Berkshire Hathaway Inc. (BRK.A)

ASM 2021

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May 1, 2021

Virtual annual meeting of Berkshire Hathaway, we did it on the hall last year on short notice. We had more warning this time. And so we came to Los Angeles and the reason we're doing it from here is because of the man on my left, not because he asked for it, but because all of us wanted to do it with Charlie here in Los Angeles. So I'll introduce the 3 Vice Chairmen of Berkshire in a minute. I'll show you the first quarter earnings. We won't take much time on that. I'll have 1 or 2 very short lessons for perhaps the new investors who are not necessarily in Berkshire Hathaway, but people who have entered the stock market in the last year and I think there have been a record number that have entered the stock market. I'll have a couple of little examples for them and then we'll swing into a Q and A led by Becky Quick who's looked at thousands of questions that have been submitted to her, but more can be submitted during this meeting and we will put up on camera from time to time the way you can communicate directly with her if you want to send questions in during the meeting, she got flooded with them last time and she miraculously keep sorting them out. And so feel free to send in the question and we will have a question period for about 3 and a half hours. And then we will finally have the annual meeting, which won't take long, at the end. So with that, I would like to first introduce the 3 Vice Chairmen of Berkshire Hathaway, I'll tell you just a little bit about him and then I'll have a mild surprise for you at the end perhaps. On my left, Charlie Munger, and I met Charlie 62 years ago, he was practicing law in Los Angeles. He was building a house at that time a few miles from here. And 62 years later, he's still living in the same house. Now that was kind of interesting because I was buying a house just a few months before 62 years ago, and I'm still living in the same house. So you've got a couple of fairly peculiar guys just to start with in terms of their love affair with their their homes. And Charlie Charlie and I get it off immediately. And I would say he's he's probably the vice chairman in charge of culture among other things. But if I ever want to get questions about where True North is, I talked to Charlie and he has been an enormous help. He's done it with a lot fewer hours and a lot less talking and everything that I have, but he's contributed in an incredible way to to Berkshire. So Charlie has been out here in Los Angeles for 60 plus years. On my right, your left, I have the vice chairman in charge of everything except insurance and investments, Greg Abel. Greg was born and raised in Edmonton, Alberta. He's Canadian, plays hockey. His 8 year old plays hockey. And he came to the United States sometime after he graduated from college in Canada, and he is in charge of a business, which has well over $150,000,000,000 in sales and employs 200 and more than 250,000, probably 275,000 people. And does a much better job doing that than I was doing previously. And on my far left, your right, we have Ajit Jain, and Ajit was born and raised in India and graduated from college there. And I met Ajit on a Saturday in 1986. And I'd been in the insurance business, Pritchard had been in the insurance business for quite a while. And I was kind of stumbling around in various ways. And Xi came to the office, and Saturday, I was opening the mail. And I said, how much, you know, about insurance? And he said, nothing. And I said, well, nobody's perfect and let's talk about it some. And by the end of the morning, I knew I had somebody that was going to build a great insurance business. And starting from that point, this improbable little company in Omaha became the largest property casualty company in the world in terms of net worth. It rights risks that it right risks right here is occasionally in a 24 hour period that other companies simply couldn't take on themselves. They'd have to assemble other it would take them a long time to come to a decision. That was very important at various times in the past. It's not so important now. But he's built an incredible, the world's leading property casualty insurance company. So here we have Charlie from LA, 60 some years. We've got Greg from Canada. We've got Ajit from India. And the one thing in common that these free fellows have aside from working for Berkshire and doing a sensational job, the one thing in common is that at one time or another, for some extended period, they lived within a mile of me in Omaha, Nebraska. And, Charlie in 1934 moved about 100 yards away from where I now live and went through high school and eventually went into service and knows the neighborhood as well as I do. Went to the same grade school my kids went to and so on. Greg spent significant time in living in Omaha, lived about 5 or 6 bucks from me, and now lives in Des Moines. And Ajit was in Omaha, about a mile away for a couple of years. So we started in very different places and sort of came together and now go our separate ways, but it's all worked very well. I would and you'll hear from me. I urge you to send questions if you're saying that you can direct them to me or you can given to any one of the other 3 and it will be a big relief to me if you direct a fair number to the other people. So we, this morning, as we always do, we always do it on Saturday, we published our 10 Q which gave the quarterly earnings. It's up on our website, britchardhathaway.com. And it's very interesting. We put these out on Saturday morning. That's not because the media likes us to do it that way. It's not because the analysts like to do it that way, but we want to give you the maximum time to digest an awful lot of information that's in that 10 Q. It can't be summarized in a perfect way, we'll give you some summary figures, but if you're really a student of the place and most of our investors buy because they simply have faith in these other three fellows to do a good job. And it's not a misplaced faith. But if you really enjoy going into the details and you want to understand the nuts and bolts of for Pathway's various operations. You should read that 10 Q and it'll take you it may take you a couple of hours. I mean it's not a small investment of time, but it's got a lot of information about all our various businesses. And for those of you who are business students of a sort, I recommend you go to it. The summary figures you see here, which are the ones we put in our press release, feel kind of an interesting a pair of numbers I made down there at the bottom. We have last year when you see those brackets around numbers you got to start worrying. And Q1 we actually showed a loss of almost $50,000,000,000 I never thought I'd receive a figure like that. And I was thinking back, I I was trying to remember whether I had gone on vacation during that quarter and turned things over to the other guys or what. But I checked the calendar and that was me. And that figure this year is a positive figure of 11 point $7,000,000,000 And neither figure is very meaningful in itself. The accounting standards board a few years ago for many, many, many, many years, unrealized gains or losses of a company like Berkshire were made adjustments to the net worth of Berkshire, but they did not run through earnings. And a few years ago, the rule was changed so that every time while the stocks go up or down, it goes through our earnings account. So in the Q1 of last year when stocks went down a lot, we had a huge sum of unrealized, well it was a reduction of unrealized gains largely. When you start saying things like that, you start losing people. But that item, the mild plus this year. But if you if we reported earnings daily, you would see earnings one day of $3,000,000,000 next year, the day of minus $2,000,000,000 And it's an accounting treatment that we don't think is particularly appropriate, but it's required and we've explained very carefully both in our press releases that we tried to explain and I tried to write on my letter and explain why I don't think that's the way to look at Berkshire. We think over time that we will have investment gains for reasons I lay out in my letter. Over a period of time, the companies we own stock and retain earnings and they use those reinvested earnings usually to our benefit and that shows up in capital gains someday. But reported earnings for a company that has a lot of common stocks, marketable stocks like ours, you don't want to look at that final line and you do want to look at the operating earnings line. Now I would say that if you would take it the 1st 2 months of last year and compared to the 1st 2 months of this year, those figures would have been quite comparable. But of course, in March of 2020, the economy was shut down. And in fact, I mean, it was a self induced the recession, and an abrupt one, very abrupt. And so the economy went off a cliff in March. It was resurrected in an extraordinarily effective way by Federal Reserve action and and later on the fiscal front by Congress, and we'll get into that later. But the figure you see that the difference was March, basically, the 2, and our businesses are done. We'll get into more specifics later. But our business has been really quite well. This has been a very, very, very unusual recession and that it's been localized as the industry to an extraordinary extent. And right now business is really very good in great many segments of the economy, which we'll talk about later. But there's still problems if you're in the few types of business that really have been decimated such as international or travel or something of the sort. So with that, we'll go back to the figures later on. Perhaps in some of the questions, I would like to just go over 2 items that I would like, particularly new entrants to the stock market to ponder just a bit before they try and do 30 or 40 trades a day in order to profit from what looks like a very easy game. So I would like to go to slide L1. So I'll put that up. And these on March 31st, I ran off a list of the 20 largest companies in the world by stock market value. And those names, good many of which will be familiar to, but they were led by Apple at slightly over $2,000,000,000,000 and it went down to the number 20th was worth 330 odd 1000000000. But those are the 20 largest companies in the world by market value on March 31. Now if I had a little I was hoping I could get a little quiz machine so I could have everybody weigh in on this answer and we could flash it up a little later. But proved technically impossible for but what I would like you to do is look at that list. Starts off with Apple. Saudi Aramco is a pretty kind of a specialized country, a company. It's I don't know whether it's 95% owned by the government or what, but it's essentially a country that's for sale in terms of that business. But the top of the top 6 companies, 5 of them are America. So when you hear people say that America hasn't it's not working very well or something of the sort in the whole world. Of the 6 top companies in value, 5 of them are in the United States. And if you think about it, you know we talked a little about this last year, but in 17/90, we had 1 half of 1 percent of the world's population, a little less, we had 4,000,000 people, 3,900,000 people, 600,000 of them were slaves. Ireland had more people than the United States had. Russia had 5 times as many people as the US, Ukraine had twice as many people as the United States. So here we were, but what did we have? We had a map for the future, an aspirational map that somehow now only 200 and well, after the constitution, 232 years later leaves us with 5 of the top 6 companies in the world. It's not an accident. And it's not because we were way smarter, way stronger, you know, anything to go short. We had good soil, decent climate, but so some of those other countries I named. And the system has worked unbelievably well, just imagine thinking of 5 of the top 6 companies in the world ending up with a a country that started with a half of 1 percent of the population just a few 100 years ago. But what I would like you to do just look at that list for a minute or 2 if you want to, and then make an estimate, make your own guess, how many of those companies are going to be on the list 30 years from now? Here they are, these powerhouses. And how many would you guys are gonna be on the list? Well, you know, it's not gonna be all 20. It may not even be all 20 today or tomorrow. This was March 31st, but what would you guess? And think about that yourself. Would you put on 5, 8, well, whatever it would be, I would now invite you to look at slide 2 or L2, which goes back a little more than 30 years and look at the top 20 from 1989. And if you look at the top 20 from 1989, there's 2 things that we should grab your interest, at least 2. None of the 20 from 30 years ago are on the present list. None. 0. There were then 6 U. S. Companies on the list, and their names are familiar to you. We have General Electric, we have Exxon, we have IBM Corp, and these are they're still around. Merck is down there at number none made it to the list 30 years later or 0. And I would guess that very few of you when I asked you to play the quiz a little a few minutes ago would have put down 0. And I don't think it will be 0, but it is a reminder of what extraordinary things are going to happen, things that seem obvious to you. Japan had this wonderful bull market for a very long time. So you had a number of Japanese companies on the list. Today, there there are none. And the United States had the 6, now we have 13, but they aren't the same 6. I would invite you to think about one other thing as you look at this list. 1989 was not the dark ages. I mean we weren't just discovering capitalism or anything else. And people thought they knew a lot about the stock market and the efficient market theory it was in and there were it was not a backward time. And if you look, the top company at that time had a market value of $100,000,000,000 $104,000,000,000 So the largest company in the world of title in just a shade over 30 years has gone from $100,000,000,000 to $2,000,000,000,000 at the bottom. The number 20 has gone from $34,000,000,000 to something a little over 10 times that. Well, that tells you something about what's happened with equality, which is a hot subject in in in this country. It tells you a little bit about inflation, but this was not a highly inflationary period as a whole. But it tells you that capitalism has worked incredibly well, especially for the capitalists. And it's a pretty astounding number. Do you think it could be repeated now that 30 years from now that you could take $2,000,000,000,000 for Apple, multiply any company and come up with 30 times that for the leader. It seems impossible and maybe it is impossible, but I just we were just as sure of ourselves as investors and Wall Street was in 1989 as we are today, but the world can change in very, very dramatic ways. And I'll just give you one other example you might ponder. This is we start feeling too sure of yourself. One thing it shows incidentally is that it's it's a great argument for index funds is that, you know, the main thing to do was to be aboard the ship, you know, a ship, you know, they were all going to a better promised land, you used to know which one was the one they'd necessarily get on, but you couldn't help but do well if you just had a diversified group of equities, U. S. Equities, it would be my preference, but to hold over a 30 year period. But if you thought you knew a lot about which ones to pick or the person that you had hiring you were paying a lot of money to had all these ideas. And I could tell you their best ideas in 1989 did not necessarily do that well, although overall equities were absolutely the place to be. Secondly, people get enormously attracted to various industries. I mean, they think if you know if a company says it's in the XYZ industry and that's a popular one, you can sell IPOs, you can sell SPACs, you can people disregard sales numbers, earnings numbers, it's just it's the place to be. So Berkshire Hathaway, where was the place to be in 1903 when my dad was born in 190 3, but that wasn't really that big of news. But it wasn't big news that actually Henry Ford was starting the Ford Motor Company, it failed a couple of times before, but he was about to change the world. I mean the auto, when you think about everything, we've got a great auto insurance company, but if there weren't any autos we wouldn't have GEICO. The but it transformed the country. And then report bought in the $5 daily wage and that was a huge thing, assembly lines, everything, autos came along. So let's just assume that you had seen a quick glance back in 190 3 of all the interstate highways, 290,000,000 vehicles on the road in the United States. You know, everything about it and you say, well, this is pretty easy. It's gonna be cars. It's gonna be autos. Well, Berkshire, let's see what we've got up there. Yeah. No. Stay where you go back. I don't want to change slides yet. The go back to the L's. The Berkshire by accident, well, we own a company called Marmon, we bought it from the Pritzker family some years ago. The Pritzkers had built this business from many, many, many companies that they'd acquired. And the name of their company was Marmon. And I don't know exactly why Jay and Bob decided to name it Marmon, but they did own a company called Marmon. And the Marmon company getting slightly ahead of me on the slides again, but that's okay. The we called it was they owned this company Marmon, which in 1911 had been a the company whose car won the first Indianapolis 500. Maybe that's why they called it Martin. They were proud of the fact that the company in 1911 named the 1 of the first Indianapolis 500. It also was the company that invented the rearview mirror. I'm not sure whether that was a big contribution to society, certainly around your household. I'm here you don't want to emphasize too much, but but they, the car that was entered in the Indianapolis 500, the guy who normally sat next to the driver and looked backwards to tell what the competitors were doing, he was sick, so they invented the rearview mirror. So let's just assume that you decided that autos were this incredible thing, and someday there'd be an Indianapolis 500 and some day ever review mirrors on cars and some day 290,000,000 cars would be buzzing around the United States or autos or the county trucks there. And so I decided to look at the history and I thought I'd put up a list of auto companies from over the years. And I was originally going to put up just the ones that were the M so I could get them on one slide. But when I went to the M's, it went on and on and on. So I just decided to put up the ones that started with MA. And as you can see, there were almost 40 companies that went into the auto business. Just started with MA including our little our Marman there in the middle column and which lasted for a while, quite a while. But it was selling cars in the 19 thirties were really quite special. But in any event, there were at least 2,000 companies then entered the auto business because it clearly had this incredible future. And of course you remember that in 2,009, there were 3 left, 2 of which went bankrupt. So there is a lot more to picking stocks than figuring out what's going to be a wonderful industry in the future. The Maytag company put out a car, Allstate put out a car, DuPont put out a car. I mean, there was Nebraska Motor Company. Everybody started car companies just like everybody starting something now that can be where you can get money from people. But there were very, very, very few people that picked the winner or got the opportunity at Ford Motor Henry Ford had a few partners and he really didn't like them, so he figured a way to buy them out. That was sort of the that was one it was sort of the beginning of the auto finance. It's a long story, but we won't get into that. But but you couldn't buy in the Ford Motor. And of course, General Motors became the dominant company. Finding when Henry Ford did not really make the shift from the Model T to the Model A very did not work very well. So I just want to tell you, it's not as easy as it sounds. And with that, we will go to Becky Quick, and and she will ask any of the 4 of us questions she has selected and which we don't she doesn't share with us. And we will do this for a considerable period of time, you can be sending in questions to her. And then later on, after about 3 and a half hours, we will have the annual meeting, which won't take long. So Becky, over to you. Thanks, Warren, and hello to everybody. This first question that came in came in from Andy Sees. He says he's the owner of not nearly enough B shares. He says, mister Buffet, you're well known for saying to be fearful when others are greedy and be greedy when others are fearful. But by all appearances, Berkshire was fearful when others were most fearful in the early months of COVID, dumping airline stocks at or near the low, not taking advantage of the fear of gripping the market buy shares of public companies at exceptional discounts and being hesitant to buy back significant amounts of Berkshire stock at very attractive prices. I'd appreciate hearing your thoughts surrounding this time and how Berkshire approached its decision making, specifically after it was assured through the CARES Act that the government would provide a robust back stop to the financial markets. Well, of course, until late until both monetary and fiscal policy kicked in. Well, you knew we had an incredible problem. And that our I am just as Charlie as the chief culture officer, I'm I'm the chief chief risk officer of Berkshire. That's that's my job that we hope we do well what we want to be sure we don't do terribly. But we didn't sell a substantial amount. I mean, we're a company with probably $700,000,000,000 worth of business some we own in their entirety, some we own a piece of. And I don't know whether we were sellers of maybe 1% of the value of all the businesses we had at that period. But the airline just kind of interesting with the airline businesses in particular then I'll get to what was done in fiscal monetary policy. But we had a few people, various subsidiaries of Berkshire that wanted to go in for help from the government. And in some cases they had minority shareholders owned a few percent. They said, well, this is, you know, we're going to get killed by what's happening, when with the regulations are being put out and stopping the economy. And and they said everybody's going in for them and why don't we go in? I said, you know, isn't Berkshire going to handle it? This is for people that can't handle what's happening and we so we're not applying. But the airlines were the most prominent beneficiaries of what took place immediately. We got $25,000,000,000 initially, most of which went to the big four airlines and some of which went in as grants, not loans. And you know, I think that was fine public policy. I think it I was wishing it could go to every restaurant and dry cleaner and every small business that really was out of business and had no I mean they they were they were they were they were made toast of you know basically. But the airlines clearly, what happened was not their fault in any way, shape, or form. It wasn't like 2,008, 2009 when people blamed the banks and