Berkshire Hathaway Inc. (BRK.A)

ASM 2015 Part 2

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May 2, 2015

Okay. Everybody will settle down. We'll move right along. I want to clear up one thing. My daughter told me that because we had all those I had all those slides that were an answer to Carol's first question that that Carol and I had discussed it ahead of time. I will guarantee you that I've discussed no questions with anyone on the panel and they will tell you the same thing. But I knew I was going to be asked questions about Clayton. So I prepared the slides. It was it was an accident. It turned out to be the first question, but it was certain to be in the first few. So Carol did not Carol in 60 years has never tipped me off on anything, nor have the other panelists. And everything, But we were but I was prepared for the fact that people would be asking questions about Clayton. Okay. Let's move right along and we'll go to Becky. Okay. This is a question. Oops, that's not the question. Hold on. Here it is. This is a question from John Wells right here in Omaha. And he says, you've described inflation as a gigantic corporate tapeworm. Which of Berkshire's businesses are best suited to thrive during a period of high inflation and why? Which will suffer the most and why? Yes. Well, the best businesses inflation enduring inflation are usually the best. They're the businesses that you buy once and then you don't have to keep making capital investments subsequently. So you get you do not face the problem of continuous reinvestment involving greater and greater dollars because of inflation. That's one reason real estate in general is good during inflation. If you built your own house 55 years ago like Charlie did or bought 1 55 years ago like I did, it's a one time outlay. Whereas if you're and you get the you get an inflationary expansion and replacement capital without having to replace yourself. And if you got something that's useful to someone else, it tends to be priced in terms of replacement value over time. So you really get the inflationary kick. Now, if you're in a business such as the utility business or the railroad business, it just keeps eating up more and more money and your depreciation charges are inadequate and you're kidding yourself as to your real economic profit. So any business with heavy capital investment tends to be a poor business to be in inflation and often it's a poor business to be in generally. And the business where you buy something once, a brand is a wonderful thing to own during inflation. See's Candy built their brand many years ago. Now we've had to nourish it as we've gone along, but the value of that brand increases during inflation just as the value of really any strongly branded goods. Gillette bought the entire radio rights to the World Series in 1939. And as I remember, it cost them $100,000 and for that, they got to broadcast the Yankees, I think, versus the Reds in 1939. And think of the number of impressions they made on mines in $19.39 for $100,000 and they were getting into the minds of young guys like myself, I was 8 or 9, And millions of people and they did it in those hours then. And of course, if you were going to go out and try and do have a similar impressions on millions of mines now, it costs a fortune and part of that's due to inflation, part of it's due to other things. But it was a great investment which could be made in $19.39 that paid off in terms of selling razors and blades in $1960, 1970, 1980. So that's the kind of business you want to own. Charlie? Well, yeah, but if the inflation ever goes completely out of control, you have no idea how it's going to end up. If it weren't for the Weimar inflation, we might never have had Adolf Hitler. It was the twosome of the great German inflation followed by the Great Depression that brought us Hitler. And think of the price that the world paid for that one. We don't want inflation because it's good for seized candy. I didn't quite realize I was promoting that. No, I'm not. I'm criticizing. 3 years ago, you noted that you had looked at a large commercial lines insurance company as a possible acquisition. And now you've started up Berkshire Specialty, which seems to be off to a good start. What are your thoughts on whether that has replaced the idea of taking over or buying or acquiring a large company or is Berkshire Specialty doing well enough that you're content with that organic growth? Yes. I would say that it's almost certain that we I don't want to say 100% certain, but it's almost certain we will not take over a large commercial insurance company. We've got the ideal operation in my view in Berkshire Hathaway, especially we've got the right people running it. We've got a jeet overseeing it. We've got more capital than any commercial insurance company in the world so that our security is and therefore our policies are really better than anyone else's. So we've got all these things going for us. And if we bought a big operation, we'd have paid a very substantial nondeductible acquisition premium. And this way, we've actually made money while we're in the building stage and I think that it can be a very, very big operation 5 or 10 years from now. So it's almost zero probability that we'll buy somebody else. Charlie? Well, I certainly agree with you. Okay. That's how he keeps his job. We'll go to incidentally the all the overflow rooms including at the Hilton got filled. I'm not sure where a couple where Station 11 is, but then we always lose a fair number at lunchtime. So now I'm sure everybody can find a seat, but we do apologize to those who could not find a seat this morning. Station 11? Yes. Hey, Warren and Charlie. How are you guys? Congratulations on 50 years. Thank you. So, in this year's annual letter, Charlie wrote about the peculiar attributes that made the Berkshire system and the leader of the system a historically organizing entity, organizational entity. So my question to both of you is, what practical mental model or mental models would you impress upon a young enterprising individual at the infancy of their career to build an important enduring enterprise of that particular distinction and impact. And if you could give like maybe some contrasting examples like why is it a Microsoft able to build itself into a dominating monolithic company versus a See's Candy, which can be a great enterprise to spin off cash flow, but not necessarily be an enduring or not necessarily enduring, but an impactful enterprise to the level of a Berkshire or Microsoft. Thank you, Warren. You're the guy that wrote it. This is pineapple juice since then. People were questioning that. They say it's good for your throat if you're going to talk a long time. Yes, well, of course, reputation you get over a long period of time. Very few people are like Charles Lindbergh where you just suddenly have a great reputation. Most of us have to acquire one very slowly and that was true in Berkshire's case. And in any individual, you just have to get the reputation you can and the years you're allotted and the time available. And it may work out well, it may work out poorly, but it's a it's a wise investment. I see all the time opportunities come to people where it's their it's the credibility they've gotten in the past that causes them to have the new opportunity. So I think hardly anything is more important than behaving well as you go through life. And I think we actually tried to behave better as we got more prosperous and I think you'd be crazy if you didn't. So, I certainly recommend that you follow those old fashioned principles and I don't think there's any way of guaranteeing a total powerhouse brand nor can if a result is a 1 and 50,000,000 type result, you're probably not going to get them. John Agnelli of Fiat, back in, I think it was 1988, I was at dinner with him one time and he said something to me that stuck with me. He said, when you get old, he says, you'll have the reputation you deserve. He said in the he said, for a while, you can you can fool people. But he says when he was talking about himself at the time and but he said, when you when you get to be my age, he says, you know, whatever reputation you have, it's probably the one you deserve. And I think the same is true of companies. And it's and frankly, it has helped Berkshire a whole lot, that it has gotten a reputation to be a somewhat different sort of company. I mean, it I don't think we set out to do that exactly, but it has worked out that way. Andrew? Warren, you have said that global warming has not increased Berkshire's payouts for weather related events, yet other insurers, including travelers, have cited climate change as a risk factor that they use. Are Berkshire's models different? And if so, how? Yeah. Yes. I've seen the of course, the SEC requires you to put in all these risk factors and the lawyers will tell you to put in everything possibly you can think of that you'll develop Alzheimer's or whatever it may be. I mean, they just want to have a laundry list so that it's all been covered in case of later litigation or something of the sort. So people do put in weather risk and maybe they put it in because they've got some model that shows it. But we price our business basically, we price it every year. It's not like a life insurance company. A life insurance company, you make a contract at so much a 1,000. And if you buy whole life insurance, that you've set a price for if you're 20, you may have set a price for 60 or 70 years in the future. But that's not the that is not the property casualty insurance business, which we're in. We set it 1 year at a time. And I see nothing that tells me that on a yearly basis, that global warming is something that should cause me to change my prices a lot at or even even a small amount. That doesn't mean that it isn't a threat to humanity or, you know, and terribly important. It just means that if I'm going to sell a 1 year insurance policy, and I'm going to sell it on a $1,000,000,000 plant. I make care of enormously about the fire protection and various other kinds of protection within that plant. I may care about what's going on adjacent to that plant and all kinds of things. But I am not thinking about global warming. It does not change the situation in a material way in any 1 year period of time, in my judgment. And it if I was writing a 50 year windstorm policy in Florida, I would think very hard about what global warming might do in that case to the incidence and the and the intensity of potential hurricanes, but I do not think it has any material effect on the likelihood of or the intensity of a hurricane in Florida or Louisiana or Texas or next year. So it is not a it's not something I would put in the in the 10 ks as a as a threat. Charlie? Yeah. I don't think it's totally clear what the effects of global warming will be on extremes of weather. I think there's a lot of guesswork in that field and a lot of people like howling about calamities that are by no means sure. Yeah. And do you think would it change your 1 year prediction as to what the rate should be? No. No. It wouldn't change mine either. So don't really understand why they put that in there. A lot of people get very invested and it's like a crazy ideology. It's not that global warming isn't happening, it's just that you can get so excited about it, you make all kinds of crazy extrapolations that aren't necessarily correct. Yes. Look at it this way, Andrew. Would you change the rate for tomorrow on insurance because from the rate today for global warming? I doubt it very much. Now, would you change it for 50 years? Might very well. But I think that 1 year is much closer to one day than it is to 50 years in terms of focusing on that factor. So, I do not want our underwriters to sit there thinking a lot about in terms of writing a risk or at the price at which to write that risk. I do not want them thinking about global warming. I want them thinking about whether there's a moral risk involved in who owns the property. I mean that that can be very significant. They there used to be one fellow called Marvin the Torch that, if you insured Marvin the Torch, global warming didn't really make much difference. His building was going to go, but, hey, Marvin had a marvelous way of looking at it though. He said, I don't burn buildings, I create vacant lots. Okay. Greg? When we look back at some of your bigger stock purchases during the past decade, two names actually stand out, ConocoPhillips and ExxonMobil. In the first instance, he bought shares near the height of the spike in oil prices in 2,008, later acknowledging that this was a mistake given how dramatically oil prices fell during the crisis. While you've been able to swap some of those holdings post the spin off of Phillips 66 into operating assets, most of what you sold the last 6 years by our estimates has been at a loss. Given that experience, it surprised some of us to see you take a meaningful position in ExxonMobil during the summer of 2013. While it looks like you're able to eliminate that stake at cost as oil prices fell last year, These types of investors, which can be negatively impacted by the volatility in oil prices, don't really seem to fit well with the other types of investments in your stock portfolio, many of which are built on strong franchises with unique competitive advantages. With that in mind and given the track record that Greg Abel and his senior Berkshire Hathaway Energy have had acquiring and investing in energy assets, does it make more sense to leave future energy related investments in their hands? Well, there's nothing we like better than do backup, Greg and buying utility properties. And, but they we call it energy, but it's not oil and gas in Berkshire Hathaway Energy. And they're really in a dramatically different business than ConocoPhillips or ExxonMobil. But we are looking constantly for opportunities for Berkshire Hathaway Energy to spend big money and it will. Berkshire Hathaway Energy, we paid $35.05 per share in $19.99 to buy the stock. I was at $35 and I don't change my prices. And the company was then called Mid America and they hired some investment bankers to come out from New York and investment bankers spent a week here doing nothing. And but they felt before they went home, they said that you know you got to give us something because we're going to send a big bill. And I said, well, in that case, we'll pay $35.05 and you can say you got the last nickel out of May. So my ambition ever since has been to have Berkshire Hathaway Energy earn $35.05 per share. It's never paid a dividend. It will probably earn about $30 a share this year, which is a great tribute to Greg and his management. But we will get the 35 or better because he will make some good deals. It's not at all analogous to the ConocoPhillips or ExxonMobil Investments. As it turned out, we wrote ConocoPhillips down because we were required by the auditors to do it. We actually by the time we got all through, we