hit. So the Great Depression went on and it lasted a very long. a very long time, but it lasted a lot longer in the minds of people than it did actually in its effects. World War II came along. And on sort of an involuntary manner, we adopted Keynesianism. We started running fiscal deficits, of course, that were absolutely huge and took our debt up to a percentage of GDP, which we've never reached, had never reached before, and never reached since. since. So we had an enormous economic recovery, but the minds of people had been so scarred the memories. Parents told their children, 1929 became a symbol in people's minds. I mean, if you said 1929, it was like saying 1776 or 1492. I mean, everybody knew exactly what you were talking about and it affected stock prices in a rather remarkable way to the point. If you'll change to the next slide, it was January 4th of 1951 that the kid who was born on August 30th in 1930 had finished college before the stock market got back to where it was at that earlier time. So take the years from 1920, 1930, or 1929, really, to 1951, or take the year from my birth, 20 years, and bear in mind that, you know, the country was only 140 years. Old wind of the start of that, that's 20 years out of this amazing 231-year lifetime of our country that was flat out, you know, a time of, for a long time of no economic growth and no feeling by people in terms about the wealth of the country, about what American economy was worth, but all these corporations that were doing far, far, far better than they were all in all. But it took all of that time to restore in the market a price level that was equal to what it was when I was born 20 years earlier. So if you think about the fact that we're enduring a few months, and we'll endure many more months, but, and we don't know how it comes out, and people in the 30s didn't know how it was going to come out, but they endured, persevered, prospered, and the American miracle continued. But it's interesting in that I actually don't have a slide for the next one because last night I was thinking, after all the slides had been prepared, I was actually thinking about this a little later, a little bit, and I remembered that in 19, at the start of 1954, the stock market was, the Dow was only at about 280, and I remember 1954 because it was the best year I ever had.
[46:51]
Warrenthe stock market and the Dow went from essentially what to 280 or thereabouts at the start of the year to a little over 400 at the end of the year and when I went to 400, as soon as it went across 381 that famous figure from 1929 when I went to 400 this will be hard for some of you to believe but everybody wondered is this 1929 all over again and it seems a little far-fetched because it was a different country in 1954 but that was the common question and it actually achieved it was it achieved such a level of worry about whether we were about to jump off another cliff just because the 381 of 199 29 have been succeeded, exceeded that they held Senator Fulbright, both Fulbright of Arkansas, who became very famous later in terms of the Foreign Relations Committee, but he added the Senate Banking Committee, and he called a special, for special investigation, and he called it the, what do you call it, the stock market study, but it really, if you read through it, he really was questioning whether we had built a another House of Cards again. And on his committee, it's interesting to see the Senate Finance Committee, one of the members was Prescott Bush, the father of George H.W. Bush and grandfather of George W. Bush, and had some illustrious names. And his committee, in March of 1955, with the Dow at 405, assembled 20 of the best minds in the the United States to testify as to whether we were going crazy again because the market was at 400, the Dow was at 400, and we'd gotten in this incredible trouble before. But that was the mindset of the country, it's incredible. We didn't really believe America was what it was. And my boss, the reason I'm familiar with this 1,000-page book that I have here, and I found it last night, in the library, I never, was that I was working in New York for one of the 20 people that was called down to testify before Senator Fulbright, and he testified right before Bill Martin, who was running the Federal Reserve, testified, and right after General Wood, who was running Seres, testified Sears was very, very important then, and Bill Martin, of course, is the fellow that, the longest running chairman in the history of the Fed, and he's the one that gave the famous quote about the function of the Fed was to take away the punch balls just when the party started to get really warmed up. But Ben, Graham, my boss, sent me over to the public library in New York and to gather some information for him.
[50:24]
WarrenSomething you could do in five minutes with the computer now, and I dug out something, and he went to testify. And on page 545 of this book, I knew where to look. I didn't have to go through at all, but he had the quote which I remember. And I remember, because Ben Graham was the, one of the three smartest people I've met in my life, and he was the dean of people in securities business. He wrote the classic security analysis book in 1934. He wrote the book that changed my life, the challenge investor in 1949. He was unbelievably smart. And when he testified, the Dow at 404, he had one line in there right toward the start in his written testimony, and he said, the stock market is high, looks high, it is high, but it's not as high as it looks. But he said, it is high. And since that time, if we'll turn to the next slide, of course, we felt the American tailwind at full force. And the Dow, well, let's see, we, yeah, when the Dow was, went down Friday, but when we made the slide, it was about 24,000, so you're looking at a market today that has produced $100 for every dollar. All you did was had to believe in America and just buy a cross-section of America. You didn't have to read the Wall Street Journal. You didn't have to look up the price of your. stock, you didn't have to pay a lot of money and fees to anybody. You just had to believe that the miracle was intact. But you'd had this testing period between 1929 and, well, really, certainly 1954 is indicated by what happened when it got back up to 380. You had this testing period, and people really, they'd lost faith to some degree. They just didn't see the potential of what America could do. And we found that nothing can stop America when you get right down to it. And it's been true all along. It may have been interrupted with the scariest of scenarios when you had a war with one group of states fighting another group of states. And it may have been tested again in the Great Depression. and it may be tested now to some degree. But in the end, the answer is never been against America. And that, in my view, as true today as it was in 1789, and even was true at the, during the Civil War and the depths of the Depression. Now, I'm now about to say something that, that don't change the slide yet, but I don't change the slide yet, I'm not about to say something that some of you will be tempted to argue with me about,
[53:57]
