Thank you. Thank you. I don't hear anything from the index funds. Where are they? It really feels good to get back and be doing this in person. It's been three years, and it's a lot better seeing actual shareholders, owners, partners. Charlie and I are now combined, if you go around for fractions, the two of us are 190 years old. I really think you're entitled if you're the owner of a company, and you've got two guys, 98 and 91 running the company, you're entitled to actually see them in person. I mean, it really shouldn't be too much to ask that. I mean, for example, if we had a manager someplace that was 98, I might wanna send somebody by occasionally to see whether he was cutting out paper dolls or something. We probably do things that are a lot more foolish than cutting out paper dolls, but we're having a lot of fun doing it. We really have a lot of fun when you come visit us. Actually, to go back a few years, we've had a couple of managers that suffered from dementia, probably many more, but I mean, just a couple of known ones, actually. There was one fellow that Charlie and I really loved. He ran a business for us. Charlie. It was out in California, and Charlie would see him occasionally, and I didn't see him, but everything seemed fine. Then we found out that he'd really been suffering from dementia for quite a while. It really was a wonderful friend of both of ours. The business had done fine, so that's become our test really, is that for new businesses, and we try to find something the guy with Alzheimer's can run, actually. You don't have as much competition for businesses like that. The guy sitting there cutting out paper dolls, and you know, that's our man. I'd like to introduce two fellows who really work at Berkshire. On Charlie's left, Greg Abel, who runs all the operations outside. Yeah. Yeah. Yeah. Next to him is, I ran the insurance business for about 15 years unsuccessfully, and then fortunately, the fellow on the far left came in one day, and I've written about it, but he came in on a Saturday, and I was opening the mail and, he said that he'd be happy to run our insurance business. I said, "Have you ever run an insurance business?" He said, "No." Then as I mentioned, I said, "Well, you know, I never run one either, so I'm not doing so hot, so give it a try." You know, he transformed Berkshire Hathaway, and Ajit Jain is here with us. What we'll do today, and I have to remind myself from time to time that the people here, of course, saw that movie and everything, but of course, we're webcasting this, so I'll probably make some references to the movie or something that'll puzzle millions of people out there, but you'll get it. We're going to talk for a little while about what's happened in the last quarter and bring up a few other things that you might be interested in. We will then, whenever that's finished, we'll go on to questions, and we will take the questions until noon. We'll break for an hour. That's Midwest time for those of you who are watching in other time zones. We'll go on till noon, and we'll break for an hour. Then Charlie and I will come back, and we'll take more questions until 3:30 P.M., and then we'll convene the shareholders meeting at 3:45 P.M. We'll take a break for 15 minutes, and then we'll do the shareholders meeting. When that's done, we'll all go our various ways. I do want to report, incidentally, that you've been doing your part in terms of the room we have adjacent to this location, where we've been yesterday for fiv hours. From noon to 5:00 P.M., we had 12,000 shareholders come and just spend money on everything we could think of to sell them. We brought in 11 tons of See's candy. If we don't sell out, Charlie and I get the rest. You did your part. See's sold, or they set a record yesterday for the Friday afternoon meeting. It's pretty heartening. Yeah. Incidentally, I've got a box of See's candy here. It's very sort of interesting. On this cover, which I hope you can see, there's a picture of a woman who was born in 1854. Today, she probably gets her picture seen more often than just about any woman in America in terms of a commercial product or something of the sort. We've got her picture up in over 200 stores and on every box of candy. That's Mary See., born in 1854. A lot of people think this is me in drag, but that is not true. I mean, there's a certain resemblance, but it's just not. These rumors are started by our competitors. Don't pay any attention. That's our schedule for the day. What we will do, we like to give shareholders, owners, partners, we like to give everybody the same information at the same time and preferably do it when stock markets aren't open. It seems to us that, that's everybody ought to be on the same playing field. It's very interesting. We don't know how many shareholders we've got. They've changed the rules over time as to registered holders and getting stock certificates and all that sort of thing. We can't keep track of it like 50 or 75 years ago where we had an actual shareholders list. We're told by the people who mail out our information it's a firm in, I think, New Jersey. Let's see, Broadridge. They pretty well do this for a very significant percentage of American corporations. They actually mail things out for us and they bill us for 3.5 million accounts. I'll take their word for it. I mean, the more accounts they bill us for, we pay them by the account. You know, some days I feel like I'd like to count. That is a lot of people that trust us. They've rightly, in my view, overwhelmingly feel that they're our partners. Some of them will like reading the financial information they've given us that we give you. Most, a great many of them just say we've saved this money and we trust you and Charlie. That's a great motivator, is trust. You know, take care of it. I'm not going to learn accounting and try to read all those statements or anything of the sort. We do believe that for those who do use the information we release, they should all get it at the same time. We have a few institutions that even though in the third paragraph of my letter every year, I refer to the fact that we want to have everybody get the same information and that we don't feel that anybody's entitled to special meetings. We can't hold three million special meetings with our partners. But we like the fact that everybody gets the same deal. Everybody gets the same information. Up this morning, on the internet, we put up our 10Q for the quarter. I'd like to take you through a few comments on that and a few other comments, and then we'll get to the questions. When we get to the questions, we will alternate between those mailed in by shareholders which, Becky Quick at CNBC and people who have helped her have sort of curate it, to get what they think are the most interesting questions from shareholders. They're not from CNBC itself. They are from shareholders, owners. We'll alternate the ones sent in versus the ones that come here. We don't get the questions ahead of time, and we enjoy getting surprised by, I'd say, almost all questions. We will keep doing that, like I say, with a break for lunch, until 3:30 P.M. when we'll have the meeting. I would like to start by putting up the first slide, which is Q1. There we have it. That's what we published this morning. There are really no great surprises in terms of the quarter. I mean, there are always some companies that are doing very well, and there are some companies that aren't for one reason or another. In the end, as you can see, we prefer to use something called operating earnings. Now, that is after depreciation, interest, and taxes, unlike other companies that prefer to tell you anything but what they earned. We do separate out capital gains. Now, over time, as I've said, over the next 20 years, I would expect us net to have more capital gains than not. You know, who knows? I'll report to you in 20 years whether that's happened or not. As you can see, we made about $7 billion in the first quarter and that's real $7 billion. I mean, we basically have that in cash when the quarter's over. That isn't true every quarter exactly, but we are talking about $7 billion of real money in that. Those managers who the people here saw in the movie, they're the people that work with your money to accomplish what Charlie and I never really planned or anything to happen, but it just sort of came about with sort of putting one foot in front of the other. Now obviously, the last two years in particular, including the first quarter, have all kinds of unusual things happen in our various businesses. I mean, when we had the meeting two years ago, roughly the start of May of 2020, we didn't know what was gonna happen with the pandemic. We didn't know what was gonna happen with the economy. Everybody that thought they did has gotten all kinds of surprises since. Here we are in 2022, and Berkshire, like I say, had $7 billion of operating earnings, and we've got lots of companies. We've got 360,000 people out there that have taken your savings and go to work every day, and they have jobs. We deliver products, and you put up the money for it, and you deserve to. You took the risks, and we feel very good about how things have turned out, and we wanna keep feeling good. We have a extreme aversion to incurring any permanent loss with your funds. You know, if I went broke, it wouldn't really make any difference. I mean, it's just, I'd keep doing what I do. I'd figure out a way to read a paper and watch a little TV and think about things and talk to Charlie. The idea of losing permanently other people's money, people who trust us, really is, that the future I don't wanna have. As Charlie says, "All I wanna know is where I'll die, so I'll never go there." That seems pretty sound. He has a way of Works so far. Yeah. Works so far. In case you missed it, Charlie says it's worked so far. We would die psychologically if we lost a lot of other people's money. We wouldn't take it in the first place. It'd be crazy to take people's money and lose it if you're gonna feel terrible about doing it. The one thing I can tell you about Berkshire, I can't predict what our earnings will be, and I can't predict what the stock will do, and I can't. We don't know. We don't know what the economy will do and all of that sort of thing. We do know that we wake up every morning, we wanna be safer in terms of your eventual investment. Not whether you make the most money or anything. We do not want you to get a terrible result, because you've decided to become our partner, and that's a pledge we live by. Now, let's see what we have here. On Q2, it gives some indication of that. This is kind of interesting. I wrote a letter to our owners, and it was dated February 26th, and that was a Saturday released. I write the letter all through the year in my mind. I mean, it I don't. You know, we don't have anybody that sits out and writes out the letter or anything like that. I mean, this is a letter between partners, and I write the letter all year in my head. I'm writing next year's letter. I don't write out the words, but I have things I wanna tell my partners. My sister's a partner, and I'm writing to her in my head. My older sister died not too long ago, but I used to be writing to both of them, in effect. I wanna tell her what I think and about the business and what I think she ought to think about it and so on. The letter's dated February 26th, and I said not much is going on. We might jump over to Q3 if we will. I sent out a letter on February 26th, but it, that wasn't written on February 26th. I said, basically, nothing much is happening around here. I said, we've repurchased some shares, and we just aren't seeing anything. Between January 1st and February 18th, as you can see, we spent $2.2 billion, which is half the quarter, you know, probably 30 trading days in there. We sold. So, basically we didn't do anything. In the next three weeks or thereabouts, we spent $40 billion. Incidentally, when I say we spent $40 billion, there's one fellow in the office that does this all. I mean, he buys all the stocks, he buys the government bond. He doesn't have an assistant or anything. I just. But he spent $41 billion at, yeah. He literally. I mean, it. He does other things for me too. He, you know, puts together totals of these. He just does what he needs to do, and he's worked in other jobs at Berkshire long ago. He likes doing what he does, and he does it very well, and we don't have a department for it. As you can see, it fell off after that. We did also in the first quarter, we spent about $3.1 billion or $3.2 billion, somewhere in that, for repurchasing shares. We talked about that in the annual report. As Charlie would say, it was keeping us out of bars. I mean, you know, it gave us something to do. We never do anything that we don't think adds to the value of Berkshire Hathaway, though, so we only repurchase the shares when that is the most attractive thing to do. We haven't repurchased any shares at all in April. So it's people who are looking for all these footprints in the woods and all that as to what we're doing, we're just doing it day by day as it comes along. I think this table kind of illustrates that we spent $40 billion in a hurry there between for three weeks and now we're back somewhat in our more lethargic mood. Anything can change at Berkshire, but the one thing that won't change, going back to Q2, if you will, is we will always have a lot of cash on hand. When I say cash, I don't mean commercial paper. When 2008 and 2009, the financial panic came along, we didn't own anybody's commercial paper. We didn't have money market funds. We have treasury bills. As I may get into a little later, I'll explain to you why we believe in having cash. There have been a few times in history, and there will be more times in history where if you don't have it, you don't get to play the next day. I mean, it's just like oxygen. It's there all the time, but if it disappears for a few minutes, it's all over. Our cash was down on March 31st because, as you saw, we spent that large sum there in that brief period during the quarter, $40 billion. We've committed to buy Alleghany Corporation for something over $11 billion. But we will always have a lot of cash. We don't. Some of our companies have bank lines. I don't know why they have the bank lines. We're better than the banks, and we'll give them the money if they need it. You know, the local banker's been calling on them, and they need something to do. Everybody else has bank lines, so it's harmless. There's no reason for any of our subsidiaries to have bank lines when Berkshire is stronger than the banks that they're. I didn't hear exactly. I don't know whether that was a banker screaming or. I don't really like to torture. I don't like to torture anybody. I mean, but I'm all for banks, and we'll talk about that a little later. In fact, we might even talk about it right now just for a minute. Money's kind of an interesting thing. People seem to like to talk to me about it. I mean, they don't ask me how to dance or anything like that, but they do ask about money. If we'll put up 20-1. It's a photo of a $20 bill, and it says at the top, "Federal Reserve Notes." Now, Federal Reserve Note, we've done all kinds of things with money in this country. It's amazing, a country only a couple of hundred years old, the number of different experiments we've made with banks and everything. We finally just decided to let the Federal Reserve do the issuing of money. Down in the lower left-hand corner, incidentally, I think Rosie Rios, who signed this note, I think she signed more U.S. currency than any other person in history. So if you see Rosie,n you cozy up to her. I mean, this is a woman who has issued a lot of currency. It says, "This note is legal tender for all debts, public and private." That makes it money. You can go in, you can go into our candy store, and if you offer us enough bushels of wheat, we'll probably give you a box of candy. Money is the only thing that the IRS is going to take from you. That you can offer them all kinds of, you can offer them paintings, you can offer them whatever, but this is what settles debts in the United States. I thought that you'll hear a lot about various kinds of money. This is the only kind of money you're going to see, in my opinion, throughout your lifetime or even throughout Charlie's lifetime. I mean, this is, and it's very interesting because it just says that, "Settle all legal tender for all debts, public and private," and nothing else says that, except I thought you might be interested in seeing another $20 bill, and this one I own. On that, it's got the same guy's picture, Andrew Jackson, and everything. That's a $20 bill, and that $20 bill was issued during my lifetime, and it was done by a bank that Berkshire ended up owning. You'll see the Illinois National Bank of Rockford, and we bought that bank back in 1969. If you look down at the bottom of that one, it's signed by a fellow named Eugene Abegg, and we bought it from Eugene Abegg. We still have some $20 bills that came in sheets. We can cut them out like paper dolls, and they're our money. The Illinois National Bank issued money. Just remember, the United States government, in effect, said that this became exchangeable for lawful money of the United States. That's what money is. It may turn out that it becomes worth dramatically less in purchasing power. It can become almost like paper money, as it has in many countries. That is all. When people tell you that they're issuing new forms of money, this is the only thing that will pay bills. Under some circumstances. There were days, a few days in 2008, and we came very close to having a repeat in March 2020. We had plenty of money on March 20. We were not very far away from having something that might have been a repeat of 2008 or even worse. We have a bookstore here, but The Bookworm that's in the other room, and they've got a book called Trillion Dollar Triage. For those of you who actually like to read about this sort of thing, it's a marvelous account of what took place day by day with the Federal Reserve and the Treasury. Believe me, if the Federal Reserve hadn't done what they did, at least in my view, in a very short period of time, things could have stopped. I tipped my hat a couple years ago to Jay Powell for acting as he did. You have to act with speed. I mean, In the old days when you had runs on banks, back in the 19th century, a line formed, and the bank would go broke. The fellow would pay out as slowly as possible, you know, hoping something would happen. A Wells Fargo truck or something, or a stagecoach would pull up with a bunch of gold or something, and he'd sweet talk the people into the line dispersing. In Omaha, in August of 1931, four state banks, so-called state banks, they had them in that day, they closed, and the national banks didn't. They were all broke as of that day. No bank can pay off in one day all of its liabilities, but the Federal Reserve is the only one that's good at that time. I will tell you this, Berkshire Hathaway will be there at that time. We run it on the basis that if Hank Paulson, George H.W. Bush, or no, George W. Bush, I'm sorry, and Ben Bernanke and a few people hadn't taken action, we were at that point where the line was formed, except it comes in electronic form, and they push buttons, and it's all over very fast if there's a run on a bank. Remember, if you ever buy a bank and there's two banks in town, hire a few extras and have them go over and start standing in line at the other guy's bank. I mean, it. There's only one problem with that. After a while, somebody will stand in front of your bank, you know, and then both of you are gone. But the Federal Reserve is not gone. The Federal Reserve in the United States can do whatever is necessary. They've got all kinds of rules about can do this or that and this and that. One time in the 1980s, Paul Volcker, who was a very honest man, said to me, and I said, "You know, what are the limits of what you can do?" He was a very unusual guy and huge, looked down at me, said, "We can do whatever we need to do." That's true, and that's what happened in 2008 and 2009, and that's what happened in 2020. You hope it happens again next time, but you wanna be we want Berkshire Hathaway to be there and in a position to operate when if the economy stops. That can always happen. With those cheery words, let's see if we. I think we can actually, it might be a good idea to start with some questions. As I said, we will have the questions alternate between CNBC, Becky Quick, and those are questions that have come in from shareholders, and they can be directed to any of the four of us up here. Then we will go alternate and go around the room here. We've got the auditorium broken into 10 or 11 sections. Charlie and I one time figured out a form and said officers of the company, broken down by age, and we just put all of us as an answer to that question. We'll have it broken down by categories around here, and we'll keep alternating, and we will break for lunch at noon and reconvene at 1:00 P.M. Let's start off, and Becky, will you lead the way? Thanks, Warren. The first question comes from Jack Ciesielski, and he says in the annual letter that you wrote on February 26th, you mentioned that Charlie and you saw little that excites us in the market, yet around March 10th, the deal for Alleghany was announced, and then later the Occidental announcement, then the disclosure of the HP investment. His question is, what changed from the time you dated the letter to the time the investments were announced? Did the names suddenly become interesting in the space of a month and a half or half a month? Well, Charlie, you want to give your version? I'll give my version. My version would be, we found some things we prefer owning to Treasury bills. As usual, Charlie's given the total answer, but I'll talk longer and say less. Actually, the letter is dated February 26th, where we were confessing our inability to find anything, which was a Saturday. The day before that, February 25th, I got a email. Actually, my assistant, Debbie Bosanek, gets it because I can't figure out quite how to handle the machinery. So she brought it in. Actually, she puts a bunch on the edge of her desk, and I collect them occasionally. There was a note just a few lines long from a fellow that is a friend of mine and that worked for Berkshire many years ago. This is on February 25th, the day before the thing. He said he'd now become CEO of Alleghany Corp. I'd been following Alleghany Corp for 60 years. I'd read their annual reports. I had four big file drawers full of it because it was an interesting company, and all companies interest me. I knew a lot about Alleghany Corp., and Joe said, "This is my first annual report as CEO, and I just wanted to send it along to you just like you write for your sisters." He says, "I write this report as if I'm writing to you." I sent a note back to Joe, and I said, "I'm going to read it over the weekend or whatever." I said to him on it, which was true. I mean, I look forward to reading it. I said, "By the way, I'm going to be in New York on March 7th. Can we get together? I'd like to see you." I think I may have said I got an idea. Well, I didn't have that idea the day before. I mean, this thing happened to come in on Friday the 26th, and I knew I'd buy Alleghany at a price. If he hadn't sent me the note, it never would have occurred to me to write him and say, "Why don't we get together on March 7th or anything of the sort?" It just wouldn't have happened except for the fact that Joe wanted to send me along this annual report that he'd just written. That's the orderly and decision-making progress. I didn't call up investment bankers and say, "Will you prepare me a report on this? And what's your advice?" and all that stuff. I knew we'd buy Alleghany at the price we offered, and if it was of interest to Alleghany, fine. If it wasn't. Otherwise, if that email hadn't been sent, we would not have made an offer for Alleghany. Give credit to the fact that Joe had written the annual report, and if he'd sent it a week earlier, well, I wasn't going to make a special trip to New York, but I wanted to sit down with him and tell him what Berkshire would do. That explains the $11 billion. What happened was that a few stocks got very interesting to us, and we also spent a lot of money. What happened, the market, and this is really important to understand, in the last couple of years, our market has probably. It's always been a combination of a casino and a and when I talk about Wall Street, I'm talking about the whole capital formation market and trading market, etc. The market has been extraordinary. Sometimes it's quite investment-oriented, kind of like always you read about in the books and everything what capital markets are supposed to do, and you study it in school and all that. Other times, it's almost totally a casino, and it's a gambling parlor. That existed to an extraordinary degree in the last couple years, encouraged by Wall Street because the money is in turning over stocks. I mean, people say how wonderful you'd done if you bought Berkshire in 1965 or something and held it, but your broker would have starved to death. I mean, it's Wall Street makes money in one way or another catching the crumbs that fall off a table of capitalism and an incredible economy that you know nobody could have ever dreamed of a couple hundred years ago. They don't make money unless people do things and they get a piece of them. They make a lot more money when people are gambling than when they're investing. I mean, it's much better to have somebody that's going to trade 20 times a day and get all excited about it, just like pulling the handle on a slot machine. You know, that's who you want. You know, you may not say that you'd want that person. You'd like the other kind of person, too, maybe, but that's where you make the money. The degree to which the market got dominated by that is shown on a slide I have here somewhere. Yeah, here's on OXY one. If you'll put up the OXY one. That shows how we bought what became. Well, we bought in two weeks, thereabouts, 14% of Occidental Petroleum. You'll say, "Well, how can you buy 14% of a company in two weeks?" It's more extreme than that, because if you look at the Occidental proxy, you'll see that the standard names, BlackRock index funds, State Street index funds, basically, Vanguard index funds, and then one other firm, Dodge & Cox. If you take those four entities, they're not gonna buy and sell stock. They may have got their own little rules. They own 40% of the company, roughly, those four firms, and they didn't do anything during this period. Now, you're