• 2005年股东大会
  • 上午场
    • 1. 欢迎致辞
    • 2. 女儿苏茜的底线
    • 3. 当天议程
    • 4. 巴菲特谈他不会谈论的内容
    • 5. 第一季度初步业绩
    • 6. 即将进行的保险收购
    • 7. 问答环节开始
    • 8. 巴菲特选择管理者的标准
    • 9. 巴菲特谈啤酒行业及其历史
    • 10. 来自对冲基金的竞争
    • 11. 巴菲特早期对股票的兴趣
    • 12. CEO应该更了解投资
    • 13. 中国石油投资
    • 标题：2005年股东大会
    • 第二部分/第五部分
    • 15. 税率并非伯克希尔分红决策的因素
    • 16. 美国贸易逆差的经济威胁
    • 17. 房地产市场的泡沫与非理性
    • 18. 巨灾保险：“一切都是相关的”
    • 19. 公共教育改革
    • 20. 比尔·盖茨在调查中超过丘吉尔、耶稣和拿破仑
    • 21. 零首付抵押贷款助长房价泡沫
• 2005年年度股东大会
  • 第3部分/共5部分
    • 24. 我们寻找有卓越业绩记录的管理者
    • 24. We look for managers with great track records
    • 25. 科隆再保险的股份
    • 25. Cologne Re stake
    • 26. 芒格为AIG辩护
    • 26. Munger defends AIG
    • 27. 房利美、房地美和住房抵押贷款乱局
    • 27. Fannie Mae, Freddie Mac, and the home mortgage mess
    • 28. 英国的报告要求是一个障碍
    • 28. UK reporting requirements are a deterrent
    • 29. 对他人的会计问题承担法律责任？
    • 29. Legal liability for someone else’s accounting?
    • 30. 投资于你自己，忽略资产配置
    • 30. Invest in yourself and ignore asset allocation
    • 31. 午餐休息
    • 31. Lunch break
  • 下午场
    • 1. 问答继续
  • Afternoon Session
    • 1. Q&A resumes
    • 2. 通胀高企时我们会“表现不错”
    • 2. We’ll “do pretty well” when inflation is high
    • 3. 巴菲特：不要做空美国
    • 3. Buffett: Don’t bet against America
    • 7. 伯克希尔有史以来最成功的投资：GEICO 和阿吉特·杰恩
    • 7. Berkshire’s best-ever investments: GEICO and Ajit Jain
    • 8. 纽约证券交易所不应以盈利为目的
    • 8. NYSE should not being trying to earn a profit
    • 9. 巴菲特（民主党）和芒格（共和党）都支持社会保障
    • 9. Buffett (D) and Munger (R) both endorse Social Security
    • 10. 不要责怪评级机构
    • 10. Don’t blame the ratings agencies
    • 11. 我们喜欢我们的股票，但现在不会买入更多
    • 11. We like our stocks but aren’t buying more now
    • 12. “我不认为黄金是价值储存手段”
    • 12. “I don’t see gold as a store of value”
    • 13. 目前没有股市泡沫，但也没有便宜货
    • 13. No stock bubble right now, but no bargains, either
    • 14. 房地产的“泡沫估值问题”
    • 14. “Bubble valuation problems” for real estate
    • 15. 全球繁荣有利于美国
    • 15. Global prosperity helps the U.S.
• 2005年年度股东大会
  • 第五部分
    • 17. 为什么伯克希尔的董事会更好
    • 17. Why Berkshire’s board is better
    • 18. 因录音带更换导致的短暂中断
    • 18. Short gap due to tape change at time of recording Text on screen: “Tape Change”
    • 19. 盖茨很聪明，但我们必须坚守“能力圈”
    • 20. 如果公司董事需要那笔钱，他们就不独立
    • 20. If corporate directors need the money, they’re not independent
    • 21. 为什么我们保留表现令人失望的公司
    • 21. Why we keep companies despite disappointing results
    • 22. 买入股票和买入公司在道德上的区别
    • 22. Moral distinction between buying a stock and a company
    • 23. 芒格的人生智慧集锦
    • 23. Munger’s collected wisdom
    • 24. 制药行业的未来“太难了”
    • 24. Future of pharmaceuticals is “too hard”
    • 25. 投资没有“难度系数”调整
    • 25. No “degree of difficulty” adjustment for investing
    • 26. 避免情绪性投资陷阱
    • 26. Avoiding emotional investment traps
    • 27. 低国债收益率是一个谜
    • 27. Low Treasury yields are a mystery
    • 28. “有限”保险
    • 28. “Finite” insurance
    • 29. 巴菲特：我会犯错，但不会为决策而纠结
    • 29. Buffett: I make mistakes but don’t agonize over decisions
    • 30. 房地产经纪业务将变得“更大”
    • 30. Real estate brokerage will get a “lot bigger”

WARREN BUFFETT: Morning. I’m Warren, he’s Charlie. We work together. We really don’t have any choice because he can hear and I can see. (Laughter) I want to first thank a few people. That cartoon was done by Andy Heyward who’s done them now for a number of years. Andy writes them. He goes around the country and gets voices dubbed in. It’s a labor of love. We don’t pay him a dime. He comes up with the ideas every year. He’s just a terrific guy. He’s unable to be here today because his daughter is having a Bat Mitzvah. But he’s a very, very creative fellow. He did something a few years ago called “Liberty’s Kids.” And if you have a child or a grandchild that wants to learn American history around the time of the Revolution, it’s a magnificent series. I think it’s maybe as many as 40 or so half-hour segments and it’s appeared on public broadcasting. It will be appearing again. You can get it and video form.

And, like I say, it’s just a wonderful way to — I’ve watched a number of segments myself. It’s a wonderful way to get American history. The only flaw in it is that the part of Ben Franklin is handled by [former CBS News anchor] Walter Cronkite, and Charlie is thinking of suing. A little bit upsetting when Charlie is available. Incidentally, we have “Poor Charlie’s Almanack” next door in the exhibition hall. And it’s an absolutely terrific book that Peter Kaufman has put together. And I think it’s going to be a seller, a huge seller, long after most books have been forgotten. It’s Charlie at his best. And Charlie’s at his best most of the time, but it’s a real gem. I want to thank Kelly Muchemore, who puts all of this together. I don’t give it a thought. Kelly takes charge of this. She works with over 200 people from our various companies that come in and help make this a success. She does it flawlessly. As I mentioned in the annual report, Kelly’s getting married in October.

So this is just a warmup. I mean, we’re expecting a much bigger event than this come October.

WARREN BUFFETT: I want to thank my daughter Suze, who does millions of things for me. She puts together that movie. She does draw the line, occasionally. A few years ago — we have a dinner at [Omaha steakhouse] Gorat’s the day after the meeting. And we were in having — the whole family was there — having dinner. The place was packed and there was a big line that had formed outside. Be sure not to go to Gorat’s unless you have a reservation tomorrow, because they’re sold out. But the big line had formed and it started raining cats and dogs. And the waitress came to me. We were eating. Waitress said, “I got to tell you,” she said. “It’s raining like crazy outside and there’s a long line and [Walt Disney CEO] Michael Eisner is standing out there getting soaked.”

So I turn to Suze — and Michael and Jane [Eisner] are friends of my mine, good friends — and I said to Suze, “Why don’t you go out there and help them out before they get drenched.” And she looked at me and said, “I waited in line at Disneyland.” (Laughter) That seems to strike a responsive chord.

WARREN BUFFETT: We’ve flipped things this year. We’re going to have the business session at about 3:15. The plan is to have questions and answers. We have 12 microphones here. We have an overflow room that’s filled also, so we got another few thousand people there. We’ll break at noon and when we break at noon — and anybody that’s been in the overflow room that wants to come in here, they’ll be, I’m sure, plenty of seats in the afternoon session. We will start the questioning as soon as I get through with a few preliminary remarks. We’ll go to noon. We’ll take a break, you’ll have lunch. Many people find that it helps the digestion to shop while you eat. And we have thoughtfully arranged a few things next door that you can participate in while you eat your lunch. Even if it doesn’t help your digestion, it will help my digestion if you shop during that period.

WARREN BUFFETT: During the question period, we can talk about anything that’s on your mind. Just, there’s 2 1/2 subjects that we can’t talk about. We can’t talk about last year’s Nebraska football season. We’ll correct that next year. But that’s off limits. We can’t talk about what we’re buying and selling. I wish we were doing more of it, but we’re doing a little, and I’ll make reference to something on that a little later. And finally, in connection with the investigation into the insurance industry practices that’s taking place, there are broad aspects of it we can talk about. I can’t talk about anything that I or other people associated with Berkshire have disclosed to the investigators. And there’s a very simple reason for that: to protect the integrity of any investigation like this, they do not, the investigators, do not want one witness talking with other witnesses, because people could tailor their stories or do various things.

And so, witnesses are not supposed to talk to each other and, of course, if you talk — we don’t do that. And then beyond that, if we were to talk in a public forum, that could be a way of signaling people as to what you’ve said and then they could adapt accordingly. So investigators, one thing they like to do, is they like to work fast if they can because they don’t want people collaborating on stories . And they — and to protect the integrity of the investigation, we won’t get into anything that’s specific to something that I or people associated with Berkshire may have told the authorities. But there may be some broader questions that that we can talk about.

WARREN BUFFETT: I can give you a little preliminary view of the first quarter with certain caveats attached. These figures — our 10-K — or 10-Q — will be filed in the end of next week. And I caution you that, particularly in insurance underwriting, it’s been a better quarter than — considerably better quarter — than I would normally anticipate. One of the reasons for that is that our business actually does have some — the insurance business has some — seasonal aspect. Now, it doesn’t have a seasonal aspect, particularly, at GEICO or at National Indemnity primary business. But when you get into writing catastrophe business, and we’re a big writer of catastrophe business, the third quarter — the biggest risk we write in big cat area is hurricanes. And those are concentrated — they’re actually concentrated in the month of September. In this part of the world, 50 percent of the hurricanes, roughly, occur in September and about maybe 17 and-a-half percent in October and August, and the balance, maybe, in November and July. But there’s a concentration in the third quarter.

So when we write an earthquake — I mean when we write a hurricane policy, for example — we may be required to bring the earnings in monthly on the premiums. But all of the risk really occurs — or a very great percentage of it — late in the third quarter, and we don’t have any risk in the first quarter of hurricanes. So we earn some premium during that quarter that really has no loss exposure. And then we get that in spades come September. Even allowing for that we had an unusually good quarter. And I would still stick by the prediction I made in the annual report where I said that if we don’t have any really mega catastrophes, I think we’ve got a decent chance of our float costing us zero or less this year, which means, in effect, we have 45 billion or so of free money. In the first quarter, our insurance underwriting income — and all of these figures are pretax — our insurance underwriting income came to almost $500 million, which was about 200 million better than a year ago. And GEICO had a very good quarter for growth. We added 245,000 policyholders, which is almost 4 percent, in one quarter to our base.

We were helped very much by this huge reception we’re getting in New Jersey, because we weren’t in there a year ago, so we’re getting very good-sized gains there. We’re not getting 4 percent in a quarter from around the country, but the boost from New Jersey took us up to that. And GEICO actually wrote at a 13 percent underwriting profit in the first quarter, which is considerably better than we expect over the full year. And we’ve reduced rates some places. And it’s been an extraordinary period for auto insurers, generally. But all of our companies in the insurance business did well in the first quarter. Our investment income was up something over 100 million pretax. Our finance business income was up, maybe, $50 million pretax. MidAmerican was about the same. And all of our other businesses, combined, were up about — close to $50 million pretax, led by Johns Manville, had the biggest increase. That businesses is very strong, currently. So if you take all of our businesses before investment gains, which I want to explain, if you take them all before investment gains, our pretax earnings were up 400 million or a little more.

Now, investment gains or losses: we don’t give a thought as to the timing of those. We take all investment actions based on what we think makes the most economic sense, and whether it results in a gain or a loss for quarter is just totally meaningless to us. A further complicating factor, slightly complicating factor, is that certain unrealized investment gains or losses go through the income statement, whereas others don’t. That’s just the way the accounting rules are. Our foreign exchange contracts are valued at market, really, every day, but you see it at quarter end. And those foreign exchange contracts, which total about 21 billion now, a little more than 21 billion, had a mark-to-market loss of a little over 300 million in the first quarter. And they bob up and down. I mean, sometimes they bob as much as 200 million or more in a single day. And those mark-to-market quotations run through our profit and loss statement. Whereas if we own some Coca-Cola stock and it goes up or down, that does not run through our income statement. But with foreign exchange contracts, it does.

So there’s a $310 million mark- to-market — it shows as realized, it actually isn’t — investment loss on that. And overall, the investment losses, including that 310, came to about 120. In other words, there was 190 million, or something like that, in other gains. As I say, that means — at least to us — that means nothing. And to underscore that point, if later in the year the Procter and Gamble-Gillette merger takes place, we are required under accounting rules, when we exchange our Gillette for Procter and Gamble stock, we are required under accounting rules to show that as a realized gain. Now that will show up as, probably, four-and-a-fraction billion dollars. We haven’t realized any gain at that time, in my view. I mean, we’ve just swapped our Gillette stock for Procter and Gamble stock, which we expect to hold for a very long time. So it’s no different, in our view, than if we’d kept our Gillette stock. But the accounting rules will require that.

So if in the third quarter of this year the P&G-Gillette merger goes through, you will see this very large supposed capital gain recorded in our figures at that time. And I want to assure you that it’s meaningless and you should ignore that as having any significance, in terms of Berkshire’s performance. So, first quarter has gone by. We’ve got a good start on operating earnings this year. We won’t earn at the rate of the first quarter throughout the year, in my view. I think it would be very unlikely, in terms of operating earnings. But the businesses are performing, generally, very well.

WARREN BUFFETT: One other thing I should mention, and then we’ll get on to the questions, that we can’t announce the name, because it isn’t quite complete in terms of the other party, but we will probably announce, very soon, an acquisition that is a little less — somewhat less — than a billion dollars, so it’s a huge deal, in reference to Berkshire’s size But it is in the insurance field. I mean, we love the insurance business. It’s been very good to us. We have some terrific managers in that field. You’ll see it in the first quarter figures, but you’ll also see how we feel about the business by the fact that this acquisition, which I would say is almost certain to go through, will probably get announced in the next few weeks. We’re looking for bigger acquisitions. We would love to buy something that cost us 5 or $10 billion. Our check would clear, I assure you. I think we ended the quarter with about 44 billion of cash, not counting the cash in the finance operations.

So, at the moment, we’ve got more money than brains and hope to do something about that.

WARREN BUFFETT: Now we’re going to go around the hall here. We’ve got 12 microphones and — get oriented here — and we’ll turn the spotlight on the microphone that is live. People can line up to get their questions asked. I think we’ve got two microphones, also, in the overflow room. And like I say, after lunch everybody should come in here because there’s enough people that get so enthralled with shopping that they don’t return. They’d rather shop than listen to me and Charlie, and we’ll have plenty of seats for everybody in this main hall after lunch. And so, with that, let’s go to — have I forgotten anything, Charlie?

CHARLIE MUNGER: No.

WARREN BUFFETT: OK. (Laughter) That may be the last you hear from him. You never can tell.

WARREN BUFFETT: We’ll go to microphone number 1, please.

AUDIENCE MEMBER: Simon Denison-Smith from London. You talk a lot about the importance of selecting terrific managers. I’d just like to understand what your three most important criteria are for selecting them, and how quickly you can assess that.

