Berkshire Hathaway Inc. (BRK.A)

ASM 2020 Q&A

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May 2, 2020

So now we're ready to have questions which Becky Quick has selected from those that's been forwarded to her directly and from Carol Ullmes and Andrew Ross Shorkin. And Greg and I are available to be we'll be answering them for some time. So Becky, you're on and I hope all the segments. I hope everything works. Yeah, Warren, I should tell you that since you put that address up on the screen, I've gotten more than 2,500 emails that have been coming in. So there is a lot of demand from shareholders wanting to get in and ask questions. And I'll ask some that we've compiled before and some that are coming in right now. The first question, though, comes from one that just came in based on the comments that you were actually saying. This is a question that comes from William Lewis. He said, Please, did I understand correctly, Mr. Buffett, to say that Berkshire Hathaway sold its interests in 4 different airlines? And if so, can you name them can the names of those airlines be identified? Yeah. I wouldn't normally talk about it, but I think it requires an explanation. And it requires an explanation that means we were not disappointed at all in, the businesses that they were being run and the management and then but we did come to a different opinion on it. And the 4 large they're the 4 largest US airlines. It's American Airlines and Delta Airlines and Southwest Airlines and United Continental. And I think collectively they probably are at least 80% of the revenue passenger miles in the it is flown in the United States. And they have significant international flying tools excluding Southwest. So we like those airlines, we like but we don't I like the world has changed for the airlines and I don't know how it's changed and I hope it corrects itself in a reasonably prompt way. I don't know whether the Americans will have now changed their habits or will change their habits because of an extended period if it happens that we're semi shut down in the economy. I don't know whether the trends toward what people have been doing by phone. I mean I've been it's been 7 weeks since I've had a haircut. It's been 7 weeks since I more than 7 weeks since I put on a tie or anything. I've been just a question of which sweat suit I wear. So who knows, who knows how we come out of this. But I think that there are certain industries and unfortunately, I think that airline industry among others that are really hurt by a forced and in fact shut down by events that are far beyond their control. Greg, would you like to add anything to that? Really nothing to add, Warren. Okay. Well, we got another Charlie here. I didn't intend to use that as a line, but, you know, you've covered it well. Yes. We would have bought other airlines too incidentally, but those were the 4 big ones and those ones we could put some money into and we put whatever it was, dollars 7,000,000,000 or $8,000,000,000 into it and we did not take out anything like $7,000,000,000 or $8,000,000,000 and that was my mistake. But it was it's always a problem if there are things on the lower levels of probabilities that happen sometimes and it happened to the airlines and I'm the one who made the decision. But Warren, just to clarify on his question, he asked, did you sell your whole stake in all four of those? Yes, the answer is yes. Yes. When we sell something, very often, it's going to be our entire stake. I mean, we don't trim positions or like that's just not the way we approach it. Any more than if we buy 100% of a business, we're going to sell it down to 90% or 80%. I mean, if we like a business, we're going to buy as much of it as we can and keep it as long as we can. But when we change our mind The next question. I'm sorry. No, go ahead. When you change your mind? Well, when we change our mind, we don't take half measures or anything of sort. So I was amazed at how frankly, now we were selling them at far lower prices than we paid. But I was amazed at the volume. Airlines always trade in large volume relatively, but we have sold the entire positions. Okay. Thank you. The next question comes from Robert Thomas from Toronto, Canada. And he says, Warren, why are you recommending listeners to buy now, yet you're not comfortable buying now as evidenced by your huge cash position? Well, a, huge when I look at worst case possibilities. I would say that there are things that I think are quite impossible, and I hope they don't happen, but that doesn't mean they won't happen. I mean, for example, in our insurance business, we could have the world's or the country's number one hurricane that it's ever had, but that doesn't preclude the fact we could have the biggest earthquake a month later. So we are not we don't prepare ourselves for a single problem. We prepare ourselves for problems that sometimes create their own momentum. I mean, 2,008, 2009, you didn't see all the problems the 1st day when, really what really kicked it off was when the Freddie and Fannie, the GSEs went into conservatorship in early September. And then when money market funds broke the buck. I mean, there are things that trip other things, and we take a very much a worst case scenario into mind that probably is a considerably worst case than most people do. So I don't look at as huge. And I'm not recommending that people buy stocks today or tomorrow or next week or next month. I think it all depends on your circumstances, but you shouldn't buy stocks unless you expect, in my view, you you expect to hold them for a very extended period and you are prepared financially and psychologically to hold them the same way you would hold a farm and never look at a quote and never, never pay it. You don't need to pay attention to them. I mean the main thing to do and you're not going to pick the bottom and you're not going to nobody else can pick it for you or anything of the sort. You've got to be prepared when you buy a stock, have it go down 50% or more and be comfortable with it as long as you're comfortable with the holding. And I pointed out, I think a year, maybe 2 years ago on the annual report, just the one before this most recent one. I I pointed out that there have been 3 times in Berkshire's history when the price of Berkshire stock went down 50%, 3 different times. Now if you owed it on borrowed money, you, you know, you could have been cleaned out. There wasn't anything wrong with Berkshire when those three times occurred. But if you're going to if you're going to look at the price of the stock, and think that you have to act because it's doing this or that or somebody else tells you, why, I mean, how can you stay with that when something else is going up or anything, really you better be in the right psychological position. And frankly, some people are not really careful. Some people are more subject to fear than others. It's like the virus, it strikes. Some people with much greater ferocity than others and fear is is something I really never felt financially. But I don't think Charlie's felt it either. Some people can handle it psychologically. If you can't handle it psychologically, then you really shouldn't know it sucks because you're going to buy and sell them at the wrong time. And you should not count on somebody else telling you that you should do something you understand yourself. If you don't understand it yourself, you're going to be affected by the next person you talk to. And so you should be in a position to hold and I don't know whether today is a great day to buy stocks. I know it will work out over 20 or 30 years. I don't know whether it will work out over 2 years at all. I have no idea whether you'll be ahead or behind on a stock you buy on Monday morning or the market. Warren, the next question comes from Scott Kelly and he writes in based on the numbers you just put up. He said, what did you spend the the $426,000,000 on equities in April? Was that adding to existing positions or was that initiating new positions? Well, I don't remember, to tell you the truth, but one thing you have to allow for. Well, these are the figures for Berkshire Hathaway, and they include both Todd and Todd Combs and Ted Wechsler manage significant sums of money. So it could well be something they bought, it could be something I bought. I dollars 462,000,000 is not much money at Berkshire. It's more to Todd and Ted than it is to be in terms of our positions. But I literally have no memory of we're not doing anything big obviously. We're willing to do something very big. I mean you could come to me on Monday morning with something that involve $30,000,000,000 or $40,000,000,000 or $50,000,000,000 And if we really liked what we were seeing, we would do it. And that will happen someday. If it happens in the market we can't put it all in one day or one week or one month. It took us months to build up our airline position, many months. We were able to sell them faster than we bought them, but we were selling them at lower prices. So the $462,000,000 is essentially meaningless and it may not have even probably was not mine. All right. This next question comes from Lee Yandar. And his question is, in the last financial crisis, Berkshire acted as a lender of support for 8 different deals. Despite the injection of expensive capital through preferred stocks and securing warrants, these companies were in fact paying for the sign of confidence from Berkshire in the midst of a crisis and that was invaluable. Today we have QE infinity low interest rates and hungry hedge funds. Even though the economy has deteriorated rapidly over the last few months, why have we not acted as a lender of support yet? Well, we haven't seen anything attractive. And frankly, it wasn't predicated on this, but the Federal Reserve did the right thing and they did it very promptly, which they should have, and I salute them for it. But that means that, that a lot of companies that needed money and probably should have done their financing a little earlier, but they're perfectly decent companies got the chance to finance in huge ways in the last 5 weeks or thereabouts. I mean, it's set records. Some companies have come back twice, a number very big companies that didn't bother to extend out their borrowings came a couple of times. Berkshire actually raised some more money. We don't need it, but I think it's still a good idea over time. And then there are some pretty marginal companies that have also had access to money. So there is no shortage of funds at rates which we would not invest at. So we have not done anything because we don't see anything that attractive to do. Now that could change very quickly or it may not change. But in 2,008, 2009 the truth is we weren't buying those things to make a statement to the world. They may have made a statement to the world to some extent and I'm glad that they did if they did. But we made them because they seemed intelligent things to do and markets were such that we didn't really have much competition. Now it turned out that we would have been a lot better off if we'd waited 4 or 5 months to do similar things. So my timing was actually terrible in 2,008 or 'nine, but the what was available was so attractive that even though my timing was terrible, we still came out okay or a little bit better than okay. But it was not it was not designed. What we did was not designed to make a statement. It was designed to take advantage of what we thought were very attractive terms but they were terms that nobody else was willing to offer at that time because the market was in a state of panic. And the market in equities was in a state of panic for a short period of time when the virus broke out and or spread the United States and it became apparent. And the debt market was frozen or in the process of freezing and that changed dramatically when the Fed acted but who knows what happens next week or next month or next year. The Fed doesn't know. I don't know and nobody knows. There's various there's a lot of different scenarios that can play out. And under some scenarios, we'll spend a lot of money and other scenarios, we won't. Greg, you've been watching what's been happening around Berkshire? Yeah. Well, I think your comment on the Fed, Warren, because as you know, interestingly, when it was first occurring, there were calls coming in, not the size of transactions we're interested in nor companies we were inclined to act upon. But there were there was that general interest out there as people were in a difficult point in time, I. E, looking at their balance sheet and deciding what they were going to do. But the reality is those companies were not of interest. And post basically effectively March 23rd, the companies have been able to act. And Warren touched on it, at Berkshire Hathaway Energy, post the Fed action, we actually issued $4,000,000,000 of securities that was associated with debts or obligations we had maturing, some short term obligations we wanted to clearly lengthen out. And we pre funded 1 of our capital programs at Pacific Corp with the thought this was the time to get the funds in place such that we could proceed with what is really an excellent opportunity both for Pacific Corp, our customers and ultimately for the Berkshire shareholders. So we've taken action within Berkshire, as Warren noted. This is a very good time to borrow money, which means it may not be such a great time to lend money, but the it's good for the country that it's a good time to borrow money. Not good for Berkshire particularly, although we borrowed some money. So we've put our money where our mouth is. That gets kind of to another question that came in from Mark McNicholas in Chicago, Illinois. He says Berkshire itself has a Fort Knox like balance sheet, but some of its operating companies may be tight on cash during the pandemic. Would Berkshire consider sending