WarrenGood morning, good morning, and thanks for coming. Palma loves it, I love it, Charlie loves it, we're glad to have you here. We're going to make this preliminary before the question is very short, because we want to get in at least 60 questions, half divided by the audience outside this arena and half from you. So I would just like to get right to the directors and the earnings that have been put up on the web page this morning. But we'll cover those very fast, and we'll get to the questions. Now, when I woke up this morning, I realized that we had a competitive broadcast going out. going out somewhere in the UK. And they were celebrating a King Charles, and we've got our own King Charles here today. And next to him we have Greg Abel, who's in charge of all the operations except for insurance. Next to Greg, and next to Greg, we have A man I ran into a 1986 and has made us look good ever since. We have the man in charge of insurance, Ajit Jane, and now we have our directors here in front, and if they would just stand briefly, and then I'll go on to the next one, and they're all here today, first of all, doing alphabetically, there's Howard Buffett. There's Susie Buffett. There's Steve Burke. Burke, Ken Schall, Chris Davis, Sue Decker, Charlotte, Charlotte Gehman, Tom Murphy Jr., Ron Olson, Wally Weiss, and Merrill Whitmer. That's as good as you can get. And there's one other person I would like to mention before we get onto the earrings that were put on the in the press release this morning. And that's... Well, let's see who we have here. We've got... This is hard to believe. Can you imagine a name? Melissa Shapiro Shapiro. She was Melissa Shapiro, just married another Shapiro, and she put this whole thing together with no help from me, no help from Charlie, and a lot of help from the people in the other room. Melissa, it's very easy, if you can remember her second name, you can remember her third name. So Melissa Shapiro, Shapiro, Shapiro. And with that, I... I would like to next move on to the earnings in a couple small slides that explain what we're all about, and then we're going to get to the Q&A. And the slide is up behind me. Yeah, there it is. We reported in the first quarter, operating earnings a little over $8 billion. And when we talk about operating earnings, we're basically referring to the The earnings of Berkshire Hathaway as generally, well, as required under Gap, excluding,
[5:07]
Warrenhowever, capital gains both realized and unrealized. There's a few other very minor items, but basically we expect to make capital gains over time. Why would we own the stocks otherwise? It doesn't always work out, but overall it works out pretty well over time. But in any day, any quarter, any year, even occasionally over a five-year period, the stock prices move around capriciously. Now, we own a lot of other businesses. We consider those stocks' businesses. We own a lot of other businesses where they get consolidated, and they don't move around in value. Now, if we had a little bit of Burlington stock outstanding, if we had a little bit of the energy stock trading, those stocks would move around a lot. But the businesses are what count. So, the operating earnings, as you'll see, in the first quarter came in at about $8 billion. And I would say that in the general economy, the feedback we get is that I would say perhaps a majority of our businesses will actually report lower earnings this year than last year. The, in various degrees in the last six months or so, at various times, the businesses have left the incredible period, which is about as extraordinary as I've seen in business since World War II, where the government would poured out a lot of money to people who couldn't get goods. It was more extreme in World War II. But this was extreme this time. And it was just a question of getting goods to deliver, and people bought, and they didn't wait for sales. And if you couldn't sell them one thing, they would put another thing in the backlog. It was an extraordinary period. And that period has ended. It hasn't ended with, as you know, it isn't that employment's fallen off a cliff or anything in the least. But it is a different climate. than it was six months ago. And a number of our managers were surprised. Some of them had too much inventory on order, and then all of a sudden it got delivered. And people weren't in the same frame of mind as earlier. And now we'll start having sales at places where we didn't need to have sales before. But despite the fact that this year, I think in general, will be slower than last year, we We actually are situated so that I would expect. And believe me, when I say accept, expect, it's, nothing is sure. Nothing's sure tomorrow, nothing's sure next year, and nothing is ever sure, either in markets or in business forecasts or anything else.
[8:16]
WarrenAnd we don't pay much attention to markets or forecasts unless the markets happen to offer something interesting to do. But nevertheless, we are positioned in two regions. As you'll see from this first report, our investment income is going to be a lot larger this year than last year. And that's built-in. I mean, we had, as you'll see in a minute, we've had 125 billion or so in very short-term investments. And believe it or not, not that long. Not that long ago, we were getting four basis points, which is next to nothing, on that $125 billion, which means we were getting $50 million a year. And now the same money, the other day or day before yesterday, we actually bought, because of some funny twist in the market because of doubts about the deficit ceiling, or the debt ceiling. We bought $3 billion of bills at a at a 590, that's 5.9, it's a 5.92, bond equivalent yield. So we will have what produced us not that long ago on a 12-month basis was producing 50 million here, producing something in the area of 5 billion a year. So we're in a position where the investment income is essentially, well, it is certain to increase quite a bit. And insurance underwriting. is not, it does not correlate with business activity. It depends on things like hurricanes and earthquakes and other events. So on a perspective basis, on a probability basis, we're likely to have a better year this year in an insurance underwriting than we had last year. It just isn't affected by what you might call the business cycle or what applies to generally in industry, detailing, you name it. So I would expect in one massive earthquake or one hurricane that came into just the wrong place would, can affect that affect that prediction, but on a probabilistic basis, our insurance looks better this year. So if you get two of those, two of the elements there of our main elements of earnings that look like they will swing in our direction, I would expect, but I can't promise that our operating earnings will be greater than last year. And if we'll move to the second slide, I give you those operating earnings figures just to give you an overview of what has happened since the pandemic started and often the year, the year before as a base. And we retain all our earnings, as you know, so if we're retaining 30 or 35 billion or whatever it may be a year, you should expect more operating earnings over time. I mean, this number should be significantly higher five or 10 or 15 years from now
[11:57]
Warrenbecause we have the advantage of retaining earnings. And that's what got us to these figures, because they were essentially nothing when we started. And they got there by retaining earnings, and we'll keep retaining earnings. So it's no great triumph if these numbers move up. And what we hope is that they move up at a reasonable rate. Historically, they moved up at an unreasonable rate. rate sometimes, but we were working with a much smaller sum then, and that can't be repeated with our present capital base. Because I note there, I believe it's on this slide, let's take a look. Now that'll be, let's see, it's on the, well, on the next, on the next place, paid, let's move to the next slide. We show that we had on March 31st, now 500, was it 500 and, was it 500,000? $4 billion of gap net worth. Now what might surprise you is that there's no other company in the United States, no other company that has a number that is that is that large. Now, that isn't because we've got the most valuable company in the United States. Other companies have used their money to repurchase shares that they could have accumulated $504 billion in gap, but basically we have more under GAAP accounting now than any other company in the U.S. And of course, if you measure return on equity, that becomes a very big number to increase at a rapid rate, but we hope to do so. Not a rapid rate, a decent rate. And right below that, you see something called float. And float is money that that is left in our hands somewhat akin, but very importantly different than a bank deposit. But you have to pay interest to get a bank deposit. You have to pay more interest these days, and you have to run a bank and do a lot of things. And basically, this is money that represents unpaid losses at this time. You get paid in advance in insurance. in advance in insurance. So what shows up as a net liability on our balance sheet is gives us funds to exercise with an amount of discretion that no other insurance company that I know of in the world enjoys just because we have so much net worth. And our float now comes to $165 billion, and the man sitting on the far left is responsible for moving that number up from a pittance in 1986 to this incredible figure, which in most years, practically all years, hasn't cost us anything. So it's like having a bank with no employees, no interest, and no ability to withdraw the money in a
[15:22]
Warrenhurry that we have working for us. And it's a very valuable set that shows up as a liability. And Ajit is responsible for building up this treasure, which has been done by out competing insurance companies all over the world. And now a number of our insurance companies in turn are run by talented managers who contributed one way or another. one way or another, start with GEICO at the beginning of my career. And that float, if you think about it, just think of a balance sheet. You've got liabilities here and you've got assets over here, and the liability side finances the asset side. It's very simple. And stockholders equity finances it, long-term debt finances it, and so on. But stockholders' equity is very expensive in a real sense. Long-term debt has been cheap for a while, but it can get expensive, and it can also become due eventually, and it may not be available. But float is another item that shows it's a liability, but hasn't cost us anything, and it can't disappear in a hurry. And it finances the asset side in the same way as stockholders' equity. And nobody else thinks of it much that way. way, but we've always thought of it that way, and it's built up over time. So I show at the bottom what's happened with cash and treasury bills through March 31st, and I will tell you that in the month of April, we probably added about $7 billion to that factor. Now part of that is because we didn't buy as much stock because that reduces, reduces cash and treasury bills. We bought about $400 million with the stock. stock in the month of April, that's a minus, in terms of cash available. And we, however, sold net some stock which produced maybe $4 billion. And of course, we had operating earnings, probably $2.5 billion or something in that area. And my guess is we probably increased our cash in treasury bills, $6 and $7 billion in the month. And I just want to give you a few. feel for how the cash flows at Berkshire. And then if we move to the final, I think it's the final one, next to the last one. No, I think it is the last one. Let's see, is the fourth? Yeah, we should have the one up there, Class A equivalent shares outstanding. And you'll notice that every year the number of our shares go down. So if we own more businesses and the businesses make more money, your share as shareholders, as owners of Berkshire increases every year without you laying out any money.
[18:43]
WarrenNow, you're laying out the alternative which you could receive in dividends, but the reason we've gotten to where we are is because we kept the money. We did pay a dividend in $0.67, 10 cents to share. It was a terrible mistake. And I always tell people that I I left for the men's room and the directors voted a while he's gone, but that isn't true. I was there, I confess. They, uh, but we were invested and it's produced the 500 billion plus of shareholders' equity and the 30 billion plus of operating earnings. And, and we'll continue to follow that policy because it makes a great deal of sense. And with that, I think we've taken care of the preliminaries. You can study that the 10 Q is, is a on the on the web page. And if you have a week or two vacation, you could spend it reading the 10-Q. But that is the essence of Berkshire. And with that, I will start with Becky quick. And we will alternate between Becky and the audience. And her questions have come in from all over the country. And I believe you identified the center and go to it, Beckhire.
QuestionerThanks, Warren. The first question comes in from Randy Jeffs in Irvine, California. And his question is, if Silicon Valley Bank's deposit had not been fully covered, what do you think the economic consequences would have been to the nation?
WarrenWell, I would just simply say it would have been catastrophic. And that's why they were covered. And even though the FDIC limit is $250,000, that's the way the statute reached. But That is not the way the U.S. is going to behave any more than they're going to let the debt ceiling cause the world to go into turmoil. And they, well, they just, I can't imagine anybody in the administration and the Congress and the Federal Reserve, whatever it may have been, FDIC, I can't imagine anybody saying, I'd like to be the one I'm on television tomorrow and explain the American public why we're keeping only $250,000 insured. And we're going to start around every bank in the country and disrupt the world financial system. So I think it was inevitable. Charlie, do you have any?
CharlieNo, I have nothing to add.
WarrenOkay. Well, incidentally, I should mention this now. Ajeet and Greg will be here in the morning session, which ends at noon. And so it's got questions to direct to them, the time to do it is in the first half of the show. And then after lunch, it'll just Charlie and I will be back. Okay. Area 1.
[22:01]
QuestionerHi. Narav Patel, Hayrell, Massachusetts. Mr. Buffett, Mr. Munger, it seems like you've found the sweet spot between being too conservative as investors. Do you ever make bad investment decisions because of your emotions, and what do you do do to try to keep that from happening?
WarrenWell, we make bad investment decisions plenty of times. I make more than Charlie, because I like to think it's because I make more decisions, but probably more batting average is worse. But I can't recall any time in the history of Berkshire, that the... We made an emotional decision. I know the movie had Jamie Lee in there, but that was for laughs. I mean, Jamie, Jamie, she's good, but she's not good enough to get me or Charlie to make an emotional decision. Charlie, I'm sure you have something to add on that.
OtherIt's a different movie that is shown at most corporate meetings.
