[0:02]
QuestionerThank you. I don't hear anything from the index funds. Where are they?
WarrenIt's really, it's really be, it really feels good to get back and be doing this in person. It's been three years and it's a lot better seeing actual shareholders, owners, partners. And we, we, uh, we, uh, Charlie and I are now, uh, combined, uh, if we're wrong for fractions, uh, the two of us are 190 years old. And, uh, and I really think you're entitled, if you're the owner of a company, and you've got two guys 98 and 91 running the company, you're entitled to the company. I actually see him in person. I mean, I, I, I, it, it, it shouldn't be too much to ask that, uh, I mean, for example, if we had a, we had a manager someplace that was 98, I might want to send somebody by occasionally to see whether he was cutting out paper dolls or something. So, so, uh, uh, uh, we probably do things that are a lot more foolish than cutting out paper dolls, but, but, but, but, And, uh, but we're having a lot of fun doing it, and, uh, and we really have a lot of fun, uh, when you come visit us. Actually, uh, we had, uh, to go back a few years, we've had a couple, um, a couple of managers that, uh, that suffered from dementia, probably many more, but I mean, I'm just a couple known ones, actually. There was one fellow that Charlie and I really loved. And, uh, he ran a business force. Charlie was out in California. Charlie would see him occasionally, and I didn't see him, but everything seemed fine. And then we found out that he'd really been suffering from dementia for quite a while. And, uh, and it really was a wonderful friend of both of ours. of ours but but the business had done fine so that's become our our test really is that from new businesses we try to find something the guy with Alzheimer's can run actually and that uh and you don't have as much competition for businesses like that we're sitting there cutting out paper dolls and you know that's our man i'd like to uh introduce uh uh uh two fellows who really work at Berkshire, on Charlie's left, Greg Abel, who runs all the operations outside. And next to him is, I ran the insurance business for about 15 years unsuccessfully. And then fortunately, the fellow on the far left came in one day, and I've written about her, but he came in on a Saturday, and I was opening the mail. And, uh, he said that, uh, he said that, uh, he said that, uh, that he'd be happy to run our insurance business.
[4:03]
WarrenI said, if you ever run an insurance business? And he said, no. And as I mentioned, I said, well, you know, I never won one either, so I'm not doing so hot, so give it a try. And, you know, he transformed Berkshire Hathaway, and the G. Jane is here with us. That's done. What we'll do today, and I have to remind myself from time to time, that the people here, of course, saw that movie and everything, but, of course, we're webcasting. So I'll probably make some references to the movie or something that'll puzzle millions of people out there, but you'll get it. So, we're going to talk for a little while about what's happened in the last quarter and bring up a few other things that you might be interested in. And we will then, whenever that's finished, we'll go on to questions. And we will take the questions until noon. We'll break for an hour. That's Midwest time for those of you are watching in other time zones. We'll go on until noon and we'll break for an hour. And then Charlie and I will come back and we'll take more questions until 3.30, and then we'll convene the shareholders meeting at 3.45. We'll take a break for 15 minutes. And then we'll do the shareholders meeting, and when that's done, we'll all go our various ways. I do want to report, incidentally, that you've been doing your part. in terms of the room we have adjacent to this location, where we've been yesterday for five hours. From noon to five, we had 12,000 shareholders come and just spend money on everything we could think of to sell them. We brought in 11 tons. We brought in 11 tons of C's candy. And if we don't sell out, Charlie and I get the rest, so, but you did your part. She's sold more, at least had a record yesterday for the Friday afternoon meeting. And it's pretty hardening, yeah. Incidentally, I've got a box of C's candy here. And it's very, it's sort of interesting. On this cover, which I hope you can see, there's a picture of a woman who was born in 1854. And today, she probably gets her picture seen more often. It's just about any woman in America in terms of a woman in terms of, a commercial product or something of the sort. So we've got our picture up in over 200 stores and on every box of candy. That's Mary C. born in 1854. A lot of people think this is me in drag, but that is not true. I mean, there's a certain resemblance, but it's just not. These rumors are started by our competitors.
[8:17]
OtherDon't pay any attention.
WarrenSo, we will, that's our schedule for the day, and what we will do, we like to give all, we like to give shareholders, owners, partners, partners, we like to give everybody the same information at the same time and preferably do it when stock markets aren't open. It seems to us that that that's, everybody ought to be on the same playing field. It's very interesting. know how many shareholders we've got. They've changed the rules over time as to registered holders and getting stock certificates and all that sort of things. So we can't keep track of it like 50 or 75 years ago or we had an actual shareholders list. But we're told by the people who mail out our information. It's a firm in, I think, New Jersey, let's see, Broadridge. And they pretty well do this for a very significant percentage of American corporations. So they actually mail things out for us, and they bill us for three and a half million accounts. And I'll take their word for it. I mean, the more accounts they bill us for it, but we pay them by the account. You know, some days I feel like I'd like to count. But that is a lot of a lot of people that trusts us. And they rightly, in my view, overwhelmingly feel that they're our partners. And some of them will like reading the financial information they've given us that we give you. But. Most, a great many of them just say, you know, we've saved this money. We trust you and Charlie. And that's a great motivator, mistrust. And, you know, take care of it. And I'm not going to learn accounting and try to read all those statements or anything of sort. But we do believe that for those who do use the information we release, they should all get it at the same time. And we have a few institutions. that even though in the third paragraph of my letter every year, I refer to the fact that we want to have everybody get the same information and that we don't feel that anybody's entitled to special meetings. We can't hold three million special meetings with our partners. But we like the fact that everybody gets the same deal. everybody gets the same information up this morning on the internet we put up our 10 Q for the quarter and I'd like to take a few through a few comments on that and a few other comments and then we'll get to the questions when we get to the questions we will alternate between those mailed in by shareholders, which Becky quick at CNBC, people have helped her
[12:17]
Questionersort of curated to get what they think are the most interesting questions from shareholders. They're not from the, from CNBC itself, but they are from shareholders, owners. And we'll alternate the ones from sent in versus the ones that come here. And we don't get the questions ahead of time, and we enjoy getting surprised by I'd say almost all questions. And we will keep doing that, like I say, with a break for lunch until 3.31 we'll have the meeting.
WarrenSo I would like to start by putting up the first slide, which is Q1. And there we have it. That's what we published this morning. And there are really no great surprises in terms of the court. I mean, there are always some companies that are doing very well, and there are some companies that aren't for one reason or another, and in the end, as you can see, we prefer to use something called operating earnings. Now, that is after depreciation and interest and taxes, unlike other companies that I prefer to tell you anything but what they earned. But we do separate out capital gains. Now, over time, as I've said, over the next 20 years, I would expect this net to have more capital gains than not. But, you know, who knows? I hope you, you know, I'll report to you in 20 years, whether that's happened or not. But as you can see, we made about $7 billion in the first quarter. And that's real $7 billion. I mean, we basically have that in cash when the quarter is over. That isn't true every quarter, exactly. But we are talking about $7 billion of real money in that. And those managers who the people here saw in the movie, They're the people that work with your money to accomplish what Charlie and I never thought would, never be planned or anything to happen, but it just sort of came about. It was sort of putting one foot in front of the other. Now, obviously, the last two years in particular, including the first quarter, all kinds of unusual things happen in our various businesses. I mean, when we had the meeting two years ago in the May of, roughly the start of May of 2020, we didn't know what was going to happen with the pandemic. We didn't know what was going to happen with the pandemic. with the economy and everybody that thought they did had gotten all kinds of surprises since. But here we are in 2022 and Berkshire. Like I say, I had $7 billion of operating earnings, and we've got lots and lots of companies. We've got 360,000 people out there that have taken your savings and going to work every day.
[16:31]
WarrenAnd they have jobs. We deliver products, and you put up the money for it, and you deserve to. You took the risks, and we feel very good about how things have turned out, and we want to keep feeling good about how things have turned out, and we want to keep feeling good. And we have a extreme a extreme aversion, we have an extreme aversion incurring, any permanent loss with your funds. You know, if I went broke, it wouldn't really make any difference. I mean, I keep doing what I do. I forgot a way to read a paper and watch a little TV and think about things and talk to Charlie. But the idea of losing permanently other people's money, people who trust us. really, really, that's just the future I don't want to have. And as Charlie says, Charlie says, all I want to know is where I'll die, so I'll never go there. And that seems pretty sound. He has a way of... Works so far. It works so far. As a case you, Mr. Charlie says it's worked so far. And we would die psychologically if we lost a lot of other people's money. We wouldn't take it in the first place. Be crazy to take people's money and lose it if you're going to feel terrible about doing it. So the one thing I can tell you about Perks, I can't predict what earnings will be, and I can't predict what the stock will do, and I can't, we don't know, we don't know what the economy will do and all of that sort of thing. But we do know that we wake up every morning and we want to be safer in terms of your eventual investment. Not whether you make the most money or anything. We do not want you to get a terrible result because you've decided to become our partner. And that's a pleasure to live by. Now, let's see what we have here. on Q2, it gives some indication of that because we, this is kind of interesting. I wrote a letter to our owners, and it was stated February 26th, and that was a Saturday, released. But I write the letter all through the year in my mind. I mean, I don't, you know, we don't have a, anybody that sits out and writes out the letter, or anything like that. I mean, this is a letter between partners, and I write the letter all here in my head. I'm writing next year's letter. I don't write out the words, but I have things I want to tell my partners. My sister's a partner, and I'm writing to her in my head. My older sister died not too long ago, but I used to be writing to both of them, in effect. And I want to tell her, you know, what I think and about the business and what I think she ought to think about it and so on.