WARREN BUFFETT: Yeah. I’ll give you two different answers. The most important factor, subject to this one caveat I’m going to give in a second, is a passion for their business. We are frequently buying businesses from people who we wish to have continue manage than them and where we are, in effect, monetizing a lifetime of work for them. I mean, they’ve built this business over the years. They’re already rich but they may not be rich in the liquid sense. They may have all their money, or a good bit of it, tied up in the business, so they’re monetizing it. They may be doing it for estate reasons or tax reasons or family reasons, whatever. But we really want to buy from somebody who doesn’t want to sell. And they certainly don’t want to leave the business. So we are looking for people that have a passion that extends beyond their paycheck every week or every month for their business. Because if we hand somebody a hundred million or a billion dollars for their business, they have no financial need to work. They have to want to work. And we can’t stand there with a whip.

We don’t have any contracts at Berkshire. They don’t work, as far as I’m concerned. So we hope that they love their business and then we do everything possible to avoid extinguishing, or in any way dampening, that love. I tell students that what we’re looking for when we hire somebody, beyond this passion, we’re looking for intelligence. We’re looking for energy. And we’re looking for integrity. And we tell them, if they don’t have the last, the first two will kill you. Because if you hire somebody without integrity, you really want them to be dumb and lazy, don’t you? I mean, the last thing in the world you want is that they are smart energetic. So we look for those qualities. But, we have generally — when we buy businesses, it’s clear to us that those businesses are coming with managers with those qualities in them. Then we need to look into their eyes and say, do they love the money or do they love the business? And if they love — there’s nothing wrong with liking the money.

But if — what it’s really all about is that they built this business so they can sell out and cash their chips and go someplace else, we have a problem, because right now we only have 16 people at headquarters and we don’t have anybody to go out and run those businesses. So we — it’s necessary that they have this passion and then it’s necessary that we do nothing to, in effect, dampen that passion. Charlie?

CHARLIE MUNGER: Yeah. The interesting thing is how well it’s worked over a great many decades and how few people copy it. (Laughter and applause)

WARREN BUFFETT: Go to microphone 2, please.

AUDIENCE MEMBER: Good morning, Warren and Charlie. My name is Walter Chang and I’m from Houston, Texas. Can you describe how you made your investment decision to invest in Anheuser-Busch and how you estimated its intrinsic value? How long did it take you to make this decision? And is Budweiser inevitable, like Coca-Cola?

WARREN BUFFETT: I’m still drinking Coca-Cola. The meeting might get a little exciting if I we were drinking Bud here. (Laughter) We don’t get into much in the way of description of things we might be buying or selling, but the decision takes about two seconds. But I bought 100 shares of Anheuser about — I haven’t looked it up — but I would say, maybe, 25 years ago when I bought 100 shares of a whole lot of other things . And I do that so I can get the reports promptly and directly. You can get them to your brokerage firm, but I’ve found that it’s a little more reliable to put the stock in a direct name. So I’ve been reading the reports for at least 25 years and I observe, just generally, consumer habits, and at a point — currently, the beer industry sales are very flat. Wine and spirits have gained in that general category at the expense of beer. So if you look at the industry figures, they’re not going anywhere. Miller’s has been rejuvenated to some degree.

So Anheuser, which has had a string of earnings gains that have been quite substantial over the years and market share gains, is experiencing, as they’ve described — and they just had a conference call the other day — is experiencing very flat earnings, having to spend more money to maintain share, in some cases, having promotional pricing. So they are going through a period that is certainly less fun for them than was the case a few years ago. And it’s a fairly easy-to-understand product and consumer behavior is fairly easy to understand. It’s a very, very — exceptionally strong business. In fact, what’s happened in the beer industry over the last 50 years has been fascinating to me and to Charlie because this is a brewing town that we grew up in, and Charlie knew the members of the Storz family, a number of them, well. Storz had over 50 percent of the Omaha market in beer post-World War II and then basically disappeared as the national brands took over. So it’s an interesting phenomenon. Beer business is not going to grow significantly in the U.S.

Worldwide, beer is popular in a great many places, and Anheuser will have a very strong position in it. But I would not expect the earnings to do much for some time, but that’s fine with us. Charlie?

CHARLIE MUNGER: Yeah. At our scale of operation now, if we’re ever going to buy into a terribly well-regarded company, we almost need a little patch of unpleasantness. (Laughter)

WARREN BUFFETT: That’s been the best time to buy Berkshire, incidentally, too. I mean, we do — What we’re looking for is businesses with a durable competitive advantage. I don’t think there’s any question that Anheuser has a very, very strong consumer position. Now, as I said, Miller has been rejuvenated to some degree. But the other thing about it is, of course, in beer you do not see the prevalence of private labels or generic products that you see in a great many consumer products that are being — that had strong positions over the years, that are being attacked . That’s a small plus. But beer consumption per capita is going no place. And there’s nothing that will change that. Interestingly enough, the average person in this climate drinks about 64 ounces of liquid a year. And I think it’s roughly 27 percent of that will be carbonated soft drinks. So almost — and, of course, of that Coca-Cola will be about — Coca-Cola products — will be 40odd percent.

So, of the 64 ounces of liquid that Americans are drinking every day, you can figure something like 11 ounces of that, man, woman, and child, will be a Coca-Cola product. Beer, as I remember — I could be wrong on this — but I think beer is about 10 percent of all liquids. So, one out of every 10 ounces that’s consumed by Americans of any kind of liquid is, I believe, is beer. Coffee, incidentally, despite what you read about — you know, the popularity of Starbucks, which is very real, of course, — but coffee has just gone down and down and down over the last 30 or 40 years. Charlie, you have any thoughts about your consumption habits? That you can talk about? (Laughter)

CHARLIE MUNGER: Well, there are people here that may remember Metz beer. In this country, we had more breweries — there were hundreds — and small places would have two or three brands. And this trend toward concentration into a few giants is, I think, permanent.

WARREN BUFFETT: Yes. Schlitz was number one, as I remember, after World War II, for a while. I think Anheuser was number four at that time. There’s an interesting book, if you’re a beer enthusiast, it came out a few years — a few months — ago, maybe a little longer than that, by a Wall Street Journal reporter that sort of toured the country sampling beers. I don’t know how it affected his writing. But it’s a pretty good book, if you like reading about the history of beer.

WARREN BUFFETT: Let’s go to number 3.

AUDIENCE MEMBER: Greetings from Bonn, Germany. I’m (inaudible). Thank you for another great year added to your track record of investing. And thank you again for allowing us to be partners at these favorable terms. This year, I want to ask you another question about how you see Berkshire positioned versus others. Last year, I asked you how you see the increased competition for buying companies through the rise of the private equity industry and how that affects Berkshire’s ability to buy great businesses at fair prices, and you basically said that there are still enough business owners who would rather sell to Berkshire versus a private equity fund. This year, I would like to hear your views on the hedge fund industry. We see hedge funds going into all investment strategies. We know that you have spoken about the fees of the hedge fund industries, but I would like to hear from you how you see Berkshire positioned. Are returns in strategies like merger arbitrage, like convertible bonds — are returns going down because of the increased competition? And are there other factors where Berkshire can be unique versus the hedge funds?

WARREN BUFFETT: Well, that’s a great question. It’s the $64 question. There’s no doubt about it that there is far more money looking at deals now than five years ago, and they’re willing to pay out more for the good, but mundane, businesses that we’ve been successful at buying in the past. And you mentioned the private equity firms and they’re bigger than ever. The hedge funds have gotten into the game, to some degree. And if someone is auctioning off a business today — this has changed just very slightly in the last four or five weeks because of some change in the junk bond market, but not in any significant degree — there were people lined up to bid on almost anything. In fact, you have private equity firms selling their businesses to other private equity firms. And there are a lot of companies that are being sold, that are being sold to someone who’s buying them to resell in a fairly short period of time. We can’t compete in that field and that’s, you know, that’s a source of distress to us. But that’s the way it is.

We will — it won’t go on forever, in our view. We still occasionally, as this deal I mentioned to you, the party on the other side and we just — we made a deal that did not go through an auction process. And we see that occasionally, but we don’t see it anything like we saw it four or five years ago. So, in terms of the near-term outlook for Berkshire, in terms of doing what it’s important that we do, do successfully, which is buy businesses and keep adding to this collection, we are not positioned favorably at all for that. And we do find it extraordinary, both Charlie and I have over the decades, just how fast things can change. There have been at least three times, maybe more, where it’s looked to me in my own career, where it looked like there was so much money sloshing around that it would be impossible to do intelligent things with money. And I actually terminated a partnership back at the end of 1969 because I felt that that the money was coming out, you know, of the woodwork.

There were all kinds of people that wanted to use it and compete, and I just didn’t feel we could do intelligent things. Within four years, I saw the greatest opportunities that I’ve ever seen in my lifetime. And we’ve had several experiences like that. You know, in 1998, when Long-Term Capital Management got in trouble in the fall of 1998 and other things were happening, you had incredible opportunities available in the investment world. Now, people were just as smart then. They had all these people with 150 IQs running around, and they actually had money. But the world became paralyzed for a short period. And you literally had so-called “on- the-run” Governments, which were the most recent issue, and “off-the-run” Governments, which were issued by the same government, the United States government, payable in dollars. You had a 30-basis point differential between the 30-year and the 29-and-a-half year. Both bonds issued by the U.S. government, you know, one a half-year shorter. Both quite liquid, but the “on-the-run” being more liquid.

And a 30-basis point differential in yield means about a three-point difference in price. Well, you wouldn’t believe that could happen in the United States of America in 1998, but it did happen. And I think I have a slide here. Mark, if it — if we can put that up — that shows what high-yield bonds —the situation in those, just really less than three years ago. In the fall of — yeah, there it is —I n the fall of 19 — in the fall of 2002, you had all these high IQ people in the financial world. You had lots of money. And I don’t know how easy it is to read those figures, but you’ll see that a bunch of high-yield bonds — this actually is a table that involves a friend of mine, but we were doing pretty much the same thing. And you can see that he was buying bonds at anywhere from a 25 percent to 60 or 70 percent yield basis, and within 12 or 14 months had sold these same bonds on a 6 percent yield basis. You don’t need to do that very many times in a lifetime.

But that was two-and-a-half years ago after all these people had graduated with MBAs, and studied modern finance theory, and had money coming out of their ears, and all had a desire to make money, and yet conditions like that could exist. We bought about seven billion of junk bonds during that period, because it was a fairly short period. But things do happen that change the landscape dramatically, I mean really dramatically, in financial markets from time to time. But right now, we are positioned very badly in terms of buying businesses, and it’s a big negative. And your Berkshire stock will not do as well under these conditions as it would do if the conditions of five years ago or 20 years ago existed. And I don’t have any magic solution for that except just to tell you what the facts are. Charlie?

CHARLIE MUNGER: Yeah. A lot of the buying by private equity funds in both real estate and stocks, and for companies, is fee-motivated. In other words, the investment manager will rationalize any price paid because he likes the extra fees for managing the extra assets. I have a friend that tried to buy warehouses with a lot of family money and he just stopped. Whatever he bid was always topped by some professional manager, managing other people’s money on a fee basis. So this is a very peculiar era where all these asset classes have been driven to very high valuations, by all historical standards. Some investment operations are very ethical in this (inaubible). I think Howard Marks is here today. He sent a lot of money back, and stopped soliciting money from his clients in certain activities where the opportunities went away. That’s the right way to behave, but it’s not normal.

WARREN BUFFETT: Yeah, I don’t think he’ll mind — I didn’t know Howard was here today — but those actually are Howard’s figures for one of his funds. And like I say, we were doing similar things. We didn’t know it at the time but we found out we had some similar positions later on. About five or six years ago, when the terms of these deals were somewhat different, I actually had a fellow call me, whose name most of you would recognize, and he started asking me questions about the reinsurance business because he was in — he said he was thinking about buying a given company, which got sold, and he didn’t really know much about the business, but that unless he spent these x dollars, he was going to have to give it back to his investors in a few months because the term of the initial sign up period expired at that point, and any unexpended funds were to be returned. And he was going to get 2 percent a year on those funds regardless of how they did. So he was looking at businesses that he didn’t understand with the hope that he can place the money.

Charlie and I are at a disadvantage in buying businesses because we have almost all of our net worth in the downside as well as the upside. You know, if we had a 2 percent fee and 20 percent of the profits and a goodbye kiss for the losses, you know, that’s a different equation than exists at Berkshire. We run it as if it’s 100 percent our money, which it is close to 100 percent of our net worth. And we will own the downside. And we don’t get paid for spending the money, we get paid for making money. And it’s tough — competing right now is tough and likely to be relatively futile, although we have one or two things that could happen that could involve the expenditure of real money.

CHARLIE MUNGER: I don’t think any of the businesses that have sold to us over the years, which are run by the kind of people we like being associated with, would have wanted to sell to a hedge fund. So there exists a class of assets out there that doesn’t want to deal with hedge funds or private equity funds. Thank God. (Laughter)

WARREN BUFFETT: Yeah, we’ve seen no deal anybody else has made the last year that we wish we had made. Now that was not the case 15 or 20 years ago when there used to be plenty of deals made with other people that we would have liked to have made if they’d come to us . But I have seen nothing that — I’ve seen nothing that if it sold for 10 percent less than the advertised price that we would have had any interest in buying. So we are in a different world right now.

WARREN BUFFETT: Number 4.

AUDIENCE MEMBER: I’m Dudley Shorter (PH) from Council Bluffs, Iowa. When you were younger, what first sparked your interest in investing, and what advice would you give a younger person if they wanted to invest in the stock market? Thank you.

WARREN BUFFETT: Well, I’m not exactly — I got interested probably when I was, maybe, seven or thereabouts. I wasted my time before that. (Laughter) It’s a little like W.C. Fields. When he inherited some money, somebody asked him what he did with it and he said he spent half of it on whiskey and the rest he wasted. (Laughter) So there I was, dawdling around. But I got — my dad [Howard H. Buffett] was in the business, so I would go down to his office, and I would see these interesting books, and I would read them and I would go down — he was on the fourth floor of what’s now known as the Omaha Building at 17th and Farnam, and on the second floor was Harris Supplement Company, and they had a board, and I would go down there. The market was open on Saturdays in those days, so I could — for two hours — so I could go down on Saturday, and I saw all these interesting things going across the tape. And I just read a lot.

I probably took every book in the Omaha Public Library, every book they had on investing — or the stock market — basically. I was very interested in the New York Stock Exchange. I thought maybe I’d want to become a specialist when I grew up and maybe I still will. But the — I took all the books out. I read them. And finally, when I was 11, I bought three shares of stock and I didn’t know — I was fascinated by the subject. My dad got elected to Congress, so now the library became even bigger, and I took all the books I could out of there on markets. And I used a chart and do all that sort of thing. And then, finally, I read [Benjamin] Graham’s book when I was at the University of Nebraska, “The Intelligent Investor,” when I was 19, and that just changed my whole framework. But the advice I would give is to read everything in sight. And to start very young. It’s a huge advantage in almost any field to start young.

If that’s where your interest lies, and you start young, and you read a lot, you’re going to you’re going to do well. I mean there are no secrets in this business that only the priesthood knows. I mean, you know, we do not go into temples and look at tablets that are only available to those who have passed earlier tests or anything. It’s all out there in black and white. It’s a simple business. It’s not — it requires qualities of temperament way more than it requires qualities of intellect. I mean, if you’ve got more than 125 IQ, you can throw away the rest of the points or give them to your other members of the family or do something because you don’t need it in investing. But you do need a certain temperament that enables you to think for yourself. And then you have to develop a framework — and I developed it from reading Ben Graham, I didn’t come up with it myself — very simple framework. And then you have to look for opportunities that fit within that framework as you go through life, and you can’t do something every day.