cash to its operating companies to 1, ensure that they can get through the pandemic and 2, allow them to increase market share while their competitors struggle? Well, we've sent money to a few, and we're in a position to do that. We're not going to send money indefinitely to anything where it looks like, their future is not has changed dramatically from what it was a year or so ago or even 6 months ago. We made that decision in terms of the airline business. We took money out of the business basically even at a substantial loss. And we will not fund the company that where we think that it's going to chew up money in the future. We started out with a company like that in our textile business at Berkshire Hathaway in 1965 and we went for 20 years trying to think we could solve something that wasn't that solvable. So we are not in the business of subsidizing any companies with shareholders money if people want to do that with their own money, but we're not going to do it on their behalf. But we have advanced money, we're perfectly ready to advance by gaining market share and all that. That may happen, but the companies that need money probably, market share is not their number one problem, I'll put it that way. Greg, would you? Yeah. Well, yeah, it's interesting when we look at our different companies as we went into the pandemic or we're addressing the COVID-nineteen crisis, obviously, the first focus by our management team inappropriately was our employees and effectively making sure they're safe and that the business environment we're in that they could continue to operate. Then we quickly moved to looking at where our customers were in the cycle, I. E, what was the underlying demand within the business. And to great credit to our managers, effectively, they're moving with the customer meaningfully. So effectively, they're moving with the customer, meaning very few of our businesses have actually required funds. Some have, and as Warren said, we've advanced the funds to them, but the businesses have really reacted in a way where they're managing consistent with where the market's at, I. E, the demand for their products. Berkshire is almost certain to generate cash. I mean, nothing is 100% certain. But and we're as Greg mentioned, at Berkshire Hathaway Energy, we had some short term financing. We don't have short term financing to any degree. We'll never get ourselves in a position where we have a lot of money that can come due tomorrow. And people that were financing heavily with commercial paper and then found their business stopped, well, you've seen what's happened to the airlines. I mean, they need money. Cruise lines need money. There's some businesses that, you know, it's just the nature of what they're in. Berkshire will never get in a position where it needs money. And we factor in, like I said, we factor in some things that are not ridiculously unlikely. And I'm not going to spell out scenarios because I to some extent, you start spelling out scenarios, you may increase the chance of them happening. So it's not something that we really want to talk about a lot. But our position will be to be a Fort Knox, but we don't need it. We don't need a it's a little higher now than it was at quarter end. We don't need 130 $1,000,000,000 but we need a lot of money that's always available and that means we own nothing but treasury bills. I mean we do not, we've never owned, we never buy commercial paper, we don't buy, we don't count on bank lines, 1 or 2 of our subsidiaries, a few of our subsidiaries have them, but they, we basically want to be in a position to get through anything. And we hope that doesn't happen, but you can't rule out the possibility any more than in 1929, you could rule out the possibility that you would be waiting until 1955 or the end of 1954 to get even. Anything can happen and we want to be prepared for anything. But we also want to do big things. If the prices are attractive, as Greg said, there was a period right before the Fed acted. We were starting to get calls. They weren't attractive calls, but we were getting calls. And the companies we were getting calls from after the Fed acted, a number of them were able to get money in the public market, frankly, in terms that we wouldn't have given it to them. All right. This next question is one that, Greg, you actually touched on the answer to this to some extent, but maybe the 2 of you could expand on it. It comes from Richard Surcer from Tucson, Arizona. He says Berkshire's annual report indicated that Berkshire had 391,539 employees at the end of 2019. Which areas of our operations have already been hardest hit or will be by the coronavirus pandemic? And what are the implications for the continued employment of those people? Those people are employed in dozens and dozens of different industries. And there's there are a few industries that there's a fair likelihood that our employment could be reduced, but they're not large. I'm just thinking as I'm talking. I mean, it's not like it's not like we're in the, some of the businesses that are, you know, we're not in the hotel business or various aspects of travel and entertainment and all of that that could really be changed in a very major way. So I don't see our employment. I'll put it this way, 5 years from now, I think virtual will be employing considerably more people. And I don't see where we'll have large dips, but the virus could take off in certain ways than in some of our manufacturing businesses, for example, the demand could be dramatically reduced. And in those cases, we would have layoffs at some point. Greg? What I would add, Warren, is that as we are in the sort of crux of the pandemic, we're still dealing with it. So our businesses have adjusted. Some have had to adjust more. We have, if you look at Berkshire Hathaway Energy, for example, you can see U. S. Electricity consumption is down 4%. That realistically doesn't impact that business in a significant way, and longer term, we'll continue to grow that business. So even in even during the crisis, a relatively small impact of the business. But as Warren knows, we do have retailers that their doors are shut right now, be it RC's Candy, some of our jewelers. And at that point in time, we do adjust and adapt to the environment, I. E, we adjust our workforce. But equally, we do see, for example, See's at a point our stores will reopen. And at that point, we reemploy the folks. And overall for Berkshire as a whole, as Warren said, 5 years from now, we see our employment numbers being far greater than they were are today and that we see great prospects within the operating businesses as a whole. Yes. Sees is an interesting example because we've owned that since 1972. That's a long time and we love it and we continue to love it. And I have a box here of our peanut brittle and I've got other box of fudge right here and I'll probably take them all home and not share with Greg. But we were in the midst of our Easter season and Easter is a big sales period for season. I don't know whether we were halfway through, but we weren't halfway through in terms of the volume that's going to be delivered because it comes toward the end. And essentially, we were shut down and we remain shut down. The malls that we've got 220 or so retail stores and we've got a lot of when Furniture Mart sells our candy, but the Furniture Mart closed down. And so season business stopped. And it's a very seasonal business to start with. So we have a lot of seasonal workers too that come in particularly for the Christmas season. But we have we have a lot of Easter candy. I mean, and and Easter candy is kind of specialized too, so we won't sell it. And we produced a good bit of it. We couldn't ship it. We couldn't put it in stores. And there's some of that's going on. And of course, Greg does all the work on those sort of situations and our managers are terrific of course in dealing with it. But this is a very, very unusual period and like I say a few years from now I think virtual will be employing more people than 395,000 over the years. We started with 2,000 of the textile business and we still got the same playbook. This next question comes from Drew Johnson who says that he's a long time shareholder who's attended a couple of meetings. He says in an interview on April 17th, Charlie mentioned that some small business owned by Berkshire would not reopen after the pandemic eases. Can you elaborate on which businesses might be impacted? Well, even we have businesses within businesses at Marmon, don't we have 97 different businesses, for example? Exactly. Yeah. Yes. And there are some that weren't doing that well before, and I'm not talking about Varmints, but they got a couple of them and there's a couple of them. And it may be that in effect, the you know, what's happened in the last couple of months has accelerated the decline and of those businesses or their customers are developing different habits. I mean, people are developing different habits in retail. There's no question about that. That doesn't mean we're we haven't got a bunch of good retail businesses, but there are businesses that were that were having problems before and that have even greater problems. Now we don't own our newspapers anymore, but we're financing the Enterprise which does have them. We've actually increased our investment in the newspaper business by selling the papers to Lee and then refinancing their debt. And the newspaper business was having plenty of problems with both circulation and advertising before the virus came along, but advertising declines every place have accelerated fairly dramatically. And when the automobile industry stops, the auto dealers don't advertise. It's made certain businesses that were tough before even tougher now. And there will be management of at least one of the subsidiaries that's suggested to us. And so there'll be but there'll be some changes in a few businesses, but they're very small businesses, our major businesses. And our business of intermediate size, I can't think of anything that's of significance that won't reopen. But it won't be any fun with the businesses where the world has really changed. You're seeing a lot of change. If you own a shopping center, you got a bunch of tenants that don't want to pay you right now. And the supply and demand for retail space may change fairly significantly. The supply and demand for office space may changed significantly. A lot of people learned that they can work at home or that there's other methods of conducting their business and they might have thought that from what they were doing a couple of years ago. And when change happens in the world, you adjust to it. Yes, I think the go ahead. I think the well, I was just going to add on the Marmon example, our 97 companies there. For example, we have a food service group, which sells equipment to a variety of the restaurants. We have a few businesses that realistically were challenged when the industry was performing really well. And as we come out of the crisis, their economic prospects aren't going to be better. And in fairness to the teams and the employees in there, they understand that and they're working through it and there'll be other opportunities potentially within the company within Marmon and things like that. But there's a very specific answer or example relative to the question. This next question is a follow-up on that. It comes from Chris Fried of Philadelphia. And he says it's been a long term policy of Berkshire to not sell or close any ongoing subsidiaries as long as their business prospects weren't a money hole. Over the last year, he points out the sale of Berkshire Hathaway Media and then Charlie's comments from that interview saying that several small Berkshire subsidiaries will not be opening when the coronavirus lockdown is lifted. So should shareholders assume that Berkshire has now changed its long term policy in regards to keeping underperforming subsidiaries out? No, I think that policy was spelled out for maybe 30 years or so in the addendum to the annual report that we have said that if a company or if an operation, we think its prospects are that it will continually lose money in the future. But we will certainly we'll try to sell it to somebody else, but one way or another, we will not continue to hold it. That is not a new policy and it's not been changed. You can say in effect we did that with the airline industry to some extent. If we owned all of an airline now, it would be a tough decision to decide whether to sustain 1,000,000,000 of dollars in operating losses when you know, A, you don't know how long it's going to happen or occur. And secondly, you know that it's very likely that there'll be too many planes around, and we know what happens in airline pricing when load factors go down and there's an oversupply of airline seats. So, you know, we didn't have to make that decision in terms of our own operation on it, but we did make a decision that that's a very tough management decision to make. And the government, of course, is, well, they've had the first wave of financing for the airlines. But to the airlines' credit, they have very aggressively raised money. I mean, it's amazing to me how what a good job they've done of that. And in the case of I think in the case of 3 of them, no, 2 of them, but there may be more coming. They've raised equity money too. I mean they are saying that the debt holders and investors, you know, you've got to put more money into this business if we're going to be able to continue. And the government's done it and private sources have done it. And it's going to it's exactly the right thing for the managements to be doing. But whether whether it makes sense, we'll find out for the investors. This next question comes from Eric Lafont and it's directed to Greg. He asks, how is Precision Castparts handling the severe slowdown