made some money in it and we made a little money in ExxonMobil too. But we will not be buying very often oil and gas stocks, but we will we probably haven't bought the last one. And in the end, we look at the cash, we look at available opportunities, both in investments and businesses, and we make decisions occasionally on buying something, and sometimes we change our mind. And that will continue that way. It's been going on that way for a lot of years. And we have not distinguished ourselves at all in the oil and gas field, although we've made a little money. And we passed up 1 or 2 the way we could have made a lot of money. Charlie? Yeah. And with interest rates being so low and the dividend on ExxonMobil being as high as it was, it was not a bad cash substitute if you think only in those terms. It worked out okay. There were other things we could have done that were a lot better, but that's always been true and will continue to be true. Station 1. Mr. Chairman, Mr. Vice Chairman, my name is Andy Peek and I'm from New York City. First, congratulations to you on a remarkable 50 years. And second, thank you for hosting a one of a kind annual meeting where you patiently answer questions from shareholders. I believe you are both Thank you. I believe you are 2 of the most knowledgeable and authoritative people on planet Earth on the U. S. Tax code. Our tax code is obviously broken at both the individual and the corporate levels. Today, we have 2,100,000,000,000 in offshore corporate cash sitting there, not being brought home. We have the highest corporate tax rates in the world. And for high income earners in the U. S, other than hedge fund managers in states like New York and California, an all in rate greater than 50%. What can be done to affect real change to bring about a simpler, more rational tax code? Thank you. Well, it takes it takes 218 members of the House of Representatives and 51 US senators, and a president that will sign the bill. The The question is how much you think the country should spend and then from whom do you get it. And I would point out that despite the tax rates that all the corporate chieftains complain about, the share of earnings, share of GDP accounted for by corporate profits is at a record. Corporate taxes, 40 years ago were 4% of GDP. They're now running about 2%. They've decreased significantly while payroll taxes have increased. It's a real question to sign. And once you get special provisions in the code, it is really hard to get rid of them absent a major revision of the code. I actually think I may be an optimist on this, but I think both Ron Wyden and Orrin Hatch, the 2 members of the ranking members, Senate Finance Committee. I think they're capable of working out something that they neither one of them likes, but they both like it better than what exists now. And I think it can be made considerably more rational. But in the end, if we're going to spend 21% or 2% of GDP, we should probably raise 19% of GDP. We can take a gap of a couple of percent without getting further into debt as a proportion of GDP than we are. So we've got that leeway. But you take 19% of $17,500,000,000,000 or thereabouts, and you're talking, as Senator Dirksen said one time, real money. And how much you get from corporations, how much you get from individuals, how much you get from the state taxes, it's a fight up and down the line. So I and in terms of the cash abroad, basically, you can bring it back. You just have to pay tax at U. S. Corporate rates and our corporate rates are 35%. Charlie and I, a good bit of our life operated with corporate rates of 52%, later at 48%. And the country grew well. American business prospered during that period. I don't shed any tears for American business in terms of the tax rate overall. I think there could be a much more equitable code in terms of the corporate tax. But I do not think that the 2% of GDP that's being raised from corporate taxes, which is far lower than was the percentage 30 or 40 years ago, I do not think that's an onerous number. And for people who are getting a quarter or a half a percent on their CDs who retired and with American Business earning on tangible equity, which is the way to measure it, probably averaging close to 15%. I think equity holders are getting treated extraordinarily well compared to debt holders in this economy. Charlie? Well, I agree with you and I don't die over these little differences in the tax code either. I live in California, of course, where there's like a 13.5% tax on long term capital gains, nondeductible for federal purposes. That's a ridiculous kind of a tax to have in California because it drives rich people out. Hawaii and Florida have enough sense to know that rich people don't commit a lot of crimes. They don't burden the schools. They provide a whole lot of medical expenditures that are good for everybody else's income. I think California has a really stupid tax policy. Why? But I don't think the U. S. But I don't think the U. S. Policy is I don't think the U. S. Policy is bad at all. And it's nondeductible because of the alternative being a tax cut? Yes, exactly. Yes. That really wasn't the case before, but it No, it's always been a Kind of slipped in. No, they did it on purpose. No, they did it on purpose. We're here Early stages of paranoia. But it is it's amazing. The idea of driving the rich people out Florida is so much smarter than California on that subject and it is really demanded. Who in the hell doesn't want rich people coming in and spending in their state? Yes. Yes. Remember that as you come here to Nebraska for the meeting. I would say that I really do think there's some chance this year and not a tiny chance. I know both Ron Wyden and Orrin Hatch. They're patriotic. They're smart. They want to do the right thing. They've got different ideas about what the right thing is. There's no question about that. But they also know they won't they can't get any place without cooperating. I think the but I think the real opportunity is if they work out of the public eye in doing and working on something like this. And I wouldn't be surprised if they are. I think that's the way to get it done. Charlie has always pointed out what it would have happened if the constitutional convention back there in Philadelphia had been held with every delegate running out immediately to tell the TV cameras how right he was and how wrong everybody else was. It doesn't accomplish much to dig in on positions and not be in a position to compromise because it takes a lot of compromise to write something when you have 2 different fundamentally different views on some important aspects of the tax code. But those are 2 good guys. And I would not I don't think it's impossible at all that we have a new corporate tactical within a year. Okay. Carol? This question, which is a little bit off beat comes from Jordan Schopf of Melbourne, Australia. Mr. Buffet, in the forward to the 6th edition of Benjamin Graham's Security Analysis, you identified 4 books that you particularly cherish. 3 of these books were authored by Graham himself and their influence on you is well known. The contributions of the 4th book to your thinking, however, that book was Adam Smith's The Wealth of Nations published in 17/76. What that book meant to you is seldom discussed. So my question is, what did you learn from The Wealth of Nations and how did it shape your investment and business philosophy? Well, it doesn't shape my investment philosophy, but it certainly learned economics from it. And, my friend, Bill Gates, gave me a original copy of it. I was able to study this. Adam Smith wrote it in 17/76. It's you know, they're just if you read Adam Smith and if you read Keynes, Ricardo, and then and if you also read that little book we've got out there called Where Are the Customers Yachts? You will have a lot of wisdom that I forgot to mention, I was supposed to mention too, we didn't want to put it on sale earlier because it would have given away the movie. But we do have Berkshire bomber underwear out there or sweatshirts or whatever it may be. So Fruit of the Loom has those. And we have French Sweats, where are the customers' yacht's book, which contains an incredible amount of wisdom and very few pages and very entertaining. But if you want to go for if you want to not only get a lot more wisdom, but appear more erudite, you should read The Wealth of Nations also. Charlie? Well, yeah, Adam Smith is one of those guys that's really worn well. I mean, he is rightly recognized as one of the wisest people that ever came along. And of course, the lessons that he taught way back then were taught again when communism failed so terribly and people like Singapore and Taiwan and China and so forth came up so fast. The productive power of the capitalist system is simply unbelievable. And he understood that fully and early and, he's done a lot of good. I took an idea of his on the specialization of labor, you know, and he talked about people making pins or something, but I applied that actually to philanthropy. You know, I mean, the idea that you let other people do what they're best at and stick with what you're best at, I've carried from mowing my lawn to philanthropy and it's a wonderful thing to just shove off everything and saying somebody else is better than that than I am at that and then work in the field it's most productive for you. You didn't do your own bowel surgery either. No. I'm not sure I have any reply to that. Okay, Jonathan. Warren, you have told the managers of your businesses to think of their businesses as something that they will own forever and that their first priority should be to widen the moat and take care of their customers. In more than one case, according to people I've spoken to, Berkshire's subsidiaries that were formerly publicly traded have run into trouble by now this is on the margin mind you trying to maximize calendar year earnings and dividends to the parent as opposed to focusing on the long term health of the business. Do you find that managements of formerly public companies through force of habit perhaps have more trouble making decisions with only minimal concern for short term results than would be the case for formerly private companies. If this dynamic is a real one, is there something more that can be done to combat it? And I'm curious, are most of Berkshire's compensation structures based on 12 month results or are they already based over multiyear periods? Yes. I don't think we've had any particular problem with public companies versus private companies that we bought. I mean, I think if you took the aggregate of the public companies we bought and matched them up against the private companies, I don't know which group I would rather own or which has delivered the greater returns. I don't know where he gets the idea. Yes. I don't know. It's not apparent to us. Yes. Well, you've heard Charlie. And I can't think of it myself. And if we tell them to think about 100 years, we mean think about 100 years. And I think they know we mean it. They certainly know we run Berkshire in terms of our own decisions that way. So I think we set the right example and I think we use the words to convey that belief as strongly as we can and we try to reinforce every we try to put it in the annual report. We try to talk about it in meetings like this. We believe in sort of hammering the same message out there over and over again. Now, we don't ignore yearly results at all. It's just we don't live by them. But I get figures every month on virtually every business And I read them with great interest and I'm thinking about them all the time. I don't think they're unimportant, but we don't live by them. And I think what really counts is where we're going to be 3 years, 5 years or 10 years from now. But I also I wouldn't if we're subpar in some area, I wouldn't accept the fact that we're working to maximize things in 10 years mean that we should be throwing away money or anything like that in the short run or not paying attention to the business. But I'd have to say what Charlie has. I don't really agree with the premise. Okay. Station 2. Dear, dear Charlie, thank you for 50 great years. I'm a happy shareholder and hope to have you continue long. My name is Victoria. I'm from Bonn in Germany. And my question is, your own company both here in the US as well as in Germany. What differences in corporate culture and in performance do you see between German and US daughter companies? What differences between what I know the question. Yes. I'm just I'm looking to you for the answer, not the question. No, they can hear so much better. Yes. Well, we we've had a hard time buying things in Europe. It's been quite rare. And, I think the traditions and the family traditions are different in Europe than they are in the United States and and in some other countries. And Germany, of course, has a long tradition of being very good at technology and capitalism and that's been a godsend to Germany. And we've always admired the way the Germans have performed. The Germans actually work fewer hours than a lot of other people and produce a lot more, and of course Warren and I are pretty good at that. And so we are we admire the Germans, particularly the engineering side and but we've been thinking about owning good German companies for a long time and we finally bought 1. Yeah, but I'll make a prediction. I will predict we buy at least one German company in the next 5 years. I think that, I think we are far more on the radar screen than we were just a few years ago in Germany. I think we now have a woman over there who brought through somebody else as well, but brought Louis to our attention. I think she is going to hear about more things because of her association with us on the transaction and the fact that we tried to get the word out as to her help with us. So I would really be surprised if we don't make at least one deal in Germany in the next 5 years. And I would look forward to it. I mean, we will be very, very happy. We have to get a business we understand. I've had probably 4 or 5 letters in the last couple of months ever since the Louis deal was announced. But there have been very small businesses in practically each case. And but we'll get one. We're eager. We got the money. And we do fit the family situation occasionally. And prices may be a little more attractive there than in the United States, although I haven't seen anything yet that we bought. But I would say that there's a reasonable chance that the price of something we're offered over there might catch my attention more than U. S. Prices currently. Okay. Becky? This question caught my attention not because I think it's a complaint, but I think it's an actual question about the actuarial models that you use at GEICO. It comes from Stan Zions and he says, my wife and I are stockholders of Berkshire Hathaway. I'm 78 and she's 74. We have a long time accident free driving record. Yet when we applied to GEICO with our stockholder