Warrenbut I wouldn't make the case that we are imperfect in great, great, very many ways. But I would say, and if you put up the next slide, that we are now a better country, as well as an incredibly more wealthy country than we were in 1789. We're far, far, far from what we should be. will be, but we have gone dramatically in the right direction. It's interesting, we said in 1776, we owe these truths to be self-evident that all men are created equal, endowed by their, or doubt by their creative, certain unalienable rights. Among these are life, liberty, and pursuit of happiness. And yet, 14 years later, A year after we officially began the country in 1789, adopted a constitution, we found that more than 15% of the people in the country were slaves. And we wrestled with that, but when you say the word self-evident, that sort of sounds like you're saying any damn fool can recognize that, and you certainly say, you can actually maybe a little bit about life and the pursuit of happiness, but I don't see how in the world anybody can reconcile liberty with the idea that that 15% of the population was enslaved. And it took us a long time to, at least partially correct that it got me, took a civil war. It took losing 6% of those people. that the males that were between 18 and 60 years of age. But we've moved in the right direction. We've got a long ways to go, but we've moved in the right direction now. In addition, going back again to that 1776 statement, that all men are created equal and endowed by their creator, etc. I think it was self-evident to the 50% of the population. that they were getting a fair deal for over half the lifetime of the country. It took 131 years of our countries, 231 years. It took 131 years until women were guaranteed the right to vote for our country's leaders. And then what's even more remarkable is that after we adopted the 19th Amendment, 1920, It took 61 more years until a woman was allowed to join those eight males on the Supreme Court. I grew up thinking that the Supreme Court, you know, must have been so, said it had to be nine men. But it, it, it's 61 years, so it took 192 years before Sander Day O'Connor was appointed to the court. And now you can say that, that there was a pipeline problem. Half the population may have been women in 1920, but they weren't half the lawyers or 10% of the lawyers probably. So you can understand some delay,
[58:16]
Warrenbut 61 years is a long time to go and to pick 33 males in between. If that was entirely by chance, the odds against that, you were flipping coins is about $8 billion to one. Like I said, there was a pipeline problem. But it took us a long, long time. And it's not done yet. But I think it does give meaning to the fact that we are a better society with a lot of room to go. But we are a better society than existed in 1789. You know, when you go to Colonial Williamsburg, you know, you have that, I've been there a couple of times. As a matter of fact, I've been there a couple of times. As a matter of fact, I watched the debate between Jimmy Carter and Gerald Ford there in 19776. And, you know, it was not a great time to be black. It was not a great time to be a woman. And both of those categories still have certainly got potential for significant improvement in terms of of fulfilling that pledge made in 1776 about how we believe that it's self-evident all men created equal. But we have made progress. We are a better society, and we will, as the years go by, if you'll move to the next slide. And I believe that, and I think I can get these slides in the proper order here. proper order here. I believe that when you get through evaluating all of the qualitative facts, what we have done toward meeting the aspirations of what we wrote in 1776, what was, we wrote in 1776 wasn't a fact. But it was an aspirational document, and we have worked toward those aspirations. And we have a long way to go, but I'll repeat if you'll move to the next slide that never. never got against America. Now, let's move on now to a much broader subject, what I don't know. And I don't know. And I don't know with a bias. I don't believe anybody knows what the market. I do tomorrow, next week, next month, next year. I know America is going to move forward over time. But I don't know for sure. And we learn this on September 10th to do. 2001 and we learned it a few months ago in terms of the virus. Anything can happen in terms of markets. And if you, you can bet on America, but you have to be careful about how you bet. Because simply because markets can do anything on October, whatever it was in 1987, October. 11th, I believe, Monday. The markets went down 22% in one day. In 1914, they closed the stock market for about four months. After 9-11, closed the market for four days. We hustled to get it going again.
[1:02:37]
WarrenBut nobody knows what's going to happen tomorrow. So when you bet them, I tell you to bet on America, and I tell you that's what's really got me through ever since I was bought my first doc when I was 11. I mean, I caught a huge, huge, huge tailwind in America, but it didn't, wasn't going to blow in my direction every single day and you don't know what's going to happen tomorrow. And I would like to, in the context of the present news, point out something you may find kind of interesting. If you go to YouTube, you'll find on June 17th of 2015, four plus years ago, he'll find Sam Nunn, who's one of the people I admire the most in the United States, in the world, enormous patriot, tremendous senator. And he's carried on thankless work since leaving the Senate. since leaving the Senate, and I'd say heading something called the Nuclear Threatter Initiative, which most of you haven't heard of, but I've been slightly involved. And it's Samn unfounded that. And the Nuclear Threat Initiative, simply organizations that devoted to trying to reduce the chances of something of a nuclear chemical, biological, and now cyber nature from either malevolent or accidental or whatever it may be, from causing deaths to millions of Americans. And among the things, Sam co-founded it, but he's been the heart and soul of the organization subsequently. And he's talked about, worried about, pandemics among among, along with a nuclear threat. nuclear threat for decades. And he's participated in war games where they play out various scenarios, including malevolent pandemics that could be started by the same kind of nut that sent the anthrax letters in around 9-11 a little after. And Sam paired on this YouTube presentation, and I'm sure he's been on many others, I just happened to look this one up, and talked about the dangers of a pandemic, and anybody should listen to Sam on any time he talks. So I, he said at that time, germs don't have borders, which we've certainly learned in the last couple of months. And I, when I clicked on YouTube, if you'll go to the next, I found out that it had recently. it had 831 views. And this was only a few days ago, I looked it up, and maybe, I don't know whether most of those views have just been the last few days, because the last few months, I should say, because of the interest in pandemics. But it is hard to think about things that haven't happened yet.