CharlieYeah. Have we ever made an emotional decision? No. No. That's in business we're talking about. Yeah. No, you don't want to be a no-emotion person in all of your life, but you definitely want to be a no-emotion person in making an investment or business decision.
WarrenYou can argue that, but with it, we probably, I would say that we've made an emotional decision, perhaps, And when a manager has been with us for some period, and we haven't, we've, we've ignored the fact that perhaps they weren't quite what they were earlier. But our businesses are so good that they've run better sometimes when, you know, I've talked about Westco, for example, of the wonderful Louisville incentive, and it ran on, it ran on automatic pilot for a while, but I don't think we suffered by it, but you can argue that if Charlie and I hadn't liked Louis as much as we did, we might have spotted it a little bit early, but I don't think it made any difference in the results. Would you agree with that, Charlie?
CharlieYeah, yeah, you agree totally with it. And I'm glad we behaved the way we did at Westco.
WarrenBy the way, we bought the thing for a few tens of millions and it became worth two, three billion. Yeah, that wasn't common in the savings and loan businesses, you may have noticed. They really went crazy in that industry, and we had a wonderful guy in Louis. We didn't go crazy.
CharlieYeah, we didn't go crazy.
QuestionerOkay, Becky. This question comes from Ben Noel in Minneapolis. He says he's a Berkshire shareholder of three decades, and he's attended many Berkshire meetings.
[25:41]
QuestionerHe's here again this year. And this is addressed to Ajit and Greg. He says, last year I asked you about how GEICO and BNSF appeared to lose ground to their leading competitors, GEICO on telematics and BNSF on precision-scheduled railroading. Ajit, you responded by saying how you expected GEICO to make progress in a year or two. Greg, you spoke about your pride in BNSF, but you didn't directly address the threat of precision-sched scheduled railroading. Will each of you please provide perspective on these competitive challenges and our company's strategies to address them?
Ajit JainLet me. In terms of you. In terms of GEICO and telematics, let me make the observation that GEICO has certainly taken the bull by the horns and has made rapid strides in terms of trying to bridge the gap in terms of telematics and its competitors. They have now reached a point where on all new business, close to 90 percent, has a telematics input to the pricing decision. Unfortunately, less than half of that is being taken up by the policy holders. The other point I want to make is even though we have made improvements in terms of bridging the gap on telematics, we still haven't started to realize the true benefit and the real culprit of the bottleneck is technology. Geico's technology needs a lot more more work than I thought it did. It has more than 500, actually, more than 600 legacy systems that don't really talk to each other, and we are trying to compress them to no more than 15, 60. 16 systems that all talk to each other. That's a monumental challenge and because of that, even though we have made improvements in telematics, we still have a long way to go because of technology. Because of that and because of the whole issue more broadly in terms of matching rate to risk, GEICO is still work in progress. I don't know if any of you had a chance to look at the first quarter results, but GEICO has had a very good first quarter coming in at a combined ratio of 90s. in change, which means a margin of six in change. Even though that's very good, it's not something we can take to the bank because there are two unusual items that contributed to it. Firstly, we've had what is called prior year reserve releases. We've reduced reserves for the previous years, and that contributed to it. And secondly, every year, the first quarter tends to be a seasonally good quarter for auto insurance writers. So if you had just for those two factors,
[28:22]
Ajit JainMy guess is the end of the year, GEICO will end up with a combined ratio just south of 100, as opposed to the target they're shooting for as 96. I hope they reach the target of 96 by the end of next year. But instead of getting too excited about it, I think it's important to realize that even if we reach 96, it will come at the expense of having lost policy holders. There is a trade-off between profitability and growth. And clearly, we're going to emphasize profitability and not growth, and that will come at the expense of policyholder. So it will not be until two years from now that we'll be back on track fighting the battles on both the profitability and the growth front. Gary?
OtherYep.
Greg AbelMoving to BNSF, I'll start again by expressing great pride in the BNSF team. We have an exceptional group of led by Katie and her managers that show up. every day to do great work on the railroad. At the same time, they would be the first to acknowledge there's more to be done there. The specific reference to precision scheduled railroading, the other large railroad class A other railroads in the U.S. follow that, and including the two in Canada. We're well aware of what they're doing and obviously pay close attention to their operating matrix. And our team strives every day to be. be more efficient, obviously. I would say we balance it with the needs of our customers. If I look back to pre-2020, so we look at the three-year period of 2019, 2020, 2021, the BNSF team made significant progress on their efficiencies and delivering overall value back to the shareholders and to their customers and at the same time maintaining a very safe railroad for our employees. We were making excellent progress. That didn't stop last year. They made great progress. Again, the reality in 2022 is we did go through a period of time where we had to call it reset the railroad. We came out of the pandemic. There were the supply challenges. We had certain other labor issues and other things going on at the port. And the reality is our team prioritized getting the railroad back in place for the long term. not a short-term focus on hitting certain operating metrics in in 2020. We're well aware of where we were relative to those metrics, but the real focus was to get the railroad reset in a safe manner such that we could deliver long-term value and long-term service to our customers. And that's really what we'll continue to see with that team. There'll be continual
[31:15]
Warrenprogress. There'll be years where it's not as quickly or even we go backwards, but over the long-term, will be very uh we'll see exceptional results from from that team and and couldn't be more proud that we have that asset thank you i wouldn't i would just well he deserved both of them deserve a pause uh the i would like to add one thing at guyco dot combs uh was a jeach's choice my choice go back to guy at geico to work on the problem of matching rate to risk which is what insurance is all about and uh he arrived with exquisite timing right before the pandemic broke out and all kinds of things changed but todd is doing a wonderful job at geico and uh and he works closely uh with the jeep but because he saw as a home in all maw he comes back here and we we get together on the weekend some times too. So that's been a remarkable accomplishment under difficult circumstances. And he's not all the way home, but he's made a very, very big change in multiple ways at GEICO. And then one other thing I would like to mention, there have been a lot of public companies created in the last decade of thereabouts in insurance. And uh there's none of them that we would like to own and and they always started out in their perspective saying this is a tech company not an insurance company of course well of course they're in a tech company with everybody's whether they're an insurance or a lot of other places are using the facility but you still have to properly match rate to risk and uh uh they invariably have reported the huge losses they've eaten up capital but there's been one company that nobody has generally heard of there's only been one that i know of company started in the last ten years that uh has been a overwhelming success and that's a company that a jeet and four people who join with them set to develop a new business it's called berkshire hathaway specialty it now has what's the float a jeet coming up to 12 billion yeah we've built more float than probably all these companies combined we've now it's cost us essentially nothing in terms of an underwriting loss the four people have turned in i don't know 1500 around the world we took on the whole industry and we brought some unique talent and the four people that that came and now have i'd say 1500 or so worldwide and we brought capital and we brought capabilities that really only berkshire could supply so it was the it was the it was the
[34:53]
Warrencombination of of brains and talent and energy and money and no one has really successfully entered this this space plenty of plenty of people in the space who didn't like us coming and we did it without it it is costing us a dime of entry and it's been unmatched by any of the public company companies that went public and people who've seen us do it but they can't duplicate it and that's what agita's created and peter eastwood has led this group berkshire hathaway especially and uh it's just remarkable so anyway with that let's go on give him a hand for that okay let's go to section two
Questionerhi charlie i'm i'm a warren i'm karen here from singapore your priorities are right yes i have a question on AI and robotics here's my questions as a i and robotics continues to advance what do you believe will be the positive and the negative impact of this technology on both the stocks market and society as a whole and are there any specific industrials and companies that you believe will be most impacted
Warrenkaren i thank you for asking charlie that question if you went into byd's factories in china you would see robotics going in at an unbelievable rate so we're going to see a lot more robotics in the world i am personally skeptical of some of the hype that has gone into artificial intelligence i think old-fashioned intelligence works pretty well there won't be a there won't be anything in a ii that replaces the gene i'll state that unqualifiedly they can do amazing things uh uh you know bill gates brought me out of uh uh uh uh you know bill gates brought me out of uh the latest maybe not the latest version but when he thought maybe i could handle which it has to be careful with me in terms of leading me too fast and it did it did these remarkable things uh it didn't but it it couldn't tell jokes bill bill told me that ahead of time and it prepared me and it just isn't there but you know things like checking all the legal opinions you know since the beginning of time and everything and eliminating all the side it can do all kinds of things and when something can do all kinds of things i get a little bit worried and uh because i know we won't be able to uninvent it and uh you know we did invent uh for very very good reason the atom bomb and in world war two and it was you know it was enormously important that we did so but is it good for the next 200 years of the world that that the ability to do so has been unleashed we didn't have any choice
[39:00]
Warrenbut uh when you start something well Einstein said after after the atom bomb he said this has changed everything in the world except how men think and uh i would say the same thing everything may not not the same thing i don't mean that but i mean they they with with AI uh it it can change everything in the world except how men think and behave and that's that's a big step to take it's a good question and it's the best answer we can give Becky this question comes from tom seymour he says the first sentence of a recent financial times article read charlie munger has warned of a brewing storm in the u.s commercial property market with american banks full of what he said were bad loans as property prices fall please elaborate on what's going on in commercial real estate how bad will the losses be and what sectors or geographies look particularly bad i'll just add an addendum from another viewer who wrote in and wanted to know if berkshire would be more active in in commercial real estate as a result well berkshire's never been very important very active in commercial real estate it it works better for taxable investors than it does for corporations tax the way birkshire is so i i i don't anticipate huge effects on berkshire but i do think that the hollowing out of the downtowns in the united states and elsewhere in the world is going to be quite significant and quite unpleasant i think the country will get through it all right but uh as they say it will awfully it will often involve a different set of owners yeah and the buildings the buildings don't go away but and the owners do well but most people like to buy with non-recourse in and in real estate and and uh one time i asked charlie i'm there was some real estate guy we were talking to them and you know how do they decide how how much they can a building like this is worth and it's the answer is it's whatever they can borrow without signing their name and if you look at at real estate generally you'll understand what the phenomenon that's happening if you do if you remind yourself that that's the attitude of most people that have uh become big in the in the real estate business and and uh and it does mean that the lenders are the ones that the ones that got the property and of course they don't want the property usually so then the real estate operator counts on negotiating with them and and the banks tend to you know extend and pretend
[42:01]
Warrenand there's all kinds of activities that arrive out of uh out of commercial real estate development which occurs on a big big scale but it all has consequences and and i think we're we're about well we are starting to see the consequences of people who could borrow it two and a half percent and find out it doesn't work at current rates and they hand it back to somebody that gave them all the money they needed to build it um charlie's had more experience and really charlie got it started in real estate though i mean charlie charlie
Charlieyes it it's difficult i like what we do better
Warrenwell as charlie once once said to me when i was leaving his house a few months ago i was busy and we talked for a couple of hours and i said to charlie as i left i just wasn't anybody else in the house i said except one daughter and i said uh charlie i'll i'll just keep keep doing what we've been doing and charlie said without looking up or pausing a second he said that's all you know how to do warren he was right too
OtherStation. Station three is it?
QuestionerHi. My name is Jala Z. I'm from Santa Clara, California. And my question is to Charlie and Warren. Given the rise of disruptive technologies that can improve productivity significantly and AI being one of them, how do you envision the future of value investing in this new era and what adaptations or new principles do think do think investors should adopt and any recommendations for investors to remain successful in this rapid changing landscape thank you
Warrenwell i'm glad to take that one i think value investors are going to have a harder time now that there's so many of them competing for a diminished bunch of opportunities so my advice to value investors is to get used to making less and Charlie has been telling me the same thing the whole time we've known each other. That we get all wonderfully because...
CharlieWe are making less.
WarrenYeah, well, but that's because that's because mostly I think it's because it's larger. We did better when we were younger and was...
CharlieNo, we never thought we could manage $508 billion. No, we never...