in the aerospace industry? So very consistent with everything we've just discussed, which is, obviously a large part of their business is the aerospace industry. And it can really be broken into 3 areas as we do in our Q, but 2 are being impacted. The defense contract business remains very sound and strong within precision cast parts. But if you look at the large body aircraft, the aircraft that they use within the regional jets, that business will move directly with the demand there and the jets that are ordered longer term. So Precision Castparts is literally as we speak continuing to adjust their business relative to the demand that would come out of Boeing. They would be having weekly calls with Boeing, recognizing what are the production orders there and adjusting the business accordingly. Boeing raised $25,000,000,000 just a day or 2 ago, and they raised $14,000,000,000 before that. And a year ago, they felt they were in a fine cash position. And I understand not all that happened. Airbus has had the same situation. They've made some comments recently within the last week. You know, the fact that, you know, they really don't know what their future is. And I don't know what their future is. We're going we're going to have aircraft in this. We're going to be flying, but the real question is whether you need a lot of new planes or not and when you're likely to need them and it affects a lot of people. And it certainly affects precision cash parts, it affects General Electric, it obviously affects Boeing and it's it's it is a blow to essentially have your demand dry up and it goes up in the chain and the aircraft manufacturers didn't bring it on themselves, the airlines didn't bring it on themselves, Precision Gaspar didn't bring it on itself, General Electric didn't. It's basically that we shut off air travel in this country. And what that does to people's habits, how they behave in the future, it's just hard to evaluate. I don't know the answer. And, but we do know that it will have an effect on precision cash parts and how severe it will be, it depends on the same sort of variables that are hitting Boeing. You name the company in aircrafts and aircrafts are big business. And this country is good at it incidentally too. I mean if you think about Boeing, it is what a hell of a company and it's important. It's a huge exporter and it affects a lot of jobs and some of them are with us. And we hope for the best and we wish everybody the best, obviously, and we wish ourselves the best in it. But part of it is out of our, certainly out of our control. This next question is for Warren. Do you think GEICO will experience unusually high profitability in 2020 due to the reduced amount of driving even after giving customers a 15% credit? Well, we have promised to give our customers at GEICO, we're the 2nd largest auto insurance company, and different auto insurers are handling a sharing of the better experience with their policyholders in different ways. We our plan will deliver back $2,500,000,000 roughly or so in recognizing, the reduced frequency of accidents during this period. What we don't know is how long this will continue. I mean, people want to drive their cars still, but conditions have reduced that driving dramatically obviously. Now we have instituted a program that runs saving people money for 6 months and so far other people have largely been 2 months, but some of them have given a little more. For those 2 months than we get per month, our total is the greatest at $2,500,000,000 And in addition to that, we and all the others in the industry, it's not just GEICO, we've also, and insurance commissioners in many cases, I believe we required it, but we have, we we give people more time to pay if they aren't paying and if they cancel their policy or if they don't end up paying us. We've in effect giving them giving them free insurance during that period. And the delay in payments is obviously increased, delay of payments on if you got to a shopping center getting rent. The delay in payments is what happens during a period like this. And that will be a significant cost to us. We don't know how significant will be. There will be more uninsured motors, motorists driving and they cause a disproportionate amount of accidents in that. So there's a lot of variables. We made our best guess as to what we're going to do to reflect the current reduced accidents in our in our premiums that we receive really over the next year applies for a 6 month on renewals, but that will be renewing policies in October that will extend it then next April. And so we've made a guess on it and we'll see how it works out. This next question comes from Steven Staller. He's a shareholder in Atlanta, Georgia. And he says, would you please help us understand the effects of COVID-nineteen on our insurance businesses? Other insurance companies have reported losses from boosting reserves for future insurance claims that they expect to be paying as a result of coronavirus. Yet in Berkshire's 10 Q released this morning, we do not appear to have reported much of these future expected losses. Can you tell us why this is the case? What kind of risks Berkshire is underwriting that allows us not to be affected by the pandemic? Or conversely what we are writing that might be? Well, the amount of litigation that is going to be generated out of what's already happened, let alone what may happen, is going to be huge. Now just the cost of defending litigation is a huge enormous expense, depending on how much there is. Now in the auto insurance field, which is our number one field in terms of premium volume by some margin, That's more definable, but who knows what comes out of it in terms of litigation. But in what they call commercial multiple peril, which involves property losses and where some people elect to buy business interruption coverage, Many policies, quite clearly in the contract language, would not have a claim for business interruption under a commercial multiple power policy where you've elected that. But other policies do. I think I know of 1 company. I don't know the details. That's written a fair amount where they cover. Certainly, there's a good argument perhaps that they cover business interruption that might arise from a pandemic. Well, they're in a very different position than the standard language, which says that you recover for business interruption only if there involves physical damage to the property. And you can buy all kinds of different policies. We are not big in the commercial multiple parallel business. So I mean, this is not like our auto business or anything of the sort. But we will have claims, we'll have litigation costs, but proportionally it's not the same with us as with some other companies which have been much heavier in writing business interruption as part of a commercial multiple parallel. But you don't automatically get coverage if you have business interruption. I mean, for example, I think it would be unusual if say General Motors had a strike, which they did, and that they have business interruption that covers a strike. We actually wrote about probably the only annual report in United States. We wrote about business interruption insurance because we had it over in France when one of our properties was adjacent to a property that's much smaller property that had a fire and then it spread to our plant and it caused a lot of physical damage and we have business interruption that ties in with that. But if we had some company we were selling auto parts to and they had a strike, our business would be interrupted, but it's not covered by that. I mean that is not part of the coverage unless you specifically really buy it. So there's some claims that are going to be very valid related to this. The present situation there'll be an awful lot that there'll be litigation on that won't be valid. And there's no question that some insurance companies, I know one particular that will pay a lot of money relative to their size in terms of policies that they've written. And I think we have reserved and our history shows we generally have reserved on the conservative side adequately at least, and that's certainly our intent. And we tell no managers of any of our insurance operations what numbers we expect from them or do any of that that they evaluate their losses and they build in something for social inflation, they build in things for all kinds of things. And generally speaking, Berkshire has been pretty accurate in its reserving, and I have no reason to think that we're otherwise than that, but currently. Stephen Teder from Atlanta, who says he's a 10 year Berkshire shareholder, writes in and he says, do you see Berkshire offering pandemic coverage and future insurance policies? Well, the answer is we insure a lot of things. Sure. I don't we had somebody come to us the other day wanting insurance involving a $10,000,000,000 protection on something very unusual. We're not going to make that deal in all probability. In fact, I would say it's dead. But we would have written pandemic insurance if people would come to us and offer us what we thought was the right price. We would have been wrong probably in doing it. But we have no reluctance to quote on very unusual things and very big limits. We're famous for it. We haven't done that much of it in certain periods because the prices aren't right. But if you want to come and insure almost anything and we don't want you to insure against fire if you happen to be a known arsonist or something. But if you come to us with any unusual coverages, either in size or in the nature of what's covered, Berkshire is a very good place to stop. And so somebody wants to buy, they can dream up the coverage and they can tell us the price they'll pay and we will consider writing it. We wrote a lot of business after nineeleven, for example, and there were really only a couple companies in the world that were willing to write the business. And Berkshire and AIG wrote a lot of business and we thought we knew what we were doing, but we could have been surprised. I mean there could have been some follow on incidents from 9eleven that we wouldn't have known about. You don't know for sure the answer. That's why people are buying insurance. But we wouldn't. We would be willing to write pandemic coverage at the right price. This next question is for Greg and it comes from a shareholder named Todd Flask. He says, I don't expect Berkshire to outperform the S and P 500 during good times. However, I remain a long term investor because of the huge war chest that can be deployed during the downturns in the market downtimes. These opportunities may only come about once a decade. There's a small window of time for these deals. They all come at once and you don't really know if you're at the bottom of the market when the deals start coming. Will Berkshire be able to continue this approach when Warren and Charlie are no longer at the helm? I fundamentally, without Warren and Charlie at the helm, I don't see the culture of Berkshire changing. I don't see our billet, which a large part of that is having the business acumen to understand the transaction, the economic prospects and then the ability to act quickly. I really don't see that changing as we've all listened. There's no one better than Warren and Charlie, but equally we've got a talented team in Berkshire, both at the Berkshire level and within our managers that can obviously look at opportunities too very quickly. But the reality is it's a huge advantage we have right now when we would clearly want to be in a position to maintain that position of strength. Warren? Yes, we will maintain it. And we not only have it with the managers of the in some cases, not all cases by a long shot, but in some cases we have managers that will occasionally come up with something that can be quite attractive. But between Greg and Todd and Ted, we've got 3 extraordinarily good minds in terms of allocating capital. And I, Charlie, may get we may get an occasional call because of someone we knew 20 years ago or something, but they know a lot more people. They've got a lot more energy and their minds work the same way as ours have in the past. So I think it could very well be a significant improvement when the 3 of them are thinking about capital allocation. And when Charlie and I are now, particularly now that he's found Zoom. All right. This next question comes from Max Rudolph in Omaha, Nebraska. And he asks if Berkshire or any of its fully owned businesses have participated in any of the bailouts from the Fed or the Treasury. I certainly don't know of any. I guess you could say, while we own the airlines, well, no, the question is about fully owned businesses. And there's no way that I wouldn't know about anybody that did any of that. Greg? No. In fact, we've been very clear with the businesses, but we our businesses understood our how Berkshire operates. And equally, we're very clear that we would not be participating in any of those programs or bailouts. This is a similarly related question. It comes from Seth Frieden, who says as a long term shareholder of Berkshire B Shares, I'd like to know Warren's viewpoint around smaller holdings, specifically Oriental Trading Company and Nebraska Furniture Mart that are based in your hometown of Omaha. He imagines that those smaller business units have been adversely impacted by COVID shelter in place mandates. So we'd like to know if Oriental Trading or other small business units applied for PPP loans or participated in those acts. And if they didn't qualify for a loan or didn't participate, then how will Berkshire support those smaller businesses to make sure that they can continue to employ their employees? Yes. Well, to my knowledge, none of them have gone in for government money. And the 2 that I mentioned, I don't like to get into specific companies, but I can