[1:06:28]
WarrenAnd so we can experience, you know, when, when, when, you know, when, when, you know, something like the current pandemic happens. It's just, it's hard to factor that in, and that's why you never want to use borrow money, at least in my view, margin to buy into investments. And we run Berkshire that way. We run it so that we literally try to think of the worst case of not only just one thing going wrong, but other things going wrong at the same time. Maybe partly caused by the first, but maybe. maybe independent even of the first. And, you know, you learned in, I don't know what grade now, probably earlier than when I went to school, but in fifth or sixth grade, that anything, you're going to have any series of numbers times zero and just need one zero in there, and the answer is zero. And there's no reason to use borrow money to participate in the American tailwind, but there's every other reason to participate in the American tailwind, but there's every other reason to participate Now, I can't resist pointing out that in October of 2019, a large 300-page, got it right here, a book was brought out. And Johns Hopkins, one of the most respected institutions, the country, the nuclear threat initiative, NTI, and the Intelligence Group at the Economist, and the Intelligence Group at The Economist, to evaluate the problems of the worldwide preparedness for pandemics, essentially. And I think in November, Sam came out to see me with Ernie, or he's former Secretary of Energy, who now is the CEO of the of NTI, he and Sam are co-chairman, and Beth Cameron, who did a lot of work on this report, came out to see me. And they gave me, in November, I believe, of last year, they gave me this appraisal. And the opening line, if you'll turn the page, this is the opening line of this 300-page tome, biological threats, natural, intentional, or accidental, in any country, can pose risk to global health, international security, and the worldwide economy. And this book was prepared in order to evaluate the preparedness of the various countries and rank them. We ranked pretty well, but all of us got a failing, all of the country's got a failing grade, basically. Now, you would think with the prestige of Johns Hopkins and the economists along with people like Sam and Ernie, et cetera, that this would have gotten some attention. And again, Sam, he'll turn the next page, Sam and the others went on YouTube on October 24th, 2019,
[1:10:04]
Warrenand they have racked up, as of a couple days ago, 1,498 views. Now, my friend Bill Gates was delivering the same warning at a TED talk some years back, and he's gotten a lot more views, but it just says something about the fact that you're going to get both from the blue, and you can read papers about them and you can talk about what will happen if some, as they used, the fellows at Sigma, Solomon used to tell me, some 25 Sigma event comes along, and they, you know, they'd say this, that'll happen once in the life of the universe, you know, and then it happens to them a couple of times in a month and they go broke. It, you just don't know what's going to happen, you know, at least in my view, you know, know that America's tailwind is not exhausted. You're going to get a fine result if you own equities over a long period of time. The idea that equities will not produce better results than the 30-year Treasury bond, which yields one and a quarter percent now, it's taxable income. It's the aim of the Federal Reserve. of the Federal Reserve to have 2% of your inflation, equities are going to outperform that bond. They're going to outperform Treasury bills. They're going to outperform that money you've stuck under your mattress. I mean, they are an enormously sound investment, as long as they're an investment, and they're not a gambling device or something that you think you can safely, you know, buy on margin. or whatever it may be. It's interesting that stocks offer, which, and stocks are a, we always look at stocks, just being a part of a business. I mean, stocks are a small part of a business. If in 1789 you'd saved a small amount of money and it wasn't easy to save. You might have bought, with those savings, you might have bought a tiny, tiny, tiny plot of property. Maybe you bought a house that could be rented to somebody, but you didn't really have the chance to buy in with 10 different people who were developing businesses and who were presumably putting their own money in and that would have the American tail went behind. And of the 10 to 10, a reasonably high percentage would succeed in a way and earn decent returns. But those are the choices you might have had to do with savings. And they started offering bonds originally, and there again, you got a limited return, but the return may have been, in those days, may have been 5% or 6% or something of the sort,
[1:13:33]
Warrenbut you can't buy risk-free bonds. I mean, the yardstick for me is always the US Treasury in. And when somebody offers you quite a bit more than the US Treasury, there's usually a reason that there's more risk. But going back to stocks, people bring the attitude to them too often that because they are liquid and quoted minute by minute, that it's an important, that you develop an opinion on them minute by minute. Now, that's really foolish when you think about it. But, and that's something Graham taught me in 1949. I mean, that single thought, stocks were parts of businesses and not just little things that moved around on charts, or charts were very popular in those days, and whatever it may be. Imagine for a moment that you decided to invest money now, and you bought a farm. And the farmland around here, let's say you bought 160 acres, and you bought it at X per share. or per acre. And the farmer next you had 160 identical acres, same contour, you know, same quality of soil quality, so it was identical. And that farmer next door to you was a very peculiar character. Because every day that farmer with the identical farm said, I'll sell you my farm, or I'll buy your your farm at a certain price, which he would name. Now, that's a very obliging neighbor. I mean, that's got to be a plus to have a fellow like that with the next farm. You don't get that with farms. You get it with stocks. You want a hundred chairs of General Motors. On Monday morning, somebody will buy your 100 chairs or sell you another 100 chairs at exactly the same price. And that goes on five days a week. five days a week. But just imagine if you had a farmer doing that. When you bought the farm, you looked to what the farm would produce. That was what went through your mind. You were saying to yourself, I'm paying X dollars per acre. I think I'll get so many bushels of corn or soybeans. On average, some year's good, some year's bad, some years the price will be good, some years the price will be bad, etc. But you think about the potential of the farm. And now you get this idiot that... that buys a farm next to you. And on top of that, he's sort of a manic depressive and drinks, maybe smokes a little pot. So his numbers just go all over the place. Now, the only thing you have to do is to remember that this guy next door is there to serve you and not to instruct you. You bought the farm because you thought the farm was
[1:16:54]
Warrenhad the potential. You don't really need a quote on it. You know, if you bought in with John D. Rockefeller or Andrew Carnegie and there were never any quotes later on. But basically, you bought into the business, and that's what you're doing when you buy stocks. But you get this added advantage that you do have this neighbor, who you're not obliged to listen to at all, who is going to give you a price every day, and he's going to have. his ups and downs and maybe he'll name a selling price that they'll buy at, in which case you sell if you want to. Or maybe he'll name a very low price and you'll buy us far from him. But you don't have to, and you don't want to put yourself in a position to where you have to. So stocks have this enormous inherent advantage of people yelling out prices all the time to you. And many people people turn that into a disadvantage. And of course, many people can profit in one way or another from telling you that they can tell you what this farmer is going to yell out tomorrow or next, your neighboring farmers going to yell out tomorrow or next week or next month. There's huge money in it. So people tell you that it's important and they know and that you should pay a lot of attention to their thoughts about what price changes should be. Or you tell yourself that you should this thing. there should be this great difference. But the truth is if you owned the businesses you liked prior to the virus arriving, it changes prices and it changes, but nobody's forcing you to sell. And if you really liked the business and you like the management you're in with, and the business hasn't fundamentally changed, and I'll get to that little one I'll report on Berkshire, which I will soon, I promise. The stocks have an enormous advantage and you still can bet on America, but you can't bet, unless you're willing and have an outlook to independently decide that you want to own a cross-section of America, because I don't think most people are in a position to pick single stocks. A few may be, but on balance, I think people are much of better off buying a cross-section America and just forgetting about it. If you've done that, if I'd done that when I got out of college, it's all I had to do to make a hundred per one and collect dividends on top of it, which increased substantially over time. The American tailwind is marvelous. American business represents and it's going to have interruptions