WarrenYeah, but I would argue that there's going to be plenty of opportunities. And part of the reason they're going to be plenty of opportunities, The tech doesn't make any difference or any of that. I mean, if you look at how the world changed in the years since 1942, when I've started, say, well, how does a kid that doesn't know anything about airplanes, it doesn't know anything
[45:10]
Warrenabout engines and cars, and doesn't know anything about electricity and all that. But that really isn't the, that's not the, the world changing doesn't, or new things coming along don't take away the opportunities. What gives you opportunities is other people doing dumb, things. And I would say that, well, the 58 years we've been running Berkshire, I would say there's been a great increase in the number of people doing dumb things and they do big dumb things. And the reason they do it to some extent is because they can get money from other people so much easier than when we started. So you could start 10 or 15 dumb insurance companies in the last 10 years, and you could become rich if you were adroit at it, whether the business succeeded or not, and the underwriters got paid, and the lawyers got paid, and the lawyers got paid. And that creates, if that's done on a large scale, which it couldn't be done, what, 58 years ago, you couldn't get the money to do some of the dumb things that we wanted to do, fortunately. And so I don't, I think that investing has disappeared so much from this huge capitalistic market that anybody can play in, but that the big money is in selling other people ideas. It isn't outperforming, in outperforming. And I think that if you don't run too much money, which we do. But if you're running small amounts of money, I think the opportunities will be greater. But then Charlie and I will always differ on this subject. He likes to tell me how gloomy the world is. And I like to tell him, we'll find something. And so far we've both been kind of right. Charlie, wouldn't we budget an inch on that or not?
CharlieThere is so much money now on the hands. of so many smart people, all trying to outsmart one another, and out promote one another, getting more money out of other people. And it's a radically different world from the world we started in. And I suppose it will have its opportunities, but it's also going to have some unpleasant episodes. But they're trying to outsmart each other in arenas that you don't have to play. I mean, if you look at that government bond market, the Treasury bill market, I mean, you've got this one bill that's out of line with the others. We want over three billion of it's the other day. But those are people. The world is overwhelmingly short-term focused. And if you go to an investor relations call, they're all trying to figure out how to fill
[48:27]
Warrenout of a sheet to show the earnings for the year. And the management is interested in feeding them expectations that will slightly be beaten. I mean, that is a world that's made to order for anybody that's trying to think about what you do that should work over five or ten or 20 years. And I just think that I would love to be born today and go out with not too much money and hopefully turn it into a lot of money. But, and Charlie would too, actually. He just like he would find something to do. I will just guarantee you. And it wouldn't be exactly the same as before, but he would have a big, big, big pile. I would not like the thrill of losing my big pile into a small pile. I like my big pile just the way it is.
CharlieWell, I like, we agree on that, incidentally.
WarrenOkay. Yes, we do. You're one of the most extreme lovers of the big pile.
QuestionerBecky? both Warren and Ajee comes from Jason Planner in Livingston, New Jersey. He says, in 2016, you entered it into a very unique transaction with AIG, where you assumed up to $20 billion of liabilities in exchange for about $10 billion up front. Can you please provide us with an update on this transaction in light of the increase in interest rates? And then in Tokyo, just a few weeks ago, you talked about the risks of banks with assets that were susceptible to rising interest rates. insight as to how Berkshire liabilities are susceptible to duration would be appreciated.
WarrenIs that directed to Ajita or me or what?
QuestionerBoth.
WarrenOkay. Let me introduce it with my one thing and well, but Ajita is the key to this. He's the one to put the deal together. But we got handed 10 billion, we'll say. But we weren't restricted to putting that into bonds. So what the exact interest rate interest rates affect us to some degree maybe in terms of the terms of the deal we did with AIG or anybody we would do a similar deal with like that. But we don't have we don't have to put it in matching bonds or anything of the sort. It goes into a general pool of assets which we manage and the assets, you know, well, the liquid assets now are 130 billion plus and but it goes in, so it, you know, it is not set aside in some little compartment like people like to think now any any other insurance no other insurance company could do it but they can't think that way they aren't even used to thinking that way but they can't think that way because they don't have our our balance sheet we account
[51:21]
Warrenfor 26% or something like that of the net worth of all property casualty companies in the United States so so far the payment that we have had to make make have run modestly and Ajit will correct me on this if he'm wrong because he paid a lot of attention to it but the the amount we have had to pay has run slightly below the amount we anticipated having to pay in terms of our share of the losses but it served AIG's purposes it came to us with where we are in a unique position there's nobody else that was able to to write that just like when when we took on the lloyds i mean lloyds said there was no choice other than berkshire hathaway when they they essentially resuscitated uh their market by laying off a lot of liabilities on on berkshire hathaway so um we won't see those deals very often if they're for 500 million or something like that somebody else will go in there and offer more money and everybody's looking for money in Wall Street but if they start talking with the deal like the AIG deal there isn't any other stop now uh correct me on all my numbers there Ajit
Ajit Jainno um one way to look at how the deal is performing since we did the deal is at the point we in time when we did the deal we had made certain projections of how much we will pay out each year and what we do is monitor what the actual payments are since the inception of the deal and how does that compare with what we expected to pay out as Warren mentioned these two numbers are very close to each other more specifically the actual payouts are 96% of what we are projected to pay out at this point in time which is good but not great we are still ahead of the curve if we do end up paying out less than what we projected not only would we have borrowed money at a very attractive rate meaning less than 4% significantly less than 4% in addition to that we would have made a fee which in 1990 which in 2015 dollars would be a million dollars so we would have borrowed money at less than 4% and we would have made a million dollar fee which is slightly more than what we were expecting to do so net net we're very happy with the deal we're happy we did it but the game is not over they're taught liabilities that coming down on the pike every second day So I'm cautiously optimistic that the deal will work out better than what we expected it to work out.
WarrenWell, the really interesting thing is that within Berkshire, the casualty insurance companies have four times as much stockholder capital
[54:25]
Ajit Jaincapital behind each dollar of premium volume. Four times normal. And of course we see the big deals. Who would you trust if you had a big liability you want to and we have 25 or billion or more coming in from things other than insurance uncorrelated to insurance every year with no obligations we don't pay dividends if you paid evidence and you know and you cut your dividend try going around trying to write insurance the next day i mean it's a business where the people are counting on you to pay and when we take that 10 billion we don't agree to put it in five-year bonds and 10-year bonds we don't even think that way and the people to do business with us know that they have somebody like nobody else on those on that's going to be able to pay 10 billion you know if no matter what happens to the economy uh so it's not only the presence of enormous strength in the insurance companies it's the fact we got all these earnings that essentially come in every month and we don't have we don't have a lot of I mean we have debt at the railroad and the energy level but but in terms of the rest of the operation and we don't guarantee that debt but but it's pulling you would and it's there's just isn't another Berkshire and and the jeet recognizes that when he's negotiating so does the other party if the sums are big enough there's all kinds of people that love to get 500 million or 300 million and they they can they may think in terms of lending it out because that's what their insurance companies can do at a somewhat higher rate but that is not a game we play in and we don't have any interest in playing in them.
OtherOkay, station four. Hello, I'm Marvin Blum, an estate planning lawyer from Fort Worth, Texas, home to many of your companies. In fact, Warren, I met you at the memorial for our beloved Paul Andrews, who was manager of TTI. I'd like to get your thoughts on a widespread problem in the world of estate planning. And that's the failure of most parents to prepare the next generation for the inheritance coming their way. In particular, if the estate includes a family business, most parents fail to do business succession planning to plan for who'll run the business on the day of the business. When, not if, the founder is no longer there to run it. The kids aren't prepared, unlike King Charles, the other King Charles, not King Charlie Munger, who has been preparing for his job as King of England now for more than 70 years.
[57:34]
WarrenI sometimes describe the situation like this. Picture a football game. At one end of the field is a quarterback. He has great skills. he throws a beautiful pass to the other end of the field. And at the other end of the field are the receivers. They've never been to a practice. They don't know the rules of the game. They don't know how to work together as a team. They're clueless. So the quarterback is the patriarch and the matriarch. The football is the inheritance or the family business. And the receivers are the kids. So what are the odds that they're going to catch the football and go score a touch? down.
QuestionerYeah. Probably only around 10%. I've got the picture on the question. Just kidding.
WarrenThe, I probably observed as many just because of my age and to some extent because of things like the giving push. I probably observed as many particularly wealthy families, the problems, and they all are, they get very particular to the family. And in my family, I do not sign a will until my three children have read it, understand it, and made suggestions. Now, my children are in their 60s, and that would not have been a great success. If I'd done the same thing at their 20s, it depends on the family, it depends on how the kids feel about each other. There's all kinds of things. It spends on the kind of business you have. So there's a thousand variables. But I do think that it's, if the children are grown, and when the will is read to them, it's the first they've heard about what the deceased thought about things. The parents have made a terrible mistake. And people, people, well, I've run into all kinds of situations. And some people don't tell their children anything, and some of them don't tell their children anything. some of them try and get them to bend to their will by using their own personal will. They make a million mistakes, and that's when you don't get to correct. Certainly in my, well, Charlie's had a lot of experience too with the world. Well, at Berkshire, we have a simple problem of estate planning. Just hold the goddamn stock.
CharlieWell, but that doesn't fit everybody, Charlie. I mean, you know.
CharlieNo, it only fits 95%.
WarrenI don't think it necessarily, I don't know necessarily whether if you have billions of dollars, you want to leave it to all of your children. I mean, that's something...
CharlieOh, that's another question, but if you're going to place it somewhere, I just as soon as
[1:00:36]
Warrenhas Berkshire stock. Yeah. Oh, you're solving the investment problem for them, but you've got the personal problem of the fact that when they were four, one of the kids pulled the other kids' cat's tail or something like that. I mean, you're dealing with human beings, and And the biggest thing you want is you want, you want your children to get along. And you want that all through your life. And the estate isn't the only place where you can mess that up, but it's a place where it's a very easy. I mean, I know a number of cases where the people did not know what was in the will, whether we're using, something's involved. And, you know, within about 15 minutes, each one of them had a lawyer. And, you know, they don't get along since. I mean, it's a, it's a, it's a, It's important to handle it right. And it's important, if you want your kids to have a certain value, certain values, it's important that you live those values. It's important that you talk about it to them or they're learning from you from the day they're born what you're really like. And don't think that a cleverly drawn will will substitute for your own behavior in teaching your kids the values you hope that they will have. And then your will should be in conjunction with that. It should start expressing it and they grow older and then they learn to pass along their values in connection with the size of the state. If there's family farms, it's one thing. If it's a bunch of marketable securities, it's something else. But I know in one instance, by a particularly rich fellow, that once a year, he'd get his kids together and have a dinner and do all kinds of things to get them to sign their income tax returns in blank because he didn't want them to know how much money they had and everything. Well, if that, that isn't going to work. I mean, I don't know what necessarily will work with him, but if you want, you know, but Charlie and I've said it. And, you know, if you want to figure out how you want to live your life, you write your obituary and reverse engineer it. I mean, you know, and Paul Andrews, incidentally, who you mentioned, that TTI lived as great a life as anybody I've known. And he, he thought about these problems, and he came to me. He was 61, I think, had all the money way beyond what he needed, didn't care about. He'd like to give it to people. he had all kinds of good things he wanted to do and he said for a year i've been worried about my
[1:03:29]
Warrenbusiness t-t i and he said i've got all the money i need the family's got all the money that i need but what do i do with the business these people have helped me throughout my life he says i could sell it to a competitor if i sold it to a competitor they fire my people and keep their people when they put it together and if i if i sell it to a private equity firm or somebody they'll they'll be their exit strategy as they signed the, sign the papers. And he said, he says, oh, I've been thinking about it a year. And he said, it isn't that you're such a great guy. He says, it's just you're the only one left. And we bought it, and we lived happily ever after. And that was a man that knew what life was about. So with that, let's go on to Becky. This question comes from Don Glickstein in Seattle. He says, Warren has criticized Norfolk Southern's handling of its train derailment, yet has been silent about BNSF's conduct. A federal judge ruled in March that BNSF intentionally and illegally violated an easement agreement on tribal land in Washington State by transporting long trains of crude oil. The same month, the judge made his ruling, a BNSF train derailed on tribal land, spilling oil in an environmentally sensitive area. What is Warren doing doing to ensure that BNSF and other Berkshire subsidiaries fulfill their ethical responsibilities. He says he's been a Berkshire owner for more than two decades and he's concerned that Berkshire has no systems to identify and dress what he calls reprehensible behavior at BNSF and other subsidiaries. Greg?