down to 60% of the Occidental Petroleum company that's even available to say, "Well, Occidental's been around for years and years and years, big company, all kinds of things." With 60% of the stock outstanding, I go in and tell Mark Millard, this fellow that is 30 feet away from me or so, and I say in the morning to him, you know, "Buy 20% and take blocks or whatever it may be." In two weeks, he buys 14% out of 60%. That's not investment. I mean, you're not buying from investors. That I find it just incredible. You wouldn't be able to do that with Berkshire. I mean, you can't literally buy it. You can say you wanna buy 14% of the company. It's going to take you a long, long time. Overwhelmingly, large companies in America, all of them, they became poker chips, and people were buying and selling like three-day calls or two-day calls. The more people, times people pull the handle on the machine, the more money the machine makes. I mean, it's very clear. Overwhelmingly, I mean, where did people go? The investors just were sitting around, and there weren't very many, and the money was being made essentially by a bunch of people gambling on things. That enabled us in a two-week period to buy 14% of a business that's been around for decades. You try to Imagine trying to buy 14% of the farms in two weeks in this country, or 14% of the apartment houses, or 14% of the auto dealerships, or just anything, when already 40% were locked up some other place. It defies anything that Charlie and I have seen, and we've seen a lot. I've never seen that percentage of the American public. Essentially, it was a gambling parlor, and the people that were making money were people that worked with gamblers. Then it declined very significantly a few weeks ago. You can feel it if you're around it. When somebody asks a very good question is, "Why weren't you doing anything on February 20, and why were you doing it on, in the case of Occidental, on February 28th?” It's because things developed in a way, and in the case of Occidental specifically, they'd had an analyst presentation of some, I don't know whether it was a quarterly one or what it was exactly, but I read it over a weekend, and that was the weekend when the annual report came out. I read it over a weekend, and what Vicki Hollub was saying made nothing but sense. I decided that it was a good place to put Berkshire's money. Then I found out in the ensuing two weeks, it was there in black and white. There was nothing mysterious about it. Vicki was saying what the company had gone through and where it was now and what they planned to do with the money. She'll do what she says. She doesn't know the price of oil next year, and nobody does. We decided it made sense, and two weeks later we had 14% of the company and we also already had a preferred stock and warrants. The story of the preferred stock and warrants is we paid $10 billion for it. At the end of the March quarter of 2020, we valued that $10 billion or our $10 billion at $5.5 billion. We had a $4.5 billion loss, and it would have. The world changed. Oil sold for - $37 a barrel one day, and now it's quite apparent, I think, that we're very happy. We should be very happy that we can produce 11 million barrels a day or something of the sort in the United States rather than being able to produce none and having to find 11 million barrels a day somewhere else in the world to take care of keeping the American industrial machine working. Charlie, have you got any comments on that as to how something this crazy could have happened? Well, it happened. It's almost a mania of speculation that we now have. We have computers with algorithms trading against other computers. We got people that know nothing about stocks being advised by stockbrokers who know even less. They understand the commissions, though. Yeah, it's just an incredible, crazy situation. It's weird that we ever got a system where all this equivalent of the casino activity is all mixed up with a lot of legitimate long-term investment. I don't think any wise country would have wanted this outcome. Why would you want your country's stocks to trade on a casino basis to people who are just like the people who play craps and roulette in the casino? I think it's crazy, but it happened, and it's respectable. Not with me, but with other people. Yeah. Well, look at what the country. I mean, they formed the New York Stock Exchange in 1792 under a buttonwood tree, and it really didn't seem like that was the eureka moment in America. Just look at what's happened using the system for less than, you know, well, you know, three of my lifetimes. I mean it's unbelievable. It's worked. Now, maybe it's worked in spite of itself, maybe with the country. One way or another, America has worked in an incredible. Nobody could have dreamt it. Nobody. You know, they'd have hauled you away if you said, you know, in three lifetimes, that this place where we're meeting, I mean, it became a state in 1867. In 1789, if you'd asked Ben Franklin or somebody that was walking out of the Constitutional Convention, you know, "Is it? What do you think the prospects are for Nebraska?" It's just unbelievable what's been accomplished, and it's been accomplished. The people who encouraged the gambling would like to say it's been accomplished because we've got these liquid markets and all these wonderful things. Charlie would probably say it's in spite of that. Who knows? The answer is that. Well, there isn't an answer. My wife, when we got married April 19, 1952, we got in my aunt's car, and we started driving west, and we ended up. Well, drove all over the west, but one night we ended up in Las Vegas. There were three fellows out there, Eddie Barrick, and Sam Ziegman, and Jackie Gaughan. All three of these guys were from Omaha, and they'd bought little pieces of the Flamingo. Bugsy Siegel had had his career ended rather abruptly a few years earlier. A bad bullet. It was a stray bullet, undoubtedly. In fact, there were probably five or six stray bullets. In any event, Bugsy Siegel was gone, and some people, including three guys from Omaha, were in the group. Sam Ziegman lived about two blocks from where I live now, and he was Stan Lipsey's uncle. Stan Lipsey ran, those of you who follow Berkshire, ran the Buffalo News and was a partner for 40 or 50 years later on. All kinds of things intersect. I walked into this casino, the Flamingo. It was kind of a motel-like arrangement. I was 21, and my bride was 19, and I looked around the room, and there were all of these people, and they were better dressed then. It was a more dignified group than perhaps currently. They'd flown thousands of miles in some cases, in planes that weren't as fast as the current ones and were more expensive probably on a per mile basis adjusted then. They'd gone to great lengths to come out to do something that was mathematically unintelligent, and they knew it was unintelligent. I mean, they couldn't do it fast enough in terms of rolling the dice, and trying to determine whether they were hot or whatever they may be. I looked around at that group. Everybody there knew that they were doing something that was mathematically dumb, and they'd come thousands of miles to do it. I said to my wife, I said, "You know, I'm going to get rich." I mean, how can you miss? If people are willing to do this, you know, this is a land of opportunity. Well, it's the way it still is. The Flamingo grew to be much bigger, and in Omaha, we're very proud of Jackie and things he did. He only died a year or two ago. He became sort of the leader, a spiritual leader of Vegas. Like I say, Sam Zigman's nephew went on to save my and Charlie's investment that we made in Blue Chip in the Buffalo News. It's a very accidental society that occurs. There is nothing stranger than what has happened in finance. On the other hand, if you go back, perhaps the greatest chapter ever written on the operation of markets, particularly the stock market, is in a book that. Probably one of the most famous books in economic history, The General Theory, written by John Maynard Keynes. I think it was 1936. I don't know whether this is chapter, I think it's chapter 12, but whatever it is, he describes what markets are all about in 1936. He describes something in beautiful prose that explains why the whole country in March of this year was sitting around trading Occidental in some crazy way that enabled us to buy a quarter of what wasn't owned by four other institutions that weren't going to sell. We were able to buy a quarter of it, and we could have bought a lot more. I mean, it was. You just wondered if there was anybody that really was thinking about investment. Going back to investing, I mean, investing is laying out money now with the hope of getting back more later on. It's really laying out purchasing power now with the hope of getting more purchasing power back. That's the reason you know, that's the way you learn in the textbooks, that you defer consumption now so you can consume more later on so that you can take care of your family. All these things about how investment takes place. That is what happens with farms. I mean, somebody buys a farm, and then generally they hope to leave it to their kids or they got it from their parents. I mean, they don't sit there every day and get quotes 15 times a day and say, you know, "I'd like to get a call. I'd like to sell a put on the farm next to me, and you can have a call on mine, and then I'll have something called a straddle or a strangle or whatever it may be. You know, they just, they go about making the farm worth more money, and they do the same thing if they got an auto dealership, and they do the same thing if they've got an apartment house. They look for improvement, attract tenants, all those kind of things. What would it be? $40 trillion at least, you know, of the ownership of all of American business. People trade as poker chips or pulling the handle, and they've got systems set up so that if you want to buy a three-day call on a stock, you can do it. They make more money selling you calls than if you buy stocks, so they teach you about calls. Nobody's going around selling calls on farms or anything of the sort. But that's why markets do crazy things, and occasionally Berkshire gets a chance to do something. And it's not because we're smart. It's because we're—the only thing I'd say we qualify on, and sometimes I wonder about that, but I think we're sane. You know, I mean that, and that's the main requirement in this business. Anybody? Charlie? Well, I don't think we've ever had anything quite like what we have now in terms of the volumes of pure gambling activity that go on daily, and the people lathering the gamblers up so they can rook them. It's not pretty, and I don't find it any glory for capitalism or anything anymore. There's a bunch of people throwing dice at a table. What good does that do the rest of the world? It's a great way to become rich, though. Just figure out ways to insert yourself into the system somehow. You know, jobs to some extent self-select. Many years ago, and I've got all kinds of friends on Wall Street, not as many as I had before I had started talking this way an hour or so ago. I really do. I mean, I don't. People make—they make lots of decisions in life, and the truth is that overall, the American system has worked extremely well. It's, it may be very unfair in many ways, but it has produced incredible difference in the goods and services available to me versus what my grandfather had available. You know? I do not wanna go back to pre-air conditioning and people pouring whiskey down me while they drill my teeth or something of the sort. I mean, this is a lot better world. I think we've made more because of the crazy gambling. I think it's made it easier for us net over the decades we've been operating. Well, I mean, we've depended on it. Yes. I mean, we depend on mispriced businesses through mechanism where we're not responsible for the mispricing of them. Overall, we learned something a long time ago that doesn't take a high IQ, doesn't take anything. It just takes the right attitude. We may talk more about that later, but I think we ought to prove that we've got an audience here by going to section one. Good morning. My name is Ole Pollem. I live in Hanover, Germany. This is my first time in Omaha. My question is on Berkshire buying entire companies outside the U.S. There were a few. ISCAR probably the first one. Detlev Louis in Germany. My question is, would you only answer calls from them if you're interested in, or would you proactively approach them if they would like to sell their company? We actually made a few trips. I think I made. Maybe Charlie went on one of them. We tried to stir up interest and all that sort of thing in Berkshire around the world. We probably did that 20 or 25 years ago. During that period that I showed you that burst of action we had, we probably spent at least $5 billion of that. Yeah, it'd be pretty in the area of $5 billion of it. We bought three German securities. We bought two. Well, we bought one Japanese. We rounded up on some of the holdings we already had there. We would love to buy, but they don't think of us as quickly there. I mean, I don't have somebody that's gonna send me an email about a company that I've been following for 60 years, and I know I can see him in New York, and, you know, I can name a number to him, and if he likes it, he can take it to his board and so on. It just doesn't happen that way. We haven't had that experience in well, anywhere outside the United States. Now, you can say with $40 trillion here, we should be able to find something here a little closer to home. But we don't have any bias against doing it. There are companies, you know, we'd buy in 10 minutes if we had somebody on the other end that could do business in 10 minutes. It's much more complicated in certain countries than in the United States to purchase businesses. There are certain rules. I would say this, you know, we got a call, whenever it was, many years ago, on our company in Germany. Actually the two fellows that run it are probably here in the audience. I saw them yesterday, and they're marvelous, and they run the business. You know, they're as trustworthy. Well, their pictures were up on the movie we showed before the meeting started here. We have so much trouble finding good ideas that we can't afford to ignore any, but they do have to be sizable now. I mean, there really isn't. I love the operation we bought in Germany, and it's just a pleasure to be associated with the people there. I just wish we could add another zero to all the figures, and it was a much larger deal. It's not gonna have an economic impact on Berkshire, but they love it. They care. You can see it. You can feel it. That's the kind of business we'd like to have, and we're very happy we've got it in Berkshire. We can't do it one Detlev Louis at a time. We would never sell an operation like that, ever. I'm looking at you, Greg Abel. You know, if we get a call tomorrow and we could make a deal that involves $10 billion or $20 billion that was in Germany, or France, or Britain, or Japan, or name a whole different country, we'd do it. We bought the interests in the five leading trading companies in Japan couple years ago, and I rounded them up a little bit. I told them originally, we weren't gonna change our positions materially without their okay. We actually, I think, rounded to 5.85% based on the latest figures we had then of all five of them, and that put a good many hundreds of millions or maybe a billion or two to work. We will. President Kennedy said, "We'll pay any price, climb any hills," you know, whatever it may be to find businesses. We actually prefer it when they fall into our lap, like getting a note, a letter from somebody and you hadn't heard from for a couple of years. Then you know what you'd pay for the business, and you know if the board of directors of that company regards it as attractive, that they'll be happy to buy it, and they know you're gonna show up at the closing and that you're not gonna pile debt on it or change things or anything. They’ve got an answer, and then you have to see if they've got the question in their mind is what’s the best thing for Alleghany Corp? In that case, we had $11 billion less at the end of the day or the end of the dinner than we had at the start of the day. It's opportunity can be any place, and we do have a terrific operation, for example, in Israel. I mean, it's just terrific. It's pretty good size. Would we like to have another one like it? Yeah, I just don't know where the other one is. Charlie? Well, think in the scheme of things, imagine buying $60 billion worth of our own stock. We like the businesses. We like the price we're paying. No overhead, no cost, no nothing. Just, just more interest in what we already own. Isn't it we're totally wasting our time? Yeah, if you look at it, there are—you can read hundreds of thousands, maybe millions of words written on stock repurchases and what this is and what that is and all this kind of thing. It's not very complicated. I mean, if you had a partner in a lemonade stand, and they wanted to sell out, sell their interest, or two partners and one wanted to sell their interest, I mean, and the business had the money to buy it, our little lemonade stand, and they were offering it at a price that was good for the other two people that are gonna remain, you'd buy them, you'd buy it. Now, the thing that is fascinating to me is what you can accomplish, and still people don't pay any attention to it. We owned, in 1998, this was more than 20 years ago, we owned about 150 million shares. I don't know whether they split whatever it is. If they split it's split adjusted. We owned 150 million shares of American Express. I think we bought our last share in 1998 or something like that. We then owned 11.2% of the American Express company. Wonderful company. Since then, they've sent us a check every quarter as a dividend. We've taken some cash a little bit as they went along. Now we own 20% of American Express. That's what's happened because they've repurchased shares. That happens to have worked out extremely well. If they overpaid for the stock and all that, it doesn't solve every problem. It's a wonderful thing if you've got an asset you like, and they take your ownership interest up. Like I say, we've gone from 11.2% to 20%. If you're using your American Express card or whatever it may be, 20% of whatever earnings our attributable interest in they used to be 11.2%, and we've done it without putting up any money. Now imagine if you owned a farm and you had 640 acres, and you farmed it every year, and you made a little money on it, and you enjoyed farming. Somehow, 20 or so years later, it had turned into 1,100 or 1,200 acres. I mean, you'd say, you know, "How long has this been going on?" You know, "What could possibly be, you know, is this un-American or whatever it may be? I mean, is it, you know, sensible use of immediate cost of capital?" Blah, blah, blah. If you do it at the right price, there's nothing better than buying in your own business. I mentioned used Apple as an example of how our interest in Apple, you know, every time a company that earns $100 billion a year, it means that our interest in it goes up 0.1%. You know, we've added another $100 million to earnings. Well, that takes, I mean, it takes a lot of work to earn $100 million in earnings. In the first quarter of it, they just reported. They're on a fiscal year, but they just reported their March quarter and they earned more money, and they had fewer shares outstanding. We actually bought a little more Apple in the first quarter. We decided we wanted to own a greater interest, and on top of that, we knew that we would own an even greater interest if they kept buying back their shares, which we didn't have any insider information or anything, but certainly would seem the way to bet. We feel better because we bought the shares we bought in the market, and we feel just as good by the fact they used their cash to buy out some of the other people. It is the simplest thing in the world, and then I read all this stuff. It is unbelievable how people can't figure out something that, if they owned a farm and the guy next to him had a farm and somehow you were getting more of his farm all the time without putting up any money while you farm your own farm, that at least, if you're using some of the earnings for that, you'd feel very good about it. Have you got any explanation for it, Charlie? Well, I have another thing that interests me in the presidency. We get all these suggestions from index funds, a letter saying we, the chairman and the president or the chief executive officer are the same person, and that they have some professor somewhere that thinks that American business would work better if it had a separate. If one could split even two and have each half work. To me, it's the most ridiculous criticism I ever heard. It would like be where Odysseus would come back from winning the battle in Troy and so forth, and some guy was saying, "I don't like the way you were holding your spear when you won that battle." You know, some guy that's never run any business and doesn't know anything. I don't think too much of this activity. Well, let's see. Somewhere in here. I may find it at some point. Oh, here it is. We wrote in the annual report that in the third paragraph of a nine-page report, we said, "We're gonna treat everybody the same." It may be a crazy concept we have, but we really feel that somebody that gave us their savings in 1960 or 1970 or 1980 and just left them with us and trusted us, we feel that they're entitled to the same sort of respect and attention that somebody that is accumulating like crazy assets under management gets paid based on assets under management that knows that they just need to have policies that essentially are popular in Washington. The only threat they have really is that Washington sometimes says that you're getting too damn big, and we're gonna do something about you. They try to be very sure that they're doing things that people will cheer. Anyway, I say, "Well, we're gonna treat you all alike." We've got three million people or shareholders out there. We're gonna treat you all alike. On March 25th, about a month after I wrote that letter, it's in the third paragraph. You'd think that they would get that far, that they had 101 million B shares. I mean, you know, somebody ought to read to the third paragraph. Anyway, we got a letter and it says, "We would like to meet with you in advance of Berkshire Hathaway's 2022 Annual Meeting of Shareholders to discuss Berkshire Hathaway's perspective on governance and sustainability." Well, A, I've written probably more on that than has been honestly written by the guy that runs the company. Why in hell would they think that we should meet with them and not you people all individually that come here? I mean, I grew up in a very Republican household, but I feel like a some raving populist or something, but I just can't imagine. Well, anyway, you've heard it. You know, I, somebody gets paid to. Well, there's a lot of people, I'm sure, in public relations, and they hire advisors because it looks better if they have advisors to tell them whether the Chairman and the CEO should be the same person or not, and those people get paid for it. Then they discuss it at their board meeting, and then, you know. In the end, believe me, if 90% of Congress, for some reason, felt it was better to have the chairman and the CEO be the same person, the index funds would not be writing those letters because all they have to worry about is whether, for some reason, people start wondering why some institution should have 10% of the votes in every major corporation in the country. I like the idea of index funds. It is interesting to watch where incentives and bureaucracy and whatever it may be lead people. The guy that wrote me the letter is probably a very nice guy. That's his job. Well, anyway, they didn't get a special meeting. You people are here, and we appreciate the fact you're here. Okay, back to Becky. This question's for Ajit and Greg. It comes from Ben Nall, who's a shareholder of 30 years. He's a Nebraska native, and he says he'll be attending the meeting here today. BNSF and GEICO appear to be losing ground to their two primary competitors, Union Pacific and Progressive. Over the past several years, UP's operating ratio has been about 400 basis points better than BNSF's. Progressive has grown faster while maintaining a lower combined ratio than GEICO. On an operating basis, UP's precision scheduled railroading and Progressive's telematics appear to have jumped ahead of the Berkshire businesses. He wants to know what Greg and Ajit are doing to address those business challenges. You want me to go first? Okay. Thank you, Becky. Let me just start by saying when we think of BNSF, we have an exceptional franchise and a great business. We do compete with other railways, and we're very well aware of how they operate, including their operating ratios and the metrics they operate to and precision railroading, and it's all part of it. What I would share with is when I think of BNSF, we start with focusing on our customer, understanding how we can best service them. Yes, we want to do it in an efficient, effective way that delivers great results back to our shareholders. That will continue to be our focus. Yes, we learn from all the metrics they report and how they operate their rail, and we observe it. I would put our team up right beside them on any operating day, and we're gonna move our rail cars as well as any other rail company in America, and we're gonna do it on behalf of our customers. We're very proud, but we're not ignoring the fact that there's more to be done, both operationally and for our customers. We'll continue to see improvement there. We've got a great leadership team there. We've got a great employee group within BNSF. What I like is we're just gonna see long-term improvement there. We have an exceptional intermodal franchise out of the West. It's incredibly valuable to our shareholders long term, our partners, and that's what our team is focused on building that franchise out. Couldn't be more proud of where we're at, but we also know we have a journey ahead of us, and we're gonna continue to get better and better. Greg, if we were offered the opportunity, would you trade our operation for theirs? Never. We love our- He knows a lot about it, fellows. We have a great franchise, and we have a great leadership team running it. Well said, Charlie. Thank you. I just before we go to Ajit. Greg, you know, was a major partner for 20 years, more