[20:25]
WarrenSo the letters dated February 26, and I said not much is going on. And actually, we might jump over to Q3. If we will, so I sent out a letter on February 26th, but that wasn't written on February 26th. And I said, basically, nothing much is happening around here. And I said, we've re-burchased some shares, and we just aren't seeing anything. And between January 1st and February 18th, as you can see, we spent $2.2 billion. dollars, which is half the quarter, probably 30 trading days in there. And we sold them, so that basically we didn't do anything. And then in the next three weeks or thereabouts, we spent $40 billion. And incident when I say we spent $40 billion, there's one fellow in the office that does this all. I mean, he buys all the stocks, he buys the government, he doesn't have an assist. or anything. I just, but he spent 41 billion at, uh, yeah, and, uh, he literally, I mean, it, uh, and he does other things for me, too, you know, puts together totals, he just does what he needs to do. And he's worked in other jobs in Berkshire long ago, but, but he likes, he likes doing what he does it very well, and we don't have a department for it. Then as you can see, it fell off after that. And we did also, in the first, in the first, uh, quarter, we spent about $3.1 or $3.2 billion somewhere in that, for repurchasing shares. And, uh, we didn't, you know, we talked about that in the annual report. And, uh, as Charlie would say, it would, it was keeping us out of bars. I mean, you know, that, that, uh, that, that, uh, that, uh, that, uh, that, uh, that, uh, that, uh, that, uh, uh, it's, uh, you know, gave us something to do. And it, and it, we never do anything that we don't think adds to the value of Berkshire Hathaway, though. So we only repurchase the shares when that is the most attractive thing to do. We haven't repurchased any shares at all in April. And, uh, so it's, people who were looking for all these, uh, prints in the, you know, footprints in the woods and all that is what we're doing, we're just doing it day by day as it comes along. And I think this this table kind of illustrates that that we spent 40 billion in our hurry there between for three weeks. And, uh, now we're back somewhat in our more lethargic, uh, move. But like, anything could change at Berkshire. But the one thing that won't change, going back to Q2, I feel, uh, is we always have a lot of cash on hand. And when I say cash, I don't mean commercial paper. When
[23:55]
Warren2008 and 2009 financial panic came along, we didn't own anybody's commercial paper. We didn't have money market funds. We didn't. We have treasury bills. And as I may get into a little later, I'll explain to you why. We would, we believe in having cash. And, uh, we would, we believe in having cash. And there have been a few times in history and there will be more times in history where if you don't have it, you don't get to play the next day. I mean, it's just, it's like oxygen, you know, it's there all the time, but if it disappears for a few minutes, it's all over. So we, our cash was down on March 31st because as you saw, we spent that large sum. They're in that brief period during the quarter, $40 billion. We've committed to buy out on any court for something over $11 billion. And, uh, but we will always a lot of cash. We won't, we don't. Some of our companies have bank lines. I don't know why they have the bank lines. We're better than the banks and we'll give them the money if they need it. But, but, you know, the local bankers have been calling on them and they need something to do. Everybody also has bank lines so it's harmless uh but our there's no reason for any of our subsidiaries uh they have bank lines when bircher is stronger than the banks that they're i didn't hear exactly what i don't know what that was a banker screaming or i don't i don't i don't really like to torture i don't like to torture anybody i mean but but uh and i'm all for banks and we'll talk about that a little later In fact, we might even talk about it right now just for a minute. Money's kind of an interesting thing. People seem to like to talk to me about it. I mean, they don't ask me how to dance or anything like that, but they do ask about money. And so if we'll put up 20-1, it's a photo of a $20 bill. and it says at the top federal reserve notes now federal reserve note we we've done all kinds of things with money in this country it's amazing country only a couple hundred years old the number of different experience we've made with banks and everything but we finally just decided to put the Federal Reserve do the issuing of money and the uh uh the down in the lower left-hand corner it's another i think rosy rios uh who signed this note i think she signed more more uh u s currency than than any other person in history uh so if you see rosy you know you cozy up to her i mean this is a woman that
[27:23]
Warrenhas issued a lot of currency uh but it says it says this note is legal tender for all debts public and private and that makes it money you you can go go into our candy store and if you offer us enough bushels of wheat we'll probably give you a box of candy but but money is the only thing that the IRS is going to take from you and you can you're going to offer them all kinds of uh you can offer them paintings you're going to offer them all whatever but this is what settles debts in the united states and i thought a lot about various kinds of money this is the only kind of money you're going to see uh in my opinion throughout your lifetime or even throughout charlie's lifetime i mean this is uh uh uh it's very interesting because it it just says that uh settle all legal tender for all that's public and private and nothing else says that except i thought you might be interested in seeing uh another $20 bill and this one i own uh on that it's got the same guy's picture Andrew Jackson and everything uh and that's a $20 bill and that $20 bill was issued during my lifetime and it was done by a bank that Berkshire ended up owning so you'll see the Illinois National Bank in trust of Rockford and uh uh we bought that bank back in 1969 and if you look down in the bottom of that one it's signed by a fellow named by a fellow named eugene abeg and we bought it from eugene abe so we uh we still have some twenty dollar bills that came in sheets we can cut them out like paper dolls and there are money uh the illinois national bank issued money but just remember the united the state government in effect said that this became exchangeable for lawful money of the united states that that's what money is it may turn out that it becomes worth dramatically less in purchasing power uh it can become almost like paper money as it has in many countries but that is all when people tell you that they're issuing new forms of money uh This is the only thing that will pay bills under some circumstances. And there were there were days, a few days, in 2008, and we came very close to having a repeat in March 2020. And we had plenty of money on March 20th. But we were not very, very far away from having something that might have been a repeat of 2008 or even worse. And we have a bookstore here, but the bookworm that's in the other room, and they've got a book called Trillion Dollar Triage. And for those of you who actually like to read about this sort of thing, it's a marvelous account
[31:22]
Warrenof what took place day by day with the Federal Reserve. and the Treasury, and believe me, if the Federal Reserve hadn't done what they did, at least in my view, in a very, very, very short period of time, things could have stopped. And I've tipped my hat a couple years ago to Jay Powell for acting. as he did, so you have to act with speed. I mean, in the old days, when he had runs on banks back in the 19th century, a line formed, you know, and the bank would go broke. But the fellow would pay out as slowly as possible, you know, hoping something would happen. A Wells Fargo truck or something would pull up with a bunch of gold or something, and We talked the people into the line dispersing in Omaha in August of 1931, four state banks, so-called state banks they had a vote in that day. They closed, and the national banks didn't. But they were all broke as of that day. If they, no bank can pay off in one day all of its liabilities. But the Federal Reserve is the only one that's good at that time. I will say and tell you this, Berkshire Hathaway will be there at that time. We run it on the basis that if things just behave slightly very, very, thank Paulson, George H.W. Bush, or no, George W. Bush, I'm sorry, and Ben Bernanke. A few people hadn't taken action. and we were at that point where the line was formed, except it comes in electronic funds. They push buttons, and it's all over very fast if there's a run on a bank. If you ever buy a bank and there's two banks in town, hire a few extras and have them go over and start standing in line at the other guy's bank. I mean, it's, uh, and there's only one problem with that. After a while, somebody will stand in front of your bank, you know, and then both of you are gone. But the Federal Reserve is not gone. And the Federal Reserve in the United States can do whatever is necessary. They've got all kinds of rules about, you can do this or that and this and that. And one time in the 1980s, Paul Volcker, it was a very honest man, said to me, and I said, you know, what are the limits of what you can do? And he said, he was a very unusual guy, huge, looked out at me. He said, we can do whatever we need to do. And that's true. And that's what happened in 2008 and 9, and that's what happened in 2020. And you hope it happens again next time. But you want to be, we want Berkshire Hathaway to be there and in a position. position to operate when the economy stops.
[35:13]
OtherAnd that can always happen. That can always happen. Some of those cheery words. Let's see if we, I think we can actually be a good idea to start with some questions. As I said, we will have the questions, alternate between CNBC, Becky Quick, and those are questions that have come in from shareholders, and they can be directed to any of the four of us up here. And then we will alternate and go around the room here, and we've got the auditorium broken into 10 or 11. sections. Charlie and I one time figured out a form and said officers of the company broken down by age, and we just put all of us as an answer to that question, but we'll have it broken down by categories around here. And we'll keep alternating and we will write for lunch at at noon and reconvene at one. So let's start off and, Becky, will you lead the way?
QuestionerThanks, Warren. The first question comes from Jack Sissilecky. And he says in the annual letter that you wrote in February 26th, you mentioned that Charlie and you saw little that excites us in the market. Yet around March 10th, the deal for Allegheny was announced, and then later the Occidental announcement, then did the disclosure of the HP investment. His question is, what changed from the time you did dated the letter to the time the investments were announced, did the name suddenly become interesting in the space of a month and a half?
WarrenNo. Or half a month. Well, Charlie, you want to give your version? I'll give my version. My version would be we found some things we preferred owning to Treasury bills. And as usual, Charlie's given the total answer, but I'll talk longer and say less. We, actually, the letters dated February 26th where we were confessing our or inability to find anything, which was a Saturday. But the day before that, February 25th, I got an email. Actually, my assistant, Debbie Bosani gets it because I can't figure out quite how to handle so she brought it in. Actually, she puts a bunch on the edge of her desk and I collect them occasionally. And there was a note, just a few lines long, from a fellow that was a friend of mine and that worked for Berkshire than many years ago. And it's on February 25th, day before the thing. And he said he'd now become CEO of Allegheny of Allegheny of Allegheny, and he said he'd now become CEO of Allegheny Allegheny Corp. I'd been following Allegheny Corp for 60 years. There were annual reports. I had four big file doors full of it because it was an interesting company.
[39:12]
WarrenAnd all companies interested me. So I knew a lot about Allegheny Corp. And Joe said, you know, this is my first annual reporter CEO. And I just wanted to send it along to you, just like you to write for your sisters. He says, I write this report as if I'm writing to you. And I sent a note back to Joe and I said, you know, I'm going to read it over the weekend or whatever. I said, do them on it, which was true. I mean, I look forward to reading it. And I said, by the way, I'm going to be in New York on March 7th. And, you know, I'm going to be in New York on March 7th. can we get together? I'd like to see you. And I've got, I think I may have said I got an idea. Well, I didn't have that idea the day before. I mean, it just, this, this thing happened to come in on Friday the 26th. And I knew I'd buy Allegheny to a price. And, and if he hadn't sent me the note, it never would have occurred to me to me to write him and say, why don't we'd get together on March 7th or anything of the sort. It just wouldn't have happened. except for the fact that Joe wanted to send me along this annual report that he'd just written. So that's the orderly and decision-making progress. I didn't call up investment bankers and say, you know, will you prepare me a report on this? And, you know, what's your advice and all that's it? I knew we'd buy Allegheny at the price we offered. And if it was of interest to Allegheny, fine, if it wasn't. But otherwise, if that email hadn't been sent, we would not have made it offer for Allegheny. So give credit to the fact that Joe had written the annual report and it'd be sent it a week earlier. Well, I wasn't going to make a special trip to New York, but I wanted to sit down with them and tell them what Berkshire would do. But that explains the 11 billion. And what happened was that a few stocks got very interesting to us. And we also spent a lot of money at what happened, the market, and this is really important to understand. In the last couple of years, our market is probably, it's always been a combination of a casino and when I talk about Wall Street, I'm talking about the whole capital formation formation of market. But the, and trading market, et cetera. But the market has been extraordinary. Sometimes it's quite investment oriented, kind of like it always you've read about in the books and everything, what capital markets are supposed to do, and you study it in school and all that.