Greg AbelSure. So the it is a valid issue that our team obviously has been dealing with at BNSF. We did move crude across that tribal land. We had an agreement that allowed us to move X number of units per day. And we did breach it. We went over it. There was some fundamental breakdowns there in that our team didn't understand the number of trains that they could move. We have had significant discussions with the tribe looking to resolve the issue recognizing. We obviously been have benefited from moving those trains and those type of discussions will continue. I would say there's lessons learned there that we have to, when we make a commitment, understand what that commitment is and live by it, or don't assume we can just move our trains as we wish, or the cargo as we wish, we have to respect those agreements. So there's a, there's been a moment learned there, but at the same time, we've taken it very seriously and attempted
[1:06:27]
Greg Abelto reach a resolution. there. And at some point, I hope we do come to a true resolution that's fair both to the tribe and to BNSF. On the derailment side, we did have an issue around the track derailed. We worked very closely with the tribe to mitigate that issue instantly, or at least over a very reasonable period of time. They were very responsive. Our team was very responsive. And they were very responsive. And they really no long-term environmental impacts to that spill. And as our team's highlighted in other comments, obviously derailments do occur in the industry. We take them incredibly serious. They're not all hazardous, but irrespective of that. We're constantly looking at how do we prevent them? How do we detect them when we potentially have one that's going to occur and what do we do do we do with our trades? And then ultimately it comes down to responding properly. Because they will occur. And I think we have an incredibly dedicated team that's always ready to respond to the communities they're impacting.
QuestionerThere are derailments. How many a year?
Greg AbelYeah. Well, there's a thousand plus in the industry.
QuestionerYeah. Yeah.
Greg AbelIt's, you start hauling freight. And we're a common carrier. And we take heavy, very heavy freight. And we take them at 100 degrees when it's the weather. And we take it zero and we go around curves and we have grades and even a 1% grade if you're going down down the hill with I don't know how much weight behind you. I mean, there's a lot of railroading is not an easy business. And of course, the systems were designed, you know, in the, in the late 1800s, the mid to the late 1800s, and we have 22,000. And we have 22,000 I think it is miles of track and that doesn't count sightings and some other things it is not an easy business. We'll make mistakes. Our job, we're not making a mistake because we have a derailment. You're going to, we will have the derailments 10 and 20 years or 30 years from now. I mean, but we and we have to carry certain products we wish we didn't have to carry. We're a common carrier. Do we like carrying chlorine and ammonia and all of them? No, but they're going to moved from one place to another in this society and we are a common carrier and we load them and if they select our railroad. But we are better than we used to be, but we've got a long way to go, I think.
QuestionerWas that a fair enough statement?
Greg AbelAbsolutely.
QuestionerYeah. Okay, Station 5.
[1:09:24]
QuestionerHi, Mr. Warren and Ms. Munga. My name is Su Jinghua from China, I'm so excited and very honored to be here today. And my question is, with more and more people focusing on environmental competition, protection, and the government supporting the new energy industry as well. So what are your thoughts on the continued development of new energy? How may the new energy firm achieve better development in the future?
WarrenI think it's the best to answer that because he, since we bought a company called Min American, but now called Berkshire Hathaway Energy, but he has been talking about it, yearly preparing reports, hoping that we can help solve a number of the problems, and we probably spent more money than any utility I would guess in the United States. Absolutely. And we've just crashed the surface, but it is not easy when you cross state state lines. I mean, you've got different jurisdictions, and we should, this country should be ahead of where it is in terms of transmission. We have been the biggest factor in helping that. But why don't you tell them a little bit about it?
Greg AbelSure. Thanks, Warren. So there's no question. There's an energy transformation going on around the globe. And as Warren touched on in the U.S., And in some ways, I would hope here in the U.S. it would be, we'd at least have a clear plan across the nation as to how to approach that. But the reality is it is it is state by state, with some exceptions. But so as a result, when you think of Berkshire-Hathaway Energy, we own three U.S. utilities there, and they'll participate in multiple states. But they're developing plan state by state and then trying to integrate them across the various states. The opportunities are significant because there is a transformation going on. We've outlined our goal on where we're going relative to carbon at BHE, where they'll by 2030 reduce their carbon footprint by 50% relative to 2005. So that's the Paris Accord and the standard they want to hold the utility industry. or the utility companies do. And we're well on that path. But to achieve it as a true journey, I've often talked to Warren, when we bought Pacific Corp back in the mid-2000s, we immediately recognized to build a lot of renewable energy like we'd been doing in the Midwest in Iowa, but that was basically in a single state. Now Pacific Corp were in six states. We started that back in the mid-2000s. Here we are, and we laid out a great transmission
[1:12:28]
Greg Abelplan. Here's how we're going to build it. Here's how we're going to effectuate it. And all the benefits for our customers over that period of time. Here we are in 2023, and we have a little more than a third of that at the time it was a $6 billion transmission project. Today, we have a little more than a third of it built and we've spent probably closer to $7 billion. And it's the right outcome. It's still a great outcome for our customers. But that transmission, as part of the transformation, you absolutely have to build it to remove all that renewable energy. And that's sort of the complexity Warren was highlighting. It is a, you can't just wake up one day and solve this problem. You start with transmission and then you build the resources. But at that same same company, and if we look at what we're doing across BHE energy and that energy transformation, we have $70 billion of known projects. that are really required to properly serve our customers and achieve that type of energy transformation across those utilities. And that's in the coming next, in the coming 10 years. So we have a team that's absolutely up to the challenge. They're delivering on their commitments. And it's a very, very good business opportunity for each of our companies and for our shareholders. Because as we deploy that capital, we obviously earn a return on equity of it. So, but it will be a long journey. It will happen over an extended period of time. And the further you get out there, the more dependent upon the evolution of a variety of technologies that are progressing, but not there yet. You've raised a question. I want to just take an extra minute on it because it's so important. And I don't really know whether our form of government is ideal. at all in terms of solving the problem you describe. We have solved at one time. In World War II, we took a country that was semi-limping along, and we found ourselves in a world war. And what we did in a world war is we brought a bunch of people to Washington at a dollar a year. You know, whether it was Sidney Weinberg or Goldman Sachs, you just name them. And we gave them enormous power to reorient the resources of the United States to face the problem that they faced, which was to create a war machine. And what they did was they found Henry Kaiser, you know, and told them to build ships. And they went to the Ford Motor Company and said, you build tanks and some airplanes.
[1:15:22]
Greg AbelAnd they reordered the industrial enterprise. of the United States in a way that was unbelievable because they had the power of the federal government and they had the ingenuity of American business. And they had the facilities of American business. And it led to a very successful outcome. But can we do that in a peace time where you've got 50 states and you have to get them to cooperate and you don't have anyone that you can issue orders, but you can't you can't designate where the capital goes at the other end and you know we try and do it with tax incentives and all that sort of thing but we haven't we haven't created the unity of purpose and the machinery that worked in world war two where essentially everybody felt their one job was to win the war and we figured out how to use our industrial capacity to in effect And how do you recreate that with the present democratic system? I'm not sure I know the answer, but I sure know the problem. But I think that if you can think of a, if you've got an emergency on your hand, I mean, you really need to re-engineer the energy system in the United States. I don't think you can do it. do it without something resembling the machinery, the urgency, whatever. The capital is there. The people are there. The objective is obvious. And we just don't seem to be able to do it in a peace time where we're used to follow a given set of procedure. And And you know, China, you've got one country and we've got 50 states and we've got a whole different system of government. We should be up to the test, but so far it hasn't worked. So thank you for the question.
QuestionerBecky?
QuestionerThis question comes from Chris Freed in Philadelphia. He says, we know that Greg Abel and Ajit Jane are the next generation of Berkshire leaders, who are currently behind Greg and Ajit in their perspective role. respective?
WarrenWell, that will be the question that they give their, well, Greg will be, have some things, extraordinary circumstances, but he's going to succeed me. And then he will have be sitting in a position where he needs his equivalent or something close to his equivalent, because he's better at many things than I've been. And he will need that substitute. And when the question comes to where we know Ajit's opinion on that. And but Greg will probably be the one that will make the final decision. I mean, it's his responsibility and Ajit will give him his best advice.
[1:18:58]
WarrenAnd I think the odds are very, very, very high that Greg would follow it. So, but it's not, those are not easy. And easy questions. It isn't like we've, everybody talks about the executive bench and all of that sort of thing, which is, well, only, I mean, you know, it, uh, that, uh, you don't have that many people that can run five, the largest gap net worth company and all kinds of diverse businesses. Uh, but you don't need five people either. And you need a lot of good operating managers and you need somebody at the top that allocates capital and make sure that you've got the business. right operating manager. And we've designed something where we separate the insurance and the rest of the business, and I think it's a very good design. But they would not be smart. We wouldn't be smart to name that decision now about the two different areas of the business, because a lot can change between now and then, and the most likely changes that this job changes. Charlie?
CharlieI've got nothing to add.
WarrenWe have a lot of good people that have risen in the Berkshire subsidiaries. And there's a reason why our operations have, by and large, done better than other big conglomerate companies. And one of them is that we change managers way less frequently than other people do. And that's helped us. When Paul Andrews. died, we know who he thought should take over there, but there wasn't any reason to announce that. I mean, Paul Anders would, I wish he'd lived to be a hundred. We had one of our managers died not long ago, and how old was he at the Garon? Yeah, mid-90s, Seymour. Yeah, Seymour, Leifton Seymour. And Seymour, I wrote him a letter when he was 80, and I said, you know, that I'm glad you're 80, and I'll write you again when you're 90. And I wrote him again. I wrote him again when he was 90 and he didn't make it to 100. But he had a terrific follow following him and really managed it jointly to some extent as the years went by. But it's case by case. The main thing to do is that the right person running the whole place. Okay. Station 6.
QuestionerGood morning. My name is Hatch Okamoto. I'm from Miyazaki, Japan. Mr. Buffett, I was one of the 8,000 employees at Salomon Brothers that you saved. I was younger back then and was working at Seven World Trade Center. I've always, always wanted to thank you in person for saving the company, its employees, including myself and my family. So thank you, Mr. Buffett.
[1:22:08]
QuestionerThank you. And thank Derek, thank Derek Maun, who actually had been over in Japan before that, and who I met for the first time the day before I put him in, and he turned out to... wouldn't have, it wouldn't have worked if Derek hadn't come. So whatever you taught him in Japan, thank you. Thank you, sir. Now my question, time to time you have reminded us to not bet against America. What do you think are the most important things for U.S. to remain strong? And on the risk side, if the strength of the country is undermined, what could be the reasons?
