WarrenOkay, let's reconvene. I think we sold 15 boats so far, I was told that a while. A little while ago out there, so get them while they last. We won't have the first one available for delivery for about a year, but people are getting 10% off, whatever that means, who order one, and I've ordered one myself, and we're, things are going well in the other room, the room and we only got seven questions, which is the new low in the first half, so we'll try and move a little faster. I can't imagine why it went that slowly. I mean, who's doing all that talking? Okay, station four.
QuestionerHi, Warren and Charlie. I'm Jeff Mulayoy, shareholder from San Francisco. In recent years, American companies have taken on a more active role in the political realm, whether it is speaking out against specific bills or promoting various social causes, often at the behest of shareholder or employee groups. While the goals of these movements can be laudable, they risk alienating significant portions of customer and employee basis. How should CEOs decide which issues to take assent on or whether their companies should engage in the political realm at all? Thank you.
WarrenOh, that's a terrific question. And that is one, obviously, I've had to think about plenty. And at one point, I've had to think about plenty. I said I don't put my citizenship in a blind trust. I want to take the job as CEO of Berkshire. But I've also learned that you can make a whole lot more people sustainably mad than you can make temporarily happy by speaking on any subject. And on certain subjects, they will take it out on our companies. And that means that the people that that are employed by us, some of them we would end up letting go. It means that the shareholders get hurt. And do I really think that it's so important that I talk on every possible subject that people can get very upset about, whether they should be asked to pay that price? And I've come to conclusion the answer is no. Why in the world? world? Do I want to hurt the people in that other room that do all kinds of things for Berkshire? Why do I want to hurt you? Because I say something that 20% of the country is going to instantly disagree with. And sometimes they will be so upset about it that they will try and take it out. And since they can't scream at me, they may have campaigns against their companies or anything else. So I think it applies to me. I'm not going to go around and take positions where instead of saying Warren Buffett says,
[3:51]
Warrenit will be, it will say, you know, Berkshire Hathaway or Warren Buffett up, Berkshire Hathaway. I get it identified. And I do not want to make the lives of you. And I decided I'm not going to. I'm not going to be doing that. If I want to do that, I should quit my job. I think my citizenship speaking out is that important. I'll give up what I love the most, which is having this job. I don't want to do that. So I've decidedly backed off. I don't want to say anything that'll get attributed basically to Berkshire and have somebody else bear the consequences of of what I talk about. And so that's where I stand. And I can tell you that at most companies, or many, that isn't fair, but the great many companies, you know, the CEOs, they have to think about what their board says to them, and they've made a point of electing people to their boards because it's socially acceptable, who represent different, uh, consistency sometimes very strongly. And if they think they're stakeholders for this group and that group and that group, uh, they're going to, they'll get pressured by their boards to take positions and, and it's, it's just the territory that, that we don't, we're not going to get into it. Charlie, how do you feel about that?
CharlieWell, I, even more than you, I have to be very careful about what I say. And the difference between the two of them is I can't resist saying a little more. I see headlines and papers just time after time after time that say, Buffett's buying such and such. Well, I'm not buying such and such. Berkshire Hathaway is buying it, and it may be the work of two other people that work at Berkshire and that people who write the articles don't have the faintest idea whether it was my, my at my instigation or what I'd even ever heard of it. And, but the headline says, the headline will attract more people if it says Buffett buying this, and if it says Berkshire Hathaway and we don't know whether it's his, the people that worked for him or him. And the headline is designed to bring people into the story. So it's, it's, the confusion is, is terrible. horrible. And the easiest thing to do is to basically shut up and not have a bunch of people have facing consequences that they didn't ask for in the first place. So with that, I'm glad you asked that question. That is a good question. And I probably thought more about that question than I think about whether this stuff.
[7:21]
Questioneror that stock is cheap. And with that, we'll go to, let's see, that was station four. We'll go back to Becky. On that note, let's go to a question from David Cass. He writes in, President Biden's fiscal 2023 budget request would impose a 20% minimum tax on the unrealized capital gains for households worth at least $100 million. What are your views on this issue? And if you don't want to answer, maybe Charlie does?
WarrenWell, we'll find out. And we should be, in all honesty, we should both say that we would be affected by, if it's $100 million, we'd both be affected. So our point of view is, and I have no point of view. Charlie, I have no point of view that I would want a tribute to them. I tend to stay out of the income tax things like this. My policy is I pay whatever taxes, they pass, and I don't want to engage in lobbying about taxes.
CharlieYeah. And I would add one thing. Lobbing is really distasteful. I once did it for a candidate, and I ended up in a room with a bunch of lobbyists for cigarette companies. They didn't care about Nebraska. They didn't care about it. They were there because they were handing over a contribution. They didn't, and I was a convenient accessory. And, you know, it made you want to throw up, basically. On the other hand, we operate in the railroad business, energy business, insurance business, and they're extensively regulated. And I don't also want to be the only railroad that stays out of the railroad group, the only insurance company that stays out of the railroad group. The only insurance company that stays out of the insurance group. Other people can rightly figure that we're a free rider under those circumstances. So I tell the managers generally, don't spend Berkshire's money on candidates that you like. Don't pressure suppliers to do it. I mean, Berkshire is not a weapon to use, which, and it's been used by certain people in the organization, but don't use it to muscle money out of anybody else for who. you like or what school your wife went to or whatever it may be. And some of it goes on anyway. But I don't tell our people that don't belong to any trade associations. Charlie wrote one of the great letters of all time. And if you go to search, type in, I think, 1989, Munger, savings and loan or something. We resigned from the U.S. Savings and Loan League, I guess it was. And we warned them. We said, we just cannot stand, you know, what you're doing to the country.
[10:41]
WarrenAnd what a bunch of very nice people get together, but they decide it's in the interest of their savings alone. Did it get to do this or that? And we warned them, and finally Charlie wrote a letter, which is, like I say, available on search. And it's one of the, it should be one of the proudest letters. Certainly one of the proudest letters has ever come out of Berkshire. And he just said we can't stand it anymore. And we're resigning. And, uh, but that's, that's a very tough thing to do. You can't, you can't, it's a tough way to live just go around criticizing the people you work with and the neighbors and, and they're perfectly decent people, but they run into institutions that are doing things that are very distasteful to them. And, and we belong, support, uh, some of our subsidiaries, uh, some of our subsidiaries, uh, in an energy. And, and, you know, I don't want to find people who are doing it for personal reasons. I mean, in that case, they're in trouble, but I don't say they can't do it because I don't want their hands tied if something comes up. And essentially, they're either their competitors within the industry or the industry versus this, we're not going to stand alone and say, well, we're morally superior to us. So you put your money up and buy it. So that's, that's where I end up, Charlie.
CharlieI've got nothing to add.
WarrenOkay, never bothers me when I don't have anything to add, but he seems stuck on that. Anyway, Becky, did that come from you?
QuestionerYeah, okay.
OtherThen station five.
QuestionerOh, thank you, Warren and Charlie. My name is Tongyao. I'm from China and now studying. I'm now studying in the University of Chicago. I really admire you to, especially Charlie, you are my idol since I was a child. And my question is also for Charlie. My question is how to practice the multidisciplinary framework in making investment decisions and in life. Like, how to make it more practical. Thank you.
CharlieWell, obviously, it helps you to know more than one discipline. There's an old saying, you know, that a man who carries only a hammer thinks everything else is a nail. And you make a lot of wrong decisions if you don't have the sum command of all the disciplines. That's all I ever said. ever said. And, but you do irritate people terribly when you come into their territory. You see, I'm multi-disciplinary, you're the expert, and I know better than you. They hate you for it.
[13:59]
WarrenI can test to do it. I've done it several times. Yeah. And, you know, China, well, there's a certain degree in the, they have a culture that, to some extent, reveres age. So Charlie's got me beat. I don't even try and compete with him on China. I can't catch him on age. Okay. I'm going to try to, though. Let's see. We've got Becky coming next. This question comes from Philip King. He writes, in the 70s, you wrote an article entitled, How Inflation Swindles the Equity Investor. You said that stocks cannot keep pace with inflation because companies cannot increase the return on equity. Do you believe that this is still the case? Yeah. Of course, bonds can swindle the equity investor, too. Everything. Inflation, I should say, swindles the bond investor, too. And it swindles the person who keeps their cash under their mattress. It swindles almost everybody. And the problem, if you have a business that doesn't take any capital, and let's just say the dollar depreciate you, percent or something. So things cost 10 times as much. If it doesn't take any capital, you can charge 10 times as much. And you've kept your relative position. But most businesses take some capital. If our utility business, just say that the dollar is worth one-tenth, some years hence from now, we have to have 10 times the capital investment, basically. And we get paid of return on that. But we have forced capital investment to essentially keep in the same place. And I wrote an article that related to that, and I will tell you a very one famous story, which you will all sympathize with, and that I wrote that story for fortune. And when I finished it, it was about 7,000 words. And fortune doesn't, didn't like it. publishing 7,000 words, and they had my friend Carol Loomis explained that to me, knowing that I would pay more attention to her than anybody else, but being stubborn and male, I said, you know, every word is precious, and they can either run it or not. So then they sent an editor, a very nice guy, out to Omaha. And this guy explained to me that it just wasn't right to use that many words. And I said, well, that's fine, but If you don't do it, I'll write it someplace, I'll sort of over here. Very disgusting behavior on my part. And then I sent it, it was beginning to bother me a little. So I sent it to my friend Meg Greenfield. And Meg was a great, great, great editor at the Washington Post.
[17:13]
WarrenAnd we were a very, very good friends. Wonderful woman. And Meg, who was tough as nails with most writers, but she was kind of nice. She didn't want her really hurt me too much. So she said, I said, well, Mae, what do you think? And she said, well, Warren, she says, you don't have to tell everything you know in this article. And it made the point. And so I'd write that letter, I'd write that article shorter, and I'd say more or less the same thing. No, and you're better off. If you really could have a totally stable unit of monetary use for the next 100 years, it would be better for better for business and investors in general.
WarrenCharlie?
OtherWe will go to station six.
CharlieInflation, inflation is, the question is how much? The question is whether you can decide that 2% and keep it. The answer is nobody knows. You know, I mean, you do not know, and nobody knows. You listen to all kinds of stuff. But nobody knows how much inflation there will be over the next 10 years or 20 years or 50 years or next month. And people talk about it all the time because you're interested in knowing the answer to your question. And they don't. don't know the answer but but there are a lot of people that will tell you they know the answer if they if you pay them enough and other people that will tell you for nothing because they think it enhances their prestige and makes them more value more valuable but the answer is they don't know and we don't know either the best protection against inflation though still is your own personal earning bar if you play the violin very well you will do reasonably well during inflation. I mean, it's quite better than other people. People will pay you for doing that if you, you know, all kinds of things. So your skills will not be taken away and your money may be.
OtherOkay, station six. Oh, wait a second. Was that, is it Becky next? Becky? It's station six. Yeah. Station six. Okay.
QuestionerMy name is Martin Wiegand. I live in Nashville, Tennessee, Mr. Buffett, and Mr. Munger. Thank you for your lifetime of teachings and for hosting us back in Omaha this year. Well, thank you. You have mentioned that companies get the shareholders they deserve. And in this year's letter, you mentioned a great satisfaction of yours is working for the individual long-term shareholders. With a growing influence of institutional index funds, how can management teams foster a shareholder culture like the one we have at Berkshire?
[21:00]
WarrenThank you. Well, fortunately, we have it. We know more about how to keep it than to institute one. And it's very interesting. We have a million 470,000 class A share is outstanding. today. Fewer than we had a year ago in there. Those seats are filled. I mean, you are, the shareholders in place. We like the group we have. So why in the world, when we've got a fixed number of seats, which we, should we go out and recruit other people to replace you? You know, I mean, the ideal shareholder is the group. Shareholder we can have is the group we have today. And why, you know, you know, you know? If we had a church, we'd want the people to keep coming back week after week after week if we had a limited number of seats and we had some wonderful parishioners. And we would not go out and recruit another 50 or 100 of them and have to throw out 50 or 100 of the ones we already had. And every company I know virtually is wooing new people to come in. And whether they're improving the group they get or not is another, I mean, it's a... it strikes us as basically crazy. We don't want anybody different than we have now. And, you know, we're not going to get rid of the index funds, so we have to get rid of people like you, and we don't want to get rid of people like you. And I just don't understand why if you had a neighborhood and the size of the terrain or whatever it was would be be such that you could have 10, 10 neighbors, and they were all great neighbors. Why in the world would you go out and say to a whole bunch of people going up down the street? You know, why don't you buy the house of the guy next to me? You know, it is, it is weird, but there's an awful lot of people to make their living by doing that, and they never really questioned. I would sort of ask any company that's making handles presentations every month. month or something, which of the present ones you're trying to get rid of, you know, basically, because you're not going to have more, I hope you're not going to have more shares outstanding at the end of the year than you have now. And am I supposed to, you know, get out of the way? So some other fund that is thinking about what your soccer is going to do next week replaces me? It is a very, very, very, very weird situation. And of course, the really, really crazy crazy process that has developed is people talking to, we'll say, analyst group, you know, the sort of the high priests of finance.
[24:11]
CharlieYou know, some companies are doing it more than once a month. Well, just imagine if you go, if you work for that company, you go to work for that company. And every month, people are repeating these things about their company that it's important that we have more services per customer. And it's 6.2 and we've got to get the 7 or something like that. And they'd say that month after month after month. It becomes a catechism. And CEO says it or his or her representative says it and it goes, how do you go on the next month and say, by the way, we were really wrong? And this is what we should be working on. You don't say that. And it's a terrible problem than the new CEO has coming in after a previous CEO is that the important thing to do is to hit your earnings targets. Well, you know, he's been meeting them in all probability by cheating from some time to time. And this guy hands you the baton and are you going to sit, come out and say, well, we've really been cheating a little and it's really counterproductive to the development of the company, you know, not to make earnings projections. and just to give you the results as they come rather than making up a few things. And the accounting department, they can't do it. You can't, it sounds human nature, and besides, you wouldn't get appointed to the successor, but you just don't go in and say, we've been perpetuating these myths that we can always deliver 8% growth, or we can do this or do that, or the most important thing is this, you can't go in and change that. change that if every month you've been preaching to people that this is what we stand for and just ask another question and carry this message out to the masses to the analysts and all that and it's it's a totally destructive policy I mean I can you know I can within GAAP accounting and and I can play a lot of games with numbers we have never We've done a lot of dumb things at Berkshire. We have never told anybody that the number had to be this or that, or that change anything. I mean, it's just, once you start it, it's all over. You can't quit. It's like taking $5 out of the cash register. You know, the first time you take the five bucks out, you say, well, I'm going to put it back. And then do it a few times and you'll ever stop. In fact, do it once, and you probably never stop. But if something is going to be destructive, the thing to do is not started.