[42:29]
WarrenAnd other times, it's almost totally a casino. And it's a gambling parlor. And that existed. to an extraordinary degree in the last couple of years, encouraged by Wall Street, because the money is in turning over stocks. I mean, people say how wonderful you've done if you bought Berkshire in, you know, 1965 or something and held it. But you broke her would starve to death. I mean, it's, Wall Street makes money on one way or another, catching the crumbs. a table of capitalism and an incredible economy that, you know, nobody could have ever dreamed of a couple hundred years ago, but that they don't make money unless people do things and that they get a piece of them. And it's, it's, and they make a lot more money when people are gambling than when they're investing. I mean, it's much better to have somebody that's going to trade 20 times a day and got all excited about just like pulling the handle on a slot machine, you know, that's who you, you know, you may not say that you want that person. You'd like the other kind of person, too, maybe, but that's where you make the money. And the degree to which the market got dominated by that is showing on a slide somewhere I have here somewhere. here's on Oxy1, if you'll put up the Oxy1. That shows how we bought what became, well, we bought in two weeks thereabouts, 14% of Occidental Petroleum. And you'll say, well, how can you buy 14% of a company in two weeks? And it's more extreme than that. Because if you look at the Occidental Proxy, you'll see that the standard names, Black Rock, index funds, State Street Index Funds, basically, Vanguard Index Funds, and then one other firm, Dodge & Cox, if you take those four entities, and they're not going to buy and sell stock. They may have got their own rules. So they own 40% of the company, roughly. Those four firms, and they didn't do anything during this period. So now you're down to 60% of the Occidental Petroleum Company that's even available. Oh, Occidental's been around for years and years and years. Big company and all kinds of things. And with 60% of the stock outstanding, I go in and tell Mark Millard, this fellow that is 30 feet away from Mearsall. And I say in the morning to them, you know, buy 20% and take blocks or whatever it may be. And in two weeks, he buys 14% out of 40%, 60%. That's not investment. I mean, you're not buying from investment. I find it just incredible.
[46:15]
WarrenYou wouldn't be able to do that with Berkshire. I mean, you can't literally buy it. You can say you want to buy 14% of the company. It's going to take you a long, long time. But over. overwhelmingly large companies in America, well, all of them, they became, they became poker chips and people were buying and selling like three-day calls or two-day calls. And the more people, times people pull the handle on the machine, the more money the machine makes. I mean, it's very clear. And overwhelmingly. I mean, where did people go? The investors just were sitting around and there weren't very many. And the money was being made essentially by a bunch of people gambling on things. And that enabled us in a two-week period to buy 14% of a business that's been around for decades. And imagine trying to buy 14% of the farms in two weeks in this country. or 14% of the apartment houses, or 14% of the auto dealerships, or just anything. When already 40% were locked up some other place, it is, it is, it is, it is, it is, it defies anything that Charlie and I have seen, and we've seen a lot, but I've never seen that percentage of the American public. Essentially it was a gambling parlor and the people. that we're making money where people would work with gamblers. And then it declined very significantly a few weeks ago. You can feel it if you're, if you're, if you're rounded. So when somebody asked a very good question is, why weren't you doing anything on February 20th, And why were you doing it on the case of Occidental on February 28th? It's because things developed in a way, and in the case of Occidental specifically, they'd had had an analyst presentation of some, I don't know, I don't know whether it's a quarterly one or what it was exactly, but I read it over a week. weekend, and that was the weekend when the annual report came out, I read it over a weekend, and what Vicki Hollop was saying, ain't nothing but since, and I decided that it was a good place to put Berkshire's money, and then I found out in the ensuing two weeks, it was there in black and white, there was nothing mysterious about it, but Vicki was saying what the company had gone through and where it was now and what they do with the money and she'll do what she says. She doesn't know the price of oil next year, nobody does, but we decided it made sense. And two weeks later, we had 14% of the company and we also already had a preferred stock and warrants.
[50:00]
WarrenAnd the story of the preferred stock is we paid 10 billion, that preferred stock and warrants. We paid $10 billion for it. And at the end of the March quarter of 2020, we valued that $10 billion for our $10,000. We valued it at $5.5 billion. So we had a $4.5 billion loss, and it would have, you know, the world changed. Oil sold for minus $37 a barrel one day, and now it's quite apparent, I think. I think that we want, we're very happy, we should be very happy that we can produce 11 million barrels a day or something of the sort in the United States rather than being able to produce none and having to find 11 million barrels a day somewhere else in the world to take care of keeping the American industrial machine working. Charlie, have you got any comments on that, isn't it? How something this crazy could have happened?
CharlieWell, it happened. It's almost a mania of speculation that we now have. We have computers with algorithms trading against other computers. We've got people who know nothing about stocks, being advised by stock workers who know even less. I understand the commissions, though.
WarrenYeah, it's just an incredible crazy situation. And it's weird that we ever got a system where all this equivalent of the casino activity is all mixed up with a lot of legitimate long-term investment. I don't think any wise country would have wanted this outcome. Why would you want your country's stocks to trade on a casino basis to people who are just like the people who play craps and roulette in the casino? I think it's crazy, but it happened. And it's respectable, not with me, but other people. And look at what the country, I mean, they formed the New York Stock Exchange in 1792 under a buttonwood tree, and it really didn't seem like that was the eureka moment in America, but just look of what happened using the system for less than, you know, well, three of my lifetimes. I mean, it's unbelievable. So it's worked. Now, maybe it's worked in spite of itself, maybe the country, but one way or another, America has worked in an incredible man. Nobody could have dreamt it. Nobody. You know, they'd have hauled you away if you said, you know, in three lifetimes, you know, that, you know, this place where we're meeting, I mean, it became a state in 1867, 17, in 1789. It asked Ben Franklin or somebody that was walking out of the Constitutional Convention, you know, what do you think the prospects are for Nebraska?
[53:42]
WarrenIt's just, it's unbelievable. It's been accomplished, and it's been accomplished. The people who encourage the gambling, they would like to say it's been accomplished. accomplished because of the of the of uh we've got these liquid markets and all these wonderful things charlie would probably say it's in spite of that who knows but uh the uh the uh the answer is that uh well there isn't an answer uh the uh the uh my wife when they got married april 19th 1952 we got in my aunt's car and we started driving west and we ended up or drove all over the west but one night we ended up in las vegas and uh there were three fellows out there uh betty barrick and sam zygman and jacky gone and all three of these guys were from omaha and they'd bought little pieces of the flamingo bugsy signal had his career ended rather abruptly a few years earlier it was a stray bullet undoubtedly but in fact there were probably five or six spray bullets but in any event uh fugsy was gone and uh some people including three guys from omama were in the group sam sigman lived about two blocks from where i live now and he was stan lipsy's uncle stan lipsy ran those of you follow berkshire ran the buffalo news and a partner for 40 or 50 years later on so all kinds of things intersect but i walked into this casino aged or a flamingo it's kind of a motel like arrangement and i was 21 and my bride was 19 and i looked around the room and uh there were all of these people and they were better dressed then it was a more dignified group than perhaps currently but they'd flown thousands of miles in some cases um you know in in the planes that weren't as fast as the current ones and were more expensive probably on a per mile basis adjusted then they've gone to great lengths to come out to do something that was mathematically unintelligent they knew it was unintelligent and i mean they couldn't do it fast enough in terms of rolling the dice you know and trying to determine whether they were hot or whatever they may be and i looked around at that group everybody there knew that they were doing something was mathematically dumb and they'd come thousands of miles to do it and they were uh and i said my wife i said you know i'm going to get rich i mean how can you miss if people are willing to do this you know this is this is this is a land of opportunity well it's the way it still is uh you know and the flamingo go to be much bigger and and and in all mahal we're very
[56:55]
Warrenproud of Jackie and thinks he did only died a year or two away that became sort of the uh the leader of spiritual leader of Vegas and like i say sam zygman's uh nephew went on to save my and charlie's investment that we made in blue chip in the buffalo news and uh it's it's a very accidental society that occurs but there is nothing strange than what has happened in finance on the other hand if you go back perhaps the greatest chapter ever written on on the operation of markets particularly the stock market is in a book that one of the most famous books in economic history the general theory written by john manner canes i think it was 1936 and i don't know whether this is chapter i think it's chapter 12 but whatever it is he describes what markets all about in 1936 and he describes something in beautiful prose uh that explains why uh the whole country in march of this year was sitting around uh trading occidental in some crazy way that enabled us to buy a quarter of what wasn't owned by uh four other institutions that weren't on yourself we were able to buy a quarter of it and we could have bought a lot more i mean it was it you just wondered if there was anybody that really was thinking about investment if you going back to investing i mean investing is laying out money now with the hope of getting back more later on it's really laying out purchasing power now with help of getting more purchasing power now without getting more purchasing power back but that's the reason you and you know that's the way you learn in the textbooks that you defer consumption now so you can consume more later on so they can take care of your family all these things about how investment takes place and that is what happens with farms i mean i'm not uh uh somebody buys a farm and then generally they over to leave it to their kids or they got it from their parents and i mean they don't sit there every day and you know get quotes 15 times a day and say you know i'd like to get a call i'd like to sell a put on the guy's farm next to me and you can have a call on mine and then i'll have something called a straddle or a strangle or whatever it may be and you know they just they go about making the farm worth more money and and they do the same thing if they got an auto dealership and they do the same thing you know if they've got an apartment house they look for for improvement and track tenants all those kind of things and um what would it be 40 trillion at least you know
[1:00:10]
Warrenof the ownership of all of the american business people and treat his poker chips are pulling the handle and they've got they've got systems set up so that if you want to buy a three-day call on a stock you can you can do it and they make more money selling you calls and if you buy stocks so they teach you about calls nobody's going around selling calls on farms or anything of the sort but that's that's that's why markets do crazy things and occasionally uh berkshire gets a chance to do something uh and it's it's it's not because we're smart it's because we're the only thing we're we're we qualify on and sometimes i wonder about that but i think we're saying you know i mean that and and that's the main main requirement in this business and anybody
Charliecharlie well i don't think we ever had anything quite like what we have now in terms of the volumes of pure gambling activity that go on daily and the people lathering the gamblers up so they can rook them and it's not pretty and i don't find it's not pretty and i don't find it it gets any gate and glory for capitalism or anything anymore there's a bunch of people throwing dice at a table what good does that do the rest of the world it's a great way to become rich now just figure out ways to insert yourself into the system somehow and uh you know
Warrenjobs to some extent self-select and many years ago and i've got all kinds of friends in wall street not as many as i had before i hadn't started talking this way an hour or so i but but i really do i mean i people make they make lots of decisions in life and the truth is that overall the american system has worked extremely well it's it may be very unfair in many ways but it has produced incredible difference in the goods and services available to me versus what my grandfather had available you know i do not want to go back to pre-air conditioning and and people pouring whiskey down me while they drill my teeth or something of the sort or any i mean this this is a lot better world and and uh we well i think we've made more because of the crazy gambling i think it's made it easier for us net over the decades we we're operating well i mean we've depended on it yeah i mean we depend on mispriced businesses through mechanism where we're not responsible for the mispricing of them and overall we learned something a long time ago that doesn't doesn't take a high IQ doesn't take anything it just takes the right attitude we may talk more about that later but i think
[1:03:24]
Otherwe ought to prove that we've got an audience here by going to section one
QuestionerGood morning. My name is Olle Pallem. I live in Hanover, Germany. This is my first time in Omaha. My question is on Berkshire buying entire companies outside the US. There were a few. Iska, probably the first one, Louis, in Germany. My question is, would you only answer calls from them if you're interested in or would you proactively approach them if they would like to sell their company
WarrenI would we actually made a few trips I think I've made them and maybe Charlie won't know one on them but we tried to stir up interest and all that sort of thing in Berkshire around the world we probably did that 20 or 25 years ago during that period that I showed you that of action we had. We probably spent at least $5 billion of that. Yeah, it'd be pretty in the area of $5 billion of it. We bought three German securities. We bought two. Well, we bought one, Japan. We rounded up on some of the hold holdings we already had there. We would love them to buy it, but they don't think of us as quickly there. I mean, I don't have somebody that's going to send me an email about a company that I've been following for 60 years, and I know I can see him in New York, and I can name a number to them, and if he likes it, take it to his board and so on. It just doesn't happen that way. We haven't had that experience in, well, anywhere outside the United States. Now, you didn't say with 40 trillion here, you know, we should be able to find something here a little closer to home. But we don't have any bias against Neway. There's, there's, there's companies, you know, we'd buy in 10 minutes if we had somebody on the other end that could do business in 10 minutes. It's much more complicated in certain countries than in the United States. to purchase businesses and there are certain rules. But obviously this, you know, we got a call, whatever it was, many years ago, on the company in Germany, and actually the two fellows that run it are probably here in the audience. I saw him yesterday, and they're marvelous, and they run the business. And, and, you know, they, they, they, they, they, they, they, they, they, they, they're just trustworthy as, well, the pictures were up on the, on the, on the movie we showed, uh, uh, uh, uh, before the meeting started here, uh, you know, we, we, we, we, we, we have so much trouble finding good ideas that we can't afford to ignore any, but they do have to be sizable now, I mean, I mean, there, there, there really isn't, there really isn't.
