10. American Express isn’t “inevitable” but has “huge value”

WARREN BUFFETT: OK. Let’s go to 8.

AUDIENCE MEMBER: Mr. Buffett, Mr. Munger, good morning. My name is Pete Banner (PH), and I’m from Boulder, Colorado. In the 1996 annual report, Mr. Buffett, you stated companies such as Coca-Cola and Gillette might well be labeled “The Inevitables,” and you just reaffirmed your view of Coca-Cola and Gillette. My question to you is, do you have the same view of American Express? That is, do you view American Express as, quote, “The Inevitable”?

WARREN BUFFETT: Yeah. I would like to clarify one point, too. I didn’t really say I regard the companies as “Inevitables.” I regarded the businesses, their dominance of soft drinks, or their competitive strength in soft drinks and in razors and blades. And as a matter of fact, I actually pointed out in talking about that — a few paragraphs later, I pointed out the danger of having a wonderful business is the temptation to go into less wonderful businesses. And to some extent, for example, Gillette’s stumble in the last year or two has not been the product of their razor and blade business, but it has been some other businesses, which are not at all inevitable. And that, you know, that is always a risk. And it’s a risk I pointed out, that when a company with a wonderful business gets into a mediocre business, that usually the reputation of the mediocre business prevails over the supposed invincibility of the management of the wonderful business.

American Express, an interesting case study, because it does have a — we always think in terms of share of mind versus share of market because, if share of mind is there, market will follow. People — virtually — probably 75 percent of the people in the world — have something in their mind about Coca-Cola. And overwhelmingly it’s favorable. Everybody in California has something in their mind about See’s Candy, and overwhelmingly it’s favorable. The job is to have it in a few more California minds — or world minds in the case of Coke — over the years, and have it even be a little more favorable as the years go by. If we have that, everything else follows. And consumer product organizations understand that. American Express was — had a very special position in people’s mind about financial integrity over the years, and ubiquity of acceptance. When the banks closed in the early ’30s, American Express traveler’s checks actually substituted, to some extent, for bank activity during that period.

The worldwide acceptance of this name meant that when American Express sold traveler’s checks — for many years, their two primary competitors were what are now Citicorp — First National City — and the Bank of America. And, despite the fact that American Express charged you one percent when you bought your traveler’s checks, and you had two other premier organizations, Citicorp, imagine, and BofA, and — actually, Barclays had one and Thomas Cook had one. And American Express still had two-thirds of the market after 60 or 70 years — two-thirds of the worldwide market — while charging more for the product than these other very wellknown competitors charged. Anytime you can charge more for a product and maintain or increase market share against wellentrenched, well-known competitors, you have something very special in people’s minds. Same thing came about when the credit card came around. Originally, American Express wanted the credit card because they thought they were going to get killed on traveler’s checks. And they thought it was going to be a substitute, and therefore, they had to go into — it was a defensive move.

It came about because a fellow named Ralph Schneider, and Al Bloomingdale, and a couple people came up with the Diners Club idea. And the Diners Club idea was sweeping, well, initially New York, and then the country in the mid-’50s. And American Express got very worried because they thought, you know, people are going to use these cards. Nobody had ever heard of Visa at that point, or anything of the sort. But people were going to use these cards instead of traveler’s checks. So they backed into the traveler’s check business — I mean, it backed into the credit card business. Immediately, despite the jump the Diners Club had on the — on this business — because Diners Club had the restaurants signed up already, and they already had the high rollers carrying around their card, and nobody had an American Express card. But American Express went in and they started charging more than Diners Club for the card, and they kept taking market share away.

Well, that is a great position to be in people’s minds where they are willing to — when faced with a choice — they’re willing to go with the newer product, at a higher price, and leave behind the entrenched product. And it just showed the power of American Express. American Express had a special cache. It identified you as something special. When you pulled out your American Express, as opposed to your Diner’s Club card, and as opposed to the Carte Blanche card, which was the third main competitor at the time. Visa still did not exist. And you could see this dominance prevail. That told you what was in people’s minds. It’s why I bought into the stock in 1964. We bought 5 percent of the company for — a huge investment at the time for us. I was only managing $20 million at the time. But you could see that this share of mind, this consumer franchise had not been lost. In the — considerable period of time, American Express got into other businesses, they got into — Fireman’s Fund Insurance was a very big acquisition. And, to some extent, they let the Visas of the world and all of those get established.

They still had this preeminent cache position, but it was eroding. But I would say that Harvey Golub, along with a lot of other people in the management, have done an extremely good job of reaffirming — intensifying — the cache. There will be probably $300 billion worth of charges, something in that area, put on American Express this year. The — 300 billion, those are big numbers, even in today’s world. The average discount fee is about 2.73 percent. If you look at the average discount fee on Visa, MasterCharge, you know, it’s going to be a —probably, a full percentage point beneath that. So you’ve got a percentage point on $300 billion, which is $3 billion of revenue that your competitor doesn’t get. You can do a lot of things for your clientele. And they’ve segmented the card, as you know. They’ve even recently gone to this black card, and — which sells for a thousand dollars. It’s got a very special cache.

I would say that — I wouldn’t use the word “inevitable,” but I would say that nourished properly, that the American Express name has had — excuse me — has huge value and is very, very likely to get stronger and stronger as the years go by. But I don’t — I think that what they went through showed that it could take quite a beating and come back. But I don’t want to — I don’t think you’d want to test it that way indefinitely. Incidentally, that’s one of the things we look for in businesses, is how — you know, if you see a business take a lot of adversity and still do well, that tells you something about the underlying strength of the business. The classic case was on that was — to me, is AOL. Four or five years ago — you know, I’m no expert on this, but I got the impression there for a period of time when they were having a lot of problems, that a very significant percentage of AOL’s customers were mad at them. But the number of customers went up every month. And that’s a terrific business.

I mean, if you have a business where your customers are mad at you and you’re growing, you know, that has met a certain test, in my mind, of utility. And you might argue that American Express had that, to some degree. It wasn’t that bad. But they had a lot of merchant unrest and all of that. So, occasionally, you will find that an interesting test of the strength of a business. Coca-Cola had some problems, you know, in Europe. But it comes back stronger than ever. They certainly had problems with New Coke, and they came back stronger than ever. So you do see that underlying strength. And that’s very impressive as a way of evaluating the depth and impenetrability of the moat that we talked about earlier. Charlie?

CHARLIE MUNGER: Well, I think it would be easier to screw up American Express than it would Coke or Gillette. But it’s an immensely strong business, and it’s wonderful to have it.

WARREN BUFFETT: We own about 11 percent of American Express. So when there are 300 billion of charges, we’re getting 33 billion of those for the account of Berkshire, and it’s growing at a pretty good clip. The first quarter, it grew very substantially in both cardholders and charges. My guess is that our 11 percent becomes more valuable over time. It’s hard to think of anything that would destroy it.

CHARLIE MUNGER: The business is very interesting. They made a deal to put American Express cards into Costco. I think that is a very intelligent thing for American Express to have done. And it’s a very aggressive place that does a lot of interesting things.

WARREN BUFFETT: Charlie is a director of Costco, so he’s a — Costco is an absolutely fabulous organization. We should have owned a lot of Costco over the years and we — I blew it. Charlie was for it, but I blew it.

11. “We don’t think in terms of absolutes”

WARREN BUFFETT: OK, we’ll go to number 1 again.

AUDIENCE MEMBER: My name is Jin Xi Wan (PH) from San Diego, California. First, I would thank both of you. My question is also about growth and value. If you look at the business in this country, most of them, if not all of them, are cyclical to various degrees. Certain businesses are, of course, more cyclical than other businesses. So when you buy a business or make a investment in a new stock, do you ever cut off — like if a business lose money in a downturn, we are not going to buy. If its earning begin to decline or downturn, we’re not going to buy. But if the earning growth slows down, then we can look at a business and make an investment. So do you have a cutoff, in terms of this cyclical factor? And also, when you buy a business — in terms of the current P/E ratio, also do you have a cutoff? Let’s say, if it’s P/E ratio is more than 15, 16, we are not going to buy the business, no matter how much the earning will grow in the future. So basically, it’s about the growth and the value.

WARREN BUFFETT: Yeah, we have — to answer your question directly — we have no cutoff, whatsoever. We don’t think in terms of absolutes that way because, again, we are trying to think of how many birds are in the bush. And sometimes the number that are currently being shown could be negative. One of the best buys we ever made was in 1976 when we bought a significant percentage — what became through repurchases — 50 percent of GEICO at a time when the company was losing a lot of money and was destined to lose a lot of money in the immediate future. And, you know, the fact they were losing money was not lost on us, but we thought we saw a future there that was significantly different than the current situation. So it would not bother us in the least to buy into a business that currently was losing money for some reason that we understood, and where we thought that the future was going to be significantly different. Similarly, if a business is making some money — there’s no P/E ratio that we have in mind as being a cutoff point at all.

There are businesses — I mean, you could have some business making a sliver of money on which you would pay a very, very high P/E ratio. But it’s basically — We look at all of these as businesses. We’re, for example, in — at Executive Jet — NetJets — we’re losing money in Europe. Well, we expect to lose money in Europe getting established. So does that mean it’s a bad thing to buy a hundred percent of, if you own the whole company, or three percent of, if Executive Jet was a public company and you were buying into? No. I mean, it — There are all kinds of decisions that involve the future looking different, in some important way, than the present. Most of our decisions relate to things where we expect the future not to change much. But you get this — well, American Express was a good example. And when we bought it in 1964, a fellow named Tino DeAngelis had caused them incredible trouble. You know, it was one of those decisions that looked, for a time, as if it could break the company.

So, we knew — if you’d been charging for what Tino had stolen from the company against the income account that year, or the legal costs that were going to be attached to it, you were looking at a significant loss. But the question was, what was American Express going to look like 10 or 20 years later? And we felt very good about that. So there are no arbitrary cutoff points. But there is that focus on, how much cash will this business deliver, you know, between now and Kingdom Come? Now as a practical matter, if you estimate it for 20 years or so, the terminal values get less important. So — but you do want to have, in your mind, a stream of cash that will be thrown off over, say, a 20-year period, that makes sense discounted at a proper interest rate, compared to what you’re paying today. And that’s what investment’s all about. Charlie?

CHARLIE MUNGER: Yeah, the answer is almost the exact reverse of what you were pointing toward. A business with something glorious underneath, disguised by terrible numbers that cause cutoff points in other people’s minds, is ideal for us, if we can figure it out.

WARREN BUFFETT: And we’ve had a couple of those in our history that have made us a lot of money. I mean, we don’t want to wish anybody ill, but —

CHARLIE MUNGER: Oh, I wouldn’t go that far —

WARREN BUFFETT: OK, well Charlie — (Laughter) I think he’s speaking for both of us. (Laughter)

12. Speculate a bit in tech? Not if we don’t understand it

WARREN BUFFETT: OK, we’ll move on to number 2.

AUDIENCE MEMBER: Mr. Buffett, I would like to start my question by giving you and Charlie 10 lashes with a wet noodle, not because of 1999 and what happened to your net worth or our net worth, but because you have spoiled your shareholders into expecting 25 percent growth every year, since 1965. And then comes the bad, bad 199[9] and it hits all of us. But by my calculations, you personally, Mr. Buffett, have lost over 10 billion dollar — not million — billion dollars during 1999. So I don’t think we should get too mad at you because probably all of us have, at this point in our life, increased our net worth and made a lot of money. So you don’t get a wet noodle today. (Laughter)

WARREN BUFFETT: Hmm.

AUDIENCE MEMBER: And the shareholders have, I’m sure, lost thousands. And some have lost millions of dollars during the year 1999. Now after reading your biography in November of 1998 — unfortunately I didn’t know about you earlier — I started investing on November the 24th of ’98. And of course, I’m a poor little investor, so I bought your B stock at 23.08. Then, because the market dropped, I bought some more on the 4th of December at 22.29. And then I bought, on January the 24th of 2000 at 16.89, so I do believe in dollar-cost averaging and I’ve been doing that for probably 30 years of my life. My January investment, I’m happy to say, is up 15 percent, so the worst may be over. Now, I read your annual report and I want to compliment you that that is the easiest and most entertaining annual report I think created in the whole world. And your — and I hope you continue that kind of a report. (Applause)

WARREN BUFFETT: Thank you.

VOICE: (Inaudible) Your name and —

AUDIENCE MEMBER: Oh!

VOICE: — where you’re from

AUDIENCE MEMBER: I’m sorry. I was just told that I should have said who I am. My name is Gaylord Hanson and I’m from Santa Barbara, California — where investor Munger puts his big, multimillion-dollar boat in the water. (Laughter)

WARREN BUFFETT: I’m not going to make any comment on that.

AUDIENCE MEMBER: Please don’t. (Laughter) Now, with technology, computers, electronics, and software transforming our entire world — not just here — the world, I must admit that I personally invested in four technology computer software and aggressive growth mutual funds and made up all of my 1999 losses on Berkshire Hathaway. (Laughter and applause) Are we asking too much as shareholders of Berkshire Hathaway for you men to put your brains to work and possibly speculate a little bit, maybe 10 percent of our money, into the only play in town, which seems to be technology, electronic? And I read your report, and I understand a lot of your reasoning that it’s difficult — and it is difficult — to project earnings of a lot — people are going to be a little bankrupt. Are they going to out of business? But isn’t there enough left in your brainpower to maybe pick a few and — (laughter) — see what’s going on? Because I made over a hundred percent profit in 1999 on my aggressive position in the technology field, so that’s —

WARREN BUFFETT: OK, well —

AUDIENCE MEMBER: — my question.

WARREN BUFFETT: The answer is we will never buy anything we don’t think we understand. And our definition of understanding is thinking that we have a reasonable probability of being able to asses where the business will be in 10 years. But, you know, we’d be delighted — we have a man here who’s done very well. And if he has any business cards, you know, you could always invest with him, and — (Laughter) And we’d welcome — you know — you can — we’ll give you a booth in our exhibitor’s section. And anybody that wants to do that is perfectly — obviously — free to do it with you or through any other — through anybody else that they select. Now, you have a whole bunch of people out there that say they can do this. And maybe they can and maybe they can’t and maybe you can spot which ones can and can’t. The only way we know how to make money is to try and evaluate businesses. And if we can’t evaluate a carbon steel company, we don’t buy it.

It doesn’t mean it isn’t a good buy. It doesn’t mean it isn’t selling for a fraction of its worth. It just means that we don’t know how to evaluate it. If we can’t evaluate the sensibilities of putting in a chemical plant or something in Brazil, we don’t do it. If somebody else knows how to do it, you know, more power to them. There are all kinds of people that know how to make money in ways that we don’t. But, you know, it’s a free world and everybody can invest in those sort of things. But they would be making a mistake, a big mistake, to do it through us. I mean, why pick a couple of guys like Charlie and me to do something like that with — when you can pick all kinds of other people that say they know how to do it. I would say this. Incidentally, you mentioned a point earlier, which is how the popular press tends to think of things. But we don’t consider ourselves — Charlie and I don’t — richer or poorer based on what the stock does.