discount, GEICO was unable to beat our rates for comparable coverage with other fine companies. Why? Well, it's the reason that we probably can beat the rate maybe 40% of the time with people who contact us and 60% of the time we can't. No company is going to be the lowest in all cases and we have our own underwriting criteria that involves many variables, one of which is age, but wouldn't be a dominant one at that age. But we have many, many variables and we make our calculations and very good competitors like State Farm and Allstate, USAA and so on, They have somewhat different underwriting weightings and sometimes they come in below us. But I don't think any company of size will be the lowest more often than GEICO. We give out quotes on the telephone to many, many thousands of people every week. I get the figures every week and I get the number of quotes and I get the number of policies sold. And I can tell you the percentages are very substantial that we sell and we're not selling them if we're charging them more than the people before them. So different people have different weightings for different variables. And the couple you referred to sound like they should get a very good rate from somebody, but they apparently got a better rate from somebody else than us. And that's going to happen perhaps 60% of the time and 40% of the time we're going to get the business. And since we're only 11% of the whole market now, it means we've got a lot of policy over shit together. The it's an interesting it's an interesting question when you're looking at how to evaluate drivers. We know that 16 year old boys are about as bad as they get. 16 year old girls are a better class. Does that mean they're better drivers? Not necessarily. It may mean that they don't have the same tendency to show off. It may mean that they don't drive as many miles. It may mean a whole lot of things. So we ask a lot of questions and other people ask different questions and we will come up with different rates. But it's definitely worth 15 minutes to call GEICO. Charlie? Well, I would say, besides, if when you get into the older people's group and you find you're not deteriorating as fast as most of your contemporaries, you may be paying an unfair price for the insurance, but it's a good trade off. Gary, And thought of it that way before. The reinsurance market has changed dramatically over the last 2 or 3 years. A lot of alternative capital coming into the business making it much harder to make the assumption that there would be a big opportunity after the next big catastrophic event. What is it that you and Ajit are planning to change or do to take advantage of whatever opportunities might be there? Well, wouldn't our competitors like to know? The reinsurance business is not as good as it was and it's unlikely to be as good as it was. There's a lot of money that's come into reinsurance, not because they want to reinsure people, but because it's become either a fashionable asset class for people that are looking for so called non correlated investments and may not know what they're doing, but it's something you can sell people. That's an attractive line to go to pension funds with. And then secondly, it's a beard for doing for asset management. So if you go to Bermuda and start a reinsurance company, you can actually run a hedge fund and you need a little business to make it look like you're doing something other than running a hedge fund and locating it offshore so you don't pay any tax. But that's the primary motivation. So when you get a whole lot of people that are bringing money in and they sort of need your facade of reinsurance to cover up what their real motivations are, you're likely to get less attractive prices in reinsurance. And that's been happening on a fairly large scale. And I would say that I would expect that reinsurance business in the next 10 years to not be as good as it has been. And I'm talking about the whole industry as it has been in the last 30 or something like that. It's a business whose prospects have turned for the worse. And there's not much we can do about it. We do find things to do. There are certain things that only Berkshire can do. And we've I mentioned in the annual report that there have been 8, I think it was 8 contracts written with premiums of $1,000,000,000 or more and we've written all 8 of them. So there we do there's a certain corner of the world that we've got a strong position in. And there's a few other things we will do, but it's not as good as it was. Charlie? Well, I think generally speaking, of course, it's going to be harder. And of course, this competition from promotional finance is getting more and more intense and they're more optimistic. They're searching for a robust narrative. We're not searching for a robust narrative so we can sell something. We're playing the game for the long pole and other people just pretend to be doing so. Yes, we could we've had the opportunity over for a long period of time to go out and promote reinsurance type money and really take advantage of people on it because we would have the best reputation in the field and we could attract a ton of money and we could get a big override on it, but it's not our game. And we don't particularly admire the way it's being played. Station 3. Mr. Buffet and Mr. Mungu. Lots of friends and get people to like you and work with you? That's not a bad question. Very good question. Well, you know, I was pretty obnoxious when I was your age and asked a lot of important questions. And not everybody liked me. And so the only way I could get the people to like me a little bit was to get very rich and very generous. That will work. People will see all kinds of virtues in you. I think you'll write a check. Yes, the 2 of the both Charlie and I were on the obnoxious side early on, but you should get a little smarter about human behavior as you get older. And I turned out to have some pretty good teachers as I went along in terms of what worked. I mean, I have looked at other people during my lifetime and had these wonderful teachers. They weren't teachers in the standard definition, but they were people I admired. And I thought to myself, why do I admire these people? And if I want to be admired myself, you know, why shouldn't I take on some of their qualities? So it's not a complicated proposition. You know, if you look around you at the people you like in your school, write down 3 or 4 things they do that make you like them and then look around at the 3 or 4 people that turn you off and write down those qualities and decide that you're going to be a person you yourself would like, that you take on the qualities of the person on the level. You're generous, you're friendly, you know, you accept things with good humor, you don't claim credit for things, you don't do all of these things and they're all possible to do. And if you like that in other people, people are going to like it than you. And if you find things that are kind of obnoxious, you're always late, you're always paying me credit for more than you do and you're kind of negative on everything and you don't like those in other people, get rid of them in yourself and you'll find out it works pretty well. It really works in marriage. If you can change yourself instead of trying to change your spouse, that's a good idea. Charlie has said the most important thing in selecting a marriage partner is that you don't look for intelligence or humor, character. It says you look for someone with low expectations. Okay, Andrew. Okay. This is a question about NetJets. We received several related to NetJets. We've combined these 2. The first is, can you comment on the lengthy dispute with NetJets pilots who are picketing outside? And Whitney Tilson asks, what type of return on investment do you expect from the 1,000,000,000 on order in aircraft for NetJets? And in a very pointed way, he writes, was buying NetJets a mistake? No, I don't think buying NetJets was a mistake. We've had a few things where it looked like a mistake for quite a while and some turned out to be a mistake. But NetJets is a very decent business. We have a good business. The pilots have a good job. And the it's not really the right way to look at it, I don't think, in terms of return on investment in the 1,000,000,000 of dollars of orders we have because we resell those planes to owners. And we do have a core fleet that represents an investment. But the investment is held in very large part by the owners themselves. I own what do I own, 3 16ths or something like that of one type of plane that my children use. I own an eighth of another plane that I use. But that's my investment. It's not the NatJet's investment. The labor relation at Berkshire, we've had hundreds of labor unions over the years. I mean literally 100. In fact, we probably have 100 at the present time. And we've only had in 50 years, we've had 3 strikes that I can remember. I don't think there have been any others. It could have been some one day walkout maybe. But we had a 4 day strike at Berkshire Hathaway Textile Operation. We had a 4 day or so strike at the Buffalo News 30 years ago and we had another strike at See's Candy one time. But so we have no anti union agenda whatsoever. And we think we have sensational pilots. I mean, I have flown that just my family's flown that just now for 20 years. And we've had nothing but professional pilots and friendly pilots. And it's not you know, it's in human nature to have differences sometimes about what people get paid. Our pilots make an average of 145,000 a year. They worked they worked 7 they have options, but they one of the options and the main option is 7 days on and 7 days off. We pay for their time to get to where they're based. They can live any place in the country. And compared to our competitors at FlexJets or flight options or so on or in charter, we pay well. But it's perfectly understandable that employers and employees have some differences from time to time. And we'll get it worked out, but that doesn't necessarily come in a day or a week or a month. And our volume is up in terms of flying. Our volume is up in terms of owners in the United States. Europe's flat, but the United States is the bigger end of it. So it's a business I'm very glad we own. I'm proud we own it. It's a 1st class operation. We give our pilots more training, I believe, than anybody else. And I'm flying on net jets. My kids are all flying on net jets. Our managers are, in many cases, are flying on. So nobody cares more about safety. This is not a company where the CEO flies on his own jet and other people fly in other ways. So I and I get the same planes that the other people get and the same pilots. I mean, there's no special arrangement. So we've got this intense interest in safety and we've got very professional pilots. And at the moment, we've got a difference of opinion about a contract, but that will get settled in my view. Charlie? I have never in all the years had a NetJet pilot. It didn't affect me as a wonderful fellow and a very skilled, able and dutiful, reliable person. And I would say most I can think of no NetJet pilot that has ever in any way indicated that he's dissatisfied with his life and a lot of them say they just love it because of them. I'm not at all sure the union is fairly representing the pilots. Okay. He said, fellows, actually we have a lot of women pilots too. Greg? Warren, looking at your acquisition of Duracell from Procter and Gamble, at the time of the deal, you noted that Duracell is a leading global brand with top quality products. You're obviously familiar with the business, which was initially acquired by Gillette in 1996. While DuroSat does provide fairly steady cash flows and has a strong brand and market position, its core business is in decline with advances in technology making alkaline batteries far less relevant than they were 20 years ago. Looking back historically, we've been willing to hang on to businesses operating in declining industries as long as they're continue to generate some cash for Berkshire overall. So having Durafuck sell in the portfolio is not necessarily out of the ordinary. The question I have is how much of a role the tax planning actually play in doing this deal, given the extremely low cost basis on your P and G shares, some of which you've been selling the last several years? And would you have done this deal without task considerations? And if so, at what price? Well, both Procter and Gamble and Berkshire Hathaway had tax advantages in doing the deal this way. So they probably wouldn't have soldered at the price at which the deal took place and we wouldn't have bought it at the price without the tax benefits that each enjoyed. And this is something we had to have held our stock for over 5 years in Procter and Gamble. It's something that's been in the code a long time that we've had nothing we have had nothing to do with it being in the code, but it's part of the code. And it's somewhat similar to the real estate exchange arrangement where you can exchange real estate and defer any tax. And we don't get a new tax basis on the Duracell. We keep the old lower tax base. Just like on what do they call it? Is it Section 1231 or real estate exchanges? So it's analogous to that. And the answer is that there wouldn't have been a transaction from Procter and Gamble standpoint and there wouldn't have been a transaction probably from Berkshire standpoint if it hadn't been for the fact that we could do an exchange arrangement. As to the declining business part, the battery business will be a declining business, but it'll be around for a very, very, very long time on a worldwide basis. And Duracell has a very strong position. It's a very good business. And like you say, I was familiar with it when I was on the Gillette board. But the that it will have unit declines over a period of time. But I think we'll do fine with the Duracell investment. Looking forward to getting the deal complete, which probably won't take place until the Q4 because we have to get it detached from a lot of other things like the IT and distribution centers and everything else that it's involved in with P&G. But P&G has been great to work with. They're making the transition. They couldn't be better to work with during that period. And I'll be very happy when we own it. Station 4. Hello, Warren and Charlie. I am Marvin Blum, an estate planning lawyer from Fort Worth, Texas, home to 4 of your companies. And by the way, we're excited about the new Nebraska Furniture Mart and the Berkshire Hathaway Automotive Group in the Dallas Fort Worth area. We're next to Omaha. We hope you think of Fort Worth as your second home. It's been good to us. And actually, we have 5 companies down there. VITAC just bought 1. All right. Even better. At the annual meeting a couple of years ago, I asked about your estate plan and your idea of leaving kids enough so they can do anything, but not so much that they can do nothing. Today, I'd like to ask