[1:07:11]
WarrenThere isn't a lot, a lot of, I love the, I love the operation we've bought in Germany, and it's just a pleasure to be associated with the, with the people there. I just wish we could add another zero to all the figures, and it was a much larger deal. It's not going to have an economic impact on Berkshire, but they love it, they care, you can see it, you can feel it, and that's the kind of business we'd like to happen, and we're very happy we've got it in Berkshire. But we can't do it one debt of Louis at a time, and we would never, never solve an operation like that, ever, ever. I'm looking at you, Greg. The, the, it's, you know, but if we get a call a call tomorrow tomorrow, and we could get a call tomorrow, and we could make a deal that involved $10 or $20 billion that was in Germany or France or Britain or Japan or name a whole country. We'd do it. We bought the interests in the five leading trading companies in Japan a couple years ago, and I rounded them up a little bit, but I told them originally we weren't going to buy a lot with, we weren't going to change our positions materially without they're okay. So we actually, I think, rounded the 5.85 percent, based on the latest figures we had then, of all five of them. And that's a good many hundreds of millions or maybe a billion or two to work. So we will, you know, President Kennedy said, well, pay any price, climb any hills, you know, whatever may be, to find businesses. but we actually prefer it when they fall into our lap, like getting a letter from somebody. And they hadn't heard from them for a couple of years, and you know what you pay for the business. And you know if the board of directors, that company regards it as attractive, that they'll be happy to buy it, and they know you're going to show up at the closing and that you're not going to pile debt on it or change things. They've got an answer. And then you have to see if they've got the question in their mind is, what's the best thing for Allegheny Corp? And in that case, we had $11 billion of less at the end of the day or the end of the dinner than we had at the start of the day. So opportunity can be any place, and we do have a terrific operation, for example, in Israel. I mean, just terrific. And it's pretty good size. Would we like to have another one like it? Yeah, I just don't know what the other one is, Charlie?
CharlieWell, but think in the scheme of things, imagine buying in $60 billion worth of our own stock.
[1:10:34]
WarrenWe like the businesses. We like the price we're paying. No overhead, no cost, no nothing. Just more interest in what we already own. Isn't that we're totally wasting our time? Yeah, and if you look at it, there are, you can read hundreds of thousands, maybe millions of words written on stock repurchases and what this is and what that is and all this kind of thing. It's not very complicated. If you had a partner in a lemonade stand and they wanted to sell out, sell their interest or two partners and want to sell their interest, and one of want to sell their interest, I mean, and the business had the money to buy it, or the lemonade, that and they were offering it a price that was good for the other two people that are going to remain. You'd buy them. You'd buy it. The thing that's fascinating to me is what you can accomplish. And still, people don't pay any attention to it. We owned in 1998, it was more than 20 years ago, we owned about 150 million. We owned about 150 million. I don't know where they've They've split, whatever it is, if they've split, it's split adjusted. But we owned 150 million shares of American Express. I think we bought our last share in 1998 or something like that. And we then owned 11.2% of the American Express Company. Wonderful company. And since then, they've sent us a check every quarter is a dividend. So we've taken some cash a little bit as they've gone along. And now we own. 20% of American Express. That's what's happened because they've repurchased shares. That happens to have worked out extremely well. If they overpaid for the stock and all that, it doesn't solve every problem. But it's a wonderful thing. If you've got an asset you like and they take your ownership interest up, and like I say, we've gone from 11.2% to 20%. If you're using your American Express card, or whatever it may be, 20% of whatever earnings are attributable to our interest. And they used to be 11.2%. And we've done it without putting up any money. Now, imagine, imagine if you owned a farm and you had 640 acres. And you farmed it every year, and you made a little money on it and enjoyed farming. And somehow, 20 or so years later, it had turned into 1,100 or 1,200 acres. I mean, you'd say, you know, how long has this been going on? You know, what could possibly be, you know, is this an American or whatever it may be? I mean, is it sensible use to meet its cost to capital, blah, blah, blah, blah, blah.
[1:13:55]
WarrenAnd if you do it at the right price, there's nothing better than buying in your own business. We own, I mentioned that you've used. Apple is an example of how our interest in Apple, you know, every time a company that earns $100 billion a year, it means of our interest, and it goes up a tenth of a percent. You know, we've added another $100 million earnings. Well, I think, I mean, it takes a lot of work, a hundred million earnings. And, you know, in the first quarter of it, they just reported, they're on a fiscal year, but they just reported their March quarter and, you know, they earn more money and they had fewer shares outstanding. And we actually bought a little more Apple in the first quarter, so we decided we wanted to own a greater interest. And on top of that, we knew that we would own an even greater interest if they kept buying in their shares, which we didn't have any insider information, I think, but certainly would seem the way to bet and we feel better because we bought the shares we bought in the market and we feel just as good as the fact by the fact they use their cash to buy some of the other people. It is the simplest thing in the world and then I read all this stuff. It is unbelievable. Oh, people can't figure out something that, you know, if they owned a farm and the guy next to him had a farm and somehow you were getting more of his farm all the time. without putting up any money while you farm your own farm, that at least, you know, you're using some of the earnings for that, you'd feel very good about it. And have you got any explanation for it, Charlie?
CharlieWell, I have another thing that interests me in the presidency. We get all these suggestions from index funds, a letter saying we, the chairman and the president of the chief executive of a... are the same person and that they have some professor somewhere that thinks that American business would work better at a separate, if Warren gets split him in two and have each half work. And to me, it's the most ridiculous criticism I've ever heard. It would like, it would like, Odessus would come back from winning the battle in Troy and so forth, and some guy was saying, I don't like the way you were holding your spear when you won that battle. It's some guy that's never run any business and doesn't know anything. I don't think too much of this. I don't know. Let's see. Somewhere in here, I may find it at some point.
[1:17:09]
WarrenOh, here it is. We wrote in the annual report that in the third paragraph of a nine-page report, we said, we're going to treat everybody the same. Maybe a crazy concept we have, but we really feel that some of the same. feel that's somebody that gave us our savings in 1960 or 1970 or 1980 and just left them with us and trusted us, we feel that they're entitled to the same sort of respect and attention that somebody that was accumulating like crazy assets under management gets paid based on assets under management that that knows that they just need to have policies that essentially are popular in Washington. The only problem, the only threat they have, really, is that Washington sometimes says that you're getting too damn big and we're going to do something about you. So they try to be very sure that they're doing things that people will share them. So anyway, I say, well, we're going to treat you all alike. We've got three million people or shareholders out there, we're going to treat you all alike. And on March 25th, about a month after I wrote that letter, send the third paragraph. You'd think that they would get that far, that they had 101 million B shares. I mean, somebody ought to read the third paragraph. But anyway, we got a letter and says, we would like to meet with you in advance of Berkshire Hathaway's 2022 annual meeting of shareholders to discuss Berkshire Hathaway's perspective on governance and sustainability. Well, I have written probably more on that that's been honestly written by the guy that runs the company, but why in hell would they think that we should meet with them and not you people all individually that come here? I grew up in a very, very, very, very Republican household, but I feel like a, you know, some raving populist or something, but I just can't imagine, well, anyway, you've heard it. But somebody gets paid to, well, there's not a lot of people, I'm sure, in public relations, and they hire advisors because it looks better if they have advisors to tell them whether the chairman and the CEO should be the same person or not, and those people get paid for it, and then they discuss it at their board meeting, and then, you know, in the end, believe me, if 90% of Congress for some reason felt it was better to have the chairman of the CEO be the same person. The index funds would not be writing those letters. All I have to worry about
[1:20:15]
Warrenis whether, for some reason, people start wondering why some institutions shouldn't have 10% of the votes in every major corporation in the country. And I like the idea of index funds, but it is interesting to watch where incentives and bureaucracy and whatever it may be lead people. The guy that wrote me the letter is probably a very nice guy. I haven't, but, you know, that's his job. And, well, anyway, they didn't get a special meeting. And you people are here, and we appreciate the fact you're here. Okay, back to Becky.
QuestionerThis question is for Ejeet and Greg. It comes from Bin Nahl, who's a shareholder of 30 years. He's a Nebraska native, and he says he'll be attending the meeting here today. BNSF and GEICO appear to be. losing ground to their two primary competitors, Union Pacific and Progressive. Over the past several years, UP's operating ratio has been about 400 basis points better than BNSFs. And Progressive has grown faster while maintaining a lower combined ratio than Geico. On an operating basis, UP's precision-scheduled railroading and Progressives telematics appear to have jumped ahead of the Berkshire businesses. He wants to know what Greg and Ajit are doing to address those business challenges. Thank you, Becky.
Greg AbelLet me just start by saying when we think of BNSF, we have an exceptional franchise there and a great business. And we do compete with other railways, and we're very well aware of how they operate, including their operating ratios and the metrics they operate to and precision railroading. And it's all part of it. But what I would share with is when I think of BNSF, we start with focusing on our customer. understanding how we can best service them. And yes, we want to do it in an efficient and effective way that delivers great results back to our shareholders. And that will continue to be our focus. So, yes, we learn from all the metrics they report and how they operate their rail and we observe it. But I would put our team up right beside them on any operating day, and we're going to move our rail cars as well as any other rail company in America, and we're going to do it on behalf of our customers. So we're very proud, but we're not ignoring the fact that there's more to be done, both operationally and for our customers. So we'll continue to see improvement there. We've got a great leadership team there. We've got a great employee group within BNSF.
