Virtual annual meeting of Berkshire Hathaway. We did it in Omaha last year on short notice. We had more warning this time, so we came to Los Angeles, and the reason we're doing it from here is because of the man on my left. Not because he asked for it, but because all of us wanted to do it with Charlie in here in Los Angeles. I'll introduce the three vice chairmen of Berkshire in a minute. I'll show you the first quarter earnings. We won't take much time on that. I'll have one or two very short lessons for perhaps the new investors who are not necessarily in Berkshire Hathaway, but people who have entered the stock market in the last year, and I think there have been a record number that have entered the stock market. I'll have a couple of little examples for them, and then we'll swing into a Q&A led by Becky Quick, who's looked at thousands of questions that have been submitted to her. More can be submitted during this meeting, and we will put up on camera from time to time the way you can communicate directly with her if you want to send questions in during the meeting. She got flooded with them last time. She miraculously keeps sorting them out. Feel free to send in a question, and we will have a question period for about three and a half hours. We will finally have the annual meeting, which won't take long at the end. With that, I would like to first introduce the three vice chairmen of Berkshire Hathaway. I'll tell you just a little bit about them, and then I'll have a mild surprise for you at the end, perhaps. On my left, is Charlie Munger, and I met Charlie 62 years ago. He was practicing law in Los Angeles. He was building a house at that time, a few miles from here. 62 years later, he's still living in the same house. Now, that was kind of interesting because I was buying a house just a few months before, 62 years ago, and I'm still living in the same house. You've got a couple of fairly peculiar guys just to start with in terms of their love affair with their homes. Charlie and I hit it off immediately. I would say he's probably the Vice Chairman in charge of culture, among other things. If I ever want to get questions about where true north is, I talk to Charlie, and he has been an enormous help. He's done it with a lot fewer hours and a lot less talking and everything than I have, but he's contributed in an incredible way to Berkshire. Charlie's been out here in Los Angeles for 60+ years. On my right, your left, I have the Vice Chairman in charge of everything except insurance and investments, Greg Abel. Greg was born and raised in Edmonton, Alberta. He's Canadian, plays hockey. His eight-year-old plays hockey. He came to the United States sometime after he graduated from college in Canada. He is in charge of a business, which has well over $150 billion in sales and employs more than 250,000, probably 275,000 people, and does a much better job at doing that than I was doing previously. On my far left, your right, we have Ajit Jain, and Ajit was born and raised in India and graduated from college there. I met Ajit on a Saturday in 1986, and I'd been in the insurance business. Berkshire had been in the insurance business for quite a while. I was kind of stumbling around in various ways. Ajit came to the office, Saturday I was opening the mail, I said, "How much do you know about insurance?" He said, "Nothing." I said, "Well, nobody's perfect, let's talk about it some." By the end of the morning, I knew I had somebody that was going to build a great insurance business. Starting from that point, this improbable little company in Omaha became the largest property casualty company in the world in terms of net worth. It writes risks occasionally in a 24-hour period that other companies simply couldn't take on themselves. They'd have to assemble other people. It would take them a long time to come to a decision. That was very important at various times in the past. It's not so important now. But he's built an incredible, the world's leading property casualty insurance company. Here we have Charlie from L.A., 60-some years. We've got Greg from Canada. We've got Ajit from India. The one thing in common that these three fellows have, aside from working for Berkshire and doing a sensational job, the one thing in common is that at one time or another, for some extended period, they lived within a mile of me in Omaha, Nebraska. Charlie in 1934 moved about 100 yards away from where I now live and went to high school and eventually went in the service, and knows the neighborhood as well as I do. Went to the same grade school my kids went to and so on. Greg spent significant time in living in Omaha, lived about five or six blocks from me, and now lives in Des Moines. Ajit was in Omaha about a mile away for a couple years. We started in very different places and sort of came together and now go our separate ways, but it's all worked very well. I would, and you'll hear from them during this meeting, I urge you to send questions if you're thinking of it. You can direct them to me or you can direct them to any one of the other three, and it will be a big relief to me if you direct a fair number to the other people. This morning, as we always do, we always do it on a Saturday, we published our 10-Q, which gave the quarterly earnings. It's up on our website, berkshirehathaway.com. It's very interesting. We put these out on Saturday morning. That's not because the media likes us to do it that way. It's not because the analysts like to do it that way, but we want to give you the maximum time to digest an awful lot of information that's in that 10-Q. It can't be summarized in a perfect way. We'll give you some summary figures, but if you're really a student of the place, and most of our investors buy because they simply have faith in these other three fellows to do a good job. It's not a misplaced faith. If you really enjoy going into the details and you want to understand the nuts and bolts of Berkshire Hathaway's various operations, you should read that 10-Q. It'll take you, it may take you a couple of hours. I mean, it's not a small investment of time, but it's got a lot of information about all our various businesses. For those of you who are business students of a sort, I recommend you go to it. The summary figures you see here, which are the ones we put in our press release, show kind of an interesting pair of numbers I made down there at the bottom. You know, we have last year, when you see those brackets around numbers, you know, you got to start worrying. First quarter, we actually showed a loss of almost $50 billion. I never thought I'd ever see a figure like that. Was thinking back, I was trying to remember whether I'd gone on vacation during that quarter and turned things over to the other guys or what. I checked the calendar, that was me. That figure this year is a positive figure of $11.7 billion. Neither figure is very meaningful in itself. The Accounting Standards Board a few years ago, for many, many, many, many years, unrealized gains or losses of a company like Berkshire were made adjustments to the net worth of Berkshire, but they did not run through earnings. A few years ago, the rule was changed so that every time the stocks go up or down, it goes through our earnings account. In the first quarter of last year, when stocks went down a lot, we had a huge sum of unrealized. It was a reduction of unrealized gains largely. When you start saying things like that, you start losing people. If we reported earnings daily, you would see earnings one day of $3 billion, next day of minus $2 billion. It, it's an accounting treatment that we don't think is particularly appropriate, but we, but it's required. We explain very carefully, both in our press releases or we try to explain, and I try to write in my letter and explain why I don't think that's the way to look at Berkshire. We think over time that we will have investment gains for reasons I lay out in my letter. Over a period of time, the companies we own stock in retain earnings, and they use those reinvested earnings usually to our benefit, and that shows up in capital gains someday. Reported earnings for a company that has a lot of common stocks, marketable stocks like ours, you don't want to look at that final line, and you do wanna look at the operating earnings line. Now, I would say that if you had taken the first two months of last year and compared to the first two months of this year, those figures would have been quite comparable. Of course, in March of 2020, the economy was shut down in effect. I mean, it was a self-induced recession and an abrupt one, very abrupt. Economy went off a cliff in March. It was resurrected in an extraordinarily effective way by Federal Reserve action and later on the fiscal front by Congress, and we'll get into that later. The figure you see that the difference was March, basically, the two. Our businesses have done, we'll get into more specifics later, but our business has done really quite well. This has been a very unusual recession in that it's been localized as to industry to an extraordinary extent. Right now business is really very good in a great many segments of the economy, which we'll talk about later. There's still problems if you're in a few types of business that have really been decimated, you know, such as international air travel or something of the sort. With that, we'll go back to the figures later on, perhaps in some of the questions. I would like to just go over two items that I would like particularly new entrants to the stock market to ponder just a bit before they try and do 30 or 40 trades a day in order to profit from what looks like a very easy game. I would like to go to slide L1. Put that up. On March 31st, I ran off a list of the 20 largest companies in the world by stock market value. Those names, good many of which you'll be familiar to, but they were led by Apple at slightly over $2 trillion. It went down to the number 20th was worth $330 billion. Those are the 20 largest companies in the world by market value on March 31st. Now, if I had a little I was hoping I could get a little quiz machine so I could have everybody weigh in on this answer, and we could flash it up a little later. But it was technically impossible. What I would like you to do is look at that list. You know, starts off with Apple. Saudi Aramco is a pretty kind of a specialized country as a company. It's, it's I don't know whether it's 95% owned by the government or what, but it's essentially a country that's for sale in terms of that business. I The, the top of the top six companies, five of them are American. When you hear people say that America hasn't, you know, it's not working very well or something of the sort. You know, in the whole world, of the six top companies in value, five of them are in the United States. If you think about it, you know, we talked a little about this last year, but in 1790, we had 1/2 of 1% of the world's population. A little less, we had 4 million people, 3.9 million people. 600,000 of them were slaves. Ireland had more people than the United States had. Russia had 5x as many people as the U.S. did. Ukraine had 2x as many people as the United States. Here we were, but what did we have? We had a map for the future, an aspirational map that somehow now only, well, after the Constitution, 232 years later, leaves us with five of the top six companies in the world. You know, it's not an accident, and it's not because we were way smarter, way stronger, you know, anything of the sort. We had good soil, decent climate. Some of those other countries I named, and the system has worked unbelievably well. Just imagine thinking of five of the top six companies in the world ending up with a country that started with 1/2 of 1% of the population, just a few hundred years ago. What I would like you to do is look at that list for a minute or two, if you want to, and then make an estimate, make your own guess. How many of those companies are gonna be on the list 30 years from now? Here they are, these powerhouses. How many would you guess are gonna be on the list? You know, it's not gonna be all 20. It may not even be all 20 today or tomorrow. This was March 31st. What would you guess? Think about that yourself. Would you put down five, eight? Whatever it would be, I would now invite you to look at slide two or L2, which goes back a little more than 30 years, and look at the top 20 from 1989. If you look at the top 20 from 1989, there's two things that we should grab your interest, at least two. None of the 20 from 30 years ago are on the present list. None. Zero. That, there were then six U.S. companies on the list, and their names are familiar to you, we have General Electric, we have ExxonMobil, we have IBM Corp. I mean, they're still around. Merck is down there at number. None made it to the list 30 years later. Zero. I would guess that very few of you, when I asked you to play the quiz a little a few minutes ago, would have put down zero. I don't think it will be zero. It is a reminder of what extraordinary things can happen, things that seem obvious to you. Japan had this wonderful bull market for a very long time, you had a number of Japanese companies on the list. Today there are none. The United States had the six, now we have 13, they aren't the same six. I would invite you to think about one other thing as you look at this list. 1989 was not the dark ages. I mean, we weren't just discovering capitalism or anything else. People thought they knew a lot about the stock market, the efficient market theory was in, it was not a backward time. If you look, the top company at that time had a market value of $100 billion, $104 billion. The largest company in the world of title in just shade over 30 years has gone from $100 billion to $2 trillion. At the bottom, the number 20 has gone from $34 billion to something a little over 10x that. Well, that tells you something about what's happened with equality, which is a hot subject in, in this country. It tells you a little bit about inflation, but this was not a highly inflationary period as a whole. It tells you that capitalism has worked incredibly well, especially for the capitalists. It's a pretty astounding number. Do you think it could be repeated now that 30 years from now that you could take $2 trillion for Apple multiply any company and come up with 30x that for the leader? You know, it seems impossible. Maybe it is impossible. We were just as sure of ourselves as investors and Wall Street was in 1989 as we are today. The world can change in very, very dramatic ways. I'll just give you one other example you might ponder. This is when you start feeling too sure of yourself. One thing it shows, incidentally, is that it's a great argument for index funds, is that the main thing to do is to be aboard the ship, you know, a ship. You know, they were all going to a better promised land. You just didn't know which one was the one to necessarily get on. You couldn't help but do well if you just had a diversified group of equities. U.S. equities would be my preference to hold over a 30-year period. If you thought you knew a lot about which ones to pick or the person that you had hiring, you were paying a lot of money to have all these ideas. They could tell you their best ideas in 1989 did not necessarily do that well, although overall equities were absolutely the place to be. Secondly, people get enormously attracted to various industries. I mean, they think if you know if a company says it's in the XYZ industry, and that's a popular one, you can sell IPOs, you can sell SPACs. People disregard sales numbers, earnings numbers. It just, you know, it's the place to be. Berkshire Hathaway, where was the place to be in 1903 when my dad was born in 1903, that wasn't really that big of news. It wasn't big news that actually Henry Ford was starting the Ford Motor Company. It failed a couple of times before. He was about to change the world. I mean, the auto, when you think about everything, we've got a great auto insurance company. If there weren't any autos, we wouldn't have GEICO. It transformed the country. Henry Ford bought in the $5 daily wage, that was a huge thing. Assembly lines, everything, autos came along. Let's just assume that you had seen a quick glance back in 1903 of all the interstate highways, 290 million vehicles on the road in the United States. You know, everything about it and said, "Well, this is pretty easy. It's gonna be cars. It's gonna be autos". Berkshire, Let's see what we've got up there. Yeah, no, stay where you were. Go back. I don't wanna change slides yet. G o back to the L's. The Berkshire by accident, we own a company called Marmon. We bought it from the Pritzker family some years ago. The Pritzkers had built this business from many, many, many companies that they'd acquired, and the name of their company was Marmon. I don't know exactly why Jay and Bob decided to name it Marmon, but they did own a company called Marmon. Getting slightly ahead of me on the slides again, but that's okay. The, we called it, the, They owned this company, Marmon, which in 1911 had been the company whose car won the first Indianapolis 500. Maybe that's why they called it Marmon. They were proud of the fact that the company in 1911 won the first Indianapolis 500. It also was the company that invented the rearview mirror. I'm not sure whether that was a big contribution to society. Certainly around your household, the rearview mirror you don't want to emphasize too much. They, the car that was entered in the Indianapolis 500, the guy who normally sat next to the driver and looked backwards to tell what the competitors were doing, he was sick, so they invented the rearview mirror. Let's just assume that you had decided that autos were this incredible thing, and someday there'd be an Indianapolis 500, and someday they'd have rearview mirrors on cars, and someday 290 million cars would be buzzing around the U.S., car or autos or, and there's probably trucks there. I decided to look at the history, and I thought I'd put up the list of auto companies from over the years. I was originally going to put up just the ones that were the M so I could get them on one slide. When I went to the Ms, it went on and on and on. I just decided to put up the ones that started with MA. As you can see, there were almost 40 companies that went into the auto business, just starting with MA, including our little, our Marmon there in the middle column, which lasted for a while, quite a while. It was selling cars in the 1930s were really quite special. In any event, there were at least 2,000 companies that entered the auto business because it clearly had this incredible future. Of course, you remember that in 2009, there were three left, two of which went bankrupt. There is a lot more to picking stocks than figuring out, you know, what's going to be a wonderful industry in the future. The Maytag Company put out a car. Allstate put out a car. DuPont put out a car. I mean, there was a Nebraska Motor Company. Everybody started car companies, just like everybody's starting something now that can be where you can get money from people. But there were very, very, very few people that picked the winner or got the opportunity for at Ford Motor, Henry Ford had a few partners, and he really didn't like them, so he figured a way to buy them out. That was sort of the, that was one, it was sort of the beginning of the auto finance. That's a long story. We won't get into that. But you couldn't buy into Ford Motor. Of course, General Motors became the dominant company. Finally when Henry Ford did not really make the shift from the Model T to the Model A very, did not work very well. I just want to tell you, it's not as easy as it sounds. With that, we will go to Becky Quick, and she will ask any of the four of us questions she has selected and which we don't, she doesn't share with us. We will do this for a considerable period of time. You can be sending in questions to her, and then later on, after about three and a half hours, we will have the annual meeting, which won't take long. Becky, over to you. Thanks, Warren. Hello to everybody. This first question that came in from Andy Serwer. He says he's the owner of Not Nearly Enough B Shares. He says, "Mr. Buffett, you're well known for saying to be fearful when others are greedy and be greedy when others are fearful. By all appearances, Berkshire was fearful when others were most fearful in the early months of COVID-19, dumping airline stocks at or near the low, not taking advantage of the fear gripping the market to buy shares of public companies at exceptional discounts, and being hesitant to buy back significant amounts of Berkshire stock at very attractive prices. I'd appreciate hearing your thoughts surrounding this time and how Berkshire approached its decision-making, specifically after it was assured through the CARES Act that the government would provide a robust backstop to the financial markets. Of course, until they, until both monetary and fiscal policy kicked in, you knew we had an incredible problem, and that our I am, as just as Charlie is the chief culture officer, I'm the chief risk officer of Berkshire. That's my job. It, we hope we do well, but we want to make sure we don't do terribly. We didn't sell a substantial amount. I mean, we're a company with $600 billion, probably $700 billion worth of businesses. Some we own in their entirety, and some we own a piece of. I don't know whether we were sellers of maybe 1% of the value of all the businesses we had. The airline, just kind of interesting with the airline businesses in particular, and then I'll get to what was done in fiscal monetary policy. We had a few people at various subsidiaries of Berkshire that wanted to go in for help from the government. In some cases, they had minority shareholders, owned a few percent, and they said, "Well, this, you know, we're gonna get killed by what's happening, when with the regulations that are being put out and we're stopping the economy." They said, "Everybody's going in for them, and why don't we go in?" I said, "You know, Berkshire can handle it". This is for people that can't handle what's happening, and we're not applying. The airlines were the most prominent beneficiaries of what took place immediately. They got $25 billion initially, most of which went to the Big Four airlines, and some of which went in as grants, not loans. You know, I think that was fine public policy. I was wishing it could go to every restaurant and dry cleaner and every small business that really was out of business and had no I mean, they were made toast of, you know, basically. The airlines, clearly what happened was not their fault in any way, shape, or form. It wasn't like 2008 and 2009 when people blamed the banks and hated to see them help. So it was. Now, airlines operate in bankruptcy, so it isn't like three of the four big ones, you know, went through bankruptcy and within the previous 10 or 15. The airlines that were kind of used to operating in bankruptcy, they would have kept operating, but it was perfectly proper for the airlines to be helped. The entire airline business, you know, you look at these figures of $2 trillion for Apple and so on, the entire Big Four airlines, they sold for about $100 billion almost. I mean, it's a very, very small. Combined, they wouldn't come close to making the cut. I mean, they wouldn't be in the top 50. Anyway, they