you about your decision to sign the giving pledge, promising to give away at least one half of your assets to charity. Can you talk about your views on philanthropy and how to balance leaving an inheritance to your family versus assets to charity? Well, it depends very much on the individual situation. And actually, I promised to give over 99% in my case. But that still leaves plenty left over. As you know, the state tax exemption has been moved up substantially here in the last couple of years. So I might have a very different feeling if I'd had a child that worked actively, helped me build the business and all of that sort of thing, and it was a small business and I wanted to give it to them, but that can be really done without any estate tax these days, particularly a little planning is used ahead of time. It's a very individual thing. As Charlie when you get to the figuring out what you do with your body, the options get very fairly limited. And as Charlie said the other day, he said where he's going, it won't do him much good anyway. There's no Forbes 400 in the graveyard. And so the question is, where does it do the most good? And I think it does limited amounts to do some real good for my children. So I'll be sure that they have that or they already have it to a degree. And on the other hand, when I look at a bunch of stock certificates in a safe deposit box that were put there 50 years ago or so, they have absolutely no utility to me, 0. They can't do anything for me in life. I mean, they can't let me consume 7,000 calories a day instead of 3,000. They can't there's nothing they can do. I've got everything in the world I want. I've had it for decades. If I wanted something, additionally, I'd go buy it. So here are these things that have no utility to me and they have enormous utility to some people in other parts of the world. I mean, they can save lives. They can provide vaccines. They can provide education. There are all kinds of utility. So why in the world should they sit there for me or for some 4th generation down of great grandchildren or something when they can do a lot of good now. So that's my own philosophy on it. But I think everybody has to develop their own feelings about it and should follow where they go. I do think they might ask themselves what it where will it do the most good? What that and it can be pretty dramatic between what it can do for millions of people that don't really have remotely the same shot at having a decent life that I've had or what it what it can do for me. I mean, if it I could have 10 houses, but I could buy a hotel to live in. Would I be happier? It'd be crazy. Charlie and I both like fairly simple lives. But the one thing we do know is we know what we like and what we don't like. And we don't judge it by what other people like. So I don't have too much advice for anybody. But I would say start thinking about it. What I call people on the giving pledge, some of them I'll get some 70 year old and he says, I don't want to think about it yet. I always tell him, are you going to make a better decision when you're 95 with some blonde on your lap or something? That actually was tried a few years ago, as you may know. Charlie? No, but I it does occur to me that that fellow who is complaining about the tax system should remember that they recently changed the estate tax rules, so you can leave 5,000,000 to your kids and so forth. I think that's a very constructive change in the law. So, I think I don't think we should assume that our politicians are always going to be totally crazy. That was a very desirable change, I think. Okay, Carol. The questioner's name is Andre Bartel, and he's a Berkshire shareholder. Would it make sense, and I'm going to add my own edit here, and just say, and would it be legally permissible for Berkshire to distribute at some time in the future. Any or some of the long term equity investments, for example, Coca Cola or American Express, to the shareholders in a tax efficient way as Yahoo! Is planning to do with the Alibaba stake, for example. The idea would be to return capital to shareholders using assets that Berkshire is not actively managing, that is, is not bought or sold for some time and is very low incentive to sell because of income tax implications while not taking away resources, cash that could be reinvested by the Berkshire management better than by its shareholders? Yeah. I don't think Yahoo solved it actually. Charlie, you follow that too. I don't think that we can do that with American Express and so forth. So it's a bad example. We've got no way of doing that. No, there used to be a way to do that many years ago, and it was done. I don't mean by us, but I saw other examples of it. But under the code, there's no way to use appreciated securities to redeem your own shares, to you can do it for something like acquiring where you're exchanging it for like asset type thing on the Duracell arrangement. But there's no way to distribute it to shareholders without paying the full capital gains tax. You have spin offs of whole businesses to shareholders if you held them a long time, but that's about the only thing you can do. Yeah, but even there, I mean, what Yahoo has done is not got rid of the tax. I don't know anything about it. Yeah. No, they you know, that or what they're planning to do. It may give them some other option if Alibaba wants to eventually redeem it themselves. I mean, there could be something they can work out a deal with Alibaba. I do not see how that they have gotten rid of the tax unless they do a subsequent transaction of some sort with Alibaba. But maybe they have different tax advice than I've seen. But I mean, I know all kinds of cases where people or where corporations have unrealized large unrealized gains in marketable securities. And I have not seen in recent years, although I did see it early in my career when the law was different, but I've not seen in recent years any way that people have gotten that money into the hands of the shareholders without paying a tax at the corporate level? John, do you? No, that's what we say. Yes. Jonathan? Berkshire owns many companies that benefit from single family home construction, Acme, Johns Manville, Benjamin Moore, Mitek and Shaw among them, not to mention the railroad. After the financial crisis, you said that young adults who are postponing household formation by living with parents or in laws would eventually get sick of that arrangement We would start to see normal rates of household formation once the job market improved or even if it didn't. Jobs are now more plentiful, yet household formation still continues to be below rates thought to be normal, whether because of high student debt, a shift in attitudes about home ownership or stricter mortgage terms for first time buyers. Could something more secular be going on where household formation rates relative to the population could continue to be lower than historical rates? Could the U. S. Become more like Europe where many adult children live with their parents or in laws for quite some time? Or do you think still that the subdued rate of household formation is mostly a cyclical phenomenon and that the rate will eventually revert to the historical mean boosting single family home starts and earnings for this group of companies? I don't know the answer obviously, but I think the latter is more likely. And I may be wrong. When's the last set of figures you've looked at in that connection? I've heard that it's turned up a fair amount in the last 6 months. But have you seen anything on that, Johnny? Or Nothing really recently, no. Yes. I should know the figures, but I don't for the last 6 months or 9 months. But my impression is that they had turned up somewhat. I did my best on selling that ring in the movie to that guy, and they're going to form a household here in another month or 2 to which I've been invited. But the truth is I don't know what's going to happen on household formation. I would expect but I expected it earlier than this. I would expect it to turn up. It always turns down in a recession. And you can argue that we're not all the way back from the recession yet. But your guess would be as good as mine. Charlie? I feel exactly the same way, but I think I speak for a lot of members of the audience when I say I have some grandchildren that I wish would marry somebody suitable promptly. What's the reason for your interest, Charlie? I don't think it's healthy for these people to hang around looking for pie in the sky or whatever the hell they're doing. Are they in attendance today? So, I don't know some of them maybe. I don't want to name names. No, no. I think you've already been pointed it out. Okay. Station 5. Gentlemen, thank you for a great day. My name is Mark Groort and I am the executive director of the Emmanuel Vision Foundation here in Omaha. Earlier today, I sat up in the corner and spoke to my son, who is working and living in Indonesia among the poorest of the poor, funded incidentally by the Gates Foundation. The contrast between where he is sitting today and where I am sitting could not be more dramatic. You have been a model of philanthropic caring for the needs of others. You have demonstrated that it's not how many shares we have, but how we share with others. So following up on the last speaker, I want to ask, how can corporations be encouraged to make an even greater impact in the lives of those who are not shareholders? Yeah. I agree entirely with your motivation about increasing philanthropy. I am much more of a believer, however, in individual philanthropy than corporate philanthropy. I really feel that that, I've got everything I need, but I do also feel that I'm working for the shareholders and they should determine their own philanthropic activities that is their money. Now we participate in things. I mean, I encourage all our companies to continue the philanthropic behavior that they have before we've acquired them and we want them to participate in their communities and to help the entities that help their employees and their customers. But I don't really think it's my business ever to write a check to my alma mater or whatever it may be and do it on company funds. I just I don't feel it's my money. It's I really look at this as a partnership. We've always looked at it as a partnership. And we had a system some years back where all the shareholders could designate contributions. And I felt that was quite a good system. And then we had to give it up for reasons that I hated to give it up, but we had to do it. The interesting thing about philanthropy, I mean, I have never given a penny to any organization that has cost me anything in my life. I mean, I've never given up a movie. I've never given up a trip. I've never given up a vacation. I've never given up a present to my kids. You know, people give money this Sunday, you know, that really actually changes their lifestyle in a small way. And that hasn't happened with me. Everything I've given has been ungodly surplus, you know, and I'm glad I can do it. But, it's people like your son, you know, that I really admire. Charlie? Well, my taste for giving away somebody else's money is also quite restrained. I was on the board one time of an organization that needed to raise a fair amount of money. And it wasn't church affiliate or anything like that. And so they asked me to call on 4 or 5 corporate chieftains. And they said, be sure not to ask them to give anything personally. Just ask them to give the corporate money. And I just I said, I'm not going to do it. Basically, if they're not if they won't put up their own money on it, why should they write checks on behalf of all their shareholders? So I've got real reservations about corporate philanthropy for the personal reasons to some extent of the CEO or the directors. Okay, Becky? This question comes from Philippe and he asks, do Charlie and you think that the euro currency has had a positive or negative effect overall in the eurozone economy? And do you think it would be a good decision for France to quit the euro currency and go back the franc? Well, that's too easy for me to answer. So I'll give it to Charlie. I haven't got the faintest idea. I think the Euro had a noble motivation and had promise of doing a lot of good and it undoubtedly has done a lot of good, But it's a flawed system in some ways to put countries that are so different together and it's straining at the moment. The big strains aren't in France. The big strains are in Greece and Portugal and so on. And I do think they created something that was probably unwise. They got countries in there that shouldn't have been there. You can't form a business partnership with your shriftless, drunken brother-in-law, you know what I mean? And you have to make your partnership with somebody else. And I think they lowered their standards a little and it's caused strains. I think everything here is off the record, understand. I think it's a good idea that needs a lot of work still. And I think it has been a good thing net to this point, but it, you know, there it is flawed and the flaws are appearing, but that doesn't mean it can't be corrected. I mean, we wrote a constitution in 17/89 that, you know, still took a few amendments, you know, and some of them didn't happen for a long time in respect to some very important factors. So I don't think that the fact that it wasn't perfectly designed initially should condemn it to being abandoned. But I think that if there are flaws, you have to face up to them. And I think that maybe the events that are happening currently will cause that. We could have had presumably, we could have had a common currency with Canada and probably have made it work, I mean, if we decided to cut. Sure, we could have made it work. Yes, we could have had a North American currency with Canada, and we'd have worked it out. And it might have even been useful, but we couldn't have had a hemisphere wide currency with Venezuela and others. With Argentina. Yes. And so he loves to name names. The praised by name, criticized by category. They and I actually think it's probably desirable to have a euro currency proper designed and enforced so that you know, that the rules really apply. There were rules originally on the euro, which got broken very early on by not the Greeks, but by the Germans and the French, as I remember. So Investment bankers let them finally they helped them prepare phony financial statements. Yeah. They actually it was investment banker aided fraud. Yeah. Not exactly novel. So returning to our main point, I think the Aero can and probably should survive and I think it's going to take some real changes and maybe some examples to enable it to do so. I hope it really I mean, it's going to go in the direction of more cohesion or less and very soon probably. And I think if we can figure out a way to do it with more cohesion, overall, it will be a good thing for Europe. But it certainly it is in its present form, it's not going