[1:23:09]
Greg AbelAnd what I like is we're just going to see long-term improvement there. We have an exceptional intermodal franchise out of the West. It's incredibly valuable to our shareholders long-term, our partners. And that's what our team is focused on building that franchise out. So couldn't be more proud of where we're at, but we also know we have a journey ahead of us, and we're going to continue to get better and better.
QuestionerGreg, if we were offered the opportunity, would you trade our operation for theirs?
Greg AbelNever, never. And we love our...
WarrenHe knows a lot about it, Phil. We have a great franchise, and we have a great franchise, and we have a great franchise. great leadership team running it.
OtherSo well said, Charlie. Thank you.
WarrenAnd I just, I just, before we go to Eugene. And Greg, you know, was a major partner for 20 years, more or less, and a little over that, since we bought the energy company. And his boss was Dave Sokol. And the two of them, I mean, they know how to run, they knew how to run businesses. I mean, you know, it isn't like we don't, we don't read what other numbers are and all that, but we, we've got the perfect person running, and Katie Farmer, we've got the perfect person running the NSF, and she'll do a great job. And it's changing around a railroad in various ways. You know, if you've got 21,000 or something miles of own track and all kinds of other, it doesn't count sightings, double tracking. And you've got a lot of things to do from something that they started building a couple hundred years ago. And not quite a couple hundred hundred, but, and you can't, you can't move things around easily. You know, when you came into Omaha in 1862, well, the railroad didn't even go across the river. I mean, even though we'd become a major rail center for the west or the opening to the West. And we're going to be here a hundred years from now. We will be an important, a really vital asset of the country, and it will be a very big part, very important part of Berkshire. And we will be a very important part of Berkshire. And we will take take what is an incredible assemblage, I think, of 300 and some railroads or something, I get over time. And, you know, the trucks got laid, the rocks laid out, you know, 150 years ago. The world changes, but you have to adapt to it, but you don't do it, you don't put an order out to change a thousand miles of how it's operated or anything of the sort. So we're running it to have that asset.
[1:26:20]
Greg Abelfor Berkshire shareholders and it will redundant to the, down to the benefit of the country. And if we do it, well, it will, no matter who ran it would be important, obviously, enormously, the country. And the UP will be here and at that time, too, and it will be a better railroad 100 years from now than this now. But I can't promise you what will happen if we get flooding in something in the next few months, you know, it can wipe out a lot of the plans you have and disrupt lots of lives and disrupt lots of shipments. And there's no magic wand in railroading to make great changes. On the other hand, you ought to be working at it every day to make it better done. I forget how many bridges we have, but some years ago, we were spending three or four billion dollars a year on capital expenditures and one, I said, Matt Rose, you know, I said, this is a lot of money to spend, you know, keeping up a railroad. And then he said, well, we're going to have to do that more and so on. And I said, well, I said, I can handle this, but I'm not sure Charlie can't. I have to explain these numbers to him. So the next bridge they built, they called the Charles Teammonger Bridge. So you can actually go see our railroad has the Charles Teamonger Bridge because Charlie, Charlie kind of was asking similar questions 10 years ago.
QuestionerAjit.
QuestionerOkay. Thank you, Becky.
Ajit JainThere's no question that the personal automobile insurance business is a very competitive business. Having said that both GEICO, and Progressive are two very successful competitors in this segment. Each one of them have their pluses and minuses. But having said that, there's no question that more recently, Progressive has done a much better job than GEICO, as you point out, both in terms of margins and in terms of growth rate. There are a number of causes for that, but I think the biggest culprit as far as GEICO is concerned, and again, you rightly pointed out, is telematics. Progressive has been on the telematics bandwagon for, I don't know, more than 10 years, probably closer to 20 years. Geico until recently wasn't involved in telematics, and it's been only the last two years that they've made a very serious effort in terms of making, using telematics for segmentation and for trying to match trade and risk. It's a long journey, but the journey has started, and the initial results have started, and the initial results have promising. It'll take a while, but my hope and expectation is that hopefully in the next
[1:29:33]
Warrenyear or two, GEICO will be in a position to catch up with Progressive in terms of telematics, and hopefully that will then translate into both growth rate and margins.
WarrenCharlie, you guys. It's very interesting. I mean, the auto insurance industry is a fascinating one to study that. In the auto insurance industry is a fascinating one to study that. In the, in the that the largest auto insurance company now, and we're talking 2022, and at you know, Henry Ford, I mean, it was 1903, you know, or something, when, when cars really got started and wasn't too many years after that, but it's turning out two million cars a year. Imagine that, you know, one guy. guy, two million cars, a year is a lot of cars. So car insurance became very important. After hundreds of years of when people thought about insurance, it was, it was, it was ships at sea and fire where they have protective societies. And insurance is a product's been around a long time. But auto insurance, you It's been pretty much the same thing since Leo Goodwin started GEICO in 1936. And we came along with a good idea and lots of big companies and all that. But the largest auto insurance company, the United States, was started over Illinois. I didn't know anything about insurance particularly. And it's a mutual company. It's not supposed to succeed in capitalism. I mean, you know, if you go to business school, they teach you that only the only because you have incentives and compensation and all kinds of things. Can a company succeed? Nobody's really gotten rich off State Farm. They've sat there, and they are the largest insurance company while Leo Goodwin started 80-some years ago, and he probably wanted to get rich and probably at progressive, you know, people wanted to get rich and at travelers and etna and name off dozens and dozens and dozens of company. And who wins? You know, a mutual company. In terms of present size, they still are the largest company. They have, believe out Berkshire, they got the largest net worth by far. I think they've got 140 billion or something like that of net worth. You know, and Progressive has had a very, very, very, very smart guy running it for a very long period of time. They've got very smart people running it now. But they have a net worth that's one sixth out of. of what some people over in Illinois that nobody knows the name of, have, after years, they've had the time to sell the same product, and they advertise like, hey, we spend $2 billion
[1:32:57]
Warrena year telling people the same thing we've been telling them for 70 or 80 years, you know. The policy doesn't change, but when we get all through, State Farm is still doing more business than anybody, and it shouldn't exist under capitalism, you know. You went there with a plan to start. a state farm today and have it compete with Progressive. Who would put up the capital? I mean, a mutual company that you're not going to get the profits from. It doesn't make any sense at all, except they've got $140 billion or something like that of net worth. And Progressive, I don't know what their net worth is, but it must be somewhere around $20 or so billion. I haven't looked for a long time. Their net worth in the first, incidentally, I mean, they've been. They are very, very, very, very disciplined and underwriting. And of course, on the investment side, their net worth dropped in the first quarter because they own a lot of bonds. And they say, well, probably everyone in the insurance business would say that, well, we own bonds because that's what people do. And here's half the business where you do what people do. And the other time, under half the business, you spend all kinds of time trying to analyze in every county and every single way you can segregate and properly rape business and all of that. And, you know, basically, Peter Lewis sat in my office 40 years ago, and he was smart as hell. And, you know, this guy was clearly going to be a major competitor of Berkshires, and he knew, and he insurance backwards and forwards and very bright and everything, but he just ignored the investment side. And that was as important as the underrunning side. And it is interesting how organizations function and have what I would say are, to some extent, blind spots. And of course, Charlie and I know we've got all kinds of blind spots ourselves. So we have to be kind of careful of criticizing other people for having them. It is, it is, the auto insurance business ought to be studied in business school because it essentially refutes so many of the things they're presently teaching. So that's my suggestion today to business schools. Okay. And thanks, Ajit. You couldn't, Ajit is responsible for adding more value. to Berkshire than the total net worth of Progressive. That's not to knock progressive. I'm just saying one guy. Okay, station two. Hello, Warren and Charlie. It is great to see you both and the wonderful Berkshire managers.
[1:36:15]
QuestionerOur thanks for everything that you do. My name is Rajiv Agarwal, and I am from New Jersey. My question is on market timing. You have always said that it is impossible to time the markets. Yet, if we look at your track record, you have had amazing timings with some of your key decisions. You got out of the stock markets in 1969, 70. You got back in 72, 74, when the markets were really cheap. You did the same thing in 87, 99, 2000. And today, we are sitting on a significant amount of cash when the markets are going down. My question is, how do you time the big market moves so well? We'd like to offer you a job first.
WarrenI will take it. The interesting thing is, you know, obviously, we have the faintest idea what the stock market is going to do when it opens on Monday. We never have had. We have never made, Charlie and I, I don't think, and all the time we've worked together time we work together. And I'll tell you something later on maybe about how learning takes place. But we have never, I don't think we've ever made a decision where either one of us has either said or been thinking we should buy or sell based on what the market is going to do. No. Or for that matter, on what the economy is going to do. We don't know. And the interesting thing is. Sometimes I get some credit someplace for the fact that, you know, how wonderful it was that we were optimistic in 2008 and when everybody was down on stocks and all that sort of thing. You know, we spent a big percentage of our net worth at a very dumb time. And I shouldn't say we, it's I. We spent about 15 or 16 billion dollars. $16 billion, which was a lot bigger to us then than it is now. We spent it in the last few weeks, a period of three or four weeks between Wrigley and Goldman Sacks and General, like, at a terrible time, as it turned out, I mean, I didn't think, I didn't know whether it was going to be a good time or a bad time, but it was a really dumb time. And I wrote an article for the New York Times and Buy America and all these things. well, if I had any sense of timing and waited six months until, I think the law was in March, in fact, I think I was on CNBC maybe that day or something, but I totally missed that opportunity. I totally missed, you know, in March of 2020. We have not been not been good a time. We have not been good a time. timing, we have been reasonably good at figuring out when we were getting enough
[1:39:36]
Warrenfor our money. And we'd had no idea when we bought anything. Well, we always hoped it would go down for a while, so we could buy more, and we hoped even after we were done buying and ran out of money that if it was cheap, the company would keep buying and, in effect, taking our interest up. I mean, that's stuff you could learn it in fourth grade, but it's not what's taught in school. I mean, so never give us any credit. Well, actually, give us all the credit. I mean, go out and tell everybody how smart we are, but we aren't. They, we, we, we haven't ever timed anything. We've never figured out insights into the economy. I mean, when I was, when I was 11 years old, March 12th, I guess, in 1942, you know, at March 11th, you know, March 11th. You know, I bought stock when the Dow was 90, well, it was 101 in the morning. It was 99 at the end of the day, I think. And, you know, now it's 34,000 or maybe it's 1,000 less than it was on Thursday. But, you know, I just, you know, it's one decision that it's a good thing to an American business. And, you know, if the Harvard endowment, when it comes to it, to see me and it's 11-year-old and, you know, or general mortgage pension fund or something. And, you know, they say, well, no, but we have to have a balance and we have to maybe have 60% and then we have to sit around every three months and listen to a bunch of managers. It's just done better if they'd just taken some darts and throwing them and just said, we're going to be in America 50 years from now and 100 years from now and we'll do better in Sox than we will in bonds. But it's amazing how hard people make, what a simple game it is. But of course, if they told everybody what a simple game it was, then 90% of the income or more of the people that were speaking would disappear. So there's really a little, too much of us to expect of human nature that people will explain why they really aren't adding any value to what you can do. by yourself, or actually you're, you know, I hate to use the example, but you can't have monkeys throwing darts at the page and, you know, take away the management fees and everything. I'll bet on the monkeys, but I don't consider them a superior species and I don't want them to move next door instead of my next door neighbor or anything, but that is the way it, it's just the way it has to be. Charlie, do you have any cheerful to say?