[1:19:49]
Warrenand you're not going to foresee the interruptions and you don't not want to get yourself in a position where those interruptions can affect. you either because you're leveraged or because you're psychologically unable to handle looking at a bunch of numbers. If you really had a farm and you had this neighbor, and one day he offered you $2,000 an acre, and the next day he offers you $1,200 an acre, and maybe the day after that he offers you $800 an acre, are you really going to feel that at $2,000 an acre when you had evaluated it When you had evaluated what the farm would produce, are you going to let this guy drive you into thinking I better sell because his number keeps coming in lower all the time. It's a very, very, very important matter to bring the right psychological approach to owning common stocks. But I will tell you if you bet on America and sustain that position for decades. you're going to do better than, in my view, far better than owning treasury securities, or far better than following people who tell you what the farmer's going to yell out next. There's huge amounts of money that people pay for advice they really don't need. And for advice where the person giving it can be very well meeting in it and believe their own line. line, but the truth is that you can't have, you can't deliver superior results to everybody by just having them trade around a business. If you want into a business, it's going to deliver what the business produces and the idea that you can outsmart the person next to you or that the person advising you can outsmart the next, the person sitting next you is, well, it's really the wrong approach. So find businesses, get a cross-section. In my view, for most people, the best thing to do is the only S&P 500 index fund. People will try and sell you other things because there's more money in it for them if they do. And I'm not saying that that's a conscious act on their part. Most good salespeople believe their own baloney. I mean, that's part of being a good salesperson, and I'm sure I've done plenty of. that in my life too. But it's very human. If you keep repeating something, often that's why lawyers get, the witnesses keep saying things over and over again, at the time they get on the witness stand, they'll, they'll believe it whether it was true in the first place or not. But the, you are dealing with something fundamentally advantageous, in my view, in owning
[1:22:52]
Warrencommon socks. I will bet on America the rest of my life, and I hope my successors. successors at Berkshire do it. Now, we do it in two different ways. We do it by buying entire businesses, and we buy parts of businesses. And I would like to emphasize that, well, I'd like to give you a few figures that will tie in from our activities in the first quarter and also what we've done in April. We are not right about, we do try to pick businesses that we think we understand. We don't buy the S&P 500, and we like to buy the entire businesses when we buy them. But we don't get a chance to do that very often. Most of the best businesses are not available for sale in their entirety. But we don't mind in the least buying partial interests in the least, buying partial interests and businesses and we would rather own six or seven or eight percent, you know, a wonderful company and regard it as a partnership interest essentially in that company. And we get an opportunity to do that through marketable securities and sometimes we get more opportunities than others. And with that, I hope I've convinced you to bet on America. I'm not saying that this is the right time to buy stocks. If you mean by right, that they're going to go up instead of now, I don't know what they're going to go in the next day or week or month or year. But I hope I know enough to know. Well, I think I can buy a cross-section and do fine over 20 or 30 years. And I may think that's kind of for a guy, 89, that's kind of optimistic viewpoint. But I hope. that really everybody would buy stocks with the idea that they're buying partnerships and businesses and they wouldn't look at them as chips to move around up or down. So we will just now take a quick look. And I see we've got the Becky's email address. So if you have questions on what I've said or other things, you can email these. questions and she is back there probably sort of a madhouse trying to handle questions coming in and pick out the one she's going to prioritize but but feel free to do anything I've talked about so far to send along to her and we'll keep her address up when I later hold the formal part of the meeting too very briefly in terms of Berkshire in the first quarter you'll put up we have the slides on that there we are we are we are operating earnings were and there's much more about this in the 10 Q and it's really not worth spending any real time on
[1:26:25]
Warrenbut the operating earns for the first quarter have no meaning whatsoever in terms of forecasting what's going to happen the next year and I don't know the consequences of shutting down the American economy. I know eventually it will work whatever we do. We may make mistakes. We will make mistakes and I'm not during this talk and later on I'm not going to be second-guessing people on this because nobody knows for sure what any alternative action would produce or anything sort. But what we do know is that for some period, certainly during the balance of the year, but it could go on a considerable period of time. Who knows? But our operating earnings will be less, considerably less, than if the virus hadn't come along. I mean, it hurts some of our businesses a lot. I mean, you shut down. Some of our businesses effectively have been shut down. It affects others much less. are three major businesses of insurance and the BNSF railroad railroad and our energy business. Those are our three largest by some margin. They're in a reasonably decent position. They will spend more than their depreciation. So some of the earnings will go along with depreciation. We'll go toward increasing fixed assets, but basically these businesses will produce cash, even though their earnings declined somewhat. And if we'll go to part two, we'll venture we keep ourselves in an extraordinarily strong position. We'll always do that. That's just, that's fundamental. We insure people, we're a specialist to some extent, and a leader, it's not our main business, but we sell structured settlements. settlements. That means somebody gets in a terrible accident, usually an auto accident, and they're going to require care for 10, 30, 50 years. And their family or their lawyer is wise enough, in our view, rather than take some big cash settlement, to essentially arrange to have money paid over the lifetime of the individual to take care of their medical bills or whatever may be. or whatever may be. And we're a large, we've got many, many, many people that, in effect, have staked their well-being on the promises of Berkshire to take care of them. But like I say, 50 years or longer into the future. Now, I would never take real chances with money under other people's money under any circumstances that both Charlie and I come from a back. background where we ran partnerships. I started mine in 1956 for really seven, either actual family members or the equivalent.