to work. Charlie? I don't know why I'm giving you another shot, but I think I've offended enough people. Right. There's 2 or 3 in the balcony. Okay, Gary. With the Van Tile acquisition or now Berkshire Hathaway Automotive, there may be some natural synergies gecko on the salesman desk. Would you expect to do anything in that regard to encourage getting more customers through that relationship? Yes, I don't think so. You always have these things that investment banker will tell you will produce synergy and all that. But most times that doesn't work. And historically, selling auto insurance through dealerships hasn't been particularly effective. And if we were to do that, we would probably have to compensate people who did the insurance work or made the insurance sales out of Ventile, that would add to cost. I mean, GEICO is a low cost model and it's a wonderful low cost model. And Tony nicely has done an incredible job of keeping those costs down and our and you can see in our expense ratios, we spent a lot of money on advertising, but its success depends on delivering 1st class insurance at a better price than other people can get. And the more people we put in distribution system or anything. So I would doubt very much that we do anything along that line. I think that those two companies will do better if run as 2 independent businesses than if we try to push through something. We Charlie and I've seen a lot of things on paper that involve that sort of a proposition and very, very few succeed. Charlie? Well, I agree it's a very dumb idea and we're not going to do it. Okay. Station 6. Mr. Buffet, in this environment of quantitative easing, low interest rates and an overvalued stock market, what value in silver at these prices do you see? And do you still follow the silver market? I really don't follow it much anymore. At one time, we owned over 100,000,000 ounces of silver. And I knew a fair amount about the supply and demand for it and the prospective supply and demand. But I really don't I haven't paid much attention to it for a long, long time. It's a very good thing too. We didn't do that well. Yes. We made a little money. The photography shakes it. Interesting thing about silver is that there are some pure silver mines, but overwhelmingly, silver is produced as a byproduct in terms of copper mining. And so it doesn't respond as much to its own supply and terms of the supply and demand characteristics of the things of which it's a byproduct like copper. So it's a very small market too, but we came out better than the Hunt Brothers. But other than that, we don't think about silver anymore. Okay. Andrew? Charlie, a question about activism. Activism continues to grow and as Charlie stated at the 20 14 Annual Meeting, he sees it getting worse instead of getting better. So the question is, we hope that Charlie and Warren will both be around forever, but unfortunately, there will be a time when they're no longer here to manage the store. I reject such defeatism. If Warren is giving away his shares to charity over a 10 year period through his estate plan and activists become increasingly more powerful, how will Berkshire defend itself from activists in the near and far future? And would you consider it a failure if Berkshire were broken up in the future and shareholders received a significant premium? And for you to consider its success, what would the premium need to be? Yes. Well, if it's run right, there won't be a premium in breaking it up. It may look like it. I mean, people will say there's subsidiary A that would sell at 20 times earnings and the whole place is something at 15. But the whole place won't sell at 15 if you spin off the one at 20. I mean, I laid out in the annual report, there are a lot of benefits to Berkshire in terms of having the companies in the same corporate tax return. So I think it's unlikely that on any long term basis or an intermediate term basis that the value of the parts will be greater than the value of the whole. The best defense against activism is performance, but lately, there's been so much money pouring into activist funds because it's been easy to raise money for that. I mean, it's been a successful way of handling money for the last few years and institutional money then starts flowing into it and the consultants recommend it and all of that sort of thing. And so I would say that much of what I see is activism. Now people are really reaching in terms of what they're of the kind of companies that they're talking about and the claims of what they can do and that sort of thing. I think the biggest if you're talking about my shares getting dispensed over 10 years after my estate settled and the voting power they have, and I think by the time that gets to be a reality, I think the market value of Berkshire is likely to be so great that even if all the activists gathered together, they wouldn't be able to do very much about it. Berkshire is likely to really be a very, very large organization 10 or 20 years ago. Besides the Buffett's super voting powers, it's going to last a long time. It's going to last a long time. Yeah. I always I've got these friends that call me in other companies and they've got an activist and they're worried about it. I just tell them to send them over to Berkshire. We'll welcome them. We'd love to have them buy our stock because they're not going to get it anyplace. And that's going to be the situation for a long, long time. We should be a place where people can dump their activists. Charlie, you're on. Well, the thing that I find interesting is, in the old days when many most stocks sold for way less than they were worth in terms of intrinsic value, It was very rare to find an American corporation buying the stock in. Now in many cases, the activists are urging corporations to buy the stock in happily, even though it's selling for more than it's worth. This is not a constructive activity and it's not a desirable change and it's not a very irresponsible activity for the activists. There's been more stupid stuff written on such a simple activity as stock repurchase, most stupid stupid stuff written and stupid stuff done. I mean, it's a very simple decision, in my view, as to whether you repurchase your shares. You know, you repurchase them if you've taken care of the needs of the business and your stock is selling for less than it's intrinsically worth. But that I don't see how I think it'd be more simple. If you had a partnership and a partner want to sell out to you at 120% of what the business is worth, you'd say, forget it. And if you want to sell out to you 80% of what's worthy, you'd take it. It's not complicated. But there are so many other motivations that have entered into people's minds about deciding whether to repurchase shares or not. It's gotten to be a very contorted and kind of silly discussion in many cases. And Charlie is right. If you look at the history of share repurchases, it falls off like crazy when stocks are cheap and it tends to go up dramatically when stocks get fully priced. But it's not what we'll do at Berkshire. At Berkshire, we will presently you know, we would love to buy it by the bushel basket at 120% a book because we know it's worth a lot more than that. We don't know how much more, but we know it's worth a lot more. And we don't get a chance to do that very often. But if we do get a chance, we'll do it big time. But we won't buy it in a 200% of book because it isn't worth it. And it's not a complicated question, but people that I've been around a lot of managements that announced they're going to buy X worth and then they buy it regardless of price. And a lot of times the price makes sense, but if it doesn't, they don't seem to stop and nobody tries to seem to want to stop them. Troy? Well, I certainly agree with you. Okay. I don't think it's a great age, this age of activism. Do you want to expand on that? Well, it's hard for me to think of any activists I want to marry into the family. I better stop before he names names. Okay. Greg? Warren, American Express, which is Berkshire's 3rd largest stockholding has relied on powerful network effects and its valuable brand to generate economic profits over the years. It has created a virtual cycle with its collection of cardholders being desirable to merchants who have been willing to pay higher transaction fees with those fees ending up funding rewards programs and services for American Express's cardholders. More recently though, competitors have turned this model against the firm, targeting its cardholder base with ever increasing levels of rewards and services, while charging merchants lower fees than American Express does. The company also saw its image of exclusivity take a bit of a hit earlier this year when Costco ended a 16 year relationship with the firm, a move that affects 1 in 10 American Express cards in circulation and which will impact results this year next. With restrictions on interchange fees and the growth and acceptance of mobile payment technologies likely to impact future revenue streams and moves by the firm to go down market in pursuit of transaction volume, potentially diminishing the brand, how does American Express defend its moat? Well, American Express has been pretty good at that and particularly when Ken Chenault has been running it. It will be all aspects of payments will be subject to lots of innovation and various modes of attack. I think that American Express is still a very special company. And like I say, Ken has done a sensational job in anticipating a lot of these trends and guiding it into different markets. As you mentioned, it's gone down in the debit cards effectively and things of that sort. I think there's a lot of loyalty with American Express cardholders. I do think a proprietary card is worth more than a co branded card, but I think that I probably shouldn't get into specifics at Costco. I've got a Costco director sitting next to me. They but we're very happy with American Express, but we'd be we'll be even happier if the stock goes down and the $4,000,000,000 or $5,000,000,000 they spent a year buying in stock buys even more shares. Charlie? Well, I like it a little better when they had a little less competition, but that's life. Incidentally, you'll find in this 50 year history of Berkshire, you know, American Express did wonders for us back in the 1960s and there's a little history on there on the fact that it was an assessable stock until 1965, which nobody paid any attention to in 1963 on. But the company has an incredible history of adapting. I mean, they started out as an express company, move trunks around and valuables around and then the railroad came along and started doing the same thing. So they went to traveler's checks as a way to very handy way of moving money around the world. And then the credit card came along, Diners Club came along in the 1950s and that threatened the traveler's check. And then they moved into the travel and entertainment card, it was called then. And the interesting thing is that Diners Club, who was first, Raul Schneider and Al Bloomingdale, priced their card as I remember $3 and they looked like they were sewing up the market. And American Express came along and did something very interesting. They priced their card I think at $5 actually established a better image. I mean people that pull out their American Express card at a dinner table, They looked like JP Morgan and the guy that pulled out a Diner's Club card that had a whole bunch of flashy things on it. He looked like a guy who was cutting his expense account or something of the sort. So you just automatically felt like a more important person with the American Express card. They have been very nimble and very smart and particularly in recent years under Ken in terms of meeting all kinds of challenges and I think they will have plenty of challenges in the future, and I'm delighted we own 15% of the company. Okay, Station 7. Hi. My name is Chang, originally from Seoul, South Korea and working Los Angeles, California. I've been traveling more than 27 countries and last year, I taught financial literacy lesson in one of the local elementary school in Belize City. Today, here, we're talking about investments and capital markets. But young students in developed countries, they don't know how to save money or they don't know the concept of interest. So in order to overcome the educational challenges, I would like to provide volunteer opportunities to talented Americans to teach in South American schools to overcome the while they're traveling. So what do you think about my plan? Or do you have any advice? Thank you. Charlie, do you have any advice? Well, I failed in this activity with some of my relatives, so I don't think I can improve South America. No, I think if you don't know how to save, I can't help you. No, but the important thing is to get good habits early on. You really, you know, someone said the chains of habit are too light to be felt until they're too heavy to be broken. And habits really make an enormous difference in your life. So Andy and Amy Hayward have developed the Secret Millionaire's Club, which I've helped out with a little. And our goal is to, in an entertaining way, present good habits to young kids through a kind of a comedy series. And I think it's actually having a pretty good effect. And here in a few days, we're going to have a here in Omaha, we're going to have 8 finalists and young kids from around the country that have developed businesses of their own. And I'm always enormously impressed with these kids. But the importance of developing good habits yourself or encouraging good habits in your children very early on in respect to money can change their lives. And it would I was $9 or $10,000 ahead when I got out of college and I got married young and had kids very fast. And if I hadn't had that start, my life would have been vastly different. So you can't start young enough on working on good money habits. And I do think that I do I think the Secret Millionaire's Club is very good, but there could be lots of other good ways of teaching them those lessons. Okay. We now I've moved solely to the audience, so we'll go to Station 8. Hello, Warren, Charlie. My name is Stefano Grasso and I come from Genova, Italy. It's great to be here today for the 50th anniversary. Last year, I asked you what was the right level for leverage at Berkshire Hathaway and why not to increase it? I argued that increasing liability more debt at the cheap level would have benefit Berkshire. Thanks to the investment capabilities of the present management. This year, I would like to get your view on the possibility of working on the other side of the balance sheet and using part of the cash sitting on bank accounts to reduce some of the liabilities currently on its balance sheet. For example, the index put that Berkshire sold between 2,004 2,008 generated a premium of almost 5,000,000,000 dollars Few years down the line, BearShare benefited from the flow. The