CharlieWell, frequently in the wealth advisory business the way it used to be, you go to your investment advisory and you say, what should I do to protect myself for the future?
[1:42:59]
CharlieAnd he says, why don't you give me $50,000 in your net worth now? That's my contribution to your future. It's a peculiar business. Yeah, it's a great play. is called rich. Still, if you have, if you have a son or daughter that really wants to make money per point of IQ and per erg of energy and all of that, tell them to go to Wall Street. I mean, don't have manner to the priesthood or anything. I mean, if that's what they, it self-selects, and it always will be the case. I mean, there's no reason to despair about humanity because they behave in their self-interest. They may not actually be behaving in their self-interest over time, but they, you know, are they happier? Who the hell knows? But if they just want to make money, but, well, people here in the auditorium saw a little session from the Solomon episode. Jerry Corrigan was then the head of the New York Fed. And that same committee was grilling him. And they said, Mr. Corrig, they were giving him a hard time. And they said, who was the highest, they said, I mean, to this effect, who was the highest paid or guy at Solomon last year? And then, and he said, well, he, uh, he, uh, he, uh, he, uh, he, uh, and he, uh, he, uh, he, uh, and he, uh, he, he, he, uh, he, he, he, he, he, he, he, he, he, he, he, he, he named him. And he said, he got, I forget what it was 20 million last year. And we're talking in 1991 now, too. He said, he got 20 million. And, uh, the guy says, well, how old is he, you know? And he said, well, I think he's, Corrigan said, somebody affected. He's, um, he's, you know, 26 or something like that. And then Corrigan couldn't resist saying, and he can't even throw a football. Now, there's a lot more money in throwing a football out than there used to be. You know, one of my heroes was Ted Williams, and, you know, I think he was making $20,000 or $25,000 a year, and, you know, just imagine today, some guy that's $2.30 or $2.40, you know, and he makes it to the big, so, I mean, the money flows in, and of course, uh, those people should sit down and thank the fact the fact that the fact that the stadium that could hold 30 or 40,000 people and was the source of revenue for the people who paid their paycheck, that stadium went from 30 to 40,000 because somebody first invented television and they came up with cable television and they came up with pay and all that sort of thing.
[1:46:22]
WarrenAnd nobody knows the names of those people, but capitalism is very, very, very peculiar in how it dishes out rewards and For a while, it was better to be in Wall Street than be at 220 or 230 he had earned in the Biggs. And, you know, it is now reversed because of the development of TV, etc. So it's a crazy world. Rewards seem very, very, very, very capricious and they are. And they don't seem very, and they don't seem to any theologian or even to Charlie and me in our spare time. The whole thing seems kind of crazy, but it's worked awfully well. And even the people who don't take advantage, get short change by the system, are doing far, far better than if the system hadn't gotten changed. Doesn't mean that you necessarily shouldn't work for change, but you should recognize the limitations of what you can do with humans. I put it that way. Okay. Charlie, there any way you'd like to close the sermon?
CharlieWell, I do think we have a very interesting phenomenon. And I would argue that in a lot of the wealth advisory business, people are charging for skill and delivering closet indexization. Exxization. In other words, nobody can stand being that different from the crowd in results. They're afraid they'll lose their fees. So everybody does the same thing. It's mildly ridiculous. The world is mildly ridiculous.
WarrenYeah. But as Charlie pointed out in the movie, which only people here saw, I mean, that before we were married, you know, we tried to convince a couple young women that we were really more attractive than we were. I mean, you can't expect people not to behave with their self-interest. And that was very important that, that, uh, that, uh, that, uh, we didn't disclose all, disclose all of our weaknesses, uh, before the marriage, so.
CharlieWarren, we're trying to be a little better.
WarrenYeah. We may fail a little, and I don't know about you, but I've slightly improved since I was 17.
CharlieYeah. Well, well.
WarrenThat's a really interesting point because if fortune has just showered you with all kinds of good things, you ought to be a better person in the second half of your life than the first half. I mean, that really should not be asking too much of people if they've won the ovarian lottery and all kinds of, you know, they're born in the United States, and all kinds of good things have happened to them. And you've had a chance to see how stupid you were in all kinds of things you did.
[1:49:49]
WarrenYou know, why not have the second half of your life be better than the first half? I mean, I would say, working from a very low base, but I mean, I'm not nearly, you know, by any intelligence test or ability to do any that, you know, I haven't learned anything, but you do learn certain things only by interacting with people. And you don't know when you're two years old, no matter how much you're picking up. all kinds of knowledge from the world. The learning machine that's going on in a two-year-old's head is just unbelievable. But it's not the same as having 30 or 40 years of experience with actually how the human animal behaves, which is that you're learning all the time about it. But that should make you a better person in the second half of your life in the first. I would say that if you say you're a better person in the second half, you've got a reason to say it in the first half, you know, forget about the first half, enjoy the second half. And I think both Charlie and I've had the luxury of a living a long time, so we get to play what we would regard as the hopeful and expectable second half. And we have had enough sense to figure out. well we figured out what makes us happy and we've gotten somewhat more sensitive to what can make other people unhappy and all that sort of thing and and and I'd rather be judged by the second half of my life than the first half and so would charlie
Charlieyeah of course okay i'm very i i i don't even look at what i did when i was young because it would embarrass me okay
Warrenuh any of you wish to quiz charlie on specifics can do so later
QuestionerBecky this question is there's two-part question it's for warren and ajede on the first part and for gregg on the second it comes from roger clefman he says several years ago mr buffett was quoted that a nuclear attack is the greatest risk to berkshire hathaway insurance given the present circumstances what would the fallout be on berkshire hathaway insurance if a nuclear event occurred in the populated world and then secondly for gregg has has berkshire hathaway energy suffered any physical or cyber attacks and irrespective of that has any special hardening of security been put into place
Warrenyeah well the first half every day since since uh august of nineteen forty five every day uh and accelerating dramatically when a second of large country had the ability to uh kill millions of people which has been magnified by an incredible factor that truth is that there is a risk every day
[1:53:10]
Warrenit's a very very tiny risk but there's a jeep with anybody at this table could tell you if you if you roll well they had a they had some they had a pair of dice out of the desert in in in Las Vegas for a while under a glass thing and some guy's thrown 32 passes in a row and a row and I don't know what maybe the odds are eight million to one against that or four million to one I get four billion to one against it but uh you know if you if you just keep rolling the dice you know everything will happen I mean if it uh get 330 million Americans out tomorrow every American says heads or tails uh uh and they do it every day after 10 days you know you've got three hundred and 30,000 of them that have called the flip ten times in a row and if you do the 10 more days you still got a bunch of people who've done it 20 times in a row and they really think they've learned how to control the flip well the answer is the world is flipping a coin every day as to whether people who can literally destroy the planet as we know and we'll do it and and unfortunately uh the major problem is with people that have large stocks of nuclear weapons and and uh iCBMs when they talk about using tactile nuclear weapons because somebody will be upset because they're losing a war i mean does anybody think that somebody's willing to kill you know hundreds of thousands of people with the tactile weapons i mean why do they they stop with it you know at there it it it is a very very very very very dangerous world and uh and and we would we don't have any way of protecting no it's a big nuclear attack i know a man who who said i know what i'm going to do if there's a nuclear war i'm going to crawl under the table and kiss my ass goodbye well yeah and charlie is in charge of lost control at berkshire that's a we have no solution for it no we don't and and there isn't any solution for it and uh you know it's extraordinary when you think about it uh in august of nineteen thirty nine september first is you know no hitter moved into poland but nobody really knew that much about it here i mean the news you got you got from the news reel you went to because the theater was air conditioned you know or something so so if i went to the movies uh which you wanted to do in the summer because it was air conditioned in in august of well september 1st in the case of the actual movement into poland but but uh you know there was a few people on the screen
[1:56:39]
Warrenand some guy with an authoritative voice telling you the german forces or just moved into uh poland be and it was over in a minute now of course all day every day you see people dying who you very much empathize with and it could be you instead of them and and and it's just so different but in august of 1939 it was a letter sent uh to president roosevelt about a month ahead of time and why did he get that letter he got the letter because hitler was so on anti-semitic basically drove all the all the jews but could see it coming out of germany and among them were some great scientists and uh leo zollard who was obviously from hungry riddom but somehow he he got driven out einstein got driven out and uh leo zillard lands and eventually in the united United States and he writes a letter to tell the president of the United States Franklin D. Roosevelt that the there's a bunch of uranium moving different ways or whatever it may be be i don't know anything about physics is zero i don't know what the off and on signs you but in any event i know what the letter did because he writes a letter and says and America better get to it first but then he has the problem of how do i get it to roosevelt oh leo's a large who's he the president of the united states so he figures if he gets Einstein to co-sign it that the president will pay attention and he's right so he goes and gets Einstein and the two of them send the letter and they sent it to roosevelt and they wouldn't necessarily have been in the united states of it you know that or had a different It hadn't had the crazy views about about Jews basically. And so anyway, that letter went and we developed the atom bomb before anybody else did. It was a very, very fortunate development that leo's a lard. And Einstein happened to end up in the United States rather than perhaps be someplace else. Who knows? But the accidents of history and the act, there's going to be more accidents in connection with atomic weapons, you know, we've come close for various times. I mean, we had geese flying over, you know, somewhere up north, and NORAD gets a crazy signal. We've had wrong training tape placed when I'm at, you know, we're in the Soviet Union or something, you know, you know, it looks like. things are going on and it's we can't do anything about it and that is one risk that Berkshire absolutely has no interest in even though you can say everybody in
[2:00:17]
Warrenthe world should have an interest but it doesn't do us any good, the feeling it doesn't do us any good to think about it Tom but that doesn't stop the fact that there are two powers in the world that through miscalculation of the other's intentions, through all kinds of things. You know, they've come close in the past, and Charlie and I lived through the Britain, through the Cuban Missile Crisis and, you know, we knew there was some chance that weapons of mass destruction would be used, and believe me there, that there's a lot, there's a lot more bad that can happen And humanity has not really come up with a counter force to technology. I mean, if you live back in the caveman ages, if you were a sociopath or something, you threw a rock at the guy in the next cave, you know, or something. I mean, it was sort of proportional to, and we kept development. And there was this breakthrough where technology is totally outrun humanity. and we'll see whether what happens but so far so good and berkshire does not have an answer though we don't we don't know there's certain things we don't write policies on because we wouldn't be able to make good on them anyway you know that that and everybody would know we wouldn't be able to make good on them so we're not at we you have that risk and there's nothing berkshire can can protect you against, and we've been very lucky so far. Ajid, do you ever get any questions in terms of?