You know, you can learn every day, but you can’t act every day. And I talked about reading the annual reports of Anheuser-Busch for 25 years, but I’ve read the reports of Coca-Cola and Gillette and all kinds of companies long before we invested in them. And if you enjoy the game, you know, you’ll find that like playing bridge or playing baseball or whatever, if you don’t enjoy it you probably won’t do well on it. But I would advise you to start early. Read everything in sight. Look for the successful framework that’s been successful for people, and there’s nothing like Graham’s, in my view, and you’ll have a lot of fun and you’ll probably make a lot of money. Charlie?

CHARLIE MUNGER: Well, I’m at a little disadvantage here. Warren has made himself into kind of a dean of investors, starting as a boy, and he has a greater respect for the process than I do. I have a good bit of [economist John Maynard] Keynes’ attitude that money management is sort of a low calling, compared to being a surgeon or a lot of other things.

CHARLIE MUNGER: I think the corporate types — the corporate managers — ought to study investing better because they’d be better managers. And I think that everyone who thinks through the investment process learns more about how the world really works. And I think that’s very worth having. But I do not like as big a percentage of GDP as we now have going to money management and its attendant frictions. And I don’t like the percentage of the nation’s brainpower that is now in all of these different forms of highly-compensated money management. I don’t think it’s a good thing for the country, and I hate the fact that we’ve contributed to it by our own predilections.

WARREN BUFFETT: Charlie is only sitting up here next to me as part of his outreach program, actually. (Laughter) Please don’t take any pictures that you could blackmail him with, being associated with me. Charlie made a very good point there about how managers would do better if they understood investments. I find it absolutely fascinating, and I’ve seen this throughout my life, I’ve seen it close up. I will have friends who are CEOs of companies and they’ll have somebody else handle their money. If you say to them, you know, should you buy Coca-Cola or Gillette or something like that, they’ll say that’s much too tough. I don’t understand that sort of thing. What do I know about investing?

And then some investment banker walks in the next day with the idea they buy a $3 billion company, which is just buying a lot of shares of stock in one company, and they’ll run through some little two-hour presentation and turn it over to a strategic planning group and think that they are then the ones that should make that decision as to whether to buy multibillion-dollar businesses when they really don’t feel they’re qualified to make $10,000 decisions with their own money. And it’s extraordinary what you see in corporate America and the acquisition activity. It’s a little like they say about making sausage and making laws, it’s better unobserved. Charlie, you have any further thoughts on that? You’ve seen a lot of it with me. (Laughs)

CHARLIE MUNGER: Well, I do think that the present era has no comparable precedent in the past history of capitalism. I think we have a higher percentage of the attention of our intelligent classes into buying little pieces of paper and getting — trying to get rich doing it, and in promotional activities with big profit sharing fees. I can recall no past era which had a similar concentration of this type of activity. Can you, Warren?

WARREN BUFFETT: No, but I think you would say, probably, too, that we’ve seen sort of baby versions of this, something subsequently happened, that —

CHARLIE MUNGER: Oh, yes. If you want to talk about what are the future implications, a lot that I see now kind of reminds me of Sodom and Gomorrah, and —

WARREN BUFFETT: We weren’t there, incidentally. I mean — (Laughter)

CHARLIE MUNGER: No, but there’s a published account. (Laughter) And I think when you get as much sort of regrettable activity going on and sort of feeding on itself in frenzies of envy and imitation, that — it has happened in the past that there came bad consequences.

Because 30 years ago, when the — whatever the local daily would be had an absolute lock on the economics of the community, because it had the megaphone through which merchants had to talk if they were going to get their message across to their audience — at that time, rate increases, both circulation and advertising, were something that were almost a big yawn to most publishers. They did it annually. They did not worry about the fact that Sears or Walmart or Penney’s or whomever would pull their advertising. They did not worry that people would drop their subscriptions to the paper. And they went merrily along, increasing prices, and they increased them when newsprint went up and they increased them when newsprint went down, and it worked. And you got these very fat profit margins. And it looked like about as strong a business as you can imagine. Now publishers find themselves in a position where they agonize over rate increases, both in advertising and in circulation, because they’re worried about driving away advertisers into other media.

And they’re worried about people, when they get a 20 cent increase, you know, per month, or whatever it may be, in their circulation prices, deciding, well, I think I’ll just drop it. And when they drop it they don’t usually take it up again. So, that world has changed. And you could recognize the change in that world, simply, if you could get inside the mind of the publisher, in terms of how they felt about price increases. You can learn a lot about — you learn a lot about the durability of the economics of a business by observing the behavior of — the price behavior. I mean, you’re seeing that — talk about the beer business. Beer has moved up in price every year, but there have been some rollbacks in certain areas in the last year, which means that, you know, it’s getting a little bit more difficult to increase prices, even though they increase them at rates below inflation. And those are not — that’s not a good economic sign. Charlie?

CHARLIE MUNGER: I have nothing to add to that.

WARREN BUFFETT: OK, we’ll go to number 7.

AUDIENCE MEMBER: My name is Pete Banner (PH) from Boulder, Colorado. First of all, Mr. Buffett, Mr. Munger, we shareholders consider you our heroes. We appreciate and very much value who you are and what you do in the world. So, thank you.

WARREN BUFFETT: Well, thank you, Pete. And I will say in return that we think we’ve got the best group of shareholders in the world. And to some extent, it’s evidenced by the fact we have the lowest turnover, and, I think, the most knowledgeable group, incidentally, too, of shareholders. So, with that our mutual love affair can go on. (Laughter)

AUDIENCE MEMBER: Thank you very much. Secondly, with taxes as they are today, 15 percent on dividends, how do you feel about declaring a dividend?

WARREN BUFFETT: Oh, you were setting me up. (Laughter) No, there’s no question about the fact that dividends are lightly treated now for taxation purposes. But we have always said, and it’s been true, that if there were no tax on dividends, to this point at least, we would have followed an identical dividend policy, because the test with us is whether we think we can retain a dollar, and in turn — and have it worth, in present value terms, more than a dollar. If we can’t do that, we should distribute any money that we can’t — we can’t utilize on that basis. Now, when the cash piles up, like currently — it has currently — you can say it’s pretty dumb to hold, you know, billions of dollars at — last year the rates were less than 1 percent after-tax — and, you know, what are you doing for shareholders with that? And I would say that the burden of proof will certainly shift if, within a few years, we can’t use a lot more money intelligently than we are now.

But, if we were — at the time at which we feel that the present value of the earnings we retain is not greater than a dollar comes, and it could come, and it’s more likely to come when you get large like we are, then we should have a — not only a, you know, dividend policy that’s X percent of earnings, we should pay out very substantial sums. The test is whether the money can be used effectively within the business. So far, it has been. That doesn’t mean it was yesterday or the day before, but so far, it’s produced more than a dollar’s worth of market value for every dollar retained. But that will be discussed — our directors meet Monday — that will be discussed then, and you are certainly — if we sit here a couple of years from now and we have not successfully deployed more cash, then I think that the burden of proof has shifted dramatically to us to explain why we would be retaining earnings at that point. Charlie?

CHARLIE MUNGER: I’ve got nothing to add to that, too.

WARREN BUFFETT: Number 8?

AUDIENCE MEMBER: My name is Ola Larson (PH), from Salt Lake City, originally from Sweden. I read your annual report where you mentioned how the current account deficit, or a trade deficit, has to eventually come to an end. And in the report, you were reluctant to give views, a forecast of how this would come down from $2 billion a day. Would you, nevertheless, be willing to share some thought on what — how it might come down, if you have any views on this?

WARREN BUFFETT: Well, that really is the $64 question, because, we are, in my view — and Charlie doesn’t — he’s not as on board on this as I am, so it’s important that you listen to him on this, too. The — it does seem to me that a $618 billion trade deficit and a larger current account deficit, rich as we are, strong as this country is, that something will happen that will change that in a major way at some point, and that the longer that it goes before changing, the more likely it is that something fairly significant happens. But most economists — most observers — would still say that some kind of a soft landing is possible. Or they would say it’s likely. They never, to my mind, they never quite explain, you know, what the soft landing is. They just say it’s, you know, it’s likely to be a soft landing but it could be something different but we still think it will be a soft landing.

But I don’t know what a soft landing is, exactly, in the sense of how the numbers come down quite significantly, and if they don’t come down, the current account surplus — or deficit — means that we are transferring more and more wealth abroad and that we will, in addition to our trade deficit, we will, at some point, have a very significant deficit in terms of the net investment position that the rest of the world holds on us. So it becomes a compounding effect. I do recommend — there was an op-ed piece in The Washington Post on April 10 by [former Federal Reserve Chairman] Paul Volcker, and he has expressed himself some on this, and he gets into the question of whether it can be a soft landing or not. But I think he certainly expresses some real apprehension about whether a soft landing will be the likely result. In the kind of world we live in, with so much of the assets of the world, whether they be foreign exchange or whether contracts or whether they be stocks or bonds or junk bonds or whatever, I think as high a percentage is on what I would call a hair trigger now as has ever existed.

In other words, I think there are more people that go to bed at night with a position in foreign exchange, or bonds, or a carry trade, or stocks, or whatever, that some event that could happen overnight would cause them to want to change that position in the next 24 hours. I think that’s the highest, perhaps in history. Somebody [economist Thomas Friedman] has referred to it as the “electronic herd,” that it’s out there. I mean people can with — they can give vent to decisions involving billions and billions and billions of dollars, you know, with the press of a key, virtually. And that electric — I think that electronic herd is at an all-time high. I think that some exogenous event — it was almost Long-Term Capital Management in 1998 — but some exogenous event — and we will have them — will cause it — I think it could very well cause some kind of stampede by that herd. You can’t get rid — if you’re the rest of the world — you can’t get rid of dollars.

I mean, if you’re sitting in Japan, China, or someplace, and you own a lot of U.S. government bonds, if you sell them to somebody in the United States you get U.S. dollars. So you still have U.S. assets. If you sell them to somebody in France, you’ve now got euros but they’ve got the [debt.] You can’t you can’t get rid of those assets. But you can have people trying to head for the door very quickly with them, under certain circumstances. Volcker said, in this thing, he said in the second paragraph, “Yet, under the placid surface there are disturbing trends: huge imbalances, disequilibria, risks — call them what you will. Altogether the circumstances seem to me as dangerous and intractable,” and I emphasize intractable, “as any I can remember, and I can remember quite a lot.” Well, Paul Volcker can remember quite a lot. And I agree with that. I don’t — I have no idea — I have no idea on timing, whatsoever.

In economics, it’s far easier to tell what will happen than when it will happen. I mean, you can see bubbles develop and things, but you do not know how big the bubble will get. For example, you know, this happened five years ago in the market. So you — predicting timing is — I’ve just never been successful at it nor do I try to do it. Predicting what will happen, I think, is a much easier sort of thing. And I would say that what is going on, in terms of trade policy, is going to have very important consequences. It was not addressed in the last presidential campaign by either candidate in any meaningful way at all. Now, I’m not sure if, you know, you were standing up in front of the American people, and somebody is giving you three minutes to explain this whole situation, when 90 percent of your audience couldn’t define current account, you know, it’s not an easy game. But it’s an important one. Now, Charlie is less enthusiastic about our foreign exchange position, somewhat, than I am, so I want to yield the floor here for a significant period of time while he gives you the other view.

CHARLIE MUNGER: Well, I’m, if anything, a little more repelled than you are by the lack of virtue in the way our nation uses consumer credit and the way we run the public finances. And I have a feeling that eventually a lack of virtue is going to hurt one. Where we differ is that I agree with [18th century Scottish economist] Adam Smith that a great civilization has a lot of ruin in that, meaning it will bear a lot of abuse. And so I think there are dangers in the current situation that make it unwise for anybody to swing for the fences. But I don’t think that we have a certainty that the system won’t stand a lot more of the kind of abuse it’s getting now.

WARREN BUFFETT: What do you think the end will be?

CHARLIE MUNGER: Bad. (Laughter)

WARREN BUFFETT: I knew I could count on him. (Laughs) No, we are truly, in this country, like an incredibly, I mean incredibly, rich family that owns, we’ll say metaphorically, millions of acres of land. They can’t see, they can’t travel to the outer reaches of their domain. But, nevertheless, they sit on the front porch and wait for the produce to come in from this vast holding, and when they get it all they still want to consume about 6 percent more than everything that’s been produced on the farm. And they have the ability to do that by simply selling off a little piece of the farm every day, and every year, that they can’t even see. So they don’t feel any poorer at the end of the day or the end of the year, because it’s still, as far as their eyesight can see, they own everything that God ever created. And they can sell that little piece or they can mortgage it. They can send IOUs to these people that are giving them the extra goods to consume. And we are very, very, very rich family.

And we produce a whole lot and we consume a little bit more than we produce. And we trade away a little bit of the farm or put a little bit of a mortgage on every day and the rest of the world is happy to take a little piece of our farm or take a mortgage on it because it’s such a terrific asset and we’ve behaved so well over the years. And so they’re willing to work a little harder to send us something so that we can consume a little bit more than we produce. It’s been going on a while. It’s accelerated a lot in the last few years. And more and more the rest of the world is owning part of us and we’re going to have to service that ownership, either through interest if they took it in IOUs, or in some other way. And it can go on a long time. But if it goes on a long time, the world will own a good bit of us and our children will be paying, one way or another, for the fact that we got to consume more than we produced.

It could happen — you could have — you’ve obviously had some less interest in the rest of the world accepting dollars by the fact that the dollar has declined somewhat in value in the last few years. In other words, the investment in us is always going to be equal to the overconsumption. I mean, it’s an equation. But if people get a little less excited about one — enthused about one side of the equation — it reflects itself in the pricing mechanism. And the world has demonstrated a diminishing enthusiasm for dollars in the last few years as they get flooded with them. We send $2 billion out every day, whether we like it or not and whether they like it or not. Now, the question is, does that reach some tipping point at some point or does some exogenous event come about that causes people to want to rush for exits? Who knows? I have a hard time thinking of any outcome from this that involves an appreciating dollar, but, as Charlie will point out in just a second, there have been times when we’ve been surprised. Charlie?

CHARLIE MUNGER: Yeah, the counter-argument is that, what does it matter if the foreigners own 10 percent more of the United States, if, at that time, the total wealth of the United States is 30 percent higher than it is now. And so, people who have that point of view just roll with it. And some of them think that if we didn’t manufacture anything in the United States and just sat here running hedge funds, we would have a wonderful economy because it comports with Republican principles.

WARREN BUFFETT: We could cut each other’s hair, too, actually, I mean — But back in the late 18th century, obviously, the idea of taxation without representation caused a certain amount of trouble, and ownership of the rest of the world — by the rest of the world of this country would be seen as a form of taxation, I think, 20 years from now, by the people who resided here. If we — if, instead of fighting the Revolutionary War, we’d simply made a deal with England and said we’ll give you three percent or five percent of our national product forever and you let us be free and we’ll just mail it — send the royalty over every day — that might have looked like a good alternative to war in, you know, in 1776. But I don’t think that subsequent generations would have reacted well. I mean, something would have happened over time. And I have a feeling that the idea of America paying tribute to the rest of the world because of the overconsumption patterns of a previous generation seems to be — I don’t think that’s a particularly stable scenario.

But that’s why we have only 21 billion in foreign exchange contracts. Charlie might have a little less, or maybe none, if he were running it entirely, and I might have somewhat more, if I didn’t know I’d have him sitting up here next to me next year. (Laughs)

WARREN BUFFETT: Let’s go to number 9.

AUDIENCE MEMBER: Hello. My name is Johann Freudenberg (PH) from Germany. What do you think would be the consequences of a strong decline of the housing market for sales of carpet retailers and manufacturers? Thank you.