or less, since little over that since we bought the energy company. His boss was David Sokol, and the two of them, I mean, they knew how to run businesses. I mean, they, you know. It isn't like we don't read what other numbers are and all that. We've got the perfect person running, in Katie Farmer, we've got the perfect person running BNSF. You know, she'll do a great job, and Changing around a railroad in various ways, you know, if you've got 20,000 or something miles of own track and all kinds of other, it doesn't count sidings, double tracking, and you've got a lot of things to do from something that they started building a couple hundred years ago. Not quite a couple hundred, but you can't move things around easily, and towns grew. You know, when you came into Omaha in 1862, well, the railroad didn't even go across the river. I mean, even though we'd become a major rail center for the West or the opening to the West. We're gonna be here a hundred years from now. We will be an important, a really vital asset of the country, and it will be a very big part, very important part of Berkshire. We will take what is an incredible assemblage, I think of 300 and some railroads or something I get over time. The tracks got laid and the rocks laid out, you know, 150 years ago. The world changes, but we have to adapt to it. You don't put an order out to change 1,000 miles of trains and how it's operated or anything of the sort. We're running it to have that asset for Berkshire shareholders, but it will run down to the penny to the benefit of the country and like we do it. No matter who ran it would be important, obviously enormously, to the country. The UP will be here at that time too. It'll be a better railroad 100 years from now than it is now. I can't promise you what'll happen if we get flooding and something in the next few months, you know, it can wipe out a lot of the plans you have and disrupt lots of lives and disrupt lots of shipments. There are no magic wands in railroading to make great changes. On the other hand, you ought to be working at it every day to make it better done. I forget how many bridges we have, but some years ago, we were spending $3 billion-$4 billion a year on capital expenditures. One time I said, Matt Rose, you know, I said, "Well, this is a lot of money to spend, you know, keeping up a railroad." He said, "Well, we're gonna have to do that and more," and so on. I said, "Well, I can handle this, but I'm not sure Charlie can." I have to explain these numbers to him. The next bridge they built, they called the Charles T. Munger Bridge. You can actually go see our railroad has the Charles T. Munger Bridge because Charlie kind of was asking similar questions ten years ago. Ajit? Okay. Thank you, Becky. There's no question that the personal automobile insurance business is a very competitive business. Having said that, both GEICO and Progressive are two very successful competitors in this segment. Each one of them have their pluses and minuses. But having said that, there's no question that more recently, Progressive has done a much better job than GEICO, as you point out, both in terms of margins and in terms of growth rate. There are a number of causes for that, but I think the biggest culprit as far as GEICO is concerned, and again, you rightly pointed out, is telematics. Progressive has been on the telematics bandwagon for, I don't know, more than 10 years, probably closer to 20 years. GEICO, until recently, wasn't involved in telematics, and it's been only the last two years that they've made a very serious effort in terms of using telematics for segmentation and for trying to match rate and risk. It's a long journey, but the journey has started, and the initial results are promising. It'll take a while, but my hope and expectation is that hopefully in the next year or two, GEICO will be in a position to catch up with Progressive in terms of telematics, and hopefully that'll then translate into both growth rate and margins. Charlie, you got anything? It's very interesting. I mean, the auto insurance industry is a fascinating one to study. That and in that the largest auto insurance company now and we're talking 2022 and, but Henry Ford, I mean, it was 1903, you know, or something when cars really got started and it wasn't too many years after that that he was turning out two million cars a year. Imagine that, you know. One guy that two million cars a year is a lot of cars. So car insurance became very important after hundreds of years of when people thought about insurance, it was ships at sea and fire where they have protective societies and Insurance as a product's been around a long time. Auto insurance has been pretty much the same thing since Leo Goodwin started GEICO in 1936, and we came along with a good idea and lots of big companies and all that. The largest auto insurance company in the United States was started over in Illinois by a guy who didn't know anything about insurance particularly. It's a mutual company. It's not supposed to succeed in capitalism. I mean, you know, if you go to business school, they teach you that only because you have incentives and compensation and all kinds of things can a company succeed. Well, nobody's really gotten rich off State Farm. They sat there, and they are the largest insurance company. While Leo Goodwin started 80-some years ago, and he probably wanted to get rich and probably at Progressive, people wanted to get rich at Travelers and, Aetna—you name dozens and dozens of companies. Who wins? You know, a mutual company. In terms of present size, they still are the largest company. They have, if you leave out Berkshire, they got the largest net worth by far. I think they've got $140 billion or something like that of net worth. You know, Progressive has had a very smart guy running it for a very long period of time. They got very smart people running it now. They have a net worth that's, you know, 1/6th out of what some people over in Illinois that nobody knows the name of have after years of. They've had the time to sell the same product, and they advertise like crazy. We spend $2 billion a year telling people the same thing we've been telling them for 70 or 80 years, you know. The policy doesn't change. When we get all through, State Farm's still doing more business than anybody, and it shouldn't exist under capitalism, you know. If you went there with a plan to start a State Farm today and have it compete with Progressive, you know, it you know, who would put up the capital? I mean, a mutual company that you're not gonna get the profits from. It doesn't make any sense at all, except they've got $140 billion or something like that of net worth. Progressive, I don't know what their net worth is, but it must be somewhere around $20 billion or so. I haven't looked for a long time. Their net worth in the first quarter, incidentally, I mean, they are very disciplined in underwriting. Of course, on the investment side, their net worth dropped in the first quarter because they own a lot of bonds. They say, well, they would probably everybody in the insurance business would say that, "Well, we own bonds because that's what people do." Here's half the business where you do what people do, and the other half the business, you spend all kinds of time trying to analyze in every county and every single way you can segregate and properly rate business and all of that. Basically, Peter Lewis sat in my office 40 years ago, and he's smart as hell. You know, this guy was clearly gonna be a major competitor of Berkshire's. He knew insurance backwards and forwards and very bright and everything, but he just ignored the investment side. That was as important as the underwriting side. It is interesting how organizations function and have what I would say are, to some extent, blind spots. Of course, Charlie and I know we've got all kinds of blind spots ourselves. We have to be kinda careful criticizing other people for having them. It is the auto insurance business ought to be studied in business school because it essentially refutes so many of the things they're presently teaching. That's my suggestion today to business schools. Okay. Thanks, Ajit. Ajit is responsible for adding more value to Berkshire than the total net worth of Progressive. That's not to knock Progressive. I'm just saying one guy. Okay, station two. Hello, Warren and Charlie. It is great to see you both and the wonderful Berkshire managers. Our thanks for everything that you do. My name is Rajiv Agarwal, and I am from New Jersey. My question is on market timing. You have always said that it is impossible to time the markets. Yet, if we look at your track record, you have had amazing timings with some of your key decisions. You got out of the stock markets in 1969, 1970. You got back in 1972, 1974 when the markets were really cheap. You did the same thing in 1987, 1999, 2000. Today, we are sitting on a significant amount of cash when the markets are going down. My question is: How do you time the big market moves so well? We'd like to offer you a job first. I will take it. The interesting thing is, obviously, we haven't the faintest idea what the stock market is gonna do when it opens on Monday. We never have had. We have never made, Charlie and I don't think in all the time we've worked together, and I'll tell you something later on maybe about how learning takes place, but we have never. I don't think we've ever made a decision where either one of us has either said or been thinking we should buy or sell based on what the market is gonna do. No. For that matter, on what the economy is gonna do. We don't know. The interesting thing is, sometimes I get some credit someplace for the fact that, you know, how wonderful it was that we were optimistic in 2008 when everybody was down on stocks and all that sort of thing. You know, we spent a big percentage of our net worth at a very dumb time. I shouldn't say we. It's I. We spent about $15 billion or $16 billion, which was a lot to us then than it is now. We spent it in the last few weeks. You know, a period of three or four weeks between Wrigley and Goldman Sachs, and generally at a terrible time as it turned out. I mean, I didn't know whether it was gonna be a good time or a bad time, but it was a really dumb time. I wrote an article for The New York Times, and buy American, and all these things. Well, if I'd had any sense of timing and waited six months until I think the low was in March. In fact, I think I was on CNBC maybe that day or something. I totally missed that opportunity. I totally missed, you know, in March of 2020. We have not been good at timing. We've been reasonably good at figuring out when we were getting enough for our money, and we'd had no idea when we bought anything. Well, we always hoped it would go down for a while, so we could buy more. We hoped even after we were done buying and ran out of money that if it was cheap, the company would keep buying and in effect taking our interest up. I mean, that stuff you could learn it in fourth grade, but it's not what's taught in school. I mean, it. Never give us any credit. Well, actually give us all the credit. I mean, go out and tell everybody how smart we are, but we aren't. We haven't ever timed anything. We've never figured out insights into the economy. I mean, when I was 11 years old, March 12th, I guess, 1942, you know, or March 11th, you know, I bought stock when the Dow was 90. Well, it was 101 in the morning. It was 99 at the end of the day, I think. You know, now it's 34,000 or maybe it's 1,000 less than it was on Thursday. But it's one decision that it's a good thing to own American business. You know, if the Harvard Endowment had come to see me, an 11-year-old, and you know, or General Motors pension fund or something, and, you know, they say, "Well, no, but we have to have a balance, and we have to maybe have 60% of it, and then we have to sit around every three months and listen to a bunch of managers." They, they'd have just done better if they'd just taken some darts and thrown them and just said, "We're gonna be in America 50 years from now and 100 years from now, and we'll do better in stocks than we will in bonds." It's amazing how hard people make what a simple game it is. Of course, if they told everybody what a simple game it was, then, you know, 90% of the income or more of the people that were speaking would disappear. There's really a little too much to expect of human nature that people will explain why they really aren't adding any value to what you can do by yourself. Actually, I hate to use the example, but you can have monkeys throwing darts at the page and take away the management fees and everything. I'll bet on the monkeys. I don't consider them a superior species, and I don't want them to move next door instead of my next door neighbor or anything, but that is the way it is. It's just the way it has to be. Charlie, do you have anything cheerful to say? Well, frequently in wealth the wealth advisory business, the way it used to be, you go to your investment advisor and you say, "What should I do to protect myself for the future?" He says, "Why don't you give me $50,000 of your net worth now? That's my contribution to your future." It's a peculiar business. It's a great place to grow rich. Still, if you have a son or daughter that really wants to make money per point of IQ and per erg of energy and all that, well, tell them go to Wall Street. I mean, don't have them enter the priesthood or any. I mean, if that's what they. It self-selects, and it always will be the case. I mean, there's no reason to despair about humanity because they behave in their self-interest. They may not actually be behaving in their self-interest over time, but they, you know, are they happier? Who the hell knows? If they just wanna make money, that. Well, people here in the auditorium saw a little session from the Salomon Brothers episode. Jerry Corrigan was then the head of the New York Fed, and that same committee was grilling him. They said, "Mr. Corrigan." They were giving him a hard time. They said something to this effect, "Who was the highest paid guy at Salomon Brothers last year?" Then he said, "Well," he named him, and he said. Or maybe he named him. He said he got, I forget whether it's $20 million last year. We're talking 1991 now, too. He said, "He got $20 million." The guy says, "Well, how old is he?" You know, he said, "Well, I think he's" Corrigan said something to the effect of, "He's 26 or something like that." Then Corrigan couldn't resist saying, "He can't even throw a football." The truth was, you know, now there's a lot more money in throwing a football than there used to be. One of my heroes was Ted Williams. I think he was making $20,000 or $25,000 a year, you know, just imagine today some guy that bats.230 or.240, you know, and if he makes it to the bigs, I mean, the money flows in. Of course, those people should sit down and thank the fact that the stadium that could hold 30,000 or 40,000 people and was the source of revenue for the people who paid their paycheck, that stadium went from 30,000 to 40,000 because somebody first invented television and they came up with cable television, and they came up with pay and all that sort of thing. Nobody knows the names of those people. Capitalism is very, very, very peculiar in how it dishes out rewards. For a while it was better to be in Wall Street than be at 220 or 230 hitter in the bigs. It is now reversed because of the development of TV, et cetera. It's a crazy world. Rewards seem very capricious, and they are. They don't seem to any theologian or even to Charlie and me in our spare time, and the whole thing seems kinda crazy. It's worked awfully well. Even the people who get shortchanged by the system are doing far better than if the system hadn't gotten changed. Doesn't mean that you necessarily shouldn't work for change, but you should recognize the limitations of what you can do with humans, I'll put it that way. Okay. Charlie, is there any way you'd like to close the sermon? Well, I do think we have a very interesting phenomenon. I would argue that in a lot of the wealth advisory business, people are charging for skill and delivering closet indexing. Closet indexing. In other words, nobody can stand being that different from the crowd in results. They're afraid they'll lose their fees, so everybody does the same thing. It's mildly ridiculous. Yeah. The world is mildly ridiculous. Yeah. As Charlie pointed out in the movie, which only a few here saw, I mean, that before we were married, we tried to convince a couple young women that we were really more attractive than we were. I mean, you can't expect people not to behave in their self-interest, and that was very important that we didn't disclose all of our weaknesses before the marriage, so. Warren and I were trying to be a little better. Yeah, that is true. We may fail a little, and I don't know about you, but I've slightly improved since I was 17. That's a really interesting point because if fortune has just showered you with all kinds of good things, you ought to be a better person in the second half of your life than the first half. I mean, that is really should not be asking too much of people if they've won the ovarian lottery and all, you know, they were born in the United States and all kinds of good things have happened to them. You've had a chance to see how stupid you were in all kinds of things you did. You know, why not have the second half of your life be better than the first half? I mean, there's a. Working from a very low base, but, I mean, I'm not nearly, by any intelligence test or ability to do any of that, I haven't learned anything. But you do learn certain things only by interacting with people, and you don't know when you're two years old, no matter how much you're picking up all kinds of knowledge from the world, the learning machine that's going on in a two-year-old's head is just unbelievable. But it's not the same as having 30 or 40 years of experience with actually how the human animal behaves, which is, you really. You know, you're learning all the time about it. But that should make you a better person in the second half of your life than the first half. I would say that if you say you're a better person in the second half, and you've got reason to say it than the first half, you know, forget about the first half. Enjoy the second half. I think both Charlie and I have had the luxury of, well, a, living a long time, so we get to play the, what we would regard as the hopeful and respectable second half. We have had enough sense to figure out. Well, we figured out what makes us happy, and we've gotten somewhat more sensitive to what can make other people unhappy and all that sort of thing. I'd rather be judged by the second half of my life than the first half, and so would Charlie. Yeah, of course. Okay. I don't even look at what I did when I was young because it would embarrass me. Yeah. Yeah, yeah. Okay. Any of you who wish to quiz Charlie on specifics can do so later. Becky. This question is. There's a two-part question. It's for Warren and Ajit on the first part and for Greg on the second. It comes from Roger Kleffman. He says, "Several years ago, Mr. Buffett was quoted that a nuclear attack is the greatest risk to Berkshire Hathaway Insurance. Given the present circumstances, what would the fallout be on Berkshire Hathaway Insurance if a nuclear event occurred in the populated world?" And then secondly, for Greg, "Has Berkshire Hathaway Energy suffered any physical or cyber attacks? And irrespective of that, has any special hardening of security been put into place? Yeah. Well, the first half, every day since August of 1945, every day and accelerating dramatically when a second large country had the ability to kill millions of people, which has been magnified by incredible factor. The truth is that there is a risk every day. It's a very, very tiny risk. But as Ajit would, or anybody at this table could tell you, if you roll. Well, they had a pair of dice out at the Desert Inn in Las Vegas for a while under a glass thing, and some guy had thrown 32 passes in a row. I don't know what. Maybe the odds are eight million to one against that or four million to one against or four billion to one against it. You know, if you just keep rolling the dice, everything will happen. I mean, if it get 330 million Americans out tomorrow, every American says heads or tails, and they do it every day, after 10 days, you've got 330,000 of them that have called the flip 10 times in a row. If you do it 10 more days, you still got a bunch of people who've done it 20 times in a row, and they really think they have learned how to control the flip. Well, the answer is the world is flipping a coin every day as to whether people who can literally destroy the planet as we know it, you know, it will do it. Unfortunately, the major problem is with people that have large stocks of nuclear weapons and ICBMs. When they talk about using tactical nuclear weapons because somebody will be upset because they're losing a war, I mean, does anybody think that somebody's willing to kill, you know, hundreds of thousands of people with tactical weapons? I mean, why do they stop with the. You know, if they're it is a very dangerous world. We don't have any way of protecting against a big nuclear attack. No. I know a man who said, "I know what I'm gonna do if there's a nuclear war. I'm gonna crawl under the table and kiss my ass goodbye. Well. Yeah, Charlie is in charge of loss control at Berkshire. We have no solution for it. No, we don't. There isn't any solution for it. You know, it's extraordinary when you think about it that in August of 1939, September 1st, as you all know, Hitler moved into Poland. Nobody really knew that much about it here. I mean, the news you got, you got from the newsreel you went to because the theater was air-conditioned, you know, or something. If I went to the movies, which you wanted to do in the summer because it was air-conditioned in August, well, September 1st in the case of the actual movement into Poland. You know, there was a few people on the screen and some guy with an authoritative voice telling you the German forces are just moved into Poland. A picture of a few tanks maybe. It was over in a minute. Now, of course, all day, every day, you see people dying who you very much empathize with. It could be you instead of them. It's just so different. In August of 1939, there was a letter sent to President Roosevelt about a month ahead of time. Why did he get that letter? He got the letter because Hitler was so anti-Semitic, basically. He drove all the Jews that could see it coming out of Germany. Among them were some great scientists. Leo Szilard, who was obviously from Hungary, but somehow he got driven out. Einstein got driven out. Leo Szilard lands eventually in the United States. He writes a letter to tell the President of the United States, Franklin D. Roosevelt, that there's a bunch of uranium moving different ways or whatever it may be. I don't know anything about physics. Zero. I don't know what the off and on sign is. In any event, I know what the letter is. Because he writes a letter and says, you know, something big may happen in physics and America better get to it first. He has the problem of how do I get it to Roosevelt? Leo Szilard, who's he? The President of the United States. He figures if he gets Einstein to co-sign it, the President will pay attention. He's right. He goes and gets Einstein and the two of them send the letter. They send it to Roosevelt. They wouldn't necessarily have been in the United States if Hitler hadn't had the crazy views about Jews, basically. Anyway, that letter went and we developed the atom bomb before anybody else did. It was a very, very fortunate development that Leo Szilard and Einstein happened to end up in the United States rather than perhaps be someplace else. Who knows? The accidents of history and there's going to be more accidents in connection with atomic weapons. You know, we've come close various times. I mean, we had the geese flying over somewhere up north and NORAD gets a crazy signal. We've had wrong training tapes placed when we're in the Soviet Union or something. You know, it looks like things are going on and we can't do anything about it. That is one risk that Berkshire absolutely has no interest in, even though you can say everybody in the world should have an interest. It doesn't do us any good. The feeling doesn't do us any good to think about it. That doesn't stop the fact that there are two powers in the world that through miscalculation of the other's intentions, through all kinds of things, you know, have come close in the past. Charlie and I lived through the Cuban Missile Crisis and we knew there was some chance that weapons of mass destruction would be used. Believe me, there's a lot more bad that can happen. Humanity has not really come up with a counterforce to technology. I mean, back in the caveman ages, if you were a sociopath or something, you threw a rock at the guy in the next cave, you know, or something. I mean, it was sort of proportional. We kept developing and there was this breakthrough where technology has totally outrun humanity. We'll see what happens. So far, so good. Berkshire does not have an answer, though. We don't know. There are certain things we don't write policies on because we wouldn't be able to make good on them anyway if it happened. Everybody would know we wouldn't be able to make good on them. You have that risk and there's nothing Berkshire can protect you against. We've been very lucky so far. Ajit, do you ever get any questions in terms of- In addition to all that Warren has said in terms of the chance of something like this happening, the additional thing that concerns me about a nuclear situation is my lack of ability to really estimate what our real exposure is in the event of a nuclear event. When you're talking about, you know, other big exposures we have, earthquake and hurricane and cyber, I can, with some reasonable degree of accuracy, have a point of view in terms of how large our exposures can be and how big our loss can be. When it comes to a nuclear thing, you know, I sort of surrender. You know, it's very difficult for us to estimate how bad can be. Very many different lines of exposures will be affected by it. Even though in almost all our contracts we try and exclude nuclear as a covered peril, nevertheless, if something like that were to happen, I'm fairly positive that the regulators and the courts will hold it against the insurers, and they'll rewrite the contract and we'll be required to pay. For example, one thing which is already being talked about, we issue