indexes are higher and the time to maturity of the put got shorter. Question is, if the unwinding of the puts were acceptable by the counterparts, which bought them, would you consider unwinding them at a reasonable price? Thank you. You're speaking specifically the equity put options we have? I'm speaking about them, but this is just an example. Right. I'm talking also of maybe reducing debts or doing other. Yeah. Well, what we hope, of course, is that what we call the excess cash, which is cash beyond $20,000,000,000 that we can put to work buying a business. But you can't do 1 a week or 1 a month. So it's opportunistic. And I don't know whether the phone call that's going to result in the next deal will come in next week or it may come in a year from now. We will get calls and we will put money to work. We just we can't do it in an even flow. And we have virtually no debt. If someone had told the 2 of us 50 years ago that we'd be able to borrow money in euros with a long duration of 1% or something like that or we would have felt we would have ended up with a way different balance sheet than we have today. But I mean, money is so cheap that it causes people to do almost anything on the asset side. And we try to avoid doing that because we don't want to drop our standards too fast just because the liability side is costing us so little. But I don't think obviously, if we could unwind a derivative trade on a basis where we thought we were mathematically ahead by a significant amount, we would do it. But I think that's very unlikely with the contracts we have now. So we'll probably I think it's very likely they just run out over time. We carry a liability of well over, I think it's getting somewhere between $3,500,000,000 $4,000,000,000 for something that has a settlement value today of $400,000,000 So it'd be it's very hard for us to it's very hard for us on the other side of those of the contract to arrive at a price that we both would be happy with. We are not going to deleverage Berkshire. There isn't that much leverage to start with. I mean, the float really is essentially very close to permanent. I mean, it can decline a couple percent in a year, but it could also increase a few percent. So I see no drain on funds of any consequence from the float for as far as the eye can see, and we have very little debt out. So I don't I would not want to pay down the debt we have now. Logically, we probably should take on more debt at these prices, but that's just not something that appeals to us. Maybe when we find a really big deal, We might take on a little more. I would like to at least have that as something I was thinking about. Charlie? We'd love to have something come along where we actually felt a little capital constrained. We haven't felt capital constrained for a long time. It's a problem we'd love to have, something so attractive that we've You would stretch a little. You would stretch a little. That would be glorious. And could happen by the way. And it could happen. Okay. Station 9. Hi, Mr. Buffet and Mr. Munger. My name is George. I'm translating for my father, Lei Wing Gao from Shanghai, China. Last year, it was my father standing here asking his question, and this year, it's me. I feel so lucky. I know at the end of last year, you purchased a car sales dealer. This year, you said in your public letter that you are going to continue to buy. The ultimate purpose of investment is to seek the return. So my question is whether the rate of return can be necessarily higher with the scale of the dealers. If so, while we cannot see that happen in China, how come the differences was the dealership business of the same nature in United States and China? Thank you. Yes. I don't know the dealership situation in China. I would say I think I mentioned this a little earlier that I don't think we're going to get significant benefits of scale as we buy more units in the auto field. I just don't see where it would come from. But we don't need it. What we really need is managers in those individual dealerships that have skin in the game of their own and that run them, you know, as 1st class businesses independently. And that's what we'll be looking for. We'll not be looking for scale. I don't know the situation in China. And maybe Charlie knows more about that. I think he does. No, but I don't think we'd be very good at running dealerships in China. And I think the people who run Bandeo are very good at running the ones here. So Yes. And with 17,000 here and we've got 81 of them, there's a little room to expand. The problem is going to be price. Our purchase probably caused people to move up their multiples by 1 or 2 that people would have them. And we paid a full but fair price for van Tile and we will be using that price more or less as a yardstick. And we really thought we bought the best there. So if anything, we would be hoping to buy others maybe for a bit less. So we will not we may buy a lot of them, we may buy very few just depending on price developments. We're having a big car year and profits are good at the dealership field. But when profits are good, we want to pay a lower multiple. I mean, because if we're going to be in the car business forever, we're going to have some good years and we're going to have some bad years. And we would rather buy at a 10 or 12 times multiple of a bad year than buy at an 8 times multiple of a good year. And that's not necessarily the way the sellers think, although they probably understand it, but they don't want to think that way. So we'll see what happens. Okay, Station 10. Hi, Mr. Buffet and Munger. Very excited to be here. My name is Liu Yu, also from Shanghai, China. Because now I'm in a company providing wealth management to the high net wealth individuals in China. The company name is Noah from Noah's Ark listed at NYSE. You 2 are my idols. What's your secrets of keeping so young, so energetic and so quick. Please don't say because of Coca Cola. And someone said that old Papa could not understand the Internet, but I don't believe that. What's your opinion? When you pay more attention to Internet, could I invite those 2 gentlemen to answer my question? Thank you very much. Charlie, I didn't get all up, so you Well, he asked if we're going to be using the Internet. Warren is a big internet user compared to me. And but I love it. He plays bridge on. It. I use a lot of I use search. It's been a huge change in my life and it cost me $100 a year or something like that. If I had to give up the plane or I had to give up the Internet, the plane cost me $1,500,000 a year. The internet cost me $100 a year. I wouldn't want to give up either one of them, but I give up the plane. Interesting. Charlie's giving up balls. Are we going to be doing more? And I think everybody is going to be doing more things on the internet. It is growing in importance. And so, like it or not, we're dragged into modern reality. Doesn't sound like he likes it, does it? No, I don't like it. I don't like multitasking. I see these people doing 3 things at once and I think, God, what a terrible way that is to think. I am so stupid that I have to think hard about a thing for a long time and the idea of multitasking my way to glory has never occurred to me. But anyway, the internet is here and it's going to be more and more important and everybody's going to think more about it and do more about it, like it or not. And of course, the younger people are way more prone to usage than we are. But Berkshire you have, what, how many bluebirds now? In the office? Yeah. You have 2 or 3, Mark? I don't know. They don't tell me about them. They sort of hide them when I come in anyway. We're into the modern world. We have Mark Hamberg tells me we have 3. We'll reevaluate that situation when I get back to the office. What's that? Oh, we're not paying for 1. I like that. Let's see if we can now pay for 2. Now the internet and it's changed many of our businesses. I mean, it's changed GEICO's business very, very dramatically. And it's affecting it affects them all to one degree or another. It's amazing to me. I mean, people get pessimistic about America. I think just think in the last 20 or 25 years or well, just 20 years on the Internet, how dramatically it's changed your life. And the game is not over yet. There's all kinds of things are going to happen to make life better. And Charlie may not think the internet makes life better, but when I compare trying to round up 3 other guys on a snowy day to come over to my house to play bridge versus snapping the thing on and having my partner in San Francisco there and 2 other friends and so on in 10 or 20 seconds, I think the world has improved. If I had your partner, I think it would have improved too. Okay. Station 11. Hi. I'm Whitney Tilson, a shareholder from New York. Mr. Buffet, I know how many how I know many shareholders have felt irritation, to put it mildly, when you weighed in on social issues such as tax policy or endorsed and raised money for a particular candidate, but I for one applaud it. I think everyone, but especially people who've achieved wealth and prominence and thus have real ability to affect change, have a duty to try and make the world a better place, not just through charitable donations, but also through political engagement. And I'd say that even to people whose political views are contrary to my own. My question relates to one of the big issues today, rising income inequality and related to that, the campaign to raise the minimum wage, which has had some recent successes with some of the largest businesses in the country like Walmart and McDonald's. How concerned are you about income inequality? Do you think raising the minimum wage is a good idea? And do you think these efforts might meaningfully affect the profitability of corporate America? Yes. I think I think income inequality is, I think it's extraordinary in the United States to see how far we've gone. Well, just go back to my own case. In since I was born in 1930, the average GDP per capita in the United States has gone up 6 for 1. Now my parents thought they were living in a reasonably decent economy in 1930. And here, their son has lived to where the average is 6 times what it was then. And if you'd asked them at that time and they'd known that fact, that it would go from $8,000 or $9,000 in today's terms to 54,000 they would have said, well, everybody in America is going to be enjoying a terrific life. And clearly, they're not. So I think it is a huge factor. There are a million causes for it. And I don't pretend to know all the answers in terms of working towards solutions. But I do think that everybody that is willing to work should have a reasonably decent livelihood in a country like the United States. And how that is best achieved, I'm actually going to write something out pretty soon. I have nothing against raising the minimum wage. But to raise it to a level sufficient to really change things very much, I think, would cost a whole lot of jobs. I mean, there are such things as supply and demand curves. And if you were to move it up dramatically, I think you would it's a form of price fixing. I think you would change the opportunities available for people very dramatically. So I'm a much more of a believer in reforming and enlarging the earned income tax credit, which rewards people that work, but also takes care of those whose skills don't fit well into a market system. So I think you put your finger on a very big problem. I don't think I don't have anything against raising the minimum wage because but I don't think you can do it in a significant enough way without creating a lot of distortions. Whereas I do think the earned income tax credit makes a lot of sense and I think it can be improved. There's a lot of fraud in it. It pays out this lump sum. So you get into these payday type loans against I mean, there's a lot of improvements can be made in it. But I think the answer lies more in that particular policy than the minimum wage. And like I said, I think I'm going to write something out pretty soon. And if there's anybody I haven't made mad yet, I'll take care of it on the next one. Charlie? Well, you've just heard a Democrat speaking and here's a Republican who says I agree with him. I think if you raise the minimum wage a lot, it would be massively stupid and hurt the poor. And I think it would help the poor to make the I think if you raise the minimum wage a lot, it would be massively stupid and hurt the poor and I think it would help the poor to make the earned income credit bigger. Let's go to Station 1. Hi. I'm Michael Monahan from Long Island, New York. Warren, Charlie, the higher education system has expanded, covering almost everyone who would like to receive a college education. This demand has translated into rising college cost. As a high school junior, I'm looking at prestigious institutions such as UPenn, Villanova, NYU, Fordham and Boston University. On the other hand, my parents are experiencing sticker shock. All these schools have a sticker price of over $60,000 with some students as shown in a businessinsider.com article can pay over $70,000 as the case at NYU. How will the average American family be able to pay this in the future? And more importantly, how do you 2 feel about this? Charlie? Well, the average American family does it by going to less expensive places and getting massive subsidies from the expensive places. Not we wouldn't have that many college students. So, most people are paying less or getting subsidies. And, but I think it is a big problem that education has just kept raising the price, raising the price, raising the price and they say, but college educated people do better. It's a big bargain. But maybe they do better because they were better to start with before they ever went to college. And they never tell you that. It's a ridiculous argument. And so I think that's one of the silliest statistics that they publish. I mean, to say that a college education is worth X because people that go to college earn this much more than the ones that don't. You're talking about 2 different universes. And to attribute the entire difference to the one variable that they went to college as opposed to the difference between the people who want to go to college and have the ability to get into college, it's completely nutty and fraud. 