[27:10]
WarrenAnd forecasting earnings, I can't imagine anything more destructive. I've got 360,000 people out there, and they know whether I'm lying or not, but many of them. And they know what they send in figures, and they get changed. You know, what message are you telling? We've got one dramatic illustration of that within Berkshire. And it, it's just, you know, we want to, if you start lying, you've got a big problem, it's that simple. And, and if you start saying to your team that somehow, you've got a job, you got, you got shareholder relations, your job is to go out and tell everybody that our stock is the best thing among thousands of choices to buy. every day. Well, that's crazy. And so what do you tell them? Well, they try to, you know, see which way the wind is blowing and figure out what they have to tell people and that they want and tell them. And then if you're human and you've said we're going to earn $3.59 a share, you can get to $3.59 and get there quite a while. And, you know, you can have all that committee, you have all these processes. But if you have a culture of lying, the processes really don't, they just disappear. And Charlie and I've seen it, well, probably every time we've gone on a board, but, you know, trying to tell them about it. Well, I think Berkshire's culture is going to last a long time after we're gone. And I think it should, and I think it'll prosper pretty well. The rest of corporate America is quite different. And it gets more different, I think, with each passing decade. And it's getting very peculiar. Pretty soon they're going to have all the shareholders' meetings online and the shareholders won't even come. And it's just, it's getting very peculiar. And the index funds get more and more important in the voting. It's like everything else in life. It changes and not always in ways you like. And it ends up for selecting different CEOs and all kinds of things. I mean, you're not going to appoint a successor CEO that's going to come in and said everything that's been done before is, you know, it's been kind of fraudulent. You know, I mean, if we needed a book, books an extra sale after the end of the quarter, if we needed to adjust the reserves. And it's just, it's, once you start lying, it's all over. And I just don't know why we're anything. way around that except to try every way you can to not you sure can if you set the wrong
[30:27]
Warrenexample of the top you got a real problem we don't we've never told we never told anybody to change a figure and we never will and if they had been changing figures you know we'd be in all kinds of trouble because they know it and I know it and the next person would know it and it just deteriorates and we've we've we've We've really seen it time after time. The way boards operate, you know, it has to be process oriented. I mean, I understand the problems that Delaware has in writing a statute that judges face when they look at things. But it's extraordinary, it's just extraordinary what an emphasis on an emphasis on process on process can do to an organization because they think they can do anything if it's allowed and you know, eventually the foundation crumbles. Okay. Oh, I should make a little news here, so you've come, you've all come and you may or may not see this, but it's very possible. One of the things we bought, one of the things I bought It was bought for a different purpose by a different manager months earlier. He bought roughly 15 million shares of Activision, and I never paid. I knew about the company, but I would just see it at the monthly report. But then on January, I don't know, 17th or 18th, something like that. Microsoft announced they were going to buy Activision for $95 a share. Now, when they announced that, at that point, Activision becomes a different kind of security. It becomes what Charlie and I used to call, well, everybody did, 50 years ago. We call them workouts or something like that, and they become known as arbitrage. Well, they're not really arbitrage. But their securities, in those cases, a common stock, whose value depends not. on what the market price does, but whether a given corporate event occurs, an announced corporate event occurs. Well, Microsoft wants to buy, Activision will say it, well, they said at $95 a share, and they've got the money, and obviously mergers and big mergers, tech companies, all kinds of things, they've got all kinds of problems with the world generally in terms of opinion. So you don't know what the Justice Department will do, or you don't know what the EU will do, and there are all kinds of things. But at that point, it becomes a different security. And Charlie and I, 50 years ago, we used to do a lot of that sort of thing. And we, and Gus Levy did it at Goldman Sachs, and Goldman Sachs, and we even went back one time, I think, on British Columbia power, didn't we, Charlie?
[34:02]
WarrenWe certainly did. Yeah. Benet was up there and we were trying to figure out whether some takeover of the power business. I mean, we spent a lot of time analyzing the probabilities of announced deals going through when we call them workouts. Now the term became ARB. And it hasn't worked where overall too well in recent years. Now every now and then, I see something that I want to do in that field in that field. and but very seldom because they got to be big the profit is limited you know if they say you're going to get 95 you're not going to get 96 and you may the deal blows up you may have a stock that's at 40 or something so it's a but we did it with Monsanto five or six years ago when Bayer was buying it and we got very lucky because it turned out to be a terrible acquisition per Bayer but but it did go through because Bayer had the money and they they went through with the deal leaving the Monsanto came with a problem that nobody I really understand to the extent of and we did it with red hat when IBM bought it so in any event on September whatever I mean on January whatever it was 17th 1890s Microsoft announces it and the stock which had been at 60 let's see what it I may have a slide here which I'll find But in any of the stock, which had been in the 60s, went up to the 81 or 2. And that looked like not a big enough spread to me for a few days. Then it settled back a little. So anyway, we now own 9.5%, something like 9.5% of Activision. And if we went over 10%, we would file a report. So in order that the news people don't feel that there's no news there, I can tell you that as of yesterday, well, about 9% and a half percent. If we go past 10%, there'll be a form file with the SEC and so on. But it is it is my purchases, not the manager, who bought it some months ago. And if the deal goes through, we make some money. If the deal doesn't go through, who knows what happens. But that's, I just want to be sure that if we do file that report, people understand very clearly, because there's been some very mixed up stories on that in the past. We want to be very clear that it was Warren Buffett's decision in that particular case. And he doesn't know what the Justice Department is going to do. He doesn't know what the EU is going to do. He never talked to anybody in Microsoft about it or anything. He's just read a document. He's made his own assessment, and it can change.
[37:11]
WarrenAnd one time, I think we sold a few shares even when I thought it was a little higher than it should be, and turned out those sales were not bad sales. So I just want to create a little news for you. And I want to, if possible, head off story, which have been incorrect in the past. which get them to get picked up by other media and corrections never get written that all the corrections were written by one inaccurate story and they apologized even to me both the reporter and the editor sent me a personal note of apology and they didn't expect to make a mistake but but when the other publications picked up the story they didn't bother to pick up the correction and millions of people were misinformed and probably uh literally by the time it gets spread around and and uh this one i will attempt to head off by telling you exactly what the facts are right now and we'll see whether it go beyond 10 percent but if you know it could easily be that if it went up a few dollars i'd it's still a ninety five dollar deal it's still the we don't know what the justice department will do we don't know what the the you will do we don't know what 30 other jurors we will do one one thing we do know is Microsoft has the money so that takes that one risk out of it uh so anyway charlie do you have any news to break
Charlieno
Warrenyeah and and instantly i don't even i don't talk this over with charlie i mean you know he knows he knows what i uh occasionally i'll see an arbitrage deal and do it and you know 50 years ago we were doing it together and and his general feeling is why is war and fooling around with this kind of stuff even but but uh um it uh it's uh the old firehorse but occasionally it looks like the odds are in our favor but absolutely we can lose money on that company and uh you know fairly large sums of money depending on what happened if the deal blows up and there will be a lot of people who want the deal to blow up but microsoft doesn't want it to blow up so we'll have to see what happens okay enough becky um you know charlie just mentioned index funds in passing so let's go to this question from matt fagel his question is related to the growth of passive investing through index funds and ets he says passive investment vehicles now control upwards of 50 percent of the united states stock market the actual owners of these passive investment vehicles decided passive investing makes the most sense for them yet in doing so passive investors have empowered
[40:13]
Questionerthe large index funds to become the biggest activists in the market these passive managers now enjoy enormous and i would argue undue influence over corporate governance do warren or charlie see any benefit or logic to a rule that would prohibit passive investment vehicle managers from voting the shares they control for their passive investment clients
Warrenwell i'll take that I think the guy's right I think the things out of control and counterproductive and I don't think it's good for the country to have three passive investors with bright young men from Harvard or what all telling them what proper governance of corporations is it's not a good development and it is and I think indexing if it gets to 90 percent then it won't work very well at all But at the moment it's worth flying.
CharlieYeah. Well, the one thing you can count on too is that if it does look like it's going to, if the public opinion shifts over to the idea that it really is a good idea to let three people decide the fate of every company in corporate America. The three people, and they won't collaborate or do anything. They're not of their evil people the least. I mean, they're just doing what you and I would do. They would figure. We don't care that much about voting. What we do care about is keeping my assets under management. So we'll figure out something that ends up reflecting public opinion and then politicians won't get mad assed. And our only threat really is that politicians get badass and regulate us in some ways. So we'll head it off. And I would predict fairly confidently that if American public doesn't like the idea of three people controlling things, the three people and their organizations and everything, but the three people, They're what they want to do is they want to get bigger. And they wouldn't be where they are in life if they hadn't wanted to get bigger. Those things don't happen by accident. That doesn't mean it's the only thing they want. They want their investors to get good results in everything. But they are certainly not going to follow a policy which is going to cause a backlash but causes them to be a lot smaller then. They can figure out their self-interest. I mean, and it's, and it just so happens in this case, it would achieve the right result, which is that they would not control America, but they'll do what's good for themselves and what they have to do what's politically acceptable.
[43:07]
WarrenThe only thing that really can mess up what is a very good deal for them is to have Congress change the rules. And the rules were... Company Act of 1940 really changed how people behaved and it's governed things in a big way for a very long time and anybody that takes on the federal government loses him. You're talking about trying to do that sort of thing and they don't need to do it. I just just say, well, we'll give up voting or we'll vote our shares as the rest of people do. And of course, if you vote your shares of the rest of people do, and of course, if you vote your shares of the the rest of the people do. Then if the passive, if the index funds at 90% of the country, you could take over a company by somebody else buying three or four percent because you'd automatically get the funds to follow your very small little percentage. You'll see it all play out. I mean, it's not an, it's a big case, but it's not an unusual case.
OtherOkay. Station 7.
QuestionerYeah. Eric Erda and I live in Albuquerque, New Mexico. So I want to first say thank you so much for a lifetime of knowledge you have both graciously shared with all of us. You've contributed greatly to push our species forward. Moreover, you've taught all of us here, along with many, many millions not here, how to behave more rationally, treat one another with more love and lead more fulfilling lives. And for that, I want to say a very sincere thank you. Thank you. As for my question, I want to ask about Berkshire Hathaway Energy and the unique structure that has evolved there, given that Berkshire doesn't own 100% of the company. The first part of that question is related to Greg's ownership and his corresponding incentive alignment with overall Berkshire. Now there's a wise man named Charlie that in 1995, at a speech to Harvard, taught us how important incentives are to human behavior. I would conservatively say that Greg's stake in BHE is worth more than 500 million at present. And I'm curious if you can share any plans that you have to compare his Berkshire Hathaway energy ownership to Berkshire stock. And if there isn't a plan to do this, can you please explain why we shouldn't be concerned about Greg's incentive structure going forward? The second part is about leverage at the entity. You have always said that BHE operates with an appropriate amount of leverage given its earning power. With that said, it's still
[46:34]
Questionera very, very large debt figure in relation to current earnings, especially with what we have become accustomed to at Berkshire. And I'm curious, if Berkshire owned 100% of Berkshire Hathaway Energy, would you still operate the business with the same amount of leverage? Okay. Thank you. The second part is the easiest one to answer, so I'll take that. And I'll throw the first one back, Charlie.
Greg AbelBut the Berkshire Hathaway Energy actually is required with its regulated utilities. And it basically started pretty much with regulated utilities. And still is dominated by that. And we're interested in buying more regulated utilities. It's required in different ways by different states and by different regulatory authorities. to have a large amount of debt because the regulatory authorities will say in Iowa or to pick any state uh the regulatory authorities are going to say you can get debt money cheaper than you can get equity money which historically has largely been almost always been true and they say that since we're going to allow you a return on equity will say just pick a figure But let's say they allow us to return on equity of 9% and we can borrow a lot of capital at 3% they say it'll result in higher rates to customers if you use it, putting in all equity. We would love to have all equity in our utilities, but we wouldn't, the regulator wouldn't stand for it because it would result in under the traditional system, it would result in higher prices to consumers. So that's built into the system. And we would, well, our regulator wouldn't allow us essentially to get the same return on equity and have an all equity structure. And the answer is, you know, we put, well, you actually saw in the film earlier, which the people that are listening, hearing the webcast, this is, you know, we put, well, you actually saw in the film earlier in the film earlier, in the film earlier, I didn't see, but, but just in Iowa, you know, we recently got approval to spend three in a fraction billion dollars, but they want us, Iowa has a history in, like every other state in the union, except Nebraska, which is all public power, but every private powers, you know, they have a history of wanting X percent to be in debt. I want you to raise a lot of money in debt because it's cheaper, means cheaper power for the consumer. So the answer is if we owned 100% of Berkshire energy, we would be, we would absolutely be following the same.
[49:55]
WarrenWe would be operating pursuant to what the utility commissions tell us they want us to do that. They represent the people of those states. Now, Charlie, do you want to... Well, the other one's simple to. It's an historical accident. It's not causing any big tension or breaches of fiduciary duty. We had the same problem with Walter Scott. It was the director for years and years known stocking in the same company, also an historical accident. Yeah. I just don't think it's a big problem at all. I see no behavior from Greg ever that isn't in the best interest of Berkshire.
QuestionerYeah. And we.
WarrenAnd we've had various percentages of Berkshire Hathaway energy ever since we bought it around 2000. And it happened. We were my sister who was here. We were at our house and there was a party going on and 20 or 30, probably 30 people. And Walter said to me, if you've got a minute or two, I'd like to talk to you about something. We went in the library or someplace. Walter says, you know, we've got this company and it doesn't seem to fit the public mold very well. And would you want to buy in and go private? I said, sure, you know, turns on the price. And when we got back to Omaha, I was out on the West Coast, we got back to Omaha, we met with Dave's Oakle, who was the big holder, beside from Walter. And we, uh, uh, um, we, um, we, um, we met with Dave's uncle, who was the big holder beside from Walter. And, uh, uh, we, um, we, he agreed on a prize and uh remember walter saying to dave don't negotiate with war he'll tell you he'll tell you to forget it and we'll do something else and uh so we bought it and at uh so it was it was kind of a weird structure from the start and we had a public utility holding up and he act deal with and all kinds of things and it's evolved and uh it now has us with 91% roughly and it has walter's estate and i don't know where that goes and uh at all and walter never talked to me about it and i never asked him about it but uh but it's one way or another interest connected with him uh or than the end the estate now close to aid i guess and and and and and and great's got one and and and the you know from our standpoint if we made a a deal with with if they ever came to us and the scott interest wanted to do something you know we'd we'd say fine well and we'll do the same thing with greg if he wants to when he probably would want to want to i mean that but from our standpoint i've never seen
[53:05]
Warrenany decision remotely if i thought that would make a difference you know he would not be he just wouldn't be the right kind of person to run um berkshire and and uh the problem of course is that you've got lots of process that can be involved with insiders and everything and and i've got no interest in as long as i'm alive you know my interests are 100% with berkshire and the board probably and to some extent a little reluctantly but they just say well Warren thinks the deal is okay must be okay which is true and uh uh so i could make a deal um with anybody and it doesn't get all messed up with process but on the other hand if i'm not around you know the pressures are to directors to do whatever the lawyers tell them to do and the lawyers tell them to do this and that and then they want to bring in investment bankers to make a value and the whole thing is a game from that point forward and uh it's expensive it takes a lot of time the people so it would be better if it happened while i'm alive and around but there's no reason we'd rather have a hundred percent than 91 percent obviously because more earnings for berkshire but there's no reason to try and do anything with either the scott interests or or or or greg unless they want to do it and the logical thing is if if anything happened with the scots we'd certainly offered to greg but that who knows what happens in the future the one thing is if if anything happened with the scots we'd certainly offered to greg but that's happens in the future the one thing i guarantee you brookshire hathaway holders will never be taken advantage of and you know you can you can you can sue my estate or something like that if it if anybody felt differently about that it isn't going to happen but it's a lot easier if it's done while i'm around actually than if it's done later but i wish we had 20 more complex inventors just like it
Otheryeah yeah that's exactly true
Warrenyeah it's it's it's an it's it's a it's a it's a it's a it's a perfectly logical question i mean i but it uh it is not a problem and any answer that's arrived at will be good for all concerned and right now i've got no i've got no feeling that that why don't i have no knowledge at all of that the scots have goals or what they how they feel about or anything and and and that's up to them they're you know the walter was our partner and as far we're concerned we're concerned we're
[56:03]
Warrenconcerned we treat anybody connected with them as our partner and they know that they don't have to worry about us taking advantage of them and and we can understand if they don't do anything we can understand that if they want to do something we can understand that it's a good question though thank Thank you.