what are called fire policies, and these fire policies try and exclude nuclear as a covered peril. There are several regulators who feel that, "Gee, if it's a fire policy and if the nuclear attack causes a fire, then how can you exclude fire? You better include fire. You know, debates like that we will have to live with, and it'll be very difficult for the insurance industry to fight back both the regulators and the court systems in terms of what is covered and what is not covered. There won't be any regulators or anybody else. We'll leave it to a million years of reconstruction. Einstein said that, he said, "I know not what the weapons will be for World War III, but I know the weapons for World War IV will be sticks and stones." You know, that. There's a lot of things, you know. I mean, it just. If you're worried about the effect of nuclear attacks, you know, you got other things to worry about than the value of your Berkshire, I'll put it that way. What other cheerful things shall we. Station. Warren, do you want me to touch on the cyber? Oh, yeah. Sure. Yeah. I'll just touch on the cyber because it was raised. When you do think of Berkshire and they use Berkshire Hathaway Energy as a reference, but cyber risk and managing that risk both at Berkshire really falls across all of our subsidiaries. It's a constant risk that's there. It's one of our greatest risks we're always evaluating and trying to literally defend against. If we use Berkshire Hathaway Energy as an example, we would receive billions of attacks every day against our various operating systems. That's basically what our team is in place for, both they harden the assets to deflect it and then evaluating the underlying attacks we have every second of the day. By the way, that would. We'd have a number of operating subsidiaries that experience that, but obviously it's the rail and the energy and a few others that we spend a lot of time on, a lot of effort, a lot of resources. The good news is that today through to today, our teams have done an exceptional job. We really haven't had a significant event. We've had some minor events at small businesses, but across our major businesses, across our major operating systems, we've had the proper security protocol in place to avoid events. It never stops. Our team would tell you that every day that's a risk they recognize and a risk they're addressing within the businesses. A significant risk, but a significant priority for all of our operating teams. Yeah. I would add one thing. I think Greg knows way more about this than I do, but my impression from everything I've seen is that you always have. You know, historically the private industry has always said the government can't do anything right and government always says that private industry is just thinking about itself, all these things. The truth is, from everything I've seen, is that the cooperation between government and business in terms of trying to minimize the threat of cyber problems, I think has been magnificent, you know, basically that in various. Yeah. Excellent point. When it comes to cyber, the collaboration between a variety of U.S. agencies and our individual businesses, it's incredibly strong, including down to the certain agencies will submit basically a lot of our operating data on a daily basis, where they're helping us go through it to identify if we have a bad character or a bad individual who's maybe penetrated into our system. It's a strong collaboration. Warren, you're absolutely right. It's very unique to see how both the industry and the government's working so closely. I think we both recognize it as such a significant risk we have to stay strongly aligned, on the approach, it's a real partnership. Yeah. It's a real partnership. We can do better because the government is helping us, and the government can do better because we're helping them, and there's no lack of will on either side. I mean, it blows your mind on sort of an. The nuclear is the number one threat, but it's a very low probability. You know, someday the sun will burn out too, you know. There's really no place for two countries with large ICBM possibilities and who knows what else and everything. We haven't figured that out yet. You know, it. It's easy to go around and say, "This is a solution," or, "That's a solution," but you know, if you have two people with loaded guns facing each other and, you know, it- Not everybody is likely to be totally rational. Well, we see so much irrational, irrationality in where people's self-interest is involved. You know, they're doing all kinds of things to destroy themselves in terms of how they live their lives and you know, it doesn't stop as you move up the ladder. You know, people, some people do terrible things, and you just have to very much hope that they aren't in a position where they can do it all by themselves with the rest of the world as their supposed prize. Okay. If station three will please ask something about motherhood and apple pie or something like that. Okay. Dear Mr. Buffett and Mr. Munger, my name is Daphne. I'm from NYC, and this is my fifth annual shareholders meeting. Well, we appreciate you coming. We do, sincerely. As you know, for the past four consecutive months, we've been going through inflation with an inflation rate north of 7% for the first time since 1982. You both have experienced this before from 1970 to 1975 at a time where your portfolio took paper losses, and yet you made some of the best investment choices of your life. Reflecting on that, my question is, if you had to pick one stock to bet on. You kind of snuck up on us there for a second. Be resilient in the inflation, which would you choose? What specifically enables that stock to do very well in what will very likely be a difficult market? Well, I'll tell something even better than that one stock. Maybe we'll get to one stock, but the best thing you can do is to be exceptionally good at something. If you're the best, if you're the best doctor in town, if you're the best lawyer in town, if you're the best whatever it may be, no matter whether people are paying you with a zillion dollars or paying you with a. They're going to give you some of what they produce in exchange for what you deliver. If you're the one they pick out to do any particular activity, sing or play baseball or be their lawyer, whatever it may be, whatever abilities you have can't be taken away from you. They can't actually be inflated away from you. Somebody else will give you some of the wheat they produce or the cotton or whatever it may be, and they will trade you for the skill you have. The best investment by far is anything that develops yourself. Again, it's not taxed. You know, it. That's what I would do. I got some advice for you, too. When you have your own retirement account and your friendly advisor suggests you blow all the money into Bitcoin. Just say no. Yeah. Nobody can take away from you the talent you have. I mean, the truth is that the world will always be willing. They'll need to do something, and some people will not have skills, and they will get less of the product of the society than somebody who has other skills. Sometimes that has something to do with education, but a good bit of the time it doesn't have anything to do with education. I mean, just figure out what you'd like to be and figure out how. What you'd like to be is what you're gonna likely be good at. The world will always need somebody on that tube to tell us what's going on, so you know, study Becky Quick or somebody and figure out, you know, what makes her good and what you sort of naturally bring to the game. I mean, who's the guy that says you gotta spend 10,000 hours doing this or that? That Malcolm Gladwell. Malcolm Gladwell would say just spend 10,000 hours on something. Well, I could have spent 10,000 hours trying to become a heavyweight boxer. I don't think I'd have felt very good at the end of the 10,000 hours. You know, you stumble into what you really like doing, what you're good at, what is useful to society. It doesn't make any difference whether the $1 bill is now worth, in terms of the purchasing power, $0.01 or $0.005 or $0.003. If you're the best doctor in town, you know, they'll bring you chickens. Whatever they may do. But they can't take it away from you. My guess is that if you've come to five meetings, you know, you've got a very good future ahead of you. I mean, it self-selects. If you wanna sell a piece of yourself, you know, we'll buy that as the best investment we can make. We'll take 10% of your future earnings and we'll give you a cash payment now and, you know, we'll have a terrific asset. You can have 100% of your future earnings, and if you make it, develop your talent, maybe you'll be a great dancer. People pay money to watch great dancers. We had Fred Astaire and his sister, Adele, that came from Omaha. You know, their name was Austerlitz then, but they could dance. Adele did whatever she did with him, moved to England, and Fred Astaire went on to do a whole bunch of other things. Ginger Rogers had to do it all the same backwards in high heels, and she didn't get paid as much because she was a woman. You're gonna do just fine. I'd bet a lot of money on you. Okay. Becky? This question is for Warren and Ajit, and it comes from someone named Modi in Israel, who writes, "My family and I are long-term shareholders of Berkshire, and we plan to hold it forever. We like that the current management thinks in the long term to increase shareholder intrinsic value, but we aren't sure that at the time of the management change, the new management will act the same way you do. They might take risks in the insurance field where it's hard to find on the balance sheet, and that might take years to realize. We would like to know how we can assess the insurance risk today and in the future, or to know in time when you and Ajit are not here anymore. Well, I would say that the future for a long time is about as assured as you can have in the world. We don't have an answer for the nuclear problem or anything, but we have a culture that, A, has worked, B, has the shares and the shareholders that will carry it a long way. You know, the first year. Let's say I die tomorrow. The first year, you know, everybody says, you know, "What's gonna happen? Are they gonna spend it all? They can do all these things." You've got the shares held in a place that it can't happen. You've got a board of directors that understands that our culture is 99.9% of running the business. They don't think that having meetings of the committees and bringing in outside experts or anything like that mean a thing. I mean, it's a process that the world has adopted, and they've done it for reasons we understand. Berkshire is just plain different. We are a business that exists for people that trust us. All we have to do to fulfill that trust is fairly simple things. We've got the people to do it. We've got unbelievable resources to do it. It isn't that difficult, as long as you've got the freedom, essentially, to do it. The world will write stories a year after, so a year later, what has happened? You know, the railroad will be run the same way then. The big worry, of course, is that somebody comes in and figures they can make billions as a group or, you know. People that sell the businesses and say it's better to be private or it's better to be pure this or something like that. Well, you know, we're a pure partnership is what we're pure at. We do have what we think is a special relationship with our owners. I don't think the relationship changes, and the ownership doesn't change that much. Well, the truth is nobody can take us over for a long, long time. By that point, we would hope that maybe the superiority of this culture might be somewhat better understood by the world. We will be here. If we have the same culture, we'll be here a hundred years from now, assuming that, you know, we haven't had a nuclear exchange or something. Berkshire is built to forever. There is no finish point. Yeah. Nobody's waiting to retire or have their option vested or thinking about. We don't have anybody that's thinking about should I take another job? It just doesn't, you know, they're doing what they wanna do in life. It isn't because we're topping somebody else's offer or that headhunters come around and say, "We want this person or that person, and what will it take to get them?" Well, they can't get them. I mean, well, I don't know whether we could build it again, but we've got it. We didn't know we were building it exactly when we took over when, you know, we had a lousy textile mill. I mean, it isn't like Charlie and I sat down, and he didn't happen to be in Berkshire, but he was my partner in everything. We were mettle partners. We didn't sit down and work out some plan that said, "Well, we'll run the dumb textile business for 20 years, and then we'll finally have to fold it, or then we'll do this and that and everything." We just kept putting one foot in front of the other. We did know how we felt about running a public company. One thing we wanted to do always was we wanted to have people that were in sync with us. We didn't really want that group I saw in the Flamingo, you know, in 1952. We wanted people who trusted us. We started, my case, in a partnership. We started with seven. Charlie started a partnership, and this is the same thing. It was, we didn't go to institutions, and we didn't pay fees to people to bring in money or anything like that. We sat down with people. My case, I handed them a little sheet of paper, and it said the ground rules, and I wanted to be sure we were on the same page. I said, "You don't have to read the partnership agreement. I mean, there's no way in the world I would be taking advantage of it. You shouldn't be here if you think I'd take. I do want you to be on the same page and measuring me by the same yardsticks I measure myself. Those people stayed with me, and they're still sure they or their children or their children's children are shareholders of Berkshire, but they're partners. It really would be hard to do that again, but I would do it. If I were gonna be in this field, I would try and do the same thing. I would try to find people to trust me. I don't wanna be with people that are saying, "How'd you do versus the S&P, you know, last month?" Or, you know, "What's your long short position?" Or anything like that. I sold securities for three years, and I just didn't wanna be in that position where essentially they thought maybe that I could do things that I couldn't do. I finally found a way to get a few people. I mean, but I didn't actually, I stumbled into it, but a few people that trusted me and they just gave me their money, and we've lived happily ever after. It's the new management's got a, well, and the management after them, and the management after them, they're just custodians of a culture that's embedded. The owners believe in it. People that work there believe in it. We're not saying others, other things can't do better or anything of the sort. We're just saying this is what we've got, and we have got the directors, we've got the share ownership and all of that to, and the size that essentially can ward off any attempts to change the culture. You know, it's silly to talk about if our board members did this and did that and they, you know. In the end, obviously we're always going to follow the law. We're a Delaware company. We follow Delaware law. That doesn't mean that we have to do what every other Delaware corporation does and how they look at the Delaware statute. We will follow the law, and then we'll run it as a group of people who trust us, and we appreciate that trust. Charlie? Well, I remember when you had a textile mill and it can I tried to forget it. The textiles are really just congealed electricity the way modern technology works, and the TVA rates were 60% lower than the rates in New England. It was an absolutely hopeless hand, and you had the sense to fold it. 25 years later. Well, you didn't pour more and more money into it. No, that's right. No, recognizing reality when it's really awful and taking appropriate action is just involves often just the most elementary good sense. How in the hell can you run a textile mill in New England when your competitors are paying way lower power rates? I'll tell you another problem with it too. I mean, the fellow that I put in to run it was a really good guy, and I mean, he was 100% honest with me in every way. He was a decent human being, and he knew textiles. If he'd been a jerk, it would've been a lot easier. I would have probably thought differently about it, but we just stumbled along for a while, and then, you know, we got lucky that Jack Ringwalt decided to sell his insurance company, and we did this and that. But I even bought a second textile company in New Hampshire. I mean, I don't know how many, seven or eight years later, I mean, I'm gonna talk some about dumb decisions. Maybe after lunch we'll do it a little, and it is incredible how many dumb decisions we made. Charlie and I bought that, and Sandy Gottesman, we bought that department store, and that was 1966. We were working with our own money, and why in the world did we think. Charlie flew to Baltimore, and I mean, we used to really work in those days. There again, we had wonderful people. Louis Kohn couldn't have been a better guy. But everybody in that business had a different reference point. You know, they wanted to expand their company. Well, who can blame them for that? They were planning the couple of new stores in each department. The shoe department said, "Well, we'll do it better this time," and all that kind of thing. The whole idea was crazy. We got there for a little while, and we figured it out finally. We reversed course. Yeah. Why the hell did we do it in the first place? Well, because we were stupid. That's important to realize. We paid $6 a share for that stock. If the department store had succeeded, it might be worth $30 a share now. It failed, but we did other things, and we merged it into Berkshire, and we'll talk about that a little later. I don't know whether it's $150,000 a share now or something like that from the $6. If it succeeded, we would have made a few dollars, and because it failed, we made hundreds of thousands of dollars per share. That's the way life is. You just keep going. Yeah. Keep learning. That's the secret. Keep learning. Keep learning. Keep learning. You can say, "Why would it take guys that long to learn?" Well, we got a few minutes before lunch. We should. Let's address that problem because I did bring something along on that. There have been. Well, I started buying stocks when I was 11. I'd been reading every book in the library on it. I loved it. My dad, it was his business, and I'd get to go down to his office, and I'd read the books down there, and I saved the money. Finally, by the time I was 11, I could buy a stock, and I could tell you at that time, I went to the New York Stock Exchange when I was 9. My dad took us to New York, each kid to New York once. He took me. I went to the New York Stock Exchange, and I was in awe of it. I could tell you how the specialist system worked and the odd lot arrangements, and I could tell you history of finance and all of these things. Then I started. I got very interested in technical analysis and chart of stocks and did all kinds of crazy things, hours and hours and hours. And saved money to buy other stocks and tried shorting and I just did everything. Then when I was either 19 or 20, and I can't remember exactly where I did it or something, I picked up a book someplace. It wasn't a textbook at school, but it was in Lincoln, Nebraska. I looked at this book and I saw one paragraph, and it told me I'd been doing everything wrong. I just had the whole approach wrong. I thought I was in the business of trying to pick stocks that would go up. In one paragraph, I saw that that was totally foolish, and I left. I brought something. It's really interesting. Let's put up. What do we call this chart? Here we are. Yeah. Let's put up illusion one. Done. Yeah, there we have it. Now, if you look at that, some people will see two faces, some people will see a vase, and some people will look a long time and only see two faces. The mind flips from one side to another, and that's. There's a name for it that they call it ambiguous illusions or something of the sort. There's other things that talk about aha moments or in the old comic strips with Popeye, Wimpy would have a little balloon over his head, and a light bulb would go on. There's this point where all of a sudden you see something you haven't seen. Well, it took me. I had an illusion that I was looking at, we'll say in that one, two phases. Go to the. Let's go to the one labeled two. If you're looking at it from one side, it looks like a rabbit, and if you look the other way, it looks like you're looking at a duck. You know, the mind is a very funny place, and I think people call it an apperceptive mass when you have all kinds of things going on in your mind, and they've gone for years, and they sit there and get lost and all. Then all of a sudden, you see something different than what you were seeing before. Now, it took me in stocks, which I was intensely interested in, and I had a decent IQ, and I was reading and thinking and, you know, and it was important to me to make some money on it. I had every motivation in the world. I read a chapter. I read a paragraph, actually, in chapter eight, I think it was, of The Intelligent Investor, and it just told me that I wasn't looking at the duck. I was looking, now it was the rabbit. Whatever it may be. Whether you call it a light bulb, whether you call it, you know, a moment of truth, whatever it may be, that's happened. That happened to me in Lincoln. I mean, it changed my life. If I hadn't read that book, I don't know how long I would have gone on looking for head and shoulders formations and 200-day moving averages and the odd lot ratios and all, a zillion things. I love that kind of stuff, except it wasn't, it was the wrong stuff I was looking at. I've had that happen, and Charlie's had it happen, I'm sure. It happens a few times in your life, and all of a sudden, you see something important. Why in the hell didn't I see this in the first place? Maybe it's a week ago, maybe it's a year ago, maybe it's five years ago. Maybe it's learning how to get along with people, you know. I mean, whether actually it's better to be kind or not. You know it when you see it, but you didn't see it for ten years before. I don't know whether Charlie's got some thoughts on that or not, but that's happened in a few situations in business where I've looked at a company for a decade and then there's something that it just all gets rearranged in your mind, and you can say, "Well, why didn't I see this five years ago?" But usually, I've had it happen a few times, obviously, and everybody here has, and just in different areas of their lives, and you think, "How could I have been so stupid?" Well, as with Charlie's, when he was in the law practice, he had a partner, Roy Tolles, and every smart guy that would get in trouble, usually with women, and they'd come into the office, and they'd look down-faced and everything, and they'd say, "It seemed like a good idea at the time." I mean, their lives unraveled, you know, in many cases. There is that apperceptive mass that's sitting in there inside somehow, and every now and then it produces some insight. It's better actually if it produces insight into your behavior than whether it produces insight to make money. I mean, that. Some people never get it, and they wonder why their, whether their kids hate them or whether there's nobody in the world that would give a damn whether they live or die. In fact, they prefer they die because then they've been courting them for their art collection or whatever it may be. It's just Charlie would say, you know, "Just write your obituary and reverse engineer it." Not a crazy idea. Charlie, I don't know, what do you know about apperceptive masses, which are optical illusions? Well, I know that that's the way the brain works and that it's easy to get it wrong, and part of the trick is to get so you correct your own mistakes. We've done a lot of that. Yeah. Frequently way too late. Yeah. We've done better with the mistakes than we have with the good, reasonably good ideas. Well, it's so easy to overdo a good idea. That's what's going on now. You have a lot of good ideas that are being grossly overdone. Well, just tell me about one that hasn't been, but tell me later when the crowd isn't listening. Look what happened to Robinhood from its peak to its trough. Wasn't that pretty obvious that something like that was going to happen? Tell me again what it. Robinhood, when it came out and it went public. Oh It got a little lurid about everybody and all the short-term gambling and big commissions and hidden kickbacks and so on and so on. It was disgusting. Yeah. It says the last year and they got mad at you and they sold a bunch of their stock and they got the money and. Yeah, but now it's unraveling. Yeah. God is getting just. No, they've gotten a lot of money from it. I mean, they were big sellers, as I remember. That may be, but. Yeah There's been some justice. Well, yeah, I have to agree with that. Whether it's a good idea to go around making enemies of people, though, that is another question which we do. Is it wise to criticize people at all? Probably not, but I can't help it. Yeah. Well, here is the smartest guy I know, and he's 98, and he hasn't figured it out yet, so give up. Enjoy. Well, with that, we'll go to lunch, and we'll try to come back wiser at 1:00 P.M. Thank you, thank you, thank you. First half, so we'll try and move a little faster. I can't imagine why it went that slowly. I mean, who's doing all that talking? Okay. Station 4. Hi, Warren and Charlie. I'm Jeff Mulloy, shareholder from San Francisco. In recent years, American companies have taken on a more active role in the political realm, whether it is speaking out against specific bills or promoting various social causes, often at the behest of shareholder or employee groups. While the goals of these movements can be laudable, they risk alienating significant portions of customer and employee bases. How should CEOs decide which issues to take a stand on or whether their companies should engage in the political realm at all? Thank you. Oh, that's a terrific question, and that is one obviously I've had to think about plenty. At one point, I said, "I don't put my citizenship in a blind trust when I take the job as CEO of Berkshire." I've also learned that you can make a whole lot more people sustainably mad than you can