WARREN BUFFETT: Well, if there’s a strong decline in the housing market, my guess is that whatever we lose in carpet we’ll be making up for somewhere else, because it would — a lot of the psychological well-being, as well as the financial well-being, of the American people is tied up with the fact — or comes from the fact that they feel so good about what has happened with their home ownership over the years. And with many people it’s been, by far, the bestbehaving asset that they’ve had. So, if there is indeed some kind of a bubble and it’s pricked at some point, my guess is that we would feel that in various ways in our operating businesses, but that in terms of what we could do with our capital, the net effect to Berkshire might well be quite positive. We’re not big on macro forecasts. I mean, this foreign exchange thing is quite different than what we’ve done over time and the way we’ve made money.

So, we are — it isn’t like we’ve got some great track record predicting macro factors and have made a lot of money doing that. We’ve made money by looking at things like PetroChina, or whatever it may be, and just deciding that here is a very good business that’s selling at a very cheap price. Certainly at the high end of the real estate market in some areas, I mean, you’ve seen some extraordinary movement. And I’ve referred to this before, but 25 years ago or so we saw the same thing in farmland in Nebraska and Iowa and surrounding areas. We had people running from cash — “cash is trash” — and people wouldn’t, you know — they were worried about the fact that inflation was out of control in the late ’70s, and before [former Federal Reserve Chairman Paul] Volcker did his stuff, people were fleeing from cash. And one of the ways they gave vent to that fear was to rush into farmland. There was a farm about 30 miles north of here that sold for about $2000 an acre in, roughly, 1980.

And a few years later, I bought it from the FDIC for $600 an acre. And you can say, how can you go crazy about farmland? It’s going to produce about 45 bushels an acre of soybeans, about 120 bushels an acre of corn. And there’s no way you could dream about a tripling, or the internet causing, you know, cornmeals to go up or something of the sort. But people went crazy on it. And the consequences were huge, in terms of banks failing, lots of banks failing in this area, banks that had gone through the Great Depression. But the people went — they just want a little crazy. People go crazy in economics, periodically, in all different kinds of ways. And, you know, you had the Resolution Trust Corp. come out of the savings and loan nuttiness that took place in real estate, where they finance everything that was put before them. And, you know, I will not — I don’t know where we stand in terms of the residential housing cycle in that it has different behavior characteristics, simply because people live in the houses in many, a great many cases.

So it will not behave, necessarily, the same as other markets. But when you get prices increasing at far, far greater rates than construction costs or inflationary factors, sometimes there can be some pretty serious consequences. Charlie?

CHARLIE MUNGER: Yeah. It’s — in a place like Omaha, there’s not much of a housing price bubble, is there, Warren?

WARREN BUFFETT: No, there’s not been a bubble, but I would say that residential real estate, probably, has increased in price at a rate quite a bit faster than the general inflation rate.

CHARLIE MUNGER: Yeah, but if you get to Laguna, California or Montecito, California, or the better suburbs of Washington, D.C., you have a real asset price bubble. I have a relative that, to move to a good school district in the suburbs of Virginia, she had to pay four times as much as she can get from selling her nice Omaha house.

WARREN BUFFETT: Yeah. Well, I sold —

CHARLIE MUNGER: So that’s a price bubble.

WARREN BUFFETT: I sold a house a few months ago in Laguna for $3 1/2 million. Now it sold the first day, so I probably listed it too cheap. So don’t count on me for residential real estate advice. But that house, the physical house, would probably cost a half a million or thereabouts. So, in effect, the land went for $3 million, implicitly, and the land is probably on the area of 2000 square feet, which is a little less than one-twentieth of an acre. Now, you’ve got streets and all that sort of thing involved. But basically, I think that land sold for about $60 million an acre, which that fellow that you saw in the farm outfit in the movie finds like — sounds like a pretty, pretty fancy price for almost any kind of land. Charlie, you’ve witnessed it firsthand, though, out there.

CHARLIE MUNGER: Well, yeah. There’s — one of the Berkshire directors lives adjacent to what I regard as a pretty modest little house, which sold for $27 million recently. Now these are houses that look right at the ocean, and there isn’t a great deal of available shoreline in California, and there are a lot of people. But you have some very extreme housing-price bubbles going on. And you would think there might be a real possibility that it could go in the other direction someday.

WARREN BUFFETT: At $27 million, I’d rather stare at my bath tub. (Laughter)

WARREN BUFFETT: Number 10.

AUDIENCE MEMBER: David Winters, Mountain Lakes, New Jersey. How do you try to manage risk at Gen Re and National Indemnity to be comfortable and maximize returns? Especially, how do you prevent a catastrophic loss or unexpected correlation? Thank you.

WARREN BUFFETT: Yeah, well, that’s a very good question because we are doing things in different parts of our insurance operation where there is correlation. And there’s not only correlation among the insurance risks. I mean, just, you know, take a major, really major, earthquake in California, in the wrong place. There have been about 25 6.0s or larger in the last hundred years, but most of them don’t occur where a lot of people are. But if you get the wrong one in the wrong place, it would not only hit National Indemnity and General Re, as you mention, but it might very well have a severe effect on See’s Candy. It might very well have a severe effect on Wells Fargo. We don’t own Freddie [Mac] or Fannie [Mae] now, but we owned Freddie at one time. It could have had a severe effect on Freddie. It can have all kinds of secondary and tertiary effects that you might not think of initially. So, we find when there’s trouble, everything correlates.

And it’s — part of my job is to have at least a general idea of the sort of risk that the various enterprises might be running operationally, and then integrate that into my own notion of the risk that we run, in terms of investments, in terms of all kinds of things. And, you know, that is my job. The most likely mega-cat, at any time, is a hurricane. But we have more exposure to that. On the other hand, if you’re talking 25 billion and up, maybe 100 billion and up, insured catastrophes, you know, a quake might be just as likely as some Force 5 hurricane that would come in at the wrong place. But that — my job is to think absolutely in terms of worst case. And to know enough about what’s going on, in both investments and operations, to make sure that no matter what happens, you know, I don’t lose sleep that night, you know, over what can, you know, whether there’s a 9.0 quake someplace or whether there’s a Force 5 hurricane that actually goes up the East Coast and enters at places that very seldom does it enter.

Long Island, for example: huge amount of exposure. How often is Long Island going to, you know, really have a major hurricane? Not very often. I think there was one back in the ’30s, but there were potato fields there in the ’30s and now there’s all kinds of insured value. Everything will — everything that can happen, will happen. I mean, in terms of our — what we know of history in this country, last three or four-hundred years, and then with the most severe quake, by far, was at New Madrid, Missouri. And who would have guessed, you know, that that quake would happen? And there were two subsequent quakes that were far enough apart so that didn’t exactly seem like aftershocks. All three of those were higher than 8 on the Richter scale. Nobody thinks about that, but they’ve had them in Charleston, South Carolina. They’ve had, I mean, it’s — you will see things, maybe not in your lifetime, but if you take the centuries, some extraordinary things can happen. And it’s Berkshire’s job to be prepared, absolutely, for the very worst.

And, by and large, I would think hurricanes and quakes are the biggest thing now, but a few years ago we did not have nuclear, chemical, and biological risks excluded in policies, and we had huge exposure, subsequently gotten rid of. But we take on large risks. I’ll give you a couple of examples. Just the other day — and nobody else will write this stuff, basically, because they would want to reinsure it with somebody else and they’re not set up to do it — but one large airport, one large international airport, came to us and we wrote a policy for $500 million, excess of 2 1/2 billion, from any action that was not caused by nuclear, chemical, or biological sources. So, if that airport is taken out in some way, but not by nuclear, chemical, or biological activities, the first 2 1/2 billion, somebody else worries about, and we get the next half-billion. There’s a — sublimit is only a billion-six can be counted for business interruption. So you would need — and that airport would have to be out for a couple of years to have a billion-six of business interruption.

So you need 900 million of physical damage on top of that. But somebody is willing to buy that policy and there is a real risk. We insured the NCAA Final Four down in St. Louis against being canceled, not postponed, or having the games, those final four games, moved to another city. But if it was canceled totally, and again, not through nuclear, chemical, or biological, we would have paid $75 million. Same thing at the Grammys. I mean, we take on risks that very few people want to write. But in the end, we’re willing to lose a lot of money in one day, but we’re not willing to do anything that causes us any discomfort, in terms of writing checks the following morning. Incidentally, while I’m on the nuclear — while we’re talking about the pleasant subjects — I recommended in the annual report that book, “Nuclear Terrorism.” And if you go to lastbestchance.org, you can obtain, or will soon be able to obtain, a tape, free, that the Nuclear Threat Initiative has sponsored, which has a dramatization of something that is now fictional, but it’s not fanciful.

It’s something that could happen, and which the Nuclear Threat Initiative is working to minimize the chances of. And on that program, in addition to this dramatization of what could happen in that field, you have [former Senator] Sam Nunn and Senator [Richard] Lugar with [NBC News anchor] Tom Brokaw, discussing the subject. It’s an important subject. It didn’t get a lot of attention, again, in this last campaign, although I think both candidates fully recognize the importance. But we would regard ourselves as vulnerable to extinction, as a company, if we did not have nuclear, chemical, and biological risks excluded from virtually all of our policies, although we intentionally take on the risk periodically, but only in an amount that we feel we can handle. We do not write it and give it away for free. And we do not want to write it promiscuously, because there could be events happen that would make it impossible for our checks to clear the next day, and we’re not going to get ourselves in that position. Charlie?

CHARLIE MUNGER: Yeah. We’re likely to do better than most other people in dealing with what concerns you. We care more about it, that kind of correlation. We just naturally have minds that think about tidal waves in California, where they’ve never had one in modern California civilization. Can you imagine what a 60-foot tidal wave would do in California? There’s nothing physically impossible in having a 60-foot tidal wave in an earthquake zone, which California is in. But it’s never happened in modern history. But it’s the kind of thing that we do think about. And you think any other company has as much, as rigorous, nuclear and so on, exclusion as we do?

WARREN BUFFETT: Well, nobody’s attacked it any more vigorously than we’ve attacked, I would say. I mean, what you have here is, individually, we probably worry more about the downside than that just about any manager you can find. And collectively, you know, it’s Armageddon around here every day. (Laughs) But that’s — you know, we care about that. We’ve never used a lot of borrowed money. Back when I started out, I mean, I had $10,000. But I just didn’t want to borrow any significant amount of money. There’s no reason to. You know, we’re living fine. We were living fine when I had $10,000. And the idea that you risk what you need and is important to you for something that you don’t need and it is unimportant, is just craziness. And we try to run Berkshire that way. And you know, I had a 98- year-old aunt, my Aunt Katie [Buffett], that died last year. She had everything she had in Berkshire.

And the idea that I should be doing something to try and add a few dollars to my net worth, or a few percentage points to the record, and be risking the fact that she would go back to Social Security, is, you know — I just think that’s kind of crazy for a manager. But, you know, maybe if I had a two-and-twenty percent arrangement with my Aunt Katie, I’d be — differently, but I hope not. (Laughs)

WARREN BUFFETT: Number 11.

AUDIENCE MEMBER: Hello. My name is Martin Wiegand from Chevy Chase, Maryland. On behalf of the assembled shareholders, we appreciate you and the Berkshire staff hosting this weekend and would like to thank you for building this community of shareholders.

WARREN BUFFETT: Martin, thank you. (Applause) I should point out that I dated Martin’s aunt, but she only went out with me once. Maybe you could explain that, Martin. (Laughs)

AUDIENCE MEMBER: New board member Bill Gates has been talking about education reform in America, and columnist George Will quoted you in an article about Patrick Byrne’s efforts to reform education in America. Could you share with us some of your thoughts about these two efforts, or your efforts, to reform education? Thank you.

WARREN BUFFETT: Well, interestingly enough, we just dedicated a school here in Omaha yesterday which is named after my Aunt Alice, who taught in the Omaha public schools. And we’ve — I think we’ve maintained quite an excellent public school system in Omaha. We also have an outstanding parochial school system here. You know, it takes the interests of parents and, frankly, it takes the interests of the well-to-do in the school system to keep a first-class school system. I’ve said that, to some extent, a public — a good public school system is a lot like virginity. It can be preserved but not restored. In Omaha, we preserved it, but you preserve it by having the parents interested and involved in the public school system. And Patrick’s got an ingenious idea to make sure that more of the money goes to teaching and less to administration and overhead. There’s a variety of ideas around about how to correct a system where it’s broken.

And Charlie, as a big Ben Franklin enthusiast, has always said that an ounce of prevention is worth a pound of cure, and I think we’ve been spending that ounce of prevention, or providing it, here in Omaha. I think it’s a — you know, Charlie will have a lot more to say on this. I admire the fact that people like Patrick and Bill Gates and a lot of other people, John Walton and Teddy Forstmann, all kinds of people — Bob Wilmers, up in Buffalo — are attacking the problem. It’s probably the — next to the nuclear, chemical, and biological problem — I mean, it’s the number one problem of the country is making sure that the educational system is the best in the world. We’ve got the resources and we’re not providing it, we’re not delivering it. So, it’s very complicated when you operate through thousands and thousands of school districts and you work with many, many unions, and you’ve had, to a great extent in many areas, the rich opt out of the system and set up a separate system.

You know, I am not as concerned about the public golf courses in Omaha as I might be if I played them every day instead of playing at a country club. And if you have a two-tier school system, one for the rich and one for the poor, it’s going to be hard to pass bond issues that benefit the people that don’t have the money to send their kids to private schools. I’m a big believer in the public school system, though, in terms of equality of opportunity in this country. (Applause) Charlie’s thought about education. He’s actually come close to running a school. Cares about it enormously, so I’ll turn it over to him.

CHARLIE MUNGER: Well I learned something rather interesting about Omaha public schools on my way to this meeting. I stopped to sign some books in a warehouse in South Omaha, and one of the very nice people in the warehouse was married to an eighth grade teacher in the Omaha public schools. And we got to talking about “No Child Left Behind.” And he said his wife, this eighth grade teacher, had a very interesting system. For the numerous children who couldn’t read, she records “books on tape,” speaking slowly in her own voice. And when some children are reading the books, other children are listening to the tapes, and that way the children who listen to the tapes are not left out when they ask questions about what went on in the books Well, this is “No Child Left Behind,” in a sense, but it’s also a failure, in a sense. And I think it’s very hard for a civilization to fix the situation once somebody is in the eighth grade and can’t read. So I think there’s a lot of failure, even in relatively advantaged places like Omaha. And it’s very serious failure.

We never should have allowed it to happen.

WARREN BUFFETT: Yep. My friend Bill Ruane, who is here — I believe he’s here — is doing something extraordinary, in terms of a program he has teaching kids to read. In fact, journalists who are here should seek out Bill and learn something about the story of what he’s done in the last 10 years, in terms of moving reading abilities, and kids’ enthusiasm for reading, which is more important because it’s, you know — I talked about our managers and the important thing is that they have a passion for their business. Well, passion for reading can be developed and Bill has shown that in programs that he — I think he first started them in Harlem. He sort of adopted a block up there and went from there. And he would be a very interesting fellow to get some views from on this subject. You know, we’ve had this great success story in this country and a lot of it is because of people have had something closer to equality of opportunity in the United States than they’ve had in most parts of the world.

And you do not have equality of opportunity when my kids get to go to some school where I can attract outstanding teachers and where they’re in the company of other kids that are also motivated and they’re getting encouraged at home and all sorts of other things, and somebody else, who is born into a less advantageous family, really doesn’t have a chance. They go into something that’s close, maybe, to an armed camp where the teachers are just sort of pushing them through. And there’s no stimulus from the other kids except to do things that are counter to the interests of society. And that just isn’t a situation that really should be allowed to exist in a country where the GDP is almost $40,000 per capita

WARREN BUFFETT: Let’s go on to number 12. Oh, incidentally, I have to make one — It was mentioned about Bill Gates being a director and I did — I got a little survey here that came out. Pricewaterhouse and the Financial Times cooperated on the survey. And they asked CEOs around the world to choose — if they could pick anybody to choose from history or today to join their company’s board, who would they choose? And I’m happy to report that Bill came in number two. And, actually, number three was Winston Churchill. [Auto executive] Carlos Ghosn came in fourth. Jesus Christ came in fifth. Napoleon Bonaparte was sixth. And I won’t give you the rest of the list but —

CHARLIE MUNGER: Who was one?