[1:30:06]
WarrenAnd Charlie did the same thing six years later. And we never, neither one of us, I think, I know I didn't. I'm virtually certain the same is true of Charlie. Neither one of us ever had a single institution investment with us. with us. I mean, every single bit of money we managed for other people was from individuals, people with faces attached to them, or entities, or money with faces attached to them. And so we've always felt that our job is basically that of a trustee and hopefully a reasonably smart trustee in terms of what we were trying to accomplish. But the trustee aspect has been very important. It's true for the people with the structured settlements. It's true for up and down the line, but it's true for the owners very much too. So we always operate from a position of strength. Now, I show on a slide that's up, I show our, let's go back one, yeah, I show our net, our cash and treasury bill position on March. on March 31st. And you might look at that and say, well, you've got 125 billion or so in cash and treasury bills, and you've got, at least at that point, we had about a hundred and, I don't know, 180 billion or so in equities. And you can say, well, that's a huge position having treasury bills versus just 180 billion in equities. But we really have far more than that in equities because we own a lot of businesses. of businesses. We own 100% of the stock of a great many businesses, which to us are very similar to the marketable stocks we own. We just own them all. They don't have a quote on them. But we have hundreds of billions of wholly owned businesses. So they are 124 billion. It's not a, not some, you know, 40% or so cash positions is far less than that. And we will always keep plenty of cash on. on hand and for any circumstances, if a 9-11 comes along, if the stock market is closed as it wasn't World War, one, it's not going to be. But, you know, I didn't think we were going to be having a pandemic when I watched that great in Pelanova game in January either. So we want to be in a position at Berkshire where, well, you remember Blanche DuBwan and a street car named Desire. that goes back before many of you. But she said she didn't want them. In Planch's case, she said that she's dependent on the kindness of strangers. And we don't want to be dependent on the kindness of friends even because there are times when money almost stops. And we had one of those, interestingly enough.
[1:33:26]
WarrenWe had it, of course, in 2008 and 9, but right around the day or two, leading up to March 23rd, we came very close, but fortunately we had a Federal Reserve that knew what to do. But money was, investment-grade companies were essentially going to be frozen out of the market. But CFOs all over the country have been taught to sort of maximize returns on equity capital. So they financed themselves to some extent through commercial paper because that was very cheap and it was backed up by bank lines and all of that. And they let the debt creep up quite a bit of many companies. And then, of course, they had the hell scared out of them by what was happening in markets, particularly the equity markets. And so they rushed to draw down lines of credit. And that surprised the people who extended those lines of credit. They got very nervous. And the capacity of Wall Street to absorb a rush to liquidity that was taking place in mid-March was strained to the limit to the point where the Federal Reserve of observing these markets decided they had to move in a very big way. We got to the point where the U.S. Treasury market, the deepest of all markets, got somewhat disorganized. And when that happens, believe me, every bank and CFO and the country knows it, and they react with fear, and fear is the most contagious. A disease you can imagine. And it makes the virus look like a piker. And we came very close to having a total freeze of credit to the largest companies in the world who were depending on it. And to the great credit of Jay Powell, I've always had Paul Volker up on a special place, special pedestal, in terms of Federal Reserve Chairman over the years. We've had a lot of them, very good Fed chairman. I had him at the top of the list and I'll recommend another book. Paul Volker died about here, I don't know, less than maybe a year or a little less, but not much before he died. He wrote a book called Keeping at it. And if you call my friends with the bookworm, I think you'll enjoy reading that book. Paul Volker was a giant. In many ways, he was a big guy too. He and Jay Powell couldn't see more in. and temperament or anything. But Jay Powell, in my view, and the Fed Board, along up there on that pedestal, with him, because they acted in the middle of March. Probably somewhat instructed by what they'd seen in 2008 and 9, they reacted in a huge way and essentially allowed what's happened since the
[1:37:12]
Warrenthat time to play out the way it has. March, where the market had essentially frozen, closed a little after mid-month, ended up because the Fed took these actions on March 23rd. It ended up being the largest month for corporate debt issuance, I believe in history. And then April followed through and was even a, with even a larger month. And you saw all kinds of companies. grabbing everything, coming to market, and spreads actually narrowed. And every one of those people that issued bonds in late March and April, I sent a thank you letter to the Fed because it would not have happened if they hadn't operated with really unprecedented speed and determination. And we'll know the consequences of swelling the Fed's balance sheet. balance sheet. You can look at the Fed's balance sheet. They put it out every Thursday. It's kind of interesting reading if you're sort of a not like me. But it's up there on the Internet every Thursday. And you'll see some extraordinary changes there in the last six or seven weeks. And like I say, we don't know the consequences of that. And nobody does exactly. And we don't know the consequences of what undoubtedly will have to do. But we do know the consequences of doing nothing. And that would have been the tendency of the Fed in many years past, not doing nothing, but doing something in that. But Mario Draghi, you know, brought the whatever it takes to Europe. And the Fed in mid-March sort of did whatever it takes squared. And we owe a huge thank you. But we're prepared at Berkshire. We always prepare on the ad. on the basis that maybe the bed will not have a chairman that acts like that. And we really want to be prepared for anything. So that explains some of the $124 billion in cash and bills. We don't need it all. But we do never want to be dependent on not only the kindness of strangers, but the kindness of friends. Now, in the next slide, we have the what we did in inequity, inequities and these numbers are tiny when you get right down to it. I mean, for having $500 billion or so in net worth, I mean, not in net worth, but in market value at the start of the year, or something close to that. You know, we bought in $1.7 billion of stock, and our purchases were a couple of billion more than our sales of equities. As you saw in the previous slide, we had operating earnings of almost $6 billion. And so we did very, very little in the first quarter.