70% of the people believe in it. So it gives you a certain hesitation about relying on your fellow man. So I think most people just have to struggle through with the system the way it is. There's a big tendency to have prices rise to what can be collected and people just rationalize that the service is worth it and I think a lot of that has happened in education. And, of course, a lot is taught in higher education that isn't very useful to the people who are learning it and, of course, all those people would never learn much from anything. So it's really wasting your time. And that's just the way it works. So I think there's a lot wrong. What I noticed that was very interesting is that when the Great Recession came, every successful university in America was horribly overstaffed and they all behaved just like their HE, they all, with a shortage of money, laid off a lot of people. The net result is they all worked better, and it was all over with the people gone. And so this rightsizing is not all bad. I don't think there's a college in America that wants to go back to its old habits. And, but you put your finger on it. It is a real problem to look at those stagger shocks. It's like any other problem in life. You have to figure out your best option and just live with it. We can't change Villanova or Fordham. They're going to do what they're going to do, and as long as it works, they'll keep raising the prices. And it will keep working. Yes. And that's pretty much the way the system works. When it really gets awful, there's finally a rebellion. In my place in Los Angeles, the little traffic accident got so cost too much to everybody because of so much fraud and the chiropractors and some of the plaintiff's attorneys and so on. And finally, the little accidents were costing so much that that they worried about the guy who lived in a tough neighborhood, couldn't afford to drive out of it to get a job. And the auto insurance companies thought, my God, if the price is going up like this, they'll have legislation creating state auto insurance or something. So the net result is they put the plaintiff's attorneys to trial in every case and that fixed it. And maybe something like that will happen in higher education, but without some big incentive, I think higher education will just keep raising the prices. On that cheerful note, we'll move to Station 2. Thank you. Thank you for taking my question. My name is Brandon Chen. I'm from Taipei, Taiwan. My question is, China is undergoing an above structural changes. What do you when you take the pulse of the Chinese economy, what do you read and what advice would you give? Thank you. Charlie is the China expert. I think China is going to do very fine over a period of time. Yeah, I'm a big fan for what's happening in China. And as a matter of fact, I've just ordered prepared a bust of Lee Kuan Yew, the recently deceased Prime Minister of ex Prime Minister of Singapore, because I think he's contributed so much to fixing first Singapore and then China. And one of the things Lee Kuan Yew did in China was in Singapore was just stop the corruption, including cashiering some of his close friends. And China is doing the same thing and I consider it the smartest damn thing I've seen a big country do in a long, long time. And I think that it's hard to set the proper example if the leading political rulers are kleptocrats. You know, you don't want to be run by a den of thieves. You want responsible people. And what Lee Kuan Yew did is he paid the civil servants way better and recruited very good people and he just created a better system and of course China is widely copying him and it's a wonderful thing they're doing. So I'm very high on what's going on in China and I think it's very likely to work. They have actually shot a few people. That really gets people's attention. Now we're starting to get some practical advice here. What has happened in China over the last 40 or so years, I mean, it just strikes me as just totally miraculous. I don't think I would not have believed that a country could move so far so a country of that size particularly so far so fast. And it's been It's never happened before in the history of the world that a company so big had come so far. When I was a little boy, 80% of the population of China was illiterate and mired in subsistence, poverty and agriculture. Now, just and they've been through horrible wars and look at them. It's one of the most remarkable achievements in the history of the earth and a few people made an extreme contribution to it, including this Chinese politician in Singapore. And I give the Communist Party a lot of credit for copying Lee Kuan Yew. That's all Berkshire does is copy the right people. In 17/90, the United States had 4,000,000 people. China had 290,000,000 people. They were just as smart as we were. They worked as hard, similar climate, similar soil. And for 200 close to 200 years, the United States went with those 4,000,000 people to close to 25% of the world's GDP and China really didn't go anyplace. And then those same people in 40 years and they're not working harder now than they were 40 years ago. They're not smarter now than they were 40 years ago in terms of the basic intelligence. And just look at what's been accomplished. I mean, it does show you the human potential when you find a system that unleashes it. And we found a system that unleashed human potential a couple of 100 years ago, and they found a system that unleashed human potential 40 or 50 years ago. And when you see that example, it has to have a powerful effect on what happens in the future. And it's just amazing that you could have people go nowhere basically in their lives for centuries and then just it explodes. And it just blows me a way to see it and you make it it's the same human beings, but they've found a way to unlock their potential. And I congratulate them for it. And as Charlie said earlier, China and the United States are going to be the superpowers for as far as the eye can see. And it is really good for us, in my view, that the Chinese have found a way to unlock their potential. And I think it's imperative for 2 countries with nuclear weapons that in this kind of world that they figure out ways to see the virtues in each other rather than the flaws. We'll have plenty of disagreements with the Chinese and they will with us, but we ought to remember that on balance, we're both better off if the other one's doing well. It's just my own view. Okay. Station 3, please. Hello, Mr. Buffet and Mr. Munger. My name is Chandra Chawla and I am from San Francisco. Thank you for the last 50 years of sharing your wisdom and being an exemplar of integrity. 50 years ago, when you were starting out or getting into new industries, how did you figure out the operational metrics for a new industry where you did not have previous experience? Well, we A, we didn't have it thought out that well in a sense at that time, but we basically looked for companies where we thought we could understand what the future would look like 5 or 10 or 15 years hence. And that didn't mean we had to do it to 4 decimal places or anything of the sort, but we had to have a feel for it. And we had to know our limitations. So we stayed away from a lot of things. And at that time, prices were different. So we in terms of knowing we were getting enough for our money, it was a much easier decision than it is currently. But it wasn't it weren't elaborate there are no planning sessions or anything of the sort. We just we kept reading and we kept thinking and we kept looking at things that came along, as Charlie described it in the movie, and comparing opportunity A with opportunity B. And in those days, we were capital constrained, so we usually had to sell something if we were going to buy something else, and that always makes for an that's the an interesting challenge always when you're measuring something, you hold against something that has come along and to see which is more attractive. And we probably leaned very much toward things where we felt we were certain to get a decent result than where we were hopeful of getting a brilliant result. That's what with our instincts and kept putting one foot in front of the other. Charlie, what would you say? Well, that's exactly what we did. And it worked wonderfully well and part of it is because we're such splendid people and worked so constructively and part of it is we were a little lucky. We had some good fortune. Now Warren says he was lucky to go to GEICO, but not every 20 year old was going down to Washington, D. C. And knocking on the doors of empty buildings to try and find something out that he was curious about. So we made some of our luck by being curious and seeking wisdom and we certainly recommend that to anybody else. And there's nothing that produces wisdom more thoroughly than really getting your own nose whacked hard when you make a mistake. And we had a fair amount of that, didn't we? We had plenty of them. If you read this book, you'll see about a few of them. We thought we knew the the department store business in Baltimore and we thought we knew about the trading staff business. And we've had a lot of we've had a lot of experience with bad businesses, and that makes you appreciate a good one. And to some extent, it sharpens your ability to make distinctions between good and bad ones. And we've had a lot of fun along the way. That helps too. I mean, if you're enjoying what you're doing, you're likely to get a better result than if you go to work with your teeth clenched every morning. I think we were helped because we came from families where there were some admirable people and we tended to identify other admirable people better than we would have coming from a different background. So, my deceased wife used to say, you can't accomplish much in 1 generation. We owe a considerable amount, both of us, to the families we were raised in. I think the family standards helped us to identify the good people more easily than we would have if we had had a more disadvantaged background. Do you agree with that, Roy? Yeah. Have you still got your father's briefcase, sir? I still got it, but I don't know where it is. I got it. I carry it anymore. It's worn out. It's got holes in I've got my dad's I got my dad's desk from 75 years ago. Okay, Station 4. Hi, Warren and Charlie. This is Decora and Dan Chen from Talgard in Los Angeles and we're thrilled to be here again. Thank you for planting the seeds for which my generation can sit under the shade. And for my children's generation with the secret millionaire's club, so that they could sit under the shade. I walk amongst giants. How are you? Go on. On to the that's all I had. Don't hold back. Seriously, though. Okay. Thank you so much for everything you've taught us. How were you able to persuade How are you able to persuade your early investors all early on besides your family and friends, to overcome their doubts and fears and to believe in what you're doing. There's a lot of other asset classes out there such as a lot of people believe real estate, bonds, gold. How are you able to get over that? And something I've been really dying to ask you. We didn't ask you. We didn't do very well until we had a winning record. Prior to the early winning record, how are you able to get them to buy into what you're trying to do? I mean, no one's ever done what you're doing and no one has still. And I've been really wanting to ask you, in the past, you said you're 90% gram and 10% fisher. Where does that percentage stand today? Thank you again from a grateful student of your teachings and my children love what you do too. They wrote you a letter. Thank you. Thank you. A lot of it, I started selling stocks here when I was 20 years old. I got out of Columbia and although I was 20, I looked about 16 and I behaved like I was about 12. So I was not I did not make a huge impression selling stocks. I used to just walk around downtown and call on people, where it was done, and then I went to work for Graham. But when I came back, the people that joined me actually, one of my sisters, her husband, my father-in-law, my aunt Alice, guy I roomed with in college, and his mother. And I've skipped 1. But in any event, those people just had faith in me. And my father-in-law, who was a dean at the what was then the University of Omaha. He gave me everything he had, you know, and to quite an extent, they all did. And so it was they knew I'd done reasonably well by that time. That would have been 1956. So I'd been investing 5 or 6 years. And actually, I was in a position where when I left New York and came back to Omaha, I had about $175,000 and I was retired. So I guess they figured if I was retired at 26, I must be doing something right. And they gave me their money. And then it just unfolded after that, an ex stockholder of Graham. Then when the president of a college came out, Ben Graham was winding up his, partnership for his fund and he recommended me. And then another fellow saw the announcement in the paper that we'd formed a partnership and he called me and he joined. And just one after another, and then actually a year or 2 later, a doctor family called and they were the ones that ended up with me meeting Charlie. So a lot of stuff just comes along if you just keep plotting along. But the record later on of the partnership attracted money, but initially it was much more just people that knew me and had faith in me, but these were small sums of money. We started with $105,000 Charlie? Well, of course, that's the way you start. And but it's amazing we've now watched a lot of other people start. And the people that have followed the old Graham Newman path have one thing in common. They've all done pretty well. Can hardly think of anybody who hasn't done moderately. Everybody did well. Yeah. So if you just avoid being a perfect idiot and have a good character and just keep doing it day after day, it's amazing how it will work. Yes, it was an accident to a significant extent. If a few of those people hadn't have said to me, you know, what should I buy? And I said, I'm not going to go back in the stock brokerage business, but I will, you know, we'll form a partnership and, your fate will be the same as mine, and I won't tell you what I'm doing. And they joined in and it went from there. But it was not planned out in the least at 0. I met Charlie and he was practicing law and I told him that was okay as a hobby, but it was a lousy businessman. Fortunately, I listened. It took a while, however. Yes. Okay. Station 5. You got Hi. My name is Arthur. I'm from Los Angeles. I wanted to thank you for having us in your hometown. And we've all been listening to your business prowess and all your successes. There's no question that you're good at business and finance and have fun doing it. But there are comments that you've made on income inequality, giving away 99% of your wealth. And I'm led to believe that you're motivated by more than just amassing wealth or financial gains. So I'd like to speak to your value core and ask what matters to you most and why. Charlie, what matters to you most? Well, I think that I have an unfortunate channeling device. I was better at figuring things out than I was at everything else. I was never going to succeed as a movie star or as an athlete or as an actor or something. So, And I early got the idea that, partly from my family, my grandfather in particular, whose name I bore, had the same idea, that really your main duty is to become as rational as you could possibly be. I mean, rationality was just totally worshipped by Judge Munger and my father and others. And since I was