QuestionerOkay, Becky. This question comes from Steve Blackmore in Bozeman, Montana. This is to Charlie. He says, in the past you've made favorable statements about investing in China, in part based upon valuation metrics. What is your opinion now and how much weight do you put on the actions of the government in your analysis? Do the recent Communist Party activities in China including human rights violations, blatant cyber theft from U.S. companies and others. Crackdowns on speech from business and media, et cetera, cause you to change your opinion on investing in China. And how do you evaluate the clear dangers of investing under authoritarian regimes, as recently evidenced by Russian atrocities in Ukraine?
CharlieWell, those are good questions. And there's no question about the fact that the government of China has worried the investors from the United States who invest in China. more in recent months and years than he did in earlier periods. So there's been some tension. And it's affected the prices of some of the Chinese stocks, particularly Internet stocks. Just in the last day or two, the Chinese leader, has sort of reversed on that. He went too far and he's going to pull way back and so on and so on. So we're having some hopeful signs. But yes, there are more difficulties invest in, I mean, dealing with the regime in China than there are in the United States. And it's different. It's a long way away. And they got their own culture and their own loyalties and so on and so on. And the reason that I invested in China is I could get so much more, so much better companies at so much lower prices. And I was willing to take a little political risk to get the, to get the, into the better companies at the lower prices. Other people might reach the opposite conclusion, and everybody is more worried about China now than they worked with three years ago. So that's just the way it is. I have nothing to add.
QuestionerOkay. Station 8. Hi, Warren and Charlie. My name is Tom Ringe. I'm from Wayne, Pennsylvania. It's great to be back here after two years. Thank you very much.
WarrenThanks for coming.
[59:02]
QuestionerIn this year's letter, you talked about insurance float, the evolution of float, the per share float, the effect on repurchase to increase the per share float. And in regard to the repurchase, I would say thank you as your partner for your careful repurchase as well as careful issuance of our shares. shares. My question is about your expectation for the likelihood that float will be stable and the cost will be zero or close to that over time with adverse years from time to time. What about Berkshire's insurance businesses give you the confidence to make that statement when your competitors are trying to do the same thing, but haven't been able to come close to achieving Berkshire's record in cost and growth of float. Thank you.
WarrenYeah, well, they really aren't trying to do the same thing, which is kind of interesting. The answer to your question is we wouldn't be in the business unless it was my judgment. the likelihood, the weighted probabilities are higher that the flow will be useful to us rather than costly to us. And nobody will know the answer to that for a very long time. So far, so good, but it is a judgment, and absolutely I could be wrong about it. But, you know, the, the, I think both Charlie and I would say that we would say that we think the odds are that it's a winning bet and the odds are pretty good and that we're quite well positioned to do it if anybody does it. But, you know, did we know 9-11 was coming or, you know, I mean, it is not a sure thing. Just think of what the potential is, though, when you're reviewing it. If we could buy common stocks, we were virtually sure, would give us 8% after taxes. with our whole float, that would be a hell of a lot of money. 11 billion. I can tell you what it would be, but 11 or 12 billion. Yes, it's an enormous amount of money. Annually. Yes, and the float has been growing. So relax. We're glad to have the float. But Charlie, Charlie's stuck in a couple of this there, if we could earn it, and if we could. The answer is, you know, it's our job, and we think we can do it as well as anybody or we wouldn't be doing it. But it's our job to figure out what businesses we want to be in and when they don't make sense, reluctantly, occasionally, to give up on them like the textile business. But those are the hard decisions. And insurance, we didn't have the faintest idea back in 1967 when Jack Ringwald stopped by the office at a quarter.
[1:02:37]
WarrenHe stopped by at about a quarter of 12. And Charlie Hyder had set him up. And Jack, about once a year, he'd get mad at the regulators. He just didn't like being regulated. And he'd say to himself, you know, I'm going to sell this damn thing. And Charlie caught him one day, and he said Jack is in the heat, you know. I said, bring him around. So he came up and quarter of 12, and Jack suddenly wanted to get rid of this damn business. The regulators were driving him nuts or something. I said, fine. it. And I said, what price do you want? And he said, I think $50 a share of that. And I said, fine. We've done. We've done it. We don't need an audit. We don't need anything. And then Jack started. And he said, well, he said, immediately, he really changed his mind, but he was too horrible to back out. So he said, well, I suppose you'll want me to sell you the agencies. And I said, and I said, of course, if I'd said, yes, and then he said, well, then we can't do it. So I just said, no, yeah, keep him, Jack, you know. And he says, I suppose you'll want me to do this. I said, no, no, I won't want you to do that. He was hoping I would just give him an out. But after doing that for 15 or 20 minutes, he saw that I was going to agree to everything he said. And he said he'd sell it to me at 50, so he followed through. And that was that. And, you know, it was pure luck. Now, we really like our float, don't we? We really like our float. Oh, yeah. We love it. No, we, we made the most of it. But we didn't make the most of it until a Gene came along. And, you know, who knew that the guy was going to walk into my office in 1986. And, you know, I would decide that he was the guy to make this damn thing work. I hadn't been able to make work the way I wanted it to do. And who knew that Geico would come along later and who knew it? There's just all kinds of things. The one thing you have to do. is be prepared. When opportunity comes, you really do have to just, you just move. And fortunately, I operate in an environment, and I wouldn't operate in any other environment I get out of there. But I operate an environment where I can do it. And it'd be crazy at the board to say, we want to set up a committee to review every acquisition and all that. And I would say, that's fine, but you can work with somebody else because I just don't like to go through all that stuff. You know, I've got other things to do the rest of my life.
[1:05:16]
WarrenSo it, there's so much, so much luck, but there is that, you do have to be mentally prepared and to do something when it makes sense and do it big time and do it instantly. And then you've got to be sure you've got the resources to do it. The relative absence of bureaucracy at Berkshire. Unbelievable. has made the company a lot of extra money for a very, very long time. And it's made my life happier. And yes, but that's ideal. But in the end, we are extraordinarily well positioned to do exactly what we want to do with float, while at the same time, never putting ourselves in the position, never coming close to making a promise we can't keep. We had two small insurance subsidiaries before, well before a G. Two companies I bought, one I really didn't know that much about, the other one I did it all by myself, and they were disasters. And left a loan, which they could have been, they'd have gone bankrupt. And we just didn't want to do it. So, you know, you know, we, we could pay the liability at least if the parent company got involved and put it in another insurance company or something, and we did it. I mean, it's, you know, Berkshire, you know, in a crazy way, I look at Berkshire, you know, I look at Berkshire as a painting, you know, and it's, it's unlimited in size. It's kind of ever-expanding canvas and I get to paint what I want. And if somebody wants to paint something else, then I'll go someplace and I'll get a smaller little thing and I'll paint away. And, you know, I actually, you know, I'm no good. I don't know anything about paints. Take me into an art museum and, you know, all I really want to know is where the men's room is, but, but it, you know, I'm just not interested. And other people look at pains and they see something and then they you see something additionally later on and I mean they really have a different sort of perception ability in relation to that. And to me, Berkshire is a painting and I get a paint. And, you know, the object, obviously, I want my partners to come out well in them, but the real thing I like is the painting. And as long as, you know, it's in my head and I see different things in as I go along. And, you know, it's, you know, it's, you know, this thing I can come to enjoying myself every minute of the day. And it's now, I don't prescribe it for other people. And occasionally, I'm not so occasionally, but I see things in the
[1:08:46]
Warrenpainting, you know, I think, well, I should have done that differently and I go back and paint it over. And it's satisfying. And who knows why human beings react in that manner. But I do know what makes me happy and what doesn't make me happy. I found what makes me happy. So why in the world would I change it? So that's a short answer to a question that I can't remember what it was.
OtherOkay. Becky.
QuestionerThis question comes from Andrew Kiesau from Minneapolis, Minnesota. He says, last year, Warren mentioned that inflation had noticeably impacted the prices that Berkshire's business businesses were paying and charging. Given those inflationary trends have continued and in some cases accelerated since last year's meeting, could you comment on how this particular inflationary period ranks among previous such periods in the United States, like the 1970s and 1980s? And what can American businesses and citizens do to reduce the negative impacts that inflation brings about?
WarrenWell, we've sort of attacked what you do yourself. And, you know, you know, you develop skills that people are willing to pay for in the future, regardless of what the unit of exchange is. But in terms of inflation in our own businesses, it's extraordinary how much we've seen. You know, the, I think you interviewed Erb Blumpkin at the Furniture Mart, and for two years, you know, the prices have just kept coming in higher for these things. and we sell them for higher prices and people have more money than they've had before. And they like to buy. And there are certain things they can't buy it's like during World War II. You got a lot of money created and people couldn't buy cars and they couldn't buy refrigerators and they couldn't even buy as much sugar or coffee or things as they wanted. They had little stamps and gasoline and all kinds of things. Well, eventually we got a lot of money in people's. hands and you don't have very many goods prices go up how you can do all kinds of things to you know try and talk it down and of course inflation is never the same nothing in economics is the same the second time after it happens in the first because the first affects people's attitudes in the second and their attitudes always influenced the the the activity itself I mean it is it is an interesting phenomena there are people write a textbook and they write it based on the last experience and people read the textbooks so they behave
[1:11:44]
Warrendifferently next time and they wonder why they're getting a different result than they got the time before so anyway we have we have sent out lots and lots and lots when I say we I mean the United States government we've the government has set out lots of money to people and at some money to people and at some point you know that the money can't be worth as much as it was when there was us money out there's an there's an interesting figure that I think probably will astound you sounds me anyway the Federal Reserve every Thursday puts out a balance sheet the Federal Reserve and Treasury they're complicated institutions but they do put out this kind of consolidated statement of all the various Federal Reserve banks all these things that have entered in the legislation over the the years and and there's a balance sheet and 15 years ago roughly if you look you know the Federal Reserve issues those notes I talked about a while back and that's the one there's the current one and they print these pieces of paper and they one way or another they they got it in the hands of people well the interesting thing is people said cash is dead and all that sort of thing you know cashless society well there were 800 billion go back 10 or 15 years there but there was about 800 billion of currency in circulation and if you look at last Thursday's report you'll see there's something like now 2.2 trillion dollars of currency in circulation 2.2 trillion Now there's about, there's 300, well, there's 330 million people in the United States. Let's look out of that way. And with 330 million people and you have almost 2.3 trillion of currency in circulation, that's $7,000 per person. Every man, woman, a child, in theory, has $7,000 worth of currency. Well, you know, that isn't right. But you do know that the Federal Reserve's bookkeeping is essentially right. They've got that much that's out there. I don't know whether it is. I mean, I don't know whether it's in Russia. I don't know whether it's in South America. I don't know whether Charlie's got it all. I mean, it's a staggering sum. Cash is dead, and yet we, on average, have $7,000 for every person in the United States. Now, while you're absorbing that, think for a moment what would happen if the U.S. government said, well, they're working out in private, and they decide that they're going to send Federal Reserve, and I'm not going to blame the Federal Reserve, but there's
[1:15:12]
Warrensomebody back in Washington decides they're going to send out a million dollars to every household in the United States. and there are 130 million households in the United States or something like that, you know, and they're going to mail you a million dollars in cash. And there were a couple of provisions attached to it. One is, if you talked about it in the next 30 days, the money disappeared. So it was like in one of those old TV shows or something, and poof, it disappears. And After 30 days, you could spend it. Well, all of a sudden, you've, the household wealth of the United States, Federal Reserve puts out an estimate, it's $130 trillion or something like that. So basically, you've doubled the household wealth. And all you've done is mailed out people, but they don't tell them you're doing it with everybody. You just say they won the lottery or whatever it may be. And now you've got an amount equal to household wealth. that on average people have doubled it. They've got this extra $130 trillion of wealth. And in a month, I can spend it. Well, what's going to happen? Well, that prices are going to go up. But are they going to go up immediately? Well, you don't know the other guy got it. You just know you've got it. So you don't really feel like you've got to rush out, buy things. But as soon as the word gets around, well, we've mailed out. If you look at the amount we've distributed the federal government. I'm just talking about the distribution of resources. We're talking numbers like that. And it affects prices. It has to affect prices. If you had 10 times as much, if you went home and you found out, you had 10 times the net worth you had yesterday. But everybody else is the same thing. It doesn't increase the amount of. bread in the economy or the number of cars, it just means that the price, the value of this is going to go down and it's purchasing power. You can't buy more than exists. So it's a very strange period where we had lots of money sent out to people. One way or another we're getting it, that they didn't find as many places to buy as before. And we had supply chains. They have all these things happen. But the end of it is they go out to the Nebraska furniture market and they start buying things. And they do it with our other companies. And they do it in very peculiar ways. And now they're buying, I mean, one thing, you know, jewelry stores were, generally speaking, not a very good business.
[1:18:35]
WarrenAnd two years ago, every landlord that had a jewelry store, or multiple jewelry stores, stores in their mall, you know, was wondering how they were going to get their rent. And now every jewelry store virtually is doing incredibly better than they ever dreamt with way less inventory because people just come in and buy. I mean, they don't wait for sales. You know, when they walk in the store, they're going to walk out and they're going to bought something. And they pay for it. They got the money. So we are seeing an unleashing of the fact that we've just mailed a lot of money to people. One way or another, it's very indirect and it all gets complicated when we talk about a big system. But this is what's happened. And I will guarantee you that if we just, if we mail out a million dollars to every household, United States, then I, and you don't know that it's happened, you don't really expect much of happen in behavior tomorrow. But somehow, at some point, and then if you start doing it every month, we'll say, and people really know you're doing it, then they start anticipating it and buying at a time and forward time. I mean, there's a million things that happen in economics. But the answer is, we've had a lot of inflation, and it was almost impossible not to have, if you're going to mail off the kind of money we'd mail up. And it's probably a good thing we did it. In fact, I think there was one point. when the Federal Reserve, which in effect creates the money, the, if they hadn't done it, your lives would be a lot worse, a whole lot worse now. And that was an important decision. And that's the way that's the, that's the, that's the, that's why you've had inflation and heaven knows. I mean, it could end. You can throw the country into recession. You can do all kinds of things. The country's going to have recessions, incidentally, and it's going to have depressions periodically. And things don't, things will happen differently. And you'll read a newspaper today and you'll wonder a year from now, why was I reading the newspaper a year ago? I mean, it's just the way it works. When I bought the first stock in 1942, did I know everything was going to happen afterwards? Of course, no damn thing. But I just needed to have one idea. And that idea wasn't really well formed. It was just probably the way practically every kid fell about the country when we'd just gone into a war.