make temporarily happy by speaking on any subject. On certain subjects, they will take it out on our companies, and that means that the people that are employed by us, some of them we would end up letting go. It means that the shareholders get hurt. Do I really think that it's so important that I talk on every possible subject that people can get very upset about, whether they should be asked to pay that price? I've come to the conclusion the answer is no. Why in the world do I wanna hurt the people in that other room that do all kinds of things for Berkshire? Why do I wanna hurt you because I say something that 20% of the country is gonna instantly disagree with? Sometimes they will be so upset about it that they will try and take it out. Since they can't scream at me, they may have campaigns against our companies or anything else. I think it applies to me. I'm not gonna go around and take positions where instead of saying Warren Buffett says, it will say, you know, Berkshire Hathaway or Warren Buffett of Berkshire Hathaway. I get it identified, and I do not wanna make the lives of you and I decided I'm not gonna be doing that. If I wanna do that, I should quit my job. If I think citizenship speaking out is that important, I'll give up what I love the most, which is having this job. I don't wanna do that. I've decidedly backed off. I don't wanna say anything that'll get attributed basically to Berkshire, and have somebody else bear the consequences of what I talk about. That's where I stand. I can tell you that at most companies, that isn't fair, but in a great many companies, you know, CEOs they have to think about what their board says to them, and they've made a point of electing people to their boards because it's socially acceptable, who represent different constituencies, sometimes very strongly. If they think they're stakeholders for this group and that group and that group, they'll get pressured by their boards to take positions, and it's just the territory that we don't, we're not gonna get into. I don't. Charlie, how do you feel about that? Well- I, even more than you, I have to be very careful about what I say. Now, the difference between the two of us is I can't resist saying a little more. I see headlines in papers just time after time after time that say, "Buffett's buying such and such." Well, I'm not buying such and such. Berkshire Hathaway is buying it, and it may be the work of two other people that work at Berkshire, and the people who write the articles don't have the faintest idea whether it was my instigation or whether I'd even ever heard of it. The headline will attract more people if it says, "Buffett buying this," than if it says, "Berkshire Hathaway," and we don't know whether it's just the people that work for him or him and them. The headline is designed to bring people into the story. It's the confusion is terrible. The easiest thing to do is to basically shut up and not have a bunch of people facing consequences that they didn't ask for in the first place. With that, I'm glad you asked that question. That is a good question. I probably thought more about that question than I think about whether this stock or that stock is cheap. With that, we'll go to. No, let's see. That was station four. We'll go back to Becky. On that note, let's go to a question from David Kass. He writes in, "President Biden's fiscal 2023 budget request would impose a 20% minimum tax on the unrealized capital gains for households worth at least $100 million. What are your views on this issue? And if you don't wanna answer, maybe Charlie does. Well, we'll find out. In all honesty, we should both say that we would be affected by it. If it's $100 million, we'd both be affected, so our point of view is we're— I have no point of view. Charlie? I have no point of view that I would want attributed to. I tend to stay out of the income tax things. Like, it's my policy is I pay whatever taxes they pass, and I don't wanna engage in lobbying about taxes. Yeah. I would add one thing. Lobbying is really distasteful. I once did it for a candidate, and I ended up in a room with a bunch of lobbyists for cigarette companies. They didn't care about Nebraska. They didn't care about. They didn't have anything. They were there because they were handing over a contribution. I was a convenient accessory. It made you wanna throw up, basically. On the other hand, we operate in the railroad business, energy business, insurance business, and they're extensively regulated. I don't also wanna be the only railroad that stays out of the railroad group, the only insurance company that stays out of the insurance group. Other people can rightly figure that we're a free rider under those circumstances. I tell the managers generally, "Don't spend Berkshire's money on candidates that you like. Don't pressure suppliers to do what." I mean, Berkshire is not a weapon to use, which it's been used by certain people in the organization. Don't use it to muscle money out of anybody else for who you like or what school your wife went to or whatever it may be. Some of it goes on anyway. I don't tell our people not to belong to any trade associations. Charlie Munger wrote one of the great letters of all time, and if you go to search, type in, I think, "1989 Munger Savings and Loan" or something. We resigned from the United States Savings and Loan League, I guess it was, and we warned them. We said, "We just cannot stand, you know, what you're doing to the country." When a bunch of very nice people get together, but they decide it's in the interest of their savings and loan to get to do this or that. We warned them, and finally Charlie wrote a letter, which is, like I say, available on search. It's one of the proudest letters. Well, it should be one of the proudest letters, certainly one of the proudest letters that's ever come out of Berkshire. He just said, "We can't stand it anymore, and we're resigning." That's a very tough thing to do. It's a tough way to live, to just go around criticizing the people you work with and the neighbors, and they're perfectly decent people, but they're running institutions that are doing things that are very distasteful to him. We support some of our subsidiaries in energy, and you know, I don't wanna find people who are doing it for personal reasons. I mean, in that case they're in trouble. I don't say they can't do it because I don't want their hands tied if something comes up, and essentially they're either competitors within the industry or the industry versus this. We're not gonna stand alone and say, "Well, we're morally superior to them, so you put your money up and buy it." That's where I end up, Charlie. I've got nothing to add. Okay. It never bothers me when I don't have anything to add, but he seems stuck on that. Anyway, Becky, did that come from you? It did. Yeah. Okay, then station five. Oh, thank you, Warren and Charlie. My name is Song Yao. I'm from China and now studying in the University of Chicago. I really admire you two, especially Charlie. You are my idol since I was a child, and my question is also for Charlie. My question is how to practice the multidisciplinary framework in making investment decisions and in life. Like, how to make it more practical. Thank you. Charlie? Well, obviously, it helps you to know more than one discipline. There's an old saying, you know, that a man who carries only a hammer thinks everything else is a nail. You make a lot of wrong decisions if you don't have some command of all the disciplines. That's all I ever said. You do irritate people terribly when you come into their territory, and you say, "I'm multidisciplinary. You're the expert, and I know better than you." They hate you for it. I can attest to it. I've done it several times. Yeah. You know, China, well, to a certain degree, they have a culture that to some extent reveres age. Charlie's got me beat. I don't even try and compete with him on China. I can't catch him on age. Okay. I'm gonna try to though. Let's see. We've got Becky coming next. This question comes from Philip King. He writes, "In the 1970s, you wrote an article entitled How Inflation Swindles the Equity Investor. You said that stocks cannot keep pace with inflation because companies cannot increase their return on equity. Do you believe that this is still the case? Of course, bonds can swindle the equity investor too. Inflation, I should say, swindles the bond investor too, and it swindles the person who keeps their cash under their mattress. It swindles almost everybody. The problem, if you have a business that doesn't take any capital, and let's just say the dollar depreciates to 90% or something, so things cost 10x as much. If it doesn't take any capital, you can charge ten times as much, and you've kept your relative position. But most businesses take some capital. If our utility business, if. Just say that the $1 is worth 1/10th some years hence from now. We have to have 10x the capital investment basically, and we get paid a return on that, but we have forced capital investment to essentially keep them in the same place. I wrote an article that related to that, and I will tell you one very famous story which you will all sympathize with, in that I wrote that story for Fortune, and when I finished it was about 7,000 words. Fortune didn't like publishing 7,000 words, and they had my friend Carol Loomis explain that to me, knowing that I would pay more attention to her than anybody else. Being stubborn and male, I said, "you know, every word is precious, and they can either run it or not." They sent an editor, a very nice guy, out to Omaha, and this guy explained to me that it just wasn't right to use that many words. I said, "Well, that's fine, but if you don't do it, I'll write it someplace else," or whatever. Very disgusting behavior on my part. It was beginning to bother me a little, so I sent it to my friend Meg Greenfield. Meg was a great, great editor at The Washington Post, and we were very, very good friends. Wonderful woman. Meg, who was tough as nails with most writers, but she was kinda nice. She didn't wanna really hurt me too much. She said, I said, "Well, Meg Greenfield, what do you think?" She said, "Well, Warren," she says, "you don't have to tell everything you know in this article." It made the point. I'd write that letter, I'd write that article shorter, but I'd say more or less the same thing. No, you're better off if you really could have a totally stable unit of a monetary use for the next 100 years, it would be better for business and investors in general. Charlie? Well, we will go to station six. Inflation. Inflation is the question is how much? The question is whether you can decide that 2% and keep it. The answer is nobody knows. I mean, you do not know, and nobody know. You can listen to all kinds of stuff, but nobody knows how much inflation there will be over the next 10 years or 20 years or 50 years or next month. People talk about it all the time because you're interested in knowing the answer to your question. They don't know the answer, but there are a lot of people that will tell you they know the answer if you pay them enough, and other people that will tell you for nothing because they think it enhances their prestige and makes them more valuable and all that. The answer is, they don't know, and we don't know either. The best protection against inflation, though, still is your own personal earning bar. If you play the violin very well, you will do reasonably well during inflation. I mean, it's way better than other people. People will pay you for doing that if you. All kinds of things. Your skills will not be taken away, and your money may be. Okay, station six. Oh, wait a second. Was that. That's right. Is it Becky next? Becky? That's right. It's station six. Yeah. Station 6. Okay. My name is Martin Wiegand. I live in Nashville, Tennessee. Mr. Buffett and Mr. Munger, thank you for your lifetime of teachings and for hosting us back in Omaha this year. Well, thank you. You have mentioned that companies get the shareholders they deserve. In this year's letter, you mentioned a great satisfaction of yours is working for the individual long-term shareholders. With the growing influence of institutional index funds, how can management teams foster a shareholder culture like the one we have at Berkshire? Thank you. Well, fortunately, we have it, and we know more about how to keep it than to institute one. It's very interesting. We have 1,470,000 Class A shares outstanding today. That's fewer than we had a year ago, and they're. Those seats are filled. I mean, you are the shareholders in place. We like the group we have. Why in the world, when we got a fixed number of seats, should we go out and recruit other people to replace you? I mean, the ideal shareholder group we can have is the group we have today. You know? If we had a church, we'd want the people to keep coming back week after week after week. If we had a limited number of seats and we had some wonderful parishionerss. We would not go out and recruit another 50 or 100 of them and have to throw out 50 or 100 of the ones we already had. Every company I know virtually is wooing new people to come in. Whether they're improving the group they get or not is another. I mean, it strikes us as basically crazy. We don't want anybody different than we have now. We're not gonna get rid of the index funds, so we have to get rid of people like you, and we don't want to get rid of people like you. I just don't understand why. If you had a neighborhood and the size of the container or whatever it was would be such that you could have 10 neighbors, and they were all great neighbors, why in the world would you go out and say to a whole bunch of people going up and down the street, "Why don't you buy the house of the guy next to me?" It is weird, but there's an awful lot of people who make their living by doing that, and they never really question. I would sort of ask any company that's making annual presentations every month or something, which of the present ones are you trying to get rid of, you know, basically? I hope you're not gonna have more shares outstanding at the end of the year than you have now. Am I supposed to get out of the way so some other fund that is thinking about what your stock is gonna do next week replaces me? It is a very weird situation. The really crazy process that has developed is people talking to, we'll say, analyst group, you know, the sort of the high priests of finance. Some companies are doing it more than once a month. Well, just imagine if you work for that company, and every month people are repeating these things about their company that it's important that we have more services per customer, and it's 6.2, and we gotta get to seven or something like that. They'd say that month after month after month. It becomes a catechism. CEO says it or his or her representative says it, and it goes. It, how do you go on the next month and say, "By the way, we were really wrong, and this is what we should be working on"? You don't say that, and it's a terrible problem when the new CEO comes in after a previous CEO has said the important thing to do is to hit your earnings targets. You know, you have to. He's been meeting them in all probability by cheating from some time to time. This guy hands you the baton, and are you gonna come out and say, "Well, we've really been cheating a little, and it's really counterproductive to the development of the company, you know, not to make earnings projections and just to give you the results as they come rather than making up a few things in the accounting department"? No. They can't do it. You can't. It's not human nature, and besides, you wouldn't get appointed as a successor, but you just don't go in and say, "We've been perpetuating these myths that we can always deliver 8% growth, or we can do this or do that, or the most important thing is this." You can't go in and change that if every month you've been preaching to people that this is what we stand for, and just ask another question, and carry this message out to the masses, to the analysts and all that. It's a totally destructive policy. I mean, I can within GAAP accounting and I can play a lot of games with numbers. We have never. We've done a lot of dumb things at Berkshire. We have never told anybody that the number had to be this or that or to change anything. I mean, it just once you start it's all over. You can't quit. It's like taking $5 out of the cash register. The first time you take the $5 out, you say, "Well, I'm gonna put it back." Then do it a few times, and you don't ever stop. In fact, do it once, and you probably never stop. But it's if something is gonna be destructive, the thing to do is not start it. Forecasting earnings, I can't imagine anything more destructive. I got 360,000 people out there, and they know whether I'm lying or not, a good many of them, and they know if they send in figures, and they get changed. You know, what message are you telling them? We've got one dramatic illustration of that within Berkshire. If you start lying, you got a big problem. It's that simple. If you start saying to your team that somehow you got a job. You got shareholder relations. Your job is to go out and tell everybody that our stock is the best thing among thousands of choices to buy every day. Well, that's crazy. What do you tell them? Well, they try to see which way the wind is blowing and figure out what they have to tell people, and then they go out and tell them. Then if you're human, and you've said we're gonna earn $3.59 a share, you can get to $3.59, and get there quite a while. You can have audit committee. You have all these processes. But if you have a culture of lying, the processes really don't. They just disappear by. Charlie and I have seen it, well, probably every time we've gone on a board at, try to tell them about it. Well, I think Berkshire's culture is gonna last a long time after we're gone. I think it should, and I think it'll prosper pretty well. The rest of corporate America is quite different, and it gets more different, I think, with each passing decade. It's getting very peculiar. Pretty soon, they're gonna hold all the shareholders' meetings online, and the shareholders won't even come. It's just, it's getting very peculiar, and the index funds get more and more important in the voting. It's like everything else in life. It changes and not always in ways you like. It ends up in selecting different CEOs and all kinds of things. I mean, you're not going to appoint a successor CEO that's going to come in and say everything that's been done before has been kind of fraudulent. I mean, if we needed to book an extra sale after the end of the quarter, if we needed to adjust the reserves, it's just once you start lying, it's all over. I just don't know any way around that except to try every way you can to not. You sure can't, if you set the wrong example at the top, you got a real problem. We've never told anybody to change a figure. We never will. If they had been changing figures, you know, we'd be in all kinds of trouble because they know it and I'd know it and the next person would know it. It just deteriorates. We've really seen it time after time. The way boards operate, it has to be process-oriented. I mean, I understand the problems that Delaware has in writing a statute that judges face when they look at things. It's extraordinary. It's just extraordinary what an emphasis on process can do to an organization because they think they can do anything if it's allowed. Eventually the foundation crumbles. Okay. Oh, I should make a little news here. You've all come and you may or may not see this, but it's very possible. One of the things we bought, one of the things I bought was bought for a different purpose by a different manager months earlier. He bought roughly 15 million shares of Activision. I never paid. I knew about the company, but I would just see it at the monthly report. Then on January, I don't know, 17th or 18th, something like that, Microsoft announced they were going to buy Activision Blizzard for $95 a share. Now, when they announced that, at that point, Activision Blizzard becomes a different kind of security. It becomes what Charlie and I used to call, well, everybody did 50 years ago. We call them workouts or something like that. They become known as arbitrage. Well, they're not really arbitrage, but they're securities or those kinds of common stock whose value depends not on what the market price does, but whether a given corporate event occurs, an announced corporate event occurs. Well, Microsoft wants to buy Activision Blizzard, we'll say. Well, they said at $95 a share. They've got the money. Obviously, mergers and big mergers, tech companies, all kinds of things have got all kinds of problems with the world generally in terms of opinion. You don't know what the Justice Department will do or you don't know what the E.U. will do and all kinds of things. At that point, it becomes a different security. Charlie and I, 50 years ago, we used to do a lot of that sort of thing. We and Gus Levy did it at Goldman Sachs. We even went back one time, I think, on British Columbia Power, didn't we, Charlie? Yeah, we certainly did. Yeah. A guy named Bennett was up there. We were trying to figure out whether some takeover of the power business. I mean, we spent a lot of time analyzing the probabilities of announced deals going through. We call them workouts. Now, the term became arb. It hasn't worked overall too well in recent years. Now, every now and then, I see something that I want to do in that field. Very seldom because they've got to be big. The profit is limited. You know, if they say you're going to get $95, you're not going to get $96. If the deal blows up, you may have a stock that's at $40 or something. We did it with Monsanto five or six years ago when Bayer was buying it. We got very lucky because it turned out to be a terrible acquisition for Bayer. It did go through because Bayer had the money. They went through with the deal even though Monsanto came with a problem that nobody really understood the extent of. We did it with Red Hat when IBM bought it. In any event, on September, whatever, I mean, on January, whatever it was, 17th, 18th, 19th, Microsoft announces it. The stock, which had been at 60, let's see what it, I may have a slide here, which I'll find. In any event, the stock, which had been in the 60s, went up to the 81 or 82. That looked like not a big enough spread to me for a few days. Then it settled back a little. Anyway, we now own 9.5%, nine, something lik 9.5% of Activision. If we went over 10%, we would file a report. In order that the news people don't feel that there's no news there, I can tell you that as of yesterday, we own about 9.5%. If we go past 10%, there'll be a form filed with the SEC and so on. It is my purchases, not the manager who bought it some months ago. If the deal goes through, we make some money. If the deal doesn't go through, who knows what happens? That's. I just want to be sure that if we do file that report, people understand very clearly because there's been some very mixed up stories on that in the past. We want to be very clear that it was Warren Buffett's decision in that particular case. He doesn't know what the Justice Department's going to do. He doesn't know what the E.U. is going to do. He never talked to anybody in Microsoft about it or anything. He's just read a document. He's made his own assessment. It can change. At one time, I think we sold a few shares even when I thought it was a little higher than it should be. It turned out those sales were not bad sales. I want to create a little news for you. I want to, if possible, head off stories which have been incorrect in the past and which get picked up by other media and corrections never get written. That although corrections were written by one inaccurate story, and they apologized even to me. Both the reporter and the editor sent me a personal note of apology. They didn't expect to make a mistake. When the other publications picked up the story, they didn't bother to pick up the correction. This one I will attempt to head off by telling you exactly what the facts are right now. We'll see whether we go beyond 10%. If it could easily be that if it went up a few dollars. It's still a $95 deal. We don't know what the Justice Department will do. We don't know what the E. U. will do. We don't know what 30 other jurisdictions will do. One thing we do know is Microsoft has the money. So that takes that one risk out of it. So anyway, Charlie, do you have any news to break? No. Yeah. Incidentally, I don't talk this over with Charlie. I mean, he knows. Occasionally, I'll see an arbitrage deal and do it. You know, 50 years ago, we were doing it together. His general feeling is why is Warren fooling around with this kind of stuff even? It's the old fire horse. Occasionally it looks like the odds are in our favor. Absolutely we could lose money on that company. Fairly large sums of money, depending on what happened if the deal blows up. There will be a lot of people that want the deal to blow up. Microsoft doesn't want it to blow up. We'll have to see what happens. Okay. Enough. Becky. You know, Charlie just mentioned index funds in passing. Let's go to this question from Matt Feigel. His question is related to the growth of passive investing through index funds and ETFs. He says, "Passive investment vehicles now control upwards of 50% of the United States stock market. The actual owners of these passive investment vehicles decided passive investing makes the most sense for them. Yet in doing so, passive investors have empowered the large index funds to become the biggest activists in the market. These passive managers now enjoy enormous, and I would argue undue influence over corporate governance. Do Warren or Charlie see any benefit or logic to a rule that would prohibit passive investment vehicle managers from voting the shares they control for their passive investment clients? Well, I'll take that. I think the guy's right. I think the thing's out of control and counterproductive. I don't think it's good for the country to have three passive investors, bright young men from Harvard or whatever, telling them what proper governance of corporations is. It's not a good development. I think indexing, if it gets to 90%, then it won't work very well at all. At the moment, it's worked fine. Yeah. Well, the one thing you can count on too is that if it does look like it's going to, if the public opinion shifts over to the idea that it really is a good idea to let three people decide the fate of every company in corporate America, the three people, and they won't collaborate