went into the government. They needed the government help, or they could go bankrupt, some of them. Really the Congress, but Steven Mnuchin too, they decided they deserved the help, which I do not quarrel with at all. Imagine if Berkshire was the 10% holder, which they had been, of everyone in the airlines, they said, "Take it up with Berkshire." I mean, they might have very well had a very different result if they'd had a very rich shareholder that owned 8% or 9%. That, they didn't have that, you know, when they went in. You might not have gotten the same result. In fact, I would think you probably wouldn't. I mean, I can just see the headlines now. I mean, they, you know, because you've seen the headlines on some companies that took $100 million or $200 million, you know, and really didn't need it, and some of them gave it back, and most of them gave it back. You were actually looking at a, probably at a different result than if we'd kept our stock. In any event, an industry that was really selling for less than $100 billion, lost a significant amount of money. They lost prospective earning power. I mean, right now, they're, you know, international travel has not come back. I would say overall too, the economic recovery has gone far better than you could say with any assurance. We didn't like having as much money as we had in banks at that time, I cut back some of the bank investment. Basically, our net sales were about 1% or 1.5%. Looking back at, you know, it would have been better to be buying. I do not consider it a great moment in Berkshire's history, but I also own, we've got more net worth than any company in the United States under accounting principles. We've got $600 billion or $700 billion of generally good businesses. I think the airline business has done better because we've sold, and I wish them well. I still wouldn't want to buy the airline business. International, people really wanna travel for personal reasons. Business travel is another thing. We've got a big exposure to business travel, of course, through the fact that we own 19% of American Express, and we own Precision Castparts, which services the air business very. We've still got a big investment in air travel, a big commitment to it. We wish the Big Four the best. I think their managements have done a very good job during this period. More specifically beyond the airlines, though, just the idea, this came from several questions too, including one from Chris Blaine. You spent years accumulating cash insisting you had your elephant gun ready. The March 2020 listed equity sell-off came with promises from the U.S. government that they would do what it takes, yet you sat on your hands. Please help me understand what I missed. I didn't get quite the last part. What was the final question? Just please help me understand what I missed. Why didn't you use more of the cash at hand? We have about, as in our cash on hand has been about 15% of our values of our businesses, and that's a healthy chunk. I'd say it'll never get below $20 billion, but we're gonna raise that number because it's just the size and importance of Berkshire. We could have deployed $50 billion or $75 billion right before the Fed acted. I mean, we hit a point where the calls were two calls came in, but there was two or three days of nothing could happen. I mean, when Jay Powell acted as he did, that was incredibly important. I mean, I should say the Fed acted as they did, but they moved with speed and a decisiveness on March 23rd that changed the situation where the economy had stopped. The government bond market was even disrupted. Berkshire Hathaway probably could not have gone out with a debt offering the day before. There was a run, it didn't get a lot of publicity at the time, but there was a run on money market funds, a very substantial run. If you look at the numbers, daily numbers on that, it was a repeat of September 2008. This time, I give great credit to what Ben Bernanke and Henry Paulson did, but this time the Fed knew that saying whatever it takes and saying it and demonstrating it, which they did on March 23rd. They took a market where Berkshire couldn't sell bonds on the day before and turned it into one where Carnival Cruise Lines or something could sell them a day or two days later. There was, you know, a record issuance of corporate debt, and companies losing money, companies were closed, whatever. It was the most dramatic move that you can imagine. At the time, as I remember, the chairman saying, you know, "How about a little help on the, on the fiscal front?" Then Congress acted very, very big. The, in 2008 and 2009, they argued about, you know, "We don't want to give money away to those dirty banks," all that sort of thing. This time, there really was not anybody to blame. They saw what was necessary, and Congress responded. You had fiscal and monetary policy that responded in a way that was incredible, and it did the job. It did, I think it did a better job than either the Fed or the Treasury or anybody expected. I mean, this economy right now is, 85% of it is running in super high gear, and people cannot, you know, and you are seeing some inflation and all of that. It has responded in an incredible way. We learned something out of 2008 and 2009, we applied. I don't think it was a sure thing that would happen. The one thing about Berkshire is we never do, we don't want to depend on anybody. We're not a bank. We can't go to the Federal Reserve if we need money, and we've got to be sure that under any circumstances, any circumstances, we can't solve nuclear war, and maybe we can't, you know. You know, Blanche DuBois, if you remember, in A Streetcar Named Desire said, "I depend on the kindness of strangers." You can't depend on the kindness of your friends if things really stop. I mean, I've seen that in several different places, and we were seeing it on March, middle of March. Everybody was drawing down their credit lines. The banks did not expect that. They just weren't sure they were gonna be able to draw down their credit lines 10 days later. They just drew them down, and they took the money out of money market funds. I give great credit on both the monetary and fiscal side of what was done, I didn't think it was a sure thing that would happen, and I didn't know how it would be implemented. It's worked. I think it's worked better than just about anybody has expected. I think, well, you're seeing it now. You know, Charlie's got some views on this too, we shouldn't leave him out of it. Well, it's crazy to think anybody's gonna be smart enough to husband money and then just come out on the bottom tick in some crazy crisis and spend it all. There's always is some person that does that by accident, but that's too tough a standard. Anybody expects that of Berkshire Hathaway is out of his mind. Yeah, Charlie and I never were very good at dancing, but we really can't do that dance. No, no, we can't. That, by the way, almost nobody else can either. Not with tens of billions. Yeah. Or hundreds of billions. It's worked out. Well, we forgot to show one of the financial sides, actually, if you go back to the balance sheet, we did buy in in the first, you'll see the shares outstanding if we go back to what is it, E3? E2. If you look- Slide, huh? Yeah. Pardon me? I think it's E2. Is it? Well, it's the balance sheet. Yeah, there it shows the shares outstanding at the bottom. We have, we spent about $25 billion in the first quarter and more money since. It's the best thing. We can't buy companies as cheap as we can buy our own. We can't buy stocks as cheap as we can buy our own. We've been able to do that with a fair amount of money. Looking back, I mean, if you know, definitely we could have done better things. We would've sold airlines and cut back on banks regardless. Whether we should have bought something else at the same time is another question. This question comes from a long-term shareholder who's been here for more than 25 years. His name's Ben Knoll. He's from Minneapolis, Minnesota. He says, "Mr. Munger and Mr. Buffett, after a 15-year period of market underperformance, you're cautious about predicting Berkshire being able to outperform the market in the future. Given this, what do you see as the arguments for longtime shareholders to continue holding their stock versus diversifying their risk across an index? Charlie, you wanna answer that? Well, sure. I personally prefer holding Berkshire to holding the market. Because- I'm quite comfortable holding Berkshire. I think our businesses are better than the average in the market. Is it because you don't think the market values it fairly? Well, these are just accidents of history, and things are fluctuating at all times. On a composite basis, I'd bet on Berkshire over the market. That's assuming we're all dead. I recommend the S&P 500 index fund and have for a long time to people. I've never recommended Berkshire to anybody because I don't want people to buy it because they think I'm tipping them into some. So I never, I mean, no matter what I was selling for. You know, I've made it public. You know, on my death, there's a fund for my then widow, and 90% will go into an S&P 500 index fund and 10% a Treasury bill set. On the other hand, I'm very happy having my future contributions to a group of charities that'll be spread over 12 years or so after my death, to stay in Berkshire. I think the odds are, Berkshire is, I like it, but I do not think the average person can pick stocks. We happen to have a large group of people that didn't pick stocks, but they picked Charlie and me to manage money for them 50 or 60 years ago. We have a very unusual group of shareholders, I think, who look at Berkshire as a lifetime savings vehicle and one they don't have to think about and one that they'll look You know, if they don't look at it again for 10 or 20 years, that will have taken care of the money reasonably well. I wouldn't argue that the S&P 500 over time, I like Berkshire, I think that a person who doesn't know anything about stocks at all and doesn't have any special feelings about Berkshire, I think they ought to, you know, they ought to buy the S&P 500 index. As a follow-up to that, Gerald Silver writes in, he says, "The trustees of your estate to, I believe you've directed the trustees of your estate to invest substantial assets into the index fund. Isn't that a vote of no confidence to your managers? Well, no, we're talking about way less than 1% of my estate. One thing I'm gonna do, incidentally, I mean, all rich people get advised by their lawyers, set up trusts so that nobody can see your will and all that sort of thing. My will is gonna be public record, and you'll be able to check at some point whether I'm telling you the truth about what is gonna get done. 99.7%, roughly, of my estate will either go to philanthropy or to the Federal Government. Before it does it, I think Berkshire is a very good thing to hold. For a given individual, particularly my wife, I just think that having a tiny fraction, which is all it takes for her to do very well for the rest of her life, I think that the best thing to do is buy 90% in an S&P 500 index fund. The index fund people naturally have started, over the time, they market more and more products that go to other indices and everything. They're really starting to say to the, to the American public, they're saying, "Well, you can pick what continent to invest in, or you can pick what industry, and we'll sell you something for that." When they just have gotten through telling them, "You know, you really don't know anything about stocks, just buy the whole index." I named the 500 index as one. It's, it's a tiny portion, but it'll be, it'll be her livelihood, and she'll have all the money she needs and way beyond it, and that's that. I don't, I don't mind having the 99.7%, large portion of it, assuming the law's the same as now, go to philanthropy to be kept in Berkshire until they finally are disposed of. This question comes from Andrew Dixon in the U.K. He says, "My question is in relation to the oil and gas business and your purchase of Chevron stock. When being asked a question on tobacco stocks in 1997, you mentioned that individuals and companies occasionally have to draw moral lines about what they're willing to do. You stated at the time that you were not comfortable in making a big commitment in tobacco stocks and that you were uncomfortable about their prospects. Charlie has also referenced passing up on a private tobacco deal that you both knew was a cinch, yet you both have no regrets in saying no to the transaction. I'm not suggesting that the oil and gas business has the same known negative externalities as cigarettes. They do not. With tobacco, the cause and effect relationship between the products and cancer is direct, obvious, and measurable. With hydrocarbons, the societal costs and benefits are far more complex to evaluate. However, an increasing portion of society is drawing their lines in such a way that their painting does not include hydrocarbons, period. My question is, has the alarmism from the climate community now become pervasive across society to the extent it has become irrational? Have we built our own unrealistic consensus on the pace of change achievable with regards to the transition to greener energy sources to the extent that this is becoming an overly expensive tax worn by the current younger generation? Can we gather from your purchase of Chevron stock that you do not believe the howling from society, regulators, and politicians will impair the prospects of hydrocarbons, and Chevron for that matter, in the next 10 years? Can investors still assume an oil and gas business that finds and produces oil at low cost per barrel can generate a sufficient return on capital for a long time to come? I'll give you a 10-word answer to that. Yeah. The, you know, I can't remember all the questions that were there, but I would say that people that are on the extremes of both sides are a little nuts. I would hate to have all hydrocarbons banned in three years or, and, you know, you wouldn't want a world. It wouldn't work. On the other hand, you know, what's happening will be adapted to over time, just as we've adapted to all kinds of things. I do not think I'm interested by this quote from 1997, because, you know, we've talked about this before. We have no problem owning Costco or Walmart, you know, and a substantial number of their stores and, you know, they sell cigarettes. It's a big item, you know? It's, it's something that brings people in. They know the price of cigarettes and, you know, they put them up front. We don't. It's a very tough situation. We made that decision a long time ago when we went to Memphis and we looked at a business that was a very, very good business, and it was much less harmful, at least from everything I could find out, it was much less harmful than smoking tobacco, chewing tobacco was. These were decent people, and they were running a legal business, and they all chewed tobacco themselves, so they were. They told me that their mother was 100 and chewing tobacco and all these things. Charlie and I did go down in the lobby of that hotel, and we just said to ourselves, "This is probably the best business we've ever seen." I called my then son-in-law, Allen Greenberg, and he'd studied chewing tobacco and its effects when he was working for a Nader-related organization. We decided not to do it. You know, would we, y ou know, I used to see ads in our paper from financial companies where I knew they were terrible, you know? It's a very tough thing to decide whether you get in or out of a business. It's a very tough time to decide what companies benefit society more than others. I mean, it's, I don't know whether I think Chevron's benefited society in all kinds of ways, and I think it continues to do so, and I think we're gonna need a lot of hydrocarbons for a long time, and we'll be very glad we've got them. I do think that the world's moving away from them too, and that could change. I don't like making the moral judgments on stocks in terms of actually running the businesses, There's something about every business that you know what you wouldn't like, and, you know, meat packers or anything. Have you ever gone through a meat packing plant? You know, there's If you expect perfection, you know, in your spouse or in your friends or in companies, you're not gonna find it. What you elect to do yourself, if you own an index fund, you own Chevron. Believe me, Chevron is not an evil company in the least. I have no compunction about owning, in the least about owning Chevron. If we owned the entire business, I would not feel uncomfortable about being in that business. Charlie? I agree. You know, you can imagine two things. A young man marries into your family. He's a English professor at, say, Swarthmore, or he works for Chevron. Which would you pick? I don't see. I want to admit I'd take the guy from Chevron. Well, I hope your daughters agree with you. On the other side of that argument, because there were lots of emails that came in both, on both sides of these ESG questions, this one comes from Christina Gallegos, who's been a shareholder since 2018. She says, "On Items 2 and 3 of the proxy materials, the board recommended voting against on the shareholder proposal regarding the reporting of climate-related risks and opportunities, as well as on the shareholder proposal regarding diversity and inclusion reporting. Berkshire is such a force for good when it comes to financial literacy and empowerment through wealth creation. Why not be a force for good and an example when it comes to these two very important issues? Please share with us more about the against recommendation. Well, I think maybe Greg can talk a little bit about what Berkshire has done as opposed to in terms of the environmental. I would say this, it's very interesting. With everything that's being I think we have over 1 million shareholders. I mean, you can't be 100% sure because of street name and duplicate accounts and all that sort. It certainly seems very, very likely. I've had and I get the letters that are written to me. I don't think I've had I only think I've had three letters in the last year or anything on from shareholders. Now, I have them our vote on this, as you'll see later, is that overwhelmingly the people that bought Berkshire with their own money voted against those propositions. But most of the votes for it were by, came from people who'd never put a dime of their own money into Berkshire. I don't think they read our annual reports, and I don't think they read the reports of Berkshire Hathaway Energy, and I don't think they know. You know, if I talk about what we're doing in high voltage transmission, we're doing more than any other company in the country. The President talked about what the government's going to do and how important it is, and, you know, we have a record and that's overall is incredibly good. We have a group of organizations just generally, and they're nice people, but they want us to answer a bunch of questionnaires their way. They want us to go to Dairy Queen and Borsheims, and all those people have them fill out reports that show a bunch of figures when the reports that count are the reports that Greg gets on Berkshire Hathaway Energy and the railroad, and you talk about three of our companies and you've covered 95% of it. It's asinine, frankly, in my view. Now, we do some other asinine things because we're required to do them, so we'll do whatever's required. To have the people at, you know, Business Wire, you know, Dairy Queen, all these places filling out reports to make it some common report that comes in, we don't do that stuff at Berkshire. We've got, during the pandemic, we probably have about 12 people to come into headquarters, and we've got, you know, 360,000 people working in a company that all kinds of diverse activities. It's built, I don't want to get into the whole thing. It's built on autonomy. I am probably the only CEO of an S&P 500 company that does not get a consolidated income statement every month. I mean, every other company, I'll bet in the S&P 500 prints out the earnings they had at the end, you know, from February and March, and the CEO gets it and a whole bunch of other people get it. I don't get it. I don't need it, you know. I could put 60 or 70 companies in a whole lot of trouble with everything, and they'd hand me something and I know the answer to it already, and it doesn't make any difference. I mean, they've got the money they need. We don't do things just because we've got a department of this or a department of that, and we don't want to set up a lot of departments like that. What's important is what we're doing in the well, primarily at Berkshire Hathaway Energy and the railroad. I mean, that's and I'll let Greg tell you about that in just one second. Warren, I don't think we think we know the answer to the all these questions about global warming and so forth, and the people who ask the questions think they know the answers. We're just more modest. Well, even if we knew the answer, I mean, in terms of what we'd the reports. Yeah. we would not collect a whole lot of things that don't mean anything to us. No to satisfy people who actually don't own any stock themselves, and in many cases, I can tell they haven't read our annual report even. The, you know, we, as I pointed out in the annual report, and I'd never but nobody would have guessed this. People think we're a bunch of guys that own stocks and all that sort of thing. Berkshire Hathaway owns, by GAAP accounting, more property, plant, and equipment, business infrastructure, which the President just got through talking about Wednesday night, infrastructure, the importance of it. We have, measured by GAAP accounting, more than any other company in the United States. We have more than any of those companies that are on the list of the largest companies in the country, but we've and we've got it by a substantial margin. We have an investment in what makes this country move and work. 15% of the interstate goods move on the, on our railroad, and we're building transmission. We started in 2006 or 2007, planning how we would close coal plants. You can't close coal plants until you get the electricity from where it's generated to the customer. If you're gonna generate it in Wyoming, and it's gonna go to Las Vegas or some place, and previously they had a coal plant near the place because that was the way it was done 50 years ago or 75 years ago, you better have the transmission. There's no sense having the wind blow in Wyoming and people trying to turn on the lights in Las Vegas. We went after transmission plan, question a lot earlier than people were talking about it. We said $16 billion or whatever it was in the annual report that we're underway. We just added $2 billion since the annual report came out. There's no utility in the country that's coming anywhere close to that. Tell them a little bit about it. Sure, Warren. Thank you. Really, as Warren touched on, BHE and BNSF have the significant carbon footprints when you think of Berkshire. Warren, you touched on the disclosure that we've provided in the past, going all the way back to 2007. I did pull those two investor presentations, one from 2007 and then our most recent one in 2021. If we could pull up BHE one as a slide, I think it would just highlight going all the way back to 2007, we've