We do feel richer or poorer based on what the business does. So we look at the business as to how much we’re worth. And we do not look at the stock price, because the stock price doesn’t mean a thing to us. I mean, it doesn’t for a variety of reasons, but beyond that, imagine trying to sell hundreds of thousands of shares at the stock price. We can always sell the business — we’re not going to do it — but we could always sell it for what the business is worth. We can’t sell our stock for what the — necessarily — what the stock price is. So we look at the business, entirely, in terms of evaluating our net worth. We figure our net worth went up very, very, slightly — very slightly — in 1999. And we would figure that no matter what the stock was selling for — it just doesn’t make any difference — because we do look at the businesses. We really look at it as if there wasn’t any quote on the stock. Because we don’t know what the stock is going to do.

If we do — if the business gets worth more at a reasonable rate, the stock will follow, over time. But it won’t necessarily follow week by week, or month by month, or year by year. We had a lousy year in 1999, but the stock price did not calibrate with that in any perfect, or close to perfect, manner. And we’ve had good years other times, when the stock price is way overpriced or overdescribed what happened during the year. So we really measure all the time by the business. We think of it as a private business, basically, for which there’s a quotation. And if it’s handy to use that quotation, either in buying more stock or something of the sort, we may do it. But it does not govern our ideas of value. Charlie?

CHARLIE MUNGER: Yeah. Generally, I would say that if you have a lot of lovely wealth in a form that makes you comfortable, and somebody down the street has found a way to make money a lot faster, in a way you don’t understand, you should not be made miserable by that process. There are worse things in life than being left behind in possession of a lot of lovely money. I mean — (Laughter)

WARREN BUFFETT: Would you want to name a couple? (Laughter) No, Charlie made — I mean, when farmland was — went from — farmland probably tripled here in the late ’70s, without any real change in yields per acre or the price of the commodity. You know, are we going to sit around and stew because, you know, they — we didn’t buy farmland at the start? You know, are we going to stew because all kinds of stuff — uranium stocks in the ’50s — or you can go back — all kinds of things that have — the conglomerates in the late ’60s, the leasing companies, I mean, you can just go down the line. And it just doesn’t make any — we’re not in that game. We would know how to create a chain letter, believe me. I mean, we’ve seen it down some many times. You know, we know the game. But it just isn’t our game. Charlie? (Applause)

13. Currencies are “important but not knowable”

WARREN BUFFETT: Number 3?

AUDIENCE MEMBER: Good morning Mr. Buffett, Mr. Munger. My name is Stacey Braverman (PH). I’m 15 years old, and I’m from South Setauket, New York. It was very nice meeting you Mr. Buffett, yesterday.

WARREN BUFFETT: Thank you.

AUDIENCE MEMBER: I especially appreciated your internet stock tips. (Laughter)

WARREN BUFFETT: (Laughs) Yeah, keep it — keep it to yourself now, Stacey. That’s our deal. (Laughs)

AUDIENCE MEMBER: I bought the B shares two years ago, when I decided that I needed to save some money for college. When the share price dipped below 1,500 I decided to investigate correspondence courses. (Laughter)

WARREN BUFFETT: Maybe you can get a scholarship. (Laughs)

AUDIENCE MEMBER: So I’m glad to see that things are back on track now. My question is, a lot of the companies that you invest in, like Coca-Cola and Gillette, seem to do better when the dollar is weak and interest rates are falling. That seems to be the opposite of what’s happening now. So how is Berkshire positioning itself to take advantage of the current economic position, with that assessment in mind?

WARREN BUFFETT: Yeah, well, that’s a good question. But if we thought we knew what the dollar was going to do, or interest rates were going to do, we would — we won’t do it — but we would just engage in transactions involving those commodities, in effect, or futures directly. In other words, it would not be — if we thought that the dollar was going to weaken dramatically — and we won’t get those kind of thoughts — but if we did, you know, we would buy other currencies. And it would be — it might benefit Coke, in dollar terms, if that happened. But it would be so much more efficient, directly, to pursue a currency play or an interest rate play than an indirect way through companies that have big international exposure. We would probably do it directly. We don’t really think much about that. Because — just take currency. If you look at what the yen has traded at, you know over the last — well, since World War II, you know. From — what was it? Three-sixty down to — what? Seventy-some, Charlie? At lowest?

CHARLIE MUNGER: Uh-huh.

WARREN BUFFETT: And, you know, back up to 140-some. And now, I don’t know, 105, or wherever it may be. I mean, those moves are huge. But, in the end, we’re really more interested in whether more people in Japan are going to drink Coca-Cola. And, over time, we’re better at predicting that than we are at predicting what the yen will do. And if Coca-Cola satisfies people’s needs — liquid needs — for more and more people, we will probably get a reasonable percentage of their purchasing power of those people around the world for their right to drink Coca-Cola, or for shaving, or whatever it may be. So, if the world’s standard of living improves, bit by bit over time, in an irregular fashion, and we supply something the world wants, we will get our share in dollars, eventually. And what it — quarter-to-quarter or year-to-year — how that moves around, because of currency moves, really doesn’t make any difference to us.

It makes a difference to reported earnings in that quarter or — but in terms of where CocaCola’s going to be 10 or 20 years from now, it would be a big mistake, I think, to focus on currency moves as opposed to focusing on the product itself. And Japan offers a good example of that because you had this — I mean, you really had a move from 360, or whatever it was, to the high 70s or thereabouts. I mean, that is an incredible move in currency, and it can overshadow in the short run, even, what’s happening in the business. But long-range, what’s really made Coca-Cola strong in Japan is the fact that the Japanese people have accepted their products in a big way. And Coca-Cola’s built this tremendous, for example, vending machine presence. And the Japanese market is very different than all the rest of the markets in the world, virtually, in that such a high percentage flows through vending machines. And my memory is that, you know, we may have something like 900-and-some thousand, out of something over 2 million, vending machines in the country. So we’ve got this tremendously dominant position.

It’s a little like billboards might be in this country. Plus, we have this terrific product, Georgia Coffee, which is huge over there. And that’s the sort of thing we focus on, because that’s something we understand. We don’t understand what currencies are going to do week-to-week or month-to-month or year-to-year. And we always try to figure on what — focus on what’s knowable and what’s important. Now, currency might be important, but we don’t think it’s knowable. Other things are unimportant, but knowable. But what really counts is what’s knowable and important. And what’s knowable and important about Coca-Cola is the fact that more and more people are going to consume soft drinks around the world, and have been doing so year after year after year, and that Coca-Cola’s going to gain share, and that the product is extraordinarily inexpensive relative to the pleasure it brings to people.

Coca-Cola — in the ’30s, when I was kid, I bought, you know, for — six for a quarter and sold them for a nickel each. That was a 6 1/2 ounce bottle for a nickel, at Coke. And you can buy a 12-ounce can now at — pick a supermarket sale — for not much more than twice per ounce what it was selling for in the ’30s. You won’t find many products where that kind of value proposition has developed over the years. So that’s the kind of thing we focus on. And interest rates and foreign exchange rates, important as they may be in the short term, really are not going to determine whether we get rich over time. The best time to buy stocks, actually was, in recent years, you know, has been when interest rates were sky high and it looked like a very safe thing to do to put your money into Treasury bills at — well, actually the primary got up to 21 1/2 percent — but you could put out money at huge rates in the early ’80s. And, as attractive as that appeared, it was exactly the wrong thing to be doing.

It was better to be buying equities at that time, because when interest rates changed, their values changed even much more. Charlie?

CHARLIE MUNGER: Yeah, we have a willful agnosticism on all kinds of things. And that makes us concentrate on certain other things. This is a very good way to think, if you’re as lazy as we are. (Laughter)

14. We’ll “probably” own M&T Bank stock 10 years from now

WARREN BUFFETT: We’ll go to 4, please.

AUDIENCE MEMBER: Jerry Zucker, Los Angeles, California. Good morning, boss. (Laughter) Calling your attention to the annual report and major investments, I’d appreciate your comments on two companies. Number one, M&T Bank, a new name to that list, but not exactly a household name, at least on the West Coast. And company number two, definitely a household name, but missing from the list this year, the Walt Disney Corporation.

WARREN BUFFETT: Well, we don’t comment much on our holdings, particularly as to purchases or sales, but we do have the CEO — longtime CEO — of M&T here today, Bob Wilmers. Bob, would you stand up? He should be up here somewhere. There he is. (Applause) Bob is a terrific businessman, a terrific banker, and a terrific citizen. I’ve known him a long time. A good friend of Stan Lipsey, our publisher in Buffalo. Bob runs the kind of a bank that allows Charlie and me to sleep very comfortably. Someone once said there are more banks than bankers, which is something worth thinking about a little bit. But believe me, Bob is a banker and he’s done a lot for Buffalo. And he runs — he’s got a — he has a very big ownership position, which he achieved, at least in very large part, through purchase with his own money, as opposed to having options. He’s got one of the largest ownership positions, probably, among the hundred largest banks in the United States.

And it’s just a very attractive business for us to be in, and we’re very comfortable with it. And 10 years from now, Bob will be here, and I hope I’m here. We will — we’ll probably own M&T. The Disney Company, our ownership in that fell below the threshold level which we used, although we had ownership. And we think Disney is a terrific business. Michael Eisner’s done a great job there. We have — as we put in the annual report — we have mildly reduced equities as prices began to — generally — began to get more and more full. We do not think the general ownership of equities is going to be very exciting over the next 10 or 15 years, so we would like to buy businesses. We bought a few last year. We had this one we announced last week in the insurance field. We got another small acquisition where we’ve got an agreement with somebody. It’s very small. But we would love it if those were 10 times that size or 20 times that size, because — you will see more of that, relative to marketable securities, as we go along. Charlie?

CHARLIE MUNGER: Yeah, regarding equities generally, I think that Fortune article, which was sent out to the Berkshire shareholders this year, should be absolutely must-reading for everybody. In fact, it would be a good thing to read two or three times. The ideas there sound so simple, that — you know, people have the theory that they must understand it. But I think the world is more complicated than that. I think we are in for reduced expectations eventually, with respect to the kind of returns people have had from investing in stocks.

WARREN BUFFETT: You want to offer any thoughts as to what — that might — what the corollary might be?

CHARLIE MUNGER: Well, I think if you have very unreasonable expectations of life, it makes life much more miserable. Much better to get your expectations within reason. It’s much easier to reduce expectations to some reasonable level than it is to get superhuman achievements.

WARREN BUFFETT: That’s why my kids were almost delirious when they heard that announcement I was going to give them $300 each and they — (Laughter) How to be — do you want to be a zillionaire, or whatever it was. Incidentally, that was terrific of Regis Philbin to do something like that. I mean, all of those appearances [in the video shown to shareholders] are nonpaid, I can assure you. (Laughter) And those people are good — very, very, good sports. And I thank them.

15. We’ll “never have a conventional dividend policy”

WARREN BUFFETT: OK, we’ll go to zone 5.

AUDIENCE MEMBER: My name is Monty Leffoltz (PH) from Omaha, Nebraska. I have a two-part question. What is Berkshire’s philosophy on paying dividends and under what circumstances would Berkshire pay a dividend in the future?

WARREN BUFFETT: Well, that’s a good question. We paid a dividend in — what, 1969, Charlie? At 10 cents a share. The — I can’t remember it, but it’s in the records. We would pay — we would be very likely to pay either very large dividends or none at all, because our test is whether we think we can use money at a rate — in a way — that it creates more than a dollar of market value for every dollar we retain. Obviously, if we can keep a dollar and it becomes, on a present-value basis, worth more than a dollar, it’s foolish to pay it out. Forget all about taxes. Assume it’s a tax-free society. We would have exactly the same dividend policy up to this point, whether there was any tax on dividends, capital gains, or anything else, or whether we were entirely tax-free.

Because we have retained money because, to date, we have felt that if we keep a dollar and use it in buying other businesses, or whatever it may be, that it becomes worth more than a dollar on a present-value basis — I mean, not that it’s going to be worth a dollar-ten four years from now — but that it’s worth more than a dollar when we look at what it’ll be four years from now. That’s subjective, but any given decision like that is subjective. Over time, you get an objective test as whether that’s met by — whether we do indeed create more value than — each dollar retained earnings, we create an extra dollar-plus of value. If that changed — and it could change — then we would give the money to the shareholders. And it might be done through repurchases or it might be done through dividends, but we would — there’s no reason to keep a dollar in the business that’s worth 90 cents if you keep it in the business. And there are companies that do that, but they don’t — they’re not necessarily intentionally doing it.

They may have higher aspirations as they go along, but they’re not realized. We, I think, would be fairly objective about trying to figure out whether we are indeed creating value or destroying value by retaining earnings. We would never have a conventional dividend policy. I mean, the idea of paying out 20 percent of your earnings, or 10 percent, or 30 percent of earnings in dividends strikes us as nuts. I mean, you may get yourself in a position where you have to do it because you build these expectations in people’s minds, but it is — there is no logic to it whatsoever. The logic is basic. If you create more than a dollar value for a dollar retained, why in the world would you pay it out, because the people who want to get that dollar as a dividend can instead get a dollar-ten by selling the stock for — or whatever it may be — a dollar-twenty— for the value that was maintained — or retained. So, that — it’s a very simple dividend philosophy, and one, I think, that’s in one of the past annual reports. We explain the logic of it.

And I see no — nothing that would change, in terms of the principles of it. Evaluating whether that’s the case — I mean, obviously we aren’t going to make a decision every week based on whether we can employ money that week at a higher rate of return, or every month. But in terms of a reasonable expectancy over a couple-year period, whether we think we can use retained earnings advantageously, that’s our yardstick. Charlie?

CHARLIE MUNGER: Yeah, what’s interesting about what Warren is saying about logical dividend policy is that if you went to all the leading business schools of the United States, all the leading economics departments, all the professors of corporate finance — this wasn’t — wouldn’t be the way they teach the subject. In other words, we’re basically saying we’re right and all the rest of academia is wrong. (Laughter)

WARREN BUFFETT: We love it when we do that. (Laughter)

CHARLIE MUNGER: Yeah, here again, we’re very much out of step with the conventions of the world. When I read annual reports, and I read a lot of them, I’m very frequently irritated by the presence of things that are totally absent from the Berkshire Hathaway annual report. I think promising people free medical care forever, between age 60 and the grave, and maybe for a younger spouse after the grave, but the first one, regardless of what’s invented and regardless of what it cost, I don’t see how anybody who cared about the shareholders would be making promises like that. There’s a lot of insanity in conventional corporate conduct on the pay front. And — but if convention determined what was sane and what was insane, we’re the oddballs. I mean, we’re the unusual example.

WARREN BUFFETT: I think per — and I think it’s very subconscious, but I think, sometimes, that the desires of the top person to get an outrageous amount gets pyramided through the organization. Because if they’re going to have some scheme that rewards them based on a lottery ticket, they feel they have to give lottery tickets to everybody else, although on a much-reduced scale. And they really do. I mean, it’s just — it becomes accepted in the course. And then you hire consultants who come around and say, “Well, you’re getting more lottery tickets at someplace else. And we’ve got some added new schemes.” It becomes very, very reinforcing. But what has happened at the top level is really unbelievable. I mean, it — if an executive said to his company, “I want an option on 300 — just for working here — I want an option on $300 million worth of S&P futures for the next 10 years,” you know, people would regard that as outrageous. They’d say, “What have you got to do with that?”