or do anything. They're not evil people in the least. I mean, they're just doing what you and I would do. They would figure we don't care that much about voting. What we do care about is keeping a lot of assets under management. We'll figure out something that ends up reflecting public opinion, and then politicians won't get mad at us. Our only threat really is the politicians get mad at us and regulate us in some way. We'll head it off. I would predict fairly confidently that if the American public doesn't like the idea of three people controlling things, the three people and their organizations and everything, but the three, they're what they want to do is they want to get bigger. They wouldn't be where they are in life if they hadn't wanted to get bigger. This doesn't happen by accident. Now, that doesn't mean it's the only thing they want. They want their investors to get good results and everything, but they are certainly not gonna follow a policy which is going to cause a backlash that causes them to be a lot smaller than. They can figure out their self-interest, I mean. It just so happens that in this case, it would achieve the right result, which is that they would not control America. They'll do what's good for themselves and what they have to do what's politically acceptable. The only thing that really could mess up what is a very good deal for them is to have Congress change the rules. The rules were the Investment Company Act of 1940 really changed how people behaved and it's governed things in a big way for a very long time. Anybody that takes on the federal government loses if you're talking about trying to do that sort of thing. They don't need to do it. They just say, "Well, we'll give up voting," or, "We'll vote our shares as the rest of people do." Of course, if you vote your shares as the rest of the people do, then if the index funds at 90% of the country, you could take over a company by somebody else buying 3% or 4% because you'd automatically get the funds to follow your very small little percentage. You'll see it all play out. I mean, it's not an unusual case. Okay, station seven. Eric Erda, and I live in Albuquerque, New Mexico. I wanna first say thank you so much for a lifetime of knowledge you have both graciously shared with all of us. You've contributed greatly to push our species forward. Moreover, you've taught all of us here, along with many, many millions not here, how to behave more rationally, treat one another with more love, and lead more fulfilling lives. I wanna say a very sincere thank you. Thank you. As for my question, I wanna ask about Berkshire Hathaway Energy and the unique structure that has evolved there, given that Berkshire doesn't own 100% of the company. The first part of that question is related to Greg's ownership and his corresponding incentive alignment with overall Berkshire. Now, there's a wise man named Charlie that in 1995, at a speech to Harvard, taught us how important incentives are to human behavior. I would conservatively say that Greg's stake in BHE is worth more than $500 million at present. I'm curious if you can share any plans that you have to convert his Berkshire Hathaway Energy ownership to Berkshire stock. If there isn't a plan to do this, can you please explain why we shouldn't be concerned about Greg's incentive structure going forward? The second part is about leverage at the entity. You've always said that BHE operates with an appropriate amount of leverage given its earning power. With that said, it's still a very, very large debt figure in relation to current earnings, especially, with what we have become accustomed to at Berkshire. I'm curious, if Berkshire owned 100% of Berkshire Hathaway Energy, would you still operate the business with the same amount of leverage? Okay. Thank you. The second part is the easiest one to answer, so I'll take that. Then I'll throw the first one back to Charlie. But the Berkshire Hathaway Energy actually is required with its regulated utilities, and it basically started pretty much with regulated utilities, and still is dominated by that, and we're interested in buying more regulated utilities. It's required in different ways by different states and by different regulatory authorities to have a large amount of debt because the regulatory authorities will say in Iowa or to pick any state, the regulatory authorities are going to say, "You can get debt money cheaper than you can get equity money," which historically has largely been, almost always been true. They'll say that, "Since we're going to allow you a return on equity," we'll say, just pick a figure, but let's say they allow us a return on equity of 9%. We can borrow a lot of capital at 3% though they say it'll result in higher rates to customers if you use it, put in all equity. We would love to have all equity in our utilities, but the regulator wouldn't stand for it because it would result in, under the traditional system, it would result in higher prices to consumers. That's built into the system. Our regulator wouldn't allow us essentially to get the same return on equity and have an all equity structure. The answer is, you know, we put. You actually saw in the film earlier, which the people that are listening or hearing the webcast didn't see, but just in Iowa, we recently got approval to spend $3 and a fraction billion, but they want us. Iowa has a history and like every other state in the union, except Nebraska, which is all public power. Every private powers, you know, they have a history of wanting X percent to be in debt. They want you to raise a lot of money in debt because it's cheaper, means cheaper power for the consumer. The answer is if we owned 100% of Berkshire Energy, we would absolutely be following the same. We would be operating pursuant to what the utility commissions tell us they want us to do that they represent the people of those states. Now, Charlie, do you want? Well, the other one's simple too. It's a historical accident. It's not causing any big tension or breaches of fiduciary duty. We had the same problem with Walter Scott, who was the director for years and years, and owned stock in the same company, also an historical accident. Yeah. I just don't think it's a big problem at all. Oh, the, we- I see no behavior from Greg ever that isn't in the best interest of Berkshire. We've had various percentages of Berkshire Hathaway Energy ever since we bought it around 2000. It happened. My sister, who's here, we were at her house, and there was a party going on, and 20 or 30, probably 30 people. Walter Scott said to me, "If you got a minute or two, I'd like to talk to you about something." We went in the library or some place, and Walter Scott says, "You know, we've got this company and it doesn't seem to fit the public mold very well. Would you wanna buy it and go private?" I said, "Sure. You know, depends on the price." When we got back to Omaha, I was out on the West Coast. We got back to Omaha, and we met with Dave Sokol, who was the big holder aside from Walter. We agreed on a price. I remember Walter saying to Dave, "Don't negotiate with Warren. He'll tell you to forget it, and we'll do something else." We bought it. It was kind of a weird structure from the start, and we had a Public Utility Holding Company Act to deal with and all kinds of things. It's evolved, and it now has us with 91% roughly, and it has Walter's estate, and I don't know where that goes, at all. Walter never talked to me about it, and I never asked him about it. It's one way or another interest connected with him, or in the estate now, or close to eight, I guess. Greg's got one. You know, from our standpoint, if we made a deal with. If they ever came to us, and the Scott interests wanted to do something, you know, we'd say, "Fine with them. We'll do the same thing with Greg if he wants to," and he probably wouldn't want to. I mean, that's. From our standpoint, I've never seen any decision remotely. If I thought that would make a difference, you know what I mean, he would not be. He just wouldn't be the right kind of person to run Berkshire. The problem, of course, is that you've got lots of process that can be involved with insiders and everything. I've got no interest in. As long as I'm alive, you know, my interests are 100% with Berkshire. The board wouldn't, probably, and to some extent a little reluctantly, but they just say, "Well, Warren thinks the deal is okay. It must be okay," which is true. I could make a deal with anybody, and it doesn't get all messed up with process. On the other hand, if I'm not around, you know, the pressures are to directors to do whatever the lawyers tell them to do, and the lawyers tell them to do this and that, and then they wanna bring in investment bankers to make a value. The whole thing is a game from that point forward. It's expensive. It takes a lot of time. It would be better if it happened while I'm alive and around, but there's no reason we'd rather have 100% than 91% obviously, because it's more earnings for Berkshire. But there's no reason to try and do anything with either the Scott interests or Greg unless they wanna do it. The logical thing is if anything happened with the Scotts, we'd certainly offer to Greg. Who knows what happens in the future. The one thing I can guarantee you, Berkshire Hathaway holders will never be taken advantage of. You know, you can sue my estate or something like that if anybody felt differently about that. It isn't gonna happen. It's a lot easier if it's done while I'm around actually than if it's done later. I wish we had 20 more complex events just like it. Yeah. Yeah. That's exactly true. Yeah. It's a perfectly logical question. I mean, it is not a problem, and any answer that's arrived at will be good for all concerned. Right now I've got no feeling that I have no knowledge at all of where the stock that the Scotts have goes or how they feel about it or anything and that's up to them. You know, Walter was our partner, and as far as we're concerned, we treat anybody connected with him as our partner and they know that. They don't have to worry about us taking advantage of them and we can understand why. If they don't do anything, we can understand that. If they wanna do something, we can understand that. It's a good question, though. Thank you. Okay, Becky. This question comes from Steve Blackmore in Bozeman, Montana. This is to Charlie. He says, "In the past, you've made favorable statements about investing in China, in part based upon valuation metrics. What is your opinion now, and how much weight do you put on the actions of the government in your analysis? Do the recent Communist Party activities in China, including human rights violations, blatant cyber theft from U.S. companies and others, crackdowns on speech from business and media, et cetera, cause you to change your opinion on investing in China? And how do you evaluate the clear dangers of investing under authoritarian regimes as recently evidenced by Russian atrocities in Ukraine? Well, those are good questions, and there's no question about the fact that the government of China has worried the investors from the United States who invest in China more in recent months and years than it did in earlier periods. There's been some tension, and it's affected the prices of some of the Chinese stocks, particularly internet stocks. Just in the last day or two, the Chinese leader has sort of reversed course on that and said he went too far and he's gonna pull way back and so on and so on. We're having some hopeful signs. Yes, there are more difficulties I mean, of dealing with the regime in China than there are in the United States, and it's different. It's a long way away, and they've got their own culture and their own loyalties and so on and so on. The reason that I invested in China is I could get so much more, so much better companies at so much lower prices, and I was willing to take a little political risk to get into the better companies at the lower prices. Other people might reach the opposite conclusion, and everybody is more worried about China now than they were two or three years ago. That's just the way it is. I have nothing to add. Okay. Station eight. Hi, Warren and Charlie. My name is Tom Ringe. I'm from Wayne, Pennsylvania. It's great to be back here after two years. Thank you very much. Thanks for coming. In this year's letter, you talked about insurance float, the evolution of float, the per share float, the effect on repurchase to increase the per share float. In this regard to the repurchase, I would say thank you as your partner for your careful repurchase as well as careful issuance of our shares. My question is about your expectation for the likelihood that float will be stable and the cost will be zero or close to that over time with adverse years from time to time. What about Berkshire's insurance businesses give you the confidence to make that statement when your competitors are trying to do the same thing but haven't been able to come close to achieving Berkshire's record in cost and growth of float? Thank you. Yeah, well, they really are trying to do the same thing, which is kind of interesting. The answer to your question is we wouldn't be in the business unless it was my judgment that the likelihood, the weighted probabilities are higher that the flow will be useful to us rather than costly to us. Nobody will know the answer to that for a very long time. So far so good, but it is a judgment and absolutely I could be wrong about it. You know, I think both Charlie and I would say that we think the odds are that it's a winning bet, and the odds are pretty good, and that we're quite well positioned to do it if anybody does it. You know, did we know 9/11 was coming or, you know? I mean, it is not a sure thing. Just think of what the potential is though when you're reviewing it. If we could buy common stocks we were virtually sure would give us 8% after taxes with our whole float, that would be a hell of a lot of money. How many people- It would be $11 billion. I can tell you what it would be. And, and- It'd be $11 billion or $12 billion. Yes. It's an enormous amount of money. Annually. Yes. The float has been growing. Relax. We're glad to have the float. Charlie stuck in a couple of ifs there. If we could earn it and if we could. The answer is, you know, it's our job, and we think we can do it as well as anybody or we wouldn't be doing it. It's our job to figure out what businesses we wanna be in and when they don't make sense, reluctantly occasionally to give up on them like the textile business. But that, those are the hard decisions. Insurance, we didn't have the faintest idea back in 1967 when Jack Ringwalt stopped by the office at about a quarter of twelve, and Charlie Munger set him up. Jack about once a year, he'd get mad at the regulators. He just didn't like being regulated. He'd say to himself, "You know, I'm gonna sell this damn thing." Charlie caught him one day, and he said, "Jack is in the heat." You know? I said, "Bring him around." He came up quarter to twelve, and Jack said nhe wanted to get rid of this damn business. The regulators were driving him nuts or something. I said, "Fine, I'll buy it." I said, "What price do you want?" He said, "I think $50 a share then." I said, "Fine, we've done it. We don't need an audit. We don't need anything. Then Jack started in and he says, "Well," he says. Immediately he really changed his mind, but he was too honorable to back out, so he said, "Well, I suppose you'll want me to sell you the agencies." I said. Of course, if I'd said yes, and then he said, "Well, then we can't do it." I just said, "No, you keep them, Jack," you know. He says, "I suppose you'll want me to do this." I said, "No, no, I won't want you to do that." He was hoping I would just give him an out. After doing that for 15 or 20 minutes, he saw that I was gonna agree to everything he said, and he said he'd sell it to me at $50, so he followed through. That was that. You know, it was pure luck. Now, Warren, we really like our float, don't we? Pardon me? We really like our float. Oh, yeah. No, it's. We love it. No, we've made the most of it, but we didn't make the most of it till Ajit Jain came along. You know, who knew that a guy was gonna walk into my office in 1986 and, you know, I would decide that he was the guy to make this damn thing work. I hadn't been able to make it work the way I wanted it to. Who knew that GEICO would come along later, and who knew what? There's just all kinds of things. The one thing you have to do is be prepared. When opportunity comes, you really do have to just. You just move. Fortunately, I operate in an environment, and I wouldn't operate in any other environment. I'd get out of there. I operate in an environment where I can do it. It'd be crazy of the board to say, "We wanna set up a committee to review every acquisition," and all that. I would say, "That's fine, but you can work with somebody else," because I don't, I just don't like to go through all that stuff. You know, I've got other things to do with the rest of my life. There's so much luck, but there is that you do have to be mentally prepared and to do something when it makes sense, and do it big time, and do it instantly. Then you gotta be sure you've got the resources to do it. I mean, you know, those. The relative absence of bureaucracy at Berkshire. Unbelievable has made the company a lot of extra money for a very, very long time. It's made my life happier. Yes. That's ideal. In the end, we are extraordinarily well-positioned to do exactly what we wanna do with float, while at the same time never putting ourselves in the position, never coming close to making a promise we can't keep. We had two small insurance subsidiaries before, well before GEICO. Two companies I bought. One I really didn't know that much about. The other one, I did it all by myself. They were disasters. Left alone, which they could have been, they'd have gone bankrupt. We just didn't wanna do it. We, you know, we could pay the liabilities and if the parent company got involved, then or we put it in another insurance company or something. We just did it. I mean, it's. Berkshire, you know, in a crazy way, I look at Berkshire as a painting, you know? It's unlimited in size. It's got an ever-expanding canvas, and I get to paint what I want. If somebody wants to paint something else, then I'll go someplace and I'll get a smaller little thing and I'll paint away. You know, I actually. You know, I'm no good. I don't know anything about paintings. Take me to an art museum and, you know, all I really wanna know is where the men's room is, but it. You know, I'm just not interested. Other people look at paintings and they see something, and then they see something additionally later on and, I mean, they really have a different sort of perception ability in relation to that. To me, Berkshire's a painting, and I get to paint. You know, the object, obviously, I want my partners to come out well in it, but the real thing I like is the painting. As long as, you know, it's in my head and I see different things in it as I go along and you know, it's the closest thing I can come to enjoying myself every minute of the day. It's not. I don't prescribe it for other people. Occasionally, well, not so occasionally, but I see things in the painting, you know, I think, "Well, I should've done that differently," and I go back and paint it over and it's satisfying. Who knows why human beings react in that manner? I do know what makes me happy and what doesn't make me happy. I found what makes me happy, so why in the world would I change it? That's a short answer to a question that I can't remember what it was. Okay. Becky. This question comes from Andrew Queso from Minneapolis, Minnesota. He says, "Last year, Warren mentioned that inflation had noticeably impacted the prices that Berkshire's businesses were paying and charging. Given those inflationary trends have continued and, in some cases, accelerated since last year's meeting, could you comment on how this particular inflationary period ranks among previous such periods in the United States, like the 1970s and 1980s? And what can American businesses and citizens do to reduce the negative impacts that inflation brings about? Well, we've sort of attacked what you do yourself. You know, you develop skills that people are willing to pay for in the future, regardless of what the unit of exchange is. In terms of inflation in our own businesses, it's extraordinary how much we've seen, you know. I think you interviewed Irv Blumkin at the Furniture Mart, and for two years, you know, the prices have just kept coming in higher for these things and we sell them for higher prices, and people have more money than they've had before. They like to buy, and there's certain things they can't buy. It's like during World War II, you got a lot of money created, and people couldn't buy cars, and they couldn't buy refrigerators, and they couldn't even buy as much sugar or coffee or things as they wanted. They had little stamps and gasoline and all kinds of things. Well, eventually, if you get a lot of money in people's hands and you don't have very many goods, prices go up. Now, you can do all kinds of things, you know, try and talk it down. Of course, inflation is never the same. Nothing in economics is the same the second time after it happens than the first because the first affects people's attitudes, and the second their attitudes always influence the activity itself. I mean, it is an interesting phenomenon. People write a textbook and they write it based on the last experience, and people read the textbook, so they behave differently next time, then they wonder why they're getting a different result than they got the time before. Anyway, we have sent out lots and lots and lots. When I say we, I mean the United States government. The government has sent out lots of money to people. At some point, you know, the money can't be worth as much as it was when there was less money out. Here's an interesting figure that I think probably will astound you. Astounds me, anyway. The Federal Reserve every Thursday puts out a balance sheet. The Federal Reserve, they're complicated institutions, but they do put out this kind of consolidated statement of all the various Federal Reserve banks, all these things that have entered into legislation over the years. But there's a balance sheet. Fifteen years ago, roughly, if you look, the Federal Reserve issues those notes I talked about a while back. That's the one, there's the current one. They print these pieces of paper. They, one way or another, they got it in the hands of people. Well, the interesting thing is people said cash is dead and all that sort of thing. You know, cashless society. Well, there were $800 billion, go back 10 or 15 years, there was about $800 billion of currency in circulation. If you look at last Thursday's report, you'll see there's something like now $2.2 trillion of currency in circulation. $2.2 trillion. Now, there's about 330 million people in the United States. Let's look at it that way. With 330 million people, and you have almost $2.3 trillion of currency in circulation, that's $7,000 per person. Every man, woman, and child in theory has $7,000 worth of currency. Well, you know, that isn't right. But you do know that the Federal Reserve's bookkeeping is essentially right. They've got that much that's out there. I don't know where it is. I mean, I don't know whether it's in Russia. I don't know whether it's in South America. I don't know whether Charlie's got it all. I mean, it's a staggering sum. You know, cash is dead, and yet we, on average, have $7,000 for every person in the United States. Now, while you're absorbing that, think for a moment what would happen if the U.S. government said they work it out in private, and they decide that they're going to send, Federal Reserve, and I'm not gonna blame the Federal Reserve, but there's somebody back in Washington decides they're gonna send out $1 million to every household in the United States. There are 130 million households in the United States or something like that, you know, and they're gonna mail you $1 million in cash. There were a couple provisions attached to it. One is, if you talked about it in the next 30 days, the money disappeared. It was like in one of those old TV shows or something, and poof, disappears. After 30 days, you could spend it. Well, all of a sudden, you've. The household wealth of the United States, Federal Reserve puts out an estimate, is $130 trillion or something like that. Basically, you've doubled the household wealth. All you've done is mailed out to people, but then you don't tell them you're doing it with everybody. You just say they won the lottery or whatever it may be. Now you've got an amount equal to household wealth. That, even on average, people have doubled it. They've got, they've got this extra $130 trillion of wealth. In a month they can spend it. Well, what's gonna happen? Well, prices are gonna go up. But are they gonna go up immediately? You know, well, you don't know the other guy got it. You just know you've got it. So you don't really feel like you gotta rush out and buy things. But as soon as word gets around, well, we've mailed out, if you look at the amount we've distributed, the federal government, I'm not talking about. I'm just talking about the distribution of resources. You know, we're talking numbers like that. And it affects prices. It has to affect prices. If you had 10 times as much... If you want a home, you had 10x the net worth you had yesterday, but everybody else did the same thing, it doesn't increase the amount of bread in the economy or the number of cars. It just means that the price, the value of this is gonna go down, and its purchasing power, it can't buy more than exists. It's a very strange period where we have lots of money sent out to people. One way or another we're getting it, they didn't find as many places, things to buy as before, and we had supply chain disruptions. We have all these things happen. The end of it is they go out to the Nebraska Furniture Mart, and they do it with our other companies. They do it in very peculiar ways. Now they're buying. I mean, one thing, you know, jewelry stores were, generally speaking, not a very good business. Two years ago, every landlord that had a jewelry store, or multiple jewelry stores in their mall, you know, was wondering how they were gonna get their rent. Now virtually every jewelry store is doing incredibly better than they ever dreamt with way less inventory because people are just coming in and buying. I mean, they don't wait for sales, you know. When they walk in the store, they're gonna walk out, and