assure you that the Nebraska Furniture Mart and OREO Trading, in my view, have a fine future. But I don't want to talk about go down the list obviously of every single company because some of them I don't know the answer to. We actually decided some time ago that our newspapers would have a much better chance of surviving if they were run as part of the Lee than if we ran them independently. And as I said earlier, we actually put considerably more money, we probably put more money in the newspaper business than virtually anybody in the country in the last 6 months because we took over a loan that would have been a problem in the year, whatever it might have been, maybe year and a half. And we enable them to just deal with 1 lender rather than a group, and they are doing a better job with the newspapers than we would do and that's always our preference if we've got a business that's, that does not have, looks like it is not going to sustain itself over time in our hands. If we can find somebody else that we think will do a better job, we'd love to have them run it. So if we have a problem business, we would prefer to find somebody that thinks they can do a better job and probably can do a better job of running it than we can, but some businesses just disappear. We started with the textile business. We started a company called Diversified Retailing, which merged into Berkshire, became part of Berkshire. And started with a department store in Baltimore. And department stores look good in 1966 but the world has gone against them and we had a trading stamp business at one time and we stayed longer than anybody else. But the world left trading stamps behind and that's going to happen with some businesses. That's capitalism. And it will happen to some Berkshire businesses over the next 10 years, in the next 50 years. We think we'll find more of them that will grow and net that Berkshire will grow, but we do not think if you own a great many businesses that everyone is destined for success. That's why I suggest to people they buy an index fund. I do not, with the exception of Berkshire, I would not want to put all my money in any one company, although there's a few I wouldn't mind being very close to that. But I don't think you get surprises in this world and there will be businesses that we think are very good that turn out not to be so good. And there will be other businesses that turn out better than we think. And it's up to the world to judge our batting average over time. Greg? Well, I would just add an echo again that when it comes to the PPP loans, we're not aware of any of our businesses taking them. And as I said, we encouraged them if they were ever thinking that there was going to be a dialogue and we're not aware of any businesses pursuing them. I would also just add that when you look at our businesses as we went into the crisis, they responded very well. So as we look at our businesses and Warren touched on this, our large businesses, our midsized businesses and even as you go down from they're in very sound shape as we go through the pandemic and are really preparing to emerge now. So they're evaluating, listen, they're going to have a different customer, there's going to be different consumer behaviors, how our employees work, I. E. A lot of them work at home now, does that make sense? And the communities we're operating in have all changed, but we're literally moving from the point of, okay, we're making it through the crisis and really planning to reemerge now and I would say our businesses are in an extremely sound place. We don't know when the This next question Well, I just but know. We don't know how long this period lasts, and nobody knows. You know, we don't know whether the most people think, and they know more about it than I do, that the virus will, you know, to some extent, decline in its spread during summer months. And I would say, but many think that it will come back at some later date. And how the American public reacts if they get their hopes up through some reopening, through some summer diminution, and how they would react to a second attack in effect by the virus. It's like Doctor. Faust, you know, the virus is going to determine our behavior. You know, we and and we're doing a lot of smart things and we've got a lot of very smart people, but there are unknowns. And the unknowns that apply to the health aspect create unknowns in the economy. And we will have to keep evaluating things as we go along. I hope like crazy obviously that that once suppressed it doesn't come back and that we readjust, but things don't always work perfectly. That doesn't mean there was a better course of action. It would not I would not go around criticizing people at all for what they've done or anything of the sort. I just think you're dealing with a huge unknown. And I think that the degree to which it's disturbed the world and changed habits and endangered businesses in the last couple of months indicates that you better be not be too sure of yourself about what will what it will do in the next 6 months or year or whatever. Warren, a moment ago, you mentioned that you still are recommending that people invest in an S and P 500 index fund. Let me ask this question that came in from Kevin. He says the last few weeks we've been hearing from active money managers that the day of passive investing is over. The historical safety of investing in an index fund long term is gone. Would you please provide your thoughts on this topic, particularly in regards to an investment time span of 10 years? Well, I can tell you I haven't changed my will. It directs that my widow would have 90% of the funds in index funds and it's it's I think it's better advice than people are generally getting from people that are getting paid a lot to give other advice. You don't make a lot of money advising an S and P 500 index fund. I mean, and how you can say the day of index funds is over. I mean, if you say the day of investing in America is over, I would disagree quite violently. And then is there something special about index funds being a terrible way to invest? I just don't think really it's very hard to have evidence of that. I mean if the index funds reflect the market and one side has high fees that think they can pick out stocks and the other side has low fees, I know which side is going to win over time. And it's you have to recognize that it's in a great many people's interest to convince you that they can do something that they may well even believe they can. And a certain percentage of them will do it from luck and a few people will do it from skill and that's what makes it so enticing that you can find the Jim Simons or somebody that's going to produce extraordinary return. And Jim and his group have done it by brainpower, but it's very unusual and incidentally they are going to charge you a lot of money and they're going to actually maybe close-up their fund, if they do it because they can't do it with really huge amounts of money compared to what they've how the record's been established in the past. So it's just have to recognize you're dealing with an industry where it pays to be a great salesperson and it pays even better if you're a great salesperson and you can actually produce something. But the money is in selling. There's a lot more money in selling than in managing actually if you look to the essence of investment management. I got a number of variations on this next question, some more polite than others. This one's right about down the middle. But this is from Mark Blakely, who writes in from Tulsa, Oklahoma. And he says, like many, I'm a proud Berkshire Hathaway shareholder. However, in comparing the performance of Berkshire with the S and P 500 over the last 5, 10 or 15 years, I've been disappointed in Berkshire's underperformance. Even year to date, Berkshire is trailing the S and P 500 by 8%. To what would you attribute Berkshire's underperformance? Well, I can't imagine ever selling my Berkshire stock. At some point, money is money. Well, I agree with everything that I forget to say, but said, I mean the truth is that I recommend the S and P 500 to people and I happen to believe that Berkshire is about a sound as any single investment can be in terms of earning reasonable returns over time. But I would not want to bet my life on whether we beat the S and P 500 over the next 10 years. I think there's a I obviously think there's a reasonable chance of doing it, but and we've had periods, I don't know how many out of the 55 years We've been doing it at, I don't know how many we've beaten or not. I mentioned earlier that 1954 was my best year, but I was working with absolutely with peanuts unfortunately. And I think if you work with small sums of money I think there is some chances, some chance of a few people that really do bring something to the game. But I think it's very, very hard for anybody to identify them and I think that when they work with large funds it gets tougher. And it certainly gotten tougher with for us with larger funds and I would make no promise to anybody that we will do better than the S and P 500. But what I will promise them is that I've got 99% of my money in Berkshire and most members of my family are, may not be quite that extreme but they're close to it, and I do care about what happens to Berkshire over the long period about as much as anybody could care about it. But you know, caring doesn't guarantee results. It does guarantee attention. Greg? Well, I would agree one that there's never guarantees. But when I look at the assets we have in place and the teams that are in place. I you're committed to Berkshire, but we have dedicated teams that equally are dedicated to Berkshire, and they're sure going to give it their their best effort every day. And when I look at the assets and the people, I think we have, as you said, you can't guarantee it, but we have a great chance of sure giving a good effort to outperform it. It's hard to imagine getting a terrible result, Woodburger, but anything that happened. And what I do know is it would be easier to be running $5,000,000 than our book net worth at Berkshire at the quarter end, I think, was $370,000,000,000 which is down, but it's still greater than the book net worth of any corporation in the United States. That's I mean, maybe there's some federal corporation that has more, but in terms of it may be the greatest in the world, I'm not sure. And that makes life difficult in some ways too. Right. And the potential of our operating businesses are substantial. When you think we've talked about energy, you touched on it that that infrastructure is continuing to change theirs. We're ready for $100,000,000,000 of investment opportunities there. If we just look at the business over the next 10 years and the infrastructure that's required and how it's changing, substantial, substantial investments there that just tell me we have very good prospects. It's and we're well positioned to pursue them, which again to me, when you look at our core businesses, you touched on in Burlington, the insurance and energy, it's tough our downside is very nicely protected. We have 3 really core great businesses. Yes. And we're better positioned than anybody in the energy business. Just because we don't have dividend requirements, we've retained $28,000,000,000 of earnings over 20 years that you can't do it if you run a normal public company. And we've got a huge appetite and the country needs it. The world needs it. And we are a very, very logical, well structured, well managed, I would say, because it doesn't involve me, company to participate in just huge requirements around the world now. They're slow and they involve governments and I mean, state governments and there's a lot of it's not anything that happens dramatically. It will happen. And Berkshire should participate in a huge way. We can do things in insurance nobody else can do. That doesn't mean much at many times, but occasionally it may be important. So there are some advantages to size and strength, but there are disadvantages to size too. If we find some great opportunity that for $1,000,000,000 to double our money, that's $1,000,000,000 pretax and that's $790,000,000 after tax and on a market value of $450,000,000,000 or whatever it may be. It doesn't amount to much unfortunately. We'll still try and do it if we can. Yes. Hey, Warren. I want to ask this question that came in because I think some people may have had misinterpretation about something you said a few minutes ago. This is the benefit of being able to get these questions real time. But a few moments ago, you were talking about the people at the company who will be allocating capital after you and Charlie are no longer doing it. And you mentioned that you've got Todd, Ted and Greg all doing that. But I've got a few questions that read similar to this. This one's from Edward Popula in New York City who says, Dear Warren, I noticed you didn't mention Ajit Jain when you reeled off your list of future management. Is he out of the picture? Well, Ajit is not in the capital allocation business. He is the best well, he's got one of the best minds in the world. I mean, I wrote his father after he worked for us for a few year a few years. I wrote up again the other day, but 20 years ago I wrote him and I said if you've got another son like this, send him send him over from India because well on the world. Now, Ajit is one of a kind that anybody will tell you that's had any contact with him and particularly anybody in the insurance business where they know him well. He is absolutely one of a kind, but his job is not capital allocation. It's evaluating insurance risk, and that is a rare. He possesses a rare talent and he has a huge capital backing to do it. So he's an incredible asset. But Greg and Todd and Ted have been in the asset allocation business in a big way for a long time. That's their game and the GEET's game is insurance. So that's why I mentioned those 3. And incidentally, while Charlie and I are around, we kind of like capital allocation ourselves. We're not going any place voluntarily, but we probably will go someplace involuntarily before that long. Charlie's in Good Health incidentally. I'm in Good Health. Greg, let me ask you one of these capital allocation questions. This one comes from Matt Leibel and he says Berkshire directed 46% of capital spending versus economic depreciation versus GAAP depreciation and help explain the time frame over which we should recognize the contracted return on equity from these large investments as we as shareholders are making in Berkshire Hathaway Energy? So when we look at Berkshire Hathaway Energy and their capital programs, we try to really look at it as it was highlighted really in a couple of different packages. 