But in effect, if they get one on their own stock and it goes up based on the fact the S&P appreciates over 10 years, they think that that’s perfectly acceptable to have that kind of a ride. So I would say that, you know, there’s been a lot of talk about the huge gap between, you know — that exists in pay. But it seems to me that the primary gap that is eating at American CEOs is the gap between the rich and the super-rich. That seems to be motivating the adoption of many plans. It’s really — it’s gotten out of hand, but it isn’t going to change. The CEO has his hand on the switch as a practical matter. I know people, and I’ve been on them myself, but on comp committees. And as a practical matter, you don’t stand a chance.

CHARLIE MUNGER: Yeah, a lot of the corporate compensation plans of the modern era worked just about the way things would work for a farmer or if you put a rat colony in the grainery. It — (Laughter)

WARREN BUFFETT: Put him down as undecided. (Laughter) Good to see you, Martin.

WARREN BUFFETT: OK, let’s go to 8.

AUDIENCE MEMBER: Good morning Mr. Buffett and Mr. Munger. My name is Ram Tarecard (PH) from Sugar Land, Texas. I’ve been a Berkshire shareholder since 1987 and always battling with the idea of what really is the intrinsic value for the company. We have seen that, over time, a change in book value is a big indicator of the change in intrinsic value of Berkshire. Although in absolute terms, you have said again and again, that intrinsic value far exceeds book value. In calculating the book value of Berkshire, our partly-owned businesses, like Coke and Gillette, are valued at their market value. This component of book value fluctuates, often irrationally, depending on the mood of the market. Do you think that using a look-through book value, just like you used look-through earnings, is a superior measure for tracking changes in intrinsic value? In fact, I had written a letter to you last August and I was very pleased to get a response from you personally saying that this approach makes sense. My question is, does this approach really give you a better measure for tracking intrinsic value? And if so, would you consider publishing it in the annual report? Thank you.

WARREN BUFFETT: Yeah, thanks for the question. I would say that — I’m not sure how you phrased it when you wrote me and how I phrased it going back, but look-through book value would not mean much, actually. The very best businesses, the really wonderful businesses, require no book value. They — and we are — we want to buy businesses, really, that will deliver more and more cash and not need to retain cash, which is what builds up book value over time. Admittedly, the prices of marketable securities, at any given time, are not a great indication of their intrinsic value. They are far better, though, than the book value of those companies in indicating intrinsic value. Berkshire’s book — Berkshire’s intrinsic value, in a very general way, and trends in it, are better reflected in book value than is the case at a very high percentage of companies. It’s still a very — it’s not a great proxy. It’s the best — it’s a proxy that is useful in terms of direction, in terms of degree, in a general way over time.

But it’s not a substitute for intrinsic value. It — in our case, when we started with Berkshire, intrinsic value was below book value. Our company was not worth book value in early 1965. You could not have sold the assets for that price that they were carried on the books, you could not have — no one could make a calculation, in terms of future cash flows that would indicate that those assets were worth their carrying value. Now it is true that our businesses are worth a great deal more than book value. And that’s occurred gradually over time. So obviously, there are a number of years when our intrinsic value grew greater than our book value to get where we are today. Book value is not a bad starting point in the case of Berkshire. It’s far from the finishing point. It’s no starting point at all of any kind in — you know, whether it’s The Washington Post or Coca-Cola or Gillette. It’s a factor we ignore. We do look at what a company is able to earn on invested assets and what it can earn on incremental invested assets. But the book value, we do not give a thought to. Charlie?

CHARLIE MUNGER: Well, I think that’s obviously correct. (Laughter)

WARREN BUFFETT: Oh. He’ll come back next year.

WARREN BUFFETT: Number 1. (Laughter)

AUDIENCE MEMBER: Hello, gentleman. My name’s Dan Sheehan. I’m from Toronto, Canada. First of all, I’d like to thank you for this weekend. It’s become more and more important to me as it’s become more and more difficult to find a rational discussion about the stock market. And this weekend really is a breath of fresh air for most of us, I think. One of the places I refer to a lot is Benjamin Graham. And what worries me now is what he referred to — is a period in 1929, in the early ’30s — as a lab experiment that — where normal intrinsic values and margins of safety broke down, or seemed to, anyway. And I wonder how much you think that might happen now or in the next few years, and how much you worry about that with the investments you’re making.

WARREN BUFFETT: Well, we generally believe you can just see anything in markets. I mean, just extraordinary what happens in markets over time. It gets sorted out, you know, eventually. But, I mean, we have seen companies sell for tens of billion dollars that are worthless. And at times, we have seen things sell for 20 percent — a number of things, not hard to find, perfectly decent running them — sell for literally 20 percent or 25 percent of what they were worth. So we have seen and will continue to see everything. It’s just the nature of markets. They produce wild, wild things over time. And the trick is, occasionally, to take advantage of one of those wild things and not to get carried away when other wild things happen. Because the wild things create their own truth for a while and you have to — you know, you — that’s the reason they’re happening, and people are getting pleasant experiences and all that. You’ll see everything if you’re around markets for a reasonable period of time. We don’t see any great cases of dramatic undervaluation by this market.

So it isn’t like we’re seeing — because there’s this — perhaps this speculative mania in a particular area of the market, we do not see that creating incredible undervaluation other places. What’s happening there may lead to undervaluation, you know, a few years from now. Or it may not, I don’t know that, but we’re — It isn’t like you can find things that are worth double or thereabouts what you’re paying because, frankly, there’s so much money sloshing around that if you found such a thing, it would be very likely corrected by some buyout types. I mean, we would love to find businesses that are selling for half of what they’re intrinsically worth. We don’t find that. We do find a lot of cases where we think the evaluations on the high side are just — are unbelievable. We have been in periods in the past where we felt almost everything was being given away, too. So you’ll get those extremes.

Most of the time the market’s in a position where there’s a little of both, but every now and then, it gets into a position where there’s a lot of one or the other. And we would — you know, we would love it if we could find a lot of reasonable-sized companies that were selling at what we thought were half of the intrinsic value. We’re not finding them. Charlie?

CHARLIE MUNGER: Well, I do think that the present time is a very unusual period. It’s hard to think of a time when residential real estate, and common stocks, and so on, rose so rapidly in price and there was so much easy money floating around. I mean, this is a very unusual period.

WARREN BUFFETT: What’s fascinating — and I’m sure you’ve thought of it — is that you can now have a business — we saw a few of them, you know, earlier this year we’ll say — that might’ve been selling for $10 billion where the business itself could not have borrowed, probably, a hundred million dollars in debt, with an equity evaluation of 10 billion. But the business itself would not — as a private business — would not have been able to borrow a hundred million. But the owners of that business, because it’s public, can borrow many billions of dollars on their little pieces of paper, because they have this market valuation. If it’s a private business, the company itself couldn’t borrow one-twentieth or so of what individuals could borrow. That’s happened, to a degree, before. But this has probably been as extreme as anything that’s happened, probably, including the ’20s. That doesn’t mean there’s a parallel to it, but it’s been pretty extreme. Charlie?

CHARLIE MUNGER: I think it probably is the most extreme that has happened in modern capitalism. In my lifetime, I would say the ’30s were the — it created the worst recession in the English-speaking world in 600 years. And it was very extreme. You could buy a “all-you-can-eat” in Omaha through the ’30s for a quarter from Henderson’s Cafeteria. And now we’re seeing the other face of what capitalism can do. And this is almost as extreme as the ’30s were, but in a different direction. It’s zero unemployment, rampant speculation, et cetera, et cetera. It’s an amazing period.

WARREN BUFFETT: That does not make it easy to predict, however, the outcome. It says to us, though, certain things we want to stay away from. I mean, basically that’s — it’s precautionary to us. It does not spell opportunity. Although, there’s no question that the — in the last year, the ability to monetize shareholder ignorance has never been exceeded, I think. Wouldn’t you say so, Charlie? (Laughter)

WARREN BUFFETT: OK, number 2.

AUDIENCE MEMBER: Good morning, gentleman. David Winters, Mountain Lakes, New Jersey. Thanks again for Berkshire Fest 2000 and having it on Saturday, for those of us who tap dance to work on Monday. (Buffett laughs) You know, over the previous 30 years or so, Berkshire has been a tactical participant in the insurance business. With the acquisition of Gen Re and the broadening of GEICO’s scope, the company’s been transformed into a mainstream activity. How will this transformation result in growth and low cost float over time? I.e., how do you avoid becoming average? And to follow on with the very perceptive 10-year-old from California’s question, will Berkshire’s newspaper interest be able to make the successful transformation to the new electronic world, especially the unique content of the Washington Post? Thank you.

WARREN BUFFETT: Those are both good questions. I think, to answer your second one, I think the Buffalo News will do just as well as, if you take the top 50 papers in the country, in making a transition. How well the top 50 will do is really an open question. And — but there is — you know, the industry factors will, in my view, just overwhelm any specific strategy. Because any strategy is — It’s so easy to copy in the internet. That’s one of the problems of the internet. It’s one of the problems of capitalism. I mean, if you open a restaurant that’s successful, somebody’s going to come in and figure out what your menu is and how — you know, the whole thing. And then they’re going to try to do it in a little bit better location, or at a lower price, or whatever. That’s what capitalism’s all about and it’s terrific for consumers. The internet accentuates that process. I mean, it gives everybody in the world real estate. You know, there are no prime locations to speak of.

I mean, I can give you the argument for how you develop one and all of that, but it really changes the world in a big way. You know, if you were at 16th and Farnam in Omaha in the ’20s, with Woolworth — that’s the place where the streetcar tracks crossed, you know, and a whole bunch of them were going north/south there and east/west — and there wasn’t any better real estate in town. I’m not sure if that’s worth as much now in nominal dollars as it was in the 1920s. But — and that looked permanent, incidentally. Who was going to rip up the streetcar tracks or — in 1910 or whenever it was? So now, you rip up the tracks every day. You know, and so the fluidity is incredible, in terms of moving economic resources around compared to what it was. The newspaper industry is going to try and figure out how to be a very important information source in a new medium. And it may solve that problem, to a degree, and still have lousy economics.

That’s — you know, that’s — unfortunately, the newspaper industry’s always — Historically, the way the industry structure worked, once you got into the majority of households and everything, somebody else could bring out a way better paper, but it wasn’t going to go any place against you. I mean, you had such structural advantages that you could, you know — you could put your idiot nephew in and he would do fine — wonderfully — you know. And nothing could happen to him except when this different medium came along. Now you can put in a genius and whether that will make any difference is an open question. I would say that it’s quite doubtful. If you own a newspaper, you want to do everything that you can think of and, fortunately, everything anybody else can think of, because you can copy them so fast. And it may work in terms of product and it may not work in terms of product. And it may work in terms of product and still not work in terms of economics very well. And I don’t know the answer to that question. I know that we will play it out — at the Buffalo News, for example — as strongly as we can.

I don’t think other people are going to get way better results than we are. I don’t know what the other people are — what their results are going to be and how it will work. It would be crazy to sit on the sidelines and simply ignore what’s going on. So we will do our darnedest to have good economics when this is all through. But nobody knows how it’s going to play out, in my view.

WARREN BUFFETT: The question about insurance, about whether we become average — average is not going to be good insurance. Average is going be terrible in insurance over time. It’s not — It’s a commodity businesss, in many respects. And if you are average, you’re going to have a very poor business. You may limp along because you got a lot of capital that’s supporting the lousy business, but it’s not — it won’t be a good business, per se. But I think in GEICO, and in General Re, and some — and our other operations as well — we do not have average businesses, and there is nothing about the way the industry is going that would force us or lead us to have average operations. I mean, we have special things we bring to the party in both cases I’ve named, and actually, in other cases as well. We have things we bring to the party that should make us considerably better than average.

It’ll show more in some periods than others, and it’ll be different in the way it is applied at GEICO or at General Re or at National Indemnity’s reinsurance operation. But none of those, in my view, will be average. But average — and there will be a lot of average, by definition — average is not going to be good. The other problem about it is average is not going to go away, either. So that is an anchoring effect, to some extent, on what even the skillful operator can achieve. I think insurance will be a very good business for us over time. Charlie?

CHARLIE MUNGER: Yeah. Every once in a while, we have a business sort of die under us. Trading stamps is now off 99 3/4 percent from its peak volume, and we were able to do nothing to prevent that except wring all the money out and multiply it by about 100. (Laughter)

WARREN BUFFETT: We actually did about, what, 120 million, in the late ’60s, per year in trading stamps, far more dominant in our area than S&H was nationally. And we have — by skillful management, Charlie and my constant attention to detail — have taken that business from 120 million a year down to, what, about 300,000 a year or so?

CHARLIE MUNGER: Oh, way less than that. (Laughter)

WARREN BUFFETT: We thought of having the sales chart here and turning it upside down to impress you, but it wouldn’t have worked very well.

CHARLIE MUNGER: I think it’s the nature of things that some businesses die. It’s also in the nature of things that, in some cases, you shouldn’t fight it. There is no logical answer, in some cases, except to wring the money out and go elsewhere.

WARREN BUFFETT: Yeah, and that’s very tough for managements, too. In fact, they almost never face up to that. It’s very, very rare. And it’s logical that it’d be rare. In a private business, you can understand why people face up to it. In a public company, if you take the equation of the manager, he or she may be far better off ignoring that reality than accepting it.

WARREN BUFFETT: Let’s go to number 3.

AUDIENCE MEMBER: Good morning, gentleman. My name’s Marc Rabinov from Melbourne, Australia. You’ve emphasized the importance of the moat around a business, or the sustainable competitive advantage. My question really relates to learning more about that. Professor Michael Porter at Harvard has made a detailed study of this. Did you find his work useful and can you recommend any other sources of information on this?

WARREN BUFFETT: Yeah, I’ve never really read Porter, although I’ve read enough about him to know that we think alike, in a general way. So I can’t refer you to specific books or anything. But my guess is that what he writes would be very useful for an investor to read. I mean, I — again, I’ve never — I’ve just seen him referred to in some commentary. But I think he talks about durable or sustainable competitive advantage as being the core of any business. And I can tell you that that is exactly the way we think. I mean, that — in the end, you — if you are evaluating a business year-to-year, you want to — the number one question you want to ask yourself is whether the — could the competitive advantage have been made stronger and more durable before — and that’s more important than the P&L for a given year. So I would suggest that you read anything that you find that’s helpful or — Actually, the best way to do it is study the people that have achieved that and ask yourself how they did it and why they did it.

I mean, why is it that in razor blades, which could — I mean, everybody grows up in business school hearing that as a great example of a product that’s very profitable and why — With it obvious that there’s going to be no reduction in demand for the next hundred years for the product, why are there no new entrants into the field? What it is that gives you that moat around the razor blade business? Normally, if you’ve got a profitable business, you know, a dozen people want to go into it. If you’ve got a dress shop here in town and it looks like it’s doing well, you know, a couple of other people are going to want to open up a shop next door to it. And here’s a worldwide business, nothing can go wrong with the demand, to speak of. And yet, people don’t go into it. So, we like to ask ourselves questions like that. We like to ourselves, “Why was State Farm successful, you know, against people that had incredible agency plants and lots of capital?”