WARREN BUFFETT: Well, one was [former General Electric CEO] Jack Welch. I knew you’d ask. (Laughs) But we didn’t ask Jack, we asked Bill. So, actually, I thought this quite an interesting list because I think many of the CEOs of the world would prefer people that are dead to be on their board. (Laughter and applause)

VOICE: It’s too funny.

So, you know, we’ll take an optimistic view of reserves, and that’s easy to do, at the end of the quarter and we won’t let him down and then he won’t look like a jerk in front of Wall Street. So we try to avoid that sort of thing. But even then, that is what we worry about. We don’t worry about this place making money. I mean, we’ll make money. And if we don’t, it’s my fault. That’s not that’s not the problem. The problem right now, in addition to the one we just talked about, the problem is deploying capital, and that’s my job, too. And, you know, I haven’t done a very good job of that recently, but with a little luck, you know, we will — and a different kind of market situation — we will get a chance to do that. Charlie?

CHARLIE MUNGER: Yeah. Well, if you stop to think about it, the history of much of which we don’t like in modern corporate capitalism comes from an unreasonable expectation, communicated from headquarters, that earnings have to go up with no volatility and great regularity — corporate earnings, I mean. That kind of an expectation from headquarters is not just the kissing cousin of evil. It’s the blood brother of evil. And we just don’t need that blood brother in our headquarters.

WARREN BUFFETT: Businesses do not meet expectations quarter after quarter and year after year. It just isn’t in the nature of running businesses. And, in our view, people that predict precisely what the future will be are either kidding investors, or they’re kidding themselves, or they’re kidding both. Charlie and I have been around the culture, sometimes on the board, where the ego of the CEO became very involved in meeting predictions which were impossible, really, over time. And everybody in the organization knew, because they were very public about it, what these predictions were and they knew that their CEO was going to look bad if they weren’t met. And that can lead to a lot of bad things. You get enough bad things, anyway, I mean. But setting up a system that either exerts financial or psychological pressure on the people around you to do things that they probably really don’t even want to do, in order to avoid disappointing you, I mean, I just think that that’s — it’s a terrible mistake. And, you know, we’ll try to avoid it.

24. We look for managers with great track records

AUDIENCE MEMBER: (Gap in video recording resumes in middle of question) — quality is largely innate. So if these characteristics are inherent and you were to attempt to consistently identify future great managers or entrepreneurs before there’s a track record, how would you go about doing it? And in particular, could there be a way to know that — before someone’s made a lot of money, before they built the business that they love and feel passionate about, that they will develop those types of qualities later in life?

WARREN BUFFETT: That’s a terrific question. And we have dodged it, largely, over the years by actually buying businesses from people where we’ve seen the record. In other words, I’m not sure I can go — in fact, I’m quite sure I can’t go — to an MBA class of 50 and sit down and talk with each one, examine their grades, examine their extracurricular activities, and whatever, talk to their parents, I’m not sure I could rank those 50 very well in terms of their potential for future business success. And, of course, some of it would depend on what areas they entered into in business. So, I think it’s tough. I think it’s tough to go out to the practice tee, where people are not actually hitting balls but just taking practice swings, and say which one is, you know, is a 2 handicap and which one’s a 15 handicap, and which ones, you know, can make it on the tour I think I can tell a little bit, maybe, but not — but it’s very hard to calibrate.

And I don’t think we’ve had much success, but we also haven’t tried very much, to identify people before they’ve had a record, to try and identify the ones that are superstars. Instead, we’ve taken the easy way, and we go — and if somebody comes to us with a business that’s done phenomenally for 10 or 15 or 20 years, or maybe for 50 years, and we’ve seen how — what their batting average is — we’ve actually seen they batted .350, or whatever it may be, in the major leagues. And we just make the assumption that we won’t screw it up by hiring them. And we also make the assumption that they’ll live to be 100 or 120 or something and we buy the business. And that’s far easier — it is far easier to tell the great baseball batters after you’ve seen a couple seasons of their batting than it is to go to a college — in college baseball teams or high school baseball teams — and pick out the superstars.

The one interesting thing, and I wish I could remember where I saw this study and it may not even be a valid study, but I do remember seeing something many, many years ago where they tried to correlate business success with various variables. And they took grades in school and whether they got MBAs and all that sort of thing, and they found that the best correlation was with the age at which they started their own business first. The people that got very interested in starting a lemonade stands, or whatever, tended to have better — it tended to correlate better with business success than other variables. We have found ourselves — we’ve got a lot of MBAs running businesses for us, but they ran them for a long time before we hired them or before we made the deal. And we’ve got others that never set foot in a business school. And I do think there’s a lot to wiring. I think there’s also a lot to working with the wiring you have and developing it over time. I don’t think that it’s all innate, and I don’t think you can’t improve.

I know you can improve on what you’re given at birth, but I do think an awful lot of it is wiring, more so than I would have thought 30 or 40 years ago. I’ve certainly seen it in business. I can — there are people, no formal business train — Charlie never went to business school, I mean, but he thought about it. I mean, I never heard him — Charlie say anything dumb about business yet, except when he disagrees with me. (Laughs) The truth is I’ve never heard him say anything dumb about business, period. And there are other people. I’ve never heard [GEICO CEO] Tony Nicely say anything dumb about business, ever. They just — they’re wired so that they — that the, you know — it doesn’t flicker. I mean, they get the answers. It doesn’t mean they can — you know, they’d be a great ballroom dancer or a great baseball player, you know, or a great politician, but they are wired for business. Charlie?

CHARLIE MUNGER: Yeah. Part of it is intelligence and part of it is temperament. I don’t know if Bill Ginn is in the audience, but by the time I was 14 years of age, I knew Bill Ginn would be rich. He was a classmate of mine in high school, and a very intelligent man, and he wanted to be rich. And he was sensible in the way he handled life. I think sensible people with the right temperament and the right intelligence, if they live long enough in our system, will get rich. But temperament is, I think to some extent, inherited, too. Don’t you?

WARREN BUFFETT: Yeah. His daughter, incidentally, is a partner with my daughter in a knit shop, which I hope you patronize while you’re — (Laughs) We’ve united the Ginn and the Buffett family. (Laughs) Charlie, when did you first think business was something of interest to you?

CHARLIE MUNGER: Very early. (Laughter) I loved games of chance and I love trying to learn how to win at them.

WARREN BUFFETT: Yeah. It’s interesting for me, you know, simply to think about the question of whether the Final Four of the NCAA will be will be canceled, as opposed to postponed or transferred in locale, and decide if we’re going to pay out $75 million the next day if it is canceled, and how much we want to receive in today to take care of that. And that probably wouldn’t interest — all kinds of people that wouldn’t be interesting to. And since my dad wouldn’t let me become a bookmaker, I went into investments. (Laughter)

25. Cologne Re stake

WARREN BUFFETT: Number 3.

AUDIENCE MEMBER: Good morning. Jens (PH) from Germany. After buying almost all of Cologne Re, how happy are you about the progress, and what are the plans for the remaining minority shareholders?

WARREN BUFFETT: Yeah. General Re, at the time we bought it in 1998, owned something in the 80s of Cologne Re, a large German company that they bought this 80-odd percent in, a few years earlier. It’s actually slightly more complicated than that because there was an arrangement where a certain purchase was deferred, but as a practical matter they owned in the 80s. Right now, Gen Re owns about 91 percent of Cologne Re. That’s a subject that, obviously, it’s not pressing with us, because we’ve owned it for seven years without taking our interest up, except periodically through small purchases. And there’s no particular reason to — why 100 would be better than 91 percent. But if the price is attractive and shares are offered to us, we will always contemplate buying it. But it’s not key to any strategy.

26. Munger defends AIG

WARREN BUFFETT: Number 4.

AUDIENCE MEMBER: I’m Christian Tukenberger (PH) from Switzerland, Europe. What do you think of the two insurance — reinsurance, AIG and Converium, from Switzerland? Thank you.

WARREN BUFFETT: Well, I’m going to give you a chance at a second question because I don’t really think I should comment on AIG. There’s, you know, they have said that they’re going to have their 10-K. They hope to have it by, I guess, today. I haven’t received any late word whether it’s been filed but they have — there’ll be more disclosure on the situation at AIG, and I really don’t know anything about what will be in that statement, and I’ll just — I’ll wait to read it. I’ll read it with interest. But I — I have no particular insights on that. Converium has had troubles in the United States, has been announced, but they also raised additional money. But again, I don’t really have any specific commentary on those two companies. Charlie?

CHARLIE MUNGER: Well, I’ll be bold enough to make one comment about AIG. (Laughter) I think whatever comes along, people are going to find that a lot that was very right was done over the years by AIG. There’s a lot of ability in that place.

WARREN BUFFETT: Oh yeah. Extraordinary. I mean, Hank Greenberg was — he was the number one man in insurance. I mean, he developed an extraordinary company, in his lifetime. It wasn’t that much when it was handed to him. And he became the most important factor, I would say, by some margin, in the property-casualty business. But in terms of evaluating where it stands now and what will be revealed when the 10-K comes out, I just have no idea.

27. Fannie Mae, Freddie Mac, and the home mortgage mess

WARREN BUFFETT: Number 5.

AUDIENCE MEMBER: Good morning. My name’s Mike Nolan. I’m here from Montclair, New Jersey with my 18-year-old son Brian, who’s experiencing his first Berkshire annual meeting. My question, and you touched on it a little bit in a couple of earlier questions, deals with the current regulatory environment in Washington, which appears to be growing much more negative on Fannie Mae, Freddie Mac, Farmer Mac, and so forth. What might the implications for the U.S. consumer specifically, and the U.S. economy generally, be if the GSEs are effectively bridled or significantly restricted from their past charters? Could this prick what you earlier referred, and some private economists are calling, a real estate bubble and what will be the fallout?

WARREN BUFFETT: Yeah. The GSEs, in effect, expanded their original charter and reason for being. The thought, originally, was that they would guarantee mortgages and they had this very limited, I think, two-and-a-quarter billion dollar line of credit from the Treasury. But they were they were brought in, to an extent, to do what FHA and VA had done for mortgages in their arena, was to give people confidence in borrowing money — or in lending money — far away from their own geographical location. I mean, when the local — when I borrowed money on my house in 19 — bought it 1958 — I mean, I went down to see Mr. Brownlee (PH) at the Occidental Building and Loan, and he, you know, he knew something about me, and he knew something about my parents, and he knew where the house was and all of that. But as the mortgage market became more institutionalized and it became more — the source of funds became geographically far more distant from the user of the funds, in order to have a market in which — which would be efficient, the GSEs were a very logical development.

And the GSEs came in, Freddie and Fannie, and the idea was that for a fee, which used to average about 25 basis points, they would guarantee these mortgages so somebody living 3000 miles away could buy them through securities and not worry about the individual property. And then, the portfolio operations developed over the following years and, of course, they enabled the GSEs to earn high rates of return on capital, because, in effect, the GSEs were looked at as government guaranteed so that people would lend them money without worrying about the degree of leverage employed. And, in effect, the GSEs became huge — they hugely developed what might be called the carry trade, using the government’s credit, in effect, and the spread between what they paid on their money and what they got on mortgages. So that became the dominant source of their earnings. They got very carried away with delivering promised rates of growth. I remember reading in the Freddie Mac report some years ago, where they talked about delivering in the mid-teens or low-teens or something like that.

And I thought to myself, you know, that this is madness, because you can’t do that when you’re running a big carry trade operation. Interest rate — the slope of the curve will develop. There’s no way to lend money for 30 years to somebody who can pay you off 30 seconds later, to actually match assets and liabilities in a way that’s risk-free. The only way you could do it would be to issue a 30-year bond of your own, which you could call 30 seconds later, and people don’t buy those bonds. So, as a practical matter, you could not perfectly handle the risk of significant interest rate changes. But the GSEs got caught up with delivering increasing earnings all the time to Wall Street. So they first enlarged their portfolios and later, as we’ve seen, they got involved in some accounting shenanigans, which really sort of boggle the mind when you think of two of the most important institutions in the country, with all kinds of financial experts on the board and top-named auditors and everything, and turning out that billions and billions and billions of dollars were misreported. It shows you what can happen in a system.

Now Congress is reacting, administration is reacting, [Federal Reserve Chairman] Alan Greenspan is reacting, in terms of saying that, you know, what have we created? What is this — the situation where these two companies have a trillion-and-a half or more of mortgages they own, and people really think the federal government is on the hook, and the federal government does — wants to say it isn’t on the hook. But the truth is, it is on the hook. And institutions worldwide own the credit — own the securities — based on this implied promise. And it was all being done just because, basically, these companies wanted earnings per share to go up. Now, they say they did it to maintain an orderly market, and all that stuff, in the mortgages. But they were really set up to guarantee mortgage credit. And there’s going to be reaction in Congress. It will be a huge fight. Both of those institutions have been heavy supporters of various legislators over the years. They’ve got lots of clout. Not as much clout as they had a year ago, but they’ve got lots of clout in Congress.

And on the other hand, people have lost faith, to some degree, in what they’ve done. And they’ve also seen that the consequences of the government issuing a blank check to two institutions that are trying to produce annual gains in earnings per share of 15 percent, and doing it by accounting means when they ran out of the ability to do it by other means. So it’s something that Congress should be giving a lot of attention to. They can’t cut them off, in my view and, I think, most people’s view. They can’t say get rid of your portfolios or anything like that. So my guess is that some kind of a curtailment comes in, some kind of tougher accounting requirements come in, sometimes it may be tougher capital ratios. And that over a long period of time, the government tries to figure out something that sort of eases them out of this position, where they were basically backing two entities that, at times, acted like the two biggest hedge funds in history. Charlie?

CHARLIE MUNGER: Yeah. Well, he was asking, partly, is what happens if the government reins these two institutions in and forces a big reduction in asset base.

WARREN BUFFETT: I don’t think they’ll — I don’t think the government is going to do something worse, they sell off hundreds of billions of dollars of mortgages, at all. But if they curtail it — let’s just say they say that from now on you got to operate in a runoff mode for a few years. There are plenty of people out there to buy mortgages. They’re already buying the securities of Fannie Mae and Freddie that are financing the mortgages. So it isn’t like Fannie and Freddie, independently, were coming up with the funds to finance these mortgages. They got them from somebody else and that somebody else can leave Freddie and Fannie out of the picture and buy the mortgages through some other form. It would not be the end of the world, at all, if Freddie and Fannie no longer had new portfolio purchases. I don’t think it would change things in any significant way, in terms of the cost of homeownership or anything else. How about you, Charlie?

CHARLIE MUNGER: Well, I agree. I don’t think it would have enormous macro effects if future growth were curtailed. I do think a lot of the troubles that came, came from a large use of derivative books, and from Fannie and Freddie both believing a lot of silver-tongue salesmanship from derivative traders. And, as many of you know, I think there is much wrong with derivative accounting and derivative trading operations in the United States, and I don’t think the full penalties have yet been paid.

WARREN BUFFETT: When you can have a $5 billion mismark in one direction at one of these — and bear in mind these are among the most scrutinized companies in the world, and with outstanding people on their boards, in terms of financial expertise — if you can have a $5 billion mismark in one direction, while at the same time the other one has a 9 billion mismark in the other direction, you know, I would say we’ve come a long way from Jimmy Stewart and “It’s a Wonderful Life.” (Laughs)

CHARLIE MUNGER: Yeah.