been doing investor presentations for what we call our fixed income investors, and we've done that through every year through 2021. We've provided very similar disclosures to our board on an annual basis and had discussions around Berkshire Hathaway Energy's plans to decarbonize. It's interesting, if you go back to the 2007 fixed income conference, and we're having a conference at that point in time. We have third-party debt, capital debt that our utilities raise. It's a traditional capital structure used across our regulated entities to manage our total cost to the customer. We have investors. We present to them, as we're highlighting on an annual basis. If you go back to that 2007 investor conference, it's interesting. In that presentation, we're highlighting climate change, that it's a fundamental risk, and we discussed what good policy would be. We discussed innovation. We discussed market transformation and the importance of setting targets at that point in time. We had recommendations for our industry. Since then, each year we've presented really a plan and a strategy around how each of our businesses in BHE, but each of our regulated entities, how they're going to transform. The whole transformation has been around decarbonization, managing that risk on behalf of our stakeholders in our many states, our customers that we serve, and ultimately managing that risk for Berkshire Hathaway's shareholders. As you go through those presentations, there's a common theme, Warren touched on it already. You have to build the foundation first, and that foundation is around building the high voltage, the transmission system. Warren touched on it in his annual report this year and letter he highlighted that at Berkshire Hathaway Energy, we'll be spending just in the West, $18 billion on transmission. $5 billion of that's already been spent, as we sit here today, and that $13 billion will be spent over the next 10 years. That's the foundation that then allows us to build incremental renewable resources and move it to our many states that we serve at Berkshire Hathaway Energy and well beyond that. I would highlight while we've been building the transmission infrastructure in place, we have been building renewables. If you look at our investment through the end of 2020, we've invested $30 billion or in excess of $30 billion into renewables and have really completely changed the way our businesses do business, i.e. our utility businesses. They've been decarbonizing and delivering a valued product to our stakeholders, to our customers. I think the results are really amazing when you look at them, I'll give you a couple of reference points. If you go back to 2015 when the U.S. was discussing, excuse me, joining the Paris Agreement, very specific targets were set. Prior to those targets being set, Berkshire Hathaway Energy and 12 other companies, including the Apples of the world, Google, Walmart, committed to Paris, and that targets needed to be set. Berkshire Hathaway Energy was one of those companies in 2015. Yeah, how many other utilities were there? Right. Warren, there were no other energy companies that made any type of commitment at that point in time. I'm happy to report we made a variety of pledges. Well, one of them was, at that point, we'd invested $15 billion in renewables, and that we would commit $30 billion in total. Well, we far exceeded that total now. There's been a clear commitment to reduce decarbonizing our businesses. We have focused on very identifiable, quantifiable outcomes, and I think that's very important. If you look at the standards that set, were set with the or the original U.S. government's commitments associated with the Paris Agreement, the target was 26%-28% reductions in carbon footprints going back to 2005. That's the reduction period, through 2025. They wanted the 26%-28% reduction level. We committed to that at BHE, I'm happy to report, Warren, we've briefed our board. We achieved that in 2020. We met our pledge, and we met the commitment under the Paris Agreement. Then if you fast-forward to the discussions that are occurring right now or have occurred around rejoining the Paris Agreement, the current administration has proposed that, again, using 2005 as a starting point, that the emission goals or reduction should be 50%-52% by 2030. Again, I'm happy to brief to our shareholders in briefings we've provided to our board, Berkshire Hathaway Energy will achieve that by 2030. Our reductions will hit the Paris Agreement target. The reason we can do it is we've built the foundation through transmission, the substantial investment that Warren's highlighted, and then followed that up with very specific investments on the, on the renewable side. I have one incremental slide that I hope sort of pulls it all together, and that's BHE2. As people discuss carbon, they often go to coal units, how many you own, how many have you closed. There's no question that's, can be an important metric, but it is a transition. We have very much focused across the three utilities we own, and the ones we've highlighted on the slide, is to transition from our existing fleet to renewables using transmission. We have not become overly dependent on transitioning to gas. That's been a clear strategy. Over a period of time, our coal units will retire. I'm happy to report or pleased to report to our shareholders that through 2020, we've closed 16 units to date. If you look at from 2021 through 2030, there'll be an incremental 16 units closed. Then if you go through to the end of 2049, our remaining 14 units will be closed. At that point in time, all our coal units are closed. That slide is just an aggregation of all the activities each of our business units have been taking to help facilitate that transition, and really transitioning to a decarbonizing those units, and I said, decarbonizing our businesses on behalf of, first and foremost, our customers, the many stakeholders they represent in their, in the various states. Then equally important, decarbonizing those businesses on behalf of our Berkshire Hathaway shareholders. The only other thing I would add, 'cause it is the entity that has the second-largest carbon footprint in Berkshire, and when you combine BNSF and BHE, you're talking the material set of emissions within Berkshire. BNSF has also been very active in managing their carbon profile. They've committed to have science-based targets established for 2030. Again, those targets will again be consistent with the Paris Agreement. We've seen what the other participants or some of them in the class in our industry that have committed to. Our commitment will be very similar, i.e., it'll be consistent with the Paris Agreement, but it'll be a 30% reduction in BNSF's footprint by 2030. That's been publicly disclosed. That's on the BNSF website. Everything I've discussed regarding BHE is on their website, filed in 8-Ks, completely accessible by our many shareholders. When I look at it from the perspective of our Berkshire shareholders, I really believe this risk is being well managed, and we're positioning ourselves for the long term. Thanks, Warren. Yeah. Incidentally, I mean, the President the other night talked about $100 billion for infrastructure. We'd love to spend $100 billion. He was talking about, you know, transmission is really the problem. I mean, a big problem because you gotta get from where the sun is shining and where the wind is blowing, essentially to concentrations of population. It'll be whether, you know, you cross state lines and you go through people's backyards. Whether the Federal Government has a better luck in just saying, "This is the way it's gonna be done," and ramming it down the throats of where they go and getting it done. I mean, they may have that power and they'll be able to do it faster than we are. On the other hand, we'd love to do it. We'll spend the $100 billion, the speed at which we can do it. We bought PacifiCorp in 2006, and we had a bunch of customers out in the far West and they had coal plants serving them. To change that, you've gotta be able to go to where wind blows and deliver it. It is interesting that we have published this information. We've spent more, far more than any utility than in terms of renewables and transmission in the United States, we started with a nothing, you know, little operation. Our, the people who bought the stock with their own money, the individuals, they seem to understand it, and they read the reports. We get calls and they say, "Well, we wanna come out and talk to you about it." Well, we're not talking to them and ignoring the million people that have been with us over time and bought it with their own money. We will not give special treatment to either to analysts or to institutions over the individuals that basically trust us with their savings for their lifetime. This question is for Warren and Ajit. It comes from Fernando Lewis, a longtime Berkshire shareholder from Panama, who says, "As a shareholder that intends to remain so for many decades, my biggest concern is around possible losses arising from higher than expected insurance losses. We've seen this in other great companies, where underwriting mistakes end up crippling businesses previously considered exemplar. While I understand that Berkshire's culture is unique and the insurance division is full of talented individuals, this is a risk that concerns me. Many of us shareholders feel comfortable now, given the privilege of having Mr. Buffett, Mr. Munger, and Mr. Jain looking at these deals. However, there will be a day when this is no longer the case. Is it reasonable to think that over the long term, Berkshire should focus on plain vanilla short tail insurance businesses like GEICO and reduce the size of some long- tail risk? I want to clarify that I have the most respect and gratitude for all of Berkshire employees that have built the best insurance group in the world. I'm confident we have this talent to remain leaders in this field for decades to come. This is focused on the inherent opaqueness and risk of some insurance lines. Ajit, do you want to lead off or was it? I mean, clearly contract certainty is an issue for us in the insurance industry. It is an issue that cuts across not only the long- tail lines that you mentioned, but even short- tail, property-focused lines. The most recent example is business interruption, which is an integral part of any property insurance policy that is bought and sold by corporations. It is a risk every time we issue a contract that either because of sloppiness in terms of how that contract is written or because of the regulatory environment we all have to live in, that the words in the contract may be tortured. Normally when they are tortured, they end up going against the insurance industry, not in their favor. It is a risk. It's an unknown risk in terms of how bad it can be. I hope we price for it. When we price for the product, we throw in something for the unknown unknowns, if you will. We try and aggregate our exposures by major risk categories. Hopefully, that'll give us some comfort in terms of having some boundaries on what the exposure really can be. There's no question the regulators play a very important role in terms of the economics of the business, especially in the U.S. where there are 50- state regulators who we have to deal with in terms of pricing, in terms of contracts, in terms of. Most of the surprises in insurance, probably all of them, are unpleasant. I mean, you get the premium on upfront, that's pleasant. Yeah From there on, you get some very imaginative losses that come through and you get some that you take on. We are willing to lose, in terms of sort of the outside limit, we think, well, we're willing to lose $10 billion in a single event, and we want to get paid very appropriately for that. We've got the resources to do it. We don't want to lose $10 billion in something where we only thought we'd lose $50 million or something like that. You know, the current situation, for example, with the Boy Scouts of America, you know, they, I think there were 1,100 claims or something like that that have been filed. Less than that. Now they're 17,000 just in- No, no, they're close to 100,000 now. Oh, well, and- Up by 50x. Wow. These go back to 1950 or 1960, you've got people advertising for claims, all of a sudden you get a lot of claims. I'm sure a lot of the claims are valid. I'm sure a lot of them are invalid. Well- How in the world do you pick out the difference? It goes back to the issue that you just raised. The reason why this number of claims have skyrocketed from less than 2,000 to close to 100,000 is because the statute of limitations had expired. In several states, if not in most states, they have unilaterally extended the deadline by when you can make claims and expanded it by a few years, as a result of which a lot of more claims have appeared, funded by plaintiff lawyers who are now very well-funded, and that results in claims just skyrocketing. Yeah. We get a lot of unpleasant surprises in insurance, but we've got a very, I'm very biased on this, but I think we've got the best insurance operation in the world. Ajit is the guy that created it. The people at GEICO did. We bought that, and they did wonderful things over time. They contribute their part of it, too, and other people have. Ajit is a symphony conductor of it. This question comes from Henry Zhu, and he says, "It looks like Charlie and Warren have some different opinions recently, like Costco and Wells Fargo. Where's that taking Berkshire? Charlie? Well, we're not all that different. Costco is a company I very much admire, and I've enjoyed my long association with that company. But I love Berkshire too, so luckily, there's no conflict. Warren and I don't have to agree on every damn little thing we do. We've gotten along pretty well. We have never had an argument. Yeah at 62 years. It's not that we agree on everything. We've literally, in 62 years, we've never gotten mad at each other. No, no. It just doesn't happen. This question's from Jason Wallner, he says, "Mr. Jain and Mr. Abel, this question's for you. One of the successful features of Berkshire is the strong bond between Mr. Buffett and Mr. Munger, who managed the company better because they had each other. As you two are clear leaders of the next generation at Berkshire Hathaway, can you please tell us about how you interact with each other or some of the other incredibly competent Berkshire managers you seek for advice? Who's that directed at? At Greg and Ajit. Greg. Okay. There's no question that the relationship Warren has with Charlie is unique, and it's not gonna be duplicated, certainly not by me and Greg, no. I can't think of very many other pairs that can duplicate it. Nevertheless, both Greg and I, at least certainly from my perspective, and I'm sure Greg will speak for himself, we've known each other for a very long time. I certainly have a lot of respect, both at a professional level and a personal level, in terms of what Greg's abilities are. We do not interact with each other as often as Warren and Charlie do, but every quarter we will talk to each other about our respective businesses and update each other on our respective businesses. During the course of the quarter, while we may not have any formal sort of meetings, if you will, every time a question comes up which is related to insurance, Greg will pick up the phone and call me. By the same token, if there's any question that comes up relating to any of the non-insurance operations that Greg is in charge of, like we had recently where a client of mine was trying to find a buyer, I picked up the phone and called up Greg and we talked about, you know, how best to proceed. There's that. That happens during the course of the quarter. Every quarter we exchange notes, and we have a perfectly well-functioning relationship between the two of us, and I hope it remains that way. Greg? Yes. Well, Ajit well said, as he touched on, Warren and Charlie have an exceptional relationship. I'm very proud of the relationship Ajit and I have had, as Ajit touched on, it's developed over many years. We've had the opportunity, or I've seen the opportunity to see how Ajit run the insurance business. As Warren highlight and Charlie highlights, there's no one better at it, so I've had the opportunity to observe that. Equally over the years, that relationship has just built and become greater and greater. As Ajit touched on, couldn't have more personal respect for Ajit, both personally and professionally. Even though the interaction may be different than, say, how Warren and Charlie do it, as Ajit touched on, there is a regular dialogue, both around opportunities within our two businesses and units. Both if we see something unusual that the other individual should hear, we make sure we're always following up with each other. It goes beyond that. Ajit has a great understanding of the Berkshire culture. I strongly believe I do too, and any time we see anything unusual in one of our businesses, it's Ajit who I'm gonna call and say, "Are you comfortable that we're taking this approach? Is it going to be consistent with how you think about it, how you think about it in insurance?." It goes beyond just discussing the businesses, but that maintaining the exceptional culture we have at Berkshire and building upon that, so very fortunate to have Ajit as a colleague and immensely enjoy working with him every day. Thank you. Thanks. This question comes from Glenn Greenberg. He says: It's on the profitability of GEICO and BNSF. He said, "Why do these companies operate at meaningfully lower profit margins than their main competitors, Progressive and Union Pacific? Can we expect current managements to at least achieve parity? Was it GEICO and? BNSF. Actually, if you look at the first quarter figures, you'll see that the Berkshire Hathaway- Union Pacific comparison's got quite better. Katie Farmer's doing an incredible job at BNSF. It's been an interesting question whether five years from now or 10 years from now BNSF or Union Pacific has the higher earnings. We've had higher earnings in the past. Union Pacific passes the first quarter you can look at. You know, they think they've got a slightly better franchise. We think we've got a slightly better franchise. We know we're larger than Union Pacific. I mean, we will do more business than they do, and we should make a little more money than they do, but we have in the last few years. It's, it's quite a railroad. I feel very good about that. I should go back to the previous question. You know, people talk about the aging management at Berkshire, and I always assume they're talking about Charlie when they say that. I would like to point out that in three more years, Charlie will be aging at 1% a year. He is no one is aging less than Charlie. If you could take some of these new companies with 25-year-olds, they're aging at 4% a year. We will have the slowest aging manage, percentage-wise, by far, than any corporate, any American company has. Did you wanna talk about GEICO versus Progressive too? 'Cause I got a lot of questions on that. Well, Progressive has had the best operation in recent years in terms of matching rate to risk. I mean, that's what insurance is all about, among other things. I mean, you have to have the right rate. If you think that 90-year-olds and 20-year-olds have an equal chance of dying I mean, you're gonna be out of business very quickly in the life insurance business. You will get all the 90-year-old risks, and the other guy will get the 20-year-old risks. The same thing applies in auto insurance. I mean, there is a huge difference between 16-year-old males and how they drive and 40-year-old married, you know, employed people. The companies that do the best job of actually having the appropriate rate for every one of their policy holders is going to do very well. Progressive has done a very good job on that. We're doing a much better job on that already. Todd Combs has gone there and, it's a very interesting business. Both Progressive and GEICO were started in the 1930s. I believe I'm right about Progressive on that, and we were started in 1936. You know, we have had the better product for a long, long time, I mean, in terms of cost. Here we are, 80, 85 years later in our case, and we have about 13% or so of the market, whatever it may be, and Progressive has just a slight bit less. The two of us have 25% of the market, roughly. In this huge market, after 80-some years of having a better product. It's a very slow-changing competitor situation. Progressive has done a very, very good job recently. We've done a very, very good job over the years, and we're doing a good job now. We have made some very significant improvements. Don't want to look at the quarters too much, our profitability in the first quarter was good. We gave back more money under our give back arrangement when the virus broke out. We gave $2.8 billion on our give back program. That was larger than any company as well. It was the largest, I think, in the country. GEICO and Progressive are both going to do very well in the future. Actually Union Pacific and BNSF are gonna do well in the future. It's just in both cases, we want to do a little bit better than the other guy. Can I? Yeah add a little bit? Yeah. There's no question Progressive is a machine. They're very good at what they do, whether it's underwriting, which Warren talked about in terms of matching rate to risk, whether it's handling claims. Having said that, I think GEICO is catching up with Progressive. more than a year ago, about a year ago, Progressive had margins that were almost twice as much as GEICO 's, and growth rates that were almost twice as much as GEICO 's. If you look at the results as of now, Progressive is still crushing it in terms of growth relative to GEICO. GEICO has certainly caught up with Progressive in terms of margins, and hopefully that gap will be nonexistent in the future. The second point I want to make on the issue of matching rate to risk, GEICO had clearly missed the bus and were late in terms of appreciating the value of telematics. They have woken up to the fact that telematics plays a big role in matching rate to risk. They have a number of initiatives, and hopefully they will see the light of day before not too long, and that'll allow them to catch up with their competitors in terms of the issue of matching rate to risk. I will predict that five years from now, State Farm is still the largest auto insurer, but I will predict that five years from now it's very likely that the top two will be GEICO and Progressive. In which order we'll see. Both companies are gonna do very well in my opinion. GEICO's done well, extremely well, but Progressive was better at setting the right rate and we're catching up, I think, fairly fast. Yeah, Progressive has certainly done better. When it comes to branding, GEICO is, I think, miles ahead of Progressive. In terms of managing expenses as well, I think GEICO does a much better job than anyone else in the industry. This question comes from Vittorio Agueci from Switzerland, who writes in, "Why in the recent past did Berkshire sell some of the common stocks owned on Apple? If the company is considered Berkshire's fourth jewel, why didn't Berkshire buy more of Apple stocks in 2020? This seems to be counterintuitive." Well, we have 5.3% or something like that now. It's gone up in the first quarter