WarrenWell, we've had a lot of tests. I mean, we're such a young country. When you think about Japan and you think about the United States, it's just incredible. How new we are to the block. I mean, you know, what are we, 234 years old since we started? That's, that's nothing. I mean, you know, Charlie and I combined are two-thirds of, people of two-thirds of the life of the country. So, and, I mean, it really has, I mean, we've been tested at 46 national elections, And we made some bad choices, and we've had a civil war. I mean, so the country has had enormous advantages, though, in some way, because we started with one-half of one percent of the world's population in 1790, and we now have something close to 25 percent of the world's GDP. And it wasn't because we had some incredible advantage in terms of the line. It was nice to have two oceans on each side back when, people tried to rule the way, rule the world by ruling the waves. But, you know, and we had good neighbors in Canada and Mexico, but it's a miracle. And you say, how do we keep the good parts of the system while calling out our obvious defects? And we do it in a very herky, jerky matter. But net, the United States is a better place to live, but it was a better place to live, but it was one when I was born by a huge factor. I mean, I just got a Ruth Canal a week ago. And I was just thinking, I don't know who even invented Nova came, but I'm for him. But in a million ways. I mean, you can romanticize about the past, but forget it. It is work, but now we do have an atom bomb, and we wish nuclear power. You know, we wish the, I've never been split, but it has been, and you can't put it back in the bottle. So the challenges are huge. Our government always looks, you know, my dad was in Congress back in the 1940s, and it looked like a mess then, you know, although it was unified by the war to some degree, but it was still
[1:25:21]
Warrenvery partisan. Now, the problem we have, I think, is that partisanship, it seems to me, has moved toward tricels. tribalism, and tribalism just doesn't work as well. I mean, when it gets to tribalism, you don't even hear the other side, and tribalism can lead to mobs. I mean, it just, it flows. I mean, you've seen it elsewhere, you've seen it to a degree here. So we have to refine in a certain way our democracy as we go along, and we deal with the world we live in. But if I sell out a choice of many people, to be born in the world. I'd want to be born in the United States and I'd want to be born today. I mean, it is a better world than we've ever had. And with present-day communications, we can all see so see much more how terrible it is in many ways. And it's got problems. When I was born in 1930, there were two billion people in the world, and now there's maybe 7.7 billion billion, and growing and we went millennia with really no change in population. So we, and of course, we've introduced energy into, uh, in an incredible way, into something where we now have 7.7 billion people using way more energy than they did when I was born when there were 2 billion people. So it's an exciting world. It's a challenging world. you know i don't know the solutions on things i do think that we do need to think about different solutions in terms of how we get important problems solved and that we don't kid ourselves that something magic will happen or that everybody will get together and we'll all just cheer and then go away by 2050 or anything it uh how well we adapt to them we will see i would say so far it doesn't look very promising but then I'm sure that when Lincoln looked out of what was going on the Civil War didn't look very promising either. So I think that the U.S. is capable of doing remarkable things, and I think it wouldn't surprise me if they do it again. Charlie, are you, pardon?
CharlieWell, I'm slightly less optimistic than Warren is. I think the best road ahead to human happiness is to expect less. I think it's going to get, I think it's going to get, I think it's going to get tougher. And I think the solution of having a huge proportion of the young and brilliant people all go into wealth management is a crazy development in terms of its natural consequences for American civilization. We don't need as many wealth managers as we have.
WarrenCharlie was born on January 1st, 1924, and you'd hate to go back to that, wouldn't
[1:28:38]
Warrento try. Yes, I would. And I like more wealth managers. We're just merely reflecting to the fact there's more wealth. But we've got, I don't like everybody going into wealth management, right? MIT or something. I think the world's a little crazy now. Take your choice.
OtherOkay, Becky. This question comes from Dennis DeGenero.
QuestionerAs Warren stated in the 2022 annual report, Berkshire will always hold a boltload of cash in U.S. Treasury bills. It will also avoid behavior that could result in any uncomfortable cash needs at inconvenient times, including financial panics and unprecedented insurance losses. After Warren passes away, his A shares will be converted into B shares and distributed to various foundations. These foundations will then sell the shares to fund their causes. Warren estimates it will take 12 to 15 years for all his shares to be sold. I worry that a corporate raider like Karel Icon or a group will buy up enough of these shares to take control of Berkshire and completely disregard Warren's philosophy of holding a lot of cash in U.S. Treasury bills and instead be greedy, reckless, and highly speculative, and ruin Berkshire's position as a rock-solid financial fortress. I also worry that changes might be made in how Berkshire subsidiaries are run. Do Warren and Charlie worry that these things could happen?
WarrenWell, I think it's fair to say we think about it plenty. But I don't worry enormously. If we, it is true that Greg and the directors will have a honeymoon period for a long time simply because of the boats that will still remain. I mean, but it's true that eventually they will get judged based on how well our operation fairs versus others. Now, if we don't pay any dividends in 12 or 15, years, you're talking a trillion and a half that it would take to take over. And I think if we can't, that limits the group. They like to think about how much they can borrow against it. It doesn't work when you, and some of these, there's nobody to come close to doing it themselves. And I think that the important thing is that Berkshire regarded, be regarded as a national asset rather than a national liability. We've got to be a plus to the country with our form of operation. And we certainly have got a record which will then be 12 or 15 years longer, done with much more capital, more companies. More things will have happened where our hundreds of billions can work its way into the economy in terms of lots of jobs, lots of products,
[1:31:41]
Warrenlots of behavior. And it can be compared with it. with other things. So I think we went out, if we deserve to win out, and I think the odds of that happening are very, very, very high.
QuestionerCharlie?
CharlieWell, we, we, I don't spend much time worrying about something that can happen 50 years ago after I'm dead. I think if you sort of take care of each day's responsibilities pretty well and think ahead as well as you can, then you just take the results as they fall. So I'm philosophical, but I'm not, I'm spreading unnecessarily.
QuestionerOkay.
WarrenNeither one of us are worried, basically. But we plan. We do plan. And, you know, I've got a model in my mind of what Berkshire has been. That model's been modified plenty of times over 58 years. The one thing I knew initially is, or very quickly, was it shouldn't be a textile company. That was an important decision. And we've just played the hand as it has come along, and we made a few really good decisions, and we'll never make a decision that kills us. Only things that are a threat to the planet, we don't have any answer for those. But we do, we keep ourselves in better shape than anybody else. And we just aren't going to have big maturities of debt. debt that come along. We aren't going to have insurance policies that can be cashed in en masse, and we will sit with what looks like a huge amount of capital. And it is a huge amount of capital, but there's a huge amount of earning power, there's a huge amount of diversity, everything. So our business model will be graded and it'll be graded against a lot of people that we'd like to be graded against. So I think we're handing it. something very secure over to the future. And I think we've got the shareholder base like nobody has. I mean, there isn't anybody in the country that I know of unless they've had a shareholder, an employee owned company prior to going public or something of the sort. But this is the product of 58 years of regarding the shareholder as the owner of the company. But what does that mean? That means having happy customers. It means being, it means being welcomed by your community rather than having them turn you away. It means that the government feels better with you if there's a financial crisis because you're, you can provide something that actually the company, the country can't under some circumstances. And you'll be there. And if it may, and same time, it'll be good for the business.
[1:34:50]
WarrenAnd we will have crises of one sort or another. one sort or another. But if they aren't challenging the planet, which worries you in terms of some of the threats that we have, we'll be a plus to the United States. And if we're a plus to the United States, we'll survive.
OtherOkay. Station 7. Mr. Buffett and Mr. Munger, thank you for having us this weekend. My name is Bo Clayton, and I'm from Durham, North Carolina. One of the reasons that we are all here is that you're great storytellers. And we carry those stories back home with us. Can you please share a couple stories that maybe we haven't heard before about Mr. Abel and Mr. Jane that capture their character and their caliber as leaders?
WarrenWell, I'll start out with the general. gee. He walked in the office in 1986 and I'd gotten the bright idea of going into the reinsurance business, I think it may be 1969. So I'd stumble along for 17 years. And a wonderful guy that ran it. But he also liked certain brokers. And I mean, he was running the traditional way, the top quality and everything else, but, but he fell into the, he, he didn't try and change the system. He tried to improve the system, to some degree. And we just, we went nowhere. 17 years wandering around in the wilderness and I thought I was, you know, I knew we could have something good. And then Ajit came in on a Saturday. And, uh, uh, uh, uh, Mike Oldberg had steered him in, I think, and, uh, Mike deserves to be enshrined and perpetuity for that act. And, uh, I talked with him a while, I think maybe I was opening the mail on Saturday while I talked with him. And, uh, he had absolutely zero experience with insurance, but he'd actually seen a good bit of how corporate America operated because he'd been been in management consulting. And after talking with him, I knew I'd struck gold. And so I hired him and gave him the backing of some money. And we had a very good period in the market, almost right away for him to act and the Jeep. You know, if I had the top pick of 10 insurance managers in the world, I'm I could take all 10 and they wouldn't, you can't replace a jeet. And we still enjoy talking. I don't, we don't talk as frequently as he used to, but we used to talk about every day. But he is, he's one of a kind. And, you know, if they're going to stick around long enough, you only need one of a kind. Paul Andrews stuck around at TTI, had all the money in the world.
[1:38:44]
WarrenEvery time I talked to him about getting a raise or something of the sort, he said, we'll talk about that next year. It just, he was not what you get when you get the top draft picks from the leading business schools. And I will say this, I have never looked at where anybody went to school in terms of hiring. I mean, I just, somebody mailed me a resume or something. I don't get where they went to school. And it just so happens that A jeet went to some pretty good schools, but he isn't Ajit because he went to the schools. And Charlie, you can tell a story or two. How'd you find Louis Bincenny? Well, he was there. But you've got to recognize him. I asked Louis once how he managed to play first-string football at, I think, Stanford, when he only weighed 165 pounds. And he said, Well, he says, I was pretty quick. And he was pretty quick. But we have found a lot of people within our companies who were pretty quick. It's a, it's a, we had one guy that quit at fourth grade, didn't, in Ben Rosner. Am I wrong? Oh, yeah, totally self-educated. Ben Rosner knew more about retailing and difficult neighborhoods than anybody. And he watched everything in his business like a hawk. And he was a man. It was amazing. Now, there was an example. We never found anybody who could do what, when Ben died, that built, that built, he left us. Yeah, and you want a story. It's kind of interesting because Ben Rosner had a partner, Leo Simon. And Leo Simon was Mo Annenberg's son-in-law. And Leo, therefore, was very, very, very, very wealthy. And Ben, uh, and Ben started with not started with nothing, but they liked each other. And one time, well before they got involved in the business, uh, the business we bought, but they got the idea of buying a submarine from World War I and taking it to the century of progress, which was the world's fair in effect in Chicago, I think in 1933. So they bought the submarine for not, probably nothing. And they figured, you know, the average guy from Omaha was going to his first world's fair, get into a submarine for a quarter or something, that they'd pay it. So they hauled it from Florida, wherever they got. They hauled it to Chicago, and then they got into Chicago, and they were hauling a submarine down the streets of Chicago. And it was creating traffic problems like nobody could imagine. So a cop came over. And he said, to Ben, he says, where do you think you guys are going with a submarine?
[1:41:56]
WarrenAnd Ben says, he says, well, I don't, he said, you'll have to talk to my partner, Mr. Capone. And the cop, the cop says, you're on, and he'll just keep going. And that was, that was Ben Rosner. And then Leo Simon died. And when he died in 1967 or so, Ben Rosner, kept delivering half the prophets to his widow, who was incredibly rich, of course, being Mo Annenberg's firstborn daughter. I think, I think Mo had nine girls in a row before Walter came along. The 10th, I may be off by one. But anyway, I went to this fancy apartment. And anyway, Ben kept her in for half the deal, and he had her signed the rent. And he had signed the rent checks just so she would look like she was doing something in this business. And she didn't need the money, obviously, but he just felt, he was obligated once his partner, Leo, died. And then she started criticizing him. And at that point, Ben went to her, his lawyer, or was her lawyer, actually, Will Feldstiner. I don't know whatever happened to Will, but he gave me, he gave me a call because Ben wanted to call me because he wanted me to call me because he wanted me to buy it. And he wanted me, if I bought it, he'd be rid of the partner's, ex-partner's wife, and he'd get, he had me and Charlie come back. And we went to Will Feldsteiner's office and Ben says, I'll work till the end of the year, and that's all. But I'll sell you this thing for six million bucks, and I had two million of cash and a couple million of real estate and a couple million of operating earnings. It was just crazy. But he felt if he was getting a lot. Lousy price. She was taking a half of the lousy price for half the money. So he looked at me at some point. Charlie, you describe the rest of it. He said, I heard you're the fastest draw in the West. He says, draw. We're in the New York lawyer's office. This guy is, he's selling, he's selling his baby. And he told us he was leaving. I got Charlie, I said, if this guy leaves at the end of the year, you can throw away every psychology books that's ever been written. I mean, it isn't going to happen. And so we bought it. And we lived happily ever after with Ben. And one time, he was taking me over to see a property we had in Brooklyn. And along the way, I said, Ben, I, you know, I promised you I wouldn't interfere in the business when we started. And he knew a butt was coming. And he just said, thank you, Warren. And they shut me up.