hated to see them help. So it was now airlines operate in bankruptcy. So it isn't like that 3 of the 4 big ones went through bankruptcy within the previous interface. So airlines that were kind of used to operating in bankruptcy, they would have kept operating, but it was perfectly proper for the airlines to be health. The entire airline business, you know, you look at these figures of $2,000,000,000,000 for Apple and so on, the entire big four airlines, they were they sold for about $100,000,000,000 almost. I mean, it's so very, very small combined. They wouldn't come close to making the the cut. I mean they wouldn't be in the top 50. So anyway, they went into the government, they needed the government help or they needed or they would go bankrupt some of them. And really the Congress, but Steve Mnuchin too, they decided they deserve the help which I do not quarrel with at all. But imagine if Berkshire was the 10% holder which they had been of everyone in the airlines, they said, let's take it from Berkshire. It'd be like one of our they would have had they might have very well had a very, very, very different result if they'd had a very, very, very rich shareholders that owned 8% or 9%, and they didn't have that, you know, when they went in. So you might not have gotten the same result. In fact, I would think you probably wouldn't. I mean, I can just see the headlines now. I mean, because you've seen the headlines on some companies that took $100,000,000 or 2 and really didn't need it and some of them gave it back and most of them gave it back. But you're actually looking at probably at a different result than if we'd kept our stock. But in any event, an industry that was really selling for less than $100,000,000,000 lost significant amount of money. They lost perspective earning power. I mean, right now, you know, international travel has not come back. But I would say overall too, the economic recovery has gone far better than you could say with any assurance. So we didn't like having as much money as we had in banks at that time. So I cut back some of the bank investment. But basically, our net sales were about 1% or 1.5%. And looking back, it would have been better to be buying. But I do not consider it a great moment in Berkshire's history, but also we've got more net worth than any company in the United States under accounting principles. And we've got we've got 6 or 700,000,000,000 of generally good businesses. And And I think as I think, I think the airline business has done better because we've sold and I wish them well, but I still wouldn't want to buy the airline business, international people really want to they want to travel for personal reasons and business travel is a different thing. And we've got a big exposure to business travel of course through the fact that we own 19 percent of American Express and we own Precision Cash Parts which services the our business very demand. So we still got a big investment in air travel, a big commitment to it. But we wish the big four the best I think their managements have done a very good job during this period. More specifically beyond the airlines though, just the idea and this came from several questions too, including one from Chris Blaine. Just you spent years accumulating cash insisting you had your elephant gun ready. The March 2020 listed equity sell off came with promises from the US government that they would do what it takes, Yet you sat on your hands. Please help me understand what I missed. I didn't get quite the last part. What was the final question? Just please help me understand what I missed. Why didn't you use more of the cash at hand? Oh, well, we have about as in our cash on hand it's been about 15% of our values of our businesses. And that's a healthy chunk and I'd say it'll never get below $20,000,000,000 but we're going to raise that number because it's just the size and importance of Berkshire. But we could have deployed $50,000,000,000 or $75,000,000,000 and right before the Fed Act. I mean, we hit a point where the calls were. Two calls came in, but it was 2 or 3 days. Nothing could happen. When when Jay Powell acted as he did, that was incredibly important. I mean, I shouldn't say the Fed acted as they did, but they moved with speed and a decisiveness on March 23rd. They changed the situation where the economy had stopped, the government bond market was even sunset disrupted. Berkshire Hathaway probably could not have gone out with a debt offering the day before. That was it didn't get a lot of publicity time, but there was a run on money market funds, a very substantial run. And if you look at the numbers, daily numbers on that, it was a repeat of September 2008. And this time, I give great credit to what Bernanke and Paulson did, but this time, the Fed knew that saying whatever it takes and saying it and demonstrating it, which they did on March 23rd, they took a market where Berkshire couldn't sell bonds on the day before and turned it into one where Carnival Cruise Lines or something like that, so a day or 2 later. And there was, you know, it's record issuance of corporate debt and companies losing money, companies were closed whatever. It was the most dramatic move that you can imagine. And at the time, as I remember, the chairman saying, how about a little help on the fiscal front? And then Congress acted very, very big. Again, in 2,008 and 'nine, they argued about, you know, we don't want to give money to those dirty banks, all that sort of thing. But this time, there really wasn't any way to blame. So they had they saw what was necessary and Congress responded. So you had fiscal monetary policy that responded in a way that was incredible and it did the job and it did a it did I think it did a better job than either the Fed or the Treasury or anybody expect. I mean, this this economy right now is 85% of it is running in super high gear and people can't you know and you're seeing some inflation and all of that. It's responded in an incredible way. And we learned something out of 2,008, 2009 and then we applied. But I don't think it was a sure thing that would happen. And the one thing about Berkshire is we never want we don't want to depend on anybody. We're not a bank. We can't go to the Federal Reserve if we need money. And we've got to be sure that under any circumstances, any circumstances, we can't solve nuclear war and maybe we can't, you know, but Blanche DuBois, if you remember in the street car named Desire said, I depend on the kindness of strangers. You can't depend on the kindness of your friends if things really stop. I mean, I've seen that in several different places and we were starting we were seeing it on March, the middle of March. Everybody was drawing down their credit lines. The banks did not expect that. They just weren't sure they were going to be able to draw it on their credit lines 10 days later. And so they just drew them down and they took the money out of money market funds. We got very prompt. I give great credit on both the monetary and fiscal side of what was done, but I didn't think it was a sure thing that would happen. I didn't know how it would be implemented. It's worked I think it's worked better than just about anybody as expected. And I think, well, you're seeing it now. You know, Charlie's got some views on this too, so we shouldn't leave him out of it. Well, it's crazy to think anybody's gonna be smart enough to husband money and then just come out on the bottom tick in some crazy crisis and spend it all. There's always just some person that does that by accident, But that's too tough a standard. Anybody expects that of Berkshire Hathaway is out of his mind. Yeah. Charlie and Charlie and I never were very good at dancing, but we really can't do that's No. No. We can't. And that by the way almost nobody else can either. Not with tens of 1,000,000,000 or 100 of 1,000,000,000. But it's worked up. Well, we forgot to show one of the financial sides actually if you go back to the balance sheet. But we did buy in in the first you'll see the shares outstanding if we go back to, what is it, E3? E2. Slide? E2. Pardon me? I think it's E2, is it? Well, the balance sheet, yeah. There it shows the shares outstanding at the bottom. And we have we spent about $25,000,000,000 in the Q1 and more money since. And we've it's the best thing. We can't buy companies as cheap as we can buy our own and we can't buy stocks as cheap as we can buy our own. So and we've been able to do that with a fair amount of money. But looking back, I mean, if you you know, definitely we could have done better things. We would have sold we would have sold airlines and cut back on banks regardless whether we should have bought something else at the same time is another question. This question comes from a long term shareholder who's been here for more than 25 years. His name's Ben Knoll. He's from Minneapolis, Minnesota. And he says, mister Munger and mister Buffet, after a 15 year period of market underperformance, you're cautious about predicting Berkshire being able to outperform the market in the Given this, what do you see as the arguments for long term shareholders to continue holding their stock versus diversifying the risk across an index? Charlie, you want to answer that? Well, sure. Well, I personally prefer holding Berkshire holding the market. So I'm quite comfortable holding Berkshire. I I think our businesses are better than the average in the market. Is it because you don't think the market values it fairly? Well, these are just accidents of history, and things are fluctuating at all times. But on a composite basis, I'd bet on Berkshire over the market. That's assuming we're all dead. The I recommend the S and P 500 Index Fund and have for a long, long time to people. And I've never recommended Berkshire to anybody because I don't want people to buy it because they think I'm tipping them into some time, never, I mean no matter what it was selling for. And, you know, I've made it public, you know, on my death, there's a there's a fund for my then widow and 90% will go into an S and P 500 index fund and 10% of the treasury bulls. On the other hand, I'm very happy having my future contributions to group of charities that will be spread over 12 years or so after my death. To stay in Berkshire, I think the odds are, Berkshire Berkshire is, yeah, I like it, but I'm not I do not think the average person couldn't pick stocks. We happen to have a large group of people that didn't pick stocks but they picked Charlie and me to managed money for them 50 or 60 years ago. And so we have a very unusual group of shareholders I think look at Berkshire as a lifetime savings vehicle and one they don't have to think about and one that they'll look, you know if they don't look at it again for 10 or 20 years that we'll have taken care of the money reasonably well. But that I wouldn't argue that S and P 500 over time, I would I like Berkshire, but I think that the person who doesn't know anything about stocks at all and doesn't have any special feelings about Berkshire. I think they ought to, you know, they ought to buy the S and P 500 index. As a follow-up to that, Gerald Silver writes in, he says, the trustees of your estate to I believe you've directed the trustees of your estate to invest uh- assets into the index fund. Isn't that a vote of no confidence to your managers? Well, no. It it because we're talking about way less than 1% on my estate. And one thing I'm going to do incidentally, I mean all rich people get advised by their lawyers, set up trusts so that nobody could see your will and all that sort of thing. My will is going to be public record and you can you'll be able to check at some point what I'm telling you the truth about what it's going to get done, but 99.7% roughly of my estate we'll either go to philanthropies or to the federal government. And before it does it, I think Berkshire is a very good thing to hold. But for a given individual, particularly my wife, I just think that having a tiny fraction, which is all it takes for her to do very well for the rest of her life, I just I think that the best thing to do is buy 90% in an S and P 500 index fund, now the index fund people naturally have started over the time they market more and more products that go to other indices and everything. So they're really starting to say to the American public, they're saying, well, you can pick what continent to invest in or you can pick what industry and we'll sell you something for that. And when they just have gotten through telegm, you know, you really don't know anything about stock, you can just buy the whole index. So I named the 500 index as one, but it's a tiny portion, but it'll be her livelihood and she'll have all the money she needs and way beyond it and that's that. But I don't mind having the 99 0.7%, large portion of it, assuming that laws with the same as now go to philanthropy, to be kept in Berkshire until they finally are disposed of. This question comes from Andrew Dixon in in the UK. He says, my question is in relation to the oil and gas business and your purchase of Chevron stock. When being asked a question on tobacco stocks in 1997, you mentioned that individuals and companies occasionally have to draw moral lines about what they're willing to do. You stated at the time that you were not comfortable in making a big commitment in tobacco stocks and that you were uncomfortable about their prospects. Charlie has also referenced passing up on a private Tobacco deal that you both knew was a sense, yet you both have no regrets in saying no to the transaction. I'm not suggesting that the oil and gas business has the same known negative uh- as cigarettes, they do not. With tobacco, the cause and effect relationship between the products and cancer is direct, obvious, and measurable. With hydrocarbons, the societal costs and benefits are far more complex to evaluate. However, an increasing portion of society is drawing their lines in such a way that their painting does not include hydrocarbons, period. My question is, has the alarmism from the climate community now become pervasive across society to the uh- It has become irrational. Have we built our own unrealistic consensus on the pace of change achievable with regards to the transition to greener energy sources to the extent that this is becoming an overly expensive tax worn by the current younger generation. Can we gather from your purchase of Chevron stock that you do not believe the howling from society, regulators and politician will impair the prospects of hydrocarbons And Chevron for that matter in the next 10 years. Can investors still assume an oil and gas business that finds and produces oil at Low cost per barrel can generate a sufficient return on capital for a long time to come. Well, I'll give you a 10 word answer to that. I can't remember all the questions there were there. But I would say that people that are on the extremes of both sides are a little nuts. I would hate to have all hydrocarbons banned in 3 years or you wouldn't want a world, it wouldn't work. And on the other hand, what's happening will be adapted to over time just as we've adapted to all kinds of things. I do not think, I'm interested in a quote from 1997 because we've talked about this before, we have no problem owning Costco or Walmart and a substantial number of their stores and they sell cigarettes, it's a big item. It's something that brings people in, they know the price of cigarettes and they put them up front. So we don't, it's a very tough situation. We made that decision a long time ago when we went to Memphis and we looked at a business that was a very, very good business and it was much less harmful, at least from everything I could find out, it was much less harmful than smoking tobacco, chewing tobacco was. And these were decent people and they were running a legal business and they all chewed tobacco themselves. So they told me that their mother was a 100 and chewing tobacco and all these things. But Charlie and I did go down in the lobby of that hotel and we just said to ourselves this is probably the best business we've ever seen. And I called my then son-in-law, Alan Re Bergen, he'd studied chewing tobacco and its effects when he was working for a NATO related organization and we decided not to do it. But you know, would we, you know, I see, I used to see ads in our paper from financial companies where I knew they were terrible. It's a very tough thing to decide whether you get in or out of a business, it's very tough time to decide what companies benefit society more than others. I mean, it's I don't know whether I think Chevron's benefited society in all kinds of ways. I think it continues to do so and I think we're going to eat a lot of hydrocarbons for a long time and we'll be very glad we've got them. But I do think that the world's moving away from them too and that could change. I don't like making the moral judgments on stocks in terms of actually running the businesses, but there's something about every business that you knew what you wouldn't like, and you know, meatpackers if you expect perfection you know in your spouse or in your friends or in companies you're not going to find it. And what you elect to do yourself, if you own an index fund, you're going to own Chevron. Believe me, Chevron is not an evil company in the least and I have no compunction about owning, in the least about owning Chevron. And if we own the entire business, would not feel uncomfortable about being in that business. Charlie? Well I agree. You know you can imagine 2 things, young man marriage into your family, easy. English professor at say Swarthmore or he's he works for Chevron. Which would you pick? I don't see. I want to admit I'd take the guy from Chevron. Well, I hope your daughters agree with you. On the other side of that argument, because there were lots of emails that came in both on both sides of these ESG questions. This one comes from Christina Gallegos, who's been a shareholder since 2018, and she says on items 23 of the uh- Proxy materials. The board recommended voting against on the shareholder proposal regarding the reporting of climate related risks and opportunities as well as on the shareholder proposal regarding diversity and inclusion reporting. Berkshire is such a force for good when it comes to financial literacy and empowerment through wealth creation. Why not be a force for good and an example when it comes to these very 2 important 2 very important issues? Please share with us more about the against recommendation. Well, I think maybe Greg can talk a little bit about what Berkshire has done as opposed to in terms of the environmental. I would say this, it's very interesting, with everything that's been really I think we have over a 1000000 shareholders. I mean you can't be 100% sure because of street name and duplicate accounts and all that, but it certainly seems very, very likely. I've had I get the letters that are written to me. I don't think I've had three letters in the last year from shareholders. Now I have them, and our vote on this as you'll see later is that overwhelmingly the people that bought Berkshire with their own money voted against those promises. Most of the votes for it whereby it came from people who never put a dime of their own money into Berkshire, and so they, and I don't think they've read our annual reports and I don't think they've read the reports of Berkshire Hathaway Energy and I don't think they know. You know if I talk about what we're doing in high voltage transmission, we're doing more in any company of the country. The President talked about what the government's going to do and how important it is. And you know, we have a record and that's overall it's incredibly good. But we have a group of organizations just generally and they're nice people, but they want us to answer a bunch of questionnaires their way, so they want us to go to Dairy Queen and Borsheim's and all those people have them fill out reports that show a bunch of figures. When the reports that count are the reports that Greg gets on Berkshire Hathaway Energy and the railroad, and you talk about 3 of our companies and you've covered 95% of it. And it's asinine frankly in my view. Now we do some other asinine things because we're required to do them, so we'll do whatever is required. But to have the people Business Wire, Dairy Queen, all these places, fairly got reports to make it some common report that comes in. We don't do that stuff at Berkshire, we've got, during the pandemic we probably have about 12 people to come into headquarters and we've got 360,000 people working in a company that all kinds of diverse activities. And it's built, I don't want to get in the whole thing, it's built on autonomy. And I am probably the only CEO of an S and P 500 company that does not get a consolidated income statement every month. I mean every other company, I'll bet in the S and P 500 prints out the earnings they had at the end from February March and CEO gets and a whole bunch of other people get it. I don't get it, I don't need it. And I could put 60 or 70 companies in a whole lot of trouble with everything and they'd hand me something and I know the answer to it already and it didn't make any difference. I mean they've got the money they need. So we don't do things just because we've got a department of this or a department of that and we don't want to set up a lot of departments like that. And what's important is what we're doing in the end. Well, primarily Berkshire Hathaway Energy and the railroad. I mean that's and I'll let Greg tell you about that in just one second. But the Warren, I don't think we think we know the answer to all these questions about global warming and so forth, and the people who ask the questions think they know the answers. We're just more modest. Well but even if we knew the answer, I mean, in terms of what we the reports, we would not collect a whole lot of things that don't mean anything to us and to satisfy people who actually don't own any stock themselves and in many cases, I can tell I haven't read our annual report even, the, we, as I pointed out in the annual report, and I'd never, nobody would have guessed that people think we're a bunch of guys own stocks and all that sort of thing. Berkshire Hathaway owns, like GAAP accounting, more property plant equipment, business infrastructure, which the President just got through talking about Wednesday night in infrastructure and parts of it. We have measured by Capric accounting more than any other company in the United States, we have more than any of those companies on the list of the largest companies in the country, but we've and we've got it by a substantial margin. So we have an investment in what makes this country move and work, 15% of the interstate goods move on them on our railroad and we're building transmission. And we started in 2006 or 2007 planning how we would close coal plants, but you can't close coal plants until you get the electricity from where it's generated to the customer. If you're going to generate it in Wyoming and it's going to go to Las Vegas or some place and previously they had a coal plant near the place because that was the way it was done 50 years ago or 75 years ago, you better have the transmission, there's no sense having the wind blow in Wyoming and people turn on the lights in Las Vegas. So we went after transmission plan question a lot earlier than people were talking about and we've done we said $16,000,000,000 or whatever it was in the annual report that we underway and we just added $2,000,000,000 since the annual report came out and there's no there's no utility in the country that's coming anywhere close to that. Tell them a little bit about it. Sure, Warren. Thank you. And really as Warren touched on BHE and BNSF We have the significant carbon footprints when you think of Berkshire. And when you touched on the disclosure that we've provided in the past going all the way back to 2,007, I did pull those 2 investor presentations, 1 from 2,007 and then our most recent one in 2021. So if we could pull up BHE 1 on the as a slide, I think it would just highlight going all the way back to 2,007, we've been doing investor presentations for our what we call our fixed income investors and we've done that through every year through 2021. We've provided very similar disclosures to our Board on an annual basis and had discussions around Berkshire Hathaway's Energy's plans to decarbonize. Now it's interesting, if you go back to the 2007 fixed income conference and we are having a conference at that point in time. We have 3rd party debt, capital debt that our utilities raise, it's a traditional capital structure used across our regulated entities to manage our total cost to the customers. So we have investors, we present to them as we're highlighting on an annual basis. If you go back to that 2007 investor conference, it's interesting. In that presentation, we're highlighting climate change, that it's a fundamental risk, And we discussed what good policy would be. We discussed innovation. We discussed market transformation and the importance of setting targets at that point in time and we had recommendations for our industry. And then since then each year we've presented really a plan a strategy around how each of our businesses in BHE, but each of our regulated entities, how they're going to transform. And the whole transformation has been around decarbonization, managing that risk on behalf of our stakeholders in our many states, our customers that we serve, and ultimately managing that risk for Berkshire Hathaway's shareholders. Now as you go through those presentations, there's a common theme and Warren touched on it already. You have to build the foundation first. And that foundation is around building the high voltage, the transmission system. Warren touched on it in his annual report this year and letter he highlighted that at Berkshire Hathaway Energy will be spending just in the West $18,000,000,000 on transmission. $5,000,000,000 of that's already been spent as we sit here today and that $13,000,000,000 will be spent over the next 10 years. That's the foundation that then allows us to build incremental renewable resources and move it to our many states that we serve Berkshire Hathaway Energy and well beyond that. I would highlight while we've been building the transmission infrastructure in place, we have been building renewables. If you look at our investment through the end of 2020, we've invested $30,000,000,000 or in excess of $30,000,000,000 into renewables and have really completely changed the way our businesses do business, I. E. Our utility businesses. They've been decarbonizing and delivering a valued product to our stakeholders, to our customers. And I think the results are really amazing when you look at them and I'll give you a couple of reference points. If you go back to 2015 when the U. S. Was discussing joining the Paris Agreement. Very specific targets were set. Prior to those targets being set, Berkshire Hathaway Energy and 12 other companies including the Apples of the World, Google, Walmart committed to Paris and that targets needed to be set. Berkshire Hathaway Energy was one of those companies in 2015. Yeah. How many other utilities were there? Right. Warren, there were no other energy companies that that made any type of commitment at that point in time. I'm happy to report we made a variety of pledges. Well, one of them was at that point we'd invested $15,000,000,000 in renewables And that we would commit $30,000,000,000 in total, well we far exceeded that total now. So there's been a clear commitment to reduce decarbonizing our businesses. We have focused on very identifiable, quantifiable outcomes and I think that's very important. If you look at the standards that were set with the or the original U. S. Government's commitments associated with the Paris Agreement, the target was 26% to 28% reductions in carbon footprints going back to 2,005, so that's the reduction period through 2025 and they wanted the 26% to 28% reduction level. We committed to that at BHE and I'm happy to report warning to we've briefed our Board. We achieved that in 2020. So we met our pledge and we met the commitment under the Paris agreement. And then if you fast forward to discussions that are occurring right now or have occurred around rejoining the Paris Agreement. The current administration has proposed that again using 2,005 as a starting point that the emission goals where reduction should be 50% to 52% by 2,030. Again, I'm happy to brief to our shareholders briefings we've provided to our Board, but Berkshire Hathaway Energy will achieve that by 2,030. Our reductions will hit the Paris Agreement target. Again, the reason we can do it is we've built the foundation through transmission, the substantial investment that Warren's highlighted and then followed that up with very specific investments on the renewable side. I have one incremental slide that I hope sort of pulls it all together and that's BHE 2 because as people discuss carbon they often go to coal units, how many you own, how many of you close, And there's no important that there's no question that can be an important metric, but it is a transition. And we are very much focused across the 3 utilities we own and the ones we've highlighted on the slide is to transition from our existing fleet to renewables using transmission. We have not become overly dependent on transitioning to gas. That's been a clear strategy. So over a period of time, our coal units will retire. I'm happy to report or pleased to report to our shareholders that through 2020, we've closed 16 units to date. If you look at from 2021 through 2,030, there'll be an incremental 16 units closed. And then if you go through to the end of 2,049, our remaining 14 units will be closed. And at that point in time all our coal units are closed. That slide is just an aggregation of all the activities each of our business units have been taking to help facilitate that transition and really transitioning to decarbonizing those units and I said decarbonizing our businesses on behalf of 1st and foremost our customers, the many stakeholders they represent in the various states. And then equally important, decarbonizing those businesses on behalf of our Berkshire Hathaway shareholders. The only other thing I would add because it is the entity that has the 2nd largest carbon footprint in Berkshire. And when you combine BNSF and BHE, you're talking the material set of emissions within Berkshire. BNSF has also been very active in managing their carbon profile. They've committed to have science based targets established for 2,030. So again those targets will again be consistent with the Paris agreement. We've seen what the other participants or some of them in the class in our in the industry that have committed to. And our commitment will be very similar, I. E, it'll be consistent with the Paris agreement, But it'll be a 30% reduction in BNSF footprint by 2,030. So again, if you look at our and that's been publicly disclosed. That's on the BNSF website. Everything I've discussed regarding BHE is on their website filed in 8 ks completely accessible by our many shareholders. So when I look at it on from the perspective of our Berkshire shareholders. I really believe this risk is being well managed and we are positioning ourselves for the long term. Thanks Warren. Yeah. Incidentally, I mean, the president the other night talked about $100,000,000,000 for infrastructure. We'd love to spend $100,000,000,000 But he was talking about transmission is really the problem. I mean, a big problem because you got to get you got to get from where the sun is shining and where the wind is blowing, essentially to concentrations of population. And it'll be whether the you know, you cross state lines and you go through people's backyards, it's whether the federal government has a better luck in just saying this is the way it's going to be done and ramming it down the throats of where they go and getting it done. I mean, they may have that power and they'll be able to do it faster than we are. On the other hand, we'd love to do it. We'll spend $100,000,000,000 but the speed at which we can do it. We bought Pacific Corp in 2,006 and we had a bunch of customers out in the Far West and they had coal plants serving them. And to change that, you've got to be able to go to where wind blows and deliver it. So it's but it is interesting that we have published this information, we spent far more than any utility in terms of renewables and transmission in the United States and we started with a nothing, you know, a little operation. But the people who bought the stock with their own money, the individuals, they seem to understand it and they read the reports and we get calls and they say, well, we want to come out and talk to you about it. Well, we're not talking to them and ignoring the 1,000,000 people that have been with us over time and bought it with their own money, we will not give special treatment to either to analysts or to the to the to institutions over the individuals that basically trust us with our savings for their lifetime. This question is for Warren and Ajit. It comes from Fernando Lewis, a long time Berkshire shareholder from Panama who says, as a we've seen this in other great companies where underwriting mistakes end up crippling businesses previously considered exemplar. While I understand that Berkshire's culture is unique and the uh- Having mister Buffet, mister Munger, and mister Jain looking at these deals. However, there will be a day when this is no longer the case. Is it reasonable to think that over the long term, Berkshire should uh- plain vanilla short tail insurance businesses like GEICO and reduce the size of some long tail risk. I want to clarify that I have the most respect and gratitude for all of Berkshire employees that uh-uh. The best insurance group in the world. I'm confident we have this talent to remain leaders in this field for decades to come. This is focused on the inherent opaqueness and risk of Some insurance lines. Ajit, do you want to lead off or I mean, clearly, contract certainty is an issue for us in the insurance industry, it is an issue that cuts across not only the long tail lines that you mentioned, but even short tail property focused lines. The most recent example is business interruption, which is an integral part of any property insurance policy that is bought and sold by corporations. It is a risk every time we issue a contract that either because of sloppiness in terms of how that contract is written or because of the regulatory environment we all have to live in, that the words in the contract may be tortured to and normally, when they are tortured, they end up going against the insurance industry, not in their favor. So it is a risk. It's an unknown risk in terms of how bad it can be. I hope we price for it. When we price for the product, we throw in something for the unknown, unknowns, if you will. And we try and aggregate our exposures by major risk categories. Hopefully, that'll give us some comfort in terms of having some boundaries on what the exposure really can be. But there's no question the regulators play a very important role in terms of the economics of the business, especially in the U. S. Where there are 50 state regulators who we have to deal with in terms of pricing, in terms of contracts, in terms of most of those surprises in insurance, frankly all of them are unpleasant. I mean you get the premium on upfront, that's pleasant. Then from there on, you get some very imaginative losses that come through and you get some that you take on. We are willing to lose in terms of sort of the outside limit we think we're willing to lose $10,000,000,000 in a single event. And we want to get paid very appropriately for that. But we've got the resources to do it and if but we don't want to lose $10,000,000,000 in something where we only thought we'd lose $50,000,000 or something like that. And the current situation for example with the Boy Scouts of America, I think there were 1100 claims or something like that that have been filed, and now they're 17,000 just in No. No. They're close to 100,000 now. Oh, well. Up by 50 times. And these go back to 1950 or 1960 and you've got people advertising for claims and so all of a sudden you I'm sure a lot of the claims are valid. I'm sure a lot of them are invalid and how in the world you pick up the difference? Yes. And it goes back to the issue that you just raised. The reason why this number of claims have skyrocketed from less than 2,000 to close to 100,000 is because the statute of limitations have expired, but in several states, if not in most states, they have unilaterally extended the deadline by when you can make claims and expanded it by a few years as a result of which a lot of more claims have appeared funded by plaintiff lawyers who are now very well funded and that results in claims just skyrocketing. Yeah, we get a lot of unpleasant surprises in insurance. But we've got a very I'm very biased on this, but I wouldn't I think we've got the best insurance operation in the world and Agita is a guy that created it and the people at GEICO, we bought that and did wonderful things over time to contribute their part of it too and other people have, but Ajita is a symphony conductor of it. This question comes from Henry Zhu and he says, It looks like Charlie and Warren have some different opinions recently, like Costco and Wells Fargo. Where's that taking Berkshire? Charlie. We're not all that different. And Costco is a company I very much admire and I've enjoyed my long association with that company. And but I love Berkshire too. So and luckily there's no conflict and Warren and I don't have to agree on every damn little thing we do. We've gotten along pretty well. We have better than pretty. We have never had an argument. Yeah. In 62 years and it's not that we agree on everything. We've literally in 62 years. We've never got we've never got mad at each other. No. No. It just doesn't happen. This question is from Jason Plonner, and, he says, mister Jain and mister Abel, this question is for you. One of the successful features of Berkshire is the strong bond between mister Buffet and mister Munger who managed the company better because they had each other. As you 2 are clear leaders of the next generation Berkshire Hathaway, can you please tell us about how you interact with each other or some of the other incredibly competent Berkshire managers you seek for advice? Who's that directed at? At at Reg and Agene. Okay. Well, there's no question that the relationship Warren has the Charlie is unique, and it's not going to be duplicated, certainly, not by me and Greg. No. I can't think of very many other pairs that can duplicate it. Nevertheless, both Greg and I, at least certainly from my perspective, and I'm sure Greg will speak for himself, we've known each other for a very long time. I certainly have a lot of respect both at a professional level and a personal level in terms of what Greg's abilities are we do not interact with each other as often as Warren and Charlie do, but every quarter we will talk to each other about our respective businesses and update each other on our respective businesses. And then during the course of the quarter, while we may not have any formal sort of meetings, if you will, but every time a question comes up which is related to insurance, Greg will pick up the phone and call me. By the same token, if there's any question that comes up relating to any of the non insurance operations that Greg is in charge of, like we had recently where a client of mine was looking for trying to find a buyer. And I picked up the phone and talked to Greg, and we talked about, you know, how best to proceed. So there's that that happens during the course of the quarter. Every quarter, we exchange notes, and we have a perfectly well functioning relationship between the 2 of us, and I hope it remains that way. Greg? Yes, well as you well said and as he touched on, Warren and Charlie have an exceptional relationship, but very proud of the relationship as it and I've had and as it touched on it's developed over many years we've had the opportunity or I've seen the to see how it's run the insurance business. And as Warren highlight and Charlie highlights, there's no one better at it. So I've had the opportunity to observe that. And then equally over the years that relationship has just built and become greater and greater. And as Ajit touched on, can have more personal respect for Ajit both personally and professionally. And even though the interaction may be different than say how Warren and Charlie do it. As you touched on there is a regular dialogue both around opportunities within our 2 this is in units both if we see something unusual that the other individual should hear we make sure we're always following up with each other. But it goes beyond that. Ajit has a great understanding of the Berkshire culture. I strongly believe I do too. And anytime we see anything unusual in one of our businesses, it's Ajit who I'm going to call and say, are you comfortable that we're taking this approach? Is it going to be consistent with how you think about it, how you think about it in insurance. So it goes beyond just discussing the businesses but that maintaining the exceptional culture we have at Berkshire and building upon that. So very fortunate to have Ajit as a colleague and and and immensely enjoy working with them every day. Thank you. Thanks. This question comes from Glenn Greenberg. He says it's on the profitability of GEICO and BNSF. He said, why do these companies operate at meaningfully lower profit margins than their main competitors, Progressive and Union Pacific? Can we expect current managements to at least achieve parity? Was it GEICO and? BNSF. Oh, actually, if you look at the Q1 figures, you'll see that the Berkshire Hathaway Union Pacific comparison has got quite better. Katie Farmer's doing an incredible job at BNSF. And it'd be an interesting question whether 5 years from now or 10 years from now BNSF or Union Pacific has the higher earnings. We've had higher earnings in the past, Union Pacific passed the Q1, you can look at and they think they've got a slightly better franchise. We think we've got a slightly better franchise. We know we're larger than the U. S. Pacific. I mean we will do more business than they do we should make a little more money than they do, but we haven't in the last few years. But it's quite a railroad. I feel very good about that. I should go back to that previous question, people talk about the aging management. The Berkshire and I always assume they're talking about Charlie when they say that. But I would like to point out that in 3 more years, Charlie will be aging at 1% a year. And he is this no one is aging less than Charlie. If you could take some of these new companies with 25 year olds, they're aging at 4% a year. So we will have the slowest aging manage percentage wise by far than any corporate company, any American company has. Did you want to talk about GEICO versus Progressive too? Because I got a lot of questions on that. Progressive in recent Progressive has had the best operation in the last in recent years in terms of matching rate to risk, and that's what insurance is all about among other things, but I mean you have to have the right rate. If you think that 90 year olds and 20 year olds have an equal chance of dying, I mean, you're going to be out of business very quickly in the life insurance business. And you will get all the 90 year old risks and the other guy will get the 20 year old risks. And the same thing applies in auto insurance. I mean, there's a huge difference between 16 year old males and how they drive in 40 year old married, you know, employed people. So the companies that do the best job of actually having the appropriate rate for every one of their policyholders is going to do very well. And Progressive has done a very good job on that. And we're doing a much better job on that already. But Todd Klumz has gone there and it's a very interesting business, both Progressive and GEICO were started in the '30s. I believe I'm right about Progressive on that and we were starting in 'thirty six. You know, we have had the better product for a long, long time, I mean, in terms of cost. And here we are 85 years later in our case and we have about 13% or so whatever it may be and Progressive has just a slight bit less. So the 2 of us are at 25% of the market roughly in this huge market after 80 some years of having a better product. So it's a very slow changing competitive situation, but Progressive has done a very, very good job recently. We've done a very, very good job over the years and we're doing a good job now, but we have made some very significant improvements. And if you looked at the, don't want to look at the quarters too much, but our profitability in the Q1 was good. But we gave back more money under our giveback arrangement when the virus broke out and we gave $2,800,000,000 on our give back program that was larger than any company as well. That's what was the largest I think in the country. And GEICO and Progressive are both going to do very well in the future. And actually the Union Pacific and BNSF are going to do well in the future. It's just in both cases we want to do a little bit better than the other guy. Can I just yes? Yes, there's no question Progressive is a machine. They're very good at what they do, whether it's underwriting, which Warren talked about in terms of matching rate to risk whether it's admin claims. Having said that, I think GEICO is catching up with Progressive. More than a year ago, about a year ago, Progressive had margins that were almost twice as much as glycos and growth rates that are almost twice as much as glycos. If you look at the results as of now, Progressive is still crushing it in terms of growth relative to GEICO. But GEICO has certainly caught up with Progressive in terms of margins and hopefully that gap will be non existent in the future. The second point I want to make on the issue of matching rate to risk, GEICO had clearly missed the bus and were late in terms of appreciating the value of telematics. They have woken up to the fact that telematics plays a big role in matching rate to risk. They have a number of initiatives, and hopefully they will see the light of day before not too long and that will allow them to catch up with their competitors in terms of the issue of matching rate to risk. I will predict that 5 years from now, State Farm is still the largest auto insurer, but I will predict that 5 years from now it's very likely that the top 2 will be GEICO and Progressive and in which order we'll see. But both companies are going to do very well in my opinion. And they GEICO has done well, extremely well, but Progressive was better at setting the right rate