[1:21:27]
WarrenYou know, we thought America was going to win, and America was going to win then. It was going to win just generally, and savings bonds were paying 2.9% over under that because we bought them. They called them war bonds originally, and they called them defense bonds, and they called them savings bonds, but they were the same thing. And it's, you, you print loads of money and money is going to be worthless. Not worthless. I got in trouble doing that one time, CNBC, because I said it was going to be worth separately less, but got contracted down to worthless. So I, I said, let me have a few years to learn to separate those words somehow. Anyway, that's everything I know about economics and more, and Charlie can probably improve on it.
CharlieWell, it happened on a scale this time we'd never seen before. Those checks that were just mailed out to everybody who claimed to have a business and claimed to have employees. They probably drowned the country in money for a while. And as you say, they probably had to do it. But it was something that had never been done on that scale before. But we had a problem we hadn't had before.
WarrenYes. No, I'm not saying it wasn't a good idea. I mean, in my book, Jay Paul's here. I mean, it's very simple. I mean, he did what he had to do, you know, when, if he had done nothing, it would be the, I mean, he would be, you know, it would be very easy to engage in what you would call thumb-sucking then. And plenty of, I shouldn't say plenty of, but there are other Fed chairman that would have been sucking their thumbs, and the world would have fallen around them. And nobody would have exactly blamed that. They would have blamed the virus and the Chinese. and all kinds of things.
CharlieWell, the really interesting company is Japan, where they, first, they buy back all the debt, then they start buying back all the common stocks. Now, that's really weird. And what did they get, 25 years of stasis? Who would have predicted that?
WarrenWell, nobody predicted anything. I mean, there's nobody's predictions that we're interested in, including our own. I mean, it's very simple. What we do know is that we can, we can, we can, we can, we can. can deserve your trust, and there's no reason to do things that don't deserve it. And we can't tell what. But basically, we think we're trying to build a Berkshire that cannot, can't withstand a nuclear exchange, but it can withstand just about, withstand as much as in, anything that we can do anything about.
[1:24:27]
WarrenThat leaves us feeling good. It doesn't leave us feeling perfect. We'd like to even promise you more than that. But we can't promise more than that. So it's very simple. And with that, we'll move on to 18. Let's see. That's Station 9.
QuestionerDear Mr. Buffett and Mr. Munger, I'm I'm Ily Abushakra from Montreal, Canada. I would like to thank you for everything you've done for us, your fellow shareholder. My question is regarding. the gap rules. If you were to change it, what would you change, what it would look like? Thank you.
WarrenWell, I would resign the job.
WarrenWhat would you do, Charlie?
CharlieNo, it's an impossible problem because first of all, you have to decide whether what gap is supposed to reflect. And it doesn't reflect value. But in certain cases, of course, it is important to say that this is value and so on. I mean, it is, it's a, it's a, it's a, it's a, it's a. convention and it is done so that the auditor generally is protected because otherwise everybody sues everybody in this country for anything. And it's designed to cause people who want to report a given amount of whatever is desired by the market to largely be able to do it. And I don't know how I would write the rules. I mean, I've watched people who I would be delighted to have live next to me. You know, if I was going away for two weeks in my kids were to stay at somebody's house, it'd be fine with me if they stayed there. If I lost my wall at some place and they found it, they'd return it to me. But they'd play games with any number that came to them. And, of course, it's a very awkward thing to be on the, audit committee of a company where people are playing around with the numbers. And they don't want you. If you raise it a stink, you've got all kinds of problems. And I actually wrote something some years ago of four. I was kind of anticipating your question about 15 years ago, I guess, and I wrote four suggestions for questions to be asked of the audit committee. And I don't whether I was on the audit committee then of coke or where. But anyway, I mean, just clear to me what was, what was happening. But you had to, you really had to follow the subrader. You got in all kinds of trouble for doing that, too. And so, uh, I just put four questions out that, that I would want to know. And there were perfectly logical questions. And in the end, nobody adopted them. I mean, it, it, it, the system was fine as it was.
[1:27:39]
WarrenThe auditors got sued, but not that. often and and the SEC had lots of rules and I admired the SEC enormously. I think I think the country is better off because of the SEC but but it is a hopeless question question or problem to devise rules that that people can't get around I mean it's that it's it's it's not I think it would who was it that my friend that was a writer said it's not the it's not the illegal things that are outrageous it's the legal things it's just it's very hard you try and it's worthwhile you need an SEC but the SEC can't really stop the stuff that that you would find outrageous you know the auditors have the same the same questions I mean, the auditors really want to, they want rules and they want processes and they want it to be so they can operate. Charlie found a, he was on the audit committee of Solomon, and we had probably literally millions of contracts where people put numbers in. And he found that $20 million, we had the largest auditing firm of the country than Arthur Anderson, as I remember. They're gone. Yeah, they're gone now. But they were the, but they were the largest. And Charlie found a $20 million error, I think, one time it was a plug. They call it as a plug. When your accountant starts talking about a plug, it's not good. Well, I'll tell you a story I haven't told before. You saw in that movie, people who were here, saw, he testified in August before, before a subcommittee who were out to, you know, get their way. And I just decided, I was just going to answer every question honestly, and I was not going to try and draw off anything. So I just sat in front of them and said what I knew and didn't know. And one of the things I said, which was absolutely true, is that I'd only been there 10 days or so at Solomon, but I said, I really haven't seen anything yet that strikes me is terrible in accounting. But I've been there 10 days. But this guy who got us in all this trouble, so far, he's the only thing I found. I don't know what else was going to be found. How in the hell could I know what had gone in a place that was doing, you know, credible numbers of transactions and everything? Well, but I said, you know, what I've seen, the accounting strikes to me as legit. A month later, I was so happy I testified earlier, not later, a very fine CFO, and these are decent people. They're very decent people. And he comes in and he said, Warren, there's probably something you should know. And I said, well, what's that? He said, well, 12 years earlier, whatever it was, Solomon emerged with FIRA, which was a huge trading company.
[1:31:21]
WarrenSolomon was a huge investment banking company. It became his huge powerhouse. And he said, 12 years ago, when we merged with him, we sort of couldn't find exactly they were on a trade basis, and we were on a settlement basis. And they said, we never really figured out how to put the books together. This is the largest audit company in the United States, Arthur Anderson, that's responsible for signing this thing. So we have this number, and every day it moves around. And it's just put in there to make assets equal liabilities. And, you know, today it's $173,412,000, you know, a ton of a penny, and tomorrow it'll be something different. And I thought to myself, I am sure glad I testified for Congress a month ago, as I did not know then. But if they ever asked me again, I'm going to tell them exactly what happened. We just got this number that floats around every day, and we haven't found it in 12 years. And Arthur Anderson doesn't know where it is. And, you know, you got to make the assets equal to the liabilities, right? I mean, so what else do you do? And that's exactly what happened. And strange things happen in this world. There's one thing I think the name was the floating plug. Yeah, you know, yeah. And Charlie's on the audit committee. Yeah. Yeah, the one thing I've always suggested, nobody ever wants to do this, I can understand why. But you've got trillions of dollars worth of contracts and everything that people are putting down little numbers for every day at banks and investment banks and all over the world. I mean, commodity traders and at Berkshire, we stick down something, you know, there's certain hedging that even the regulators want us to do in terms of given utilities. put a little number in. And I've made this suggestion once or twice that if you really want to do something sort of interesting, you know, just get some young guy that give him a couple of weeks and pick the 100 most kind of complicated long-term, you know, lots of wording, derivative contracts, and look at what one side who promises to do something values it at and look at what's the other side who also reports you know and and just let them do it for a hundred operations that ran them I just like to know if somebody's valuing some we're valuing a contract at 28 million the other guy's valuing it at 33 million you know and you've got the same auditing firm on in both cases and they're they're signing their name going nobody ever I don't
[1:34:24]
Warrenlike anyways ever done anything with that suggestion and it's you know that would be the first thing i would do actually if i really wanted to sort of dig into what was happening in accounting but but there's a lot of things in life you can't change and and nobody is going to go looking for ways to create lawsuits and newspaper stories all kinds of things and i don't blame them but i did i said i brought one thing i just couldn't resist I was hoping I'd get a question so I'll ask it myself I was hoping to get a question that how could be some guy be so idiotic as to propose a price that of $848 and 2 cents or whatever it was or is for Allegheny Court and I mean that isn't that getting a little scientific you know And of course I did provide when I made the offer that it'd be $850 less whatever was paid to whatever investment banker they wanted to select allegation this case and they're bound to have to do it because Delaware law has developed in such a way that the directors are protected if they get expert opinions or all that sort of thing so I don't I don't fall in the system but I just thought it might be useful actually maybe to Delaware judges someday Delaware statute maker maybe people that are writing papers who knows but I suggest that we just since I'm willing to pay $850 a share for the place as is you know if the audit fees are I mean if the advisory fees are 10 million or 40 million that it makes a difference to someone And it has always made a difference to us as the buyer, but that's just the way the game was. Well, there's a little history to that. And I went back and there's been twice in the, nobody's ever paid intention to this, but, but it's been twice in the history of Berkshire Hathaway, 57 years, twice that Berkshire was required to get a fairness opinion. And it was perfectly. logical that we be required to get a fairness opinion in those two cases because in one case diversified retailing which was a company I was invested in both of them that came out of our partnership but one had a group of shareholders that were different than the other group of shareholders at Berkshire and the two I want to merge so you have two companies with me being the the biggest beneficiary in between and And it really, it wasn't up to me to determine the ratio. I mean, even though I had the most involved, but I had a little more of one company than the other.
[1:37:42]
WarrenSo anyway, a fairness and opinion was required. And this has only been twice in the history of Berkshire that one was required. So naturally, I went to Charlie. I said, Charlie, you know, we do have to, but Charlie told me, he knew it better ideas. We needed a fairness opinion in this case. And I said, you know, I know what's fair. You know what's fair? Sandy knows what he thinks is fair. If the three of us owned it, in ten minutes, we could have worked out a deal that all three of us regarded as fair. But because there were public shareholders and everything, it wasn't right to do it that way. And the first one, we have two of these, but the first one was November 27th, 1978. And I told the shareholders, essentially, that my personal belief is that both diversified and Berkshire shareholders will benefit from the merger, but I will not, I will vote for the merger only if a majority of the shares, which are voted by other shareholders of each company, are voted to support it. So I, which was fine. I committed myself, you know, let the other people decide whether this is fair, but on top of that, we needed to get a fairness opinion. from an investment bank with a big name and everything. And so I said to Charlie, I said, you know, these things are going for a million or two million bucks where they get some guy that they hired last week and he writes up a little thing. And then we get a bill for a million or two million. They really haven't done anything. They don't know either company. And, you know, there's a million things that are not going to know about it, but they're going to write it opinion. And we need the opinion. I said, so what do I do? I go to Charlie with these kind of problems. I said, Warren, it's very simple. He said, pick out 10 prestigious investment banks and do exactly what I say. So, okay, Charlie, what do I do? What do I call and get these 10? He says, well, put them in order, one through 10. And he said, call the guy at the top of the list and tell him, you'll pay him $60,000 for doing a fairness opinion. And you know that it's an insulting price, and it's ridiculous for him to do it because it'll affect what he can get from other people down the line. They'll look back and they'll say, well, if it only paid $60,000, why should I pay $2 million? And it's, it's, it's, but he says, just tell them that that's what you'll pay. And if, if they're installed by it, which they probably should be, and then you'll go to number two.
[1:40:53]
WarrenAnd they'll offer them the same deal. And you'll just keep going down until you get to number 10. And if you don't have anybody by number 10, you've told the other people, you'll come back to number one again, and you'll say, well, I'll pay 80,000, and then you'll go down the list and everything. Well, so I picked 10 names out, and number one name was Jack Shad, and Jack Shad was a friend of Tom Murphy's, a friend of Bill Rewains, and he was running E.F. Hutton, and he was a very, very, very successful investment banker. I didn't know him as well as the others, but I'd met him through my friends. I called up, and I said, Jack, I said, I said, I forget this crazy request. He says, only because everybody admires you so much, and my friends are your friends, and blah, blah, blah, and E.F. Hutton is so well regarded. I said, I'm going to do something that's, I'm going to ask you something that is totally against your interest, and I fully understand the fact that you're going to say, you're an idiot to call me on this and slammed out on the phone. But I said, Jack, here's our procedure. And I describe this procedure that he gets called first, and if he turns it down, then I go to Payne Weber, and then I go to the, and then I go through it. And I tell them, there's these 10 people, and if we don't get any yeses, I'm going to come back to you again, and I'll offer you 75, and we'll do the same thing until somebody says yes. And I said, Jack, you know, but you are the first cause. So $60,000, and it's going to screw up your business if you do this, because every client you get in the future is going to say, well, you did it for diversified retailing in Berkshire, and why in the world should we pay you $2 million when he paid you $60,000? And Jack said, don't worry about it, Warren. I can take care of that. He says, we're in. And so we got a fairness opinion, but for one side, now the next call I made was to payneweber. And I said, E.F. Hutton was dumb enough to take the one side for $60,000. You know, I don't know why the hell they're doing it. you know, they're destroying their reputation and all that. And Payne Weber said, we'll take the other side for $60,000. So we have a person, we have a thing that describes the whole process. And they got well, though. They sent out an amiable alcoholic. They had to do something with. Well, what they did was they each billed us for $60,000, and we paid it.