28. UK reporting requirements are a deterrent

WARREN BUFFETT: Number 6.

AUDIENCE MEMBER: Hi, this is Peter Webb from London, U.K. The question I wanted to ask you: I’ve been an investor for many years and done very well following a similar sort of style to yourself. So thank you for that. The big question I have is —

WARREN BUFFETT: Would you want to quantify that? You can always send us a check. (Laughs)

AUDIENCE MEMBER: But if there’s a deal to be had, maybe we can speak afterwards.

WARREN BUFFETT: OK. (Laughs)

AUIDENCE MEMBER: The question that I have for yourself and Charlie is, over the time I’ve bought many different companies in the U.K. and Europe, and I’ve seen many American value funds buying the same companies, but I see very little activity from Berkshire and its subsidiaries. And I didn’t know whether that was a reflection on your views on U.K., Europe, and the world. Whether you just see a lack of investment opportunity? Is it outside your sphere of competence? Or is there some other reason that I see less activity from you in Europe?

WARREN BUFFETT: Yeah, it’s a good question. We own, of course, as you know, 80 percent or so of MidAmerican Energy, which has a very large business in the U.K., but that’s an operating business. As you know, in the U.K. there’s a rule that requires reporting when you own three percent of a company’s stock. And actually, there’s some conditions under which the ownership will be reported even sooner than that three percent. There’s a provision that — I think if there is an inquiry or anything, that it has to be responded to. So, if you take a company with a market cap of, you know, £5 billion, if we bought £150 million of it, we would have to report, and that tends to mess up subsequent purchases. So, we bought stock — we own stock in Diageo, which was Guinness at the time. We’ve owned stock in some other U.K. companies.

But we’ve thought twice before going over three percent, because of the reporting requirements, and then we’d have to report if we were selling, and all of that. So that’s a deterrent, but it’s not an overwhelming deterrent. And if we, you know, if we get a chance to buy a significant piece of something that we think is cheap, particularly if we could buy it in one purchase. But there’s a lot of special rules that kick in, over in the U.K., that do not in the United States. Incidentally, there was something in the Journal the other day that said that we had to report if we bought over five percent of a company within 10 business days in the U.S. That is not true. That was a mistake in the report. But it is the case in the U.K. that at 3 percent, reporting is triggered. But there — we would feel very comfortable with lots of U.K. businesses. And, you know, they’d have — it’d be the same criteria we applied over here: a durable competitive advantage, and a management that we like and trust, and a reasonable price.

And we have seen some of those. There was an insurance company in the U.K., a year or so back, that I would very much have liked to have bought, but we couldn’t come to terms on price. But we have no bias whatsoever against buying businesses in the U.K. And as I say, we’ve — at Yorkshire and Northern Electric, you know, we have a business that, shows in our report, made close to $300 million after-tax. And actually, considering my views on currency, you know, I would have — I’d give a slight edge to buying something where the earnings would be in sterling in the future, rather than in dollars. Charlie?

CHARLIE MUNGER: Well, I regard it as kind of amusing that we ended up preferring the currencies of Europe when it’s so much more socialized than the United States is. That’s a queer occurrence.

WARREN BUFFETT: You actually prefer them or not, Charlie? (Laughs)

CHARLIE MUNGER: Well, certainly in recent — over a considerable period of recent months — we’ve actually preferred the currencies of socialized Europe to our own currency. I just regard that as an odd occurrence for both of us. That wouldn’t have happened.

WARREN BUFFETT: No. Up till three years ago, if I came back from Europe and I had a euro in my pocket I couldn’t wait to run to the bank or someplace. I was afraid it would depreciate before I could get rid of it. But I changed my views a few years ago. We hope to buy businesses, and stocks, other places in the world. And Charlie mentions the difference in political climate. One thing: you read about slow growth in Europe and Japan and all those, and it’s true. But usually — but the growth figures that you see are usually not on a per capita basis. And since the population of Europe has been, generally, very little changed, whereas the population of the United States grows one or one- and-a-half percent a year, if you look at growth figures in the United States and somebody says three- and-a-fraction percent, that’s not on a per capita basis. I mean, you’ve got to — you have to deflate that by the growth in population.

Whereas, if you read about the growth in Europe, generally, you’re dealing with a population base that hasn’t changed. So the differences in growth rate on a per capita basis are not as wide as the headlines would suggest.

29. Legal liability for someone else’s accounting?

WARREN BUFFETT: Number 7.

AUDIENCE MEMBER: Gentlemen, my name’s Mike McCloskey. I’m from Toronto, Canada. My question is: what obligation does a financial intermediary, or a party to a transaction, have to ensure that the other party to the transaction properly accounts for it.

WARREN BUFFETT: Well, that question may come up in a very real sense. (Laughs) But, you know, we have lots of reinsurance transactions, obviously. Banks have lots of transactions with people. Certainly, if you knowingly are doing something that causes a company that are participating in it, you know, you may have very serious obligations on that. But on the other hand, if you’re — I mean, we reinsure hundreds of companies. They have legal departments. They have auditors. And there could be somebody out there today — well, they could be doing anything with their accounting. It probably wouldn’t be limited to the contract they had with us. It might well be other things. But it really gets down to whether there’s knowing participation, I would say. Isn’t that right, Charlie?

CHARLIE MUNGER: Well, as you say, it’s a subject rife with ambiguities and different issues. You have had some bartender liability, if you serve a drink to somebody that’s already inebriated, why, some people say the bartender is liable. On the other hand, radio stations are allowed, in America, to sell advertising time to people that use it for perfectly obvious fraud, and nobody ever sues the radio station. It’s very hard to predict what things are going to get legally shifted around so a supplier gets liability for its customer’s behavior.

30. Invest in yourself and ignore asset allocation

WARREN BUFFETT: Number 8.

AUDIENCE MEMBER: My name is (UNINTEL). I live in Sacramento, California. My question is related to the issue of U.S. trade deficit again and its implications on the future value of the dollar. Do you think an individual or a business owner here in U.S. should be concerned about the purchasing power of his future dollar earnings or savings, and diversify his or her investments in non-dollar-based securities?

WARREN BUFFETT: I think it’s very tough for individuals to either select individual stocks, select individual times to enter the market, select currencies. I mean, I just think that’s a game that they tend to get interested in at the wrong time. There’s some adverse selection, in terms of when people who do not follow stocks carefully get interested in stocks. I think that, you know, the best investment you can have, for most people, is in your own abilities. I mean, when I talk to students, you know, I would pay a student — in many cases, I would be glad to, you know, pay them $100,000, cash up front, for 10 percent of all their future earnings. So, I’m willing to pay 100,000 for 10 percent of them, I’m valuing the whole person at a million dollars, just capital value standing there in front of me. And those — anything you do to develop your own abilities is probably going to be — or your own business — is probably going to be more productive for you than starting to think about individually making commitments into foreign exchange.

If you have a good business in this country earning money in dollars, you’ll do ok. I mean, you may live in a world 20 years from now where a couple percent of the GDP is going to service the debts and the ownership that we’ve created now by running these deficits. But you’ll do fine in America. So, I wouldn’t worry about that much. Charlie?

CHARLIE MUNGER: Well, if you look at Berkshire, you will find that it really doesn’t do much of conventional asset allocation to categories. We are looking for opportunities and we don’t much care what category they’re in, and we certainly don’t want to have our search for opportunities governed by some predetermined artificial bunch of categories. In this sense, we’re totally out of step with modern investment management, but we think they’re wrong.

WARREN BUFFETT: Yeah. And incidentally, we have 80 percent of our money, or more — well over 80 percent — tied to this country and to the dollar. So it’s not like, you know, we’ve left the country or anything of the sort.

CHARLIE MUNGER: When have you done a big asset allocation strategy?

WARREN BUFFETT: Never.

CHARLIE MUNGER: Yeah.

WARREN BUFFETT: Yeah. We end up with peculiar asset mixes. I mean, if the junk bond thing had gone on a little longer, instead of having 7 billion in there, we might have had 30 billion in. But we were doing that simply based on the fact that it was screaming at you. And we do the same thing with equities. I mean, back — for many years, we had more than the net worth of Berkshire in equity positions. But they were cheap.

CHARLIE MUNGER: And I want you to remember one of my favorite sayings as you do this asset allocation. “If a thing’s not worth doing at all, it’s not worth doing well.” (Laughter)

WARREN BUFFETT: You can see why Ben Franklin turned the mantle over to Charlie. (Laughter)

31. Lunch break

WARREN BUFFETT: We’re going to take a break now, so you can all go out there and enjoy yourself in the adjoining room, and have lunch, and we’ll be back here at 12:45. And those in the other room might come back to this area because I think we’ll have enough seats for everybody after lunch.

Afternoon Session

1. Q&A resumes

WARREN BUFFETT: OK, we’re going to start in just a minute or two, if you have a chance to sit down. OK, let’s go to station 9. And I’ve — I’ll — we will go till 3 o’clock. We’ll break until 3:15, when we’ll convene the business meeting. No one has submitted any proposals for that meeting, so it may be relatively short. At 4 o’clock, Charlie and I will meet in another room here — I’m not sure where — with any of those of you from outside North America that are here. We would like to especially thank you for coming this long distance.

2. We’ll “do pretty well” when inflation is high

WARREN BUFFETT: So, with that, we’ll go to area 9.

AUDIENCE MEMBER: Good afternoon. My name is Ken Goldberg from Sharon, Massachusetts — Massachusetts, having the distinction of being the birthplace of Benjamin Franklin. And, thanks to New Jersey, the only state in the Union where one cannot buy GEICO auto insurance. (Laughter) Earlier this morning, you discussed policies that have eroded, and that threaten to continue to erode, the U.S. dollar. In some of your earlier letters to shareholders, you warned about the dangers of inflation and cautioned that shareholders should fully take inflation into account when evaluating the performance of a business. To what degree do you expect a large decline in the value of the dollar to trigger inflation that would adversely impact Berkshire’s equity holdings and its businesses? And to what extent should we calibrate Berkshire’s overall performance against the backdrop of a weakening dollar?

WARREN BUFFETT: Well, we think, by and large, we have businesses that will do pretty well in inflation. But inflation destroys value, but it destroys it very unequally. The best business to have during inflation is one that retains its earning power in real dollars without commensurate investment to, in effect, fund the inflation-produced nominal growth. The worst kind of business is where you have to keep putting more and more money into a lousy business. In effect, the airlines have been hurt by inflation over the last 40 years, because now they have to put a whole lot of money in a lousy investment, which is a plane, compared to 30 or 40 years ago. And they have to stay in the game. They have to keep buying new planes. And the new planes cost far more now, and the returns continue to be inadequate. So the best protection is a very good business that does not require big capital investment. And, you know, the best investment at all — of all — I mean, if you’re the leading brain surgeon in town or the leading lawyer in town or the — whatever it may be — you don’t have to keep re-educating yourself to be that in current terms.

You bought your expertise when you went to medical school or law school in old dollars, and you don’t have to keep reinvesting. And you retain your earning power in current dollars. We — Charlie and I are always suspicious that inflation will regain some of the momentum it had a couple of decades ago. We always think it’s in sort of remission. We thought the talk about deflation was total nonsense. And certainly, the trade picture is one that you would think would accentuate any inflationary trends that might otherwise be experienced. I mean, obviously, the price of oil in euros has gone up far less than the price has gone up in dollars. And you and I are buying gasoline in dollars, so we have seen a bigger increase in our fuel costs because of the decline of the dollar than we would’ve seen if we lived in Europe, or some other — or Australia, for that matter. So, it’s — inflation is always a factor in calculating the kind of investment, the kind of business, that we want to buy. But it doesn’t — it isn’t like it crowds out all other factors. I mean, it’s always been with us.

We’ll think about it always. See’s Candy has done fine during an inflationary period because it does not have huge capital investments that have to be made in current dollars. Other businesses we have, you know, if we’re — the public utility business, for example — it costs a lot more money to maintain capital expenditures now in dollar terms than it would’ve 30 years ago. So you have to keep putting more and more money into a public utility. And you’d better hope that the rate of return allowed is commensurate in times of high inflation the same way that it might have been in low inflation with a lower rate of return. Charlie?

CHARLIE MUNGER: Yeah. Well, so far, the facts that are driving the dollar down in relation to other currencies have been restraining inflation in the United States. In other words, it’s the competitive export advantages of the other people that are — that have so far restrained inflation here. So, it’s —

WARREN BUFFETT: Yeah, you’re paying less for shoes. You know, we got killed in the — in parts of our shoe business. And 30 years ago, of the billion-plus pairs of shoes used in the United States, a very high percentage were made here. And now, virtually none are. But if they were all being made here, you would be paying more for shoes. There’s no question about that.

CHARLIE MUNGER: Yeah.

3. Buffett: Don’t bet against America

WARREN BUFFETT: Number 10.

AUDIENCE MEMBER: I’m a physician from St. Louis. And I want to thank you and everyone here, because I’m one of these doctors that really doesn’t know anything about money or finance. The money comes in, but I don’t know what to do with it. I’m not able to really evaluate the financial strength of a company, but I can evaluate the ethical strength of a company. And that’s why I feel real comfortable — I think most of us here — having our savings in Berkshire Hathaway. And the —

WARREN BUFFETT: Thank you. (Applause)

AUDIENCE MEMBER: This question has probably been asked in different ways already, but several years ago, a fellow I know who was — had been manager of Magellan Fund — warned that we were going to have a terrible decade or so in the stock market because of all the things people have brought up so far. The increasing interest rates, and runaway spending, and decreasing dollar, and stagflation may be right around the corner, Social Security problems. And even what Charlie Munger referred to, is that most of our best and brightest graduates, I find, are going into money management rather than — they’re not becoming doctors or molecular biologists or Ph.D.s in chemical engineering. And so, in view of the fact that a year or two ago, people — there was still an ebullience of emotion about the stock market going up and making everyone rich just by having their money in the stock market — it seems like that ebulliences dropped, and I’m hearing, in anticipation of a bear market. And you wrote, I think several years ago, that it’s hard to make money in a bull market. And the real opportunities come in a bear market.

So, I’m wondering if you would give us a clue as to what your strategies are going to be, if it’s really true that the market gets dismal over the next few years.

WARREN BUFFETT: Well, if the market gets cheaper, we will have many more opportunities to do intelligent things with money. Now whether we will blow on the money in the meantime or something is another question. But, you know, we are going to be buying things — one thing or another — operating businesses, stocks, high-yield bonds, whatever — we’re going to be buying things for as long as I live, just like I’m going to be buying groceries —

CHARLIE MUNGER: Longer than that, Warren.