because we bought in our shares, which helps our own shareholders expand their interest in Apple indirectly without laying out a penny. Apple's repurchased its shares and just announced another repurchase program. Let's say, we look at Apple as a business that we own 5.3%. Now, It's a marketable security, so it shows up as way greater than any other marketable security we have. Of course, if you look at our railroad that we mentioned, well, Union Pacific is selling for about $150 billion in the market. We own one that's a little larger than the Union Pacific and making a little less money, but not much less. It's an extraordinarily Apple, it's got a fantastic manager. Tim Cook was underappreciated for a while. He's one of the best managers in the world, and I've seen a lot of managers. He's got a product that people absolutely love. There's an installed base of people. They get satisfaction rates of 99%, and I get the figures from The Furniture Mart as to what's being sold. If people come in and they want an Android phone, they want an Android phone. If they want Apple, they want an Apple phone, you can't sell them the other one. I mean, it, the brand and the product is, it's an incredible product. It's a huge bargain to people. I mean, the part it plays in their lives is huge. I use it as a phone, but I'm probably the only guy in the country. You know, maybe some descendant of Alexander Graham Bell's doing the same thing. It is indispensable to people and, you know, it costs, you know, a car costs $35,000 and I'm sure with some people if you asked them whether they wanted to give up, had to give up their Apple or give up their car, you know, and really make the choice for the next five years, you know, who knows what they'd do? It's, you know, we get a chance to buy it, and I sold some stock last year, although our shareholders still had their percentage interest go up because we repurchased shares. That was probably a mistake. In fact, I and Charlie, in his usual low-key way, let me know that you thought it was a mistake too, didn't you, Charlie? Yes. Yeah. Yeah. I can only do so many things that I can get away with Charlie, and I kind of used them up between Costco and Apple. Certainly he probably, well, he very likely was right in both circumstances. It's an extraordinary business. I do wanna emphasize that in his own way, it's a different way, Tim Cook is we see a lot of managers of a lot of businesses, and you're looking at two great ones on the both ends here. He's handled that business so well. He couldn't do what Steve Jobs obviously could do in terms of creation. Steve Jobs couldn't really, I don't think, do what Tim Cook has done in many respects. I also think it's clear that that list you showed of the leading American companies, it's been very important for America that we've done so well in this new tech field, and I personally would not like to see our present giants brought down to some low level by some anti-competitive reasonings. I don't think they're doing a lot of harm anti-competitively. I think they're a credit to the Americans, credit to our civilization. They're huge. They're huge, and that's good for us. Let me have a, ask a follow-up question on that then. This comes from Jack Sang, who says, "What's your mindset when you see so many of these high flyers, not the GME or meme stocks, but more like the big tech growth stocks gaining 50%, 100%, 200%, et cetera, in a matter of a year or less? I know you eventually bought Apple in 2016 because of the quality of their businesses and their management. How do you assess if these high flyers are worthy of your investment given this crazy high valuations that muddy the waters?." Well, we don't think they're crazy. We don't. At least I, Charlie, I feel that I understand Apple and its future with consumers around the world better than I understand some of the others. I don't regard prices, and that gets back, well, it gets back to something fundamental in investments. I mean, interest rates, you know, basically are to the value of assets what gravity is to matter, you know, essentially. On the way out here, I tore out a little clipping from The Wall Street Journal yesterday. Probably the only one that read it, so small I'm having trouble finding it. Anyway, on Thursday, the U.S. Treasury sold some 8-week, some 4-week notes, Treasury bills. The price was in, i f you looked at your Wall Street Journal down in a little corner next to the last page in my paper, in the very bottom corner. Here it is, the results of the Treasury auction. Little, tiny thing. They sold 4-week Treasury bill. bill. They had applications on the 4-week Treasury bill for $100 some billion. They accepted bids for $40 billion-$43 billion worth. It says, "Average price 100.000000." Six zeros. Essentially, people were giving $40 some billion to the Treasury, and they offered to give $130 billion or something, whatever the amount tendered, and the Treasury received the money at zero. Janet Yellen has talked a couple of times about the reduced carrying cost of the debt. In the, I think in the last fiscal quarter, the U.S. Treasury, the U.S. government, which owes a few trillion dollars more than a year ago, their interest expense was down 8%. You've had this incredible reduction in the so-called super risk-free group, the short-term Treasury bill, and that is the yardstick against which other values are measured. I mean, if I could reduce gravity, its pull by about 80%, I mean, I'd be in the Tokyo Olympics jumping. Essentially, if interest rates were 10%, valuations are much higher. You've had this incredible change in the valuation of everything that produces money because the risk-free rate produces really short enough right now, nothing. It's very interesting. I brought this book along because for 25 or more years, Paul Samuelson's book was the definitive book on economics. It was taught in every school. Paul was he was the first Nobel Prize winner. It's sort of a cousin to the Nobel Prize. They started giving it in economics, I think in the late 1960s. He was the first winner from the United States, Paul Samuelson. Amazingly enough, the second winner was Ken Arrow, and both of them are the uncles of Larry Summers. Larry Summers had the first two winners as uncles. Paul, he was a wonderful guy. He was a wonderful writer, the definitive writer. I got out the 1973 economics book. Bear in mind, probably economics kind of started in as kind of an interesting science and respect. With Adam Smith, we'll say, you know, he wrote The Wealth of Nations in 1776, and he'd written some books earlier, but you sort of date it from kind of when our country started. You had all these famous economists subsequently. Paul became the most famous of his time. I looked up in the back under interest rates. I looked for negative interest rates. There's nothing there. I finally found zero interest rates. Paul Samuelson, brilliant man, after a couple of 100 years we've had of kind of studying economics, basically, he said that, he said, "You can conceivably," technically he said, "You can conceive perhaps of negative interest rates, but it can't ever really happen." That was, you know, in the 1970s. This wasn't back in the dark ages. No economist wrote up and said, "This is a terrible line to have in a book," or anything. You know, here we are in this world where we had zero interest rates last year on a 4-week note. Berkshire Hathaway, which has more than this, but let's say we had $100 billion in treasury bills. We have more than that. Before the epidemic, pandemic, we were getting about a $1.5 billion f rom that a year. At present rates, if it's 2 basis points, we'd get $20 million. Imagine your wages going from $15 an hour to $0.20 an hour or something. It's been a sea change, and it was designed to be that. I mean, it was that's why the Fed moved the way they did. They wanted to give a massive push, just like Mario Draghi did in Europe in whenever it was, 2012, when he says, "Whatever it takes." They want the negative rates. The Fed has said it doesn't want to go to negative rates, and I think the Treasury actually has got some small borrow. If you, present rates were destined to be appropriate, if the 10-year should really be at the price it is, those companies that the mentioned in this question, they're a bargain. I mean, they have the ability to deliver cash at a rate that's, if you discount it back, and you're discounting at present interest rates, stocks are very, very cheap. Now, the question is what interest rates do over time. There's a view of what interest rates will be based in the yield curve out to 30 years and, you know, so on. It's a fascinating time. We've never really seen what shoveling money in on the basis that we're doing it on a, on a fiscal basis while following a monetary policy of something close to zero interest rates, and it is enormously pleasant. In economics, there's one thing always to remember. You can never do one thing. You always have to say, "And then what?" We're sending out huge sums. I mean, President said it on Wednesday, 85% of the people were gonna get a $1,400 check, you know, or, 85%. A couple of years ago, we were saying 40% of the people couldn't, never could come up with $400 of cash. We've got 85% of the people getting those sums, and so far we've had no unpleasant consequences from it. I mean, people feel better. The people who get the money feel better, and people who are lending money don't feel very good. It causes stocks to go up. It causes business to flourish. It causes an electorate to be happy. We'll see if it causes anything else. If it doesn't cause anything else, you can count on it continuing in a very big way. Now there are consequences to everything in economics. That is why the Googles and the Apples, and we don't own Google, we don't own Microsoft, they are incredible companies in terms of what they earn on capital. They don't require a lot of capital, and they gush out more money. If you're trying to find bonds that gush out more money from the Federal Government, we got $100 billion that's gushing out, like, you know, $30 million or $40 million a year or whatever it may be, depending on the short-term rates. It's that puts the pressure on, which is exactly, of course, what the monetary authorities want done. I mean, that's, they're pushing the economy. They're doing it in Europe, you know, even more extreme. They're pushing, and we're aiding it with fiscal policy, and people feel good, and people have become numb to numbers. You know, trillions don't mean anything to anybody, you know? And $1,400 does mean something to them. We'll see where it all leads, but it's Charlie and I consider it the most interesting movie by far we've ever seen in terms of economics, don't we, Charlie? Yes, the professional economists, of course, have been very surprised by what's happened. It reminds me of what Churchill said about Clement Attlee. He said, "He was a very modest man and had a great deal to be modest about." That's exactly what's happened with the professional economists. You know, they were so confident about everything, and it turns out the world is more complicated than they thought. As a follow-up to that, Pat Kane wrote in, "What's your opinion about the economic theory MMT, especially the United States, because it's the reserve currency for the world?" Well, I think the modern monetary theorists are more confident than they ought to be, too. I don't think we, any of us know what's gonna happen to this stuff. I do think there's a good chance that this extreme conduct is more feasible than everybody thought. I do know if you keep just doing it without any limit, it will end in disaster. On a related question, L. Kendall wrote in on this, too, and said, "If you can borrow money at a guaranteed low or even zero interest rate, is it still worthy of borrowing money for not that guaranteed cost from the insurance operation? It reduces the value of float by a substantial amount. We have a flexibility with our float that virtually no one has. I've written about this in the annual letter, but the value of float has gone down dramatically because everything is off of interest rates. When you get to negative interest rates, if a country can borrow at negative interest rates, you get into something that's kind of akin to the St. Petersburg paradox. Those of you who wanna go to search, you can find some interesting things on it. It becomes infinite. It's a crazy consequence of a bunch of abstract mathematics that, where you get there. You lose gravity entirely. You know, if you tell me that I'm gonna have to lend money to the government at - 2% a year, I'm talking nominal figures, not, you know, you're just telling me how I'll go broke over time. If I do that. It pushes you to do other things. Of course, we've seen it, well, we saw the rest of the world do it in even more extreme fashion. But n obody, Paul Samuelson, brilliant man, nobody thought you could do this, we don't really know what the consequences are. We know there are consequences, obviously. This question comes from Sam Butler, who says he's been a shareholder for many years, and asks, "What impact does the rise of so many new SPACs have on Berkshire's ability to find and close new acquisitions? Well, it's a killer. These SPACs generally have to spend their money in two years, as I understand it, so they have to buy a business in two years. If you put a gun to my head and said, "You gotta buy a big business in two years," you know, I'd buy one, but it wouldn't be much of one. It's, you know, we look and look and now there are. There's always been the pressure from private equity funds. I mean, if you're running money for somebody else and you're getting paid a fee and you get the upside and you don't have the downside, you're gonna buy something. I could tell you about a call from a very famous figure many years ago that was involved in it and wanted to learn about reinsurance, and I said, "Well, I don't really think it's a very good business." He said, "Yeah." He says, "If I don't spend this money in six months, I've got to give it back to the investors." It, you know, it's a different equation that you have if you're working with other people's money, where you get the upside, and you have to give it back to them if you don't do something. Frankly, we're not competitive with that. You know, that won't go on forever. It's where the money is now, and Wall Street goes where the money is, and it, it does anything, you know, basically that works. SPACs have been working for a while, and you stick a famous name on it, and you can sell almost anything. It's an exaggerated version of what we've seen in kind of, well, gambling-done-type market. In fact, I did have a quote from Keynes. Yeah, this is probably one of the most famous quotes in history, because it really sums up the problem of the fact we've got the greatest markets the world could ever imagine. I mean, imagine being able to own parts of the biggest businesses in the world and putting billions of dollars in them and take it out of, you know, two days later. I mean, compared to farms or apartment houses or office buildings where it takes months to close a deal, I mean, the markets offer a chance to participate and invest in earning assets on a basis that's very low cost and instantaneous, huge, all kinds of good things. It makes its real money if they can get the gamblers to come in because they provide more action, and they're willing to pay sillier fees and all kinds of things. You have this incredible huge asset to humanity, but it's, it really makes its money when people are doing stupid things. I mean, that's where the money really is. Keynes wrote this in 1936. It says 1939 on the slide, but he wrote in 1936 in the General Theory that, you know, "Speculators may do no harm as bubbles on a steady stream of enterprise. The position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill done." Well, the stock market, we've had a lot of people enter the casino in the last year. You have millions and billions of people have set up accounts where they day trade, where they're selling puts and calls, where they I would say that you had the greatest increase in the number of gamblers, essentially. You know, there's nothing wrong with gambling. They got better odds than they've got if they play the state lottery. They've had cash in their pocket. They've had action, and they have actually had, you know, have a lot of good results. If they just bought stocks, they'd do fine and held them. The gambling impulse is very strong in people worldwide, and occasionally it gets an enormous shove. Conditions lead to this place where more people are entering the casino than are leaving every day, and it creates its own reality for a while. Nobody tells you when the clock's gonna strike 12 and it all turns to pumpkins and mice. When the competition is playing with other people's money or and if they're playing foolishly with their own money, but the big stuff is done with other people's money, they're gonna beat us. I mean, we're not. That's a different game, and they've got a lot of money. We're not gonna have much luck on acquisitions while this sort of a period continues. It's happened before. This is about as extreme as we've seen it, isn't it, Charlie, or? Yes, of course. I call it fee-driven buying. In other words, they're not buying because it's a good investment. They're buying it because the advisor gets a fee. Of course, the more of that you get, the sillier your civilization is getting. To some extent, it's a moral failing too because the easy money made by things like SPACs and total der- return derivatives and so on and so on, you push that to excess, it causes horrible problems for the civilization, and it reflects no credit on the people that are doing it and no credit on the regulators and voters that allow it. I think we have a lot to be ashamed of current conditions. It's where the money is. Yeah, it's shameful what's going on. Yeah. It's not just stupid, it's shameful. I don't regard it as shameful on a lot of the people that gamble. I mean, gambling is a very human instinct, and they've got money in their pocket, and they know somebody else that's made money who they don't think is any smarter than they are. No, no, I don't mind the poor fish that gamble. I don't like the professionals that take the suckers. All right. Moshe Levine writes in. He's an American living in Israel. He says, "If you deem stock prices to be overvalued or in a bubble, do you think it's best to keep your money in cash while waiting for prices to come down to a fair price? Or would it be a better idea to invest this money in some way while waiting until stock prices are fair again, and then sell the investment to buy the stocks?." Well, Charlie and I have had that discussion on a lot of things. We bought some stocks we really don't know that much about, but I'm not really comfortable doing that. We're used to shooting fish in a barrel, but that's gotten harder. Yeah. We've got probably 10%- 15% of our total assets in cash beyond what I would like to have just as a way of protecting our, the owners and the people that are our partners from ever having us ever get in a pickle. You know, we really run firm to make sure that we don't wanna lose other people's money who will stick with us for years. We can't help what somebody does who buys it today and sells it tomorrow. We've got a real gene that pushes us in that direction. We've got more than, w e've got probably $70 billion or $80 billion, something like that maybe, that we'd love to put to work. That's 10% of our assets roughly, and we probably won't get well, we won't get a chance to do it under these conditions. Conditions change very rapidly sometimes in markets, and we do have people that would like to join us. The market option they have is too great for them. If they're publicly traded, I mean, they basically can't. They would have great difficulty, well, then making a deal with us because somebody else would come along with using other people's money. It's, you know, we may be unhappy about the $70 billion, we're very happy about the other $700 billion. It's not like we should complain. Warren, when we spoke before the annual meeting, you said that it was okay if I asked a follow-up or two, and I'd like to do that. Sure One of those right now. You said you bought some stocks that you don't know a lot about. What are they? Well, I will not get into naming what stocks. Maybe there's some there that I think I know about that I don't know about. We have bought stocks where Charlie and I mean, we know the business generally, but we don't have any insights. They are, as a group, if I had to. They told me I was gonna be shot unless I got the best result. I would rather own those stocks than the Treasury bills we own. On the other hand, we work with the quantities of money where, if we put $50 billion into things that I'm kind of so-so about but that are better than Treasury bills, I'm not wildly comfortable about that, even though it can be undone. It's selling $50 billion, when it's really attractive to buy something else. There's a lot of, there's a lot of slippage that can happen in moving sums like that around. That's something we talk about all the time. They're good companies. They're fine companies, but do we know something about those companies or have a way of evaluating that gives us an edge? The answer, I think. What do you feel about it, Charlie? We've talked about it a lot. Well, of course it's a lot harder. I think one consequence of this present situation is that Bernie Sanders has basically won, and that's because with the everything boomed up so high and interest rates so low, what's gonna happen is the millennial generation is gonna have a hell of a time getting rich compared to our generation. The difference between the rich and the poor in the generation that's rising is gonna be a lot less. Bernie has won. He did it by accident, but he won. All right, this question comes from Denny Poland, a shareholder from Pittsburgh. "A prominent senator recently categorized share buybacks as a form of market manipulation. You've often said that repurchasing shares at prices below intrinsic value benefits continuing shareholders. Could you and Charlie please elaborate on the higher order effect that these share repurchases have on society?" Yeah, they're a way essentially of distributing cash to the people that want the cash when other co-owners mostly want you to reinvest, and it's a savings vehicle. If the four of us sitting at this table decided we'd buy a few Dairy Queen franchises, we form a little company, we all put in $1 million or something like that, and we buy the Dairy Queen franchises, and they're doing well. Three of the four of us wanna keep buying more Dairy Queen franchises, and we're not done building and saving for the future, we're in the wealth creation business. The fourth one says, "Listen, I've gotten rich enough. I'd rather take some money out." Well, there's only two ways to do it. We can pay dividends to all four of us, three of us of whom don't want it, and we can repurchase the shares at a fair price. If it's just the four of us, we pick out a fair price, and the fourth one gets bought out of his interest. I find it almost impossible to believe some of the arguments that are made that it's terrible to repurchase shares from a partner if they wanna get out of