And here’s some farmer out in Bloomington, Illinois named George Mecherle , you know, who’s in his forties. And he sets up a company that defies capitalistic imperatives. I mean, it has no stock, it has no stock options, it has no big rewards. It’s, you know, it’s kind of half socialistic. And all it does is take 25 percent of the market away from all of these companies that had all these characteristics. We believe you should study things like that. We think you should study things like Mrs. B out at the Nebraska Furniture Mart, who takes $500 and turns it, you know, over time, into the largest home furnishing store in the world. There has to be some lessons in things like that. What gives you that kind of a result and that kind of competitive advantage over time? And that is the key to investing. I mean, if you can spot that — particularly if you can spot it when others don’t spot it so well — you’re on the — you know, you will do very well. And we focus on that. Charlie?

CHARLIE MUNGER: Yeah, it — these factors — every business tries to turn this year’s success into next year’s greater success. And they all use pretty much every advantage they have in every direction from this year to make next year’s better. Microsoft did exactly that, year after year after year and happened to win big. And it’s hard to see — for me at least — to see why Microsoft is sinful because they tried to improve the products all the time and make next year’s business position stronger than last year’s business position. (Applause) If that’s a sin, every subsidiary at Berkshire is a sinner, I hope. (Laughter)

WARREN BUFFETT: Yeah, yeah, yeah. We declare ourselves for sin. (Laughter)

WARREN BUFFETT: At this moment, I think we have a small interruption in the program here. Charlie, on your left. (Laughs) It’s just a sample of what it’s like to be an officer at Berkshire. (Laughter) Oh, OK. This is the new See’s Barbie doll. And — never before seen, it will be in the exhibitors section, lower level. And believe it or not, we’ve come up with three more just like this young woman. And they will be down there to take your orders. We can’t ship them now, we won’t charge your credit card until they — until they’re available for shipment, which will probably be, I guess, around September or so. But we wanted our shareholders to be the first ones to have a shot at this new product, and — The model is not included in the — (laughter) — delivered price.

WARREN BUFFETT: OK, if area one is ready, we’re ready to start answering.

AUDIENCE MEMBER: Hi.

WARREN BUFFETT: Hi.

AUDIENCE MEMBER: My name is Steve Check. I’m from Costa Mesa, California. My question is regarding stock options. I’ve taken your suggestion and have been attempting to subtract stock option compensation from reported income when evaluating companies. When I read annual reports, I usually find companies estimating option costs using the Black-Scholes model. However, the assumptions going into the Black-Scholes model seem quite different from company to company. These assumptions, of course, are what is used for risk-free interest rates — quote unquote, “risk-free” interest rates, expected option lives — even though options have stated lives, and expected volatility. Help me out a little bit. What is the best way to calculate option costs? Do you think BlackScholes is appropriate? If so, how should we normalize the assumptions? And just one short follow-up: how can we possibly estimate future earnings for companies, when companies, such as even Microsoft last week, in response to a lower stock price, simply reissue a bunch of new options?

WARREN BUFFETT: Yeah, the — I can tell you, from some personal experience, that companies attempt to use the lowest figure they can, even though it doesn’t hit the income account. So they like to make fairly short assumptions as to the life of the options, even though they’re granted on a ten-year basis. Because they’ll make certain assumptions about exercise date or forfeiture and so on. I think the most appropriate way, when you’ve got a pattern, which you have at many companies, of what they do on options, is simply to make an educated guess as to the average option issuance that they’re going to incur, or they’re going to elect to do over time. And, generally, what you really want to — if you were to be precise — you would try to figure out what they could’ve sold those options for in the open market. Because that’s the opportunity cost of giving them to the employees instead of selling the same option in the market.

I think you’ll find, generally, that if you take a value of about a third, for a ten-year option, if you take a value of about a third — obviously, it depends on dividend rate and volatility and a whole bunch of things — but about a third of the market value, strike price, at the time they’re issued, that’s the expectable cost. We believe in using the expectable cost versus the actual cost. I mean, that is how we would look at it. If we were issuing options at Berkshire, and we issued options on $100 million worth of stock a year, we would figure it was costing us, probably in our case, with no dividend, at least $35 million a year to issue those options. And we would figure that if we gave people $35 million in some other form of result-oriented compensation, that it would be a wash. And that is not the way most managements, of course, figure. At least that’s my experience.

And we would figure we could use that 35 million in a more shareholder-oriented way and one where the employee (who) was productive would be sure of getting results, as opposed to having it be at the whims of the market. And I think you’ll see a lot of option repricing. Everybody says they won’t reprice their options, until they do it. And, you’ll see that with a lot of schemes. It would be interesting to see whether CONSICO is willing to bankrupt all the executives who made loans to buy the stock and had those loans guaranteed by the company. And the company initially said they would enforce those loans. And we’ll see whether they do it. I would say, in many cases, they won’t. I don’t know what CONSICO will do. But, a lot of things that are said in connection with executive option schemes and that sort of thing are what they’ll do if it works in their favor. And then they’ll do something else if it doesn’t work in their favor. And that’s not spelled out in the initial approval that’s granted. Charlie, you have anything to add?

CHARLIE MUNGER: Well, Warren’s somewhat critical attitude is very understated compared to mine. (Laughter)

WARREN BUFFETT: We’re going to leave raisins out of this particular — (laughter) — analysis. Let’s go to area 2. We do believe, incidentally, if a company is going to end up giving out 10 percent of the, company over a 10-year period or 15 percent on options, that is like buying an apartment house and letting the seller keep a 10 or 15 percent interest in the upside. Or it’s like buying an oil field and giving somebody a 10 or 15 percent interest-free override. It changes the value of the property. Make no mistake about it. It is a — it has a huge economic impact on the value of a property. And just go out and try and sell your house and say, “I want to keep 15 percent of the appreciation in it,” and ask the buyer whether he’s going to pay the same price for the house. Options subtract value the moment they are granted. And, like I say, unless companies — some companies follow a practice of making a mega-grant every three or four or five years. A lot of them just issue a fairly constant amount annually. And you can figure out the cost.

And, you know, they don’t want to tell the shareholders there’s a cost. And that’s why they fought through Congress and everything else in order to prevent it from being the truth. But, you know, Galileo had that problem many years ago and finally won out. So maybe we will, too. (Laughs)

WARREN BUFFETT: Yeah, area 2.

AUDIENCE MEMBER: My name is Dennis Jean-Jacques from Chatham, New Jersey. I first would like to thank you personally for taking the time out of your busy schedule to visit MBA students throughout the country on a regular basis. In fact, I consider your visit to the Harvard Business School campus many years ago my personal rational awakening. My question is in regard to Dun & Bradstreet. Many academics would argue that two of the many factors that determine a firm’s sustainable competitive advantage are the threat of new interest through imitation, and the threat of substitution through technological advances, such as, you know, the internet and things of that nature. My question is, how deep is the moat around Moody’s and the operating company?

WARREN BUFFETT: Yeah, we don’t want to go into too much detail about our marketable investments. But I would say that the moat is, just in our view, is far wider, deeper, and infested with far more poisonous characters, in the case of Moody’s, than in the case of the operating company. We’ve had experience — just in terms of making decisions about how you either obtain credit information, in the case of the operating company, or if you want to obtain ratings on securities or something — I think you’d conclude that Moody’s is a much stronger franchise than the operating company. Doesn’t mean the operating company can’t turn out to be a better business. It might have more upside under certain circumstances, too. But if you’re really thinking of, you know, what bad can happen to you, I think that you would regard Moody’s as a considerably stronger franchise than the operating company. Charlie?

CHARLIE MUNGER: Well, I’d certainly agree. The — Moody’s is a little like Harvard. It’s a self-fulfilling prophecy. (Laughter) You know, I hate to think of how much you could mismanage Harvard now and still have it work out pretty well.

WARREN BUFFETT: If you cut the price of the admission to the Harvard Business School by $10,000 a year, you would have less demand, in all probability, than an increase in demand. I mean, it’s totally counterintuitive in that respect. Because the cachet of the school, in that case, is not only reinforced, it almost makes it necessary, that it be priced toward the top. So, it — you can throw away the demand and supply curves that they teach you in Economics 101 on something like that. I — frequently, I have a little fun with — when I attend business schools. Because I ask them, you know, what the definition of a wonderful business is, and we go through all this stuff. And then I say, you know, I tell them that — really — the best business I’ve seen is the Harvard Business School or the Stanford Business School, because the more they increase the price, the more people want to get in, and the more people think the product is worth. And that is a marvelous position to be in.

(Laughter) And I thank you for your comments on the — you know, I was lucky enough to have a great, great teacher in Ben Graham at Columbia. And Ben didn’t need to go up to Columbia once a week, on Thursday afternoon, to talk to a bunch of us. So it — I really feel it’s — I enjoy, sort of, passing that along. I haven’t had any original ideas in this field at all. But I, you know, I had a terrific teacher. And it’s fun to talk to students. If you talk to a bunch of guys my age, nothing happens. I mean, they just want to be entertained. (Laughter) But they want predictions always and that sort of thing. So I don’t do any of that at all. I’d rather talk to students. And I thank you for coming.

WARREN BUFFETT: Let’s go to number 3.

AUDIENCE MEMBER: My name’s Jared Placeler (PH). I’m 15 from St. Louis. Are you considering investing in energy and transportation companies, such as ones that deal with fuel cell and environmentally friendly energy resources? And if you are, will you thus be replacing any other energy-based investments you may currently hold, such as your newly acquired holdings in MidAmerican Energy?

WARREN BUFFETT: Yeah. I would say that energy and transportation, in the very broad sense, are both things that we’ve at least got a chance of understanding. So those are the kind of areas in which, we would think about making investments. We would probably think about it less in connection with new technology. We might expect the people who run MidAmerican Energy to be thinking about that all the time. But Charlie would be better at it than I am, because he has a different background and thinks better about that, anyway, in terms of evaluating newer technologies. I wouldn’t be very good at it at all. But those fields are, they’re big, in terms of capital investment, for one thing. So they’re very big fields. And then secondly, we would probably think we were capable of evaluating the potential, some years down the road, of many companies in energy and transportation. So those would be fields we would consider. And of course, as you mentioned, we made an investment in MidAmerican Energy. I doubt if the technology changes dramatically in any near term as to the product that they’re delivering.

But if there were changes on the horizon, I think we’ve got the management there that would be very good at spotting that ahead of time and capitalizing on it in a proper way. I wouldn’t take that function on myself. Charlie?

CHARLIE MUNGER: Well, historically, we’ve done very little in either field. And mostly, the past is a pretty good guide to the future.

WARREN BUFFETT: Historically, the transportation field, I mean, it’s been a terrible place to have money, and, whether it’s been in airlines or in the rails. If you — we’ve mentioned Value Line from here — from time to time. If you go to the rail transportation section and just run your eye across on the revenues and look at the capital investment, the amount of capital required to produce incremental revenues is just — is horrible. And on the other hand, there’s not much alternative here in the game to doing that. So there — many railroads will spend hundreds and hundreds and hundreds of millions of dollars. And it will not move the top line hardly at all. The ones where the top line has changed is where there’s been acquisitions or mergers. Airlines, you’ll see just the opposite. You’ll see this great movement in the top line, but again, a disastrous amount of capital investment and very little in the way of returns. So, it hasn’t been a great field. Most fields that require heavy capital investment, most of the time, they don’t turn out very well over time.

There are plenty of exceptions to that. But if you find a business that has to keep adding up huge sums of money every year, there always will be a reason why they’re doing it. But the net result, after five or 10 or 20 years usually isn’t very good. Charlie, got anything?

WARREN BUFFETT: Area 4?

AUDIENCE MEMBER: Good afternoon, Mr. Buffett and Mr. Munger. My name is Bob Odem (PH) from Seattle, Washington. I’d like to say, first of all, how nice it is to come out to Omaha, and how I am made to feel comfortable by its people. I hope you both are as enthusiastic about the meeting as you seem to be in years to come.

Mr. Munger, by the way, I am looking forward to your book coming out. My question has to do with Doug Ivester’s severance package and what justifies it, considering he had a very short tenure as CEO and that he took the reins from some very strong performance from Goizueta and to be relieved of his dismal performance by Doug Daft. My brother, still in the bottling and distribution business of Coke, cut this article from Bottlers’ World Magazine concerning the severance package. He said he also would retire, if he were offered this — (laughter) — 97.4 million in stock, 3 million per year for 2000 to 2002, 2 million per year, 2002 to 2007, 1.4 million per year from 2007 for the rest of his life.

Anyway, I don’t see how — or here, car and cell phone, he gets that. That’s a Mercury Grand Marquis and mobile telephones, laptop computer, and the like. I don’t know why he’d need that. (Laughter) Anyway, I have been wondering how you voted on this, whether you supported it or not, or what degree, considering executive pay at Berkshire hasn’t risen except, perhaps, for the CFO who last got a raise, I believe, in 1997.

WARREN BUFFETT: You asked — no, CFO’s gotten a raise every year. But the — you asked whether I supported it. Yeah, I can tell you, I supported it. Because with my 35 percent interest in 8 percent of Coca-Cola, I paid almost 3 percent of it myself, personally. I probably paid more severance pay than any man in the history of the world, personally. (Laughter) I was not on the comp committee. But I will say this. Doug Ivester did all kinds of really wonderful things for the Coca-Cola Company, over time. He was — for many, many years, when Roberto was running things, Doug — working with Don Keough, too, and I had this first hand from both of them. I wasn’t in Atlanta. But there was no question that he was a huge, huge asset and conceived and carried out many of the things that other people may have gotten even more credit for. Most of what you described, not the little things at the end, but most of what you described was contractually in place at the time that he left.