[1:44:58]
WarrenHe was a lot of fun. We have so many Ben Rossner's stories, but now you've heard one that hasn't been published before. Okay, Becky.
QuestionerThis question comes from Chai Gohill. He writes, this is for Ejit. Reinsurance industry is going through one of the hardest pricing environments in the last 15 years. Berkshire historically has participated during these stress times when economic returns are very attractive. This year, it appears, Berkshire has not been interested in deploying its resources towards property cat reinsurance despite such strong returns. Can you elaborate on reasons for not participating despite these returns? And your broader view on how you're planning to shape your reinsurance business post-acquisition of Allegheny?
Ajit JainIn terms of Allegheny, that's an easy response. We look, we treat operating units independent of each other. And as far as Allegheny is concerned, they have a major presence. presence of the reinsurance business under the brand name of Transatlantic Re. That company will operate the way it's been operating in the past. There'll be no change in terms of strategy or management and they will keep doing what they're doing. They've been very successful and hopefully they'll keep being successful. Now, in terms of the property cat business that I have been active in over these last several years, you are right that the last 15 years has been a difficult time. prices have not been attractive and even though we have had some presence in the property cat business in the last 15 years it really is being minimal this December 31st which is a big renewal date for cat re-insurance we were hoping that we would get a few days in the sun and we'd be able to deploy our capital and be able to write some fairly attractive business as it happened And towards the end of December, till about the third week of December, I was very optimistic that we would get a chance to put several billion dollars on the books. But in the last 10 days of December, unfortunately, a lot of capacity came out of the woodworks. Pricing that we were expecting to realize didn't really come and meet our pricing requirements as a result of which January 1 was a big disappointment. We did not write as much as do you have. We're hoping to write. Now, fast forward to April 1, which is another big renewal date, we had a lot of powder dry and we were lucky that we kept the powder dry because April 1 suddenly prices zoomed up again a lot
[1:47:41]
Ajit Jainhigher than what they were on January 1 and started to look attractive to us. So now we have a portfolio that is very heavily exposed to property catastrophe. To put that in perspective, our exposure today is almost 50% more than what it was five, six months ago. So, you know, we, I think we have written as much as our capacity will allow us to write. We are very happy with what we've written. The margins have been healthy. The only thing that I want to mention to you is that while the margins have been healthy, we have a very unbalanced portfolio. What that means is if there's a big hurricane in Florida, we will have a very substantial loss, as opposed to that if we have a very big loss anywhere other than Florida, relative to our competition, we will have a much smaller loss. Net net, I'm very happy with the portfolio. It's been a lot better, it is a lot better than what it's been in the past. I don't know how long it will last. And of course, if the hurricane has been. happens in Florida, we could lose, across all the units, we could lose as much as $15 billion. And if there isn't a loss, we'll make several billion dollars profit. And gee, tell them how long, when you call me and said, you'd like to expose us to whatever it was, a couple billion more of exposure. How long I took to say yes.
WarrenYeah. So the way we think about our exposures, you know, in in the property, in the insurance operations collectively across the entire company. Given that we have about a little less than 300 billion of gap capital, we think of that as a 55% exposure that you're willing to take on. So, to complete Warren's story, a few weeks ago, we had about $13 billion of exposure all across the globe. And I called up Warren and I said, we up to 13, it'll be nice if we can go up to 15, that's a good round number and that was less than a 30-second phone call. I think Warren said yes without even listening to what the numbers were. I hope he calls me again.
QuestionerOkay, Station 8. Hello, my name is Adal Flores and I've been a sheholder for about 16 years and I'm coming from Guadalajara, Mexico. My question is for Warren and Charlie. Companies have the eternal dilemma between brought, building products that can make profits and increase their company competitive position. In the best case, you can build products that have both characteristics at the same time, like Google did. But most of the time, companies need to choose between short-term profits and long-term defensibility.
[1:50:53]
QuestionerFor example, Amazon was focused on building their famous Amazon flywheel with limited profits initially in order to obtain, obtain stronger network effects with the hope of getting more defensible profits. more defensible profits in the future. When you invest, you constantly speak about the importance of building competitive modes. What advice would you give to CEOs about how to balance this dilemma, which is essentially short-term profits versus long-term defensibility? Thank you.
WarrenWell, the answer is to control your destiny, which we've been able to do at Berkshire. So we have, we feel no pressure from Wall Street. You know, we don't have investor calls, we don't have to make promises, we get a chance to make our own mistakes and occasionally find something that works well. But we recognize that the people in this room and people like them are the ones that we're working for, and we're not working for a bunch of people that care about whether we meet the court or estimate or anything. We have a freedom that we get to use. And we're interested in owning a wonderful business forever. Well, there aren't very many wonderful businesses. But we do learn a lot as we go along. Charlie and I have often mentioned how we learned so much when we bought Seas Candy, which we did. But we learned when we bought Ben Rogers, chain of women's dress shops spread all over the eastern part of the country. We learned when we tried getting into the department store business back in 1966. And as the ink was drying on our purchase price, we realized we'd done something dumb. We're learning all the time how consumers behave. I'm not going to be able to learn the technical aspects of businesses, but that, you know, that's You know, that'd be nice if I knew it, but it isn't essential. And, you know, we are obviously, we've got a business at Apple, which is larger than our energy business. And we may only own 5.6 or 7 percent, but our ownership goes up every year. And I don't understand the phone at all, but I do understand consumer behavior. and I know how people think about whether to buy a second car. I know how they go out to different, we own auto dealerships. We own, we're learning all the time from all of our businesses, how people react to animals versus, you know, selling them something else. And so C's was a sort of breakthrough, but it just, we just keep learning as to learning as to
[1:54:04]
Warrenmore about how people behave and how a good business can turn into a bad business and how some good businesses can maintain their competitive advantage over time. And so we don't have some formula at Berkshire people. We just, but we can also tell in 10 seconds whether it's something of interest, we just, but we can also tell in 10 seconds whether it's something of interest. I mean, you know, when I get these calls and we want to send decks and all that sort of, which is nonsense. I mean, it's a bunch of guys sitting, get paid for drawing up these projections of the future and everything like that. If they knew the future, you know, we don't know the future, but we do know certain kinds of businesses. We know what the right price is and we know what we think we can project out in terms of consumer behavior. uh and consumer through and threats to a business and and that's what we've been about and that's what we'll continue to be about we do get we don't get smarter over time we get we get a little wiser though uh following it over time and and you can do it while sitting in the office with the telephone too which we like charlie
Warrenwell tell them the story of the japanese investment that that should be told again that that that's That's a nice story.
CharlieWell, it was pretty simple. I mean, I, you know, other, back when I started, other people were going through Playboy, and I was going through Moody's, you know, basically. There's a movie out called Turn Every Page, which I saw again for the second time a couple of days ago. Lizzie Gottlieb, and I recommend everybody in this world watch that because I turned every page in the past. And I did it for thousands. and thousands of pages and moody's and i did it at the department of public utilities in in boston i did it in new insurance department that it just kept turning pages well that that that goes on for for a while but now we need big ideas in order to find things and uh and what was your question charlie tell them about the japanese
Charliewell the japanese thing was was simple i mean it then i like looking at companies every i mean i like looking at companies every i mean i like looking at figures about companies and and here were five very very substantial companies understandable companies most of them uh maybe all of them we'd done business with in a dozen different ways if you go a couple miles from where this place is uh our last coal generating plant
[1:56:57]
Warrenwas built by one of the companies that uh so here they were they were sitting as a group where they were earning we'll say 14 percent on what we were going to pay to buy them they were paying decent dividends they were going to repurchase shares in some cases they owned a whole bunch of businesses that we could understand as a group although we didn't mean we had deep understanding on any but we seen them operate and everything there wasn't anything to it and at the same time we could take out the currency risk by financing in the end and and that was going to cost us to half of one percent well if you get 14 percent on one side a half a percent on the other side and you've got money that you know forever and they're doing intelligent things and they're sizable so we just started buying them i didn't even probably tell greg until maybe six months after we'd gotten going and and then when we hit five percent uh in all of them we announced on my birthday and at 90 that we owned over 5 percent and recently went over for the first time to visit with them and we were more than pleasantly surprised delighted with what we find there and now we own 7.4 percent of them we won't go over 9.9 without they're agreeing and we sold another 164 whatever it is a billion of a they would have done for us if we only had five billion dollars or something and it made 10 billion dollars simply in that way yeah we would look like heroes now 10 billion just sort of disappears as it's a little dot in bursher's reports but it's fun and it is fun and it is 10 billion dollars and charlie says it keeps and charlie says it keeps me out of bars talk about and i probably talked to up about and i probably talked to charlie about this i that the year after i started i don't but who knows i mean i knew he'd like it i mean obviously and and uh we tried we tried to do every dollar we would do we could only do about 10 billion yeah yeah well not even that quite that much yeah but you know we are four or five billion a head plus dividends and we got to carry that's terrific and and and you know uh and they welcome us and they should welcome us and but we we we love it the way they're operating we're not there to tell them what to do in the least so we didn't but we did say we never go over up 9.9 and we mean it and then they they know that we'll be true to our word and i went over there partly to introduce reg to those people because we're going to be with them 10 20 30 40 years
[2:00:01]
Warrenfrom now and they may occasionally find something that we can do jointly and they look they look forward to doing that and we look forward to it and in addition we have some other operating businesses in japan so great do you have anything
Greg Abelthe only thing i would add is that um one is that um one is warn you went over there it was to um build the build the build the trust with these japanese companies because we do hope there's long-term opportunities but fundamentally as you highlighted uh they're an incredible uh they've been a very good investment i'd also highlight the five meetings we had we're really quite remarkable i mean these companies the culture and the history around it and how proud they are you know there's just moments of learning from them so it was it was just a great experience to to spend really two days with the five companies and an issue that we intended to be 56 billion of the end that we were issuing and selling turned out to be 164.4 or something like that everything everything works so well and as charlie says it you know it doesn't move 500 billion of net worth that much but this one is you know it will keep adding over the years to the berkshire's value with this very widespread probably four or five hundred million dollars a year and uh you know we'll just keep looking for more opportunities and and japan we have berkshire is the largest borrower is the largest borrowererererer out outside of corporate borough our side of japan that that exists and we didn't set out to be that but it's it's turned out that way and and we're not done i mean it uh you know in terms of what may come along there and uh and we have some direct operations there as i mentioned that uh and we've got some really wonderful partners working for us and i don't have to do anything okay
QuestionerBecky the next question comes from Ellie Amin Tibet who asks during an episode of investing the Templeton Way podcast professor Damodaran who he respects almost as much as Warren and Charlie mentioned that he is not comfortable with positions becoming a large part of his portfolio for example when they reached 25 to 35 percent he mentioned that Apple is now 35 percent of Berkshire's portfolio and thinks that that is near a danger zone wonders if warren and charlie can comment i'd like to make one comment first but charlie will come up with
Warreni think he's out of his mind yeah i knew that that's coming but apple is not 35 percent of a
[2:03:00]
Warrenof berkshire's portfolio includes the railroad the energy business or animals you name it sees candy they're all businesses and uh you know the good the good thing that the good thing about apple is that we we can go up they buy in their stock and instead of owning only 5.6 percent you know they get down to they got about 15 billion 700 and some million shares outstanding they get down to 15 and a quarter billion without us doing anything we got 6 percent so we can't own more than 100 percent of the bnsf we can't own more than 100 percent of of granables or seizes candy and it'd be nice we'd love to own 200 percent but that just isn't doable but they're all the same they're good businesses and to think that our criterion a criteria for apple is different than the other businesses we own it just happens to be a better business than any we own and we put a fair amount of money in it but we haven't got more money in it than we've got in the railroad and apple is a better business our railroad is a very good business but it's not remotely as good as Apple's business that Apple you know has a position with consumers where they're paying maybe they'll pay 1500 bucks or whatever it may be for a phone and these same people pay $35,000 for having a second car and if they had to give up a second car or give up their iPhone they'd give up their second car I mean it's an extraordinary probably we don't have anything like that that that we own own 100% of but we're very very very happy to have 5.6 or whatever it may be percent and we're delighted every tenth of a percent that goes up that's like adding a hundred million dollars to our earnings I mean our share of the earnings and they use their rings to buy out our partners which we're glad to see them sell out too the index funds have to sell them they bring the number of shares down and uh you know I'm good we went up slightly last year and i made a mistake a couple years ago and i sold some shares when i had certain certain reasons why uh gains were useful to take that year from a tax standpoint but having heard having heard me say that it was a dumb decision uh and uh or you've already given your comment about it but but we do not have 35 percent of berkshire's portfolio burkshire's portfolio is the funds we have to work with and we want to own good businesses and we also want to have plenty of liquidity and beyond that you know the sky's the limit or or are mistakes who knows
[2:06:03]
Questionerwhat the bottom is charlie do you want to add anything to your earlier comment
Charliewell i think one of the inane things that's taught in modern university education is that a vast diversification is absolutely mandatory and investing in common stocks that is an insane idea it's not that easy to have a vast plethora of good opportunities that are easily identified and if you've only got three i'd rather be in my best ideas instead of my worst and now some people can't tell their best ideas from their worst and in the act of deciding that the investment already is good they get to thinking it's better than it is i think we make fewer mistakes like that than other people and that is a blessing to us we're not so smart but we kind of know where the edge of our smartness it is that is a very important part of practical intelligence and a lot of people who are geniuses on IQ tests think they're a lot smarter than they are and what they are is dangerous and and but if you know the edge of your own ability pretty well, you should ignore most of the notions of our experts about what I call de-worsification of portfolios.