and we're catching up I think fairly fast. Yeah, excuse me, Progressive has certainly done better, but when it comes to branding, GEICO is, I think, miles, excuse me, miles ahead of Progressive. And in terms of managing expenses as well, I think GEICO does a much better job than anyone else in the This question comes from Vittorio Aglici from Switzerland who writes in why in the recent past did Berkshire sell some of the common stocks owned on Apple? If the company is considered Berkshire's 4th jewel, why didn't Berkshire buy more of Apple stocks in 2020? This seems to be counterintuitive. Well, we have 5.3% or something like that now. It's gone up in the first quarter because we bought in our shares which helps our own shareholders expand their interest in Apple indirectly without laying out a penny and then Apple's repurchased its shares and just announced another repurchase program. So let's say, we look at Apple as a business that we own 5.3%. Now we've got it's a marketable security, so it shows up as way greater than any other marketable security we have. But of course, if you look at our railroad, as we mentioned, well, the Union Pacific is selling for about $150,000,000,000 in the market. We own one that's a little larger than the Union Pacific and making a little less money, but not much less. So it's an extraordinarily apple. It's got a fantastic manager. Tim Cook was underappreciated for a while. He's one of the best managers in the world. I've seen a lot of managers and he's got a product that people absolutely love. And there's an installed base of people and they get satisfaction rates of 99%. And I get the figures from the furniture mart as to what's being sold. And if people come in and they want an Android phone, they want an Android phone, if they want Apple, they want an Apple phone, you can't sell them the other one. The brand and the product is it's an incredible product, so a huge, huge bargain the people. I mean the part it plays in their lives is huge. I use it as a phone but I'm probably the only guy in the country, you know, some of the Senator Alexander Graham Bell is doing the same thing, but it is indispensable to people and you know it costs, you know, car costs $35,000 and I'm sure with some people if you asked them whether they want to go had to give up their Apple would give up their car and really make the choice for the next 5 years, who knows what they do, but it is and we got a chance to buy it and I sold some stock last year although our shareholders still had their percentage interest go up because we repurchased shares, but that was probably a mistake. In fact, Charlie in his usual low key way let me know that you thought it was a mistake too, didn't you, Charlie? Yes. Yeah. I could only do so many things that I can get away with a try. I kind of used them up between Costco's Apple. So incidentally he probably, he's very likely was right in both circumstances. It's an extraordinary business. But I do want to emphasize that in his own way, it's a different way. But Tim Cook is we see a lot of managers of a lot of businesses and you're looking at 2 great ones on the both ends here. He's handled that business so well. He couldn't do what Steve Jobs obviously could do in terms of creation. But Steve Jobs couldn't really, I don't think, do what Tim Cook has done in many respects. Well, I also think it's clear that that list you showed of the leading American companies, it's been very important for America that we've done so well in this new tech field. And I personally would not like to see our President Giants brought down to some low level by some anti competitive reasonings. I don't think they're doing a lot of harm any competitively. I think they're a credit to the Americans, credit to our civilization. And they're and they're huge. And they're huge, and that's good for us. Well, let me ask a follow-up question on that then. This comes from Jack Sang who says, what's your mindset when you see so many of these high flyers, Not the GME or meme stocks, but more like the big tech growth stocks gaining 50%, 100%, 200%, etcetera, in a matter of a year or less. I know you eventually bought Apple in 2016 because of the quality of their businesses and their management. How do you assess if these high flyers are worthy of your investment given this crazy high valuations That muddy the waters. But we don't think they're crazy. They, but we don't Charlie, I feel that I understand Apple and its future with consumers around the world better than I understand some of the others. But I don't regard prices and that gets back, well it gets back to something fundamental in investments. I mean interest rates, you know, basically are to the value of assets what gravity is to matter essentially. And on the way out here, I tried a little clipping from the Wall Street Journal yesterday, probably the only one that read it, so small I'm having trouble finding it, but anyway on Thursday, the US Treasury sold some 8 week, some 4 week notes, treasury bills. And the price was in, if you looked at your Wall Street Journal down a little corner next to the last page in my paper, in the very bottom corner, the here it is, the results of the treasury auction, little tiny thing, they sold 4 they had applications on the 4 week Treasury bill for 100 and some billion, they accepted bids for 43,000,000,000 worth. And it says average price 100.0000, 6 zeros. And essentially, people were giving 40 some $1,000,000,000 to the registry and they offered to give 130,000,000,000 or something, whatever the amount tendered. And the Treasury received the money at 0 And Janet Yellen has talked a couple of times about the reduced carrying cost of the debt. I think in the last fiscal quarter, the US Treasury which US government which owes a few 1,000,000,000, a few $1,000,000,000,000 I should say, few $1,000,000,000,000 more than a year ago, their interest expense was down 8%. So you've had this incredible reduction in the so called super risk free group, the short term Treasury bill. And that is the yardstick against which other values are measured. I mean, if I could reduce gravity, it's pull by about 80%, I mean, I'd be in the Tokyo Olympics jumping. And essentially, if interest rates were 10%, valuations are much of a, so you've had this incredible change in the valuation of everything that produces money because the risk free rate produces really short enough, right now, nothing. It's very interesting. I brought this book along because for 25 or more years, Paul Samuelson's book was the definitive book on economics, it was taught in every school. And Paul was he was the 1st Nobel Prize winner. It's sort of a cousin to the Nobel Prize, they started giving it in Economics I think in the late sixties, he was the 1st winner from the United States, Paul Samuelson. Amazingly enough, the 2nd winner was Ken Arrow and both of them are the uncles of Larry Summers. Larry Summers had the first two winners as uncles. But Paul, he was a wonderful guy, he was a wonderful writer, the definitive writer. And so I got out the 73 Economics books. And bear in mind probably economics kind of started as kind of an interesting science and respect. But with Adam Smith, we'll save, you know, he wrote The Wealth of Nations in 17/76, he'd written some books earlier, but it sort of dated from of when our country started. And you had all these famous economists subsequently and Paul became the most famous of this time. So I looked up in the back under interest rates, I looked for negative interest rates, there's nothing there. So I finally found 0 interest rates and Paul Samuelson, brilliant man after a couple 100 years we've had of kind of studying economics basically, he said that he said you can conceivably, technically he said, you can conceive perhaps of negative interest rates, but it can't ever really happen. And that was in the 1970s, this wasn't back in the dark ages and this was a and no economist wrote up and said this is a terrible line to have an upward ending. And here we are in this world where we had 0 interest rates last year out of, I mean last week on or this week on a 4 week note, and Berkshire Hathaway, which had a has more than this, but let's say we had $100,000,000,000 in treasury bills, we have more than that. Before the epidemic, pandemic, we were getting about a 1,000,000,000 and a half from that a year. At present rates, if it's 2 basis points, we'd get 20,000,000 Imagine your wage is going from $15 an hour to $0.20 an hour, so it's been a sea change And it was designed to be that. I mean it was that's why the Fed moved the way they did. They wanted to give a massive push just like Mario Draghi did in Europe and whenever it was 2012 when he says whatever it takes and they they want the negative rates and Fed has said it doesn't want to go to negative rates and I think the Treasury actually has got some small bar. But if present rates were destined to be appropriate, if the 10 year should really be at the price it is, those companies that mentioned in this question, they're bargain, they have the ability to deliver cash at a rate that's if you discount it back and you're discounting at present interest rates, stocks are very, very cheap, now the question is what interest rates do over time. But there's a view of what interest rates will be based in the yield curve after 30 years and so on. It's a fascinating time. We've never really seen what shoveling money in on the basis that we're doing it on a fiscal basis while following a monetary policy of something close to 0 interest rates and it is enormously pleasant. But in economics, there's one thing always to remember, you can never do one thing, you always have to say and then what. And we are sending out huge sums. I mean President said it on Wednesday, 85% of the people were gonna get a $1400 check, 85%. And a couple of years ago, we were saying 40% of the people couldn't, never could come up with $400 of cash. So we've got 85% of the people getting those sums. And so far we've had no unpleasant consequences from it. I mean people feel better, the people who get the money feel better and people who are lending money don't feel very good, but it causes stocks to go up, it causes business to flourish, it causes an electorate to be happy and we'll see if it causes anything else. And if it doesn't cause anything else, you can count on it continuing in a very big way. But there are consequences to everything in economics, but that is why the Googles and the Apples, when we don't own, we don't own Microsoft, but they are incredible companies in terms of what they earn on capital, they don't require a lot of capital and they gush out more money. And if you're trying to find bonds that gush out more money from the federal government, we got $100,000,000,000 this is gushing out like you know $30,000,000 or $40,000,000 a year or whatever it may be depending on the short term rates. So that puts the pressure on, which is exactly of course what the monetary authorities want done. I mean that's they're pushing the economy in a and they're doing it in Europe, they're even more extreme and they're pushing and we're aiding it with fiscal policy and people feel good and people have become numb to numbers. You know, 1,000,000,000,000 don't mean anything to anybody. And $1400 does mean something to them. So we'll see where it all leads, but it's Charlie and I consider it the most interesting movie by far we've ever seen in terms of economics. Yes. And the professional economists, of course, have been very surprised by what's happened. It reminds me of what Churchill said about Clement Adly. He said he was a very modest man and had a great deal to be modest about. And that's exactly what's happened with the impression on economists. They were so confident about everything. It turns out the world is more complicated than than they thought. As a follow-up to that, Pat King, What's your opinion about the economic theory MMT, especially the United States because it's the reserve currency for the world? Well I think there are more I think the modern monetary theorists are more confident than they ought to be too. I don't think we any of us know what's gonna happen with this stuff. I do think there's a good chance that that this extreme conduct is more feasible than everybody thought. But I do know if you keep just doing it without any limit, it will end in disaster. On a related question, l Candle wrote in on this too and said if you can borrow money at a guaranteed lower even 0 interest rate, is it Still worthy of borrowing money for not that guaranteed cost from the insurance operation? It reduces the value of float by a substantial amount. And we have a flexibility with our float that virtually no one has, and I've written about this in the annual letter, but the value of float has gone down dramatically because everything is off of interest rates. And when you get to negative interest rates, if a country can borrow at negative interest rates, you get into something that's kind of akin to the St. Petersburg Paradox and those of you who want to go to search, can find some interesting things on it, but it becomes infinite. It's a crazy consequence of a bunch of abstract mathematics that where you get there, but you lose gravity entirely and if you tell me that I'm going to have to lend money to the government at minus 2% a year, I'm talking nominal figures, not you're just telling me how I'll go broke over time if I do that. So it pushes you to do other things. And of course, we've seen it. Well, we saw the rest of the world do in even more extreme fashion, but nobody, Paul Samuelson, brilliant man, nobody thought he could do this and we don't really know what the consequences are. But we know there are consequences obviously. This question comes from Sam Butler, who says he's been a shareholder for many years and asks, what impact does the rise of so many new SPACs have on Berkshire's ability find and close new acquisitions. Well, it's a killer. These packs generally have to spend their money in 2 years as I understand it, so they have to buy a business in 2 years. You put a gun to my head and said you got to buy a big business in 2 years, you know, I'd buy one but it wouldn't be much of one. It's, you know, we'd look and look and and now there are, I don't know how many, whether it's 100 and there's always been the pressure from private equity funds. I mean, if you're running money for somebody else and you're getting paid a fee and you get the upside and you don't have the downside, you're gonna buy something. And I could tell you about I had a very famous I had a call from a very famous figure many years ago that was involved in it and wanted to learn about reinsurance. And I said, well, I don't really think it's a very good business. And he said, yeah, he says, if I don't spend this money in 6 months, I've got to give it back to the investors. So it's a different equation that you have if you're working with other people's money where you get the upside and you have to give it back to them if you don't do and frankly, we're not competitive with that. That won't go on forever, but it's where the money is now and Wall Street goes where the money is, and it does anything basically that works. And specs have been working for a while and you seek your famous name on it, you can sell almost anything. But it's an exaggerated version of what we've seen in kind of, well, gambling done type market. In fact, I did have a quote from Keynes that we might put up on the let's see if I've got. Yeah, this is probably the one of the most famous quotes in history because it really sums up the problem of the fact we've got the greatest markets the world could ever imagine. I mean imagine being able to own parts of the biggest businesses in the world and putting 1,000,000,000 of dollars in them and take it out of you know, 2 days later, I mean compared to farms or apartment houses or office buildings where it takes months to close a deal, the markets offer a chance to participate and invest in earning assets on a basis that's very, very low cost, instantaneous, huge, all kinds of good things. But it makes it real money if they can get the gabblers come in because they give, they provide more action and they're willing to pay cellular fees and all kinds of things. So you have this incredible, a huge asset to humanity, but it really makes us money when people are doing stupid things. I mean that's where the money really is. And Keynes wrote this in 1930 in 1936, it says 1939 in the slide, but he wrote in 1936 in the general theory that speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a byproduct of the activities of a casino, the job is likely to be ill done. Well, the stock market, we've had a lot of people under the casino in the last year. You have millions and billions of people who have set up accounts where they day trade, where where they're selling puts and calls, where they, I would say that you had the greatest increase in the number of gamblers essentially, and there's nothing wrong with gambling. And so they got better odds than they've got to play the State lottery, but they've had cash in their pocket, they've had action, and they actually have a lot of good results and if they just bought stocks they do fine and held them, but the gambling impulse is very strong in people worldwide and occasionally, it gets an enormous shove and conditions lead to this a place where more people are entering the casino that are leaving every day and it creates its own reality for a while. And nobody tells you when the clock's going to strike 12 and it all turns to pumpkins and mice. But when the competition is playing with other people's money or whether they're and if they're paying foolishly with their own money, but the big stuff is done with other people's money, they're going to beat us. I mean we're not, that's a different game and they've got a lot of money, so we're not going to have much luck on acquisitions while this sort of a period continues. But it's happened before. This is about as extreme as we've seen it, isn't it, Charlie? Yes, of course, I call it fee driven buying. In other words, they're not buying because it's a good investment. They're buying it because the advisor gets And of course, the more of that you get, the sillier your civilization is getting. And to some extent, it's a moral failing too because the easy money made by things like specs and total return derivatives and so on and so on. You push that to excess, it causes horrible problems for the civilization. It reflects no credit on the people that are doing it and no credit on the regulators and voters that allow it. So I think we have a lot to be ashamed of current conditions. But it's where the money is. Yeah. But we still but it's shameful what's going on. It's not just stupid, it's shameful. It's not I don't regard it as shameful on a lot of the people that gamble. I mean, gambling is a very human instinct and they've got money in their pocket and they know somebody else has made money. They don't think it's any smarter than they are. No, no. I don't mind the poor fish that gamble. I don't like the professionals that take the suckers. Alright. Moshe Levine writes in. He's an American living in Israel. He says, if you deem stock prices to be overvalued or in a bubble, do you think it's best to keep your money in cash while waiting for prices to come down to a fair price, or would it be a better idea to invest this money in some way while waiting until stock prices are fair again and then sell the investment to buy stocks. Well, Charlie and I have had that discussion on a lot of things. We bought some stocks we really don't know that much about, but I'm not really comfortable doing that. You're used to shooting fish in a barrel, but that's gotten harder. We've got probably 10% to 15% of our total assets in cash beyond what I would like to have just as a way of protecting the owners and the people that are our partners from ever having us ever getting a pickle. We really run that friction to make sure that we don't want to lose other people's money who will stick with us for years. We can't help if somebody does it, buys it today and sells it tomorrow. But we've got a we've got a real gene that pushes us in that direction. But we've got more than we we've got probably $70,000,000,000 or $80,000,000,000 something like that maybe. We'd love to put it to work, but that's 10% of our assets roughly and we probably won't get, well we won't get a chance to do it under these conditions, but conditions change very, very, very rapidly sometimes in markets. And we do have people that would like to join us, but the market option they have is just it's too great for them. And if they're publicly traded, I mean, they basically can't they would have great difficulty, well then making a deal with us because somebody else would come along with using other people's money. It's you know, we may be unhappy about the 70,000,000,000 but we're very happy about the other 700,000,000,000. So it's not like we should complain. Warren, when we spoke before the annual meeting, you said that it was okay if I asked a follow-up or 2, and I'd like to Sure. One of those right now. You said you bought some stocks that you don't know a lot about. What are they? Well, I will not get into naming what stocks and maybe that there's something there that I think I know about that I don't know but we have bought stocks where Charlie and I, I mean we know the business generally, but we don't have any insights. And they are as a group, if I had told me I was going to be shot unless I got the best result, I would rather own those stocks than the treasury bills we own. But on the other hand, we work with the quantities of money where if we put $50,000,000,000 of the things that I'm kind of so so about but that are better than Treasury bills, it doesn't I'm not wildly comfortable about that even though it can be undone. It's selling $50,000,000,000 when it's really attractive to buy something else. There's a lot of slippage that can happen in moving something like that around. So that's something we talk about all the time. They're good companies, they're fine companies. But do we know something about those companies or have a way of evaluating that gives us an edge the answer. I think what do you feel about Charlie? We've talked about it a lot. Well of course it's a lot harder and and I think one consequence of this present situation is that Bernie Sanders is basically 1. And that's because the with the everything boomed off so high and interest rates so low. What's going to happen is the millennial generation is going to have a hell of a time getting rich compared to our generation. And so the difference between the rich and the poor in the generation that's rising is going to be a lot less. So Bernie has won. He did it by accident, but he won. Alright. This question comes from Denny Poland, a shareholder from Pittsburgh. A prominent senator recently categorized share buybacks as a form of market manipulation. You've often said that Shares at prices below intrinsic value benefits continuing shareholders. Could you and Charlie please elaborate on the higher order effect that these share repurchases have on society? Their way essentially of distributing cash to the people that want the cash when other co owners mostly want you to reinvest and it's a savings vehicle. If the 4 of us sitting at this table decided we'd buy a few Dairy Queen