I mean, those were deals that were made, restricted stock and all of that, that really occurred, in significant part, when Roberto was the chief executive officer and at Roberto’s recommendation. Doug’s devotion to Coke, his knowledge of Coke, I mean, he lived and ate and breathed Coke. But in my opinion, Doug

2000年股东大会

第四部分（共六部分）

如果那位父母是个优秀的榜样，我认为这对孩子来说会是一个巨大的加分项。我认为这比生活中其他很多事情都重要，身边有正确的榜样。而且，就像我说的，即使我年纪大了，我也又学到了一些榜样。这会影响你的行为，我对此深信不疑。如果你想要——根据你的个性——或多或少地像你所钦佩的人那样。我跟课堂上的学生们说，我告诉他们，“你们就挑出班上你最钦佩的人，坐下来，把钦佩他们的原因写下来。然后试着想想，为什么你不能拥有那些同样的品质。”因为这些品质不是能将橄榄球扔出60码，或者百米跑进10秒之类的。它们是性格、人品、气质上的品质，是——是可以被效仿的。但你必须尽早开始。以后要想改变行为就非常难了。

你还可以反过来用。按照查理的“反过来想”理论，你可以找出你不喜欢的人——（笑声）——然后说：“我不喜欢这些人身上的哪些地方？”然后你可以看看——这需要一点性格力量。但你可以向内看，扪心自问：“我身上是不是也有点那种特质？”——这不复杂。本·格雷厄姆做过。本·富兰克林也做过。这不复杂。没有什么比试图找出你认为值得钦佩的品质，然后下定决心，让你真正想钦佩的人就是你自己，更简单的了。而做到这一点的唯一方法，就是去拥有你钦佩他人的那些品质。总之，这是对我和比尔确实讨论过的一点做出的两分钟回答。查理？（掌声）

查理·芒格：是的。也没有理由只找活着的榜样。那些杰出的逝者——从本质上讲，他们往往是我们身边最好的榜样。而且，如果你只是想要一个榜样，你最好不要把自己局限于活着的人。有些最好的榜样已经去世很久了。（笑声）

沃伦·巴菲特：查理读过的传记可能比这个房间里任何三个人加起来都多。所以他确实在实践这一点。而且，正如之前有人提到的，珍妮特·洛（Janet Lowe）写的查理传记将在今年晚些时候出版。所以你可以读到查理一生的所有秘密。（掌声）

9. 巴菲特和芒格对执掌美联储毫无兴趣

沃伦·巴菲特：好的，第7个问题。

股东：下午好，先生们。我叫加里·布拉德斯特罗姆，来自内布拉斯加州的奥马哈。我的问题是，如果艾伦·格林斯潘决定退休，并把那份工作提供给你们中的任何一位，你会接受吗？

沃伦·巴菲特：嗯，我可以告诉你，我的答案是“不”，很快就会说不。（笑声）我想查理会给你他的答案。

查理·芒格：我会更快地说“不”。（笑声）

沃伦·巴菲特：你注意到，我们给了你非常明确的答案。当然，仅这一点就会让我们失去美联储这份工作的资格。（笑声）我记得好像是艾伦对一位参议员说过：“既然你似乎如此准确地复述了我的言论，那你一定是误解了我的意思。”（笑声）我不认为你能在公共生活中找到一份能吸引我们中任何一个人的工作。事实是，我们玩得太开心了。我是说，这——我们拥有世界上最好的工作。我们一年到头都能和我们喜欢、钦佩和信任的人一起工作。我们可以用我们自己想要的方式做我们想做的事。我们本应该为这份工作付钱，这对一些其他CEO来说也是如此。我是说，这真的很有趣。

我经常想，如果你能拿到一个密封的信封，里面有薪酬委员会说他们愿意付多少钱来填补这个职位，但同时，首席执行官也说他在离职前愿意付多少钱来保住这个职位，那两者之间会有一个巨大的差距。我是说，有各种各样的事情——我的意思是，从处理有趣的问题、做有趣的事情、每天都有不同的事情开始，这本身就很有趣。这份工作无可挑剔。而能为此获得报酬，只是蛋糕上的糖霜。我自己在公共生活中看不到这样的工作。查理，你有什么要补充的吗？查理承担了一些公共工作。他经营着一家医院和一些其他事务。他可以告诉你其中的奇妙之处。查理？

查理·芒格：哦，是的。有句老话说：“他撒谎就像货币贬值前夕的财政部长一样。”我从来不想从事一份要求说谎的工作。（笑声与掌声）

10. 伯克希尔是“企业界的‘大都会博物馆’”

沃伦·巴菲特：第8个问题。

股东：巴菲特先生，芒格先生，我叫诺曼·伦特罗普，来自德国波恩。非常感谢你们昨天和今天如此耐心地倾听、回答和分享。我从1992年起就是股东了。这是我第一次参加股东大会。我来这里时受到了罗伯特·迈尔斯（Robert Miles）所著《101个拥有伯克希尔·哈撒韦的理由》一书的启发。我非常仔细地聆听了你们关于如何挑选优秀人才的讲述，即对事业的热爱远胜于对金钱的热爱。我想更多地了解你们的哲学，特别是伯克希尔·哈撒韦现在越来越多地收购公司。在此过程中，你们如何确保那是“真爱”，以及你们如何挑选人才。

沃伦·巴菲特：这是个极好的问题。我不太清楚该如何准确回答。也许查理在我支支吾吾的时候会想出答案，但我——我真的——我认为我能做得很好。但我不知道有什么方法能给别人一套问询清单，或者——我不知道如何告诉别人，用那些标准——他们是热爱事业还是热爱金钱——来挑选经理人。这非常非常重要。我的意思是，这至关重要。因为——嗯，我们经常看到这种情况。我是说，你身边总有一些爱钱的人。你在上市公司里看到他们，他们做些我们不想与之有任何关联的事情。另一方面，如果他们热爱事业，我们会——我会告诉所有者这一点。我会对他们说：“你满怀爱心地建立这项事业50年了，也许你的父母之前就在做，甚至你的祖父母。”我们正在收购的一家企业已经是第四代了。

事实上，最关键的论据，我在1967年对杰克·林沃特（Jack Ringwalt）用过。我对杰克说，他经营这家公司已经很长时间了：“你想卖掉它吗？你知道，你想处理掉它，这个你最重要的——你的创造，你的画作吗？还是你想在你死后，让某个26岁的信托官员来处理它？”正是谁将处理这幅他自己创作的杰作的想法，对他至关重要。我告诉他，如果他们想把它放在我们的博物馆里，我们保证：第一，它不会被转卖；第二，它会得到应有的尊重；第三，你可以继续画它。我们不会进来告诉你用红色代替黄色或诸如此类。所以，即使它现在已经是杰作，你还可以继续增添色彩。因此，我们喜欢把自己看作企业界的“大都会博物馆”，我们能让真正杰出的创作安家于我们的博物馆。

但是——我们实际上必须为这些企业的“画家”提供那种我们自己如果做同样事情也会想要的博物馆。对某些人来说，这毫无意义。我是说，他们只想拍卖自己的企业，你知道。他们可能还会在出售前的一两年里，稍微操纵一下数据来粉饰它。他们什么都干得出来。他们还会雇佣一些投资银行家，那些银行家假装从其他人那里得到了报价，以便进一步抬价。这对很多人来说是标准操作。我们毫无兴趣以任何价格与他们合伙，因为我们不想在余生里与一个会那样做的人站在对立面。如果有人热爱他的事业——我热爱伯克希尔，我是说，你在一段时间内创造出一些东西——这对你来说意义重大。有些人从装饰家居中获得满足，有些人从各种不同的事情中获得满足，比如高尔夫球技或其他什么。

但我们中的一些人从建立事业中获得满足。而它最终找到一个什么样的“家”必然极其重要。在很多情况下，由于遗产税的原因，或者因为孩子们合不来，或者无论什么原因，人们需要对他们的企业做些安排。但他们不希望它被拍卖掉。而我们——我们为它提供了一个好的归宿。我想，当人们带着企业来找我们时，我能很好地判断他们的动机。到目前为止，我们做得很好。我们犯过错误，毫无疑问。但从某种意义上说，我认为这些错误这些年来越来越少了。我们对人的失望非常非常少。我们有时会错误判断企业的经济状况。但那是我们的错误，不是他们的。我们很少看错人。我希望我能给你一个清单，你可以对照着说：“嗯，这家伙爱钱。所以他会在六个月内离开。这家伙爱事业。所以只要我让他独立完成工作，欣赏他的作为，公平对待他，他就会尽可能长久地留在这里。”查理，你对如何区分这些人有什么想法吗？

查理·芒格：我认为我们的文化非常老派。换句话说，我认为它是本·富兰克林和安德鲁·卡内基式的。非常老派。而我认为伯克希尔令人惊叹之处在于，这些非常老派的理念依然如此有效。你能想象安德鲁·卡内基打电话叫来薪酬顾问或者——（笑声）——投资银行家，告诉他是否应该再买一家钢厂吗？或者——我们没有多少人模仿。我们模仿的是一个早已逝去的时代的行为。但是，我不认为——我们买的很多企业都像我们一样有点古怪和老派。我希望我们能继续这样下去。

沃伦·巴菲特：它们就在外面，查理。（笑声）

查理·芒格：是的，是的。嗯，但我认为这些企业确实有标准。喜诗糖果有标准。它有自己独特的个性。但是——维护标准是其中非常重要的一部分。

沃伦·巴菲特：查理说到了一点。请投资银行家或其他人来评估你将要收购的企业，这个想法，在我们看来简直是愚蠢。如果你对一门生意了解得不够，无法自己决定是否购买，那你最好忘了它。这毫无意义。（掌声）你请来一个如果你买下他就得到一大笔佣金，不买他就得到很少佣金的人，这显示出一种对人性（的信任）。（笑声）这是你提出的一个关键点。坦率地说，如果我认为我们有什么擅长的话，我认为我们很擅长你刚才说的那一点。这是资本配置的一个重要部分。因为我们自己无法管理这些企业。我们既想要好的企业，也想要好的管理。我们得到了。我们从那些留下来并为我们做出了出色工作的人那里得到了很多。这也让我们的生活轻松多了。

11. 当巴菲特说“不理解”一家企业时，他到底是什么意思

沃伦·巴菲特：让我们回到第1个问题。

股东：你好，沃伦。你好，查理。我叫道格·帕特森，来自奥马哈。我在附近的奥马哈内布拉斯加大学教书。我在戏剧系教书，这同样是世界上最好的工作。我必须说，我很享受你们每年提供的这场“戏剧”。非常感谢。

沃伦·巴菲特：谢谢。

股东：坐在这里，对于我们这些已经坐了三四小时的人来说，涌上心头的问题实在太多了。我有三个非常不连贯的问题。

沃伦·巴菲特：好的，我们一个一个来。

股东：酷。关于这些科技股，你说你不理解它们。你能不能说说你是否认为——我无法想象你会有不理解的东西。

沃伦·巴菲特：哦，我们理解产品。我们理解它为用户带来什么。我们只是不知道它十年后的经济状况。我是说，你可以理解各种各样的事情——你可以理解钢铁行业。你可以理解房屋建筑业。但如果你看着一家房屋建筑商，试图思考它五年或十年后会是什么样，它的经济状况如何，那就是另一个问题了。我是说，这不是理解他们生产的产品或他们用来分销的方法等问题。而是关于十年后经济状况的可预测性。而那——那是我们的问题。

股东：对，我不是在试图激你去做。我很高兴你没有做。因为在过去几个月里，我可能已经心脏病发作好几次了。

沃伦·巴菲特：嗯，我们也会的。

股东：是的。那么你的预测是，你不会试图去理解它。你认为它是——它是不可理解的吗？就是这样，它是不可理解的？

沃伦·巴菲特：是的。我看待每一门生意，都会思考它的经济状况。这已经融入我的骨子里了。也融入了查理。所以，这不是说当我和安迪·格鲁夫（Andy Grove）在一起时，或者实际上，我在1968年和1969年就在格林内尔学院认识了罗伯特·诺伊斯（Bob Noyce），当时他们正在创办英特尔。当他和我说起创办英特尔，或者任何人和我谈起一门生意，我都会思考它的经济状况。如果我们聊上三四分钟，我可能会想一想奥马哈大学戏剧系的经济状况。但这——所以并不是我们关掉了阀门。只是我们得不出任何结论。我们不知道它会是什么样。你知道，生活中有很多事情，它们——对我们许多人来说，是超出理解范围的。而且——

股东：所以你是说，就像，可能真的没有人能够理解它十年后会是什么样。没有人能理解。

沃伦·巴菲特：我们对此会非常怀疑。我会说——顺便说一句，我的朋友比尔·盖茨也会这么说。实际上，罗伯特·诺伊斯如果还在世也会这么说，鲍勃几年前去世了，但——或者安迪·格鲁夫——他们也会这么说。我和安迪一起散过很长的步。他们不会愿意把他们关于你选出的十家科技公司十年后经济状况的预测写下来。他们会说：“这太难了。”

12. 巴菲特：就算我被卡车撞了，伯克希尔也会安然无恙

股东：酷。第二个问题，同样不相关。但今天我已经听了好几次这个问题了。而且每年都会冒出来。我想换个不同的角度来问。假设你走出这栋大楼，被一辆公共汽车撞了。

沃伦·巴菲特：是的。我们有一位股东反对这么问。通常的说法是被卡车撞。

股东：卡车，好的。

沃伦·巴菲特：他碰巧是做卡车运输生意的，所以他——

股东：或者，考虑到——

沃伦·巴菲特：只要不是GEICO的司机就行。但——（笑声）

股东：考虑到奥马哈，也可能是平地机。那会是很突然的——也许你会因此投出一个很棒的快球。也许就是这样。但你在股票方面的能力会丧失。在这样一个时刻，你会给持有伯克希尔·哈撒韦股票的人什么建议？

沃伦·巴菲特：嗯，关于这个问题，我有终极测试。因为届时，我的遗产将有99.75%投资于伯克希尔。考虑到已经做出的安排、我们拥有的企业以及我们在位的经理人，我感到完全放心。但是，没有人会比我自己——且不说其他方面——在经济上更受那辆卡车的影响了。（笑声）所以这个想法在我脑海里闪现过。这个问题对我来说比对其他任何人都更重要。我已经给出了令我满意的答案。董事们知道我对此的一些想法。但世界将继续运转。企业将继续运营。我认为届时会有出色的管理层在位。

股东：谢谢。我很感激。也谢谢你回答了我的这三个问题。它们太不连贯了。

沃伦·巴菲特：好的，谢谢。

13. 巴菲特：对收购《奥马哈世界先驱报》没有兴趣

股东：鉴于你对报纸行业的评论，我们是否可以假设你可能不会收购《奥马哈世界先驱报》？

沃伦·巴菲特：我认为这是个合理的假设。但即使不考虑我对报纸的看法，这也可能是事实。因为他们不打算卖。查理，你有什么要补充的吗？

查理·芒格：嗯，关于《世界先驱报》的故事很有趣。事实是，如果二三十年以前有人把《奥马哈世界先驱报》卖给沃伦，他会很高兴地买下。现在他不想要了。这和经济状况无关。

沃伦·巴菲特：没错。是的，我是说，毫无疑问——没人向我出售过，也永远不会有人向我出售。而且所有权结构已经确定。但查理说的是对的。如果它仍然归个人所有，而他们想卖给我，出于经济原因，我不会想买。出于其他原因，我也不会想买。

查理·芒格：但你现在不想买它，因为之后你的生活会比之前更不舒服。会有更多的人找上你。

沃伦·巴菲特：拥有《世界先驱报》在生活中不会有任何积极意义。完全没有。（笑声）而且，正如查理所说，这可能不是我们30年前会有的想法。

查理·芒格：完全不是。

沃伦·巴菲特：我认为我们现在是对的。

14. 互联网对社会有利，对企业不利

沃伦·巴菲特：第2个问题。

股东：你好，我是霍华德·温斯顿，来自伊利诺伊州芝加哥。感谢查理和你的热情好客。我的问题是，伯克希尔多年来从其低成本浮存金中获益匪浅。你认为互联网会使保险业更具竞争力，从而提高你们的浮存金成本吗？