Ajit JainIn addition to all what Warren has said in terms of the chance of something like this happening, the additional thing that concerns me about a nuclear situation is my lack of ability to really estimate what our real exposure is in the event of a nuclear event. When you're talking about, you know, other big exposures we have, earthquake and hurricane and cyber, I can, with some reasonable degree of accuracy, have a point of view in terms of how large our exposures can be and how big our loss can be. When it comes to a nuclear thing, you know, I sort of surrender. I, you know, it's very difficult for us to estimate how bad can be. Very many different lines of exposures will be affected by it. And even though in almost all our contracts, we try and exclude nuclear as a covered peril, nevertheless, if something like that would happen, I'm fairly positive that the regulators and the courts will hold it against the insurance and we will be, and they'll rewrite the contract and we'll be
[2:03:30]
Ajit Jainrequired to pay. For example, one thing which is already being talked about, we issue. what are called fire policies. And these fire policies try and exclude nuclear as a covered peril. But there are several regulators who feel that, gee, if it's a fire policy and if the nuclear attack causes a fire, then how can you exclude fire? And you better include fire. So, you know, debates like that we will have to live with, and it will be very difficult for the insurance industry to fight back both the regulators and the code systems in terms of what is covered and what is not covered. And there won't be any regulators or anybody else. So we'll leave it to a million years of reconstruction. But Einstein said that, he said, I know not what the weapons will be for World War III, but I know the weapons for World War III. 4 will be sticks and stones. You know, there's a lot of things, you know. I mean, it's just, if you're worried about the effect of nuclear attacks, you know, you got other things to worry about than the value of your Berkshire. I'll put it that way. And what other cheerful things going on. station.
Greg AbelYou want me to touch on the cyber? Oh, yeah, sure. I'll just touch on the cyber because it was raised. And when you do think of Berkshire and they use Berkshire Hathaway Energy as a reference, but cyber risk and managing that risk, both at Berkshire really falls across all of our subsidiaries. And it's a constant risk that's there. It's one of our greatest risks we're always evaluating and trying to live. trying to literally defend against. And if we use Berkshire Hathaway Energy as an example, we would receive billions of attacks every day against our various operating systems. So that's basically what our team is in place for, both they harden the assets to deflect it, and then evaluating the underlying attacks we have, you know, every second of the, every second of the day. And by the way, that would, we'd have a number of number of operating subsidiaries that experience that, but obviously it's the rail and the energy and a few others that we spend a lot of time on, a lot effort, a lot of resources. And the good news is that today that through to today our teams have done an exceptional job. We really haven't had a significant event. We've had some minor events at small businesses, but across our major businesses, across our major operating systems, we've had the proper security protocol in place to avoid events.
[2:06:41]
Otherevents, but again, it never stops. Our team would tell you that every day that's a risk they recognize and a risk they're addressing within the businesses. So a significant risk, but a significant priority for all of our operating teams.
WarrenYeah, and I would add one thing, I think Greg knows way more about this than I do, but my impression from everything I've seen is that you always have, you know, the story the private industry has always said the government can't do anything right, and the government always says that private industry is just thinking about itself, all these things. The truth is, from everything I've seen, is that the cooperation between government and business in terms of trying to minimize the threat of cyber problems, I think has been magnificent, you know, basically.
QuestionerYeah, excellent point.
Greg AbelWhen it comes to cyber, the collaboration between a variety of U.S. agencies and our individual businesses, it's incredibly strong, including down to the certain agencies, we'll submit basically a lot of our operating data on a daily basis where they're helping us go through it to identify if we have a bad character, a bad individual who's maybe penetrated into our system. So it's a strong collaboration. and more, and you're absolutely right. It's very unique to see how both the industry and the government's working so closely, but I think we both recognize it as such a, such a significant risk, we have to stay strongly aligned on the approach. It's a real partnership.
WarrenIt's a real partnership. And we can do better because the government is helping us, and the government can do better because we're helping them, and there's no lack of will on either side. And I, I, cyber, I mean, it blows your mind on sort of an, the nuclear is the number. But it's a very, very, very, very low probability, you know, you'll, you know, someday the sun will burn out, too, you know, but it is, there's really no place for two countries. with large ICBM possibilities and who knows what else and everything. But we haven't figured that out yet. You know, it's easy to go around and say this is a solution or that's a solution, but, you know, if you have two people with loaded guns facing each other, and, you know. And not everybody is likely to be totally rational. Oh, well, we see so. Well, we see so much irrationality in where people's self-interest is involved. They're doing all kinds of things that destroy themselves in terms of how they live their lives.
[2:10:03]
OtherAnd it doesn't stop with, as you move up the ladder, and people, some people do terrible things and just help the very much hope that they aren't in a position where they can do it all by themselves. with the rest of the world is their supposed prize.
OtherOkay, if station three will please ask something about Motherhood and Apple Pie or something like that.
QuestionerDear Mr. Buffett and Mr. Munger, my name is Daphne, I'm from NYC, and this is my fifth annual shareholders meeting.
WarrenWell, we appreciate you coming. We do, sincerely.
Charliesincerely.
QuestionerAs you know, for the past four consecutive months, we've been going through inflation with an inflation with an inflation weight north of 7% for the first time since 1982. You both have experienced this before, from 1970 to 1975, at a time where your portfolio took paper losses, and yet you made some of the best investment choices of your life. Reflecting on that, my question is, if you had to pick one stock to bet on.
WarrenYou kind of snuck up on us there for a second. And be resilient in the inflation, which would you choose? And what specifically enables that stock to do very well and might very likely be a difficult market?
WarrenWell, I'll tell something even better than that one stock. Maybe we'll get to one stock. But the best thing you can do is to be exceptionally good at something. If you're the best, if you're the best doctor in town, if you're the best lawyer in town, if you're the best, whatever it may be, no matter whether people are paying you with a zillion dollars or paying you, they're going to give you some of what they produce. produce in exchange for what you deliver. And if you've got it, if you're the one they pick out to do any particular activity, sing or play baseball or be their lawyer, whatever it may be, whatever abilities you have can't be taken away from you, they can't actually be inflated away from you. Somebody else will give you some of the wheat they produce or the cotton or or whatever it may be, and they will trade you for the skill you have. So the best investment, by far, is anything that develops yourself. And it's not taxed, you know, so that's what I would do.
CharlieI got some advice for you, too. When you have your own retirement account and your friendly advisor suggests you put all the money into Bitcoin. say no nobody can take away from you the talent you have i mean and the truth is that the world will always be willing they'll need to do something and some people will not have skills and they
[2:13:56]
Warrenwill get less of the product of the society uh than somebody who has other skills and sometimes that has something to do with education but a good bit of the time it doesn't have anything do with education. I mean, but to figure out figure out what you'd like to be and figure out how and what you'd like to be is what you're going to likely be good at it. And you know, the world will always need somebody on that tube to tell us what's going on on. So, you know, study back and quick or somebody and figure out, you know, what makes you're good. And what you sort of naturally bring to the game. I mean, I could have, who's the guy that says you've got to spend 10,000 hours of doing this or that? Malcolm Gladwell, Malcolm Gladwell, you know, would say, just spend 10,000 hours on something. Well, I could have spent 10,000 hours trying to become a heavyweight boxer, but I don't think I just felt very good at the end of the 10,000 hours. I mean, you stumble in to what you really like doing, what you're good at, what is useful to society, and then it doesn't make any difference whether the dollar bill, you know, is now worth in terms of the purchasing power, a cent or a half a cent or a hundredth of a cent. If you're the best doctor in town, you know, you're the best doctor in town, you know, you will, they'll bring you chickens, whatever they may do, but they can't take it away from you. And my guess is that if you've come to five meetings, you know, you've got a very good future ahead of you. I mean, that shows it, it self-selects. I mean, so if you want to sell a piece of yourself, you know, we'll buy that as the best investment we can make. We'll take 10% of your future earnings And we'll give you a cash payment now, and, you know, we'll have a terrific asset. And you can have 100% of your future earnings, and if you make it, develop your talent, maybe it'll be a great dancer. People pay money to watch great dancers. We had Fred Astaire and sister Adele that came from Omaha, you know. Their name was Austroitz then, but they could dance. And Adele did whatever she did with it. England and Fed Astaire went on to do a whole bunch of other things and Ginger Rogers had to do it all the same backwards in high heels and she didn't get paid as much because she was a woman. But you're going to do just fine. I've been a lot of money I knew. Okay, Becky. This question is for Warren and Ajee, and it comes from someone named Modi in Israel who
[2:17:01]
Questionerwrites, my family and I are long-term shareholders of Berkshire and we plan to hold it forever. We like that the current management thinks in the long term to increase shareholder intrinsic value, but we aren't sure that at the time of the management change, the new management will act the same way you do. They might take risks in the insurance field where it's hard to find on the balance sheet, and that might take years to realize. We would like to know how we can assess the insurance risk today and in the future or to know in time when you and Ajit are not here anymore.
WarrenWell, I would say that the future for a a long time is about as assured as you can have in the world. We don't have an answer for the nuclear problem or anything, but we have a culture that A has worked, B, has the shares and the shareholders that will carry it a long way. And, you know, the first year, let's say I die tomorrow. The first year, you know, everybody's you know what's going to happen or they're going to spend it all they can do all these things you've got the shares held in a place that it can't happen you've got a board of directors that understands that our culture is 99.9% of running the business they don't think that having meetings of the committees and bringing in outside experts or anything like that mean the thing i mean the thing i mean it's a process that the that the world is adopted and and they're They've done it for reasons we understand, but we're sure is just plain different. We are a business that exists for people to trust us. And all we have to do to fulfill that trust is fairly simple things. We've got the people do, we've got unbelievable resources to do it. And it isn't that difficult as long as you've got the freedom, essentially, to do it. And the world will write stories. stories a year after, so a year later, what has happened at Verga? The railroad will be run the same way. The big worry, of course, is that somebody comes in and figures they can make billions as a group or, you know, people that sell the businesses and say it's better to be private, you know, or it's better to be pure this or something like that. Well, you know, we're a pure partnership. is what we're pure at. And we do have what we think is a special relationship with our owners. And I don't think the relationship changes, and the ownership doesn't change that much. And truth is, nobody can take us over for a long, long time.
