Berkshire's 2023 annual shareholder meeting: Watch the full morning session with Warren Buffett

excuse me good morning good morning and thanks for coming I love it Charlie loves it we're glad to have you here we're going to make this this uh preliminary before the question is very short because we want to get in at least 60 Questions half divided by the the audience outside this Arena and a half from you so I would just like to get right to the to the directors and the earnings that have been put up on the uh on our web page this morning but we'll cover those very fast and we'll get to the questions now I when I woke up this morning I realized that we had a competitive broadcast going out somewhere in the UK and and they were they were celebrating a King Charles and we've got our own King Charles here today [Applause] and next to him we have Greg Abel the who's in charge of all the operations except for insurance next [Applause] and actually great we have uh 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 Jaden [Applause] and now we have our our directors here in front and if they would just stand briefly and then I'll go on to the next one and and uh they're all here today first of all doing alphabetically there's Howard Buffett there's Suzy Buffett there's Steve Burke [Applause] Ken Chanel [Applause] Chris Davis [Applause] Sue Decker [Applause] Charlotte Guymon [Applause] Tom Murphy Jr [Applause] Ron Olson [Music] Wally Weiss [Applause] and Merrill Whitmer [Applause] [Music] that's as good as you can get and there's one other person I would like to mention before we get on to the earnings that were put on the uh uh in the press release this morning and uh that's uh well let's see who we have there we've got this is hard to believe can you imagine a name Melissa Shapiro Shapiro and she was uh Melissa Shapiro until she 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 of the other room Melissa [Applause] yeah it's very easy if you can remember her second name you can remember her third name so Melissa shabiro Shapiro and with that I would like to next move on to the earnings in a couple small slides that that explain what we're all about and then we're going to get to the Q a and uh 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 earnings a Berkshire Hathaway as generally well as required under gaap excluding however 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 uh 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 uh 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 them 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 uh I would say that in the general economy the feedback we get is that uh I would say perhaps the 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 uh the the businesses have left the incredible period which is about as extraordinary as I've seen in business since World War II uh where the government would pour 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 their backlog it was an extraordinary period and that period uh has ended it hasn't ended with as you know it isn't that employment's fall born off a cliff or anything in the least but but it is a different climate than it was six months ago and and a number of our managers uh 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 uh despite the fact that this year I think in general will be slower than last year we actually are situated so that I would expect and believe me when I say accept expect it's nothing is sure nothing sure tomorrow nothing sure next year and nothing is ever sure either in markets or in business forecasts or anything else and we don't pay much attention to markets or forecasts unless the Marcus Epping off or something interesting to do but nevertheless we are positioned in two respects as you'll see from from this uh first report our investment income is going to be a lot larger uh this year than last year and that's that's built in I mean we have as you'll see in a minute we've had 125 billion or so in very short term investments and and believe it or not uh 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 just day or day before yesterday we actually bought because of someone funny twist in the market because of doubts about the deficit ceiling or the debt ceiling uh we bought three billion of bills at the 590 [Music] that's 5.9 is it 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 here 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 uh it does not correlate with business activity it depends on things like hurricanes and earthquakes and and other events so on a prospective basis on a probability basis we're likely to have a a better year uh this year in Insurance underwriting than we had last year uh it just isn't affected by what you might call the business cycle or uh what applies to generally an industry detailing you name it uh so I would expect and one massive EarthQuaker one one hurricane that came into just the wrong place I would can affect that prediction but on a probable listing 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 uh greater than last year and if we'll move to the second slide uh I give you those operating earnings figures just to give you a overview of what has happened uh since the pandemic started and off of the year the yearbook before as a base and we retain all our earnings as you know so if we're retaining 30 or 35 billion or whatever but maybe a year you should expect more operating earnings over time I mean this I mean this this number should be significantly higher five or 10 or 15 years from now because 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 sometimes but we were working with a much smaller Sons 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 uh now that'll be see it's on the well on the on the next on the next place paid and much smoother the next slide we showed that we had on March 31st now 500 and was it 504 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 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 Gap accounting now than any other company in the US and of course if you measure return on on Equity that becomes a very big number to increase at a rapid rate but we hope to do so uh not a rapid rate additional rate um and right below that you see something called float and float is money that uh is left in our hands uh somewhat Akin but very importantly different a little bank deposit but it you have to pay interest to get a bank deposit you have to pay more interests 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 so what shows up as a net liability on our balance sheet is gives us funds uh do 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 hurry that we have working for us and it's a very valuable asset that uh that shows up as a liability and uh Ajit is responsible for building up this treasure uh which has done been done by out competing insurance companies all over the world and then now a number of our insurance companies in turn are run by talented managers who contributed one way or another uh start with Geico the beginning of my career and the uh that float if you think about it just think of a balance sheet you've got liabilities here and you got assets over here and and the liability side finances the asset side is very simple and stockholders Equity finances it long-term debt finances 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 do eventually and if and it may not be available uh but float is another item that shows a it's a liability but hasn't cost us anything and it 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 but but we've always thought of it that way and it's built up over time so uh I show at the bottom what's happened with cash and treasury bills through March 31st and I will tell you that the in the month of April we probably added about seven billion dollars 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 dollars worth of stock in the month of April that's that's a minus uh in terms of cash available and uh we we however sold net some stock which produced maybe 4 billion and of course we had operating earnings probably two and a half billion or something in that area and my guess is we probably increased our cash and treasury bills uh six and seven billion in the month and uh I just want to give you a feel for other cash flows at Berkshire and then if we move to the final I think it's the final one next to the last one uh no I I think it is the last let's see it's the fourth yeah is this we should have the one of their class a equivalent shares outstanding and and uh 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 chair as shareholders as owners a Berkshire increases every year without you laying out any money now you're laying out the the alternative which you could receive in dividends but the reason we've gotten to where we are is because we we kept the money we did pay a dividend in nineteen sixty seven ten cents to share it was a terrible mistake and I I always tell people that I I'd love for the men's room and the directors voted it while I was gone but that isn't true I was there I confessed they uh but we were invested and has produced the 500 billion possible shareholders equity in 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 uh with that I think we've taken care of the preliminaries you can study that the 10q is is on the uh on the web page and if you have a week or two vacation you could spend it reading the 10-q and but that is the essence of Berkshire and with that I will start with Becky quick and and uh we will alternate between Becky and 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 Becky thanks 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 well I've just simply say it would have been catastrophic and that's why they were covered uh and even though the FDIC limit is 250 000 that that's the way the statute reads but that is not the way the us is going to behave uh any more than they're going to let the debt ceiling uh uh cause the world to go into turmoil and they ah well they're just I 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's saying uh I'd like to be the one on television tomorrow and explain the American public why we're keeping uh uh only two hundred and fifty thousand dollars insured and we're gonna start around every Bank in the country and disrupt the world financial system uh so uh I think it was inevitable Charlie do you have any no I have nothing to add okay well uh incidentally I should mention this now ajeed and Greg will be here in the morning session which ends at noon and so uh if you've got questions to direct to them the time to do it is in the first half of the show and