franchise, we formed a little company and we all put in $1,000,000 or something like that and we buy the Dairy Queen franchises and they're doing well. And 3 of the 4 of us want to keep buying more Dairy Queen franchises and we're not done building and saving for the future. And we're in the wealth creation business and the 4th one says listen, I've gotten rich enough, I'd rather take some money out. And well there's only 2 ways to do it, we can pay dividends all 4 of us, 3 of us of whom don't want it and we can repurchase the shares at a fair price, if it's just the 4 of us, we pick out a fair price and the 4th one gets bought out of his interest. I find it almost impossible to believe some of the arguments that are made that it's terrible to repurchase shares from a partner if they want to get out of something. And you're able to do it at prices advantageous to the people who are staying and it helps slightly the person that wants out and a majority of the Berkshire shareholders, a great majority, we had a vote on dividend one time. We've got savers. Now that's partly because we've advertised ourselves as being that sort of a vehicle we've created that something we've stuck with it for 50 some years and people look individuals huge number look at Berkshire as something there. They're going on till they die. Now they may their circumstances may change, their needs may change, but the savers generally keep saving. We just recently had somebody that bothered came with us 60 years ago and 1,000,000,000 of dollars and they just they weren't saving exactly for their old age, just was sort of built into them that they like to do it. Now philanthropies will get a lot of money and so on. It's the most what could be more logical than if a very small minority of your holders want to get out and most of them want to stay in and the person who wants to get out wants the money, don't give the money to everybody, you give it to the one who wants it and you do it at a price that is beneficial the most part is on a private deal you'd work out the fair value. The market tells you the value in the case of a publicly traded company. Charlie, got anything? Well, I if you're repurchasing stock just a bullet higher, it's deeply immoral. But if you're repurchasing stock because it's a fair thing to do in the interest of your existing shareholders, it's highly moral act. And the people who are criticizing it are bonkers. Okay. This comes from Gary Gambino. He wants to know if Berkshire would switch its capital return policy to dividends From buybacks, if the capital gains rate goes up to 43.4%, dividends would be far more a tax advantage for shareholders under that scenario. We literally did have a vote by our shareholders. Now we've got a different group of shareholders and a REIT would have or an MLP might have, I mean there's different people select what they go into and people that go into SPACs are hoping the goes up next week, I've been basically and we've got a bunch of people that were assembled over 55 years, but they started with a base of people that it was a lifetime investment. And if they wanted to cash out, they thought they'd get a fair price at that time, but they really didn't they had bought it with no intentions like that. So we had a vote and it was something like 97% or something of the shares that they don't want a dividend. And now that wouldn't be true at other companies and be crazy to be paying a regular dividend like Coca Cola has done for many years and then all of a sudden changed the policy on millions of people who had bought it with one expectation in mind and try and change it into a different animal. But Coca Cola isn't going to change to Berkshire and Berkshire isn't going to change to Coca Cola. We've got a different group of owners and it will keep self selecting because people have a choice every day, which do you want to sort of thing do you want to be in and Berkshire is a certain kind of animal in that respect. So we will not if they jigger on the tax laws, that's really got nothing to do with the decision, I mean, we've got a very substantial majority of people that want us to reinvest the money and what they're more concerned about is whether we find something to do with the money, the $100,000,000,000 or something and repurchasing shares is something that helps them in there, they own a larger percentage of Berkshire as they go along and they'd love to see us buy another business but with them, they don't mind us intensifying their interest in the present business. You got a lot of questions that came in on taxes, so I'll run through a few of them. We'll see How many of you answered them? How many of you answered before we get to them? But this one came from Arthur Lewis in Denver. What are your thoughts on the new administration's capital gains, corporate tax and stepped up basis tax increases. Well, if if if Sharagan wants to answer that, I'll be glad to have him do it. I long ago, many times have said that I don't put my political opinions or anything in a blind trust when I take this job but I also don't speak for Berkshire Hathaway. We've got people have very different views on taxes and you know I've expressed some things in the past. I don't like to speak on behalf of when I'm sitting at a Berkshire Hathaway annual meeting presumably speaking for sure I don't really like to get into political questions generally. I don't really think I should, but I also think if somebody asked me who I vote for the last election is a personal way, I vote for Biden, but I don't I've never asked a single employee of ours who they voted for, you know anything of the sort but religion. It just it's and I am not authorized to go around signing my name as chairman of Berkshire Hathaway to proposals. I write if I write op ed pieces, I do it as an individual. I try to make it clear. So I don't think I'll want to use the meeting to give a lot of views on taxes, Charlie. No, but I think it's probably a mistake to be basically anti capitalist. I think capitalism is what raises GDP for everybody. And so and I have also a feeling that Benjamin Franklin was right when he said that it's hard for an empty sack to stand upright, and to some extent parity of leading American institutions helps them behave better. Now there are exceptions and promotional finance and so on. But by and large Franklin was right. And so I'm I'm a little wary of just constantly being mad at people because they have a little more money. Charlie, there was a question that came in uh- Specifically to you on the tax issue, over the years and with emphasis in 2020, we've heard people leaving California for various reasons such as high cost of living, high taxes, etcetera. I understand that you believe it's dumb for states to have policies and laws that provoke rich residents leaving, but are your thoughts what are your thoughts on those people leaving? What keeps you in California? Well, that's a very interesting question. I frequently said I wouldn't move across the street to save my children $500,000,000 in taxes. And so I have that's that's my personal view on the subject. But I do think it is stupid for states to drive out their wealthier citizens. The old people, they don't commit any crimes. They donate to the local charity. Who in the hell in the right mind would drive out the rich people? I mean, Florida and places like that are very shrewd in places like California are being very stupid. It's contrary to the interest of the state. One more question for you. Jack Robbins asks, how will a 25 to 28% corporate tax rate affect Berkshire's companies? Well, I don't think it would be the end of the world. We've adapted to the tax rate, whatever it is. Yeah, I would say that if they raise the tax rate, they're only the federal government's owning a larger percentage of business. I'm not but not saying what the tax rate is but we have a Class A stock and a Class B stock. The U. S. Government owns what I call the Class AA stock. As a very special stock. They get a percentage of the earnings, but they don't own the assets and they don't vote on who gets to run the place or anything else. But if the government wants to take when I was first starting, they used to take 52%, the federal government did of corporate profits and they've got what would you pay to own the government's Class A double A stock? If there was a public issue by the US Treasury and they said this vehicle given the name like SPAC or something even sexier but And all it will do is it owns the future tax payments of Berkshire Hathaway forever. And how much is that stock now worth? And it gets and it'll pay a big cash dividend and they'll go up as we retain earnings and build the company and everything else. It's worth more if it's if the tax rate is 25% or 28% or 52% than a 21%. They own a special stock. And when people talk about how it all gets passed the customer and everything. In the utility business, it actually does, that's a special case. But it doesn't in most of our businesses. I mean it's just, it's a corporate fiction when they put out statements about the fact that this will be terrible for all of you people, we pay more taxes, it hurts the Berkshire shareholders if rates are higher and that may be quite appropriate, but to say otherwise is just it doesn't make any sense. I would love to see the government actually issue. They could have, I mean, they could set up a company, just call it the Berkshire Hathaway Tax Company and it would take all the taxes we paid every year. How much would they be able to sell that asset for? They talk about unfunded obligations of the government, that's an unreported asset of the Federal government, they own part of Berkshire. And they get to determine how much. I mean, it's an interesting question. One last tax question, this one comes from William Barnard who says, in the owner's manual portion of your annual report, Warren, you state, on my death, none of my stock will have to sold to take care of the cash bequests I've made or for taxes. But the recent Biden proposal to treat unrealized gains as sold and taxable at death at a 43.4% rate Change the amount of stock required to be sold for payment of taxes upon your death. Yeah. Well, the tax law can be changed tomorrow. And I don't you know, it can be done a lot of different ways and it's been done a lot of different ways in the past. I can tell you, I can actually make a promise to society that 99.7% of what I have when I die will either go to the or to the federal government. And the federal government can actually determine the rules on that. And no, I would prefer that it would go to philanthropy. I think it actually will accomplish more utility if it goes to be used by some smart people in philanthropy then if it simply reduces the federal debt by $100,000,000,000 or something when I die, I don't think it makes a damn bit of difference. Federal debt is $100,000,000,000 higher or lower, it won't change anything in the world. And at present days, it doesn't really save them anything because they borrow $100,000,000,000 it doesn't cost them anything anyway. But that condition won't prevail. But I don't, I would not regard it. I'm just talking personally, I'm not advocating this public policy, but I wouldn't, if they took it all, it would not bother me. I guarantee it won't bother you. Charlie says you won't know. But the you know if you decide if the American democracy decides that it's better to take it all, which I don't think they will and I don't think they should, but nevertheless, you know, so what? I would like to see it used to accomplish the most for humanity. And that means having smart people properly motivated, and more importantly, not improperly motivated, distribute in a way and who knows what the hell it would be 10, 20, 30 or 40 years from now. I do know if it goes to the government, it basically reduces the national debt by that amount. I don't think it changes whether they change the minimum wage laws or does anything else, I just think a little figure changes, it'll be, you know, it'll show up in the budget one day, you know, received from Buffet, you know, X and then some huge figure appears down below. I don't think it really so I I would prefer it be used privately, but that's really up to the people in the United States at the side through their representatives. This next question is for Ajit. It comes from professor Don Wunsch at the Missouri University of Science and Technology who says, Mister Jain, what has COVID nineteen taught us about systemic and correlated risk, and there is there anything that we will do differently from now on? Yeah. In the insurance business, we often think about pandemic risk as one of the risk factors that we need to cope with in our business. Having said that, I think the Big lesson for us, having gone through what we've gone through recently, is that while we were aware of the fact that pandemic risk is a risk factor, it was totally, totally underpriced by all of us in the industry. Several of us thought it's an event that will happen at most once in a 100 years, and even then, those odds are pretty high. So I think the big lesson for us is to recalibrate and rethink about what the return time is for something like a pandemic risk. And separately, we haven't yet done a good enough job as an industry, I'm saying, in terms of correlating the risk and aggregating the risk and making sure we can deal with the aggregate numbers. For example, pandemic risk has obviously taken taken people's lives, but then separately, a bunch of us used to write something called event cancellation or contingency policies. And in terms of pricing for the contingency policies, like the Olympics being canceled, NBC would buy insurance for their rights, Which might suddenly be not worth much. And when pricing something like that, we would think in terms of earthquake and risk and more recently terrorism, but we would never factor something like what portion of the price should come from the pandemic exposure. So I think the industry will become a lot more sophisticated in terms of thinking through what is the impact of pandemic risk across the entire portfolio as opposed to it just being localized to 1 or 2 areas. And I'm sorry. Don asked if anyone else on the stage wanted to comment after Ajit on that same topic. I missed it. Oh, he he was just looking if anyone else on the stage wanted to comment on that. Well, as as Jean mentioned, people were throwing in, well, an event cancellation. I mean lots of people buy insurance against the Olympics being canceled or the United States not participating. I mean they try to think of all kinds of risk because they had they have ad campaigns based upon all. So there's a lot of event cancellation insurance and it was probably underpriced the implicit part of that premium that was attributable to a pandemic risk. I mean, Bill Gates gave a terrific talk at TED, 5 or 6 years ago and people ignored it. And it's very interesting because this isn't the worst case, what we've seen and yet it's staggering in terms of what has happened. And people that rolled insurance that they may have found out sometimes that they were covering things they didn't want to didn't even intend to cover and maybe the insurance didn't think they were buying. But nevertheless, after the event occurs that they get very inventive in coming after them. There are certain risks too that are just too big. The nuclear risk, for example, I mean the federal government is very early on, they recognize that the private insurance industry, they can't handle the risk involved and the financial risk that would be involved in terms of a massive nuclear strike or something like that. So it's the pandemics, the wording will be much more careful in future policies on trying to define it very precisely. And incidentally, I mean, the way the cases have come so far in the United Kingdom, I mean, and I think there was one particular insurer, I mean, the cases are coming down much tougher on insurers in the United States. I mean, the policies were just written differently. You don't get insurance against something you don't buy against it for and generally the court decisions have come down favorable to insurers. And at Berkshire, it just so happens we are not a big player but that's in commercial mobile apparel which might be where it is not a huge factor for Berkshire. This follow-up question is from Martin Devine, and he asked both Ajit and Warren, What's your best estimate of Berkshire's insurance claim exposure from the COVID nineteen pandemic? Well, in terms of reserves, starting from last year to the end of Q1 this year, we have put up a 1,000,000,000 and change In terms of reserves. Now what that doesn't take into account is some of the frequency benefit because of COVID nineteen that results because of fewer accidents, and GEICO has had a huge tailwind because of that. But in terms of what the insurance operations collectively are going to be writing checks for, that number as of now is about 1,600,000,000, And my guess is that it'll probably grow because if you look upon it, the industry as a whole has reserved we've reserved 1.6, as I mentioned. The industry as a whole has reserved about $25,000,000,000 to $30,000,000,000 for COVID nineteen as of now. If you believe the pundits in the industry, they will tell you that number is probably gonna be closer to a 100,000,000,000. So there's another about 70, dollars 75,000,000,000 of COVID nineteen losses that need to flow through insurance industry's balance sheet and income statement. Our number, therefore, of 1.6 that we have as of now is going to be a lot, lot higher, But it's not something that we cannot manage completely. Yeah, we will not be in this top 5 payers of my guess of insurance claims even though we're it's and we write a much smaller amount of both life insurance and annuities actually. And in the end, we had more life insurance claims but the annuities are not going to last. More people will have died that would have otherwise got payments under annuities. It cuts a lot of ways. It's a one of the great human catastrophes of all time, but it's not that big an insurance. Say this, if the insurance industry thinks they're going to lose $100,000,000,000 $100,000,000,000 ought to be up on their books now. I mean, the idea of feeding in losses, you've got a liability and our goal is not our goal is to have put up the liability when we think it's happened. And then if we should not be at 1,000,000,000, I would say this, if we really if we really think we're going to have some proportional share of $100,000,000,000 well, that's an upset on that. This next question is for Greg, but also for Warren and Charlie. It's from Blair Miller who asks, What does the combination of Kansas City Southern with either Canadian Pacific or Canadian National mean to BNSF in terms of competition? And do you think the synergies of the merger will justify the multiple paid? Sure. So it's obviously a transaction. We followed very closely with both Canadian National and Canadian Pacific bidding to purchase Kansas City Southern. Either of those companies acquiring Kansas City Southern will have an impact on BNSF. We what they're basically proposing is to create a north south railway that goes from Canada into Mexico. We do have a strong presence in Mexico, not as strong as some of our competition, but we would feel competition there. So we'll follow that transaction very closely. As it goes before the Surface Transportation Board, the standard that will be applied is that competition has to be protected or enhanced. So that's our opportunity to protect our franchise on behalf of our customers. So we move intermodal business both in and out of there on behalf certain customers will want to protect the rights of our customers there. So we'll be active in the approval process, but there's no question at the end it impacts our franchise. Warren? Yeah, it's not huge but it affects both the Union Pacific and the NSF to a small degree, relatively small degree. But that's not really the worry of the Surface Transportation Board. Their job is to do what's best for the shippers. And in terms of the price that's being paid, like you say, if you can borrow all the money for nothing, but it doesn't make much difference to people and this would not be being paid under a different interest rate environment. I mean, it's very simple. But it would make, there's no magic to the Kansas City Southern. It's got a I think their deal with Mexico ends in 2,047 and that it's it will the number of cardholders carried, not going to change that much. But it is kind of interesting, there's only there's 2 major Canadian, what they call Class 1 railroads and there's 5 in the United States And this will result in essentially 3 of the units being Canadian, poor being U. S, which is not the way you normally think of the way the development of the railroad system would work in the United States. But it's we've talked about it plenty and CP or either Canadian Pacific or Canadian National was very likely to get I think Surface Transportation Board voted for it 1 didn't they the other day didn't get they voted on an initial trust structure that they had to approve for Canadian Pacific and that was a 4 to Vote as you noted, Warren, so they're moving forward with the evaluation of it. Yeah. And normally railroad deals are very long, take a long time for them to evaluate, but in this case, I think they have 2 opposing trust proposals and in effect, by making a if they make a quick decision on which trust proposal that they allow, I don't say they allow 2 proposals exactly, so it may be a very accelerated decision, I don't know. But it's up to the Surface Transportation Board to do what's best for what their obligation is to the country to do. There was a follow-up question on that. Do you think the valuation that they're paying is worth it? Well, I we in a very, very mild way, I mean, everybody's contemplated making deals with different railroads ever since I've been in the railroad business. We've talked about it, we've done one CP, when it was Hunter Harrison that came after, was it Hunter that did on CP that kind of led the way. And you know we looked at buying CP, I mean everybody looks at everything and we would not pay this price and it implies a price for the NSF that's even higher than what the UP is selling for. But you know, it's kind of play money to some degree. I mean, when interest rates are this low and I'm sure from the standpoint of both CP and CN, there's only one KC Southern and they're not going to get a chance to expand. They're not going to buy us, they're not going to buy the UP and the juices flow and and the prices go up and And they're buying on somebody else's money. Yeah. It's somebody else's money and you're going to retire in 5 or 10 years and people are not going to remember what you paid, but they're going to remember whether you built a larger system and the investment bankers are cheering you on every move, you know, they're they're saying you could pay more and this is, you know, they're moving the figures around, the spreadsheets are out, and the fees are flowing. This question comes from Asher Haft in Brooklyn who says, Asher's been a Shareholders since 2006 says that he appreciates your honesty and candidness when it comes to explaining costly errors you made. In this year's chairman letter, you discussed that you made a mistake in 2016 when calculating Precision Castparts average amount of future