[1:43:35]
WarrenThat's what you get for $60,000 bucks. No, no, no, no. We got the same thing everybody else got Charlie. And, of course, Jack Shad, this was in 1978. He was appointed chairman of the FCC for seven years. I mean, Jack, Jack likes to do business. And it's true, it didn't hurt him. They paid us $60,000, and they went back and charged somebody else $2 million the next week. And those guys, it's all play money. And so we did the same thing when we got to Blue Chip Stamps, where we were similarly conflicted four or five years later. We went back to the same two guys, and there'd been a lot of inflation and everything like that. So we said 110,000 then. I've got the prospectors for that. And both of them said, you know, send it in, don't worry about our other clients. We'll figure out some story to tell them, you know, whatever it may be. But I just thought it would be. interesting at some point have people realize that it's not play money. Somebody pays it. And it's a game. And it, you know, it, uh, but it's, it's, it's what passes muster in Delaware, and the directors will have it explained to them by the lawyers that they're not going to get sued if they do it in a certain kind of way. And, you know, it's, uh, uh, uh, uh, so I just, just decided that somebody at some point on a point out what that actually is happening in the situation and that's why we did it that way and and uh you know it may go down with our earlier attempts to educate the world on the realities of finance and its various interactions and why it's better to teach your son to be an investment banker than to be an electrician or something but it's uh uh you've got an eccentric chairman and that's what he did charlie how do you feel about this whole matter it was your idea of originally well it's we're a little peculiar and it's not all all the peculiarities are not bad i talked to charlie before i didn't talk to charlie before i did it this uh this time yeah it's but charlie has given me four ideas and together that on extremely practical matters were so much i mean they just changed everything i think you really ought to tell about the experience with the fraud kind of what on the fraud claim it you know that the fidelity claim with a guy you know you had you had the very well-known insurance company that you don't have to name names but uh you where you know you basically told them just raised the stakes to make the
[1:46:53]
Questionergame fair this was back in the 1960s do you remember that
Warreni don't remember
Questioneroh well i do i remember i remember
Warrenoh tell it then uh charlie had this tiny little operation which he ran his fund also had a seat on the pacific coast stock exchange the firm was called wheeler munger it was called wheeler munger at first later it changed itself to munger wheeler and jack wheeler said well pretty soon it'll be a mongered company but that's okay they jack wheeler was a very interesting guy and he had the specialist position in general motors and a few things and some employee stole like i don't know 12 000 bucks or something like that from yeah he hit i remember he had the trading tickets yeah some guy some guy steals some money and charlie's firm wheeler muller mgger was required to have a fidelity bond and all these things that covered dishonest employees and all of that sort so this guy's clearly dishonest he's clearly stolen the money so charlie puts in a claim for twelve thousand dollars or something like that whatever the loss was and sends it to this very big and prestigious insurance company and of course the insurance company denies his claim they say you know the guy really wasn't employed he doesn't you don't have a dog you know i mean the whole thing and charlie gets this letter back and they're not going to pay the claim and uh so charlie writes a letter to this very well-known big name uh person that runs the insurance company and he said look it he said we have this $12,000 claim and he said this guy stole the money uh and we thought we had a insurance policy against people steal the pay this people stole money and he said he said we're in this very interesting position because you've got a bunch of people on the payroll and they're going to get their weekly check or monthly check whatever they do so they just say we're not going to pay and life goes on whereas i'm sitting here and i've got my time i got to work on this thing and it isn't worth the $12,000 for me to pool around with this claim against the company and they'll appeal and all these things so he said i know that you would be offended by the thought that you might be using this inequality of bargaining position to avoid playing at the claim and that never could be your intention so what i suggest in order to to really live up to your code of behavior is why don't we make the $12,000 claim we'll just we'll just multiply it by 10 and call it 120,000 either way and if you lose you pay me
[1:50:00]
Warren120,000 if i lose i'll pay you 120,000 now it's worth my while and uh he addresses the letter to the chairman and says that's the guy he gets a 12,000 dollar check by return mail it's not a bad lesson he's told me two others but the tricks are too good i don't even want to share them now i may use it myself something okay uh let's go to uh becky we've got a lot of questions on this topic i'll ask this one that came from raj he says have you changed your views on bitcoin and or cryptocurrency in any respect i'm conflicted about this because his own views have slightly evolved during the past two years from bitcoin is a fraud and waste to bitcoin is in a speculative bubble but might have some uses well i shouldn't answer any questions on the subject but i will you know there's there's all kinds of people watching this that are long bitcoin and there's nobody that's nobody wants their windpipe stepped on i don't blame them i don't like people to step on my windpipe but i would say this that if all the people listen if the people in this room uh owned all of the farmland in the united states and you offered me a 1% interest in it and you said for a 1% interest in all the farmland in the united states pay me uh pay our group well let's see 10 for us this bargain price 25 billion dollars i'll write you check this afternoon 25 billion now i own 1% of the farmland if you tell me you own 1% of the apartment houses in the united states uh and you offer me uh a 1% interest so i'll have a 1% in all the apartment houses in the country and you want whatever it may be for it another 25 billion or something right you check you know it's very simple now if you told me you owned all of the bitcoin in the world and you offered it to me for $25 i wouldn't take it because what would i do with it um i have to sell it back to you one way or another i mean maybe have the same people but it isn't going to do anything the apartments are going to produce rental and and the farms are going to produce food and uh uh if i've got all the bitcoin you know i'm back where whatever his name was who made or may not have existed was you know 15 years ago if i've got it all he could create a mystery about it but everybody knows what i'm like i mean so if i'm trying to get rid of it you know people will say well uh you know why should i buy some bitcoin from you i mean why don't you call a buffer coin you know make your own or something but don't i'm not going to give you anything for it
[1:53:34]
Warrenand you'd be right incidentally but that explains the difference between productive assets and something that depends on the next guy paying him more than the last guy got now net if you look at it a lot of commissions have been paid and then there's i mean there's all kinds of frictional costs that are very real that somebody has paid to a bunch of people who facilitate this game but whatever one group of the public is taken out or one group of owners has come in from other people i mean it's other people have entered the room and they've move money around but but no money has there's no more money in the room it just changed hands with a lot of maybe fraud and costs involved and you know a whole bunch of things you'll lose you know you forget the numbers or get the equation they uh you can do that with a lot of things i mean it's been done throughout history uh certain things have value that that don't produce something tangible i mean you can you can say a great painting you know probably will have some value 500 years from now may not but the odds are pretty good that if it was a big enough name at some point there'll be a few things i mean it you know you can uh you can find something if somebody wants to sell you a pyramid or something and you can charge the viewers or you know it'll be around a lot of you can find something you can find something you can charge the viewers or you know it'll be around long time and won't produce anything but but but uh people will find it interesting to go there because i've read about the parents but basically uh assets to be to have value they have to deliver something to somebody and uh and there's only one currency that's acceptable in the united i mean you can come up with all kinds of things uh we can put up berkshire coins or you know we can put up Berkshire money or anything like that but uh we get in trouble i guess if we call it money but uh in the end this is money and and there's no reason in the world why the united states government whose currency people prefer at it we literally there's 2.3 just under 2.3 trillion just of these little pieces of paper floating around some places 7 000 for every man woman a child in the united states and of course most of them probably aren't the united states who knows but this is the only thing that's money and anybody that thinks the united states is going to change to where they let berkshire money replace theirs you know it's out of
[1:56:41]
Warrentheir mind i mean and uh so anyway uh with those few deficiencies uh you know you can whether it goes up or down the next year or five years 10 years i don't know but the one thing i'm pretty sure of is that it it doesn't it doesn't multiply it doesn't produce anything it's it's uh it's got a magic to it it and people have attached magics to lots of things i mean the gold on wall street you know create magic you know we are not an insurance company we're a tech company well they're an insurance company but a dozen people or soles raised a lot of money they just say just don't pay any attention to the fact that we say you don't pay any attention to the fact that we sell insurance we are a tech company well in the end they wrote insurance and overwhelmingly they've lost a lot of money since that you can you can you can make up things that work well and getting money from other people and that's why well i have a slightly different way of looking at it i'll sell you something well i in my life i try and avoid things that are stupid an evil and make me look bad in comparison with somebody else and bitcoin does all three and the first place it's stupid because it's very likely to go to zero the same place it's evil because it undermines the federal reserve system and the national currency system which we desperately need to maintain its integrity and government control and so on and third it makes us look foolish compared to the communist leader in china he was smart enough to ban bitcoin in china and with all of our presumed advantages of civilization we are a lot dumber than the communist leader in china
Charlieyeah and when 25% of the people of the country get mad because we've said what we've said today just remember charlie spoke last it was the most
Warrenthe one development i really do think is actually important but i don't know any way to do anything about it but i would my general sense and there's no way to prove it but i essentially believe people are now behaving somewhat more tribal than they have for a long time and i mean people are always going to be partisan and they're they're going to have religious beliefs they're going to have all kinds of things but but it gets pretty it gets pretty tribal and i want to tell you i speak from experience from experience because i've been tribal and you know we're confessing today uh and uh you know Nebraska football is tribal and when i watch a television set and i see our
[1:59:59]
Warrenguys step Nebraska step out of bounds by a foot but somehow the refuserses it and calls it in and then they show six replays all continue to believe it was in even though it's right in front of my eyes and they stepped out you know that's tribal behavior and and it's fun i mean participated but it gets it can get very dangerous when people one group of people say two plus two is five and another say it's two plus two is three you know and they're going to give you those answers if you call them and the interesting thing is to me at least and partly because of my age but i actually think that just from memory uh that the last time that the country was seen as tribal was actually when i was a kid and roosevelt was in either you hated roosevelt or you loved him i mean nobody cared about the fact alfland it was running or window woke he was running against them they just had these feelings they either had roosevelt's picture on the wall and named their kids after roosevelt's or they hated him and and they thought he was going to no third term and you know a million things and the country was very very tribal in the 30s but roosevelt's tribe was bigger and in my opinion they did some wonderful things but i happen to grow up in a household where we didn't get served dessert until we said something nasty about roosevelt i mean i'm be and believe me if you don't get dessert you're going to say something to ask me about roosephal and so you trained them young and you know all kinds of things and uh so i've been i've seen a i think i've seen a period that it wasn't that way when you know eisenau was running against stevenson or you know or whatever it might be i mean it uh uh you know people they didn't they didn't they had a partisan behavior and they had a certain amount of tribal always but i i think it i don't think it's a good development for society generally when people get tribal regardless of i mean charlie what tribes are you member of them
Charliewell in california we have a legislature which is completely gerrymandered so nobody can ever be thrown out by the voters and therefore the only the only people in the legislature are insane rightists and insane leftists and they get together every 10 years and there's usually six moderates somewhere in the legislature and so they rejigger all the districts to throw them out because neither party can stand them now that is government in california and and you live there and you
[2:03:16]
Otherhave to go back yes yes i'm sure you're all the wall and i prefer living there they're living in russia okay who who haven't we gotten in trouble with you know what was it lindy bruce that you say is there anyone i've forgotten to offend you uh the section 10 i believe
Questioneruh hello mr buffett and mr munger my name is sahedge i'm from new jersey and i'm currently a freshman at rutgers university um you knew quite early on that you wanted to be investors and you've obviously been amazing at it what advice would you have have for someone who's still trying to figure out what they want to focus on and find their calling
Warrenwell that is it is a very interesting question because i got i was very very lucky in that i um i found what i wanted to do because my dad happened to be in the business that he wasn't interested in but they had some books down there and i loved my dad and i'd go down read the books and they interested me and you know i'm glad he wasn't a you know professional or professional boxer's i'm thinking i you know i wouldn't have any teeth left or anything i i it was it was accident just totally accident but i do think i do think you know it when you see it and it doesn't mean you can follow i i i would tell the students that wrote in the report i i mean you know find out what you love doing it or you spend most of your life doing it and that uh why in the world would you want to be uh around for a lifetime uh working with people that you didn't like unless you had to which sometimes happens and uh just work for whom ever you admire the most and uh i gave the talk at stanford one time and somebody showed up at Tom Murphy's office i think a couple of days later i mean that person was right and of course it's what i did when i got out of school i wanted to work for ben graham i mean that is i just i didn't care what i got paid it didn't make it you know i'm it just is i just knew that that's what i wanted to do and then i pestered him for three years and he finally hired me uh and then i found somebody else that i'd even rather work for than ben well well who happened to be myself so so so i've been working for myself ever since but i worked for i had about four bosses in my life uh you know i've done the lincoln journal with uh uh uh uh name slips my mind at the moment of the moment he's wonderful boss it was cooper smith and j c pennies here in omaha and they all were wonderful people but i still prefer
[2:06:40]
Warrenworking for myself and of course charlie and i both worked for my grandfather and and we just didn't we didn't find it that interesting at uh uh i never i don't remember how did you why'd you ever decide to go to work at the store charley charlie worked there in 1940 i worked just for the experience of working i didn't need the money my father gave me an ample allowance and i also had a private business so i was kind of working as a lark in your grocery store 12 hours a day yes for a lark yeah as a lark yes you consider that a good investment of your time i'm looking back on it well i had never done it before and i wanted to have a little of that experience and i wasn't going to do it very long that sure as hell wasn't the reason i worked well but i could give that young lady the advice figure out what your bed at and avoid all of it that's the way warren and i found our provision absolutely we yeah we failed at everything we worked at everything till we found the ideal employers ourselves you know and that that was an organ that was something we really admired was i know one said work for somebody you admire the only one he knew was the one he was shaving he became self-employed you see when he was shaving but it isn't bad advice it isn't bad advice i mean who wants this if they've got an option i mean if you're you know charley went into the service and whatever year it was in the 40s and he didn't really have a choice of who he was going to work for and as i remember it didn't really work out that well who you worked for charlie did it well well if you stop to think about it the two things that neither one of us has ever succeeded at one we've never succeeded anything that didn't interest us right right and we've never it's succeeded anything that was really hard where we didn't have much aptitude for it yeah and we've been doing whatever we've placed yeah it's just and we get we have fun in our way and i'm just amazed you'd think if you're smart you could do things that don't interest you well but you can't well i've certainly got a lot of examples in my own case but we won't get into them here and we will go to Becky this question comes from Foster Taylor in Tulsa Oklahoma he said he recently listened to the berkshire hathaway 2008 annual meeting where you talked about global oil production at the time you talked about major ramifications of global oil production
[2:09:38]
Questionerwent below 85 million barrels in 25 years we are at the 14 year mark in global oil production looks to be 79 million barrels at the same time we're depleting our strategic oil reserves should the united states be doing something differently and do you see consequences to these actions in the next 10 years if we do not become more proactive
Warrenwell charlie's the expert on oil well that only compared to me samuel johnson said it's harder hard to determine the order of precedency between a louse and a flea it's hard to tell which of us is more incompetent in oil the yeah we're still competing i have a different on this subject i like having made reserves of oil if i were running the benevolent desperate of the united states i would just leave most of the oil we have here and i'd pay whatever the arabs charge for their oil and i'd pay it cheerfully and conserve my own i think it's going to be very precious stuff over the next 200 years and so and nobody else has my view so it doesn't bother me i just think they're all wrong yeah but at any rate i that is not the normal view and we've been pretty flexible in our own view i mean actually the the the you know the the federal government is serving up however many billion barrels of of the stuff that that entered into the economy and you know it wasn't that long ago that you know the idea that anybody produced a barrel of oil was somehow uh something terrible i mean just try doing without 11 million barrels of that see what happens tomorrow it is it is it is something that everybody has a feeling on immediately and and you know this gets into a whole bunch of different uh tribes of sorts and and and you offend an awful lot of people if you talk in any way about it but in the end i think at the moment at least most people feel that it's nice to have some oil in this country than not have it and uh and we're using a lot of it and if we were to try and change over in three years or five years uh nobody knows what would happen but but the odds that it would work well are extremely low it seems to me
Warrencharlie why don't you say something more dramatic so you'll be the one that offended the most people
Charliewell if you stop to think about it the oil industry is being so vilified now i can hardly think of a more useful industry more and i don't know about wildcatters but certainly the petroleum engineers i i know and the people who design our
[2:13:01]
Warrenoil refineries and pipelines are some of the finest and most reliable people they know and i see very little trouble with the oil supply thing in the united states so i'm basically in love with standard oil so and i don't have this feeling that's a evil crazy place uh i i wish the rest of the world worked as well as our big oil companies
Warrenwell we better move on to station 11
Otheri'm not sure where the station 11 is operative there
Questionerwell we're here um greetings from the overflow room my name is is glen tongue i'm a shareholder from new york this is my 20th berkshire annual meeting and i'm delighted that we're able to once again be here in person you two have brought tremendous joy to all of us through the years and speaking personally your wisdom has not only made me a better investor but more importantly a better happier person it's a privilege and honor to thank you so warren and charlie thank you
Warrenwell that's my kind of a question
Otheryeah that's fine let's have more of
WarrenYeah. Or you can say it again. I mean, maybe you could say it. Maybe I should quit at this point. Let go to it.