and then after lunch it'll uh just Charlie and I will be back okay area one hi nirav Patel Haverhill Massachusetts Mr Buffett Mr Monger it seems like you found the Sweet Spot between being being too conservative and too aggressive as investors do you ever make bad investment decisions because of your emotions and what do you do to try to keep that from happening well we make bad investment decisions uh plenty of times I make more than Charlie because I'm I like to think it's because I make more decisions but the public normatic average is worse but I can't recall anytime in the history of Berkshire that we made an emotional decision that I know the movie had Jamie Lee in there but that that was for Laughs I mean Jamie Jamie Lee she's good but she's not good enough to get me or Charlie to make an emotional decision [Applause] Charlie I'm sure you have something to add on that well it's a different movie than it is shown in the most corporate meetings [Laughter] but have we ever made an emotional decision no no that's in business we're talking about yeah yeah no you don't want to be a no emotion person in all of your life but you you definitely want to be a no more no emotion person of making an investment or business decision that uh you can argue that that uh uh 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 we've ignored the fact that perhaps they weren't quite what they were earlier but our businesses are so good that they they've run better sometimes when uh you know I've talked about West Coast for example the wonderful Louisville it ran on it ran on automatic pilot for a while but I don't think we suffered by it but you're going to argue that if Charlie and I hadn't liked Louie as much as we did we might have spotted a little bit early but I don't think it made any difference in the results would you would you agree with that Charlie yeah yeah you'd be totally with it and I'm glad I'm glad we behaved the way we did at Wesco by the way we bought the thing for a few tens of millions and it became worth two or three billion yeah that wasn't common in the Savings and Loan businesses you may have noticed and they don't want they really want crazy in that industry and and we had a wonderful guy in Louis and we didn't go crazy yeah we didn't go crazy um okay Becky this question comes from Ben Knoll in Minneapolis he says he's a Berkshire shareholder of three decades and he's attended many Berkshire meetings he'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's scheduled railroading will each of you please provide perspective on these competitive challenges and our company's strategies to address them let me in terms of Geico and telematics let me make the observation that Geico has certainly taken the ball 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 is has a telematics input to to the pricing decision unfortunately less than half of that is being taken up by the policyholders the other point I want to make is even though we have made improvements in in terms of Bridging the Gap on telematics we still haven't started to realize the true benefit and the real culprit or the bottleneck is technology Geico's technology needs a lot 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 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 uh 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 you 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 93 and change which means a margin of six and change even though that's very good it's not something we can take to the bank because they're two unusual items that contributed to it firstly we've had what is called prior year Reserve releases we've reduced results for the previous years and that contributed to it and secondly every year the first quarter tends to be a seasonally good quota for auto insurance writers so if you just for those two factors my 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 96. I hope they reach the target of 96 by the end of next year uh and 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 have 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 okay yep moving to BNSF I'll start again by expressing great pride in the BNSF team we have an exceptional group of led by Katie and and her managers that uh show up every day to do great work on on the railroad at the same time they would be the first to acknowledge there's more to be done there uh the specific reference to Precision scheduled railroading uh the other large railroad Class A uh on the railroads in the in the U.S follow that and including the two in Canada we're well aware of what they're doing and and obviously pay close attention to their operating Matrix and our team strives every day to be more efficient obviously I would say we balance it with the needs of our customers if I look back to pre-2022 so we look at the three-year period of 2019 2020 2021 the BNSF team made significant progress on their efficiencies and and and delivering overall value back to the shareholders and and to their customers and at the same time maintaining a very safe railroad for our employees so we're making excellent progress that didn't stop last year they made great progress again the reality in 2022 as 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 issue 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 2022 we're well aware of where we were relative to those metrics but the real Focus was to get the railroad reset in a in a safe manner such that we could deliver long-term value and long-term service to our customers and and that's really what we'll continue to see with that team they'll be continual progress there'll be years where it's not as quickly or even we go backwards but over the long term we'll be very 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 deserves but both of them deserve Applause uh the I would like to add one thing the and Geico dot Combs was Jake'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 and he works closely uh with the Jeep because he saw his home and all Mulligan comes back here and we we get together on the weekend sometimes too so uh that's been a a remarkable com accomplishment under difficult circumstances and he's not all the way home but he said he just made a very very big change uh 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 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 we're of course they're in a tech company with it everybody's whether they're in insurance or a lot of other places are using the facility but you still have to properly match rate to risk and uh uh that they invariably have reported a 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 10 years that has been a overwhelming success and that's a company that Ajit and four people who join with them set to develop a new business it's called Berkshire Hathaway specialty it now has yeah what's the float a Jeep coming up to 12 billion yeah yeah we've we've built more slope than probably all these companies combined we've now it 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 we took on the whole industry and we brought some unique talent and the four people that came and now have like you said 1500 or so worldwide and we brought capital and we brought okay capabilities that really only Berkshire could Supply so it was the it was the combination of of brains and talent and energy and money and no one has really successfully entered this this space plenty of people in the space who didn't like us coming and we did it without it costing us a dime of Entry and it's been unmatched by any of the public companies that went public and people who've seen us do it but they can't duplicate it and that's what Vegeta's created and Peter Eastwood has led this group Berkshire Hathaway specially and uh it's just remarkable so anyway with that let's go on yeah we'll give him a hand for that [Applause] [Music] okay let's go to section two hi Charlie I'm Lorenz I'm Karen here your priorities are right yes I have questions on AI and Robotics here's my questions as Ai and Robotics continue to advance what do you believe will be the positive and an active impact of this technology on both the stocks markets and society as a whole and are there any specific Industrials and companies that you believe will be most impacted Karen I thank you for asking Charlie that question well if you went into byd's factories in China you would see robotics going in the unbelievable rate so we're gonna 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 [Applause] there won't be a there won't be anything in AI that replaces the gene the state that unqualifiedly they can do amazing things uh you know Bill Gates brought me out of them out the latest maybe not the latest version but one he thought maybe I could handle which has to be careful with me in terms of leading me too fast uh and it did it did these remarkable things uh it didn't but it it it couldn't tell jokes Bill told me that ahead of time and it prepared me and it it just isn't there but you know things like checking all the legal opinions on you know since the beginning of time and everything and eliminating all the sided I mean it can do all kinds of things and when something can do all kinds of things I get a little bit worried and 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 II 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 a choice but uh uh when you start something well Einstein said after this has changed everything in the world except how men think and uh I would say the same thing May not not the same thing I don't mean that but I mean 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 commercial real estate as a result okay 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 Berkshire is so 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 as they say it will awfully it will often involve a different set of owners yeah in the buildings the buildings don't go away but the owners do well but but most people like to buy with non-recourse in in real estate and and one time I asked Charlie there was some real estate guy we were talking to him and you know how do they decide 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 real estate generally you'll understand what the phenomena that's happening if you do if you remind yourself that that's the attitude of most people that have uh become big in in the real estate business and and uh and it does mean that the lenders are the ones that got the property and of course they don't want the property usually so then the real estate operator comes on negotiating with them and and the banks tend to you know extend and pretend and there's all kinds of