沃伦·巴菲特：嗯，这是个好问题。我想说，就我目前所见，互联网不太可能增加伯克希尔浮存金的成本。它会对我们保险业务的不同方面产生不同的影响。它会在某些方面改变保险业，但我不能确切告诉你是什么。但你知道，任何一种分销系统都会受到像互联网这样改变分销经济模式的东西的影响。所以毫无疑问它会带来影响。我认为，最终，我们整个保险集团所拥有的竞争优势，净效应来说，不会受到互联网的损害。但我可能错了。因此，我不认为我们的浮存金成本会有太大变化。我不认为整个保险业的行业经济状况会有很大改变。保险业的经济状况一直不太好。我认为它们会保持在——你知道——大致相同的范围内。我也不认为我们的竞争优势会被削弱。

因此，我认为我们未来的浮存金成本会比过去更高。但那是出于互联网以外的原因。我仍然认为随着时间的推移，我们的浮存金会是一个有吸引力的资金来源。这宗生意对我们来说是门好生意。我不认为它对普通公司来说一定是门好生意。查理？

查理·芒格：嗯，你的问题里埋藏着一个绝妙的问题。互联网通过使竞争更加高效，会不会总体上让美国企业更难做，也就是说，竞争更激烈，资本回报率更低？我的猜测是“会”。

沃伦·巴菲特：是的。我的猜测也是“会”。我想说，总的来说，对社会而言，互联网是件美妙的事情。而对资本家来说，它可能是一个净负面因素。

查理·芒格：所以你们所有人都可以高兴地看到，人类的进步将恶化你们的经济前景。（笑声）

沃伦·巴菲特：一种牺牲，以我们这把年纪，愿意做出。但我们年轻时可不乐意。（笑声）顺便说一句，这——有很多值得思考的地方。互联网，我的意思是，如果你分析它，你不得不认为它更有可能降低美国企业的盈利能力，而不是提高它。它会提高美国企业的效率。但是，各种提高美国企业效率的事情，并不一定让它更赚钱。我认为互联网很可能就属于这一类。到目前为止，它提高了美国企业的货币化价值。但这最终会跟随互联网所带来的基础经济效应。我认为，与没有互联网的情况相比，它更有可能让美国企业的总体价值变得更低。

查理·芒格：顺便说一句，这非常明显，但很少有人理解。（笑声）

沃伦·巴菲特：就是这样。（笑声）

15. 自我意识和委托书说明书加剧了CEO薪酬过高问题

沃伦·巴菲特：好的，第3个问题。

股东：是的，下午好。我叫汤姆·盖纳，来自弗吉尼亚州里士满。在当前环境下，对优秀企业护城河的攻击似乎来自城堡内部，形式是股票期权薪酬，其严重程度不亚于外部竞争对手。你的榜样之一本·富兰克林说过：“一个小洞也能弄沉一艘大船。”看起来这个洞越来越大了。您能讨论一下，哪些可能的因素会导致这种情况改变吗？这是个会变得更糟还是会变得更好的问题？第二，具体来说，您作为可口可乐和吉列等公司的董事，是否正在寻求改变这些做法？您预期在那里会取得什么样的成功？他们让你加入薪酬委员会了吗？第三，如果这些薪酬做法是非理性的，伯克希尔会从这种非理性中受益吗？谢谢。

沃伦·巴菲特：嗯，接着你的城堡比喻来说，我们不仅寻找一个伟大的经济城堡，我们还寻找一位伟大的骑士来掌管那个城堡。因为这很重要。正是他负责把鳄鱼扔进护城河，并随着时间的推移拓宽护城河。当然，问题在于，骑士为此能得到城堡的多少份额？我想，总的来说，在伯克希尔，你会得到非常公平的对待——我们拥有很多“城堡”。我们努力公平地支付报酬。但我不认为——在城堡所有者和守护护城河的骑士之间的分配是不公平的。我很难想象薪酬实践——即骑士得到城堡的多少份额——会如何随着时间的推移而向城堡所有者有利的方向改变。棘轮效应简直令人难以置信。

在美国，没有一个薪酬委员会会听一个走进来就说“我认为你们的管理层应该有一个让他们最终处于后半部分的安排”的顾问的话。如果没有人愿意处于后半部分，请相信我，中位数会上涨。我的意思是，这是无法避免的。这些人每年或更频繁地开会。他们手头有行业中其他每家公司的委托说明书。你知道，他们会挑出那些数字最大的。然后他们说：“哎呀，我们需要至少和这家公司一样好的管理层。我们怎么能吸引到人呢？”等等诸如此类的话。它只会向上“棘轮”。我认为这是生活中的一个事实。我认为股东们理解这一点很重要。我曾是19家公司的董事会成员，不包括伯克希尔的任何子公司之类的。我上次参加的薪酬委员会是在所罗门公司。我想我是薪酬委员会的主席。可能我记错了。

我们一共三个人。另外两个人是很好的人。有一年，盈利比前一年少了大约1亿美元——我想是1990年。而薪酬反而增加了不少。我发现其中还涉及一些早期的问题。我只是说，我再也无法忍受了。我投了反对票。我不记得我是不是主席了。但无论如何，结果是二比一反对我。我想即使我是主席，结果也会是二比一反对我。另外两个人完全理性。他们说：“我们怎么留住这些人？我们怎么能否定我们管理的价值？”所有你能听到的那些话。所以实际上——我有一个朋友，一位非常受尊敬的企业家——他——他们不会把你赶出薪酬委员会。他们只是不再提名你。他曾在两个薪酬委员会中被踢出来，仅仅是因为提出了一些问题——关于那些你会觉得离谱的事情。

我不在薪酬委员会。我只待过一个薪酬委员会。他们看到了我的所作所为。所以那就是结局了。人们说：“我们喜欢你的想法。”“你思维有创意。但我们不想听到你对薪酬的看法。”你知道，这可以理解。你会遇到一些非常出色的人。比如，经营Fastenal的那位，他们就非常出色。还有很多例子表明人们行为良好。但大多数情况下，我认为有些时候——我不认为有时主要是钱的问题。我认为是自我意识在作祟。他们无法忍受看到一个他们认为击球率只有0.280的家伙，而自己击球率是0.300，却拿得更多。你知道，这个过程是无休止的。我认为，这也能理解。就像电影中谁排在演员表首位之类的事情。

人们关心的是，他们的名字与别人相比排在什么位置。而在这里，他们的名字就是薪酬。我怀疑这种情况是否会自行逆转。查理？

查理·芒格：不，我认为我们可以自信地预期情况会变得更糟。而且，我认为我们可以自信地预期，就伯克希尔作为大公司的被动股东而言，这对它是有害的。但有一个地方我们获得了优势：我们自己的文化和态度如此不同，这确实吸引了一些拥有优秀企业的人。我是说，我们真的，有时会发现，我们是他们唯一能接受的买家。他们和你一样不喜欢其他大公司的这种文化。这确实给了我们一个优势。

沃伦·巴菲特：是的。你也问了我们关于——我们可能有多积极地说这个。我们永远不会坐在这里告诉你我们在其他董事会说了什么，因为那会削弱我们可能拥有的任何影响力。而且我们可能本来也没有多少影响力。但是——你在餐桌上只能打那么多次嗝，还能被再次邀请回来。而且——（笑声）——我们可能已经做得够多了。我们——我们努力以我们认为值得钦佩的方式经营伯克希尔。我们努力阐明我们的理由和一切。我们希望也许有人能将它作为榜样。但是到处指名道姓地谴责是行不通的。所以我们——你知道，我们恨的是罪行，爱的是罪人，诸如此类。但这没什么效果。

16. 很难预测人口结构将如何影响市场

沃伦·巴菲特：第4个问题。

股东：下午好，沃伦和查理。我叫埃拉斯，来自加拿大马尼托巴省温尼伯。这是我第一次来到内布拉斯加州奥马哈，第一次听你们现场演讲。你们身后有一个巨大的冰淇淋人。

沃伦·巴菲特：嗯。来了！

女性声音：给您。

查理·芒格：哦，谢谢。

沃伦·巴菲特：你觉得伯克希尔没有管理层福利吗？

股东：哦，天哪。（笑声）好吧，我们谈正事吧。

沃伦·巴菲特：好的。

股东：我的问题是关于您去年11月在《财富》杂志上发表的文章，您谈到了企业盈利以及市场——你们在听吗？还是……

沃伦·巴菲特：我在听。（笑声）我们可以边嚼口香糖边听。

股东：好吧，好吧，好吧。正如我所说的——

沃伦·巴菲特：但如果我们有——

股东：——您在《财富》杂志文章中关于企业盈利以及市场为其支付的价格的观点，为股市和未来市场水平描绘了一幅相当暗淡的图景。现在，您可能知道，存在一个非常强劲的人口结构趋势。在加拿大和美国，我们看到人口老龄化，更重要的是，这批人口中的大部分同时达到储蓄高峰年龄。

沃伦·巴菲特：你有点粗鲁了。但请继续。（笑声）

股东：我真不敢相信。沃伦居然说我粗鲁。

沃伦·巴菲特：我想向你证明我在听。请继续。（笑声）

股东：总之，好的。因此，存在一场重大的退休危机，因为大多数加拿大和美国公民，特别是22岁到55岁之间的人，担心他们没有足够的钱来维持退休生活，更不用说维持生计了。因此，出于这个原因，我的意思是，预计这批人将投资于股票，而不是固定收益工具，以获得必要的长期回报率来为他们的退休储蓄做好准备。因此，许多人预测，在未来5年、10年、15年里，将有大量资金通过股票和共同基金流入市场，从而推高市场价格和市场水平。许多人预测股市将出现有史以来最大的增长。那么，您对这个潜在趋势的看法是什么？是独立于您在《财富》杂志那篇文章中所说的，还是与之相关？非常感谢。

沃伦·巴菲特：很好。我不是要粗鲁，但坦率地说，我们认为这毫无意义。（笑声）储蓄率，私人储蓄率，你知道，现在并不高。也不需要很高。真正决定老年人或非常年幼的人——无论是哪种，处于非生产年龄的人——总体状况的，是商品和服务的总产量，以及在处于生产年龄和不处于生产年龄的人之间的分配。这正是社会保障争论等问题的核心。对处于非生产年龄的人（无论是年轻人还是老年人）而言，最有利的单一因素是，蛋糕在不断变大。这使得解决非生产群体的问题变得更容易。当我说“非生产”时，显然这个词没有贬义。它只是指谁处于就业年龄，谁不处于。

我们的社会在照顾非生产年龄人口方面会做得非常好。当然，随着人们寿命延长，会有一个转变。当然，也许在定义“生产性”方面也应该有转变——我认为应该有——因为65岁的退休年龄是在20世纪30年代决定的。我认为这已经改变了。但蛋糕不断变大这一事实，使得问题变得容易——不是容易——但我认为，30或40年后，这会比30或40年前更容易。因为人均产出的商品和服务会多得多，使得生产年龄的人能够以比过去更容易维持的方式来照顾非生产年龄的人或老年人。产出低才会给社会带来压力。我的意思是，当产出非常少，或者分配存在巨大差异时，才会给社会带来真正的压力。

但是，一个产出每年增长3%、人口每年增长1%的社会，其压力会比20、30、50、100年前小得多。但是，你知道，我们不需要储蓄的大繁荣或诸如此类的东西。目前的储蓄率对于世界来说就足够了。在美国，我的意思是，我不是在说全球——我不应该代表全世界说这个。查理？

查理·芒格：嗯，一般来说，你可以说股票有两种估值方式。一种，它们像小麦一样被估值，基于其在使用者眼中的实际效用。另一种，它们像伦勃朗的画作一样被估值。在某种程度上，伦勃朗的画作之所以估价很高，是因为过去它们的价格一直在上涨。一旦股市中有了很多“伦勃朗因素”，并且通过大规模的退休金购买来推波助澜，你就可能看到股票以历史标准来看非常高的价格出售。这可能会持续很长很长时间。这就是让生活如此有趣的原因。目前尚不清楚最终结果会如何。甚至利率水平会是多少也不清楚。这个房间里没有人期望再次看到3%的利率长期持续。但这可能发生。那将对股票价格产生巨大影响。你生活在一个你无法真正预测这些宏观经济变化的世界里。

沃伦·巴菲特：不，你可以论证，储蓄的增加会压低资本回报率。资本越多，资本回报率就越低。但我不认为——我不认为你一生中通过思考这类问题能帮助你做出关于企业的任何决策。我们对此有点偏见。但你会发现各种人会告诉你。我是说，这就是书被写出来的原因。因为每个人都喜欢预测和书籍。所以，你可以——请继续。

查理·芒格：在回答这个问题时，你可以看到我们的行为很像我在哈佛法学院时的一位老教授。他常说：“告诉我你的问题是什么。我会努力让它变得更难解决。”（笑声）

17. 巴菲特：关于我如何投资的最佳书籍

沃伦·巴菲特：请提第5个问题。

股东：我叫埃里克·特威迪，来自宾夕法尼亚州沙弗镇。再次感谢你们主持了又一次精彩的会议。在去年年会期间，我的妻子在镇上的一家商店里买了一本名为《巴菲特法则》（Buffettology）的书，作者是巴菲特先生的前儿媳。这是一本写得非常好的书，非常有趣。它试图概述沃伦·巴菲特的投资方法。我的问题是，我不知道你们两位是否熟悉这本书的内容或是否读过。如果读过，您能否评论一下，您认为它是否很好地概述了这种投资方式？我的第二个相关问题，我想知道——巴菲特先生能否评论一下，您当初为何要购买马萨诸塞州的那家原始纺织厂，这是否代表了您早期更严格遵循格雷厄姆式价值投资的一个阶段，与您当前的投资风格有所不同？

沃伦·巴菲特：或许最好——我想说，最能代表我观点的一本书是拉里·坎宁安（Larry Cunningham）编的那本，因为他基本上是把我的话收集起来，以更有条理的方式重新编排——他取材于多年的内容。他编的那本书最能代表我的观点。我们有20年或更久的年报放在网上，还有《财富》杂志上的文章，各种材料。所以这可能是我个人的偏见。但我——我更倾向于认为，我自己的阐述比别人的重写要好。但——这由你来判断。但我确实认为拉里做得很好，他把许多报告收集起来，按主题重新编排，使得阅读起来比逐年翻阅容易得多。而且实际上，你很快也能读到这本关于查理的书了。

我们在这些会议上说

2000年年度股东大会

第5/6部分

但浮存金，如果你看看我们的历史记录，未来的记录不可能像过去那样好，但它不是——关键在于浮存金的成本，以及浮存金的增长规模。我的意思是，如果你告诉我，我可以增加500亿美元的浮存金，而成本是3%，我会毫不犹豫地接受，而不是增加100亿美元但成本为零。所以，在保险业务中，我们有很多不同的方式来考虑如何创造浮存金。通常，一种方式不会排斥另一种。偶尔，它们会相互冲突。但通常，一种方式不会排斥另一种。请相信我，我们花了大量时间思考这个问题。只要我们还在经营伯克希尔，我们就会继续思考。这是我们战略的重要组成部分。查理？