QuestionerMy question relates to share repurchases. Since you started buying back Berkshire shares in size two years ago, the repurchases have ranged between $1 billion and $3 billion per month. By my estimate, it appears that the buyback rate is about $3 billion per month when Berkshire's trading at a $20 million. trading at a 20 or so percent discount to intrinsic value, $2 billion per month at about a 10 percent discount and a billion per month at a zero to 10 percent value. Do I have that about right and approximately, approximately right? And do any other factors influence the rate of share repurchases?
WarrenWell, after you were so nice in your introduction, I have to say that you're actually wrong in that. If somebody had offered us 50, billion dollars with the stock at a certain point in the last reform, five months, we'd have taken it. You know, it's that simple. And as I mentioned earlier, we haven't bought any stock in April. It's something that when we can do it and we know, at least we think the probabilities are very high, we certainly believe in terms of our own evaluation and our own investment. investment. We think that we're improving things for the remaining shareholder. We'll buy it back. And if we don't, we don't buy it back. And if we have the choice of buying businesses that we like or buying back stock, controlling factors, how much money we have, we'd rather buy businesses. And so it isn't, you know, we don't stay awake at night.
[2:16:12]
Warrenworking out formulas or anything of the sort. But we don't ever do it if we think that we're not doing something at the time. If we had a lemonade stand and Charlie and I and you owned it, and the lemonade stand was making us about a buck a week or something, and we divided it up. And you said you wanted to get out. And if you said one number, we'd have the funds and we'd have the funds in the our little buy a lemonade company. We'd buy you out. And if we didn't like the price, we wouldn't buy you out. It's the same way we feel we don't do. But we do feel an obligation to do things that we think are intelligent and in no way risk, absolutely, no way present any any risk, financial problems under any circumstances we can vision except maybe something like nuclear war. You know, we will do it, but it never can be that big a factor, certain in companies. Well, Charlie, I think, spoke the other day, and then I was with Henry Singleton. I think he bought back 89% of the company over time. And he sold stock like crazy or issued it much earlier when it was over overpriced and he bought it back underpriced. But the key to that, of course, is having people think you're wrong in doing it. So he was able to buy a ton of it. And there's some other companies that have bought a ton of it. And Berkshire isn't going to get the chance to do that because we, if people think we're buying, we've got sensible shareholders is what it amounts to. If we had the same group of shareholders that own two-day puts and they were our shareholders, we'd buy back the whole company you know and in a very short period of time but it's such an easy concept to assess i mean the second stock i bought what city service preferred that was the first one second stock i bought was a company called texas pacific land trust and that came out of the bankruptcy of the texas and pacific railroad back in the 1880s or nothing like that and they had three million some acres and they own the minerals and they owned the surferrals and they owned the and everything else but it was it was terrible land in the 1880s but they had some kind of a charter that said that used the proceeds from land sale whatever it was they were going to buy in stock every year and and you know I sat there when I was 13 or 14 and I figure if I lived to be 100 I would own the whole place well I haven't lived to be 100 yet and I didn't buy the whole I wouldn't have bought the whole place so both calculations are
[2:19:22]
Warrenso far and perfect but it's been a remarkable company just plain remarkable because they would talk about raising fees of six thousand dollars a year or something like that you know maybe when they had three million acres and then they kept finding oil and more oil and more oil and and they've changed the form and all kinds of things but they bought in in stock week after week after week and I sat there and figured out how long it would take until I own the whole company and I obviously made some improper calculations because it wouldn't work that way but uh it still was apparent to me it would be a very good idea if they had three million acres down there that they got all through with it and they kept their mineral rights and all kinds of things which they were doing uh you know at a very cheap price it ought to work out well for anybody that's had for a long time and it has worked out extremely well for anybody sat around a long time but but nobody knew that they were going to find a lot of oil and eventually el paso would grow out far enough so that the the surface lands became worse some money that they were somewhat near el paso then they had to go a couple of hundred more miles to find the next person but that was another problem so uh it's it's it's just so some of the stuff is so simple you know but But, you know, people want to get their Ph.D or something, so they work out hundreds of pages and have lots of wreath letters in it and all that sort of thing. And, you know, either you're buying, buying out your partner or don't attract your price or you're not buying them out of your price. And if you got the money around to do it and the prices attract you, you don't have some other opportunities. You know, why not do, I mean, you've got to come out ahead by doing it. And if certain other, you've got other things that are more intelligent, you don't do it. And if it isn't intelligent on an absolute basis, you also don't do it.
CharlieCarly, have you got anything to add to the, what were you doing in 1940? Three, you were in the service. Well, Warren, we'd be crazy if we didn't rather enjoy having come a considerable distance from small beginnings. And to do that in good company. It's a favored life. We've been very fortunate.
WarrenYeah. And tomorrow, Monday, I can tell you, it's almost certain that if anybody offers us, well, there'll be shares trade of Berkshire, and we won't buy any, but it's also pretty fair chance someday a lot of shares,
[2:22:21]
Warrenquite a few shared, not a lot. Berkshire's got the, our shareholders are too smart. That's one of our problems. That's what we want to repurchase shares. But we really don't want to squeeze it. We don't want to squeeze out anybody. But we also are here to do things that increase the value for the people who stick with us. I mean, it's not very complicated. And we'll get, well, there'll be times when we'll do it, and there'll be times when we won't. But it won't, there won't be any formula, but there will be the principles that I've just expressed. And my guess is that my successor and their successor will have a similar calculation because we're looking for people that are rational and devoted to Berkshire. So, Glenn, thanks for coming. And Becky, you're next.
QuestionerThis question was sent in by Dave Shane from Brooklyn, New York. He's responding to something he heard earlier today. He said, in the future, will Greg be able to act with the same spontaneity that you mentioned earlier and make immediate multi-billion dollar decisions without board approval?
WarrenWell, my guess is. that the board, it's just, they respond as people do, they'll be, they'll put some more restrictions or they'll have some more consultation on a lot of matters that, that, that, or some matters, then they do with me. I mean, they won't need to, but they'll feel that they haven't had the experience, they haven't seen them as long. and a whole bunch of things, and they'll feel that the Delaware laws protects them better. And then suddenly, they don't have directors and officers, liability insurance. I mean, virtually every company on the New York Stock Exchange has it. And we just don't buy it. I mean, to come on the board and you're a trustee for a whole bunch of people who trust you and me. I'm talking about the directors and me. You know, fine, but it's very interesting. People go on museum boards, you know, and they're expected to contribute. People go on college boards and they're expected to contribute money. And they say it's a great honor to be on a university board or museum board or whatever. It's a great honor and therefore you should raise money for us. Well, frankly, I think our board's more interesting than being on a university board. or, you know, or a hospital board or something. I wouldn't know what they were talking about in any way in a museum board or art board. And so, in, in, uh, in, uh, uh, uh, uh, but people have found that they could make $300,000
[2:25:24]
Charliea year, uh, uh, you know, which is way more, which is enormously important to some people and is meaningless to others, uh, and, I mean, and, I mean, that chances are if, if, if, if, somehow they had arranged it so that directors didn't get paid at all, there'd be plenty of people who wanted to be directors. And it would be a prestigious sort of thing and all that, but, but in effect, it's, it's money I, that comes very easily. I did, the whole idea of the independent director, frankly, is, it just doesn't really make any sense. You don't think a director is independent who needs $300,000 a year? He needs the money, yeah. I mean, he's independent the way a slave is independent. I am, I am going to read a few sentences, which are absolutely the case, except I'm doctoring, there's just a, I don't want, I don't want anybody to be identified, obviously, with this, and these are just, but these are word for word, excerpts, was, I'm not, I'm not telling it whether it's a woman or a man. I'm going to use a male pronoun, because it's just because it's easier. I picked out a few sentences from a letter I received many years ago, and this letter said, I'm writing to you with a great deal of reluctance and a sense of personal embarrassment. I have tried all of the conventional means of raising the money. This person needed a couple million dollars, and I wouldn't have known the person if I saw him on the street, but it wrote this letter and said, I need to a couple million dollars. And, uh, and then this is the item that I think you might find interesting. And I've kept the letter. My income is composed 100% of my board fees. Well, he, I just looked him up and the time, and he was a director of five prestigious companies, and they've been directors of others and directors, and he's going to be director of a whole bunch of But he was desperate for money, and he says, he's getting 100% of it for board fees. And he was an independent director, classified as an independent director at every one of these companies. And it's just astounding to me that, you know, we're going to have a shareholder to mean in just a couple of minutes. We're going to start it. It's just a sounding to me that in 2006, we own 9% of the Coca-Cola company. I mean, maybe they gave me a free Coke. I mean, but we own 9% at Berkshire Hathaway. We obviously cared about the future of the Coca-Cola company.
[2:28:41]
WarrenAnd it just so happened in that year. Calpers and a few others recommended that we'd be voted that we'd be both. voted against or something or other, and at one time, there were two big institutional investors, but voted because they didn't think I was independent, because Dairy Queen bought some Coca-Cola, or actually the people that had our franchises, bought some Coca-Cola. I mean, do they think I can't add things and if we've got billions and billions and billions of dollars, that I'm going to be compromised, but it's just nutty. Just nutty. And so one year, my vote fell from 96%, maybe there's 98% vote approval to 84% because I'd forget whether it's 2004 or somewhere along the line. They just decided that I wasn't the right sort of person to be able to handle these responsibilities. the idea that somebody is an important part of their income. I mean, what they want, they may want to do a lot of other good things. It doesn't mean they're terrible people. But if the difference is whether you, how you live, in this case, whether the person might go broke, how in the world you can call somebody like an independent, and say that anybody owns a lot of us, you know, Walter Scots, you know, not independent or maybe, it's just ridiculous. But it's the way the rules are and we, we will, we follow the rules, but.
QuestionerWell, they don't want them just independent. Now they want one horse, one rabbit, one cow, whatever.
WarrenYeah, well, I mean, I, you know, I feel like Galilee. Independence is not enough. You gotta have a very diverse kind of independence.
QuestionerYeah, yeah. And if you desperately need the money, in this case, 100% of the income coming from it, you're on five of the most prestigious boards in the country and classify as independent on each and other, and all you're hoping is that your CEO gets called by another CEO and says, is this guy okay? And you say, of course he's okay, which means, of course, he doesn't cause trouble. And so he gets on a sixth board. Anyway.
WarrenI know. It's not our idea of an independent director.
QuestionerNo. No, it's all a little crazy, which brings us the fact that we're now going to have our annual meeting here. And about 15 minutes, we'll reconvene at 345, and then we'll do the business of the meeting that is required. And you're all welcome to stay. And it's very... We're now come to the moment you've all been waiting for. We will all have the annual meeting.
[2:32:19]
WarrenCharlie doesn't join me for this because once or twice in the past he was caught on camera sleeping, so we've solved that one. And we're now going to have an annual meeting where I follow a script. And you may think that's impossible. You may think that's impossible, but I'll do it. So the meeting will now come to order. I'm Warren Buffett, Chairman of the Board of Directors of the Company. I welcome you to this 2022 annual meeting of shareholders. Mark Hamburg is Secretary of Berkshire Hathaway and he will make a written record of the proceedings. Rebecca Amick has been appointed inspector of elections at this meeting and she will certify the count of votes cast in the election for directors and the motions to be voted upon at this meeting. The named proxy holders for this meeting are Greg Abel and Mark Hambur. Does the Secretary have a report of the number of Berkshire shares outstanding, entitled to vote, and representative of 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 2nd, 2022, the record date for this meeting that were 614,692 shares of Class A, Berkshire. of Class A, Berkshire, Hathaway, Common Stock Outstanding, with each share entitled to one vote on motions considered at this meeting. And 1,287,633,719 shares of Class B, Berkshire Hathaway Common Stock Outstanding, with each share entitled to 110,000th of one vote on motions considered at this meeting. Of that number, 423,719. 19 Class A shares and 759,159,354 Class B shares are represented at this meeting by proxies returned through Thursday evening April 28th.
WarrenOkay, and I will interrupt this meeting for one second to announce that we're still selling things next door and we've sold 15 boats. So, with that brief commercial, and And if anybody leaves, I will not be offended. Thank you. The number represents the quorum, and we will therefore directly proceed with the meeting. The first order of business will be a reading of the minutes of the last meeting of shareholders. I recognize Ms. Sue Decker, who will place a motion before the meeting.
OtherI move that the reading of the minutes from 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 business is to do. elect directors. If a shareholder is present who did not send in a proxy or wishes to
[2:35:20]
Otherwithdraw a proxy previously sent in, you may vote in person on the election of directors and other matters to be considered at this meeting. Please identify yourself to one of the meeting officials in the aisle so that you can receive a ballot. I recognize Ms. Sue Decker to place a motion before the meeting with respect to election directors.
OtherI move that Warren Buffett, Charles Munger, Gregory Abel, Howard Buffett, Susan Buffett, Stephen Burke, Kenneth Chenalt, Christopher Davis, Susan Decker, David Goddessman, Charlotte Guyman, Ajit Jane, Ronald Olson, Wallace Whites, and Merrill Whitner be elected as directors.
OtherI second the motion.
OtherIt has been moved and seconded that the 15 individual named in Ms. Decker's motion be elected as directors. The nominations are ready to be acted upon. If there are any shareholders voting in person, they should now mark their ballot on the motion. 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 449,190 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 place with the minutes of this meeting.
OtherThank you, Ms. Amick. The 15 nominees have been elected as directors. The next four items of business relate to four shareholder proposals that are each set forth through the proxy statement that can be accessed at Berkshirehathaway.com. The first proposal requests that the company adopt a policy and amend the bylaws to require the chair of the board of directors to be an independent member of the board. The directors have recommended that the shareholders vote against the proposal. I will now recognize.
QuestionerPeter Flaherty, a representative of National Legal and Policy Center, to present the proposal.