something. You're able to do it at a price that's advantageous to the people that are staying. It helps slightly the person that wants out. A majority of the Berkshire shareholders, a great majority, we had a vote on dividends one time. We've got savers. That's partly because we've advertised ourselves as being that sort of a vehicle. We've created that something. We've stuck with it for 50-something years and people look, individuals, huge number, look at Berkshire as something they're gonna own till they die. Their circumstances may change, their needs may change, but the savers generally keep saving. We just recently had somebody that father came with us 60 years ago and billions of dollars, and they just, they weren't saving exactly for their old age. It just was sort of built into them that they like to do it. Philanthropies will get a lot of money and so on. What could be more logical than if a very small minority of your holders wanna get out and most of them wanna stay in, and the person who wants to get out wants the money? You don't give the money to everybody. You give it to the one who wants it. You do it at a price that is beneficial to most parties. On a private deal, you'd work out the fair value. The market tells you the value in the case of a publicly traded company. Charlie, got anything? Well, if you're repurchasing stock just a bullet higher, it's deeply immoral. If you're repurchasing stock because it's a fair thing to do in the interest of your existing shareholders, it's a highly moral act, and the people who are criticizing it are bonkers. This comes from Gary Gambino. He wants to know if Berkshire would switch its capital return policy to dividends from buybacks if the capital gains rate goes up to 43.4%. Dividends would be far more tax-advantaged for shareholders under that scenario. Yeah. We literally did have a vote by our shareholders. Now, we've got a different group of shareholders than a REIT would have or, you know, an MLP might have. I mean, there's different people select what they go into, and people that go into SPACs are hoping the stock goes up next week. You know, I mean, basically. We've got a bunch of people that were assembled over 55 years, but they started with a base of people that it was a lifetime investment. If they wanted to cash out, they thought they'd get a fair price at that time. They really didn't. They bought it with no intentions like that. We had a vote, and it was something like 97% or something of the shareholders said they don't want a dividend. That wouldn't be true at other companies, and it'd be crazy to be paying a regular dividend like Coca-Cola has done for many years and then all of a sudden change the policy on millions of people who have bought it with one expectation in mind and try and change it into a different animal. Coca-Cola isn't gonna change to Berkshire, and Berkshire isn't gonna change to Coca-Cola. We've got a different group of owners. It will keep self-selecting because people have a choice every day. Which do you want sort of thing do you wanna be in? Berkshire's a is a certain kind of animal in that respect. We will not. If they jiggle around the tax laws, that's really got nothing to do with the decision. I mean, we've got a very substantial majority of people that want us to reinvest the money. What they're more concerned about is whether we find something to do with the money, the $100 billion or something. Repurchasing shares is something that helps them, and they own a larger percentage of Berkshire as they go along. They'd love to see us buy another business, but they don't mind us intensifying their interest in the present business. You got a lot of questions that came in on taxes. I'll run through a few of them. We'll see kind of how many of you answered them, how many you answered before we get to them. This one came from Arthur Lewis in Denver. What are your thoughts on the new administration's capital gains, corporate tax, and stepped-up basis tax increases? Well, if Charlie wants to answer that, I'll be glad to have him do it. I long ago, many times have said that I don't put my political opinions or anything in a blind trust when I take this job. I also don't speak for Berkshire Hathaway. I mean, we've got people who have very different views on taxes and, you know, I've expressed some things in the past. I don't like to speak on behalf of when I'm sitting at a Berkshire Hathaway Annual Meeting, presumably speaking for Berkshire, I don't really like to get into political questions generally. I don't really think I should. I also think if somebody asks me who I vote for the last election as a personal vote, I voted for Biden. I've never asked a single employee of ours who they voted for, you know, anything of the sort, what religion. I am not authorized to go around signing my name as chairman of Berkshire Hathaway to proposals. If I write op-ed pieces, I do it as an individual. I try to make it clear. I don't think I don't want to use the meeting to give a lot of views on taxes. Charlie. No, I think it's probably a mistake to be basically anti-capitalist. I think capitalism is what raises GDP for everybody. I have also a feeling that Benjamin Franklin was right when he said that it's hard for an empty sack to stand upright. To some extent, the prosperity of leading American institutions helps them behave better. Now, there are exceptions in promotional finance and so on. By and large, Franklin was right. I'm a little wary of just constantly being mad at people because they have a little more money. Charlie, there was a question that came in specifically to you on the tax issue. Over the years, and with emphasis in 2020, we've heard people leaving California for various reasons, such as high cost of living, high taxes, et cetera. I understand that you believe it's dumb for states to have policies and laws that provoke rich residents leaving, what are your thoughts on those people leaving? What keeps you in California? Well, that's a very interesting question. I frequently said I wouldn't move across the street to save my children $500 million in taxes. So that's my personal view on the subject. I do think it is stupid for states to drive out their wealthiest citizens. The old people, they don't commit any crimes. They donate to the local charity. Who in the hell in their right mind would drive out the rich people? I mean, Florida and places like that are very shrewd, and places like California are being very stupid. It's contrary to the interests of the state. One more question for you. Jack Robbins asks, "How will a 25%-28% corporate tax rate affect Berkshire's companies?" I don't think it would be the end of the world. We've adapted to the tax rate, whatever it is. Yeah, I would say that if they raise the tax rate, the Federal Government's owning a larger percentage of the business. I'm not saying what the tax rate is, we have a Class A stock and a Class B stock. The U.S. government owns what I call the Class AA stock. It's a very special stock. They get a percentage of the earnings, they don't own the assets, they don't vote on who gets to run the place or anything else. When I was first starting, they used to take 52%, the Federal Government did, of corporate profits. They've got. What would you pay to own the government's Class A, A A stock? If there was a public issue by the U.S. Treasury and they said, "This vehicle," give it a name like SPAC or something even sexier, but, and all it will do is it owns the future tax payments of Berkshire Hathaway forever. How much is that stock now worth? It'll pay a big cash dividend, and they'll go up as we retain earnings and build the company and everything else. Well, it's worth more if the tax rate is 25% or 28% or 52% than at 21%. They own a special stock. When people talk about how it all gets passed through to customer and everything, in the utility business it actually does. That's a special case. It doesn't in most of our businesses. I mean, it's just, it's a corporate fiction when they put out statements about the fact that this will be terrible for all of you people if we pay more taxes. It hurts the Berkshire shareholders if rates are higher, and that may be quite appropriate, but to say otherwise is just, it doesn't make any sense. I would love to see the government actually issue. Well, they could have, I mean, they could set up a company, just call it the Berkshire Hathaway Tax Company, and it would take all the taxes we paid every year. How much would they be able to sell that asset for? You know, they talk about unfunded obligations of the government. That's an unreported asset of the Federal Government. They own part of Berkshire, and they get to determine how much. I mean, it's an interesting question. One last tax question. This one comes from William Barnard, who says, "In the owner's manual portion of your annual report, Warren, you state, 'On my death, none of my stock will have to be sold to take care of the cash bequests I've made or for taxes.' Would the recent Biden proposal to treat unrealized gains as sold and taxable at death at a 43.4% rate change the amount of stock required to be sold for payment of taxes upon your death?" Yeah, well, the tax law can be changed tomorrow, and I don't, you know, it can be done a lot of different ways, and it's been done a lot of different ways in the past. I can tell you, I can actually make a promise to society that 99.7% of what I have when I die will either go to philanthropy or to the Federal Government. The Federal Government can actually determine the rules on that. You know, I would prefer that it would go to philanthropy. I think it actually will accomplish more utility if it goes to be used by some smart people in philanthropy than if it simply reduces the federal debt by $100 billion or something when I die. I don't think it makes a damn bit of difference, you know, whether the federal debt is $100 billion higher or lower. It won't change anything in the world. At present days, it doesn't really save them anything, because they can borrow $100 billion. It doesn't cost them anything anyway. That condition won't prevail. I don't, I would not regard it. I'm just talking personally. I'm not advocating this as public policy, but it, I wouldn't if they took it all, you know, it would not bother me. I guarantee it won't bother you. Yeah. That's what Charlie would say. Charlie would say. Charlie says you won't know. The, it, you know, if American democracy decides that it's better to take it all, I, which I don't think they will, and I don't think they should, nevertheless, it, you know, so what? You know, I would like to see it used to accomplish the most for humanity. I mean, that means having smart people properly motivated, and more importantly, not improperly motivated, distribute it in a way, then, who knows what the hell it would be 10, 20, 30 or 40 years from now. I do know if it goes to the government, it basically reduces the national debt by that amount. I don't think it changes whether they change the minimum wage laws or does anything else. I just think in little figure changes it'll be, you know, it'll show up in the budget one day, you know, received from Buffett, you know, X, and then, and then some huge figure appears down below. I would prefer it be used privately, but that's really up to the people of the United States to decide through their representatives. This next question's for Ajit. It comes from Professor Donald Wunsch at the Missouri University of Science and Technology, who says, "Mr. Jain, what has COVID-19 taught us about systemic and correlated risk? Is there anything that we will do differently from now on?" Yeah. In the insurance business, we often think about pandemic risk as one of the risk factors that we need to cope with in our business. Having said that, I think the big lesson for us having gone through what we've gone through recently is that while we were aware of the fact that pandemic risk is a risk factor, it was totally underpriced by all of us in the industry. Several of us thought it an event that'll happen at most once in 100 years, and even then, those odds are pretty high. I think the big lesson for us is to recalibrate and rethink about what the return time is for something like a pandemic risk. Separately, we haven't yet done a good enough job as an industry, I'm saying, in terms of correlating the risk and aggregating the risk and making sure we can deal with the aggregate numbers. For example, pandemic risk has obviously taken people's lives. Separately, a bunch of us used to write something called event cancellation or contingency policies, and in terms of pricing for the contingency policies, like the Olympics being canceled, NBC would buy insurance for their rights, which might suddenly be not worth much. When pricing something like that, we would think in terms of earthquake and risk, and more recently terrorism, but we would never factor something like what portion of the price should come from the pandemic exposure. I think the industry will become a lot more sophisticated in terms of thinking through what is the impact of pandemic risk across the entire portfolio, as opposed to it just being localized to one or two areas. I'm sorry, Don asked if anyone else on the stage wanted to comment after Ajit on that same topic. I missed that. Oh, he was just looking if anyone else on the stage wanted to comment on that. Well, as Ajit mentioned, people were throwing in, well, an event cancellation. You know, I mean, lots of people buy insurance against the Olympics being canceled or the United States not participating. I mean, they try to think of all kinds of risks because they had, they have ad campaigns based upon all. There's a lot of event cancellation insurance, and it was probably underpriced the implicit part of that premium that was attributable to a pandemic risk. I mean, you know, Bill Gates gave a terrific talk at TED that's five or six years ago, people ignored it. It's very interesting because this isn't a worst case, what we've seen, yet it's staggering in terms of what has happened. People that wrote insurance, that they, they may have found out sometimes that they were covering things they didn't even intend to cover, and maybe the insurance didn't think they were buying, but nevertheless, after the event occurs, that they get very inventive in coming after them. There are certain risks too that are just too big. The nuclear risk, for example, I mean, the Federal Government is very early on, they recognized that the private insurance industry, they can't handle the risk involved in the financial risk that would be involved in terms of a massive nuclear strike or something like that. It's the pandemics, the wording will be much more careful in future policies on trying to define it very precisely. Incidentally, I mean, the in the way the cases have come so far, in the United Kingdom, I mean, there and I think there was one particular insurer. I mean, the cases are coming down much tougher on insurers. In the United States, I mean, the policies were just written differently. You don't get insurance against something you don't buy against for. Generally the court decisions have come down favorable to insurers. At Berkshire, it just so happens we are not a big player, but that's in commercial multiple peril, which might be where It is not a huge factor for Berkshire. This follow-up question is from Martin Devine, and he asked both Ajit and Warren, "What's your best estimate of Berkshire's insurance claim exposure from the COVID-19 pandemic?" Well, in terms of reserves, starting from last year to the end of the first quarter this year, we have put up $1.6 billion and change in terms of reserves. What that doesn't take into account is some of the frequency benefit because of COVID-19 that results because of fewer accidents, and GEICO's had a huge tailwind because of that. In terms of what the insurance operations collectively are going to be writing checks for, that number as of now is about $1.6 billion. My guess is that'll probably grow because if you look upon it, the industry as a whole has we've reserved $1.6 billion, as I mentioned. The industry as a whole has reserved about $25 billion-$30 billion for COVID-19 as of now. If you believe the pundits in the industry, they will tell you that number is probably gonna be closer to $100 billion. There's another about $70 billion-$75 billion of COVID-19 losses that need to flow through insurance industry's balance sheet and income statement. Our number, therefore, of $1.6 billion that we have as of now is gonna be a lot higher, but it's not something that we cannot manage completely. Yeah, we will not be in its top five- Right payers of, my guess, of insurance claims, even though we write a much smaller amount of both life insurance and annuities actually. You know, in the end, we had more life insurance claims, but the annuities are not gonna last. More people will have died that would've otherwise got payments under annuities. It cuts a lot of ways. It's a, you know, one of the great human catastrophes of all time, but it is not that big in insurance. I would say this, if the insurance industry thinks they're gonna lose $100 billion, the $100 billion ought to be up on their books now. I mean, the idea of feeding in losses. You've got a liability and our goal is not. Our goal is to have put up the liability when it, when it, when we think it's happened and then, if we should not be at $1.6 billion, I would say this, if we really, if we really think we're gonna have some proportional share of $100 billion. Well, that's enough said on that. This next question is for Greg, but also for Warren and Charlie. It's from Blair Miller who asks, "What does the combination of Kansas City Southern with either Canadian Pacific or Canadian National mean to BNSF in terms of competition? And do you think the synergies of the merger will justify the multiple paid?" Sure. It's obviously a transaction we followed very closely with both Canadian National and Canadian Pacific bidding to purchase Kansas City Southern. Either of those companies acquiring Kansas City Southern will have an impact on BNSF. What they're basically proposing is to create a north-south railway that goes from Canada into Mexico. We do have a strong presence in Mexico, not as strong as some of our competition, but we would feel competition there. We'll follow that transaction very closely as it goes before the Surface Transportation Board. The standard that will be applied is that competition has to be protected or enhanced. That's our opportunity to protect our franchise on behalf of our customers. We move intermodal business both in and out of there on behalf of certain customers. We'll wanna protect, the rights of our customers there. We'll be active in the approval process, but there's no question in the end it impacts our franchise. Warren? Yeah, it's not huge, but it affects both the Union Pacific and BNSF to a small degree, relatively small degree. That's not really the worry of the Surface Transportation Board. Their job is to do what's best for the shippers. In terms of the price that's being paid, you know, well, like I say, when if you can borrow all the money for nothing, you know, it wouldn't make much difference to people and this would not be being paid under a different interest rate environment. I mean, it's very simple. It would make, there's no magic to the Kansas City Southern. I think their deal with Mexico ends in 2047. I mean, it's, you know, it's the number of carloads carried, I mean, they're not gonna change that much. It is kind of interesting. There's only two major Canadian, what they call Class I railroads, and there's five in the United States and this will result, you know, in essentially three of the units being Canadian, four being U.S., which is not the way you'd normally think of the way the development of the railroad system would work in the United States. It's, you know, we've talked about it plenty and CP or either Canadian Pacific or Canadian National is very likely to get it. I think Surface Transportation Board vote, voted 4 to 1, didn't they, the other day? They didn't get. Am I correct on that? They voted on an initial trust structure that they had to approve for Canadian Pacific. That was a 4-to-1 vote as you noted, Warren. Yeah. They're moving forward with the evaluation of it. Yeah. Normally, railroad deals are very long, take a long time for them to evaluate. In this case, I think they have two opposing trust proposals, and in effect, if they make a quick decision on which trust proposal that they allow, I don't see how you allow two proposals exactly. It may be a very accelerated decision. I don't know. It's up to the Surface Transportation Board to do what's best for what their obligation is to the country to do. There was a follow-up question on that. Sure. Do you think the valuation that they're paying is worth it? In a very, very mild way, I mean, everybody's kind of play to making deals with different railroads, you know, ever since I've been in the railroad business. You know, we've talked about it. When CP, when Hunter Harrison or, you know, came after him? Was it Hunter that did it on CP that kind of led the way. You know, we looked at buying CP. I mean, they're, everybody looks at everything, and we would not pay this price, and it implies a price for BNSF that's even higher than what the UP is selling for. You know, it's kind of play money to some degree. I mean, when interest rates are this low and everything. I'm sure from the standpoint of both CP and CN, there's only one Kansas City Southern, and they're not gonna get a chance to expand it. They're not gonna buy us, they're not gonna buy the UP. The juices flow, and the prices go up. They're buying with somebody else's money. Yeah, it's somebody else's money, and you're gonna retire. Yeah In five or 10 years, people are not going to remember what you pay, but they're going to remember whether you built a larger system. The investment bankers are cheering you on at every move, you know. They're saying you could pay more. You know, they're moving the figures around, the spreadsheets are out, and the fees are flowing. This question comes from Asher Haft in Brooklyn, who says, Asher's been a shareholder since 2006. Says that he appreciates your honesty and candidness when it comes to explaining costly errors you made. In this year's Chairman's Letter, you discussed that you made a mistake in 2016 when calculating Precision Castparts' average amount of future earnings, which resulted in Berkshire overpaying to acquire it. It appears that Precision's earnings declined substantially in 2020 because of the pandemic and the effect of airline and travel industry. What calculations could you have made in 2016 that might have altered your decision to acquire it? Secondly, are the problems Precision is currently facing larger than the pandemic? Berkshire didn't make the mistake. I made the mistake incidentally. No, any time we look at buying a business, we're evaluating the competitive strengths of the business, the price we have to pay, the management we get and everything. We didn't make a mistake on the management, but in terms of the earning power on average, and, you know, when Boeing has troubles with the 737 MAX, well, that's a probability. I mean, any time any customer is a big I mean, all kinds of things can happen. We have seen some