查理·芒格：嗯，我一直对我们用浮存金取得的成就感到惊讶。我从内部观察了很长时间。能够以远低于国债利率的成本，创造出数百万、数十亿、甚至数百亿美元的浮存金，这是一件非常美妙的事情。有些人会不惜一切代价来获得这样的机会。

沃伦·巴菲特：是的。当然，这也使得它竞争激烈。我们确实——有许多其他人也在以类似的方式思考，并且可能观察了我们的做法。所以，就像资本主义的其他一切一样，它是竞争性的。我们认为自己在几个非常重要的方面拥有优势。而且我们认为，就目前所能预见的，这个优势是可持续的。我们打算尽可能地推动它。然后，我们再看它会走向何方。如果在10年或20年前，我根本不会想到我们会拥有现在这样的局面。但我们确实发现，如果你像伍迪·艾伦说的那样，每天露面，接听电话，看看报纸，时不时地，你总能看到一些值得去做的事情。我们偶尔确实能找到它们。难的是，找到那些相对于我们当前规模而言足够重大的事情。如果我们经营一家非常小的企业，我们会发现很多有意义的事情可以做。相对于我们的规模，我们现在能找到的事情并不多。

对此，除了大幅缩减规模之外，真的没有其他办法，而这并不是我们正在考虑的行动。

23. 芒格谈威斯科的继任问题

沃伦·巴菲特：第8个问题。

股东提问：我是来自纽约市的James Pan。我实际上有一个关于威斯科的问题，这是你们持股80%的子公司，有几个问题关于它。第一个问题是，上次我查的时候，它的交易价格低于内在价值。考虑到威斯科的大部分资产都投在了房地美，而房地美在未来几年内在价值很可能以较低的两位数增长，你们打算如何管理，我是说，你们将如何管理内在价值与当前价格之间的差距，以及两三年后内在价值会是多少？另外，威斯科是否有继任计划，或者最终有什么整合计划？

沃伦·巴菲特：查理是威斯科的老板。所以——

查理·芒格：是的。我们几乎完全不关注威斯科的股价。所以，通过回购少量威斯科股票来为威斯科股东创造任何有意义的收益，这个机会太小了，我们实际上都不太考虑。至于继任问题，我们正在慢慢地让我变得非常没用，以至于大家不会想念我。（笑声）

沃伦·巴菲特：是的，顺便提一下，你刚才说威斯科相对于内在价值被显著低估了。我不确定是不是这样。查理，你比我在行。

查理·芒格：嗯，肯定没有什么巨大的差距。而且，我们不会花很多时间去思考那些实际上赚不到钱的事情。（笑声）

24. 芒格：EVA估值是“胡扯”和“中世纪神学”

沃伦·巴菲特：第1个问题。

股东提问：嗨，我是来自密歇根州特拉弗斯城的Jason Tang。在问问题之前，我想确认一下，你们明天上午9:30还会在这里回答更多问题吗？（笑声）我的问题是，我最近读了一本书，叫《价值探寻》，作者好像是贝内特·斯图尔特，来自斯特恩·斯图尔特咨询公司。我想跟你们聊聊——只是问问你们关于不同的估值方法，特别是EVA，以及它是否比，比方说，其他价值基准，如市盈率、市净率或市销率更有效。这是不是更接近？我注意到这本书里用的语言和你们在文章里用的语言非常相似。所以，如果你们能谈谈EVA，那就太好了。

沃伦·巴菲特：查理，你来谈谈EVA吧？

查理·芒格：我认为其中有大量的胡扯和废话。（笑声）

沃伦·巴菲特：我就知道他会这么说。我觉得它活该被这么说，所以——我不想自己说出来。

查理·芒格：在EVA中，我们一再强调，游戏的关键是将留存下来的每一美元变成超过一美元的价值。而EVA倾向于纳入一些毫无意义的资本成本概念。它们让它听起来很时髦。天知道，一家资本回报率很高并且长期留存收益的公司，在EVA指标上会有很好的记录。但整个思维体系是行不通的。它就像中世纪的神学。（笑声）

沃伦·巴菲特：相对于前面那个词，我更喜欢这第二个说法。（笑声）

25. 巴菲特与比尔·盖茨的友谊是如何开始的

沃伦·巴菲特：第2个问题。

股东提问：下午好。我——对不起——我是来自爱荷华州苏城的斯图尔特·哈特曼。首先，我要感谢你们两位允许几位伯克希尔的员工向北迁移到苏城。我和科里·雷恩以及马克·西斯利一起工作。他们都是很棒的人。你们把他们训练得很好。巴菲特先生，您认识比尔·盖茨好几年了，可能比我们在座的任何人都花更多时间和他在一起。您是否觉得——？

沃伦·巴菲特：如果杰夫·雷克斯在这里的话，那就不一定了。我不知道。杰夫在吗？不管怎样，请继续。但我们确实有一位本地人，来自离这里30英里的地方，杰夫·雷克斯，他是微软的关键员工。我想他这周末在城里。我以为他在会场里。

股东提问：我无意做出那种宽泛的概括来引起争论。（笑声）

沃伦·巴菲特：我只是不想让杰夫觉得——我在试图排挤他。

股东提问：当然，当然。既然这样，我想我换个方式问。您是否愿意与我们分享您和盖茨先生的关系是如何开始并发展的？关于他的精神和竞争天性，您预计他会以多大的力度来捍卫他公司的地位，以应对政府和各州目前的反垄断诉讼？然后，对你们两位，包括芒格先生，在你们看来，政府和各州胜诉并将其公司分拆的可能性有多大？另外，既然芒格先生提到了，我想问，能否给我们更新一下公司白银头寸的情况及其作为投资的未来前景？（笑声）谢谢您打开这个话题的大门。

沃伦·巴菲特：好的，嗯，他也可以关上它们。（笑声）是的，我真的不太方便代表比尔谈论他将要做什么。事实上，我认为他和史蒂夫·鲍尔默都已经非常明确地表达了微软将会怎么做。所以我不想试图去复述、修改或添加任何东西。因为他们说话时知道自己说的是什么。我会相信他们的话。我真的不应该再添加任何东西。我认识比尔，是因为我的一个非常好的朋友，梅格·格林菲尔德，她是《邮报》的社论版编辑。大概10多年前，她有一次打电话给我。她说：“沃伦，”——她热爱华盛顿州，她是在那里长大的。所以她说：“我买得起第二套房子吗？”她现在住在华盛顿特区。所以她说：“我能在华盛顿买第二套房子吗？”

我说——她说：“我会把我所有的财务信息都寄给你。”我说：“梅格，你不需要。”任何问我是否买得起某样东西的人，他们都买得起。那些从来不问我的人，永远买不起。所以我说：“就去买吧。”“这会让你开心的。”于是她这么做了。然后一两年后，她想让我去看看，在她的温和鼓励下，她做了什么。所以我去了那里拜访。那是1991年的7月4日周末。他们举办了游行，她希望我看到的岛上的一切。她还邀请了一些其他朋友。她也是比尔父母的朋友。所以当我们回到那里时，我们去了胡德运河拜访他们，见见他的父母。我想比尔本来不想来。但凯·格雷厄姆要来。他想见她。

他不想见我。所以，他还是来了。然后我们立刻就很投缘。我们玩得很开心。我的意思是，他有一只黑猩猩，他想向它解释这些技术性的东西。但对他来说，我算是一只挺有趣的黑猩猩。所以，我们——他是个出色的老师。我们聊了好几个小时。我们就是很投缘。我发现他说的东西非常有趣。从那以后，我们一直相处得很愉快。我们一起打桥牌、打高尔夫。所以我可以告诉你，他在那些游戏中非常有竞争力。但我不能告诉你任何关于微软或其他任何事情。我对此了解不多。而且，如果我不知道什么私人的事情，谈论它也不合适。查理，你认识比尔。

查理·芒格：是的。嗯，我也不想为任何人代言。我碰巧非常同情微软在待决反垄断案中的立场。但是——（掌声）关于白银，我只能说，到目前为止，它是一段沉闷的旅程。（笑声）

26. 巴菲特和芒格谈针对微软的反垄断案

沃伦·巴菲特：关于微软案，我想说这一点。而且我已经向几个早些时候提出这个问题的新闻机构表达过这个观点。二十年前，这个国家对自己的世界经济地位确实有点自卑情结。我们谈论自己是一个满是翻汉堡工的国家。我们以为会失去钢铁工业和汽车工业。我们真的不太清楚美国如何融入那个看起来日本人和德国人在某种程度上正在抢我们饭碗的世界。你们很多人太年轻，不记得那个了。但在座的很多人会记得。当时我们对自己国家的经济状况非常沮丧。然后，这个，不管你怎么称呼它，信息时代或其他什么，由技术推动，到来了。我们简直把世界甩在了后面。我的意思是，我们如此遥遥领先，以至于很难想出谁是第二名。

所以我们有了——它在某种程度上，我应该说——改变了民族情绪。我们的繁荣在多大程度上归功于它，没人知道。但我认为在座的每个人都会同意，这很重要。而且这个时代——这个发展——在未来几年会变得越来越重要。它将推动世界上大部分事情的发生，并使这个国家成为世界领导者。就像我说的，你甚至看不到第二名是谁，而且它甚至跑得更快，以增加这种领先优势，带来所有随之而来的好处，你知道，我认为——我认为有些东西运转得非常好，可能不太适合过多干预。所以我不想拿一把斧头去砍一个在我看来正在以巨大方式拉着这个国家前进的东西。我只是不想干预成功。这是一个重要的成功。

这确实是一个非常重要的成功。查理和我在如何利用这一点方面可能不明白，比如购买那些未来10年或15年表现良好的公司。但我们知道有些公司会表现良好。我们当然知道它会为社会带来巨大的好处，即使它可能使商业利润降低，但使社会更有效率。我的意思是，这是一个巨大的优势。我希望这个国家拥有世界上最高效的行业，即使它可能会压低相对于低效系统的资本回报率。所以我们——我想我们俩都不会倾向于去干预一个正在运作的东西。

查理·芒格：我认为——（掌声）如果你从大局来看，从爱国角度讲，我们在收音机、立体声、电视机等方面完全输掉了，在其他许多主要行业也输给了日本人和其他国家，我们终于在一个全新的、美妙的领域——软件——取得了巨大的领导地位，全世界都需要它。而某个从美国政府领薪水的人却想出一个“好主意”，认为他们应该大幅削弱我们唯一一个赢得很大的地方。（掌声）他晚上回家，还为自己感到骄傲。（笑声）

27. 行业利润率整体收窄，GEICO反而受益

沃伦·巴菲特：好的，第3个问题。

股东提问：下午好。我是来自纽约的Joe Levinson。您在今年的年报中提到，GEICO面临的经营环境，尤其是定价方面，今年会变得更加艰难。我想知道，GEICO过去几年面临的这种艰难环境，是周期性的，还是有更结构性的原因需要我们担心？

沃伦·巴菲特：嗯，实际上，过去几年发生的事情是，情况异常良好。所以我认为现在发生的事情更像是一种回归常态。全行业的汽车保险利润远高于我认为可持续的水平，也高于我五年前预料会达到的水平。所以这个行业一度非常非常幸运。顺便说一句，这不一定对我们有好处。我们赚了比原本更多的钱。但行业上方也有一个大大的保护伞，以至于效率较低的竞争对手也做得非常好。我们认为利润率下降的环境一点也不糟糕。我们不喜欢一个行业上方顶着一个巨大的保护伞。我们希望最有效率的公司做得好，而效率较低的公司有很多问题。所以，我们对于汽车保险业务利润率下降并不不满意。我们认为它们应该下降。

只要我们认为，我们新增保单的成本低于这些保单未来对我们的净价值，我们就会继续这样做。我们会很乐意这样做。但在2000年，我们不会赚到像1999年那样多的钱，而1999年已经不如1998年了。但这并不——对我们来说，这没问题。因为我们希望成为长期的低成本生产商——这是我们的目标。我认为我们有很多方面都在朝这个方向努力，使我们能够做到这一点。在一个巨大的行业里，低成本生产商长期会做得非常好。接下来的问题只是——签约新客户并把它们纳入我们的体系需要花钱。然后我们必须把他们留在我们的体系里。我们每年也会流失一些。在某种程度上，这是一个沙漏问题。但这些都是等式的一部分。GEICO的等式从根本上来说是好的。

它不像几年前那么好，只是从整体盈利能力来看，因为整个行业头上没有那个巨大的保护伞了。但那个保护伞迟早会消失。它的消失对我们没有任何坏处。第二点是，正如我在报告中所指出的，我们获取客户咨询的成本比几年前更高了。我们早就知道会是这样。三年后，成本会比现在更高。所以我们相信要加大投入。我们相信我们能够以更低的成本吸引业务，并且以比大多数竞争对手（如果不是全部的话）更低的成本来运营业务。我们打算继续推进这一点。我在年报中说，我推测行业今年的赔付率可能会比去年差三个点。嗯，在1200亿美元的保费规模上，三个点就意味着36亿美元的利润差异，如果这个预测正确的话。这丝毫不会困扰我们。

实际上，我们不仅要承受行业恶化的这三个点，而且在此基础上，我们还会花更多的钱来招揽业务，这会让我们的短期数据看起来更糟糕。但是，你知道——最终，招揽这类业务要比那些每吨现金都在流失的电子零售商招揽客户有吸引力得多，他们的客户在我们这里的消费远远少于我们的客户，而且我敢说，他们的客户留存率也会低于我们的留存率。我们有一个非常好的商业模式。它不如几年前那么好。可能比几年后要好。但我认为，它仍然远优于大多数竞争对手的商业模式。我们在GEICO有一个很棒的机器。我们有一个出色的人在管理它，托尼·奈斯利。他是世界上运营这项业务最好的人。他从18岁起就在那里了。

他对如何运营这项业务了如指掌。我认识托尼很多年了。我从未听他说过任何不合理的话。这真的很有趣。如果你拿一大群智商140的人来说，他们实际做的事表现非常参差不齐。有些人说的东西大约90%的时间都很有道理。然后另外10%的时间，他们就发疯了。而托尼——托尼说的和做的一切都很有道理。他是伯克希尔的一笔巨大、巨大的资产。他正在使用一个非常非常强大的商业模式。查理？

查理·芒格：没什么要补充的。

28. 中美能源：回报“尚可”但不“惊人”

沃伦·巴菲特：好的，第4个问题。

股东提问：下午好，巴菲特先生，芒格先生。我叫Andrew Sole，来自纽约市。我想，如果你们不介意的话，能否谈谈中美能源。你们谈到过非常尊重这家公司的管理层。但是否可以详细说明一下，你们认为中美能源的长期竞争优势是什么？你们认为这家公司10年后会怎样？你们是否希望或打算让中美能源成为美国成本最低的电力供应商？