earnings, which resulted in Berkshire overpaying to acquire it. It appears that Precision's earnings declined substantially in 2020 because of the pandemic and the effect of airline and travel industry. What calculations could you have made in 2016 that might have altered your decision to acquire it? And secondly, are the problems Precision is currently facing larger than the pandemic? Well, Berkshire didn't make the mistake, I made the mistake incidentally. Now I would anytime we look at buying a business, we're evaluating the competitive strengths of the business, the price we have to pay, the management we we got everything and we didn't make a mistake on the management, but in terms of the earning power on average. And when Boeing has troubles with the MAX, well, that's a probability. I mean, anytime, any customer is big. I mean, all kinds of things can happen And we have seen some of those things happen and therefore, I paid too much in relation to average earnings, it's a terrific company and it's I'm happy with the management, everything and but GE doesn't need as many engines as we thought we would need and they get into the power business and a variety of things and we knew those are in the businesses, but we did not think those businesses would necessarily be in something close to a depression when other businesses are that we bought end up doing, sometimes it's doing better than we think. But we'll continue making mistakes. I mean, and I shouldn't say we will, I will, but even these other The rest of us will help. And well, we've got some wonderful deals and some terrible deals and the nice thing about it is as I pointed out, this doesn't really precise apply in the case of precision precisely. But when we're disappointed in a business, it usually becomes a smaller and smaller percentage of our business just by the nature of things because it isn't going anyplace. And when we get a successful business like a GEICO or something of the sort, GEICO is doing, they're doing 15 times as much business as when we bought control in 19, they become a proportionally much more important part of our mix. So you really get through just natural forces, you get more of your money in the things that have developed more favorably than you thought, you actually end up getting a greater concentration in the ones that work out. It's not like Charlie would say, it's not like having children. I mean, the ones that the backgrounds cause you more problems, but the but in this in the children of businesses, the small ones kind of, by the way, we started with 3 businesses, Charlie and I, and Berkshire was textiles, Diversified Retailing was a department store and Trading Stamps were blue chips business and those were the 3 companies we put together and all 3 of the original businesses failed, which sort of gets me in terms of the people that are worried about don't we know that coal is going to be phased out over time? Of course we don't, coal is going to be, but that doesn't mean we're going to be phased out over time. I mean that every business has some things to think about that way. The biggest danger, they have that section in the perspectives called, what do they call that? But certain risk factors. But risk factors, yeah. The number one risk factor, you never see it. The number one risk factor is that this business gets the wrong management and you get a guy or a woman in charge of it that are they're personable, the directors like them, they don't know what they're doing, but they know how to put on an appearance, that's the biggest single danger that our business and that that person stays and runs it for 10 or 15 years and either stays in the textile business or department store business and expands. And I've looked at a lot of businesses and that's what's caused the number one problem and it isn't the kind of thing where they list them all because the lawyers tell them to listen. This question comes from Raghu Bashwal, and it's for both Warren and Charlie. Now that the crypto market overall is valued at $2,000,000,000,000 do you still consider cryptos as worthless artificial gold? I knew there'd be a question on Bitcoin or crypto. And I thought to myself, well, I've watched these politicians dodge questions all the time, you know, and I always find it kind of disgusting when they do it, but truth is I'm gonna dodge that question because we probably got hundreds of thousands of people watching this that own Bitcoin. And we've probably got 2 people that are short, so we got a choice of making 400,000 people mad at us and unhappy and or making 2 people happy and that's just a dumb equation. So I thought about it, we had a governor one time in Nebraska, a long time ago, but he would get a tough question, what do you think about property taxes or what should we do about schools? And he'd look right at the person, he'd say, I'm all right on that one. And he'd just walk off, well, I'm alright on that one and maybe we'll see how Charlie is. Well, those who know me well are just waving the red flag of the bull. Of course I hate the Bitcoin success, and I don't welcome a currency that's so useful to kidnappers and extortionists and so forth, nor do I like just shuffling out a few extra 1,000,000,000 and 1,000,000,000 and 1,000,000,000 of dollars to somebody who just invented a new financial product out of thin air. So I think I should say modestly that I think the whole damn development is disgusting and contrary to the interests of civilization, and I'll let leave the criticism to others. I'm alright on that one. The next question that comes in or the next series of are from James Hernandez. He has 2 questions. 1 for Ajit, 1 for Greg. They both concern Elon Musk. For Greg, this question is for you. Elon Musk has stated that Berkshire Hathaway's energy proposal for Texas Spending more than $9,000,000,000 for new generating capacity is wrong. Instead, mister Musk argues that load balancing using battery storage is the appropriate course of action. Can you explain why the BAG proposal is the better course of action for governor Abbott in the state of Texas? Specifically, what amount of savings can the citizens of Texas expect above and beyond what mister Musk is proposing. Sure. So the, obviously, there is a very unfortunate event in Texas in February and it basically lasted 4 days. Many lives were lost. The economic damage was significant Texas has highlighted that anywhere from $80,000,000,000 to $130,000,000,000 incurred losses over that period of time. And I think when you look at the power sector, it fundamentally let the citizens down. It didn't perform as they expected. And then when it did perform, it was extremely expensive. They incurred 1,000,000,000 and 1,000,000,000 of dollars of energy costs versus a multiple of basically 10 times what they paid. They paid 10 times in energy costs over those 4 days what they paid in the past year. So a very substantial event for Texas. We've gone to Texas with what we believe is a good solution. We spent a lot of time pulling it together, understanding the fundamental issues around it. And our proposal is really based upon the fact that the health and welfare of Texans were at risk and we needed to have effectively an insurance policy in place for them that if they needed the power on very short notice it would be able to be dispatched and it would be there for the 4 days. We're actually proposing it could be there for 7 days. And the fundamental concept of our proposal has always been if there's a better proposal that's brought forward, we've accomplished our mission. We've just been really there to it's the best proposal or option we could come up with and obviously if Texas or Elon or someone else comes up with a better proposition. We've always said Texas you should pursue it. We strongly believe right now we have what remains is a very good proposal for Texas and it'll continue to be discussed and evaluated. The big difference between a battery proposal and our proposal is that we will have power that can be generated continuously for 7 consistent days where if you went to a battery solution you may release that power that's been stored for 4 hours but we're talking 4 days of a problem not 4 hours and it's just a completely different cost equation and solution. So very proud that our teams brought forward what I thought was a very unique solution. We've worked hard with our suppliers and Peter Kew and Sons to put together what we believe is a firm cost that can also be delivered by November of 'twenty three. So again, we put a firm date on. It won't be ready next winter unfortunately, it won't be ready this summer, but it's a valuable solution and one that we hope at least leads to the right discussion and the right long term solution for the state. Yeah, and we're also willing to put up $4,000,000,000 that if we don't deliver when we say we're going to deliver, we'll pay it as a penalty basically. And but you know we went to Keywood, we went to General Electric and said you know how long can we get turbines and you know for that. You know, if you're going to be prepared for 2023, you have to start at a point fairly soon and you have inflation going on and it was not going to change things on us in a month. We don't try to get the contract's all written out, but we they had a 100 people working on it. Yeah, they had 100 working on it. Yeah. And you know, and GE is cooperative and everything, but doesn't mean we have the best solution, we just know what we can do. And if anybody can do it faster, they can do it cheaper, whatever, that's terrific. But they should have something to lose if they don't do it. I mean and we will back our profits up by $4,000,000,000 which and we won't have any rinky dink clauses in there that if this happens or that happens we don't pay. Well, so but we won't be able to do that a year from now. I mean we can do it a year from now with the cost then from what they are then and then it'll be a year further out. We want Texas. Texas is a terrific place to do business. We do a lot of business there and where BNS had a set of headquarter with and it's a great place. And this was out of the blue, but one way or another, the nature of utility business is that you've got to you have to be prepared for something that probably isn't going to happen. You don't want to say it's a well, it's a 130 year event, you know, and people die. I mean, so you want you want a margin of safety in it. And we've got one solution and other people may have other solutions. And we will cheer when a solution is reached of any kind, and we will cheer a little louder if it's ours. Ajit, your question from this gentleman. Suppose the hypothetical situation arises where Warren Buffett calls you on the phone to tell you that Elon Musk has contacted him about writing an insurance policy on proposed mission to and subsequent colonization of Mars. Specifically, he wants insurance to insure SpaceX heavy rocket, capsule, payload, and human capital. Would you underwrite any portion of a venture like that? This is an easy one. No. Thank you. I'll pass. Well I would say it would depend on the premium. And I would say that I would probably have a somewhat different rate if Elon was on board or not on board. I mean, no, it makes a difference. I mean, if somebody's asking you to share something, that so I would that's called getting skin in the game and what you know. But in general, I would be very concerned about writing an insurance policy where Elon Musk is on the other side. Tell Elon to call me instead of the Jeep. This question comes from Michael Lu from California. This is for both Warren and Charlie. In your shareholder letter, you mentioned that the best investment results come from the companies that require minimum assets to conduct high margin businesses. In today's world, many of these companies tend to be software driven businesses. While Berkshire has avoided investing in high growth technology companies in the past, this appears to be slowly changing with your investments in Apple and Snowflake, as shareholders, should we expect that high margin businesses will begin to constitute a larger proportion of Berkshire's investment portfolio over time, particularly as Todd and Ted take on larger roles in the investment decision process. Well, we've always known that the dream business is the one that takes very little capital and grows a lot. And Apple and Google and Microsoft and Facebook are terrific examples of that. I mean Apple has $37,000,000,000 in property plant equipment, Berkshire has $170,000,000,000 or something like that and they're going to make a lot more money than we do. They're in better business, it's a much better business than we have. And so in micros business is a way better business we have, Google's business is way better business. So we've always looked, we've known that a long time. We found that out with See's Candy in 1972. I mean, See's Candy just doesn't require that much capital, it doesn't have, you know, it has obviously a couple of manufacturing plants, they call them kitchens, and but it doesn't have big inventories except seasonally very for a short period, doesn't have a lot of receivables. So those are the kind of businesses, they're the best businesses, but they command the best prices too and there aren't that many of them and they don't always stay that way. So we're looking for them all the time and we've got we've got a few that are pretty darn good, but we don't have anything as big as the big guys, but that's what everybody's looking for, capitalism is about people getting a return on capital. And the way you get it is having something that doesn't take too much capital. I mean if you have to really put out tons and tons of capital, utility business that it's not a super high return business. You just have to put out a lot of capital. You get a return on that capital but you don't get fabulous return. You don't get Google like returns or anything remotely close to it. We're proposing a return in the transaction with the proposition with Texas, I think it's a 9.3%. Yes, 9.3%. Yes. And you know that but if you look at the return on most American businesses on net tangible assets, it's a lot higher than 9.3, but they aren't utility businesses either. Charlie, did you want to add anything to that? No. Okay. This question is from Ryan Fasaro in New York City who says Todd and Ted have taken on increased responsibility at Berkshire over the years, managing larger pools of capital including the company's sizable Apple Holdings, participating in m and a strategy and even overseeing the company's now shuttered healthcare partnership With Amazon and JPMorgan, we are grateful for their efforts. But Todd and Ted are still not made available to shareholders at the annual meeting each year. Given their growing importance to the firm, can you discuss this policy and whether we can expect to hear from them more in the coming years? They're both absolutely terrific, and that's one reason I don't want people quizzing them on stocks. They are assets of Berkshire and just there's no reason for them to be out educating other people on how to compete with us. And it wouldn't it always seems so silly that people expect they don't expect you to they don't expect Merck or Pfizer or something to tell them exactly what their scientists are working on, you know, and where they stand and where the failures have been so they can eliminate those. And you know, the if you've got talent that knows how to evaluate businesses, and those 2 fellows have been they've gone far beyond that, terrific assets and they love Berkshire and they work extraordinary hours, but we don't really want them going around with people asking them questions about why you like this industry better than that industry or anything of the sort. This question is for Charlie. It comes from Stephen Teder in Atlanta. He's been a Berkshire shareholder for 10 years and says, You and your friend Li Lu have been very optimistic with respect to investing opportunities in China. BYD has performed Tactularly for Brookshire since its initial purchase in 2,008, and it's currently valued at $5,800,000,000 The Daily Journal recently bought a large position in Alibaba after founder Jack Ma had been reprimanded by the Chinese Communist Party and Ma's other company, Ant, was not allowed to proceed with its IPO. What are your current thoughts on China and whether the communist leaders will allow businesses with strong leadership to flourish in decades to come? Well, I think that the Chinese government will allow businesses to flourish. It was one of the most remarkable things that ever happened in the history of the world when a bunch of committed communists just looked at the prosperity of places like Singapore and said the hell with this. We're not going to stay here in poverty. We're going to copy what works, and they changed communism. They just accepted Adam Smith and added it to their communism. Now we have communism the Chinese characteristics, which is China with a free market with a bunch of many billionaires and so forth, and they made that shift. They deserve a lot of credit. Warren and I are not quite as good at that as changing our minds in many cases. And that was a remarkable change coming from such a place. And of course, it's worked like gangbusters. There's enormous growth in the average income of the average Chinese. They've lifted 800 1,000,000 people out of poverty fast and there was never anything like it in the history of the world. So my hat is off to the Chinese and I think they will continue to allow people to make money. They've learned it works. The Chinese, I love what the guy said in the 1st place. I don't in that list of the 20 most valuable companies, 3 are Chinese. Now if you're looking out 30 years, you know, how many do you think will be Chinese? My guess is more, but I don't think it'll talk to the United States, but who knows? It's amazing what has been accomplished and Yeah, really amazing. And they found what works. I mean, there's nothing like finding something works in order to sort of reinforce ideas over time, and we'll see what happens. But I would bet there will be more than 3, but I will bet the United States has more than China has too. This one comes from Tim Medley. Sorry. Tim Medley in Jackson, Mississippi who's been a Berkshire shareholder since 1987. He writes, on March 19th, respected economist Larry Summers, the former president of Harvard University and the former secretary of the treasury under president Obama, Was critical of president Joe Biden's $1,900,000,000,000 American rescue stimulus plan. In an interview with Bloomberg Television, he said, I am much more worried that we will have more inflation or that we will have a pretty dramatic fiscal monetary collision. This goes way beyond what is necessary. He said also, this is the least responsible macroeconomic policy we've had in the last 40 years. Your thoughts? You're asking me on that? He didn't write to who, so is anybody on stage? Well, I would I would say that Larry has been reading his uncle's book, which was Paul Samuels. But Larry is a very, very, very smart follow, and he's laying out possibilities which actually now have probably even voiced a little more even since that March 19th, whatever date it was that he made that, you can't just do one thing in economics and if we really could shovel out more and more debt and the carrying cost turned out be something very good. People thought Japan couldn't do what they've done, but they you know, that it used to be called the widowmaker around Solomon and people were shorting Japanese bonds, but the answer is we don't know, but Laurie's view is an important view and it's just as good as probably the view on the other side might be. We don't know what happens from the present policies. We do know, as Jay Powell said the other day, the idea that 100% of GDP was some terribly dangerous level for in terms of debt and that doesn't really make a whole lot of sense now and that used to be kind of accepted wisdom. We've learned that a lot of things we thought before weren't true, but what we haven't learned yet is whether what we're doing now is true. And the best thing to do is recognize you don't know and proceed in a way where you get a decent result no matter what happens and that's what we try and do at Berkshire Hathaway. We do not think we can make money by making macroeconomic predictions. We do think we can pretty darn be pretty darn sure we'll get a reasonable result under policies that will not maximize result if we could do that sort of thing. It's not at all clear whether Larry is right or wrong, and he's a smart man though. He is a smart man. Yeah. And and it's courageous that I'm raising it to. He's frankly the only one talking that way, which I admire by the way. Yeah. It guarantees he won't get a position in the administration. Yes. Well, that's one of the reasons I admire him. Yeah. And it it not that there being wrong with having a position in the administration, but I think people who kind of tell the way they think it is, I like it. This question comes it circles back to banking, which you touched on earlier. But Jerome Bernard from Switzerland writes, Could you please explain why you decided to exit most of your bank stocks in 2020 except for Bank of America? And what's your view on the future of the banking industry? I like banks generally, I just didn't like the proportion we had in it compared to the possible risk if we got bad results that did not so far we haven't gotten. So I just and I we were over 10% of Bank of America. It's a real pain in the neck, both of the bank and more of the banks than us if we go over 10% there's just a whole lot. And I like the Bank of America. I mean and I like Brian Weinheimer very much. And I liked the banking business fine. So we took that up but we took the overall bank position down. We didn't want to go above 10% and any of the others and we did want to increase the B of A position, but we overall didn't want as much in banks as we have. We like the banking business is way better than it was in the United States in 10 or 15 years ago. The banking business around the world, in various places, might worry me, but our banks are in far, far better shape than 10 or 15 years ago. But when things froze for a short period of time, the biggest thing the banks had going for them is that the Federal Reserve was buying them. And Federal Reserve is not they're not behind Berkshire. It's up to us to take care of ourselves. This question comes from Matt Y in Los Angeles. You recently purchased a large stake in Verizon. For educational purposes, could you please explain your thinking behind this investment? In general, many people see telecoms as dumb pipes that have to spend heavily on CapEx building out the 5 gs infrastructure only for the other tech companies to take advantage and capture most of the value created from the infrastructure like Facebook, Uber, Airbnb and DoorDash. Well, I think he's analyzed the situation well, but we are not in the business of explain why we own a stock which we either buy more of or sell or who knows what. So he's on his own, but he sounds like he he's very capable of thinking it through very well himself. Slavin Vukobrat writes them, Senator Josh Hawley recently unveiled a new antitrust proposal that would ban mergers and acquisitions by firms with a market capitalization over $100,000,000,000 while this legislation is unlikely to go through, increasing