activities that arrive out of 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 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 done Charlie's had more experience than really Charlie got it started in real estate though I mean Charlie Charlie yes it it's difficult I like what we do better well as Charlie once said to me when I was leaving his house a few months ago I was visiting him we talked for a couple of hours and I said to Charlie as I left I just it wasn't anybody else in the house and I said except one daughter and I said uh Charlie hello I'll just 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 yeah he was right too ah station three is it hi uh my name is salazi I'm from Santa 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 you think investors should adopt and any recommendations for investors to remain successful in this rapid changing landscape thank you take that one I think value investors are going to have a harder time now that there's so many of them competing first a diminished bunch of opportunities so my advice to Value investors is to get used to making less and Charlie was been telling me the same thing the whole time we've known each other we we get along wonderfully because we are making less yeah well but that's because that mostly I think is because it's larger we were younger we never thought we could manage 508 billion no one or five yeah but I I would argue that uh that uh there's gonna 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 them in the years since 1942 when I started to say well how do the kid that doesn't know anything about airplanes it doesn't know anything about androgens and cars and doesn't know anything about them electricity and all that but that really isn't the that's not there 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 uh is that [Applause] and I would say that well the 58 years we've been running Berkshire I would say there's been a great increase uh and 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 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 uh if you were a Droid at it whether the business succeeded it or not and the underwriters got paid and the lawyers got paid and that creates if that's not 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 uh and uh so I know I think that investing has disappeared so much from this huge capitalistic Market that anybody can play in but the big money is in selling other people ideas that isn't outperforming in outperforming and I think that I think if you don't run too much money which we do but if you're running small amounts of money I think I think the opportunities will be greater but then Charlie and I have always differed on this subject he he likes to tell me how gloomy the world is and I I like to tell them we'll find something and and so far we've both been kind of right on that or not there there is so much money now in the hands of so many smart people all trying to outsmart one another and not promote one another getting more money out of other people and it's a radically different world from the world we started in 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 you don't have to play I mean if you look at that Government Bond Market I feel the treasury ball Market I mean you've got this one bill that's out of line with the others when we were over three billion of us the other day and and 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 those out of 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 that is the world was made to order for anybody that's trying to think about what you do that should work over five or ten or Twenty Years and uh I 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 just like he he would find something to do I will just guarantee you uh 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 pie but we like my big piles is the Way It Is Well I like we agree on that incidentally okay we do you're one of the most extreme lovers of the big pile Becky this question is for both Warren and a g it comes from Jason ploner in Livingston New Jersey he says in 2016 you entered into a very unique transaction with AIG where you assumed up to 20 billion dollars of liabilities in exchange for about 10 billion dollars 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 any insight as to how Berkshire liabilities are susceptible to duration would be appreciated is that direction to Vegeta or me or what both okay let me introduce my one thing and well but Egypt is the key to this he's the one that put the deal together but we got handed 10 billion we'll say uh uh and but we weren't restricted to putting that into into bonds uh so what the exact interest rate interest rates affect us to some degree maybe in terms of the terms uh 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 then well the liquid assets now are 130 billion plus and that but it goes in so it you know it it it is not set aside in some little compartment like people like to think uh now any any other insurance no other insurance company could do it but they can't think that way uh 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 for 26 or something like that of the net worth of all property casualty companies in the United States uh so uh so far uh the payments that we have had to make have run modestly and Ajit will correct me on this if I'm wrong because he paid a lot of attention over the the amount we have had to pay has runs slightly below the amount we anticipated having to pay in terms of our share of the losses uh 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 write that just like when when we took on the Lloyds I mean Lloyd's 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 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 a jade no 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 expect it to pay out as Warren mentioned these two numbers are very close to each other more specifically the actual payouts are 96 percent of what we had 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 four percent significantly less than four percent in addition to that we would have made a fee which in 1990 which in 2015 dollars would be a million dollars so if you would have borrowed money at less than four percent 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 uh but the game is not over the taught liabilities are coming down 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 well the really interesting thing is that in within Bircher the Casualty Insurance companies have four times as much stockholder Capital between 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 wanted to dump on somebody 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 who do business with us know that they have somebody like nobody else on those and it's going to be able to pay 10 billion you know if no matter what happens to the economy so it's not only the presence of enormous strength in the insurance companies this is 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 debt I mean we we have debt at the railroad and the energy level but but in terms of the rest of the operation uh and and we don't guarantee that that but but it's probably good uh and it's there just isn't another Berkshire and uh and the Jeep recognizes that when he's negotiating so does the other party if sums are big enough there's all kinds of people that love to get 500 million or 300 million and they'll and 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 okay 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 will run the business on the day when not if the founder is no longer there to run it the kids aren't prepared unlike uh King Charles the 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 I 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 that they're going to catch the football and go score a touchdown probably only around 10 percent I've got the picture on on the question no they uh I probably observed as many just because of my age and to some extent because of things like the giving Pleasures I probably observed as many particularly wealthy families the problems and they all are they get very particular uh to the family and uh uh and uh 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 one success if I'd done the same thing as their 20s it depends on the Family it depends on how the kids feel about each other there's all kinds of things depends on the kind of business you have so there's a 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 burns have made a terrible mistake and uh people people who well I've run into all kinds of situations and some people don't tell their children anything and some of them try and get them to bend to their will by using their their own personal World they make a million mistakes and that's when you don't get to correct uh and certainly in my well Charlie's had a lot of experience too well at Berkshire we have a simple problem of uh estate planning just hold the goddamn stock well but that doesn't fit everybody Charlie I mean uh you know if it's 95 percent I don't think it necessarily I don't know necessarily whether we have billions of dollars you want to leave it to your all your children I mean that's something that's another question but if you're going to play places somewhere I just as soon as Berkshire stock is down oh you're solving the investment problem yeah but you've got the personal problem of the fact that when there were four one of the kids pulled the other kids uh cat's tail or something like that I mean you're dealing with human beings and the biggest thing you want is you want you want your children to get along and you'll want that all through your life and the estate isn't the only place where you can mess that up but the it's a place where you 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 a long sense of it it's it's a it's important to handle it right and uh uh it's important if you want your kids do 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 going they're learning from you from the day they're born what you're really like and uh 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 and they grow older and then they they they learn to they them 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 is something else but I know in one instance by particularly Rich fellow that once a year he'd get those 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 why necessarily real words with him but uh if you want you know about Charlie and I've said it you know if you want to figure out how you want to live your life who you write your obituary and reverse engineer it I mean you know and