沃伦·巴菲特：嗯，你——对于发电环节的沉没成本，你没什么大作为。我的意思是，如果你有一组电厂，在美国，它们相对来说是低成本发电。但如果有别人有一个水电站什么的，具有与生俱来的优势，使得他们能够以比我们用煤在爱荷华州发电更低的成本供电，那也没办法。我的意思是，它——所以作为发电商，它的定位相对不错，但我们无法做任何事来特别、显著地改变与其他竞争对手相比的发电成本。但是——在一个向几乎全国每个消费者出售电力这种必需品的行业里，你不应该期望获得异常丰厚的利润。公用事业行业的整个理念就不允许获得超额利润。但我们认为这是一门很好的生意。我们确实认为，戴夫·索科尔在管理公司的这段时间里，展现出了能力，想出了很多有意义的各种事情、各种项目。不是每件事都能成功。但他的成功率非常高。

像他这样聪明的头脑，我们期望他随着时间的推移能想出更多的点子。但是，这不是那种能让你看到烟花般绚烂成果的领域。你知道，我们有可能在某一天有机会在那个领域做点大事，因为它是个大领域。它是一个你可以开出50亿美元支票的领域。所以它不像卖糖豆的生意。但我们是否会这么做，取决于很多事情，包括监管限制。因为这个行业有很多规则，从1935年的《公用事业控股公司法》开始。但也许有办法做一些非常大的事情。我们有合适的管理层来做这件事。我们有足够的财力去做这件事。我们拭目以待。我认为中美能源是一个非常——在我看来，我们很可能从中获得非常不错的回报。但我们应该不会获得超额回报，因为它不是那种生意。查理？

查理·芒格：没什么要补充的。

29. 我们可以用保险浮存金做几乎任何事情

沃伦·巴菲特：好的，第5个问题。

股东提问：巴菲特先生，我叫John Shayne，来自田纳西州纳什维尔。我想和其他股东一起，感谢你们取得的成就，也感谢你们为整个商业界树立的榜样。我的问题是关于浮存金的收益，以及它们是否可以投资于普通股。您以前被问过这个问题。有一次，我问过您类似的问题。我想至少还有一位股东也问过。但我想知道您能否再详细解释一下。如果我过去理解得没错，您说过，“是的，浮存金可以用来投资普通股。”我认为这是一个重要的问题，因为它会影响浮存金的内在价值。如果浮存金被锁定在固定收益中，它值一种价值。如果它某天可以投资于股票，那它就显然值多得多的价值。我难以理解的是，我认为你们一定有某种方法来确保保单持有人得到保护。

显然，你可以在市场低迷时将一切投入股市，而市场可能跌得更低。是否仅仅因为你们拥有的资本规模巨大，使得这种情况极其不可能发生？或者你们会用未来的保险收入、保费收入来支付理赔？你们会借钱来支付理赔吗？如果您能提供一些细节，或许我们能更好地理解你们的想法。

沃伦·巴菲特：是的。浮存金，绝不仅仅局限于固定收益证券。浮存金实际上可以用来做任何我们在任何特定时间认为最明智的事情。我们之所以能这么说，而其他保险公司不能，是因为我们拥有极其充裕的资本，以及与其他保险业务无关的其他盈利来源。所以我们完全可以把浮存金全部投资于股票。我们过去也这样做过，或者说几乎等同于那样。我们也可以把很大一部分投资于运营企业。我们可以把它放在任何最有意义的地方。但我们能这么做的唯一原因是我们拥有非同寻常的资本。而且我们债务很少。我们经营业务的方式，或者说思考方式，可能与90%的管理层不同。除了几个小例外，我们通常以合并报表的方式看待资产。我们看待资产和负债时，完全不会为具体的资产和负债建立联系。所以我们在伯克希尔的任务是尽可能廉价地获得负债。

我们想要所有能获得的、我们确信能够履行的、尽可能便宜的负债，再加上大量的资本。然后我们希望所有资产都能以最明智的方式被运用。我们不会，你知道，把资产端的十亿美元与负债端的十亿美元特定负债对应起来。有一两个例外，但那是在我们被要求这样做的情况下——但这是基本方法。所以，当查理和我在思考伯克希尔时，我们在想，我们如何能尽可能多地、尽可能便宜地获得资金，同时又绝不以任何方式危及我们在任何情况下、任何时候支付给任何人的能力？然后，我们如何以我们感觉最舒适的方式、以最好的回报来配置这些资金？这常常会是股票。过去就是这样。有时候，可能不是。我们找不到标的。但这就是目标。浮存金几乎在所有情况下都可以像普通股权益一样使用。

我们在思想上不会区分它们。这给了我们——这种灵活性给了我们一些优势，有时可能是相当大的优势，相对于我们的竞争对手。查理？

查理·芒格：嗯，是的，你可以从迄今为止的结果中看到这一点。我们过去利用过这个优势。我们希望未来也能利用它。

30. 对Liz Claiborne和Jones Apparel的投资

沃伦·巴菲特：第6个问题。

股东提问：嗨，我是来自康涅狄格州辛斯伯里的Kevin Pilon。我快速说一句，我非常期待查理的书。我希望它能详述他之前所作的那些演讲，关于你需要理解一定数量的模型才能在生活中取得成功（听不清）。我有两个问题，我会快速连续地问。因为第一个问题你们可能想跳过。第一个问题是，我想听听你们对品牌服装公司Liz Claiborne和Jones Apparel的兴趣，能否展开说说？第二个问题是，在目前所有的喧嚣中，你们能否评论一下房地美的未来？正如你们所知，每年都有新的喧嚣，比如30年期债券的回购、寻找新的基准、以及财政部表示机构证券可能并非由政府的完全信用和信誉支持等等。

沃伦·巴菲特：是的，我们——我们无法在一些问题上给你太多帮助。因为我们或许有些看法，但这些可能是不太方便谈论的事情。你提到的Liz Claiborne和Jones Apparel的投资，Jones Apparel是由GEICO的路·辛普森决定投资的。路为伯克希尔管理一个独立的股票投资组合。这些股票由GEICO持有。但显然，它们是伯克希尔账户上的。这个投资组合的规模远超过20亿美元。在某种程度上，可以根据路的意愿进行扩张或收缩。他完全独立地管理这个组合。他的薪酬基于这个组合的表现。他做出买卖决策，完全不需要和我商量，这正是我们喜欢的方式。有时，我们的决策会有重叠。但比如，当我第一次知道Jones Apparel时，我从来没读过这家公司的年报。我不知道他们是做什么的，什么都不知道。

但那是路的宝贝。他非常擅长管理资金。他是个我百分之百信任的人。所以我了解他的通用投资标准，和我的非常相似，但不完全一样，但非常相似。他对企业的熟悉程度，也和我的非常相似，但不完全相同。他管理着一个很好的投资组合。这让我生活轻松了一些，不必把这20多亿美元加到我正在头疼投资的其余资金上。Liz Claiborne的情况有点不同。某个周末，我接到一个电话，是关于购买一个大宗股票，有人要卖。我记得，我们在周一早上在伦敦买了它。它从未在任何交易所上报。我甚至不太确定交易是怎么发生的。但处理这事的经纪人在那边安排了交易。而且，你知道，他们的记录非常非常好。他们回购自己的股票。我喜欢他们经营的业务。

它不是可口可乐或者吉列那种生意，甚至也不是美国运通那种。但我们被提供以非常有吸引力的价格买入那只股票。结果很好。关于房地美的问题，坦率地说，我宁愿不深入讨论。因为它有很多政治色彩。查理？

查理·芒格：我和你一样，也可以跳过。

沃伦·巴菲特：好的。（笑声）

31. 伯克希尔的下一任CEO不会是“看守人”

沃伦·巴菲特：第7个问题。

股东提问：我是来自纽约州克罗顿的Garesh Paku。首先，关于——我只有几个问题。首先，关于继任问题。我简直无法想象你会允许别人在你之后，我是说在你“撞车”之后，抹掉你的画作。所以我想知道，你的继任计划的性质更像是一个博物馆的看守人角色吗？还是说更有活力？

沃伦·巴菲特：它会更有活力。不，我最不想要的就是一个看守人。那将是——不，我不会——我不希望那成为我的遗产。

32. 通胀对GEICO的潜在影响

股东提问：第二个问题关于通货膨胀。我理解您专注于具体业务，并且坚持不试图预测通货膨胀。我们很幸运地经历了连续的低通胀率。我想知道，考虑到大量资金在房地产、股票和其他地方流动，您是否担心通货膨胀，它会如何影响伯克希尔的保险业务，以及您能做什么来防范这些风险。

沃伦·巴菲特：我在预测通胀率方面的记录非常糟糕。所以，这不是我们决策的因素。通货膨胀加速对保险业务的主要危险在于会导致保费规模增加。保费规模增加基本上对我们有好处，尽管定价可能存在滞后，最终会补上等等。所以，除了我要提到的下一个因素外，通货膨胀对GEICO这样的公司不一定有害。当你进入长尾责任险领域，比如通用再保险可能有的业务时，通货膨胀会对那些早在四、五年甚至十年前产生的负债产生影响，它们需要以当前货币重新结算。显然，这会以一种不可预测的方式推高结算这些负债的成本。

通货膨胀对GEICO这样的公司的危险在于，在通胀期间，人们对所有东西都涨价感到恼火。有些东西他们可以采取行动，有些则不能。还有一些他们以为自己可以，但实际上不能。其中之一可能就是保险费用。所以，当人们看到汽车保险费用占其年度预算的很大一部分时，他们可能会对汽车保险体系非常不满。因为对于人们和全国几乎每个消费者来说，一份汽车保险单平均来说是很重要的。可能会给立法机构施加很大压力，要求他们采取各种措施，可能会从根本上改变这个体系。这不会减少相撞的汽车数量或造成的伤害或其他任何事情。但这是一种对高费率表达不满的方式。人们对这些费率会不高兴。这也可能反映在难以获得必要的保费上涨，以应对快速上升的成本。所以总的来说，我认为通货膨胀对汽车保险业务不利。

尽管你可以争辩说，GEICO——我想我第一次对GEICO感兴趣时，他们大约有——那是1951年，我写了一篇《我最看好的证券》。我想他们当时有大约17.5万张保单。我猜他们的业务量大约是700万美元，也就是每张保单大约40美元。现在，如果我们现在每张保单只收40美元，我们的保费规模——公司的价值会低得多。所以，不管怎样，它经历了从那个时期平均每张保单40美元，到现在平均每张保单1100美元，而行业并没有崩溃。由于通货膨胀和优秀商业模式的结合，它在货币价值上变得更有价值，而且在这个过程中没有被摧毁。尽管如此，我更喜欢无通胀的环境。从长远来看，这对整个世界更好。这也是我们的愿望所在。

然后我们有一种迄今尚未应验的担忧，即过去15年存在的条件可能导致通胀重新爆发，但迄今为止还没有。我对此会发生什么的了解并不比你多。查理？

查理·芒格：我也不知道任何情况。（笑声）

33. 国际扩张：有趣但不容易

沃伦·巴菲特：第8个问题。

股东提问：下午好，先生们。我叫Zeke Turner，即将在印第安纳州的泰勒大学完成大四学业。所以再有四个星期，我就毕业了。（巴菲特笑）作为一个金融专业的学生，我很欣赏你们对学术界投资教学的评论。那些方面肯定还有改进空间。我说这话时希望很少有研究生院招生官在听。但我确实想快速特别感谢一下，所有那些有智慧和勇气实际教授价值投资、并偏离有效市场理论的教授们。我真希望本杰明·格雷厄姆还在教书。很多问题都集中在技术及其对商业模式的发展上。我认为最大的影响可能在于经济全球化。这对我们今天所知的商业模式已经产生，并将继续产生重大影响。

现在，除了某些增长机会外，这可能对像See’s Candy或Nebraska Furniture Mart这样的公司影响较小，但对像吉列、可口可乐这样拥有显著国际业务的公司已经产生，并且很可能将继续产生巨大影响。我的问题是，鉴于国际扩张，你们的方法有何改变（如果有的话）？我特别感兴趣的是，在理解商业模式、理解经济前景以及与国际环境相关的经济风险方面，这引入了更大的难度。此外，你们会积极地在全球范围内寻找投资机会吗？

沃伦·巴菲特：是的。答案是，我们显然喜欢那些在当前规模下是好生意，并且有机会以类似的经济特征进行大幅扩张的企业。对于任何在美国存在已久的生意，在世界其他地方可能比这里拥有更多的机会（至少潜在地）。可口可乐增长得更快。哦，它在这里也增长得很好。但它在世界其他地方比这里增长得更快。吉列也是如此，仅仅因为我们是更成熟的市场。所以我们喜欢那些能够“旅行”的产品。有些旅行得好，有些则不然。我的意思是，这个世界在这方面令人难以置信。糖果棒似乎不太能旅行，你知道。软饮料旅行得非常棒。剃须刀片也是。但是吉百利巧克力棒在英国卖。而好时巧克力棒在这儿卖。对于某些产品，试图推销是非常困难的——事实上，在这个国家内部，这让我惊讶。我们谈论拥有一个流动的社会。人们一直在移动。

我们都在看同样的电视和其他的东西。Dr. Pepper在达拉斯的超市市场份额是18%多一点。而在波士顿，是0.6%。我是说，18比0.6，30倍的市场份额。Dr. Pepper已经存在很久了。你知道，人们来来往往。你怎么能在这个国家有这么大的差异？皇冠可乐，在芝加哥有3%，在底特律可能只有0.1%，距离只有几百英里，同样的人群等等。皇冠可乐也已经有75年或者至少50年了。甚至在同一个国家内部，你也会看到人们行为的这些令人难以置信的差异。所以，预测如何——如果你不能预测Dr. Pepper——如果你搞不懂如何让Dr. Pepper——如果我拥有Dr. Pepper，在达拉斯的超市里卖了18%的市场份额，而波士顿只有0.6%，这会把逼疯我，你知道。或者我想底特律是0.5%。那也会把我逼疯，尽管也许我应该庆幸在达拉斯有18%。只是——很难预测产品会如何“旅行”。

比如See’s Candy，你知道，我们在西部，特别是在加州，有着令人难以置信的市场渗透率。我们知道它是最好的糖果。但是盒装巧克力在这个国家就是卖得不好。年消费量很低。但似乎，如果我们能在加州赚很多钱，我们也应该能在纽约或宾夕法尼亚州赚些钱。但我们还没搞明白怎么做。我们尝试了很多方法。所以，答案是我们一直对地理扩张感兴趣，无论是在美国境内，还是在其他国家。这并不像看起来那么容易。

但当扩张的机会来临时，你就应该持续不断地努力。我们偶尔也会买入其他国家的股票。前几天，我给一位德国人写了信，我读到了关于他的生意。我从没见过他或别的什么。但听起来他有一门不错的生意。听起来他可能是我欣赏的那种人。所以我只是给他写了封信。也没有收到回信。但也许会有。可能性不大。但在我看来，如果他愿意回信并想做点什么，我会买下他的生意。我们非常愿意在世界任何国家做生意，只要我们认为我们理解那个公司治理体系、税收制度等细微差别。我们远远谈不上理解所有200个国家。但我们很愿意在很多国家做生意。几年前，我们看过日本一家非常重要的公司。另一个我认识的人买了它，并且做得非常好。那对我们来说是合理的。我们错过了。

我们会继续在国际上看东西。这很有意义。我们有大量资本需要配置。在这里找到机会的可能性更大一些。但我们可能会在这个国家之外找到一个大的。查理？