WARREN BUFFETT: Yeah. (Laughter) Yeah. Charlie’s just waiting to take over after I’m — (Laughter) And I’m going to be buying groceries the rest of life. Now, would I rather have grocery prices go up or down if I’m going to be buying groceries tomorrow and next week and next month and next year? And the answer is obviously, if I’m a net buyer, I would — I will do better if prices are lower. We have no — we’re not good at forecasting markets. I mean, we, in a general way, knew that we were getting enormous bargains in the mid-’70s. We knew that the market went crazy to some extent in the late ’90s. But we don’t have much — we don’t spend any time — Charlie and I spend no time — thinking or talking about what

7. 伯克希尔有史以来最成功的投资：GEICO 和阿吉特·杰恩

沃伦·巴菲特：第一个问题。

观众提问：我是来自英国伦敦的乔纳森·米尔斯。在你们的职业生涯中，最成功的一笔投资是什么（不包括伯克希尔·哈撒韦本身）？为什么这么认为？

沃伦·巴菲特：嗯，如果从商业角度说，最成功的投资可能是让查理成为了我的合伙人。而且他收费也不高。（笑）这些年来——你没法用美元金额来衡量，因为我们现在做的规模显然比早期大得多。你看，喜诗糖果是我们成功中极其重要的一部分。虽然它现在在我们净利润中占比不高，但过去它提供的利润让我们得以购买其他东西。它教会了我们很多关于商业的教训，方方面面。所以，从它已经实现的价值和未来将产生的价值来看，或许有史以来最成功的一笔投资是我们用4000万美元购买的GEICO的前一半股份。买后一半花了我们20亿美元。我很庆幸我不是分三次买的。（笑声）但是，你知道，那4000万美元——买下公司一半股份——将会带来非常好的回报。不过，GEICO——我们的一些业务有增长潜力，有些则没有。我们并不要求一项业务必须有增长潜力。如果一家业务能赚很多钱，我们可以用它来购买其他业务，伯克希尔体系的一个优势就是我们有一种税收高效且几乎没有摩擦的方式，将资金转移到最佳机会上。而从内部看，GEICO仍然有巨大的增长潜力。顺便说一句，你知道，我看了那部电影，一直在推销美国运通卡。但这是我们的GEICO卡，我相信在座各位都有资格申请。我不建议人们使用信用卡并循环欠款。但事实是人们确实会这样做，所以如果你要赊账，就用GEICO卡吧。我仍然建议你在开始产生循环利息前还清账单。我认为人们陷入高利率循环信贷的泥潭是一个可怕的错误。这也是我首先告诉学生们的一点：如果他们不记得我说的其他话，那至少要知道，别在信用卡上胡闹，别让欠款余额越滚越大。但是GEICO——GEICO现在拥有超过600万客户。正如前面提到的，我们去年进入了新泽西州。我们在那里增长非常迅速。这是一个非常非常棒的商业模式。它由一个杰出的人和商人托尼·奈斯利管理。我认为它有巨大的潜力。但我爱它们所有。

查理·芒格：嗯，但是GEICO，毕竟买后一半花了20亿美元——

沃伦·巴菲特：没错。

查理·芒格：——而前一半花了数千万美元。现在，想想我们为了把阿吉特·杰恩招致麾下所花费的搜寻成本，那才是一项真正带来丰厚红利的投资。我想不出我们做过比这回报更高的投资了。（掌声）我认为这是一个很好的人生教训。换句话说，让合适的人进入你的系统，往往比任何其他事情都更重要。

8. 纽约证券交易所不应以盈利为目的

沃伦·巴菲特：好的。我们来试试第二个问题。

观众提问：我是来自纽约市的玛吉·吉列姆。我从小就参观过纽约证券交易所，多年来一直称赞它的优点。您能否评论一下目前正在发生的那些不当行为？

沃伦·巴菲特：嗯——

查理·芒格：哪儿？

沃伦·巴菲特：在交易所。

查理·芒格：哦。沃伦，你非常擅长回答这个问题。（笑声）

沃伦·巴菲特：你是指那些不当行为，还是……我个人认为，如果纽约证券交易所保持中立——它严格来说不是非盈利机构，它会赚一些钱——但作为一个“非大盈利”机构，我们不妨这么说——那会更好。我的意思是，交易所几个世纪以来一直做得非常出色。它是世界上最重要的机构之一。而投资业绩的敌人是频繁交易。一个以盈利为导向的交易所的利润创造者是交易活动。因此，我个人宁愿不要一个试图逐年提高每股收益，从而希望鼓励人们更积极地交易以为自身创造更多收入的交易所。在我看来，那对美国投资者没有好处。所以，我认为昨天的交易所可能比看似可能的明天的交易所对美国投资者更有利。现在，人们可能找到各种他们认为有说服力的理由，想把交易所变成一个盈利性机构。但我知道，如果纽约证券交易所的交易量翻倍，美国投资者的境况并不会变得更好。

而且我知道，作为一个盈利性机构，纽约证券交易所会想方设法增加交易量，甚至可能以各种方式收取更多费用。我的意思是，交易所的利润，在其中工作的人的利润，从某种意义上说，是资本主义的摩擦成本。这部分来自于企业的盈利。你知道，IBM、通用汽车或通用电气不会因为它们的股票换手更频繁而赚到更多的钱。但一个盈利性的交易所会赚到更多的钱。我不喜欢交易所站在违背投资者长期利益一边的想法。查理？

查理·芒格：嗯，在这个问题上，我的感受和您一样——甚至更强烈。我认为，当像证券交易所的董事和CEO这样的人没有意识到他们有责任作为榜样——即正确行为的典范——时，我们就迷失了方向。一旦你的活动承载了如此重大的公共意义，我认为你就有责任创造恰当的表象。你有责任成为榜样。我的意思是，你不想让你的一年级老师在教室地板上……呃……或者课堂上喝酒……同样，你——我认为你不想让你的交易所因为严重的过度行为而登满头条。我当然更不想把你所在国家的主要证券交易所变成比现在更像赌场的地方。我认为我们在这些事情上完全迷失了方向。我同意沃伦的看法，它应该是一个——（掌声）——一个深切关心其作为典范职责的公共机构。

沃伦·巴菲特：我希望我是在他读一年级的地方读的书。（笑声）

查理·芒格：我没听清。

沃伦·巴菲特：我说，我希望我是在你读一年级的地方读的书。

9. 巴菲特（民主党）和芒格（共和党）都支持社会保障

沃伦·巴菲特：第三个问题。（笑声）

观众提问：下午好，先生们。我叫格伦·斯特朗，来自俄亥俄州坎顿。我想对沃伦的女儿苏珊表示热烈的感谢，感谢她为这次会议所做的精彩介绍。

沃伦·巴菲特：谢谢。（掌声）

观众提问：同时，特别感谢您的妻子苏珊。我感谢她为公司所做的贡献，以及她为她的丈夫和她接触过的许多人树立的杰出榜样。（掌声）今天，我想请教您对社会保障的看法。我们能称它为“政府赞助的退休人员庞氏骗局”吗？我对个人账户、退休年龄调整以及雇员的税收调整很感兴趣。如果您在白宫，您会推动什么？谢谢。

沃伦·巴菲特：是的，社会保障是在——是36年还是37年引入的。我祖父过去常常让查理周六带着两分钱去巴菲特父子杂货店上班，用来支付他那份社会保障税。他可不想让查理产生任何关于世界上有免费午餐的错误想法。他还给他上了半小时关于社会主义罪恶的课。所以，我们对社会保障及其各种争论有很深的了解。当然，它最初是作为保险提出的，因为基本上那是[富兰克林]罗斯福总统能使其通过的唯一方式。转移支付的想法在30年代是行不通的，当然行不通。你知道，我认为第一个收到社会保障支票的女性总共只缴纳了22美元左右，却收到了2400美元。所以，它不是保险。它根本不是保险。

而处于生产年龄的人向已过生产年龄的人进行的转移支付——至于年龄是65岁还是67岁，我们现在需要定义——本质上就是一种转移支付。我基本上认为，任何将社会保障福利降低到低于当前保证水平的做法都是错误的。我认为在这个国家——一个极其富裕的国家——处于生产年龄的人能够照顾到这两个领域的非生产年龄人口，尽管生产与非生产人口的比例已经改变并且正在改变。但我们照顾我们的年轻人。一个富裕的国家照顾它的年轻人，也照顾它的老人。顺便说一句，在照顾年轻人方面，当我们教育一个家庭的五个孩子时，我们并不期望那个家庭缴纳五倍的税或类似的东西。我们认识到，在照顾年轻人方面，不应该基于人均基础或家庭规模。我们提供好的学校——我们努力提供好的学校——以及健康等等给所有年轻人，这是我们整体责任的一部分。

我相信一个富裕的国家应该为老年人做同样的事情。你知道，查理和我来到这个世界时，脑回路就使我们可以变得非常非常非常富有——远远超出我们可能有的任何需求。但并不是每个人都是同样的脑回路。如果你来到这个世界时智商只有85左右，或者有残疾等等，你在市场经济中就不会表现得像我们这么好，甚至远远不及。但你仍然为让查理和我变得非常富有贡献了很多。你知道，当涉及到在伊拉克打仗之类的事情时，那又变成了一个机会均等的事情。但当涉及到赚大钱时，在这个国家并不是机会均等。所以，我相信像我们这样一个富裕的国家不应提供比现在更低的福利。我当然不认为——我们有各种各样的储蓄机制，而且非常好。我们有401(k)计划。

我们对股息和资本利得征收15%的税，所以我赚的钱的税率低于我们办公室接待员可能赚的钱的税率。如果我被困在孟加拉国或其他地方，我不会做得这么好。所以这个社会给我提供了其他社会无法提供的巨大好处。我认为在这个社会中表现出色的人有义务为那些过了生产年龄的人提供合理的生活保障。我们有能力做到这一点。你知道，现在社会保障的征税上限是9万美元。这意味着我办公室里的每个人——或者大多数——都在为这个体系缴纳12.4%——12.2%或12.4%，包括公司缴纳的部分。人们谈论股息的双重征税；他们为社会保障缴税，也为他们的收入缴税。在许多情况下，他们支付的总体税率与我支付的税率相同或更高。我认为这在我们的社会里是荒谬的。

所以，我不想做任何——任何——伤害收入底层20%或30%人群的事情。我看到人们生活在医疗保健的恐惧中，或者担心晚年钱会花光。我认为一个社会应该努力减少其居民所经历的恐惧。这不仅仅意味着害怕被抢劫之类的。这包括他们担心生命的最后25年没有多少收入。所以，我会——而政府或其他人在担心25年后社会保障的赤字问题，而此时他们已经在没有社会保障盈余的情况下有5000亿美元的赤字，我觉得这简直是胡说八道。（掌声）我们在这里哀叹20年后会发生的事情，而这只是目前正在发生的事情的一小部分，而他们却在欢呼，你知道，基本上，并在谈论税法上的进一步优惠。

所以，我非常难以理解那些说这个体系无法维持的人——目前，我们GDP的百分之四点几用于社会保障。50年后，是6%——不，是百分之六点几——嗯，相信我，50年后我们的GDP会大得多。从4%上升到6%在我看来并不是一个可怕的前景。如果你问我现在会做什么改变，我会进行经济状况调查。我会大幅提高9万美元的上限。事实上，我可能会把它应用于所有收入。那样人们真的会注意了。但是——而且我会逐步地——我们正在这样做——但我肯定会提高退休年龄。我的意思是，2005年的世界与1937年的世界大不相同，无论是从寿命前景还是从有效工作的能力来看。查理，你说呢？

查理·芒格：嗯，这是伯克希尔民主派主席的观点。（笑声和掌声）在这个问题上，伯克希尔的奇怪之处在于，作为发言者的右翼共和党人比沃伦更强烈地认为共和党人简直是疯了，现在竟然——（掌声）——要处理这个问题。我不认为——如果这个国家在未来很长一段时间内以每年1%或2%的速度变得更富，并且会有更多的老人活得更长，在医疗上花更多的钱，那么最终通过社会保障支付给退休人员等的GDP份额比现在更高，这个想法对我来说并不可怕。这恰恰是在不同情况下花钱的一种合乎逻辑的方式。如果政府在承担更多社会保障义务时资金稍显不足，我认为征收一些消费税什么的，以合理的方式为非常合理的支出买单，这并没有什么错。社会保障非常成功。除了相对较小的残疾部分，几乎没有欺诈行为。

假装死了是很难的。（笑声）而且，这是对工作的奖励。这个国家各种各样的人都在工作，因为他们希望最终有资格获得社会保障，就像许多人从事危险的兵役是因为他们想要最终能得到的养老金一样。所以，社会保障是一个非常具有资本主义性质的制度，具有极其良好的效果。在效率和良好效果方面，它是政府有史以来做得最成功的事情之一。一个可能很快就要处理一些真正令人不快的棘手问题（比如在原子弹问题上对抗朝鲜或伊朗）的共和党政府，却把它的善意浪费在一堆没有经过深思熟虑的经济学家们虔诚相信的废话上？这是一个非常可悲的事件。（掌声）

10. 不要责怪评级机构

沃伦·巴菲特：第四个问题。

观众提问：谢谢。我是来自纽约的比尔·阿克曼。少数几家AAA级公司中的四家——AIG、房利美、房地美和MBIA——正在因会计欺诈行为接受正式调查，并正在重述其财务报表。就像查理之前说的，我认为AAA级公司应该是一个典范，一家应该以最高会计和道德标准行事的公司。这引出的我的问题是：即使——当相当比例的AAA级公司存在虚假和误导性的财务报表时，投资者如何才能放心地投资于任何金融服务公司？我想后续问题是，为什么评级机构不从会计角度做一些独立的尽职调查，以便他们能在这个问题上起到监督作用？

沃伦·巴菲特：嗯，金融公司比许多公司更难分析。我的意思是，这更——如果你拿保险业务来说，你知道，即使你拥有这家公司，最难评估的单一因素就是损失和损失调整费用准备金。这对任何给定时期的报告收益都有巨大影响。期间越短，假设条件的微小变化带来的影响就可能越大。你知道，我们持有大约450亿美元的损失准备金。但是，你知道，如果我不得不拿我的生命打赌，赌这450亿美元是稍微多了一点还是稍微少了一点，我会——我会想很长时间。这个数字也很可能是455亿或445亿。如果你关心在某个特定时期报告出某个特定的盈利数字，那将是一个很容易玩的把戏。在银行，你知道，基本上就是贷款是否良好。我曾经在银行董事会任职。你知道，我也遇到过意外情况。

这很难判断。金融公司——如果你在分析像WD-40这样的公司，你知道，或者喜诗糖果，或者我们的砖块业务，或者其他什么，你知道，它们的前景可能好也可能坏，但你不太可能在当前状况上自欺欺人。但对于金融机构来说，这要困难得多。然后你再加上——把衍生品也加上，你知道，很可能没有人完全知道——甚至在合理的范围内——世界上一些最大银行的确切状况。但是——这又让你回到了评级机构的尽职调查问题。房地美和房利美的董事会里都有非常高水平、非常聪明——财务上聪明——的人。然而，你知道，一个是50亿美元，另一个显然是90亿美元。这些都是大数字。我不认为那些人失职了。只是，要精确知道一家金融机构内部到底发生了什么，这非常非常困难。

查理和我是所罗门兄弟公司的董事。查理是审计委员会成员。我忘了你发现的其中几件事的规模。但是，你知道，没有被发现的事——这并不意味着下面的人是骗子或什么。这只是意味着，在成千上万笔复杂的交易中，有时涉及——计算涉及——多个变量，要弄清楚在任何给定时刻的情况可能非常困难。当然，当两边的数字都变得巨大时，这些巨大数字的微小变化会对季度或年度数据产生令人难以置信的影响，因为这些调整都集中在短时期内。所以，我只能认为你必须接受一个事实，即保险、银行、金融公司——我们见过各种各样的金融公司——无论是欺诈还是重大错误——多年来一个接一个。这是一个更危险的分析领域。这并不意味着你不能从中赚钱。

我们从中赚了很多钱。但这很难。现在，像GEICO这样的公司，你承保的是几乎一样的东西——汽车驾驶员——你得到的统计数据比承保像石棉责任这样受制于更大估算误差的东西要有效得多。这并不意味着人们不诚信经营。但是，你知道，就拿20家最大保险公司的石棉估计值来说。我敢打赌它们差得很远，但我不知道是多了还是少了。这有点像金融公司的本质。我不会责怪评级机构无法深入挖掘财务数据并发现那些——你知道，你提到的所有那些公司都有大名鼎鼎的审计师。我们在伯克希尔的审计师，去年花了多少个小时？你知道，我不知道是多少，可能是6万、7万小时。