uh and Paul Andrews incidentally who you mentioned that TTI lived as great a life as anybody I've known and uh he he thought about these problems 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 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 business TTI and he said I've got all the money I need the families all the money that I need but what do I do with the business these people have have helped me throughout my life and he says I could sell it to a competitor and if I sold it to a competitor they'd 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 figuring their exit strategy as they sign the sign the papers and he said so I've been thinking about a year and uh 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 uh that was a man that knew what life was about so with that let's go on to Becky [Applause] uh 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 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 lands spilling oil in an environmentally sensitive area what is Warren doing to ensure that BNSF and other Berkshire subsidiaries fulfilled 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 sure so the uh it it is a valid issue that our team obviously has been dealing with at BNSF we did move uh crude across that tribal land we had an agreement that allowed us to move X number of of uh units per day and we did breach it we went over it there's uh there was some fundamental breakdowns there in that our team didn't understand the number of of trains that they could move we have had significant discussions with the tribe looking to resolve the issue recognizing uh we obviously been benefited from moving those trains and those type of discussions will continue um I would say there's Lessons Learned there that we have to when we make a commitment understand what that commitment is and and live by it or don't assume we can just move our trains as we wish or the 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 to reach a resolution there and at some point I I hope we do come to a true resolution that's fair both to the tri-band to BNSF on the derailment side we did have a an issue around the track derailed we worked very closely with the tribe to mitigate that issue instantly where at least over a very reasonable period of time they were very responsive our team was very responsive and there were really no long-term environmental impacts to to that to that's Bill and as our teams 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 with our trains 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 there are derailments how many how many a year yeah well there's uh a thousand plus in the industry the the yeah yeah it's you start hauling right and we're a common carrier we and we take heavy very heavy Freight and we take them at 100 degrees when it's the weather and it's we take it at zero and and we go around curves and we have grades and uh even a one percent rate if you're going down down a 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 and basically in the in the late 1800s amid the late 1800s 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 gonna we will have the derailments 10 and 20 years or 30 years from now I mean that 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 no but they're going to move from one place to another in this society and we are a common carrier and uh we load them and uh if they select our railroad but we are better than we used to be but we got a long way to go I didn't was that a fair enough statement absolutely yeah okay station five hi Mr Warren and Miss Manga my name is from China company and first of all 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 made the new energy firm achieve better development in future yeah well Greg I think it's the best answer that because he since we bought a company called Mid-American but now called Berkshire Hathaway energy but he's been talking about a yearly preparing reports hoping that we can help solve a number of the problems and we probably spent more money than any utility I'm I would guess in the United States absolutely and uh and we've just crashed the surface but it is not easy when you cross state lines I mean it's uh uh you've got different jurisdictions and we should this country should be ahead of word is in terms of transmission and uh we have been the biggest factor in helping that uh but why don't you tell them a little bit about it sure things weren't so there's no question there's an energy transformation going on around the globe and and as Warren touched on in the U.S and in some ways I would hope in here in the U.S it would be um we'd at least have a a clear plan Across the Nation as to how to uh approach that but the reality is it is state by state uh with some exceptions but so as a result when you think of Berkshire Hathaway energy we we own uh three U.S utilities there and and they'll participate in multiple States but they're developing plans state by state and then trying to integrate them across the the various States the the opportunities are significant because there is a transformation going on uh We've outlined our goal on on where we're going relative to carbon at bhe where they'll buy 20 30 reduce their carbon footprint by uh 50 relative to 2005 so that's the Paris Accord and the standard they want to hold the the utility industry or the utility companies do and and we're well on that path but to achieve it is a true Journey uh I've often talked to Warren when we bought Pacific Corp back in the mid 2000s we immediately recognized uh to build a lot of renewable energy like we've been doing in the midwest in Iowa but that was basically in a single stay 8 now Pacific Corp were in Six States we started that in the back in the mid 2000s here we are and we laid out a great transmission plan here's how we're going to build it here's how we're gonna uh 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 six billion dollar transmission project today we have a little more than a third of it built and we've spent probably closer to seven billion dollars and it's the right outcome it's still a great outcome for our customers but that transmission you absolutely as part of the transformation you absolutely have to build it to remove to move all that renewable energy and that's sort of the complexity Warren was highlighting it is a uh you you can't just wake up one day and 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 VA G Energy and that energy transformation we have 70 billion dollars of known projects that are really required to properly serve our customers and Achieve that type of energy uh transformation across those utilities and that and that's in the coming next in the coming 10 years so um we have a team that's absolutely up to the challenge they're delivering on their commitments and it's a very uh very good business opportunity for for each of our companies and for our shareholders because as we deploy that Capital we obviously are in a return on Equity of it so um but it will be a long journey it it hap it'll happen over an extended period of time and and the further you get out there the more dependent more dependent upon the uh the evolution of a variety of technologies that are progressing but not there yet so you you've raised a question I want to just take an extra minute on because it's so important and and I don't really know whether our form of government uh is ideal at all in terms of solving uh the problem you described we have solved it one time in World War II we took a country that was semi-lumping 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 Sydney Weinberg or Goldman's actually you just name him 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 and they 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 peacetime where you've got 50 50 states and you have to get them to cooperate and you don't have anyone that you can you can issue orders but you can't you can't designate where the capital goes as 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 II were essentially everybody felt their one job was to win the war and we figured out how to use our industrial capacity to uh in effect defeat the axis of powers and uh how do you recreate that uh uh with the present democratic system I I'm not sure I know the answer but I sure know the problem but um and I think that it if you can think of a if you've got an emergency on your hand I mean you really need to re-engineer the engineer energy system in the United States I don't think I don't think you can do it uh without something resembling the Machinery the urgency whatever the capital is there the people are there uh the the objective is obvious and uh uh we just don't seem to be able to do it in a peacetime where where they're used to following a given set of a procedure and uh and you know China you've got one country and we've got we've got 50 states and we got a whole different system of government that we should be up to the test but so far it hasn't worked but uh so thank you for the question Becky this question comes from Chris freed in Philadelphia he says we know that Greg Abel and Ajit Jain are the next generation of Berkshire leaders who are currently behind Greg and Ajit in their prospective roles respective well that will be the question that they give their well Greg will be have some things extraordinary circumstances but 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 the corner because he's better at many things than I've been uh he will need that a substitute and when the when the question comes word we know ajit's opinion on that uh and but Greg will probably be the one that will make that make the final decision I mean it says it was being his responsibility and Ajit will give him his best advice and I think the others are very very very high that great would follow him so but it's not those are not easy questions it doesn't like we've everybody talks about the executive bench and all of that sort of thing which is baloney I mean you know it they 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 right operating manager and we've decided to design 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 wish Martin name that decision now about the two different different uh areas of the business because a lot can change between now and then and the most likely changes that this job changes Charlie I I got nothing to add we have a lot of good people that have risen and the Berkshires and City areas 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 is that we change managers way less frequently than other people do and that's helped us when Paul Andrews died we know