1, what does it actually require to maintain the existing assets for the next 10, 20, 30 years, I. E, it's not incremental. It's effectively maintaining the asset, the reflection of depreciation. And our goal is always to clearly understand across our businesses, do we have businesses that require more than our depreciation or equal or less? And happy to say with the assets we have in place and how we've maintained the energy assets, we generally look at our depreciation as being more than adequate if we deploy it back in the capital to maintain the asset. Now the unique thing in the lion's share of our energy businesses that are regulated and that exceeds 85% of them 83% of them, we still earn on that capital we deploy back into that business. So it's not a traditional model where you're putting it in, but you're effectively putting it in to maintain your existing earnings stream. So it's not drastically different, but we do earn on that capital. But what we do spend a lot of time and that's what when Warren and I think about the substantial amounts of opportunities, that's incremental capital that is truly needed within new opportunities. So it's to build incremental wind, incremental transmission that services the wind or other types of renewable solar. That's all incremental to the business and drives incremental both growth in the business. It does require capital, but it does drive growth within the energy business. So there's really the two buckets. I think we would use a number a little bit lower than the depreciation. We're comfortable the business can be maintained at that level. And as we deploy amounts above that, we really do view that as incremental or growth CapEx. Yes, we have what dollars 40,000,000,000 or something. What do we have in sort of kind of in the works? Oh, yes. So we have basically, as Warren is highlighting, dollars 40,000,000,000 in the works of capital. That's over the next effectively 9 years, 10 year period. A little approximately half of that we would view as maintaining our assets. A little more than half of it's truly incremental, but and that are known those are known projects we're going to move forward with. And I would be happy to report, we probably have another $30,000,000,000 that aren't far off of becoming real opportunities in that business. Now as Warren said, that takes a lot of time, it's a lot of work. The transmission projects, for example, we're finishing in 2020 were initiated in 2,008 when we bought Pacific Corp. I remember working on that transmission plan, putting it together, thinking 6 to 8 years from now we'll have them in operation 12 years later. And over that period of time, we earn on that capital. We have invested and then when it comes into service, we earn on the whole amount. So we're very pleased with the opportunity. But we plant a lot of seeds, put it that way. Yes. And these are not it's not like they're super high return thing, but they're decent returns over time. And we're almost uniquely situated to deploy the capital as opposed I mean, you could have government entities do it too, but in terms of the private enterprise. And they take a long time, they earn decent returns. I've always said about energy, but it's not a way to get real rich, but it's a way to stay real rich. And we will deploy a lot of money at decent returns, not super returns. You shouldn't earn super returns on that sort of thing. I mean, it does you are getting rights to do certain things that governmental authorities are authorizing and they should protect consumers and but they also should protect people to put up the capital. And it's worked now for 20 years and it's got a long runway ahead. All right. This next question comes from Jason in New Jersey. As both Berkshire and Occidental shareholder, I was encouraged to see your investment in the company. But with passing weeks, it became evident that your investment facilitated Occidental Management's ability to avoid a shareholder vote on the Anadarko acquisition, a very shareholder unfriendly outcome. This deal proved to be irresponsible and expensive from an Oxy perspective and ultimately very value for Oxy shareholders. In my view, it also permanently hurt Berkshire's reputation in the marketplace. Please comment on this unfortunate outcome and tell me why Oxy shareholders and other market observers shouldn't feel this way? Well, we said right from the beginning, although we didn't certainly expect to agree to it, what's happened. We said essentially when you buy into an oil, a huge oil production company, how it works out is going to depend on the price of oil to a great extent. It's not going to be your geological home runs or super mistakes or anything like that. It is a It is a investment that depends on the price of oil. And when oil goes to minus $37 it happened the other day for, I guess, it was the May contract. You know, that's off the chart. And if you own oil, you should only own oil if you expect these prices to go up significantly. I don't know whether they'll go up significantly or not. We're in the transaction. Our commitment was made on a Sunday when the management of Anadarko favored Chevron and Chevron had a breakup fee of $1,000,000,000 and accidental people have been working on it for several years. And it was attractive at oil prices that then prevailed and it doesn't work obviously. It doesn't work at $20 a barrel. Certainly doesn't work in minus $37 a barrel, but it doesn't work at 20 dollars a barrel. And everything the oil companies have been doing whether it's Exxon or Oxitel or anybody else, it doesn't work at these oil prices. That's why oil production is going to go down a lot in the next few years because it does not pay the drill now. That's happened at other times in the past, but the situation is, you know, you don't know where you're going to store the incremental barrel of oil and oil demand is down dramatically and for a while the Russians and the Saudis were trying to outdo each other and how much oil they could produce. And when you've got too much in storage, it doesn't work its way off that very fast. Now you will have production of oil go down in the United States significantly. It does not pay to drill in all kinds of formations that that paid before and it doesn't pay it doesn't pay to a paid the price that oil was trading at in the ground a year or 2 ago. And to that extent, if you're an Oxy shareholder, you know, you've or any shareholder in any oil producing company, you join me in having made a mistake so far in terms of where oil prices went and who knows where they go in the future. And then this one comes in from Manish Bal, who says, is there a risk of permanent loss of capital in the oil equity investment? Well, there certainly is. There's no question. If oil stays at these prices, there's going to be a lot of money, a whole lot of money and it will extend to bank loans and it will affect the banking industry to some degree. Now it doesn't destroy them or anything, but there's a lot of money that's been invested that was not invested based on a $17 or $20 or $25 price for WTI West Texas Intermediate Oil. And but you can do the same thing in copper. You can do the same thing in some of the things we manufacture. I mean it but with commodities it's particularly dramatic. And, you know, farmers have been getting lousy prices, but to some extent the government subsidizes them. I'm all for it actually. But if you're an oil producer, you take your chances on future prices unless you want to sell a lot of futures forward. Oxy actually did sell 300,000 barrels a day of puts in effect that are they they bought puts but and sold, calls in effect to match it. And they were protected on a 10 dollars for a layer of $10 a barrel on 300,000 barrels a day. But you're really buying when you buy oil, you're betting on oil prices over time and over a long time. And oil prices, there's risk. And the risk is being realized by oil producers as we speak. There will be if these prices prevail, there will be a lot of bad loans and energy loans and the bad debts in energy loans. And if there are bad debts in energy loans, you can imagine what happens to the equity holders. So yes, there's a risk. All right. This question comes from Bob Coleman. He says, Warren, could you bring us up to date with the status of your equity put contracts? Sourcing the 2019 annual report found on Page 60, it appears at 2019 year end, the fair value liability was just under $1,000,000,000 And if the index has declined 30%, the liability obligations ballooned to 2 point $7,000,000,000 So if the indexes are down 60%, would Berkshire's obligation be close to $5,500,000,000 Does that math seem reasonable? And are there any loose ends or open exposures associated with that? No. We between 2,004, I think, and 2,006, I think we wrote 48, maybe 50 contracts, something like that. The shortest was 15 years. The longest was 20 years. And we received, as I remember, roughly $4,800,000,000 which we were free to do with what we wanted and we agreed to pay based on where 1 or more of 4 indices were selling for at the time of expiration. There were so called European style puts where they're only payable based on one And we did not have with a small exception, we did not have to put up collateral, which was part of the deal. With a small exception, we did not have to put up collateral, which was part of the deal. Digital nominal value of something over $30,000,000,000 maybe $35,000,000,000 That's if everything went to 0. I mean, if Dow Jones went to 0, the FTSE went to 0 and the Nikkei and so on. A number of those have run off. So we now have about $14,000,000,000 nominal. We have something less than half left. We haven't paid out anything significant. We bought back a few of them. If everything went to 0, we would owe $14,000,000,000 If everything were to sell at the same price it was selling for on March 31st, I think the number is some I think it's somewhat less than we carry as a liability on the balance sheet which is 200 fraction 1,000,000,000. So far so good. I mean we've had the use of a lot of money and the outstanding potential of them is the market went up a lot, we wouldn't have to pay anything. And if it goes down some more, we have to pay more than a couple of 1,000,000,000 but we've got the liability set up for that. But so far so good on that. And it is not anything that causes us any problem. They come due, the final one I think comes due sometime in 2023. I think there's I think maybe 20% or 25% of them come due late this year. And so it's the there's nothing that the questioner doesn't really understand about them. I tell by the question and there's no surprises there. There's no way that some liability could double up on us except based on except relating to where those indices close at the expiration of a group of different puts, which, like I said, have been more than cut in half. And we've done very well on it. Key to that Warren, you mentioned a few minutes ago that you Well, I was just going to say, key to that was with just a couple of tiny exceptions, we did not agree to put up collateral. We never would have gotten ourselves in that position. And that was when we made the deals, we just would not get ourselves in that position and we never will, where on a given date we could have some tremendous obligation that would come due that we weren't counting on getting having come due. I'm done then, Becky. Okay. Thanks. You mentioned a few minutes ago that you're very concerned about Berkshire's long term health too. This question came in from Drew Estes in Atlanta, Georgia, who says there's already speculation of a post Buffett breakup of Berkshire. And given the sway carried by modern activists, the speculation should be taken seriously. Many long term owners see the folly in this view. A $25,000,000,000 ancillary earnings stream provides a lot of flexibility when investing insurance float. On our and your estate's behalf, could you more forcefully make the case of maintaining Berkshire's current architecture? If you don't, that responsibility will fall on an unknown set of shoulders with far less credit. Well, if you were to if you were to sell Berkshire's various subsidiaries, you would incur a very significant amount of tax at the corporate level before anything was distributed to the shareholders. You can spin off a given one or something of the sort, but the ability to break up a diverse company without tax implications, there was something called the general utilities doctrine that prevailed in various ways up until 1986. And a lot of people seem to comment based on the fact that that didn't happen in 1986. And there's imaginative ways where people try to avoid taxes and can do it in some cases. On certain types of transactions, if you were to break up Berkshire, that would be one factor. But the interaction of being able to move capital around in terms of being able to do things in insurance that we couldn't do unless there were the