[1:40:39]
WarrenAnd then I've added another figure which I wouldn't normally present to you, but I want to be sure that if I'm talking to you about investments in stocks, more than I usually have, I want you to know what Berkshire is actually doing now. You'll see in the month of April that we, that we net sold $6 billion or so of securities. And that's basically, that isn't because we thought the stock market was going to go down or anything of this order because somebody changes their target price or they change this year's earnings forecast. I just decided that I'd made a mistake in evaluating as an understandable mistake was a probability weighted decision. decision when we bought that we were getting an attractive amount for our money when investing across the airlines business. So we bought roughly 10% of the four largest airlines. And we probably, this doesn't, not 100% of what we did in April, but we probably paid $7 or $8 billion, somewhere between $7 or $8 billion. somewhere between $7 and $8 billion, to own 10% of the four large companies in the airline business. And we felt for that we were getting a billion dollars roughly of earnings. Now it wasn't getting a billion dollars of dividends, but we felt our share of the underlying earnings was a billion dollars, and we felt that that number was more likely to go up and down over a period of time that it would be cyclical, obviously. But it was as if we bought the whole company, but we bought it for through the New York Stock Exchange, and we can only effectively buy 10% roughly of the four. And we treated mentally exactly as if we were buying a business. And it turned out I was wrong about that business because of something that was not in any way the fault of four excellent CEOs. I mean, believe me. me, no joy being a CEO of an airline. But the companies we bought were well managed. They did a lot of things right. It's a very, very, very, very difficult business because you're dealing with millions of people every day. And if something goes wrong for 1% of them, they are very unhappy. So I don't envy anybody the job of being CEO of an airline, but I particularly don't enjoy him being in a period like this essentially nobody and people have been told basically not to fly. I've been told not to fly for a while. I'm looking forward to flying. I may not fly commercial, but that's another question. But the airline business, and I may be wrong and I hope I'm wrong,
[1:43:52]
Warrenbut I think it changed in a very major way. And it's obviously changed in the fact that their four companies are each four companies are each going to borrow, you know, perhaps an average of at least 10 or 12 billion each. Well, you have to pay that back out of earnings over some period of time. I mean, you're 10 or $12 billion dollars worse off if that happens. And of course, in some cases, they're having to sell stock or sell the right to buy his stock of these prices. And that takes away from the upside down. And I don't know whether two or three years from now that, that as many people will fly as many passenger miles as they did last year. They may and they may not. But the future is much less clear to me, how the business will turn out through absolutely no fault of the airlines themselves. That's something that was a low probability event happened and it happened to hurt particularly, whether it's something. the travel business, the hotel business, the cruise business, the theme park business, but the airline business in particular, and of course the airline business has the problem that if the business comes back, 70% or 80%, the aircraft don't disappear. So you've got too many planes. And it didn't look that way when the orders were placed a few months ago and or arrangements were made. But the world changed for airlines, and I wish them well, but it's one of the businesses we have. We have businesses we own directly that are going to be hurt significantly. The virus will cost Berkshire money. It doesn't cost money because our stock and various other businesses moves around. I mean, if XYZ, which is say it's one of our holdings and we own it as a business and we like the business. The stock goes down 20 or 30 or 40 percent. We don't feel we're poorer in that situation. We felt we were poorer in terms of what actually happened to those airline businesses just as if we don't 100% of them. So that explains those sales, which are relatively minor, but I want to make sure that nobody thinks that that involves a market prediction. And that pretty well wraps it up for for Berkshire. So now we move into the formal part of the meeting, which will be followed by a fairly extended question and answer period if there are a lot of questions with Becky. And while we're doing this formal part of the meeting, it's not too exciting. So feel free to leave your whatever you're viewing this through.
[1:47:12]
OtherAnd if you want to send questions to Becky, we'll keep her contact information up on the screen. Or if you want to pick yourself a sandwich or do anything else, we will now move. Or you can pay attention to the formal part of the meeting. But we will do this and won't take too long. And then we will move on to the question and answer. So with that, I will call the meeting to order.
