OtherGood morning. It's 1130, or 10.30 here in Los Angeles, and we're going to hold our second virtual annual meeting of Berkshire Hathaway. We did an Omaha last year on short notice. We had more warning this time. And so we came to Los Angeles, and the reason we're doing it from here is because of the man on my left, not because he asked for it, but because all of us wanted to do it with Charlie in. and here in Los Angeles.
CharlieThanks, Warren, and hello to everybody.
QuestionerThis first question that came in, came in from Andy C's. He says he's the owner of not nearly enough B shares. He says, Mr. Buffett, you're well known for saying to be fearful when others are greedy and be greedy when others are fearful. But by all appearances, Berkshire was fearful when others were most fearful in the early months of COVID, dumping airline stocks at or near the low, not taking advantage of the fear gripping the market to buy shares of public companies that exceptional discounts and being hesitant to buy back significant amounts of Berkshire stock at very attractive prices. I'd appreciate hearing your thoughts surrounding this time and how Berkshire approached its decision-making, specifically after it was assured through the CARES Act that the government would provide a robust backstop to the financial markets.
WarrenOf course, until late, until both monetary and fiscal policy kicked in, well, you knew we had an incredible problem and that are I am just as Charlie is the chief culture officer I'm the chief risk officer of Berkshire that's that's my job that we hope we do well but we want to be sure we don't do terribly but we didn't sell a substantial amount I mean we're a company was six probably seven hundred billion dollars worth of businesses some we own in their entirety with some we own a piece of of and I don't know whether we were sellers of maybe one percent of the value of all the businesses we had at that period right now there you know international travels not come back but I would say overall to them the the economic recovery has gone far better than you could say with any insurance so we we didn't like having as much money as we had in banks at that time so I cut back some of the bank investment but basically our net sales were about 1% or 1 and a half percent and and looking back it would have been better to be buying but what I do not consider it I do not consider it a great moment in
[2:43]
WarrenBerkshire's history but also we've got more net worth than any any company in the United States under accounting principles and we've got six or 700 billion of generally good businesses and and I think as I think I think I think the airline business is done better because we've sold and I wish them well but I still I still wouldn't want to buy the airline business business travel is the other thing and we've got a big exposure to business travel of course through the fact that we own 19% of American Express and we own precision cast parts which services the air business very so we've we've still got a big investment in air travel a big commitment to it but but we wish the big for the best and And I think their managements have done a very good job during this period.
WarrenIt's crazy to think anybody's going to be smart enough to husband money and then just come out on the bottom tick in some crazy crisis and spend it all. There's always just some person that does that by accident. But that's too tough a standard. Anybody expects that of Berkshire Hathaway is out of his mind.
WarrenYeah, Charlie and I never were very good at dancing, but we really can't do that dance. No, no, we can't. By the way, almost nobody else can either.
QuestionerThis question comes from Andrew Dixon in the UK. He says, my question is in relation to the oil and gas business and your purchase of Chevron stock. When being asked a question on tobacco stocks in 1997, you mentioned that individuals and companies occasionally have to draw moral lines about what they're willing to do. Have we built our own unrealistic consensus on the pace of change achievable with regards to the transition to greener energy sources to the extent that this is becoming an overly expensive tax worn by the current younger generation. Can we gather from your purchase of Chevron stock that you do not believe the howling from society? Regulators and politician will impair the prospects of hydrocarbons and Chevron, for that matter, in the next 10 years? Can investors still assume an oil and gas business that finds and produces oil at low cost per barrel can generate a sufficient return on capital for a long time to come?
WarrenWell, I'll give you a 10-word answer to that. I can't remember all the questions there were there, but I would say that people that are on the extremes of both sides are a little nuts. I would hate to have all hydrocarbons banned in three years or, you know, you wouldn't want a world.
[5:18]
WarrenIt wouldn't work. And on the other hand, you know, what's happening will be adapted to over time, just as we've adapted to over time, just as we've adapted to all kinds of things. I do not think, I'm interested in a quote from 1997. Because, you know, we've talked about this before. We have no problem owning Costco or Walmart, you know, and a substantial number of their stores. And it's a very tough thing to decide whether you get in or out of a business. And it's a very tough time to decide what companies benefit society more than others. I mean, it's, I don't know whether I think Chevron's benefited society in all kinds of ways, and I think it continues to do so. And I think we're going to need a lot of hydrogen for a long time, and we'll be very glad we've got them. But I do think that the world's moving away from them, too. And that could change. I don't like making the moral judgments on stocks in terms of actually running the businesses. What you elect to do yourself, if you own an index fund, you're going to own Chevron. Blemly, Chevrona is not an evil company in the least. And I have no compunction about owning in the least about owning, in the least, about it. owning Chevron. And if we own the entire business, I would not feel uncomfortable about being in that business. Charlie?