of those things happen, and therefore I paid too much in relation to average earnings. It's a terrific company, and, you know, it's, I'm happy with the management and everything. GE doesn't need as many engines as we thought it would need, and they get into the power business and a variety of things. We knew they were in the businesses, but we did not think those businesses would necessarily be in something close to a depression when other businesses are, that we bought end up doing, sometimes are doing better than we think. We'll continue making mistakes. I mean, and I shouldn't say we will. I will. Even these other guys- The rest of us will help. you know, we've got some wonderful deals and some terrible deals. The nice thing about it is, as I pointed out, this doesn't really apply in the case of Precision precisely, but when we're disappointed in a business, it usually becomes a smaller and smaller percentage of our business just by the nature of things, because it isn't going any place. When we get a successful business like a GEICO or something of the sort, GEICO's doing, they're doing 15x as much business as when we bought control in 19. They become a proportionally much more important part of our mix. You really get, through just natural forces, you get more of your money in the things that have developed more favorably than you thought. You'll actually end up getting a greater concentration in the ones that work out. It's not like Charlie would say, it's not like having children. I mean, the ones, the bad ones cause you more problems, but this, in the children of businesses, the small ones kind of wither away. We started with three businesses, Charlie and I, and Berkshire was textiles, Diversified Retailing was a department store, and trading s tamps were Blue Chip Stamps business, and those were the three companies we put together, and all three of the original businesses failed. Which sort of gets me in terms of the people that are worried about don't we know that coal is gonna be phased out over time? Of course, we know coal is gonna be. You know, that doesn't mean we're gonna be phased out over time. I mean, that every business has some things to think about that way. The biggest danger, they have that section in the prospectus called, w hat do they call that? I don't. Certain- Risk factors. Risk factors. What? Risk factors, yeah. Yeah, risk factors. The number one risk factor, you never see it, the number one risk factor is that this business gets the wrong management, and you get a guy or a woman in charge of it that are, they're personable, the directors like them. They don't know what they're doing, but they know how to put on an appearance. That's the biggest single danger that a business. If that person stays and runs it for 10 or 15 years and either stays in the textile business or department store business and expands. you know, I've looked at a lot of businesses, and that's what's caused the number one problem, and it isn't the kind of thing where they list them all because the lawyers tell them to list them. This question comes from Raghu Boswell, and it's for both Warren and Charlie. Now that the crypto market overall is valued at $2 trillion, do you still consider cryptos as worthless artificial gold? I knew there'd be a question on Bitcoin or I thought to myself, "Well, I watch these politicians dodge questions all the time, you know, I always find it kind of disgusting when they do it" but the truth is, I'm gonna dodge that question because we've probably got hundreds of thousands of people watching this that own Bitcoin, and we've probably got two people that are short. We've got a choice of making 400,000 people mad at us and unhappy or making two people happy, and that's just a dumb equation. I thought about it. We had a governor one time in Nebraska, a long time ago, but he would get a tough question, you know, "What do you think about property taxes?" Or, you know, "What should we do about schools and." He'd look right at the person and he'd say, "I'm all right on that one." He'd just walk off. Well, I'm all right on that one, we'll see how Charlie is. Well, those who know me well are just waving the red flag of the bull. Of course, I hate the Bitcoin success, and I don't welcome a currency that's so useful, and the kidnappers and extortionists and so forth. Nor do I like just shuffling out a few extra billions and billions and billions of dollars to somebody who just invented a new financial product out of thin air. So I think I should say modestly that I think the whole damn development is disgusting and contrary to the interests of civilization, and I'll leave the criticism to others. I'm all right on that one. The next question that comes in, or the next series of questions are from James Hernandez. He has two questions. One for Ajit, one for Greg. They both concern Elon Musk. For Greg, this question is for you. Elon Musk has stated that Berkshire Hathaway's energy proposal for Texas, spending more than $9 billion for new generating capacity is wrong. Instead, Mr. Musk argues that load balancing using battery storage is the appropriate course of action. Can you explain why the BHE proposal is the better course of action for Governor Abbott and the State of Texas? Specifically, what amount of savings can the citizens of Texas expect above and beyond what Mr. Musk is proposing? Sure. Obviously there is a very unfortunate event in Texas in February, and it basically lasted four days. Many lives were lost. The economic damage was significant. Texas has highlighted that anywhere from $80 billion-$130 billion in incurred losses over that period of time. I think when you look at the power sector, it fundamentally let the citizens down. It didn't perform as they expected. When it did perform, it was extremely expensive. They incurred billions and billions of dollars of energy costs versus a multiple of basically 10x what they paid. They paid 10x in energy costs over those four days what they paid in the past year. A very substantial event for Texas. We've gone to Texas with what we believe is a good solution. We spent a lot of time pulling it together, understanding the fundamental issues around it, and our proposal is really based upon the fact that the health and welfare of Texans were at risk and we needed to have effectively an insurance policy in place for them, that if they needed the power on very short notice, it would be able to be dispatched and it would be there for the four days. We're actually proposing it could be there for seven days. The fundamental concept of our proposal has always been, if there's a better proposal that's brought forward, we've accomplished our mission. We've just been really there to, it's the best proposal or option we could come up with and obviously if Texas or Elon or someone else comes up with a better proposition, we've always said, "Texas, you should pursue it." We strongly believe right now we have a what remains is a very good proposal for Texas, it'll continue to be discussed and evaluated. The big difference between a battery proposal and our proposal is that we will have power that can be generated continuously for seven consistent days. Where if you went to a battery solution, you may release that power that's been stored for four hours, we're talking four days of a problem, not four hours. It's just a completely different cost equation and solution. Very proud that our team's brought forward what I thought was a very unique solution. We've worked hard with our suppliers and Peter Kiewit Sons' to put together what we believe is a firm cost that can also be delivered by November of 2023. Again, we put a firm date on. It won't be ready next winter, unfortunately. It won't be ready this summer, but it's a valuable solution, and one that we hope at least leads to the right discussion and the right long-term solution for the state. Yeah, we're also willing to put up $4 billion that if we don't deliver when we say we're gonna deliver, we'll pay it as a penalty, basically. You know, we went to Kiewit, we went to General Electric and said, you know, "How long can we get turbines?" You know, for that, you know, if you're gonna be prepared for 2023, you have to start at a point fairly soon, and you have inflation going on, and Kiewit's not gonna change things on us in a month. We don't try to get the contracts all written out. They had 100 people working on it. Yeah, they had hundreds working on it. Yeah, and, you know, GE's cooperative and everything. Doesn't mean we have the best solution. We just know what we can do. If anybody can do it faster, they can do it cheaper, you know, whatever, that's terrific. They should have something to lose though if they don't do it. I mean, and we will back our promise up by $4 billion, which, you know, and we won't have any ricketing clauses in there that if this happens or that happens, we don't pay. We'll sell. We won't be able to do that a year from now. I mean, we can do it a year from now with the costs then from what they are then it'll be a year further out. Texas is a terrific place to do business. We do a lot of business there. It's where BNSF is headquartered with. It's a great place. This was out of the blue. One way or another, the nature of utility business is that you gotta, you have to be prepared for something that probably isn't gonna happen. Yep and be, you know, you don't want to say it's a, "Well, it's a one in 30 year event," you know. Then, people die. I mean, it, so, you want a margin of safety in it. We've got one solution, and other people may have other solutions. We will cheer when a solution is reached of any kind, and we will cheer a little louder if it's ours. Ajit, your question from this gentleman. Suppose the hypothetical situation arises where Warren Buffett calls you on the phone to tell you that Elon Musk has contacted him about writing an insurance policy on his proposed mission to and subsequent colonization of Mars. Specifically, he wants insurance to insure his SpaceX Heavy rocket, capsule, payload, and human capital. Would you underwrite any portion of a venture like that? This is an easy one. No, thank you. I'll pass. Well, I would say it would depend on the premium. I would say that I would probably have a somewhat different rate if Elon was on board or not on board. I mean, you know, it makes a difference. I mean, if somebody's asking you to insure something, you know, that, That's called getting skin in the game and part of, you know. In general, I would be very concerned about writing an insurance policy where Elon Musk is on the other side. Okay. Tell Elon to call me instead of Ajit. This question comes from Michael Lu, from California. This is for both Warren and Charlie. In your shareholder letter, you mentioned that the best investment results come from the companies that require minimum assets to conduct high- margin businesses. In today's world, many of these companies tend to be software-driven businesses. While Berkshire has avoided investing in high- growth technology companies in the past, this appears to be slowly changing with your investments in Apple and Snowflake. As shareholders, should we expect that high- margin businesses will begin to constitute a larger proportion of Berkshire's investment portfolio over time, particularly as Todd and Ted take on larger roles in the investment decision process? Well, we've always known that the dream business is the one that takes very little capital and grows a lot. Apple and Google and Microsoft and Facebook are terrific examples of that. I mean, Apple has $37 billion in property, plant, and equipment. You know, Berkshire has $170 billion or something like that, and they're gonna make a whole lot more money than we do. They're in better business. It's a much better business than we have. Microsoft's business is a way better business than we have. Google's business is a way better business. We've always looked, we've known that a long time. We found that out with See's Candy in 1972. I mean, See's Candy just doesn't require that much capital. It doesn't have, you know, obviously a couple of manufacturing plants. They call them kitchens. But it doesn't have big inventories except for seasonally, very, for a short period. It doesn't have a lot of receivables. They're in very, you know, those are the kind of businesses we, they're the best businesses, but they command the best prices too, and there aren't that many of them, and they don't always stay that way. We're looking for them all the time, and we've got a few that are pretty darn good, but we don't have anything as big as the big guy. That's what everybody's looking for. That's what capitalism is about, people getting a return on capital. The way you get it is having something that doesn't take too much capital. I mean, if you have to really put out tons and tons of capital utility business, that was, it's not a super high- return business. You just have to put out a lot of capital. You get a return on that capital, but you don't get fabulous return. You don't get Google-like returns, you know, or anything remotely close to it. You know, we're proposing a return in the transaction with the proposition with Texas. I think it's a 9.3%, isn't it? Yeah, 9.3%. Yeah, you know, that, if you look at the return on most American businesses on net tangible assets, it's a lot higher than 9.3%, but they aren't utility businesses either. Charlie, did you want to add anything to that? No, thank you. This question is from Ryan Fusaro in New York City, who says, "Todd and Ted have taken on increased responsibility at Berkshire over the years, managing larger pools of capital, including the company's sizable Apple holdings, participating in M&A strategy, and even overseeing the company's now shuttered healthcare partnership with Amazon and JP Morgan. We are grateful for their efforts, but Todd and Ted are still not made available to shareholders at the annual meeting each year. Given their growing importance to the firm, can you discuss this policy and whether we can expect to hear from them more in the coming years? They're both absolutely terrific. That's one reason I don't want people quizzing them on stocks. They are assets of Berkshire. Just, there's no reason for them to be out educating other people on how to compete with us. It always seems so silly that people expect. They don't expect Merck or Pfizer or something to tell them exactly what their scientists are working on, you know, and where they stand or where the failures have been so they can eliminate those. Yeah, they. You know, if you've got talent that knows how to evaluate businesses, and those two fellows have been, they've gone far beyond that. They're terrific assets, and they love Berkshire, and they work extraordinary hours. We don't really want them going around with people asking them questions about why you like this industry better than that industry or anything of the sort. This question's for Charlie. It comes from Steven Tedder in Atlanta. He's been a Berkshire shareholder for 10 years and says, "You and your friend Li Lu have been very optimistic with respect to investing opportunities in China. BYD has performed spectacularly for Berkshire since its initial purchase in 2008. It is currently valued at $5.8 billion. The Daily Journal recently bought a large position in Alibaba after founder Jack Ma had been reprimanded by the Communist Party of China and Ma's other company, Ant, was not allowed to proceed with its IPO. What are your current thoughts on China and whether the communist leaders will allow businesses with strong leadership to flourish in decades to come? Well, I think that the Chinese government will allow businesses to flourish. It was one of the most remarkable things that ever happened in the history of the world when a bunch of committed communists just looked at the prosperity of places like Singapore and said, "The hell with this. We're not gonna stay here in poverty. We're gonna copy what works." They changed communism. They just accepted Adam Smith and added it to their communism, and now we have communism with Chinese characteristics, which is China with a free market with a bunch of billionaires and so forth. They made that shift. They deserve a lot of credit. Warren and I are not quite as good at that, as changing our minds, in many cases. Yeah. That was a remarkable change coming from such a place. Of course, it's worked like gangbusters. They've had this enormous growth in the average income of the average Chinese. They've lifted 800 million people out of poverty fast, and it There was never anything like it in the history of the world. My hat is off to the Chinese, and I think they will continue to allow people to make money. They've learned it works. I love what the guy said in the first place, "I don't care whether the cat is black and white, as long as it catches mice." That's my kind of talk. In that list of the 20 most valuable companies, there are just three are Chinese. If you're looking out 30 years, you know, how many do you think will be Chinese? My guess is more. I don't think it'll top the United States. Who knows? It's amazing what has been accomplished. Yeah, it really amazing. They found what works. I mean, there's nothing like finding something that works in order to sort of reinforce ideas over time. We'll see what happens. I would bet there will be more than three, but I will bet the United States has more than China has, too. This one comes from Tim Medley in Jackson, Mississippi, who's been a Berkshire shareholder since 1987. He writes, "On March 19th, respected economist Larry Summers, the former president of Harvard University and the former Secretary of the Treasury under President Obama, was critical of President Joe Biden's $1.9 trillion American Rescue stimulus plan. In an interview with Bloomberg Television, he said, 'I am much more worried that we will have more inflation or that we will have a pretty dramatic fiscal monetary collision. This goes way beyond what is necessary.' He said also, 'This is the least responsible macroeconomic policy we've had in the last 40 years.' Your thoughts? You're asking me on that? He didn't write to who, so it could be anybody on the stage. Well, I would say that Larry's been reading his uncle's book, which was Paul Samuelson. No, I think Larry is a very smart fellow, and he's laying out possibilities which actually now have probably been voiced a little more even since that March 19th, whatever date it was that he made that it. You can't just do one thing in economics, and if we really could shovel out more and more debt, and the carrying cost turned out to be something very low. People thought Japan couldn't do what they've done, but they, you know, and now they, that it used to be called the widow maker in, around Salomon and people were shorting Japanese bonds, but the answer is we don't know. Larry's view is an important view, and it's just as good as in my, probably, the view on the other side might be. We don't know what happens from the present policies. We do know, as Jay Powell said the other day, the idea that 100% of GDP was some terribly dangerous level for GDP in terms of debt, and that doesn't really make a whole lot of sense now, and that used to be kind of accepted wisdom. We've learned that a lot of things we thought before weren't true, but what we haven't learned yet is whether what we're doing now is true. The best thing to do is recognize you don't know and proceed in a way where you get a decent result no matter what happens, and that's what we try and do at Berkshire Hathaway. We do not think we can make money by making macroeconomic, economic predictions. We do think we can pretty darn sure we'll get a reasonable result under policies that will not maximize result if we could do that sort of thing. It's not at all clear whether Larry is right or wrong. He's a smart man, though. He is a smart man. Yeah. It's courageous of him to raising it, too. He's practically the only one talking that way, which I admire, by the way. Yeah. It guarantees he won't get a position in the administration. Yes. Well, that's one of the reasons I admire him. Yeah. It, not that there would be anything wrong with having a position in the administration, but I think people who kind of tell it the way they think it is, I like it. This question comes, it circles back to banking, which you touched on earlier. Jerome Bernard from Switzerland writes, "Could you please explain why you decided to exit most of your bank stocks in 2020, except for Bank of America, and what's your view on the future of the banking industry?" I like banks generally. I just didn't like the proportion we had in it compared to the possible risk if we got bad results that did not, so far we haven't gotten. I just. We were over 10% of Bank of America. There's, it's a real pain in the neck to both of the bank and more to the banks than to us if we go over 10%. They're just all over. I like the Bank of America. I mean, I like Brian Moynihan very much. I like the banking business fine. We took that up, but we took the overall bank position down. We didn't want to go above 10 in any of the others. We did wanna increase the B of A position, but we overall didn't want as much in banks as we had. We like the banking business way better than it was in the United States in 10 or 15 years ago. The banking business around the world, in various places might worry me. Our banks are in far better shape than 10 or 15 years ago. When things froze for a short period of time, the biggest thing the banks had going for them was that the Federal Reserve was behind them. Federal Reserve is not, they're not behind Berkshire. It's up to us to take care of ourselves. This question comes from Matt Y in Los Angeles. "You recently purchased a large stake in Verizon. For educational purposes, could you please explain your thinking behind this investment? In general, many people see telecoms as dumb pipes that have to spend heavily on CapEx building out the 5G infrastructure, only for the other tech companies to take advantage and capture most of the value created from the infrastructure, like Facebook, Uber, Airbnb, and DoorDash? Well, I think he's analyzed the situation well, but we are not in the business of explaining why we own a stock which we either might buy more of or sell or who knows what. He's on his own, but he sounds like he's very capable of thinking it through very well himself. Slaven Vukobrat writes, "Senator Josh Hawley recently unveiled a new antitrust proposal that would ban mergers and acquisitions by firms with a market capitalization over $100 billion. While this legislation is unlikely to go through, increasing antitrust regulation could represent a material risk for Berkshire. Has Berkshire's board already discussed what would happen to the company over the long term if Berkshire was to be prevented from acquiring controlled businesses? We don't discuss that as a specific way, the board is very, very, very familiar with what Berkshire does, why they do it, you know, how we think in deploying capital. We could, you know, everybody knows that if you change the antitrust laws, it can change things for Berkshire. If you change the tax laws, it can change things for Berkshire. There, you know, there's a lot of things and we could spend hours discussing them. In the end, you know, is it a 22.3% risk that you know, something changes? Or, you