we know who he thought to take over there but there wasn't any reason to to announce that I mean that Paul Anderson would I wish he'd lived to be honored we had we had one of our managers die not longer going how old was he at Karen yeah mid 90s Seymour yeah see more away from the scene and Seymour I wrote him a letter when he was 80 and I said you know I'm glad you're 80. and I'll write you again when you're 90. and uh I wrote him again one of his 90 and he didn't make it to 100 but but he had a terrific uh following him and it really Managed IT jointly to some extent as the years went by but it's Case by case and the main thing to do is have the right person running the whole place okay station six good morning my name's hatch okamot I'm from Miyazaki Japan a Mr Buffett I was one of the 8 000 employees at Solomon Brothers that you saved I was younger back then I 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 thank you and and and thank Derek thank Derek Martin 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 it 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 but we've been we've had a lot of tests I mean we're such a young country you know 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 what are we 234 years old since since we started that that's that's that's nothing I mean you know Charlie and I combined are two-thirds of we look two-thirds of the life of the country so and I mean it really has I mean we've we've been tested at 46 national elections but and and we've made some bad choices and we've got a Civil War I mean it so the the country has had an enormous Advantage as 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 and oceans on each side back when when uh people tried to rule away Rule the World by ruling the waves but it you know and we've 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 manner but net the United States it's a better place to live but almost when I was born by a huge Factor I mean I just got a root canal a week ago and I was just thinking I don't know who even invented Nova game but I'm for him you know I mean but in a million ways I mean you can roll you can romanticize about the past but forget it uh it is it is work but now we do have an atom bomb and we we wish nuclear power yeah you know we wish the item had never been split but but uh 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 it all it was unified by the war to some degree but it was still very partisan now the problem we have I think is that partisanship and it seems to me has moved toward 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 it flows I mean you've seen it all Explorers we've seen it to a degree here so we 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 still had a choice of any post to be born in the in the world I'd want to be born in the United States and I'd want to be born today I mean it's it is a it is a better world than we've ever had and with present-day Communications we can also see it seem 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 and growing and we went Millennium 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 two billion people so it's it's an exciting world it's a challenging world and I I 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 problem 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 they'll go away by 2050 or anything it uh uh and 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 looks at it what was going on in the Civil War didn't look very promising either so I think that that the U.S is capable of doing remarkable things and I think I wouldn't surprise me if they do it again Charlotte charleming are you well I'm slightly less optimistic than warranty I think the best wrote ahead to human happiness as we expect less 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 the way to 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 Charlie was born on January 1st 1924. and you'd hate to go back to that wouldn't you Troy yes I would and I I I like more worlds managers who were just merely reflecting the fact there's more wealth but we've got I don't like everybody going into wealth management of MIT or something it's I think the world's a little crazy now take your choice okay Becky now this question comes from Dennis degennaro as Warren stated in the 2022 annual report Berkshire will always hold a boatload 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 Cairo 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 well I think it's fair to say we think about it plenty but I don't I don't I don't I don't worry enormously if we it is true that that uh Greg and the directors will have a honeymoon period for a long time because simply because uh of the boats it will still remain I mean it and and uh 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 and in 12 or 15 years you're talking a trillion and a half and it would take to take over and and uh I think if we can't that that limits the group they like to think about how much they can borrow against it it doesn't work when you uh and 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 the 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 lots of behavior and it can be compared with other things so I I I think we went out of if we deserved to win out and I think uh I think the odds of that happening are very very very high Charlie well we I don't spend much time worrying about fluent can happen 50 years ago and ever I'm dead I I think you sort of take care of each day's responsibilities pretty well and think ahead as well as you can and you just take the results as they fall so I'm I'm philosophical but I I'm not I'd be spreading unnecessarily okay neither one of us are worried basically uh but we but but we plan we do plan and and you know I've got a model in my mind of what Berkshire has been that model's getting it's been modified plenty of times over 58 years and the one thing I know initially is or very quickly was it shouldn't be a textile company that was that was an important decision and and I mean we've just played the hand as a as a come along and and we made a few really good decisions and we will never make a decision that kills us only things that are a threat to the planet um we don't have any answer for those but we do we keep ourselves in better shape than anybody else that and we just aren't going to have big maturities of debt that come along we aren't going to have uh insurance policies that be can be cashed in at mass and we will sit with the Lord what looks like a huge amount of capital and but there's 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 a lot of people that we'd like to be graded against so uh I think we're handling 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 but this is the product of you know the 58 years of of regarding the shareholder as the owner of the company but what does that mean that means having happy customers it means being it being 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 good for the business uh and we will have crises of 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 were will be a plus to the United States and if we're close to the United States we'll we'll survive okay station Seven Mr Buffett and Mr Munger thank you for having us this weekend my name is Beau Clayton and I'm from Durham North Carolina one of the reasons that we are all here is that your 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 well I'll start out with a Jeep he walked into the office and 1986 and I had gotten the bright idea of going into the reinsurance business I think in maybe 1969 so I'd stumbled along uh for 17 years and I wonderful guy that ran it uh uh but he also liked certain Brokers and I mean he was running at the traditional wave top calls top quality and everything else but but uh but he fell into he he didn't try and change the system he tried to improve the system and uh to some degree and we just we went nowhere 17 17 years wandering around to the Wilderness and I thought I was um I knew we could have something good and then the Jeep came in on a Saturday and uh uh Mike Goldberg and steered him in I think and 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 and he had absolutely zero experience with with insurance but it actually seen a good bit of how Corporate America operated because they 've been in management consulting and after talking with him I I knew I'd struck golden and uh so I hired him and gave him the backing of some money uh and we had a very good period in the market almost right away for him to act and and the Jeep uh you know if I had the top pick of 10 Insurance managers in the world I'm I I could take all ten and they wouldn't you can't replace Ajit and uh we still enjoy talking I don't we don't talk as frequently as he used to but we should talk about every day but he is he's one of a kind and you know what if they're going to stick around long enough you only need one of a kind Paul Andrews stuck around a TTI had all the money in the world every time I talk to him about getting a raise or something of the sort he said we'll talk about that next year I 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 of hiring I mean I I just somebody mailed me a resume or something I don't care where they went to school uh uh and it just so happens that that she went to some pretty good schools but he isn't the Jeep because he went to the schools and uh Charlie didn't tell a story or two um how'd you find Louis vincenti well he was there I I but you got to recognize him I asked Louie 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 it's a yeah we had 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 and anybody and he watched everything in his business like a hawk and he was a he was amazing now there was an example we never found anybody who could do what when band died that billability left us yeah and you want a story it's kind of interesting because Ben Rosner had a partner Leo Simon at least Leo Simon was uh Moe annenberg's son-in-law and Leo therefore it was very very very wealthy and uh and then started with nothing but they they liked each other and one time well before they got involved in the in the business uh the business we bought but they got the idea of buying a submarine from World War One and taking it to the century of progress or 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 Walmart was going to his first World's Fair getting 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 what do you think you guys are going with a submarine Ben says he says well he said you'll have to talk to my partner Mr Capone and the cop the cop