OtherGood afternoon. I am Peter Flaherty, Chairman of the National and Legal and Policy Center. I'm from Washington, D.C., but please don't hold that against me. Our proposal would separate the roles of Chairman and CEO. Sorry, Charlie, but I would take it one step further and suggest that Berkshire remove itself from corporate America's assault on American Institute, and culture. I'm proud to say I'm a capitalist, but it is obvious to me that capitalism
[2:38:02]
Questioneris failing to deliver for the American people. Real wages have been falling for years. Wealth disparity has never been greater. And right outside my hotel window here in Omaha is a homeless encampment and all too familiar sight in American cities. We don't have a free economy. We have bailout capitalism. When small businesses lose money, they go out of business. But when billionaires bet wrong, government steps in. Money printing by the Federal Reserve and irresponsible, debt-fueled spending by politicians, what they call fiscal stimulus, have artificially inflated asset values. So those with the most assets benefit the most. Wage earners get ruinous inflation. But even worse, than the wealth gap is the values gap. The top 1% now seek to impose their corrupt morality upon the rest of us, whether it's in the form of critical race theory, transgenderism, and or the myriad of other woke causes that permeate corporate advertising and messaging. Why has corporate America embraced both economic and cultural radicalism? It's pretty simple. When you have so much money, your fortune is going to come under scrutiny. The best way to insulate yourself and keep anti-business off your back is to embrace their causes, even if in the process you undermine the system that produces your wealth. That is what allowed Mr. Buffett to advocate for higher taxes, even though they will fall in the middle class. The Federal Reserve has offered free money to corporate America for over a decade now. now, creating a class of oligarchs, and greatly enhancing corporate political power. Executives now believe that they can tell elected governors and legislators what to do, as we've seen in Indiana, Georgia, Texas, and Florida. Last year, Coca-Cola CEO, James Quincy, a British citizen, sought to kill Georgia's new voter integrity law by making inaccurate and inflammatory statements about it. He also instituted diversity training, whereby white employees were encouraged to try to be less white. Despite being Koch's most celebrated shareholder, Warren Buffett is nothing about Quincy. In fact, Mr. Buffett jumped on the America is racist bandwagon by signing a statement by corporate leaders suggesting that Republicans seek to extric ballot access based on race. All this did not prevent. Co. from sponsoring the Winter Olympics in China, which has never had a free election, and we're minority communities are the victims of genocidal policies.
[2:41:05]
QuestionerAnd what about Apple? A large part of Apple's supply chain is in China. The company removes apps from the App Store at the request of the Chinese government because they are used by human rights activists. And of course, Apple is the world's most successful corporate tax minimizer, famous for routing profits through offshore tax. offshore tax shelters. Over at American Express, the company instituted an anti-racist initiative for employees that teaches that capitalism is fundamentally racist and requires workers to engage in an exercise to determine whether they are the oppressor or the oppressed. Activism by woke CEOs may be reaching its limits. The people of Florida are fighting back against Disney's Robert Chapec, who not only embraces the view that gender is a form of oppression, but that kindergartens must be forced to confront it. Mr. Buffett has praised the brand endurance of Disney's characters and to trust parents place in its content to be safe and appropriate for children. But now the company is adding warnings to Dumbo, Peter Pan, and Aladdin about the stereotypes they allegedly portray. And poor Prince Charming has been excised for kissing Snow White, quote, unquote, with consent. Warren Buffett is yet to address the crisis dripping corporate America, and I fear he never will. Yes, Berkshire may be a holding company, and Mr. Buffett may stay out of the way of managers. But what happens when these executives use their companies to wage a social revolution that most Americans don't want? Is he not responsible? He can't have it both ways. In this country, wealth has been admired and even celebrated. Because our system, allows anyone to become rich. But what happens when Americans suddenly find their history and future under attack by corporate America? The social compact that permits such affluence will be broken. Mr. Buffett, if you are the face of the capitalism, why don't you do something to save it? Thank you.
OtherOkay. Thank you, Mr. Flaherty. Well, uh, if, uh, if, uh, uh, if, uh, there are you do something to save it, shareholders voting in person, they should now should mark their ballot on the motion. Ms. Amick, 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 72,298 votes for the motion and 421,181 votes against the motion.
[2:43:53]
OtherAs the number of votes against the motion, as the number of votes against the motion, the motion exceeds a majority of the number of votes of all Class A and Class B shares properly cast on the matter, the motion has failed. The certification required by Delaware law of the precise count of the votes given to the Secretary to be placed with the minutes of this meeting. Thank you, Ms. Amick. The proposal fails. The second proposal, the second proposal requested the company published an annual assessment addressing of the company manages physical and transitional climate-related risks and opportunities. Directors have recommended the shareholders vote against the proposal. I now will now recognize Tim Yeomanz, a representative of Federated Hermes, to present the proposal.
QuestionerI thank the chair, the board, and fellow shareholders. I'm Tim Yeoman's lead North America, IAS at Federated Hermes, here today to talk about ballot item 3, a proposal that is co-sponsored by by Brunel Pension Partnership, Limited, represented by EOS, Coste de de Po a Plaza Mondeu, Quebec, California Public Employees Retirement System, and State of New Jersey Common Pension Fundee on behalf of their combined millions of ultimate beneficiaries. EOS CalPERS and CDPQ co-sponsored her similar proposal last year asking the company to commence climate-related risk reporting, which the company has not started. The context for this year's parent company climate reporting proposal is, however, different in three ways. First, we've added New Jersey Common Pension Fund D. Second, we stand before this annual meeting of shareholders, backed by, in our estimate, the majority of non-insider votes cast at last year's annual meeting. We provided the company tallies showing that the majority of non-insider votes cast supported last year's proposal. As in Glass-Lewis, Las Lewis has also corroborated this result. The company disagrees, but has not shared its reasoning. Third, the parent company began engaging with the co-sponsors this year, and the company recently published a supplement to the chair's letter from Vice Chair Abel discussing climate change matters in the company's energy and rail subsidiaries. Also, the parent company's audit committee has amended his charter to now include climate risk oversight. We welcome the company's new engagement of approach, Vice Chair Abel's supplement, and the revised Audit Committee Charter.
[2:46:36]
QuestionerHowever, these changes do not address in any meaningful way what last year's non-insider majority-supported shareholder proposal asked for, and what this year's ballot item three asked for, which is that the parent company should, a, commence annual climate-related financial reporting for its subsidiaries wear material, and for the parent company as a whole following the recommendations of the task force on climate-related financial disclosures. B, explain how the board oversees climate-related risks for the combined enterprise, and C, explore the feasibility of the parent company and its subsidiaries establishing science-based greenhouse gas reduction targets. Here is why all shareholders, including the non-insider shareholders who supported last year's shareholder proposal, should once again this year, tell the board to change course and support parent company climate risk reporting. Vice Chair Abel's supplement talks about emissions reductions. We ask the parent company to report on climate-related financial risks, not just emissions reductions, as these risks may be material. Abel's letter also talks about emissions reductions in rail and energy, two of the four giants of Berkshire Hathaway, as they are referred to in the Chair's annual letter. What about climate risk and insurance? The company has 60 subsidiaries and more than a few large investment holdings. The company should disclose material climate-related financial risks beyond rail and energy in a composite parent company picture. We ask the company to allocate a small portion of its more than $100 billion in cash equivalents to climate risk reporting at the parent company level. Climate financial risk may be significant, even material at the parent company. On page K-26 of the 2021 annual report, the company states that climate-related risks could produce losses and significantly affect financial results. The company audit, however, is silent on climate risk. We have asked the auditor, Deloitte, to explain its inconsistency. We asked the audit committee to explain why Deloitte has not disclosed how it considered climate-related risks in its review of financial statements. When the company itself disclosed, this is a significant risk. Investors representing $68 trillion in assets make up the climate action 100 plus collaborative engagement on climate change. Berkshire Hathaway is the only major public company in the U.S., the only one,
[2:49:20]
Questionerto earn now for two years in a row a score of zero on the CA 100 plus net zero assessment of climate progress. The undisputed worst performer. This stands in stark contrast to Berkshire Hathaway's track record of usually strong, long-term financial performance. In response to last year's non-insider majority shareholder vote, the company has made a start towards climate action. Mustmore is needed. Vice Chair Abel is the name CEO's successor, his annual meeting remarks both in 2020 and last year, and his recent letter show he has a solid grasp of climate risk. We ask Vice Chair able to commence climate risk reporting at the parent company level. This would give the company a head start in complying with the SEC's new proposed climate disclosure rules that ask for more disclosure than we asked for in item three. We ask all shareholders, both non-insiders and insiders, including the chair, to cast their votes for item three in support of parent company climate risk disclosures starting before the the 2023 annual meeting. Thank you.
WarrenThank you. I do think it's worth discussing just a little bit who the actual, the actual constituency is of public pension plans. Generally speaking, we hear from various pension and it's not limited to California in the least. But saying, you know, they're protecting their, they're the holders of the pensions, the retired people and all of that, and therefore they're usually suggesting that something that we may or may not agree with in terms of whether it's actually in the economic interest. But they do, and they honestly feel, incidentally, that they are representing the pension holders. People are going to get these checks every month now. They're getting them now. They may get them later. It's a very understandable position. But of course, in essence, that's not who they represent. The people that are promised the pensions, whether it's in California or any other state in the Union, they're going to get their checks. It's obvious. The United States, American people, people in California, are simply not going to stand for the fact that people don't get their checks. So one way or another, they're going to get their checks. And to the extent possible, the states will attempt to attempt to realize from the taxpayers of the state in the future, I'd love money so they can pay the checks. I mean, that's why states have adopted pension plans and that sort of thing.
[2:52:37]
WarrenMany of the states have found their taxes to go up. I mean, in effect, no state government, public opinion in the United States, they're not going to allow people not to get their pension checks. And the state does have the right to tax income and property and various things of people within their state. And they'll exercise the power or they'll look to the federal government for grants. So we'll do anything, but the one thing they aren't going to do is stiff the pensioners. So you're probably representing, if you're on a public pension more, you're essentially are representing the future taxpayers of the state. Now, there's one problem about future taxpayers. They can leave the state. And it gets awkward in certain states, particularly when people start leaving the state. because the revenue that goes with those people from income taxes and sales tax and so on. So people have a fair amount of freedom of women. They don't feel the same way about U.S. taxes. Not very many people are going to move from one place to another, but they may even be, in the United States, they move. And it's gradual. Sometimes it isn't so gradual. And of course, as the tax base goes down, the past pensions stay. So they become kind of like an aging steel company or something of the sort that, well, whatever it may be, or the pension pens may become insolvent, but they're going to keep paying the people. Just like we're paying on, you know, we've adopted certain policies on multi-employer pension plans and so on the country. The United States is not going to stiff a bunch of people, particularly people that vote. But they're, the moral feeling is to do it. So the real, the people that are, that, the people that are, that, that, the people that, the people that, the people that, the trustee should be worried about because they, of course, is the future taxpayers. And if they really mess things up, those taxpayers become more and more likely to leave, and it has a lot of effects. Interestingly enough, you know, one of the calculations that might go on in Berkshire's mind if we're going to build a plant someplace, it's going to sit there for 50 years, is whether there are going to be any people around that are going to pay the tax and we can't move our plant. So all these invisible decisions go on all the time. And it, I don't think there's anything wrong with representing the taxpayers of the future.
[2:55:26]
WarrenI don't think there's anything wrong with sitting on a pension board, but I do think they ought to actually figure out who really is, they really are representing, and they're representing future taxpayers. And in some cases, they're creating some tremendous problems for future taxpayers because they're like politicians. I mean, they've got promises they're going to fulfill, but they've got to do it from revenue that comes in in in the future. And they can't print money, and people can leave their state. So it's an interesting set of problems. And I can't resist mentioning, in 1991, you've seen that solid a solid problem. when Solomon was essentially, might or might not have gone down the drain and had a bankruptcy, which was, in my opinion, would have spread like wildfire. And who knows what would have happened, just like in 2008 and 9, you know, when Lehman fell on a few things. I mean, who knows what's going to happen after something like that. So Solomon was bigger relatively by far than Lehman was in 2008 and 9, and on a Sunday in August, the Treasury Department, the Securities Exchange Commission, the Federal Reserve, all decided on a Sunday that something they did on Sunday morning really was a mistake and that they better change it on a Sunday or the whole economic system might go down the tubes. And in this book, which we have for sale out here, the other, trillion-dollar triage, in the first early page, it describes that period. I didn't know some of the stuff that's in the book even that was going on. But essentially, the Federal Reserve, Alan Greenspan was brought at one time, Jerry Corrigan was there, Nick Brady was Secretary of the Treasury. They decided with various degrees of conviction. they did decide because they had to decide by roughly 2.30 in the afternoon whether something they did at 10 o'clock, which was kind of unprecedented, they were going to reverse themselves. Now, can you imagine trying to get institutions like Federal and Treasury Department to reverse themselves, but they did realize that they had probably done something that was going to cause a huge bankruptcy, which could turn into a whirlwind in Wall Street. So they reversed themselves and tells the story in this trillion-dollar triage. And I knew some of what was going on. There was other parts I didn't know what was going on. Anyway, all of those institutions reversed themselves, very reluctantly.
[2:58:45]
WarrenBig institutions do not like to reverse themselves, and they're particularly not four hours later when some guy from all mall is selling them, if they do this, if they do this, We're going to declare bankruptcy in Tokyo because we're going to have a multi-billion dollar run and we can't pay it and directors who approve preferential payments when they know the place is going busts to have all kinds of legal liability and the whole thing was falling apart. And to their credit, enormous credit, you basically had the Fed and the SEC, mostly it was the Fed and the Treasury. And they said, we just can't have this happen. It could produce a national catastrophe. And for some weeks, we had about $130 or $40 billion of funding. And $130 or $40 billion was a lot of money in those days. We were one of the three or four largest borrowers in the United States. And we borrowed daily. And we borrowed daily. And we borrowed against government. bonds. We had inventory there, but we only had $4 billion of equity and we have $130 billion. And there was a guy, a wonderful guy, John McFarland, he was the treasurer. He slept down at the downtown offices, or right near their offices of Solomon for days and days and days because a billion dollars a day was draining out. There was a run on Solomon and it was a run that the Treasury and the Fed and the SEC did not want to have happened and it reversed themselves and everything. And a few days into it, for whatever reason, but CalPERS was a big lender to us, and they decided they weren't going to do business with Solomon anymore, so they were going to precipitate them, they were going to accelerate the run on. And they announced one day that they kind of approved of everything was going on, but they just didn't want anything to do with us. even though we were giving them government bonds of security. And this was accentuating the problems for the Federal Reserve, the U.S. Treasury at SEC, and no one knew how it was going to come out. But they polled and other people pulled, and John McFarland stayed downtown and kept trying to raise a billion dollars every day to pay off people in terms of ruin that was occurring. And the Fed did not want this run to get out. out of hand, but they couldn't give us the money, and the Treasury didn't want to run to get out of hand, but they couldn't give us money, and so on. And it was, you know, it was a terrible problem.