know, it's a good way to fill the time at board meetings, and if you're getting $300,000 or $400,000 a year as a board director, you might wanna spend your time doing that. We really don't focus on that. The main thing about Berkshire is how do you preserve the culture, how do you make sure that if you get the wrong person as the CEO, you can do something about it. That's the biggest risk a board has, is if you pick the wrong CEO, and I've been on 20 boards, and it's happened more than once. Sometimes it's a terrible problem to get rid of them. You know, years go by and you know, if a dissident comes in, it's one thing, but if you just sit there and you collect your $300,000 or $400,000 a year, and the chief executive keeps proposing you'll get an increase time to time, and it's worse yet if he's, if he's a nice person, you know, doing his best. Yeah, it's, but we're not gonna spend a lot of time. We may do it on a personal basis, but we're not gonna take a lot of people in. We want them to know more about what's going on with BNSF and how Katie's doing and whether the KCS thing can injure us in any material way and so on. We really don't, except maybe on a private side thing, we don't start talking about, you know, what the effects will be in 2050 if this projection or that projection is met. Charlie? Nothing to add. Okay. This question was sent in by Don Graham during the meeting based on something you said earlier today. He says, "Why does Warren say Berkshire's ability to insure enormous risk quickly is a less valuable asset than it used to be?" Well, because the demand is less, I mean, basically on that. If you take a period like happened after 9/11, I remember, I may be wrong on the details on this, but Cathay Pacific, for example, they couldn't land in Hong Kong, as I remember, unless they had an insurance policy by Monday of the following week. Well, we can do it. I mean, Ajit calls me up, and he thinks of a price, and I think of a price, and but we can, we can do it. We can take the loss if it happens. They called us on the Sears Tower, I think, back then. You know, nobody knew, they didn't know whether, you know, bombs were might be placed. They wanted more insurance all of a sudden, and we gave them a price. That thing, that sort of an environment hasn't really persisted. I mean, there were times, I think, perhaps AIG, when Hank Greenberg was there, he would do the same thing. There weren't 10 or 20 people out there, and they needed big limits in some cases, and we were good for it. They knew that if they bought the insurance and it happened, that we'd write a check, and it would clear. Ajit, you might have something. In addition to the demand side, the supply side has become a lot more competitive as well. There are a lot of people who can put up big limits, not as much as we do, but they can syndicate a program and put up $1 billion very easily. That competitive advantage we had, we still have, but it's no longer as big a deal as it used to be. This question comes from a shareholder in Scotland who wants to know Warren, Charlie, and Greg's views on how Kraft Heinz has performed over the last 12 months compared to the disappointing performance pre-COVID, and what are your current and longer-term views on Kraft Heinz prospects? I think that Greg's on the board, so he I don't know that we're in a position to give advice on Kraft Heinz. We do, you know, we entered a in effect, a semi-formal partnership with 3G many years ago when it was just the Heinz deal. We do what we said we'd do going in, which is to be a financial partner, and they're more of the operating partner, although we participate to a degree in any big decisions, and they would listen to us. We're not making any in terms of Kraft Heinz stock, that's up to somebody else to evaluate. Yeah, the only thing I would add, Warren, is I think we're very comfortable with the fact that they put a strong manager in place in Miguel Patricio, and he's put a very good team in place at Kraft Heinz. We're pleased with the leadership and management team in place. They're very focused on how they're executing as they've gone forward and rationalizing their capital structure and managing down their debt structure. Very pleased with the path forward with the existing management team. Yeah, we feel better about the. Well, this is a more general subject, but one of the subjects I might write about in one of the future annual reports is the problems caused by the myths that people have about their own organization, and I've seen that so many times in various forms. To some extent, the problem has become accentuated in the last 20 or 30 years because the CEO often works with the investor relations, then they say, "Well, we have to have constant contact with the analyst community." Of course, they go on every couple of months, and they repeat certain things about their company, and it becomes part of sort of the catechism. Nobody's gonna go on two months after the CEO has said one thing and say, "Well, actually, that really isn't the way." They're not gonna contradict themselves or change course. If you get these myths, and they can occur in a lot of different ways. I can give a lot of examples, which I won't do, as I tell my friends in Corporate America, I really am not gonna squeal on them. But there's a lot of mythology that gets handed down from one CEO to the next. Can the succeeding CEO say the guy that picked him, you know, was on the wrong course, or he's been telling you something that isn't really quite true? He can't do it. You know, then he starts repeating it leads to enormous errors. It's hard to tell the story without giving examples, and I don't like to give examples. We'll see whether I write about it sometime. Charlie, you probably got some thoughts that we've. He's had a ringside seat at a lot of, he's been on boards that I haven't been on. I mean, he, it doesn't just extend to business. It goes beyond that, into education. Yeah To, well, a lot of areas. Well, what's really interesting is the way you prattle out all the time, you're pounding back in even if it's wrong. One of my favorite remarks in the history of human remarks was by Sir Cedric Hardwicke, who was a great British actor, and he said, "I have been a great actor for so long that I no longer know what I truly think on any subject." I think that happens to a lot of people. It happens to virtually every politician. It gets embedded in corporations. Gets embedded and so on. The trouble is now the CEOs speak out so often, so they, if they got some crazy thing that they're saying about their company, and they keep repeating it, the subordinates aren't gonna contradict them. You know, it and Charlie, they just believe it after a while, and it's dangerous. Yeah. Of course, the young people get these ideas after their liberal educations and think that God has given them direct insights, and they're just as crazy as the politician. Yeah, there's some old people that have them too. Yeah, well the old people are already crazy, but They're gonna die sooner, so it wouldn't. We have our old- probably. We have our old insanities. The new insanities are the young get. All right, this question comes from Bill Begley, who said, "Could you tell us what happened to the joint venture between Berkshire, JP Morgan, and Amazon to investigate what could be done about the current state of medical healthcare in the United States? The only item I read was that it was disbanded. Do you have any lessons to be learned from your effort? Well, we learned a lot about the difficulty of changing around an industry that's 17% of GDP. We accomplished a lesser objective, which was probably more important to us even than either JP Morgan or to Amazon, 'cause we knew less about our own system than they did. They knew that their more centralized operation. We got some benefits in the sense that we looked at 60 or 70 different operations we had presently and that was, that's one case where a certain amount of centralization, at least in certain aspects of it, can save real money. I mean, we found inefficiencies. Like I say, we probably saved more than the other two partners, 'cause they knew their situation better. We found some dumb things we were doing. We got our money's worth, but in terms of the big picture of changing something, that so many people have a vested interest in doing, and there's one additional factor to it which is really interesting. There's an ingenious aspect to it. It goes back to a fellow named, which didn't have any direct connection, but Beardsley Ruml. Nobody's ever heard of Beardsley Ruml. Beardsley Ruml in 1941 came up with the idea of the withholding tax. People, instead of April 15th having to write a check and thinking how much they hated their politicians and hated the government and everything else, they actually looked at it as kind of a Christmas club, and there were overpayments involved, and they actually got a check when the final payment came due. When you aren't writing the check yourself, you know, you may know that the health benefit from your company is worth $10,000 a year to you or $15,000. It may cost them that much. It may cost the company that much, but you don't see it. The company pays it, and most of the people in that waiting room sitting next to me when they are not sitting there thinking about whether I can afford to do this, you know, or what's this going to do? They're generally under some kind of a plan. Not always, obviously. They don't think that if the company wasn't paying them that, they could pay them till that in additional compensation. Of course, the weird system is the company gets a deduction if they pay it, but if you pay it yourself on a policy, I don't believe you get a deduction of the. So it's something that's, most of the people are not seeing as a cost to them, and they like that pretty well. No kidding. Yeah. Well, that's true of the federal income tax. I mean. Yeah it was a act of genius from the standpoint of the government to go to a withholding system. If it didn't, just think of how many people on April 15th would have to sit down and write a pretty good- sized check, and they'd be mad. They wouldn't like it. They don't feel it now. You know, that's an obvious point. You also, people like their doctor in general, and they don't like the fact that it's 17% of GDP, but one is just kind of a, you know, amorphous sort of thing, and the other is very, very real to them. The most prestigious people in the community are on the hospital boards. There's a lot of people that are fairly happy with the system. We did not make inroads on that, and we are paying 17% of GDP for healthcare. No major country is more than 11%. In the pandemic. You know, we've had a death rate that or a death total as a percentage of population that's way higher than the rest of the world. Not every single country, but way higher. It, you know, we've laid out more money and gotten a poorer result in terms of this particular pandemic in terms of deaths per capita. Now, that may not turn out to be the. Oh, Warren, even though you shot it and missed, you were at least shooting at an elephant. The cost of healthcare in Singapore is 20% of what it is in the United States, and their medical system works better. You were shooting at a huge elephant. As you found out, it's very hard to people to get very enthusiastic about losing part of their income. Oh, yeah, no, I said we were fighting a tapeworm. Yeah. The American economy. You were. The tapeworm won. Yeah, the tapeworm, right. Yeah. That's good, wonderful phrase, the tapeworm. Oh, I'll have to copy that. Well, it wasn't a phrase we were looking for. This question comes in from Mark Blakely in Tulsa. This is for Warren and Charlie. When we discuss Berkshire, we often focus on the insurance operations and the largest non-insurance businesses, the Redwoods, as you mentioned, in 2019. However, Berkshire owns a large number of subsidiary businesses, most of which are never mentioned. Is there a point at which Berkshire becomes too large to manage, and should we have any concern over the lack of information for most of Berkshire's companies? Is there a time that could come when Berkshire's too large and complex? Well, it's too large to do certain things, that's for sure. I mean, we, you know, we can't spend our time looking for $100 million acquisitions. We have a wonderful company in Fort Worth, and we had a marvelous man running it, and he died recently. He sold it to me 15 years ago, and he just basically ran it, you know? I couldn't find my way to the company. I mean, we've got this terrific company that makes recreational vehicles, Elkhart, based in Elkhart, Indiana, and we bought it 15 years ago. I've never been there, you know. Maybe there's some guy in a closet just making up numbers to send to me every month. I feel I understand the business pretty well, but I've never seen it. The fellow that runs it likes running it, and he likes me keeping my nose out of it, and he'll let Greg get a little more than he'll let me because, but it's, we've got a system that will work with wonderful businesses and wonderful managers, and it's up to us to find them. But it's also us to nurture them when we find them. If you'll get somebody like Paul Andrews, who ran TTI, and who built it from nothing, absolutely nothing, nobody ever heard of him, and the earnings have octupled during the period that he ran it for us, and he was happy. Employees were happy. He was a wonderful man. We were happy. I would call him at the end of the year, I'd say, "Paul, you know, you're shooting the lights out and everything, you should take a raise." He said, or bonus or what. He'd say, "Well, we'll talk about that next year, Warren." I mean, he did. He just loved, he loved the business. I love Berkshire, he loved the business, I wasn't gonna add anything by having him fill out a bunch of reports about how much he's using in the way of carbon or anything. You know, It's ridiculous to think of a guy like Paul Andrews behaving in an antisocial manner or anything of the sort. We'd love to have more of those. Obviously, as we get bigger, they get harder to buy. We've got a number in the place, and I don't think we bought our last one over time, but I certainly don't see anything in the near future at all. We're intensifying our interest a little bit in the ones we have by repurchasing shares, so our shareholders own more of those companies every year while we're, assuming we're repurchasing shares, which is price sensitive. Charlie? Yeah. Yeah, I don't think we're getting too big to manage because we're different from practically every other big corporation in the United States in that we are so excessively decentralized. We have decentralized so much, and we have so much authority in the subsidiaries, that we can keep doing it for a long, long time, as long as it keeps working. I would say so far that our decentralization has caused more benefits than defects. Nobody seems to copy us. Well, But. That's absolutely true, but I would say this, decentralization won't work unless you have the right kind of culture accompanying it. Yeah, but we do. Yeah, we do. And Greg is. it's dependent on it. Greg will keep the culture. If we had a culture of people who were trying to make a lot of money for themselves in the next five years at the top, it would not have worked. No, of course not. The culture is part of it. Assuming we keep the culture, it can go on quite a ways. For a long, long time. Long, long time. In fact, it may amaze everybody. Charlie says to me By the way, the Roman Empire worked as long as it did because it was so decentralized. Yeah. Charlie says to me, "You won't know." Yeah. This question comes from Kevin Young. It's for Ajit and Greg. Warren spends his days reading, and his literature of choice is annual reports. How do each of you spend your days? What do you read, and how do you review investment decisions?" Well, in my job, I spend a lot of my time reading deals that brokers and people send us. Reading what they're proposing, trying to analyze them, having a point of view whether it is something that is of interest to us or not. I might add, I do not spend a lot of time reading annual reports because I'm not in the stock picking business per se. In terms of keeping track of what's going on in the insurance business, that's what 90% of my reading is all about. Greg? Yeah. Generally in a day, what I'm gonna focus on when I'm reading is really around our businesses, what industries they're in. I'm trying to understand what our competitors are doing, what's the fundamental risks around those businesses, how they're gonna get disrupted. It always comes back to are we allocating our capital properly in those businesses relative to the risks we're seeing both in our business and in the industry. A lot of time spent on that, and as that knowledge is built, it's sharing it back and forth with our management teams of those relevant subsidiaries and sort of fine-tuning it is really the approach. Both of these fellows can absorb information to an extraordinary degree. I mean, they have, for one thing, they're terribly interested in it. I mean, you know, it's theirs. I'm amazed at both of them, the degree which they just sort of know everything. They enjoy it. I mean, they're not thinking about whether, you know, they'll get the next job that opens up at some huge place or anything like that. Nobody leaves us, you know, basically. The ones we want. You really gotta kind of be in love with your business, and that makes a huge difference, and that means that we've gotta have the conditions that allow that love to flourish and it wouldn't flourish under many, with many organizations. This question comes from Robert Miles in Nebraska. The trading apps, what do you think about Robinhood and other trading apps or fintech companies enabling all ages and experience to participate in the stock market? Well, I'm looking forward to reading the S-1 on Robinhood. That's a big thing you file with the SEC when you are going to be offering securities. It's, you know, it's become a very significant part of the casino aspect, of the casino group that has joined into the stock market in the last year and a half. I do want to see how concerned about how they handle the source of income when they say they don't charge the customer anything. I mean, you know, it should be interesting to watch how they describe it. I mean, they have attracted, maybe set out to attract, but they have attracted, I think I read where 12% or 13% of their casino participants were dealing in puts and calls. I looked up on Apple's the number of seven-day calls and 14-day calls outstanding, and I'm sure a lot of that is coming through Robinhood, and that's a bunch of people writing. They're gambling on the price of Apple over the next seven days or 14. There's nothing illegal about it. There's nothing immoral. I don't think you'd build a society around people doing it. I mean, if a group of us landed on a desert island, we knew we would never be rescued, and I was one of the group, and I said, "Well, I'll set up the exchange over here, and I'll trade our corn futures and everything around it." I think the degree to which a very rich society can reward people who know how to take advantage, essentially, of the gambling instincts of the American public, worldwide public, it, you know, it's not the most admirable part of the accomplishment. I think what America's accomplished is pretty admirable overall. I think actually, you know, American corporations have turned out to be a wonderful place for people to put their money and save. They also make terrific gambling chips. If you cater to those gambling chips when people have money in their pocket for the first time, and you tell them they can make 30 or 40 or 50 trades a day, and you're not charging them any commission, but you're selling their order flow or whatever, it, I hope we don't have more of it, I'll put it that way, and I will be interested in reading the prospectus. Charlie? Well, that is really waving the red flag at the bull. I think it's just God awful that something like that would draw investment from civilized men and decent citizens. It's deeply wrong. We don't want to make our money selling things that are bad for people. We've got the states doing it with the lottery, you know? No, that's bad too. Yeah, I understand. That's very bad. But, I mean, like, once you get your first- It's very bad. yeah That's one of the things that's wrong with it. It's getting respectable to be, to do these things. The states are just as bad as Robinhood. Well, in a sense, they're worse. I mean, they're really taxing. I know. people based on- It's I know, I know. Yeah. They're taxing hope. Not only that. They don't get much in the way of taxes for beer truck that they do that. The states in America replaced the mafia as the proprietor of the numbers game. That's what happened. Yep. They pushed the mafia aside and said, "That's our business, not yours." Doesn't make me proud of my government. When I was a kid, my dad was in Congress. They had a numbers runner in the House office building, actually. I will ask this question from Chris Freed from Philadelphia. Whoever wants to take this on stage. From raw material purchases by Berkshire subsidiaries, are you seeing signs of inflation beginning to increase? Let me answer that. Greg can give more. We're seeing very substantial inflation. It's very interesting. I mean, it, we're raising prices. People are raising prices to us, and it's being accepted. I mean, it's not, if we get. Well, you know, take home building. I mean, you know, the cost of, w e've got nine home builders in addition to our manufactured housing thing, and then, operation, which is the largest in the country. So we really do a lot of housing. The costs are just up, up. Steel costs, you know, just every day, they're going up. And that, it, there hasn't yet been, because the wage stuff follows. I mean, if the UAW writes a three-year contract, we got a three-year contract. If you're buying steel at General Motors, or someplace, you're paying more every day. It's an economy really, it's red hot. I mean, we weren't expecting it. I mean, all our companies, when they thought when they were allowed to go back to work, you know, at our various operations, we closed the furniture store, as I mentioned. You know, they were closed for six weeks or so on average, and they didn't know what was gonna happen when they opened. You know, they can't stop people from buying things, and we can't deliver them. They said, "Well, that's okay." Nobody else can deliver them either, and we'll wait for three months or something of the sort. The backlog grows, we thought it would end when the $600 payments ended in, I think, you know, around August of last year. It just kept going, it keeps going, it keeps going, and it keeps going. I get the figures. Every week I call, or Blumkin calls me, and we go over day by day what happened at three different stores in Chicago and Kansas City and Dallas, it just won't stop. People have money in their pocket, they pay the higher prices. When carpet prices go up in a month or two, you know, we announced a price increase for April. For our costs are going up. Supply chain's all screwed up, you know, for all kinds of people. It's almost a buying frenzy, except certain areas you can't buy yet. You know, you really can't buy international air travel. The