antitrust regulation could represent a material risk for Berkshire. As Berkshire's board already discussed what would happen to the company over the long term if Berkshire was to be prevented from acquiring controlled businesses. But we don't discuss that as a specific way. But the board is very, very, very familiar with what Berkshire does, why they do it, how we think in deploying capital, but we could everybody knows that if you change the antitrust laws, it can change things for Berkshire, if they change the tax laws, it can change things for Berkshire. There's a lot of things and we could spend hours discussing them. But in the end, is it a 22.3% risk that something changes? It's a good way to fill the time at board meetings if you're getting $300,000 or $400,000 a year as a board director, you might want to spend your time doing that. But we really don't focus on that. The main thing about Berkshire is how they preserve the culture, how do you make sure that if you get the wrong person as a CEO, you can do something about it. That's the biggest risk board has is if you picked the wrong CEO, and I've been on 20 boards and this happened more than once. And it's sometimes it's a problem to get rid of them. You know, years go by and you know, the dissident comes in, it's one thing, but if you just sit there and you collect your 3 or 400,000 a year and the Chief Executive keeps proposing you'll get an increase from time to time and it's worse yet if he's if he's a nice person doing his best, but we're not going to spend a lot of time, we may do it on a personal basis, we're not going to take a lot of people and we wanted to know more about what's going on with BNSF and how Katie's doing and whether the KCS thing can injure us in a material way and so on. And we really don't except maybe on a private side, we don't start talking about what the effects will be in 2,050 if this projection or that projection is met. Charlie, nothing to add. Okay. This question was sent in by Don Graham during the meeting based on something you said earlier today, and he says, why does Warren say Berkshire's ability to ensure enormous risk quickly is a less valuable asset than it used to be? Well, because the demand is less, I mean, basically on that. If you take a period like happened after 911. I remember, I may be wrong in the details, but Cathay Pacific for example, they couldn't land in Hong Kong as I remember unless they had an insurance policy by Monday of the following week. Well, we can do it. I mean, Xi calls me up and he thinks of a price and I think of a price and but we could we can do it. We can take the loss if it happens. They called us on the Sears Tower I think back then after that. Nobody knew they didn't know whether bombs might be placed all over that. So and they wanted more insurance all of a sudden, and we gave them a price. And so that thing, that sort of an environment hasn't really persisted. I mean there were times I think perhaps AIG, when Ann Greenberg was there, he would do the same thing, but there weren't 10 or 20 people out and they needed big limits in some cases and we were good for it. And they knew that if they bought the insurance and it happened that we'd write a check and it would clear. Ajit, you might have said. Yeah. In addition to the demand side, the supply side has become a lot more competitive as well. A lot of people who can put up big limits, Not as much as we do, but they can syndicate a program and put up $1,000,000,000 very easily. So that competitive advantage we had, we still have, but it's no longer as big a deal as it used to be. This question comes from a shareholder in Scotland Who wants to know Warren, Charlie, and Greg's views on how Kraft Heinz has performed over the last 12 months compared to the disappointing performance pre COVID? And what are your current and longer term views on Kraft Heinz prospects? Well, I think that Greg's on the board. So I don't know that we're in a position to give advice on Kraft Heinz, we entered an effect a semi formal partnership with 3 gs many years ago when it was just behind steel. We do what we said we do going in which is to be a financial partner and they're more of the operating partner, although we participate to a degree any big decisions and they would listen to us. But we're not making any in terms of Kraft Heinz stock that's up to somebody else to evaluate. Yeah. The only thing I would add Warren is I think we're very comfortable with the fact that they put a strong manager in place in Miguel and he's put a very good team in place at Kraft Heinz. So we're pleased with the leadership and management team in place, they're very focused on how they're executing as they've gone forward and rationalizing their capital structure and managing down their debt structure. So very pleased with the path forward with the existing. Yes, we feel better about the one of the this is a more general subject, but one of the subjects I might write about in one of the future annual reports is the problems caused by the myths that people have about their own organization. And I've seen that so many times in various forms. And to some extent, the problem has become accentuated in the last 20 30 years because the CEO often and works with the Investor Relations, but then they say, well, we have to have constant contact with the analyst community and of course, so they go on every couple of months and they repeat certain things about their company and it becomes part of sort of the catechism. And nobody's going to go on 2 months after the CEO has said one thing and say, well, actually that really isn't the way. They're not going to contradict themselves or change course. And so if you get these mists, and they can occur in a lot of different ways, I can give a lot of examples, which I won't do as I tell my friends in corporate America I really am not going to squeal on them. But there's a lot of mythology that gets handed down from 1 CEO to the next, can the succeeding CEO say the guy that picked him was on the wrong course or he's been telling you something that isn't really quite true, he can't do it. And then he starts repeating it and it leads to enormous errors. But it's hard to tell the story without giving examples and I don't like to give examples. So we'll see what I write about it sometime. Charlie, you probably got some thoughts. He's been he's had a ringside seat at a lot of, he's been on boards that I haven't been on. I mean it doesn't just extend the business. It goes beyond that in education and into a lot of areas. What's really interesting is the way you prattle out all the time. You're pounding back in even if it's wrong. And so one of my favorite remarks in the history of human remarks was by Sir Cedric Ardwick who is a great British actor and he said I have been a great actor for so long that I no longer know what I truly think on any subject. And I think that happens to a lot of people and it happens to virtually every politician. And it gets embedded in corporate. Gets embedded in And and the trouble is now the CEOs speak out so often. So they if they've got some crazy thing that they're saying about their company and they keep repeating it, the subordinates aren't going to contradict it, the 6 you know, and they just believe it after a while and it's dangerous. Yeah. And of course the young people get these ideas after their liberal education. So I think that God has given them direct insights, and they're just as crazy as the politicians. There are some old people that have them too. Well, the old people are already crazy but they're gonna die sooner. So We have our old we have our oldest insanities. The new insanities are the young the young get. Alright. This question comes from Bill Begley, who said, could you tell us what happened to the joint venture between Berkshire, JPMorgan, and Amazon to investigate what could be done about the current state of medical health care in the United States. The only item I read was that it was disbanded. Do you have any lessons to be learned from your effort? Well we learned a lot about the difficulty of changing around an industry at 17% of GDP, and where we accomplished a lesser object, which was probably more important to us even than either JPMorgan or Amazon because we knew less about our own system than they did. They knew that there were more centralized operations. So we got some benefits in the sense that we looked at 60 or 70 different operations we had presently and that was, that's one case where a certain amount of centralization, at least in certain aspects of it can save real money. I mean, we found inefficiencies. And like I say, we probably saved more than the other 2 partners because they knew their situation better. We found some dumb things we were doing. So we got our money's worth, but in terms of the big picture of changing something that so many people have a vested interest in doing and there's one additional factor to it, which is really interesting. There's an ingenious aspect to it and goes back to a fellow named, which didn't have any direct connection, but Beardsley Rummel. And nobody's ever heard of Beardsley Rummel, but Beardsley Rummel in 1941 came up with the idea of the withholding tax. So people instead of April 15th having to write a check and think how much they hated their politicians and hated the government and everything else, they actually looked at it as kind of a Christmas club and there were overpayments involved and they actually got a check when the final payment came due. So when you aren't writing the check yourself, you may know that the health benefit from your company is worth $10,000 a year to you or 15,000, it may cost them that much, but it may cost the company that much, but you don't see it. So the company pays it and most of the people in that waiting room sitting next to me when they are not sitting there thinking about whether I can afford to do this, you know, or what's this going to do? They're generally under some kind of a plan, not always obviously, but they don't think that if the company wasn't paying them that they could pay them to that in additional compensation, but course the weird system is the company gets a deduction if they pay it, but if you pay it yourself on a policy, I don't believe you get a deduction. So it's something that's most of the people are not seeing as a cost to them and they like that pretty well. No kidding. Yeah. Well, but that's true, the federal income tax. I mean, it was an act of genius from the standpoint of the government to go to a withholding system. And if you didn't, just think of how many people on April 15th would have to sit down and write a pretty good sized check and they'd be mad, they wouldn't like it and they don't feel it now. So we were up, that's an obvious point, but you also, people like their doctorate in general and they don't like the fact that it's 17% of GDP, but one is just kind of you know amorphous sort of thing and the other is very real to them and the most prestigious people in the community are on the hospital boards and a lot of people are fairly happy with the system. So we did not make inroads on that and we are paying 17% of GDP per healthcare and no major country is more than 11%. And in the pandemic, we've had a death rate or a death total as a percentage of population that's way higher than the rest of the world, not every single country, but way higher. So we've laid out more money and gotten a poor result in terms of this particular pandemic in terms of deaths per capita. Now that may not turn out to be the Oh, Warren, even though you shot it and missed. You were at least shooting at an elephant. The cost of health care in Singapore is 20% of what it is in the United States And their medical system works better. So you were shooting at a huge elephant, but as you found out it's very hard to people get very enthusiastic about losing part of their income. Oh, yeah. No. I said we were fighting a tapeworm. Yeah. And they were kind of being the tapeworm 1. Yeah. The tapeworm I wasn't afraid we were looking. This question comes in from Mark Blakely in Tulsa. This is for Warren and Charlie. When we discuss Berkshire, we often focus on the insurance operations and the largest non insurance businesses, the Redwoods as you mentioned in 2019. However, Berkshire owns a large number of subsidiary businesses, most of which are never mentioned. Is there a point at which Berkshire becomes too large to manage? And should we have any concern over the lack of information for most of Berkshire's companies? Is there a time that could come when Berkshire's too large and complex? Well, it's too large to do certain things, that's for sure. I mean, we, you know, it's not, we can't spend our time looking for $100,000,000 acquisitions. But we have a wonderful company in Fort Worth and we had a marvelous man running it and he died recently. But he ran it. He sold it to me 15 years ago, and he just basically ran it. And I couldn't find my way to the company. We've got got this terrific company that makes recreational vehicles based in Elkhart, Indiana and we bought it 15 years ago, I've never been there. Maybe there's some kind of closet just making up numbers to send to me everybody, but I feel I understand the business pretty well, I've never seen it. And the fellow that runs it likes running it and he likes me keeping my nose out of it and he'll let Greg in a little more than he'll let me because, but it's we've got a system that will work with wonderful businesses and wonderful managers. And it's up to us to find them, but it's also us to nurture them when we find them. And if you'll get somebody like Paul Andrews who ran TTi and who billed it from nothing, absolutely nothing, nobody ever heard of him. And the earnings have octupled during the period that he ran it for us and he was happy, employees were happy, he was a wonderful man, we were happy, and I would call him at the end of the year and I'd say Paul, you know this place is, you're shooting the lights out of everything and you should take a raise and he said, or bonus or what, he'd say well, we'll talk about the next year warranty. I mean he just loved, he loved the business. I love Berkshire, he loved the business and I wasn't going to add anything by having him fill out a bunch of reports about how much he's using in the way of carbon or the, you know, it's just it's ridiculous to think of a guy like Paul Andrews behaving in an antisocial manner or anything of the sort, and we'd love to have more of those. And obviously if we get bigger they get harder to buy, but we've got a number in the place And I don't think we bought our last one over time, but I certainly don't see anything in the near future at all. But we're intensifying our interest a little bit in the ones we have by repurchasing shares. So our shareholders own more of those companies every year while we're if assuming we're repurchasing shares, which is price sensitive. Charlie? Yeah, I don't think we're getting too big to manage because we're different from practically every other big corporation in the United States and that we are so excessively decentralized. We have decentralized so much we have so much authority in the subsidiaries that we can keep doing it for a long, long time as long as it keeps working. And I would say so far that our decentralization has caused more benefits than defects, But nobody seems to copy us. Well, but that's absolutely true. But I would say this, decentralization won't work unless you have the right kind of culture accompanying it. Yeah, but we do. Yeah, we do, but it's dependent on it. Greg will keep the culture. If we'd had the if we had a culture of people who are trying to make a lot of money for themselves in the next 5 years at the top, it would not have worked. No, of course not. And the culture is part of it. But assuming we keep the culture, it will go on quite a ways. For a long, long time. Long, long time. I think it may amaze everybody. And by the way, the Roman Empire worked Worked as long as it did because it was so decentralized. Charlie says to me, you won't know. This question comes from Kevin Young. It's for Ajit and Greg. Warren spends his days reading and his literature of choice is annual reports. How do each of you spend your days? What do you what do you read, and how do you review investment decisions? Well, in my job, I spend a lot of my time reading deals that be brokers and people send us, reading what they're proposing, trying to analyze them, having a point of view whether it is something that is of interest to us or not. I might add, I do not spend a lot of time reading annual reports because I'm not in the stock picking business per se. But in terms of keeping track of what's going on in the insurance business, that's what 90% of my reading is all about. Greg? Yes. So generally in a day what I'm going to focus on when I'm reading is really around our businesses, what industries are in. I'm trying to understand what our competitors are doing, what's the fundamental risks surround those businesses, how they're going to get disrupted. And then it always comes back to are we allocating our capital properly in those businesses relative to the risks we're seeing both in our business and in the industry. So a lot of time spent on that and as that knowledge is built at sharing it back and force with our management teams of those relevant subsidiaries and sort of fine tuning it is really the approach. Both of these fellows can absorb information to an extraordinary degree. I mean they have and for one thing they're terribly interested in. I mean, you know, and it's theirs. So I'm amazed at both of them, the degree which they just sort of know everything and, but they enjoy it. I mean they're not thinking about whether they'll get the next job that opens up in some huge place or anything like that. Nobody leaves us basically, the ones we want and but you really got to kind of be in love with your business and that makes a huge difference. And that means that we've got to have the conditions that allow that love to flourish, and and it wouldn't flourish under many under many with many organizations. This question comes from Robert Miles in Nebraska. The trading apps, what do you think about Robinhood and other trading apps or fintech companies enabling all ages and experience participate in the stock market? Well, I'm looking forward to reading the s one on on Robin, that's a big thing you file with the SEC when you are going to be offering securities and it's become a it's a very significant part of the casino aspect of the casino group that has joined into the stock market in the last year, year and a half. And I do want to see how concerned about how they handle the source of income when they say they don't charge the customer or anything. I mean, it should be interesting to watch how they describe it, I mean, but they have attracted, maybe set out to attract, but they have attracted, I think I read where 12% or 13% of their casino participants were dealing and puts and calls. I looked up on Apple, you know, the number of 7 day calls and 14 day calls outstanding and I'm sure a lot of that is coming through Robin and that's a bunch of people writing they're gambling on the price of Apple over the next 7 days or 4 days. There's nothing illegal about it. There's nothing immoral. But I don't think you'd build a society around people doing it. I mean if a group of us landed on a desert island, we knew we would never be rescued and I was one of the group and I said, well I'll set up the exchange over here and I'll trade our corn futures and everything around it. I think the degree to which a very rich society can reward people who now know how to take advantage essentially of the gambling instincts of the not only American public, worldwide public. It's not the most admirable part of the accomplishment. But I think what America's accomplished is pretty admirable overall. And I think actually, American corporations have turned out to be a wonderful place for people to put their money and save, but they also make terrific gambling chips. And if you cater to those gambling chips, when people have money in their pocket for the first time and you tell them they can make 30 or 40 or 50 trades a day and you're not charging them any commission but you're selling your order flow or whatever. I hope we don't have more of it. I'll put it that way and I will be interested in reading the perspectives. Charlie? Well, that is really waving the red flag of the bull. I think it's just god awful that something like that would draw investment from civilized men and decent citizens. It's deeply wrong. We don't want to make our money selling things that are bad for people. But we've got the states doing it with the lottery. No, but that's very bad too. Yeah. I understand. Very quick. Once you Very bad. That's one of the things that's wrong with it, and it's getting Preactable to be to do these things. The states are just as bad as Robin Hood. Well, in a sense, they're worse. I mean, they're they're really taxing I know. It's probation. I know. I know. Yeah. They're taxing hope. Not only that And they don't get much away in taxes from being a truck than they do that. The states in America replaced the mafia as the proprietor of the numbers game, that's what happened. They pushed the mafia aside and said that's our business not yours. Doesn't make me proud of my government. When I when I was a kid, my dad was in Congress, dad, a numbers runner in the House office building actually. I will ask this question from Chris Fried from Philadelphia, and whoever wants to take this on stage. From raw material purchases by Berkshire subsidiaries, are you seeing signs of inflation beginning to increase? Let me answer that. Greg can give more. We're seeing very substantial inflation. It's very interesting. I mean, we're raising prices, people are raising prices to us and it's being accepted. I mean, it's not if we get well, take homebuilding, I mean, the cost of we've got 9 homebuilders in addition to our manufactured housing thing and operation which is the largest in the country, so we really do a lot of housing. The costs are just up, up, up. Steel costs, you know, just every day, they're going up. And there hasn't yet been because the wage stuff follows. I mean if the UAW writes a 3 year contract, we got a 3 year contract. But if you're buying steel at General Motors or someplace you're paying more every day. So it's an economy really, it's red hot. I mean, and we weren't expecting it. I mean all our companies when they thought when they were allowed to go back to work you know at our various operations, they we closed the furniture stores I mentioned, you know, they were closed for 6 weeks or so on average and they didn't know what was going to happen when they open up and they can't stop people from buying things and we can't deliver them. But they said, well that's okay, nobody else can deliver them either and we'll wait for 3 months or something of the sort. But the backlog grows and then we thought it would end when the $600 payments ended and I think around August of last year, it just kept going and it keeps going and it keeps going and it keeps going and I get the figures every week I call her bumping calls me and we go over day by day what happened at 3 different stores in Chicago and Kansas City and Dallas and it just won't stop. People have money in their pocket and they pay higher prices and