我敢肯定在其他公司——你知道，如果你拿大型银行来说，他们花的时间更多。但是，你知道，他们能确定这些数字吗？我怀疑。查理？

查理·芒格：是的。沃伦显然是对的，当你遇到复杂性时，这种复杂性本身就提供了更多出错而不被发现的机会，或者欺诈而不被查出的机会，那么你遇到的欺诈和错误就会比卖沙子生意（从河里挖沙，按卡车卖）多得多。就像卖天然气的生意比卖沙子的生意更容易发生爆炸一样，像这些大型金融机构这样的生意，本质上会面临更多的问题。而且这将永远如此。即使金融机构为政府所有，也是如此。事实上，世界上一些最差的财务报告是由政府和政府所有的机构（如中国的政府银行等）做出的。所以，如果你不喜欢金融机构中不完美的会计，那你就是来错了世界。

11. 我们喜欢我们的股票，但现在不会买入更多

沃伦·巴菲特：第五个问题？

观众提问：下午好，巴菲特先生，芒格先生。非常感谢你们的智慧和所有投资建议。我是阿德里安·谢尔，来自香港。在香港的旧时候，如果有人活到100岁，他们可以去白金汉宫与女王喝茶。我不知道在美国这里是什么，但我希望到2030年我们能回来看你在白宫做50个俯卧撑。（笑声）

查理·芒格：这样打赌可不妙。

沃伦·巴菲特：你能接受10个吗？（笑声）

观众提问：我的问题有两部分。首先，在1968-69年，你清算了所有合伙公司。我想，除了你在伯克希尔·哈撒韦的持股，你完全退出了市场，并且一直没进去。在2000-2001年，你对我们提到，未来十年市场最多也就是原地踏步。然而，尽管拥有500亿美元现金，你和我们一样，仍然大量投资于市场。所以我的第一个问题是，今天的投资环境与1968-69年相比，有何不同以及为何不同，使得你能够安心地保持大量投资？

沃伦·巴菲特：是的，嗯，我们确实持有一些证券，在目前的价格下我们可能——我们很可能不会买入。有些我们会，有些不会。我们对自己持有的任何东西都不感到不快。但我们也不想投入更多资金，所以对于其中一些证券，我们处于一个既不买也不卖的区域。现在，这个决定部分与我们交易所涉及的规模有关。我的意思是，如果我们持有的每只股票只有100股，你知道，价值几十亿美元，那么进出就会容易得多。但我们在尝试进出这些大的头寸时，会面临巨大的成本——包括税收，而且是在税收之上。基本上我们喜欢这些企业。所以，我们并没有不开心。我们可能觉得在这里不想再买更多了。但我们对自己拥有大量股权的这些企业并不感到不快。

尽管如此，我们持有的普通股在内在价值中所占的比例，现在可能比我们历史上任何时期都要低，除了少数几个时期——嗯，就是1969年底我们清算合伙公司的那段时间。所以，我们并没有通过购买股票或持有股票发出任何重大声明，表明我们认为现在拥有它们是一个特别有吸引力的时机。但我们并不对可口可乐感到不快。我们不反感美国运通。我们不反感——我们不反感富国银行或穆迪。这些都是我们拥有的非常非常好的企业。如果今天这个价格，我们会买吗？嗯，答案是我们不会。你知道，我们有资金。我们以后可能会买入更多。我们更可能在以后买入更多，而不是卖出这类投资。但是存在一个区域，因为规模的原因，因为税收的原因，我们既不是买家也不是卖家。

我们并没有看到很多有吸引力的股票，但我们也不认为市场像大约五年前那样愚蠢得多。查理？

查理·芒格：是的。近来伯克希尔有趣的一点是，如果我们回顾过去我们在股票市场上做的四五笔交易，涉及数千万美元——实际上是数十亿——但与伯克希尔的整体规模相比很小——我们的记录与过去某些最好的日子非常相似。当我们能用少量资金灵活运作时，结果相当不错。但是当我们面临因为过于富有而被阻碍重现过去那种灵活赚钱记录的问题时，我不认为这是一种永久状态，但它也永远不会消失。但是它——

沃伦·巴菲特：解释一下那个。（笑声）

查理·芒格：嗯，我的意思是，我认为我们可能最终能够以非常令人满意的利率配置大量资金——

沃伦·巴菲特：是的。

查理·芒格：——而近段时间，我们以非常令人满意的利率配置了小量资金。有少量总比没有好。而“少量”仍然是数十亿。（笑声）

12. “我不认为黄金是价值储存手段”

沃伦·巴菲特：第六个问题。（笑声）

观众提问：下午好。我叫迈克·麦高恩，来自加利福尼亚州帕萨迪纳。我本来有一个关于13号提案的好问题，但看完电影后我想我不会问了。

沃伦·巴菲特：好。（笑声）

观众提问：我想问的是，一个小异议然后一个问题。问题大概是关于金融教育，或者说金融历史的学习，这可能有助于人们应对这些市场，或者——只是在处理投资时，尤其是在西方文明的顶峰或接近顶峰的时候。当你提到你父亲在20世纪30年代关于“购买黄金”的讲座，然后说，“嗯，60年后，它表现并不太好”时，黄金在30年代基本被固定在一个价格上很多年，直到1971年才被放开。然后它赶上来了。之后它就有点上下波动。如果你现在看看黄金，看看衍生品和房地产泡沫以及其他很多事情，用当前的条件来看，黄金可能不是一个那么糟糕的投资。所以，我的问题是，您是否认为您有某种责任或义务作为金融典范，也许应该稍微关注一下那种古典的黄金在某种程度上是金融体系的基准或基石的观点？

并且，也许在您——至少是在您给股东的年度信中——讨论一下，在当前这种相当泡沫化的环境中，人们如何能够保护自己免受购买力下降或我们今天面临的金融主导地位所造成的问题的影响？谢谢。

沃伦·巴菲特：是的。我要说的是，黄金在我作为价值储存手段的清单上会排在很靠后的位置。我的意思是，我更愿意在内布拉斯加州这里拥有一百英亩土地，或者一栋公寓楼，或者一只指数基金。黄金，我们这么说吧，是30多年前被放开的。但它调整到了一个市场，如果你回到1900年，你知道，当时是20美元黄金。嗯，一百年内从20涨到400。同期道琼斯指数从60涨到，嗯，12000或13000——12000或什么的——并且在持有期间还会支付你股息。我记得世纪之初是66。我忘了它最后是多少，但大约是11000或12000。就像我说的，在那段时期它每个季度都付给你一些钱。如果你拥有黄金，你在1900年左右支付了20美元。然后你——我们假设一百年后你有了400美元。在此期间，你支付了保险和可能的存储费用。

它真的不是——它不是一种价值储存手段。并且——我并不是在为纸币辩护，但如果你担心纸币——我认为，从长远来看担心纸币是非常有道理的——但就我而言，在这种情况下，它几乎是我最不想持有的东西。你知道，它——农场有实用价值，公寓楼有实用价值，企业，你知道，会产生收益。一些企业会随着时间推移产生实际收益。你知道，我更愿意有能力在20年后向人们卖出一磅糖果。如果他们用贝壳交易，我会得到适当数量的贝壳而不是纸币。但是，我——我只是不——我不认为黄金是价值储存手段。而且——事实是，它表现并不太好。

但先别管它过去一百年、五十年或十年表现好不好，我看不出有什么理由它在未来会表现好。我忘了我们每年大约开采三到四千吨黄金。你知道，我们在南非把它从地下挖出来，然后把它存回诺克斯堡或某个地方的地下，或者纽约联邦储备银行。我的意思是，它在这个过程中对任何人都没什么大用。所以，我——查理，你对黄金怎么看？

查理·芒格：嗯，我认为黄金——以及类似物品——如果你在1935年是维也纳一个富裕的犹太家庭，那是一件很好的东西，因为你面临的风险下，黄金对你具有巨大的实用价值。但对于坐在2005年的伯克希尔·哈撒韦来说，它完全不吸引我们。

13. 目前没有股市泡沫，但也没有便宜货

沃伦·巴菲特：第七个问题。

观众提问：我叫阿尔·亨德森，来自明尼苏达州。我要感谢你们两位做你们自己，为我们大家做了这么多，帮助我们和所有人变得富有。我的问题是——实际上，你已经提到了——你花很少的时间去看整个市场，而主要寻找个别机会。但我想知道，过去你曾对预测股市未来十年合理回报率时应考虑的因素做过一些极好的阐述，并提出了降低预期的观点。那么，现在我们站在哪里，关于你对股市和经济指标的衡量，以及对未来十年回报率的预期？

沃伦·巴菲特：是的。时不时地——我的意思是，我同意——非常罕见地，你也许能对市场整体做出一些明智的陈述。我是说，你会看到一些足够极端的情况，以至于你可以做出一个可能在五年或十年后看起来相当明智的陈述。我一生中见过几次这样的情况。我的意思是，我——我有几次公开发表过看法。在69年、74年和几次。大多数时候，你知道，你处于某个中间区域。显然，现在股票投资能给你带来的回报比，比如说，1999年夏天要多，那是我在太阳谷发表演讲后来被《财富》杂志写成文章的时候。但那是——我当时之所以说出来，是因为情况极端。我的意思是，我大致知道我会是对的，尤其是在市场的某些方面，但我不知道什么时候，也不知道会正确到什么程度。

在70年代中期，你也可以在相反的方向做同样的事情。我认为，如果你必须在持有长期国债（目前收益率，国债，仅略高于4.5%）和持有未来20年的股票之间做出选择，并且你不能改变这个决定，我肯定会选择股票。但我认为那些期望能从股票中获得超过6%或7%回报的人，尤其是当他们开始期望两位数回报时，我认为他们期望能做到这一点，或者让别人为他们做到这一点，是大错特错的。但是6%或7%完全不是世界末日。事实上，它——而且目前它在税收方面的待遇比几乎任何时候都好——实际上，比我一生中任何时候都好。所以——我认为目前的股票估值根本不处于泡沫状态。我也认为我们离便宜货估值还差得远，甚至差得很远。

我认为现在还不是一个足够极端的时期，以至于你可以对前景做出某种非常明确的断言。但是，如果你告诉我，我必须离开20年，在指数基金股票和长期债券之间选择一项，我宁愿选择股票。但我认为，在未来不太多的年份里——也许更短的时间里——你将有机会做一些比你现在面临的选择明显更明智的事情。查理？

查理·芒格：嗯，我完全同意。

14. 房地产的“泡沫估值问题”

沃伦·巴菲特：那么我们来第八个问题。（笑声）

观众提问：你好。我叫哈米德·雷扎普尔，来自加州奥林达。我有一个关于房地产的问题。我知道以前股东大会上有人问过，“为什么伯克希尔不投资房地产？”我相信答案是，“我们喜欢经营企业。”所以我想让我的问题更具体一些，针对商业房地产。考虑到像REITs这样的大型商业房地产投资，其行为和财务回报可以像一个运营中的企业，为什么不投资房地产呢？是因为你不喜欢回报率吗？还是这个业务本身不吸引人？

沃伦·巴菲特：嗯，查理是从房地产起家的。对吗，查理？

查理·芒格：是的。我会说，第一，在像伯克希尔这样根据《国内税收法》C子章应纳税的公司里，拥有房地产与你这样的个人直接拥有相比，处于严重的劣势。这是第一点。第二，房地产——投资性房地产——目前本身正面临泡沫估值问题。我所有拥有房地产的富人朋友都在卖掉他们最差的房产。他们得到的报价甚至高于他们最高的期望。人们争相接手这些资产。我并不觉得这令人兴奋。这当然不适合伯克希尔。你能举出很多C类公司长期作为被动房地产持有人并且表现良好的例子吗？这几乎是一个空的类别。

沃伦·巴菲特：是的，查理和我——我的意思是，我们俩——查理比我更多——我们个人过去做过一些房地产投资。你知道，这是一个我们总体上理解的领域。我们并没有给这个游戏带来太多特别的东西，但我们懂。我们在这个领域赚过钱。实际上，在纳斯达克接近高点的时候，我认为REITs相当便宜。我在伯克希尔之外的净资产不到1%，但基本上我把那部分都投在了REITs上。当时都是些小型的。而且——它们当时是以折价交易的。当时它们的售价低于物业价值。而这些物业价值的计算比今天保守得多。今天，房地产价格非常高昂。除此之外，REITs本身也常常溢价交易。所以，我认为现在的REITs相当没有吸引力，当然与五六年前相比是这样。但这是一个——

查理·芒格：对于个人来说，你认为它们没有吸引力？

沃伦·巴菲特：是的。

查理·芒格：对于公司来说，更是如此？

沃伦·巴菲特：是的，没错。没错。情况与五六年前相比发生了巨大变化。我的意思是，股市在许多方面，从1999-2000年期间到现在，是显著下跌的。REITs则显著上涨。五六年前，REITs非常不受欢迎。现在它们很受欢迎。关注被冷落的东西比关注被追捧的东西要好。在过去的五六年里，REITs的状况确实发生了巨大变化。

查理·芒格：而且REITs的会计是虚假的。

沃伦·巴菲特：否则，我们很喜欢它们。

查理·芒格：是的。（笑声）

沃伦·巴菲特：你在这些会议上最好什么都别提。（笑声）

15. 全球繁荣有利于美国

沃伦·巴菲特：第九个问题。

观众提问：下午好。我叫卡洛斯·洛克，来自堪萨斯州劳伦斯市。美国在世界经济中占据主导地位大约有一百年了。这种主导地位类似于一种经济垄断。您会说美国是所谓的“有护城河的城堡”吗？如果是的话，我们如何把护城河挖得更宽？谢谢。

沃伦·巴菲特：是的，嗯，正如我之前的评论所指出的，美国一直非常卓越。我的意思是，你知道，基本上还是同样的人口池，他们在215年的历程中，获得了世界财富中非凡的份额。一个有趣的问题是，为什么这里的这群人能比世界其他地方做得好这么多，考虑到我们并不更聪明或什么的。它不再是一个经济城堡了。我不会那么称呼它。我们做的事情不是什么秘密。我认为美国的相对重要性——我的意思是，我们一直是世界上的主导力量，二战后——我认为它会有所下降，尽管我对此并不危言耸听。但我认为在某种程度上，世界其他地方，或者大部分其他地方——或者部分其他地方——正在赶上来，并采用，你知道，那种行业内所谓的“最佳实践”。

我们的城堡规模会增长，但它周围会有更多的城堡。我基本上认为这对世界是一件非常好的事情。我认为世界其他地方总体上越繁荣，通常对我们越好。你知道，我谈过我们的贸易问题。我们的贸易越多越好。去年我们国家有1.1万亿美元的实际贸易。我们与世界——然后我们还有另外的6000亿美元——0.6万亿美元——是单方面购买的。嗯，我很乐意看到这1.1万亿美元不断增长。这对我们和世界其他地区都有好处。但我认为我们未来的繁荣绝不会以牺牲世界其他地区为代价。我确实认为世界上有些地区会从一个较低的基数开始经济增长，但增速会比美国快得多。基本上，我认为这是一件好事。

我的意思是，这个世界上有60亿人，其中很多人生活得并不好。我希望20年或50年后，他们中有更高比例的人能生活得好——但我不认为这会损害我们的利益。查理？

查理·芒格：嗯，我不同意这会损害我们的利益，但如果我们现在是世界上最富有、最强大的国家，而50或100年后，我们沦为某个亚洲国家之下的第三名，当然，我们是更富有了，但如果你失去了在世界上的相对地位，这是一种奇特的富有。我认为——如果我必须打赌，我会赌世界上表现最好的地区是亚洲，就年增长率百分比而言。而且我认为，如果它不以某种方式爆炸，它可能会表现得惊人地好。如果它表现得惊人地好，它最终可能会成为一个比我们富裕得多的地方。

沃伦·巴菲特：嗯哼。