they're gonna have bought something, and they pay for it. They got the money. We are seeing an unleashing of the fact that we've just mailed a lot of money to people one way or another. It's very indirect, and it all gets complicated when you talk about a big system. This is what's happened. I will guarantee you that if we mail out $1 million to every household in the United States tonight, and you don't know that it's happened, you know, you don't really expect much to happen in behavior tomorrow. Somehow, at some point, and then if you start doing it every month, we'll say, and people really know you're doing it, then they start anticipating it and buying ahead of time and forward. I mean, there's a million things that happen in economics. The answer is we've had a lot of inflation, and it was almost impossible not to have if you're gonna mail out the kind of money we've mailed out. It's probably a good thing we did it. In fact, I think there was one point when the Federal Reserve, which in fact creates the money. If they hadn't done it, your lives would be a lot worse, a whole lot worse now, and that was an important decision. That's why you've had inflation. Heaven knows, I mean, it could end. You can throw the country into recession. You can do all kinds of things. Country's gonna have recessions, incidentally, and it's gonna have depressions periodically. Things will happen differently. You'll read a newspaper today, and you'll wonder a year from now, "Why was I reading the newspaper a year ago?" I mean, it's just the way it works. I mean, when I bought the first stock in 1942, did I know everything that was gonna happen afterwards? Of course not. I didn't know a damn thing. I just needed to have one idea, and that idea wasn't really well-formed. It was just probably the way practically every kid felt about the country when we'd just gone into a war, you know. We thought America was gonna win, and America was gonna win then. It was gonna win just generally. Savings bonds were paying 2.9%. I learned that because we bought them. They called them war bonds originally, and then they called them defense bonds, and then they called them savings bonds, but they were the same thing. You print loads of money, and money is gonna be worth less. Not worthless. I got in trouble doing that one time with CNBC because I said it was going to be worth separately less, but it got contracted down to worthless. It took me a few years to learn to separate those words somehow. Anyway, that's everything I know about economics and more, and Charlie can probably improve on it. Well, it happened on a scale this time we'd never seen before. Those checks that were just mailed out to everybody who claimed to have a business and claimed to have employees, they probably drowned the country in money for a while. As you say, they probably had to do it. It was something that had never been done on that scale before. We had a problem we hadn't had before. Yes. No, I'm not saying it wasn't a good idea. No, I mean, in my book, Jay Powell's a hero. I mean, it's very simple. I mean, he did what he had to do, you know, when. If he had done nothing, I mean, he would be, you know. It'd be very easy to engage in what you would call thumb-sucking then. I shouldn't say plenty of, but there are other Fed chairmen that would have been sucking their thumbs, and the world would have fallen around them, and nobody would have exactly blamed them. They would have blamed the virus and the Chinese and all kinds of things. Well, the really interesting company is Japan, where they first buy back all the debt, then they start buying back all the common stocks. Now, that's really weird. What did they get? 25 years of stasis. Who would have predicted that? Well, nobody predicted anything. I mean, there's nobody's predictions that we're interested in, including our own. I mean, it's very simple. What we do know is that we can deserve your trust. There's no reason to do things that don't deserve it. We can't tell what. Basically, we think we're trying to build a Berkshire that can't withstand a nuclear exchange, but it can withstand just about as much as anything we can, that we can do anything about. That leaves us feeling good. It doesn't leave us feeling perfect. We'd like to even promise you more than that, but we can't promise more than that. It's very simple. With that, we'll move on to 18. Let's see. That's station nine. Dear Mr. Buffett and Mr. Munger, I'm Eli Abushakra from Montreal, Canada. I would like to thank you for everything you've done for us, your fellow shareholder. My question is regarding the GAAP rules. If you were to change it, what would you change and what would it look like? Thank you. Well, I would resign the job. What would you do, Charlie? No, it's an impossible problem because first of all, you have to decide whether what GAAP is supposed to reflect, and it doesn't reflect value. In certain cases, of course, it is important to say that this is value and so on. I mean, it is a convention, and it is done so that the auditor, generally is protected because otherwise, everybody sues everybody in this country for anything, and it's designed to cause people who want to report a given amount of whatever is desired by the market to largely be able to do it. I don't know how I would write the rules. I mean, I've watched people who I would be delighted to have live next to me. You know, if I was going away for two weeks and my kids were to stay at somebody's house, it'd be fine with me if they stayed there. If I lost my wallet someplace and they found it, they'd return it to me. But they'd play games with any number that came to them. Of course, it's a very awkward thing to be on the audit committee of a company where people are playing around with the numbers, and that, and they don't want you. If you raise a stink, you've got all kinds of problems. I actually wrote something some years ago of four. I was kind of anticipating your question about 15 years ago, I guess. I wrote four suggestions for questions to be asked of the audit committee. I don't know whether I was on the audit committee then of Coke or where. Anyway, I mean, it was just clear to me what was happening. You had to, you really had to follow the charade or you got in all kinds of trouble for doing that too. I just put four questions out that I would wanna know, and they were perfectly logical questions. In the end, nobody adopted them. I mean, the system was fine as it was. The auditors got sued, but not that often. The SEC had lots of rules, and I admire the SEC enormously. I think the country is better off because of the SEC. It is a hopeless question or problem to devise rules that people can't get around. I mean, it's not, I think it was. Who was it that my friend that was a writer said, "It's not the illegal things that are outrageous, it's the legal things." It's just very hard. You try, and it's worthwhile, and you need an SEC, but the SEC can't really stop the stuff that, you know, you would find outrageous if, you know, if explained. The auditors have the same question. I mean, the auditors really want a, they want rules, and they want processes, and they want it to be so they can operate. Charlie found a, he was on the audit committee of Salomon Brothers, and we had probably literally millions of contracts where people put numbers in. He found that we had the largest auditing firm in the country then, Arthur Andersen, as I remember it, Charlie. They're gone now. Yeah, they're gone now. But they were the largest. Charlie found a $20 million error, I think, one time in an audit. They called it a plug. When your accountant starts talking about a plug, it's not good. Well, I'll tell you a story I haven't told before. You saw in that movie, people who are here saw me testify in August before a subcommittee who were out to get their way. I just decided I've, you know, I'm just gonna answer every question honestly, and I was not gonna try to draw up anything. I just sat in front of them and said what I knew and didn't know. One of the things I said, which was absolutely true, is that I'd only been there 10 days or so at Salomon, but I said, "I really haven't seen anything yet that strikes me as terrible in accounting." But I'd been there 10 days. This guy who got us in all this trouble, so far, he's the only thing I found. I don't know what else was gonna be found. How in the hell could I know what had gone in a place that was doing, you know, incredible numbers of transactions and everything? I said, you know, "What I've seen, the accounting strikes me as legit." About a month later, I was so happy I had testified earlier, not later, a very fine CFO, and these are decent people. They're very decent people. He comes in, and he said, "Warren, there's probably something you should know." I said, "Well, what's that?" He said, "Well," 12 years earlier or whatever it was, Salomon Brothers merged with Phibro, which was a huge trading company. Salomon Brothers was a huge investment banking company. It became this huge powerhouse. He said, "12 years ago when we merged with them, we sort of couldn't find exactly. They were on a trade basis, and we were on a settlement basis." He said, "We never really figured out how to put the books together." This is the largest audit company in the United States, Arthur Andersen, that's responsible for signing this thing. "So we have this number, and every day it moves around, and it's just put in there to make assets equal liabilities." "You know, today it's $173,412,000," you know, down to the penny, "and tomorrow it'll be something different, you know?" I thought to myself, "I am sure glad I testified before Congress a month ago because I did not know then. If they ever ask me again, I'm gonna tell them exactly what happened. That we've just got this number that floats around every day, and we haven't found it in 12 years, and Arthur Andersen doesn't know where it is. You know, you gotta make the assets equal the liabilities, right? I mean, so what else do you do? That's exactly what happened. Strange things happen in this world. There's one guy. I think the name was the floating plug. Charlie's on the audit committee. The one thing I've always suggested, nobody ever wants to do this, and I can understand why. You've got trillions of dollars worth of contracts and everything that people are putting down little numbers for every day at banks and investment banks and all over the world, I mean, commodity traders. At Berkshire, we stick down something that, you know, there's certain hedging that even the regulators want us to do in terms of giving utilities, and we put a little number in. I've made the suggestion once or twice that if you really wanna do something sort of interesting, you know, just get some young guy that, give him a couple of weeks and pick the 100 most kind of complicated, long-term, you know, lots of wording, derivative contracts, and look at what one side who promises to do something values it at, and look at what the other side, who also reports, you know, and just let them do it for 100 operations at random. I'd just like to know if somebody's valuing some. We're valuing a contract at $28 million, the other guy's valuing it at $33 million, you know, and you've got the same auditing firm on, in both cases, and they're signing their name to them. I don't think anybody's ever done anything with that suggestion. You know, that would be the first thing I would do actually if I really wanted to sort of dig into what was happening in accounting. There's a lot of things in life you can't change, and nobody is gonna go looking for ways to create lawsuits and newspaper stories, all kinds of things, and I don't blame them. Listen, I brought one thing I just couldn't resist. I was hoping I'd get a question, so I'll ask it myself. I was hoping to get a question about how some guy could be so idiotic as to propose a price of $848.02 or whatever it was, or is, for Alleghany Corporation? I mean, isn't that getting a little scientific at all? Of course, I did provide, when I made the offer, that it'd be $850 less whatever was paid to whatever investment banker they wanted to select, Alleghany in this case, and they're bound to have to do it because Delaware laws developed in such a way that the directors are protected if they get expert opinions, all that sort of thing. I don't fault anybody in the system, but I just thought it might be useful actually, maybe to Delaware judges someday, Delaware statute makers, maybe people that are writing papers, who knows? I suggest that since I'm willing to pay $850 a share for the place as is, you know, if the audit fees are. I mean, if the advisory fees are $10 million or $40 million, then it makes a difference to someone. It's always made a difference to us as the buyer, but that's just the way the game was. Well, there's a little history to that. I went back. Nobody's ever paid attention to this, but there's been twice in the history of Berkshire Hathaway, 57 years, twice that Berkshire was required to get a fairness opinion, and it was perfectly logical that we'd be required to get a fairness opinion in those two cases because in one case, Diversified Retailing, which was a company I was invested in both of them that came out of our partnership, but one had a group of shareholders that were different than the other group of shareholders at Berkshire. The two wanted to merge, so you have two companies with me being the biggest beneficiary in between. It wasn't up to me to determine the ratio. I mean, even though I was the most involved, but I had a little more of one company than the other. Anyway, a fairness opinion was required, and this has only been twice in the history of Berkshire that one was required. Naturally, I went to Charlie and I said, "Charlie, you know, we do have to." I mean, Charlie told me we. He knew it better than I did. "We need a fairness opinion in this case." I said, "You know, I know what's fair. You know what's fair. Sandy knows what he thinks is fair. If the three of us owned it, in 10 minutes we could've worked out a deal that all three of us regarded as fair. Because there were public shareholders and everything, it wasn't right to do it that way. The first time, the first one, we have two of these, but the first one was November 27th, 1978. I told the shareholders essentially that, "My personal belief is that both Diversified and Berkshire shareholders will benefit from the merger, but I will vote for the merger only if a majority of the shares which are voted by other shareholders of each company are voted to support it." Which was fine. I committed myself, you know, that let the other people decide whether this was fair, but on top of that, we needed to get a fairness opinion from an investment bank with a big name and everything. I said to Charlie, I said, "You know, these things are going for $1 million or $2 million bucks, where they get some guy that they hired last week and he writes up a little thing and then we get a bill for $1 million or $2 million. They really haven't done anything. They don't know either company and, you know, they. There's a million things they're not gonna know about it, but they're gonna write an opinion and we need the opinion." I said, "So what do I do?" I go to Charlie with these kind of problems. Charlie said, "Warren, it's very simple." He said, "Pick out 10 prestigious investment banks and do exactly what I say." "Okay, Charlie, what do I do? Why don't I call and get these 10?" He says, "Well, put them in order, 1 through 10." He said, "Call the guy at the top of the list and tell him you'll pay him $60,000 for doing a fairness opinion, and you know that it's an insulting price, and it's ridiculous for him to do it because it'll affect what he can get from other people down the line that will look back and they'll say, 'Well, Buffett only paid $60,000. Why should I pay $2 million?' He says, "Just tell him that that's what you'll pay, and if they're insulted by it, which they probably should be, then you'll go to number two, and then you'll offer them the same deal, and you'll just keep going down till you get to number 10. If you don't have anybody by number 10, you've told the other people, you'll come back to number 1 again and you'll say, 'Well, I'll pay $80,000,' and then you'll go down the list and everything." Well, I picked 10 names out, and number one name was John Shad. John Shad was a friend of Tom Murphy. He's a friend of Bill Ruane's, and he was running E.F. Hutton, and he was a very successful investment banker. I didn't know him as well as the others, but I'd met him through my friends. I called up and I said, "Jack." I said, "I've got this crazy request." He says, "Only because everybody admires you so much, and my friends are your friends, and blah, blah," and E.F. Hutton is so well regarded. I said, "I'm going to ask you something that is totally against your interest, and I fully understand the fact that you're gonna say you're an idiot to call me on this and slam down the phone. Yeah. I said, "Jack, here's our procedure." I described this procedure that he gets called first, and if he turns it down, then I go to PaineWebber, and then I go to the. Then it goes on. I tell him, "There's these 10 people, and if we don't get any yeses, I'm gonna come back to you again and I'll offer you $75,000, and we'll do the same thing till somebody says yes." I said, "Jack, you know, but you are the first call, so, $60,000, and it's gonna screw up your business if you do this because every client you get in the future is gonna say, 'Well, you did it for Diversified Retailing and Berkshire, and why in the world should we pay you $2 million when he paid you $60,000?'" Jack said, "Don't worry about it, Warren. I can take care of that." He says, "We're in." We got a fairness opinion but by for one side. Now, the next call I made was to PaineWebber, and I gave him the same story. I said, "E.F. Hutton was dumb enough to take the one side for $60,000, you know. I don't know why the hell they're doing it. You know, they're destroying their reputation and all that." PaineWebber said, "We'll take the other side for $60,000." We have a thing here that describes the whole process. They got well, though. They sent out an amiable alcoholic they had to do something with. Well, what they did was they each billed us for $60,000 and we paid it. That's what you get for $60,000. No, no. We got the same thing everybody else got, Charlie. Yeah, I know. Of course, John Shad, this was 1978, he was appointed chairman of the SEC about seven years. I mean, John liked to do business. It's true, it didn't hurt him. They paid us $60,000, and they went back and charged somebody else $2 million, you know, the next week. Those guys, it's all play money. We did the same thing when we got to Blue Chip Stamps, where we were similarly conflicted four or five years later. We went back to the same two guys, and there'd been a lot of inflation and everything like that. We said $110,000 then. I've got the prospectus for that. Both of them said, you know, "Send it in. Don't worry about our other clients. We can, we'll figure out some story to tell them, you know, and whatever it may be. I just thought it would be interesting, at some point, to have people realize that it's not play money. Somebody pays it, and it's a game. You know, but it's what passes muster in Delaware, and the directors will have it explained to them by the lawyers that they're not gonna get sued if they do it in a certain kind of way. I just decided that somebody at some point ought to point out what actually is happening in this situation. And that's why we did it that way. You know, it may go down with our earlier attempts to educate the world on the realities of finance and its various interactions, and why it's better to teach your son to be an investment banker than to be an electrician, you know, or something. It's, you've got an eccentric Chairman, and that's what he did. Charlie, how do you feel about this whole matter? It was your idea, originally. Well, it's, we're a little peculiar. It's not all the peculiarities are not bad. I talked to Charlie before. I didn't talk to Charlie before I did it this time. Yeah. Charlie has given me four ideas and together on extremely practical matters with so much, I mean, they just changed everything. I think you really ought to tell them about the experience with the fraud claim, Charlie. What? On the fraud claim at, you know, that, where the fidelity claim with the guy, you know, he had a very well-known insurance company that you don't have to name names. But where the, you know, you basically told him, "Just raise the stakes to make the game fair." This was back in the 1960s. You remember that? I don't remember. Oh, well, I do remember it. Well, tell it then. Charlie had this tiny little operation which he ran his fund, also had a seat on the Pacific Coast Stock Exchange. The firm was called Wheeler, Munger & Co. It was called Wheeler, Munger & Co. at first. Later it changed itself to Munger, Wheeler & Co. and Jack Wheeler said, "Well, pretty soon it'll be Munger and Company, but that's okay." Jack Wheeler was a very interesting guy, and he had the specialist position in General Motors and a few things. Some employee stole, like, I don't know, $12,000 or something like that from the firm. Yeah. Well, he, I remember it. He hid the trading tickets. Some guy steals some money. Charlie's firm, Wheeler and Munger, was required to have a fidelity bond and all these things that covered dishonest employees and all of that sort. This guy's clearly dishonest. He's clearly stolen the money. Charlie puts in a claim for $12,000 or something like that, whatever the loss was, and sends it to this very big and prestigious insurance company. Of course, the insurance company denies this claim. They say, you know, "The guy really wasn't employed. He doesn't exist. You don't have a dog." You know, I mean, the whole thing. Charlie gets this letter back, and they're not gonna pay the claim. Charlie writes a letter to this very well-known, big name, person that runs the insurance company. He said, "Lookit." He said, "We have this $12,000 claim." He said, "This guy stole the money, and we thought we had an insurance policy against people stealing, to pay us if people stole money." He said, "We're in this very interesting position because you've got a bunch of people on the payroll, and they're gonna get their weekly check or monthly check, whatever they do, so they just say, 'We're not gonna pay.' Life goes on. Whereas I'm sitting here, and I've got my time. I gotta work on this thing, and it isn't worth the $12,000 for me to fool around with this claim against the company, and they'll appeal it, and all these things. He said, "I know that you would be offended by the thought that you might be using this inequality of bargaining position to avoid paying off the claim. I mean, that never could be your intention. So what I suggest in order to really live up to your code of behavior is why don't we make the $12,000 claim, we'll just multiply it by 10 and call it a $120,000 either way. And if you lose, you pay me a $120,000. If I lose, I'll pay you a $120,000. Now it's worth my while." He addresses the letter to the Chairman and says that's the guy. He gets a $12,000 check by return mail. It's not a bad lesson. He's told me two others, but the tricks are too good. I don't even wanna share them now. I may use them myself someday. Okay, let's go to Becky. We got a lot of questions on this topic. I'll ask this one that came from Raj. He says, "Have you changed your views on Bitcoin and or cryptocurrency in any respect? I'm conflicted about this because his own views have slightly evolved during the past two years from Bitcoin is a fraud and waste to Bitcoin is in a speculative bubble but might have some uses. Well, I shouldn't answer any questions on the subject, but I will. You know, there's all kinds of people watching this that are long Bitcoin, and there's nobody that's short, and nobody wants their windpipe stepped on, and I don't blame them. I don't like people to step on my windpipe. I would say this, that if the people in this room owned all of the farmland in the United States, and you offered me a 1% interest in it, and you said, "For a 1% interest in all the farmland in the United States, pay me, pay our group..." Well, let's see. 10 trillion. Pay us this bargain price, $25 billion. I'll write you a check this afternoon. $25 billion, now I own 1% of the farmland. If you tell me you own 1% of the apartment houses in the United States, and you offer me a 1% interest, so I'll have a 1% interest in all the apartment houses in the country, and you want whatever it may be for it, then call it another $25 billion or something. I'll write you a check. You know, it's very simple. Now, if you told me you owned all of the Bitcoin in the world, and you offered it to me for $25, I wouldn't take it because what would I do with it? I have to sell it back to you one way or another. I mean, maybe I have the same people, but it isn't gonna do anything. The apartments are gonna produce rental and the farms are gonna produce food. If I've got all the Bitcoin, you know, I'm back where whatever his name was, who may or may not have existed was, you know, 15 years ago. If I've got it all, he could create a mystery about it, but everybody knows what I'm like. I mean, so if I'm trying to get rid of it, you know, people will say, "Well, you know, why should I buy some Bitcoin from you? I mean, why don't you call it Buffett coin? You know, make your own or something. Do something, but don't. I'm not gonna give you anything for it." You'd be right, incidentally. But that explains the difference between productive assets and something that depends on the next guy paying you more than the last guy got. Now, net, if you look at it, a lot of commissions have been paid, and there's, I mean, there's all kinds of frictional costs that are very real that somebody has paid to a bunch of people who facilitate this game. Whatever one group of the public has taken out, or one group of owners, has come in from other people. I mean, it's other people have entered the room, and they move money around. No money has. There's no more money in the room. It just changed hands with a lot of maybe fraud and costs involved and, you know, a whole bunch of things you lose. You know, you forget the numbers or forget the equation. You can do that with a lot of things. I mean, it's been done throughout history. Certain things have value that don't produce something tangible. I mean, you can say a great painting, you know, probably will have some value 500 years from now. May not, but the