OtherOkay, uh, station nine.
QuestionerHi, Charles and Warren. Thank you for this superb shareholder meeting celebration. My name is David Chung from Hong Kong and a proud graduate of Chicago. I'm also here with my two sons, Aidan and Ashen, who's currently studying University of Chicago, as a freshman and sophomore. This is my second time attending the conference, last being 2019, four years ago, which I was only a guest shareholder of my friend Andrew. So after the shareholder meeting, I have decided to buy into Bersher Halfaway, which has given me a great return of 62 percent. since 2019. So I want to thank you for that. I have also taken one of your advice to give my children a share for each of their birthdays. Although they want a Bershire halfway eight shares, they will do just fine with B shares. My question is, how do you see the current U.S.-China Internet companies' valuation and the price disparity? given there has been many uncertainties such as geo-political tensions, significant cost optimizations with lean at U.S. tech firms, while China tech has been through all that already. Thank you.
WarrenCharlie, I want to... Well, there's been some tension in the economic relationship of the United States and China. I think that that tension has been wrongly critical.
[2:09:41]
Warrenhas been wrongly created on both sides. I think we're equally guilty of being stupid. If there's one thing we should do, it's get along with China, and we should have a lot of free trade with China in our mutual interest. And I just can't imagine. It's just so obvious. There's so much safety and so much creativity that's possible. Think of what Apple has done by engaging in a partnership. partnership with China as a big supplier. It's been good for Apple and good for China. That's the kind of business we ought to be doing with China. And more of it. Everything that increases the tension between the two companies is stupid, stupid, stupid. And ought to be stopped on each side. And each side ought to respond to the other side stupidity with reciprocal kindness. That's my view. And it creates one enormous problem. problem, of course, which is that you have the two superpowers of the world, and they know they have to get along with each other. Either one can destroy the other. And they're going to be competitive with each other. But part of it is trying, always in a game like that, is trying to judge how far you can push the other guy without them reacting wrong. And, you know, if either side is a bully, in some ways they can get away with it to an extent because the alternative would drive them both into destruction. But if they push it too far, they increase the probability that something really does go wrong. So it's a, you know, it's one of those game theory dilemmas. But you really need the leader of both countries. And you need the populace to understand at least. the general situation in which these countries are going to operate over the next century and know that some leader that promises too much can get you in a hell of a lot of trouble. And that, like, you know, you've got one kind of a system that gets its leader one way, and you've got another system that gets his leader another way. And keeping either side from trying to play the game too hard. and thinking the other side will go along, you know, it's like playing chicken, you know, and driving toward a cliff. So it is, if you've got any diplomacy skills, persuasive skills, or anything like that, you really want people that will convince the other country as well as his own or her own country that this is what we're engaged in. we've got to do it right. We won't give away the store, but we won't try and take
[2:12:58]
Warrenthe whole store either. And we're just at the beginning of this, unfortunately. I mean, we've learned what the situation was. It used to be the Soviet. And mutually assured destruction was our policy then, and that kept a lot of things from happening, but it also came with a very, very, very, very close call with Cuba. And these are not, you know, these are different games than existed hundreds of years ago. You could, you know, Britain might rule the seas or France or Spain, but now you're playing with a game that you can't really make a huge mistake in. And I think that that that should be, the better that's understood in both countries, the more the leaders feel that their citizenry does understand that, the better off will be. And that a lot of demography or a lot of inflammatory speaking, but a lot of authoritarian action. I mean, it all carries its dangers. And the world has stumbled through the years post-1945 with a lot of close calls from from the, in the nuclear arena, and now we've got pandemics, and we've got cyber and a whole bunch of other things. So we've got more tools of destruction than the world's ever had. And it's imperative that China and the United States both understand what the game is and understand that you can't push too hard. But both places are going to be competitive. And both can prosper. That's what really is. That's the vision that is out there that China will have a more wonderful country. The United States will have a more wonderful country. And the two are not just compatible. They're almost imperative in terms of what's going to happen in the next 100 years or so. And I think that the leaders of both countries have got an important job in having that understood and not to do inflammatory things. And we'll see whether the luck that has taken us from 1945 to present holds out. And I think we can affect to some extent that luck. And with that sure a message, we won't hold to Becky.
OtherThis question comes from Roheed Bellany.
QuestionerBerkshire bought a substantial position in Taiwan semiconductor, and contrary to its normal holding timeline, sold almost the entire position within a few short months. While you cited in a CNBC interview that geopolitical issues were the catalyst, these issues were seemingly no different when you acquired that stock. So what else, if anything, changed in those few months and prompted the firm to offload close
[2:16:29]
Warrento $5 billion worth of Taiwan Semiconductor shares? Taiwan Semiconductor is one of the best managed companies and important companies in the world. And there is not, and I think you'll be able to say the same thing, five or 10 or 20 years from now. I don't like its location and I've re-evaluated that. I mean, I don't think you should be any place but Taiwan, although they will be. obviously opening up chip capacity in this country and actually one of our subsidiaries that we got in Allegheny is is participating in their Arizona construction activities. But it's a question of we would rather have the same kind of company and there's nobody in the chip company. There's no in the chip industry that's in their league in our bit, at least in my view. And the man that was a 91-year-old or so that connected with it that I think I played bridge with and in Albuquerque, and marvelous people, marvelous company, but I'd rather find a marvelous people, I won't find it in the ship industry, but marvelous people and marvelous competitive position and everything, I'd rather find it in the United States. I feel better about the capital that we've got deployed in Japan than in Taiwan. I wish it weren't so, but I think that's the reality, and I've re-evaluated that in the light of certain things that we're going on. Charlie?
CharlieWell, my view is that Warren ought to feel comfortable if you wants to. Put that in the minutes.
OtherOkay, Station 10. First of all, thank you for making our lives better. My name is Bogumil Baranowski. I'm a founding partner of Sikas Associates in New York. We manage multi-generational family fortunes, hence my question. Mr. Buffett, in your tribute to Benjamin Graham, you wrote, Walter Lipman spoke of men who plant trees that other men will sit under. Ben Graham was such a man. You were both such people. Could you share with us your 100-year vision for Berkshire? It's a question to you both.
WarrenYeah, I would like to add one thing about Ben Graham. Ben Graham did all kinds of things for me. I never expected one thing in return. I mean, just you name it, and he did it. And there wasn't any hidden, you know, there's slides. you know, a hint, I should say, of anything he expected in return. And I checked, well, he wrote a book in 1949 that, in a sense, said to me in very persuasive terms that what I'd been spending the previous eight or nine years working at and loving was all wrong.
[2:20:19]
WarrenAnd that book has been, I check it every now and then on Amazon to where it ranks. And you know, Amazon ranks hundreds and hundreds and hundreds of thousands of books by sales. And Ben Graham's book has been up there like number 300 or 350 or something like that forever. And there isn't any book like that. I wrote Harper Columns a note the other day, because they're bringing out another edition. And I asked them how many copies have been sold. And they said the records didn't go back far enough, but they had 7.3 million copies of this little book that changed my life and continues to outsell every investment book. Investment books come along and, you know, they're number 400. or a thousand or something for a while, and then all of a sudden they're number 25,000 or 200,000. And, and this, this book, you know, in how many areas can you find any book that has had that sustained position? You can't, you go back and look at number one at 1950 or number two or number three, and you look at 51 and 52. They don't continue. I mean, they just don't continue. Cookbooks, maybe one or two of them. them last for a while. But there is nothing. And this book lives on and everybody keeps bringing out new books and saying a lot of other things. But they aren't saying anything that's as important as what he said in 1949 in this relatively thin little book. So, uh, our vision for Berkshire is exactly what we said today. We want it to be a company that is owned by its shareholders and behaves in a way that society is happy that it exists and not unhappy. And we will have unlimited capital. We'll get lots of talent. And we've got a base that can't be beat. And there's no reason why it can't be perpetuated just like Ben's book and maybe be an example to other people. And if so, we'll be very happy. Charlie?
CharlieYeah, one of the really interesting things about Benegra. He was a really gifted teacher, a very honorable profession. And that is what has lasted. However, an interesting fact that he was sheepish about in his old age was that more than half of all the investment return that Ben Ben Graham made in his whole life came from one stock, one growth stock. Keiko, Bircher's subsidiary. And at the time he operated, there were a lot of sort of lousy companies that were too cheap, and you could make a little money floating from one to another. But the big money he made was one growth stock. Buying one
[2:23:44]
Warrenundervalued great company is a very good thing, as Berkshire has found out again and again and again. And Ben wrote a postscript to the 49 edition, pointing out exactly that fact and acknowledging it, but said, but also took some good lessons from it. You know, he said, that's the way life is, that you prepare and you, you know, you don't lose everything along the way, and then something comes along. And Geico came along because a banker in Fort Worth that had financed Leo Davis, And I think the banker got three quarters of it, and I don't mean Leo Davidson, Leo Goodwin, who founded Geico, then called Government Employees Insurance Company, and you can figure out the acronym. And the deal almost fell apart. The deal was, as I remember, for maybe a million and a half or something like a million a quarter. And it almost fell apart because of a difference of $25,000. in the net worth delivered. This is a business that's, you know, we're tens of billions. I mean, but he pointed out the irony in that, too. I mean, he was honest about, it was totally intellectually honest about his, about his, the failings and also the strengths of his approach. And he, and that, to some extent, you know, Charlie and I have seen that in our lives. I mean, that sort of the prepared mind, the willingness to act when you need to act and the willingness to ignore it every salesman in the world and the imperative to ignore them. And it's one or two things that make the right decision. If you make the right decision on a spouse, I mean, you've won the game. They, you know, and there's enormous important decision. And you got all the time, I mean, in the world, you got more time now than used to have when I was a kid. make that decision. And, you know, I don't know whether a third or whatever percentage below that one, you know, it is really interesting. The thing to do is just keep trying to, trying to think things through and not do too many stupid things. And sooner or later, you have a Lollapalooza, Charlotte would say.