WarrenAnd this follows the script, as you can't tell by what I'm saying. I'm Warren Buffett, Chairman of the Board of Directors of the Company, and I welcome you to this 2020 annual meeting of shareholders.
WarrenMark Hamburg is Secretary of Berkshire Hathaway, and he will make a written record of the proceedings. Dan Jackson has been appointed inspector of elections at this meeting. He will certify to the count of votes, cast in the election for directors. for directors and the motions to be voted upon at this meeting. The name proxy holders for this meeting are Walter Scott and Mark Hambur. Does the Secretary have a report of the number of Berkshire shares outstanding entitled to vote and representative 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 4, 2020, the record date for this meeting. There were 699,123 shares of Class A, Berkshire Hathaway Common Stock Outstanding, with each share entitled to one vote on motions considered at the meeting, and 1,382,352,370 shares of Class B, Berkshire Hathaway Common Stock Outstanding, with each share entitled to 110,000th of one vote on motions considered at the meeting. Of that number, 4,000,000,000. Of that number, 472,037 Class A shares, and 834 million, 802,274 Class B shares are represented at this meeting by proxies returned through Thursday evening April 30th.
WarrenThank you. That number represents a quorum, and we will therefore directly proceed with the meeting. First order of business will be a reading of the minutes at the last meeting of shareholders. I recognize Ms. Deppie.
Otherwho will place a motion before the meeting. I move that the reading of the minutes of the last meeting of shareholders be dispensed with and the minutes be approved.
WarrenDo I hear a second?
OtherI second the motion.
WarrenThe motion is carried. The next item of businesses to elect directors. I recognize Ms. Debbie Pasonic to place motion before the meeting with respect to election of directors.
[1:50:06]
OtherI move that Warren Buffett, Charles Munger, Gregory Abel, Howard Buffett, Stephen Burke, Kenneth Chenalt, Susan Decker, David Goddessman, Charlotte Geiman, Ajit Jane, Thomas Murphy, Ronald Olson, Walter Scott, and Merrill Whitmer be elected as directors.
OtherI second the motion.
OtherIt has been moved in second of the Warren Buffett, Charles Munger, Greg Gable, Howard Buffett, Steve Burke, Ken Chanal, Susan Decker, David Goddessman, Charlotte, Geithen, Jane, Tom Murphy, Ron Olson, Walter Scott, and Merle Whitner, and Merle Whitner Whitmer be elected as directors.
OtherThe nominations are ready to be acted upon. Mr. Jackson, 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 Thursday evening cast not less than 543,203 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.
OtherThank you, Mr. Jaskett.
OtherWarren Buffett, Charles, Morgan, Greg Abel, Howard, Buffett, Steve, Burke, Ken Chen Schenallt, Susan Decker, David Goddus, from Charlotte, Gehman, Jean, Tom Murphy, Ron Olson, Walter Scott, and Merle Whitmer have been elected as directors.
WarrenAnd, Ken, if you're watching, or listening, Ken Schenalt, our new director, actually got the highest vote of all the directors, well ahead of me, I might add. So congratulations, Ken.
OtherThe next item on the agenda is an advisory vote on the compensation of Berkshire Hathaway's executive officers. I recognize Ms. Debbie Monsic to place a motion before the meeting on this item.
OtherI move that the shareholders of the company approve on an advisory basis the compensation paid to the company's named executive officers as disclosed pursuant to item 402 of regulation SK, including the compensation discussion and analysis, the accompanying compensation tables, and the related narrative discussion in the company's 2020 annual meeting proxy statement.
OtherI second the motion.
OtherIt has been moved and seconded that the shareholders, the company, prove on an advisory basis the compensation paid at the company's named executive officers.
OtherMr. Jackus, 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 Thursday evening cast not less than 519,750 votes to approve on an advisory basis the compensation to the companies named executive officers. The compensation paid to the companies named executive officers. That number exceeds a majority of the number of the total votes of all Class A and Class B shares outstanding.
[1:53:19]
OtherThe 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, Mr. Decker's. The motion to approve on an advisory basis of the compensation paid at the company's named executive officers has passed. The next item on the agenda is an advisory vote on the frequency of a shareholder advisory vote on compensation of Berkshire Hathaway's executive officers. I recognize Ms. Debbie Masonic to place a motion before the meeting on this item.
OtherI move that the shareholders of the company determine on an advisory basis, the frequency, whether annual, biannial, or triennial, with which they shall have an advisory vote on the compensation paid to the company's named executive officers as set forth in the company's 2020 annual meeting proxy statement.
OtherI second the motion.
OtherIt's been moved and seconded. The shareholders of the company term the frequency with which they have, they shall have an advisory vote on, vote on compensation of named executive officers with the options. the option being every one, two, or three years. Mr. Jackson, 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 Thursday evening casts 131,443 votes for a frequency of every year, 2,228 votes for a frequency of every two years, and 419,984 votes for a frequency of every three years, 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, Mr. Jackson.
OtherThe shareholders of the company have determined on an advisory basis that they shall have have an advisory vote on the compensation paid to the company's named executive officers every three years.
WarrenNow we're through with sort of the boilerplate resolutions, and this next next year. And this next item is of more importance. And we have put up on the Berkshire Hathaway.com site, some material relating to this motion, which I hope shareholders and others read, because it's important, and it's, well, I'll describe it as the script says. The next item of business is a motion put forth by the boards of trustees of the New York City Employees Retirement System.
[1:55:59]
Othersystem, the New York City Teachers Retirement System, the New York City Police Pension Fund, the New York City Fire Pension Funds collectively call the systems. The motion is set forth in the proxy statement. The motion requests that the company adopt the policy for improving board and top management diversity. The directors have recommended that the shareholders vote against the proposal.