says girl I know just keep going and that was that was Ben Roger and then Leo Simon died and when he died in 1967 or so uh Ben Rosner kept delivering half thee prophets to his widow who was incredibly Rich of course being no Anna birks first born born daughter I think I think I think Moe had nine nine girls in a row before Waller came along the tenth I may be lost by one but anyway I went to this fancy apartment and anyway then then kept her in for a half the deal and he had her sign 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 then went to her his lawyer was her lawyer actually will felsteiner 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 buy it and he wanted me if I bought it he'd be rid of the partners ex-partner's wife and uh and he'd gotten he had me and Charlie come back and we went to will felsteiner's office and Ben says I'll work till the end of the year and that's all but I'll show you this thing for six million bucks and I had two million to cash and a couple million in real estate and a couple million of operating earnings this is crazy but he fell off he was getting a lousy prize she was taking a half of the lousy price for half the money so uh uh he looked at me at some point Charlie you described the rest of it again he said I heard here you're the fastest draw in the west he says draw we're one of the New York lawyer's office yeah and this guy is he's selling he's selling his baby and and he told us he's leaving I got Charlie on this side I said if if this guy leaves at the end of the year he can throw away every psychology book that's ever been written I mean it isn't happening and uh 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 uh and along the way I said uh then 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're shooting him he was a lot of fun we had so many Ben Rosner stories but now you've heard one that hasn't been published before okay Becky this question comes from chai gohil he writes this is for a G 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 in terms of Allegheny that's an easy response we look we treat our operating units independent of each other and as far as Allegheny is concerned they have a major presence in the reinsurance business under the brand name of transatlantic Ree 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 been minimal this December 31st which is a big renewal date for Cattery 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 towards the end of December till about the third week of December I was very optimistic that we would get a chance to put put several billion dollars on on the books but in the last 10 days of uh 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 we were 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 higher 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 uh to put that in perspective our exposure today is almost 50 percent more than what it was uh 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 uh I don't know how long it'll last and of course if the hurricane happens in Florida we could lose across all the units we could lose as much as 15 billion dollars and if there isn't a loss we'll make several billion dollars as profit and LG tell them how long when you called me and said you'd like to expose us to whatever was a couple billion more of of exposure how long I took to say yes yeah uh so the way we think about our exposure is you know in in the property in the insurance operations collectively across the entire company uh given that we have about a little less than 300 billion of capital we think of that as a 55 exposure that we're willing to take on so to complete Warren's story a few weeks ago we had about 13 billion dollars of exposure all across like uh the globe and I called up war and I said we have 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 I hope he calls me again okay station eight hello my name is adal Flores and I've been a shareholder for about 16 years and I'm coming from Guadalajara Mexico my my question is for Warren and Charlie companies have the Eternal dilemma between bought 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 for example Amazon was focused on building their famous Amazon flywheel with limited profits initially in order to abstain obtain stronger Network effects with the hope of getting 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 profit versus long-term definitibility thank you well the answer to control your destiny which we've been able to do it uh Berkshire so we have we feel no pressure from Wall Street uh you know we don't have investor calls we don't have to make promises we we get a chance to make our own mistakes and and occasionally find something that that works well but we recognize that the people in this room and people like them uh are the ones we're working for and we're not working for a bunch of people that that care about whether we meet the quarter estimate or anything so we have a freedom uh that we that we get to use and we're interested in men we're interested in owning a wonderful business forever we'll learn very many wonderful businesses but we do learn a lot as we go along we we Charlie and I have often mentioned how we learn so much when we bought C's candy which we did but we learned when we bought Ben Rogers chain of women's dress shops spread all over the the eastern part of the country we learned when we tried them getting into the department store business back in 1966 and as the ink was drawing on our purchase price we realized we'd done something dumb I mean but 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 that be nice if I knew it but but it isn't essential and you know we are obviously uh we've got a business at Apple which is larger than our energy business and we may only own Five Points six or seven 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 only we're learning all the time from all of our businesses how people react to Garanimals versus you know selling them something else and and so seize was a sort of breakthrough but but it just we just keep learning uh as to more about how people behave and how a good business can turn into a bad business and how some good businesses can maintain uh uh they're competitive advantage over time and and so um we don't we don't have some formula that person people we just but we can also tell them in 10 seconds whether it's something of Interest I mean with you know when when uh I get these calls and we want to send decks and all that sort of which is nonsense I mean it uh uh it's a bunch of guys sitting that 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 and threats do a business and then and that's what we've been about and that's what we'll continue to 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 a telephone too which we like Charlie well tell them the story of the Japanese investment that that should be told again that that that's that's a nice story you know well it was pretty simple I mean I you know other back when I started other people for going through Playboy and I was going through Moody so that you know basically and uh uh there's a movie out called Turn every page but which I saw again for the second time a couple of days ago Lizzie got leaving I recommend everybody in this world watch that because I turned every page in the past and uh 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 Newton the insurance department that it just kept turning Pages well that that goes on 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 well the Japanese thing was was simple I mean it kind of 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 them in a dozen different ways if you go a couple miles from where this place is the our last coal generating plant was built by one of the companies that so here they were they were sitting as a group where they were earning we'll say 14 percent uh on what we were going to pay to buy them they were paying decent dividends they were going to repurchase the 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 anything but we've 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 in the and that was going to cost us a half of one percent well if you get 14 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 we hit five percent uh in all of them we announced on my birthday and uh at 90th at the we owned over five percent and recently went over for the first time to visit with him and move 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 their agreeing and we sold another 164 or whatever it is uh billion of us again 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 an Old Dot in person'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 right talk show up about it and I probably talked to Charlie about this app the year after I started but who knows I mean I knew he'd like it I mean obviously and and uh we try 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 ahead plus dividends and we got a carry that's terrific and and you know uh and they welcome us and they should welcome us and but we we love it the way they're operating we're not there to tell them what to do in the least uh uh so we didn't and but we did say we never go over 9.9 and we mean it and then they they know that will be true to our word and I went over there partly to introduce Greg the those people because we're going to be Willem 10 20 30 40 years from now and they may occasionally find something that we can do jointly and they look they look forward to doing that we look forward to it and in addition we have some other operating businesses in Japan so great gaming now the only thing I would add is that one has warned you when over there it was to 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 were 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 Yen that we were issuing and selling turned out to be 164.4 or something like that everything everything's worked 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 us very widespread probably four or five hundred million dollars a year and uh you know we'll just keep looking for more opportunities and Japan we have Berkshire is the largest borrower outside of corporate borrower outside of Japan that exists and yeah 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 the uh and we've got some really wonderful Partners working for us and I don't have to do anything [Laughter] okay Becky 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 reach 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 like to make one comment first but Charlie will come up with yeah but apple is not 35 percent of of Berkshire portfolio bursar's portfolio