odds are pretty good that if it was a big enough name at some point. There will be a few things. I mean, it, you know, you can find something. If somebody wants to sell you a pyramid or something, and you can charge the viewers or, you know, it'll be around a long time and won't produce anything, but people will find it interesting to go there because I've read about the pyramids. Basically, assets to have value, they have to deliver something to somebody. There's only one currency that's acceptable in the United States. I mean, you can come up with all kinds of things. We can put up Berkshire coins or, you know, we can put up Berkshire money or anything like that. We get in trouble, I guess, if we call it money. In the end, this is money and there's no reason in the world why the United States government, whose currency people prefer, I think, literally, there's $2.3 trillion just of these little pieces of paper floating around some places, $7,000 for every man, woman, and child in the United States. Of course, most of them probably aren't in the United States. Who knows? This is the only thing that's money. Anybody that thinks the United States is going to change the way they let Berkshire money replace theirs, you know, is out of their mind. I mean, with those few deficiencies, you know, whether it goes up or down in the next year or five years, 10 years, I don't know. The one thing I'm pretty sure of is that it doesn't multiply, it doesn't produce anything. It's got a magic to it. People have attached magics to lots of things. I mean, the gold bug on Wall Street, you know, creates magic, you know. You know, we are not an insurance company. We're a tech company. Well, we're an insurance company, but a dozen people or so have raised a lot of money. They just say, "Just don't pay any attention to the fact that we sell insurance. We are a tech company." Well, in the end, they wrote insurance, and overwhelmingly, they've lost a lot of money since then. You can make up things that work well in getting money from other people, and that's why. Well, I have a slightly different way of looking at it. I'll sell you something then. In my life, I try and avoid things that are stupid and evil and make me look bad in comparison with somebody else. Bitcoin does all three. In the first place, it's stupid because it's very likely to go to zero. In the second place, it's evil because it undermines the Federal Reserve System and the national currency system, which we desperately need to maintain its integrity and government control, and so on. Third, it makes us look foolish compared to the communist leader in China. He was smart enough to ban Bitcoin in China. With all of our presumed advantages of civilization, we are a lot dumber than the communist leader in China. Yeah, when 25% of the people of the country get mad because we've said what we've said today, just remember Charlie spoke last. It was the most. The one development that I really do think is actually important, but I don't know any way to do anything about it, but I would. My general sense, and there's no way to prove it, but I essentially believe people are now behaving somewhat more tribal than they have for a long time. I mean, people are always gonna be partisan, and they're gonna have religious beliefs. They're gonna have all kinds of things. But it gets pretty tribal. I wanna tell you, I speak from experience because I've been tribal. You know, we're confessing today. You know, Nebraska football is tribal. When I watch a television set, and I see our guys step out of bounds by a foot, but somehow the ref misses it and calls it in, and then they show six replays, I'll continue to believe it was in even though it's right in front of my eyes and they stepped out. You know, that's tribal behavior. It's fun, I mean, to participate in. But it can get very dangerous when people, one group of people say two plus two is five, and another say it's two plus two is three. You know, and they're gonna give you those answers if you call them. The interesting thing is, to me at least, and partly because of my age, but I actually think that just from memory, that the last time that the country was seen this tribal was actually when I was a kid and Roosevelt was in. Either you hated Roosevelt, or you loved him. I mean, nobody cared about the fact Al Smith was running or Wendell Willkie was running against him. They just had these feelings. They either had Roosevelt's picture on the wall and named their kids after Roosevelt, or they hated him. They thought he was no third term and, you know, and I mean, a million things. The country was very, very tribal in the 1930s, but Roosevelt's tribe was bigger, and in my opinion, they did some wonderful things. I happened to grow up in a household where we didn't get served dessert until we said something nasty about Roosevelt. Believe me, if you don't get dessert, you're gonna say something nasty about Roosevelt. You trained them young and, you know, all kinds of things. I've seen a period that it wasn't that way when, you know, if Eisenhower was running against Stevenson or, you know, or whatever it might be. People, they didn't just. They had a partisan behavior, and they had a certain amount of tribal always. I don't think it's a good development for society generally when people get tribal, regardless. Charlie, what tribes are you a member of, though? Well, in California, we have a legislature which is completely gerrymandered, so nobody can ever be thrown out by the voters. Therefore, the only people in the legislature are insane rightists and insane leftists. They get together every 10 years, and there's usually 6 moderates somewhere in the legislature. They rejigger all the districts to throw them out because neither party can stand them. Now, that is government in California. Yeah. You live there, and you have to go back? Yes. Yes. I'm sure you'll overwhelm people. I prefer living there than living in Russia. Okay, who haven't we gotten in trouble with? You know, now. Who was it? Mort Sahl that you say, "Is there anyone I've forgotten to offend?" Yeah. The section ten, I believe. Hello, Mr. Buffett and Mr. Munger. My name is Sahej. I'm from New Jersey, and I'm currently a freshman at Rutgers University. You knew quite early on that you wanted to be investors, and you've obviously been amazing at it. What advice would you have for someone who's still trying to figure out what they wanna focus on and find their calling? Well, that is a very interesting question because I was very, very lucky in that I found what I wanted to do because my dad happened to be in a business that he wasn't interested in, but they had some books down there, and I loved my dad, and I'd go down, read the books, and they interested me. You know, I'm glad he wasn't a, you know, a professional boxer or something, or I, you know, I wouldn't have any teeth left or anything. It was an accident, just totally an accident. I do think you know it when you see it, and it doesn't mean you can follow. I would tell the students that wrote in the report, I mean, you know, find out what you love doing, and you spend most of your life doing it. Why in the world would you wanna be around for a lifetime working with people that you didn't like unless you had to, which sometimes happens? Just work for whomever you admire the most. I gave a talk at Stanford one time, and somebody showed up at Tom Murphy's office, I think, a couple of days later. I mean, that person was right. Of course, it's what I did when I got out of school. I wanted to work for Ben Graham. I mean, that is. I just. I didn't care what I got paid. It didn't make any. You know, I'm. It just is. I just knew that that's what I wanted to do, and then I pestered him for three years, and he finally hired me. Then I found somebody else that I'd even rather work for than Ben, who happened to be myself. I've been working for myself ever since. I had about four bosses in my life. Down at the Lincoln Journal with, oh, name slips my mind at the moment. He's a wonderful boss. It was Cooper Smith at J.C. Penney's here in Omaha, and they all were wonderful people. I still preferred working for myself. Of course, Charlie and I both worked for my grandfather, and we just didn't find it that interesting at. I never. I don't remember. Why'd you ever decide to go to work at the store, Charlie? Charlie worked there in 1940. I worked there. Well, I worked just for the experience of working. I didn't need the money. My father gave me an ample allowance, and I also had a private business. I was kinda working as a lark in your grocery store. 12 hours a day? Yes. For a lark? Yeah, as a lark, yes. You consider that a good investment of your time looking back on it? Well, I had never done it before, and I wanted to have a little of that experience, and I wasn't gonna do it very long. That sure as hell wasn't the reason I worked. Well- But- I could give that young lady the advice, figure out what you're bad at and avoid all of it. Yeah. That's the way Warren and I found our profession. Absolutely. We failed at everything else. We worked at everything till we found the ideal employers ourselves. You know, that was something we really admired was. I know. Warren said work for somebody you admire. The only one he knew was the one he was shaving. became self-employed. You could see when he was shaving. It isn't bad advice. I mean, who wants to if they've got an option. I mean, if you're, you know, Charlie went into the service in whatever year it was, in the '40s, and he didn't really have a choice of who he was gonna work for. As I remember it didn't really work out that well who you worked for, Charlie, did it? Well, if you stop to think about it, the two things that neither one of us has ever succeeded at, one, we've never succeeded at anything that didn't interest us, right? Right. We've never succeeded at anything that was really hard where we didn't have much aptitude for it. Yeah, we've been doing whatever we please. Yeah, it's just. for 68 years now, I mean. We get, you know, we have fun in our way and- I'm just amazed. You'd think if you're smart, you could do things that don't interest you well, but you can't. Well, I've certainly got a lot of examples in my own case, but we won't get into them here. We will go to Becky. This question comes from Foster Taylor in Tulsa, Oklahoma. He said he recently listened to the Berkshire Hathaway 2008 annual meeting where you talked about global oil production. At the time, you talked about major ramifications if global oil production went below 85 million barrels in 25 years. We are at the 14-year mark, and global oil production looks to be 79 million barrels. At the same time, we're depleting our strategic oil reserves. Should the United States be doing something differently, and do you see consequences to these actions in the next 10 years if we do not become more proactive? Well, Charlie's the expert on oil. Well. Only compared to me. It's strange that Samuel Johnson said it's hard to determine the order of precedency between a louse and a flea. It's hard to tell which of us is more incompetent in oil. Yeah. We're still competing. I have a different view on this subject. I like having big reserves of oil. If I were running the country, I would just leave most of the oil we have here, and I'd pay whatever the Arabs charge for their oil, and I'd pay it cheerfully and conserve my own. I think it's gonna be very precious stuff over the next 200 years. Nobody else has my view, so it doesn't bother me. I just think they're all wrong. Yeah. At any rate, I, that is not the normal view. We've been pretty flexible in our own view. I mean, actually, you know, the federal government is serving up however many billion barrels of the stuff that into the economy. You know, it wasn't that long ago that, you know, the idea that anybody produced a barrel of oil was somehow something terrible. I mean, just try doing without 11 million barrels a day and see what happens tomorrow. It is something that everybody has a feeling on immediately. You know, this gets into a whole bunch of different tribes of sorts. You offend an awful lot of people if you talk in any way about it. In the end, I think, at the moment at least, most people feel that it's nice to have some oil in this country than not have it. We're using a lot of it. If we were to try and change over in three years or five years, nobody knows what would happen, but the odds that it would work well are extremely low, it seems to me. Charlie, why don't you say something more dramatic so you'll be the one that offended the most people? Well, if you stop to think about it, the oil industry is being so vilified now. I can hardly think of a more useful industry. I don't know about wildcatters, but certainly the petroleum engineers I know and the people who design our oil refineries and pipelines are some of the finest and most reliable people I know. I see very little trouble with the oil supply thing in the United States. I'm basically in love with Standard Oil. I don't have this feeling that it's an evil, crazy place. I wish the rest of the world worked as well as our big oil companies. Well, we better move on to station 11. I'm not sure whether station 11 is operative. Well, we're here. Okay. Greetings from the overflow room. My name is Glenn Tung. I'm a shareholder from New York. This is my 20th Berkshire annual meeting, and I'm delighted that we're able to once again be here in person. You two have brought tremendous joy to all of us through the years, and speaking personally, your wisdom has not only made me a better investor, but more importantly, a better, happier person. It's a privilege and honor to thank you. Warren and Charlie, thank you. Well, that's my kind of a question. Yeah, that's fine. Let's have more of those. Yeah. Or you can say it again. I mean. Maybe you could sing it. Maybe I should quit at this point. Glenn, go to it. My question relates to share repurchases. Since you started buying back Berkshire shares in size two years ago, the repurchases have ranged between $1 billion and $3 billion per month. By my estimate, it appears that the buyback rate is about $3 billion per month when Berkshire's trading at a 20% or so discount to intrinsic value, $2 billion per month at about a 10% discount, and $1 billion per month at a zero to 10% value. Do I have that about right and approximately right, and do any other factors influence the rate of share repurchases? Well, after you were so nice in your introduction, I have to say that you're actually wrong in that. If somebody had offered us $50 billion worth of stock at a certain point in the last three or four, five months, we'd have taken it. You know, it's that simple. As I mentioned earlier, we haven't bought any stock in April. It's something that when we can do it, and we know, at least we think the probabilities are very high, we certainly believe it in terms of our own evaluation and our own investment, if we think that we're improving things for the remaining shareholder, we'll buy it back. If we don't, we don't buy it back. If we have the choice of buying businesses that we like or buying back stock, the controlling factor is how much money we have, we'd rather buy businesses. It isn't. You know, we don't stay awake at night working out formulas or anything of the sort. Look, we don't ever do it if we think that we're not doing something at the time. If we had a lemonade stand, and Charlie and I and you owned it, and the lemonade stand was making us about a buck a week or something, and we divided it up, and you said you wanted to get out. If you said one number, we'd have the funds in our little lemonade company, and we'd buy you out. If we didn't like the price, we wouldn't buy you out. That's it's the same way we feel. We do feel an obligation to do things that we think are intelligent and in no way risk, absolutely no way can present any risk of financial problems under any circumstances we can envision, except maybe if something like nuclear war. We will do it, but it never can be that big a factor. Certainly in companies. Well, Charlie, I think, spoke the other day at an excellent Henry Singleton's. I think he bought back 89% of the company over time, and he'd sold stock like crazy, or issued it much earlier when it was overpriced, and he bought it back underpriced. The key to that, of course, is having people think you're wrong in doing it. He was able to buy a ton of it. There's some other companies that have bought a ton of it. Berkshire isn't gonna get the chance to do that because if people think we're buying the. We've got sensible shareholders, is what it amounts to. If we had the same group of shareholders that own two-day puts, and they were our shareholders, we'd buy back the whole company, you know, in a very short period of time. It's such an easy concept to assess. I mean, the second stock I bought, well, Cities Service Preferred, that was the first one. Second stock I bought was a company called Texas Pacific Land Trust, and that came out of the bankruptcy of the Texas and Pacific Railway back in the 1880s or something like that. They had three million some acres, and they owned the minerals, and they owned the surface and everything else. It was terrible land in the 1880s. They had some kind of a charter that said to use the proceeds from land sales, whatever it was, they were gonna buy in stock every year. You know, I sat there when I was 13 or 14, and I figured if I lived to be 100, I would own the whole place. Well, I haven't lived to be 100 yet, and I wouldn't have bought the whole place. Both calculations are so far imperfect. It's been a remarkable company. Just plain remarkable because they would talk about raising fees of $6,000 a year or something like that, you know, maybe when they had three million acres. Then they kept finding oil and more oil and more oil, and they've changed the form and all kinds of things, but they bought in stock week after week after week. I sat there and figured out how long it would take until I owned the whole company, and I obviously made some improper calculations because it wouldn't have worked that way. It still was apparent to me that it would be a very good idea if they had three million acres down there, that if they got all through with it and they kept the mineral rights and all kinds of things which they were doing, you know, it ought to. At a very cheap price, it ought to work out well for anybody who sat around for a long time. It has worked out extremely well for anybody who sat around a long time. Nobody knew that they were gonna find a lot of oil and that eventually El Paso would grow out far enough so that the surface lands became worth some money that they were somewhat near El Paso. Mm-hmm. They had to go a couple of hundred more miles to find the next person, but that was another problem. It's just so some of the stuff is so simple, you know? You know, people wanna get their PhD or something, so they work out hundreds of pages and have lots of Greek letters in it and all that sort of thing. You know, either you're buying out your partner at an attractive price or you're not buying him out at an attractive price. If you got the money around to do it and the price is attractive and you don't have some other opportunities, you know, why not do it. You gotta come out ahead by doing it. If certain other If you've got other things that are more intelligent, you don't do it. If it isn't intelligent on an absolute basis, you also don't do it. Charlie, have you got anything to add? What were you doing in 1943? You were in the service and I was- Well, Warren, we'd be crazy if we didn't rather enjoy having come a considerable distance from small beginnings. To do that in good company, it's a favored life. Yeah. We've been very fortunate. Yeah. Tomorrow, Monday, I can tell you it's almost certain that if anybody offers us. Well, there'll be shares trade at Berkshire, and we won't buy any. It's also pretty fair chance someday a lot of shares, quite a few shares, not a lot. Berkshire's got our shareholders are too smart. That's one of our problems, that we want to repurchase shares. We really don't want to squeeze it. We don't want to squeeze out anybody, but we also are here to do things that increase the value for the people who stick with us. I mean, it's not very complicated. There'll be times when we'll do it, and there'll be times when we won't. It won't be any formula, but there will be the principles that I've just expressed. My guess is that my successor and their successor will have a similar calculation because we're looking for people that are rational and devoted to Berkshire. Yeah. Glenn, thanks for coming. Becky, you're next. This question was sent in by Dave Shane from Brooklyn, New York. He's responding to something he heard earlier today. He said, "In the future, will Greg be able to act with the same spontaneity that you mentioned earlier and make immediate multibillion-dollar decisions without board approval? My guess is that the board, they respond as people do. They'll put some more restrictions, or they'll have some more consultation on a lot of matters or some matters than they do with me. I mean, they won't need to, but they'll feel that they haven't had the experience, they haven't seen them as long, and then a whole bunch of things, and they'll feel that the Delaware laws protects them better. Incidentally, they don't have directors and officers liability insurance. I mean, virtually every company on the New York Stock Exchange has it. We just don't buy it. I mean, to come on the board and you're a trustee for a whole bunch of people who trust you and me, I'm talking about the directors and me, you know, fine. It's very interesting. People go on museum boards, you know, and they're expected to contribute. People go on college boards, and they're expected to contribute money. They say it's a great honor to be on a university board or museum board or whatever. It's a great honor, and therefore you should raise money for us. Well, frankly, I think our board's more interesting than being on a university board or, you know, or a hospital board or something. I don't know. I wouldn't know what they were talking about anyway on museum board or art board. People have found that they can make $300,000 a year, you know, which is way more, which is enormously important to some people and is meaningless to others. I mean, chances are if somehow they'd arranged it so that directors didn't get paid at all, there'd be plenty of people who wanted to be directors, and it'd be a prestigious sort of thing and all that. In effect, it's money that comes very easily. The whole idea of the independent director, frankly, is it just doesn't really make any sense at all. You don't think a director is independent who needs $300,000 a year? He needs the money. Yeah. I mean. He's independent the way a slave is independent. I am going to read a few sentences which are absolutely the case, except I'm doctoring. I don't want anybody to be identified obviously with this, and these are word for word excerpts. I'm not telling whether it's a woman or a man. I'm gonna use a male pronoun because it's easier. I picked out a few sentences from a letter I received many years ago, and this letter said, "I'm writing to you with a great deal of reluctance and a sense of personal embarrassment. I have tried all of the conventional means of raising the money." This person needed $2 million, and I wouldn't have known the person if I saw him on the street, you know. It wrote this letter and said, "I need a couple million dollars." Then this is the item that I think you might find interesting, and I've kept the letter. "My income is composed 100% of my board fees." I just looked him up, and at the time he was a director of five prestigious companies, and had been director of others, and he was gonna be director of a whole bunch of things. He was desperate for money, and he says he's getting 100% of it from board fees, and he was an independent director, classified as an independent director at every one of these companies. It's just astounding to me that you know, we're gonna have a shareholders' meeting in just a couple minutes. We're gonna start it. It's just astounding to me that in 2006 we owned 9% of the Coca-Cola company. I mean, maybe they gave me a free Coke. I mean, but we own 9% of Berkshire Hathaway. We obviously cared about the future of the Coca-Cola company. It so happened in that year CalPERS and a few others have recommended that we be voted against for something or other, and at one time there were two big institutional investors that voted because they didn't think I was independent because Dairy Queen bought some Coca-Cola. Actually, the people that had our franchises bought some Coca-Cola. I mean, do they think I can't add things in my head if we've got billions of dollars, that I'm gonna be compromised and. It's just nutty. One year my vote fell from 96%, yeah, maybe it was 98% vote approval to 84% because I forget whether it's 2004 or 2000. Somewhere along the line, they just decided that I wasn't the right sort of person to be able to handle these responsibilities. The idea that somebody, it's an important part of their income, I mean, what they want, they may wanna do a lot of other good things. It doesn't mean they're terrible people. If the difference is whether you how you live, and in this case whether the person might go broke, how in the world you can call somebody like that independent and then say that anybody owns a lot of, you know, maybe Walter Scott's, you know, not independent or maybe. It's just ridiculous. It's the way the rules are and we will follow the rules but. Well, they don't want them just independent now. They want one horse, one rabbit, one cow, one what-whatever. Well, I mean, you know, I feel like Galileo. Independence is not enough. You gotta have a very diverse kind of independence. If you desperately need the money, in this case 100% of the income coming from it, you're on five of the most prestigious boards in the country and classified as independent on each and other. All you're hoping is that. Well, I think. your CEO gets called. We can make it. by another CEO and says, "Is this guy okay?" You say, "Of course he's okay," which means, of course, he doesn't cause trouble, and so he gets on a sixth board. Anyway. I know. But- All I can say is it's not our idea of an independent director. No. No. It's all a little crazy, which brings us to the fact that we're now gonna have our annual meeting here in about 15 minutes. We'll reconvene at 3:45 P.M., and then we'll do the business of the meeting that is required, and you're all welcome to stay or. It's very-