WarrenI'd like to interrupt the script here just a second to point out that we, when we We saw that it would be impossible to have shareholders attend this meeting and traveling to Omaha and gathering and gatherings, which really neither the governor, the mayor, the public safety people thought would be advisable. We were hoping to have somebody from the controller's office come and to come and to have somebody from the controller's office, come and present the motion and then have a good discussion at the meeting of the pros and cons, because it's a very, it's a serious, important subject. And I can tell you on a personal basis, I think I'm in sync with the controller in terms of how he wants the world to evolve, but I'm not, I disagree. on the specifics of this motion is applied to board generally and to, to Berkshire's board in particular. And we've been very outspoken over the years. We've probably written more on qualifications for directors, probably any public company I can think of, and we've been consistent over the years, and we've explained the reasons for our position. And we know a great many people disagree with that position. And so I was, I welcomed the idea of really presenting to our meeting and having our shareholders hear what they had to say and evaluate what we had to, what our thoughts were. And when we had to essentially not allow shareholders at the meeting, we immediately got in touch with the controller's office. And we said we'd make an exception. if anybody from the controller's office wanted to come out and present the proposition or the proposal and engage in our discussion of the pros and cons. And as you might expect, they were not in a position to send somebody. And we also, so we offered, we may have made it even in the first place, we'd be glad to have somebody. introduce the motion on their behalf. And that we would also, if they would send along a supporting statement, we would be glad to have the person that was their proxy in effect, present the motion.
[1:59:30]
WarrenWe'd be had to have them read the supporting statement. We said we'd appreciate it that they'd keep it to five minutes or less. And they wrote back immediately and emailed back immediately and said that they'd be delighted to do it that way and they'd even try and keep it down to three minutes. So they have, they have sent a supporting statement, which it's going to be read to you in a minute, and I'm glad they did it. I do hope shareholders will or have already, and others, will listen to what the supporting statement says, and we'll also read the original arguments that they made in the proxy for their proposal, and they will read our reasons for voting against the suggest voting against, the suggest voting against, because it's an important topic and I really hope that next year that, you know, if somebody from the controller's office wishes to come out, we'd be glad to have even a more fulsome discussion of the subject. So with that, I will now recognize Mr. Hamburg to read a statement prepared by the controller of the city of New York in support of the motion. Thank you.
OtherMr. Chairman, members of the board, fellow share owners. I'm Mark Hamburg from Berkshire Hathway, and I'm here to present Proposal 4 on behalf of the New York City Comptroller, Scott Stringer, and the New York City Pension Funds. The funds have approximately $211 billion in assets as of February and our substantial long-term Berkshire Hathaway share owners with 2.5 million shares. Our proposal requests that Berkshire Hathaway Board, adopt a diversity search policy requiring that the initial candidates from which new director nominees and external CEOs are chosen include qualified female and racially or ethnically diverse candidates. First of all, we would like to commend the directors for the addition of Mr. Kenneth Chenault and the fact that 21% of the board is made up of women. We would also like to recognize that the executive pipeline includes diverse candidates. including Mr. Ajit Jane, another board member. Secondly, we applaud Mr. Buffett's recognition that women in the boardroom have historically been rare, and even more importantly, that although women run the right to have their voices heard in a voting booth a century ago, attaining similar status in a boardroom remains a work in progress. With our share owner proposal, what we are seeking is to nudge this particular process forward.
[2:02:32]
Questionerprocess forward. Thirdly, one of the things that Mr. Buffett mentions is that he only buys businesses that have three criteria, the second of which is able and honest managers, and that the most important duty for a board is to find and retain a talented CEO. We would note that in reviewing Berkshire Hathaway's largest stock market holdings of businesses, all 10 of these companies have boards that meet our board diversity requirement. In essence, the companies that Berkshire Hathaway is found fit to invest in are those that have more diverse boards. Fourthly, we would like to clarify that through this shareholder proposal, we are not asking for the Berkshire Hathaway Board our Guardians to have a quantifiable end result in terms of its composition, but that an initial pool of candidates for a board seat include a woman and another individual who is racially or ethnically diverse. We believe these candidates, if qualified, would also have very high integrity, business savvy, shareholder orientation, and a genuine interest in the company. According to a 2016 Harvard Business Review study, including more than one woman or a member of a racial minority in a finalist pool, helps combat the unconscious biases amongst interviewers and increases the likelihood of a diverse hire. What we are requesting is a small step in that direction to include diverse candidates at the beginning of the search. Finally, we would like to applaud Berkshire Hathaway's robust internal CEO succession plans. Our proposal states that a CEO diversity policy should only apply in the case of an external search. The New York City Comptroller's Office is disappointed that we never had the opportunity to discuss our proposal with Director or management, but remain open to constructive engagement. In the interim, we strongly urge Berkshire Hathaway share owners to support proposal for. Thank you.
OtherOkay. Thanks, Mark. And thank you to the controller for the presenting that supporting statement. The motion is now ready to be acted upon. Mr. Jackson, when you are ready, you may give your report.
OtherMy report is ready. The ballot of the proxy holds. In response to proxies that were received through last Thursday evening, cast 65,925 votes for the motion and 485,824 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 of the precise count of the votes will be given to the Secretary to be placed with the minutes of this meeting.
OtherThank you, Mr. Jackson. The proposal fails. I move that this meeting be adjourned.
OtherI second the motion to adjourn.
OtherThe motion has been made and seconded. The meeting is adjourned. So thank you.
WarrenI'm just looked at my watch and I talked a lot longer than I should have probably. And I've, that's not a unique experience of mine that just occurred.