backup earnings and capital employed in the other entities. There's enormous advantages in capital deployment within the place. So there is not a big discount to break up value embodied in Berkshire's price. And the situation actually is that although all my Berkshire shares, every share will be given to charities pursuant to a plan I developed back 14 years ago and followed ever since and will continue following this July of the giving away $3,000,000,000 or so worth of the stock. But it's all it still involves a big voting percentage that including other peoples that still remain in the picture aside even from the Buffett family, it isn't going to happen. Now I will tell you everybody in the world will come around and propose something and say it's wonderful for shareholders and by the way it involves huge fees. I mean, you do not get impartial advice from the street when there's enormous amount of fees possible from one action and no fees applicable from another action. But you can be sure I've thought about it and I would say that you can count on Berkshire's present posture being continued for a long time. I can't tell you what's going to happen 100 years from now. And I can't tell you exactly what would happen, for example, if certain ideas in terms of wealth taxes changed or taxes on foundations change. I mean, they're good. But my plan has been thought out and then placed for a long time. And it not only ensures that the money that's been made off Berkshire, all of it ends up going to various philanthropies staggered over time, but it also it will keep the walls away. Greg, do you have any thoughts on that? Well, I think the comment on the capital allocation is critical that we have the ability to move the capital amongst the be it the operating businesses or up to the insurance or down with really no consequences to our shareholders. That's the value driver, the unique structure of Berkshire and it creates immense value. So that's all I would add or second, I guess. All right. This question comes from Rob Grandish in Washington, D. C. He says interest rates are negative in much of Europe, also in Japan. Warren has written many times that the value of Berkshire's insurance companies derived from the fact that policyholders pay upfront creating insurance float on which Berkshire gets to earn interest. If interest rates are negative, then collecting money upfront will be costly rather than profitable. If interest rates are negative, then the insurance float is no longer a benefit, but a liability. Can you please discuss how Berkshire's insurance companies would respond if interest rates became negative in the United States? Well, they were going to be negative for a long time. You better own equities or you better own something other than that. I mean, it's remarkable what's happened in the last 10 years. I've been wrong in thinking that you could really have the developments you've had without inflation taking hold. But we have $120 odd 1,000,000,000 while we have some almost very high percentage in treasury bills, some and other and some just in cash. But those treasury bills are paying us virtually nothing. Now they're a terrible investment over time. But they are the one thing that when opportunity arises, it will arise at the time and maybe the only thing you can look to to pay for those opportunities is the treasury bills you have. I mean, the rest of the world may have stopped. And we also need them to protect, be sure that we can pay the liabilities we have in terms of policyholders over time, and we take that very seriously. So if the world turns into a world where you can issue more and more money and have negative interest rates over time, I'd have to see it to believe it, but I've seen a little bit of it. I've been surprised. So I've been wrong so far. I do not think that I don't see how you can create. I would say this, if you can have negative interest rates and pour out money and incur more and more debt relative to productive capacity. You think the world would have discovered it in the 1st couple of 1000 years rather than just coming on it now, but we will see. It's one of the it's probably the most interesting question I've ever seen in economics is can you keep doing what we're doing now? And we've been able to do it. The world's been able to do it for now a dozen years or so. And but we're we may be facing them. We may be facing a period where we're testing that hypothesis that you can continue it with a lot more force than we've tested before. Greg, do you have any thoughts on that? I wish I knew the answer. Maybe you do. No. I think as you articulated, I think it was in the annual report too. I mean, we don't know the answer. But as you said, some of the fundamentals right now are very relative to having a negative interest rate. But I know I hate to say it, but I don't have anything to add. I'd love to be secretary of the treasury if I knew I could keep raising money at negative interest rates. That makes life pretty simple. It we're doing things that we really don't know the ultimate outcome. I think and I think in general they're the right things, but I don't think they're without consequences. And I think they could be kind of extreme consequences pushed far enough, but but there would be kind of extreme consequences if we didn't do it as well. So somebody has to balance those questions. This question comes from Adam Schwartz in Miami, Florida. He says Berkshire is the largest holding in his partnership, which houses most of their net worth. He says Berkshire has invested in many capital intensive businesses through the years, railroads as an example. How do you think about the inflationary or even deflationary risks for all of the capital intensive businesses? And could this prove to be an existential problem for businesses? Kind of referencing what you were just talking about that eventually the bill for the debts being issued comes due. Will it eventually come from all businesses through some combination of higher tax rates on corporations, increased wages for the lower middle class itself? Well, I certainly think that increased corporate taxes are a much higher probability than having lower corporate taxes. So I I think that we got handed as a corporation a big chunk of what used to be the government's profits from our business a couple of years ago and it would depend on to some extent which party is elected and whether they have control of both houses as well as the presidency and who knows what else. But we could very easily have higher corporate income taxes and perhaps much higher corporate income taxes at some point. And in terms of capital intensive businesses, they're just not as good if you can find an equally good business. I mean in terms of operations that doesn't require capital. I mean they're the seas never seas never required capital, didn't grow, but it's it just doesn't it didn't take money to expand it. And it delivered enormous sums to us. And because we own it within Berkshire to redeploy it elsewhere didn't require a lot of tax expense either at the corporate level or at the personal level. So you really want a business and everybody wants a business that doesn't take any capital to speak of and keeps growing, it doesn't take more capital as it grows. Now our utility business, our energy business requires more capital as it grows. Our railroad business to some extent requires more capital if it doesn't grow even. So capital intensive businesses by their nature are not as good as something where people pay in advance and you don't need the capital. I mean, if you look at where the top market value is in a $30,000,000,000,000 market, you know, if you take the top 4 or 5 companies that account for maybe 3, 4,000,000,000,000 of or so of that 30,000,000,000,000. Basically they don't take much capital. And that's why they're worth a lot of money because they make a lot of money and they don't require the money to any great extent in the business. We own some businesses like that but it's certainly not the railroad and it's not the energy business. They're good businesses. We love them. But if they didn't take any capital, they'd be unbelievable. They're that's what we've learned from 50 or 60 years of operating businesses that if you can find a great business that doesn't require capital when it grows, you've really got something. And to a certain extent, because insurance uses the kind of assets we would like to own anyway, our insurance business doesn't really take capital. It requires having capital available, but we're able to invest that money largely in things we'd like to own anyway. So we're particularly well suited for the insurance business and it's really been the most important factor in our growth over the years, although a lot of other things contribute. Greg, you're in a capital you were in a capital intensive business. So why don't you tell us about it? Well, I think there's no question, obviously, we would prefer to be in a less capital intensive business. But there are unique opportunities there. And the one I would touch on when I think of inflation or even potentially as we go through this crisis and maybe a prolonged one or depending on how long it takes to recover. I mean, we are in a unique when we're looking at energy or rail, we do have a certain amount of pricing power. And it's through our regulatory formulas or how our arrangements are with our customers. So if we then were to move into an inflationary period, it's not perfect protection, but those businesses generally can recover a significant portion of their costs even in an inflationary environment and still are in a reasonable return. They're not going to be great returns as you highlighted, Warren, but they're still going to earn a reasonable return on their capital even in an inflationary period. There may be some lag and some things like that, but they're still going to be very sound investments. Oh, yes. If there was 10 for 1 inflation, make it extreme, We'd be happy we own the railroad, very happy. Well, we'd be investing a lot of capital in it, but that business is in my view is a very, very solid business for many, many, many, many decades it it will earn more dollars if there's a lot of inflation. In real terms, who knows, but but it would it would earn a lot more dollars and and a lot of the energy projects within the but but it's better if we don't have inflation and it's better if we don't have capital. If we can find the same sort of businesses that aren't as capital intensive. We've got capital. I mean, we were ideally positioned for capital intensive businesses that other people have trouble raising capital for, but they've still got to promise decent returns. Alright. This question comes from Charlie Wang. He's a shareholder in San Francisco. He says, given the unprecedented time of the economy and the debt level, could there be any risks and consequences of the US government defaulting on its bonds? No. The, if you if you print bonds in your own currency, what happens to the currency? Is it going to be a question? But you don't default. And the United States has been smart enough and people have trusted us enough to issue its debt in its own currency. And Argentina is now having a problem because the debt isn't in their own currency and lots of countries have had that problem and lots of countries will have that problem in the future. It is very painful to owe money in somebody else's currency. But if you listen, if I could issue a currency, Buffet bucks and I had a printing press and I could borrow money and I could borrow money in that, I would never default. So what you end up getting in terms of purchasing power can be in doubt. But in terms of the U. S. Government, when Standard and Poor's downgraded the United States Government, I think it was Standard and Poor's some years back, that to me did not make sense. I mean in the end how you can regard any corporation as stronger than a person who can print the money to pay you, I just don't understand. So don't worry about the government defaulting. I think it's kind of crazy incidentally. This should be said to have these limits on the debt and all of that sort of thing and then stop government arguing about whether it's going to increase the limits. We're going to increase the limits on the debt. The debt isn't going to be paid. It's going to be refunded. And anybody that thinks they're going to bring down the national debt. I mean that there's been brief periods and I think it's in the late '90s or thereabouts when the debts come down a little bit. The country is going to print more debt. It's going to and it's going to and it's going to grow in terms of its its debt paying capacity. And, but the trick is to keep borrowing in your own currency. Emphasis on the trick. This question comes from David Cass. He is a clinical professor of finance at the University of Maryland. And he says, Berkshire has invested in many companies with stock buyback programs. Recently, there's been a backlash against buybacks. What are your views on this? Well, it's very politically correct to be against buybacks now. I mean, and they're going to incorporate it in the loan program. There's a lot of crazy things set on buybacks. Buybacks are so simple. I mean, it's a way of distributing cash to shareholders. And let's just say that you and I and Greg, the 3 of us decide to buy an auto dealership or a McDonald's franchise or something, We each put $1,000,000 in or whatever the number may be. And we get along with each other and the business grows and all of that. And one of us really wants to spend our share of the earnings. And the other 2 want to leave the money in the business to grow. Now if the 3 of us did that and we're the only shareholders, we would not establish a 100 percent dividend payout for everybody and we wouldn't freeze the one that wanted to get out