includes the railroad the energy business or animals you name it See's Candy they're all businesses and uh you know the the good thing about Apple is that we we can go up they buy in their stock and instead of owning 5.6 percent you know they got down to I got about 15 billion 700 and some million shares outstanding they get down to 15 and a quarter billion without us doing anything we've got six percent so we can't own more than 100 of the NSF we can't own more than 100 of Garanimals or See's candy and it'd be nice we'd live alone 200 but it just isn't doable but they're all the same they're good businesses and to think that are 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 it's not remotely as good as Apple's business but uh Apple you know has a position with consumers where they're paying you know 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 we 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 it's like adding a hundred million dollars to our earnings I mean our share of the earnings and they use their earnings to buy out our partners which we're glad to see them sell out too the index funds have to sell 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 of years ago and I sold some shares when I had certain reasons why ah games were useful to take that year from a tax standpoint but having heard having heard me say that it was a dumb decision and uh Charlie you've already given your comment about it but but we do not have 35 percent of berkshire's portfolio berkshire'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 limiter or are mistakes who knows what the bottom is Charlie do you want to add anything to your earlier comment well I think one of the inane things is taught in modern University education is it 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 read my best ideas instead of my worst and now some people can't tell their best ideas from their worst in in the act of deciding the investment already is good they they get the thing gets better than it is I think we make fewer mistakes like that than other people and that is a blessing to us it we're not so smart but we kind of know where the edge of our smartness 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 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 diversification of portfolios okay yeah station nine hi Charlotte hi Charlie and Warren thank you for this superb shareholder meeting celebration my name is David Chung from Hong Kong and a proud graduate of Chicago Booth I'm also here with my two sons Aiden 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 Berkshire Hathaway which has given me a great return of 62 since 2019. so I want to thank you for that thank you I have also taken one of your advice to give my children a share for each of their birthdays although they won a Berkshire Hathaway eight years they will do just fine with pre-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 geopolitical tensions significant course optimizations with lean at U.S tech firms while China attack has been through all that already thank you Charlie I wanna well there's been some tension in the economic relationship of the United States and China I think that that tension has been wrongly created on both sides I think we're equally guilty of being stupid there's one thing we should do let'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 what Apple has done by engaging in a partnership with China as a big supplier yeah it's been good for apple and good for China that's the kind of business we'll be doing with China and more of it and with everything that increases the tension between the two companies is stupid stupid you know at least 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 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 uh but part of it is trying always in the game like that is trying to judge how far you can push the other guy without them reacting wrong and uh you know if either side is a bullying some ways they can get away with it to an extent because the alternative is 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 uh 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 that some leader of the promises too much couldn't get you on a hell of a lot of trouble and that like you know that you've got one kind of a system that gets this leader one way they've got another system that gets his leader another way and keeping keeping either side from trying to play the game too hard uh and thinking the other side will 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 that this is what we're engaged in we've got to do it right we won't give away the story but we won't try and take the whole story either and it it we we're just at the beginning of this uh unfortunately and I mean we've we've learned what the situation was it used to be the Soviet 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 close call uh 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 Caesar France or Spain but but now you're playing with a game that you can't really make a huge mistake in and I think 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 we'll be and that a lot of democr the the uh demography or the a lot of a lot of inflammatory speaking but a lot of authoritarian action I mean that it all carries its dangers and the world was stumbled through the years post 1945 with a lot of close calls from the in the nuclear Arena and now we've gotten pandemics and we've gotten we've got cyber and a whole bunch of other things so we've got more tools of Destruction the world's ever had and it 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 working but both places are going to be competitive and both can prosper that's that's what really is that's 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 and and the two are not just compatible they're almost imperative uh in terms of uh what's going to happen in the next 100 years or so and uh uh I think that the leaders of both countries have got an important job and and having that understood and not to do inflammatory things and we'll see whether the lock that has taken us from 1945 to present holds out and and I think we can affect to some extent that luck and without sure a message we will move to Becky this question comes from Rohit bellany Berkshire 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 to five billion dollars worth of Taiwan semiconductor shares at Taiwan semiconductor is one of the best managed companies and important companies in the world and uh there is not and I think you'll be able to say the same thing 5 or 10 or 20 years from now I don't like its location and and uh reevaluated that I mean I don't think it 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 uh is participating in in in their Arizona uh construction activities but uh it's uh it uh it's a question of we would rather have the same yeah kind of company and they're 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 uh and the man that was a 91 year old or so that connected with us and that I think I played Bridge with and and uh in Albuquerque and The Marvelous people marvelous company but I'd rather find a marvelous people I won't find it in the chip industry but marvelous people and marvelous uh 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 it uh I wish it weren't so but I think that's the reality and I've reevaluated that uh in the light of certain things that were going on try well my view is that we're in ought to feel comfortable if he wants to yeah put that in the minutes okay station 10. first of all thank you for making our lives better my name is bogumil Baranowski I'm a founding partner of New York we manage multi-generational family fortunes hence my question Mr Buffett in 1976 in your tribute to Benjamin Graham you wrote Walter lippman spoke of men who plant trees that other men will sit under Ben Graham was such a man you're both such people could you share with us your 100 Year vision for Berkshire it's a question to you both yeah I would like to add one thing about Ben Graham uh Ben Graham didn't all kinds of things for me and I never expected one thing in return I may just you name it and he did it and and there wasn't any hidden you know there's a hint I should say of of anything he expected in return and uh I I checked uh well he wrote a book in 1949 that in a sense said to me in very persuasive terms that what I'd been spending on the previous eight or nine years working at and loving was all wrong and 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 uh 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 there isn't any book I got I wrote harpercollins and 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 they had 7.3 million copies of this little book that changed my life and uh uh continues to outsell every investment book investment will come along and you know their number 400 or a thousand or something for a while and then all of a sudden they're numbered 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 in 1950 or number two or number three and you're looking in 51 and 52 they don't continue I mean they just don't continue uh cookbooks maybe one or two of 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 it'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 we wanted to be a company that is owned by shareholders and behaves in a way 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 and if so we'll be very happy Charlie yeah one of the really interesting things about vinegar 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 returned that Benny Graham made in his whole life came from one stock one growth stock Geico Birches subsidiary and he at the time he operated there were a lot of sort of lousy companies that were too cheap and you can make a little money floating from one to another but the big money he made was one growth stock buying one undervalued great company uh is a very good thing as Berkshire is found out again and again and again and and Ben wrote a post trip to the 49 Edition pointing out exactly that fact and acknowledging it but said but also took the some good lessons from it you know he said that's the way life is that 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 at a financial Leo Davidson uh and I think the banker got three quarters of it and I don't mean Leo Davis and Leo Goodwin uh who founded Geico then called government employees insurance company and you can figure out the acronym and uh the deal almost fell apart the deal was as I remember from maybe a million and a half or something like a million and a quarter and it almost fell apart because of a difference of twenty