good at that, no good at anything else, I was steered in something that worked well for me. And but I do think rationality is a moral duty. That's the reason I like Confucius. He had the same idea all those years ago. And so and I think Berkshire is sort of a temple of rationality. What's really admired around Berkshire is somebody who sees it the way it is. Wouldn't you agree with that Warren? Yeah. That is You better than anything, more than energy. You better see it the way it is. You better see it the way it is. You see it the way it is. And so that's the way I did it. But that goes beyond a technique for amassing wealth. To me, that's a moral principle. I think if you have some easily removable ignorance and keep it, it's dishonorable. I don't think it's just a mistake or a lack of diligence. I think it's dishonorable to say to stay stupider than you have to be. And so that's my ethos. And I think you have to be generous because it's crazy not to be. We're a social animal and we're tied to other people. Well, I would say, Scott, it doesn't sound very noble, but the what matters to me most now and probably has for some time, I mean, there are things that matter that you can't do anything about, I mean, in terms of health and the health of those around you and all of that. But actually, what matters to me most is that VirTra does well. Basically, I'm in a position where we've probably got a1000000 or more people that are involved with us and it just so happens that it's enormously enjoyable to me. So I can rationalize it, the activity. But I would not be happy if Berkshire were doing poorly. That doesn't mean whether the stock goes down or whether, the economy has a bad year. But if I felt that we weren't building something every year that was better than what we had the year before, I would not be happy. And I get this enormous fun out of it and I get to work with people I like and But that's very important. The truth of the matter is, it's easy for somebody like Warren or me to lose a little of our own money because it doesn't matter that much, but we hate losing somebody else's. It's and that's a very desirable attitude to having a civilization. Don't you hate losing Berkshire? Yes, it would that would be the only thing that would keep me up at night. Yes. Yes. We won't do it. We can lose money on individual things, obviously. We can have bad years in the economy. And we can't be sure when the stock market was down a lot. That doesn't bother me in the least. What bothers me is if I do something that actually costs Berkshire in terms of its long term value, then I feel I do not feel good about life on that day. But we can avoid most of that fortunately. We do get to pick our spots. We are very fortunate of that response. Well, a good doctor doesn't like it when the patient dies on the table either, you know. Not a new thought. Okay. Let's go to Station 6. Hi, Mr. Buffet and Mr. Munger. My name is Petra Bergman. I'm from Stockholm, Sweden in the Northern Europe. I work at something called ef m.se. I wanted to ask you, from my point of view, what would be the answer to the most intelligent question I could ask you right now? Everybody tries that question. And it would be wonderful if that would solve all your problems, but I don't think it's a very good question. Or perhaps I should say, let's phrase that differently, Charlie. Well, what I mean is you are asking too much of somebody when you ask him to honestly say what is the most enlightening question he can answer. Yes, I get that asked by the students a lot and I've had a lot of practice in hearing it asked, but I haven't had very much success in answering it. So I'll have to beg off on that one. How about 7? Good afternoon, Warren and Charlie. Congrats on 50 years. My name is Jim and I'm from Brooklyn, New York. This is kind of a follow on to a recent question. You both had success in investing even before Berkshire Hathaway as investors and as fund managers. While it's well known you closely followed Graham's teachings, others like Walter Schloss and his son also had success with similar teachings yet different strategies. What would you cite as the most important reason for your early success with small amounts of capital? And given hindsight today, what might you have done to improve your strategy with these small funds? Yes. Well, I had a great teacher. I had exceptional focus and I had the right sort of, emotional qualities that would help me in being a investor. I enjoyed the game. I mean, you do give it all back in the end, and it wouldn't make any difference if I did that that was not the key thing. The game was enormously fun. And I think Gene McCarthy said about football one time, you know, that it's just about, you know, hard enough to be interesting, but not so hard as to be beyond the capabilities of people understanding it. And that's kind of the way this game is. I mean, it's not like Henry Singleton kind of questions he took on. It's actually a pretty easy game, and it does require a certain emotional stability. And I went at it hammer and tong. I went through the manuals and everything. But I was enjoying when I did it. And like I say, I started out between ages 7 and about 19. I had that same enthusiasm, but I didn't really have any guiding principle. And then I ran into the intelligent investor and Ben Graham. And then at that point, I was able to take all this energy and everything, enthusiasm for it. And now I had a philosophy that made a lot of sense, total sense, and I found that I could employ. And so the game became even more fun, but it wasn't really more complicated than that. Charlie? Well, I don't have anything to add. I do think that it's an easy game if somebody has the temperament for it and keeps at it because he likes it and is interested in it. I have a problem that Warren has less of. I don't like being too much an example to people who want to get rich by being shrewd and buying and passively holding securities. I don't think that's enough of a life, Rick. If you rest a fortune from life by being shrewder than other people and buying little pieces of paper, I don't think that's an adequate contribution in exchange for what you're taking. So I like it when you're investing money for an endowment or a pension fund or your relatives or something, but I never considered it enough of a life to merely be shrewd in picking stocks and passively holding them. Yes. Running Berkshire has been far, far more fun than running, in my case, Buffet Partnership or just an investment fund. I mean that You would be less of a man. If you run that partnership It would be a crazy way to go through life. Yes. Yes. I mean, just, you know, Berkshire is incredibly more satisfying. So if you're good at just investing your own money, I hope you'll morph into doing something more. Okay. We'll do 8 and then we'll move on to the Annual Meeting. My name is John Bostos. I'm from South Dartmouth, Massachusetts. My question is regarding an interview that you gave Mr. Buffet several years ago. You made a very interesting point. It was about the old Wall Street Journal, if you will, the one before it was purchased by News Corp. You mentioned in the interview that Wall Street Journal at some point in the past had very significant competitive advantages, but a number of them were largely unrealized. I was just wondering if you could elaborate on that, what the advantages were, how they were unrealized, etcetera. Thank you. Yes. Well, Dow Jones, which owned the Wall Street Journal, in the '60s '70s going into the area into the era of the enormous spread of financial information and value of financial information. You know, they basically they owned the field. They had the news ticker and they had the journal, which, anybody interested in finance in the country identified with. And they starting with that in what would be the an incredible growth industry, finance, for the next 30 or 40 years, they I forget a couple of those ventures they went into and they bought a chain of small newspapers, I remember one time, and they just totally missed what was going to happen. Here comes Michael Bloomberg and takes away financial information. I mean, they had such an advantage and they didn't really see various areas that they could have pursued which could have turned that company into something worth many 100 of 1,000,000,000 of dollars in all probability. And they had a situation where a family owned it and a lawyer essentially controlled the family, family's behavior and they were sitting pretty, you know, they were all getting dividends, but there was nobody there with any imagination as to what could be done in the financial field. So starting with this position, they were a trusted name. They were in every brokerage firm in the country with a news ticker. I mean, I went to Walter Annenberg's house one time and he had the Dow Jones ticker there. I didn't it just or the news ticker. And it was they couldn't have been in a better place. They couldn't have started with a stronger position. They had a very good balance sheet, and they just let the world pass them by. Now Rupert is changing it into a different newspaper. He's going into he's basically going into competition with the or has gone into competition with The New York Times, so he but that's the game he likes and it makes for a very interesting competitive situation. Charlie? Well, they did end up with $6,000,000,000 or $7,000,000,000 So they may have blown their opportunities, but they didn't destroy their fortune. If you'd had the hand, if Tom Murphy had had the hand, it would have been in the 100 of 1,000,000,000, wouldn't it? Well, I don't know. I'm not sure if we had had that hand. Well, I'm not so sure, but I'm not talking about MRF. There are a lot of opportunities there. Well, I think even MRF is more like us than he is like Bill Gates. I'm not sure where that goes, but I think it's hard to invent these. He's more our A. He's entirely new modalities and so on. I think Bill would have done very well without Jones too. Yes. He might have done better than that. Yes. I like to buy into that retroactively. Okay. 3:30 has arrived. We are going to go to the annual meeting in about 5 minutes. We have got a certain amount of formal business to take care of. I thank you all for coming. Let's reassemble and we'll conduct the business of the meeting. The meeting will now come to order. I'm Warren Buffett, Chairman of the Board of the company and I welcome you to this 2015 Annual Meeting of Shareholders. This morning, I introduced the Berkshire Hathaway directors that are present. Also with us today are partners in the firm of Deloitte and Touche, our auditors. They are available to respond to appropriate questions you might have concerning the firm's audit of the accounts of Berkshire. Sharon Heck is secretary of Berkshire Hathaway and she will make a written record of the proceedings. Becky Amick has been appointed Inspector of Elections at this meeting. She will certify that the count of votes cast in the election for directors and the motion to be voted at this meeting. The named proxy holders for this meeting are Walter Scott and Mark Hamburg. Does the secretary have a report of the number of Berkshire shares outstanding entitled to vote and represented at the meeting? Yes, I do. As indicated in the proxy statement that accompanied the notice of this meeting that was sent to all shareholders of record. On March 5, 2015, the record date for this meeting, there are 824,920 shares of Class A Brookshire Hathaway common stock outstanding with each share entitled to one vote on motions considered at the meeting and 1,227,000,000 69,442 shares of Class B Brookshire Hathaway common stock outstanding with each share entitled to 1 10,000th of one vote on motions considered at the meeting. Of that number, 592,750 Class A Shares and 736,000,000 403,387 Class B Shares are represented at this meeting by proxies return through Thursday evening, April 30th. Thank you, Sharon. That number represents a quorum and we will therefore directly proceed with the meeting. First order of business will be a reading of the minutes of the last meeting of shareholders. I recognize Mr. Walter Scott, who will place a motion before the meeting. I move that the reading of the minutes of the last meeting of shareholders be dispensed with and the minutes be approved. Do I hear a second? I second the motion. The motion has been moved and seconded. Are there any comments or questions? We will vote on this motion by voice vote. All those in favor, say aye. Aye. Opposed? The motion is carried. The next item of business is to elect directors. If a shareholder is present or did not send in a proxy or wishes to withdraw a proxy previously sent in, you may vote in person on the election of directors and other matters to be considered at this meeting. Please identify yourself to one of the meeting officials in the aisle so that you can receive a ballot. I recognize Mr. Walter Scott to place a motion before the meeting with respect to election of directors. I move that Warren Buffett, Charles Munger, Howard Buffett, Stephen Burt, Susan Decker, William Gates, David Gottesman, Charlotte Guymon, Thomas Murphy, Ronald Olson, Walter Scott, and Merle Whitmer be elected as directors. Is there a second? Second. It has been moved and seconded that Warren Buffett, Charles Munger, Howard Buffett, Steven Burke, Susan Decker, William Gage, David Gottesman, Charlotte Guymon, Thomas Murphy, Ronald Olson, Walter Scott and Merrill Whitmer be elected as directors. Are there any other nominations? Is there any discussion? The nominations are ready to be acted upon. There are any shareholders voting in person. They should now mark their ballot on the election of directors and deliver their ballot to one of the meeting officials in the aisles. Ms. Hammock, when you are ready, you may give your report. My report is ready. The ballot of the proxy holders in response to proxies that were received through last Thursday evening cast not less than 657,000 744 votes for each nominee. That number far exceeds a majority of the number of the total votes of all Class A and Class B shares outstanding. The certification required by Delaware law of the precise count of the votes will be given to the secretary to be placed with the minutes of this meeting. Thank you, Ms. Amick. Warren Buffett, Charles Munger, Howard Buffett, Steven Burke, Susan Decker, William Gates, David Gottesman, Guyman, Thomas Murphy, Ronald Olson, Walter Scott and Merrill Whitmer have been elected as directors. Does anyone have any further business that have come before this meeting before we adjourn? If not, I recognize Mr. Scott to place a motion before the meeting. I move that this meeting be adjourned. Second? Motion to adjourn has been made and seconded. We will vote by voice. Is there any discussion? If not, all in favor, say aye. All opposed, no. The meeting is adjourned. Thank you.

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