CharlieWell, I agree. You know, you can imagine two things. A young man marries into your family. He's a English professor at, say, Swarthmore, or he's a, he works for Chevron. Which would you pick? I don't see. I want to admit I'd take the guy from Chevron. Well, I hope your daughters agree with you. And I get the letters that are written to me. I don't think I've had, I don't think I've had three letters in the last year from shareholders. Now I have them, and our vote on this, as you'll see later, is that overwhelmingly, the people that bought Berkshire with their own money voted against those properties. But most of the votes for it were, whereby it came from people who would never be. put a dime of their own money into Berkshire. And so they, and I don't think they read our annual reports. And I don't think they've read the reports of Berkshire Hathaway Energy. And I don't think, I don't think they know, you know, if I talk about what we're doing in high-voltage transmission, we're doing more an able company of the country. But they want us to answer a bunch of questionnaires their way, so they want us to go to Derry
[8:14]
WarrenQueen and Borschheims and all those people have them fill out reports. that show a bunch of figures when the reports to count are the reports that Greg gets on Berger Out of the Way energy and the railroad. You talk about three of our companies, and you've covered 95% of it, and it's asinine, frankly, in my view. Now, we do some other asinine things because we're required to do them, so we'll do whatever's required. But to have the people at, you know, business wire, you know, business wire, you know, Dairy Queen, all these places. I felt I got reports to make it some common report that comes in. We don't do that stuff at Berkshire. We got a chance to buy it, and I, I sold some stock last year, although our shareholders still had their percentage interest go up because we repurchase shares. But that was probably a mistake. In fact, Charlie, in his usual, low-key way, let me know that.
QuestionerYou thought it was a mistake, too, didn't Shirley?
OtherYes.
WarrenYeah. I could only do so many things that I can get away with it, Charlie.
CharlieWell, it's a killer. The SPACs generally have to spend their money in two years, as I understand it. So they have to buy a business in two years. If you put a gun to my head and said, you've got to buy a big business in two years, you know, I'd buy one, but it wouldn't be much of one. You know, we'd look and look. And now there are, I don't know how many, whether it's hundreds, and there's always been the pressure from private equity funds. I mean, if you're running money for somebody else and you're getting paid a fee and you get the upside and you don't have the downside, you're going to buy something. So, you know, it's a different equation that you have if you're working with other people's money where you get the upside and you have to give it back to them if you don't do something. And frankly, we're not competitive with that. That won't go on forever. The stock market, we've had a lot of people under the casino in the last year. You have millions and billions of people who have set up accounts where they day trade, where they're selling puts and calls, where they, I would say that you had the greatest increase in the number of gambers, essentially. And there's nothing wrong with gambling and then they got better odds than they've got if they play the state lottery. But they've had cash in their pocket. They've had action, and they actually have a lot of good results.
[11:05]
CharlieAnd if they just bought stocks, they do fine and held them. But the gambling impulse is very strong in people worldwide, and occasionally it gets an enormous shove and conditions lead to this place where more people are entering the casino than are leaving every day. And it creates its own reality for a while. and nobody tells you when the clock's going to strike 12 and it all turns to pumpkins and mice. But when the competition is playing with other people's money, and if they're paying foolishly with their own money, but the big stuff is done with other people's money, they're going to beat us.
WarrenYeah, but it's shameful what's going on. It's not just stupid, it's shameful.
CharlieIt's not, I don't regard it as shameful on a lot of the people that gamble. I mean, gambling is a very human instinct, and they've got money in their pocket, and they know somebody else that's made money who they don't think is any smarter than they are. No, no, I don't mind the poor fish that gamble. I don't like the professionals that take the suckers.
WarrenWell, of course, it's a lot harder. And I think one consequence of the present situation is that Bernie Sanders is that Bernie Sanders has basically, basically one. And that's because with the everything boomed up so high and interest rates so low, what's going to happen is the millennial generation is going to have a hell of a time getting rich compared to our generation. And so the difference between the rich and the poor and the generation that's rising is going to be a lot less. So Bernie has won. He did it by accident, but he won.
QuestionerThis question comes from Raghu Bashwal, and it's for both Warren and Charlie. Now that the crypto market overall is valued at $2 trillion, do you still consider crypto's as worthless artificial gold?