five thousand dollars in the net worth delivered this is a business'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 on about us about his the failings and but 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 the sort of the prepared mind the willingness to to act when you need to act and the willingness to ignore it every salesman in the world and and the imperative norm and uh is 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 we got more time now than used to have when I was a kid to make that decision and and uh you know I don't know whether a third or whatever percentage blow that one you know it it is it is really interesting the thing to do is just keep trying to trying to think things through not do too many stupid things and and sooner or later you have a lot of Polo so Charlotte would say okay Becky all right this question comes from terrafter 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 this 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 they 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 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 to that we will strike a deal with some of them before not too long Tesla has made NGM 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 three billion dollars a 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 sauce before not too long and we ourselves are in that race yeah I would I would point out that General Motors Motors insurance for decades and I mean this is not a new idea and uh Uber or a lot of insurance for a while they laid it off with somebody and that company got killed by it but I and 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 yeah James River yeah and you know it there's 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 in matching risk to reward I'm sorry risk to price then then uh a bunch of very smart people are doing at a progressive and a bunch of very smart people are doing it uh to a greater extent at Geico and I mean it it is it's just it was fascinating to me when Uber wanted to do it you know and they were going to get their head handed to them but they laid off a good bit of it and very very substantial percentage of it was somebody else who got their head out in this way and uh you know and but it was a story you know Wall Street loves it and uh uh I with we've got 80 car dealerships that do a lot of business uh and you know we've got the people buying the car and the place and and we form an insurance company around the group for some reason that rights Insurance you know it it's hard to improve on the president's system and yeah I I have no it wouldn't I wouldn't pay a penny I'd pay to avoid it actually I mean uh and go ahead yeah the only point I'd like to add is the virgins on writing auto insurance are four percent 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 yeah you can say the there was one big new idea in insurance and property and car insurance back in 1920 or so when State Farm started and State Farm uh and still has it next to Berkshire it's it's our 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 P Farmer for murder is the name of the book I think in over in Illinois and he created a system where he really took 20 points or so out of the cost and surprise surprise areas you know and nobody's own stock in State Farm it's it's it's an insult to capitalism actually everything you learn 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 and nobody's really improved on their system that much uh so it's fascinating how people don't really look at the essence you know you these are cases that that should carry a message but the truth is in Wall Street anything can get the test is whether you can sell it or not but if if you can sell it it'll get sold and a bunch of insurance companies came along got a sold and this is this can be a story about this stock or that stock and it sounds a good one they talked about it at Uber for a while and it is it is really interesting the investing public does not learn much okay station 11. hi my name is Jeff Miriam 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 well let's make Charlie nervous that question has to do control in the miniature there was a question earlier about corporate Raider I was more wondering about 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 check boxes that we're gonna have to check and what should we be thinking about that well you're thinking very well and uh the interesting thing is uh the big aggregations look like of course they'd be in index funds but what indirect 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 and I was in the last year or two uh it's looked like a better idea for them not quite togethers uh uh What was a phrase that Charlie use but he backed off a lot yeah they backed off a lot and and it's it's in their interest to back out off an interesting interestingly enough and looking at money management you know the game is not performance it's assets under management and index funds produce a tiny tiny tiny uh fee on assets under management because it was pioneered by Vanguard and uh and it's when it became successful it was very easy to replicate not so easy but I mean it was inevitable to be uh 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 level management 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 embedded in the first place but so it's gotten it's not a loss leader but it is a way to pull money in and then you hope that people ignore what was said by by what's the name of you know the John Bogle Jack Vogel ignore him and essentially they give up the I say idea that will offer you a fund that does this in the Indian will offer you another fund that does that and of course those management fees are higher so they're really counter selling the idea that John Bogle came along with but in the process they have achieved a lot of bolts add that was fun for a while but the last thing in the world I wanted to do is at Washington or the American public decide that they're throwing around their weight too much so they're tending to back off now if you figure out where their self-interest is you can judge where their behavior is going to go Charlie yeah you're one of the defend them no you can square me what you just said you're totally right on everything well in that case I won't ask anybody else okay Becky all right this question comes from almu Grinnell and it's about this is for Warren and Greg since 2019 Berkshire repurchased huge amounts of stock about approximately reducing 10 percent of the share count 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 does he 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 buyback decisions well then 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 is it's no more some it's no more complicated than if you and I and Charlie had a business and you want to sell yours your interest in we could buy it for less than we thought it was worth and 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 right uh 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 with the and and how you and Charlie have approached it and and really don't see that framework changing when the opportunity presents itself we'll want to be a an active repurchaser of Berkshire shares we think it's a it's a great outcome for Berkshire shareholders to own a a larger piece of each of our operating businesses and our and the uh portfolio of the equity companies when the when the opportunity presents itself it can be the dumbest thing you can do it or can be the smartest thing you can do and to make it more complicated than that and start getting into all this but you obviously do what the business needs to do first then the opportunities are there grow your present business buy additional business whatever it may be and then then you make a decision on dividends but that decision becomes pretty irrevocable because you don't cut dividends and without having them major effects and your shareholder base and a lot of things and uh 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 an old-brainer and if it's 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 okay station one I'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 do you stand behind those quotes today yeah sure well we got time for one more than before lunch Becky okay that I thought I was out but let's see uh how about oh uh could be how about lunch pretty soon but no no okay let's just got one for you this one comes from Drew Estes um this is a question for Warren in 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 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 well I think I would just I would have some comfort in the fact that 99 of my net worth is in that company so I I probably got a stronger interest in it and and perhaps 100 billion or more of philanthropy will be affected by and and uh but I would say that I don't have a second choice I mean it is it is that tough Divine but I've also seen Greg in action that I feel 100 percent comfortable and uh uh 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 Bergeron automatic pilot couldn't work extremely well for a long time I mean it doesn't it doesn't like the businesses go away or any other thing sort uh 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 like event useful input may show itself in five years it may go a long long long time and uh how how are the shareholders you know advised by a bunch of 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 is very hard to ask me to rank the management of each one it's uh 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 time ago is it the secret of business is 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 the that'll be a very interesting job for the board but it shouldn't listen to Wall Street on it it they've got the job if they put somebody in there's a surprise we both go down on a plane that put somebody in they've got a real job in assessing that person because it'll depend on how good he or she is as a talker it'll depend on you know them courting Wall Street to be supportive of all kinds of things and and uh 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 and other companies were 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 [Applause] we'll see you at one o'clock thank you and 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 short and I'll try and keep the answer short thanks [Music]

Channel: CNBC Television

Views: 455,141

Keywords: 2023 Berkshire Hathaway Annual Shareholders Meeting, Berkshire, Warren Buffett, Charlie Munger, Omaha

Id: kfzp_IgA6YQ

Length: 164min 45sec (9885 seconds)

Published: Sat May 06 2023