either. The logical thing to do is to buy a portion, whatever that person wants to spend annually from the earnings, buy a portion of their stock and the other 2 find their interest in the company goes up. And the 3rd person still has a little more of an interest by what they leave in, but they also can take some money out of the business. So you're taking money out of the business in either case and one you call dividends and you send it to everybody whether they want it or not and with buybacks you give it to the ones who want the money. And I have been following a policy of giving away stock now since 2006 and I'll give away a lot of stock but the people, the philanthropies that receive it, the guests have to spend the money very promptly within on a current basis more or less. So they are getting $3,000,000,000 worth of stock or whatever it may be, and I am in effect reducing my interest in Berkshire, but I'm still Berkshire is still retaining more capital than I'm giving away. So I have more dollars invested, but my interest goes down. And the people that need the cash to carry out the philanthropic efforts, they cash out the stock. And I don't force my sister or whoever it may be to take a bunch of money she doesn't want, she wants to reinvest it, all of it reinvest in the business and people that don't want to sell some of their stock. And the company ends up in the same position. We've distributed some of the capital that we don't need for growth. Now whether the company should buy it depends on a couple of things. One is they ought to retain the money they need for intelligent growth prospects. That's fine. And secondly, and this is a point that's never mentioned, they should be buying it back below what they think it's worth. Now they'll make mistakes in that, but you make mistakes in a lot of business decisions, but over that should be the guiding principle. And to my knowledge, JPMorgan, Jamie Dimon said it once and we've said it various times, we retain we will repurchase shares when it's to the advantage of the continuing shareholder to have us do so. But you read about all these buyback programs that we're going to spend $5,000,000,000 buying it back or $10,000,000,000 dollars Well, that's like saying I'm going to go out and buy some business this year for $5,000,000,000 without knowing what you're going to get for the money. It should be price sensitive, obviously. It should be need sensitive, obviously. But when the conditions are right, it should also be obvious to repurchase shares, and there shouldn't be the slightest taint to it any more than there is to dividends. And people have now sort of taken up the cries about how terrible it was that companies bought back Star Wars. You can say it was terrible for them to pay dividends too, then they'd have more money now. But they were doing what was intelligent at the time and I hope they continue to do what's intelligent as they go forth. Greg? No, the only thing I know you've commented on in the past Warren is that I think the one thing we are seeing and obviously we're supportive of buybacks, but there are companies that used probably their financial engineering was just a little Extreme. Extreme and too cute that effectively you're using every ounce of your balance sheet to buy back stock at a time where you're really creating no cushion for your business, for any type of event or bump in the road. And I we're going to see that and I think that's a very unfortunate outcome of them and hence you get some of the back lash. But there's still companies as you highlighted many that do it right. Yeah. Now if they're buying it back because it's fashionable, because they really do like the idea, there's nothing wrong with doing taking an action that increases the value of the remaining shares, but if they're doing it very and instantly I've been witness to some programs where it really is stupid. But I don't think it's immoral, I think you should think it's stupid basically. And on the other hand, we favor companies that take care of all our requirements for growth and as Greg says, maintain sound balance sheets and all of that. Leave a margin of error for things that you can get surprised with. And if they find their stock selling below the what the business is intrinsically worth, I think they're making a big mistake if they don't buy in their stock. And it's going to be a political football. And like I say that when it becomes politically correct to do something in this country, if you're a politician, the best thing to do is get on board. But Berkshire is going to do what it thinks makes sense for shareholders. And we like investing in companies that think that way too and not all companies obviously do. All right. Here's a question from Lou Bogart in Boca Raton, Florida. He says, I'm a long time shareholder with a concern as I head into retirement. I understand the theory that splitting shares does nothing for the value of shares. However, with the extremely high price on A Shares, when I wish to draw down some money on my portfolio in retirement, I'm facing a large tax hit. Say the average price has been about $300,000 this year and I'm sitting on a $200,000 capital gains liability for each share. If I need $60,000 in additional cash during my retirement, I need to sell a full share and get hit with $200,000 tax liability. If you would split the stock 10 for 1, I could sell $230,000 shares and keep my tax liability at a more manageable $40,000 I could also maintain more of my investment in Berkshire. He said, Have you thought about this? In retrospect, I should have bought B shares, but didn't think of that at the time. You can convert A to B shares, which is exactly what takes place when I give away the money in July to the 5 foundations. I actually convert it immediately before the gift. I mean, and so they get B shares. And the truth is the B shares are very useful to people that want to either give away a small portion of what they have or spend it or whatever it may be. So you can convert the A to B shares, which is exactly what I've been doing now for 14 years as I give it away, and solve that problem. And we split the B shares as I remember it at one point, you know, just to make it even more manageable so that people could deal with smaller denominations. The B shares, the A Shares have a different voting power, but we passed some resolution sometime ago, I think, and certainly would be the case in any event. We're never going to give the A shares an advantage over the B. They used to have an advantage in a shareholder designated contribution program that we had, and we put that in there when we started. But that's that goes way back in time and that doesn't exist anymore. So that the B and the A are going to get treated exactly the same over time. It's true that A have more votes, but and they sell very close to parity all the time. So I would say that if you want to do anything in terms of raising cash and you've got a lot of A shares, take 1 or 2 shares of A and plenty of people I know have done this and just cash in and turn it into B and give yourself whatever amount of cash you want to get. This is one that comes from Thomas Lin in Taiwan. He says Warren once said that banking is a good business if you don't do dumb things on the asset side. Given that the pandemic might put a lot of pressure on the loans, dumb things that got done in the past few years are likely to explode. Through reading annual reports, 10 Qs and other public information, what clues are you looking for to decide whether a bank is run by a true banker who avoids doing dumb things? That's that's a very good question, but I would say that the one thing that made Chairman Powell's job a little easier this time than it was in 2,008, 'nine is that the banks are in far better shape. So in terms of thinking about what was good for the economy, he wasn't at the same time worrying about what he was going to do with Bank A or Bank B to merge them with somebody else or put strange, add his trains on the system or anything. And the banks, the banks were very involved with the problem in 2,008 and 2009. They had they had done some things they shouldn't have done in some of them, and they were certainly in far different financial condition than ours. So that the banking system is not the problem in this particular show. I mean, the government is we decided as a people to shut down part of the economy in a big way, and it was not the fault of anyone that it happened. Things do happen in this world. Earthquakes happen. You know? The huge hurricanes happen. This was something different. But the the banks banks need regulation. I mean they benefit from the FDIC, but part of having the government standing behind your deposits is to behave well, and I think that the banks should behave very well, and I think they're in very good shape. I mean, that's why the FDIC has built up $100,000,000,000 that I've talked about. I mean, they've assessed the banks in recent years at accelerated amounts in certain periods and they even differentiated against the big banks. So they've built up great reserves there and they built their own balance sheets and they are not presently part of Chairman Powell's problem whereas they were very much part of Chairman Bernanke's problem back in 2000,809. How you spot the peoples that are doing the dumb things is not easy because well, sometimes it's easy. But I don't I don't see a lot that bothers me, but banks are in the end institutions that operate with significant amounts of other people's money. And if problems become severe enough in an economy, even strong banks can be under a lot of stress and we'll be very glad we've got the Federal Reserve System standing behind them. I don't see special problems in the banking industry. Now I could think of possibilities and Jamie Dimon referred to this a little bit in the JPMorgan, JPMorgan report. You can dream of scenarios that puts a lot of strain on banks and they're not totally impossible. And that's why we have a fathom. And I think that I think overall the banking system is not going to be the problem. But I'm not a I wouldn't say that with a 100% certainty because there are certain possibilities that exist in this world, more banks could have problems. They're going to have problems with energy loans. They're going to have problems. Some, you know, they're going to have extra problems with consumer credit. They're going to have, you know, they're in, but they know it and they're well reserved. Well, they're well capitalized for it. They were reserve building in the Q1 and they may need to build more reserves, but they are not a primary worry of mine at all. We own a lot of banks. We own a lot of bank stocks. Greg, do you have any thoughts on it? No, I really, you touched on it earlier too just in general, which is we don't know how long this pandemic will go. We don't know if there's going to be a second event, which are just risks that are really unknown at this time and the banks will have to continue to manage through that as businesses do. But you've already highlighted that obviously. Yes. Thank you. All right. This question, I was looking for one of these because I got several questions that came in similar to this. I was looking for one of these a moment ago. This one's from Andrew Wenke. Says, can you ask Warren why he didn't purchase repurchase Berkshire shares in March when they dropped to a price that was 30% lower than the price that he had repurchased shares for in January February? Yeah. It was a very, very, very short period where they were 30% less. But we I don't think Berkshire shares relative to present value are at a significantly different discount than they were when we were paying somewhat higher prices. I mean, it's like Cain said or whoever it was, if the facts change, I changed my mind. What do you do, sir? So it's we always think about it, but I don't feel that it's more far more compelling to buy Berkshire shares now than I would have felt 3 months or 6 months or 9 months ago. It's always a possibility, and we'll see what happens. Greg, you think about repurchasing shares? No, I mean generally. No, I think our approach warrants the right approach. I mean, you're always I can't really add anything other than the approach is the right approach. We approach it when we see it's the right thing for our shareholders to be repurchasing, and that doesn't mean we're repurchasing all the time or the view doesn't change. There could be a price relative to value at the time, not relative to what it was worth a year ago. I mean, the value of certain things have decreased. Our airline position was a mistake. Berkshire is worth less today because I took that position than if I hadn't. And there are other decisions like that and it is not more compelling to buy the shares now than it was when we were buying them. It's not less compelling. I mean it's a wash, but we didn't do anything. It's not gotten the price has not gotten to a level or not been at a level where it really feels way better to where it really feels way better to us than other things, including the option value of money to step up in a big, big way. This question comes from 3 investors in Israel, Leidars Luft, Yossi Luft and Dan Gorfang. They wanna know about the credit card industry. It says, how do you explain the rise in the average credit card interest rate in recent years compared to the federal funds rate? What are the forces that you think might keep it at or around current levels and what are the forces that might drive it lower in the future? Well, that is not a subject that I'm, you know, obviously it affects American Express to some degree. It affects the banks we own, but interest rates on credit cards respond to competition, obviously, to loss potential, which obviously has gone up significantly in the last few months, although it's gone down perhaps