when carpet prices go up in a month or 2, we announced a price increase for April, our costs are going up, supply chains all screwed up for all kinds of people, but it's almost a buying frenzy except certain areas you can't buy it. You really can't buy international air travel. And there's so the money is being diverted from a little sum of piece of the economy into the rest and everybody's got more cash in our pocket than except for meanwhile, you know, it's a terrible situation for a percentage of the people. The you know, this suit, I haven't worn a suit you know for a year practically and that means that as the dry cleaner nurse just went out of business, I mean that nobody's bringing in suits to get dry cleaned and nobody's bringing in white shirts to get to a place where my wife goes. The small business person, if you didn't have takeout and delivery services for restaurants, you got killed. On the other hand, if you've got takeout facilities, you know, same source sales of Dairy Cleaner up a whole lot and they adapted and, but it is not a price sensitive economy right now in the least and I don't know exactly how, one shows up in different price indices, but there's more inflation going on than quite a bit more inflation going on than people would have anticipated of just 6 months ago or thereabouts. Yeah. And there's one very intelligent man who thinks it's dangerous and that's just the start. Greg, you're probably in a good position to come. Yeah, well, Warren, I think you touched on it. When we look at steel prices, timber prices, any petroleum input. Fundamentally, there's pressure on those raw materials. I do think something you've touched on warning it. It goes really back to the raw materials. There's a scarcity of product right now of certain raw materials. It's impacting price and the ability to deliver the end product. But that scarcity factor is also real out there right now as our businesses address that challenge. And it may be the some of that's contributed or arisen from the storm we previously discussed in Texas. When you take down that many petrochemical plants in one state that the rest of the country is very dependent upon it, we're seeing it flow through both on price but overall in scarcity of product, which obviously go together, but there's there's challenges. That's for sure. This question comes from BJ Corolla, what do you think of Quants? Jim Simons medallion fund has done 39% net of fees for 3 decades, which proves that it works. Will you consider hiring a quant lieutenant in Berkshire to work alongside with Ted or Todd? Well, I'll say no to the second part, and I'll let Charlie handle the first part. Well that's rather interesting. The leading quant fund did fabulously on the short term trading. They found little algorithms that worked to make them add predictive value and as long as they kept working, they just kept doing it as long as the money kept coming in. When they got to using the same system just to finding some little algorithm and trying to do it mechanically for long term stock predictions, the record was not nearly as good. And in the short term stuff, they found that if they tried to do it too much, they destroyed their own advantage. So there was a limit on the amount they could make. But they were very, very smart. Yes. They got very rich. Very, very smart. Very smart and very rich. And very high grade by the way. Yeah. Yeah, Mr. Simons. But we're not trying to make money trading stocks. I mean, the answer we don't think we know how to do it. I mean it doesn't if we knew how to make a lot more money make we'd probably be trading stocks too, but we don't know how to do it and we really don't trust anybody else to do it for us. That's simple. This question comes from Richard Warner. Mister Buffett has espoused for decades the philosophy of buy and hold or or hold forever Was too short of a time period. Is it a misperception on my part or has his philosophy changed? It seems to be a much greater turnover in the equity portfolio lately. I don't think there's that much turnover. I mean, but No. There's too much. What? There's way too much. Yeah. Yeah. It's still too much in the same amount. I'd agree with that. And the truth is we own our businesses or equities, so we own 400,000,000,000 or 500,000,000,000 maybe more. In businesses, we don't turn them over at all. We don't resell businesses. We could probably well, we won't even get into that what we could do, but we don't do it. And we do relatively little Shirley says we'd do better if we had not if we, if I'd done less. This is from Daniel Gauthier. Warren Buffett's 2013 letter in the middle of page 21 made a prediction that in the next decade, you'll see lots of really bad news about pensions. Given recent events like COVID nineteen and That 2023 is 2 years away. Would mister Buffett like to comment or revise his 2013 prediction? Did COVID 19 delay, accelerate, eliminate, or not change it? Well, in a very limited, I mean, a terrible way, COVID improves the pension position. If you it's you know, it's it. We have less pensioners, but the pension situation is terrible and a great many states. It's not so bad at the corporate level and there's some multi employer plans obviously that have got problems. But basically it's a terrible problem for the States and of course some States, and States are going to go to Washington now and say, we all want to get a lot of money because we had these terrible things happen to us during the pandemic which they did, but some of those states have enormous pension deficits and they'll come again if they got a check once. It makes sure not to be a federal obligation de facto or something that then a state situation. It has not gotten better, has not gotten better at all, and obviously. And to a certain extent, the pension managers get more and more desperate as interest rates go down. So they'll listen to almost anybody that promises them, they've always had the tendency anyway, but they'll listen to people that promise them that they're going to one way or another solve their problem for them and that isn't going to work. So it's a big, big, big problem. And of course the real problem is let's just take a hypothetical state that has a huge pension deficit and maybe even has a cost of living factor in it which has been really be a killer. And you can move if you're an individual, Charlie won't move to say that 500, he was not going to move to Nevada or some place. But you can move if you're an individual to some degree, particularly be rich and old and retired. And you can actually take away an asset from that kind of environment and give it to another state that doesn't really need it as much. So you'll get adverse selection over time, but if you're a company and you put a plant there, you can't move the plant in 5 or 10 or 20 years. So as the taxable base of individuals falls down simply because people select out of being a part of the population. You can't select out very well as a corporation. So you have to be very careful and think a long time before you go into some state with a huge pension deficit and a declining population because you're going to be the last man left and the pensions won't go away. And I don't think, well, anybody with a short term outlook doesn't worry about that. I mean, just get me to pass the next election and I'm all right on that one. But we don't want to be, we're not going to stay our plants, it's going to be around for 50 years in some place where the population gets halved and the richer part gets cut dramatically, even more dramatically we still got a valuable plant there and we got to keep operating and we're going to one way or another we're going to it's not going to be a good place to be. And we're almost out of time, so I'll make this the last question. That's a good answer, Werner. It reminds me of my old Harvard law professor who used to say, let me know what your problem is and I'll try and make it more difficult for you. So this one comes from Jan Michael Ottlinger. It's for Warren and Charlie. I have one question which is inspired by Charlie's mantra, you have to be a continuous learning machine. So here's my question. What's the biggest lesson both of you learned during the last year? Well my biggest lesson is to has been to listen more to Charlie. He's been right on some things that I've been brought Well, I don't know. If you're not a little confused by what's going on, you don't understand it. It's just we're in sort of uncharted territory. We enjoy in a crazy way actually seeing what happens. I mean and this has made us halfway through the movie much more interested, watching even more. This is an unusual movie, but we our basic principles of you know, we start with the fact we don't want to disappoint the people who left their money with us and things flow out of that. And we may disappoint people that don't make quite as much money as they are, but we don't. And we've seen it some strange things happen in the world in the last year 15 months and we've always recognized the fact stranger things are going to happen in the future. And I would say if anything, it's reinforced our desire well to figure out everything possible we can do to make sure that Berkshire is 50 or 100 years from now every bit the organization and then something that it is now. Charlie. Well of course that's the idea. I think it's pretty likely to work. You know, well we wouldn't have spent 55 years at it unless we did. Yeah. And Becky, is that the last question? That's the last question. Okay. Well in that case we'll move on to the meeting. The other 3 all those here can leave, it's not gonna be that exciting, but we've got a script here even somewhat. I don't like scripts but they not my nature. And one of the proposals for the 2 items on the proxy is here in the building to present his argument personally and the other one has recorded it. So we'll get to that in just a minute. But we offered both of, I mean, they either could record or come and then I'm happy one of them came. So here we go and the meeting will now come to order. I am Warren Buffett, not that you didn't know by this time. Chairman, Board of Directors of the company, I welcome you to the 2021 Annual Meeting of Shareholders. Mark Hamburg is Secretary of Berkshire Hathaway. He will make a written record other proceedings. Rebecca Hammock has been appointed Inspector of Elections at this meeting, she will certified at the count of votes cast in the election of directors and the motion to be voted upon at this meeting. The name proxy holders for this meeting, 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 3, 2021, the record date for this meeting, there were 639,747 shares of Class A Berkshire Hathaway common stock outstanding with each entitled to one vote on motions considered at the meeting and 1,335,000,000,000 74,355 shares of Class B Berkshire Hathaway common stock outstanding With each share entitled to 1 10000th of one vote and motions considered at the meeting. Of that number, 456,000 40 Class A shares and 663,000,000,442,000 and 69 Class B shares are represented at this meeting by proxy's return through Thursday evening, April 29. Thank you. That number represents a quorum and we will therefore directly proceed with the meeting. The first order of business will be a reading of the minutes of the last meeting of shareholders. I recognize miss Debbie Bosonek 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. Motion is carried. Next item of business is to elect directors. I recognize miss Debbie Bolsonic to place a motion before the meeting with respect to election of directors. I move that Warren Buffett, Charles Munger, Gregory Abel, Howard Buffett, Steven Burke, Kenneth Chenault, Susan Decker, David Gottesman, Charlotte Guymon, Ajit Jain, Thomas Murphy, Ronald Olson, Walter Scott, and Merrill Whitmer be elected as directors. I second the motion. It has been moved and seconded that the 14 individuals named in Ms. Balsamiq's motion be elected as structures. The nominations are ready to be acted upon. Mr. Hamber, when you are ready, you may provide the voting results from Ms. Amec's preliminary report. Ms. Amec has reported that the ballot of the proxy holders in response to proxies that were received through last Thursday evening cast not less than 473,474 votes for each nominee. Ms. Amick's report also states that this number exceeds a majority of the number of the total votes of all Class A and Class B shares outstanding. The report also states that the certification required by Delaware law of the precise count of the votes will be placed with the minutes of this meeting. Thank you, Mr. Amber. The 14 nominees have been elected as directors. The next two items of business relate to 2 shareholder proposals that are each set forth in the proxy statement that can be accessed at berkshirehathaway.com. If you haven't read that, those proposals, just go to berkshirehatheway.com because there are interesting proposals and the proponents views are set forth well there and I think our views are set forth and I welcome you reading it. To get back to the script, the first proposal requested the company publish an annual assessment addressing how the company manages physical and transitional climate related risks and opportunities. The directors have recommended that the shareholders vote against the proposal. I will now recognize Tim Youmans, a representative of Federated Hermes to present the proposal. I think we're connected up with mister Yeomans. I thank the chair. I thank the chair of the board and fellow shareholders. I'm Tim Yeomans, lead North America, EOS at Federated Hermes. Here today on behalf of item 2 cosponsors Federated Hermes, CalPERS, the California Public Employees Retirement System, And CDPQ, Castet Du Peau at Place Amand du Quebec and our combined millions of ultimate beneficiaries. For well more than a year, the parent company has been unresponsive to this co sponsors requests to discuss the parent company's lack of climate related financial disclosures. In order to have some kind of dialogue with the parent company, we have co filed a proposal that Berkshire Hathaway's Board issue a report annually assessing how the company manages physical and transitional climate related risks and opportunities including climate related financial reporting where material for subsidiaries and for the parent company, how the board oversees climate related risks for the combined enterprise and the feasibility of the parent company And its subsidiaries establishing science based greenhouse gas reduction targets consistent with limiting climate change to well below 2 degrees. We ask that the annual assessment follows the recommendations of the task force on climate related financial disclosures, TCFD. The board argues that since it manages its operating businesses on an unusually decentralized basis and there are few centralized or integrated business functions. The board believes that the shareholder proposal is inconsistent with Berkshire's culture. The cosponsors note, despite Berkshire's culture and decentralized management, shareholders can only purchase shares in the combined parent company entity. Shares cannot be purchased in the individual subsidiaries that may Or may not have the climate disclosures that the board sites in its opposition statement. The company has more than $100,000,000,000 in cash equivalents. The cosponsors and many in the $54,000,000,000,000 Climate Action 100 Plus Investor Coalition want the parent company to put more resources into sustainability and in mitigating the financial impact of climate change and the energy transition. The company's sustainability website consists only of links to 15 subsidiaries. We note the parent company has 60 subsidiaries. This is insufficient disclosure to shareholders who think that sustainability risks, especially climate risks, maybe material to the parent company's long term future prospects. Of course, recognizing the company's strong past financial performance. No doubt climate change and the energy transition to a low carbon economy post a systemic risk to the economy. The company's auditor, Deloitte, says on its website, climate change is not a choice. It's 1,000,000,000 of them. We are all compelled to act. Deloitte does not assess climate change related financial impacts in the company's audit. When asked by the co sponsors why climate change impacts are excluded from audits like Berkshire's, Deloitte failed to provide any meaningful reply. In his new book, former Berkshire director Bill Gates says companies accepting more risk is needed to avoid climate disaster. And shareholders and board members will have to be more willing to share in this risk, making it clear to executives that they'll back smart investments even if they don't ultimately pan out. This is the Gates position, and the chair is 1 of 3 Gates Foundation trustees. We asked the board to take the cultural risk for a modest degree of centralization needed to issue the annual climate related financial assessment, we all need to take action now to limit climate change impact on our long term sustainability. We strongly urge Berkshire Hathaway shareholders to support item 2 as climate risk may be material to the parent company. And we have a question for the chair. Will you please change your mind and vote your personal shares in support of item 2? Thank you. Thank you, mister humans. Of this meeting. Thank you, Mr. Hamburg. The proposal fails. 2nd shareholder proposal request that Berkshire Hathaway Companies annually published reports assessing their diversity and inclusion efforts. The directors have recommended the shareholder vote against the proposal. I will now ask that the audio tape provided by Meredith Benton, representative as you saw the play to present the proposal. Hello. I am Meredith Benton. I'm speaking on behalf of the nonprofit advocacy organization, as you saw. And I'm also the CEO of the consultancy Whistle Stop Capital. I formally move proposal number 3 asking for Berkshire Hathaway to report on how it assesses diversity, equity and inclusion efforts, including the process that the board follows for determining the effectiveness of its diversity and inclusion programs and how it assesses goals, metrics and trends related to recruitment, promotion and retention. What would it mean if the majority of Berkshire's operating units weren't managing their diversity programs, it would mean that Berkshire companies are missing out on the benefits that an inclusive workplace culture can provide, such as according to the studies, access to top talent, to good people, better understanding of consumer preferences, a stronger mix of leadership skills, informed strategy discussions, and improved risk management. Best practices in diversity inclusion reporting exist and are increasingly standardized across companies. Berkshire companies can publish their workforce composition through their consolidated EEO-one form. This form is already submitted to the Equal Employment Opportunity Commission, So it requires no additional effort on behalf of the companies to collect or reconcile. It is a universally disliked form, But it is standardized and companies will often publish their EO-one along with an explanation of their own internal structures and ways. 72 of the S and P 100 Companies publicly share or have committed to share this form. To my knowledge, no Berkshire company currently does, Not one. The release of workforce composition data is akin to a balance sheet detailing diversity at a single point in time. Just as a balance sheet would by itself be insufficient to identify the strength of a company's financials, so to the EO-one by itself Is insufficient in assessing the effectiveness of DEI programs. The company's inclusion data, the hiring, retention And promotion rates of diverse employees must also be shared. Investors need to have a full understanding of the actual experience of Berkshire employees. In theory, companies should want to share their retention data. If it's a good company to work for, people want to stay. They should want to share their promotion data, in theory. If it's a company that hires good people and treats them well, those good people will ascend with mentorship in time. 70% of the S and P 500 currently share diversity inclusion data at some level, 70%. Only 22 percent of Berkshire companies do at any level. And only 4 Berkshire companies speak to work waste equity with any meaningful depth. Berkshire is a serious outlier here. Berkshire is famously decentralized. Its units operate independently. Yet, if an issue isn't conveyed as important from headquarters, Can we expect it to be prioritized by an operating unit? Here's the thing. Mister Buffet, mister Munger, the board members and the team at headquarters, you may each individually, truly and genuinely hire, mentor and promote the best people for the job regardless of their gender, race, ethnicity, sexual orientation or any immutable characteristic. But we can't conclude that this is the mindset of each of your employees, managers and hiring directors. Berkshire headquarters can't sit passively and hope that their independent units are addressing bias and discrimination in their workplace. Active management, proactive attention is needed. In its statement in opposition to the proposal, the board said, Mr. Buffet, Berkshire's Chairman and CEO has set the tone at the top for Berkshire and its employees for over 50 years. It also states Mr. Buffett has a record of opposing efforts seen or unseen to suppress diversity or religious inclusion. Mr. Buffett holds extraordinary influence over his own companies and over the broader business community. He opposes efforts to suppress diversity. Given that, we asked for him to step forward decisively in his own inevitable words, in his own inevitable way to detail how important diversity and inclusion is to his companies, the expectations he has and the efforts he expects to see, the metrics that will be used to judge success, actions speak louder than words, but silence here speaks volumes. Thank you. Thank you. The proposal is now ready to be acted upon mister Hamburg. When you are ready, you may provide the voting results disclosed in Ms. Amick's preliminary report. Miss Amec's report states that the ballot of the proxy holders in response to proxies that were received through last Thursday evening Cast 124,842 votes for the motion and 391,662 votes Against the motion. As the number of votes against the motion exceeds a majority of the number of votes of all Class A and Class B shares Properly cast on the matter, the motion has failed. The certification required by Delaware law of the precise count of the votes we'll be placed with the minutes of this meeting. Thank you, mister Amberg. The proposal fails. I move miss Posada Kiappen. I move that this meeting be adjourned. I second the motion to adjourn. Motion is adjourned, been made and seconded. This meeting is adjourned. And I would just like to add one final comment that that I really hope I think the odds are very, very good that we get to hold this next year in Omaha. And I hope that we get a record turnout of Berkshire shareholders and we look forward to we really look forward to meeting you in Omaha. I guess it'll be next April 30th, but we'll be sure of that date a little later. So thank you for watching and we will see you next year and hopefully in Omaha. Meeting is adjourned.

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