WarrenI knew there'd be a question on Bitcoin or crypto. And I thought to myself, well, I've watched these politicians dodge questions all the time, you know, and I always find it kind of disgusting when they do it. But the truth is, I'm going to dodge that question. Well, those who know me well, well, are just waving the red flag of the bull. Of course, I hate the Bitcoin success. And I don't welcome a currency that's so useful and the kidnappers and extortionists and so forth, nor do I like just shuffling out a few extra billions and billions and billions of dollars to somebody who just invented a new financial product out of thin air. So I think I should say,
[14:14]
Charliemodestly that I think the whole damn development is disgusting and contrary to the interests of civilization and I'll leave the criticism to others I'm all right on that one this is an easy one no thank you I'll pass
Ajit Jainwell I would say it would depend on the premium and and I would say that that I would probably have a somewhat different rate if Elon was on board or not on board I mean you know I No, it makes a difference. I mean, if somebody's asking you to insure something, you know. So I would, that's called getting skin in the game and what a, you know. But in general, I would be very concerned about writing an insurance policy where Elon Musk is on the other side.
CharlieTell Elon to call me instead of a jeep.
QuestionerHowever, Berkshire owns a large number of subsidiary businesses, most of which are never mentioned. Is there a point at which Berkshire becomes too large to manage? And should we have any concern over the lack of information for most of Berkshire's companies? Is there a time that could come when Berkshire's too large and complex?
WarrenYeah, I don't think we're getting too big to manage because we're different from practically every other big corporation in the United States in that we are so excessively decentralized. We have decentralized so much and we have so much authority. in the subsidiaries that we can keep doing it for a long, long time as long as long as it keeps working. And I would say so far that our decentralization has caused more benefits than defects. But nobody seems to copy us.
CharlieWell, but that's absolutely true, but I would say this. Decentralization won't work unless you have the right kind of culture accompanying it.
WarrenYeah, but we do.
CharlieYeah, we do. But it's dependent on it. And Greg will keep the culture.
QuestionerThis question comes from Robert Mo. files in Nebraska, the trading apps, what do you think about Robin Hood and other trading apps or fintech companies enabling all ages and experience to participate in the stock market?
WarrenWell, I'm looking forward to reading the S1 on Robin. That's a big thing you file with the SEC when you are going to be offering securities. And it's, you know, it's become a very significant part. part of the casino aspect, of the casino group that has joined into the stock market in the last year, year and a half. And I do want to see how concerned about how they handle the source of income when they say they don't charge the customer or anything.
[17:29]
WarrenI mean, it would be interesting to watch how to describe it. But they have attracted, maybe set out to attract, but they have attracted, I think I read where 12 or 13% of their casino participants were dealing in puts and cause. There's nothing illegal about it. There's nothing immoral. But I don't think he'd build a society around people doing. people doing it. I mean, if a group of us landed on a desert island, we knew we'd never be rescued. And I was one of the group and I said, well, I'll set up the exchange over here and I'll trade our corn futures and everything around. I think the degree to which a very rich society can reward people who know how to know how to take advantage essentially of the gambling instincts of the not only American public, worldwide public. It's not the most admirable part of the accomplishment, but I think what America's accomplished is pretty admirable overall. And I think actually, you know, American corporations have turned out to be a wonderful place for people to put their money and save. But they also make terrific gambling chips. And if you cater to those gambling chips when people have money in their pocket for the first time and you tell them they can make 30 or 40 or 50 trades a day and you're not charging many commissions but you're selling your order flow or whatever, I hope we don't have more of it. I'll put it that way. And I will be interested in reading the perspectives. Charlie?
CharlieThat is really waving the red flag of the bull. I think it's just god-awful with something like that with broad investment from civilized men and decent citizens. It's deeply wrong.
QuestionerThis one comes from Jan Michael Otlinger. It's for Warren and Charlie. I have one question which is inspired by Charlie's mantra. You have to be a continuous learning machine. So here's my question. What's the biggest lesson both of you learned during the last year?
WarrenWell, my biggest lesson is to learn. Well, my biggest lesson is to learn. has been to listen more to Charlie. He's been right on some things that I've been wrong on.
CharlieWell, I don't know. If you're not a little confused by what's going on, you don't understand it. It's just, we're in sort of uncharted territory. We enjoy, in a crazy way, actually seeing what happens. I mean, and this has made us halfway through the movie much more interested in watching even more. This is an unusual movie, but we, our basic principles of, you know, we start with the fact
[20:54]
Warrenwe don't want to disappoint the people who love their money with us and things flow out of that. And we may disappoint people that don't make quite as much money as they're, but we don't. And we've seen it, some strange things happen in the world in the last year and 15 months, and And we've always recognized the fact stranger things are going to happen in the future. And I would say, if anything, it's reinforced, you know, our desire, well, to figure out everything possible we can do to make sure that Berkshire is 50 or 100 years from now, you know, every bit the organization and then something that it is now.
WarrenCharlie, well, of course, that's the idea. I think it's pretty likely to work.
CharlieYeah, well, we wouldn't have spent 55 years at it unless we did.