from some other periods you can pick in the past. But I don't really have much I can bring to the party on that question. We are not in the well, that isn't true. Our furniture companies, a couple of them have their own credit card. They do a lot of business on other people's credit cards. My general advice to people, I mean, we have an interest in credit cards. But I think people should avoid using credit cards as a piggy bank to be rated. I had a woman come to see me here not long ago and she had come on some money and not very much, but it was a lot to her. And she's a friend of mine and she said, what should I do with it? You know, And I said, Well, put it on your credit card. And she said, Well, I owe X. And I said, well, what you should do, I don't know what interest rate she was paying, but I think I asked her and she knew and she was something like 18% or something. I said, I don't know how to make 18%. I mean if I owed any money at 18%, the first thing I do with any money I had would be to pay it off. It's going to be way better than any investment idea I've got. And that wasn't what she wanted to hear. And then later on in the conversation, she talked about her daughter and her daughter had $1,000 or $2,000 or something. And she said, well, what should I do with? And she named the girls, money. And I said, have her lend it to you. I mean if you're willing to pay 18% or whatever, I mean she's not going to find a better deal, I'll lend you money. It just doesn't make sense. You can't go through life borrowing money at those rates and be better off the thinking of it. So I encourage everybody. It's contrary to my own Berkshire interest in certain cases, and the world is in love with credit cards. But I would suggest to anybody that the first thing they do in life is not on they can get to something else later on, but don't be paying paying even 12% to anybody. I mean, pay that off and then If they're really a good credit and they don't want to do it, come and see me personally, I'll lend you the money at that rate. Greg, what do you tell your children? No. Same advice. Excellent advice. No, I have 3 that carefully use their credit card more, I would say, for not the obviously, people use it a lot more as they go into the digital world and e commerce world, but then the goal has to be to repay it. It doesn't mean you because you have to use it for those type of transactions, You run up the balance. But there's an incremental risk there now. It's a matter of convenience for some people. But I would have trouble if I were paying 12% for money or whatever it might be, it would not be a good thing. You won't see Berkshire paying that. Warren, this question is from Lindsey Schumacher. Well, we probably ought to wind this up maybe in 15 minutes. Can you select the best ones? Okay. Absolutely. Yeah. Well, I've got a couple more questions for you. This one's from Lindsey Schumacher. She says, Warm, what's your opinion regarding the payroll protection plan? Well, I don't want to get into politics generally, but I think that's a very good idea to take care of the people that are having terrible trouble taking care of themselves in a period like this. I mean, if the government and surrounding conditions and whatever it may be, if you're telling a lot of businesses, essentially, quit doing business for a long time. It's one thing to tell me, but to tell somebody that's living from paycheck to paycheck that way, I'm all for it. It must be hell to administer. I mean, any huge problem. To I'll never get into criticizing on how people do this or that because I've had problems myself in running a few big things. It just isn't that easy to inaugurate incredibly large problems. There's going to be a certain amount of fraud. There's going to be You know, everything doesn't go perfectly, but I am 100% for taking care of the people that really get hurt by something that they've got nothing to do with. And where it's who knows how long it lasts. You've got millions and millions of people that are worrying about something that they weren't worried about a few months ago, and they didn't do anything. They showed up for work on time and they pleased the people they dealt with and whatever it may have been. And now they don't have a job or they've been furloughed or whatever. So I'm totally for the basic idea, and I think it's very difficult. You can't carry it out perfectly. You do your best, and you do it promptly. And I give real credit to both Congress for acting properly on what the problem is. They have sort of caught on from what they learned in 2,008, 2009, I think. And I give credit to trying to do what I think is very much the right thing and I don't sit around and think about how I could do it better. Greg? I agree with the comments. Warren, this question comes from Bill Murray, the actor, who's also a shareholder in Berkshire. He says this pandemic will graduate a new class of war veterans, health care, food supply, deliveries, community services. So many owe so much to these few. How might this great country take our turn and care for all of them? Well, we won't be able to pay actually. It's like people would land at Normandy or something. I mean, the poor, the disadvantaged, they suffer. There's an unimaginable suffering. And at the same time, they're doing all these things that they're working 24 hour days, and we don't even know their names. So we ought to do if we go overboard on something, we ought to do things that can help those people. And this country, I've said it a lot of times before, but the history of it. I mean, we are a rich, rich, rich country. And the people that are doing the kind of work that Bill talks about, you know, they are they're contributing a whole lot more than some of the people that came out of the right womb or got backhand things or know how to arbitrage bonds or whatever it may be. And I'm in a large part, I'm one of those guys. So you really try to create a society that under normal conditions with more than $60,000 of GDP per capita, that anybody that worked 40 hours a week can have a decent life without a second job and with a couple of kids and have they can't live like kings. I don't mean that, but that nobody should be left behind. It's like a rich family. You find rich families and that they have 5 heirs or 6 heirs, they try and pick maybe the most able one to run the business. But they don't forget about get that actually maybe a better citizen in some ways, even than the one that does the best in business. But it just doesn't have to have market value skills. So I do not think that a very rich company ought to totally abide by what the market dishes out in 18th century style or something of the sort. So I welcome ideas that go in that direction. We've gone in that direction. We did come up with Social Security in the '30s. We've made some progress, but we ought to. I mean, we have become very, very, very rich as a country. And things have improved for the bottom 20%. I mean, you can see various statistics on that. But rather be in the bottom 20% now than be in the bottom 20 percent 100 years ago or 50 years ago. But what's really improved is the topic, 1%. And I hope we as a country move in a direction where people build, talking about get treated better and it isn't going to hurt the country's growth. It's overdue, but a lot of things are overdue. We are I will still say we're a better society than we were 100 years ago. But you would think with our prosperity, we couldn't we wouldn't hold ourselves to even higher standards of taking care of our fellow man, particularly when you see a situation like you've got today where it's the people whose names you don't know that are watching the people come in and watching the bodies go out. Greg? Yeah. I Yeah. The only other group that I would highlight, and I think it's it'll be very interesting how it plays out is with the number of homeschooling and the Children that are home. I think there's a we've always had so much respect for teachers, but we all talk about how we don't take care of them. And, you know, it is remarkable to hear how many people comment that clearly we don't recognize or, you know, I have a little 8 year old Beckett at home and, you know, plenty of challenges for mom, but all of a sudden you respect the institution, the school, the teachers and everything around it. So there's and then when I think of our companies and the delivery employees we have, it's absolutely amazing what they're doing, and they're truly on the front line. You know, that's where we have our our challenges around keeping them health and safety. And then you go all the way to the rail. The best videos you see out of our companies are when we have folks that are actively engaged in moving supplies, food, medical products, and they're so proud of it, and they recognize they're making a difference. So a lot of it is we just owe them a great thanks. And, you know, Warren, you touched on it. We can Some way, maybe hopefully longer term compensate them. But there's a great deal of thanks and I probably just think an immense amount new appreciation for a variety of folks. We're going in the right direction all around the country, but it's been awfully slow. Yeah. Gentlemen, I'll make this the last question. It comes from Phil King. He says many people in the press and politics are questioning the validity of capitalism. What can you say to them that might prompt them to take a look at capitalism more favorably? Well, the market system works wonders, and it's also brutal if left entirely to itself. And we wouldn't be the country we are if the market system hadn't been allowed to function, and to some extent, you can say that other countries around the world that have improved their way of life dramatically, to some extent have copied us. So the market system is marvelous in many respects, but it needs government. And it is creative destruction. But for the ones who are destroyed, it can be a very brutal game and for the people who work in the industries and all of that sort of thing. So I do not want to come up with anything different than capitalism, but I certainly do not want unfettered capitalism. And it's I don't think we'll move away from it, but I think we capitalists, I'm one of them. I think there's a lot of thought that should be given what would happen if we all drew straws again for particular market based skills. Somewhere way back, somebody invented television. I don't know what it was. And then they invented cable. Then they invented pay systems and all of that. And so a fellow that could bat 406 in 1941 was worth $20,000 a year and now a marginal big leaguer will make vastly greater sums because in effect the stadium size was increased from 30 or 40 or 50,000 people to the country and the market system capitalism took over. And it's very uneven. And, incidentally, I think the Ted Williams worth a whole lot more money than I ever should make. But the market system can work toward a winner takes all type situation. And we don't want to discourage people from working hard and thinking hard. But that alone doesn't do it. There is a lot of randomness in the capital system, including inherited wealth. And I think we can keep the best parts of our market system and capitalism, and we can do a better job of making sure that everybody participates in the prosperity that that produces. Greg? Yeah. No. I think it's always keeping the best parts of it. And I even think if we look at the current environment we're in, I. E. In the pandemic, and we have to do it only when we can do it properly and reemerge. But in some ways, the best opportunity for people is when we're back working clearly and that the systems functioning again, but that That that's that's the obvious. And then there's this one you've highlighted. There's you know, there's a lot of imperfections, but it's still, it's definitely the best model out there that just needs some fine tuning. And Becky, at the end, I would just say that oh, sure. Can I can I just slip on one more quick question? I forgot this one. Someone sent it in earlier. Thanks. Anderson wrote in. He said Warren mentioned that Ben Graham is one of the 3 smartest people he's ever met. I'd like to ask him the names of the other 2. Well, I I may not be one of the smartest, but I'm smart enough not to name the other 2. I'd make 2 people happy. But I would, Ben Graham is one of the pretty smartest people. I've known some really smart people. Smartness is not necessarily does not necessarily equate to wisdom either, and then, Graham, one of the things he said he liked to do every day was he wanted to do something creative, something generous, and something foolish. And he said he was pretty good at the latter, but he was pretty good. He was amazing, actually, at the creative, but but it's interesting that IQ does not always translate into rationality and behavioral success or wisdom. And so I know some people that are extraordinarily wise that would not be in the top 3 on an IQ test. But if I wanted their judgment on some matter, even if I want to put them in a position of responsibility someplace, I might prefer them to, we'll say 1 of the 3, that'll leave the other 2 feeling fine of the 3. Greg, do you have any thoughts on that? No. I agree with the person you named. And, Becky, I would just say again that we may have, I hope we don't, but we may get some unpleasant surprises and we're dealing with a virus that spreads its wings in a certain way, in very unpredictable ways. And how Americans react to it. There's all kinds of possibilities, but I definitely come to the conclusion after weighing all that sort of stuff, never bet against America. So thanks. Thank you. I appreciate your time tonight. And we'll see you next year, and we'll have we'll fill this place. Okay. Okay. Good night, everybody.

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