[2:20:04]
WarrenAnd by that point, we would hope that maybe the superiority of this culture might be somewhat better understood by the world. And we will be here, we have the same culture, we'll be here 100 years from now. Assuming, you know, we haven't had nuclear exchange or something, but Berkshire is built forever. There is no finish point, you know. Nobody's waiting to retire or have their options vested or thinking about, we don't have anybody that's thinking about, should I take another job. It just doesn't, you know, they're doing what they want to do in life. And it isn't because, you know, we're topping somebody else's offer or that the headhunters come around and say, we want this person or that person, and what will it take to get them? Well, they can't get them. I mean, that, well, it's, I don't know whether we could build it again, but we've got it. And we didn't know we were building it exactly when we took over one, you know, we had a lousy textile mill. I mean, it isn't like Charlie and I sat down, and he didn't happen to be in Berkshire, but he was my partner and everything, and so we were mental partners. We didn't sit out and work out some plan that said, well, we'll run the dumb textile business for 20 years and then we'll finally have to fold it, and then we'll do this and that and everything. We just kept putting one foot in front of the other, but we did know how we did know how we felt how we felt about running a public company. And one thing we wanted to do always was we wanted to have people that were in sync with us. We didn't really want that group I saw in the Flamingo, you know, in 1952. We wanted people who trusted us. And we started, in my case in a partnership, we started with seven, and Charlie started a partnership, and this is the same thing. It was, we didn't go to institutions, and we didn't pay fees to people to bring in money or anything like that. We sat down with people. In my case, I handed them a little sheet of paper and it said the ground rules. I wanted to be sure we were on the same page. I said, you don't have to read the partnership agreement. I mean, there's no way in the world. I would be taking advantage. It shouldn't be here if you think I'd think I'd take it. But I do want you to, I do want you to be on the same page and measuring me by the same yardsticks I measure myself. And those people stayed with me. They are their
[2:22:48]
Warrenchildren, their children, children, their shareholders of Berkshire, but they're partners. And you'd really be hard to do that again, but I would do it with whatever. If I were going to be in this field, I would try and do the same thing. I would try to find people to trust me. And I don't want be with people who are saying, how'd you do versus the S&P, you know, last month or, you know, what's your long, short position or anything like that? I sold securities for three years, and it just, I just didn't want to be in that position where essentially they thought maybe that I could do things that I couldn't do. So I finally found a way to get a few people. I mean, I didn't actually, I stumbled into it. but a few people that trusted me, and they just gave me their money. And we've lived halfway ever after. So it's, it's, uh, the new management's got a, well, and the management after them and the management after them. They're just, excuse me. They're just custodians of a, of a culture that's embedded. Owners believe in it. People that work there believe in it. And we're not saying other things can't do better or anything of sort. We're just saying this is what we've got. And we have got the directors. We've got the share ownership and all of that to, and the size that essentially can ward off any attempts to change the culture. And, you know, it's silly to talk about if our board members did this and did that and they, you know, and in the end, obviously we're always going to follow the law. And we're a Delaware company, we follow Delaware law. But that doesn't mean that we have to do what every other Delaware corporation does. And now they look at the Delaware statute. We'll follow the law and then we'll run it as a group of people who trust us. and we appreciate that trust. Charlie?
CharlieWell, I remember when you had a textile mill. And it can...
WarrenI try to forget it.
CharlieThe textiles aren't really just congealed electricity the way modern technology works. And the TVA rates were 60% lower than the rates in New England. It was an absolutely hopeless hand. And you had the sense to fold it. 25 years later.
WarrenWell, you didn't pour more money into it.
CharlieNo, that's right. And, no, recognizing reality when it's really awful and taking appropriate action, it just involves often just the most elementary good sense. How on the hell can you run a textile mill in New England when your competitors are paying way lower power rates?
[2:26:16]
WarrenI'll tell you another problem with it, too. I mean, the fellow that I put in to run it was a really good. guy. And I mean, he was 100% honest with me in every way. And he was a decent human being. And he made new textiles. And if he'd been a jerk, it would have been a lot easier. I would have probably thought differently about it. But we just stumbled along for a while. And then, you know, we got lucky that Jack Ringwald decided to sell his insurance company, and we did this and that. But I even bought a second textile company in New Hampshire. I mean, I don't know how many, seven or eight years later, I mean, I'm going to talk some about dumb decisions. Maybe after lunch, we'll do it a little. And it is incredible. How many dumb decisions we made, Charlie and I bought that, and Sandy Goddessman, we bought that department store. And that was 1966. And we were working with our own money. And why in the world did we think? And Charlie flew to Baltimore and I mean, we used to really work in those days. And there again, we had wonderful people. Louis Cohen couldn't have been a better guy. But everybody in that business had a different sororference point. They wanted to expand their company. Well, who can blame them for that? And, you know, they were planning the, you know, they were planning the, a couple of news stores, and each department, the shoe department said, well, we'll do it better at this time and all the kind of thing. But the whole idea was crazy. And we got there for a little while, and we figured it out, finally. We were reversed course. Yeah. But why the hell did we do it in the first place? Well, because we were stupid. Yeah, okay. Well, that's important to realize. We paid $6 a share for that. that stock. And if the department store has succeeded, it might be worth, you know, $30 a share now. And it failed, so, but we did other things, and we merged it into Berkshire, and we'll talk about that a little later. And, you know, I don't know whether it's $150,000 a share now or something like that from the six bucks. So if it succeeded, we would have made a, we would have maybe made a few dollars and because it failed we made hundreds of thousands of dollars per share but that's the way life is you just keep going and keep learning that's the keep learning that's the see keep learning keep learning and you can say why would it take guys that long to learn and well we got a few minutes before lunch we should let's address that problem
[2:29:32]
Warrenbecause I did bring something along on that. There have been, well, I started buying stocks when I was 11. I've been reading every book in the library on it. I loved it. My dad, you know, it's his business, and I get to go down to his office, and I'd read the books down there, and I saved the money, and finally, by the time I was 11, I could buy a stock, and I could tell you at that time, At that time, I went to New York Stock Exchange when I was nine. My dad took us to New York, each kid to New York once, and he took me. I went to the New York Stock Exchange and I was in all of it. I could tell you how the specialist system worked and the odd lot arrangements and I could tell you history of finance and all of these things. Then I started, I got very interested in technical analysis and chartered socks and didn't. all kinds of crazy things, hours and hours and hours and and saved money to buy other stocks and tried shorting and I just did everything. And then when I was either 19 or 20 and I can't remember exactly where I did it or something, I picked up a book someplace. It wasn't a textbook at school, but it was in Lincoln. Nebraska and I, you know, I looked at this book and I saw one paragraph and it told me I'd been doing everything wrong. I just had the whole approach wrong. I thought, I was in the business of trying to pick stocks that would go up and in one paragraph, I saw that that that was totally foolish and I left. I brought something that it's really interesting. Let's put up Let's put up, what do we call this chart? Oh, here we are, yeah. Let's put up illusion, uh, illusion one. Yeah, there we have it. You know, if you look at that, some people will see two faces, some people will see a base, and some people will look a long time and only see two faces, but the mind flips from one side to another, and that's There's some name for it that they call it ambiguous illusions or something of the sort. There's other things that talk about aha moments or or in the old comic strip with Popeye Wimpy would have a little balloon over his head and the light bulb would go on. There's this point where all of a sudden you see something you haven't seen. Well, it took me. I had an illusion that I was looking at, we'll say in that one, two phases, go to the, let's go to the one label two. If you're looking at it from one side, you look, it looks like a rabbit, and if you look the other way, it looks like it, you're looking at a duck, and, you know, the mind is a very funny place.
[2:33:19]
WarrenAnd I think people call it an aperceptive mass when you have all kinds of things going on in your mind and they're gone for years and they sit there and get lost and then all of a sudden you see something different than what you were seeing before down it took me in stocks which i was intensely interested and i had a decent IQ and i was reading and thinking and you know and it was important to me to make some money on it every every motivation in the world and then i read a chapter i read a paragraph actually in chapter eight i think it was of the intelligent investor and it just it told me that i wasn't looking at the duck i was looking you know now it was the rabbit whatever it may be and whether you call it a light bulb whether you call it you know a moment of truth whatever it may be and that's happened that happened to me in lincoln i mean it changed my life if i hadn't read that book I don't know how long I would have gone on looking for head and shoulders formations and 200-day moving averages and the out-lot ratios and a zillion things and I love that kind of stuff except it wasn't it was the wrong stuff I was looking at it and I've had that happen and Charlie's had it happen I'm sure it happens a few times in your life and all of a sudden you see something important that why in the hell didn't I see this in the first place maybe it's a week ago maybe it's a year ago maybe it's five years ago maybe it's maybe it's learning how to get along with people you know i mean whether actually it's it's better to be you know kind or not you know or whether i mean they're just learning how to have if you want the world to love you what you have to do or what it's it's you know what when you see it but you didn't see it for 10 years before and i don't want that charlie's got and thoughts on that or not but that's happened in a few situations in business where i've looked at a company for for a decade and and then there's something that it just all gets rearranged in your mind and you you know you can say well why didn't i see this five years ago or but usually i've had it happen a few times obviously and and everybody here has and just in different areas their lives and you think how could i have been so stupid well that's what charlie's when he was in the law practice uh had a partner boy tolls and every smart guy that would get in trouble usually with it was guys and usually it was women and the and and uh you know
[2:36:27]
Warrenthey'd come into the office and they'd look you know down face and everything and they'd say it seemed like a good idea at the time you know i mean and their lives unraveled you know in many cases uh so there's there is there is that a perceptive mass that's sitting in there inside somehow and every now then it produces some insight it's better actually if it produces insight into your behavior than whether it produces insight to make money i mean that and some people never get it and they wonder why they're you know whether the kids hate them or whether there's no way in the world that would give a damn whether they live or die in fact they prefer they die because then then courting them for their art collection or whatever it may be it's it's it's just charlie would say you know you know just write your obituary and reverse engineer it and not a not a crazy idea but charlie i don't know what do you know about that perceptive masses which are optical illusions
Charliewell i know that that's the way in works and that it's easy to get it wrong and part of the trick is to get so you correct your own mistakes and we've done a lot of that frequently frequently way too late
Warrenyeah we've done better with the mistakes than we have with the good reasonably good ideas
Charliewell it's so easy to overdo a good idea that's what's going on now you have a lot of good ideas that are being grossly overdone
Warrenjust tell me tell me about one that hasn't been but tell me later when the crowd isn't listening
Charliewell that's where well look what happened to robin hood from its peak to its drop wasn't that pretty obvious that something like that was going to happen
Warrentell me again what it should robin hood when they came out and i went public and got a little lured everybody in all the short-term gambling and big commissions and hidden kickbacks and so on and so on it was disgusting
Charlieyeah and it says the last year and they got mad at you and they sold a bunch of their stock and they've got the money and
Warrenyeah but now they're it's unwaveling god is getting just but a lot of the insiders have right not but they've gotten a lot of money from it i mean they were big sellers as i i remember that
Charliemay be but there's a there's been some justice
Warrenwell yeah i have to agree with that well it's a good idea to go around making enemies of people though that's another question which we we do
Charlieis it wise to criticize people at all probably not but i can't help it
Warrenwell and here's the smartest guy knowing he's 98 and he hasn't figured it out yet so i mean give up enjoy
Charliewell with that we'll go to lunch and we'll try to come back wiser at one o'clock and thank you thank you thank you thank you