[3:01:41]
OtherAnd CalPERS, like they say, they said, well, we don't want anything to do with these guys, so we won't lend on government securities, even though the loan is good. And then, a little later, it was sent, they sent word to me that if I would come out, to California and talk to the people, the trustees, that the name would be considered. So that was what they wanted as part of their deal not to cause them keep participating in this run and take a different position. And I never would have done this for anything except for the fact that it was solemn. I mean, so basically, I got on a plane and I flew to California, and I met with the California, and I met with the and I wasn't charging them anything if I've been charging them a lot of money that would have paid attention and they still paid attention they were very nice to me when I went out there and I talked to them and and they were happy and they clapped and they paid and made any attention to what I said because I wasn't charging a big fee or anything of sort and I went back to New York and then they started doing business with us and announced that really they had decided if Solomon was fit to do business. Now, I have a little bias in terms of when they come around and they present a proposal and they say that in their proposal, and this is in our proxy statement, and we filed this with the SEC. We're not going to say it if it isn't true. And basically they make a mistake, they and some other people that, they make a mistake and say something about the shareholders voting. It says in the 2021 annual meeting, this is part of the supporting proposal where a significant majority of non-inside shareholders supported the similar version of this resolution. Well, we say in our response, the proponent's assertion that at the 2,021 annual meeting is a significant majority of non-inside shareholders supported a similar resolution is incorrect. In fact, a significant majority of such shareholders did not support the proposal. That's either true or false. And I have the last report submitted by that same firm that handles are material at Broadmoor. What is it? It reports the number of shareholders. It's the last day before the voting or something like that, and it's got the number of of shareholders that support us and are against us, and it's four to one in our favor and something like that. And it just doesn't make any difference to them.
[3:04:44]
Greg AbelI mean, it's fascinating to me that, and, you know, it's, I would be willing to wager somebody if we could find an impartial judge. And if you go to any group you want to pick, take the same. The CEOs of the five leading utility companies in the United States, the CEOs of the 10 league, and ask them, you know, whether Berkshire Hathaway Energy has been a leader in the field of renewables and so on. And they'd all say yes, but essentially, you've got a group of people that write us letters and say, we want to be, we want you to do things our way. And we've got three million other shareholders, but forget about them and spend some money on this and have a meeting with us. And here's our way of measuring it. And admittedly, we've got all kinds of information up about what we've done, and they can come out to Iowa and look around, and it is the, it is the renewables capital of the world, practically, and we're the ones that have done it. And that isn't what they want. I like, you know, I'm for a shareholder democracy and all that sort of thing, but the answer is that the resolution, you know, they pay lots of money to somebody that probably works in these groups and they've got groups of the, you know, they've got their way of doing. I get letters from institutions in Europe and they say, well, you know, you've got, you may have 40 pages or a history of going back to 2006 of explaining what you're doing, but here's what we the way we want you to do it and you know and you know how much energy is your animals which we own is it's just it you have to think you know as a person sitting here and you know it's it's it's it's it's it's not a but it's these are the rules you get on the proxy statement under certain circumstances most companies they don't want a lot of resolutions so it's just easier for them to you know set up a department and you know pay a bunch of people to pay attention to them just like Warren did when he flew across the whole country because he had it wasn't money I just I was worried about a company surviving that the people in Washington the supervisor were worried about it surviving and and and if I came if I flew across country and and paid them sufficient respect I mean it was kind of like the godfather or something, you know, I just bowed out and then flew back. So I have a certain reservation about, about, uh, uh, shareholder proposals should have some meaning.
[3:07:53]
WarrenI mean, I, it's kind of thing I argued for when I was younger, but, you know, basically, it's become, uh, in my opinion, uh, there are certain items that you can put on the balance and certain that you can't. And practically every example. Every executive at the country, now the chief executive wants to have a virtual meeting. The last thing you have shareholders and people stand up and propose things. And we'll just keep talking about it the way we see it is. And in the end, we will have a report as to the boat and this time. And I can sure you, we're not stuffing the ballot box this, you know, we're not doing anything. I mean, voter fraud, you know, it's not like Chicago in the old days where you waited for the cemetery boat to come in or that sort of thing. We don't count the boats, you know, we don't say where they come from. We don't know where they come from. But we can tell when two or three institutions, they've got huge amounts of shares, but they're one or one hour, and they vote a certain way, and then they feel pure and they don't really, what they care about is whether we check their boxes and the people that work for them. A certain number of people are getting employed by them and their hearts are pure, but ours aren't impure. And with that, I think we ought to, well, I won't do this again, but I just, it's a really interesting development in terms of getting more rules-based. type of situation where basically every, you know, no company, almost every company, figures out how to negotiate with the people, and they all have, good many of the CEOs. I mean, they don't, they just figure it's something that they endure in the business, and they set up a department to answer the questions and meet with the people and show the proper respect and so on, and so on. And, and, you know, it's a It's being done to carry through on something which I think the substance of is pretty similar. If I thought Berkshire-Hathaway energy was behaving in a way that was bad for society, worse than other utility companies, but no company. And the reason, of course, is that we don't take dividends out of it. So we've pubbed tens of billions of dollars into the business. Most, probably every utility pays out the dividends. And it's not the fall of the utility management. That's just a policy that's been the case in the utility industry. But they don't really have much cash left over.
[3:10:55]
Greg AbelAnd we have plenty of cash, and we'll put in more cash, and we're willing to build, you know, whatever amount of transmission lines and all kinds of things that would be helpful to the country. And we're doing a fair amount of them that we could do. a whole lot more and we're better positioned to do it really than any utility company in the country. And I think if you talk to the utility executives, I don't advise you to go and put them on spot or anything, but they would agree. But they also know that their life is easier if they just have somebody to take care of people that want to be catered to, basically. And I catered to them at the time of Sullivan in 1991 because 8,000 people were working there. And John McFarland was trying to raise a billion dollars a day and the Treasury and the Fed and SEC wanted us to stay alive. And in effect, that caused me to go and pay my respects to the Godfather and I came back. But I do think a little background is kind of interesting on this. And with that, we'll ask Ms. Amick, can you 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 127,21414 votes for the motion and 370,415 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, the motion has failed. The certification required by Delaware law of the precise count of the votes given to the Secretary to be placed with the minutes of this meeting.
WarrenYeah, and I will just add that, you know, I've got a report a day or two ago, the last report they sent me from this firm. And it's poor to wander, if I want to be glad to share it with anybody. But anyway, in terms of the number of shareholders, there are a number of shareholders that are a number of shareholders that based on what these people in New Jersey tell me the vote was, we're against it. And if they would reintroduce the proposal next year, I just hope they leave that line out, because it, I would just suggest that somebody read what the proposal is, or what the facts are before they spend They announced their proposals and all that sort of thing. Okay. Well, the third proposal request of the company issue report addressing if and how it intends to measure and disclose and reduce GHG emissions associated with his underwriting, insuring,
[3:14:03]
Otherand investing activities. The directors will recommend that the shareholders vote against the proposal. I will now recognize Jalen Span, Representative of the Whistle Stop Capital, present the proposal.
QuestionerChairman, Mr. Buffett, and Board of the Board of the bill. members. Good afternoon. My name is Jay Lynn Span. I want to first thank you for the opportunity to present proposal number four on behalf of shareholder representative, as you so. This proposal asked Berkshire to measure, disclose, and begin reducing the greenhouse gas emissions supported by its insuring, underwriting, and investment activities. In its most simple terms, the proposal asked Berkshire to take responsibility for its contribution to climate change. The U.S. Commodity Futures Trading Commission has acknowledged that climate change can impair the productive capacity of the national economy. The litany of national and global events associated with climate change, the fires in California and Colorado, the floods across the Midwest, the The growing strength of hurricanes, the deep freeze in Texas, to name just a few, demonstrate the growing risk and costs of climate change. 2021 was the second most costly year on record for the world's insurers, with insured losses totaling $120 billion from natural catastrophes. Significantly, these losses can no longer be categorized as simply a bad year. As noted by Munich RE, economic losses caused by natural catastrophes are trending upward. The insurance industry faces year-on-year growth in insured losses related to climate change. Merckshire is not only exposed to climate-related risks, but it is actively amplifying these risks through its continued investment in and underwriting of high-carbon activity. Berkshire is one of the largest providers of coverage to the oil and gas industry, surpassing peers such as Chubb and Liberty Mutual. Its shareholdings in coal alone amounts to $5.1 billion, once again, far surpassing its American peers. A financial institution's investment and underwriting activities are by far the greatest source. of its total carbon footprint, highlighting the need for Berkshire to measure, disclose, and begin taking responsibility for the emissions it enables. The global financial sector is rising to the challenge of meeting the Paris Agreement's goal to maintain global temperature rise at 1.5 degrees Celsius. The Net Zero Insurance Alliance has grown to 22 members, seven,
[3:17:17]
Otherof which are in the top 30 largest global insurers by market cap. All members have committed to reach net zero emissions from their insurance and reinsurance underwriting portfolios by 2050. AIG and the Hartford have also recently committed to reach net zero emissions from their underwriting and investment portfolios by 2050 or sooner. Berkshire is lagging both its American and its European peers, a position that increases climate risk globally and to its own portfolios. The insurance industry, and Berkshire specifically, has a key role to play in the ongoing low-carbon transition. And we believe Berkshire has the ability to become a climate leader on this critical issue, and the first steps are to quantify the emissions of social with its underwriting and investing activities, disclose those emissions, and begin developing plans to reduce those emissions in alignment with the Paris goal. To ensure global success in protecting this planet and its inhabitants, every business must take responsibility for its own contribution to climate change. And we look forward to working with Berkshire to address this vital issue. Thank you.
OtherThank you, Ms. Ben. The motion is not ready to be acted upon. If there are any shareholders voting in person, they should now, how about a little light up here? They should now mark their proposal. They're ballot on the motion. Ms. Amick, 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 127,065 votes for the ballot. votes for the motion and 370,630 votes against the motion. As the number of votes against the motion exceeds the majority of the number of the votes of all Class A and Class B shares properly cast on the matter, the motion has failed. The certification required by the Delaware law of the precise count of the votes given to the Secretary to be placed with the minutes of this meeting.
OtherThank you, Ms. Amec. Pawsall fails. The fourth proposal requested the company report to shareholders on the outcome of the diversity, equity, and inclusion efforts. Directors are recommended that the shareholders vote against the proposal. I will now recognize Jaylen Span, representative of Whistle Stop, to present the proposal.
OtherHello, I'm Jalen Spann. I'm speaking on behalf of the nonprofit advocacy organization, as you so, and Whistle Stop Capital.
[3:20:25]
QuestionerI formally move Proposal Number 5. asking for Berkshire Hathaway to report on the outcomes of their diversity, equity, and inclusion efforts by publishing quantitative data on their workforce composition and recruitment, retention, and promotion rates of employees by gender, race, and ethnicity. Warren Buffett once mentioned that he had grown up with two sisters who, to quote Mr. Buffett, are absolutely smart as I am and better personality. personalities. He also bravely admitted that he only placed women on his board after his wife suggested it in 2003, 40 years after he started his company. It's one thing to know that people of all genders, races, and ethnicities can contribute to Berkshire Hathaway. It is another thing entirely to intentionally and proactively create the space, opportunity, and training needed within a company for those people to be able to contribute without facing harassment and discrimination. In the absence of data, we must instead assume that Berkshire Hathaway companies are no better nor any worse than any company in America. The statistics for American companies are unacceptable, particularly when we consider the strong link found by the Wall Street Journal, McKinsey, Credit Suisse, and others between diversity, equity, and inclusion programs and corporate outperformance. Forty-two percent of Americans have witnessed or experienced racism at work. Sixty-four percent of black employees say that discrimination is an issue in their own workplace. Many people of color are barred from entering the workplace at all. A meta-study Reviewing data from 1989 to 2017 found that, on average, whites received 24 percent more callbacks than blacks and 36 percent more callbacks than Latinos. If we take a look at Berkshire's executive team, we can see that headquarters should be proud of the gender and racial diversity present in its leadership team. The culture that exists at Berkshire Hathaway Headquarters, appears to be one that recruits, hires, promotes, and retains diverse employees. Mr. Buffett stresses the importance of culture and the value that it has on the long-term success of a company. He said that culture, more than rule books, determines how an organization behaves. Investors are looking for assurances that this culture is successfully implemented within the organization behaves. within the famously decentralized Berkshire Hathaway companies as well.
[3:23:39]
QuestionerIn order to allow their investors to understand their workplace diversity, 87 of the S&P 100 companies have released or have committed to releasing their EO1 form, which is a standardized government-mandated accounting of gender, race, and ethnicity breakdown by employment levels. By contrast, of the more than 60 companies Berkshire owns, only one has publicly released this form. One company. This is not the leadership that Mr. Buffett is known for. The company's inclusion data, the hiring, retention, and promotion rates of diverse employees must also be shared for investors to have a full understanding of the actual experience of not only Berkshire's employees, but of its portfolio companies' employees as well. The board has released insufficient information to assure investors that it is attentive to diversity, equity, and inclusion at Berkshire Hathaway companies. We encourage transparency, even in the face of imperfection, in order to show that the company's leaders are truly committed to change and to attracting, retaining and promoting the best possible employees. Thank you.
WarrenI certainly agree with you that my sisters were better looking, smarter, had better personalities. And in 1930, that a father and mother, teachers who loved them, like they loved them, like they love me. And if I've been born female, black, in various other countries, I would not have had remotely the life. I've enjoyed. But I, uh, I, uh, if, if what the people at the top believe is important in terms of how our subsidiaries behave, they certainly, there's everybody that runs any one of our subsidiaries who are subsidiaries, certainly there's everybody that runs any one of our subsidiaries, knows how I feel, and they also know that they're in charge of their own business, and that we think we've got great leaders in every, virtually every company we have, every now and then. We find we've made a mistake, obviously, but if the idea that I should replace any of the people who run the businesses and they're doing, I, I, I, uh, I, I just don't think that's the way to operate. And I will tell you, just so that the question doesn't come up later, in terms of our shareholders, by, again, a four or five to one, vote, so the owners of the Berkshire company, whether not forgetting about A or B shares, you know, basically the big funds that are, worried about what their perception is, but also may well believe it.
[3:27:30]
WarrenWho knows what people's motivations are? Somebody said that the word motivation should never be used in the singular, because you really don't know. But the one thing is that it's very hard to find people that are running big institutions that, you know, are acting against their self-interest. Now, it doesn't mean they're acting for their self-interest necessarily. They're acting for a lot of reasons. But, uh, it's, uh, it's something that I could, if you could change that in people, it would do a lot more for American, Americans in the future, but you can't, basically can't change that. I mean, it's a situation about people behave and protecting essentially their own interests and, and their own interests, uh, 40 or 50 years ago was, uh, 40 or 50 years ago was, uh, uh, essentially to regard corporate America as a boys club and that's not acceptable anymore so they changed but they haven't changed as much by a substantial margin in relation to to blacks and that's where we are as a society but overwhelmingly our shareholders don't don't agree with you even though they had a chance to um you gave them a chance to express their view on it.
OtherSo, Ms. Amick, when you're 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 123,614 votes for the motion and 373,925 votes against the motion. As a 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. The motion has failed. The certification required by Delaware law of the precise count of the votes given to the Secretary to be placed with the minutes of this meeting.
WarrenThank you, Ms. Amick. Proposal fails. I move that this meeting be adjourned.
OtherI second the motion to adjourn.
WarrenMotion to adjourn has been made and seconded. The meeting is adjourned. Thank you all for coming.