money is being diverted from a piece of the economy into the rest. Everybody's got more cash in their pocket. Except for meanwhile, you know, it's a terrible situation for a percentage of the people. You know, this suit, I haven't worn a suit, you know, for a year practically. That means that the dry cleaner just went out of business. I mean, nobody's bringing in suits to get dry cleaned. Nobody's bringing in my church to the place where my wife goes. The small business person, if you didn't have takeout and delivery services for restaurants, you got killed. On the other hand, if you've got takeout facilities, then, you know, same store sales at Dairy Queen are up a whole lot, and they adapted. It's not a price sensitive economy right now in the least. I don't know exactly how, when it shows up in different price indices, but there's more inflation going on than quite a bit more inflation going on than people would have anticipated of just six months ago or thereabouts. Yeah. There's one very intelligent man who thinks it's dangerous, and that's just the start. Greg, you probably are in a good position to comment. Yeah. Well, Warren, I think you touched on it. When we look at steel prices, timber prices, any petroleum input, you know, fundamentally there's pressure on those raw materials. I do think something you've touched on, Warren, it goes really back to the raw materials. There's a scarcity of product right now of certain raw materials. It's impacting price and the ability to deliver the end product. You know, that scarcity factor is also real out there right now as our businesses address that challenge. It may be the, s ome of that's contributed or arisen from the storm we previously discussed in Texas. When you take down that many petrochemical plants in one state that the rest of the country is very dependent upon it, we're seeing it flow through both on price, but overall in scarcity of product, which obviously go together. There's challenges, that's for sure. This question comes from BJ Coralla. What do you think of quants? Jim Simons' Medallion Fund has done 39% net of fees for three decades, which proves that it works. Will you consider hiring a quant lieutenant in Berkshire to work alongside with Ted or Todd? Well, I'll say no to the second part, and I'll let Charlie handle the first part. Well, that's rather interesting. The leading quant fund did fabulously on the short- term trading. They found little algorithms that worked. They had predictive value, and as long as they kept working, they just kept doing it, as long as the money kept coming in. When they got to using the same system just to finding some little algorithm and trying to do it mechanically for long- term stock predictions, the record was not nearly as good. In the short- term stuff, they found that if they tried to do it too much, they destroyed their own advantage. There was a limit on the amount they could make. They were very, very smart. Yes, they got very rich. Very, very smart. Very smart and very rich, yes. and- Very high grade, by the way. Yeah. Jim Simons. We're not trying to make money trading stocks. I mean. No the answer, we don't think we know how to do it. I mean, if we knew how to make a lot more money trading stocks, we'd probably be trading stocks too. We don't know how to do it, and we really don't trust anybody else to do it for us. That simple. This question comes from Richard Warner. Mr. Buffett has espoused for decades the philosophy of buy and hold or hold forever was too short of a time period. Is it a misperception on my part, or has his philosophy changed? It seems to be a much greater turnover in the equity portfolio lately. I don't think there's that much turnover. I mean. No, but there's too much. what? There's way too much. Yeah. Yeah. It's still too much. Yeah it's the same amount. Yeah, I'd agree with that. The truth is, we own, o ur businesses are equities, so we own $400 billion or $500 billion and, you know, maybe more. In businesses we don't, we don't turn them over at all. We don't resell businesses. We could probably. Well, we won't even get into that, what we could do, but we don't do it. We do relatively little, and as Charlie says, we'd do better if I'd done less. This is from Daniel Gautier. Warren Buffett's 2013 letter in the middle of page 21 made a prediction that in the next decade, you'll see lots of really bad news about pensions. Given recent events like COVID-19 and that 2023 is two years away, would Mr. Buffett like to comment or revise his 2013 prediction? Did COVID-19 delay, accelerate, eliminate, or not change it? Well, in a very limited, I mean, a terrible way, COVID-19 improves the pension position because the fewer, the more It's, you know, it. Yeah You have less pensioners. The pension situation is terrible in a great many states. It's not so bad at the corporate level. There's some multi-employer plans, obviously, that have got problems. Basically, it's a terrible problem for the states and of course some states. States are gonna go to Washington now and say, "You know, we all want to get a lot of money because we had these terrible things happen to us during the pandemic," which they did. Some of those states have enormous pension deficits, and they'll come again if they get a check once. Make sure not to be a federal obligation de facto or something then. It has not gotten better. It has not gotten better at all, and obviously. To a certain extent, the pension managers get more and more desperate as interest rates go down. They'll listen to almost anybody that promises them. They've always had that tendency anyway, but they'll listen to people that promise them that they're going to one way or another solve their problem for them, and that isn't gonna work. It's a big, big, big problem. Of course the real problem is, l et's just take a hypothetical state that has a huge pension deficit, and maybe even has a cost of living factor in it, which is gonna really be a killer, and you can move if you're an individual. Charlie won't move to save that $500 million. He was not gonna move to Nevada or someplace. You can move if you're an individual to some degree, particularly if you're rich and old and retired. Yeah. You can actually take away an asset from that kind of environment and give it to another state that doesn't really need it as much. You'll get adverse selection over time. If you're a company and you put a plant there, you can't move the plant in five or 10 or 20 years. As the taxable base of individuals falls down, simply because people select out of being a part of the population, you can't select out very well as a corporation. You have to be very careful and think a long time before you go into some state with a huge pension deficit and a declining population, because you're gonna be the last man left, and the pensions won't go away. Well, anybody with a short-term outlook doesn't worry about that, you know. I mean, you know, "Just get me past the next election and I'm all right on that one," you know? You know, we're not gonna stay at a plant that's gonna be around for 50 years in some place where the population gets halved and the richer part gets cut, you know, dramatically, even more dramatically, and we still got a valuable plant there, and we gotta keep operating. One way or another, it's not gonna be a good place to be. We're almost out of time, so I'll make this the last question. That's a good answer, Warren. It reminds me of my old Harvard law professor who used to say, "Let me know what your problem is, and I'll try and make it more difficult for you." This one comes from Jan Michael Ottlinger. It's for Warren and Charlie. "I have one question, which is inspired by Charlie's mantra, you have to be a continuous learning machine. Here's my question: What's the biggest lesson both of you learned during the last year?" Well, my biggest lesson is to listen more to Charlie. He's been right on some things that I've been wrong on. Well, I don't know. Yeah If you're not a little confused by what's going on, you don't understand it. It's just. Yeah It is. We're in sort of uncharted territory. Yeah. We enjoy, in a crazy way, actually seeing what happens. I mean, and this has made us halfway through the movie much more interested in watching even more. This is an unusual movie. Our basic principles of, you know, we start with the fact we don't wanna disappoint the people who left their money with us, things flow out of that. We may disappoint people that they don't make quite as much money as they but we don't. We've seen it, some strange things happen in the world in the last year and 15 months, and we've always recognized the fact stranger things are gonna happen in the future. I would say if anything, it's reinforced, you know, our desire to figure out everything possible we can do to make sure that Berkshire is 50 or 100 years from now, you know, every bit the organization and then some that it is now. Charlie, anything? Well, of course that's the idea. I think it's pretty likely to work. Yeah. Well, we wouldn't have spent 55 years at it unless we did. Yeah. Yeah. Becky, Is that the last question? That's the last question. Okay. Well, in that case, we'll move on to the meeting. The other three fellows here can leave. It's not gonna be that exciting, but we've got a script here even somewhat. I don't like scripts, but not my nature. One of the proposers for the two items on the proxy is here in the building to present his argument personally, and the other one has recorded it. We'll get to that in just a minute. We offered both of, I mean, when they either could record or come, and I'm happy one of them came. Here we go, and the meeting will now come to order. I am Warren Buffett, not that you didn't know by this time, Chairman of the Board of Directors of the company. I welcome you to the 2021 annual meeting of shareholders. Marc Hamburg is Secretary of Berkshire Hathaway. He will make a written record of the proceedings. Rebecca Amick has been appointed Inspector of Elections at this meeting. She will certify that the count of votes cast in the election of directors and the motions to be voted upon at this meeting. The named proxy holders for this meeting are Walter Scott and Marc Hamburg. Does the Secretary have a report of the number of Berkshire shares outstanding entitled to vote and represented at the meeting? Yes, I do. As indicated in the proxy statement that accompanied the notice of this meeting that was sent to all shareholders of record on March 3rd, 2021, the record date for this meeting, there were 639,747 shares of Class A Berkshire Hathaway common stock outstanding, with each entitled to one vote on motions considered at the meeting, and 1,335,074,355 shares of Class B Berkshire Hathaway common stock outstanding, with each share entitled to 1/10,000th of one vote on motions considered at the meeting. Of that number, 456,040 Class A shares and 663,442,069 Class B shares are represented at this meeting by proxies returned through Thursday evening, April 29th. Thank you. That number represents a quorum. We will therefore directly proceed with the meeting. The first order of business will be a reading of the minutes of the last meeting of shareholders. I recognize Ms. Debbie Bosanek, who will place a motion before the meeting. I move that the reading of the minutes of the last meeting of shareholders be dispensed with and the minutes be approved. Do I hear a second? I second the motion. Motion is carried. Next item of business is to elect directors. I recognize Ms. Debbie Bosanek to place a motion before the meeting with respect to election of directors. I move that Warren Buffett, Charles Munger, Gregory Abel, Howard Buffett, Stephen Burke, Kenneth Chenault, Susan Decker, David Gottesman, Charlotte Guyman, Ajit Jain, Thomas Murphy, Ronald Olson, Walter Scott Jr., and Meryl Witmer be elected as directors. I second the motion. It has been moved and seconded that the 14 individuals named in Ms. Bosanek's motion be elected as directors. The nominations are ready to be acted upon. Mr. Hamburg, when you are ready, you may provide the voting results from Ms. Amick's preliminary report. Ms. Amick has reported that the ballot of the proxy holders in response to proxies that were received through last Thursday evening cast not less than 473,474 votes for each nominee. Ms. Amick's report also states that this number exceeds a majority of the number of the total votes of all Class A and Class B shares outstanding. The report also states that the certification required by Delaware law of the precise count of the votes will be placed with the minutes of this meeting. Thank you, Mr. Hamburg. The 14 nominees have been elected as directors. The next two items of business relate to two shareholder proposals that are each set forth in the proxy statement that can be accessed at berkshirehathaway.com. If you haven't read that and those proposals, I'd just go to berkshirehathaway.com because they're interesting proposals, and the proponents' views are set forth well there. I think our views are set forth and I welcome you reading it. To get back to the script, the first proposal requests that the company publish an annual assessment addressing how the company manages physical and transitional climate-related risks and opportunities. The directors have recommended that the shareholders vote against the proposal. I will now recognize Tim Youmans, a representative of Federated Hermes, to present the proposal. I think we're connected up with Mr. Youmans. I thank the chair. I thank the chair of the Board and fellow shareholders. I'm Tim Youmans, Lead North America, EOS at Federated Hermes. Here today on behalf of Item 2 co-sponsors Federated Hermes, CalPERS, the California Public Employees' Retirement System, and CDPQ, Caisse de dépôt et placement du Québec, and our combined millions of ultimate beneficiaries. For well more than a year, the parent company has been unresponsive to the co-sponsors' requests to discuss the parent company's lack of climate-related financial disclosures. In order to have some kind of dialogue with the parent company, we have co-filed a proposal that Berkshire Hathaway's board issue a report annually assessing how the company manages physical and transitional climate-related risks and opportunities, including climate-related financial reporting where material for subsidiaries and for the parent company, how the board oversees climate-related risks for the combined enterprise, and the feasibility of the parent company and its subsidiaries establishing science-based greenhouse gas reduction targets consistent with limiting climate change to well below 2 degrees. We ask that the annual assessment follows the recommendations of the Task Force on Climate-related Financial Disclosures, TCFD. The board argues that since it manages its operating businesses on an unusually decentralized basis, and there are few centralized or integrated business functions, the board believes that the shareholder proposal is inconsistent with Berkshire's culture. The co-sponsors note, despite Berkshire's culture and decentralized management, shareholders can only purchase shares in the combined parent company entity. Shares cannot be purchased in the individual subsidiaries that may or may not have the climate disclosures that the board cites in its opposition statement. The company has more than $100 billion in cash equivalents. The co-sponsors and many in the $54 trillion Climate Action 100+ investor coalition want the parent company to put more resources into sustainability and in mitigating the financial impact of climate change and the energy transition. The company's sustainability website consists only of links to 15 subsidiaries. We note the parent company has 60 subsidiaries. This is insufficient disclosure to shareholders who think that sustainability risks, especially climate risks, may be material to the parent company's long-term future prospects. Of course, recognizing the company's strong past financial performance. No doubt, climate change and the energy transition to a low-carbon economy pose a systemic risk to the economy. The company's auditor, Deloitte, says on its website, "Climate change is not a choice. It's billions of them. We are all compelled to act." Deloitte does not assess climate change-related financial impacts in the company's audit. When asked by the co-sponsors why climate change impacts are excluded from audits like Berkshire's, Deloitte failed to provide any meaningful reply. In his new book, former Berkshire director Bill Gates says companies accepting more risk is needed to avoid climate disaster, and shareholders and board members will have to be more willing to share in this risk, making it clear to executives that they'll back smart investments even if they don't ultimately pan out. This is the Gates position, and the chair is one of three Gates Foundation trustees. We ask the board to take the cultural risk for a modest degree of centralization needed to issue the annual climate-related financial assessment. We all need to take action now to limit climate change impact on our long-term sustainability. We strongly urge Berkshire Hathaway shareholders to support Item 2 as climate risk may be material to the parent company. We have a question for the chair. Will you please change your mind and vote your personal shares in support of Item 2? Thank you. Thank you, Mr. Youmans. Of this meeting. Thank you, Mr. Hamburg. The proposal fails. Second shareholder proposal requests the Berkshire Hathaway companies annually publish reports assessing their diversity and inclusion efforts. The directors have recommended the shareholder vote against the proposal. I will now ask that the audio tape provided by Meredith Benton, a representative of As You Sow, be played to present the proposal. Hello, I am Meredith Benton. I am speaking on behalf of the nonprofit advocacy organization, As You Sow, and I'm also the CEO of the consultancy Whistle Stop Capital. I formally move Proposal No. 3, asking for Berkshire Hathaway to report on how it assesses diversity, equity, and inclusion efforts, including the process that the board follows for determining the effectiveness of its diversity and inclusion programs and how it assesses goals, metrics, and trends related to recruitment, promotion, and retention. What would it mean if the majority of Berkshire's operating units weren't managing their diversity programs? It would mean that Berkshire companies are missing out on the benefits that an inclusive workplace culture can provide, such as, according to the studies, access to top talent, to good people, better understanding of consumer preferences, a stronger mix of leadership skills, informed strategy discussions, and improved risk management. Best practices in diversity inclusion reporting exist and are increasingly standardized across companies. Berkshire companies can publish their workforce composition through their consolidated EEO-1 form. This form is already submitted to the Equal Employment Opportunity Commission, so it requires no additional effort on behalf of the companies to collect or reconcile. It is a universally disliked form, but it is standardized, and companies will often publish their EEO-1 along with an explanation of their own internal structures and ways. 72 of the S&P 100 companies publicly share or have committed to share this form. To my knowledge, no Berkshire company currently does. Not one. The release of workforce composition data is akin to a balance sheet, detailing diversity at a single point in time. Just as a balance sheet would by itself be insufficient to identify the strength of a company's financials, so too the EEO-1 by itself is insufficient in assessing the effectiveness of DEI programs. The company's inclusion data, the hiring, retention, and promotion rates of diverse employees must also be shared. Investors need to have a full understanding of the actual experience of Berkshire employees. In theory, companies should want to share their retention data. If it's a good company to work for, people will want to stay. They should want to share their promotion data, in theory. If it's a company that hires good people and treats them well, those good people will ascend with mentorship and time. 70% of the S&P 500 currently share diversity inclusion data at some level. 70%. Only 22% of Berkshire companies do at any level, and only four Berkshire companies speak to workplace equity with any meaningful depth. Berkshire is a serious outlier here. Berkshire is famously decentralized. Its units operate independently. Yet, if an issue isn't conveyed as important from headquarters, can we expect it to be prioritized by an operating unit? Here's the thing, Mr. Buffett, Mr. Munger, board members, and the team at headquarters, you may each individually, truly, and genuinely hire, mentor, and promote the best people for the job, regardless of their gender, race, ethnicity, sexual orientation, or any immutable characteristic. We can't conclude that this is the mindset of each of your employees, managers, and hiring directors. Berkshire headquarters can't sit passively and hope that their independent units are addressing bias and discrimination in their workplace. Active management, proactive attention is needed. In its statement in opposition to the proposal, the board said, "Mr. Buffett, Berkshire's chairman and CEO, has set the tone at the top for Berkshire and its employees for over 50 years." It also states, "Mr. Buffett has a record of opposing efforts, seen or unseen, to suppress diversity or religious inclusion." Mr. Buffett holds extraordinary influence over his own companies and over the broader business community. He opposes efforts to suppress diversity. Given that, we ask for him to step forward decisively in his own inimitable words, in his own inimitable way, to detail how important diversity and inclusion is to his companies, the expectations he has and the efforts he expects to see, the metrics that will be used to judge success. Actions speak louder than words, but silence here speaks volumes. Thank you. Thank you. The proposal is now ready to be acted upon. Mr. Hamburg, when you are ready, you may provide the voting results disclosed in Ms. Amick's preliminary report. Ms. Amick's report states that the ballot of the proxy holders in response to proxies that were received through last Thursday evening cast 124,842 votes for the motion and 391,662 votes against the motion. As the number of votes against the motion exceeds a majority of the number of votes of all Class A and Class B shares properly cast on the matter, the motion has failed. The certification required by Delaware law of the precise count of the votes will be placed with the minutes of this meeting. Thank you, Mr. Hamburg. The proposal fails. I move- Ms. Bosanek. Yeah. I move that this meeting be adjourned. I second the motion to adjourn. Motion to adjourn has been made and seconded. This meeting is adjourned, and I would just like to add one final comment that I really hope, and I think the odds are very, very good, that we get to hold this next year in Omaha. I hope that we get a record turnout of Berkshire shareholders, and we really look forward to meeting you in Omaha. I guess it'll be next April 30th. We'll be sure of that date a little later. Thank you for watching, and we will see you next year and hopefully in Omaha. Meeting's adjourned.