OtherOkay. Becky.
QuestionerAll right. This question comes from to Rafter, a shareholder in Sierra. Vista Arizona, who is asking a question of Ajit, wants to know about electric vehicles getting insurance from the manufacturer instead of car insurance companies. A recent article in the Wall Street Journal shows that though EVs are a small but growing percentage of sales, Tesla and GM are offering their own electric vehicle insurance. What will GEICO do to combat
[2:26:51]
Ajit Jainthis? Yeah. So, Geico is talking to a number of original equipment manufacturers as well to try and see how best they can work with the auto manufacturer and offer insurance at the point of sale. There haven't been very many success stories as yet. So we'll wait and see, you know, clearly it is a very convenient way to sell auto insurance at the point of sale, but there's a fair amount of data that needs to be collected on the driver, not just the car, and that makes it a little more complicated. So we are talking to. some auto manufacturers ourselves. We are hopeful that we will strike a deal with some of them before not too long. Tesla has made and GM. They both have talked a lot in the press in terms of getting into their insurance business. And in fact, GM, I think, has projected. They'll write $3 billion of premium, which, you know, it's hard to imagine where it'll come from. But they're all hot to trot. I think somebody will find the secret source before not too long and we ourselves are in that race.
WarrenYeah. I would point out that General Motors had motors insurance for decades. And I mean, this is not a new idea. And Uber, a lot of insurance for a while. They laid it off with somebody and that company got killed by it, but I don't know the deal between Uber and forget the name of the company that took it on. The Jeep would probably know, but. James River. Yeah. And, you know, it, there's nothing, it is not, it's not a new idea, it's not magic in the lease. I mean, it is hard to come up with something that is better at missing, max, and matching risk to reward, risk, I'm sorry, risk to price, then a bunch of very smart people are doing it at a progressive and a bunch of very smart people are doing it to a greater extent. at Geico, and I mean, it is, it's just, it was fascinating to me when Uber went into it, you know, and they were going to get their head handed to them, but they laid it off a good bit of it, a very substantial percentage of it was somebody else who got their head hands to it, and, you know, but it was a story, you know, and Wall Street loves it, and, I, we've, we've got 80 card. dealerships that do a lot of business. And, you know, we've got the people buying the car and the place, and we form an insurance company around the dealer group for some reason that rights insurance. It's hard to improve on the present system. I have no, I wouldn't, I wouldn't pay a penny.
[2:30:01]
WarrenI'd pay to avoid it, actually. I mean, and go ahead, Ajit.
Ajit JainYeah. The only point I'd like to add is the margins on writing auto insurance are 4%, which is a very small number. And once there are more people that are trying to take a bite of the apple, it just becomes very, very difficult to keep all the mouths fed in a profitable manner.
WarrenYeah, you can say there was one big new idea in insurance and property, in car insurance back in 1920 or so, when State Farm started. and State Farm, and still has it next to Berkshire. It's the leader in having net worth. It's a mutual company, but some guy just figured that there was a cartel running car insurance. And he, farmer from Merner, is the name of the book, I think, over in Illinois, and he created a system where he really took 20 points or so out of the cost and surprised. surprise here he is. You know, and nobody's own stock and state farm. It's, it's an insult to capitalism, actually. Everything you learned at the business school says it shouldn't work because nobody owns it, nobody's going public with it, no nothing, but it's got more net worth. It's almost probably double, leaving Berkshire out of the picture. It's probably double the next guy and nobody's really improved on their system that much. So it's fascinating how People don't really look at the essence, you know, these are cases that should carry a message. But the truth is in Wall Street, anything that gets, the test is whether you can sell it or not. If you can sell it, it'll get sold. And a bunch of insurance companies came along and got it sold, and this is, this can be a story about this stock or that stock. And it sounded a good when they talked about it at Uber for a while. It is really interesting. The investing public does not learn much.
QuestionerOkay, station 11. Hi, my name is Jeff Merriam. I'm from Edina, Minnesota. We've been coming for years to make that professor from the earlier question really nervous. Half our family's wealth is in Berkshire Hathaway.
WarrenWell, it doesn't make Charlie nervous.
QuestionerMy question has to go with voting control in the future. There was a question earlier about corporate raider. I was more wondering about who, Who is actually going to own the voting control? Is it going to be institutions, CalPERS, BlackRock? Are they eventually going to get their way with the ESG checkboxes that we're going to have to check? And what should we be thinking about that?
[2:32:58]
WarrenWell, you're thinking very well. And the interesting thing is the big aggregations look like, of course, they'd be in index funds. But what indirects funds want is they want a world in which society doesn't get upset with them about the fact they've got all the voting power. And I was saying in the last year or two, it's looked like a better idea for them not quite together's. What was the phrase that Charlie used? They backed off a lot. Yeah, they backed off a lot. a lot. And it's in their interest to back out off. And interestingly enough, in looking at money management, you know, the game is not performance. It's assets under management. And index funds produce a tiny, tiny, tiny fee on assets under management because it was pioneered by Vanguard. And when it became successful, it was very, easy to replicate, not so easy, but I mean, it was inevitable to be copied, but it came with a management fee of two basis points. So what people that have offered index funds would really like is you to buy their other funds or let them manage money in some other way so that they get a higher higher fee on assets under management, which of course is exactly why the index fund was invented in the first place. So it's gotten, it's not a lost leader, but it is a way to pull money in. And then you hope that people ignore what was said by, what's the name that, you know, that John Bogle, Jack Bogle, they ignore him and essentially they give up the idea and that we'll offer you a fund that does this in India and we'll offer you another fund that does that. And of course, those management fees are higher. So they're really counter-sufficiency. telling the idea that John Bogle came along with. But in the process, they have achieved a lot of boats. And that was fun for a while. But the last thing of the world I want to do is that Washington, where the American public decide that they're throwing around their way too much. So they're tending to back off now. If you figure out where their self-interest is, you'll judge where their behavior is going to go. Charlie, yeah. You want to defend them?
CharlieNo, you can square what you just said. You're totally right on everything.
WarrenWell, in that case, I won't ask anybody else. Okay, Becky.
QuestionerAll right, this question comes from Almu, Grinnell, and it's about, this is for Warren and Greg. Since 2019, Berkshire repurchase huge amounts of stock about approximately reducing 10% of the share
[2:36:13]
Questionercount and increasing the intrinsic value per share for the continuing shareholders. Greg is expected to be the successor of Warren as CEO. So will he be in charge of the main capital allocation decisions, including future share buybacks? Greg has been key in the development of Berkshire-Hathaway Energy and I think a good capital allocator. Has he been involved in the share repurchases that have been executed over the past years? And do you, both Warren and Greg, work together in the estimation of Berkshire's intrinsic value and the share-byback decisions?
WarrenWell, the answer is that Greg I'm going to turn it over to him, but the answer is Greg understands capital allocation as well as I do, and that's lucky for us. And he will make those decisions, I think, very much in the same framework as I would make them. And we've laid out that framework now for 30 years, probably, or something like that. People make it way more complicated. I mean, particularly if you're working on a doctorate or something, it's just a great subject to have lots of footnotes and, you know, 50 pages or 100 pages. But it's no more simple, it's no more complicated than if you and I and Charlie had a business and you want to sell your interest and we could buy it for less than we thought it was worth and without misleading you in any way about what was going on. And we'd buy it then. But Greg, you're on because you're going to be doing in the future.
Greg AbelRight. Yeah, well, I think Warren, you said it really well. I mean, the framework's been laid out. We know how you approach it and how you and Charlie have approached it and really don't see that framework changing. When the opportunity presents itself, we'll want to be an active repurchaseer of Berkshire shares. We think it's a great outcome for Berkshire shareholders to own a larger piece of each of our operating businesses and the portfolio, the equity companies, when the opportunity presents itself. It can be the dumbest thing you can do it or it can be the dumbest thing you can do it, or it can be smartest thing you can do. And to make it more complicated than that and start getting into all these, but you obviously do what the business needs to do first. The opportunities are there, grow your present business, buy additional business, whatever it may be, and then you make a decision on dividends, but that decision becomes pretty irrevocable because you don't cut dividends without having major effects in your shareholder
[2:38:45]
Warrenand a lot of things and then if you've got ample capital and you don't see that you're going to use it all and your stock is attractive and it enhances the intrinsic value for the remaining shareholders, it's a no-brainer and if it's above the price of intrinsic value, it's a no brainer that you don't even listen to anybody no matter what investment banker comes in and tells you here's how to do a repurchase program.
OtherOkay. Station one.
QuestionerI'm Tom Nelson, a podcast here from North Oaks, Minnesota. Charlie, in 2022, you used phrases like really massively stupid, massive kind of ignorance, and crazy to describe what you said was the 30% of Americans hesitant to submit themselves to untested MRNA COVID gene therapy. therapy. Do you stand behind those quotes today?
CharlieYeah, sure.
OtherWell, we got time for one more than before lunch. Becky?
OtherOkay. I thought I was out, but let's see. How about? Let's see here. Could be how about lunch pretty soon, but No, no, okay. Let's back that one for you.
OtherThis one comes from Drew Estes. This is a question for Warren.
QuestionerIn your 1969 letter to partners, you said in any company where the founder and chief, driving force behind the enterprise is still active, it's still very difficult to evaluate second men. The only real way to see how someone is going to do when running a company is to let them run it. This wise statement now applies to Berkshire. Once the second men are running Berkshire, what would you advise owners of Berkshire to watch for, specifically what actions, if taken, should give us concern?
WarrenWell, I think I would just do. that I would have some comfort in the fact that 99% of my net worth is in that company. So I probably got a stronger interest in it, and perhaps a hundred billion or more of philanthropy will be affected by it. But I would say that I don't have a second choice. I mean, it is that tough to find, but I've also seen Greg in action that I feel 100% of comfortable and like I say I don't know something happened to Greg I would tell the directors you know they have a problem and they won't I don't have anybody to name and if they put somebody in Bircheron automatic pilot can work extremely well a long time I mean it doesn't it doesn't like the businesses go away or anything sort and you can't it's hard to judge successor management in a really good business. Because if they, if they don't show up at the office, it'll keep working for a long time. And maybe, maybe that
[2:42:16]
Warrenlack of event, useful input may show itself in five years. I mean, it may go a long, long, long time. And how are the shareholders, you know, advised by a bunch of people that people that are concerned about whether you're meeting earnings projections or something telling them whether the management's any good thing. You know, it is very, very hard. It's very hard. I've been on the board of 20 companies. It's very hard to, if you ask me to rank the management of each one, I, it's, it's very difficult to do because some are just better businesses than others. Some would be better off not managed hardly at all. Others really need help, but they got a lousy business and uh tom murphy told me a long long long time ago he said the secret of businesses to buy a good business and it's okay to inherit one too and Greg is inheriting a good business and i think he'll make it better but i don't think it's easy to put any one of the next 10 nominees in and try and judge three years later whether they've done a good job or not so it's going to be that that'll be a very interesting job for the board but it shouldn't listen to the wall street on it they've got the job if they put somebody in there's a surprise we both go down on a plane they put somebody in they've got a real job in assessing that person it's uh it'll depend on on how good he or she is as a talker it'll depend on you know them courting wall street to be supportive of them all kinds of things and uh we've got some very good people on the board but they would be challenged in that position as would i where i've been in that position in other companies where a very great leader has left and uh on the way back from the funeral you know nobody knows what to do exactly so with that cheery message we will go to lunch and we will come back we'll see at one o'clock thank you and we're still going to try and get 60 questions in we've done 25 so far 20 yeah 25 so keep the question and I'll try and keep the answer short. Thanks.